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As filed with the Securities and Exchange Commission on September 21, 1999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
REGISTRATION NO. 333-______
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-09589
RREEF SECURITIES TRUST
875 N. Michigan Ave
41st Floor
Chicago, IL 60611
(312) 266-9300
Fax: (312) 266-9925
Agent For Service: Arthur Don, Esq.
D'Ancona & Pflaum LLC
111 East Wacker Drive, Suite 2800
Chicago IL 60601
(312) 602-2048
Fax: (312) 602-3048
Approximate Date of Proposed Public Offering: November 30, 1999
Title of Securities Being Registered: Shares of Beneficial Interest
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[X] Approximate date of Proposed Public Offering:
As soon as practicable after the
effective date of this Registration Statement
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Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
may determine.
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[RREEF LOGO]
RREEF RREAL ESTATE SECURITIES FUND
A No-Load Mutual Fund
PROSPECTUS DATED
November 30, 1999
The Securities and Exchange Commission has not approved or disapproved of these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
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TABLE OF CONTENTS
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AN OVERVIEW OF THE FUND............................................................................ 1
WHAT ARE THE FUND'S INVESTMENT OBJECTIVES..................................................... 1
WHAT ARE THE FUND'S PRIMARY INVESTMENT STRATEGIES
AND PRINCIPAL RISKS........................................................................... 1
WHO MAY WANT TO INVEST IN THE FUND?........................................................... 2
WHO MAY NOT WANT TO INVEST IN THE FUND?....................................................... 2
FEES AND EXPENSES............................................................................. 3
EXAMPLE....................................................................................... 3
INFORMATION ABOUT THE FUND......................................................................... 4
WHAT ARE THE FUND'S INVESTMENT OBJECTIVES?.................................................... 4
HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVES?........................................... 4
WHAT IS A REIT?............................................................................... 5
WHAT ARE THE PRIMARY RISKS OF INVESTING IN THE FUND?.......................................... 5
FUNDAMENTAL INVESTMENT POLICIES............................................................... 7
THE YEAR 2000 COMPUTER PROBLEM................................................................ 7
MANAGEMENT......................................................................................... 8
WHO MANAGES THE FUND?......................................................................... 8
THE BOARD OF TRUSTEES......................................................................... 8
THE INVESTMENT ADVISER........................................................................ 8
THE INVESTMENT ADVISER'S PAST PERFORMANCE WITH A SIMILAR FUND................................. 9
THE FUND MANAGEMENT TEAM...................................................................... 10
CUSTODIAN..................................................................................... 10
DISTRIBUTOR................................................................................... 10
TRANSFER AGENT................................................................................ 10
SHAREHOLDER INFORMATION............................................................................ 11
BUYING AND SELLING SHARES..................................................................... 11
Opening An Account And Making The Initial Purchase Of Shares.................................. 11
Buying More Shares............................................................................ 12
Making Automatic Investments.................................................................. 12
When Your Purchase Is Processed............................................................... 12
Selling Your Shares (Redemptions)............................................................. 12
Redemption of Shares in Low-Balance Accounts.................................................. 14
Abusive Trading Practices..................................................................... 14
Special Requirements For Large Redemptions.................................................... 14
Investing Through Financial Intermediaries.................................................... 14
SHARE PRICE AND DISTRIBUTIONS...................................................................... 16
SHARE PRICE................................................................................... 16
DISTRIBUTIONS................................................................................. 16
TAXES.............................................................................................. 17
Tax-Deferred Accounts......................................................................... 17
Taxable Accounts.............................................................................. 17
Taxability of Distributions................................................................... 17
Taxes on Distributions........................................................................ 18
Buying a Dividend............................................................................. 18
Taxes on Transactions......................................................................... 19
MORE INFORMATION ABOUT THE FUND.................................................................... 20
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RREEF RREAL ESTATE SECURITIES FUND
AN OVERVIEW OF THE FUND
WHAT ARE THE FUND'S INVESTMENT OBJECTIVES
The RREEF Rreal Estate Securities Fund (the "Fund") seeks long-term capital
appreciation. Income is a secondary objective.
WHAT ARE THE FUND'S PRIMARY INVESTMENT STRATEGIES
AND PRINCIPAL RISKS
The Fund invests primarily in real estate securities. These securities include
shares of real estate investment trusts (REITs) and companies engaged in the
real estate industry. The Fund's managers look for real estate securities they
believe will provide superior returns to the Fund, focusing on companies with
the potential for stock price appreciation, plus strong growth of cash flow to
investors. A more detailed description of the Fund's investment strategies and
risks begins on Page 4.
The value of the Fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities the Fund owns will
go up and down based on the performance of the companies that issued them,
general market and economic conditions, and investor confidence. As with all
funds, if you sell your shares when the value is less than the price you paid,
you will lose money.
An investment in the Fund may be subject to many of the same risks as a direct
investment in real estate. These risks include changes in economic conditions,
interest rates, property values, property tax increases, overbuilding and
increased competition, environmental contamination, zoning, and natural
disasters. This is due to the fact that the value of the Fund's investments may
be affected by the value of the real estate owned by the companies in which it
invests. To the extent the Fund invests in companies that make loans to real
estate companies, the Fund also may be subject to interest rate risk.
Because the Fund concentrates its investments in real estate securities, it may
be subject to greater risks and market fluctuations than funds investing in a
broader range of industries.
1
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WHO MAY WANT TO INVEST IN THE FUND?
The Fund may be a good investment if you are:
. Seeking long-term capital growth and current income from your
investment.
. Seeking diversification of your investment portfolio through an
investment in real estate securities.
. Comfortable with the risks associated with investing in real estate
securities.
. Comfortable with the Fund's short-term price volatility.
. Investing through an IRA or other tax-advantaged retirement plan.
WHO MAY NOT WANT TO INVEST IN THE FUND?
The Fund may not be a good investment if you are:
. Investing for a short period of time.
. Uncomfortable with the risks associated with investments in real estate.
. Uncomfortable with short-term volatility in the value of your
investment.
An investment in the RREEF Rreal Estate Securities Fund is not a bank deposit
and is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
2
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FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and
hold shares of the Fund. The Fund is a true "no-load" fund, meaning you do not
pay a sales charges or incur a 12b-1 distribution fee.
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RREEF Rreal Estate Securities Fund Shareholder Fees
(Fees Paid Directly From Your Investment)
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Maximum Sales Charge (Load) Imposed on Purchases None
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Maximum Deferred sales Charge (Load) None
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Maximum Sales Charge (Load) you Pay on Reinvested Dividends None
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Redemption Fees None
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Exchange Fees None
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Wire Transfer Fees None
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Annual Fund Operating Expenses
(Expenses That Are Deducted From The Fund's Assets)
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Management Fee* 1.00%
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Distribution (12b-1) fees None
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Other Expenses** None
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Total Fund Operating Expenses 1.00%
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* Out of the management fee, the Adviser pays all expenses of managing and
operating the Fund except brokerage expenses, taxes, interest, fees and expenses
of the independent trustees (including legal counsel fees), and extraordinary
expenses. A portion of the management fee may be paid by the Adviser to
unaffiliated third parties who provide recordkeeping and administrative
services.
** Other expenses, which include the fees and expenses of the independent
trustees, are expected to be less than 0.005%.
EXAMPLE
The example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, your costs would be:
------------------------------------------------
1 year 3 years
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$102 $318
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INFORMATION ABOUT THE FUND
WHAT ARE THE FUND'S INVESTMENT OBJECTIVES?
The Fund seeks long-term capital appreciation. Income is a secondary objective.
HOW DOES THE FUND PURSUE ITS INVESTMENT OBJECTIVES?
The Fund invests primarily in equity securities issued by real estate investment
trusts (REITs) and companies engaged in the real estate industry. Equity
securities include common stock, preferred stock and securities convertible into
common stock. The Fund managers look for real estate securities they believe
will provide superior returns to the Fund. They attempt to focus the Fund's
investments on real estate companies and REITs with the potential for stock
price appreciation, plus strong growth of cash flow to investors.
To find these issuers, the Fund managers track economic conditions and real
estate market performance in major metropolitan areas and analyze performance of
various property types within those regions. To perform this analysis, they use
information from a nationwide network of real estate professionals to evaluate
the holdings of real estate companies and REITs in which the Fund may invest.
Their analysis also includes the companies' management structure, financial
structure and business strategy. The goal of these analyses is to determine
which of the issuers the Fund managers believe will be the most profitable to
the Fund. The Fund managers also consider the effect of the real estate
securities markets in general when making investment decisions.
The Fund managers do not attempt to time the market. Instead, under normal
market conditions, they intend to keep at least 80% of the Fund's assets
invested in equity securities of REITs or real estate companies. A company is
considered to be a real estate company if, in the opinion of the Fund managers,
at least 50% of its revenues or 50% of the market value of its assets at the
time its securities are purchased by the Fund are attributed to the ownership,
construction, management or sale of real estate.
When the Fund managers believe that it is prudent, the Fund may invest a portion
of its assets in other types of securities. These securities may include
convertible securities, short-term securities, bonds, notes, securities of
companies not principally engaged in the real estate industry, non-leveraged
stock index futures contracts and other similar securities. Stock index futures
contracts, a type of derivative security, can help the Fund's cash assets remain
liquid while performing more like stocks. The Fund has a policy governing stock
index futures which prohibits leverage of the Fund's assets by investing in a
derivative security. For example, the Fund managers cannot invest in a
derivative security if it would be possible for the Fund to lose more money than
it invested. A complete description of the derivatives policy is included in
the Statement of Additional Information.
Additional information about the Fund's investments will be available in the
Annual and Semiannual Reports. In these reports you will find a discussion of
the market conditions and investment strategies that significantly affected the
Fund's performance during the most recent fiscal period. You may get these
reports at no cost by calling us.
4
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WHAT IS A REIT?
A real estate investment trust, or REIT, invests primarily in income-producing
real estate or makes loans to persons involved in the real estate industry.
Some REITs, called equity REITs, buy real estate and pay investors income from
the rents received from the real estate owned by the REIT and from any profits
on the sale of its properties. Other REITs, called mortgage REITs, lend money
to building developers and other real estate companies and pay investors income
from the interest paid on those loans. There are also hybrid REITs which engage
in both owning real estate and making loans.
If a REIT meets certain requirements, it is not taxed on the income it
distributes to its investors.
WHAT ARE THE PRIMARY RISKS OF INVESTING IN THE FUND?
The value of the Fund's shares depends on the value of the stocks and other
securities it owns. The value of the individual securities the Fund owns will
go up and down depending on the performance of the companies that issued them,
general market and economic conditions, and investor confidence.
As with all funds, at any given time the value of your shares of the Fund may be
worth more or less than the price you paid. If you sell your shares when the
value is less than the price you paid, you will lose money.
An investment in the Fund may be subject to many of the same risks as a direct
investment in real estate. This is due to the fact that the value of the Fund's
investments may be affected by the value of the real estate owned by the
companies in which it invests. These risks include changes in economic
conditions, interest rates, property values, property tax increases,
overbuilding and increased competition, environmental contamination, zoning and
natural disasters.
To the extent the Fund invests in mortgage REITs, it will be subject to credit
risk and interest rate risk with respect to the loans made by the REITs in which
it invests. Credit risk is the risk that the borrower will not be able to make
interest and principal payments on the loan to the REIT when they are due.
Interest rate risk is the risk that a change in the prevailing interest rate
will cause the value of the loan portfolio held by the REIT to rise or fall.
Generally, when interest rates rise, the value of the loan portfolio will
decline. The opposite is true when interest rates decline. The degree to which
interest rate changes affect the Fund's performance varies and is related to the
specific characteristics of the loan portfolios of the mortgage REITs in which
the Fund invests.
Because the Fund concentrates its investments in real estate securities, it may
be subject to greater risks and market fluctuations than a fund representing a
broader range of industries. In addition, market performance tends to be
cyclical and, in the various cycles, certain investment styles may fall in and
out of favor. If the market is not favoring the Fund's style, the Fund's gains
may not be as big as or its losses may be bigger than, other equity funds using
different investment styles.
5
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FUNDAMENTAL INVESTMENT POLICIES
Fundamental investment policies contained in the Statement of Additional
Information of the Fund may not be changed without a shareholder vote. The
Board of Trustees may change any other policies and investment strategy.
THE YEAR 2000 COMPUTER PROBLEM
The Adviser and third parties providing investment advisory, administrative,
transfer agent, custodial and other services utilize systems that may be
affected by Year 2000 transition issues. Many computer software systems in use
today cannot distinguish the year 2000 from the year 1900 because of the way
dates are encoded and calculated. Difficulties with Year 2000 issues could have
a negative impact on handling securities trades, payments of interest and
dividends, pricing, and account services. Although there can be no assurance
that there will be no adverse impact on the Fund, the service providers have
advised the Fund that they have been actively working on necessary changes to
their computer systems to prepare for the Year 2000 and expect that their
systems, and those of parties they deal with, will be adapted in time for these
events. In addition, there can be no assurance that the issuers of securities
that the Fund owns will not experience difficulties with Year 2000 issues which
may negatively affect the market value of those securities.
6
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MANAGEMENT
WHO MANAGES THE FUND?
The Board of Trustees, investment adviser and its fund management team play key
roles in the management of the Fund.
THE BOARD OF TRUSTEES
The Board of Trustees oversees the management of the Fund and meets at least
quarterly to review reports about Fund operations. Although the Board of
Trustees does not manage the Fund, it has hired the Investment Adviser to do so.
A majority of the trustees are independent of the Fund's Adviser (they are not
employed by and have no financial interest in the Adviser).
THE INVESTMENT ADVISER
The Fund's investment adviser is RREEF America, LLC (the "Adviser"), located at
875 North Michigan Avenue, 41/st/ Floor, Chicago, Illinois 60611 (1-312-266-
9300).
The Adviser is responsible for managing the investment portfolios of the Fund
and directing the purchase and sale of its investment securities. The Adviser
also arranges for transfer agency, custody and all other services necessary for
the Fund to operate.
For the services it provides to the Fund, the Adviser receives a unified
management fee of 1.00% of the average net assets of the shares of the Fund.
The amount of the management fee is calculated on a daily basis and paid
monthly.
The Statement of Additional Information contains detailed information about the
calculation of the management fee. Out of that fee, the Adviser pays all
expenses of managing and operating the Fund except brokerage expenses, taxes,
interest, fees and expenses of the independent trustees (including legal counsel
fees), and extraordinary expenses. A portion of the management fee may be paid
by the Adviser to unaffiliated third parties who provide recordkeeping and
administrative services.
7
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THE INVESTMENT ADVISER'S PAST PERFORMANCE WITH A SIMILAR FUND
The Adviser manages the investment program of the mutual fund known as the RREEF
Rreal Estate Securities Fund a portfolio of the RREEF Securities Trust, and is
primarily responsible for the day-to-day management of the Fund's portfolio.
Previously, the Adviser was the sole investment manager of a similar mutual fund
which was also known as the RREEF Real Estate Securities Fund, a portfolio of
RREEF Securities, Inc., from its inception on September 21, 1995 through June
13, 1997. In 1997, this RREEF Real Estate Securities Fund merged with and into
American Century Capital Portfolios, Inc.'s Real Estate Fund (the "American
Century fund)". The American Century fund continues to be managed by the
Adviser, as investment subadviser, and has been managed by the Adviser since its
inception on June 13, 1997. At October 31, 1999 that fund had $_______ million
in net assets. As subadviser to the American Century Real Estate Fund, the
Adviser has full discretionary authority over the selection of investments. The
Adviser will be managing the RREEF Rreal Estate Securities Fund, with the same
investment objective and principal investment strategy as the American Century
fund. Calendar Year and Average Annual Total Returns of the American Century
fund, under the investment management of the Adviser, are listed below:
[GRAPH APPEARS HERE]
American Century Real Estate Fund
Calendar Year Total Returns
(As of December 31/st/ of Each Year)
Best Quarter 4/th/ Quarter 1996 19.92%
Worst Quarter 3/rd/ Quarter 1998 (13.35%)
Return For The Fiscal Quarter
Ended June 30, 1999 was
(Not Annualized) 7.44%
8
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Average Annual Total Returns
(for the periods ending December Past 1 Year Life of Fund
31, 1998)
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American Century Real Estate Fund (18.10)% 13.54%
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Wilshire REIT Index * (16.96)% 11.32%
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* The Wilshire REIT Index is a market cap index of equity securities issued by
equity real estate investment trusts (REITs) and real estate operating companies
(REDOCs). An investor cannot invest directly in an index.
The American Century Real Estate Fund is a separate fund and its historical
performance is not indicative of the potential performance of the Fund. The
"Life of Fund" index figure includes returns from September 30, 1995. Past
performance is not a guarantee of future results. Share prices and investment
returns will fluctuate reflecting market conditions.
THE FUND MANAGEMENT TEAM
KIM G. REDDING
Mr. Redding, Portfolio Manager, is a Senior Vice President and Principal of
RREEF America, LLC. From 1990 to 1993, he was a principal in K.G. Redding &
Associates, an investment adviser, and was previously the President of Redding,
Melchor & Company, an investment adviser. He has been managing portfolios of
real estate securities since 1987.
KAREN J. KNUDSON
Ms. Knudson, Portfolio Manager, is a Senior Vice President and Principal of
RREEF America, LLC. Prior to joining RREEF, she was a Senior Vice President and
Chief Financial Officer for Security Capital Group, an investment adviser. She
has more than 16 years of real estate investment experience, specializing in
REITS.
CUSTODIAN DISTRIBUTOR
UMB Bank, N.A. Sunstone Distribution Services, LLC
928 Grand Boulevard, 10/th/ floor 207 East Buffalo Street, Suite 400
Kansas City, Missouri 64106 Milwaukee, Wisconsin 53202
TRANSFER AGENT
Sunstone Financial Group, Inc.
207 East Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202
9
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SHAREHOLDER INFORMATION
This section describes how you may buy, sell and exchange shares in the RREEF
Rreal Estate Securities Fund, how an investment in the Fund is valued, how money
is earned on an investment and how those earnings are taxed by the government.
BUYING AND SELLING SHARES
Subject to a minimum initial investment of $X0,000.00 ($X,000.00 for tax
sheltered accounts such as IRAs and similar accounts) and minimum subsequent
investments of $X,000.00, you may invest any amount you choose, as often as you
want.
Opening An Account And Making The Initial Purchase Of Shares
1 By Mail. You may open an account and purchase shares of the Fund by
completing and signing the investment application form which accompanies this
Prospectus. Mail it, together with a check (subject to the minimum amounts)
made payable to RREEF Rreal Estate Securities Fund, to the Custodian at:
RREEF Rreal Estate Securities Fund
c/o UMB Bank, N.A.
928 Grand Boulevard, 10th floor
Kansas City, Missouri 64106
2 By Wire. You may purchase shares of the Fund by wiring federal funds from
your bank, which may charge you a fee for doing so. If money is to be wired,
you must call Sunstone Financial Group, Inc., the Fund's Transfer Agent, at
[1-800-xxx-xxxx] and provide the following information:
UMB Bank, N.A.
ABA #
Attn: RREEF Rreal Estate Securities Fund
DDA #
Account Name
(write in shareholder name)
Shareholder Account #
(write in account #)
You must mail a signed application to the Transfer Agent at the above address in
order to complete your initial wire purchase. Wire orders will be accepted only
on a day on which the Fund and the Custodian and Transfer Agent are open for
business. Any delays which may occur in wiring money, including delays which may
occur in processing by the bank, are not the responsibility of the Fund or the
Transfer Agent. The Transfer Agent or the Custodian may charge you a fee for
wire transfers. Currently, that fee is a total of $10.00. Any charges for wire
transfers will be deducted from your Fund account by redemption of shares. Your
bank may also charge you a fee for this service. A wire purchase will not be
considered made until the wired money is received and the purchase is accepted
by the Fund. If your check or wire does not clear, you will be charged $20.00
and will be responsible for any loss incurred. If you are already a
10
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shareholder, the Fund can redeem shares from any identically registered account
in the Fund as reimbursement for any loss incurred. You may be prohibited or
restricted from making future purchases in the Fund.
You should contact the Transfer Agent for the procedure to open an IRA or SEP
plan, as well as more specific information regarding these retirement plan
options. Consultation with an attorney or tax advisor regarding these plans is
advisable. Custodial fees for tax sheltered accounts will be paid by the
shareholder by redemption of sufficient shares of the Fund from the account
unless the fees are paid directly to the custodian. You can obtain information
about the custodial fees from the Transfer Agent.
Buying More Shares
You may purchase additional shares of the Fund at any time (minimum of
$X,000.00) by mail or wire. Each additional purchase request must contain your
name, the name of your account(s) and your account number(s). Checks should be
made payable RREEF Rreal Estate Securities Fund and should be sent to the
Custodian's address. A bank wire should be sent as indicated in "By Wire."
Making Automatic Investments
You may arrange to make additional investments ($X,000.00 minimum) automatically
on a monthly or bi-monthly basis by transfers from your checking account. You
must complete the optional automatic investment plan section of the investment
application and provide the Trust with a voided check to institute this option.
You may terminate this automatic investment program at any time, and the Fund
may modify or terminate the plan at any time.
When Your Purchase Is Processed
Your purchase of shares of the RREEF Rreal Estate Securities Fund will be
effected at the next share price calculated after the close of business on the
day your investment is received by the Transfer Agent. If a check for purchase
of shares is not drawn on federal funds, shares will be purchased at the next
share price calculated after the check is converted into federal funds (normally
two days or less).
The Fund does not issue share certificates. All shares are held in non-
certificated form registered on the books of the Fund and the Fund's Transfer
Agent for the account of the shareholder. The Fund reserves the right to limit
the amount of purchases and to refuse to sell to any person.
Selling Your Shares (Redemptions)
All sales will be made at the net asset value determined after the redemption
request has been received by the Transfer Agent in proper order. "Proper order"
means your request for a redemption must include your letter of instruction,
including the Fund's name, account number, account name(s), the address and the
dollar amount or number of shares you wish to redeem. This request must be
signed by all registered share owner(s) in the exact name(s) and any special
capacity in which they are registered. For all redemptions, the Fund requires
that signatures be guaranteed by a bank or member firm of a national securities
exchange. Signature guarantees are
11
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for the protection of shareholders. At the discretion of the Fund or the
Transfer Agent, a shareholder, prior to redemption, may be required to furnish
additional legal documents to insure proper authorization.
Redemptions will be effected at the next determined share price. The proceeds
will then be made payable to the registered shareholder and mailed to the
address registered on the account, or wired to your bank or brokerage firm, as
authorized by you on your application. The Transfer Agent and the Custodian may
charge you a fee for wire transfers. Currently, that fee is a total of $10.00
($15.00 for redemptions from an IRA account). Any charges for wire redemption
will be deducted from your Fund account by redemption of shares. The proceeds
of the sale may be more or less than the purchase price of your shares,
depending on the market value of the Fund's securities at the time of your
redemption.
Redemptions specifying a certain date or share price cannot be accepted and will
be returned. We will mail or wire you the proceeds on or before the fifth
business day following the redemption. However, payment for redemption made
against shares purchased by check (other than permitted exchanges) will be made
only after the check has been collected, which normally may take up to fifteen
days. Also, when the New York Stock Exchange is closed (or when trading is
restricted) for any reason other than its customary weekend or holiday closing
or under any emergency circumstances, as determined by the Securities and
Exchange Commission, we may suspend redemptions or postpone payment dates.
You May Sell Your Shares
1 By Mail. Your request should be addressed to:
RREEF Rreal Estate Securities Fund
c/o UMB Bank, N.A.
928 Grand Boulevard, 10/th/ floor
Kansas City, Missouri 64106
2 By Telephone. You may request the redemption of your shares in the Fund by
calling Sunstone Financial Group, Inc., the Transfer Agent, at [1-800-xxx-
xxxx] and requesting that proceeds be mailed to you or wired to your bank or
brokerage firm. For sales or exchanges, you must first complete the optional
telephone redemption and exchange section of the investment application.
The Fund, the Adviser, the Transfer Agent and the Custodian are not liable
for following redemption instructions communicated by telephone that they
reasonably believe to be genuine. However, if they do not employ reasonable
procedures to confirm that telephone instructions are genuine, they may be
liable for any losses due to unauthorized or fraudulent instructions.
Procedures employed will include recording telephone instructions and
requiring a form of personal identification from the caller. The telephone
redemption procedures may be terminated at any time by the Fund or the
Transfer Agent. During periods of extreme market activity it is possible that
shareholders may encounter some difficulty in contacting the Fund by
telephone, although neither the Fund nor the Transfer Agent have ever
experienced difficulties in receiving and in a timely fashion responding to
telephone requests for redemptions.
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Redemption of Shares in Low-Balance Accounts
If your balance or the balance of your financial intermediary, if applicable,
falls below the minimum investment requirements due to redemptions or exchanges,
we will notify you and give you 90 days to meet the minimum. If you do not meet
the deadline, the Fund will redeem the shares in the account and send the
proceeds to your address of record.
Abusive Trading Practices
The Fund does not permit market timing or other abusive trading practices.
Excessive, short-term (market-timing) or other abusive trading practices may
disrupt portfolio management strategies and harm performance of the Fund. To
minimize harm to the Fund and its shareholders, we reserve the right to reject
any purchase order from any investor we believe has a history of abusive trading
or whose trading, in our judgment, has been or may be disruptive to the Fund.
In making this judgment, we may consider trading done in multiple accounts under
common ownership or control. We also reserve the right to delay delivery of
your redemption proceeds (up to seven days) or to honor certain redemptions with
securities, rather than cash, as described in the next section.
Special Requirements For Large Redemptions
If, during any 90-day period, you redeem Fund shares worth more than $250,000
(or 1% of the assets of the Fund if that percentage is less than this amount),
we reserve the right to pay part or all of the redemption proceeds in excess of
this amount in readily marketable securities instead of cash. If we make
payment in securities, we will value the securities selected by the Fund
managers in the same manner as we do in computing the Fund's net asset value.
We may provide these securities in lieu of cash without prior notice.
If your redemption would exceed this limit and you would like to avoid being
paid in securities, please provide us with an unconditional instruction to
redeem at least 15 days prior to the date on which the redemption transaction is
to occur. The instruction must specify the dollar amount or number of shares to
be redeemed and the date of the transaction. This minimizes the effect of the
redemption on the Fund and its remaining shareholders.
Investing Through Financial Intermediaries
If you do business with us through a financial intermediary or a retirement
plan, your ability to purchase, exchange and redeem shares will depend on the
policies of that entity. Some policy differences may include:
. Minimum investment requirements;
. Exchange policies;
. Fund choices; and
. Cutoff time for investments.
13
<PAGE>
Please contact your financial intermediary or plan sponsor for a complete
description of its policies. Copies of the Fund's Annual Report and Statement
of Additional Information are available from your intermediary or plan sponsor.
Certain financial intermediaries perform recordkeeping and administrative
services for their clients that would otherwise be performed by the Transfer
Agent. In some circumstances, the Fund will pay the service provider a fee for
performing those services.
Although transactions in Fund shares may be made directly with the Fund at no
charge, you also may purchase, redeem and exchange Fund shares through
financial intermediaries that charge a transaction-based or other fee for their
services. Those charges are retained by the intermediary and are not shared
with the Fund.
The Fund has contracts with certain financial intermediaries requiring them to
track the time investment orders are received and to comply with procedures
relating to the transmission of orders. The Fund has authorized those
intermediaries to accept orders on its behalf up to the time at which the net
asset value is determined. If those orders are transmitted to the Fund and paid
for in accordance with the contract, they will be priced at the net asset value
next determined after your request is received in the form required by the
intermediary on the Fund's behalf.
Financial intermediaries include banks, broker-dealers, insurance companies and
investment advisers.
Other Purchase, Redemption and Exchange Policies
Good Order. The Fund must receive your request to buy, sell or exchange shares
in good order. The request must include:
. Your account number;
. The number or dollar amount of shares you want to buy or sell;
. Signatures of all owners, exactly as registered on the account;
. Signature guarantees for redemption requests over $X0,000; and
. Any documentation required for redemptions by estates, trusts and
other organizations.
Telephone Transactions. Unless you waive telephone privileges on your new
account application, you automatically have the privilege to make telephone
inquiries, exchanges and redemptions. Once your account is established, you
must make requests to change these privileges in writing, signed by each
registered holder of the account, with all signatures guaranteed. A notary
public is not an acceptable guarantor.
The Fund will take reasonable measures to prevent unauthorized telephone
transactions and will not be liable for such transactions. The Fund reserves
the right to refuse a telephone transaction.
Signature Guarantees. Generally, whenever you change your account privileges,
your bank information, or your registration information, you need signature
guarantees for each registered
14
<PAGE>
holder. These guarantee requirements help protect you from fraud. You can have
signatures guaranteed by a U.S. commercial bank or trust company, a member of
the National Association of Securities Dealers, Inc., or other eligible
institutions. A notary public is not acceptable.
SHARE PRICE AND DISTRIBUTIONS
SHARE PRICE
The Adviser determines the Net Asset Value ("NAV") of the Fund as of the close
of regular trading on the New York Stock Exchange (usually 4:00 p.m. Eastern
Time) on each day the Exchange is open. On days when the Exchange is not open
(including certain U.S. holidays), the Adviser does not calculate the NAV. The
NAV of a Fund share is the current value of the Fund's assets, minus any
liabilities, divided by the number of Fund shares outstanding.
If current market prices of securities owned by the Fund are not readily
available, the Adviser may determine their fair value in accordance with
procedures adopted by the Fund's Board of Trustees. Therefore, the value of the
Fund's portfolio may be affected on days when you cannot purchase or redeem
shares of the Fund.
We will price your purchase, exchange or redemption at the NAV next determined
after we receive your transaction request in good order.
DISTRIBUTIONS
Federal tax law requires the Fund to make distributions to its shareholders in
order to qualify as a "regulated investment company." Qualification as a
regulated investment company means that the Fund itself will not be subject to
state or federal income tax on amounts distributed. The distributions generally
consist of dividends and interest received, as well as capital gains realized on
the sale of investment securities.
The Fund pays distributions of substantially all of its income quarterly.
Distributions from realized capital gains are paid annually, usually in
December. The Fund may make more frequent distributions if necessary to comply
with Internal Revenue Code provisions. Distributions are reinvested
automatically in additional shares unless you choose another option.
You will participate in Fund distributions when they are declared, starting on
the day after your purchase is effective. For example, if you purchase shares
on a day that a distribution is declared, you will not receive that
distribution. If you redeem shares, you will receive any distribution declared
on the day you redeem. If you redeem all shares, we will include any
distribution received with your redemption proceeds.
Participants in employer-sponsored retirement or savings plans must reinvest all
distributions. For shareholders investing through taxable accounts, we will
reinvest distributions unless you elect to receive them in cash. Please consult
your services guide for further information regarding distributions and your
distribution options.
15
<PAGE>
TAXES
The tax consequences of owning shares of the Fund will vary depending on whether
you own them through a taxable or tax-deferred account. Tax consequences result
from distributions by the Fund of dividend and interest income it has received
or capital gains it has generated through its investment activities. Tax
consequences also result from sales of Fund shares by investors after the net
asset value has increased or decreased.
Tax-Deferred Accounts
If you purchase Fund shares through a tax-deferred account, such as an IRA or a
qualified employer-sponsored retirement or savings plan, income and capital
gains distributions usually will not be subject to current taxation, but will
accumulate in your account under the plan on a tax-deferred basis. Likewise,
moving from one fund to another fund within a plan or tax-deferred account
generally will not cause you to be taxed. For information about the tax
consequences of making purchases or withdrawals through an employer-sponsored
retirement or savings plan, or through an IRA, please consult your plan
administrator, your summary plan description or a professional tax advisor.
Taxable Accounts
If you own Fund shares through a taxable account, distributions by the Fund and
sales by you of Fund shares may cause you to be taxed.
Taxability of Distributions
Fund distributions may consist of income earned by the Fund from sources such as
dividends and interest, or capital gains generated from the sale of Fund
investments. Distributions of income are taxed as ordinary income.
Distributions of capital gains are classified either as short-term (gains on
Fund shares held for 12 months or less), long-term (gains on Fund shares held
for more than 12 months), or unrecaptured Section 1250 capital gains and are
taxed as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Type of Distribution Tax Rate for 15% Bracket Tax Rate for 28% Bracket or
Above
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Capital Gains Ordinary income rate Ordinary income rate
- ---------------------------------------------------------------------------------------------
Long-Term Capital Gains 10% 20%
- ---------------------------------------------------------------------------------------------
Unrecaptured Section 1250 Ordinary income rate 25%
Capital Gains
- ---------------------------------------------------------------------------------------------
</TABLE>
The tax status of any distributions of capital gains is determined by how long
the Fund held the underlying security that was sold, not by how long you have
been invested in the Fund or
16
<PAGE>
whether you reinvest your distributions in additional shares or take them in
cash. The Fund will send you the tax status of Fund distributions for each
calendar year in an annual tax mailing (Form 1099-DIV) from the Fund.
The Fund may receive distributions of unrecaptured Section 1250 capital gains
from REITs. To the extent the Fund receives such distributions, unrecaptured
Section 1250 capital gains will be distributed to shareholders of the Fund.
Unrecaptured Section 1250 capital gains are named for the Internal Revenue Code
section that describes them and are frequently realized upon the sale of real
estate and are subject to a maximum tax rate of 25%. These gains are received
by the Fund from its REIT securities and are then subsequently passed through to
shareholders.
Because of the nature of REIT investments, REITs may generate significant non-
cash deductions, such as depreciation on real estate holdings, while generating
a greater cash flow to their shareholders. If a REIT distributes more cash flow
than it has taxable income, a return of capital results. A return of capital
represents the return of a portion of a shareholder's original investment that
is generally non-taxable when distributed, or returned, to the investor. The
Fund may pay a return of capital distribution to its shareholders by
distributing more cash than its taxable income. If you do not reinvest
distributions, the cost basis of your shares will be decreased by the amount of
returned capital, which may result in a larger capital gain when you sell your
shares. Although a return of capital generally is not taxable to you upon
distribution, it would be taxable to you as a capital gain if your cost basis in
the shares is reduced to zero. This could occur if you do not reinvest
distributions and the returns of capital are significant.
Taxes on Distributions
Distributions also may be subject to state and local taxes. Because everyone's
tax situation is unique, always consult your tax professional about federal,
state and local tax consequences.
Because the REITs invested in by the Fund do not provide complete information
about the taxability of their distributions until after the calendar year end,
the Fund may not be able to determine how much of the Fund's distribution is
taxable to shareholders until after the January 31 deadline for issuing Form
1099-DIV. As a result, the Fund may request permission from the Internal
Revenue Service each year for an extension of time to issue Form 1099-DIV until
February 28.
Buying a Dividend
Purchasing Fund shares in a taxable account shortly before a distribution is
sometimes known as buying a dividend. In taxable accounts, you must pay income
taxes on the distribution whether you reinvest the distribution or take it in
cash. In addition, you will have to pay taxes on the distribution whether the
value of your investment decreased, increased or remained the same after you
bought the Fund shares.
The risk in buying a dividend is that the Fund's portfolio may build up taxable
gains throughout the period covered by a distribution, as securities are sold at
a profit. We distribute those gains to you, after subtracting any losses, even
if you did not own the shares when the gains occurred.
17
<PAGE>
If you buy a dividend, you incur the full tax liability of the distribution
period, but you may not enjoy the full benefit of the gains realized in the
Fund's portfolio.
Taxes on Transactions
Your redemptions are subject to capital gains tax. The table regarding the
taxability of distributions can provide a general guide for your potential tax
liability when selling or exchanging Fund shares. If your shares decrease in
value, their sale will result in a long-term or short-term capital loss.
However, you should note that any loss realized upon the sale or redemption of
shares held for six months or less will be treated as a long-term capital loss
to the extent of any distribution of long-term capital gains to you with respect
to such shares. If a loss is realized on the redemption of Fund shares, the
reinvestment in additional Fund shares within 30 days before or after the
redemption may be subject to the wash sale rules of the Internal Revenue Code.
This may result in a postponement of the recognition of such loss for federal
income tax purposes. Please consult your professional tax advisor for more
complete information.
If you have not certified to us that your Social Security number or tax
identification number is correct and that you are not subject to 31%
withholding, we are required to withhold and remit 31% of dividends, capital
gains distributions and redemptions to the IRS.
18
<PAGE>
MORE INFORMATION ABOUT THE FUND
For more information about RREEF Rreal Estate Securities Fund, request a free
copy of the Statement of Additional Information or the Annual and Semi-Annual
Reports. The Statement of Additional Information provides more detailed
information about the Fund and its operations, investment restrictions, policies
and practices. Annual and Semi-Annual Reports to shareholders discuss the market
conditions and investment strategies that significantly affect the Fund's
performance and provide additional information about the Fund's investments.
The Fund's Statement of Additional Information has been filed electronically
with the Securities and Exchange Commission (the "SEC") and is incorporated by
reference into this Prospectus.
YOU MAY REQUEST THESE DOCUMENTS
1 By Telephone. Call RREEF Rreal Estate Securities Fund toll-free at [1-800-
xxx-xxxx], Monday through Friday, 8 a.m. to 5 p.m. Central Time. You may
also call this number for shareholder inquiries.
2 Via The Internet. Visit the SEC Web site at www.sec.gov[, or visit our Web
-----------
site at WEB SITE ADDRESS].
3 From The SEC. You may obtain copies of the documents highlighted above,
for a duplicating fee, by writing the SEC's Public Reference Room,
Washington DC, 20549-6009. For more information call 1-800-SEC-0330.
4 By Mail. Specify the document you are requesting when writing to us:
RREEF Rreal Estate Securities Fund
c/o Sunstone Financial Group, Inc.
207 East Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202
Distributed by Sunstone Distribution Services, LLC.
19
<PAGE>
[RREEF LOGO]
STATEMENT OF ADDITIONAL INFORMATION
DATED
NOVEMBER 30, 1999
RREEF SECURITIES TRUST
RREEF RREAL ESTATE SECURITIES FUND
THIS STATEMENT OF ADDITIONAL INFORMATION ADDS TO THE DISCUSSION IN THE FUND'S
PROSPECTUS, DATED NOVEMBER 30, 1999, BUT IS NOT A PROSPECTUS. THE STATEMENT OF
ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE FUND'S CURRENT
PROSPECTUS. IF YOU WOULD LIKE A COPY OF A PROSPECTUS, PLEASE CONTACT US AT 207
EAST BUFFALO STREET, SUITE 400, MILWAUKEE, WISCONSIN 53202 OR [1-800-xxx-xxxx]
[OR VISIT OUR WEBSITE AT _____________________].
Distributed by
SUNSTONE DISTRIBUTION SERVICES, LLC
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
November 30, 1999
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE FUND'S HISTORY........................................................... 1
FUND INVESTMENT GUIDELINES................................................... 1
DETAILED INFORMATION ABOUT THE FUND.......................................... 2
INVESTMENT STRATEGIES AND RISKS......................................... 2
INVESTMENT POLICIES.......................................................... 12
FUNDAMENTAL INVESTMENT POLICIES......................................... 12
NONFUNDAMENTAL INVESTMENT POLICIES...................................... 13
PORTFOLIO TURNOVER...................................................... 14
MANAGEMENT................................................................... 15
TRUSTEES AND OFFICERS................................................... 15
COMPENSATION OF TRUSTEES................................................ 16
THE FUND'S PRINCIPAL SHAREHOLDERS....................................... 17
INVESTMENT ADVISER...................................................... 17
OTHER ADVISORY RELATIONSHIPS............................................ 18
OTHER INFORMATION ABOUT THE FUND............................................. 19
BROKERAGE ALLOCATION.................................................... 19
CODE OF ETHICS.......................................................... 20
DISTRIBUTION PLAN....................................................... 21
INFORMATION ABOUT FUND SHARES................................................ 22
THE SHARES OF THE TRUST................................................. 22
VALUATION OF THE FUND'S SECURITIES...................................... 23
TAXES........................................................................ 24
FEDERAL INCOME TAXES.................................................... 24
STATE AND LOCAL TAXES................................................... 25
TAXATION OF CERTAIN MORTGAGE REITS...................................... 25
HOW PERFORMANCE IN THE FUND IS CALCULATED.................................... 26
PERMISSIBLE ADVERTISING INFORMATION..................................... 27
EXPLANATION OF FIXED-INCOME SECURITIES RATINGS............................... 27
MORE INFORMATION ABOUT THE FUND.............................................. 30
</TABLE>
i
<PAGE>
THE FUND'S HISTORY
The RREEF Rreal Estate Securities Fund (the "Fund") is the sole outstanding
series of RREEF Securities Trust (the "Trust"), an open-end investment company
established as a business trust under the laws of Delaware by an Agreement and
Declaration of Trust dated September 15, 1999 (the "Trust Agreement"). The
fiscal year of the Trust ends on October 31.
FUND INVESTMENT GUIDELINES
This section explains the extent to which the Fund's adviser, RREEF America, LLC
(the "Adviser"), can use various investment vehicles and strategies in managing
the Fund's assets. Descriptions of the investment techniques and risks
associated with the Fund appear in the section, "Detailed Information About the
Fund," which begins on page 2. In the case of the Fund's principal investment
strategies, these descriptions elaborate upon discussions contained in the
Prospectus.
The Fund is a non-diversified, open-end investment company as defined in the
Investment Company Act of 1940. Non-diversified means that the proportion of the
Fund's assets that may be invested in the securities of a single issuer is not
limited by the Investment Company Act.
To meet federal tax requirements for qualification as a regulated investment
company, the Fund must limit its investments so that at the close of each
quarter of its taxable year (1) no more than 25% of its total assets are
invested in the securities of a single issuer (other than the U.S. government or
a regulated investment company), and (2) with respect to at least 50% of its
total assets, no more than 5% of its total assets are invested in the securities
of a single issuer.
In general, within the restrictions outlined here and in the Fund's Prospectus,
the Fund's managers have broad powers to decide how to invest Fund assets,
including the power to hold them uninvested.
Investments are varied according to what is judged advantageous under changing
economic conditions. It is the Adviser's policy to retain maximum flexibility in
management without restrictive provisions as to the proportion of one or another
class of securities that may be held, subject to the investment restrictions
described below. It is the Adviser's intention that the Fund generally will
consist of common stocks and equity-equivalent securities. However, subject to
the specific limitations applicable to the Fund, the Fund's management team may
invest the assets of the Fund in varying amounts using other investment
techniques, such as those reflected below, when such a course is deemed
appropriate in order to attempt to attain the Fund's investment objective.
Senior securities that are high-grade issues, in the opinion of the managers,
also may be purchased for defensive purposes.
Income is a secondary objective of the Fund. As a result, a portion of the
portfolio of the Fund may consist of debt securities.
So long as a sufficient number of acceptable securities are available, the
manager intends to keep the Fund fully invested. However, under exceptional
conditions, the Fund may assume a
1
<PAGE>
defensive position, temporarily investing all or a substantial portion of its
assets in cash or short-term securities.
The Fund's manager may use stock index futures and options as a way to expose
the Fund's cash assets to the market while maintaining liquidity. However, the
manager may not leverage the Fund's portfolios, so there is no greater market
risk to the funds than if they purchase stocks. See Derivative Securities, page
5, and Short-Term Securities and Futures and Options, page 8.
DETAILED INFORMATION ABOUT THE FUND
INVESTMENT STRATEGIES AND RISKS
This section describes various investment vehicles and techniques that the
Fund's managers can use in managing the Fund's assets. It also details the risks
associated with each, because each technique contributes to the Fund's overall
risk profile.
EQUITY EQUIVALENTS
In addition to investing in common stocks, the Fund may invest in other equity
securities and equity equivalents, including securities that permit the Fund to
receive an equity interest in an issuer, the opportunity to acquire an equity
interest in an issuer, or the opportunity to receive a return on its investment
that permits the Fund to benefit from the growth over time in the equity of an
issuer. Examples of equity securities and equity security equivalents include
preferred stock, convertible preferred stock and convertible debt securities.
The Fund will limit its holdings of convertible debt securities to those that,
at the time of purchase, are rated at least B- by Standard & Poor's Corporation
("S&P") or B3 by Moody's Investors Service ("Moody's"), or, if not rated by S&P
and Moody's, are of equivalent investment quality as determined by the Adviser.
The Fund's investments in convertible debt securities and other high-yield,
nonconvertible debt securities rated below investment-grade will comprise less
than 35% of the Fund's net assets. Debt securities rated below the four highest
categories are not considered "investment-grade" obligations. These securities
have speculative characteristics and present more credit risk than investment-
grade obligations.
Equity equivalents also may include securities whose value or return is derived
from the value or return of a different security.
DEBT SECURITIES
The Fund may invest in debt securities because the Fund has the creation of
income as a secondary investment objective. As a result, the Fund may invest in
debt securities when the Fund's Adviser believes such securities represent an
attractive investment for the Fund. It is intended that the Fund may invest in
debt securities for income or as a defensive strategy when the Adviser believes
adverse economic or market conditions exist.
The value of the debt securities in which the Fund may invest will fluctuate
based upon changes in interest rates and the credit quality of the issuer. Debt
securities that comprise part of the
2
<PAGE>
Fund's fixed-income portfolio will be limited primarily to "investment-grade"
obligations. However, the Fund may invest up to 5% of its assets in "high-yield"
securities. "Investment grade" means that at the time of purchase, such
obligations are rated with the four highest categories by a nationally
recognized statistical rating organization (for example, at least Baa by Moody's
or BBB by S&P), or, if not rated, are of equivalent investment quality as
determined by the Adviser. According to Moody's, bonds rated Baa are medium-
grade and possess some speculative characteristics. A BBB rating by S&P
indicates S&P's belief that a security exhibits a satisfactory degree of safety
and capacity for repayment, but is more vulnerable to adverse economic
conditions and changing circumstances.
"High-yield" securities, sometimes referred to as "junk bonds," are higher risk,
non-convertible debt obligations that are rated below investment-grade
securities, or are unrated, but with similar credit quality.
There are no credit or maturity restrictions on the fixed-income securities in
which the high-yield portion of the Fund's portfolio may be invested. Debt
securities rated lower than Baa by Moody's or BBB by S&P or their equivalent are
considered by many to be predominantly speculative. Changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments on such securities than is the case with
higher quality debt securities. Regardless of rating levels, all debt securities
considered for purchase by the Fund are analyzed by the investment manager to
determine, to the extent reasonably possible, that the planned investment is
sound, given the investment objective of the Fund.
The Fund will not necessarily dispose of high-yield securities if the aggregate
value of such securities exceeds 5% of the Fund's assets, if such level is
exceeded as a result of market appreciation of the value of such securities or
market depreciation of the value of the other assets of the Fund. Rather, the
Adviser will cease purchasing any additional high-yield securities until the
value of such securities is less than 5% of the Fund's assets and will monitor
such investments to determine whether continuing to hold such investments is
likely to assist the Fund in meeting its investment objectives.
In addition, the value of the Fund's investments in fixed-income securities will
change as prevailing interest rates change. In general, the prices of such
securities vary inversely with interest rates. As prevailing interest rates
fall, the prices of bonds and other securities that trade on a yield basis
generally rise. When prevailing interest rates rise, bond prices generally fall.
These changes in value may, depending upon the particular amount and type of
fixed-income securities holdings of the Fund, impact the net asset value of the
Fund's shares.
Notwithstanding the fact that the Fund will invest primarily in equity
securities, under exceptional market or economic conditions, the Fund may
temporarily invest all or a substantial portion of its assets in cash or
investment-grade short-term securities (denominated in U.S. dollars or foreign
currencies).
To the extent that the Fund assumes a defensive position, it will not be
investing for capital growth.
3
<PAGE>
CONVERTIBLE DEBT SECURITIES
A convertible debt security is a fixed-income security that offers the potential
for capital appreciation through a conversion feature that enables the holder to
convert the fixed-income security into a stated number of shares of common
stock. As fixed-income securities, convertible debt securities provide a stable
stream of income with generally higher yields than common stocks. Because
convertible debt securities offer the potential to benefit from increases in the
market price of the underlying common stock, however, they generally offer lower
yields than non-convertible securities of similar quality. Of course, like all
fixed-income securities, there can be no assurance of current income because the
issuers of the convertible securities may default on their obligations. In
addition, there can be no assurance of capital appreciation because the value of
the underlying common stock will fluctuate.
Convertible debt securities generally are subordinated to other similar but non-
convertible debt securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible securities.
SHORT SALES
The Fund may engage in short sales, if, at the time of the short sale, the Fund
owns or has the right to acquire securities equivalent in kind an amount to the
securities being sold short.
In a short sale, the seller does not immediately deliver the securities sold and
is said to have a short position in those securities until delivery occurs. To
make delivery to the purchaser, the executing broker borrows the securities
being sold short on behalf of the seller. While the short position is
maintained, the seller collateralizes its obligation to deliver the securities
sold short in an amount equal to the proceeds of the short sale plus an
additional margin amount established by the Board of Governors of the Federal
Reserve. If the Fund engages in a short sale, the collateral account will be
maintained by the Fund's custodian. While the short sale is open, the Fund will
maintain in a segregated custodial account an amount of securities convertible
into, or exchangeable for, such equivalent securities at no additional cost.
These securities would constitute the Fund's long position.
The Fund may make a short sale, as described above, when it wants to sell the
security it owns at a current attractive price, but also wishes to defer
recognition of gain or loss for federal income tax purposes. There will be
certain additional transaction costs associated with short sales, but the Fund
will endeavor to offset these costs with returns from the investment of the cash
proceeds of short sales.
4
<PAGE>
PORTFOLIO LENDING
In order to realize additional income, the Fund may lend its portfolio
securities. Such loans may not exceed one-third of the Fund's total assets
valued at market except (1) through the purchase of debt securities in
accordance with its investment objectives, policies and limitations, or (2) by
engaging in repurchase agreements with respect to portfolio securities.
DERIVATIVE SECURITIES
To the extent permitted by its investment objectives and policies, the Fund may
invest in securities that are commonly referred to as derivative securities.
Generally, a derivative is a financial arrangement, the value of which is based
on or derived from a traditional security, asset or market index. Certain
derivative securities are described more accurately as index/structured
securities. Index/structured securities are derivative securities whose value or
performance is linked to other equity securities (such as depository receipts),
currencies, interest rates, indices or other financial indicators (reference
indices).
Some derivatives, such as mortgage-related and other asset-backed securities,
are in many respects like any other investment, although they may be more
volatile or less liquid than more traditional debt securities.
There are many different types of derivatives and many different ways to use
them. Futures and options are commonly used for traditional hedging purposes to
attempt to protect the Fund from exposure to changing interest rates, securities
prices or currency exchange rates, and for cash management purposes as a low-
cost method of gaining exposure to a particular securities market without
investing directly in those securities.
The Fund may not invest in a derivative security unless the reference index or
the instrument to which it relates is an eligible investment for the Fund. For
example, a security whose underlying value is linked to the price of oil would
not be a permissible investment because the Fund may not invest in oil and gas
leases or futures.
The return on a derivative security may increase or decrease, depending upon
changes in the reference index or instrument to which it relates.
There are a range of risks associates with derivative investments, including:
. The risk that the underlying security, interest rate, market index or other
financial asset will not move in the direction the Adviser anticipates.
. The possibility that there may be no liquid secondary market, or the
possibility that price fluctuation limits may be imposed by the exchange,
either of which may make it difficult or impossible to close out a position
when desired.
. The risk that adverse price movements in an instrument can result in a loss
substantially greater than the Fund's initial investment.
. The risk that the counterparty will fail to perform its obligations.
5
<PAGE>
The Board of Trustees has approved the Adviser's policy regarding investments in
derivative securities. That policy specifies factors that must be considered in
connection with a purchase of derivative securities. The policy also establishes
a committee that must review certain proposed purchases before the purchases can
be made. The Adviser will report on Fund activity in derivative securities to
the Board of Trustees as necessary. In addition, the Board will review the
Adviser's policy for investments in derivative securities annually.
OTHER INVESTMENT COMPANIES
The Fund may invest up to 10% of its total assets in other mutual funds,
including those of the Adviser, if any, provided that the investment is
consistent with the Fund's investment policies and restrictions. Under the
Investment Company Act, the Fund's investment in such securities, subject to
certain exceptions, currently is limited to (a) 3% of the total voting stock of
any one investment company; (b) 5% of the Fund's total assets with respect to
any one investment company; and (c) 10% of the Fund's total assets in the
aggregate. Such purchases will be made in the open market where no commission or
profit to a sponsor or dealer results from the purchase other than the customary
brokers' commissions. As a shareholder of another investment company, the Fund
would bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would be
in addition to the management fee than the Fund bears directly in connection
with its own operations.
REPURCHASE AGREEMENTS
The Fund may invest in repurchase agreements when such transactions present an
attractive short-term return on cash that is not otherwise committed to the
purchase of securities pursuant to the investment policies of the Fund.
A repurchase agreement occurs when, at the time the Fund purchases an interest-
bearing obligation, the seller (a bank or a broker-dealer registered under the
Securities Exchange Act of 1934) agrees to purchase it on a specified date in
the future at an agreed-upon price. The repurchase price reflects an agreed-upon
interest rate during the time the Fund's money is invested in the security.
Because the security purchased constitutes a security for the repurchase
obligation, a repurchase agreement can be considered a loan collateralized by
the security purchased. The Fund's risk is the ability of the seller to pay the
agreed-upon repurchase price on the repurchase date. If the seller defaults, the
Fund may incur costs in disposing of the collateral, which would reduce the
amount realized thereon. If the seller seeks relief under the bankruptcy laws,
the disposition of the collateral may be delayed or limited. To the extent the
value of the security decreases, the Fund could experience a loss.
The Fund will limit repurchase agreement transactions to securities issued by
the U.S. government and its agencies and instrumentalities, and will enter into
such transactions with those banks and securities dealers who are deemed
creditworthy pursuant to criteria adopted by the Fund's Board of Trustees.
6
<PAGE>
The Fund will not invest more than 15% of its assets in repurchase agreements
maturing in more than seven days.
WHEN-ISSUED AND FORWARD COMMITMENT AGREEMENTS
The Fund may sometimes purchase new issues of securities on a when-issued or
forward commitment basis in which the transaction price and yield are each fixed
at the time the commitment is made, but payment and delivery occur at a future
date (typically 15 to 45 days later).
When purchasing securities on a when-issued or forward commitment basis, the
Fund assumes the rights and risks of ownership, including the risks of price and
yield fluctuations. Market rates of interest on debt securities at the time of
delivery may be higher or lower than those contracted for on the when-issued
security. Accordingly, the value of such security may decline prior to delivery,
which could result in a loss to the Fund. While the Fund will make commitments
to purchase or sell securities with the intention of actually receiving or
delivering them, it may sell the securities before the settlement date if doing
so is deemed advisable as a matter of investment strategy.
In purchasing securities on a when-issued or forward commitment basis, the Fund
will establish and maintain a segregated account consisting of cash, cash
equivalents or other appropriate liquid securities until the settlement date in
an amount sufficient to meet the purchase price. When the time comes to pay for
the when-issued securities, the Fund will meet its obligations with available
cash, through the sale of securities, or, although it would not normally expect
to do so, by selling the when-issued securities themselves (which may have a
market value greater or less than the fund's payment obligation). Selling
securities to meet when-issued or forward commitment obligations may generate
taxable capital gains or losses.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may, from time to time, purchase restricted or illiquid securities,
including Rule 144A securities, when they present attractive investment
opportunities that otherwise meet the Fund's criteria for selection. Rule 144A
securities are securities that are privately placed with and traded among
qualified institutional investors rather than the general public. Although Rule
144A securities are considered restricted securities, they are not necessarily
illiquid.
With respect to securities eligible for resale under Rule 144A, the staff of the
Securities and Exchange Commission (the "SEC") has taken the position that the
liquidity of such securities in the portfolio of a fund offering redeemable
securities is a question of fact for the Board of Trustees to determine, based
upon a consideration of the readily available trading markets and the review of
any contractual restrictions. Accordingly, the Board of Trustees is responsible
for developing and establishing the guidelines and procedures for determining
the liquidity of Rule 144A securities. As allowed by Rule 144A, the Board of
Trustees of the Fund has delegated the day-to-day function of determining the
liquidity of Rule 144A securities to the adviser. The Board retains the
responsibility to monitor the implementation of the guidelines and procedures it
has adopted.
7
<PAGE>
Because the secondary market for such securities is limited to certain qualified
institutional investors, the liquidity of such securities may be limited
accordingly and the Fund may, from time to time, hold a Rule 144A or other
security that is illiquid. In such an event, the Fund managers will consider
appropriate remedies to minimize the effect on the Fund's liquidity.
SHORT-TERM SECURITIES
In order to meet anticipated redemptions, to hold pending the purchase of
additional securities for the Fund's portfolio, or, in some cases, for temporary
defensive purposes, the Fund may invest a portion of its assets in money market
and other short-term securities.
Examples of those securities include:
. Securities issued or guaranteed by the U.S. government and its agencies and
instrumentalities;
. Commercial Paper;
. Certificates of Deposit and Euro Dollar Certificates of Deposit;
. Bankers' Acceptances;
. Short-term notes, bonds, debentures or other debt instruments; and
. Repurchase agreements.
In addition, the Fund may invest up to 5% of its total assets in any money
market fund, including those advised by the Adviser.
FUTURES AND OPTIONS
The Fund may enter into futures contracts, options or options on futures
contracts. Generally, futures transactions will be used to:
. Protect against a decline in market value of the Fund's securities (taking
a short futures position);
. Protect against the risk of an increase in market value for securities in
which the Fund generally invests at a time when the Fund is not fully
invested (taking a long futures position); and
. Provide a temporary substitute for the purchase of an individual security
that may not be purchased in an orderly fashion.
Some future and options strategies, such as selling futures, buying puts and
writing calls, hedge the Fund's investments against price fluctuations. Other
strategies, such as buying futures, writing puts and buying calls, tend to
increase market exposure.
8
<PAGE>
Although other techniques may be used to control the Fund's exposure to market
fluctuations, the use of futures contracts may be a more effective means of
hedging this exposure. While the Fund pays brokerage commissions in connection
with opening and closing out futures positions, these costs are lower than the
transaction costs incurred in the purchase and sale of the underlying
securities.
For example, the sale of a future by the Fund means the Fund becomes obligated
to deliver the security (or securities, in the case of an index future) at a
specified price on a specified date. The purchase of a future means the Fund
becomes obligated to buy the security (or securities) at a specified price on a
specified date. Futures contracts provide for the sale by one party and purchase
by another party of a specific security at a specified future time and price.
The Fund managers may engage in futures and options transactions based on
securities indices that are consistent with the Fund's investment objectives. An
example of an index that may be used is the S&P 500 Index. The managers also may
engage in futures and options transactions based on specific securities, such as
U.S. Treasury bonds or notes. Futures contracts are traded on national futures
exchanges. Futures exchanges and trading are regulated under the Commodity
Exchange Act by the Commodity Futures Trading Commission (CFTC), a U.S.
government agency.
Index futures contracts differ from traditional futures contracts in that when
delivery takes place, no stocks or bonds change hands. Instead, these contracts
settle in cash at the spot market value of the index. Although other types of
futures contracts by their terms call for actual delivery or acceptance of the
underlying securities, in most cases the contracts are closed out before the
settlement date. A futures position may be closed by taking an opposite position
in an identical contract (i.e., buying a contract that has previously been sold
or selling a contract that has previously been bought).
Unlike when the Fund purchases or sells a bond, no price is paid or received by
the Fund upon the purchase or sale of the future. Initially, the Fund will be
required to deposit an amount of cash or securities equal to a varying specified
percentage of the contract amount. This amount is known as initial margin. The
margin deposit is intended to ensure completion of the contract (delivery or
acceptance of the underlying security) if it is not terminated prior to the
specified delivery date. A margin deposit does not constitute margin
transactions for purposes of the Fund's investment restrictions. Minimum initial
margin requirements are established by the futures exchanges and may be revised.
In addition, brokers may establish margin deposit requirements that are higher
than the exchange minimums. Cash held in the margin account is not income-
producing. Subsequent payments to and from the broker, called variation margin,
will be made on a daily basis as the price of the underlying debt securities or
index fluctuates, making the future more or less valuable, a process known as
marking the contract to market. Changes in variation margin are recorded by the
Fund as unrealized gains or losses. At any time prior to expiration of the
future, the Fund may elect to close the position by taking an opposite position
that will operate to terminate its position in the future. A final determination
of variation margin is then made, additional cash is required to be paid by or
released to the Fund, and the Fund realizes a loss or gain.
9
<PAGE>
Risks Related to Futures and Options Transactions
Futures and options prices can be volatile, and trading in these markets
involves certain risks. If the Fund's managers apply a hedge at an inappropriate
time or judge interest rate or equity market trends incorrectly, futures and
options strategies may lower the Fund's return.
The Fund could suffer losses if it is unable to close out its position because
of an illiquid secondary market. Futures contracts may be closed out only on an
exchange that provides a secondary market for these contracts, and there is no
assurance that a liquid secondary market will exist for any particular futures
contract at any particular time. Consequently, it may not be possible to close a
futures position when the Fund's managers consider it appropriate or desirable
to do so. In the event of adverse price movements, the Fund would be required to
continue making daily cash payments to maintain its required margin. If the Fund
had insufficient cash, it might have to sell portfolio securities to meet daily
margin requirements at a time when the Fund's managers would not otherwise elect
to do so. In addition, the Fund may be required to deliver or take delivery of
instruments underlying futures contracts it holds. The Fund's managers will seek
to minimize these risks by limiting the contracts entered into on behalf of the
Fund to those traded on national futures exchanges and for which there appears
to be a liquid secondary market.
The Fund could suffer losses if the prices of its futures and options positions
were poorly correlated with its other investments, or if securities underlying
futures contracts purchased by the Fund had different maturities than those of
the portfolio securities being hedged. Such imperfect correlation may give rise
to circumstances in which the Fund loses money on a futures contract at the same
time that it experiences a decline in the value of its hedged portfolio
securities. The Fund also could lose margin payments it has deposited with a
margin broker, if, for example, the broker became bankrupt.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of the trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond the limit. However, the daily limit
governs only price movement during a particular trading day and, therefore, does
not limit potential losses. In addition, the daily limit may prevent liquidation
of unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
Options on Futures
By purchasing an option on a futures contract, the Fund obtains the right, but
not the obligation, to sell the futures contract (a put option) or to buy the
contract (a call option) at a fixed strike price. The Fund can terminate its
position in a put option by allowing it to expire or by exercising the option.
If the option is exercised, the Fund completes the sale of the underlying
security at the strike price. Purchasing an option on a futures contract does
not require the Fund to make margin payments unless the option is exercised.
10
<PAGE>
Although they do not currently intend to do so, the Fund may write (or sell)
call options that obligate them to sell (or deliver) the option's underlying
instrument upon exercise of the option. While the receipt of option premiums
would mitigate the effects of price declines, the Fund would give up some
ability to participate in a price increase on the underlying security. If the
Fund were to engage in options transactions, it would own the futures contract
at the time a call were written and would keep the contract open until the
obligation to deliver it pursuant to the call expired.
Restrictions on the Use of Futures Contracts and Options
Under the Commodity Exchange Act, the Fund may enter into futures and options
transactions (a) for hedging purposes without regard to the percentage of assets
committed to initial margin and option premiums or (b) for purposes other than
hedging, provided that assets committed to initial margin and option premiums do
not exceed 5% of the Fund's total assets. To the extent required by law, the
Fund will segregate cash or securities on its records in an amount sufficient to
cover its obligations under the futures contracts and options.
FORWARD CURRENCY EXCHANGE CONTRACTS
The Fund may purchase and sell foreign currency on a spot (i.e., cash) basis and
may engage in forward currency contracts, currency options and futures
transactions for hedging or any other lawful purpose. See "Derivative Securities
on page 5."
The Fund expects to use forward contracts under two circumstances:
(1) When the Fund's managers wish to lock in the U.S. dollar price of a
security when the Fund is purchasing or selling a security denominated in a
foreign currency, the Fund would be able to enter into a forward contract to do
so; or
(2) When the Fund's managers believe that the currency of a particular foreign
country may suffer a substantial decline against the U.S. dollar, the Fund would
be able to enter into a forward contract to sell foreign currency for a fixed
U.S. dollar amount approximating the value of some or all of its portfolio
securities either denominated in, or whose value is tied to, such foreign
currency.
In the first circumstance, when the Fund enters into a trade for the purchase or
sale of a security denominated in a foreign currency, it may be desirable to
establish (lock in) the U.S. dollar cost or proceeds. By entering into forward
contracts in U.S. dollars for the purchase or sale of a foreign currency
involved in an underlying security transaction, the Fund will be able to protect
itself against a possible loss between trade and settlement dates resulting from
the adverse change in the relationship between the U.S. dollar at the subject
foreign currency.
Under the second circumstance, when the Fund's managers believe that the
currency of a particular country may suffer a substantial decline relative to
the U.S. dollar, the Fund could enter into a foreign contract to sell for a
fixed dollar amount the amount in foreign currencies approximating the value of
some or all of its portfolio securities either denominated in, or whose value is
tied to, such foreign currency. The Fund will segregate on its records cash or
securities in an amount sufficient to cover its obligations under the contract.
11
<PAGE>
The precise matching of forward contracts in the amounts and values of
securities involved generally would not be possible because the future values of
such foreign currencies will change as a consequence of market movements in the
values of those securities between the date the forward contract is entered into
and the date it matures. Predicting short-term currency market movements is
extremely difficult, and the successful execution of short-term hedging strategy
is highly uncertain. The Fund's managers do not intend to enter into such
contracts on a regular basis. Normally, consideration of the prospect for
currency parities will be incorporated into the long-term investment decisions
made with respect to overall diversification strategies. However, the Adviser
believes that it is important to have flexibility to enter into such forward
contracts when they determine that the Fund's best interests may be served.
At the maturity of the forward contract, the Fund may either sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and terminate the obligation to deliver the foreign currency by
purchasing an offsetting forward contract with the same currency trader
obligating the Fund to purchase, on the same maturity date, the same amount of
the foreign currency.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of the forward contract. Accordingly, it
may be necessary for the Fund to purchase additional foreign currency on the
spot market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Fund is obligated to
deliver and if a decision is made to sell the security and make delivery of the
foreign currency the Fund is obligated to deliver.
INVESTMENT POLICIES
Unless otherwise indicated, with the exception of the percentage limitations on
borrowing, the following restrictions apply at the time transactions are entered
into. Accordingly, any later increase or decrease beyond the specified
limitation resulting from a change in the Fund's net assets will not be
considered in determining whether it has complied with its investment
restrictions.
FUNDAMENTAL INVESTMENT POLICIES
The Fund is subject to the following investment restrictions that are
fundamental and may not be changed without approval of a majority of the
outstanding votes of shareholders of the Fund, as determined in accordance with
the Investment Company Act.
Senior Securities. The Fund may not issue senior securities, except as permitted
under the Investment Company Act.
Borrowing. The Fund may not borrow money, except for temporary or emergency
purposes (not for leveraging or investment) in an amount not exceeding 33 1/3%
of the Fund's total assets.
Lending. The Fund may not lend any security or make any other loan if, as a
result, more than 33 1/3% of the Fund's total assets would be lent to other
parties, except (i) through the purchase
12
<PAGE>
of debt securities in accordance with its investment objectives, policies and
limitations, or (ii) by engaging in repurchase agreements with respect to
portfolio securities.
Real Estate. The Fund may not purchase or sell real estate unless acquired as a
result of ownership of securities or other instruments. This policy shall not
prevent the Fund from investing in securities or other instruments backed by
real estate or securities of companies that deal in real estate or are engaged
in the real estate business.
Underwriting. The Fund may not act as an underwriter of securities issued by
others, except to the extent that the Fund may be considered an underwriter
within the meaning of the Securities Act of 1933 in the disposition of
restricted securities.
Commodities. The Fund may not purchase or sell physical commodities unless
acquired as a result of ownership of securities or other instruments, provided
that this limitation shall not prohibit the Fund from purchasing or selling
options and futures contracts or from investing in securities or other
instruments backed by physical commodities.
Control. The Fund may not invest for purposes of exercising control over
management.
NONFUNDAMENTAL INVESTMENT POLICIES
In addition, the Fund is subject to the following additional investment
restrictions that are not fundamental and may be changed by the Board of
Trustees.
Borrowings. The Fund may not purchase additional investment securities at any
time during which outstanding borrowings exceed 5% of the total assets of the
Fund.
Liquidity. The Fund may not purchase any security or enter into a repurchase
agreement if, as a result, more than 15% of its net assets would be invested in
repurchase agreements not entitling the holder to payment of principal and
interest within seven days and in securities that are illiquid by virtue of
legal or contractual restrictions on resale or the absence of a readily
available market.
Short Sales. The Fund may not sell securities short unless it owns or has the
right to obtain securities equivalent in kind and amount to the securities sold
short, and provided that transactions in futures contracts and options are not
deemed to constitute selling securities short.
Margin. The Fund may not purchase securities on margin, except to obtain such
short-term credits as are necessary for the clearance of transactions and
provided that margin payments in connection with futures contracts and options
on futures contracts shall not constitute purchasing securities on margin.
Futures and Options. The Fund may enter into futures contracts, and write and
buy put and call options relating to futures contracts. The Fund may not,
however, enter into leveraged futures transactions if it would be possible for
the Fund to lose more money than it invested.
Issuers with Limited Operating Histories. The Fund may invest up to 5% of its
assets in the securities of issuers with limited operating histories. An issuer
is considered to have a limited
13
<PAGE>
operating history if that issuer has a record of less than three years of
continuous operation. Periods of capital formation, incubation, consolidations,
and research and development may be considered in determining whether a
particular issuer has a record of three years of continuous operation.
The Investment Company Act imposes certain additional restrictions upon
acquisition by the Fund of securities issued by insurance companies, broker-
dealers, underwriters or investment advisers, and upon transactions with
affiliated persons as therein defined. It also defines and forbids the creation
of cross and circular ownership. Neither the SEC nor any other agency of the
federal or state government participates in or supervises the management of the
funds or their investment practices or policies.
For purposes of determining industry groups in connection with this restriction,
the SEC ordinarily uses the Standard Industry Classification codes developed by
the U.S. Office of Management and Budget. In the interest of ensuring adequate
diversification, the funds monitor industry concentration using a more
restrictive list of industry groups than that recommended by the SEC. The
adviser believes that these classifications are reasonable and are not so broad
that the primary economic characteristics of the companies in a single class are
materially different. The use of these restrictive industry classifications may,
however, cause the funds to forego investment possibilities that may otherwise
be available to them under the Investment Company Act.
PORTFOLIO TURNOVER
The Fund's managers will purchase and sell securities without regard to the
length of time the security has been held. Accordingly, the Fund's rate of
portfolio turnover may be substantial.
The Fund's managers intend to purchase a given security whenever they believe it
will contribute to the stated objective of the Fund. In order to achieve the
Fund's investment objectives, the managers may sell a given security, no matter
how long or how short a period it has been held in the portfolio, and no matter
whether the sale is at a gain or at a loss, if the managers believe that the
security is not fulfilling its purpose, either because, among other things, it
did not live up to the managers' expectations, or because it may be replaced
with another security holding greater promise, or because it has reached its
optimum potential, or because of a change in the circumstances of a particular
company or industry or in general economic conditions, or because of some
combination of such reasons.
Because investment decisions are based on the anticipated contribution of the
security in question to the Fund's objectives, the managers believe that the
rate of portfolio turnover is irrelevant when they believe a change is in order
to achieve the objectives. As a result, the Fund's annual portfolio turnover
rate cannot be anticipated and may be higher than other mutual funds with
similar investment objectives. Higher turnover would generate correspondingly
greater brokerage commissions, which is a cost the Fund pays directly. Portfolio
turnover also may affect the character of capital gains realized and distributed
by the Fund, if any, because short-term capital gains are taxable as ordinary
income. This disclosure regarding portfolio turnover is a statement of
fundamental policy and may be changed only by a vote of the shareholders.
14
<PAGE>
Because the managers do not take portfolio turnover rate into account in making
investment decisions, (1) the managers have no intention of accomplishing any
particular rate of portfolio turnover, whether high or low, and (2) the
portfolio turnover rates in the past should not be considered as representative
of the rates that will be attained in the future.
MANAGEMENT
TRUSTEES AND OFFICERS
The Trust's Board of Trustees has general supervisory responsibilities of RREEF
Rreal Estate Securities Fund and supervises the Adviser's activities.
The names of the Trustees and executive officers of the Trust are shown below.
Each Trustee who is an "interested person" of the Trust, as defined in the
Investment Company Act, is indicated by an asterisk.
<TABLE>
<CAPTION>
Address and Principal Occupation(s)
Name Fund Position Age (9/99) During Past 5 Years**
- ---- ------------- ---------- ---------------------
<S> <C> <C> <C>
Kim G. Redding* Trustee, Chief 44 875 N. Michigan Avenue, Chicago, IL 60611
Executive
Officer and
President Mr. Redding joined the Adviser in 1993. He
is currently a member of RREEF America,
LLC, in charge of the real estate
securities adviser, operations, and
co-manager of the Fund. Prior to joining
RREEF, Mr. Redding was the Principal for
K.G. Redding & Associates and President of
Redding, Melchor & Company, both real
estate investment advisers in California.
Peter J. Broccolo* Trustee, Vice 42 875 N. Michigan Avenue, 41st floor,
President and Chicago, Illinois 60611.
Assistant
Secretary Mr. Broccolo joined the Adviser in 1993.
He currently is a member of RREEF America,
LLC. Prior to joining RREEF, he was a Vice
President with LaSalle Partners from 1985
to 1993 and a Vice President of First
Chicago Corp., in Real Estate Lending from
1978 to 1985.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Address and Principal Occupation(s)
Name Fund Position Age (9/99) During Past 5 Years**
- ---- ------------- ---------- ---------------------
<S> <C> <C> <C>
Karen J. Knudson* Vice President 41 875 N. Michigan Avenue, 41st floor,
Chicago, Illinois 60611.
Ms. Knudson joined RREEF in 1995. Prior to
joining RREEF, Ms. Knudson was Senior Vice
President and CFO of Security Capital Group
and an advisor to two NYSE listed REITS,
from January 1993 to January 1995. She
also acted as Real Estate Investment
Manager, Senior Vice President/Chief
Financial Officer of Bailard, Biehl and
Kaiser from November 1983 to January 1993.
Paula M. Ferkull* Treasurer and 48 875 N. Michigan Avenue, 41st floor,
Secretary Chicago, Illinois 60611.
Ms. Ferkull joined RREEF in 1979. She is
currently a Member of RREEF America, LLC.
Richard W. Burke Trustee
Nicholas C. Babson Trustee
Trustee V Trustee
</TABLE>
The Fund does not pay any direct remuneration to any Trustee who is an
"interested person" of the Fund, or any officer employed by the Adviser or its
affiliates. Trustees of the Fund who are not "interested persons" are paid an
annual retainer of $6,000, a fee of $1,000 per meeting attended and a fee of
$200 for each telephone conference meeting, plus expenses, with a maximum annual
fee of $10,000 per Trustee.
COMPENSATION OF TRUSTEES
The Trustees of the Trust did not receive any compensation during the last
fiscal year.
16
<PAGE>
THE FUND'S PRINCIPAL SHAREHOLDERS
As of DATE, the following persons owned five percent (5%) or more of the Fund:
Name and Address Percent Outstanding
- ---------------- -------------------
NAME PERCENT
As of [ ], the officers, directors and members of the Board of Trustees of the
Trust owned [ ] % of the Fund.
INVESTMENT ADVISER
The Adviser has provided real estate investment management services to
institutional investors since 1975, and has been an investment adviser of real
estate securities since 1993. A description of the responsibilities of the
Adviser appears in the Prospectus under the heading Management.
For the services provided to the Fund, the Adviser receives an annual fee based
on 1.00% of the average net assets of the Fund, payable monthly.
On the first business day of each month, the Fund pays the Adviser for the
previous month at the specified rate. The fee for the previous month is
calculated by multiplying the applicable fee for the Fund by the aggregate
average daily closing value of the Fund's net assets during the previous month.
This number is then multiplied by a fraction, the numerator of which is the
number of days in the previous month and the denominator of which is 365 (366 in
leap years).
The management agreement shall continue in effect until the earlier of the
expiration of two years from the date of its execution, and for as long
thereafter as its continuance is specifically approved, at least annually by (1)
the Trust's Board of Trustees, or by the vote of a majority of outstanding votes
(as defined in the Investment Company Act) and (2) the vote of a majority of the
Trustees of the Fund who are not parties to the agreement or interested persons
of the Adviser, cast in person at a meeting called for the purpose of voting on
such approval.
The management agreement provides that it may be terminated at any time without
payment of any penalty by the Trust's Board of Trustees, or by a vote of a
majority of outstanding votes, on 60 days' written notice to the Adviser, and
that it shall be automatically terminated if it is assigned.
The management agreement provides that the Adviser shall not be liable to the
Fund or its shareholders for anything other than willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations and duties. The
management agreement also provides that the Adviser and its officers, directors
and employees may engage in other business, devote time and attention to any
other business whether of a similar or dissimilar nature, and render services to
others.
17
<PAGE>
Certain investments may be appropriate for the Fund and also for other clients
advised by the Adviser. Investment decisions for the Fund and other clients are
made with a view to achieving their respective investment objectives after
consideration of such factors as their current holdings, availability of cash
for investment and the size of their investment generally. A particular security
may be bought or sold for only one client or the Fund, or in different amounts
and at different times for more than one but less than all clients or the Fund.
In addition, purchases or sales of the same security may be made for two or more
clients or the Fund on the same date. Such transactions will be allocated among
clients in a manner believed by the Adviser to be equitable to each. In some
cases this procedure could have an adverse effect on the price or amount of the
securities purchased or sold by the Fund.
OTHER ADVISORY RELATIONSHIPS
In addition to managing the funds, the Adviser also serves as an investment
adviser to the American Century Real Estate Fund and institutional accounts
investing in real estate securities and has net assets under management of $
________________, as of ________________, 1999.
TRANSFER AGENT AND ADMINISTRATOR
Sunstone Financial Group, Inc., serves as Transfer Agent and dividend-paying
agent for the Fund. It provides physical facilities, computer hardware and
software and personnel, for the day-to-day administration of the Fund and of the
Adviser. The Adviser pays the Transfer Agent and Administrator for such
services.
From time to time, special services may be offered to shareholders who maintain
higher share balances in the Fund. These services may include the waiver of
minimum investment requirements, expedited confirmation of shareholder
transactions, newsletters and a team of personal representatives. Any expenses
associated with these special services will be paid by the Adviser.
DISTRIBUTOR
The Fund's shares are distributed by Sunstone Distribution Services, LLC, a
registered broker-dealer.
The distributor is the principal underwriter of the Fund's shares. The
distributor makes a continuous, best-efforts underwriting of the Fund's shares.
This means that the distributor has no liability for unsold shares.
OTHER SERVICE PROVIDERS
CUSTODIAN BANKS
UMB Bank, N.A., 928 Grand Boulevard, 10/th/ floor, Kansas City, Missouri
64106, serves as custodian of the assets of the Fund. The custodian takes no
part in determining the investment policies of the Fund or in deciding which
securities are purchased or sold by the Fund. The
18
<PAGE>
Fund, however, may invest in certain obligations of the custodian and may
purchase or sell certain securities from or to the custodian.
INDEPENDENT AUDITORS
Deloitte & Touche LLP is the independent auditor of the Fund. The address of
Deloitte & Touche LLP is Two Prudential Plaza, 180 North Stetson Avenue,
Chicago, Illinois 60601. As the independent auditor of the Fund, Deloitte &
Touche provides services including (1) audit of the annual financial statements
for the Fund, (2) assistance and consultation in connection with SEC filings,
and (3) review of the annual federal income tax return filed for the Fund.
LEGAL COUNSEL
The firm of D'Ancona & Pflaum LLC, 111 East Wacker Drive, Suite 2800, Chicago,
Illinois 60601, acts as legal counsel to the Fund.
OTHER INFORMATION ABOUT THE FUND
BROKERAGE ALLOCATION
Subject to policies established by the Board of Trustees of the Trust, the
Adviser is responsible for the Trust's portfolio decisions and the placing of
the Trust's portfolio transactions. In placing portfolio transactions, the
Adviser seeks the best qualitative execution for the Trust, taking into account
such factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer. The Adviser generally seeks favorable prices and commission
rates that are reasonable in relation to the benefits received.
Ongoing portfolio brokerage decisions for the Fund are made or recommended by
the Adviser, including the commission rates at which transactions for the Fund
will be effected, with the objective of obtaining the most favorable price and
market for the execution of each transaction. In seeking the most favorable
price and market for execution, the Adviser evaluates a wide range of criteria,
including the broker's commission rate, execution, capability, positioning and
distribution capabilities, back office efficiency, ability to handle difficult
trades, financial stability and prior performance. When circumstances relating
to a proposed transaction indicate that a particular broker or dealer is in a
position to obtain the best execution, the order generally is placed with that
broker or dealer. This may or may not be a broker or dealer which has provided
investment information and research services to the Adviser. The Adviser may not
always place brokerage transactions on the basis of the lowest commission rate
available for a particular transaction.
Research information received from brokers or dealers covers a wide range of
topics, including the economic outlook, the political environment, demographic
and social trends, and individual company and industry analysis. Subject to the
requirement of seeking the best available prices and execution, the Adviser may,
in circumstances in which two or more broker-dealers are in a position to offer
comparable prices and execution, give preference to broker-dealers which have
19
<PAGE>
provided research, statistical, and other related services to the Adviser for
the benefit of the Fund.
Since the Adviser may be managing accounts with similar investment objectives,
the Adviser may aggregate orders for securities for such accounts. In such
event, allocation of the securities so purchased or sold, as well as expenses
incurred in the transaction, are made by the Adviser in the manner it considers
to be the most equitable and consistent with its fiduciary obligations to such
accounts.
The Adviser reserves the right, without notice, to enter into arrangements to
receive brokerage and research products and services in exchange for the
direction of brokerage business to a particular broker or brokers. Such products
and services may include research materials, or equipment and software allowing
access to research-related computer services, such as quotation services, and
may be used for both research and other purposes, including administration and
marketing. The Adviser makes a good faith effort to determine the relative
proportions of such products or services which may be attributed to research.
The portion attributable to research may be paid through client brokerage
commissions and the non-research portion will be paid in cash by the Adviser.
The Adviser uses such arrangements to enhance the advice provided to clients.
Because all clients are managed in the same manner, no one client receives more
benefit than any other from these arrangements with the broker. The research
provided by broker-dealers may be used in servicing any or all of the Adviser's
clients and may be used in connection with accounts other than those which pay
commissions to the broker-dealer providing the research.
Over-the-counter transactions will be placed either directly with principal
market makers or with broker-dealers, if the same or a better price, including
commissions and executions, is available. Fixed income securities are normally
purchased directly from the issuer, an underwriter or a market maker. Purchases
include a concession paid by the issuer to the underwriter and the purchase
price paid to market makers may include the spread between the bid and asked
prices.
The Adviser uses such arrangements to enhance the advice provided to the Fund.
Of course, in directing brokerage transactions, the Adviser acts in accordance
with its duty to seek best price and execution and will not continue any
arrangements if the Adviser determines that such arrangements are no longer in
the best interest of the Fund.
CODE OF ETHICS
The Fund has a Code of Ethics designed to ensure that the interests of the
Fund's shareholders come before the interests of the people who manage the Fund.
Among other provisions, the Code of Ethics prohibits portfolio managers and
other investment personnel from buying securities in an initial public offering
or from profiting from the purchase and sale of the same security within 60
calendar days. In addition, the Code of Ethics requires portfolio managers and
other employees with access to information about the purchase or sale of
securities by the Fund, to obtain approval before executing permitted personal
trades.
20
<PAGE>
DISTRIBUTION PLAN
The Board of Trustees and initial shareholder of the Fund have approved and
entered into a Master Distribution and Shareholder Services Plan. Under the
unified management fee, the Adviser pays all distribution costs. The Fund does
not directly pay for any distribution costs. The Plan is described below.
In adopting the Plan, the Board of Trustees (including a majority of independent
trustees) determined that there was a reasonable likelihood that the Plan would
benefit the Fund and the shareholders of the affected class. Pursuant to Rule
12b-1, information with respect to revenues and expenses under the Plan is
presented to the Board of Trustees quarterly for its consideration in connection
with its deliberations as to the continuance of the Plan. Continuance of the
Plan must be approved by the Board of Trustees (including a majority of the
independent trustees) annually. The Plan may be amended by a vote of the Board
of Trustees (including a majority of the independent trustees), except that the
Plan may not be amended to require the Fund to make any payment of expenses
without majority approval of the shareholders. The Plan terminates automatically
in the event of an assignment and may be terminated upon a vote of a majority of
the independent trustees or by vote of a majority of the outstanding voting
securities.
All fees paid under the Plan will be made in accordance with Section 26 of the
Rules of Fair Practice of the National Association of Securities Dealers (NASD).
The Fund is made available to participants in employer-sponsored retirement or
savings plans and to persons purchasing through financial intermediaries such as
banks, broker-dealers and insurance companies. The Fund's distributor enters
into contracts with various banks, broker-dealers, insurance companies and other
financial intermediaries, with respect to the sale of the Fund's shares and/or
the use of the Fund's shares in various investment products or in connection
with various financial services.
Certain recordkeeping and administrative services that are provided by the
Fund's transfer agent may be performed by a plan sponsor (or its agents) or by a
financial intermediary for shareholders. In addition to such services, the
financial intermediaries provide various distribution services.
Payments may be made by the Adviser for a variety of shareholder services,
including, but not limited to (a) receiving, aggregating and processing
purchase, exchange and redemption requests from beneficial owners (including
contract owners of insurance products that utilize the funds as underlying
investment media) of shares and placing purchase, exchange and redemption orders
with the Fund's distributor; (b) providing shareholders with a service that
invests the assets of their accounts in shares pursuant to specific or pre-
authorized instructions; (c) processing dividend payments from the Fund on
behalf of shareholders and assisting shareholders in changing dividend options,
account designations and addresses; (d) providing and maintaining elective
services such as check writing and wire transfer services; (e) acting as
shareholder of record and nominee for beneficial owners; (f) maintaining account
records for shareholders and/or other beneficial owners; (g) issuing
confirmations of transactions; (h) providing subaccounting with respect to
shares beneficially owned by customers of third parties or
21
<PAGE>
providing the information to the Fund as necessary for such subaccounting; (i)
preparing and forwarding shareholder communications from the Fund (such as
proxies, shareholder reports, annual and semiannual financial statements, and
dividend, distribution and tax notices) to shareholders and/or other beneficial
owners; and (j) providing other similar administrative and sub-transfer agency
services. Shareholder services do not include those activities and expenses that
are primarily intended to result in the sale of additional shares of the Fund.
Distribution services include any activity undertaken or expense incurred that
is primarily intended to result in the sale of shares, which services may
include but are not limited to, (a) the payment of sales commissions, ongoing
commissions and other payments to brokers, dealers, financial institutions or
others who sell shares pursuant to Selling Agreements; (b) compensation to
registered representatives or other employees of distributor who engage in or
support distribution of the Fund's shares; (c) compensation to, and expenses
(including overhead and telephone expenses) of the distributor; (d) the printing
of prospectuses, statements of additional information and reports for
other-than-existing shareholders; (e) the preparation, printing and distribution
of sales literature and advertising materials provided to the Fund's
shareholders and prospective shareholders; (f) receiving and answering
correspondence from prospective shareholders, including distributing
prospectuses, statements of additional information and shareholder reports; (g)
the providing of facilities to answer questions from prospective investors about
Fund shares; (h) complying with federal and state securities laws pertaining to
the sale of Fund shares; (i) assisting investors in completing application forms
and selecting dividend and other account options; (j) the providing of other
reasonable assistance in connection with the distribution of Fund shares; (k)
the organizing and conducting of sales seminars and payments in the form of
transactional and compensation or promotional incentives; (l) profit on the
foregoing; (m) the payment of "service fees" for the provision of personal,
continuing services to investors, as contemplated by the Rules of Fair Practice
of the NASD; and (n) such other distribution and services activities as the
Adviser determines may be paid for by the funds pursuant to the terms of the
Plan and in accordance with Rule 12b-1 of the Investment Company Act.
INFORMATION ABOUT FUND SHARES
THE SHARES OF THE TRUST
The Trust Agreement permits the Trustees to issue an unlimited number of shares
of beneficial interest of separate series without par value. In addition, the
Trust Agreement permits the Trustees to authorize multiple series. Shares of one
non-diversified series have been authorized by the Trustees, which shares
constitute the interests in RREEF Rreal Estate Securities Fund (the "Fund").
Each share, when issued and paid for in accordance with the terms of the
offering, is fully paid and non-assessable. Shares have no preemptive or
subscription rights and are freely transferable. Each of the Fund's shares
represents an interest in the assets of the Fund issuing the share and has
identical voting, dividend, liquidation and other rights, and the same terms and
conditions as any other shares except that if the Fund is authorized to issue
additional series or classes (1) each dollar of net asset value per share is
entitled to one vote, (2) the expenses related to a particular class, such as
those related to the distribution of each class and the transfer agency expenses
of each class are borne solely by each such class, and (3) each class of shares
votes separately with
22
<PAGE>
respect to provisions of the Rule 12b-1 Distribution Plan, which pertains to a
particular class, and other matters for which separate class voting is
appropriate under applicable law. Each fractional share has the same rights, in
proportion, as a full share. Shares do not have cumulative voting rights;
therefore, the holders of more than 50% of the voting power of the Trust can
elect all of the Trustees of the Trust.
Rule 18f-2 of the Investment Company Act, provides that any matter required to
be submitted under the provisions of the Act or applicable state law or
otherwise to the shareholders of the outstanding voting securities of an
investment company, such as the Trust, will not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each series affected by such matter. Rule 18f-2 further
provides that a series shall be deemed to be affected by a matter unless it is
clear that the interests of each series in the matter are identical, or that the
matter does not affect any interest of such series. Rule 18f-2 exempts the
selection of independent accountants and the election of Board members from the
separate voting requirements of the Rule.
The Trust does not hold annual shareholder meetings, but does hold special
shareholder meetings when the Board of Trustees believes it is necessary or when
required by law. The Trust will hold a special meeting when requested in writing
by the holders of at least 10% of the shares eligible to vote at a meeting. In
addition, subject to certain conditions, shareholders of the Fund may apply to
the Fund to communicate with other shareholders to request a shareholders'
meeting to vote upon the removal of a Trustee or Trustees.
Under Delaware law, the shareholders of the Fund are not personally liable for
the obligations of the Fund; a shareholder is entitled to the same limitation of
personal liability extended to shareholders of corporations.
Upon sixty days' prior written notice to shareholders, the Fund may make
redemption payments in whole or in part in securities or other property if the
Trustees determine that existing conditions make cash payments undesirable.
VALUATION OF THE FUND'S SECURITIES
The Fund's net asset value per share ("NAV") is calculated as of the close of
business of the New York Stock Exchange (the "Exchange"), usually at 4 p.m.
Eastern time on each day the Exchange is open for business. The Exchange
typically observes the following holidays: New Year's Day, Martin Luther King
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. Although the Fund expects the same
holidays to be observed in the future, the Exchange may modify its holiday
schedule at any time.
The Fund's NAV is calculated by adding the value of all portfolio securities and
other assets, deducting liabilities and dividing the result by the number of
shares outstanding. Expenses and interest earned on portfolio securities are
accrued daily.
The portfolio securities of the Fund, except as otherwise noted, listed or
traded on a domestic securities exchange, are valued at the last sale price on
that exchange. Portfolio securities
23
<PAGE>
primarily traded on foreign securities exchanges generally are valued at the
preceding closing values of such securities on the exchange where primarily
traded. If no sale is reported, or if local convention or regulation so
provides, the mean of the latest bid and asked prices is used. Depending on
local convention or regulation, securities traded over-the-counter are priced at
the mean of the latest bid and asked prices, or at the last sale price. When
market quotations are not readily available, securities and other assets are
valued at fair value as determined in accordance with procedures adopted by the
Board of Trustees.
Debt securities not traded on a principal securities exchange are valued through
valuations obtained from a commercial pricing service or at the most recent mean
of the bid and asked prices provided by investment dealers in accordance with
procedures established by the Board of Trustees.
Debt securities maturing within 60 days of the valuation date may be valued at
cost, plus or minus any amortized discount or premium, unless the directors
determine that this would not result in fair valuation of a given security.
Other assets and securities for which quotations are not readily available are
valued in good faith at their fair value using methods approved by the Board of
Trustees.
TAXES
FEDERAL INCOME TAXES
The Fund intends to qualify annually as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). By
so qualifying, the Fund itself will be exempt from federal income taxes to the
extent that it distributes substantially all of its net investment income and
net realized capital gains (if any) to shareholders. If the Fund fails to
qualify as a regulated investment company, it will be liable for taxes,
significantly reducing its distributions to shareholders and eliminating
shareholders' ability to treat distributions of the Fund in the manner they were
realized by the Fund.
If Fund shares are purchased through taxable accounts, distributions of net
investment income and net short-term capital gains are taxable to you as
ordinary income. The dividends from net income may qualify for the 70%
dividends-received deduction for corporations to the extent that the Fund held
shares receiving the dividend for more than 45 days.
Distributions from gains on assets held longer than 12 months are taxable as
long-term gains regardless of the length of time you have held the shares.
However, you should note that any loss realized upon the sale or redemption of
shares held for six months or less will be treated as a long-term capital loss
to the extent of any distributions of long-term capital gains to you with
respect to such shares.
If you have not complied with certain provisions of the Internal Revenue Code
and regulations, either the Fund or your financial intermediary is required by
federal law to withhold and remit 31% of reportable payments (which may include
dividends, capital gains distributions and
24
<PAGE>
redemptions) to the IRS. Those regulations require you to certify that the
Social Security number or tax identification number you provide is correct and
that you are not subject to 31% withholding for previous under-reporting to the
IRS.
You will be asked to make the appropriate certification on your application.
Payments reported by us that omit your Social Security number or tax
identification number will subject us to a non-refundable penalty of $50, which
will be charged against your account if you fail to provide the Certification by
the time the report is filed, and is not refundable.
Redemption of shares of the Fund (including redemptions made in an exchange
transaction) will be a taxable transaction for federal income tax purposes, and
shareholders generally will recognize gain or loss in an amount equal to the
difference between the basis of the shares and the amount received. If a loss is
realized on the redemption of Fund shares, the reinvestment in additional Fund
shares within 30 days before or after the redemption may be subject to the "wash
sale" rules of the Code, resulting in a postponement of the recognition of such
loss for federal income tax purposes.
STATE AND LOCAL TAXES
Distributions also may be subject to state and local taxes, even if all or a
substantial part of such distributions are derived from interest on U.S.
government obligations which, if you received them directly, would be exempt
from state income tax. However, most but not all states allow this tax exemption
to pass through to fund shareholders when the Fund pays distributions to its
shareholders. You should consult your tax advisor about the tax status of such
distributions in your own state.
TAXATION OF CERTAIN MORTGAGE REITS
The Fund may invest in REITs that hold residual interests in real estate
mortgage investment conduits. Under Treasury regulations that have not yet been
issued, but may apply retroactively, a portion of the Fund's income from a REIT
that is attributable to the REIT's residual interest in a REMIC (referred to in
the Code as an "excess inclusion") will be subject to federal income tax in all
events. These regulations are also expected to provide that excess inclusion
income of a regulated investment company, such as the Fund, will be allocated to
shareholders of the regulated investment company in proportion to the dividends
received by them with the same consequences as if these shareholders held the
related REMIC residual interest directly. In general, excess inclusion income
allocated to shareholders (i) cannot be offset by net operating losses (subject
to a limited exception for certain thrift institutions) and (ii) will constitute
unrelated business taxable income to entities (including a qualified pension
plan, an individual retirement account, a 401(k) plan, a Keogh plan or other
tax-exempt entity) subject to tax on unrelated business income, thereby
potentially requiring such an entity that is allocated excess inclusion income,
and otherwise might be required to file a tax return, to file a tax return and
pay tax on some income. In addition, if at any time during any taxable year a
"disqualified organization" (as defined in the Code) is a record holder of a
share in a regulated investment company, then the regulated investment company
will be subject to a tax equal to that portion of
25
<PAGE>
its excess inclusion income for the taxable year that is allocable to the
disqualified organization, multiplied by the highest federal income tax rate
imposed on corporations.
HOW PERFORMANCE IN THE FUND IS CALCULATED
"Average annual total return," as defined by the SEC, is computed by finding the
average annual compounded rates of return (over the one and five year periods
and the period from initial public offering through the end of the Fund's most
recent fiscal year) that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1+T)n = ERV
Where: P = a hypothetical $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the applicable
period of the hypothetical $1,000 investment made at
the beginning of the applicable period.
The computation assumes that all dividends and distributions are reinvested at
the net asset value on the reinvestment dates and that a complete redemption
occurs at the end of the applicable period.
The Fund's investment performance will vary depending upon market conditions,
the composition of the Fund's portfolio and operating expenses of the Fund.
These factors and possible differences in the methods and time periods used in
calculating non-standardized investment performance should be considered when
comparing the Fund's performance to those of other investment companies or
investment vehicles. The risks associated with the Fund's investment objective,
policies and techniques should also be considered. At any time in the future,
investment performance may be higher or lower than past performance, and there
can be no assurance that any performance will continue.
The Fund performance may be compared with the performance of other mutual funds
tracked by mutual fund rating services or with other indices of market
performance. This may include comparisons with funds that, unlike the Fund, are
sold with a sales charge or deferred sales charge. Sources of economic data that
may be used for such comparisons may include, but are not limited to: U.S.
Treasury bill, note and bond yields, money market fund yields, U.S. government
debt and percentage held by foreigners, the U.S. money supply, not free
reserves, and yields on current-coupon GNMAs (source: Board of Governors of the
Federal Reserve System); the federal funds and discount rates (source: Federal
Reserve Bank of New York); yield curves for U.S. Treasury securities and AA/AAA-
rated corporate securities (source: Bloomberg Financial Markets); yield curves
for AAA-rated, tax-free municipal securities (source: Telerate); yield curves
for foreign government securities (sources: Bloomberg Financial Markets and Data
Resources, Inc.); total returns on foreign bonds (source: J.P. Morgan Securities
Inc.); various U.S. and foreign government reports; the junk bond market
(source: Data Resources, Inc.); the CRB Futures Index (source: Commodity Index
Report); the price of gold (sources: London a.m./p.m. fixing and New York Comex
Spot Price); rankings of any
26
<PAGE>
mutual fund or mutual fund category tracked by Lipper, Inc. or Morningstar,
Inc.; mutual fund rankings published in major, nationally distributed
periodicals; data provided by the Investment Company Institute; Ibbotson
Associates, Stocks, Bonds, Bills, and Inflation; major indices of stock market
performance; and indices and historical data supplied by major securities
brokerage or investment advisory firms. The Fund also may utilize reprints from
newspapers and magazines furnished by third parties to illustrate historical
performance or to provide general information about the Fund.
PERMISSIBLE ADVERTISING INFORMATION
From time to time, the Fund may, in addition to any other permissible
information, include the following types of information in advertisements,
supplemental sales literature and reports to shareholders: (1) discussions of
general economic or financial principles (such as the effects of compounding and
the benefits of dollar-cost averaging); (2) discussions of general economic
trends; (3) presentations of statistical data to supplement such discussions;
(4) descriptions of past or anticipated portfolio holdings for the Fund; (5)
descriptions of investment strategies for the Fund; (6) descriptions or
comparisons of various savings and investment products (including, but not
limited to, qualified retirement plans and individual stocks and bonds), which
may or may not include the Fund; (7) comparisons of investment products
(including the Fund) with relevant market or industry indices or other
appropriate benchmarks; (8) discussions of Fund rankings or ratings by
recognized rating organizations; and (9) testimonials describing the experience
of persons who have invested the Fund. The Fund also may include calculations,
such as hypothetical compounding examples, which describe hypothetical
investment results. Such performance examples will be based on an express set of
assumptions and are not indicative of the performance of the Fund.
EXPLANATION OF FIXED-INCOME SECURITIES RATINGS
As described in the Prospectus, the Fund may invest in fixed-income securities.
Those investments, however, are subject to certain credit quality restrictions,
as noted in the Prospectus. The following is a summary of the rating categories
referenced in the prospectus disclosure.
CORPORATE BOND RATINGS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
S&P Moody's Description
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
AAA Aaa These are the highest ratings assigned by S&P and Moody's to a debt
obligation and indicate an extremely strong capacity to pay interest
and repay principal.
- --------------------------------------------------------------------------------------------------------
AA Aa Debt rated in this category is considered to have a very strong
capacity to pay interest and repay principal. It differs from AAA/Aaa
issues only in a small degree.
- --------------------------------------------------------------------------------------------------------
A A Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher-rated categories.
- --------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
BBB Baa Debt rated BBB/Baa is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in
higher-rated categories.
- --------------------------------------------------------------------------------------------------------
BB Ba Debt rated BB/Ba has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial or Economic
conditions that could lead to inadequate capacity to meet timely
interest and principal payments. The BB rating category also is used
for debt subordinated to senior debt that is assigned an actual or
implied BBB- rating.
- --------------------------------------------------------------------------------------------------------
B B Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions will likely impair
capacity or willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied BB/Ba or BB-/Ba3 rating.
- --------------------------------------------------------------------------------------------------------
CCC Caa Debt rated CCC/Caa has a currently identifiable vulnerability to
default and is dependent upon favorable business, financial and
economic conditions to meet timely payment of interest and repayment
of principal. In the event of adverse business, financial or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal. The CCC/Caa rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied B or
B-/B3 rating.
- --------------------------------------------------------------------------------------------------------
CC Ca The rating CC/Ca typically is applied to debt subordinated to
senior debt that is assigned an actual or implied CCC/Caa rating.
- --------------------------------------------------------------------------------------------------------
C C The rating C typically is applied to debt subordinated to senior
debt, which is assigned an actual or implied CCC-Caa3 debt
rating. The C rating may be used to cover a situation where a
bankruptcy petition has been filed, but debt service payments are
continued.
- --------------------------------------------------------------------------------------------------------
CI - The rating CI is reserved for income bonds on which no interest
is being paid.
- --------------------------------------------------------------------------------------------------------
D D Debt rated D is in payment default. The D rating category is
used when interest payments or principal payments are not made
on the date due even if the applicable grace period has not
expired, unless S&P believes that such payments will be made
during such grace period. The D rating also will be used upon
the filing of a bankruptcy petition if debt service payments are
jeopardized.
- --------------------------------------------------------------------------------------------------------
</TABLE>
To provide more detailed indications of credit quality, the Standard & Poor's
ratings from AA to CCC may be modified by the addition of a plus or minus sign
to show relative standing within
28
<PAGE>
these major rating categories. Similarly, Moody's adds numerical modifiers (1,
2, 3) to designate relative standing within its major bond rating categories.
Fitch Investors Service, Inc. also rates bonds and uses a ratings system that is
substantially similar to that used by Standard & Poor's.
COMMERCIAL PAPER RATINGS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
S&P Moody's Description
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
A-1 Prime-1 This indicates that the degree of safety regarding timely payment is
strong. Standard & Poor's rates those issues determined
to possess extremely strong safety characteristics as A-1+.
- -------------------------------------------------------------------------------------------------
A-2 Prime-2 Capacity for timely payment on commercial paper is satisfactory, but
the relative degree of safety is not as high as for issues designated
A-1. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still
appropriated, may be more affected by external conditions. Ample
alternate liquidity is maintained.
- -------------------------------------------------------------------------------------------------
A-3 Prime-3 Satisfactory capacity for timely repayment. Issues that carry this
rating are somewhat more vulnerable to the adverse changes in
circumstances than obligations carrying the higher designations.
- -------------------------------------------------------------------------------------------------
</TABLE>
NOTE RATINGS
<TABLE>
<CAPTION>
S&P Moody's Description
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
SP-1 MIG-1; VMIG-1 Notes are of the highest quality enjoying strong protection from
established cash flows of funds for their servicing or from
established and Broad-based access to the market for refinancing, or
both.
- -------------------------------------------------------------------------------------------------
SP-2 MIG-2; VMIG-2 Notes are of high quality, with margins of protection ample, although
not so large as in the preceding group.
- -------------------------------------------------------------------------------------------------
SP-3 MIG-3; VMIG-3 Notes are of favorable quality, with all security elements accounted
for, but lacking the undeniable strength of the preceding grades.
Market access for refinancing, in particular, is likely to be less
well-established
- -------------------------------------------------------------------------------------------------
SP-4 MIG-4; VMIG-4 Notes are of adequate quality, carrying specific risk but having and
not distinctly or predominantly speculative.
- -------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
MORE INFORMATION ABOUT THE FUND
For more information about RREEF Rreal Estate Securities Fund, request a free
copy of the Statement of Additional Information or any existing Annual and Semi-
Annual Reports. The Statement of Additional Information provides more detailed
information about the Fund and its operations, investment restrictions, policies
and practices. Annual and Semi-Annual Reports to shareholders which discuss the
market conditions and investment strategies that significantly affect the Fund's
performance and provide additional information about the Fund's investments.
The Fund's Statement of Additional Information has been filed electronically
with the Securities and Exchange Commission (the "SEC") and is incorporated by
reference into this Prospectus.
YOU MAY REQUEST THESE DOCUMENTS
1 By Telephone. Call RREEF Rreal Estate Securities Fund toll-free at [1-800-
xxx-xxxx], Monday through Friday, 8 a.m. to 5 p.m. Central Time. You may
also call this number for shareholder inquiries.
2 Via The Internet. Visit the SEC Web site at www.sec.gov[, or visit our Web
-----------
site at WEB SITE ADDRESS].
3 From The SEC. You may obtain copies of the documents highlighted above, for
a duplicating fee, by writing the SEC's Public Reference Room, Washington
DC, 20549-6009. For more information call 1-800-SEC-0330.
4 By Mail. Specify the document you are requesting when writing to us:
RREEF Rreal Estate Securities Fund
c/o Sunstone Financial Group, Inc.
207 East Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202
Distributed by Sunstone Distributing Services, LLC.
30
<PAGE>
RREEF SECURITIES TRUST
RREEF RREAL ESTATE SECURITIES FUND
PART C. OTHER INFORMATION
-----------------
Item 23. EXHIBITS
- -------- --------
(a) Declaration of Trust.*
(b) By-Laws.*
(c) Not Applicable.
(d) Form of Investment Management Agreement.*
(e) Form of Distribution Agreement.*
(f) Not Applicable.
(g) Form of Custody Agreement.*
(h) (i) Form of Administration and Fund Accounting Agreement.*
(ii) Form of Transfer Agency Agreement.*
(i) Opinion and Consent of D'Ancona & Pflaum LLC as to legality
of shares being registered.**
(j) Consent of Independent Auditors.**
(k) Not Applicable.
(l) Not Applicable.
(m) Form of Rule 12b-1 Distribution Plan.*
(n) Not Applicable.
(o) Not Applicable.
(p) Powers of Attorney.**
<PAGE>
* Filed Herein.
** To be filed by amendment prior to request for declaration of effectiveness.
Item 24. Persons Controlled by or Under Common Control with the Registrant
- -------- -----------------------------------------------------------------
Not Applicable.
Item 25. Indemnification
- -------- ---------------
Reference is made to Article VIII of the Declaration of Trust of
the Registrant, filed as Exhibit to Registrant's Initial
Registration Statement which provides the following:
No Trustee of officer of the Trust, when acting in such capacity,
shall be personally liable to any person other than the Trust of
a beneficial owner for any act, omission or obligation of the
Trust of any Trustee. No Trustee or officer shall be liable for
any act or omission in his or her capacity as Trustee or officer,
or for any act or omission of any officer or employee of the
Trust or of any other person or party, provided that nothing
contained herein or in the Delaware Business Trust Act shall
protect any Trustee or officer against any liability to the trust
or to Shareholders to which such Trustee or officer would
otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in
the conduct of the office of Trustee or as an officer.
The Trust shall indemnify each of its Trustees against all
liabilities and expenses (including amounts paid in satisfaction
of judgments, in compromise, as fines and penalties, and as
counsel fees) reasonably incurred in connection with the defense
or disposition of any action, suit or other proceeding, whether
civil or criminal, in which said Trustee may be involved or with
which said trustee may be threatened, while as a Trustee or
thereafter, by reason of being or having been such a Trustee
except with respect to any matter as to which said Trustee shall
have been adjudicated to have acted in bad faith or with willful
misfeasance, gross negligence or reckless disregard of the duties
of office; provided that as to any matter disposed of by a
compromise payment by such person, pursuant to a consent decree
or otherwise, no indemnification either for said payment or for
any other expenses shall be provided unless the Trust shall have
received a written opinion from independent legal counsel
approved by the Trustees to the effect that if either the matter
of willful misfeasance, gross negligence or reckless disregard of
duty, or the matter of bad faith had been adjudicated, it would
in the opinion of such counsel have been adjudicated in favor of
such person. The rights accruing to any person under these
provisions shall not exclude and other right to which such person
may be lawfully entitled; provided that no person may satisfy any
right of indemnity or reimbursement hereunder except out of the
property of the Trust. The Trustees may make advance payments in
connection with the indemnification under Section X.X of the
Declaration of Trust; provided that the indemnified person shall
have given a written undertaking to reimburse the Trust
<PAGE>
in the event it is subsequently determined that such person is
not entitled to such indemnification.
Item 26. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
RREEF America, LLC, the Registrant's investment adviser, renders
investment advisory services to individual, institutional and
pension and profit sharing plan accounts. None of the officers or
directors of the Adviser have engaged in other professions and/or
employment capacities during the past two fiscal years except as
follows:
Item 27. Principal Underwriters
- -------- ----------------------
Not Applicable.
Item 28. Location of Accounts and Records
- -------- --------------------------------
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules
promulgated thereunder will be maintained by the Registrant at
875 N. Michigan Avenue, 41st floor, Chicago, IL 60611, and/or by
the Registrant's Custodian, UMB Bank, N.A. 928 Grant Boulevard,
10th floor, Kansas City, Missouri 64106 or the Administrator and
Transfer Agent, Sunstone Financial Group, Inc., 207 East Buffalo
Street, Suite 400, Milwaukee, Wisconsin 53202.
Item 29. Management Services Not Discussed in Parts A or B
- -------- -------------------------------------------------
Not Applicable.
Item 30. Undertakings
- -------- ------------
The Registrant hereby undertakes to furnish each person to whom a
Prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a trustee,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment
Company Act, the Fund has duly caused this registration statement to be signed
on its behalf by the undersigned, duly authorized, in the City of Chicago, and
State of Illinois on the 21st day of September, 1999.
RREEF SECURITIES TRUST
By: /s/ Kim G. Redding
-----------------------------
Kim G. Redding, Trustee
Pursuant to the requirements of the Securities Act, this registration statement
has been signed below by the following persons in the capacities and on the
date(s) indicated.
Name Title Date
/s/ Kim G. Redding President, Chief Executive September 21st, 1999
- ----------------------
Kim G. Redding Officer and Sole Initial
Trustee
/s/ Paula M. Ferkull Secretary Treasurer, Principal September 21st, 1999
- ---------------------- Financial and Principal
Paula M. Ferkull Accounting Financial Officer
<PAGE>
EXHIBIT (a)
RREEF SECURITIES TRUST
DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST, made this 15th day of September, 1999,
by Kim G. Redding (the "Trustee").
WHEREAS, the Trustee desires to establish a business trust under the
Delaware Business Trust Act for the purpose of carrying on the business of an
investment company;
NOW, THEREFORE, the Trustee declares that all money and property
contributed to the Trust hereunder shall be held and managed in trust under this
Trust Instrument as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 NAME. The name of the trust created hereby is "RREEF Securities
Trust." Should the Trustees determine that the use of the name of the Trust
or any name of a Series of the Trust is not advisable, they may use such
other name for the Trust or Series as they deem proper and the Trust or
Series may hold its property and conduct its activities under such other
name.
Section 1.2 DEFINITIONS. Wherever used herein, unless otherwise required by the
context or specifically provided:
(a) The "1940 Act" refers to the Investment Company Act of 1940 and the rules
and regulations promulgated thereunder, all as amended from time to time;
(b) "Bylaws" means the bylaws referred to in Article IV, Section 4.1(e) hereof,
as from time to time amended;
(c) The terms "Affiliated Person," "Assignment," "Commission," "Interested
Person," and "Principal Underwriter" shall have the meanings given them in
the 1940 Act;
(d) "Net Asset Value" means the net asset value of each Series of the Trust
determined in the manner provided in Article VII, Section 7.3 hereof;
(e) "Shares" means the equal proportionate transferable units of beneficial
interest into which the beneficial interest of each Series of the Trust or
class thereof shall be divided and may include fractions of Shares as well
as whole Shares;
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(f) "Outstanding Shares" means those Shares recorded from time to time in the
books of the Trust or its transfer agent as then issued and outstanding,
but shall not include Shares which have been redeemed or repurchased by the
Trust and which are at the time held in the treasury of the Trust;
(g) "Series" means a series of Shares of the Trust established in accordance
with the provisions of Article II, Section 2.6 hereof;
(h) "Shareholder" means a record owner of Outstanding Shares of the Trust;
(i) The "Trust" refers to the Delaware business trust established by this
Declaration of Trust and includes each and every Series established and
designated hereunder;
(j) The "Trustee" or "Trustees" means the person or persons who has or have
signed this Trust Instrument, so long as such person or persons shall
continue in office in accordance with the terms hereof, and all other
persons who may from time to time be duly qualified and serving as Trustees
in accordance with the provisions of Article III hereof and reference
herein to a Trustee or to the Trustees shall refer to the individual
Trustees in their capacity as Trustees hereunder;
(k) "Trust Property" means any and all property, real or personal, tangible or
intangible, which is owned or held by or for the account of the Trust or
the Trustees or any Series, on behalf of the Trust or any Series.
ARTICLE II
BENEFICIAL INTEREST
Section 2.1 SHARES OF BENEFICIAL INTEREST. The beneficial interest in the Trust
shall be divided into such transferable Shares of one or more separate and
distinct Series or classes of a Series as the Trustees shall from time to
time create or establish. The number of Shares of each Series, and class
thereof, authorized hereunder is unlimited. Each Share shall have no par
value. All Shares issued hereunder, including, without limitation, Shares
issued in connection with a dividend in Shares or a split or reverse split
of Shares, shall be fully paid and nonassessable.
Section 2.2 ISSUANCE OF SHARES. The Trustees in their discretion may, from time
to time without a vote of the Shareholders, issue Shares to such party or
parties and for such amounts and type of consideration, subject to
applicable law, including cash or securities (including Shares of a
different Series), at such time or times and on such terms as the Trustees
may deem appropriate, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with,
the assumption of liabilities) and businesses. In connection with any
issuance of Shares, the Trustees may issue fractional Shares and Shares
held in the treasury. The Trustees may from time to time divide or combine
the Shares into a greater or lesser number without thereby changing the
proportionate beneficial interest in the Trust.
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<PAGE>
Section 2.3 REGISTER OF SHARES AND SHARE CERTIFICATES. A register shall be kept
at the principal office of the Trust or an office of the Trust's transfer
agent which shall contain the names and addresses of the Shareholders of
each Series, the number of Shares of that Series (or any class or classes
thereof) held by them respectively and a record of all transfers thereof.
As to Shares for which no certificate has been issued, such register shall
be conclusive as to who are the holders of the Shares and which shall be
entitled to receive dividends or other distributions or otherwise to
exercise or enjoy the rights of Shareholders. No Shareholder shall be
entitled to receive payment of any dividend or other distribution, nor to
have notice given to such Shareholder as provided herein or in the Bylaws,
until such Shareholder has given the Shareholder's address to the transfer
agent or such other officer or agent of the Trustees as shall keep the such
register for entry thereon. The Trustees need not issue any Share
certificates but, in their discretion, may authorize the issuance of Share
certificates and promulgate appropriate rules and regulations as to their
use. In the event that one or more certificates are issued, whether in the
name of a Shareholder or a nominee, such certificate or certificates shall
constitute evidence of ownership of Shares for all purposes, including
transfer, assignment or sale of such Shares, subject to such limitations as
the Trustees may, in their discretion, prescribe.
Section 2.4 TRANSFER OF SHARES. Except as otherwise provided by the Trustees,
Shares shall be transferable on the records of the Trust only by the record
holder thereof or by the agent of such record holder, thereunto duly
authorized in writing, upon delivery to the Trustees or the Trust's
transfer agent of a duly executed instrument of transfer, together with a
Share certificate, if one is outstanding, and such evidence of the
genuineness of each such execution and authorization and of such other
matters as may be required by the Trustees. Upon such delivery the transfer
shall be recorded on the register of the Trust. Until such record is made,
the Shareholder of record shall be deemed to be the holder of such Shares
for all purposes hereunder and neither the Trustees nor the Trust, nor any
transfer agent or registrar nor any officer, employee or agent of the Trust
shall be affected by any notice of the proposed transfer.
Section 2.5 TREASURY SHARES. Shares held in the treasury shall, until reissued
pursuant to Section 2.2 hereof, not confer any voting rights on the
Trustees, nor shall such Shares be entitled to any dividends or other
distributions declared with respect to the Shares.
Section 2.6 ESTABLISHMENT OF SERIES. The Trust created hereby shall consist of
one or more Series and separate and distinct records shall be maintained by
the Trust for each Series and the assets associated with any such Series
shall be held and accounted for separately from the assets of the Trust or
any other Series. The Trustees shall have full power and authority, in
their sole discretion, and without obtaining any prior authorization or
vote of the Shareholders of any Series of the Trust, to establish and
designate and to change in any manner any such Series of Shares or any
classes of initial or additional Series and to fix such preferences, voting
powers, rights and privileges of such Series or classes thereof as the
Trustees may from time to time determine, to divide or combine the Shares
or any Series or classes thereof into a greater or lesser number, to
classify or reclassify any issued Shares or any Series or classes thereof
into one or more Series or classes of Shares, and to take such other action
with respect to the Shares as the Trustees may deem desirable. The
establishment and designation of any Series shall be effective upon the
adoption of a
3
<PAGE>
resolution by the Trustees setting forth such establishment and designation
and the relative rights and preferences of the Shares of such Series. A
Series may be issued in any number of Shares.
All references to Shares in this Trust Instrument shall be deemed to be
Shares of any or all Series, or classes thereof, as the context may require. All
provisions herein relating to the Trust shall apply equally to each Series of
the Trust, and each class thereof, except as the context otherwise requires.
Each Share of a Series of the Trust shall represent an equal beneficial
interest in the net assets of such Series. Each holder of Shares of a Series
shall be entitled to receive distributions of income and capital gains, if any,
which are made with respect to such Series and which are attributable to such
Shares. Upon redemption of Shares, such Shareholder shall be paid solely out of
the funds and property of such Series of the Trust.
Section 2.7 INVESTMENT IN THE TRUST. The Trustees shall accept investments in
any Series of the Trust from such persons and on such terms as they may
from time to time authorize. At the Trustees' discretion, such investments,
subject to applicable law, may be in the form of cash or securities in
which the affected Series is authorized to invest, valued as provided in
Article VII, Section 7.3 hereof. Investments in a Series shall be credited
to each Shareholder's account in the form of full Shares at the Net Asset
Value per Share next determined after the investment is received; provided,
however, that the Trustees may, in their sole discretion, (a) fix the Net
Asset Value per Share of the initial capital contribution, (b) impose sales
or other charges upon investments in the Trust, or (c) issue fractional
Shares.
Section 2.8 ASSETS AND LIABILITIES OF SERIES. All consideration received by the
Trust for the issue or sale of Shares of a particular Series, together with
all assets in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall be held and accounted for separately
from the other assets of the Trust and of every other Series and may be
referred to herein as "assets belonging to" that Series. The assets
belonging to a particular Series shall belong to that Series for all
purposes, and to no other Series, subject only to the rights of creditors
of that Series. In addition, any assets, income, earnings, profits or
funds, or payments and proceeds with respect thereto, which are not readily
identifiable as belonging to any particular Series shall be allocated by
the Trustees between and among one or more of the Series in such manner as
the Trustees, in their sole discretion, deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Shareholders of all
Series for all purposes, and such assets, income, earnings, profits or
funds, or payments and proceeds with respect thereto shall be assets
belonging to that Series. The assets belonging to a particular Series shall
be so recorded upon the books of the Trust, and shall be held by the
Trustees in trust for the benefit of the holders of Shares of that Series.
The assets belonging to each particular Series shall be charged with the
liabilities of that Series and all expenses, costs, charges and reserves
attributable to that Series. Any general liabilities, expenses, costs,
charges or reserves of the Trust which are not readily identifiable as
belonging to any particular Series shall be allocated and charged by the
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<PAGE>
Trustees between or among any one or more of the Series in such manner as
the Trustees in their sole discretion deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Shareholders of all
Series for all purposes. Without limitation of the foregoing provisions of
this Section 2.8, but subject to the right of the Trustees in their
discretion to allocate general liabilities, expenses, costs, charges or
reserves as herein provided, the debts, liabilities, obligations and
expenses incurred, contracted for or otherwise existing with respect to a
particular Series shall be enforceable against the assets of such Series
only, and not against the assets of the Trust generally. Notice of this
contractual limitation on inter-Series liabilities shall be set forth in
the certificate of trust of the Trust (whether originally or by amendment)
as filed or to be filed in the Office of the Secretary of State of the
State of Delaware pursuant to the Delaware Business Trust Act, and upon the
giving of notice in the certificate of trust, the statutory provisions of
Section 3804 of the Delaware Business Trust Act relating to limitations on
inter-Series liabilities (and the statutory effect under Section 3804 of
setting forth such notice in the certificate of trust) shall become
applicable to the Trust and each Series. Any person extending credit to,
contracting with or having any claim against any Series may satisfy or
enforce any debt, liability, obligation or expense incurred, contracted for
or otherwise existing with respect to that Series from the assets of that
Series only. No Shareholder or former Shareholder of any Series shall have
a claim on or any right to any assets allocated or belonging to any other
Series.
Section 2.9 NO PREEMPTIVE RIGHTS. Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other securities
issued by the Trust or the Trustees, whether of the same or other Series.
Section 2.10 NO PERSONAL LIABILITY OF SHAREHOLDERS. Each Shareholder of the
Trust and of each Series shall not be personally liable for the debts,
liabilities, obligations and expenses incurred by, contracted for, or
otherwise existing with respect to the Trust or by or on behalf of any
Series. The Trustees shall have no power to bind any Shareholder personally
or to call upon any Shareholder for the payment of any sum of money or
assessment whatsoever other than such as the Shareholder may at any time
personally agree to pay by way of subscription for any Shares or otherwise.
A note, bond, contract or other undertaking issued by or on behalf of the
Trust or the Trustees relating to the Trust or to a Series may include a
recitation limiting the obligation represented thereby to the Trust or to
one or more Series and its or their assets. The omission of such a
recitation shall not operate to bind any Shareholder or Trustee of the
Trust.
Section 2.11 ASSENT TO TRUST INSTRUMENT. Every Shareholder, by virtue of having
purchased or otherwise acquired a Share, shall become a Shareholder and
shall be held to have expressly assented and agreed to be bound by the
terms hereof and the Bylaws as currently in effect and as amended from time
to time.
ARTICLE III
THE TRUSTEES
Section 3.1 MANAGEMENT OF THE TRUST. The Trustees shall have exclusive and
absolute control over the Trust Property and over the business of the Trust
to the same extent
5
<PAGE>
as if the Trustees were the sole owners of the Trust Property and business
in their own right, but with such powers of delegation as may be permitted
by this Trust Instrument. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its
branches and maintain offices both within and without the State of
Delaware, in any and all states of the United States of America, in the
District of Columbia, in any and all commonwealths, territories,
dependencies, colonies, or possessions of the United States of America, and
in any foreign jurisdiction and to do all such other things and execute all
such instruments as they deem necessary, proper or desirable in order to
promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of
the Trust made by the Trustees in good faith shall be conclusive. In
construing the provisions of this Trust Instrument, the presumption shall
be in favor of a grant of power to the Trustees.
The enumeration of any specific power in this Trust Instrument shall
not be construed as limiting the aforesaid powers. The powers of the Trustees
may be exercised without order of or resort to any court.
Section 3.2 INITIAL TRUSTEE. The initial Trustee shall be the person named
herein.
Section 3.3 TERM OF OFFICE OF TRUSTEES. The Trustees shall hold office during
the existence of this Trust, and until its termination as herein provided;
except that (a) any Trustee may resign his or her trust by written
instrument signed by such Trustee and delivered to the Chairman, President,
Secretary, or other Trustees of the Trust, which shall take effect upon
such delivery or upon such later date as is specified therein; (b) any
Trustee may be removed with or without cause at any time by written
instrument, signed by at least two-thirds of the number of Trustees prior
to such removal, specifying the date when such removal shall become
effective; (c) any Trustee who requests in writing to be retired or who has
died, becomes physically or mentally incapacitated by reason of disease or
otherwise, or is otherwise unable to serve, may be retired by written
instrument signed by a majority of the other Trustees, specifying the date
of such Trustee's retirement; and (d) a Trustee may be removed at any
meeting of the Shareholders of the Trust by a vote of Shareholders owning
at least two-thirds of the outstanding eligible votes unless otherwise
provided by law.
Section 3.4 ELECTION, VACANCIES AND APPOINTMENT OF TRUSTEES. Except for the
Trustee named herein or Trustees appointed to fill vacancies pursuant to
this section, the Trustees shall be elected by the Shareholders owning of
record a plurality of the votes at a meeting of Shareholders. In case of
declination to serve, death, resignation, retirement, removal, physical or
mental incapacity by reason of disease or otherwise of a Trustee, or a
Trustee is otherwise unable to serve, or an increase in the number of
Trustees, a vacancy shall occur. Whenever a vacancy in the Board of
Trustees shall occur, until such vacancy is filled, the other Trustees
shall have all the powers hereunder and the certificate of the other
Trustees of such vacancy shall be conclusive. In the case of a vacancy, the
remaining Trustees may fill such vacancy by appointing such other person as
they in their discretion shall see fit consistent with the limitations
under the 1940 Act.
An appointment of a Trustee may be made by the Trustees then in office
in anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees
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effective at a later date, provided that such appointment shall become effective
only at or after the effective date of such retirement, resignation or increase
in number of Trustees. As soon as any Trustee appointed pursuant to this Section
3.4 shall have accepted this trust, such Trustee shall be deemed a Trustee
hereunder. Such acceptance may be in writing or by an open declaration of
acceptance at a meeting of the Board of Trustees.
In the event that less than a majority of the Trustees have been elected by
the Shareholders, the Trustees shall call a meeting of the Shareholders to hold
an election for the Trustees not elected by the Shareholders.
Section 3.5 TEMPORARY ABSENCE OF TRUSTEE. Any Trustee may, by power of
attorney, delegate his or her power for a period not exceeding six months
at any one time to any other Trustee or Trustees, provided that in no case
shall less than two Trustees personally exercise the other powers hereunder
except as herein otherwise expressly provided.
Section 3.6 NUMBER OF TRUSTEES. The number of Trustees shall be one, or such
other number as shall be fixed from time to time by the Trustees.
Section 3.7 EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE. The declination to
serve, death, resignation, retirement, removal, incapacity, or inability of
the Trustees, or any one of them, shall not operate to terminate the Trust
or to revoke any existing agency created pursuant to the terms of this
Trust Instrument.
Section 3.8 OWNERSHIP OF ASSETS OF THE TRUST. Legal title in and beneficial
ownership of all of the Trust Property shall at all times be considered as
vested in the Trust, except that the Trustees may cause legal title in and
beneficial ownership of any Trust Property to be held by, or in the name of
one or more of the Trustees acting for and on behalf of the Trust, or in
the name of any person as nominee acting for and on behalf of the Trust. No
Shareholder shall be deemed to have a severable ownership interest in any
individual asset of the Trust or of any Series or any right of partition
thereof, but each Shareholder shall have, except as otherwise provided for
herein, a proportionate undivided beneficial interest in the Trust or
Series. The Shares shall be personal property giving only the rights
specifically set forth in this Trust Instrument. The Trust, or at the
determination of the Trustees, one or more of the Trustees or a nominee
acting for and on behalf of the Trust, shall be deemed to hold legal title
and beneficial ownership of any income earned on securities of the Trust
issued by any business entities formed, organized, or existing under the
laws of any jurisdiction, including the laws of any foreign country.
ARTICLE IV
POWERS OF THE TRUSTEES
Section 4.1 POWERS. The Trustees in all instances shall act as principals, and
are and shall be free from the control of the Shareholders. The Trustees
shall have full power and authority to do any and all acts and to make and
execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust.
The Trustees shall have full authority and power to make any and
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all investments which they, in their sole discretion, shall deem proper to
accomplish the purpose of this Trust. Without limiting any of the
foregoing, the Trustees shall have power and authority:
(a) To invest and reinvest cash and other property, and to hold cash or other
property uninvested, and to sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of the
Trust;
(b) To carry on the business of an investment company, and exercise all the
powers necessary and appropriate to the conduct of such business;
(c) To borrow money and in this connection issue notes or other evidence of
indebtedness; to secure borrowings by mortgaging, pledging or otherwise
subjecting as security the Trust Property; to endorse, guarantee, or
undertake the performance of an obligation or engagement of any other
person and to lend Trust Property;
(d) To provide for the distribution of interests of the Trust either through a
Principal Underwriter in the manner hereinafter provided for or by the
Trust itself, or both, or otherwise pursuant to a plan of distribution of
any kind;
(e) To adopt Bylaws not inconsistent with this Trust Instrument providing for
the conduct of the business of the Trust and to amend and repeal them to
the extent that they do not reserve that right to the Shareholders, which
Bylaws shall be deemed a part of this Trust Instrument and are incorporated
herein by reference;
(f) To elect and remove such officers and appoint such agents as they consider
appropriate;
(g) To set record dates in the manner provided herein or in the Bylaws;
(h) To delegate such authority (which delegation may include the power to
subdelegate) as they consider desirable to any officers of the Trust and to
any investment adviser, manager, administrator, transfer agent, custodian,
underwriter or other agent or independent contractor;
(i) To purchase and pay for entirely out of Trust Property such insurance as
they may deem necessary or appropriate for the conduct of the business of
the Trust, including insurance policies insuring the Trust Property and
payment of distributions and principal on its investments, and insurance
policies insuring the Shareholders, Trustees, officers, representatives,
employees, agents, investment advisers, managers, administrators,
custodians, underwriters or independent contractors of the Trust
individually against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such
person in such capacity, including any action taken or omitted that may be
determined to constitute negligence, whether or not the Trust would have
the power to indemnify such person against such liability;
(j) To sell or exchange any or all of the assets of the Trust, subject to the
provisions of Article IX, Section 9.4(b) hereof;
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(k) To vote or give assent, or exercise any rights of ownership, with respect
to stock or other securities or property; and to execute and deliver powers
of attorney to such person or persons as the Trustees shall deem proper,
granting to such person or persons such power and discretion with relation
to securities or property as the Trustees shall deem proper;
(l) To exercise powers and rights of subscription or otherwise which in any
manner arise out of ownership of securities;
(m) To hold any security or property in a form not indicating any trust,
whether in bearer, book entry, unregistered or other negotiable form, or
either in the name of the Trust or in the name of a custodian or a nominee
or nominees;
(n) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of
which is held in the Trust; to consent to any contract, lease, mortgage,
purchase, or sale of property by such corporation or concern, and to pay
calls or subscriptions with respect to any security held in the Trust ;
(o) To compromise, arbitrate, or otherwise adjust claims in favor of or against
the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(p) To make distributions of income and of capital gains to Shareholders in the
manner hereinafter provided;
(q) To establish, from time to time, a minimum investment for Shareholders in
the Trust or in one or more Series or class, and to require the redemption
of the Shares of any Shareholders whose investment is less than such
minimum upon giving notice to such Shareholder;
(r) To establish one or more committees composed of one or more of the
Trustees, and to delegate any of the powers of the Trustees to such
committees;
(s) To interpret the investment policies, practices or limitations of any
Series;
(t) To determine and change the fiscal year of the Trust and the method by
which its accounts shall be kept;
(u) To adopt a seal for the Trust, but the absence of such seal shall not
impair the validity of any instrument executed on behalf of the Trust;
(v) To employ one or more investment advisers, transfer agents, distributors,
managers administrators, custodians, accountants, auditors, counsel, and
keepers of the books and records, or any other agents or independent
contractors;
(w) In general, to carry on any other business in connection with or incidental
to any of the foregoing powers; to do everything necessary, suitable or
proper for the accomplishment of any purpose or the attainment of any
object or the furtherance of any power hereinbefore set forth, either alone
or in association with others; and to do every other act or thing
incidental or appurtenant to or growing out of or connected with the
aforesaid business or purposes, objects or powers.
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The foregoing clauses shall be construed both as objects and powers, and
the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees. Any action by one or
more of the Trustees in their capacity as such hereunder shall be deemed an
action on behalf of the Trust or the applicable Series, and not an action in an
individual capacity.
No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see to the application
of any payments made or property transferred to the Trustees or upon their
order.
Section 4.2 ISSUANCE AND REPURCHASE OF SHARES. The Trustees shall have the
power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, exchange, and otherwise deal in Shares and,
subject to the provisions set forth in Article II and Article VII, to apply
to any such repurchase, redemption, retirement, cancellation or acquisition
of Shares any funds or property of the Trust, or the particular Series of
the Trust, with respect to which such Shares are issued.
Section 4.3 TRUSTEES AND OFFICERS AS SHAREHOLDERS. Any Trustee, officer or
other agent of the Trust may acquire, own and dispose of Shares to the same
extent as if such person were not a Trustee, officer or agent; and the
Trustees may issue and sell, or cause to be issued and sold, Shares to, and
buy such Shares from, any such person, or any firm or company in which such
person is interested, subject to the general limitations herein contained
as to the sale and purchase of such Shares.
Section 4.4 ACTION BY THE TRUSTEES AND COMMITTEES. The Trustees (and any
committee thereof) may act at a meeting held in person or in whole or in
part by conference telephone. One-third, but (except at such times as there
is only one Trustee) no less than two, of the Trustees shall constitute a
quorum at any meeting. Except as the Trustees may otherwise determine, one-
third of the members of any committee shall constitute a quorum at any
meeting. The vote of a majority of the Trustees (or committee members)
present at a meeting at which a quorum is present shall be the act of the
Trustees (or any committee thereof). The Trustees (and any committee
thereof) may also act by written consent signed by a majority of the
Trustees (or committee members). Regular meetings of the Trustees may be
held at such places and at such times as the Trustees may from time to time
determine. Special meetings of the Trustees (and meetings of any committee
thereof) may be called in a manner to be set forth in the Bylaws. Notice of
the time, date and place of all meetings of the Trustees (or any committee
thereof) shall be given by the party calling the meeting to each Trustee
(or committee member) by telephone, telefax, electronic mail or telegram
sent to the person's home or business address at least twenty-four (24)
hours in advance of the meeting or by written notice mailed to the person's
home or business address at least seventy-two (72) hours in advance of the
meeting. Notice of all proposed written consents of Trustees (or committees
thereof) shall be given to each Trustee (or committee member) by telephone,
telefax, telegram, electronic mail or first class mail sent to the person's
home or business address. Notice need not be given to any person who
attends a meeting without objecting to the lack of notice or who executes a
written consent or a written waiver of notice with respect to a meeting.
Written consents or waivers may be executed in
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one or more counterparts. Execution of a written consent or waiver and
delivery thereof may be accomplished by telefax.
Section 4.5 CHAIRMAN OF THE TRUSTEES. The Trustees shall appoint one of their
number to be Chairman of the Board of Trustees. The Chairman shall preside
at all meetings of the Trustees at which such Chairman is present and may
be (but is not required to be) the chief executive officer of the Trust.
Section 4.6 PRINCIPAL TRANSACTIONS. Except to the extent prohibited by
applicable law, the Trustees may, on behalf of the Trust, buy any
securities from or sell any securities to, or lend any assets of the Trust
to, any Trustee or officer of the Trust or any firm of which any such
Trustee or officer is a member acting as principal, or have any such
dealings with any investment adviser, distributor or transfer agent for the
Trust or with any Interested Person of such person; and the Trust may
employ any such person, or firm or company in which such person is an
Interested Person, as broker, legal counsel, registrar, investment adviser,
distributor, transfer agent, dividend disbursing agent, custodian or in any
other capacity upon customary terms.
Section 4.7 PARTIES TO CONTRACT. A contract may be entered into with any
corporation, firm, partnership, trust or association, although one or more
of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, and no
such contract shall be invalidated or rendered void or voidable by reason
of the existence of any relationship, nor shall any person holding such
relationship be disqualified from voting on or executing the same in such
person's capacity as Shareholder and/or Trustee, nor shall any person
holding such relationship be liable merely by reason of such relationship
for any loss or expense to the Trust under or by reason of such contract or
accountable for any profit realized directly or indirectly therefrom,
provided that the contract, when entered into, was not inconsistent with
the provisions of this instrument. The same person may be the other party
to contracts entered into pursuant to this instrument, and any individual
may be financially interested or otherwise affiliated with persons who are
parties to any or all of the contracts mentioned in this Section 4.7.
Section 4.8 SHAREHOLDER APPROVAL REQUIRED. Any provisions of the Agreement to
the contrary notwithstanding, no act, contract, or instrument undertaken or
entered into by or on behalf of this Trust requiring Shareholder approval
under the 1940 Act shall take effect until such approval is obtained.
ARTICLE V
EXPENSES OF THE TRUST
Section 5.1 GENERAL. The Trustees shall have the power to incur and pay or be
reimbursed from the assets of the Trust, or the assets of the appropriate
Series, any expenses which in the opinion of the Trustees are necessary or
incidental to carry out any of the purposes of the Trust or such Series,
and to pay reasonable compensation from the funds of the Trust to
themselves as Trustees. The Trustees shall fix the compensation of all
officers, employees,
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and Trustees, and shall be reimbursed from the assets of the Trust or the
assets of the appropriate Series for expenses reasonably incurred by
themselves on behalf of the Trust.
Section 5.2 EXPENSES OF SERIES. The Trustees shall have the power to allocate
and charge all expenses which are not readily identifiable as belonging to
any particular Series between or among any one or more of the Series as set
forth in Article II, Section 2.8 of this Trust Instrument.
ARTICLE VI
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 6.1 VOTING POWERS. The Shareholders shall have power to vote only (i)
for the election of Trustees as provided in Article III, Section 3.4
hereof, (ii) for the removal of Trustees as provided in Article III,
Section 3.3 hereof, and (iii) with respect to such additional matters
relating to the Trust as may be required by law, by this Trust Instrument,
or as the Trustees may consider desirable. On any matter submitted to a
vote of the Shareholders, all Shares shall be voted separately by
individual Series, except that the Shareholders of all Series shall vote
for the election or removal of Trustees and when the Trustees have
determined that any other matter affects the interests of more than one
Series, then the Shareholders of all Series that the Trustees have
determined will be affected shall be entitled to vote thereon. The Trustees
may also determine that a matter affects only the interests of one or more
classes of a Series, in which case any such matter shall be voted on by
such class or classes. Each Shareholder shall have one vote for each dollar
of net asset value per Share for each Share held, irrespective of the
Series or Class thereof, except in the event that net asset value voting
would disqualify the Trust from offering Shares for sale in any
jurisdiction in which Shares are to be offered for sale, each whole Share
shall be entitled to one vote as to any matter on which it is entitled to
vote, and each fractional Share shall be entitled to a proportionate
fractional vote and this method of voting shall continue until such time as
such legal requirement is no longer in force or applicable. There shall be
no cumulative voting in the election of Trustees. Shares may be voted in
person or by proxy or in any manner provided for in the Bylaws. Proxies may
be given orally or in writing or pursuant to any computerized or mechanical
data gathering process specifically approved by the Trustees. Anything in
this Trust Instrument to the contrary notwithstanding, in the event a
proposal by anyone other than the officers or Trustees of the Trust is
submitted to a vote of the Shareholders of one or more Series or of the
Trust, or in the event of any proxy contest or proxy solicitation or
proposal in opposition to any proposal by the officers or Trustees of the
Trust, Shares may be voted only in person or by written proxy. Until Shares
are issued, the Trustees may exercise all rights of Shareholders and may
take any action required or permitted by law, this Trust Instrument or any
of the Bylaws of the Trust to be taken by Shareholders.
Section 6.2 MEETINGS. Meetings of Shareholders may be held within or without
the State of Delaware. Special meetings of the Shareholders of the Trust or
one or more Series or classes may be called by the Trustees and shall be
called by the Trustees upon the written request of Shareholders owning at
least one-tenth of the Outstanding Shares. Whenever ten or more
Shareholders meeting the qualifications set forth in Section 16(c) of the
1940 Act
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seek the opportunity of furnishing materials to the other Shareholders with
a view to obtaining signatures on such a request for a meeting, the
Trustees shall comply with the provisions of such Section 16(c) with
respect to providing such Shareholders access to the list of the
Shareholders of record of the Trust or the mailing of such materials to
such Shareholders of record, subject to any rights provided to the Trust or
any Trustees provided by such Section 16(c). Notice shall be sent, by mail
or such other means determined by the Trustees, at least 15 days prior to
any such meeting. Meetings shall be called on any matter requiring a vote
of the Shareholders under the 1940 Act, including the election of Trustees
as required under Section 16(a) of the 1940 Act.
Section 6.3 QUORUM AND REQUIRED VOTE. The presence in person or by proxy of
Shareholders entitled to cast thirty percent (30%) of all votes entitled to
be cast shall be a quorum for the transaction of business at a
Shareholders' meeting, except that where any provision of law or of this
Trust Instrument permits or requires that holders of any Series shall vote
as a Series (or that holders of a class shall vote as a class), then the
holders of thirty percent (30%) of the aggregate number of votes of that
Series (or that class) entitled to be cast shall be necessary to constitute
a quorum for the transaction of business by that Series (or that class).
Any lesser number shall be sufficient for adjournments. Any adjourned
session or sessions may be held without the necessity of further notice.
Except when a different vote is required by law or by the Trustees or by
any provision of this Trust Instrument, a majority of the votes cast, voted
in person or by proxy, shall decide any questions and a plurality of the
votes cast shall elect a Trustee, provided that where any provision of law
or of this Trust Instrument permits or requires that the holders of any
Series shall vote as a Series (or that the holders of any class shall vote
as a class), then, except when a different vote is required by law or by
the Trustees or by any provision of this Trust Instrument, a majority of
the votes cast in person or by proxy of that Series (or class) shall decide
that matter insofar as that Series (or class) is concerned.
Section 6.4 ACTION BY WRITTEN CONSENT. Any action which may be taken by the
Shareholders of the Trust, or of a Series, may be taken without a meeting
if Shareholders holding more than a majority of the votes entitled to be
cast, except when a larger vote is required by law or by any provision of
this Trust Instrument, shall consent to the action in writing. If the
consents of all Shareholders entitled to vote have not been solicited in
writing and if the unanimous written consent of all such Shareholders shall
not have been received, the Secretary shall give prompt notice to all
Shareholders of actions approved by the Shareholders without a meeting.
ARTICLE VII
DISTRIBUTIONS AND REDEMPTIONS
Section 7.1 DISTRIBUTIONS.
(a) The Trustees may from time to time declare and pay dividends or other
distributions with respect to any Series, or class thereof. The amount of
such dividends or distributions and the payment of them and whether they
are in cash or any other Trust property shall be wholly in the discretion
of the Trustees.
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(b) Dividends and other distributions may be paid or made to the Shareholders
of record at the time of declaring a dividend or other distribution or
among the Shareholders of record at such other date or time or dates or
times as the Trustees shall determine, which dividends or distributions, at
the election of the Trustees, may be paid pursuant to a standing resolution
or resolutions adopted only once or with such frequency as the Trustees may
determine. All dividends and other distributions on Shares of a particular
Series shall be distributed pro rata to the Shareholders of that Series in
proportion to the number of Shares of that Series they held on the record
date established for such payment, except that such dividends and
distributions shall reflect expenses allocated to a particular class of
such Series. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as the
Trustees shall deem appropriate and may at any time, or from time to time,
provide that all dividends shall be reinvested or that all dividends shall
be reinvested unless the Trust or its transfer agent has been instructed
otherwise by a Shareholder.
(c) Anything in this Trust Instrument to the contrary notwithstanding, the
Trustees may at any time declare and distribute a stock dividend pro rata
among the Shareholders of a particular Series, or class thereof, as of the
record date of that Series fixed as provided in Article IX, Section 9.3
hereof.
Section 7.2 REDEMPTIONS. In case any holder of record of Shares desires to
dispose of such Shares or any portion thereof, such holder may deposit at
the office of the transfer agent or other authorized agent of the Trust a
written request or such other form of request and other documents to
authenticate the request as may from time to time be required by the Trust,
requesting that the Shares be redeemed or purchased. The Shareholder so
requesting shall be entitled to require the Trust to purchase, and the
Trust or the Principal Underwriter of the Trust shall purchase such Shares,
but only at the Net Asset Value thereof (as described in Section 7.3).
Payment shall be made for any Shares to be redeemed, as aforesaid, in cash
or property from the assets of the Series represented by such shares. Upon
redemption or repurchase, such Shares shall become Treasury shares and may
be re-issued from time to time.
Section 7.3 DETERMINATION OF NET ASSET VALUE AND VALUATION OF PORTFOLIO ASSETS.
The term "Net Asset Value" of any Series shall mean that amount by which
the assets of that Series exceed its liabilities. The resulting amount,
which shall represent the total Net Asset Value of the particular Series,
shall be divided by the total number of shares of that Series outstanding
at the time and the quotient so obtained shall be the Net Asset Value per
Share of that Series. Such value shall be determined separately for each
Series and shall be determined on such days and at such times as the
Trustees may determine. Such determination shall be made with respect to
securities for which market quotations are readily available, at the market
value of such securities; and with respect to other securities and assets,
at the fair value as determined in good faith by the Trustees; provided,
however, that the Trustees, without Shareholder approval, may alter the
method of valuing portfolio securities consistent with the 1940 Act. The
Trustees may delegate any of their powers and duties under this Section 7.3
with respect to valuation of assets and liabilities.
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At any time, the Trustees may cause the Net Asset Value per Share last
determined to be determined again in similar manner and may fix the time when
such redetermined value shall become effective. If, for any reason, the net
income of any Series, determined at any time, is a negative amount, the Trustees
may, with respect to that Series, (i) offset each Shareholder's pro rata share
of such negative amount from the accrued dividend account of such Shareholder,
or (ii) reduce the number of outstanding Shares of such Series by reducing the
number of Shares in the account of each Shareholder by a pro rata portion of
that number of full and fractional Shares which represents the amount of such
excess negative net income, or (iii) cause to be recorded on the books of such
Series an asset account in the amount of such negative net income (provided that
the same shall thereupon become the property of such Series and shall not be
paid to any Shareholder), which account may be reduced by the amount of
dividends declared thereafter upon the Outstanding Shares of such Series on the
day such negative net income is experienced, until such asset account is reduced
to zero, (iv) combine the methods described in clauses (i) and (ii) and (iii) of
this sentence; or (v) take any other action they deem appropriate, in order to
cause (or in order to assist in causing) the Net Asset Value per Share of such
Series to remain at a constant amount per Outstanding Share immediately after
each such determination and declaration. The Trustees shall also have the power
not to declare a dividend out of net income for the purpose of causing the Net
Asset Value per Share to be increased. The Trustees shall not be required to
adopt, but may at any time adopt, discontinue or amend the practice of
maintaining the Net Asset Value per Share of the Series at a constant amount.
Section 7.4 SUSPENSION OF THE RIGHT OF REDEMPTION. The Trustees may declare a
suspension of the right of redemption or postpone the date of payment as
permitted under the 1940 Act. Such suspension shall take effect at such
time as the Trustees shall specify but not later than the close of business
on the business day next following the declaration of suspension, and
thereafter there shall be no right of redemption or payment until the
Trustees shall declare the suspension at an end. In the case of a
suspension of the right of redemption, a Shareholder may either withdraw a
request for redemption or receive payment based on the Net Asset Value per
Share next determined after the termination of the suspension. In the event
that any Series is divided into classes, the provisions of this Section
7.4, to the extent applicable as determined in the discretion of the
Trustees and consistent with applicable law, may be equally applied to each
such class.
Section 7.5 REDEMPTION OF SHARES IN ORDER TO QUALIFY AS A REGULATED INVESTMENT
COMPANY. If the Trustees shall be of the opinion that direct or indirect
ownership of Shares of any Series has or may become concentrated to an
extent which would disqualify any Series as a regulated investment company
under the Internal Revenue Code, then the Trustees shall have the power
(but not the obligation) by lot or other means deemed equitable by them (i)
to call for redemption by any such person of a number, or principal amount,
of Shares sufficient to maintain or bring the direct or indirect ownership
of Shares into conformity with the requirements for such qualification and
(ii) to refuse to transfer or issue Shares to any person whose acquisition
of the Shares in question would result in such disqualification. The
redemption shall be effected at the redemption price and in the manner
provided in this Article VII. Upon demand, the holders of Shares shall
disclose to the Trustees in writing such information with respect to direct
and indirect ownership of Shares as the Trustees deem necessary to comply
with the provisions of the Internal Revenue Code, or to comply with the
requirements of any other taxing authority.
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ARTICLE VIII
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 8.1 LIMITATION OF LIABILITY. No Trustee or officer of the Trust, when
acting in such capacity, shall be personally liable to any person other
than the Trust or a beneficial owner for any act, omission or obligation of
the Trust or any Trustee. No Trustee or officer shall be liable for any act
or omission in his or her capacity as Trustee or officer, or for any act or
omission of any officer or employee of the Trust or of any other person or
party, provided that nothing contained herein or in the Delaware Business
Trust Act shall protect any Trustee or officer against any liability to the
Trust or to Shareholders to which such Trustee or officer would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the office of
Trustee or as an officer.
Section 8.2 INDEMNIFICATION. The Trust shall indemnify each of its Trustees
against all liabilities and expenses (including amounts paid in
satisfaction of judgments, in compromise, as fines and penalties, and as
counsel fees) reasonably incurred in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or
criminal, in which such Trustee may be involved or with which such Trustee
may be threatened, while as a Trustee or thereafter, by reason of being or
having been such a Trustee except with respect to any matter as to which
such Trustee shall have been adjudicated to have acted in bad faith or with
willful misfeasance, gross negligence or reckless disregard of the duties
of office; provided, however, that as to any matter disposed of by a
compromise payment by such person, pursuant to a consent decree or
otherwise, no indemnification either for such payment or for any other
expenses shall be provided unless the Trust shall have received a written
opinion from independent legal counsel approved by the Trustees to the
effect that if either the matter of willful misfeasance, gross negligence
or reckless disregard of duty, or the matter of bad faith had been
adjudicated, it would in the opinion of such counsel have been adjudicated
in favor of such person. The rights accruing to any person under these
provisions shall not exclude any other right to which such person may be
lawfully entitled; provided, however, that no person may satisfy any right
of indemnity or reimbursement hereunder except out of the property of the
Trust. The Trustees may make advance payments in connection with the
indemnification under this Section 8.2; provided, however, that the
indemnified person shall have given a written undertaking to reimburse the
Trust in the event it is subsequently determined that such person is not
entitled to such indemnification.
The Trust shall indemnify officers, and shall have the power to
indemnify representatives and employees of the Trust, to the same extent that
Trustees are entitled to indemnification pursuant to this Section 8.2.
Section 8.3 SHAREHOLDERS. In case any Shareholder or former Shareholder of any
Series shall be held to be personally liable solely by reason of being or
having been a Shareholder of such Series and not because of such
Shareholder's acts or omissions or for some other reason, the Shareholder
or former Shareholder (or his or her heirs, executors, administrators, or
other legal representatives, or, in the case of a corporation or other
entity, its corporate, or other general successor) shall be entitled out of
the assets belonging to the applicable Series
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to be held harmless from and indemnified against all loss and expense
arising from such liability. The Trust, on behalf of the affected Series,
shall, upon request by the Shareholder, assume the defense of any claim
made against the Shareholder for any act or obligation of the Series and
satisfy any judgment thereon from the assets of the Series.
ARTICLE IX
MISCELLANEOUS
Section 9.1 TRUST NOT A PARTNERSHIP. It is hereby expressly declared that a
trust and not a partnership is created hereby. No Trustee hereunder shall
have any power to bind personally either the Trust's officers or any
Shareholder. All persons extending credit to, contracting with or having
any claim against the Trust or the Trustees may satisfy or enforce any
debt, liability, obligation or expense incurred, contracted for, or
otherwise existing with respect to the Trust from the assets of the Trust
only; and neither the Shareholders nor the Trustees, nor any of their
agents, whether past, present, or future, shall be personally liable
therefor.
Section 9.2 TRUSTEES' GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY. The
exercise by the Trustees or their delegate of the Trustees' powers and
discretions hereunder in good faith and with reasonable care under the
circumstances then prevailing shall be binding upon everyone interested.
Subject to the provisions of Article VIII hereof, the Trustees and officers
shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees and officers may take advice of counsel or other experts with
respect to the meaning and operation of this Trust Instrument, and subject
to the provisions of Article VIII hereof, shall be under no liability for
any act or omission in accordance with such advice or for failing to follow
such advice. The Trustees shall not be required to give any bond as such,
nor any surety if a bond is obtained.
Any Trustees shall, in the performance of their duties, be fully
protected in relying in good faith upon the records of the Trust and upon such
information, opinions, reports, or statements presented to the Trust by any of
the Trust's officers or employees, or committees of the Board of Trustees, or by
any other person as to matters the Trustees reasonably believe are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Trust.
Section 9.3 ESTABLISHMENT OF RECORD DATES. The Trustees may close the Share
transfer books of the Trust for a set period or may establish a record date
for the determination of Shareholders entitled to (i) notice of or vote at
a Shareholders' meeting, or (ii) receive any dividend payment or other
right as provided in the Bylaws.
Section 9.4 TERMINATION OF TRUST OR SERIES.
(a) This Trust shall continue without limitation of time but subject to the
provisions of subsection (b) of this Section 9.4.
(b) The Trustees may
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(i) sell and convey all or substantially all of the assets of the Trust or any
Series to another trust, partnership, association, or corporation, or to a
separate series of shares thereof, organized under the laws of any state,
for adequate consideration which may include the assumption of all
outstanding obligations, taxes, and other liabilities, accrued or
contingent, of the Trust or any Series, and which may include shares of
beneficial interest, stock, or other ownership interests of such trust,
partnership, association, or corporation or of a series thereof, or
(ii) at any time sell and convert into money all of the assets of the Trust or
any series.
Upon making reasonable provision, in the determination of the
Trustees, for the payment of all such liabilities in either (i) or (ii), by such
assumption or otherwise, the Trustees shall distribute the remaining proceeds or
assets (as the case may be) of each Series (or class) ratably among the holders
of Shares of that Series then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or the
remaining assets as provided in subsection (b), the Trust or any affected
Series shall terminate and the Trustees and the Trust shall be discharged
of any and all further liabilities and duties hereunder and the right,
title, and interest of all parties with respect to the Trust or Series
shall be canceled and discharged.
Upon termination of the Trust, following completion of winding up of
its business, the Trustees shall cause a certificate of cancellation of the
Trust's certificate of trust to be filed in accordance with the Delaware
Business Trust Act, which certificate of cancellation may be signed by any one
Trustee.
Section 9.5 REORGANIZATION. Anything in this Trust Instrument to the contrary
notwithstanding, the Trustees, in order to change the form of organization
and/or domicile of the Trust, may, without prior Shareholder approval, (i)
cause the Trust to merge or consolidate with or into one or more trusts,
partnerships, associations or corporations which is formed, organized, or
existing under the laws of a state, commonwealth, possession, or colony of
the United States or (ii) cause the Trust to incorporate under the laws of
Delaware. Any agreement of merger or consolidation or certificate of merger
may be signed by one or more of the Trustees. Pursuant to and in accordance
with the provisions of Section 3815(f) of the Delaware Business Trust Act,
and notwithstanding anything to the contrary contained in this Trust
Instrument, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 9.5 may effect any amendment to
the Trust Instrument or effect the adoption of a new trust instrument of
the Trust if it is the surviving or resulting trust in the merger or
consolidation. Any merger or consolidation of the Trust other than as
described in the foregoing provisions of this Section 9.5 shall, in
addition to the approval of the Trustees, require the approval of the
holders of a majority of the Outstanding Shares.
Section 9.6 FILING OF COPIES, REFERENCES, HEADINGS. The original or a copy of
this Trust Instrument and of each amendment hereof, or Trust Instrument
supplemental hereto, shall be kept at the office of the Trust where it may
be inspected by any Shareholder. Anyone dealing with the Trust may rely on
a certificate by an officer or Trustee of the Trust as to whether or not
any such amendments or supplements have been made and as to any matters in
connection with the Trust hereunder, and with the same effect as if it were
the
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original, may rely on a copy certified by an officer or Trustee of the
Trust to be a copy of this Trust Instrument or of any such amendment or
supplemental Trust Instrument. In this Trust Instrument or in any such
amendment or supplemental Trust Instrument, references to this Trust
Instrument, and all expressions like "herein," "hereof," and "hereunder"
shall be deemed to refer to this Trust Instrument as amended or affected by
any such supplemental Trust Instrument. Where the context so requires,
words used in singular shall include the plural and vice versa, and words
of one gender shall include all other genders. The term "person" shall be
deemed to include an entity (such as a proprietorship, corporation,
partnership, trust, or association) or an individual as the context
requires. Headings are placed herein for convenience of reference only and,
in case of any conflict, the text of this Trust Instrument rather than the
headings, shall control. This Trust Instrument may be executed in any
number of counterparts each of which shall be deemed an original.
Section 9.7 APPLICABLE LAW. The trust set forth in this instrument is made in
the State of Delaware, and the Trust and this Trust Instrument, and the
rights and obligations of the Trustees and Shareholders hereunder, are to
be governed by and construed and administered according to the Delaware
Business Trust Act and the laws of such State; provided, however, that
there shall not be applicable to the Trust, the Trustees, or this Trust
Instrument (a) the provisions of Section 3540 of Title 12 of the Delaware
Code or (b) any provisions of the laws (statutory or common) of the State
of Delaware (other than the Delaware Business Trust Act) pertaining to
trusts which relate to or regulate (i) the filing with any court or
governmental body or agency of trustee accounts or schedules of trustee
fees and charges, (ii) affirmative requirements to post bonds for trustees,
officers, agents, or employees of a trust, (iii) the necessity for
obtaining court or other governmental approval concerning the acquisition,
holding, or disposition of real or personal property, (iv) fees or other
sums payable to trustees, officers, agents, or employees of a trust, (v)
the allocation of receipts and expenditures to income or principal, (vi)
restrictions or limitations on the permissible nature, amount, or
concentration of trust investments or requirements relating to the titling,
storage, or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards or responsibilities or
limitations on the acts or powers of Trustees, which are inconsistent with
the limitations or liabilities or authorities and powers of the trustees
set forth or referenced in this Trust Instrument. The Trust shall be of the
type commonly called a "business trust," and without limiting the
provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust under Delaware law. The Trust specifically
reserves the right to exercise any of the powers or privileges afforded to
trusts or actions that may be engaged in by trusts under the Delaware
Business Trust Act, and the absence of a specific reference herein to any
such power, privilege, or action shall not imply that the Trust may not
exercise such power or privilege or take such actions.
Section 9.8 AMENDMENTS. Except as specifically provided herein, the Trustees
may, without Shareholder vote, amend, or otherwise supplement this Trust
Instrument by making an amendment, a Trust Instrument supplemental hereto
or an amended and restated trust instrument. Shareholders shall have the
right to vote (i) on any amendment which would affect their right to vote
granted in Section 6.1 hereof, (ii) on any amendment to this Section 9.8,
(iii) on any amendment that they are required by law to vote on, and (iv)
on any amendment submitted to them by the Trustees. Any amendment required
or permitted to be submitted to Shareholders which, as the Trustees
determine, shall affect the Shareholders of
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one or more Series shall be authorized by vote of the Shareholders of each
Series affected and no vote of Shareholders of a Series not affected shall
be required. Anything in this Trust Instrument to the contrary
notwithstanding, any amendment to Article VIII hereof shall not limit the
right to indemnification or insurance provided therein with respect to any
action or omission prior to such amendment.
Section 9.9 FISCAL YEAR. The fiscal year of the Trust shall end on a specified
date as determined from time to time by the Trustees.
Section 9.10 PROVISIONS IN CONFLICT WITH LAW. The provisions of this Trust
Instrument are severable, and if the Trustees shall determine, with the
advice of counsel, that any of such provisions is in conflict with the 1940
Act, the regulated investment company provisions of the Internal Revenue
Code or with other applicable laws and regulations, the conflicting
provision shall be deemed never to have constituted a part of this Trust
Instrument; provided, however, that such determination shall not affect any
of the remaining provisions of this Trust Instrument or render invalid or
improper any action taken or omitted prior to such determination. If any
provision of this Trust Instrument shall be held invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall attach only
to such provision in such jurisdiction and shall not in any manner affect
such provisions in any other jurisdiction or any other provision of this
Trust Instrument in any jurisdiction.
IN WITNESS WHEREOF, the undersigned, being the initial Trustee of the
Trust, has executed this Declaration of Trust this 15th day of September, 1999.
/s/ Kim G. Redding
------------------
Kim G. Redding, Initial Trustee
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EXHIBIT (b)
RREEF SECURITIES TRUST
BYLAWS
These Bylaws of RREEF Securities Trust (the "Trust"), a Delaware
business trust, are subject to the Declaration of Trust of the Trust dated
September 15, 1999, as from time to time amended, supplemented or restated (the
"Trust Instrument"). Capitalized terms used herein that are defined in the Trust
Instrument are used as therein defined.
ARTICLE X
PRINCIPAL OFFICE
----------------
The principal office of the Trust shall be located in such location as
the Trustees may from time to time determine. The Trust may establish and
maintain such other offices and places of business as the Trustees may from time
to time determine.
ARTICLE XI
OFFICERS AND THEIR ELECTION
---------------------------
Section 11.1 Officers. The officers of the Trust shall be a President, a
--------
Treasurer, a Secretary, and such other officers as the Trustees may from
time to time elect. It shall not be necessary for any officer to be a
holder of Shares in the Trust.
Section 11.2 Election of Officers. A single person may hold two or more
--------------------
offices. Subject to the provisions of Section 2.3 hereof, the officers
shall hold office until their successors are chosen and qualified and serve
at the pleasure of the Trustees.
Section 11.3 Resignations. Any officer of the Trust may resign by filing a
------------
written resignation with the President, the Secretary or the Trustees,
which resignation shall take effect on being so filed or at such later time
as may be therein specified.
ARTICLE XII
POWERS AND DUTIES OF OFFICERS AND TRUSTEES
------------------------------------------
Section 12.1 President. The President shall be the chief executive officer of
---------
the Trust. Subject to the direction of the Trustees, the chief executive
officer shall have general administration of the business and policies of
the Trust. Except as the Trustees may otherwise order, the chief executive
officer shall have the power to (i) grant, issue, execute or sign such
powers of attorney, proxies, agreements or other documents as may be deemed
advisable or necessary in the furtherance of the interests of the Trust or
any Series thereof and (ii) employ attorneys, accountants and other
advisers and agents and counsel for the Trust.
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Section 12.2 Treasurer. The Treasurer shall be the principal financial and
---------
accounting officer of the Trust and shall deliver all funds and securities
of the Trust which may come into his or her hands to such company as the
Trustees shall employ as custodian in accordance with the Trust Instrument
and applicable provisions of law. The Treasurer shall (i) make annual
reports regarding the business and condition of the Trust, which reports
shall be preserved in Trust records, and (ii) furnish such other reports
regarding the business and condition of the Trust as the Trustees may from
time to time require. The Treasurer shall perform such additional duties as
the Trustees or the chief executive officer may from time to time
designate.
Section 12.3 Secretary. The Secretary shall record, in books kept for the
---------
purpose, all votes and proceedings of the Trustees and the Shareholders at
their respective meetings and shall have the custody of the seal of the
Trust, if any. The Secretary shall perform such additional duties as the
Trustees or the chief executive officer may from time to time designate.
Section 12.4 Vice President. Any Vice President of the Trust shall perform
--------------
such duties as the Trustees or the chief executive officer may from time to
time designate. At the request or in the absence or disability of the
President, the most senior Vice President present and able to act may
perform all the duties of the President and, when so acting, shall have all
the powers of and be subject to all the restrictions upon the President.
Section 12.5 Assistant Treasurer. Any Assistant Treasurer of the Trust shall
-------------------
perform such duties as the Trustees or the Treasurer may from time to time
designate, and, in the absence of the Treasurer, the most senior Assistant
Treasurer present and able to act may perform all the duties of the
Treasurer.
Section 12.6 Assistant Secretary. Any Assistant Secretary of the Trust shall
-------------------
perform such duties as the Trustees or the Secretary may from time to time
designate, and, in the absence of the Secretary, the most senior Assistant
Secretary present and able to act may perform all the duties of the
Secretary.
Section 12.7 Subordinate Officers. The Trustees from time to time may appoint
--------------------
such other officers or agents as they may deem advisable, each of whom
shall have such title, hold office for such period, have such authority and
perform such duties as the Trustees may determine.
Section 12.8 Surety Bonds. The Trustees may require any officer or agent of
-------------
the Trust to execute a bond (including, without limitation, any bond
required by the Investment Company Act of 1940, or rules and regulations
promulgated thereunder) in such sum and with such surety or sureties as the
Trustees may determine, conditioned upon the faithful performance of his
duties to the Trust including responsibility for negligence and for the
accounting of any of the Trust's property, funds, or securities that may
come into his hands.
Section 12.9 Removal. The Trustees may remove any officer from office at any
-------
time.
Section 12.10 Remuneration. The salaries or other compensation, if any, of the
------------
officers of the Trust shall be fixed from time to time by resolution of the
Trustees.
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ARTICLE XIII
SHAREHOLDERS' MEETINGS
----------------------
Section 13.1 Notices. Notices of any meeting of the Shareholders shall be
-------
given by the Secretary by delivering or mailing, postage prepaid, to each
Shareholder entitled to vote at said meeting, written or printed
notification of such meeting at least fifteen (15) days before the meeting,
to such address as may be registered with the Trust by the Shareholder.
Notice of any Shareholder meeting need not be given to any Shareholder if a
written waiver of notice, executed before or after such meeting, is filed
with the record of such meeting, or to any Shareholder who shall attend
such meeting in person or by proxy. Notice of adjournment of a
Shareholders' meeting to another time or place need not be given, if such
time and place are announced at the meeting or reasonable notice is given
to persons present at the meeting.
Section 13.2 Voting; Proxies. Subject to the provisions of the Trust
---------------
Instrument, Shareholders entitled to vote may vote either in person or by
proxy, provided that either (i) an instrument authorizing such proxy to act
is executed by the Shareholder in writing and dated not more than eleven
(11) months before the meeting, unless the instrument specifically provides
for a longer period or (ii) the Trustees adopt by resolution an electronic,
telephonic, computerized or other alternative to execution of a written
instrument authorizing the proxy to act, which authorization is received
not more than eleven months before the meeting. Proxies shall be delivered
to the Secretary of the Trust or other person responsible for recording the
proceedings before being voted. A proxy with respect to Shares held in the
name of two or more persons shall be valid if executed by one of them
unless at or prior to exercise of such proxy the Trust receives a specific
written notice to the contrary from any one of them. Unless otherwise
specifically limited by their terms, proxies shall entitle the holder
thereof to vote at any adjournment of a meeting. A proxy purporting to be
exercised by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden or proving invalidity
shall rest on the challenger. At all meetings of the Shareholders, unless
the voting is conducted by inspectors, all questions relating to the
qualifications of voters, the validity of proxies, and the acceptance or
rejection of votes shall be decided by the Chairman of the meeting. Except
as otherwise provided herein or in the Trust Instrument, all matters
relating to the giving, voting or validity of proxies shall be governed by
the General Corporation Law of the State of Delaware relating to proxies,
and judicial interpretations thereunder, as if the Trust were a Delaware
corporation and the Shareholders were shareholders of a Delaware
corporation.
Section 13.3 Closing of Transfer Books; Record Dates. The Trustees may fix the
---------------------------------------
time, not exceeding twenty (20) days preceding the date of any meeting of
Shareholders, any dividend payment date or any date for the allotment of
rights, during which the books of the Corporation shall be closed against
transfers of stock. If such books are closed for the purpose of determining
Shareholders entitled to notice of or to vote at a meeting of Shareholders,
such books shall be closed for at least ten (10) days immediately preceding
such meeting. In lieu of providing for the closing of the books against
transfers of stock as aforesaid, the Trustees may fix, in advance, a date,
not exceeding one hundred (100) days and not less than ten (10) days
preceding any dividend payment date or any date for the
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allotment of rights, as a record date for the determination of the
Shareholders entitled to notice of and to vote at such meeting, or entitled
to receive such dividends or rights, as the case may be; and only
Shareholders of record on such date shall be entitled to notice of and to
vote at such meeting or to receive such dividends or rights, as the case
may be.
Section 13.4 Conduct of Shareholders' Meeting. The meetings of the
--------------------------------
Shareholders shall be presided over by the Chairman of the Board or, if the
Chairman shall not be present then by the President or, if the President
shall not be present, then by a Vice President or, if no Vice President is
present, then by a chairman to be elected at the meeting. The Secretary of
the Trust, if present, shall act as Secretary of such meeting, or if the
Secretary is not present, an Assistant Secretary shall so act; if neither
the Secretary nor an Assistant Secretary is present, then the presiding
officer shall appoint a secretary.
Section 13.5 Validity of Proxies and Ballots. At every meeting of the
-------------------------------
Shareholders, all proxies shall be received and taken in charge of and all
ballots shall be received and canvassed by the secretary of the meeting,
who shall decide all questions touching on the qualification of voters, the
validity of the proxies, and the acceptance or rejection of votes.
Section 13.6 Place of Meeting. Meetings of the Shareholders shall be held at
----------------
such places as the Trustees may designate.
ARTICLE XIV
SHARES OF BENEFICIAL INTEREST
-----------------------------
Section 14.1 Share Certificate. No certificates certifying the ownership of
-----------------
Shares shall be issued except as the Trustees may otherwise authorize. The
Trustees may issue certificates to a Shareholder of any Series or class
thereof for any purpose and the issuance of a certificate to one or more
Shareholders shall not require the issuance of certificates generally. In
the event that the Trustees authorize the issuance of Share certificates,
such certificate shall be in the form prescribed from time to time by the
Trustees and shall be signed by the President or a Vice President and by
the Treasurer, Assistant Treasurer, Secretary, or Assistant Secretary. Such
signatures may be facsimiles if the certificate is signed by a Transfer
Agent or shareholder services agent or by a registrar, other than a
Trustee, officer or employee of the Trust. In case any officer who has
signed or whose facsimile signature has been placed on such certificate
shall have ceased to be such officer before such certificate is issued, it
may be issued by the Trust with the same effect as if he or she were such
officer at the time of its issue.
Section 14.2 Loss of Certificate. In case of the alleged loss or destruction
-------------------
or the mutilation of a Share certificate, a duplicate certificate may be
issued in place thereof, upon such terms as the Trustees may prescribe.
Section 14.3 Discontinuance of Issuance of Certificates. The Trustees may at
------------------------------------------
any time discontinue the issuance of Share certificates and may, by written
notice to each Shareholder, require the surrender of Share certificates to
the Trust for cancellation. Such surrender and cancellation shall not
affect the ownership of Shares in the Trust.
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ARTICLE XV
INSPECTION OF BOOKS
-------------------
The Trustees shall from time to time determine whether and to what
extent, and at what times and places, and under what conditions and regulations
the accounts and books of the Trust or any of them shall be open to the
inspection of the Shareholders; and no Shareholder shall have any right to
inspect any account or book or document of the Trust except as conferred by law
or otherwise by the Trustees.
ARTICLE XVI
SEAL
----
The seal of the Trust shall be circular in form bearing the
inscription:
"The RREEF Securities Trust -- 1999
THE STATE OF DELAWARE"
The form of the seal shall be subject to alteration by the Trustees
and the seal may be used by causing it or a facsimile to be impressed or affixed
or printed or otherwise reproduced.
Any officer or Trustee of the Trust shall have authority to affix the
seal of the Trust to any document, instrument or other paper executed and
delivered by or on behalf of the Trust; however, unless otherwise required by
the Trustees, the seal shall not be necessary to be placed on, and its absence
shall not impair the validity of any document, instrument, or other paper
executed by or on behalf of the Trust.
ARTICLE XVII
AMENDMENTS
----------
These Bylaws may be amended from time to time by the Trustees.
ARTICLE XVIII
HEADINGS
--------
Headings are placed in these Bylaws for convenience of reference only
and, in case of any conflict, the text of these Bylaws rather than the headings
shall control.
5
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EXHIBIT (d)
FORM OF INVESTMENT MANAGEMENT AGREEMENT
THIS INVESTMENT MANAGEMENT AGREEMENT ("Agreement") is made as of the _____
day of _______________, 1999, by and between RREEF Securities Trust, a Delaware
business trust, (hereinafter called the "Trust") and RREEF America, LLC, a
Delaware limited liability company (hereinafter called the "Investment
Manager").
WHEREAS, the parties hereto desire to enter into this Agreement to arrange
for investment management services to be provided by the Investment Manager for
all classes of shares issued by the Trust;
NOW, THEREFORE, IN CONSIDERATION of the mutual promises and agreements
herein contained, the parties agree as follows:
1. Investment Management Services. The Investment Manager shall supervise
------------------------------
the investments of each series of shares of the Trust listed in Schedule A to
this Agreement. Each such series is sometimes hereinafter referred to as a
"Fund." In such capacity, the Investment Manager shall either directly, or
through the utilization of others as contemplated by Section 7 below, maintain a
continuous investment program for each such series, determine what securities
shall be purchased or sold by each such series, secure and evaluate such
information as it deems proper, and take whatever action is necessary or
convenient to perform its functions, including the placing of purchase and sale
orders.
2. Compliance with Laws. All functions undertaken by the Investment
--------------------
Manager hereunder shall at all times conform to and be in accordance with any
requirements imposed by (1) the Investment Company Act of 1940, as amended, (the
"Investment Company Act") and any rules and regulations promulgated thereunder;
(2) any other applicable provisions of law; (3) the Trust's Declaration of Trust
and Bylaws, each as amended from time to time; and (4) the registration
statement(s) of the Trust, as amended from time to time, filed under the
Securities Act of 1933 and the Investment Company Act.
3. Supervision by Trustees. All of the functions undertaken by the
-----------------------
Investment Manager hereunder shall at all times be subject to the direction of
the Trustees of the Trust, its executive committee, or any committee or officers
of the Trust acting under the authority of the Trustees.
4. Payment of Expenses. The Investment Manager will pay all expenses of
-------------------
managing and operating any Fund listed in Schedule A to this Agreement other
than brokerage expenses, taxes, interest, fees and expenses of those Trustees
who are not "interested persons" as defined in the Investment Company Act
(hereinafter referred to as the "Independent Trustees") (including legal counsel
fees), and extraordinary expenses. The Investment Manager will provide the
Trust with all physical facilities and personnel required to carry on the
business of each such series, including, but not limited to office space, office
furniture, fixtures and equipment, office supplies, computer hardware and
software, and salaried and hourly paid personnel. The
1
<PAGE>
Investment Manager may at its expense employ others to provide all or any part
of such facilities and personnel.
5. Account Fees. The Trust, by resolution of the Board of Trustees,
------------
including a majority of the Independent Trustees, may from time to time
authorize the imposition of a fee as a direct charge against shareholder
accounts of any series, such fee to be retained by the Trust or to be paid to
the Investment Manager to defray expenses which would otherwise be paid by the
Investment Manager in accordance with the provisions of paragraph 4 of this
Agreement. At least sixty (60) days' prior written notice of the intent to
impose such fee must be given to the shareholders of the affected series.
6. Management Fees.
---------------
(a) In consideration of the services provided by the Investment Manager,
each series of shares of the Trust listed in Schedule A to this Agreement shall
pay to the Investment Manager a per annum management fee (hereinafter, the
"Applicable Fee") as set forth in Schedule B to this Agreement. On the first
business day of each month, each such series of shares shall pay the management
fee, at the applicable rate, for the previous month. The fee for the previous
month shall be calculated by multiplying the Applicable Fee for each such series
by the aggregate average daily closing value of the net assets of each such
series during the previous month, and further multiplying that product by a
fraction, the numerator of which shall be the number of days in the previous
month, and the denominator of which shall be 365 (366 in leap years).
(b) In the event that the Trustees of the Trust shall determine to issue
any additional series of shares for which it is proposed that the Investment
Manager serve as investment manager, the Trust and the Investment Manager may
enter into an Addendum to this Agreement setting forth the name of the series,
the Applicable Fee, and such other terms and conditions as are applicable to the
management of such series of shares.
7. Subcontracts. In rendering the services to be provided pursuant to
------------
this Agreement, the Investment Manager may, from time to time, engage or
associate itself with such persons or entities as it determines are necessary or
convenient in its sole discretion and may contract with such persons or entities
to obtain information, investment advisory and management services, or such
other services as the Investment Manager deems appropriate. Any fees,
compensation, or expenses to be paid to any such person of entity shall be paid
by the Investment Manager, and no obligation to such person or entity shall be
incurred on behalf of the Trust. Any arrangement entered into pursuant to this
paragraph shall, to the extent required by law, be subject to the approval of
the Trustees of the Trust, including a majority of the Independent Trustees, and
the shareholders of the Trust.
8. Continuation of Agreement. This Agreement shall continue in effect,
-------------------------
unless sooner terminated as hereinafter provided, for a period of two years from
the execution hereof, and for as long thereafter as its continuance is
specifically approved at least annually (a) by the Trustees of the Trust or by
the vote of a majority of the outstanding class of voting securities of each
series and (b) by the vote of a majority of the Trustees of the Trust who are
not parties to the
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Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval.
9. Termination. This Agreement may be terminated by the Investment
-----------
Manager at any time without penalty upon giving the Trust sixty (60) days'
written notice, and may be terminated at any time without penalty by the
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of each series on sixty (60) days' written notice to the Investment
Manager.
10. Effect of Assignment. This Agreement shall automatically terminate in
--------------------
the event of assignment by the Investment Manager, the term "assignment" for
this purpose having the meaning defined in Section 2(a)(4) of the Investment
Company Act.
11. Other Activities. Nothing herein shall be deemed to limit or restrict
----------------
the right of the Investment Manager, or the right of any of its officers,
directors, or employees (who may also be a Trustee, officer, or employee of the
Trust), to engage in any other business or to devote time and attention to the
management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other trust,
corporation, firm, individual or association.
12. Standard of Care. In the absence of willful misfeasance, bad faith,
----------------
gross negligence, or reckless disregard of its obligations or duties hereunder
on the part of the Investment Manager, it, as an inducement to it to enter into
this Agreement, shall not be subject to liability to the Trust or to any
shareholder of the Trust for any act or omission in the course of, or connected
with, rendering services hereunder or for any losses that may be sustained in
the purchase, holding, or sale of any security.
13. Non-Liability of Trustees and Shareholders. Any obligation of the
------------------------------------------
Trust hereunder shall be binding only upon the assets of the Trust or the
applicable series thereof, and shall not be binding upon any Trustee, officer,
employee, agent, or shareholders of the Trust. Neither the authorization of any
action by the Trustees or the shareholders of the Trust nor the execution of
this Agreement on behalf of the Trust shall impose any liability upon any
Trustee or any shareholder.
14. Use of Investment Manager's Name. The Trust may use the name "RREEF
--------------------------------
Securities Trust" and the series names listed in Schedule A or any other name
derived from the name "RREEF" only for so long as this Agreement or any
extension, renewal, or amendment hereof remains in effect, including any similar
agreement with any organization which shall have succeeded to the business of
the Investment Manager as investment adviser. At such time as this Agreement or
any extension, renewal, or amendment hereof, or such other similar agreement
shall no longer be in effect, the Trust will cease to use any name derived from
the name "RREEF" or otherwise connected with the Investment Manager, or with any
organization which shall have succeeded to the Investment Manager's business as
investment adviser.
15. Separate Agreement. The parties hereto acknowledge that certain
------------------
provisions of the Investment Company Act, in effect, treat each series of shares
of an investment company as a
3
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separate investment company. Accordingly, the parties hereto hereby acknowledge
and agree that, to the extent deemed appropriate and consistent with the
Investment Company Act, this Agreement shall be deemed to constitute a separate
agreement between the Investment Manager and each series of shares of the Trust
managed by the Investment Manager.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized officers as of the day and year first above
written.
RREEF SECURITIES TRUST RREEF America, LLC
By: /s/ Kim G. Redding By: /s/ ____________________
Name: Kim G. Redding Name: ________________________
Title: Trustee Title:________________________
Attest:/s/ ________________ Attest: /s/ ___________________
Name: _________________ Name: _______________________
Title: _________________ Title: _______________________
4
<PAGE>
RREEF SECURITIES TRUST
INVESTMENT MANAGEMENT AGREEMENT
SCHEDULE A
The series of the Trust currently subject to this Agreement are as follows:
Effective Date
---------------------
RREEF Real Estate Securities Fund _______________, 1999
Dated: ________________, 1999
<PAGE>
RREEF SECURITIES TRUST
INVESTMENT MANAGEMENT AGREEMENT
SCHEDULE B
Compensation pursuant to Section 6 of this Agreement shall be calculated in
accordance with the fee rate applicable to the average daily net assets of each
of the series of the Trust listed below:
Name of Series Applicable Fee Rate
-------------- -------------------
RREEF Real Estate Securities Fund 1.00%
Dated: ________________, 1999
<PAGE>
EXHIBIT (e)
FORM OF DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of this ___ day of _______, 1999, by and between
RREEF Securities Trust, a _________ business trust (the "Trust"), and Sunstone
Distribution Services, LLC, a Wisconsin limited liability company (the
"Distributor").
WHEREAS, the Trust is an open-end investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act") and is authorized
to issue shares of beneficial interests in separate series with each such series
representing interests in a separate portfolio of securities and other assets;
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member of
the National Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Trust and Distributor desire to enter into an agreement pursuant
to which Distributor shall be the distributor of the shares of the Trust
representing the investment portfolios described on Schedule A hereto and any
additional shares and/or investment portfolios the Trust and Distributor may
agree upon and include on Schedule A as such Schedule may be amended from time
to time (such shares and any additional shares are referred to as the "Shares"
and such investment portfolios and any additional investment portfolios are
individually referred to as a "Fund" and collectively the "Funds").
NOW, THEREFORE, in consideration of the mutual promises and agreements herein
contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. Appointment of the Distributor.
------------------------------
The Trust hereby appoints the Distributor as agent for the distribution
of the Shares, on the terms and for the period set forth in this Agreement.
Distributor hereby accepts such appointment as agent for the distribution of the
Shares on the terms and for the period set forth in this Agreement.
2. Services and Duties of the Distributor.
--------------------------------------
2.1 Distributor will act as agent for the distribution of Shares in
accordance with the instructions of the Trust's Board of Trustees and the
registration statement and prospectuses then in effect with respect to the Funds
under the Securities Act of 1933, as amended (the "1933 Act").
2.2 Distributor may incur expenses for appropriate distribution activities
which it deems reasonable which are primarily intended to result in the sale of
Shares, including, but not
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limited to, advertising, the printing and mailing of prospectuses to other than
current shareholders, and the printing and mailing of sales literature.
Distributor may enter into servicing and/or selling agreements with qualified
broker/dealers and other persons with respect to the offering of Shares to the
public, and if it so chooses Distributor will act only on its own behalf as
principal. The Distributor shall not be obligated to incur any specific expenses
nor sell any certain number of Shares of any Fund.
2.3 All Shares of the Funds offered for sale by Distributor shall be
offered for sale to the public at a price per unit (the "offering price")
provided in the Funds' then current prospectus. The Distributor shall have no
liability for payment of the purchase price of the Shares sold pursuant to this
Agreement or with respect to redemptions or repurchases of Shares.
2.4 Distributor shall act as distributor of the Shares in compliance in
all material respects with all applicable laws, rules and regulations,
including, without limitation, all rules and regulations made or adopted
pursuant to the 1940 Act, by the Securities and Exchange Commission (the
"Commission") and the NASD.
2.5 Distributor shall not utilize any materials in connection with the
sales or offering of Shares except the Trust's prospectus and statement of
additional information and such other materials as the Trust shall provide or
approve. The Distributor agrees to provide compliance review of all sales
literature and marketing materials prepared for use by or on behalf of the Fund
in advance of the use of such materials. The Fund agrees to incorporate such
changes to such materials as the Distributor shall request. The Distributor
will file the materials as may be required with the NASD, SEC or state
securities commissioners. The Trust represents that it will not use or authorize
the use of any advertising or sales material unless and until such materials
have been approved and authorized for use by the Distributor.
2.5 As compensation for the services performed hereunder and the expenses
incurred by Distributor, the Distributor shall be entitled to the fees and be
reimbursed the expenses as provided in Schedule B hereto.
3. Duties and Representations of the Trust.
---------------------------------------
3.1 The Trust represents that it is registered as an open-end management
investment company under the 1940 Act and that it has and will continue to act
in conformity with its Declaration of Trust, By-Laws, its registration statement
as may be amended from time to time and resolutions and other instructions of
its Board of Trustees and has and will continue to comply with all applicable
laws, rules and regulations including without limitation the 1933 Act, the 1934
Act, the 1940 Act, the laws of the states in which shares of the Funds are
offered and sold, and the rules and regulations thereunder.
3.2 The Trust shall take or cause to be taken all necessary action to
register and maintain the registration of the Shares under the 1933 Act for sale
as herein contemplated and shall pay all costs and expenses in connection with
the registration of Shares under the 1933 Act, and be responsible for all
expenses in connection with maintaining facilities for the issue and
2
<PAGE>
transfer of Shares and for supplying information, prices and other data to be
furnished by the Trust hereunder.
3.3 The Trust shall execute any and all documents and furnish any and all
information and otherwise take all actions which may be reasonably necessary in
the discretion of the Trust's officers in connection with the qualification of
the Shares for sale in such states as Distributor and the Trust may approve,
shall maintain the registration of a sufficient number or amount of shares
thereunder, and shall pay all costs and expenses in connection with such
qualification. The Trust shall notify the Distributor, or cause it to be
notified, of the states in which the Shares may be sold and shall notify the
Distributor of any change to the information.
3.4 The Trust shall, at its expense, keep the Distributor fully informed
with regard to its affairs. In addition, the Trust shall furnish Distributor
from time to time such information, documents and reports with respect to the
Trust and the Shares as Distributor may reasonably request, and the Trust
warrants that the statements contained in any such information shall be true and
correct and fairly represent what they purport to represent.
3.5 The Trust represents to Distributor that all registration statements
and prospectuses of the Trust filed or to be filed with the Commission under the
1933 Act with respect to the Shares have been and will be prepared in conformity
with the requirements of the 1933 Act, the 1940 Act, and the rules and
regulations of the Commission thereunder. As used in this Agreement the terms
"registration statement" and "prospectus" shall mean any registration statement
and prospectus (together with the related statement of additional information)
at any time now or hereafter filed with the Commission with respect to any of
the Shares and any amendments and supplements thereto which at any time shall
have been or will be filed with said Commission. The Trust represents and
warrants to Distributor that any registration statement and prospectus, when
such registration statement becomes effective, will contain all statements
required to be stated therein in conformity with the 1933 Act, the 1940 Act and
the rules and regulations of the Commission; that all information contained in
the registration statement and prospectus will be true and correct in all
material respects when such registration statement becomes effective; and that
neither the registration statement nor any prospectus when such registration
statement becomes effective will include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading. The Trust agrees to file from time
to time such amendments, supplements, reports and other documents as may be
necessary or required in order to comply with the 1933 Act and the 1940 Act and
in order that there may be no untrue statement of a material fact in a
registration statement or prospectus, or necessary or required in order that
there may be no omission to state a material fact in the registration statement
or prospectus which omission would make the statements therein misleading. The
Trust shall promptly notify the Distributor of any advice given to it by counsel
to the Trust regarding the necessity or advisability of amending or
supplementing the registration statement.
3.6 The Trust shall not file any amendment to the registration statement
or supplement to any prospectus without giving Distributor reasonable notice
thereof in advance and if the Distributor declines to assent to such amendment
(after a reasonable time), the Trust may terminate this Agreement forthwith by
written notice to the Distributor without payment of
3
<PAGE>
any penalty. If the Trust shall not propose an amendment or amendments and/or
supplement or supplements promptly after receipt by the Trust of a written
request in good faith from Distributor to do so, Distributor may, at its option,
immediately terminate this Agreement. In addition, if, at any time during the
term of this Agreement, the Distributor requests the Trust to make any change in
its governing instruments or in its methods of doing business which are
necessary in order to comply with any requirement of applicable law or
regulation, and the Trust fails (after a reasonable time) to make any such
change as requested, the Distributor may terminate this Agreement forthwith by
written notice to the Trust without payment of any penalty. Nothing contained in
this Agreement shall in any way limit the Trust's right to file at any time any
amendments to any registration statement and/or supplements to any prospectus,
of whatever character, as the Trust may deem advisable, such right being in all
respects absolute and unconditional.
3.7 Whenever in their judgment such action is warranted by market,
economic or political conditions, or by circumstances of any kind, the Trust may
decline to accept any orders for, or make any sales of, any Shares until such
time as it deems it advisable to accept such orders and to make such sales and
the Trust shall advise Distributor promptly of such determination.
3.8 The Trust agrees to advise the Distributor promptly in writing:
(i) of any correspondence or other communication by the Commission
or its staff relating to the Funds including requests by the Commission for
amendments to the registration statement or prospectuses;
(ii) in the event of the issuance by the Commission of any stop
order suspending the effectiveness of the registration statement or prospectuses
then in effect or the initiation of any proceeding for that purpose;
(iii) of the happening of any event which makes untrue any statement
of a material fact made in the registration statement or prospectuses or which
requires the making of a change in such registration statement or prospectuses
in order to make the statements therein not misleading; and
(iv) of all actions taken by the Commission with respect to any
amendments to any registration statement or prospectus which may from time to
time be filed with the Commission.
4. Indemnification.
---------------
4.1(a) The Trust authorizes Distributor to use any prospectus or statement
of additional information, in the form furnished to Distributor from time to
time, in connection with the sale of Shares. The Trust shall indemnify, defend
and hold the Distributor, and each of its present or former directors, members,
officers, employees, representatives and any person who controls or previously
controlled the Distributor within the meaning of Section 15 of the 1933 Act
("Distributor Indemnitees"), free and harmless from and against any and all
losses, claims,
4
<PAGE>
demands, liabilities, damages, charges, payments, costs and expenses (including
the costs of investigating or defending any alleged losses, claims, demands,
liabilities, damages, charges, payments, costs or expenses and any counsel fees
incurred in connection therewith) of any and every nature ("Losses") which
Distributor and each of the Distributor Indemnitees may incur under the 1933
Act, the 1934 Act, any other statute (including Blue Sky laws) or any rule or
regulation thereunder, or under common law or otherwise, (a) arising out of or
based upon any untrue statement, or alleged untrue statement, of a material fact
contained in the registration statement or any prospectus, an annual or interim
report to shareholders or sales literature, or any amendments or supplements
thereto, or arising out of or based upon any omission, or alleged omission, to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the Trust's
obligation to indemnify Distributor and any of the foregoing indemnitees shall
not be deemed to cover any Losses arising out of any untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with information relating to the Distributor and furnished to
the Trust or its counsel by Distributor in writing for the purpose of, and used
in, the preparation thereof; or (b) in connection with this Agreement or arising
out of or based on the Distributor's or the Distributor Indemnitees' performance
hereunder, except to the extent the Losses result from the Distributor's willful
misfeasance, bad faith or negligence in the performance of its duties, or by
reason of its reckless disregard of its obligations and duties under this
Agreement. Promptly after receipt by the Distributor of notice of the
commencement of an investigation, action, claim or proceeding, the Distributor
shall, if a claim for indemnification in respect thereof is to be made under
this section, notify the Trust in writing of the commencement thereof, although
the failure to do so shall not prevent recovery by the Distributor or any
Distributor Indemnitee.
4.1(b) The Trust shall be entitled to participate at its own expense in
the defense or, if it so elects, to assume the defense of any suit brought to
enforce any such loss, claim, demand, liability, damage or expense, but if the
Trust elects to assume the defense, such defense shall be conducted by counsel
chosen by the Trust and approved by the Distributor, which approval shall not be
unreasonably withheld. In the event the Trust elects to assume the defense of
any such suit and retain such counsel and notifies the Distributor of such
election, the indemnified defendant or defendants in such suit shall bear the
fees and expenses of any additional counsel retained by them subsequent to the
receipt of the Trust's election. If the Trust does not elect to assume the
defense of any such suit, or in case the Distributor does not, in the exercise
of reasonable judgment, approve of counsel chosen by the Trust, or in case there
is a conflict of interest between the Trust and the Distributor or any of the
Distributor Indemnitees, the Trust will reimburse the indemnified person or
persons named as defendant or defendants in such suit, for the fees and expenses
of any counsel retained by Distributor and them. The Trust's indemnification
agreement contained in this Section 4.1 and the Trust's representations and
warranties in this Agreement shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Distributor and each
of the Distributor Indemnitees, and shall survive the delivery of any Shares and
the termination of this Agreement. This agreement of indemnity will inure
exclusively to the Distributor's benefit, to the benefit of each of the
Distributor Indemnitees, and their estates and successors. The Trust agrees
promptly to notify Distributor of the commencement of any litigation or
proceedings against the Trust or any of its officers or Trustees in connection
with the issue and sale of any of the Shares.
5
<PAGE>
4.1(c) The Trust acknowledges and agrees that in the event the
Distributor, at the request of the Trust, is required to give indemnification
comparable to that set forth in clause (a) of this Section to any entity selling
Shares or providing shareholder services to shareholders or others and such
entity shall make a claim for indemnification against the Distributor, the
Distributor shall make a similar claim for indemnification against the Trust and
shall be entitled to such indemnification.
4.2(a) Distributor shall indemnify, defend and hold the Trust, and each of
its present or former trustees, officers, employees, representatives, and any
person who controls or previously controlled the Trust within the meaning of
Section 15 of the 1933 Act ("Trust Indemnitees"), free and harmless from and
against any and all Losses which the Trust, and each of its present or former
trustees, officers, employees, representatives, or any such controlling person,
may incur under the 1933 Act, the 1934 Act, any other statute (including Blue
Sky laws) or any rule or regulation thereunder, or under common law or
otherwise, arising out of or based upon any untrue, or alleged untrue, statement
of a material fact contained in the Trust's registration statement or any
prospectus, as from time to time amended or supplemented, or the omission, or
alleged omission, to state therein a material fact required to be stated therein
or necessary to make the statement not misleading, but only if such statement or
omission was made in reliance upon, and in conformity with, information relating
to the Distributor and furnished in writing to the Trust or its counsel by the
Distributor for the purpose of, and used in, the preparation thereof.
Distributor's agreement to indemnify the Trust and any of the Trust Indemnitees
shall not be deemed to cover any Losses to the extent they arise out of or
result from the Trust's willful misfeasance, bad faith or negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties, under this Agreement. Promptly after receipt by the
Trust of notice of the commencement of an investigation, action, claim or
proceeding, the Trust shall, if a claim for indemnification in respect thereof
is to be made under this section, notify the Distributor in writing of the
commencement thereof, although the failure to do so shall not prevent recovery
by the Trust or any Trust Indemnitee.
4.2(b) The Distributor shall be entitled to participate at its own expense
in the defense or, if it so elects, to assume the defense of any suit brought to
enforce any such loss, claim, demand, liability, damage or expense, but if the
Distributor elects to assume the defense, such defense shall be conducted by
counsel chosen by the Distributor and approved by the Trust, which approval
shall not be unreasonably withheld. In the event the Distributor elects to
assume the defense of any such suit and retain such counsel and notifies the
distributor of such election, the indemnified defendant or defendants in such
suit shall bear the fees and expenses of any additional counsel retained by them
subsequent to the receipt of the Distributor's election. If the Distributor
does not elect to assume the defense of any such suit, or in case the Trust does
not, in the exercise of reasonable judgment, approve of counsel chosen by the
Distributor, the Distributor will reimburse the indemnified person or persons
named as defendant or defendants in such suit, for the fees and expenses of any
counsel retained by the Trust and them. The Distributor's indemnification
agreement contained in this Section 4.2 and the Distributor's representations
and warranties in this Agreement shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Trust or any
of the Trust Indemnitees, and shall survive the delivery of any Shares and the
termination of this Agreement.
6
<PAGE>
This agreement of indemnity will inure exclusively to the Trust's benefit, to
the benefit of each of the Trust Indemnitees, and their estates and successors.
The Distributor agrees promptly to notify the Trust of the commencement of any
litigation or proceedings against the Distributor or any of its officers or
directors in connection with the issue and sale of any of the Shares.
5. Offering of Shares.
------------------
No Shares shall be offered by either the Distributor or the Trust under any
of the provisions of this Agreement and no orders for the purchase or sale of
such Shares hereunder shall be accepted by the Trust if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the 1933
Act, or if and so long as the current prospectus as required by Section 10 of
the 1933 Act, as amended, is not on file with the Commission; provided, however,
that nothing contained in this paragraph 5 shall in any way restrict or have an
application to or bearing upon the Trust's obligation to repurchase Shares from
any shareholder in accordance with the provisions of the prospectus or
Declaration of Trust.
6. Limitation of Liability
-----------------------
6.1 The Distributor shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Company in connection with the
performance of its obligations and duties under this Agreement, except a loss
resulting from the Distributor's willful misfeasance, bad faith or negligence in
the performance of such duties and obligations, or by reason of its reckless
disregard thereof. Furthermore, the Distributor shall not be liable for any
action taken or omitted to be taken in accordance with instructions received by
the Distributor from an officer or representative of the Trust.
6.2 The Distributor assumes no responsibility hereunder, and shall not
be liable, for any damage, loss of data, errors, delay or any other loss
whatsoever caused by events beyond its reasonable control. The Distributor
will, however, take all reasonable steps to minimize service interruptions for
any period that such interruption continues beyond its control.
6.3 Each party shall have the duty to mitigate damages for which the
other party may become responsible. Notwithstanding anything in this agreement
to the contrary, in no event shall either party, its affiliates or any of its or
their trustees, directors, officers, employees, agents or subcontractors, be
liable for lost profits or consequential damages.
7. Term.
----
7.1 This Agreement shall become effective with respect to each Fund listed
on Schedule A hereof as of the date hereof and, with respect to each Fund not in
existence on that date, on the date an amendment to Schedule A to this Agreement
relating to that Fund is executed. Unless sooner terminated as provided herein,
this Agreement shall continue in effect with respect to each Fund until
__________, 200__. Thereafter, if not terminated, this Agreement shall continue
automatically in effect as to each Fund for successive annual periods, provided
7
<PAGE>
such continuance is specifically approved at least annually by (i) the Trust's
Board of Trustees or (ii) the vote of a majority (as defined in the 1940 Act and
Rule 18f-2 thereunder) of the outstanding voting securities of a Fund, and
provided that in either event the continuance is also approved by the
Distributor and by a majority of the Trust's Board of Trustees who are not
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval.
7.2 This Agreement may be terminated without penalty with respect to a
particular Fund (1) through a failure to renew this Agreement at the end of a
term, (2) upon mutual consent of the parties, or (3) on no less than thirty (30)
days' written notice, by the Trust's Board of Trustees, by vote of a majority
(as defined with respect to voting securities in the 1940 Act and Rule 18f-2
thereunder) of the outstanding voting securities of a Fund, or by the
Distributor (which notice may be waived by the party entitled to such notice).
The terms of this Agreement shall not be waived, altered, modified, amended or
supplemented in any manner whatsoever except by a written instrument signed by
the Distributor and the Trust. This Agreement will also terminate automatically
in the event of its assignment (as defined in the 1940 Act).
8. Miscellaneous.
-------------
8.1 The services of the Distributor rendered to the Funds are not deemed
to be exclusive. The Distributor may render such services and any other
services to others, including other investment companies. The Trust recognizes
that from time to time directors, officers, and employees of the Distributor may
serve as directors, trustees, officers and employees of other entities
(including other investment companies) and that the Distributor or its
affiliates may enter into distribution, administration, fund accounting,
transfer agent or other agreements with such other entities.
8.2 Distributor agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records relative
to the Funds shareholders (and clients of said shareholders), and not to use
such records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Trust, which approval may not be withheld where the
Distributor may be exposed to civil or criminal proceedings for failure to
comply, when requested to divulge such information by duly constituted
authorities, when subject to governmental or regulatory audit or investigation,
or when so requested by the Trust. Records and information which have become
known to the public through no wrongful act of the Distributor or any of its
employees, agents or representatives shall not be subject to this paragraph.
8.3 This Agreement shall be governed by Wisconsin law, excluding the laws
on conflicts of laws. To the extent that the applicable laws of the State of
Wisconsin, or any of the provisions herein, conflict with the applicable
provisions of the 1940 Act, the latter shall control, and nothing herein shall
be construed in a manner inconsistent with the 1940 Act or any rule or order of
the Commission thereunder. Any provision of this Agreement which may be
determined by competent authority to be prohibited or unenforceable in any
8
<PAGE>
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. In such case, the parties shall in good faith modify or
substitute such provision consistent with the original intent of the parties.
8.4 Any notice required or to be permitted to be given by either party to
the other shall be in writing and shall be deemed to have been given when sent
by registered or certified mail, postage prepaid, return receipt requested, as
follows: Notice to the Distributor shall be sent to Sunstone Distribution
Services, LLC, 207 East Buffalo Street, Suite 400, Milwaukee, WI, 53202,
Attention: Miriam M. Allison, and notice to the Trust shall be sent to
___________________ Attention: ______________.
8.5 This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original agreement but such counterparts shall
together constitute but one and the same instrument.
8.6 This Agreement is executed by the Trust with respect to each of the
Funds and the obligations hereunder are not binding upon any of the trustees,
officers or shareholders of the Trust individually but are binding only upon the
Fund to which such obligations pertain and the assets and property of such Fund.
All obligations of the Trust under this Agreement shall apply only on a Fund-by-
Fund basis, and the assets of one Fund shall not be liable for the obligations
of another Fund. The Fund's Declaration of Trust is on file with the Secretary
of _________________.
8.7 The captions of this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise effect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer as of the day and year first above
written.
RREEF SECURITIES TRUST
(the "Trust")
By:____________________________________________
President
SUNSTONE DISTRIBUTION SERVICES, LLC
(the "Distributor")
By:____________________________________________
Miriam M. Allison
President
9
<PAGE>
Schedule A
to the
Distribution Agreement
by and between
RREEF Securities Trust
and
Sunstone Distribution Services, LLC
Name of Funds
-------------
Fund Effective Date
---- --------------
RREEF Real Estate Securities Trust ____, 1999
<PAGE>
Schedule B
to the
Distribution Agreement
by and between
RREEF Securities Trust
and
Sunstone Distribution Services, LLC
FEES
As compensation for the services performed by the Distributor, the Trust shall
pay the Distributor a fee payable monthly in arrears, equal to ___% of the
average net assets of each Fund, subject to a minimum annual fee per Fund of
$_____. In addition, the Trust shall pay to Distributor a fee based on the
actual time spent by representatives of Distributor providing compliance review
of sales literature and marketing materials at the hourly rate of $____ per
hour. Such fees shall be payable monthly promptly (as specified in the invoice)
after the receipt by the Trust of an invoice for such fees.
In addition to the compensation payable to the Distributor, the Funds agree to
reimburse, upon request (or pay directly at the Distributor's discretion), the
Distributor's out-of-pocket expenses in providing services hereunder including,
without limitation, amounts paid or to be paid by Distributor to dealers or
others entering into selling, servicing or related agreements with the
Distributor or the Trust.
Such fees and expenses shall be paid to the Distributor by the respective Funds
pursuant to the Trust's Rule 12b-1 Plan or, if the Rule 12b-1 Plan payments are
not sufficient to pay such fees and expenses over an annual period, or if the
Rule 12b-1 Plan is discontinued, or if the Fund otherwise determines that Rule
12b-1 Plan fees may not be paid, in whole or in part, to the Distributor, the
Funds' adviser(s) shall be responsible for the payment of the amount of such
fees not covered by Rule 12b-1 payments and shall reimburse Distributor or pay
directly at the Distributor's discretion such amounts.
<PAGE>
EXHIBIT (g)
FORM OF CUSTODY AGREEMENT
Dated ______________, 1999
Between
UMB BANK, N.A.
and
[FAMILY OF MUTUAL FUNDS]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
1. Appointment of Custodian 1
2. Definitions 1
(a) Securities 1
(b) Assets 1
(c) Instructions and Special Instructions 1
3. Delivery of Corporate Documents 2
4. Powers and Duties of Custodian and Domestic Subcustodian 2
(a) Safekeeping 3
(b) Manner of Holding Securities 3
(c) Free Delivery of Assets 4
(d) Exchange of Securities 4
(e) Purchases of Assets 4
(f) Sales of Assets 5
(g) Options 5
(h) Futures Contracts 6
(i) Segregated Accounts 6
(j) Depositary Receipts 6
(k) Corporate Actions, Put Bonds, Called Bonds, Etc. 6
(l) Interest Bearing Deposits 7
(m) Foreign Exchange Transactions 7
(n) Pledges or Loans of Securities 8
(o) Stock Dividends, Rights, Etc. 8
(p) Routine Dealings 8
(q) Collections 8
(r) Bank Accounts 9
(s) Dividends, Distributions and Redemptions 9
(t) Proceeds from Shares Sold 9
(u) Proxies and Notices; Compliance with the Shareholders
Communication Act of 1985 9
(v) Books and Records 9
(w) Opinion of Fund's Independent Certified Public Accountants 10
(x) Reports by Independent Certified Public Accountants 10
(y) Bills and Others Disbursements 10
5. Subcustodians 10
(a) Domestic Subcustodians 10
(b) Foreign Subcustodians 10
(c) Interim Subcustodians 11
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(d) Special Subcustodians 11
(e) Termination of a Subcustodian 11
(f) Certification Regarding Foreign Subcustodians 11
6. Standard of Care 12
(a) General Standard of Care 12
(b) Actions Prohibited by Applicable Law, Events Beyond Custodian's Control, Armed 12
Conflict, Sovereign Risk, etc.
(c) Liability for Past Records 12
(d) Advice of Counsel 12
(e) Advice of the Fund and Others 12
(f) Instructions Appearing to be Genuine 13
(g) Exceptions from Liability 13
7. Liability of the Custodian for Actions of Others 13
(a) Domestic Subcustodians 13
(b) Liability for Acts and Omissions of Foreign Subcustodians 13
(c) Securities Systems, Interim Subcustodians, Special Subcustodians, Securities 13
Depositories and Clearing Agencies
(d) Defaults or Insolvency's of Brokers, Banks, Etc. 14
(e) Reimbursement of Expenses 14
8. Indemnification 14
(a) Indemnification by Fund 14
(b) Indemnification by Custodian 14
9. Advances 14
10. Liens 15
11. Compensation 15
12. Powers of Attorney 15
13. Termination and Assignment 15
14. Additional Funds 15
15. Notices 16
16. Miscellaneous 16
</TABLE>
<PAGE>
CUSTODY AGREEMENT
This agreement made as of this ____ day of __________, 1999, between UMB
Bank, n.a., a national banking association with its principal place of business
located at Kansas City, Missouri (hereinafter "Custodian"), and each of the
Funds listed on Appendix B hereof, together with such additional Funds which
shall be made parties to this Agreement by the execution of Appendix B hereto
(individually, a "Fund" and collectively, the "Funds").
WITNESSETH:
WHEREAS, each Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended; and
WHEREAS, each Fund desires to appoint Custodian as its custodian for the
custody of Assets (as hereinafter defined) owned by such Fund which Assets are
to be held in such accounts as such Fund may establish from time to time; and
WHEREAS, Custodian is willing to accept such appointment on the terms and
conditions hereof.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties hereto, intending to be legally bound, mutually covenant and agree
as follows:
1. APPOINTMENT OF CUSTODIAN.
------------------------
Each Fund hereby constitutes and appoints the Custodian as custodian of
Assets belonging to each such Fund which have been or may be from time to time
deposited with the Custodian. Custodian accepts such appointment as a custodian
and agrees to perform the duties and responsibilities of Custodian as set forth
herein on the conditions set forth herein.
2. DEFINITIONS.
-----------
For purposes of this Agreement, the following terms shall have the meanings
so indicated:
(a) "Security" or "Securities" shall mean stocks, bonds, bills, rights,
script, warrants, interim certificates and all negotiable or nonnegotiable paper
commonly known as Securities and other instruments or obligations.
(b) "Assets" shall mean Securities, monies and other property held by the
Custodian for the benefit of a Fund.
(c)(1) "Instructions", as used herein, shall mean: (i) a tested telex, a
written (including, without limitation, facsimile transmission) request,
direction, instruction or certification signed or initialed by or on behalf of a
Fund by an Authorized Person; (ii) a telephonic or other oral
1
<PAGE>
communication from a person the Custodian reasonably believes to be an
Authorized Person; or (iii) a communication effected directly between an
electro-mechanical or electronic device or system (including, without
limitation, computers) on behalf of a Fund. Instructions in the form of oral
communications shall be confirmed by the appropriate Fund by tested telex or in
writing in the manner set forth in clause (i) above, but the lack of such
confirmation shall in no way affect any action taken by the Custodian in
reliance upon such oral Instructions prior to the Custodian's receipt of such
confirmation. Each Fund authorizes the Custodian to record any and all
telephonic or other oral Instructions communicated to the Custodian.
(c)(2) "Special Instructions", as used herein, shall mean Instructions
countersigned or confirmed in writing by the Treasurer or any Assistant
Treasurer of a Fund or any other person designated by the Treasurer of such Fund
in writing, which countersignature or confirmation shall be included on the same
instrument containing the Instructions or on a separate instrument relating
thereto.
(c)(3) Instructions and Special Instructions shall be delivered to the
Custodian at the address and/or telephone, facsimile transmission or telex
number agreed upon from time to time by the Custodian and each Fund.
(c)(4) Where appropriate, Instructions and Special Instructions shall be
continuing instructions.
3. DELIVERY OF CORPORATE DOCUMENTS.
-------------------------------
Each of the parties to this Agreement represents that its execution does
not violate any of the provisions of its respective charter, articles of
incorporation, articles of association or bylaws and all required corporate
action to authorize the execution and delivery of this Agreement has been taken.
Each Fund has furnished the Custodian with copies, properly certified or
authenticated, with all amendments or supplements thereto, of the following
documents:
(a) Certificate of Incorporation (or equivalent document) of the Fund as
in effect on the date hereof;
(b) By-Laws of the Fund as in effect on the date hereof;
(c) Resolutions of the Board of Directors of the Fund appointing the
Custodian and approving the form of this Agreement; and
(d) The Fund's current prospectus and statements of additional
information.
Each Fund shall promptly furnish the Custodian with copies of any updates,
amendments or supplements to the foregoing documents.
2
<PAGE>
In addition, each Fund has delivered or will promptly deliver to the
Custodian, copies of the Resolution(s) of its Board of Directors or Trustees and
all amendments or supplements thereto, properly certified or authenticated,
designating certain officers or employees of each such Fund who will have
continuing authority to certify to the Custodian: (a) the names, titles,
signatures and scope of authority of all persons authorized to give Instructions
or any other notice, request, direction, instruction, certificate or instrument
on behalf of each Fund, and (b) the names, titles and signatures of those
persons authorized to countersign or confirm Special Instructions on behalf of
each Fund (in both cases collectively, the "Authorized Persons" and
individually, an "Authorized Person"). Such Resolutions and certificates may be
accepted and relied upon by the Custodian as conclusive evidence of the facts
set forth therein and shall be considered to be in full force and effect until
delivery to the Custodian of a similar Resolution or certificate to the
contrary. Upon delivery of a certificate which deletes or does not include the
name(s) of a person previously authorized to give Instructions or to countersign
or confirm Special Instructions, such persons shall no longer be considered an
Authorized Person authorized to give Instructions or to countersign or confirm
Special Instructions. Unless the certificate specifically requires that the
approval of anyone else will first have been obtained, the Custodian will be
under no obligation to inquire into the right of the person giving such
Instructions or Special Instructions to do so. Notwithstanding any of the
foregoing, no Instructions or Special Instructions received by the Custodian
from a Fund will be deemed to authorize or permit any director, trustee,
officer, employee, or agent of such Fund to withdraw any of the Assets of such
Fund upon the mere receipt of such authorization, Special Instructions or
Instructions from such director, trustee, officer, employee or agent.
4. POWERS AND DUTIES OF CUSTODIAN AND DOMESTIC SUBCUSTODIAN.
--------------------------------------------------------
Except for Assets held by any Subcustodian appointed pursuant to Sections
5(b), (c), or (d) of this Agreement, the Custodian shall have and perform the
powers and duties hereinafter set forth in this Section 4. For purposes of this
Section 4 all references to powers and duties of the "Custodian" shall also
refer to any Domestic Subcustodian appointed pursuant to Section 5(a).
(a) Safekeeping.
-----------
The Custodian will keep safely the Assets of each Fund which are delivered
to it from time to time. The Custodian shall not be responsible for any property
of a Fund held or received by such Fund and not delivered to the Custodian.
(b) Manner of Holding Securities.
----------------------------
(1) The Custodian shall at all times hold Securities of each Fund
either: (i) by physical possession of the share certificates or other
instruments representing such Securities in registered or bearer form; or (ii)
in book-entry form by a Securities System (as hereinafter defined) in accordance
with the provisions of sub-paragraph (3) below.
(2) The Custodian may hold registrable portfolio Securities which
have been delivered to it in physical form, by registering the same in the name
of the appropriate Fund or its nominee, or in the name of the Custodian or its
nominee, for whose actions such Fund and
3
<PAGE>
Custodian, respectively, shall be fully responsible. Upon the receipt of
Instructions, the Custodian shall hold such Securities in street certificate
form, so called, with or without any indication of fiduciary capacity. However,
unless it receives Instructions to the contrary, the Custodian will register all
such portfolio Securities in the name of the Custodian's authorized nominee. All
such Securities shall be held in an account of the Custodian containing only
assets of the appropriate Fund or only assets held by the Custodian as a
fiduciary, provided that the records of the Custodian shall indicate at all
times the Fund or other customer for which such Securities are held in such
accounts and the respective interests therein.
(3) The Custodian may deposit and/or maintain domestic Securities
owned by a Fund in, and each Fund hereby approves use of: (a) The Depository
Trust Company; (b) The Participants Trust Company; and (c) any book-entry system
as provided in (i) Subpart O of Treasury Circular No. 300, 31 CFR 306.115, (ii)
Subpart B of Treasury Circular Public Debt Series No. 27-76, 31 CFR 350.2, or
(iii) the book-entry regulations of federal agencies substantially in the form
of 31 CFR 306.115. Upon the receipt of Special Instructions, the Custodian may
deposit and/or maintain domestic Securities owned by a Fund in any other
domestic clearing agency registered with the Securities and Exchange Commission
("SEC") under Section 17A of the Securities Exchange Act of 1934 (or as may
otherwise be authorized by the SEC to serve in the capacity of depository or
clearing agent for the Securities or other assets of investment companies) which
acts as a Securities depository. Each of the foregoing shall be referred to in
this Agreement as a "Securities System", and all such Securities Systems shall
be listed on the attached Appendix A. Use of a Securities System shall be in
accordance with applicable Federal Reserve Board and SEC rules and regulations,
if any, and subject to the following provisions:
(i) The Custodian may deposit the Securities directly or through
one or more agents or Subcustodians which are also qualified to act as
custodians for investment companies.
(ii) The Custodian shall deposit and/or maintain the Securities in a
Securities System, provided that such Securities are represented in an account
("Account") of the Custodian in the Securities System that includes only assets
held by the Custodian as a fiduciary, custodian or otherwise for customers.
(iii) The books and records of the Custodian shall at all times
identify those Securities belonging to any one or more Funds which are
maintained in a Securities System.
(iv) The Custodian shall pay for Securities purchased for the
account of a Fund only upon (a) receipt of advice from the Securities System
that such Securities have been transferred to the Account of the Custodian in
accordance with the rules of the Securities System, and (b) the making of an
entry on the records of the Custodian to reflect such payment and transfer for
the account of such Fund. The Custodian shall transfer Securities sold for the
account of a Fund only upon (a) receipt of advice from the Securities System
that payment for such Securities has been transferred to the Account of the
Custodian in accordance with the rules of the Securities System, and (b) the
making of an entry on the records of the Custodian to reflect such transfer and
payment for the account of such Fund. Copies of all advices from the Securities
System relating to transfers of Securities for the account of a Fund shall be
maintained
4
<PAGE>
for such Fund by the Custodian. The Custodian shall deliver to a Fund on the
next succeeding business day daily transaction reports that shall include each
day's transactions in the Securities System for the account of such Fund. Such
transaction reports shall be delivered to such Fund or any agent designated by
such Fund pursuant to Instructions, by computer or in such other manner as such
Fund and Custodian may agree.
(v) The Custodian shall, if requested by a Fund pursuant to
Instructions, provide such Fund with reports obtained by the Custodian or any
Subcustodian with respect to a Securities System's accounting system, internal
accounting control and procedures for safeguarding Securities deposited in the
Securities System.
(vi) Upon receipt of Special Instructions, the Custodian shall
terminate the use of any Securities System on behalf of a Fund as promptly as
practicable and shall take all actions reasonably practicable to safeguard the
Securities of such Fund maintained with such Securities System.
(c) Free Delivery of Assets.
-----------------------
Notwithstanding any other provision of this Agreement and except as provided
in Section 3 hereof, the Custodian, upon receipt of Special Instructions, will
undertake to make free delivery of Assets, provided such Assets are on hand and
available, in connection with a Fund's transactions and to transfer such Assets
to such broker, dealer, Subcustodian, bank, agent, Securities System or
otherwise as specified in such Special Instructions.
(d) Exchange of Securities.
----------------------
Upon receipt of Instructions, the Custodian will exchange portfolio
Securities held by it for a Fund for other Securities or cash paid in connection
with any reorganization, recapitalization, merger, consolidation, or conversion
of convertible Securities, and will deposit any such Securities in accordance
with the terms of any reorganization or protective plan.
Without Instructions, the Custodian is authorized to exchange Securities held
by it in temporary form for Securities in definitive form, to surrender
Securities for transfer into a name or nominee name as permitted in Section
4(b)(2), to effect an exchange of shares in a stock split or when the par value
of the stock is changed, to sell any fractional shares, and, upon receiving
payment therefor, to surrender bonds or other Securities held by it at maturity
or call.
(e) Purchases of Assets.
-------------------
(1) Securities Purchases. In accordance with Instructions, the Custodian
--------------------
shall, with respect to a purchase of Securities, pay for such Securities out of
monies held for a Fund's account for which the purchase was made, but only
insofar as monies are available therein for such purpose, and receive the
portfolio Securities so purchased. Unless the Custodian has received Special
Instructions to the contrary, such payment will be made only upon receipt of
Securities by the Custodian, a clearing corporation of a national Securities
exchange of which the Custodian is a member, or a Securities System in
accordance with the provisions of Section
5
<PAGE>
4(b)(3) hereof. Notwithstanding the foregoing, upon receipt of Instructions: (i)
in connection with a repurchase agreement, the Custodian may release funds to a
Securities System prior to the receipt of advice from the Securities System that
the Securities underlying such repurchase agreement have been transferred by
book-entry into the Account maintained with such Securities System by the
Custodian, provided that the Custodian's instructions to the Securities System
require that the Securities System may make payment of such funds to the other
party to the repurchase agreement only upon transfer by book-entry of the
Securities underlying the repurchase agreement into such Account; (ii) in the
case of Interest Bearing Deposits, currency deposits, and other deposits,
foreign exchange transactions, futures contracts or options, pursuant to
Sections 4(g), 4(h), 4(l), and 4(m) hereof, the Custodian may make payment
therefor before receipt of an advice of transaction; and (iii) in the case of
Securities as to which payment for the Security and receipt of the instrument
evidencing the Security are under generally accepted trade practice or the terms
of the instrument representing the Security expected to take place in different
locations or through separate parties, such as commercial paper which is indexed
to foreign currency exchange rates, derivatives and similar Securities, the
Custodian may make payment for such Securities prior to delivery thereof in
accordance with such generally accepted trade practice or the terms of the
instrument representing such Security.
(2) Other Assets Purchased. Upon receipt of Instructions and except as
----------------------
otherwise provided herein, the Custodian shall pay for and receive other Assets
for the account of a Fund as provided in Instructions.
(f) Sales of Assets.
---------------
(1) Securities Sold. In accordance with Instructions, the Custodian will,
---------------
with respect to a sale, deliver or cause to be delivered the Securities thus
designated as sold to the broker or other person specified in the Instructions
relating to such sale. Unless the Custodian has received Special Instructions
to the contrary, such delivery shall be made only upon receipt of payment
therefor in the form of: (a) cash, certified check, bank cashier's check, bank
credit, or bank wire transfer; (b) credit to the account of the Custodian with a
clearing corporation of a national Securities exchange of which the Custodian is
a member; or (c) credit to the Account of the Custodian with a Securities
System, in accordance with the provisions of Section 4(b)(3) hereof.
Notwithstanding the foregoing, Securities held in physical form may be delivered
and paid for in accordance with "street delivery custom" to a broker or its
clearing agent, against delivery to the Custodian of a receipt for such
Securities, provided that the Custodian shall have taken reasonable steps to
ensure prompt collection of the payment for, or return of, such Securities by
the broker or its clearing agent, and provided further that the Custodian shall
not be responsible for the selection of or the failure or inability to perform
of such broker or its clearing agent or for any related loss arising from
delivery or custody of such Securities prior to receiving payment therefor.
(2) Other Assets Sold. Upon receipt of Instructions and except as
-----------------
otherwise provided herein, the Custodian shall receive payment for and deliver
other Assets for the account of a Fund as provided in Instructions.
6
<PAGE>
(g) Options.
-------
(1) Upon receipt of Instructions relating to the purchase of an option or
sale of a covered call option, the Custodian shall: (a) receive and retain
confirmations or other documents, if any, evidencing the purchase or writing of
the option by a Fund; (b) if the transaction involves the sale of a covered call
option, deposit and maintain in a segregated account the Securities (either
physically or by book-entry in a Securities System) subject to the covered call
option written on behalf of such Fund; and (c) pay, release and/or transfer such
Securities, cash or other Assets in accordance with any notices or other
communications evidencing the expiration, termination or exercise of such
options which are furnished to the Custodian by the Options Clearing Corporation
(the "OCC"), the securities or options exchanges on which such options were
traded, or such other organization as may be responsible for handling such
option transactions.
(2) Upon receipt of Instructions relating to the sale of a naked option
(including stock index and commodity options), the Custodian, the appropriate
Fund and the broker-dealer shall enter into an agreement to comply with the
rules of the OCC or of any registered national securities exchange or similar
organizations(s). Pursuant to that agreement and such Fund's Instructions, the
Custodian shall: (a) receive and retain confirmations or other documents, if
any, evidencing the writing of the option; (b) deposit and maintain in a
segregated account, Securities (either physically or by book-entry in a
Securities System), cash and/or other Assets; and (c) pay, release and/or
transfer such Securities, cash or other Assets in accordance with any such
agreement and with any notices or other communications evidencing the
expiration, termination or exercise of such option which are furnished to the
Custodian by the OCC, the securities or options exchanges on which such options
were traded, or such other organization as may be responsible for handling such
option transactions. The appropriate Fund and the broker-dealer shall be
responsible for determining the quality and quantity of assets held in any
segregated account established in compliance with applicable margin maintenance
requirements and the performance of other terms of any option contract.
(h) Futures Contracts.
-----------------
Upon receipt of Instructions, the Custodian shall enter into a futures margin
procedural agreement among the appropriate Fund, the Custodian and the
designated futures commission merchant (a "Procedural Agreement"). Under the
Procedural Agreement the Custodian shall: (a) receive and retain confirmations,
if any, evidencing the purchase or sale of a futures contract or an option on a
futures contract by such Fund; (b) deposit and maintain in a segregated account
cash, Securities and/or other Assets designated as initial, maintenance or
variation "margin" deposits intended to secure such Fund's performance of its
obligations under any futures contracts purchased or sold, or any options on
futures contracts written by such Fund, in accordance with the provisions of any
Procedural Agreement designed to comply with the provisions of the Commodity
Futures Trading Commission and/or any commodity exchange or contract market
(such as the Chicago Board of Trade), or any similar organization(s), regarding
such margin deposits; and (c) release Assets from and/or transfer Assets into
such margin accounts only in accordance with any such Procedural Agreements.
The appropriate Fund and such futures commission merchant shall be responsible
for determining the type and amount of Assets held in the segregated account or
paid to the broker-dealer in compliance with applicable
7
<PAGE>
margin maintenance requirements and the performance of any futures contract or
option on a futures contract in accordance with its terms.
(i) Segregated Accounts.
-------------------
Upon receipt of Instructions, the Custodian shall establish and maintain on
its books a segregated account or accounts for and on behalf of a Fund, into
which account or accounts may be transferred Assets of such Fund, including
Securities maintained by the Custodian in a Securities System pursuant to
Paragraph (b)(3) of this Section 4, said account or accounts to be maintained
(i) for the purposes set forth in Sections 4(g), 4(h) and 4(n) and (ii) for the
purpose of compliance by such Fund with the procedures required by the SEC
Investment Company Act Release Number 10666 or any subsequent release or
releases relating to the maintenance of segregated accounts by registered
investment companies, or (iii) for such other purposes as may be set forth, from
time to time, in Special Instructions. The Custodian shall not be responsible
for the determination of the type or amount of Assets to be held in any
segregated account referred to in this paragraph, or for compliance by the Fund
with required procedures noted in (ii) above.
(j) Depositary Receipts.
-------------------
Upon receipt of Instructions, the Custodian shall surrender or cause to be
surrendered Securities to the depositary used for such Securities by an issuer
of American Depositary Receipts or International Depositary Receipts
(hereinafter referred to, collectively, as "ADRs"), against a written receipt
therefor adequately describing such Securities and written evidence satisfactory
to the organization surrendering the same that the depositary has acknowledged
receipt of instructions to issue ADRs with respect to such Securities in the
name of the Custodian or a nominee of the Custodian, for delivery in accordance
with such instructions.
Upon receipt of Instructions, the Custodian shall surrender or cause to be
surrendered ADRs to the issuer thereof, against a written receipt therefor
adequately describing the ADRs surrendered and written evidence satisfactory to
the organization surrendering the same that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depository to deliver the
Securities underlying such ADRs in accordance with such instructions.
(k) Corporate Actions, Put Bonds, Called Bonds, Etc.
------------------------------------------------
Upon receipt of Instructions, the Custodian shall: (a) deliver warrants,
puts, calls, rights or similar Securities to the issuer or trustee thereof (or
to the agent of such issuer or trustee) for the purpose of exercise or sale,
provided that the new Securities, cash or other Assets, if any, acquired as a
result of such actions are to be delivered to the Custodian; and (b) deposit
Securities upon invitations for tenders thereof, provided that the consideration
for such Securities is to be paid or delivered to the Custodian, or the tendered
Securities are to be returned to the Custodian.
Notwithstanding any provision of this Agreement to the contrary, the
Custodian shall take all necessary action, unless otherwise directed to the
contrary in Instructions, to comply with the
8
<PAGE>
terms of all mandatory or compulsory exchanges, calls, tenders, redemptions, or
similar rights of security ownership, and shall notify the appropriate Fund of
such action in writing by facsimile transmission or in such other manner as such
Fund and Custodian may agree in writing.
The Fund agrees that if it gives an Instruction for the performance of an act
on the last permissible date of a period established by any optional offer or on
the last permissible date for the performance of such act, the Fund shall hold
the Bank harmless from any adverse consequences in connection with acting upon
or failing to act upon such Instructions.
(l) Interest Bearing Deposits.
-------------------------
Upon receipt of Instructions directing the Custodian to purchase interest
bearing fixed term and call deposits (hereinafter referred to, collectively, as
"Interest Bearing Deposits") for the account of a Fund, the Custodian shall
purchase such Interest Bearing Deposits in the name of such Fund with such banks
or trust companies, including the Custodian, any Subcustodian or any subsidiary
or affiliate of the Custodian (hereinafter referred to as "Banking
Institutions"), and in such amounts as such Fund may direct pursuant to
Instructions. Such Interest Bearing Deposits may be denominated in U.S. dollars
or other currencies, as such Fund may determine and direct pursuant to
Instructions. The responsibilities of the Custodian to a Fund for Interest
Bearing Deposits issued by the Custodian shall be that of a U.S. bank for a
similar deposit. With respect to Interest Bearing Deposits other than those
issued by the Custodian, (a) the Custodian shall be responsible for the
collection of income and the transmission of cash to and from such accounts; and
(b) the Custodian shall have no duty with respect to the selection of the
Banking Institution or for the failure of such Banking Institution to pay upon
demand.
(m) Foreign Exchange Transactions.
-----------------------------
(l) Each Fund hereby appoints the Custodian as its agent in the execution
of all currency exchange transactions. The Custodian agrees to provide exchange
rate and U.S. Dollar information, in writing, to the Funds. Such information
shall be supplied by the Custodian at least by the business day prior to the
value date of the foreign exchange transaction, provided that the Custodian
receives the request for such information at least two business days prior to
the value date of the transaction.
(2) Upon receipt of Instructions, the Custodian shall settle foreign
exchange contracts or options to purchase and sell foreign currencies for spot
and future delivery on behalf of and for the account of a Fund with such
currency brokers or Banking Institutions as such Fund may determine and direct
pursuant to Instructions. If, in its Instructions, a Fund does not direct the
Custodian to utilize a particular currency broker or Banking Institution, the
Custodian is authorized to select such currency broker or Banking Institution as
it deems appropriate to execute the Fund's foreign currency transaction.
(3) Each Fund accepts full responsibility for its use of third party
foreign exchange brokers and for execution of said foreign exchange contracts
and understands that the Fund shall be responsible for any and all costs and
interest charges which may be incurred as a result of the failure or delay of
its third party broker to deliver foreign exchange. The Custodian shall have
9
<PAGE>
no responsibility or liability with respect to the selection of the currency
brokers or Banking Institutions with which a Fund deals or the performance of
such brokers or Banking Institutions.
(4) Notwithstanding anything to the contrary contained herein, upon
receipt of Instructions the Custodian may, in connection with a foreign exchange
contract, make free outgoing payments of cash in the form of U.S. Dollars or
foreign currency prior to receipt of confirmation of such foreign exchange
contract or confirmation that the countervalue currency completing such contract
has been delivered or received.
(5) The Custodian shall not be obligated to enter into foreign exchange
transactions as principal. However, if the Custodian has made available to a
Fund its services as a principal in foreign exchange transactions and subject to
any separate agreement between the parties relating to such transactions, the
Custodian shall enter into foreign exchange contracts or options to purchase and
sell foreign currencies for spot and future delivery on behalf of and for the
account of the Fund, with the Custodian as principal.
(n) Pledges or Loans of Securities.
------------------------------
(1) Upon receipt of Instructions from a Fund, the Custodian will release
or cause to be released Securities held in custody to the pledgees designated in
such Instructions by way of pledge or hypothecation to secure loans incurred by
such Fund with various lenders including but not limited to UMB Bank, n.a.;
provided, however, that the Securities shall be released only upon payment to
the Custodian of the monies borrowed, except that in cases where additional
collateral is required to secure existing borrowings, further Securities may be
released or delivered, or caused to be released or delivered for that purpose
upon receipt of Instructions. Upon receipt of Instructions, the Custodian will
pay, but only from funds available for such purpose, any such loan upon re-
delivery to it of the Securities pledged or hypothecated therefor and upon
surrender of the note or notes evidencing such loan. In lieu of delivering
collateral to a pledgee, the Custodian, on the receipt of Instructions, shall
transfer the pledged Securities to a segregated account for the benefit of the
pledgee.
(2) Upon receipt of Special Instructions, and execution of a separate
Securities Lending Agreement, the Custodian will release Securities held in
custody to the borrower designated in such Instructions and may, except as
otherwise provided below, deliver such Securities prior to the receipt of
collateral, if any, for such borrowing, provided that, in case of loans of
Securities held by a Securities System that are secured by cash collateral, the
Custodian's instructions to the Securities System shall require that the
Securities System deliver the Securities of the appropriate Fund to the borrower
thereof only upon receipt of the collateral for such borrowing. The Custodian
shall have no responsibility or liability for any loss arising from the delivery
of Securities prior to the receipt of collateral. Upon receipt of Instructions
and the loaned Securities, the Custodian will release the collateral to the
borrower.
10
<PAGE>
(o) Stock Dividends, Rights, Etc.
-----------------------------
The Custodian shall receive and collect all stock dividends, rights, and
other items of like nature and, upon receipt of Instructions, take action with
respect to the same as directed in such Instructions.
(p) Routine Dealings.
----------------
The Custodian will, in general, attend to all routine and mechanical matters
in accordance with industry standards in connection with the sale, exchange,
substitution, purchase, transfer, or other dealings with Securities or other
property of each Fund except as may be otherwise provided in this Agreement or
directed from time to time by Instructions from any particular Fund. The
Custodian may also make payments to itself or others from the Assets for
disbursements and out-of-pocket expenses incidental to handling Securities or
other similar items relating to its duties under this Agreement, provided that
all such payments shall be accounted for to the appropriate Fund.
(q) Collections.
-----------
The Custodian shall (a) collect amounts due and payable to each Fund with
respect to portfolio Securities and other Assets; (b) promptly credit to the
account of each Fund all income and other payments relating to portfolio
Securities and other Assets held by the Custodian hereunder upon Custodian's
receipt of such income or payments or as otherwise agreed in writing by the
Custodian and any particular Fund; (c) promptly endorse and deliver any
instruments required to effect such collection; and (d) promptly execute
ownership and other certificates and affidavits for all federal, state, local
and foreign tax purposes in connection with receipt of income or other payments
with respect to portfolio Securities and other Assets, or in connection with the
transfer of such Securities or other Assets; provided, however, that with
respect to portfolio Securities registered in so-called street name, or physical
Securities with variable interest rates, the Custodian shall use its best
efforts to collect amounts due and payable to any such Fund. The Custodian
shall notify a Fund in writing by facsimile transmission or in such other manner
as such Fund and Custodian may agree in writing if any amount payable with
respect to portfolio Securities or other Assets is not received by the Custodian
when due. The Custodian shall not be responsible for the collection of amounts
due and payable with respect to portfolio Securities or other Assets that are in
default.
(r) Bank Accounts.
-------------
Upon Instructions, the Custodian shall open and operate a bank account or
accounts on the books of the Custodian; provided that such bank account(s) shall
be in the name of the Custodian or a nominee thereof, for the account of one or
more Funds, and shall be subject only to draft or order of the Custodian. The
responsibilities of the Custodian to any one or more such Funds for deposits
accepted on the Custodian's books shall be that of a U.S. bank for a similar
deposit.
11
<PAGE>
(s) Dividends, Distributions and Redemptions.
----------------------------------------
To enable each Fund to pay dividends or other distributions to shareholders
of each such Fund and to make payment to shareholders who have requested
repurchase or redemption of their shares of each such Fund (collectively, the
"Shares"), the Custodian shall release cash or Securities insofar as available.
In the case of cash, the Custodian shall, upon the receipt of Instructions,
transfer such funds by check or wire transfer to any account at any bank or
trust company designated by each such Fund in such Instructions. In the case of
Securities, the Custodian shall, upon the receipt of Special Instructions, make
such transfer to any entity or account designated by each such Fund in such
Special Instructions.
(t) Proceeds from Shares Sold.
-------------------------
The Custodian shall receive funds representing cash payments received for
shares issued or sold from time to time by each Fund, and shall credit such
funds to the account of the appropriate Fund. The Custodian shall notify the
appropriate Fund of Custodian's receipt of cash in payment for shares issued by
such Fund by facsimile transmission or in such other manner as such Fund and the
Custodian shall agree. Upon receipt of Instructions, the Custodian shall: (a)
deliver all federal funds received by the Custodian in payment for shares as may
be set forth in such Instructions and at a time agreed upon between the
Custodian and such Fund; and (b) make federal funds available to a Fund as of
specified times agreed upon from time to time by such Fund and the Custodian, in
the amount of checks received in payment for shares which are deposited to the
accounts of such Fund.
(u) Proxies and Notices; Compliance with the Shareholders Communication Act
-----------------------------------------------------------------------
of 1985.
- -------
The Custodian shall deliver or cause to be delivered to the appropriate Fund
all forms of proxies, all notices of meetings, and any other notices or
announcements affecting or relating to Securities owned by such Fund that are
received by the Custodian, any Subcustodian, or any nominee of either of them,
and, upon receipt of Instructions, the Custodian shall execute and deliver, or
cause such Subcustodian or nominee to execute and deliver, such proxies or other
authorizations as may be required. Except as directed pursuant to Instructions,
neither the Custodian nor any Subcustodian or nominee shall vote upon any such
Securities, or execute any proxy to vote thereon, or give any consent or take
any other action with respect thereto.
The Custodian will not release the identity of any Fund to an issuer which
requests such information pursuant to the Shareholder Communications Act of 1985
for the specific purpose of direct communications between such issuer and any
such Fund unless a particular Fund directs the Custodian otherwise in writing.
(v) Books and Records.
-----------------
The Custodian shall maintain such records relating to its activities under
this Agreement as are required to be maintained by Rule 31a-1 under the
Investment Company Act of 1940 ("the 1940 Act") and to preserve them for the
periods prescribed in Rule 31a-2 under the 1940 Act. These records shall be
open for inspection by duly authorized officers, employees or agents
12
<PAGE>
(including independent public accountants) of the appropriate Fund during normal
business hours of the Custodian.
The Custodian shall provide accountings relating to its activities under
this Agreement as shall be agreed upon by each Fund and the Custodian.
(w) Opinion of Fund's Independent Certified Public Accountants.
----------------------------------------------------------
The Custodian shall take all reasonable action as each Fund may request to
obtain from year to year favorable opinions from each such Fund's independent
certified public accountants with respect to the Custodian's activities
hereunder and in connection with the preparation of each such Fund's periodic
reports to the SEC and with respect to any other requirements of the SEC.
(x) Reports by Independent Certified Public Accountants.
---------------------------------------------------
At the request of a Fund, the Custodian shall deliver to such Fund a
written report prepared by the Custodian's independent certified public
accountants with respect to the services provided by the Custodian under this
Agreement, including, without limitation, the Custodian's accounting system,
internal accounting control and procedures for safeguarding cash, Securities and
other Assets, including cash, Securities and other Assets deposited and/or
maintained in a Securities System or with a Subcustodian. Such report shall be
of sufficient scope and in sufficient detail as may reasonably be required by
such Fund and as may reasonably be obtained by the Custodian.
(y) Bills and Other Disbursements.
-----------------------------
Upon receipt of Instructions, the Custodian shall pay, or cause to be paid,
all bills, statements, or other obligations of a Fund.
5. SUBCUSTODIANS.
-------------
From time to time, in accordance with the relevant provisions of this
Agreement, the Custodian may appoint one or more Domestic Subcustodians, Foreign
Subcustodians, Special Subcustodians, or Interim Subcustodians (as each are
hereinafter defined) to act on behalf of any one or more Funds. A Domestic
Subcustodian, in accordance with the provisions of this Agreement, may also
appoint a Foreign Subcustodian, Special Subcustodian, or Interim Subcustodian to
act on behalf of any one or more Funds. For purposes of this Agreement, all
Domestic Subcustodians, Foreign Subcustodians, Special Subcustodians and Interim
Subcustodians shall be referred to collectively as "Subcustodians".
(a) Domestic Subcustodians.
----------------------
The Custodian may, at any time and from time to time, appoint any bank as
defined in Section 2(a)(5) of the 1940 Act or any trust company or other entity,
any of which meet the requirements of a custodian under Section 17(f) of the
1940 Act and the rules and regulations thereunder, to act for the Custodian on
behalf of any one or more Funds as a subcustodian for
13
<PAGE>
purposes of holding Assets of such Fund(s) and performing other functions of the
Custodian within the United States (a "Domestic Subcustodian"). Each Fund shall
approve in writing the appointment of the proposed Domestic Subcustodian; and
the Custodian's appointment of any such Domestic Subcustodian shall not be
effective without such prior written approval of the Fund(s). Each such duly
approved Domestic Subcustodian shall be listed on Appendix A attached hereto, as
it may be amended, from time to time.
(b) Foreign Subcustodians.
---------------------
The Custodian may at any time appoint, or cause a Domestic Subcustodian to
appoint, any bank, trust company or other entity meeting the requirements of an
"eligible foreign custodian" under Section 17(f) of the 1940 Act and the rules
and regulations thereunder to act for the Custodian on behalf of any one or more
Funds as a subcustodian or sub-subcustodian (if appointed by a Domestic
Subcustodian) for purposes of holding Assets of the Fund(s) and performing other
functions of the Custodian in countries other than the United States of America
(hereinafter referred to as a "Foreign Subcustodian" in the context of either a
subcustodian or a sub-subcustodian); provided that the Custodian shall have
obtained written confirmation from each Fund of the approval of the Board of
Directors or other governing body of each such Fund (which approval may be
withheld in the sole discretion of such Board of Directors or other governing
body or entity) with respect to (i) the identity of any proposed Foreign
Subcustodian (including branch designation), (ii) the country or countries in
which, and the securities depositories or clearing agencies (hereinafter
"Securities Depositories and Clearing Agencies"), if any, through which, the
Custodian or any proposed Foreign Subcustodian is authorized to hold Securities
and other Assets of each such Fund, and (iii) the form and terms of the
subcustodian agreement to be entered into with such proposed Foreign
Subcustodian. Each such duly approved Foreign Subcustodian and the countries
where and the Securities Depositories and Clearing Agencies through which they
may hold Securities and other Assets of the Fund(s) shall be listed on Appendix
A attached hereto, as it may be amended, from time to time. Each Fund shall be
responsible for informing the Custodian sufficiently in advance of a proposed
investment which is to be held in a country in which no Foreign Subcustodian is
authorized to act, in order that there shall be sufficient time for the
Custodian, or any Domestic Subcustodian, to effect the appropriate arrangements
with a proposed Foreign Subcustodian, including obtaining approval as provided
in this Section 5(b). In connection with the appointment of any Foreign
Subcustodian, the Custodian shall, or shall cause the Domestic Subcustodian to,
enter into a subcustodian agreement with the Foreign Subcustodian in form and
substance approved by each such Fund. The Custodian shall not consent to the
amendment of, and shall cause any Domestic Subcustodian not to consent to the
amendment of, any agreement entered into with a Foreign Subcustodian, which
materially affects any Fund's rights under such agreement, except upon prior
written approval of such Fund pursuant to Special Instructions.
(c) Interim Subcustodians.
---------------------
Notwithstanding the foregoing, in the event that a Fund shall invest in an
Asset to be held in a country in which no Foreign Subcustodian is authorized to
act, the Custodian shall notify such Fund in writing by facsimile transmission
or in such other manner as such Fund and the Custodian shall agree in writing of
the unavailability of an approved Foreign Subcustodian in
14
<PAGE>
such country; and upon the receipt of Special Instructions from such Fund, the
Custodian shall, or shall cause its Domestic Subcustodian to, appoint or approve
an entity (referred to herein as an "Interim Subcustodian") designated in such
Special Instructions to hold such Security or other Asset.
(d) Special Subcustodians.
---------------------
Upon receipt of Special Instructions, the Custodian shall, on behalf of a
Fund, appoint one or more banks, trust companies or other entities designated in
such Special Instructions to act for the Custodian on behalf of such Fund as a
subcustodian for purposes of: (i) effecting third-party repurchase transactions
with banks, brokers, dealers or other entities through the use of a common
custodian or subcustodian; (ii) providing depository and clearing agency
services with respect to certain variable rate demand note Securities, (iii)
providing depository and clearing agency services with respect to dollar
denominated Securities, and (iv) effecting any other transactions designated by
such Fund in such Special Instructions. Each such designated subcustodian
(hereinafter referred to as a "Special Subcustodian") shall be listed on
Appendix A attached hereto, as it may be amended from time to time. In
connection with the appointment of any Special Subcustodian, the Custodian shall
enter into a subcustodian agreement with the Special Subcustodian in form and
substance approved by the appropriate Fund in Special Instructions. The
Custodian shall not amend any subcustodian agreement entered into with a Special
Subcustodian, or waive any rights under such agreement, except upon prior
approval pursuant to Special Instructions.
(e) Termination of a Subcustodian.
-----------------------------
The Custodian may, at any time in its discretion upon notification to the
appropriate Fund(s), terminate any Subcustodian of such Fund(s) in accordance
with the termination provisions under the applicable subcustodian agreement, and
upon the receipt of Special Instructions, the Custodian will terminate any
Subcustodian in accordance with the termination provisions under the applicable
subcustodian agreement.
(f) Certification Regarding Foreign Subcustodians.
---------------------------------------------
Upon request of a Fund, the Custodian shall deliver to such Fund a
certificate stating: (i) the identity of each Foreign Subcustodian then acting
on behalf of the Custodian; (ii) the countries in which and the Securities
Depositories and Clearing Agencies through which each such Foreign Subcustodian
is then holding cash, Securities and other Assets of such Fund; and (iii) such
other information as may be requested by such Fund, and as the Custodian shall
be reasonably able to obtain, to evidence compliance with rules and regulations
under the 1940 Act.
6. STANDARD OF CARE.
----------------
(a) General Standard of Care.
------------------------
The Custodian shall be liable to a Fund for all losses, damages and
reasonable costs and expenses suffered or incurred by such Fund resulting from
the negligence or willful misfeasance
15
<PAGE>
of the Custodian; provided, however, in no event shall the Custodian be liable
for special, indirect or consequential damages arising under or in connection
with this Agreement.
(b) Actions Prohibited by Applicable Law, Events Beyond Custodian's
---------------------------------------------------------------
Control, Sovereign Risk, Etc.
- ----------------------------
In no event shall the Custodian or any Domestic Subcustodian incur
liability hereunder (i) if the Custodian or any Subcustodian or Securities
System, or any subcustodian, Securities System, Securities Depository or
Clearing Agency utilized by the Custodian or any such Subcustodian, or any
nominee of the Custodian or any Subcustodian (individually, a "Person") is
prevented, forbidden or delayed from performing, or omits to perform, any act or
thing which this Agreement provides shall be performed or omitted to be
performed, by reason of: (a) any provision of any present or future law or
regulation or order of the United States of America, or any state thereof, or of
any foreign country, or political subdivision thereof or of any court of
competent jurisdiction (and neither the Custodian nor any other Person shall be
obligated to take any action contrary thereto); or (b) any event beyond the
control of the Custodian or other Person such as armed conflict, riots, strikes,
lockouts, labor disputes, equipment or transmission failures, natural disasters,
or failure of the mails, transportation, communications or power supply; or (ii)
for any loss, damage, cost or expense resulting from "Sovereign Risk." A
"Sovereign Risk" shall mean nationalization, expropriation, currency
devaluation, revaluation or fluctuation, confiscation, seizure, cancellation,
destruction or similar action by any governmental authority, de facto or de
jure; or enactment, promulgation, imposition or enforcement by any such
governmental authority of currency restrictions, exchange controls, taxes,
levies or other charges affecting a Fund's Assets; or acts of armed conflict,
terrorism, insurrection or revolution; or any other act or event beyond the
Custodian's or such other Person's control.
(c) Liability for Past Records.
--------------------------
Neither the Custodian nor any Domestic Subcustodian shall have any
liability in respect of any loss, damage or expense suffered by a Fund, insofar
as such loss, damage or expense arises from the performance of the Custodian or
any Domestic Subcustodian in reliance upon records that were maintained for such
Fund by entities other than the Custodian or any Domestic Subcustodian prior to
the Custodian's employment hereunder.
(d) Advice of Counsel.
-----------------
The Custodian and all Domestic Subcustodians shall be entitled to receive
and act upon advice of counsel of its own choosing on all matters. The Custodian
and all Domestic Subcustodians shall be without liability for any actions taken
or omitted in good faith pursuant to the advice of counsel.
(e) Advice of the Fund and Others.
-----------------------------
The Custodian and any Domestic Subcustodian may rely upon the advice of any
Fund and upon statements of such Fund's accountants and other persons believed
by it in good faith to be expert in matters upon which they are consulted, and
neither the Custodian nor any Domestic
16
<PAGE>
Subcustodian shall be liable for any actions taken or omitted, in good faith,
pursuant to such advice or statements.
(f) Instructions Appearing to be Genuine.
------------------------------------
The Custodian and all Domestic Subcustodians shall be fully protected and
indemnified in acting as a custodian hereunder upon any Resolutions of the Board
of Directors or Trustees, Instructions, Special Instructions, advice, notice,
request, consent, certificate, instrument or paper appearing to it to be genuine
and to have been properly executed and shall, unless otherwise specifically
provided herein, be entitled to receive as conclusive proof of any fact or
matter required to be ascertained from any Fund hereunder a certificate signed
by any officer of such Fund authorized to countersign or confirm Special
Instructions.
(g) Exceptions from Liability.
-------------------------
Without limiting the generality of any other provisions hereof, neither the
Custodian nor any Domestic Subcustodian shall be under any duty or obligation to
inquire into, nor be liable for:
(i) the validity of the issue of any Securities purchased by or for
any Fund, the legality of the purchase thereof or evidence of ownership required
to be received by any such Fund, or the propriety of the decision to purchase or
amount paid therefor;
(ii) the legality of the sale of any Securities by or for any Fund,
or the propriety of the amount for which the same were sold; or
(iii) any other expenditures, encumbrances of Securities, borrowings
or similar actions with respect to any Fund's Assets;
and may, until notified to the contrary, presume that all Instructions or
Special Instructions received by it are not in conflict with or in any way
contrary to any provisions of any such Fund's Declaration of Trust, Partnership
Agreement, Articles of Incorporation or By-Laws or votes or proceedings of the
shareholders, trustees, partners or directors of any such Fund, or any such
Fund's currently effective Registration Statement on file with the SEC.
7. LIABILITY OF THE CUSTODIAN FOR ACTIONS OF OTHERS.
------------------------------------------------
(a) Domestic Subcustodians
----------------------
The Custodian shall be liable for the acts or omissions of any Domestic
Subcustodian to the same extent as if such actions or omissions were performed
by the Custodian itself.
(b) Liability for Acts and Omissions of Foreign Subcustodians.
---------------------------------------------------------
The Custodian shall be liable to a Fund for any loss or damage to such Fund
caused by or resulting from the acts or omissions of any Foreign Subcustodian to
the extent that, under the terms set forth in the subcustodian agreement between
the Custodian or a Domestic
17
<PAGE>
Subcustodian and such Foreign Subcustodian, the Subcustodian has failed to
perform in accordance with the standard of conduct imposed under such
subcustodian agreement and the Custodian or Domestic Subcustodian recovers from
the Foreign Subcustodian under the applicable subcustodian agreement.
(c) Securities Systems, Interim Subcustodians, Special Subcustodians,
-----------------------------------------------------------------
Securities Depositories and Clearing Agencies.
- ---------------------------------------------
The Custodian shall not be liable to any Fund for any loss, damage or
expense suffered or incurred by such Fund resulting from or occasioned by the
actions or omissions of a Securities System, Interim Subcustodian, Special
Subcustodian, or Securities Depository and Clearing Agency unless such loss,
damage or expense is caused by, or results from, the negligence or willful
misfeasance of the Custodian.
(d) Defaults or Insolvency's of Brokers, Banks, Etc.
-----------------------------------------------
The Custodian shall not be liable for any loss, damage or expense suffered
or incurred by any Fund resulting from or occasioned by the actions, omissions,
neglects, defaults or insolvency of any broker, bank, trust company or any other
person with whom the Custodian may deal (other than any of such entities acting
as a Subcustodian, Securities System or Securities Depository and Clearing
Agency, for whose actions the liability of the Custodian is set out elsewhere in
this Agreement) unless such loss, damage or expense is caused by, or results
from, the negligence or willful misfeasance of the Custodian.
(e) Reimbursement of Expenses.
-------------------------
Each Fund agrees to reimburse the Custodian for all out-of-pocket expenses
incurred by the Custodian in connection with this Agreement, but excluding
salaries and usual overhead expenses.
8. INDEMNIFICATION.
---------------
(a) Indemnification by Fund.
-----------------------
Subject to the limitations set forth in this Agreement, each Fund agrees to
indemnify and hold harmless the Custodian and its nominees from all losses,
damages and expenses (including attorneys' fees) suffered or incurred by the
Custodian or its nominee caused by or arising from actions taken by the
Custodian, its employees or agents in the performance of its duties and
obligations under this Agreement, including, but not limited to, any
indemnification obligations undertaken by the Custodian under any relevant
subcustodian agreement; provided, however, that such indemnity shall not apply
to the extent the Custodian is liable under Sections 6 or 7 hereof.
If any Fund requires the Custodian to take any action with respect to
Securities, which action involves the payment of money or which may, in the
opinion of the Custodian, result in
18
<PAGE>
the Custodian or its nominee assigned to such Fund being liable for the payment
of money or incurring liability of some other form, such Fund, as a prerequisite
to requiring the Custodian to take such action, shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
(b) Indemnification by Custodian.
----------------------------
Subject to the limitations set forth in this Agreement and in addition to
the obligations provided in Sections 6 and 7, the Custodian agrees to indemnify
and hold harmless each Fund from all losses, damages and expenses suffered or
incurred by each such Fund caused by the negligence or willful misfeasance of
the Custodian.
9. ADVANCES.
--------
In the event that, pursuant to Instructions, the Custodian or any
Subcustodian, Securities System, or Securities Depository or Clearing Agency
acting either directly or indirectly under agreement with the Custodian (each of
which for purposes of this Section 9 shall be referred to as "Custodian"), makes
any payment or transfer of funds on behalf of any Fund as to which there would
be, at the close of business on the date of such payment or transfer,
insufficient funds held by the Custodian on behalf of any such Fund, the
Custodian may, in its discretion without further Instructions, provide an
advance ("Advance") to any such Fund in an amount sufficient to allow the
completion of the transaction by reason of which such payment or transfer of
funds is to be made. In addition, in the event the Custodian is directed by
Instructions to make any payment or transfer of funds on behalf of any Fund as
to which it is subsequently determined that such Fund has overdrawn its cash
account with the Custodian as of the close of business on the date of such
payment or transfer, said overdraft shall constitute an Advance. Any Advance
shall be payable by the Fund on behalf of which the Advance was made on demand
by Custodian, unless otherwise agreed by such Fund and the Custodian, and shall
accrue interest from the date of the Advance to the date of payment by such Fund
to the Custodian at a rate agreed upon in writing from time to time by the
Custodian and such Fund. It is understood that any transaction in respect of
which the Custodian shall have made an Advance, including but not limited to a
foreign exchange contract or transaction in respect of which the Custodian is
not acting as a principal, is for the account of and at the risk of the Fund on
behalf of which the Advance was made, and not, by reason of such Advance, deemed
to be a transaction undertaken by the Custodian for its own account and risk.
The Custodian and each of the Funds which are parties to this Agreement
acknowledge that the purpose of Advances is to finance temporarily the purchase
or sale of Securities for prompt delivery in accordance with the settlement
terms of such transactions or to meet emergency expenses not reasonably
foreseeable by a Fund. The Custodian shall promptly notify the appropriate Fund
of any Advance. Such notification shall be sent by facsimile transmission or in
such other manner as such Fund and the Custodian may agree.
10. LIENS.
-----
The Bank shall have a lien on the Property in the Custody Account to secure
payment of fees and expenses for the services rendered under this Agreement. If
the Bank advances cash or
19
<PAGE>
securities to the Fund for any purpose or in the event that the Bank or its
nominee shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of its duties
hereunder, except such as may arise from its or its nominee's negligent action,
negligent failure to act or willful misconduct, any Property at any time held
for the Custody Account shall be security therefor and the Fund hereby grants a
security interest therein to the Bank. The Fund shall promptly reimburse the
Bank for any such advance of cash or securities or any such taxes, charges,
expenses, assessments, claims or liabilities upon request for payment, but
should the Fund fail to so reimburse the Bank, the Bank shall be entitled to
dispose of such Property to the extent necessary to obtain reimbursement. The
Bank shall be entitled to debit any account of the Fund with the Bank including,
without limitation, the Custody Account, in connection with any such advance and
any interest on such advance as the Bank deems reasonable.
11. COMPENSATION.
------------
Each Fund will pay to the Custodian such compensation as is agreed to in
writing by the Custodian and each such Fund from time to time. Such
compensation, together with all amounts for which the Custodian is to be
reimbursed in accordance with Section 7(e), shall be billed to each such Fund
and paid in cash to the Custodian.
12. POWERS OF ATTORNEY.
------------------
Upon request, each Fund shall deliver to the Custodian such proxies, powers
of attorney or other instruments as may be reasonable and necessary or desirable
in connection with the performance by the Custodian or any Subcustodian of their
respective obligations under this Agreement or any applicable subcustodian
agreement.
13. TERMINATION AND ASSIGNMENT.
--------------------------
Any Fund or the Custodian may terminate this Agreement by notice in
writing, delivered or mailed, postage prepaid (certified mail, return receipt
requested) to the other not less than 90 days prior to the date upon which such
termination shall take effect. Upon termination of this Agreement, the
appropriate Fund shall pay to the Custodian such fees as may be due the
Custodian hereunder as well as its reimbursable disbursements, costs and
expenses paid or incurred. Upon termination of this Agreement, the Custodian
shall deliver, at the terminating party's expense, all Assets held by it
hereunder to the appropriate Fund or as otherwise designated by such Fund by
Special Instructions. Upon such delivery, the Custodian shall have no further
obligations or liabilities under this Agreement except as to the final
resolution of matters relating to activity occurring prior to the effective date
of termination.
This Agreement may not be assigned by the Custodian or any Fund without the
respective consent of the other, duly authorized by a resolution by its Board of
Directors or Trustees.
20
<PAGE>
14. ADDITIONAL FUNDS.
----------------
An additional Fund or Funds may become a party to this Agreement after the
date hereof by an instrument in writing to such effect signed by such Fund or
Funds and the Custodian. If this Agreement is terminated as to one or more of
the Funds (but less than all of the Funds) or if an additional Fund or Funds
shall become a party to this Agreement, there shall be delivered to each party
an Appendix B or an amended Appendix B, signed by each of the additional Funds
(if any) and each of the remaining Funds as well as the Custodian, deleting or
adding such Fund or Funds, as the case may be. The termination of this Agreement
as to less than all of the Funds shall not affect the obligations of the
Custodian and the remaining Funds hereunder as set forth on the signature page
hereto and in Appendix B as revised from time to time.
15. NOTICES.
-------
As to each Fund, notices, requests, instructions and other writings
delivered to [INSERT FUND COMPLEX ADDRESS], postage prepaid, or to such other
address as any particular Fund may have designated to the Custodian in writing,
shall be deemed to have been properly delivered or given to a Fund.
Notices, requests, instructions and other writings delivered to the
Securities Administration department of the Custodian at its office at 928 Grand
Blvd., 10th Floor, Attn: Ralph Santoro, Kansas City, Missouri 64106, or mailed
postage prepaid, to the Custodian's Securities Administration department, Post
Office Box 226, Attn: Ralph Santoro, Kansas City, Missouri 64141, or to such
other addresses as the Custodian may have designated to each Fund in writing,
shall be deemed to have been properly delivered or given to the Custodian
hereunder; provided, however, that procedures for the delivery of Instructions
and Special Instructions shall be governed by Section 2(c) hereof.
16. MISCELLANEOUS.
-------------
(a) This Agreement is executed and delivered in the State of Missouri and
shall be governed by the laws of such state.
(b) All of the terms and provisions of this Agreement shall be binding
upon, and inure to the benefit of, and be enforceable by the respective
successors and assigns of the parties hereto.
(c) No provisions of this Agreement may be amended, modified or waived, in
any manner except in writing, properly executed by both parties hereto;
provided, however, Appendix A may be amended from time to time as Domestic
Subcustodians, Foreign Subcustodians, Special Subcustodians, and Securities
Depositories and Clearing Agencies are approved or terminated according to the
terms of this Agreement.
(d) The captions in this Agreement are included for convenience of
reference only, and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
21
<PAGE>
(e) This Agreement shall be effective as of the date of execution hereof.
(f) This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(g) The following terms are defined terms within the meaning of this
Agreement, and the definitions thereof are found in the following sections of
the Agreement:
Term Section
---- -------
Account 4(b)(3)(ii)
ADR'S 4(j)
Advance 9
Assets 2(b)
Authorized Person 3
Banking Institution 4(1)
Domestic Subcustodian 5(a)
Foreign Subcustodian 5(b)
Instruction 2(c)(1)
Interim Subcustodian 5(c)
Interest Bearing Deposit 4(1)
Liens 10
OCC 4(g)(1)
Person 6(b)
Procedural Agreement 4(h)
SEC 4(b)(3)
Securities 2(a)
Securities Depositories and Clearing 5(b)
Agencies
Securities System 4(b)(3)
Shares 4(s)
Sovereign Risk 6(b)
Special Instruction 2(c)(2)
Special Subcustodian 5(d)
Subcustodian 5
1940 Act 4(v)
(h) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid by any court of competent
jurisdiction, the remaining portion or portions shall be considered severable
and shall not be affected, and the rights and obligations of the parties shall
be construed and enforced as if this Agreement did not contain the particular
part, term or provision held to be illegal or invalid.
(i) This Agreement constitutes the entire understanding and agreement of
the parties hereto with respect to the subject matter hereof, and accordingly
supersedes, as of the effective
22
<PAGE>
date of this Agreement, any custodian agreement heretofore in effect between the
Fund and the Custodian.
IN WITNESS WHEREOF, the parties hereto have caused this Custody Agreement
to be executed by their respective duly authorized officers.
[INSERT MUTUAL FUND
COMPLEX]
Attest: By:
- ----------------------------------- ---------------------------------
Name:
---------------------------------
Title:
---------------------------------
Date:
---------------------------------
UMB BANK, N.A.
Attest: By:
- ----------------------------------- ---------------------------------
Name: Ralph R. Santoro
---------------------------------
Title: Senior Vice President
---------------------------------
Date:
---------------------------------
23
<PAGE>
APPENDIX A
CUSTODY AGREEMENT
DOMESTIC SUBCUSTODIANS:
Brown Brothers Harriman & Co. (Foreign Securities Only)
SECURITIES SYSTEMS:
Federal Book Entry
Depository Trust Company
Participant Trust Company
SPECIAL SUBCUSTODIANS:
SECURITIES DEPOSITORIES
COUNTRIES FOREIGN SUBCUSTODIANS CLEARING AGENCIES
- --------- --------------------- -----------------
Euroclear
[INSERT MUTUAL FUND UMB BANK, N.A.
COMPLEX]
By: By:
----------------------------------- ----------------------------------
Name: Name: Ralph R. Santoro
----------------------------------- ----------------------------------
Title: Title: Senior Vice President
----------------------------------- ----------------------------------
Date: Date:
----------------------------------- ----------------------------------
<PAGE>
APPENDIX B
CUSTODY AGREEMENT
The following open-end management investment companies ("Funds") are hereby
made parties to the Custody Agreement dated _________________, 199__, with UMB
Bank, n.a. ("Custodian") and ______________________, and agree to be bound by
all the terms and conditions contained in said Agreement:
[LIST THE FUNDS]
--------------
[INSERT MUTUAL FUND COMPLEX]
Attest: By:
- ------------------------------ -----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Date:
-----------------------------------
UMB BANK, N.A.
Attest: By:
- -------------------------------- -----------------------------------
Name: Ralph R. Santoro
-----------------------------------
Title: Senior Vice President
-----------------------------------
Date:
-----------------------------------
<PAGE>
EXHIBIT (h)(i)
FORM OF ADMINISTRATION AND FUND ACCOUNTING AGREEMENT
----------------------------------------------------
THIS AGREEMENT is made as of this ___ day of _______, 1999, by and between
RREEF Securities Trust, a _________ business trust (the "Trust"), and Sunstone
Financial Group, Inc., a Wisconsin corporation (the "Administrator").
WHEREAS, the Trust is an open-end investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act") and is authorized to
issue shares of beneficial interests (the "Shares") in separate series with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Trust and the Administrator desire to enter into an agreement
pursuant to which the Administrator shall provide administration and fund
accounting services to such investment portfolios of the Trust as are listed on
Schedule A hereto and any additional investment portfolios the Trust and
Administrator may agree upon and include on Schedule A as such Schedule may be
amended from time to time (such investment portfolios and any additional
investment portfolios are individually referred to as a "Fund" and collectively
the "Funds").
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. Appointment
-----------
The Trust hereby appoints the Administrator as administrator and fund
accountant of the Funds for the period and on the terms set forth in this
Agreement. The Administrator accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. Services as Administrator
--------------------------
(a) Subject to the direction and control of the Trust's Board of Trustees
and utilizing information provided by the Trust and its agents, the
Administrator will provide the services listed on Schedule B hereto. The duties
of the Administrator shall be confined to those expressly set forth herein, and
no implied duties are assumed by or may be asserted against the Administrator
hereunder.
(b) The Trustees of the Trust shall cause the officers, investment
adviser, legal counsel, independent accountants, transfer agent and custodian
for the Funds to cooperate with the Administrator and to provide the
Administrator, upon request, with such information, documents and advice
relating to the Funds and the Trust as is within the possession or knowledge of
such persons, in order to enable the Administrator to perform its duties
hereunder. In connection with its duties hereunder, the Administrator shall be
entitled to rely, and shall be held harmless by the
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Trust when acting in reliance (without investigation or verification), upon the
instruction, advice, information or any documents relating to the Funds provided
to the Administrator by an officer or representative of the Funds or by any of
the aforementioned persons. The Administrator shall be entitled to rely on any
document that it reasonably believes to be genuine and to have been signed or
presented by the proper party. Fees charged by such persons shall be an expense
of the Trust. The Administrator shall not be held to have notice of any change
of authority of any officer, agent, representative or employee of the Trust
until receipt of written notice thereof from the Trust.
(c) In compliance with the requirements of Rule 31a-3 under the 1940 Act,
the Administrator hereby agrees that all records which it maintains for the
Trust are the property of the Trust and further agrees to surrender promptly to
the Trust any of such records upon the Trust's request. Subject to the terms of
Section 6, the Administrator further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records described in (a) above
which are maintained by the Administrator for the Trust.
(d) It is understood that in determining security valuations, the
Administrator employs one or more pricing services to determine valuations of
portfolio securities for purposes of calculating net asset values of the Funds.
The Administrator shall identify to the Trust and the Board of Trustees any such
pricing service utilized on behalf of the Trust. The Administrator is authorized
to rely on the prices provided by such service(s) or by the Funds' investment
adviser or other authorized representative of the Funds, and shall not be liable
for losses to the Trust or its securityholders as a result of its reliance on
the valuations provided by the approved pricing service(s) or the
representative.
(e) The Trust's Board of Trustees and the Funds' investment adviser have
and retain primary responsibility for all compliance matters relating to the
Funds including but not limited to compliance with the Investment Company Act of
1940, as amended, the Internal Revenue Code of 1986, as amended, and the
policies and limitations of each Fund relating to the portfolio investments as
set forth in the Prospectus and Statement of Additional Information. Sunstone's
monitoring and other functions hereunder shall not relieve the Board and the
investment adviser of their primary day-to-day responsibility for assuring such
compliance.
3. Fees; Delegation; Expenses
--------------------------
(a) In consideration of the services rendered pursuant to this Agreement,
the Trust will pay the Administrator a fee, computed daily and payable monthly,
as provided in Schedule C hereto, plus out-of-pocket expenses. Fees shall be
paid by each Fund at a rate that would aggregate at least the applicable minimum
fee for each Fund.
(b) For the purpose of determining fees payable to the Administrator, net
asset values shall be computed in accordance with the Trust's Prospectuses and
resolutions of the Trust's Board of Trustees. The fee for the period from the
day of the month this Agreement is entered into until the end of that month
shall be pro-rated according to the proportion that such period bears to the
full monthly period. Upon any termination of this Agreement before the end of
any month, the fee for such part of a month shall be pro-rated according to the
proportion which such
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<PAGE>
period bears to the full monthly period and shall be payable upon the date of
termination of this Agreement. Should the Trust be liquidated, merged with or
acquired by another fund or investment company, any accrued fees shall be
immediately payable. Such fee as is attributable to each Fund shall be a
separate charge to each Fund and shall be the several (and not joint or joint
and several) obligation of each such Fund.
(c) The Administrator will bear all expenses in connection with the
performance of its services under this Agreement except as otherwise provided
herein. Other costs and expenses to be incurred in the operation of the Funds,
including, but not limited to: taxes; interest; brokerage fees and commissions,
if any; salaries, fees and expenses of officers and Directors; Commission fees
and state Blue Sky fees; advisory fees; charges of custodians, transfer agents,
dividend disbursing and accounting services agents; security pricing services;
insurance premiums; outside auditing and legal expenses; costs of organization
and maintenance of corporate existence; typesetting, printing, proofing and
mailing of prospectuses, statements of additional information, supplements,
notices and proxy materials for regulatory purposes and for distribution to
current shareholders; typesetting, printing, proofing and mailing and other
costs of shareholder reports; expenses in connection with the electronic
transmission of documents and information including electronic filings with the
Commission and the states: expenses incidental to holding meetings of the Fund's
shareholders and Trustees; and any extraordinary expenses; will be borne by the
Funds or their investment adviser. Expenses incurred for distribution of shares,
including the typesetting, printing, proofing and mailing of prospectuses for
persons who are not shareholders of the Trust, will be borne by the investment
adviser, except for such expenses permitted to be paid by the Trust under a
distribution plan adopted in accordance with applicable laws. Administrator
shall not be required to pay any Blue Sky fees unless and until it has received
the amount of such fees from the Trust.
4. Proprietary and Confidential Information
----------------------------------------
The Administrator agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records relative
to the Funds shareholders, and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be withheld where the
Administrator may be exposed to civil or criminal proceedings for failure to
comply, when requested to divulge such information by duly constituted
authorities, when subject to governmental or regulatory audit or investigation,
or when so requested by the Trust. Records and information which have become
known to the public through no wrongful act of the Administrator or any of its
employees, agents or representatives shall not be subject to this paragraph.
5. Limitation of Liability
-----------------------
(a) The Administrator shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Funds in connection with the
matters to which this Agreement relates, except for a loss resulting from the
Administrator's willful misfeasance, bad faith or negligence in the performance
of its duties or from reckless disregard by it of its obligations and duties
under this Agreement. Furthermore, the Administrator shall not be liable for any
action
3
<PAGE>
taken or omitted to be taken in accordance with written or oral instructions
received by the Administrator from an officer or representative of the Trust.
(b) The Administrator assumes no responsibility hereunder, and shall not
be liable, for any damage, loss of data, errors, delay or any other loss
whatsoever caused by events beyond its reasonable control. The Administrator
will, however, take all reasonable steps to minimize service interruptions for
any period that such interruption continues beyond its control.
(c) In no event and under no circumstances shall Administrator, its
affiliates or any of its or their officers, directors, agents or employees be
liable to anyone, including, without limitation, the other party, under any
theory of tort, contract, strict liability or other legal or equitable theory
for lost profits, exemplary, punitive, special, indirect or consequential
damages for any act or failure to act under any provision of this Agreement
regardless of whether such damages were foreseeable and even if advised of the
possibility thereof.
6. Term
----
(a) This Agreement shall become effective with respect to each Fund listed
on Schedule A hereof as of the date hereof and, with respect to each Fund not in
existence on that date, on the date an amendment to Schedule A to this Agreement
relating to that Fund is executed. This Agreement shall continue in effect with
respect to each Fund until _______ , 200_ (the "Initial Term"). Thereafter, if
not terminated as provided herein, this Agreement shall continue automatically
in effect as to each Fund for successive annual periods.
(b) This Agreement may be terminated with respect to any one or more
particular Funds without penalty after the Initial Term (i) upon mutual consent
of the parties, or (ii) by either party upon not less than sixty (60) days'
written notice to the other party (which notice may be waived by the party
entitled to the notice). The terms of this Agreement shall not be waived,
altered, modified, amended or supplemented in any manner whatsoever except by a
written instrument signed by the Administrator and the Trust.
(c) Notwithstanding anything herein to the contrary, upon the termination
of this Agreement or the liquidation of a Fund or the Trust, the Administrator
shall deliver the records of the Fund(s) and/or Trust as the case may be to the
Trust or person(s) designated by the Trust, at the Trust's cost and expense, and
thereafter the Trust or its designee shall be solely responsible for preserving
the records for the periods required by all applicable laws, rules and
regulations. In addition, in the event of termination of this Agreement, or the
proposed liquidation or merger of the Trust or a Fund(s), and the Trust requests
the Administrator to provide services in connection therewith, the Administrator
shall provide such services and be entitled to such compensation as the parties
may mutually agree.
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<PAGE>
7. Non-Exclusivity
---------------
The services of the Administrator rendered to the Trust are not deemed to
be exclusive. The Administrator may render such services and any other services
to others, including other investment companies. The Trust recognizes that from
time to time directors, officers and employees of the Administrator may serve as
trustees, directors, officers and employees of other entities (including other
investment companies) and that the Administrator or its affiliates may enter
into investment advisory or other agreements with such other entities.
8. Governing Law; Invalidity
-------------------------
This Agreement shall be governed by Wisconsin law, excluding the laws on
conflicts of laws. To the extent that the applicable laws of the State of
Wisconsin, or any of the provisions herein, conflict with the applicable
provisions of the 1940 Act, the latter shall control, and nothing herein shall
be construed in a manner inconsistent with the 1940 Act or any rule or order of
the Commission thereunder. Any provision of this Agreement which may be
determined by competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. In such case, the parties shall in good faith modify or
substitute such provision consistent with the original intent of the parties.
9. Notices
-------
Any notice required or permitted to be given by either party to the other
shall be in writing and shall be deemed to have been given when sent by
registered or certified mail, postage prepaid, return receipt requested, as
follows: Notice to the Administrator shall be sent to Sunstone Financial Group,
Inc., 207 East Buffalo Street, Suite 400, Milwaukee, WI, 53202, Attention:
Miriam M. Allison, and notice to the Trust shall be sent to ____________,
Attention: President.
10. Entire Agreement
----------------
This Agreement constitutes the entire Agreement of the parties hereto.
11. Trust Limitations.
------------------
This Agreement is executed by the Trust with respect to each of the Funds
and the obligations hereunder are not binding upon any of the trustees, officers
or shareholders of the Trust individually but are binding only upon the Fund to
which such obligations pertain and the assets and property of such Fund. All
obligations of the Trust under this Agreement shall apply only on a Fund-by-Fund
basis, and the assets of one Fund shall not be liable for the obligations
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<PAGE>
of another Fund. The Fund's Declaration of Trust is on file with the Secretary
of _________________.
12. Counterparts
------------
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original agreement but such counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer as of the day and year first above
written.
RREEF SECURITIES TRUST
(the "Trust")
By:_______________________________
President
SUNSTONE FINANCIAL GROUP, INC.
("Administrator")
By:_______________________________
President
6
<PAGE>
Schedule A
to the
Administration and Fund Accounting Agreement
by and between
RREEF Securities Trust
and
Sunstone Financial Group, Inc.
Name of Funds
-------------
RREEF Real Estate Securities Fund
<PAGE>
Schedule B
to the
Administration and Fund Accounting Agreement
by and between
RREEF Securities Trust
and
Sunstone Financial Group, Inc.
SERVICES
- --------
(1) provide office space, facilities, equipment and personnel to carry out its
services hereunder;
(2) compile data for and prepare with respect to the Funds timely Notices to
the Securities and Exchange Commission (the "Commission") required pursuant
to Rule 24f-2 under the 1940 Act and Semi-Annual Reports on Form N-SAR
(3) assist in the preparation for execution by the Trust and file all federal
income and excise tax returns and state income tax returns (and such other
required tax filings as may be agreed to by the parties) other than those
required to be made by the Trust's custodian or transfer agent, subject to
review and approval of the Trust and the Trust's independent accountants
(4) prepare the financial statements for the Annual and Semi-Annual Reports
required pursuant to Section 30(d) under the 1940 Act
(5) provide financial information for inclusion in the Registration Statement
for the Trust (on Form N-1A or any replacement therefor) and any amendments
thereto
(6) determine and periodically monitor each Fund's income and expense accruals
and cause all appropriate expenses to be paid from Trust assets on proper
authorization from the Corporation
(7) calculate daily net asset values and income factors of each Fund
(8) Maintain all general ledger accounts and related subledgers
(9) perform security valuations
(10) assist in the acquisition of the Trust 's fidelity bond required by the
Act, monitor the amount of the bond and make the necessary Commission
filings related thereto
(11) from time to time as the Administrator deems appropriate, check each Fund's
compliance with the policies and limitations of each Fund relating to the
portfolio investments as set forth in the Prospectus and Statement of
Additional Information and monitor each Fund's status as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended (but these functions shall not relieve the Trust's investment
adviser
<PAGE>
and sub-advisers, if any, of their primary day-to-day responsibility for
assuring such compliance)
(12) maintain, and/or coordinate with the other service providers the
maintenance of, the accounts, books and other documents required pursuant
to Rule 31a-1(a) and (b) under the 1940 Act
(13) prepare and/or file securities registration compliance filings, with the
advice of the Trust's legal counsel, in accordance instructions from the
Trust, which instructions will include the states to qualify in, the
amounts of Shares to qualify and the warning threshold to be maintained.
(14) develop with legal counsel and secretary of the Trust an agenda for each
board meeting and, if requested by the Trustees, attend board meetings and
prepare minutes
(15) prepare Form 1099s for directors and other fund vendors
(16) calculate dividend and capital gains distributions subject to review and
approval by the Trust and its independent accountants
(17) generally assist in the Trust's administrative operations as mutually
agreed to by the parties.
<PAGE>
Schedule C
to the
Administration and Fund Accounting Agreement
by and between
RREEF Securities Trust
and Sunstone Financial Group, Inc.
FEE SCHEDULE
Asset Based Fees
- ------------------------------------------------------------------------------
Name of Fund Average Net Assets Basis Points Minimum
- ------------ ------------------ ------------ Annual Fee
----------
- ------------------------------------------------------------------------------
RREEF Real
Estate Securities
Fund
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
The minimum annual fee is subject to an annual escalation of five percent (5%),
which escalation shall be effective commencing one year from the effective date
of the Fund and the corresponding date each year thereafter. No amendment of
this Schedule C shall be required with each escalation. The foregoing fee
schedule assumes a single class of shares for the Fund. Additional fees shall
apply when adding any additional Fund(s) and/or classes including compensation
for the Administrator's services in connection with the organization of the new
Fund(s) or classes. The Administrator shall provide such services and be
entitled to such compensation as the parties may mutually agree in writing.
Out-of-Pocket and Other Related Expenses
<PAGE>
The Trust shall also pay/reimburse the Administrator's out-of-pocket and other
related expenses. Out-of-pocket expenses include, but are not limited to,
travel, lodging and meals in connection with travel on behalf of the Trust,
programming and related expenses (previously incurred or to be incurred by
Administrator) in connection with providing electronic transmission of data
between the Administrator and the Funds' other service providers, brokers,
dealers and depositories, fees and expenses of pricing services, fees of
research services including Lexis/Nexis, Morningstar and Lipper, NASDAQ and
other service interface fees, EDGAR related fees, long distance telephone
charges, and photocopying, faxes, postage and overnight delivery expenses.
<PAGE>
EXHIBIT (h)(ii)
FORM OF TRANSFER AGENCY AGREEMENT
---------------------------------
THIS TRANSFER AGENCY AGREEMENT is made as of the ___ day of _______, 1999,
by and between RREEF Securities Trust, a __________ business trust (the
"Trust"), and Sunstone Financial Group, Inc., a Wisconsin corporation, its
successors and assigns ("Sunstone").
R E C I T A L S:
WHEREAS, the Trust is registered under the 1940 Act as an open-end
management investment company; and
WHEREAS, the Trust desires to retain Sunstone to render certain transfer
agency and dividend disbursement services, and Sunstone is willing to render
such services, all in accordance with the terms of this Agreement.
A G R E E M E N T S:
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
ARTICLE I
---------
DEFINITIONS
In addition to any terms defined in the body of this Agreement, the
following capitalized terms shall have the meanings set forth hereinafter
whenever they appear in this Agreement:
1.01 1940 Act shall mean the Investment Company Act of 1940, as amended
--------
from time to time.
1.02 Authorized Person shall mean any individual who is authorized to
-----------------
provide Sunstone with Instructions and requests on behalf of the Trust, whose
name shall be certified to Sunstone from time to time pursuant to Section 7.01
of this Agreement.
1.03 Board of Trustees shall mean the Board of Trustees of the Trust.
-----------------
1.04 Custodian shall mean the financial institution appointed as custodian
---------
under the terms and conditions of the custody agreement between the financial
institution and the Trust, or its successor.
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1.05 Declaration of Trust shall mean the Declaration of Trust or other
--------------------
similar operational document of the Trust, as the case may be, as the same may
be amended from time to time.
1.06 Exchange Act shall mean the Securities Exchange Act of 1934, as
------------
amended from time to time.
1.07 Fund shall mean each separate series of Shares offered by the Trust
----
representing interests in a separate portfolio of securities and other assets
for which the Trust has appointed Sunstone as transfer agent and dividend
disbursing agent under this Agreement.
1.08 Fund Business Day shall mean each day on which the New York Stock
-----------------
Exchange, Inc. is open for trading.
1.09 Instructions shall mean an oral communication from an Authorized
------------
Person or a written communication signed by an Authorized Person and actually
received by Sunstone. Instructions shall include manually executed originals,
telefacsimile transmissions of manually executed originals or electronic
communications.
1.10 Prospectus shall mean the last Prospectus with respect to a Fund and
----------
any supplement actually received by Sunstone from the Trust with respect to
which the Trust has indicated a registration statement has become effective
under the Securities Act and the 1940 Act, including the Statement of Additional
Information, incorporated by reference herein.
1.11 Securities Act shall mean the Securities Act of 1933, as amended from
--------------
time to time.
1.12 Shares shall mean such shares of capital stock or beneficial
------
interest, as the case may be, or class thereof, of each respective Fund of the
Trust as may be issued from time to time.
1.13 Shareholder shall mean a record owner of Shares of each respective
-----------
Fund of the Trust.
ARTICLE II
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APPOINTMENT OF TRANSFER AGENT
2.01 Appointment. The Trust hereby appoints Sunstone as transfer agent and
-----------
dividend disbursing agent of all the Shares of the Trust during the term of this
Agreement with respect to each Fund listed on Schedule A hereto, and any
----------
additional Fund the Trust and Sunstone may agree to include on any amended
Schedule A. Sunstone hereby accepts such
- ----------
2
<PAGE>
appointment as transfer agent and dividend disbursing agent and agrees to
perform the duties thereof as hereinafter set forth.
2.02 Duties.
------
A. Sunstone shall perform the transfer agent and dividend disbursement
services described on Schedule B hereto and such additional services as may be
----------
agreed to by the parties from time to time and set forth in an amendment to
Schedule B (collectively, the "Services"). Sunstone shall have no duties or
- ----------
responsibilities other than those specifically set forth in this Agreement, and
no covenant or obligation to carry out any other duties or responsibilities
shall be implied in this Agreement against Sunstone.
B. Sunstone may, in its discretion, appoint other parties to carry out
some or all of its responsibilities under this Agreement; provided, however,
that unless the Trust shall enter into a written agreement with any such party,
the party shall be the agent of Sunstone and not the agent of the Trust. In such
event, Sunstone shall be fully responsible for the acts or omissions of such
party and shall not be relieved of any of its responsibilities hereunder by the
appointment of such party.
2.03 Deliveries.
----------
A. In connection with Sunstone's appointment as transfer agent and
dividend disbursing agent, the Trust shall deliver or cause the following
documents to be delivered to Sunstone:
(1) A copy of the Declaration of Trust and By-laws of the Trust
and all amendments thereto, certified by the Secretary of the Trust;
(2) A certificate signed by the President and Secretary of the
Trust specifying the number of authorized Shares and the number of such
authorized Shares issued and currently outstanding, if any;
(3) A certified copy of the resolutions of the Board of Trustees
of the Trust appointing Sunstone as transfer agent and dividend disbursing agent
and authorizing the execution of this Transfer Agency Agreement on behalf of the
Trust;
(4) Copies of the Trust's Registration Statement, as amended to
date, and the most recently filed Post-Effective Amendment thereto, filed by the
Trust with the Securities and Exchange Commission under the Securities Act and
the 1940 Act, together with any applications filed in connection therewith;
(5) An opinion of counsel for the Trust with respect to the
Trust's organization and existence under the laws of its state of organization,
the validity of the authorized and outstanding Shares, whether such Shares are
fully paid and non-assessable and the status of such Shares under the Securities
Act and any other applicable federal law or regulation (i.e., if subject to
registration, that they have been registered and that the Registration Statement
has become effective, or if exempt, the specific grounds therefor); and
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<PAGE>
(6) The certificate required by Section 7.01 of this Agreement,
signed by an officer of the Trust and designating the names of the Trust's
initial Authorized Persons.
B. The Trust agrees to deliver or to cause to be delivered to Sunstone in
Milwaukee, Wisconsin, at the Trust's expense, all of its Shareholder account
records in a format acceptable to Sunstone, as well as all other documents,
records and information that Sunstone may reasonably request in order for
Sunstone to perform the Services hereunder.
ARTICLE III
-----------
COMPENSATION & EXPENSES
3.01 Compensation. As compensation for the performance of the Services,
------------
the Trust agrees to pay Sunstone the fees set forth on Schedule C attached
----------
hereto. The parties may amend Schedule C to include fees for any additional
----------
services requested by the Trust, or to add Funds for which Sunstone has been
retained. The Trust agrees to pay Sunstone's then current rate for any Services
added to Schedule C after the execution of this Agreement.
----------
3.02 Expenses. The Trust also agrees to promptly reimburse Sunstone for
--------
all out-of-pocket expenses or disbursements incurred by Sunstone in connection
with the performance of Services under this Agreement. Out-of-pocket expense
shall include, but not be limited to, those items specified on Schedule C
----------
hereto. If requested by Sunstone, out-of-pocket expenses are payable in
advance. Payment of postage expenses, if prepayment is requested, is due at
least seven days prior to the anticipated mail date. In the event Sunstone
requests advance payment, Sunstone shall not be obligated to incur such expenses
or perform the related Service(s) until payment is received.
3.03 Payment Procedures.
------------------
A. The Trust agrees to pay all amounts due hereunder within fifteen days
of the date reflected on the statement for such Services (the "Due Date").
Sunstone shall bill Service fees monthly, and out-of-pocket expenses as incurred
(unless prepayment is requested by Sunstone). Sunstone may, at its option,
arrange to have various service providers submit invoices directly to the Trust
for payment of reimbursable out-of-pocket expenses.
B. The Trust is aware that its failure to remit to Sunstone all amounts
due on or before the Due Date will cause Sunstone to incur costs not
contemplated by this Agreement, including, but not limited to carrying,
processing and accounting charges. Accordingly, in the event that Sunstone does
not receive any amounts due hereunder by the Due Date, the Trust agrees to pay a
late charge on the overdue amount equal to one and one-half percent (1.5%) per
month or the maximum amount permitted by law, whichever is less. In addition,
the Trust shall pay Sunstone's reasonable attorney's fees and court costs if any
amounts due Sunstone are collected by or through an attorney. The parties hereby
agree that such late charge represents a fair and reasonable computation of the
costs incurred by reason of the Trust's late payment. Acceptance of such late
charge shall in no event constitute a waiver by Sunstone of the Trust's default
or prevent Sunstone from exercising any other rights and remedies available to
it.
4
<PAGE>
3.04 Allocation of Risk. The Trust acknowledges that the fees charged by
------------------
Sunstone under this Agreement reflect the allocation of risk between the
parties, including the exclusion of remedies and limitations on liability in
Article VIII. Modifying the allocation of risk from what is stated herein would
affect the fees that Sunstone charges. Accordingly, in consideration of those
fees, the Trust agrees to the stated allocation of risk.
ARTICLE IV
----------
PROCESSING AND PROCEDURES
4.01 Issuance, Redemption and Transfer of Shares
A. Sunstone agrees to accept purchase orders and redemption requests with
respect to the Shares of each Fund on each Fund Business Day in accordance with
such Fund's Prospectus; provided, however, that Sunstone shall only accept
purchase orders from states in which the Shares are registered, as indicated
from time to time by the Trust. Sunstone shall, as of the time at which the net
asset value of each Fund is computed on each Fund Business Day, issue to and
redeem from the accounts specified in a purchase order or redemption request in
proper form and accepted by the Fund the appropriate number of full and
fractional Shares based on the net asset value per Share of the respective Fund
specified in an advice received on such Fund Business Day from or on behalf of
the Fund. Sunstone shall not be responsible for the payment of any original
issue or other taxes required to be paid by the Trust in connection with the
issuance of any Shares in accordance with this Agreement. Sunstone shall not be
required to issue any Shares after it has received from an Authorized Person or
from an appropriate federal or state authority written notification that the
sale of Shares has been suspended or discontinued, and Sunstone shall be
entitled to rely upon such written notification.
B. Upon receipt of a redemption request and monies paid to it by the
Custodian in connection with a redemption of Shares, Sunstone shall cancel the
redeemed Shares and after making appropriate deduction for any withholding of
taxes required of it by applicable federal law, make payment in accordance with
the Fund's redemption and payment procedures described in the Prospectus.
C. Except as otherwise provided in this paragraph, Sunstone will transfer
or redeem Shares upon presentation to Sunstone of instructions endorsed for
exchange, transfer or redemption, accompanied by such documents as Sunstone
deems necessary to evidence the authority of the person making such transfer or
redemption. Sunstone reserves the right to refuse to transfer or redeem Shares
until it is satisfied that the endorsement or instructions are valid and
genuine. For that purpose, it will require, unless otherwise instructed by an
Authorized Person or except as otherwise provided in this paragraph, a guarantee
of signature by an "Eligible Guarantor Institution" as that term is defined by
SEC Rule 17Ad-15. Sunstone also reserves the right to refuse to transfer or
redeem Shares until it is satisfied that the requested transfer or redemption is
legally authorized, and it shall incur no liability for the refusal, in good
faith, to make transfers or redemptions which Sunstone, in its judgment, deems
improper or unauthorized, or until it is satisfied that there is no reasonable
basis to any claims adverse to such transfer or redemption. Sunstone may, in
effecting transfers and redemptions of Shares, rely
5
<PAGE>
upon those provisions of the Uniform Act for the Simplification of Fiduciary
Security Transfers (or such other statutes which protect it and the Trust in not
requiring complete fiduciary documentation) and shall not be responsible for any
act done or omitted by it in good faith in reliance upon such laws.
Notwithstanding the foregoing or any other provision contained in this Agreement
to the contrary, Sunstone shall be fully protected by each Fund in not requiring
any instruments, documents, assurances, endorsements or guarantees, including,
without limitation, any signature guarantees, in connection with a redemption,
exchange or transfer of Shares whenever Sunstone reasonably believes that
requiring the same would be inconsistent with the transfer and redemption
procedures described in the Prospectus.
D. Notwithstanding any provision contained in this Agreement to the
contrary, Sunstone shall not be required or expected to require, as a condition
to any transfer or redemption of any Shares pursuant to a computer tape or
electronic data transmission, any documents to evidence the authority of the
person requesting the transfer or redemption and/or the payment of any stock
transfer taxes, and shall be fully protected in acting in accordance with the
applicable provisions of this Article.
E. In connection with each purchase and each redemption of Shares,
Sunstone shall send such statements as are prescribed by the Federal securities
laws applicable to transfer agents or as described in the Prospectus. It is
understood that certificates for Shares have not been and will not be offered by
the Trust or available to investors.
F. Sunstone and the Trust shall establish procedures for effecting
purchase, redemption or transfer transactions accepted from investors by
telephone or other methods consistent with the terms of the Prospectus. Sunstone
may establish such additional procedures, rules and regulations governing the
purchase, redemption or transfer of Shares, as it may deem advisable and
consistent with the Prospectus and industry practice. Sunstone shall not be
liable, and shall be held harmless by the Trust, for its actions or omissions
which are consistent with the foregoing procedures.
G. The Trust agrees to provide Sunstone with prior notice of any increase
or decrease in the total number of Shares authorized to be issued, or the
issuance of any additional Shares of a Fund pursuant to stock dividends, stock
splits, recapitalizations, capital adjustments or similar transactions, and to
deliver to Sunstone such documents, certificates, reports and legal opinions as
Sunstone may reasonably request.
4.02 Dividends and Distributions
---------------------------
A. The Trust shall give or cause to be given to Sunstone a copy of a
resolution of its Board of Trustees, that either:
(i) sets forth the date of the declaration of a dividend or
distribution, the date of accrual or payment, as the case may be, thereof, the
record date as of which Shareholders entitled to payment or accrual, as the case
may be, shall be determined, the amount per Share of such
6
<PAGE>
dividend or distribution, the payment date on which all previously accrued and
unpaid dividends are to be paid, and the total amount, if any, payable to
Sunstone on such payment date, or
(ii) authorizes the declaration of dividends and distributions on
a daily or other periodic basis and further authorizes Sunstone to rely on a
certificate of an Authorized Person setting forth the information described in
subsection (i) of this paragraph.
B. In connection with a reinvestment of a dividend or distribution of
Shares of a Fund, Sunstone shall as of each Fund Business Day, as specified in a
certificate or resolution described in paragraph A, issue Shares of the Fund
based on the net asset value per Share of such Fund specified in an advice
received from or on behalf of the Fund on such Fund Business Day.
C. Upon the mail date specified in such certificate or resolution, as the
case may be, the Trust shall, in the case of a cash dividend or distribution,
cause the Custodian to deposit in an account in the name of Sunstone on behalf
of a Fund, an amount of cash sufficient for Sunstone to make the payment, as of
the mail date specified in such certificate or resolution, as the case may be,
to the Shareholders who were of record on the record date. Sunstone will, upon
receipt of any such cash, make payment of such cash dividends or distributions
to the Shareholders as of the record date. Sunstone shall not be liable for any
improper payments made in accordance with a certificate or resolution described
in the preceding paragraph. If Sunstone shall not receive from the Custodian
sufficient cash to make payments of any cash dividend or distribution to all
Shareholders of a Fund as of the record date, Sunstone shall, upon notifying the
Trust, withhold payment to such Shareholders until sufficient cash is provided
to Sunstone.
D. It is understood that Sunstone in its capacity as transfer agent and
dividend disbursing agent shall in no way be responsible for the determination
of the rate or form of dividends or capital gain distributions due to the
Shareholders pursuant to the terms of this Agreement. It is further understood
that Sunstone shall file with the Internal Revenue Service and Shareholders such
appropriate federal tax forms concerning the payment of dividend and capital
gain distributions but shall in no way be responsible for the collection or
withholding of taxes due on such dividends or distributions due to shareholders,
except and only to the extent, required by applicable federal law.
4.03 Records.
-------
A. Sunstone shall keep those records specified in Schedule D hereto in
----------
the form and manner, and for such period, as it may deem advisable but not
inconsistent with the rules and regulations of appropriate government
authorities, in particular Rules 31a-2 and 31a-3 under the 1940 Act. Sunstone
may deliver to the Trust from time to time at Sunstone's discretion, for
safekeeping or disposition by the Trust in accordance with law, such records,
papers and documents accumulated in the execution of its duties as transfer
agent, as Sunstone may deem expedient, other than those which Sunstone is itself
required to maintain pursuant to applicable laws and regulations. The Trust
shall assume all responsibility for any failure thereafter to produce any
record, paper, canceled Share certificate, or other document so returned, if and
when required. To the extent required by Section 31 of the 1940 Act and the
rules and regulations
7
<PAGE>
thereunder, the records specified in Schedule D hereto maintained by Sunstone,
----------
which have not been previously delivered to the Trust pursuant to the foregoing
provisions of this paragraph, shall be considered to be the property of the
Trust, shall be made available upon request for inspection by the officers,
employees, and auditors of the Trust, and shall be delivered to the Trust
promptly upon request and in any event upon the date of termination of this
Agreement, in the form and manner kept by Sunstone on such date of termination
or such earlier date as may be requested by the Trust. Notwithstanding anything
contained herein to the contrary, Sunstone shall be permitted to maintain copies
of any such records, papers and documents to the extent necessary to comply with
the recordkeeping requirements of federal and state securities laws, tax laws
and other applicable laws.
B. Sunstone agrees to keep all records and other information relative to
the Trust and its Shareholders confidential, except when requested to divulge
such information by duly-constituted authorities or court process, or when
requested by a Shareholder or Shareholder's agent with respect to information
concerning an account as to which such Shareholder has either a legal or
beneficial interest, or when requested by the Trust, the Shareholder, the
Shareholder's agent or the dealer of record with respect to such account. In
case of any requests or demands for the inspection of the Shareholder records of
the Trust, Sunstone will endeavor to notify the Trust promptly and to secure
instructions from an Authorized Person as to such inspection. Sunstone reserves
the right, however, to exhibit the Shareholder records to any person whenever it
believes there is a reasonable likelihood that Sunstone will be held liable for
the failure to exhibit the Shareholder records to such person; provided,
however, that in connection with any such disclosure Sunstone shall promptly
notify the Trust that such disclosure has been made or is to be made. Records
and information which have become known to the public through no wrongful act of
Sunstone or any of its employees, agents or representatives shall not be subject
to this paragraph.
ARTICLE V
---------
REPRESENTATION AND WARRANTIES
5.01 Representations of Trust. The Trust represents and warrants to
------------------------
Sunstone that:
A. It is a business trust duly organized and existing under the laws of
the State of ______; it is empowered under applicable laws and by its
Declaration of Trust and By-laws to enter into and perform this Agreement; and
all requisite corporate proceedings have been taken to authorize it to enter
into and perform this Agreement.
B. Any officer of the Trust has the authority to appoint additional
Authorized Persons, to limit or revoke the authority of any previously
designated Authorized Person, and to certify to Sunstone the names of such
Authorized Persons.
C. It is duly registered as an investment company under the 1940 Act.
8
<PAGE>
D. A registration statement under the Securities Act is currently
effective and will remain effective, and appropriate state securities laws
filings have been made and will continue to be made, with respect to Shares of
the Trust being offered for sale.
E. All outstanding Shares are validly issued, fully paid and non-
assessable and when Shares are hereafter issued in accordance with the terms of
the Trust's Declaration of Trust and its Prospectus with respect to each Fund,
such Shares shall be validly issued, fully paid and non-assessable.
5.02 Representations of Sunstone. Sunstone represents and warrants to the
---------------------------
Trust that:
A. It is a corporation duly organized and existing under the laws of the
State of Wisconsin; it is empowered under applicable law and by its Articles of
Incorporation and By-laws to enter into and perform this Agreement; and all
requisite proceedings have been taken to authorize it to enter into and perform
this Agreement.
B. It is duly registered as a transfer agent under Section 17A of the 1934
Act to the extent required.
C. It has received a copy of each Fund's Prospectus which describes how
sales and redemptions of Shares shall be made.
ARTICLE VI
----------
ADDITIONAL COVENANTS AND AGREEMENTS
6.01 Information Updates. During the term of this Agreement the Trust
-------------------
shall have the ongoing obligation to provide Sunstone with the following
documents as soon as they become effective: (i) certified copies of all
amendments to its Declaration of Trust and By-laws made after the date of this
Agreement; and (ii) a copy of each Fund's currently effective Prospectus. For
purposes of this Agreement, Sunstone shall not be deemed to have notice of any
information contained in any such Prospectus until a reasonable time after it is
actually received by Sunstone.
6.02 Share Registration. The Trust agrees to take or cause to be taken all
------------------
requisite steps to register the Shares for sale in all states in which the
Shares shall at the time be offered for sale and require registration. If the
Trust receives notice of any stop order or other proceeding in any such state
affecting such registration or the sale of Shares, or of any stop order or other
proceeding under the federal securities laws affecting the sale of Shares, the
Trust will give prompt notice thereof to Sunstone.
6.03 Compliance with Laws. The Trust will comply with all applicable
--------------------
requirements of the Securities Act, the Exchange Act, the 1940 Act, blue sky
laws, and any other applicable laws, rules and regulations.
9
<PAGE>
6.04 Addditional Duties. The Trust agrees that it shall advise Sunstone
-----------------
at least 30 days prior to effecting any change in the Prospectus which would
increase or alter the duties and obligations of Sunstone hereunder, and shall
proceed with such change only if it shall have received the written consent of
Sunstone thereto.
6.05 Transfer Agent System.
---------------------
A. Sunstone shall retain title to and ownership of any and all data bases,
computer programs, screen formats, report formats, interactive design
techniques, derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, trade secrets, trademarks and other
related legal rights utilized by Sunstone in connection with the Services
provided by Sunstone to the Trust herein (the "Sunstone System").
B. Sunstone hereby grants the Trust a limited license to use the Sunstone
System for the sole and limited purpose of having Sunstone provide the Services
contemplated hereunder. Nothing contained in this Agreement should be construed
or interpreted otherwise, and such license shall immediately terminate upon the
termination of this Agreement.
6.06 Internet Services.
-----------------
A. In the event Schedule B reflects any Services in the Sunstone 4.net(SM)
----------
category, the Trust agrees to provide, at its cost, all computers,
telecommunications equipment and other equipment and software necessary to
develop and maintain its web site, to design and develop the web site
functionality necessary to facilitate and maintain hypertext links between its
web site and Sunstone's web site, and to provide Sunstone with such Instructions
as it may request from time to time in connection with the performance of
Sunstone's obligations hereunder.
B. Sunstone shall retain title to and ownership of any and all data bases,
computer programs, screen formats, report formats, interactive design
techniques, derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, trade secrets, trademarks and other
related legal rights utilized by Sunstone in connection with the Sunstone
4.net(SM) services provided by Sunstone to the Trust pursuant to this Agreement
(the "Sunstone 4.net(SM) System"). The Sunstone 4.net(SM) System is licensed,
not sold. Sunstone hereby grants the Trust a nonexclusive, limited license to
use the Sunstone 4.net9(SM) System for the sole and limited purpose of having
Sunstone provide the services to the Trust. Such license shall immediately
terminate upon the termination of the Agreement. The Trust agrees that it will
not mask, delete or otherwise alter any disclaimers, trademark or service mark
notifications embedded in or describing the Sunstone 4.net(SM) System.
C. SUNSTONE IS PROVIDING THE SUNSTONE 4.NET(SM) SYSTEM TO THE TRUST ON AN
"AS IS" BASIS, AND SPECIFICALLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES,
EXPRESS OR IMPLIED, REGARDING THE SUNSTONE 4.NET(SM) SYSTEM AND THE SERVICES TO
BE PROVIDED HEREUNDER RELATING THERETO, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE OPERATION OF
THE SUNSTONE 4.NET(SM) SYSTEM WILL BE ERROR FREE OR WILL NOT BE INTERRUPTED FROM
TIME TO TIME BY REASON OF A DEFECT THEREIN. The parties acknowledge that
Sunstone's ability to provide the Sunstone 4.net(SM) services
10
<PAGE>
described herein depends upon a number of factors beyond Sunstone's control,
including, but not limited to, the Internet and equipment, software, data and
services provided by telecommunications carriers and unrelated vendors and third
parties. Sunstone shall not be liable for its failure to perform any of the
services or for the delay or interruption of any such services, if the failure,
delay or interruption in caused by circumstances beyond Sunstone's reasonable
control. The terms and conditions of this Section shall supercede and control
any conflicting provisions in this Agreement.
ARTICLE VII
-----------
TRUST INSTRUCTIONS
7.01 Authorized Persons. Upon the execution of this Agreement, the Trust
------------------
shall provide Sunstone with a certificate containing the names of the initial
Authorized Persons in a form acceptable to Sunstone. Any officer of the Trust
has the authority to appoint additional Authorized Persons, to limit or revoke
the authority of any previously designated Authorized Person, and to certify to
Sunstone the names of the Authorized Persons from time to time. The Trust shall
provide Sunstone with an updated certificate evidencing the appointment, removal
or change of authority of any Authorized Person, it being understood Sunstone
shall not be held to have notice of any change in the authority of any
Authorized Person until receipt of written notice thereof from the Trust.
7.02 Acceptance of Instructions. Sunstone, its officers, agents or
--------------------------
employees shall accept Instructions given to them by any person representing or
acting on behalf of the Trust only if such representative is an Authorized
Person. The Trust agrees that when oral Instructions are given, it shall, upon
the request of Sunstone, confirm such Instructions in writing.
7.03 Request for Instructions. At any time, Sunstone may request
------------------------
Instructions from the Trust with respect to any matter arising in connection
with this Agreement. If such Instructions are not received within a reasonable
time, then Sunstone may seek advice from legal counsel for the Trust, or its own
legal counsel at the expense of the Trust, and it shall not be liable for any
action taken or not taken by it in good faith in accordance with such
Instructions or in accordance with advice of counsel.
7.04 Reliance on Instructions. Sunstone shall not be liable for acting
------------------------
upon any written Instructions reasonably believed by it to be genuine and to
have been signed or made by an Authorized Person or oral Instructions which the
individual receiving the instructions on behalf of Sunstone reasonably believes
to have been given by an Authorized Person.
11
<PAGE>
ARTICLE VIII
LIMITATION OF LIABILITY; INDEMNIFICATION
8.01 Limitation of Liability. Notwithstanding anything contained in this
-----------------------
Agreement to the contrary, Sunstone shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust or the Funds in
connection with the matters to which this Agreement relates, except for a loss
resulting from Sunstone's willful misfeasance, bad faith or negligence in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement. Furthermore, Sunstone shall not be liable for
any action taken or omitted to be taken in accordance with instructions received
by it from an officer or representative of the Trust.
8.02 Indemnification. The Trust agrees to indemnify and hold harmless
---------------
Sunstone, its employees, agents, officers, directors and nominees from and
against any and all claims, demands, actions and suits, whether groundless or
otherwise, and from and against any and all judgments, liabilities, losses,
damages, costs, charges, counsel fees and other expenses of every nature and
character which may be asserted against Sunstone or for which Sunstone may be
held liable (a "Claim") arising out of or in any way relating to any of the
following:
(a) any action of Sunstone required to be taken, or omitted to be taken,
pursuant to the Agreement, unless a Claim resulted from Sunstone's willful
misfeasance, bad faith, negligence in the performance of its duties or from
reckless disregard by it of its obligations and duties hereunder;
(b) Sunstone's reliance on, or use of information, data, records and
documents received by Sunstone from the Trust, or any third party acting on
behalf of the Trust, in the performance of Sunstone's duties and obligations
hereunder;
(c) the reliance on, or the implementation of, any Instructions or any
other requests of the Trust on behalf of the applicable Fund;
(d) Sunstone's acting upon telephone instructions relating to the
exchange or redemption of Shares received by Sunstone in accordance with
procedures established by Sunstone and the Trust;
(e) the offer or sale of Shares in violation of any requirement under
the securities laws or regulations of any state that such Shares be registered
in such state or in violation of any stop order or determination or ruling by
any state with respect to the offer or sale of such Shares in such state; or
(f) The Trust's refusal or failure to comply with the terms of the
Agreement, or any Claim that arises out of the Trust's negligence or misconduct
or breach of any representation or warranty of the Trust made herein.
12
<PAGE>
8.03 Indemnification Procedures. Sunstone will notify the Trust promptly
--------------------------
after identifying any situation which it believes presents or appears likely to
present a Claim for which the Trust may be required to indemnify or hold
Sunstone harmless hereunder. In such event, the Trust shall have the option to
defend Sunstone against any Claim, and, in the event that the Trust so elects,
such defense shall be conducted by counsel chosen by the Trust and approved by
Sunstone in its reasonable discretion. Sunstone shall not confess any Claim or
make any compromise in any case in which the Trust will be asked to provide
indemnification, except with the Trust's prior written consent. The obligations
of the parties under the Sections 8.02 and 8.03 shall survive the termination of
this Agreement.
8.04 Force Majure. Sunstone assumes no responsibility hereunder, and
------------
shall not be liable, for any damage, loss of data, errors, delay or any other
loss whatsoever caused by events beyond its reasonable control. Sunstone will,
however, take all reasonable steps to minimize service interruptions for any
period that such interruption continues beyond Sunstone's control.
8.05 Consequential Damages. In no event and under no circumstances shall
---------------------
Sunstone, its affiliates or any of its or their officers, directors, agents or
employees be liable to anyone, including, without limitation, the other party,
under any theory of tort, contract, strict liability or other legal or equitable
theory for lost profits, exemplary, punitive, special, indirect or consequential
damages for any act or failure to act under any provision of this Agreement
regardless of whether such damages were foreseeable and even if advised of the
possibility thereof.
8.06 Additional Limitations and Exclusions. Notwithstanding any other
-------------------------------------
provision of this Agreement, Sunstone shall have no duty or obligation under
this Agreement to inquire into, and shall not be liable for:
(a) The legality of the issue or sale of any Shares, the sufficiency of
the amount to be received therefor, or the authority of the Trust, as the case
may be, to request such sale or issuance;
(b) The legality of a transfer of Shares or of a purchase or redemption of
any Shares, the propriety of the amount to be paid therefor, or the authority of
the Trust, as the case may be, to request such transfer or redemption;
(c) The legality of the declaration of any dividend by the Trust, or the
legality of the issue of any Shares in payment of any stock dividend; or
(d) The legality of any recapitalization or readjustment of Shares.
13
<PAGE>
ARTICLE IX
----------
TERM AND TERMINATION
9.01 Term. This Agreement shall remain in full force and effect until
----
_________, (the "Initial Term") and thereafter shall automatically extend for
additional, successive twelve (12) month terms unless earlier terminated as
provided below.
9.02 Termination.
-----------
A. Either party may terminate this Agreement at any time after the
Initial Term by giving the other party a written notice specifying the date of
such termination (the "Termination Date"), which shall be not less than sixty
(60) days after the date notice is deemed given in accordance with Section
10.01. In the event such notice is given by the Trust, it shall be accompanied
by a copy of a resolution of the Board of Trustees of the Trust, certified by
the Secretary or any Assistant Secretary, electing to terminate this Agreement
and designating the successor transfer agent or transfer agents. In the event
such notice is given by Sunstone, the Trust shall on or before the Termination
Date, deliver to Sunstone a copy of a resolution of its Board of Trustees
certified by the Secretary or any Assistant Secretary designating a successor
transfer agent or transfer agents. In the absence of such designation by the
Trust, the Trust shall be deemed to be its own transfer agent as of the
Termination Date and Sunstone shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement. Fees and out-of-pocket expenses
incurred by Sunstone, but unpaid by the Trust upon such termination, shall be
immediately due and payable upon and notwithstanding such termination.
9.03 Effect of Termination. Upon the termination of the Agreement as
---------------------
provided herein, Sunstone, upon the written request of the Trust, shall deliver
the records of the Trust to the Trust or its successor transfer agent in the
form maintained by Sunstone at the expense of the Trust. The Trust shall be
responsible to Sunstone for all out-of-pocket expenses and for the costs and
expenses associated with the preparation and delivery of such media, including:
(a) any custom programming requested by Trust in connection with the preparation
of such media and agreed upon by Sunstone; (b) transportation of forms and other
materials used in connection with the processing of Trust transactions by
Sunstone; and (c) transportation of records and files in the possession of
Sunstone. In addition, Sunstone shall be entitled to such compensation as the
parties may mutually agree for any services requested by the Trust in connection
with the termination of this Agreement or the liquidation or merger of the
Trust. Sunstone shall not reduce the level of service provided to the Trust
prior to termination following notice of termination by the Trust.
ARTICLE X
---------
MISCELLANEOUS
10.01 Notices. Any notice required or permitted to be given by either
-------
party to the other under this Agreement shall be in writing and shall be deemed
to have been given when sent by either an overnight delivery service or by
registered or certified mail, postage prepaid, return receipt requested, to the
addresses listed below, or to such other location as either party may from time
to time designate in writing:
14
<PAGE>
If to Sunstone: Sunstone Financial Group, Inc.
--------------
207 East Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202
Attention: President
If to the Trust: RREEF Securities Trust
---------------
___________________________
___________________________
Attention: _________________
10.02 Amendments/Assignments.
----------------------
A. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the formality of
this Agreement.
B. This Agreement shall extend to and shall be binding upon
the parties hereto, and their respective successors and assigns. This Agreement
shall not be assignable by either party without the written consent of the other
party, except that Sunstone may assign this Agreement to an affiliate with
advance written notice to the Trust.
10.03 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the internal laws of the State of Wisconsin, without regard to
its conflict of law provisions.
10.04 Severability. If any part, term or provision of this Agreement is
------------
determined by the courts or any regulatory authority having jurisdiction over
the issue to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be affected,
and the rights and obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or provision held to
be illegal or invalid.
10.05 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
10.06 Non-Exclusivity; Other Agreements. The services of Sunstone
---------------------------------
hereunder are not deemed exclusive and Sunstone shall be free to render similar
services to others. Except as specifically provided herein, this Agreement does
not in any way affect any other agreements entered into among the parties hereto
and any actions taken or omitted by any party hereunder shall not affect any
rights or obligations of any other party hereunder.
10.07 Captions. The captions in the Agreement are included for
--------
convenience of reference only, and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.
15
<PAGE>
10.08 Trust Limitations. This Agreement is executed by the Trust with
-----------------
respect to each of the Funds and the obligations hereunder are not binding upon
any of the trustees, officers or shareholders of the Trust individually but are
binding only upon the Fund to which such obligations pertain and the assets and
property of such Fund. All obligations of the Trust under this Agreement shall
apply only on a Fund-by-Fund basis, and the assets of one Fund shall not be
liable for the obligations of another Fund. The Fund's Declaration of Trust is
on file with the Secretary of _________________.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
SUNSTONE FINANCIAL GROUP, INC. RREEF SECURITIES TRUST
By: ______________________________ By: ________________________________
(Signature) (Signature)
______________________________ ________________________________
(Name) (Name)
______________________________ ________________________________
(Title) (Title)
______________________________ ________________________________
(Date Signed) (Date Signed)
16
<PAGE>
SCHEDULE B
TO
TRANSFER AGENCY AGREEMENT
SERVICE SCHEDULE
Services
* Set up and maintain shareholder accounts and records, including IRAs and
other retirement accounts
* Store account documents electronically
* Receive and respond to investor account inquiries by telephone, mail, or e-
mail, if desired
* Process purchase and redemption orders, transfers, and exchanges, including
automatic purchases and redemptions
* Process dividend payments by check, wire or ACH, or reinvest dividends
* Issue daily transaction confirmations and monthly or quarterly statements
* Mail prospectus, annual and semiannual reports, and other shareholder
communications to existing shareholders
* File IRS Forms 1099, 5498, 1042, 1042-S and 945 with shareholders and/or
the IRS
* Handle load and multi-class processing, including rights of accumulation
and purchases by letters of intent
* Calculate 12b-1 plan fees
* Provide standards to structure forms and applications for efficient
processing
Optional Services
- -----------------
The Trust may contract with Sunstone to provide one or more of the following
optional services. Additional fees apply.
* Personal follow-up calls to prospects who return incomplete applications
* Comprehensive clerical confirmation statements for maintenance transactions
* Give dealers access through NSCC's Fund/SERV and Networking
<PAGE>
* 4.net services, Sunstone's array of Internet services, including Adviser
Services, RIA/Broker Services, Shareholder Services, NAV Services and email
services.
* 4.prompt services, Sunstone's advanced voice response capabilities
* Average cost calculations and cost basis statements
* Shareholder "welcome" packages with initial confirmation
* Access to Sunstone's Tax and Retirement Group to answer questions and
coordinate retirement plan options
* Follow up on IRAs, soliciting beneficiary and other information and sending
required minimum distribution reminder letters
* Money market funds for short-term investment or exchanges
* Dedicated service representatives
* Weekend shareholder services
* Customized reorder form tracking
<PAGE>
EXHIBIT (j)(ii)
CONSENT OF PROPOSED TRUSTEE
To: The Board of Trustees of RREEF Securities Trust
RREEF Real Estate Securities Fund
The undersigned consents to the use of his name as a Trustee of the RREEF
Securities Trust (the "Trust") in the Trust's Registration Statement on Form
N-1A.
/s/ Peter J. Broccolo
--------------------------
Peter J. Broccolo
September 21, 1999
<PAGE>
CONSENT OF PROPOSED TRUSTEE
To: The Board of Trustees of RREEF Securities Trust
RREEF Real Estate Securities Fund
The undersigned consents to the use of his name as a Trustee of the RREEF
Securities Trust (the "Trust") in the Trust's Registration Statement on Form
N-1A.
/s/ Robert L. Stovall
--------------------------
Robert L. Stovall
September 21, 1999
<PAGE>
CONSENT OF PROPOSED TRUSTEE
To: The Board of Trustees of RREEF Securities Trust
RREEF Real Estate Securities Fund
The undersigned consents to the use of his name as a Trustee of the RREEF
Securities Trust (the "Trust") in the Trust's Registration Statement on Form
N-1A.
/s/ Nicholas C. Babson
---------------------------
Nicholas C. Babson
September 21, 1999
<PAGE>
CONSENT OF PROPOSED TRUSTEE
To: The Board of Trustees of RREEF Securities Trust
RREEF Real Estate Securities Fund
The undersigned consents to the use of his name as a Trustee of the RREEF
Securities Trust (the "Trust") in the Trust's Registration Statement on Form
N-1A.
/s/ Richard W. Burke
-------------------------
Richard W. Burke
September 21, 1999
<PAGE>
EXHIBIT (m)
RREEF SECURITIES TRUST
FORM OF DISTRIBUTION EXPENSE PLAN
WITH RESPECT TO
RREEF RREAL ESTATE SECURITIES FUND
Section 1. RREEF Securities Trust (the "Trust"), pursuant to Rule 12b-1
(the "Rule") under the Investment Company Act of 1940 (the "Act"), may act as
the distributor of the shares of the RREEF Rreal Estate Securities Fund (the
"Fund") in accordance with the terms of this Distribution Expense Plan (the
"Plan").
Section 2. Pursuant to an Investment Management Agreement between the
Trust and RREEF America, LLC (the "Adviser"), the Adviser acts as the investment
adviser to the Fund and pays the expenses of promoting and selling the Fund's
shares. To the extent that any advisory fees paid by the Trust with respect to
the Fund, pursuant to the Investment Management Agreement, may be considered to
be indirectly financing any activity or expense which is primarily intended to
result in the sale of Fund shares within the meaning of the Rule, the payment of
such advisory fees is authorized under this Plan.
Section 3. While this Plan is in effect, the selection and nomination of
those trustees of the Trust who are not "interested persons" of the Trust shall
be committed to the discretion of the trustees who are not interested persons
then in office.
Section 4. While this Plan is in effect, the Adviser shall furnish at
least quarterly to the Board of Trustees of the Trust, and the Trustees shall
review, a written report of amounts expended for the promotion and sale of the
Fund's shares during the last calendar quarter and the purposes for which such
amounts were expended.
Section 5. This Plan shall not take effect until it has been approved by a
majority of the Board of Trustees of the Trust and by a majority of the Trustees
who are not interested persons of the Trust and have no direct or indirect
financial interest in the operation of the Plan or any agreements related to the
Plan ("Independent Trustees"), by votes cast in person at a meeting called for
the purpose of voting on the Plan, and by a vote of a majority of the
outstanding voting securities of the Fund. This Plan shall continue in effect
for so long as such continuance is specifically approved at least annually by a
majority of the Board of Trustees and a majority of the Independent Trustees, by
votes cast in person at a meeting called for the purpose of voting on such
continuance. This Plan may be terminated at any time by a vote of a majority of
the Independent Trustees or by a vote of a majority of the outstanding voting
securities of the Fund. This Plan may not be amended to provide for any direct
payment by the Trust of distribution expenses, or otherwise to materially
increase the amount to be spent by the Trust for distribution expenses, without
the approval of a majority of the outstanding voting securities of the Fund, and
all material amendments to the Plan must be approved by a majority of the Board
of Trustees and a majority of the Independent Trustees, by votes cast in person
at a meeting called for the purpose of voting on such amendment.
Section 6. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide (a) that such agreement may
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be terminated at any time, without payment of any penalty, by a vote of a
majority of the Independent Trustees or by a vote of a majority of the
outstanding voting securities of the Fund, on not more than sixty days' notice
to any other party to the agreement, and (b) that such agreement shall terminate
automatically in the event of its assignment.
Section 7. The adoption of this Plan and the furnishing of any reports
pursuant to Section 4, shall not constitute any admission that any payments of
investment advisory fees and expenses made by the Company constitute
distribution expenses within the meaning of the Rule, or that any payments of
distribution expenses by the Adviser of the Fund's shares would constitute the
indirect payment of distribution expenses by the Company.
Section 8. As used in this Plan, the terms "assignment," "interested
person" and "vote of a majority of the outstanding voting securities" shall have
the respective meanings specified in the Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission.
September___, 1999
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