<PAGE> 1
As filed with the Securities and Exchange Commission on February 14, 2000
Securities Act Registration No. 333-90085
Investment Company Act Registration No. 811-09679
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. 1 [X]
-----
Post-Effective Amendment No. [ ]
-----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 1 [X]
-----
LEND LEASE FUNDS
(Exact Name of Registrant as Specified in Charter)
207 EAST BUFFALO STREET, SUITE 400
MILWAUKEE, WISCONSIN 53202
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (414) 271-5885
Constance Dye Shannon
Sunstone Financial Group, Inc.
207 East Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202
(Name and Address of Agent for Service)
Copy to:
Elizabeth Shea Fries
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes
effective.
================================================================================
<PAGE> 2
THE 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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE> 3
LEND LEASE FUNDS
LEND LEASE U.S. REAL ESTATE SECURITIES FUND
CLASS A SHARES
---------------------
PROSPECTUS
February __, 2000
The Securities and Exchange Commission has not approved or disapproved
these securities or determined if this Prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
KEY INFORMATION ABOUT THE FUND.....................................................................................
Investment Objective.......................................................................................
Principal Investment Strategies............................................................................
Principal Risk Factors.....................................................................................
FEES AND EXPENSES OF THE FUND......................................................................................
Shareholder Fees...........................................................................................
Fees and Expenses..........................................................................................
Example....................................................................................................
OTHER INFORMATION REGARDING INVESTMENT PRACTICES...................................................................
REITS......................................................................................................
Year 2000..................................................................................................
Defensive Investing........................................................................................
MANAGEMENT.........................................................................................................
Investment Adviser........................................................................................
Sub-Investment Adviser....................................................................................
Portfolio Managers........................................................................................
BUYING, SELLING AND EXCHANGING SHARES..............................................................................
Before You Invest.........................................................................................
How to Purchase Shares....................................................................................
How to Sell Shares........................................................................................
How to Exchange Shares....................................................................................
Making Changes to Your Account............................................................................
SPECIAL FEATURES AND SERVICES......................................................................................
Retirement Account Options................................................................................
ACH Transactions..........................................................................................
Automated Telephone Service...............................................................................
Automatic Investment Plan.................................................................................
OTHER SHAREHOLDER INFORMATION......................................................................................
Shareholder Communications................................................................................
Multiple Classes..........................................................................................
Transactions Through Financial Services Agents and Sub-Agents.............................................
DIVIDENDS,DISTRIBUTIONS AND TAXES..................................................................................
Dividends and Distributions...............................................................................
</TABLE>
(i)
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<TABLE>
<CAPTION>
<S> <C>
Taxes.....................................................................................................
</TABLE>
(ii)
<PAGE> 6
KEY INFORMATION ABOUT THE FUND
This Prospectus contains important information for anyone interested in
investing in Class A Shares of LEND LEASE U.S. REAL ESTATE SECURITIES FUND (the
"Fund"), a series of LEND LEASE FUNDS. Please read this document carefully
before you invest and keep it for future reference. You should base your
purchase of shares of the Fund on your own goals, risk preferences and
investment time horizons.
INVESTMENT OBJECTIVE
The Fund's objective is total return from a combination of dividend income and
long-term growth by investing principally in real estate securities.
PRINCIPAL INVESTMENT STRATEGIES
The Fund seeks to achieve its objective by investing at least 85% of its assets
in equity securities of companies principally engaged in the U.S. real estate
industry.
Lend Lease Rosen Real Estate Securities LLC ("Lend Lease Rosen" or the
"Sub-Adviser") manages the Fund's day to day investment activity. The process of
selecting portfolio positions is a two-part process involving both an analysis
of property sectors (a top down approach) and an analysis of individual
companies within the selected property sectors (a bottom up approach).
First, the top down process is used to identify promising property sectors of
the U.S. real estate market. In conducting this analysis, the Sub-Adviser relies
on proprietary real estate transaction databases, supply and demand forecasts
for various property types such as residential, commercial and industrial real
estate and local market intelligence from an extensive network of affiliates
around the country engaged in various aspects of the real estate industry and
its own subjective views of the market for real estate and real estate
securities. The Fund ordinarily expects to be invested in at least four property
sectors of the real estate market but, if conditions warrant, may focus its
investments more narrowly. The property sectors identified through the top down
process yield a universe of companies from which the Sub-Adviser then selects
Fund investments. The Sub-Adviser evaluates potential investments based on a
variety of factors including overall investment strategy, strength of company
management, fundamental analysis of financial statements and yields.
A substantial portion of the Fund's portfolio at any given time may be invested
in real estate investment trusts ("REITs"). Furthermore, the Fund expects under
normal circumstances to invest principally in what are known as "equity REITs".
An equity REIT owns or leases real estate and realizes a return on its holdings
primarily from rental income although it may also realize gains (or losses) by
selling properties in its portfolio. Equity REITs generally exercise some degree
of control over the operational aspects of their real estate investments, lease
terms, and property maintenance and repair. REITs invest shareholder capital in
real estate or real estate-related loans, interests or securities. A REIT is
not taxed on income distributed to shareholders if it complies with certain
federal tax requirements relating primarily to its organization, ownership,
assets and income and, further, if it distributes the vast majority of its
taxable income to shareholders each year. As a consequence, REITs generally
focus on income-producing real estate investments.
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The Fund expects its investments to be primarily in companies contained in the
Wilshire REIT Index (the "Wilshire Index") having market capitalizations that
fall in the upper two thirds of the range of market capitalizations represented
in the Wilshire Index. These companies include those with large, medium and
small capitalizations.
- -- The Wilshire Index is an unmanaged securities index designed to measure the
performance of U.S. publicly traded REITs. The composition of the Wilshire
Index is determined by Wilshire Associates Incorporated and includes REITs
representing a variety of property types. The Wilshire Index currently
consists entirely of equity REITs. As of January 31, 2000, 106 securities
were included in the Wilshire Index, with a total market capitalization of
approximately $102 billion.
Under normal circumstances, the Fund's portfolio turnover in anticipated to be
low, not exceeding 80% per year.
PRINCIPAL RISK FACTORS
The principal risks of investing in the Fund are the risks generally
associated with investing in stocks and the risks specific to investing in the
real estate industry. Fund shares are not bank deposits and are not guaranteed,
endorsed or insured by any financial institution, government entity or the FDIC.
The Fund's share price will fluctuate, and it is possible to lose money by
investing in the Fund.
- -- RISKS OF INVESTING IN STOCKS. A company's stock price may fluctuate due to
circumstances unique to that company. For example, a company's business
prospects may affect its stock price. If investors believe the company's
business prospects are good, they will generally be willing to pay higher
prices for its stock. If these expectations are not met, or if expectations
are lowered, the price of the securities will tend to drop. A stock's price
will also tend to rise and fall as a result of investors' perceptions of the
market as a whole. In other words, if the stock market drops in value, the
value of the Fund's portfolio of investments is also likely to decrease in
value. The increase or decrease in the value of the Fund's investments in
response to this phenomenon may be proportionally more or less than the
increase or decrease in the value of the market. The share prices of stock
issued by medium capitalization issuers will generally fluctuate more than
those of large capitalization issuers, and the share price of small
capitalization issuers will generally fluctuate more than those of medium and
large capitalization issuers. To the extent the Fund invests in small and
medium capitalization issuers, the Fund's share price may be more volatile
than if the Fund restricted its portfolio to large capitalization issuers.
- -- RISKS OF THE REAL ESTATE INDUSTRY. The stock prices of companies in the real
estate industry are typically sensitive to changes in real estate values,
property taxes, interest rates, cash flow of underlying real estate assets,
occupancy rates, government regulations affecting zoning, land use, and
rents, and the management skill and creditworthiness of the issuer. Companies
in the real
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<PAGE> 8
estate industry may also be subject to liabilities under environmental and
hazardous waste laws which could negatively affect their value.
o RISKS OF REITS. REITs are dependent upon specialized management skills. They
also have limited diversification and are, therefore, subject to risks inherent
in operating and financing a limited number of projects. Furthermore, some REITs
have relatively small market capitalizations, which tends to increase the
volatility of their securities.
o INDUSTRY CONCENTRATION. 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 industries
and investment approaches may fall in and out of favor. If the market does not
currently favor the real estate industry or the Fund's investment approach, the
Fund's gains may not be as big or its losses may be bigger than other equity
funds investing in different industries or using different investment
approaches.
o NON-DIVERSIFIED STATUS. The Fund is not "diversified" within the meaning of
the Investment Company Act of 1940. This means that, compared with "diversified"
funds, it may invest a relatively greater portion of its assets in any single
issuer. As a result, the Fund may be more susceptible to negative developments
affecting a single issuer.
FUND PERFORMANCE
Because the Fund is new and has not completed a full calendar year's
operations, performance information is not included in this Prospectus. To
obtain the Fund's performance information after its first full calendar quarter
of operations, please call the Fund at 1-877-LND-LEAS (1-877-563-5327).
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A SHARES
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of the offering price) ......................................... 5.75%
Maximum Contingent Deferred Sales Charge (Load)..................................... None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
and Other Distributions.......................................................... None
Redemption Fee (within 12 months of purchase)....................................... 1.00%*
Exchange Fee........................................................................ None
</TABLE>
FEES AND EXPENSES
CLASS A SHARES
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<TABLE>
<CAPTION>
<S> <C>
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fee**.................................................................... .80%
Distribution and Service (12b-1) Fees............................................... .25%
Other Expenses***................................................................... 1.70%
Total Annual Fund Operating Expenses****............................................ 2.75%
Fee Waiver and/or Expense Reimbursement............................................. 1.25%
Net Expenses........................................................................ 1.50%
</TABLE>
* If you redeem your Class A shares within 12 months of your purchase,
you will be subject to a redemption fee of 1.00% of the net asset value of your
shares on the redemption date. Please see "Redemption Fee" under the caption
"Additional Redemption Provisions" for more information. In addition, the Fund
charges a $10 fee for redemptions made by wire and $15 for redemptions from
retirement accounts.
** The Management Fee includes the fees paid to both the Adviser and
the Sub-Adviser.
*** Because the Fund is new, Other Expenses are based on estimated
amounts for the current fiscal year.
**** Lend Lease Real Estate Investments, Inc., the Fund's investment
adviser (the "Adviser"), and the Sub-Adviser have contractually agreed
to limit the Total Annual Fund Operating Expenses of Class A shares to 1.50%
through January 31, 2002 subject to later reimbursement by the Fund in certain
circumstances. After January 31, 2002 the expense limitation may renew for
annual periods under certain conditions.
EXAMPLE
The following Example will help you compare the cost of investing in
the Fund to the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 as an initial investment in the Fund for the time
periods indicated and redeem all of your shares at the end of those periods. It
also assumes that your investment has a 5% total return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
1 YEAR+ 3 YEARS+
------- --------
Class A $933 $1,379
+ Taking the current expense limitation into account, your costs for the Fund's
Class A shares would be:
1 YEAR 3 YEARS
------ -------
Class A $816 $1,149
OTHER INFORMATION REGARDING INVESTMENT PRACTICES
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<PAGE> 10
Companies or issuers in the U.S. real estate industry in which the Fund may
invest include among others: real estate investment trusts ("REITs"), companies
that invest in interests in real estate, real estate developers and brokers,
real estate operating companies ("REOCs"), companies with substantial real
estate holdings (such as hotel companies, and land-holding companies), as well
as companies whose products and services are significantly related to the real
estate industry such as building supply manufacturers, mortgage lenders and
mortgage servicing companies.
COMPANIES PRINCIPALLY ENGAGED IN THE U.S. REAL ESTATE INDUSTRY
For purposes of the Fund's investment policies, a company is considered to be
principally engaged in the U.S. real estate industry if the Fund's Sub-Adviser
determines that the company (i) derives at least 50% of its revenues or profits
from the ownership, renting, leasing, construction, management, development,
financing or sale of commercial, industrial and residential real estate or
related interests or (ii) has at least 50% of the value of its assets invested
in U.S. commercial, industrial and residential real estate. Equity securities
include common stock, preferred stock, partnership interests and other
instruments evidencing an ownership interest in an issuer as well as rights,
warrants and securities convertible into equity securities.
MORTGAGE AND HYBRID REITS
In addition to equity REITs, there are two other generally recognized categories
of REITs- mortgage REITs and hybrid REITs. A mortgage REIT invests primarily in
loans secured by real estate and derives its income primarily from interest
payments on its mortgage loans. A hybrid REIT combines the characteristics of
both equity REITs and mortgage REITs, generally by holding both ownership and
mortgage interests in real estate.
REOCS
The Fund may invest in REOCs from time to time. Like REITs, REOCs may invest in,
own and manage real estate properties. REOCs do not however, elect to qualify
for the federal income tax treatment accorded REITs. As a consequence, REOCs
generally offer investment potential more from capital growth and less from
dividend income than do REITs.
YEAR 2000
Although the year 200 has begun, the "Year 2000 problem," a date-related
computer issue, may still have an adverse impact on the Fund's operations. To
avoid problems of this nature, the Fund has verified that all its internal
systems are Year 2000 compliant (able to handle dates past 1999), and has taken
steps to address this problem with its Adviser and Sub-Adviser and with other
Fund service providers and vendors. The Fund has received assurances from each
of its key service providers that the service provider's systems and products
are Year 2000 compliant. The Fund cannot, however, be completely certain that
all third parties on which it is directly or indirectly dependent for services
are Year 2000 compliant. It is also still possible that an issuer of securities
held by the Fund could experience a Year 2000 problem whose adverse effects
result in lower prices for those securities. The Fund will continue to monitor
developments relating to the Year 2000 problem.
RESTRICTED SECURITIES
The Fund may purchase restricted securities. Any security whose resale is
restricted can be difficult to sell at a desired time and price. Owning a large
percentage of restricted securities could hamper the Fund's ability to raise
cash to meet redemptions. Also, in the absence of an established securities
market, the Fund may have to estimate the value of restricted securities it
holds which adds a subjective element to valuation of the Fund.
DEFENSIVE INVESTING
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<PAGE> 11
During unusual market conditions, the Fund may place up to 100% of its total
assets in cash or quality short-term debt securities including repurchase
agreements. Defensive investing may prevent the Fund from achieving its
investment objective.
CASH POSITION
As a means of maintaining consistent investment performance and preserving
capital in adverse market conditions, the Fund may invest up to 15% of its
assets in cash or cash equivalents. These investments may include repurchase
agreements which involve the Fund's buying securities with the understanding
that the seller will buy them back with interest at a later date. If the seller
is unable to honor its commitment to repurchase the securities, the Fund could
lose money.
INVESTMENT MANAGEMENT
WHO ARE LEND LEASE ROSEN AND LEND LEASE REAL ESTATE INVESTMENTS?
Lend Lease Real Estate Investments, Inc. (the Adviser), Monarch Tower, 3424
Peachtree Road, N.E., Suite 800, Atlanta, Georgia 30326, is the Fund's Adviser.
The Adviser is a wholly-owned subsidiary of Lend Lease Corporation Limited, an
integrated property and financial service company listed on the Australian and
New Zealand stock exchanges with a market capitalization at December 31, 1999 of
approximately U.S. $6 billion. The Adviser is a full-service real estate
investment advisor with substantial experience in investing and managing
commercial real estate assets for institutional lenders and owners. As of
December 31, 1999, the Adviser managed approximately $31 billion in U.S. assets
on behalf of its clients and investors in its funds, which include a wide
variety of public and corporate pension funds, insurance companies, endowments,
foundations and foreign institutions. The Adviser is also one of the leading
advisors to pension funds regarding investments in U.S. real estate. The Adviser
is co-headquartered in New York, New York and Atlanta, Georgia.
Lend Lease Rosen Real Estate Securities, LLC (the Sub-Adviser), 1995 University
Avenue, Suite 550, Berkeley, California 94704, is responsible for the day to day
management of the Fund's investment program. Lend Lease Rosen is a real estate
investment management company founded in 1993 by Dr. Kenneth T. Rosen. In 1997,
the Adviser acquired a 50% interest in the Sub-Adviser. As of December 31, 1999,
assets under management were approximately $892 million. Lend Lease Rosen is a
research driven investment management firm managing assets principally on behalf
of institutional investors. Lend Lease Rosen uses both a top down and bottom up
approach to construct the investment portfolios it manages.
The Fund pays an annual fee of .80% of its average daily net assets for the
services provided by the Adviser and the Sub-Adviser.
The Adviser and Sub-Adviser have contractually agreed to limit the total
operating expenses of the Fund's Class A shares to 1.50% of the average daily
net assets through January 31, 2002. After that date, the expense limitation
will renew for one year periods if certain conditions are met. With respect to
each waiver or reimbursement in connection with maintaining the expense
limitation, the Fund is obligated to repay the amount waived or reimbursed to
the extent that
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repayment would not cause the Fund's total operating expenses for the year in
which the repayment is made to exceed 1.50% of the Fund's average daily net
assets. The Fund's repayment obligation with respect to a particular waiver or
reimbursement ends with the third anniversary of the waiver or reimbursement.
PORTFOLIO MANAGERS
The Fund is managed by a portfolio management team that includes Michael A.
Torres (portfolio manager), Jennifer Nichols and Greg Prophet (portfolio
analysts). They are responsible for the day to day management of the Fund and
the selection of the Fund's investments.
Michael Torres is co-president of the Sub-Adviser and has 13 years of real
estate and securities research experience. Mr. Torres joined the Sub-Adviser in
February 1995 and is responsible for its operations, client services and
research. Prior to joining the Sub-Adviser, Mr. Torres was Director of real
estate and Portfolio Manager at Wilshire Associates from 1990 to 1995. He has a
B.A. in architecture and a M.B.A. in economics from the University of
California, Berkeley.
Jennifer Nichols, CPA, is a Vice President of the Sub-Adviser and oversees
research for the Sub-Adviser with responsibility for company-specific research
and portfolio strategy. Ms. Nichols joined the Sub-Adviser in 1998 and has a
B.A. from the University of California, Santa Barbara and an M.B.A. from the
University of California, Berkeley. Prior to joining the sub-adviser. Ms.
Nichols was a research analyst at Montgomery Securities from 1996 to 1998. Prior
to this, she was a Portfolio Administrator at Barclay's Global Investors.
Gregory Prophet is a Vice President of the Sub-Adviser and is responsible for
company-specific research and oversees the Sub-Adviser's proprietary
quantitative model. Mr. Prophet has been with the Sub-Adviser for 5 years and
has a B.A. from the University of California, Los Angeles and an M.B.A. from the
University of California, Berkeley.
BUYING, SELLING AND EXCHANGING SHARES
BEFORE YOU INVEST
AVAILABLE SHARE CLASSES. The Fund offers investors three different classes of
shares - Class A, Class K and Class Y. Class A shares are described in this
prospectus. The different classes represent investments in the same portfolio of
securities, but each class has different expenses and will likely have different
share prices. When you buy shares, remember to specify the class of shares you
want to buy. If you do not choose a class, your investment will be made in Class
A shares.
- - Class A Shares. If you buy Class A shares, you will pay an up-front sales
charge, or "load" and will be subject to a Redemption Fee (for shares sold
within twelve months of purchase) and Distribution and Service Fees. See,
"How to Purchase Shares," below, for information on the applicable sales
charge rates and Distribution and Service Fees. See, "How to Sell Shares,"
below, for more information on the Redemption Fee.
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<PAGE> 13
Class K and Class Y shares, which are sold by a different prospectus, do not
have an up-front sales charge or redemption fee. Class K shares which, like
Class A shares, are subject to Distribution and Service Fees are sold only to
Registered Investment Advisers. Class Y shares are not subject to Distribution
and Service Fees, but do have higher investment minimums. Call 1-877-LND-LEAS
(1-877-563-5327) for more information about Class K and Class Y shares. You
should be aware that financial service firms may receive different compensation
depending upon which class of shares they sell.
ACCOUNT REGISTRATION. When purchasing shares, you need to select the appropriate
form of account registration. There are many different types of mutual fund
ownership. How you register your account with the Fund can affect your legal
interests, as well as the rights and interests of your family and beneficiaries.
You should always consult with your legal and/or tax adviser to determine what
form of account registration best meets your needs.
Available forms of registration include:
- - Individual ownership. If you have reached the legal age of majority in
your state of residence, you may open an individual account.
- - Joint ownership. Two or more individuals may open an account together
as joint tenants with right of survivorship, tenants in common or as
community property.
- - Custodial account. You may open an account for a minor under the
Uniform Gift to Minors Act/Uniform Transfers to Minors Act for your state of
residence.
- - Business/trust ownership. Corporations, trusts, charitable
organizations and other businesses may open accounts.
- - IRAs and other tax-deferred accounts. The Fund offers a variety of
retirement accounts for individuals and institutions. Please refer to
"Retirement Account Options," below, for more information about these types
of accounts.
ACCOUNT MINIMUMS. You also need to decide how much money to invest. The
following chart shows you the minimum amounts that you will need to open or add
to certain types of accounts. The Fund may waive the minimum investment amounts
at any time.
<TABLE>
<CAPTION>
- ------------------------------------- --------------------------------- -------------------------------------
TYPE OF ACCOUNT INITIAL MINIMUM PURCHASE ADDITIONAL MINIMUM PURCHASE
- ------------------------------------- --------------------------------- -------------------------------------
<S> <C> <C>
Regular (Individual, joint, CLASS A CLASS A
business or trust) $10,000 $250
- ------------------------------------- --------------------------------- -------------------------------------
IRA (including spousal, Roth and CLASS A CLASS A
SEP) $1,000 $250
- ------------------------------------- --------------------------------- -------------------------------------
Gifts to Minors (UTMA/UGMA) CLASS A CLASS A
$10,000 $250
- ------------------------------------- --------------------------------- -------------------------------------
Automatic Investment Plan CLASS A CLASS A
$5,000 $250
- ------------------------------------- --------------------------------- -------------------------------------
</TABLE>
DETERMINING YOUR SHARE PRICE. The price at which you purchase and sell the
Fund's shares is called the Fund's net asset value ("NAV") per share. The Fund
calculates NAV by taking the total value of its assets, subtracting its
liabilities, and dividing the total by the number of Fund
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<PAGE> 14
shares that are outstanding. The Fund calculates its NAV as of the close of
trading on the New York Stock Exchange (usually 4:00 p.m. Eastern time) on each
day the Exchange is open for trading. The Fund does not calculate NAV on days
the Exchange is closed (including national holidays and Good Friday). NAV is
determined separately for each class of shares. The price of the shares you
purchase or redeem will be the next NAV calculated after your order is received
in good order by the Fund or other financial intermediary with the authority to
accept orders on the Fund's behalf.
The value of the Fund's assets is based on the current market value of its
investments. For securities with readily available market quotations, the Fund
uses those quotations to price a security. If a security does not have a readily
available market quotation, the Fund values the security based on fair value, as
determined in good faith in accordance with the guidelines established by the
Fund's board of trustees. The Fund may use pricing services to assist in the
determination of market value.
HOW TO PURCHASE SHARES
You can buy shares directly from the Fund or through a broker-dealer or other
institution that the Fund has authorized to sell shares.
CLASS A SHARES. Class A shares are sold at their offering price, which is net
asset value plus an initial sales charge. The sales charge varies depending on
the amount of your purchase. A portion of the sales charge may be retained by
the Fund's distributor or allocated to your dealer as a commission. The current
sales charge rates are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------- ------------------------------- ----------------------------------
AMOUNT OF PURCHASE SALES CHARGE (AS A % OF SALES CHARGE (AS A % OF NET
OFFERING PRICE) AMOUNT INVESTED)
- --------------------------------------------------- ------------------------------- ----------------------------------
<S> <C> <C>
Less than $100,000 5.75% 6.10%%
- --------------------------------------------------- ------------------------------- ----------------------------------
$100,000 or more but less than $250,000 4.75% 4.99%
- --------------------------------------------------- ------------------------------- ----------------------------------
$250,000 or more but less than $500,000 3.75% 3.90%
- --------------------------------------------------- ------------------------------- ----------------------------------
$500,000 or more but less than $1,000,000 2.75% 2.83%
- --------------------------------------------------- ------------------------------- ----------------------------------
$1,000,000 and over None None
- --------------------------------------------------- ------------------------------- ----------------------------------
</TABLE>
If you sell your Class A shares within 12 months of purchase, a 1% redemption
fee will be deducted from your redemption proceeds. However, there is no charge
upon the redemption of any share appreciation or reinvested dividends. The
redemption fee, which is paid to the Fund, is designed to reimburse the Fund for
the brokerage and other transaction costs associated with short-term trading.
Front-end sales charge exemptions. Various individuals and institutions may
purchase Class A shares without a front-end sales charge, including:
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<PAGE> 15
- - Investment advisers or financial planners who place trades for their own
accounts or the accounts of their clients and who charge a management,
consulting, or other fee for their services; and clients of such investment
advisers or financial planners who place trades for their own accounts if
the accounts are linked to the master account of such investment adviser or
financial planner on the books and records of the broker or agent.
- - Shareholders who automatically reinvest their dividends or capital gains in
additional shares, with respect to shares purchased through automatic
reinvestment;
- - Certain retirement plans, such as profit-sharing, pension, 401(k), SEP-IRAs
and Simple IRAs, deferred compensation plans and trusts used to fund those
plans, including, but not limited to, those defined in Section 401(a),
403(b), or 457 of the Internal Revenue Code, and "Rabbi Trusts;"
- - Shareholders who have taken a distribution from a retirement plan invested
in shares of the Fund. This exemption applies to the extent of the
distribution, provided that such distribution is reinvested within 90 days
of the payment date;
- - Individual accounts of registered brokers and dealers who have entered into
sales or service agreements with the Distributor and who have achieved
certain sales objectives of the Fund;
- - Individual accounts of certain registered personnel and employees of
registered brokers and dealers, their spouses, children, grandchildren and
parents, in accordance with the internal policies of the employing broker
or dealer;
- - State and local government entities that are prohibited from paying mutual
fund sales charges;
- - Owners of private accounts invested in real estate securities managed by
the Adviser or Sub-Adviser, who either (i) purchase Fund shares within one
year of the Fund's inception or (ii) in the Adviser's or Sub-Adviser's sole
discretion, are no longer eligible for separate account management by the
Adviser or Sub-Adviser. In either case, such owners must liquidate their
private account(s) and purchase Fund shares with the proceeds within 90
days of the liquidation.
- - "Wrap accounts" for the benefit of clients of registered broker-dealers
having sales or service agreements with the Distributor;
- - Registered investment companies;
- - Trust companies investing $1 million or more for common trust or collective
investment funds;
- - Trustees and officers of the Fund, employees of and counsel for the
Adviser, Sub-Adviser and their affiliates, and their spouses, children,
grandchildren and parents, in accordance with the internal policies and
procedures of their respective employers; and
- - Private partnerships managed by the Adviser, Sub-Adviser, or their
affiliates.
You may be eligible to buy Class A shares at reduced sales charge rates under
the Fund's "Letter of Intent," as described in "Reduced Sales Charges" in the
Fund's Statement of Additional Information.
DISTRIBUTION AND SERVICE FEES (12B-1 PLAN)
The Fund has adopted a 12b-1 Plan for its Class A shares under which the Fund
may pay up to 0.25% of the average daily net assets attributable to Class A
shares for certain service and distribution expenses incurred by this class of
shares. (This type of plan is named after the rule under the securities laws
which permits it.) Because 12b-1 Plan fees paid by the Fund are an
12
<PAGE> 16
ongoing expense, they will increase the cost of a Fund investment, and over
time, may cost an investor more than other types of sales charges.
To open an account or buy additional shares from the Fund, just follow these
steps:
<TABLE>
<CAPTION>
- ------------------------------------------------------- -----------------------------------------------------
TO OPEN AN ACCOUNT TO ADD TO AN EXISTING ACCOUNT
- ------------------------------------------------------- -----------------------------------------------------
<S> <C>
BY MAIL: BY MAIL:
- - Complete and sign the account application or - Complete the investment slip that is included in
an IRA application. If you do not complete the your account statement, and write your account
application properly, your purchase may be number on your check.
delayed or rejected. - If you no longer have your investment slip,
- - Make your check payable to "Lend Lease Funds." please reference your name, account and address
The Fund does not accept cash, third number on your check.
party checks, travelers checks or checks drawn - Make your check payable to "Lend Lease Funds."
on banks outside the U.S.
- - For IRA accounts, please specify the year for
which the contributions is made.
- ------------------------------------------------------- -----------------------------------------------------
MAIL YOUR APPLICATION AND CHECK TO: MAIL THE SLIP AND THE CHECK TO:
Lend Lease U.S. Real Estate Securities Fund Lend Lease U.S. Real Estate Securities Fund
P.O. Box 1192 P.O. Box 1192
Milwaukee, WI 53201-1192 Milwaukee, WI 53201-1192
- ------------------------------------------------------- -----------------------------------------------------
BY OVERNIGHT COURIER, SEND TO:
Lend Lease U.S. Real Estate Securities Fund
207 E. Buffalo Street
Suite 315
Milwaukee, WI 53202
- ------------------------------------------------------- -----------------------------------------------------
- ------------------------------------------------------- -----------------------------------------------------
BY TELEPHONE: BY TELEPHONE:
- You automatically have the privilege to
You may not make your initial purchase by telephone. purchase additional shares by telephone unless
you have declined this service on your account
application. You may call 1-877-LND-LEAS
(1-877-563-5327) to purchase shares for an
existing account.
- ------------------------------------------------------- -----------------------------------------------------
</TABLE>
13
<PAGE> 17
<TABLE>
<CAPTION>
- ------------------------------------------------------- -----------------------------------------------------
<S> <C>
Investments made by electronic funds transfer
must be in amounts of at least $250 and not
greater than $20,000.
- ------------------------------------------------------- -----------------------------------------------------
BY WIRE: BY WIRE:
- - To purchase shares by wire, the Fund must Send your investment to Lend Lease U.S. Real
have received a completed application and issued Estate Securities Fund by following the
an account number to you. Call 1-877-LND-LEAS instructions listed in the column to the left.
(1-877-563-5327) for instructions prior to wiring
the funds.
- - Send your investment to Lend Lease U.S. Real
Estate Securities Fund with these instructions:
UMB Bank, n.a.
ABA # 101000695
For Credit to Lend Lease Funds
A/C # 9870983966
For further credit to: investor account
number; name(s) of investor(s); SSN or
TIN; name and class of Fund
- ------------------------------------------------------- -----------------------------------------------------
</TABLE>
If your purchase request is received by the Fund, broker-dealer or other
authorized agent before close of trading on the New York Stock Exchange
(typically 4:00 p.m. Eastern time) on a business day, your request will be
executed at that day's NAV, provided that your application is in good order.
"Good order" means that the Fund has received your properly completed, signed
application, your payment, and any supporting legal documentation that may be
required. If your request is received after close of trading, it will be priced
at the next business day's NAV. Shares purchased by wire will receive the NAV
next determined after the Fund receives your completed application, the wired
funds and all required information is provided in the wire instructions.
ADDITIONAL PURCHASE INFORMATION.
- - The Fund does not issue certificates for shares.
- - If your check does not clear, your purchase will be cancelled. You will
be responsible for any resulting losses or expenses (including a $20 fee)
incurred by the Fund. The Fund may redeem shares you own in this or another
identically registered Fund account as reimbursement for any such losses.
- - You must provide the Fund with a Social Security Number or Taxpayer
Identification Number before your account can be established. If you do not
certify the accuracy of your Social Security or Taxpayer Identification
Number on your account application, the Fund will be required to withhold
Federal income tax at a rate of 31% from all of your dividends, capital
gain distributions and redemptions.
- - The Fund is only offered and sold to residents of the United States.
Your application will be accepted only if it contains a U.S. address. This
prospectus should not be considered a
14
<PAGE> 18
solicitation to buy or an offer to sell shares of the Fund in any
jurisdiction where it would be unlawful to do so under the securities laws
of that jurisdiction.
- - The Fund will not accept your application if you are investing for another
person as attorney-in-fact. The Fund will not accept applications that list
"Power of Attorney" or "POA" in the registration section.
- - Once you place your order, you may not cancel or revoke it. The Fund may
reject a purchase order for any reason.
TRANSACTIONS THROUGH FINANCIAL SERVICES AGENTS. In addition to purchasing shares
from the Fund, you may invest through a financial services agent. Financial
advisers, broker-dealers and other financial service agents may charge
transaction and other fees and may set different minimum investments or
limitations on buying and selling shares, than those described in the
prospectus. In addition, these intermediaries may place limits on your ability
to use services the Fund offers.
HOW TO SELL SHARES
You may sell your shares on any day the Fund is open for business by following
the instructions below. You may elect to have redemption proceeds sent to you by
check, wire or electronic funds transfer. The Fund normally pays redemption
proceeds within two business days, but may take up to seven days. You can redeem
shares purchased by check at any time. However, while the Fund will process your
redemption on the day it receives your request, it will not pay your redemption
proceeds until your check has cleared, which may take up to 10 calendar days
from the date of purchase. You can avoid this delay by purchasing shares by a
federal funds wire. Please note that this provision is intended to protect the
Fund and its shareholders from loss.
- -------------------------------------------------------
HOW TO SELL SHARES
- -------------------------------------------------------
BY MAIL:
- - Send a letter of instruction that includes your
account number, the Fund name, the dollar value
or number of shares you want to sell, and how and
where to send the proceeds.
- - Sign the request exactly as the shares are
registered. All registered owners must sign.
- - Include a signature guarantee, if necessary (see
"Signature Guarantees," below),
- -------------------------------------------------------
MAIL YOUR REQUEST TO:
Lend Lease U.S. Real Estate Securities Fund
P.O. Box 1192
Milwaukee, WI 53201-1192
- -------------------------------------------------------
BY OVERNIGHT COURIER, SEND TO:
- -------------------------------------------------------
15
<PAGE> 19
- -------------------------------------------------------
Lend Lease U.S. Real Estate Securities Fund
207 E. Buffalo Street
Suite 315
Milwaukee, WI 53202
- -------------------------------------------------------
BY TELEPHONE:
- - You automatically have the privilege to redeem
shares by telephone unless you have declined this
option on your account application.
- - Call 1-877-LND-LEAS (1-877-563-5327), between
8:00 a.m. and 8:00 p.m. Eastern time. You may
redeem as little as $1,000 and as much as $20,000
by telephone.
- - Telephone redemptions are not available for
retirement plan accounts.
- -------------------------------------------------------
BY WIRE:
- - If you choose to redeem your shares by wire, your
redemption proceeds will be sent to your bank
account of record. A $10 fee will be deducted from
your proceeds for Class A shares.
- - If you wish to have your redemption proceeds sent
by wire to a bank account other than that of
record, you must provide a written request signed
by all owners of the account with signatures
guaranteed.
- -------------------------------------------------------
Redemption requests received in good order before close of trading on the New
York Stock Exchange (typically, 4:00 p.m. Eastern time) will be processed at
that day's NAV. "Good order" means that for redemptions, you have included all
required information and documentation along with any required signature
guarantees. Redemption requests sent by facsimile will not be honored.
Please note that the Fund may require additional documents for redemptions by
corporations, executors, administrators, trustees and guardians. If you have any
questions about how to redeem shares, or to determine if a signature guarantee
or other documentation is required, please call 1-877-LND-LEAS (1-877-563-5327).
ADDITIONAL REDEMPTION PROVISIONS
16
<PAGE> 20
- - Once we receive your order to sell shares, you may not revoke or cancel it.
We cannot accept an order to sell that specifies a particular date, price
or any other special conditions.
- - If you are redeeming from an IRA, please tell us the proper tax withholding
on your redemption request. If you did not make a tax election on your IRA
application, we will automatically withhold 10% of your redemption
proceeds. (The Fund charges $15 for a redemption from an IRA account.)
- - If your redemption request exceeds the amount that you currently have in
your account, your entire account will be redeemed. The automatic purchase
plan that you have initiated for the account will be cancelled.
- - The Fund reserves the right to suspend the redemption of Fund shares when
the securities markets are closed, trading is restricted for any reason, an
emergency exists and disposal of securities owned by the Fund is not
reasonably practicable, the Fund cannot fairly determine the value of its
net assets, or the Securities and Exchange Commission permits the
suspension of the right of redemption or postpones the date of payment of a
redemption.
- - If the amount you redeem is large enough to affect the Fund's operations,
the Fund may pay your redemption "in kind." This means that the Fund may
pay you in portfolio securities rather than cash. If this occurs, you may
incur transaction costs when you sell the securities you receive.
REDEMPTION FEE. If you redeem your Class A shares within 12 months of your
purchase, you will be subject to a redemption fee of 1.0%. The redemption fee is
based on the net asset value of the shares on the redemption date. The Fund will
not impose a redemption fee on shares purchased through reinvestment of
dividends or distributions. The Fund also charges a $10 redemption fee for
redemptions made by wire and a $15 redemption fee for redemptions from
retirement accounts.
When you redeem your shares, your redemption request is processed to minimize
the amount of redemption fee that is payable. The Fund first redeems those
shares that are not subject to a redemption fee (e.g., shares acquired through
reinvestment of dividends or distributions), and then redeems those that have
been held the longest.
The redemption fee is remitted to the Fund, to offset the brokerage and other
costs associated with short-term trading.
REDEEMING SHARES THROUGH THIRD PARTIES. A broker-dealer, financial institution
or other service provider may charge a fee to redeem your Fund shares. If the
service provider is the shareholder of record, the Fund may accept redemption
requests only from that provider.
TELEPHONE TRANSACTIONS
- - In times of drastic economic or market conditions, you may have
difficulty selling shares by telephone. The Fund reserves the right to
temporarily discontinue or limit the telephone purchase, redemption or
exchange privileges at any time during such periods. If you are unable to
reach the Fund by telephone, please send your redemption request via
overnight courier at the address provided above.
- - The Fund reserves the right to refuse a telephone redemption request if
it believes it is advisable to do so. The Fund uses procedures reasonably
designed to confirm that telephone
17
<PAGE> 21
redemption instructions are genuine. These may include recording telephone
transactions, testing the identity of the caller by asking for account
information and sending prompt written confirmations. The Fund may
implement other procedures from time to time. If these procedures are
followed, the Fund and its service providers will not be liable for any
losses due to unauthorized or fraudulent instructions.
SIGNATURE GUARANTEES. The Fund will require the signature guarantee of each
account owner to redeem shares in the following situations:
- - to change ownership on your account;
- - to send redemption proceeds to a different address than is currently on
the account;
- - to have the proceeds paid to someone other than the account's owner;
- - to transmit redemption proceeds by federal wire transfer or ACH to a bank
other than your bank of record;
- - if a change of address request has been received by the transfer agent
within the last 30 days;
or
- - if your redemption is for more than $20,000.
The Fund requires signature guarantees to protect both you and the Fund from
possible fraudulent requests to redeem shares. You can obtain a signature
guarantee from most broker-dealers, national or state banks, credit unions,
federal savings and loan associations or other eligible institutions. A NOTARY
PUBLIC IS NOT AN ACCEPTABLE SIGNATURE GUARANTOR.
SMALL ACCOUNTS. All Fund account owners share the high cost of maintaining
accounts with low balances. To reduce this cost, the Fund reserves the right to
close an account when a redemption or exchange leaves your account balance below
$8,000 for Class A shares, or you discontinue the automatic investment plan
before you reach the minimum. We will notify you in writing before we close your
account, and you will have 60 days to add additional money to bring the balance
up to $8,000 for Class A shares or to renew your automatic investment plan. This
provision does not apply to retirement plan accounts or UGMA/UTMA accounts.
MAKING CHANGES TO YOUR ACCOUNT
You may call or write the Fund to make changes to your account. Common changes
include:
Name changes. If your name has changed due to marriage or divorce, send the Fund
a letter of instruction signed with both your old and new names. Include a
certified copy of your marriage certificate or have your signatures guaranteed.
Address changes. The easiest way to notify the Fund is to return the stub from a
recent confirmation or statement. You can also call 1-877-LND-LEAS
(1-877-563-5327) with any changes.
Transfer of account ownership. Send the Fund a letter including your account
number, the share class, number of shares or dollar amount that are being
transferred along with the name, address and Social Security or Taxpayer
Identification Number of the person to whom the shares are being transferred.
All living registered owners must sign the letter. You will also need to
18
<PAGE> 22
include a signature guarantee. Corporations, businesses and trusts may have to
provide additional documents. In order to avoid delays in processing account
transfers, please call us at 1-877-LND-LEAS (1-877-563-5327) to determine what
additional documents are required.
SPECIAL FEATURES AND SERVICES
RETIREMENT ACCOUNT OPTIONS
The Fund offers a variety of retirement accounts for individuals and
organizations. These accounts may offer you tax advantages. For information on
establishing retirement accounts, please call 1-877-LND-LEAS (1-877-563-5327).
You should consult with your legal and/or tax adviser before you establish a
retirement account.
The Fund currently offers the following kinds of retirement accounts:
- - Traditional IRA (including spousal IRA)
- - "Rollover" IRA
- - Roth IRA
- - SEP-IRA
- - Simple IRA
The Fund is also available for investment by other retirement plans. Please call
1-877-LND-LEAS (1-877-563-5327) for additional information.
ACH TRANSACTIONS
If you would like to purchase shares electronically or have redemption proceeds
sent directly to your bank account, you must first have certain bank account
information on file with us so that funds can be transferred electronically
between your Fund account and bank account. You will receive the NAV next
calculated after receipt of your funds, which typically takes 2 to 3 days. There
is no charge to you for this procedure. The Fund requires 10 business days to
verify your bank information before initiating this privilege. You can establish
this privilege by filling out the appropriate section of your account
application. If you did not select the electronic purchase or redemption options
on your original application, call us at 1-877-LND-LEAS (1-877-563-5327).
AUTOMATED TELEPHONE SERVICE
The Fund offers 24-hour, seven days a week access to Fund and account
information via a toll-free line. The system provides total returns, share
prices and price changes for the Fund, gives you account balances and history
(e.g., last transaction, latest dividend distribution), and market commentary
from the Fund's management team. To access the automated system, please call
1-877-LND-LEAS (1-877-563-5327).
AUTOMATIC INVESTMENT PLAN (AIP)
To make regular investing more convenient, you can open an automatic investment
plan with an initial investment of $5,000 and a minimum investment of $250 per
month after you start your plan. We will automatically transfer from your
checking or savings account the amount you want to invest on any of the
following days: the 5th, 10th, 15th, 20th, 25th or last day of each month.
19
<PAGE> 23
There is no charge for this service, but if there is not enough money in your
bank account to cover the withdrawal you will be charged $20, your purchase will
be cancelled and you will be responsible for any resulting losses to the Fund.
You can terminate your automatic investment plan at any time by calling the Fund
at least 10 days before your next scheduled withdrawal date. To implement this
plan, please fill out the appropriate area of your application, or call
1-877-LND-LEAS (1-877-563-5327) for assistance.
OTHER SHAREHOLDER INFORMATION
SHAREHOLDER COMMUNICATIONS
Confirmations. You will receive a confirmation each time you buy, sell or
exchange Fund shares. Automatic investment plan participants receive quarterly
confirmations of all automatic transactions. Please review your confirmation and
notify us immediately if there are any discrepancies in the information.
Quarterly and annual statements. You will receive a quarterly statement
providing year-to-date information, including all distributions, purchases and
redemptions of Fund shares. Your December statement will include a listing of
all transactions for the entire year.
Semi-annual and annual reports. The Fund sends semi-annual and annual reports to
its shareholders. These reports provide financial information on your
investments and give you a "snapshot" of the Fund's portfolio holdings at the
end of its semi-annual and fiscal year periods. Additionally, the annual report
discusses the factors that materially affected the Fund's performance for its
most recently completed year, including relevant market conditions and the
investment strategies and techniques that were used. You may consent to receive
the semi-annual and annual reports via electronic mail, over the Internet.
Before receiving these documents via electronic mail, you will need to consent
to this form of delivery on the application. If you consent to receive these
reports via electronic mail, you may obtain paper copies upon request and may
revoke your consent at any time.
Prospectus. Each year, the Fund sends all shareholders a new prospectus. Please
read the prospectus and keep it for future reference. You may also consent to
receive the prospectus via electronic mail. As with the semi-annual and annual
reports, you will need to consent to this form of delivery on the application.
Form 1099. Each year you will receive a Form 1099-DIV, showing the source of
distributions for the preceding year and a Form 1099-B showing any shares you
sold during the year.
Form 1099R. If you received a distribution from an IRA account during the year,
you will receive a Form 1099R.
Form 5498. If you contributed to an IRA during the year, you will receive a Form
5498 verifying your contribution.
TRANSACTIONS THROUGH FINANCIAL SERVICES AGENTS AND SUB-AGENTS
20
<PAGE> 24
The Fund may authorize one or more broker-dealers or other financial services
agents or sub-agents to accept purchase, redemption and exchange orders on the
Fund's behalf. In these cases, the Fund will be deemed to have received an order
when an authorized financial services agent or sub-agent accepts the order, and
your order will be priced at the Fund's NAV next computed after it is received
in good order by the financial services agent or sub-agent. Designated financial
services agents and sub-agents are responsible for transmitting accepted orders
and payment for the purchase of shares to the transfer agent within the time
period agreed upon by them. If payment is not received within the time
specified, your transaction may be cancelled, and the financial services agent
will be held responsible for any resulting fees or losses.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute virtually all of its net investment income and
net realized capital gains at least once a year. The Fund will automatically
reinvest your dividends and capital gain distributions in additional Fund shares
unless you elect to have them paid to you in cash on your account application.
If you elect to have your distributions paid in cash, the Fund will send a check
to your address of record.
A dividend from net investment income represents the income the Fund earns from
dividends and interest paid on its investments, after payment of the Fund's
expenses. The Fund intends to pay dividends quarterly. A capital gain is the
increase in the value of a security that the Fund holds. The Fund's gain is
"unrealized" until it sells a portfolio security. Each realized capital gain is
either short-term or long-term. The tax status of any capital gains distribution
is determined by how long the Fund held the underlying security that was sold,
rather than how long you have held your Fund shares. The Fund intends to pay
capital gains annually, usually in December.
The Fund may also receive distributions of short-term, long-term and
unrecaptured Section 1250 capital gains from REITs. To the extent the Fund
receives such distributions, such capital gains (including unrecaptured Section
1250 capital gains) will be distributed to shareholders of the Fund.
You will participate in any Fund distributions that are declared starting the
day after your purchase is effective. Because the REITs the Fund invests in do
not provide complete information about the taxability of their distributions
under after the calendar year end, the Fund may not be able to determine how
much of its 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. Unless you invest through a tax-deferred retirement account
(such as an IRA), it is generally not to your advantage to buy shares of the
Fund shortly before it makes a distribution. This is known as "buying a
dividend." Buying a dividend may cost you money in taxes because you will
receive, in the form of a taxable distribution, a portion of the money you
21
<PAGE> 25
just invested (even if you elected to have it reinvested in additional Fund
shares). To avoid "buying a dividend," check the Fund's proposed distribution
schedule before you invest by calling 1-877-LND-LEAS (1-877-563-5327).
- --------------------------------------------------------------------------------
TAXES
You will be subject to income tax on all Fund distributions regardless of
whether you receive them in cash or elect to have them reinvested in Fund
shares. Dividend distributions and distributions of the Fund's net short-term
capital gains are taxable to you as ordinary income. Distributions of the Fund's
net long-term capital gains are taxable to you as long-term capital gains.
Distributions of unrecaptured Section 1250 capital gains are taxable to you as
ordinary income if you are in the 15% tax bracket or at a rate of 25% if you are
in the 28% or higher tax bracket.
The Fund's REIT investments may generate significant non-cash deductions, such
as depreciation on real estate holdings, while having greater cash flow to
distribute to its shareholders. If a REIT distributes more cash than it has
taxable income, a return of capital results. The Fund may pay a return of
capital distribution to you by distributing more cash than its taxable income.
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 is 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.
If you sell or exchange your shares, any gain or loss is a taxable event. You
may also be subject to state and local income taxes on dividends or capital
gains from the sale or exchange of Fund shares.
This tax information provides only a general overview. It does not apply if you
invest in a tax-deferred retirement account such as an IRA. Please consult your
own tax adviser about the tax consequences of an investment in the Fund.
22
<PAGE> 26
[LOGO]
LEND LEASE U.S. REAL ESTATE SECURITIES FUND
TRUSTEES
Susan J. Lloyd-Hurwitz, Chairman
Hubbard R. Garber
William J. Klipp
Kevin Malone
Michael A. Torres
FUND DISTRIBUTOR
Sunstone Distribution Services, LLC
207 East Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202
TRANSFER AGENT
Sunstone Financial Group, Inc.
207 East Buffalo Street, Suite 315
Milwaukee, Wisconsin 53202
CUSTODIAN
Wilmington Trust Company
1100 North Market, 9th Floor
Wilmington, Delaware 19890
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
AUDITORS
PricewaterhouseCoopers LLP
333 Market Street
San Francisco, CA 94105
For More Information
Additional information about the Fund, including the Fund's Statement
of Additional Information, is available to you free upon request. The Statement
of Additional Information is incorporated by reference into (is legally part of)
this Prospectus.
By Telephone: Call 1-877-LND-LEAS (1-877-563-5327)
By Mail: Write to: LEND LEASE FUNDS
P.O. Box 1192
23
<PAGE> 27
Milwaukee, Wisconsin
53201-1192
By E-Mail:
On the Internet: Electronic copies are available on
our website at http://www.__________
Information about the Fund (including the Statement of Additional Information)
can be reviewed and copied at the Commission's Public Reference Room in
Washington, D.C. Information on the operation of the Public Reference Room may
be obtained by calling the Commission at 1-202-942-8090. Reports and other
information about the Fund are available in the EDGAR Database on the SEC's
Internet site at http://www.sec.gov, and copies of this information may be
obtained, after paying a duplicating fee, by E-mail request to
[email protected], or by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
INVESTMENT COMPANY ACT REGISTRATION NUMBER 811-9679.
24
<PAGE> 28
LEND LEASE FUNDS
LEND LEASE U.S. REAL ESTATE SECURITIES FUND
CLASS K AND CLASS Y SHARES
---------------------
PROSPECTUS
February __, 2000
The Securities and Exchange Commission has not approved or disapproved
these securities or determined if this Prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
<PAGE> 29
TABLE OF CONTENTS
Page
KEY INFORMATION ABOUT THE FUND................................
Investment Objective..................................
Principal Investment Strategies.......................
Principal Risk Factors................................
FEES AND EXPENSES OF THE FUND.................................
Shareholder Fees......................................
Fees and Expenses.....................................
Example
OTHER INFORMATION REGARDING INVESTMENT PRACTICES..............
REITS
Year 2000.............................................
Defensive Investing...................................
MANAGEMENT....................................................
Investment Adviser...................................
Sub-Investment Adviser...............................
Portfolio Managers...................................
BUYING, SELLING AND EXCHANGING SHARES.........................
Before You Invest....................................
How to Purchase Shares...............................
How to Sell Shares...................................
How to Exchange Shares...............................
Making Changes to Your Account.......................
SPECIAL FEATURES AND SERVICES.................................
Retirement Account Options...........................
ACH Transactions.....................................
Automated Telephone Service..........................
Automatic Investment Plan............................
OTHER SHAREHOLDER INFORMATION..................................
Shareholder Communications...........................
Multiple Classes.....................................
Transactions Through Financial Services
Agents and Sub-Agent............................
DIVIDENDS, DISTRIBUTIONSAND TAXES.............................
Dividends and Distributions..........................
Taxes................................................
(i)
<PAGE> 30
KEY INFORMATION ABOUT THE FUND
This Prospectus contains important information for anyone interested in
investing in the Class K or Class Y shares of LEND LEASE U.S. REAL ESTATE
SECURITIES FUND (the "Fund"), a series of LEND LEASE FUNDS. Please read this
document carefully before you invest and keep it for future reference. You
should base your purchase of shares of the Fund on your own goals, risk
preferences and investment time horizons.
INVESTMENT OBJECTIVE
The Fund's objective is total return from a combination of dividend income and
long-term growth by investing principally in real estate securities.
PRINCIPAL INVESTMENT STRATEGIES
The Fund seeks to achieve its objective by investing at least 85% of its assets
in equity securities of companies principally engaged in the U.S. real estate
industry.
Lend Lease Rosen Real Estate Securities LLC ("Lend Lease Rosen" or the
"Sub-Adviser") manages the Fund's day to day investment activity. The process of
selecting portfolio positions is a two-part process involving both an analysis
of property sectors (a top down approach) and an analysis of individual
companies within the selected property sectors (a bottom up approach).
First, the top down process is used to identify promising property sectors of
the U.S. real estate market. In conducting this analysis, the Sub-Adviser relies
on proprietary real estate transaction databases, supply and demand forecasts
for various property types such as residential, commercial and industrial real
estate and local market intelligence from an extensive network of affiliates
around the country engaged in various aspects of the real estate industry and
its own subjective views of the market for real estate and real estate
securities. The Fund ordinarily expects to be invested in at least four property
sectors of the real estate market but, if conditions warrant, may focus its
investments more narrowly. The property sectors identified through the top down
process yield a universe of companies from which the Sub-Adviser then selects
Fund investments. The Sub-Adviser evaluates potential investments based on a
variety of factors including overall investment strategy, strength of company
management, fundamental analysis of financial statements and yields.
3
<PAGE> 31
A substantial portion of the Fund's portfolio at any given time may be invested
in real estate investment trusts ("REITs"). Furthermore, the Fund expects under
normal circumstances to invest principally in what are know as "equity REITs".
An equity REIT owns or leases real estate and realizes a return on its holdings
primarily from rental income although it may also realize gains (or losses) be
selling properties in its portfolio. Equity REITs generally exercise some degree
of control over the operational aspects of their real estate investments, lease
terms and property maintenance and repair. REITs invest shareholder capital in
real estate or real estate-related loans, interests or securities. A REIT is not
taxed on income distributed to shareholders if it complies with certain federal
tax requirements relating primarily to its organization, ownership, assets and
income and, further, if it distributes the vast majority of its taxable income
to shareholders each year. As a consequence, REITs generally focus on
income-producing real estate investments.
The Fund expects its investments to be primarily in companies contained in the
Wilshire REIT Index (the "Wilshire Index") having market capitalizations that
fall in the upper two thirds of the range of market capitalizations represented
in the Wilshire Index. These companies include those with large, medium and
small capitalizations.
-- The Wilshire Index is an unmanaged securities index designed to
measure the performance of U.S. publicly traded REITs. The composition
of the Wilshire Index is determined by Wilshire Associates
Incorporated and includes REITs representing a variety of property
types. The Wilshire Index currently consists entirely of equity REITs.
As of January 31, 2000, 106 securities were included in the Wilshire
Index, with a total market capitalization of $102 billion.
Under normal market circumstances, the Fund's portfolio turnover is anticipated
to be low, not exceeding 80% per year.
PRINCIPAL RISK FACTORS
The principal risks of investing in the Fund are the risks generally
associated with investing in stocks and the risks specific to investing in the
real estate industry. Fund shares are not bank deposits and are not guaranteed,
endorsed or insured by any financial institution, government entity or the FDIC.
The Fund's share price will fluctuate, and it is possible to lose money by
investing in the Fund.
4
<PAGE> 32
o RISKS OF INVESTING IN STOCKS. A company's stock price may fluctuate due to
circumstances unique to that company. For example, a company's business
prospects may affect its stock price. If investors believe the company's
business prospects are good, they will generally be willing to pay higher
prices for its stock. If these expectations are not met, or if expectations
are lowered, the price of the securities will tend to drop. A stock's price
will also tend to rise and fall as a result of investors' perceptions of the
market as a whole. In other words, if the stock market drops in value, the
value of the Fund's portfolio of investments is also likely to decrease in
value. The increase or decrease in the value of the Fund's investments in
response to this phenomenon may be proportionally more or less than the
increase or decrease in the value of the market. The share prices of stock
issued by medium capitalization issuers will generally fluctuate more than
those of large capitalization issuers and the share price of small
capitalization issuers will generally fluctuate more than those of medium
and large capitalization issuers. To the extent the Fund invests in small
and medium capitalization issuers, the Fund's share price may be more
volatile than if the Fund restricted its portfolio to large capitalization
issuers.
o RISKS OF THE REAL ESTATE INDUSTRY. The stock prices of companies in the real
estate industry are typically sensitive to changes in real estate values,
property taxes, interest rates, cash flow of underlying real estate assets,
occupancy rates, government regulations affecting zoning, land use, and
rents, and the management skill and creditworthiness of the issuer.
Companies in the real estate industry may also be subject to liabilities
under environmental and hazardous waste laws which could negatively affect
their value.
o RISKS OF REITS. REITs are dependent upon specialized management skills. They
also have limited diversification and are, therefore, subject to risks
inherent in operating and financing a limited number of projects.
Furthermore, some REITs have relatively small market capitalizations, which
tends to increase the volatility of their securities.
o INDUSTRY CONCENTRATION. 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 industries and investment approaches may fall in and out of
favor. If the market does not currently favor the real estate industry or
the Fund's investment approach, the Fund's gains may not be as big or its
losses may be bigger than other equity funds investing in different
industries or using different investment approaches.
o NON-DIVERSIFIED STATUS. The Fund is not "diversified" within the meaning of
the Investment Company Act of 1940. This means that, compared with
"diversified" funds, it may invest a relatively greater portion of its
assets in any single issuer. As a result, the Fund may be more susceptible
to negative developments affecting a single issuer.
FUND PERFORMANCE
Because the Fund is new and has not completed a full calendar year's
operations, performance information is not included in this Prospectus. To
obtain the Fund's performance information after its first full calendar quarter
of operations, please call the Fund at 1-877-LND-LEAS (1-877-563-5327).
5
<PAGE> 33
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS K AND CLASS Y
SHARES
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of the offering price).......................... None
Maximum Deferred Sales Charge (Load)................................ None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
and Other Distributions.......................................... None
Redemption Fee...................................................... None
Exchange Fee........................................................ None
FEES AND EXPENSES
CLASS K SHARES
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fee*..................................................... .80%
Distribution and Service (12b-1) Fees............................... .25%
Other Expenses**.................................................... 1.67%
Total Annual Fund Operating Expenses***............................. 2.72%
Fee Waivers and/or Expense Reimbursement............................ 1.47%
Net Expenses........................................................ 1.25%
* The Management Fee is comprised of both the Adviser fee and the
Sub-Adviser fee.
** Because the Fund is new, Other Expenses are based on estimated
amounts for the current fiscal year.
*** Lend Lease Real Estate Investments, Inc., the Fund's investment
adviser (the "Adviser"), and the Sub-Adviser have contractually agreed to limit
the Total Annual Fund Operating Expenses of Class K shares to 1.25% through
January 31, 2002, subject to later reimbursement by the Fund in certain
circumstances. After January 31, 2002, the expense limitation may renew for
annual periods under certain conditions.
CLASS Y SHARES
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fee*..................................................... .80%
Distribution and Service (12b-1) Fees............................... None
Other Expenses**.................................................... 1.51%
Total Annual Fund Operating Expenses***............................. 2.31%
Fee Waiver and/or Expense Reimbursement............................. 1.34%
Net Expenses........................................................ .97%
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<PAGE> 34
* The Management Fee is comprised of both the Adviser fee and the
Sub-Adviser fee.
** Because the Fund is new, Other Expenses are based on estimated
amounts for the current fiscal year.
*** Lend Lease Real Estate Investments, Inc., the Fund's investment
adviser (the "Adviser") and the Sub-Adviser have contractually agreed to limit
the Total Annual Fund Operating Expenses of Class Y shares to .97% through
January 31, 2002, subject to later reimbursement by the Fund in certain
circumstances. After January 31, 2002, the expense limitation may renew for
annual periods under certain conditions.
EXAMPLE
The following Example will help you compare the cost of investing in
the Fund to the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 as an initial investment in the Fund for the time
periods indicated and redeem all of your shares at the end of those periods. It
also assumes that your investment has a 5% total return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
1 YEAR+ 3 YEARS+
------- --------
Class K $275 $844
Class Y $234 $721
+ Taking the current expense limitation into account, your costs for the Fund
would be:
1 YEAR 3 YEARS
------ -------
Class K $127 $556
Class Y $ 99 $455
OTHER INFORMATION REGARDING INVESTMENT PRACTICES
Companies or issuers in the U.S. real estate industry in which the Fund may
invest include among others: real estate investment trusts ("REITs"), companies
that invest in interests in real estate, real estate developers and brokers,
real estate operating companies ("REOCs"), companies with substantial real
estate holdings (such as hotel companies, and land-holding companies), as well
as companies whose products and services are significantly related to the real
estate industry such as building supply manufacturers, mortgage lenders and
mortgage servicing companies.
COMPANIES PRINCIPALLY ENGAGED IN THE U.S. REAL ESTATE INDUSTRY
For purposes of the Fund's investment policies, a company is considered to be
principally engaged in the U.S. real estate industry if the Fund's Sub-Adviser
determines that the company (i) derives at least 50% of its revenues or profits
from the ownership, renting, leasing, construction, management, development,
financing or sale of commercial, industrial and residential real estate or
related interest or (ii) has at least 50% of the value of its assets invested in
U.S. commercial, industrial and residential real estate. Equity securities
include common stock, preferred stock, partnership interests and other
instruments evidencing an ownership interest in an issuer as well as rights,
warrants and securities convertible into equity securities.
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<PAGE> 35
MORTGAGE AND HYBRID REITS
In addition to equity REITs, there are two other generally recognized categories
of REITs -mortgage REITs and hybrid REITs. A mortgage REIT invests primarily in
loans secured by real estate and derives its income primarily from interest
payments on its mortgage loans. A hybrid REIT combines the characteristics of
both equity REITs and mortgage REITs, generally by holding both ownership and
mortgage interests in real estate.
REOCS
The Fund may invest in REOCs from time to time. Like REITs, REOCs may invest in,
own and manage real estate properties. REOCs do not, however, elect to qualify
for the federal income tax treatment accorded REITs. As a consequence, REOCs
generally offer investment potential more from capital growth and less from
dividend income than do REITs.
YEAR 2000
Although the year 2000 has begun, the "Year 2000 problem," a date-related
computer issue, may still have an adverse impact on the Fund's operations. To
avoid problems of this nature, the Fund has verified that all its internal
systems are Year 2000 compliant (able to handle dates past 1999), and has taken
steps to address this problem with its Adviser and Sub-Adviser and with other
Fund service providers and vendors. The Fund has received assurances from each
of its key service providers that
8
<PAGE> 36
the service provider's systems and products are Year 2000 compliant. The
Fund cannot, however, be completely certain that all third parties on which it
is directly or indirectly dependent for services are Year 2000 compliant. It is
also still possible that an issuer of securities held by the Fund could
experience a Year 2000 problem whose adverse effects result in lower prices for
those securities. The Fund will continue to monitor developments relating to the
Year 2000 problem.
RESTRICTED SECURITIES
The Fund may purchase restricted securities. Any security that is whose resale
is restricted can be difficult to sell at a desired time and price. Owning a
large percentage of restricted securities could hamper the Fund's ability to
raise cash to meet redemptions. Also, in the absence of an established
securities market, the Fund may have to estimate the value of restricted
securities it holds which adds a subjective element to valuation of the Fund.
DEFENSIVE INVESTING
During unusual market conditions, the Fund may place up to 100% of its total
assets in cash or quality short-term debt securities including repurchase
agreements. Defensive investing may prevent the Fund from achieving its
investment objective.
CASH POSITION
As a means of maintaining consistent investment performance and preserving
capital in adverse market conditions, the Fund may invest up to 15% of its
assets in cash or cash equivalents. These investments may include repurchase
agreements which involve the Fund's buying securities with the understanding
that the seller will buy them back with interest at a later date. If the seller
is unable to honor its commitment to repurchase the securities, the Fund could
lose money.
INVESTMENT MANAGEMENT
WHO ARE LEND LEASE ROSEN AND LEND LEASE REAL ESTATE INVESTMENTS?
Lend Lease Real Estate Investments, Inc. (the Adviser), Monarch Tower, 3424
Peachtree Road, N.E., Suite 800, Atlanta, Georgia 30326, is the Fund's Adviser.
The Adviser is a wholly-owned indirect subsidiary of Lend Lease Corporation
Limited, an integrated property and financial
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<PAGE> 37
service company listed on the Australian and New Zealand stock exchanges with a
market capitalization at December 31, 1999 of approximately U.S. $6 billion. The
Adviser is a full-service real estate investment advisor with substantial
experience in investing and managing commercial real estate assets for
institutional lenders and owners. As of December 31, 1999, the Adviser managed
approximately $31 billion in U.S. assets on behalf of its clients and investors
in its funds, which include a wide variety of public and corporate pension
funds, insurance companies, endowments, foundations and foreign institutions.
The Adviser is also one of the leading advisors to pension funds regarding
investments in U.S. real estate. The Adviser is co-headquartered in New York,
New York and Atlanta, Georgia.
Lend Lease Rosen Real Estate Securities, LLC (the Sub-Adviser), 1995 University
Avenue, Suite 550, Berkeley, California 94704, is responsible for the day to day
management of the Fund's investment program. Lend Lease Rosen is a real estate
investment management company founded in 1993 by Dr. Kenneth T. Rosen. In 1997,
the Adviser acquired a 50% interest in the Sub-Adviser. As of December 31, 1999,
assets under management were approximately $892 million. Lend Lease Rosen is a
research driven investment management firm managing assets principally on behalf
of institutional investors. Lend Lease Rosen uses both a top down and a bottom
up approach to construct the investment portfolios it manages.
The Fund pays an annual fee of .80% of its average daily net assets for the
services provided by the Adviser and the Sub-Adviser.
The Adviser and Sub-Adviser have contractually agreed to limit the Fund's total
operating expenses to 1.25% of the average daily net assets for the Fund's Class
K shares and 0.97% of the average daily net assets for the Fund's Class Y shares
through January 31, 2002. After that date, the expense limitation will renew for
one year periods if certain conditions are met. With respect to each waiver or
reimbursement in connection with maintaining the expense limitations, the Fund
is obligated to repay the amount waived or reimbursed for a class to the extent
that repayment would not cause the total operating expenses for the year in
which the repayment is made to exceed 1.25% of average daily net assets for the
Fund's Class K shares and 0.97% of average daily net assets for the Fund's Class
Y shares. The Fund's repayment obligation with respect to a particular waiver or
reimbursement ends with the third anniversary of the waiver or reimbursement.
PORTFOLIO MANAGERS
The Fund is managed by a portfolio management team that includes Michael A.
Torres (portfolio manager), Jennifer Nichols and Greg Prophet (portfolio
analysts). They are responsible for the day to day management of the Fund and
the selection of the Fund's investments.
Michael Torres is co-president of the Sub-Adviser and has 13 years of real
estate and securities research experience. Mr. Torres joined the Sub-Adviser in
February 1995 and is responsible for its operations, client services and
research. Prior to joining the Sub-Adviser, Mr. Torres was
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<PAGE> 38
Director of real estate and Portfolio Manager at Wilshire Associates from 1990
to 1995. He has a B.A. in architecture and a M.B.A. in economics from the
University of California, Berkeley.
Jennifer Nichols, CPA, is a Vice President of the Sub-Adviser and oversees
research for the Sub-Adviser with responsibility for company-specific research
and portfolio strategy. Ms. Nichols joined the Sub-Adviser in 1998 and has a
B.A. from the University of California, Santa Barbara and an M.B.A. from the
University of California, Berkeley. Prior to joining the sub-adviser. Ms.
Nichols was a research analyst at Montgomery Securities from 1996 to 1998. Prior
to this, she was a Portfolio Administrator at Barclay's Global Investors.
Gregory Prophet is a Vice President of the Sub-Adviser and is responsible for
company-specific research and oversees the Sub-Adviser's proprietary
quantitative model. Mr. Prophet has been with the Sub-Adviser for 5 years and
has a B.A. from the University of California, Los Angeles and an M.B.A. from the
University of California, Berkeley.
BUYING, SELLING AND EXCHANGING SHARES
BEFORE YOU INVEST
AVAILABLE SHARE CLASSES. The Fund offers investors three different classes of
shares - Class A, Class K and Class Y. Class K and Class Y shares are discussed
in this prospectus. The different classes represent investments in the same
portfolio of securities, but each class has different expenses and will likely
have different share prices. When you buy shares, remember to specify the class
of shares you want to buy.
Class K Shares. Class K shares are available only to Registered
Investment Advisers ("RIAs"). If you buy Class K shares, you will not pay an
up-front sales charge or "load", nor will you be subject to a redemption
charge. Your Class K shares will, however, be subject to a Distribution and
Service Fee. See "Distribution and Service Fee (12b-1 Plan)" for further
information.
Class Y Shares. If you buy Class Y shares, you will not pay an up-front
sales charge or "load", nor will you be subject to a redemption charge.
SELECTING A SHARE CLASS. If you are not an RIA and do not meet the minimum
investment amounts to purchase Class Y shares, you may want to consider Class A
shares which have the same minimum investment amounts as Class K shares but are
not limited to purchase by RIAs. Class A shares, which are sold by a different
prospectus, are subject to an up-front sales charge, redemption fee and
Distribution and Service Fees. Call 1-877-LND-LEAS (1-877-563-5327) for more
information and a prospectus for Class A shares. You should be aware that
financial service firms may receive different compensation depending upon which
class of shares they sell.
ACCOUNT REGISTRATION. When purchasing shares, you need to select the appropriate
form of account registration. There are many different types of mutual fund
ownership. How you register your account with the Fund can affect your legal
interests, as well as the rights and
11
<PAGE> 39
interests of your family and beneficiaries. You should always consult with your
legal and/or tax adviser to determine what form of account registration best
meets your needs.
Available forms of registration include:
Individual ownership. If you have reached the legal age of majority in
your state of residence, you may open an individual account.
Joint ownership. Two or more individuals may open an account together
as joint tenants with right of survivorship, tenants in common or as
community property.
Custodial account. You may open an account for a minor under the
Uniform Gift to Minors Act/Uniform Transfers to Minors Act for your state of
residence.
Business/trust ownership. Corporations, trusts, charitable
organizations and other businesses may open accounts.
IRAs and other tax-deferred accounts. The Fund offers a variety of
retirement accounts for individuals and institutions. Please refer to
"Retirement Account Options," below, for more information about these types
of accounts.
ACCOUNT MINIMUMS. You also need to decide how much money to invest. The
following chart shows you the minimum amounts that you will need to open or add
to certain types of accounts. The Fund may waive the minimum investment amounts
at any time.
TYPE OF ACCOUNT INITIAL MINIMUM PURCHASE ADDITIONAL MINIMUM
PURCHASE
Regular (Individual, joint, CLASS K CLASS Y CLASS K CLASS Y
business or trust) $10,000 $250,000 $250 $10,000
IRA (including spousal,
Roth and SEP) CLASS K CLASS Y CLASS K CLASS Y
$1,000 $250,000 $250 $10,000
Gifts to Minors (UTMA/UGMA) CLASS K CLASS Y CLASS K CLASS Y
$10,000 $250,000 $250 $10,000
Automatic Investment Plan CLASS K CLASS Y CLASS K CLASS Y
$5,000 * $250 *
* The Automatic Investment Plan is not available for Class Y shares of the Fund.
DETERMINING YOUR SHARE PRICE. The price at which you purchase and sell the
Fund's shares is called the Fund's net asset value ("NAV") per share. The Fund
calculates NAV by taking the total value of its assets, subtracting its
liabilities, and dividing the total by the number of Fund shares that are
outstanding. The Fund calculates its NAV as of the close of trading on the New
York Stock Exchange (usually 4:00 p.m. Eastern time) on each day the Exchange is
open for trading. The Fund does not calculate NAV on days the Exchange is closed
(including national holidays and Good Friday). NAV is determined separately for
each class of shares. The price of the shares you purchase or redeem will be the
next NAV calculated after your order is received in good order by the Fund or
other financial intermediary with the authority to accept orders on the Fund's
behalf.
The value of the Fund's assets is based on the current market value of its
investments. For securities with readily available market quotations, the Fund
uses those quotations to price a
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<PAGE> 40
security. If a security does not have a readily available market quotation, the
Fund values the security based on fair value, as determined in good faith in
accordance with the guidelines established by the Fund's board of trustees. The
Fund may use pricing services to assist in the determination of market value.
HOW TO PURCHASE SHARES
You can buy shares directly from the Fund or through an RIA, a broker-dealer or
other institution that the Fund has authorized to sell shares.
CLASS K SHARES. Class K shares are sold at net asset value per share without an
initial sales charge and are available for sale only to RIAs.
CLASS Y SHARES. Class Y shares are sold at net asset value per share without an
initial sales charge.
To open an account or buy additional shares from the Fund, just follow these
steps:
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<PAGE> 41
<TABLE>
<CAPTION>
TO OPEN AN ACCOUNT TO ADD TO AN EXISTING ACCOUNT
<S> <C>
BY MAIL: BY MAIL:
Complete and sign the account application or Complete the investment slip that is
an IRA application. If you do not complete the included in your account statement, and write
application properly, your purchase may be your account number on your check.
delayed or rejected. If you no longer have your investment
Make your check payable to "Lend Lease slip, please reference your name, account
Funds." The Fund does not accept cash, third number and address on your check.
party checks, travelers checks or checks drawn Make your check payable to "Lend Lease
on banks outside the U.S. Funds."
For IRA accounts, please specify the year
for which the contributions is made.
MAIL YOUR APPLICATION AND CHECK TO: MAIL THE SLIP AND THE CHECK TO:
Lend Lease U.S. Real Estate Securities Fund Lend Lease U.S. Real Estate Securities Fund
P.O. Box 1192 P.O. Box 1192
Milwaukee, WI 53201-1192 Milwaukee, WI 53201-1192
BY OVERNIGHT COURIER, SEND TO:
Lend Lease U.S. Real Estate Securities Fund
207 E. Buffalo Street
Suite 315
Milwaukee, WI 53202
</TABLE>
15
<PAGE> 42
<TABLE>
<CAPTION>
BY TELEPHONE: BY TELEPHONE:
<S> <C>
You may not make your initial You automatically have the
purchase by telephone. privilege to purchase
additional shares by
telephone unless you have
declined this service on
your account application.
You may call 1-877-LND-LEAS
(1-877-563-5327) to purchase
shares for an existing
account.
Investments made by
electronic funds transfer
must be in amounts of at
least $250 and not greater
than $20,000.
</TABLE>
15
<PAGE> 43
<TABLE>
<CAPTION>
BY WIRE: BY WIRE:
<S> <C>
To purchase shares by wire, the Fund must Send your investment to Lend Lease U.S.
have received a completed application and issue Real Estate Securities Fund by following the instructions
an account number to you. Call 1-877-LND-LEAS listed in the column to the left.
(1-877-563-5327) for instructions prior to
wiring the funds.
Send your investment to Lend Lease U.S. Real
Estate Securities Fund with these instructions:
UMB Bank, n.a.
ABA # 101000695
For Credit to Lend Lease Funds
A/C # 9870983966
For further credit to: investor account
number; name(s) of investor(s); SSN or TIN;
name and class of Fund
</TABLE>
If your purchase request is received by the Fund, broker-dealer or other
authorized agent before close of trading on the New York Stock Exchange
(typically 4:00 p.m. Eastern time) on a business day, your request will be
executed at that day's NAV, provided that your application is in good order.
"Good order" means that the Fund has received your properly completed, signed
application, your payment, and any supporting legal documentation that may be
required. If your request is received after close of trading, it will be priced
at the next business day's NAV. Shares purchased by wire will receive the NAV
next determined after the Fund receives your completed application, the wired
funds and all required information is provided in the wire instructions.
ADDITIONAL PURCHASE INFORMATION.
The Fund does not issue certificates for shares.
If your check does not clear, your purchase will be cancelled. You will be
responsible for any resulting losses or expenses (including a $20 fee) incurred
by the Fund. The Fund may redeem shares you own in this or another identically
registered Fund account as reimbursement for any such losses.
You must provide the Fund with a Social Security Number or Taxpayer
Identification Number before your account can be established. If you do not
certify the accuracy of your Social Security or Taxpayer Identification Number
on your account application, the Fund will be required to withhold Federal
income tax at a rate of 31% from all of your dividends, capital gain
distributions and redemptions.
The Fund is only offered and sold to residents of the United States. Your
application will be accepted only if it contains a U.S. address. This prospectus
should not be considered a solicitation to buy or an offer to sell shares of the
Fund in any jurisdiction where it would be unlawful to do so under the
securities laws of that jurisdiction.
The Fund will not accept your application if you are investing for another
person as attorney-in-fact. The Fund will not accept applications that list
"Power of Attorney" or "POA" in the registration section.
16
<PAGE> 44
Once you place your order, you may not cancel or revoke it. The Fund
may reject a purchase order for any reason.
TRANSACTIONS THROUGH FINANCIAL SERVICES AGENTS. In addition to purchasing shares
from the Fund, you may invest through a financial services agent. Financial
advisers, broker-dealers and other financial service agents may charge
transaction and other fees and may set different minimum investments or
limitations on buying and selling shares, than those described in the
prospectus. In addition, these intermediaries may place limits on your ability
to use services the Fund offers.
HOW TO SELL SHARES
You may sell your shares on any day the Fund is open for business by following
the instructions below. You may elect to have redemption proceeds sent to you by
check, wire or electronic funds transfer. The Fund normally pays redemption
proceeds within two business days, but may take up to seven days. You can redeem
shares purchased by check at any time. However, while the Fund will process your
redemption on the day it receives your request, it will not pay your redemption
proceeds until your check has cleared, which may take up to 10 calendar days
from the date of purchase. You can avoid this delay by purchasing shares by a
federal funds wire. Please note that this provision is intended to protect the
Fund and its shareholders from loss.
HOW TO SELL SHARES
BY MAIL:
o Send a letter of instruction that includes your account number, the Fund
name, the dollar value or number of shares you want to sell, and how and
where to send the proceeds.
o Sign the request exactly as the shares are registered. All registered owners
must sign.
o Include a signature guarantee, if necessary (see "Signature Guarantees,"
below),
MAIL YOUR REQUEST TO:
Lend Lease U.S. Real Estate Securities Fund
P.O. Box 1192
Milwaukee, WI 53201-1192
17
<PAGE> 45
BY OVERNIGHT COURIER, SEND TO:
Lend Lease U.S. Real Estate Securities Fund
207 E. Buffalo Street
Suite 315
Milwaukee, WI 53202
BY TELEPHONE:
o You automatically have the privilege to redeem shares by telephone unless
you have declined this option on your account application.
o Call 1-877-LND-LEAS (1-877-563-5327), between 8:00 a.m. and 8:00 p.m.
Eastern time. You may redeem as little as $1,000 and as much as $20,000 by
telephone.
o Telephone redemptions are not available for retirement plan accounts.
BY WIRE:
o If you choose to redeem your shares by wire, your redemption proceeds will
be sent to your bank account of record. A $10 fee will be deducted from your
proceeds for Class A shares..
o If you wish to have your redemption proceeds sent by wire to a bank account
other than that of record, you must provide a written request signed by all
owners of the account with signatures guaranteed.
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<PAGE> 46
Redemption requests received in good order before close of trading on the New
York Stock Exchange (typically, 4:00 p.m. Eastern time) will be processed at
that day's NAV. "Good order" means that for redemptions, you have included all
required information and documentation along with any required signature
guarantees. Redemption requests sent by facsimile will not be honored.
Please note that the Fund may require additional documents for redemptions by
corporations, executors, administrators, trustees and guardians. If you have any
questions about how to redeem shares, or to determine if a signature guarantee
or other documentation is required, please call 1-877-LND-LEAS (1-877-563-5327).
ADDITIONAL REDEMPTION PROVISIONS
o Once we receive your order to sell shares, you may not revoke or cancel it.
We cannot accept an order to sell that specifies a particular date, price or
any other special conditions.
o If you are redeeming from an IRA, please tell us the proper tax withholding
on your redemption request. If you did not make a tax election on your IRA
application, we will automatically withhold 10% of your redemption proceeds.
(The Fund charges $15 for a redemption from an IRA account.)
o If your redemption request exceeds the amount that you currently have in
your account, your entire account will be redeemed. The automatic purchase
plan that you have initiated for the account will be cancelled.
o The Fund reserves the right to suspend the redemption of Fund shares when
the securities markets are closed, trading is restricted for any reason, an
emergency exists and disposal of securities owned by the Fund is not
reasonably practicable, the Fund cannot fairly determine the value of its
net assets, or the Securities and Exchange Commission permits the suspension
of the right of redemption or postpones the date of payment of a redemption.
o If the amount you redeem is large enough to affect the Fund's operations,
the Fund may pay your redemption "in kind." This means that the Fund may pay
you in portfolio securities rather than cash. If this occurs, you may incur
transaction costs when you sell the securities you receive.
REDEEMING SHARES THROUGH THIRD PARTIES. A broker-dealer, financial institution
or other service provider may charge a fee to redeem your Fund shares. If the
service provider is the shareholder of record, the Fund may accept redemption
requests only from that provider.
TELEPHONE TRANSACTIONS
o In times of drastic economic or market conditions, you may have difficulty
selling shares by telephone. The Fund reserves the right to temporarily
discontinue or limit the telephone purchase, redemption or exchange
privileges at any time during such periods. If you are unable to reach the
Fund by telephone, please send your redemption request via overnight courier
at the address provided above.
o The Fund reserves the right to refuse a telephone redemption request if it
believes it is advisable to do so. The Fund uses procedures reasonably
designed to confirm that telephone redemption instructions are genuine.
These may include recording telephone transactions, testing the identity of
the caller by asking for account information and sending prompt
19
<PAGE> 47
written confirmations. The Fund may implement other procedures from time to
time. If these procedures are followed, the Fund and its service providers
will not be liable for any losses due to unauthorized or fraudulent
instructions.
SIGNATURE GUARANTEES. The Fund will require the signature guarantee of each
account owner to redeem shares in the following situations:
o to change ownership on your account;
o to send redemption proceeds to a different address than is currently on the
account;
o to have the proceeds paid to someone other than the account's owner;
o to transmit redemption proceeds by federal wire transfer or ACH to a bank
other than your bank of record;
o if a change of address request has been received by the transfer agent
within the last 30 days; or
o if your redemption is for more than $20,000.
The Fund requires signature guarantees to protect both you and the Fund from
possible fraudulent requests to redeem shares. You can obtain a signature
guarantee from most broker-dealers, national or state banks, credit unions,
federal savings and loan associations or other eligible institutions. A NOTARY
PUBLIC IS NOT AN ACCEPTABLE SIGNATURE GUARANTOR.
SMALL ACCOUNTS. All Fund account owners share the high cost of maintaining
accounts with low balances. To reduce this cost, the Fund reserves the right to
close an account when a redemption or exchange leaves your account balance below
$8,000 for Class K shares or $200,000 for Class Y shares, or you discontinue the
automatic investment plan before you reach the minimum. We will notify you in
writing before we close your account, and you will have 60 days to add
additional money to bring the balance up to $8,000 for Class A shares or
$200,000 for Class Y shares or to renew your automatic investment plan. This
provision does not apply to retirement plan accounts or UGMA/UTMA accounts.
MAKING CHANGES TO YOUR ACCOUNT
You may call or write the Fund to make changes to your account. Common changes
include:
Name changes. If your name has changed due to marriage or divorce, send the Fund
a letter of instruction signed with both your old and new names. Include a
certified copy of your marriage certificate or have your signatures guaranteed.
Address changes. The easiest way to notify the Fund is to return the stub from a
recent confirmation or statement. You can also call 1-877-LND-LEAS
(1-877-563-5327) with any changes.
Transfer of account ownership. Send the Fund a letter including your account
number, the share class, number of shares or dollar amount that are being
transferred along with the name, address and Social Security or Taxpayer
Identification Number of the person to whom the shares are being transferred.
All living registered owners must sign the letter. You will also need to include
a signature guarantee. Corporations, businesses and trusts may have to provide
20
<PAGE> 48
additional documents. In order to avoid delays in processing account transfers,
please call us at 1-877-LND-LEAS (1-877-563-5327) to determine what additional
documents are required.
SPECIAL FEATURES AND SERVICES
RETIREMENT ACCOUNT OPTIONS
The Fund offers a variety of retirement accounts for individuals and
organizations. These accounts may offer you tax advantages. For information on
establishing retirement accounts, please call 1-877-LND-LEAS (1-877-563-5327).
You should consult with your legal and/or tax adviser before you establish a
retirement account.
The Fund currently offers the following kinds of retirement accounts:
Traditional IRA (including spousal IRA)
"Rollover" IRA
Roth IRA SEP-IRA
Simple IRA
The Fund is also available for investment by other retirement plans. Please call
1-877-LND-LEAS (1-877-563-5327) for additional information.
ACH TRANSACTIONS
If you would like to purchase shares electronically or have redemption proceeds
sent directly to your bank account, you must first have certain bank account
information on file with us so that funds can be transferred electronically
between your Fund account and bank account. You will receive the NAV next
calculated after receipt of your funds, which typically takes 2 to 3 days. There
is no charge to you for this procedure. The Fund requires 10 business days to
verify your bank information before initiating this privilege. You can establish
this privilege by filling out the appropriate section of your account
application. If you did not select the electronic purchase or redemption options
on your original application, call us at 1-877-LND-LEAS (1-877-563-5327).
AUTOMATED TELEPHONE SERVICE
The Fund offers 24-hour, seven days a week access to Fund and account
information via a toll-free line. The system provides total returns, share
prices and price changes for the Fund, gives you account balances and history
(e.g., last transaction, latest dividend distribution), and market commentary
from the Adviser's management team. To access the automated system, please call
1-877-LND-LEAS (1-877-563-5327).
AUTOMATIC INVESTMENT PLAN (AIP)
To make regular investing more convenient, you can open an automatic investment
plan with an initial investment of $5,000 and a minimum investment of $250 per
month after you start your plan. We will automatically transfer from your
checking or savings account the amount you want to invest on any of the
following days: the 5th, 10th, 15th, 20th, 25th or last day of
21
<PAGE> 49
each month. There is no charge for this service, but if there is not enough
money in your bank account to cover the withdrawal you will be charged $20, your
purchase will be cancelled and you will be responsible for any resulting losses
to the Fund. You can terminate your automatic investment plan at any time by
calling the Fund at least 10 days before your next scheduled withdrawal date. To
implement this plan, please fill out the appropriate area of your application,
or call 1-877-LND-LEAS (1-877-563-5327) for assistance.
OTHER SHAREHOLDER INFORMATION
SHAREHOLDER COMMUNICATIONS
Confirmations. You will receive a confirmation each time you buy, sell or
exchange Fund shares. Automatic investment plan participants receive quarterly
confirmations of all automatic transactions. Please review your confirmation and
notify us immediately if there are any discrepancies in the information.
Quarterly and annual statements. You will receive a quarterly statement
providing year-to-date information, including all distributions, purchases and
redemptions of Fund shares. Your December statement will include a listing of
all transactions for the entire year.
Semi-annual and annual reports. The Fund sends semi-annual and annual reports to
its shareholders. These reports provide financial information on your
investments and give you a "snapshot" of the Fund's portfolio holdings at the
end of its semi-annual and fiscal year periods. Additionally, the annual report
discusses the factors that materially affected the Fund's performance for its
most recently completed year, including relevant market conditions and the
investment strategies and techniques that were used. You may consent to receive
the semi-annual and annual reports via electronic mail, over the Internet.
Before receiving these documents via electronic mail, you will need to consent
to this form of delivery on the application. If you consent to receive these
reports via electronic mail, you may obtain paper copies upon request and may
revoke your consent at any time.
Prospectus. Each year, the Fund sends all shareholders a new prospectus. Please
read the prospectus and keep it for future reference. You may also consent to
receive the prospectus via electronic mail. As with the semi-annual and annual
reports, you will need to consent to this form of delivery on the application.
Form 1099. Each year you will receive a Form 1099-DIV, showing the source of
distributions for the preceding year and a Form 1099-B showing any shares you
sold during the year.
Form 1099R. If you received a distribution from an IRA account during the year,
you will receive a Form 1099R.
Form 5498. If you contributed to an IRA during the year, you will receive a Form
5498 verifying your contribution.
TRANSACTIONS THROUGH FINANCIAL SERVICES AGENTS AND SUB-AGENTS
22
<PAGE> 50
The Fund may authorize one or more broker-dealers or other financial services
agents or sub-agents to accept purchase, redemption and exchange orders on the
Fund's behalf. In these cases, the Fund will be deemed to have received an order
when an authorized financial services agent or sub-agent accepts the order, and
your order will be priced at the Fund's NAV next computed after it is received
in good order by the financial services agent or sub-agent. Designated financial
services agents and sub-agents are responsible for transmitting accepted orders
and payment for the purchase of shares to the transfer agent within the time
period agreed upon by them. If payment is not received within the time
specified, your transaction may be cancelled, and the financial services agent
will be held responsible for any resulting fees or losses.
DISTRIBUTION AND SERVICE FEES - CLASS K SHARES (12B-1 PLAN)
The Fund has adopted a 12b-1 Plan for its Class K shares under which the Fund
may pay up to 0.25% of the average daily net assets attributable to Class K
shares for certain service and distribution expenses incurred by this class of
shares. (This type of plan is named after the rule under the securities laws
which permits it.) Because 12b-1 Plan fees paid by the Fund are an ongoing
expense, they will increase the cost of an investment in Class K shares, and
over time, may cost an investor in Class K shares more than other types of sales
charges.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute virtually all of its net investment income and
net realized capital gains at least once a year. The Fund will automatically
reinvest your dividends and capital gain distributions in additional Fund shares
unless you elect to have them paid to you in cash on your account application.
If you elect to have your distributions paid in cash, the Fund will send a check
to your address of record.
A dividend from net investment income represents the income the Fund earns from
dividends and interest paid on its investments, after payment of the Fund's
expenses. The Fund intends to pay dividends quarterly. A capital gain is the
increase in the value of a security that the Fund holds. The Fund's gain is
"unrealized" until it sells a portfolio security. Each realized capital gain is
either short-term or long-term. The tax status of any capital gains distribution
is determined by how long the Fund held the underlying security that was sold,
rather than how long you have held your Fund shares. The Fund intends to pay
capital gains annually, usually in December.
The Fund may also receive distributions of short-term, long-term and
unrecaptured Section 1250 capital gains from REITs. To the extent the Fund
receives such distributions, such capital gains (including unrecaptured Section
1250 capital gains) will be distributed to shareholders of the Fund.
You will participate in any Fund distributions that are declared starting the
day after your purchase is effective. Because the REITs the Fund invests in do
not provide complete information about the taxability of their distributions
under after the calendar year end, the Fund
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<PAGE> 51
may not be able to determine how much of its 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. Unless you invest through a tax-deferred retirement account
(such as an IRA), it generally is not to your advantage to buy shares of the
Fund shortly before it makes a distribution. This is known as "buying a
dividend." Buying a dividend may cost you money in taxes because you will
receive, in the form of a taxable distribution, a portion of the money you just
invested (even if you elected to have it reinvested in additional Fund shares).
To avoid "buying a dividend," check the Fund's proposed distribution schedule
before you invest by calling 1-877-LND-LEAS (1-877-563-5327).
TAXES
You will be subject to income tax on all Fund distributions regardless of
whether you receive them in cash or elect to have them reinvested in Fund
shares. Dividend distributions and distributions of the Fund's net short-term
capital gains are taxable to you as ordinary income. Distributions of the Fund's
net long-term capital gains are taxable to you as long-term capital gains.
Distributions of unrecaptured Section 1250 capital gains are taxable to you as
ordinary income if you are in the 15% tax bracket or at a rate of 25% if you are
in the 28% or higher tax bracket.
The Fund's REIT investments may generate significant non-cash deductions, such
as depreciation on real estate holdings, while having greater cash flow to
distribute to its shareholders. If a REIT distributes more cash than it has
taxable income, a return of capital results. The Fund may pay a return of
capital distribution to you by distributing more cash than its taxable income.
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 is 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.
If you sell or exchange your shares, any gain or loss is a taxable event. You
may also be subject to state and local income taxes on dividends or capital
gains from the sale or exchange of Fund shares.
This tax information provides only a general overview. It does not apply if you
invest in a tax-deferred retirement account such as an IRA. Please consult your
own tax adviser about the tax consequences of an investment in the Fund.
24
<PAGE> 52
[ LOGO]
LEND LEASE U.S. REAL ESTATE SECURITIES FUND
TRUSTEES
Susan J. Lloyd-Hurwitz, Chairman
Hubbard R. Garber
William J. Klipp
Kevin Malone
Michael A. Torres
FUND DISTRIBUTOR
Sunstone Distribution Services, LLC
207 East Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202
TRANSFER AGENT
Sunstone Financial Group, Inc.
207 East Buffalo Street, Suite 315
Milwaukee, Wisconsin 53202
CUSTODIAN
Wilmington Trust Company
1100 North Market Street, 9th Floor
Wilmington, Delaware 19890
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
AUDITORS
PricewaterhouseCoopers LLP
333 Market Street
San Francisco, CA 94105
For More Information
Additional information about the Fund, including the Fund's
Statement of Additional Information, is available to you free upon request. The
Statement of Additional Information is incorporated by reference into (is
legally part of) this Prospectus.
By Telephone: Call 1-877-LND-LEAS (1-877-563-5327)
By Mail: Write to: LEND LEASE FUNDS
P.O. Box 1192
Milwaukee, Wisconsin 5320-1192
25
<PAGE> 53
By E-Mail:
On the Internet: Electronic copies are available on our website at
http://www.________________
Information about the Fund (including the Statement of Additional Information)
can be reviewed and copied at the Commission's Public Reference Room in
Washington, D.C. Information on the operation of the Public Reference Room may
be obtained by calling the Commission at 1-202-942-8090. Reports and other
information about the Fund are available in the EDGAR Database on the SEC's
Internet site at http://www.sec.gov, and copies of this information may be
obtained, after paying a duplicating fee, by E-mail request to
[email protected], or by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
INVESTMENT COMPANY ACT REGISTRATION NUMBER 811-9679.
<PAGE> 54
STATEMENT OF ADDITIONAL INFORMATION
for
LEND LEASE FUNDS
Lend Lease U.S. Real Estate Securities Fund
This Statement of Additional Information describes the Class A, Class K
and Class Y shares of Lend Lease U.S. Real Estate Securities Fund (the "Fund")
and should be read in conjunction with the Prospectus dated February __, 2000
describing the class in which you intend to invest. The Fund's Class A shares
are described in one Prospectus; the Fund's Class K and Class Y shares are
described in another. This Statement of Additional Information is incorporated
by reference in its entirety into each of these Prospectuses. Because this
Statement of Additional Information is not itself a prospectus, you should not
make an investment in shares of the Fund based solely on the information
contained herein. You may obtain copies of each Prospectus without charge by
calling 1-877-LND-LEAS (1-877-563-5327) or by writing to Lend Lease Funds, P.O.
Box 1192, Milwaukee, Wisconsin 53201-1192.
This Statement of Additional Information is dated February __, 2000.
<PAGE> 55
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
FUND ORGANIZATION...............................................................
INVESTMENT POLICIES AND PRACTICES...............................................
Investment Restrictions................................................
Investment Strategies and Risks........................................
MANAGEMENT OF THE FUND..........................................................
Trustees and Officers..................................................
Control Persons and Principal Holders of Securities....................
INVESTMENT ADVISORY AND OTHER SERVICES..........................................
Investment Adviser.....................................................
Sub-Investment Adviser.................................................
Administration and Fund Accounting.....................................
Transfer Agent and Dividend-Paying Agent...............................
Custodian..............................................................
Distributor............................................................
Legal Counsel .........................................................
Independent Accountants................................................
DISTRIBUTION OF SHARES..........................................................
PORTFOLIO TRANSACTIONS AND BROKERAGE............................................
CAPITAL STRUCTURE...............................................................
TAXES...........................................................................
General................................................................
Original Issue Discount................................................
Options, Futures and Foreign Currency Forward Contracts; Straddles.....
Currency Fluctuations - "Section 988" Gains or Losses..................
Passive Foreign Investment Companies...................................
Distributions..........................................................
Disposition of Shares..................................................
Back-up Withholding....................................................
Other Taxation.........................................................
PURCHASE, REDEMPTION AND PRICING OF SHARES......................................
Determination of Net Asset Value.......................................
Reduced Sales Charges..................................................
Retirement Accounts....................................................
Suspension of Redemptions..............................................
Redemptions in Kind....................................................
PERFORMANCE INFORMATION.........................................................
MISCELLANEOUS...................................................................
FINANCIAL STATEMENTS............................................................
</TABLE>
----------------
2
<PAGE> 56
FUND ORGANIZATION
Lend Lease Funds is a non-diversified, open-end, management investment
company organized as a Delaware business trust on October 28, 1999 (the
"Trust"). The Trust is authorized by its Declaration of Trust to issue an
unlimited number of shares of beneficial interest in series and classes. The
Trust currently offers one series of shares, Lend Lease U.S. Real Estate
Securities Fund (the "Fund").
INVESTMENT POLICIES AND PRACTICES
INVESTMENT RESTRICTIONS
Consistent with the Fund's investment objective, the Fund has adopted
certain investment restrictions. Unless otherwise noted, whenever an investment
restriction states a maximum percentage of the Fund's assets that may be
invested in any security or other asset, such percentage restriction will be
determined immediately after and as a result of the Fund's acquisition of such
security or other asset.
The Fund's fundamental restrictions cannot be changed without the
approval of the holders of the lesser of: (i) 67% of the Fund's shares present
or represented at a shareholders meeting at which the holders of more than 50%
of such shares are present or represented; or (ii) more than 50% of the
outstanding shares of the Fund. Other policies and restrictions set forth in
this Statement of Additional Information may be changed by the Trustees without
shareholder approval consistent with applicable law.
The following seven numbered limitations are the Fund's fundamental
investment restrictions in their entirety. Except as otherwise noted, the Fund
may not:
1. Issue senior securities, except as permitted under the Investment
Company Act of 1940, as amended (the "Investment Company Act").
2. Make loans, except that the Fund may (i) lend portfolio securities
in accordance with the Fund's investment policies up to 33% of the Fund's total
assets taken at market value, (ii) enter into repurchase agreements, (iii)
purchase all or a portion of an issue of debt securities, bank loan
participation interests, bank certificates of deposit, bankers' acceptances,
debentures or other securities, whether or not the purchase is made upon the
original issuance of the securities and (iv) lend portfolio securities and
participate in an interfund lending program with other series of the Trust
provided that no such loan may be made if, as a result, the aggregate of such
loans would exceed 33% of the value of the Fund's total assets.
3. Purchase the securities of any issuer if, as a result, 25% or more
of the value of its total assets, determined at the time an investment is made,
exclusive of U.S. government
<PAGE> 57
securities, are in securities issued by companies primarily engaged in the same
industry, except that the Fund will invest more than 25% of its total assets in
the real estate industry.
4. Act as an underwriter or distributor of securities other than shares
of the Fund except to the extent that the Fund's participation as part of a
group in bidding or by bidding alone, for the purchase of permissible
investments directly from an issuer or selling shareholders for the Fund's own
portfolio may be deemed to be an underwriting, and except to the extent that the
Fund may be deemed an underwriter under the Securities Act of 1933, as amended
(the "Securities Act"), by virtue of disposing of portfolio securities.
5. Purchase or sell real estate, except that the Fund may (i) acquire
or lease office space for its own use, (ii) invest in securities of issuers that
invest or deal in real estate or interests therein, (iii) invest in securities
that are secured by real estate or interests therein, (iv) purchase and sell
mortgage-related securities, and (v) hold and sell real estate acquired by the
Fund as a result of the ownership of securities.
6. Borrow money, except (i) in amounts not to exceed 33% of the value
of the Fund's total assets (including the amount borrowed) taken at market value
from banks or through reverse repurchase agreements or forward roll
transactions, (ii) up to an additional 5% of its total assets for temporary
purposes, (iii) in connection with short-term credits as may be necessary for
the clearance of purchases and sales of portfolio securities, (iv) to the extent
otherwise permitted by the Investment Company Act or any exemption therefrom
granted by the SEC and (v) the Fund may purchase securities on margin to the
extent permitted by applicable law. For purposes of this investment restriction,
investments in short sales, roll transactions, futures contracts, options on
futures contracts, securities or indices and forward commitments, entered into
in accordance with the Fund's investment policies, shall not constitute
borrowing.
7. Purchase or sell physical commodities or commodities contracts
unless acquired as a result of ownership of securities or other instruments (but
this shall not prevent the Fund from engaging in transactions involving options
on securities, securities indices and currency, futures contracts on securities,
securities indices and currency and options on such futures, forward foreign
currency exchange contracts, forward commitments, securities index put or call
warrants and repurchase agreements entered into in accordance with the Fund's
investment policies, or from investing in securities or other instruments backed
by physical commodities).
Unless otherwise provided, for purposes of investment
restriction (3) above, the term "industry" shall be defined by reference to the
SEC Industry Codes set forth in the Directory of Companies Required to File
Annual Reports with the Securities and Exchange Commission.
INVESTMENT STRATEGIES AND RISKS
The Prospectus describes the Fund's investment objective, as well as the
principal investment strategies used to achieve that objective and the principal
risks associated with such strategy. The following information supplements the
discussion about the Fund set forth in the Prospectus
4
<PAGE> 58
under the heading "Key Information About the Fund" and "Other Information
Regarding Investment Practices."
TEMPORARY DEFENSIVE MEASURES. The Fund may increase its investment in
government securities, and other short-term, interest-bearing securities without
regard to the Fund's otherwise applicable percentage limits, policies or its
normal investment emphasis, when it believes market conditions warrant a
temporary defensive position. Taking larger positions in such short-term
investments may serve as a means of preserving capital in unfavorable market
conditions. When in a defensive position, the Fund could miss the opportunity to
participate in any stock market advances that occur during those periods, which
the Fund might have been able to participate in if it had remained more fully
invested.
NON-DIVERSIFICATION. The Fund is classified as a "non-diversified" Fund
under the Investment Company Act, which means that the Fund is not limited by
that Act in the proportion of its assets that it may invest in the securities of
a single issuer. The Fund's net asset value may be more volatile than that of a
more-widely diversified fund because the Fund invests more of its assets in a
smaller number of issuers. Consequently, the Fund may be more vulnerable to any
single economic, political or regulatory occurrence, and the gains or losses on
a single stock will have a greater impact on the Fund's net asset value.
PORTFOLIO TURNOVER RATE. The Fund intends to have a portfolio turnover
rate below 80%. The portfolio turnover rate for the Fund is calculated by
dividing the lesser of purchases or sales of portfolio investments for the
reporting period by the monthly average value of the portfolio investments owned
during the reporting period. A 100% portfolio turnover rate results, for
example, if the equivalent of all the securities in the Fund's portfolio are
replaced in a one year period. The calculation excludes all securities,
including options, whose maturities or expiration dates at the time of
acquisition are one year or less. Portfolio turnover may vary greatly from year
to year as well as within a particular year, and may be affected by cash
requirements for redemption of shares. The Fund is not restricted by policy with
regard to portfolio turnover and will make changes in its investment portfolio
from time to time as business and economic conditions as well as market prices
may dictate. Higher portfolio turnover rates result in correspondingly higher
brokerage costs for the Fund. Although the existence of a higher portfolio
turnover rate has no direct correlation to the tax liability of the Fund, sales
of certain stocks will result in realized gains, and, possibly, in increased
taxable distributions to shareholders.
U.S. GOVERNMENT OBLIGATIONS. As a temporary defensive measure, the Fund
may invest in obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. Some of the obligations purchased by the Fund,
such as U.S. Treasury bills, notes and bonds, are backed by the full faith and
credit of the U.S. Government and are guaranteed as to both principal and
interest by the U.S. Treasury. While the obligations of many of the agencies and
instrumentalities of the U.S. Government are not direct obligations of the U.S.
Treasury, they are generally backed indirectly by the U.S. Government. Some of
the agencies are indirectly backed by their right to borrow from the U.S.
Government. Others are supported solely by the credit of the agency or
instrumentality itself, but are given additional support due to the U.S.
Treasury's authority to purchase their outstanding debt obligations. However, no
assurance can be given
5
<PAGE> 59
that the U.S. Government would provide financial support to U.S. Government-
established or sponsored agencies where it is not obligated to do so by law. The
U.S. Government does not guarantee the market value or current yield of these
obligations, and the U.S. Government's guarantee does not extend to the Fund
itself.
SECURITIES OF COMPANIES WITH LIMITED OPERATING HISTORIES. The Fund may
invest in securities of companies with limited operating histories. The Fund
considers these to be securities of companies with a record of less than three
years' continuous operation, including the operations of any predecessors and
parents. Because these companies have only a limited operating history, it is
more difficult to evaluate the company's growth prospects. As a result,
investment decisions for these securities may place a greater emphasis on
current or planned projects and the reputation and experience of the company's
management and less emphasis on fundamental valuation factors than would be the
case for more mature companies. In addition, many of these companies may also be
small companies and involve the risks and price volatility associated with
investments in smaller companies.
SECURITIES OF SMALLER COMPANIES. The Fund may invest in securities of
companies with small or mid-sized market capitalizations. An investment in
companies with smaller capitalizations involves greater risks than investing in
larger, more established companies. Smaller company stocks may be subject to
more abrupt or erratic price movements, because the stocks are traded in lower
volumes in fewer markets and their issuers are more sensitive to changing
conditions and have less certain growth prospects. Smaller companies in which
the Fund invests may have limited holdings, markets or financial resources, or
may be dependent on a small management group. Smaller companies also may be less
significant factors within their industries or industry sectors and may have
difficulty withstanding competition from larger companies. While smaller
companies may be subject to these additional risks, they may also realize more
substantial growth than larger or more established companies.
SPECIAL SITUATIONS. The Fund may also invest in securities of companies
that have recently experienced or are anticipated to experience a significant
change in structure, management, products or services or other special situation
that may significantly affect the value of their securities. Examples of special
situations are companies being reorganized or merged, companies emerging from
bankruptcy, companies introducing unusual new products or which enjoy particular
tax advantages. Other examples include companies experiencing changes in senior
management, extraordinary corporate events, significant changes in cost or
capital structure or which are believed to be probable takeover candidates. The
opportunity to invest in special situations, however, is limited and depends in
part on the market's assessment of these companies and their circumstances. By
its nature, a "special situation" company involves to some degree a break with
the company's past experience. This creates greater uncertainty and potential
risk of loss than if the company were operating according to long-established
patterns. In addition, stocks of companies in special situations may decline or
not appreciate as expected if an anticipated change or development does not
occur or is not assessed by the market as favorably as expected.
ILLIQUID AND RESTRICTED SECURITIES. The Fund is authorized to invest up
to 15% of its net assets in securities which are illiquid or not readily
marketable because they are subject to
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<PAGE> 60
restrictions on their resale ("restricted securities") or because, based upon
their nature or the market for such securities, no ready market is available.
Investments in illiquid securities involve certain risks to the extent that the
Fund may be unable to dispose of such a security at the time desired or at a
reasonable price or, in some cases, may be unable to dispose of it at all. In
addition, in order to resell a restricted security, the Fund might have to incur
the potentially substantial expense and delay associated with effecting
registration. The Fund may have to lower the price, sell other portfolio
securities instead or forego an investment opportunity, any of which could have
a negative impact on Fund management or performance. Because illiquid and
restricted securities may be difficult to sell at an acceptable price, they may
be subject to greater volatility and may result in a loss to the Fund.
The Board has delegated to the Sub-Adviser the day-to-day determination
of the liquidity of a security, although it has retained oversight and ultimate
responsibility for such determinations. Although no definite quality criteria
are used, the Sub-Adviser considers such factors as (i) the nature of the market
for a security (including the institutional, private or international resale
market), (ii) the terms of these securities or other instruments allowing for
the disposition to a third party or the issuer thereof (e.g., certain repurchase
obligations and demand instruments), (iii) the availability of market quotations
(e.g., for securities quoted in PORTAL system), and (iv) other permissible
relevant factors. Certain securities are deemed illiquid by the Securities and
Exchange Commission (the "SEC"), including repurchase agreements maturing in
more than seven days and options not listed on a securities exchange or not
issued by the Options Clearing Corporation. These securities will be treated as
illiquid and subject to the Fund's limitation on illiquid securities. Because an
active market may not exist for illiquid securities, the Fund may experience
delays and additional cost when trying to sell illiquid securities.
Restricted securities may be sold in privately negotiated or other
exempt transactions, qualified non-U.S. transactions, such as under Regulation
S, or in a public offering with respect to which a registration statement is in
effect under the Securities Act. Where registration is required, the Fund may be
obligated to pay all or part of the registration expenses and a considerable
time may elapse between the decision to sell and the sale date. If, during such
period, adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell. Restricted securities
will be priced at fair value as determined in good faith by the Board.
In recent years, a large institutional market has developed for certain
securities that are not registered under the 1933 Act, including repurchase
agreements, commercial paper, foreign securities, municipal securities and
corporate bonds and notes. The Fund may buy or sell restricted securities in
accordance with Rule 144A under the 1933 Act ("Rule 144A Securities").
Securities may be resold pursuant to Rule 144A under certain circumstances only
to qualified institutional buyers as defined in the rule, and the markets and
trading practices for such securities are relatively new and still developing;
depending on the development of such markets, such Rule 144A Securities may be
deemed to be liquid as determined by or in accordance with methods adopted by
the Trustees. In all other cases, however, securities subject to restrictions on
resale will be deemed illiquid. The Sub-Adviser will determine the liquidity of
Rule 144A Securities under the supervision of the Board of Trustees using
various factors such as (1) the
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<PAGE> 61
frequency of trades and quotations, (2) the number of dealers and prospective
purchasers in the marketplace, (3) dealer undertakings to make the market, (4)
the nature of the security (including any demand or tender features) and (5) the
likelihood of continued marketability and credit quality of the issuer.
Investments in Rule 144A Securities could have the effect of increasing the
level of the Fund's illiquidity to the extent that qualified institutional
buyers become, for a time, disinterested in purchasing such securities. Also,
the Fund may be adversely impacted by the possible illiquidity and subjective
valuation of such securities in the absence of a market for them.
CONVERTIBLE SECURITIES. The Fund may invest in convertible securities.
A convertible security may be converted either at a stated price or rate within
a specified period of time into a specified number of shares of common stock. By
investing in convertible securities, the Fund seeks the opportunity, through the
conversion feature, to participate in a portion of the capital appreciation of
the common stock into which the securities are convertible, while earning higher
current income than is available from the common stock. Convertible securities
entitle the holder to receive interest paid or accrued on debt or the dividend
paid on preferred stock until the convertible securities mature or are redeemed,
converted or exchanged. Prior to conversion, convertible securities have
characteristics similar to ordinary debt securities or preferred stocks in that
they normally provide a stable stream of income with generally higher yields
than those of common stock of the same or similar issuers. Convertible
securities rank senior to common stock in a corporation's capital structure.
In selecting convertible securities, the Fund will consider, among
other factors, its evaluation of the creditworthiness of the issuers of the
securities; the interest or dividend income generated by the securities; the
potential for capital appreciation of the securities and the underlying common
stocks; the prices of the securities relative to other comparable securities and
to the underlying common stocks; whether the securities are entitled to the
benefits of sinking funds or other protective conditions; the diversification of
the Fund's portfolio as to issuers; and whether the securities are rated by a
rating agency and, if so, the ratings assigned.
The value of convertible securities is a function of their investment
value (determined by yield in comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and
their conversion value (their worth, at market value, if converted into the
underlying common stock). The investment value of convertible securities is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline, and by the
credit standing of the issuer and other factors. The conversion value of
convertible securities is determined by the market price of the underlying
common stock. If the conversion value is low relative to the investment value,
the price of the convertible securities is governed principally by their
investment value. To the extent the market price of the underlying common stock
approaches or exceeds the conversion price, the price of the convertible
securities will be increasingly influenced by their conversion value. In
addition, convertible securities generally sell at a premium over their
conversion value determined by the extent to which investors place value on the
right to acquire the underlying common stock while holding fixed income
securities.
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<PAGE> 62
The Fund may realize capital appreciation from an improvement in the
credit standing of an issuer whose securities are held in the Fund or from a
general lowering of interest rates, or a combination of both. Conversely, a
reduction in the credit standing of an issuer whose securities are held by the
Fund or a general increase in interest rates may be expected to result in
capital depreciation to the Fund.
REPURCHASE AGREEMENTS. A repurchase agreement is an agreement under
which the Fund acquires securities (generally government securities, bankers'
acceptances or certificates of deposit) from a commercial bank, broker or
dealer, subject to resale to the seller at an agreed-upon price and date
(normally the next business day). The resale price reflects an agreed-upon
interest rate effective for the period the instruments are held by the Fund and
is unrelated to the interest rate on the instruments. The instruments acquired
by the Fund (including accrued interest) must have an aggregate market value in
excess of the resale price and will be held by a Fund custodian until they are
repurchased. The [Sub-Adviser] evaluates the creditworthiness of repurchase
agreement counterparties and takes steps that are reasonably designed to ensure
that the Fund's repurchase agreements are fully collateralized.
The use of repurchase agreements nevertheless involves certain risks.
For example, if the seller defaults on its obligation to repurchase the
instruments acquired by the Fund at a time when their market value has declined,
the Fund may incur a loss. If the seller becomes insolvent or subject to
liquidation or reorganization under bankruptcy or other laws, a court may
determine that the instruments acquired by the Fund are collateral for a loan by
the Fund and therefore are subject to sale by the trustee in bankruptcy.
Finally, it is possible that the Fund may not be able to substantiate its
interests in the instruments it acquires. While the Fund acknowledges these
risks, it is expected that they can be controlled through careful documentation
and monitoring.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase and
sell securities on a when-issued or delayed delivery basis. However, the Fund
does not currently intend to purchase or sell securities on a when-issued or
delayed delivery basis, if as a result, more than 5% of its total assets taken
at market value at the time of purchase would be invested in such securities.
When-issued or delayed delivery transactions arise when securities (normally,
obligations of issuers eligible for investment by the Fund) are purchased or
sold by the Fund with payment and delivery taking place in the future in order
to secure what is considered to be an advantageous price or yield. However, the
yield available on a comparable security when delivery takes place may vary from
the yield on the security at the time that the when-issued or delayed delivery
transaction was entered into. Any failure to consummate a when-issued or delayed
delivery transaction may result in the Fund missing the opportunity to obtain a
price or yield considered to be advantageous. When-issued and delayed delivery
transactions may generally be expected to settle within one month from the date
the transactions are entered into, but in no event later than 90 days. However,
no payment or delivery is made by the Fund until it receives delivery or payment
from the other party to the transaction.
When the Fund purchases securities on a when-issued basis, it will
maintain in a segregated account with its Custodian cash, U.S. government
securities or other liquid assets having an aggregate value equal to the amount
of such purchase commitments, until payment is
9
<PAGE> 63
made. If necessary, additional assets will be placed in the account daily so
that the value of the account will equal or exceed the amount of the Fund's
purchase commitments.
LENDING OF PORTFOLIO SECURITIES. The Fund may lend its
securities to qualified institutional investors (such as brokers, dealers or
other financial organizations) who need to borrow securities in order to
complete certain transactions, such as covering short sales, avoiding failures
to deliver securities or completing arbitrage operations. By lending its
securities, the Fund will be attempting to generate income through the receipt
of interest on the loan which, in turn, can be invested in additional securities
to pursue the Fund's investment objective. Any gain or loss in the market price
of the securities loaned that might occur during the term of the loan would be
for the account of the Fund.
The Fund may lend its portfolio securities to qualified brokers,
dealers, banks or other financial institutions, so long as the terms, the
structure and the aggregate amount of such loans are not inconsistent with the
Investment Company Act, or the rules and regulations or interpretations of the
SEC thereunder, which currently require that (a) the borrower pledge and
maintain with the Fund collateral consisting of cash, an irrevocable letter of
credit or securities issued or guaranteed by the United States government having
a value at all times not less than 100% of the value of the securities loaned,
(b) the borrower add to such collateral whenever the price of the securities
loaned rises (i.e., the borrower "marks to the market" on a daily basis), (c)
the loan be made subject to termination by the Fund at any time, (d) the Fund
receives reasonable interest on the loan, which interest may include the Fund's
investing cash collateral in interest bearing short-term investments, and (e)
the Fund receives all dividends and distributions on the loaned securities and
any increase in the market value of the loaned securities.
The Fund bears risk of loss in the event that the other party to a
securities lending transaction defaults on its obligations and the Fund is
delayed in or prevented from exercising its rights to dispose of the collateral,
including the risk of a possible decline in the value of the collateral
securities during the period in which the Fund seeks to assert these rights, the
risk of incurring expenses associated with asserting these rights and the risk
of losing all or a part of the income from the transaction. The Fund will not
lend its portfolio securities if, as a result, the aggregate value of such loans
would exceed 33-1/3% of the value of the Fund's total assets. Loan arrangements
made by the Fund will comply with all other applicable regulatory requirements,
including the rules of the New York Stock Exchange, which rules presently
require the borrower, after notice, to redeliver the securities within the
normal settlement time of three business days. All relevant facts and
circumstances, including creditworthiness of the broker, dealer or institution,
will be considered in making decisions with respect to the lending of
securities, subject to review by the Fund's trustees.
HEDGING TRANSACTIONS. The Fund may buy and sell options, futures
contracts and options on futures contracts for hedging purposes (i) to protect
against the effect of changes in market prices on the value of investments the
Fund holds, intends to purchase or intends to sell or (ii) to permit a portion
of its portfolio held in cash to perform as if invested in securities. The
instruments underlying the Fund's futures and options positions may include,
without limitation, securities, securities indices, commodities and currencies.
The Fund may also take futures and options positions related to financial,
commercial and other economic indicators such as interest rates. (This
discussion refers to a derivative instrument's subject matter as the
instrument's
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<PAGE> 64
underlying asset.) The Fund may also purchase instruments with characteristics
of both futures and securities (e.g., debt instruments with interest and
principal payments determined by reference to the value of a commodity or a
currency at a future time) and which, therefore, possess the risks of both
futures and securities investments.
Derivatives, such as options, futures contracts and options on futures
contracts enable the Fund to take both "short" positions (positions which reduce
the Fund's exposure to a particular instrument or index) and "long" positions
(positions which increase the Fund's exposure to a particular instrument or
index).
Futures Contracts. Futures contracts are publicly traded contracts to
buy or sell a commodity or an underlying instrument or group of instruments,
e.g., a security or an index of securities, at a future time at a specified
price. A contract to buy establishes a long position while a contract to sell
establishes a short position.
The purchase of a futures contract normally enables a buyer to
participate in the market movement of the underlying asset after paying a
transaction charge and posting margin in an amount typically equal to a
percentage of the value of the asset or index. The Fund will initially be
required to deposit with the Trust's custodian or the futures commission
merchant effecting the futures transaction an amount of "initial margin" in cash
or securities, as permitted under applicable regulatory policies.
Initial margin differs from margin in securities transactions in that
the former does not involve the borrowing of funds to finance the transaction.
Rather, the initial margin is like a performance bond or good faith deposit on
the contract. Subsequent payments (called "maintenance margin") to and from the
broker will be made on a daily basis as the price of the underlying asset
fluctuates. This process is known as "marking to market." For example, when the
Fund has taken a long position in a futures contract and the value of the
underlying asset has risen, that position will have increased in value and the
Fund will receive from the broker a maintenance margin payment equal to the
increase in value of the underlying asset. Conversely, when the Fund has taken a
long position in a futures contract and the value of the underlying asset has
declined, the position would be less valuable, and the Fund would be required to
make a maintenance margin payment to the broker. If a liquid market exists, the
Fund may choose to close a futures position prior to expiration by taking a
position opposite to the one it holds.
For each futures contract the Fund enters, it will identify to the
Trust's custodian assets equal to the face value of the futures contract for
maintenance in a separate account to ensure that the use of such futures
contracts is unleveraged. The Fund may also "cover" its futures positions using
other means as permitted under applicable exchange and regulatory policies.
Options. There are two basic types of options: "puts" and "calls." Each
type of option can establish either a long or short position, depending upon
whether the Fund is the purchaser or writer (seller) of the option. A call
option, for example, gives the purchaser of the option the right to buy, and the
writer the obligation to sell upon exercise by the option holder, the underlying
asset at the exercise price during the option period. Conversely, a put option
gives
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<PAGE> 65
the purchaser the right to sell, and the writer the obligation to buy upon
exercise by the option holder, the underlying asset at the exercise price during
the option period.
The purchaser of an option receives the opportunity to benefit from
favorable movements in the price of the option's underlying asset while risking
only the amount of the premium regardless of unfavorable movements in the price
of the underlying asset. In general, a purchased put increases in value as the
value of the underlying asset falls and a purchased call increases in value as
the value of the underlying asset rises.
The writer of a put or call option takes the opposite side of the
transaction from the option's purchaser. In return for receipt of the premium,
the writer assumes the obligation to pay the strike price for the option's
underlying asset if the other party to the option chooses to exercise it. The
writer may seek to terminate its exposure to a put option before exercise by
closing out the option in the secondary market at its current price. If the
secondary market is not liquid, however, the writer must continue to be prepared
to pay the strike price while the option is outstanding, regardless of price
changes. If the value of the underlying asset remains unchanged over time, it is
likely that the writer will also profit, because it should be able to close out
the option at a lower price. If the value of the underlying asset falls, the put
writer would expect to suffer a loss. This loss should be less than the loss
from purchasing the underlying asset directly, however, because the premium
received for writing the option should offset the effects of the decline to some
extent.
Writing a call option obligates the writer to deliver the option's
underlying asset, in return for the strike price, upon exercise of the option.
The characteristics of writing call options are similar to those of writing put
options, except that writing calls generally is a profitable strategy if prices
remain the same or fall. At the same time, because a call writer must be
prepared to deliver the underlying asset in return for the strike price, even if
its current value is greater, a call writer gives up some ability to participate
in security price increases.
The Fund may engage in options on futures contracts. These options give
the purchaser the right, in return for the premium paid, to assume a position in
a futures contract at a specified exercise price at any time during the period
of the option. When writing an option on a futures contract, the Fund will be
required to make margin payments as described above for other types of futures
contracts. The Fund's transactions in options are subject to applicable
regulatory requirements regarding the segregation of assets to cover its
positions.
Limitations and Risks of Derivatives. The Fund has filed a notice of
eligibility for exclusion from the definition of the term "commodity pool
operator" with the Commodity Futures Trading Commission ("CFTC") and the
National Futures Association, which regulate trading in the futures markets. The
Fund intends to comply with Rule 4.5 under the Commodity Exchange Act, which
limits the extent to which the Fund can commit assets to initial margin deposits
and option premiums.
The Fund's ability to use derivatives effectively depends on the degree
to which price movements in its holdings correlate with price movements of its
derivatives positions. The Fund may invest in derivatives based on securities
with different issuers, maturities, or other
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<PAGE> 66
characteristics from the securities in which the Fund typically invests, which
involves a risk that the derivatives position will not track the performance of
the Fund's other investments. Options and futures prices can also diverge from
the prices of their underlying assets, even if the underlying assets match the
Fund's investments well. Options and futures prices are affected by such factors
as current and anticipated short-term interest rates, changes in volatility of
the underlying asset, and the time remaining until expiration of the contract,
which may not affect securities prices the same way. Imperfect correlation may
also result from differing levels of demand in the options and futures markets
and the securities markets, from structural differences in how options and
futures and securities are traded, or from imposition of daily price fluctuation
limits or trading halts. As a result of these factors, the Fund's futures and
options positions may not perform as expected.
The market for a derivative instrument may also be less liquid than the
market for its underlying asset. Some positions in futures and options may be
closed out only on the exchange where they are traded. There can be no assurance
that a liquid secondary market will exist for any particular futures contract or
option at any specific time. Thus, it may not be possible to close such an
option or futures position prior to maturity. The inability to close options and
futures positions also could have an adverse impact on the Fund's ability to
effectively carry out its derivatives strategies and might, in some cases,
require the Fund to deposit additional cash to meet applicable margin
requirements.
MANAGEMENT OF THE FUND
As a Delaware business trust, the business and affairs of the Fund are
managed by its officers under the direction of its Board of Trustees. The
Trustees meet periodically throughout the year to oversee the Fund's activities,
review its performance, and review the actions of the Adviser and Sub-Adviser.
TRUSTEES AND OFFICERS
Information regarding the Board of Trustees and officers of the Fund,
including their principal business occupations during at least the last five
years, is set forth below. An asterisk appears next to the name of each Trustee
who is an interested person of the Fund as defined by the Investment Company
Act.
<TABLE>
<CAPTION>
- --------------------------------------- -------------------------- ---------------------------------------------------
NAME, ADDRESS AND AGE POSITIONS HELD WITH THE PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
FUND
- --------------------------------------- -------------------------- ---------------------------------------------------
<S> <C> <C>
Susan J. Lloyd-Hurwitz* Chairman of the Board, President, Lend Lease Rosen Real Estate
1995 University Avenue President Securities LLC, an investment advisory firm
Suite 550 (1999-present); CEO, Rosen Consulting Group, LLC
Berkeley, CA 94704 (1999-Present); Senior Vice President,
DOB: 2/15/67 (1997-1999), Principal (1999-present) Lend Lease
Real Estate Investments, Inc.; Portfolio
- --------------------------------------- -------------------------- ---------------------------------------------------
</TABLE>
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<PAGE> 67
<TABLE>
- --------------------------------------- -------------------------- --------------------------------------------------
<S> <C> <C>
Manager,
General Property Trust (1994-1997).
- ---------------------------------------------------------------------------------------------------------------------
Hubbard R. Garber Trustee Partner, Barrington Financial Group, LLC, a
101 Federal Street consulting and investment advisory firm
19th Floor (1996-present); Consultant, Chestnut Partners, a
Boston, MA 02110 consulting and investment advisory firm
DOB: 3/13/59 (1995-1996).
- --------------------------------------- -------------------------- ---------------------------------------------------
William J. Klipp Trustee Private investor (2000-present); President and
530 Kentucky Avenue Chief Operating Officer, Charles Schwab
San Mateo, CA 94402 Investment Management, Inc., an investment
DOB: 12/9/55 advisory firm (1995-1999); Executive Vice
President, Schwab Funds(R) and Charles Schwab &
Co., Inc. (1995-1999).
- --------------------------------------- -------------------------- ---------------------------------------------------
Kevin Malone Trustee President and Founder, Greenrock Research, LLC
Greenrock Research, LLC (1996-present); Portfolio Manager, Alliance
231 West 22nd Street Capital Management, an investment advisory firm
Oak Brook, IL 60523 (1995-1996).
DOB: 7/3/47
- --------------------------------------- -------------------------- ---------------------------------------------------
Michael A. Torres* Trustee, Vice President President and Co-President, Lend Lease Rosen Real
1995 University Avenue Estate Securities, LLC, an investment advisory
Suite 550 firm (1998-present); ERE Rosen Real Estate
Berkeley, CA 94704 Securities, L.L.C., an investment advisory firm
DOB: 6/21/60 (1997-1998); Director, AMB Rosen Real Estate
Securities, L.L.C., an investment advisory firm
(1995-1997).
- --------------------------------------- -------------------------- ---------------------------------------------------
Mark A. Hoopes Vice President, Vice President, Lend Lease Real Estate
1995 University Avenue Assistant Treasurer Investments, Inc. (2000-present); Account
Suite 550 Director, Mutual Fund Services Division, SEI
Berkeley, CA 94704 Investments, Inc. (1994-2000).
DOB: 3/31/64
- --------------------------------------- -------------------------- ---------------------------------------------------
</TABLE>
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<PAGE> 68
<TABLE>
- --------------------------------------- -------------------------- ---------------------------------------------------
<S> <C> <C>
Jon P. Kiekhofer Treasurer Administration Services Manager (1999-present),
207 East Buffalo Street Senior Financial Analyst (1995-1999), Financial
Suite 400 Analyst (1994-1995) - Sunstone Financial Group,
Milwaukee, WI 53202 Inc.
DOB: 12/20/58
- --------------------------------------- -------------------------- ---------------------------------------------------
Gage R. Johnson Secretary Principal (1999 to present), Senior Vice
Lend Lease Real Estate Investments, President (1999) - Legal Department, Lend Lease
Inc. Real Estate Investments, Inc.; Of Counsel, Real
Monarch Tower Estate Department - Paul, Hastings, Janofsky &
3424 Peachtree Road, N.E. Walker LLP (1994-1998).
Suite 800
Atlanta, GA 30326
DOB: 11/28/61
- --------------------------------------- -------------------------- ---------------------------------------------------
Patricia K. Styles Assistant Secretary Blue Sky and Client Development Manager
207 East Buffalo Street (1999-present), Blue Sky Supervisor (1996-1999),
Suite 400 Senior Compliance Analyst (1995-1996), Compliance
Milwaukee, WI 53202 Analyst (1994-1995) - Sunstone Financial Group,
DOB: 3/9/58 Inc.
- --------------------------------------- -------------------------- ---------------------------------------------------
</TABLE>
At various times beginning in 1997 and continuing through January 2000,
Barrington Financial Group, LLC, the consulting and investment advisory firm of
which Mr. Garber is a partner, provided the Adviser, Sub-Adviser and various of
their respective affiliates with advice regarding the development of collective
investment vehicles including the Trust. Barrington Financial Group's aggregate
fees for these services during the period were approximately $80,000 which was
not material to the business of Barrington Financial Group or the business of
the Adviser, the Sub-Adviser or their respective affiliates. Mr. Torres is a
Director of Manufactured Home Communities, Inc., a REIT primarily in the
business of owning, operating, leasing, developing, redeveloping and acquiring
manufactured home communities; the Fund does not intend to purchase securities
of Manufactured Home Communities, Inc. so long as Mr. Torres is a Director of
the company.
The Trustees of the Trust who are officers of the Adviser or
Sub-Adviser receive no remuneration from the Fund. Each of the other Trustees
will be paid the sum of $500 per meeting attended, and will be reimbursed for
the expenses of attending meetings.
COMPENSATION TABLE (a)
<TABLE>
<CAPTION>
- ------------------------- ---------------------------------- ------------------------------
AGGREGATE COMPENSATION FROM TOTAL COMPENSATION FROM
NAME OF PERSON FUND TRUST PAID TO TRUSTEES
<S> <C> <C>
Susan J. Lloyd-Hurwitz $0 $0
- ------------------------- ---------------------------------- ------------------------------
</TABLE>
15
<PAGE> 69
<TABLE>
- ------------------------- ---------------------------------- ------------------------------
<S> <C> <C>
Hubbard R. Garber $2,000 $2,000
William J. Klipp $2,000 $2,000
Kevin Malone $2,000 $2,000
Michael A. Torres $0 $0
- ------------------------- ---------------------------------- ------------------------------
</TABLE>
(a) The information provided in the above table is based on an estimate of
payments to be made for the Fund's first fiscal year ending January 31, 2001.
The Trust has not adopted any pension or retirement plans for the officers or
Trustees of the Trust. Therefore, there have been no benefits accrued as part of
Trust expenses nor are there estimated currently any annual benefits upon
retirement.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of January 31, 2000, the Sub-Adviser owned all of the outstanding
shares of the Fund. It is contemplated that soon after the initial public
offering of shares of the Fund, the Sub-Adviser's ownership of the shares of the
Fund will represent less than 25% of the Fund's outstanding shares. As of
January 31, 2000, the trustees and officers of the Fund as a group beneficially
owned less than 1% of the outstanding shares of the Fund.
INVESTMENT MANAGEMANT AND OTHER SERVICES
ADVISER. The investment adviser to the Fund is Lend Lease Real Estate
Investments, Inc. (the "Adviser"). The Adviser was organized as a Delaware
corporation on May 18, 1984, and its principal place of business is Monarch
Tower, 3424 Peachtree Road, N.E., Suite 800, Atlanta, Georgia 30326. Pursuant to
an advisory agreement entered into between the Trust on behalf of the Fund and
the Adviser (the "Advisory Agreement"), the Adviser provides continuous
investment management services to the Fund. The Adviser also provides the Fund
with office space, equipment and personnel necessary to operate and administer
the Fund's business and to supervise the provision of services by third parties.
The Adviser is a wholly-owned indirect subsidiary of Lend Lease Corporation
Limited, an integrated property and financial services company listed on the
Australian and New Zealand stock exchanges with a market capitalization
exceeding U.S. $5 billion.
The Advisory Agreement is dated February 1, 2000. The Advisory
Agreement has an initial term of two years and thereafter is required to be
approved annually by the Board of Trustees of the Trust or by vote of a majority
of the Fund's outstanding voting securities (as defined in the Investment
Company Act). Each annual renewal must also be approved by the vote of a
majority of the Fund's Trustees who are not parties to the Advisory Agreement or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval. The Advisory Agreement is terminable without
penalty on 60 days' written notice by the Trustees, by vote of a majority of a
Fund's outstanding voting securities, or by the Adviser, and will terminate
automatically in the event of its assignment.
The Adviser has contractually agreed, through January 31, 2002, to
limit total annual operating expenses to the following percentages of average
daily net assets for each class of
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shares of the Fund: Class A shares (1.50%), Class K shares (1.25%) and Class Y
shares (0.97%), subject to later reimbursement by the Fund in certain
circumstances. After that date, the limitations may be renewed for one year
periods under certain conditions. See "Investment Management" in the Prospectus
for further information.
SUB-ADVISER. The sub-adviser to the Fund is Lend Lease Rosen Real
Estate Securities LLC (the "Sub-Adviser" or "Lend Lease Rosen"). The Sub-Adviser
was organized as a Delaware limited liability company on February 14, 1995, and
its principal place of business is 1995 University Avenue, Suite 550, Berkeley,
CA 94704. Pursuant to a sub-advisory agreement entered into between the Adviser
and the Sub-Adviser (the "Sub-Advisory Agreement"), the Sub-Adviser provides an
investment program for the Fund, makes investment decisions for the Fund and
places all orders for the purchase and sale of portfolio securities and all
other instruments. The activities of the Sub-Adviser are subject to the
supervision and control of the Trustees and the Adviser.
As compensation for its services, the Adviser pays to the Sub-Adviser a
sub-advisory fee at the annual rate of .40% of the Fund's average daily net
assets. The sub-advisory fee is accrued daily and paid monthly.
The Adviser owns a 50% interest in the Sub-Adviser. Dr. Kenneth T.
Rosen, the founder of Lend Lease Rosen, owns an approximately 45% interest in
the Sub-Adviser.
ADMINISTRATION AND FUND ACCOUNTING. Sunstone Financial Group, Inc., 207
East Buffalo Street, Suite 400, Milwaukee, Wisconsin 53202 ("Sunstone") has
entered into an agreement with the Fund to provide various administrative and
fund accounting services to the Fund (the "Administration Agreement").
Sunstone's services include, but are not limited to, the following: calculating
daily net asset values for the Fund; overseeing the Fund's Custodian; assisting
the preparation and filing of all federal income and excise tax filings (other
than those to be made by the Fund's Custodian); overseeing the Fund's fidelity
insurance relationships; participating in the preparation of the Fund's
registration statement; preparing notice and renewal securities filings pursuant
to state securities laws; compiling data for and preparing notices to the SEC;
preparing financial statements for the annual and semi-annual reports to the SEC
and current investors; monitoring the Fund's expenses; monitoring the Fund's
status as a regulated investment company under Subchapter M of the Internal
Revenue Code (the "Code"); monitoring compliance with the Fund's investment
policies and restrictions and generally assisting the Fund's administrative
operations. Sunstone, at its own expense, and without reimbursement from the
Fund, furnishes office space and all necessary office facilities, equipment,
supplies and clerical and executive personnel for performing the services
required to be performed by it under the Administration Agreement.
For the foregoing, Sunstone receives a fee on the value of the Fund
computed daily and payable monthly, at the annual rate of 0.17 percent of the
first $50 million of its average daily net assets, and decreasing as assets
reach certain levels, subject to an annual minimum fee of $68,750, plus
out-of-pocket expenses.
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TRANSFER AGENT AND DIVIDEND-PAYING AGENT. Sunstone also acts as the
Fund's transfer agent and dividend-paying agent. As such, Sunstone processes
purchase and redemption requests for the securities of the Fund, keeps records
of shareholder accounts and transactions, pays dividends as declared by the
Board of Trustees and issues confirmations of transactions to shareholders. For
these services, the Fund pays Sunstone a fee based on the number of shareholder
accounts, transactions and other activities, subject to a minimum annual fee.
Sunstone does not exercise any supervisory functions over the management of the
Fund or the purchase and sale of Fund securities.
From time to time, the Trust, on behalf of the Fund, either directly or
indirectly through arrangements with the Adviser, the Sub-Adviser, the
Distributor (as hereinafter defined) or Sunstone, in its capacity as transfer
agent, may pay amounts to third parties that provide transfer agent-type
services and other administrative services relating to the Fund to persons who
have a beneficial interest in the Fund, such as 401(k) plan participants. These
services may include, among other things, sub-accounting services, transfer
agent type activities, answering Fund-related inquiries, transmitting proxy
statements, annual reports, updated prospectuses and other communications
regarding the Fund and other related services as the Fund may request.
CUSTODIAN. Wilmington Trust Company, 1100 North Market, 9th Floor,
Wilmington, Delaware, 19890 (the "Custodian"), serves as the custodian for the
Fund. Under the terms of the Custody Agreement, the Custodian is responsible for
the receipt and delivery of the Fund's securities and cash. The Custodian does
not exercise any supervisory functions over the management of the Fund or the
purchase and sale of securities.
DISTRIBUTOR. Under an agreement with the Trust, on behalf of the Fund,
Sunstone Distribution Services, LLC, 207 East Buffalo Street, Suite 400,
Milwaukee, Wisconsin 53202 (the "Distributor") acts as principal underwriter for
the Fund and acts as exclusive agent for the Fund in selling its shares to the
public. The Distributor shall offer shares of the Fund on a continuous basis and
may engage in advertising and solicitation activities in connection therewith.
The Distributor is not obligated to sell any certain number of shares of the
Fund. For marketing and distribution services provided, the Fund pays the
Distributor compensation at the annual rate of 0.02% of the first $250 million
of its average daily net assets and decreasing as assets reach certain levels,
subject to an annual minimum fee of $25,000, plus out-of-pocket expenses.
LEGAL COUNSEL. Goodwin, Procter & Hoar LLP, with offices at Exchange
Place, Boston, Massachusetts 02109, serves as counsel to the Fund.
INDEPENDENT AUDITORS. PricewaterhouseCoopers LLP are the independent
auditors for the Fund. They are responsible for performing an audit of the
Fund's year-end financial statements as well as providing accounting and tax
advice to the management of the Fund.
DISTRIBUTION OF SHARES
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The Fund has adopted Plans of Distribution (the "Plans") for Class A
and Class K shares, respectively, under Rule 12b-1 of the Investment Company
Act. Each Plan provides that the Fund may make payments up to 0.25% (on an
annual basis) of the average daily value of the net assets of the class in
question (the "12b-1 fee") designed to result in the sale of, or the servicing
of shareholder accounts, holding shares of the class of Fund shares to which the
Plan applies. Some or all of the 12b-1 fee may be used to compensate brokers and
other authorized institutions ("Authorized Firms") for their efforts in selling
shares of that class and/or for providing account administration services to
their clients who are beneficial owner of such shares. One or more affiliates of
the Adviser and Sub-Adviser may act as Authorized Firms. The services provided
by the Authorized Firms may include, among other things, receiving, aggregating
and processing shareholder or beneficial owner (collectively "shareholder")
orders; furnishing shareholder subaccounting; providing and maintaining
retirement plan records; communicating periodically with shareholders; acting as
the sole shareholder of record and nominee for shareholders; maintaining account
records for shareholders; answering questions and handling correspondence from
shareholders about their accounts; issuing various shareholder reports and
confirmations for transactions by shareholders; performing daily investment
("sweep") functions for shareholders and performing similar account and
administrative services. Any 12b-1 fees received by the Distributor and not
allocated to Authorized Firms may be retained by the Distributor to compensate
the Distributor for services provided and expenses incurred by it in connection
with sales, promotional and marketing activities relating to that class (e.g.
for advertising costs, the cost of printing and mailing prospectuses and reports
to potential investors).
The Trustees have determined that, in their judgment, there is a
reasonable likelihood that each 12b-1 Plan will benefit the Fund and holders of
the class to which the Plan applies. In the Trustees' quarterly review of the
12b-1 Plans, they will consider the continued appropriateness of and the level
of compensation provided in the Plans.
Each Plan has been approved by a vote of the Board of Trustees,
including a majority of the Independent Trustees, cast in person at a meeting
called for the purpose of voting on the Plan. Each Plan has also been approved
by the holders of a "majority" (as defined in the Investment Company Act) of the
shares of the applicable class. The shareholder vote for each class was cast by
the Sub-Adviser as the sole initial holder of shares of that class.
Unless a Plan is terminated as described below, it continues in effect
from year to year but only if the Fund's Board of Trustees and the Independent
Trustees specifically vote annually to approve its continuance. (In the context
of Plan approvals, the term "Independent Trustees" in this Statement of
Additional Information refers to those Trustees who are not "interested persons"
of the Fund and who do not have any direct or indirect financial interest in the
operation of the Plan or any agreement under such Plan; otherwise, "Independent
Trustees" means those Trustees who are not interested persons of the Fund.)
Approval must be by a vote cast in person at a meeting called for the purpose of
voting on continuing the Plan. A Plan may be terminated at any time by the vote
of a majority of the Independent Trustees or by the vote of the holders of a
"majority" (as defined in the Investment Company Act) of the outstanding shares
of the applicable class.
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The Board of Trustees and the Independent Trustees must approve all
material amendments to a Plan. An amendment to increase materially the amount of
payments to be made under a Plan must be approved by a "majority" (as defined in
the Investment Company Act) of the applicable class.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Sub-Adviser is primarily responsible for decisions to buy and sell
securities for the Fund, for the placement of its portfolio business and the
negotiation of the commissions to be paid on such transactions, subject to the
supervision of the Board of Trustees. It is the policy of the Sub-Adviser to
seek the best execution at the best security price available with respect to
each transaction, in light of the overall quality of brokerage and research
services provided to the Sub-Adviser.
The Sub-Adviser will place orders pursuant to its investment
determination for the Fund either directly with the issuer or with any broker or
dealer. In executing portfolio transactions and selecting brokers or dealers,
the Sub-Adviser will use its best effort to seek on behalf of the Fund the best
overall terms available. In selecting brokers and assessing the best overall
terms available for any transaction, the Sub-Adviser shall consider all factors
that it deems relevant, including the breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer, and reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. The most favorable price to the
Fund means the best net price without regard to the mix between purchase or sale
price and commission, if any. Over-the-counter securities are generally
purchased or sold directly with principal market makers who retain the
difference in their cost in the security and its selling price (i.e., "markups"
when the market maker sells a security and "markdowns" when the market maker
purchases a security). In some instances, the Sub-Adviser may determine that
better prices are available from non-principal market makers who are paid
commissions directly. Subject to obtaining the best price and execution, the
Sub-Adviser may consider the sales of shares of the Fund when allocating Fund
portfolio transactions to brokers.
In evaluating the best overall terms available, and in selecting the
broker-dealer to execute a particular transaction, the Sub-Adviser may also
consider the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) provided to the Fund
and/or other accounts over which the Sub-Adviser or an affiliate of the
Sub-Adviser exercises investment discretion. While the Sub-Adviser believes
these services have substantial value, they are considered supplemental to its
own efforts in the performance of its duties. Other clients of the Sub-Adviser
may indirectly benefit from the availability of these services to the
Sub-Adviser, and the Fund may indirectly benefit from services available to the
Sub-Adviser as a result of transactions for other clients. The Sub-Adviser is
authorized to pay to a broker or dealer who provides such brokerage and research
services a commission for executing a portfolio transaction for the Fund which
is in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if, but only if, the Sub-Adviser
determines in good faith that such commission was reasonable in relation to the
value of
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the brokerage and research services provided by such broker or dealer
viewed in terms of that particular transaction or in terms of the overall
responsibilities the Sub-Adviser has to the Fund. In no instance, however, will
portfolio securities be purchased from or sold to the Sub-Adviser, or any
affiliated person of either the Trust or the Sub-Adviser, acting as principal in
the transaction, except to the extent permitted by the SEC through rules,
regulations, decisions and no-action letters.
The Sub-Adviser may retain advisory clients in addition to the Fund and
place portfolio transactions for these accounts. Research services furnished by
firms through which the Fund effects its securities transactions may be used by
the Sub-Adviser in servicing all of its accounts; not all of such services may
be used by the Sub-Adviser in connection with the Fund. In the opinion of the
Sub-Adviser, it will not be possible to separately measure the benefits from
research services to each of the accounts (including the Fund) to be managed by
the Sub-Adviser. Because the volume and nature of the trading activities of the
accounts will not be uniform, the amount of commissions in excess of those
charged by another broker paid by each account for brokerage and research
services will vary. However, such costs to the Fund will not, in the opinion of
the Sub-Adviser, be disproportionate to the benefits to be received by the Fund
on a continuing basis.
On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interests of the Fund as well as other fiduciary or
agency accounts managed by it, the Sub-Advisory Agreement provides that the
Sub-Adviser, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be sold or purchased for the Fund with those to be
sold or purchased for such other accounts in order to obtain the best overall
terms available with respect to common and preferred stocks and the best net
price and execution with respect to other securities. In such event, allocation
of the securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Sub-Adviser in the manner it considers to be
most equitable and consistent with its fiduciary obligations to the Fund and
other accounts involved. The Sub-Adviser has established allocation procedures
designed to achieve these goals. In some instances, these procedures may
adversely affect the size of the position obtainable for the Fund or the amount
of the securities that are able to be sold for the Fund.
THE TRUST
The Trust, a Delaware business trust, is a non-diversified open-end
management investment company, registered under the Investment Company Act.
Under the terms of the Trust's Master Trust Agreement dated October 28, 1999
(the "Master Trust Agreement"), the Trustees of the Trust are ultimately
responsible for the management of the Fund's business and affairs. The Fund
represents a separate series of the Trust's shares of beneficial interest. There
are no other series currently, but the Trust's Board of Trustees is empowered to
establish additional Funds at any time without shareholder approval. Shares of
the Fund are currently issued in three classes: Class A, Class K and Class Y.
The Board of Trustees may establish additional classes at any time without
shareholder approval. Each share purchased in compliance with the procedures
established by the Trust will be fully paid and nonassessable.
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Under the Master Trust Agreement, the Trustees of the Trust have
authority to issue an unlimited number of shares of beneficial interest, par
value $.0001 per share, of the Fund. Shares issued by the Fund have no
preemptive, conversion or subscription rights. Each share of the Fund has equal
and exclusive rights to a proportionate share of dividends and distributions
declared by the Fund and to the net assets of the Fund upon liquidation or
dissolution, except such differences as are attributable to differential class
expenses.
Shareholders are entitled to one vote for each dollar of net asset
value held and a proportional fractional vote for any fractional dollar amount
of net asset value held. Shareholders of the Fund or of a class of the Fund have
the right to vote as a separate class with respect to matters as to which their
interests are not identical to those of shareholders of other series of the
Trust or other classes of the Fund, respectively.
The assets received by the Trust from the issue and sale of shares of
the Fund, and all income, earnings, profits and proceeds thereof, subject only
to the rights of creditors, are especially allocated to the Fund and constitute
the underlying assets of the Fund. The underlying assets of the Fund are
required to be segregated on the books of account and are to be charged with the
expenses of the Trust. Any general expenses of the Trust not readily
identifiable as belonging to the Fund shall be allocated by or under the
direction of the Trustees in such a manner as the Trustees determine to be fair
and equitable, taking into consideration, among other things, the nature and the
type of expense and the relative size of the Fund and any other series then in
existence.
Each share of the Fund has equal dividend, redemption and liquidation
rights with other shares of that Fund. Under the Master Trust Agreement, no
annual or regular meeting of shareholders is required. Thus, there will
ordinarily be no annual shareholders meeting unless otherwise required by the
Investment Company Act. Special meetings of shareholders may be called from time
to time for purposes such as electing or removing Trustees, changing a
fundamental policy or approving an investment advisory agreement.
The Board will be a self-perpetuating body until fewer than 50% of the
Trustees serving as such are Trustees who were elected by shareholders. At that
time, another meeting of shareholders will be called to elect Trustees. Under
the Master Trust Agreement and the Investment Company Act, any Trustee may be
removed by votes of two-thirds of the outstanding Trust shares, and holders of
ten percent or more of the outstanding shares of the Trust can require the
Trustees to call a meeting of shareholders for the purpose of the removal of one
or more Trustees. Whenever ten or more shareholders of the Trust who have been
such for at least six months, and who hold in the aggregate shares having a net
asset value of at least $25,000 or which represent at least 1% of the
outstanding shares, whichever is less, apply to the Trustees in writing stating
that they wish to communicate with other shareholders with a view to obtaining
signatures to request a meeting, and such application is accompanied by a form
of communication and request which they wish to transmit, the Trustees shall
within five (5) business days after receipt of such application either (1)
afford to such applicants access to a list of the names and addresses of all
shareholders as recorded on the books of the Trust; or (2) inform such
applicants as to the approximate number of shareholders of record and the
approximate cost of mailing to them the proposed communication or form of
request.
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Shares do not have cumulative voting rights, which means that in
situations in which shareholders elect Trustees, holders of more than 50% of the
shares voting for the election of Trustees can elect 100% of the Trust's
Trustees, and the holders of less than 50% of the shares voting for the election
of Trustees will not be able to elect any person as a Trustee.
TAXES
GENERAL. The Fund intends to qualify for treatment as a regulated
investment company ("RIC") under Subchapter M of the Code. To so qualify, the
Fund must meet the following requirements: (1) the Fund must derive at least 90%
of its gross income each taxable year from dividends, interest, payments with
respect to securities loans, and gains from the sale or other disposition of
stock or securities or foreign currencies, or other income (including but not
limited to gains from options, futures or forward contracts) derived with
respect to its business of investing in such stock, securities or those
currencies; (2) at the close of each quarter of the Fund's taxable year, at
least 50% of the value of its total assets must be represented by cash and cash
items, U.S. government securities, securities of other RICs, and other
securities, with these other securities limited, with respect to any one issuer,
to an amount that does not exceed 5% of the value of the Fund's total assets and
that does not represent more than 10% of the issuer's outstanding voting
securities; and (3) at the close of each quarter of the Fund's taxable year, not
more than 25% of the value of its total assets may be invested in securities
(other than U.S. government securities or the securities of other RICs) of any
one issuer.
As a RIC, the Fund generally will not be subject to U.S. Federal income
tax on income and gains that it distributes to shareholders, if at least 90% of
the Fund's investment company taxable income (which includes, among other items,
dividends, interest and the excess of any short-term capital gains over net
long-term capital losses) for the taxable year is distributed. The Fund intends
to distribute substantially all of such income.
If the Fund fails to qualify for treatment as a RIC in any fiscal year,
it will be treated as a corporation for federal income tax purposes. As such,
the Fund would be required to pay income taxes on its net investment income and
net realized capital gains, if any, at the rates generally applicable to
corporations. Shareholders of the Fund that did not qualify for treatment as a
RIC would not be liable for income tax on the Fund's net investment income or
net realized capital gains in their individual capacities. Distributions to
shareholders, whether from the Fund's net investment income or net realized
capital gains, would be treated as taxable dividends to the extent of current or
accumulated earnings and profits of the Fund.
TAXATION OF CERTAIN MORTGAGE REITS. The Fund may invest in REITS that
hold residual interests in real estate mortgage investment conduits (REMICs).
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 RIC,
such as the Fund, will be allocated to shareholders of the RIC in proportion to
the dividends received by them with the same consequences as if these
shareholders held the related REMIC residual interest directly.
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In general, excess inclusion income allocated to shareholders (i) cannot be
offset by net operating losses 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 that otherwise might
not 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 shareholder in a RIC, then the RIC
will be subject to a tax equal to that portion of 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.
DISTRIBUTIONS. Distributions of investment company taxable income are
taxable to a U.S. shareholder as ordinary income, whether paid in cash or
shares. Dividends pay by the Fund to a corporate shareholder, to the extent such
dividends are attributable to dividends received from U.S. corporations by the
Fund, may qualify for the dividends received deduction. Dividends attributable
to the Fund's investments in REITs generally will not qualify for the dividends
received deduction. In addition, the alternative minimum tax applicable to
corporations may reduce the value of the dividends received deduction.
Distributions of net capital gains (the excess of net long-term capital gains
over net short-term capital losses), if any, designated by the Fund as capital
gain dividends, are taxable to shareholders at the applicable long-term capital
gains rate (or the rate for unrecaptured Section 1250 capital gains, as
applicable and designated by the Fund), whether paid in cash or in shares,
regardless of how long the shareholder has held the Fund's shares, and they are
not eligible for the dividends received deduction. Shareholders will be notified
annually as to the U.S. federal tax status of distributions, and shareholders
receiving distributions in the form of newly issued shares will receive a report
as to the net asset value of the shares received.
Dividends and other distributions declared by the Fund in, and payable
to shareholders of record as of a date in, October, November or December of any
year will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if the distributions are paid by the
Fund during January of the following calendar year. Accordingly, those
distributions will be taxed to shareholders for the year in which that December
31 falls.
If the net asset value of shares is reduced below a shareholder's cost
as the result of a distribution by the Fund, such distribution generally will be
taxable even though it represents a return of invested capital. Investors also
should be aware that if shares are purchased shortly before the record date for
any distribution, the shareholder will pay full price for the shares and receive
some portion of the price back as a taxable dividend or capital gain
distribution.
In addition, 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 dividends-received deduction for corporations to the extent that (i) the
Fund held shares receiving the dividend for more than 45 days and (ii) the
dividends were not received from REITs or foreign holdings.
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The Fund will be subject to a nondeductible 4% excise tax to the extent
it fails to distribute, by the end of any calendar year, substantially all of
its ordinary income for that year and capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts. The Fund
intends to declare and distribute dividends during each year sufficient to
prevent imposition of the excise tax.
DISPOSITION OF SHARES. Upon a redemption, sale or exchange of shares of
the Fund, a shareholder will realize a taxable gain or loss that will be treated
as a capital gain or loss if the shares are capital assets in the shareholder's
hands and generally will be long-term or short-term, depending upon the
shareholder's holding period for the shares. Any loss realized on a redemption,
sale or exchange will be disallowed to the extent the shares disposed of are
replaced (including through reinvestment of dividends) within a period of 61
days beginning 30 days before and ending 30 days after the disposal of the
shares. In such a case, the basis of the shares acquired will be adjusted to
reflect the disallowed loss. Any loss realized by a shareholder on the
disposition of the Fund's shares held by the shareholder for six months or less
will be treated for tax purposes as a long-term capital loss to the extent of
any distributions of capital gain dividends received or treated as having been
received by the shareholder with respect to such shares.
BACKUP WITHHOLDING. The Fund will be required to report to the Internal
Revenue Service (the "IRS") all distributions and gross proceeds from the
redemption of the Fund's shares, except in the case of certain exempt
shareholders. All distributions and proceeds from the redemption of the Fund's
shares will be subject to withholding of federal income tax at a rate of 31%
("backup withholding") in the case of non-exempt shareholders if (1) the
shareholder fails to furnish the Fund with a Form W-9 to certify the
shareholder's correct taxpayer identification number or social security number,
(2) the IRS notifies the shareholder or the Fund that the shareholder has failed
to report properly certain interest and dividend income to the IRS and to
respond to notices to that effect, or (3) when required to do so, that
shareholder fails to certify that he or she is not subject to backup
withholding. If the withholding provisions are applicable, any such
distributions or proceeds, whether reinvested in additional shares or taken in
cash, will be reduced by the amounts required to be withheld.
OTHER TAXATION. Distributions may also be subject to additional state,
local and foreign taxes depending on each shareholder's particular situation.
Non-U.S. shareholders may be subject to U.S. tax rules that differ significantly
from those summarized above. This discussion does not address all of the tax
consequences applicable to the Fund or shareholders, and shareholders are
advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the Fund.
PURCHASE, REDEMPTION AND PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE. As set forth in the Prospectus, the
net asset value of the Fund will be determined as of the close of trading
(typically 4 p.m. Eastern time) on each day the New York Stock Exchange is open
for trading. Class A Shares of the Fund are offered and sold on a continuous
basis at the Offering Price, which is the sum of the net
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asset value per share (next computed following receipt of a purchase request)
and the applicable sales charge. The Class A sales charge may be waived for
certain investors. For more information, please see "Front-end sales charge
exemptions" in the prospectus.
In connection with the determination of the Fund's net asset value,
securities which are traded on a recognized stock exchange are valued at the
last sale price on the securities exchange on which such securities are
primarily traded. Securities traded on only over-the-counter markets are valued
on the basis of closing over-the-counter trade prices. Securities for which
there were no transactions are valued at the average mean price. Options written
or purchased by the Fund are valued at the last sales price if such last sales
price is between the current bid and asked prices. Otherwise, options are valued
at the mean between the current bid and asked prices. Debt securities (other
than short-term instruments) are valued at prices furnished by a pricing
service, subject to review and possible revision by the Fund's Sub-Adviser. Any
modification of the price of a debt security furnished by a pricing service is
made pursuant to procedures adopted by the Trust's Board of Trustees. Debt
instruments maturing within 60 days are valued by the amortized cost method. Any
securities for which market quotations are not readily available are valued at
their fair value as determined in good faith by Trust's Board of Trustees.
Generally, trading in foreign securities, as well as U.S. Government
securities and certain cash equivalents and repurchase agreements, is
substantially completed each day at various times prior to the close of the New
York Stock Exchange. The values of such securities used in computing the net
asset value of the shares of the Fund are determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of the
New York Stock Exchange. Occasionally, events affecting the value of such
securities and such exchange rates may occur between the times at which they are
determined and at the close of the New York Stock Exchange, which will not be
reflected in the computation of net asset value. If during such periods, events
occur which materially affect the value of such securities, the securities will
be valued at their fair market value as determined by management and approved in
good faith by the Trustees.
For purposes of determining the net asset value per share of the Fund,
all assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars at the mean between the bid and offer prices of such
currencies against U.S. dollars furnished by a pricing service approved by the
Trustees.
The Fund's net asset value per share will be calculated separately from
the per share net asset value of the other funds of the Trust, if any. "Assets
belonging to" the Fund consist of the consideration received upon the issuance
of shares of the Fund together will all net investment income, earnings,
profits, realized gains/losses and proceeds derived from the investment thereof,
including any proceeds from the sale of such investments, any funds or payments
derived from any reinvestment of such proceeds, and a portion of any general
assets of the Trust not belonging to a particular series. The Fund will be
charged with the direct liabilities of that Fund and with a share of the general
liabilities of the Trust's funds. Subject to the provisions of the Trust's
Declaration of Trust, determinations by the Trustees as to the direct and
allocable
26
<PAGE> 80
expenses, and the allocable portion of any general assets, with respect to a
particular fund are conclusive.
REDUCED SALES CHARGES. The Fund's Letter of Intent ("LOI") allows for
reduction of the initial sales charge for Class A shares when multiple purchases
of Class A shares are combined by taking advantage of the breakpoints in the
sales charge schedule. By completing the LOI application, you express an
intention to invest during the next 13-month period a specified amount (minimum
of at least $100,000) which, if made at one time would qualify for a reduced
sales charge. Any Class A shares owned on the date the LOI is executed may be
used as credit toward the completion of the LOI. However, the reduced sales
charge will only be applied to new purchases. Any redemptions made during the
13-month period will be subtracted from the amount of the purchases for purposes
of determining whether the terms of the LOI have been satisfied. If, at the end
of the 13-month period covered by the LOI, the total amount of purchases (less
redemptions) does not equal the amount indicated, the difference between the
sales charge paid at the reduced rate and the sales charge applicable to the
purchases actually made must be paid. Shares equal to 5% of the amount specified
in the LOI will be held in escrow during the 13-month period and are subject to
involuntary redemption to assure any payment of a higher applicable sales
charge.
By signing the LOI application, the Distributor has a security interest
in the reserved shares and the Distributor is appointed attorney-in-fact to sell
any or all of the reserved shares to cover any additional sales charges if the
undertaking is not fulfilled. The completion of the LOI application is not
binding, but the purchase must be completed in accordance with the terms of the
LOI to obtain the reduced sales charge. For more information about the LOI,
contact the Fund directly or contact an investment professional.
RETIREMENT ACCOUNTS. The Fund currently offers several retirement
account options to shareholders, including: traditional IRA, "Rollover" IRA,
Roth IRA, SEP-IRA and Simple IRA. The shareholder's employer must establish a
plan before the shareholder opens a SEP or Simple account. The Fund is also
available for investment by other retirement plans. Call 1-877-LND-LEAS
(1-877-563-5327) for additional information.
A description of accounts currently offered, applicable service fees
and certain limitations on account contributions and withdrawals, as well as
application forms, are available from the transfer agent upon request at
1-877-LND-LEAS (1-877-563-5327). The IRA documents contain a disclosure
statement that the IRS requires to be furnished to individuals who are adopting
the IRA. Because a retirement program involves commitments covering future
years, it is important that the investment objective of the Fund be consistent
with the participant's retirement objectives. Premature withdrawals from a
retirement account will result in adverse tax consequences. Consultation with a
competent financial and tax adviser regarding the foregoing retirement accounts
is recommended.
SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended, or
the date of payment postponed beyond the normal seven-day period by the Fund,
under the following conditions authorized by the 1940 Act: (1) for any period
during which the New York Stock Exchange is closed, other than customary weekend
or holiday closings, or during which
27
<PAGE> 81
trading on the Exchange is restricted; (2) for any period during which an
emergency exists as the result of which the disposal by the Fund of securities
owned by it is not reasonably practical, or it is not reasonably practical for
the Fund to determine the fair value of its net assets; or (3) for such other
periods as the SEC may by order permit for the protection of the Fund's
shareholders.
REDEMPTIONS IN KIND. It is possible that conditions may exist in the
future which would, in the opinion of the Board of Trustees, make it undesirable
for the Fund to pay for redemptions in cash. In such cases the Board may
authorize payment to be made in portfolio securities of the Fund. Securities
delivered in payment of redemptions are valued at the same value assigned to
them in computing the net asset value per share. Shareholders receiving such
securities generally will incur brokerage costs when selling such securities.
PERFORMANCE INFORMATION
The performance of each class of shares is shown separately, because
the performance of each class of shares will usually be different. That is
because of the different kinds of expenses each class bears. The total returns
of each class of shares of the Fund are affected by market conditions, the
performance of the Fund's investments, and the allocation of expenses among
classes.
Total Return Information. There are different types of "total returns"
to measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. The cumulative total return measures the change
in value over the entire period (for example, ten years). An average annual
total return shows the average rate of return for each year in a period that
would produce the cumulative total return over the entire period. However,
average annual total returns do not show actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribed by the
SEC. The methodology is discussed below.
In calculating total returns for Class A shares, the current maximum
sales charge of 5.75% (as a percentage of the offering price) is deducted from
the initial investment ("P") (unless the return is shown without sales charge,
as described below). In addition, the payment of the applicable redemption fee
for Class A shares is deducted for returns for the one-year period. There is no
sales charge on Class I shares and Class K shares.
Average Annual Total Return. To facilitate the comparability of
historical performance data from one mutual fund to another, the SEC has
developed guidelines for the calculation of average annual total return. The
average annual total return for the Fund for a specific period is found by first
taking a hypothetical $1,000 investment ("initial investment") in the Fund's
shares on the first day of the period and computing the "redeemable value" of
that investment at the end of the period. The redeemable value is then divided
by the initial investment, and this quotient is taken to the Nth root (N
representing the number of years in the period) and 1 is subtracted from
28
<PAGE> 82
the result, which is then expressed as a percentage. The calculation assumes
that all income and capital gains dividends paid by the Fund have been
reinvested at net asset value on the reinvestment dates during the period. This
calculation can be expressed as follows:
P(1 + T)(N) = ERV
Where:
T = average annual total return.
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the period.
P = hypothetical initial payment of $1,000.
N = period covered by the computation, expressed in terms of years.
Cumulative Total Return. The "cumulative total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as average
annual total return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
SEC 30-day Yield. The Fund calculates its 30-day (or one month) yield
in accordance with the method prescribed by the SEC for mutual funds:
a-b
Yield =2[( +1)(6) -1]
------
cd
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements);
c = average daily number of shares outstanding during the period
entitled to receive dividends; and
d = net asset value per share on the last day of the period.
The Fund's performance figures for each class will be based upon
historical results and will not necessarily be indicative of future performance.
The Fund's returns and net asset value
29
<PAGE> 83
will fluctuate and the net asset value of shares when sold may be more or less
than their original cost. Any additional fees charged by a dealer or other
financial services firm would reduce the Fund's returns.
From time to time, in marketing and other literature, the Fund's
performance may be compared to the performance of other mutual funds in general
or to the performance of particular types of mutual funds with similar
investment goals, as tracked by independent organizations. Among these
organizations, Lipper Analytical Services, Inc. ("Lipper"), a widely used
independent research firm which ranks mutual funds by overall performance,
investment objective and assets, may be cited. Lipper performance figures are
based on changes in net asset value, with all income and capital gains dividends
reinvested. Such calculations do not include the effect of any sales charges
imposed by other funds. The Fund will be compared to Lipper's appropriate fund
category, that is, by fund objective and portfolio holdings.
The Fund's performance may also be compared to the performance of other
mutual funds by Morningstar, Inc., which ranks funds on the basis of historical
risk and total return. Morningstar's rankings range from five stars (highest) to
one star (lowest) and represent Morningstar's assessment of the historical risk
level and total return of a fund as a weighted average for 3, 5, and 10 year
periods. Rankings are not absolute or necessarily predictive of future
performance.
The performance of the Fund may be compared in publications to
averages, performance rankings, or other information prepared by recognized
mutual fund statistical services. Evaluations of Fund performance made by
independent sources may also be used in advertisements concerning the Fund,
including reprints of or selections from, editorials or articles about the Fund.
Sources for Fund performance and articles about the Fund may include
publications such as Money, Forbes, Kiplinger's, Financial World, Business Week,
U.S. News and World Report, the Wall Street Journal, Barron's and a variety of
investment newsletters.
The performance of the Fund may be compared in publications to the
performance of various indices and investments for which reliable performance
data is available. Such indices may include the Standard & Poor's 500(R) Index,
the Nasdaq Over-the-Counter Composite Index, the Wilshire REIT Index, the Morgan
Stanley REIT Index and the NAREIT Total Return Index. There are differences and
similarities between the investments that the Fund may purchase for its
portfolio and the investments measured by these indices.
Occasionally statistics may be used to specify the Fund's volatility or
risk. Measures of volatility or risk are generally used to compare the Fund's
net asset value or performance relative to a market index. One measure of
volatility is beta. Beta is the volatility of a fund relative to the total
market as represented by the Standard & Poor's 500(R) Index. A beta of more than
1.00 indicates volatility greater than the market, and a beta of less than 1.00
indicates volatility less than the market. Another measure of volatility or risk
is standard deviation. Standard deviation is used to measure variability of net
asset value or total return around an average, over a specified period of time.
The premise is that greater volatility connotes greater risk undertaken in
achieving performance.
30
<PAGE> 84
Marketing and other Fund literature may include a description of the
potential risks and rewards associated with an investment in the Fund. The
description may include a "risk/return spectrum" which compares the Fund to
broad categories of funds, such as money market, bond or equity funds, in terms
of potential risks and returns. Risk/return spectrums also may depict funds that
invest in both domestic and foreign securities or a combination of bond and
equity securities. Money market funds are designed to maintain a constant $1.00
share price and have a fluctuating yield. Share price, yield and total return of
a bond fund will fluctuate. The share price and return of an equity fund also
will fluctuate. The description may also compare the Fund to bank products, such
as certificates of deposit. Unlike mutual funds, certificates of deposit are
insured up to $100,000 by the U.S. government and offer a fixed rate of return.
MISCELLANEOUS
The Prospectus and this Statement of Additional Information do not
contain all the information included in the Registration Statement filed with
the SEC (the "Commission") under the Securities Act with respect to the
securities offered by the Fund's Prospectus. Certain portions of the
Registration Statement have been omitted from the Prospectus and this Statement
of Additional Information, pursuant to the rules and regulations of the
Commission. The Registration Statement including the exhibits filed therewith
may be examined at the office of the Commission in Washington, D.C.
Statements contained in the Prospectus or in this Statement of
Additional Information as to the contents of any contract or other documents
referred to are not necessarily complete, and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement of which the Prospectus and this Statement of Additional
Information form a part, each such statement being qualified in all respects by
such reference.
FINANCIAL STATEMENTS
The following financial statements have been audited and are attached
hereto:
1. Statement of Assets and Liabilities
2. Statement of Operations
3. Notes to the Financial Statements
4. Report of Independent Accountants
31
<PAGE> 85
LEND LEASE FUNDS
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 11, 2000
ASSETS
<TABLE>
<CAPTION>
U.S. REAL ESTATE
SECURITIES FUND
---------------
<S> <C>
Cash $100,000
Receivable from sponsor 224,329
Prepaid initial registration expenses 45,030
--------
TOTAL ASSETS 369,359
--------
LIABILITIES AND NET ASSETS
Payable to sponsor 269,359
--------
TOTAL LIABILITIES 269,359
--------
NET ASSETS $100,000
========
NET ASSETS CONSIST OF:
Class K shares outstanding, $0.0001 par value, unlimited
shares authorized 10,000
========
Net asset value, redemption price and offering price,
Class K shares
(net assets/shares outstanding) $ 10.00
========
</TABLE>
- ------------------------------
The accompanying notes are an integral part of these Financial Statements.
<PAGE> 86
LEND LEASE FUNDS
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM OCTOBER 28, 1999 (INCEPTION) TO FEBRUARY 11, 2000
<TABLE>
<CAPTION>
U.S. REAL ESTATE
SECURITIES FUND
---------------
<S> <C>
Organization expenses $ 224,329
Less: Expenses paid by sponsor (224,329)
-----------
NET INVESTMENT INCOME $ -
===========
</TABLE>
- ------------------------------
The accompanying notes are an integral part of these Financial Statements.
<PAGE> 87
LEND LEASE FUNDS
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD FROM OCTOBER 28, 1999 (INCEPTION) TO FEBRUARY 11, 2000
NOTE 1 - ORGANIZATION AND REGISTRATION
Lend Lease Funds (the "Company") was established on October 28, 1999, as a
Delaware business trust and is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company.
The U.S. Real Estate Securities Fund (the "Fund") is a separate, non-diversified
investment portfolio of the Company. The Fund has had no operations other than
those relating to organizational matters, including the sale of 10,000 Class K
shares of beneficial interest of the Fund to capitalize the Company ("Original
Shares"), which were sold to Lend Lease Real Estate Investments, LLC (the
"Adviser") on February 11, 2000 for cash in the amount of $100,000.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with accounting principles generally accepted in the
United States ("GAAP").
A. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported changes in net assets during
the reporting period. Actual results could differ from those estimates.
B. ORGANIZATION AND PREPAID INITIAL REGISTRATION EXPENSES
Expenses incurred by the Company in connection with the organization
and the initial public offering of shares are expensed as incurred. These
expenses were advanced by the Adviser, and the Adviser has agreed to voluntarily
reimburse the Fund for these expenses, subject to potential recovery (see Note
3). Prepaid initial registration expenses are deferred and amortized over the
period of benefit (not to exceed twelve months).
C. FEDERAL INCOME TAXES
The Fund intends to qualify annually for treatment as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended, and, if so qualified, will not be liable for federal income taxes to
the extent earnings are distributed to shareholders on a timely basis.
NOTE 3 - INVESTMENT ADVISORY AND OTHER AGREEMENTS
Lend Lease Real Estate Investments, LLC serves as the Fund's investment adviser.
As compensation for its services to the Fund, the Adviser receives an investment
advisory fee at an annual rate of 0.80% of the average daily net assets of the
Fund, which is accrued daily and paid monthly. Lend Lease Rosen Real Estate
Securities, LLC (the "Sub-Adviser") serves as Sub-Adviser to the Adviser. As
compensation for its services to the Adviser, the Sub-Adviser receives an annual
sub-advisory fee equal to 0.40% of the average daily net assets of the Fund. The
Adviser has also agreed to voluntarily reduce fees for expenses (exclusive of
brokerage expenses, interest, taxes, distribution expenses, extraordinary
expenses and any other items allowed to be excluded by applicable state law)
that exceed 1.25% per annum of the average daily net assets of the Fund until
January 31, 2002. The Adviser is entitled to recoup amounts waived or reimbursed
for a period of up to three years from the date such amounts were reimbursed or
waived, to the extent that actual fees and expenses for a period are less than
the expense limitation then in effect.
The Company has entered into an administration and fund accounting agreement and
transfer agent agreement with Sunstone Financial Group, Inc. The administrative
services agreement provides for an annual fee of 0.17% which
<PAGE> 88
decreases as the assets of the Fund reach certain levels, subject to a minimum
annual fee of $68,750, plus out-of-pocket expenses. The transfer agent agreement
provides for an annual base fee per shareholder account, with a minimum annual
fee of $12,000. The transfer agent is also paid certain fees related to set-up
costs, processing and out-of-pocket expenses.
The Company has entered into a distribution agreement with Sunstone Distribution
Services, LLC (the "Distributor"). Under the Distribution Agreement, the
Distributor shall offer shares of the Fund on a continuous basis and may engage
in advertising and solicitation activities in connection therewith. The plan
permits the Fund to make payments to any Distributor, Servicing Agent or any
other party engaged by the trust, a monthly distribution fee not to exceed 0.25%
per annum of the average daily net assets of the Fund.
NOTE 4 - CAPITAL STOCK
The Company is authorized to issue an unlimited number of shares with $0.0001
par value. The Fund has three separate classes: Class A, Class K and Class Y.
Each class of shares has a different combination of sales charges, fees and
eligibility requirements. As of February 11, 2000, Class K shares are the only
class of shares outstanding.
<PAGE> 89
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Trustees
of Lend Lease Funds
In our opinion, the accompanying statement of assets and liabilities and
statement of operations present fairly, in all material respects, the financial
position of the Lend Lease U.S. Real Estate Securities Fund (a portfolio of Lend
Lease Funds, hereinafter referred to as the "Fund") at February 11, 2000 and the
results of its operations for the period from October 28, 1999 (inception)
through February 11, 2000, in conformity with accounting principles generally
accepted in the United States. These financial statements are the responsibility
of the Fund's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
financial statements in accordance with auditing standards generally accepted in
the United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
February 11, 2000
<PAGE> 90
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
<S> <C>
(a-1) Master Trust Agreement of Lend Lease Funds dated
October 28, 1999*
(a-2) Amendment No. 1 to Master Trust Agreement
(b) Registrant's By-Laws*
(c) Sections 4.2(d), 4.2(e), 4.2(f), 4.2(j), 4.2(k),
4.2(m), 4.6, 4.7, 6.3, 6.6, 7.1, 7.2, and 7.3 and
Article V of the Master Trust Agreement are
incorporated herein by reference.
(d-1) Advisory Agreement between Lend Lease Real Estate
Investments, Inc. and Lend Lease Funds
(d-2) Sub-Advisory Agreement between Lend Lease Real Estate
Investments, Inc. and Lend Lease Rosen Real Estate
Securities, LLC
(d-3) Expense Agreement among the Adviser, Sub-Adviser and
Trust
(e-1) Distribution Agreement between Lend Lease Funds and
Sunstone Distribution Services, LLC
(e-2) Form of Dealer Agreement
(f) None
(g) Form of Custodian Agreement between The Wilmington
Trust Company and Lend Lease Funds
(h-1) Form of Administration and Fund Accounting Agreement
between Lend Lease Funds and Sunstone Financial
Group, Inc.
(h-2) Form of Transfer Agency Agreement between Lend Lease
Funds and Sunstone Financial Group, Inc.
(i) Opinion of Goodwin, Procter & Hoar LLP
(j) Consent of Independent Accountants
(k) None
</TABLE>
<PAGE> 91
(l) Initial Capital Agreement
(m-1) Class A shares Plan of Distribution
(m-2) Class K shares Plan of Distribution
(m-3) Form of Shareholder Servicing Agreement
(n) Rule 18f-3 Plan
*Incorporated by reference to the Trust's Registration Statement on Form N-1A
(Securities Act File No. 333-90085, Investment Company Act File No. 811-09679)
filed via EDGAR on November 1, 1999.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 25. INDEMNIFICATION
Article VI of the Registrant's Master Trust Agreement provides that, to the
fullest extent permitted by law, the Trust shall indemnify (from the assets of
the Sub-Trust or Sub-Trusts in question) each of its Trustees and officers
(including persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest as a
shareholder, creditor or otherwise (hereinafter referred to as a "Covered
Person") against all liabilities, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and
expenses, including reasonable accountants' and counsel fees, incurred by any
Covered Person in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person may be or may
have been involved as a party or otherwise or with which such person may be or
may have been threatened, while in office or thereafter, by reason of being or
having been such a Trustee or officer, director or trustee, expect with respect
to matter as to which it has been determined that such Covered Person had acted
with willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such Covered Person's office (such conduct
referred to hereafter as "Disabling Conduct"). A determination that the Covered
Person is entitled to indemnification may be made by (i) a final decision on the
merits by a court or other body before whom the proceeding was brought that the
person to be indemnified was not liable by reason of Disabling Conduct, (ii)
dismissal of a court action or an administrative proceeding against a Covered
Person for insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the Covered Person was not
liable by reason of Disabling Conduct by (a) a vote of a majority of a quorum of
Trustees who are neither "interested persons" of the Trust as defined in section
2(a)(19) of the 1940 Act nor parties to the proceeding, or (b) an independent
legal counsel in a written opinion. Expenses, including accountants' and counsel
fees so incurred by any such Covered Person (but excluding amounts paid in
satisfaction of judgments in compromise or as fines or penalties), may be paid
from time to time from funds
<PAGE> 92
attributable to the Sub-Trust in question in advance of the final disposition of
any such action, suit or proceeding, provided that the Covered Person shall have
undertaken to repay the amounts so paid to the Sub-Trust in question if it is
ultimately determined that indemnification of such expenses is not authorized
under this Article VI and (i) the Covered Person shall have provided security
for such undertaking, (ii) the Trust shall be insured against losses arising by
reason of any lawful advances, or (iii) a majority of a quorum of the
disinterested Trustees who are not a party to the proceeding, or an independent
legal counsel in a written opinion, shall have determined, based on a review of
readily available facts, (as opposed to a full trial-type inquiry), that there
is reason to believe that the Covered Person ultimately will be found entitled
to indemnification.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The business and other connections of the Adviser and the Sub-Adviser are set
forth in the Uniform Application for Investment Adviser Registration ("Form
ADV") of each of them as currently filed with the SEC, (SEC File Number
801-24771 for the Adviser and SEC File number 801-48599 for the Sub-Adviser)
which is incorporated by reference herein.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Sunstone Distribution Services, LLC currently serves as the
distributor of the shares of Choice Funds, First Omaha Funds, Inc.,
The Marsico Investment Fund, Green Century Funds, The Haven Funds,
JohnsonFamily Funds, and La Crosse Funds.
(b) The principal business address of Sunstone Distribution Services, LLC,
the Registrant's distributor, is 207 East Buffalo Street, Suite 400,
Milwaukee, Wisconsin 53202. To the best of the Registrant's knowledge,
the following are the members and officers of Sunstone Distribution
Services, LLC:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME POSITIONS AND OFFICES WITH POSITIONS AND OFFICES WITH
UNDERWRITER REGISTRANT
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Miriam M. Allison President, Treasurer, Member None
- -------------------------------------------------------------------------------------------
Daniel S. Allison Secretary and Member None
- -------------------------------------------------------------------------------------------
Therese A. Ladwig Vice President None
- -------------------------------------------------------------------------------------------
Peter Hammond Vice President None
- -------------------------------------------------------------------------------------------
</TABLE>
(c) None
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books or other documents required to be maintained by Section
31(a) of the Investment Company Act and the rules promulgated thereunder, are in
the possession of the Registrant, located at 1995 University Avenue, Suite 550,
Berkley, California 94704, other than records held and maintained by (i)The
Wilmington Trust Company, the Registrant's custodian, located at 1100 North
Market, 9th Floor, Wilmington, Delaware 19890; (ii) Sunstone Financial Group,
Inc., the Trust's administrator and fund accountant, transfer agent and
dividend-paying
<PAGE> 93
agent and Sunstone Distribution Services, LLC, the Registrant's distributor,
each of which is located at 207 East Buffalo Street, Suite 400, Milwaukee,
Wisconsin 53202.
ITEM 29. MANAGEMENT SERVICES
All management-related service contracts entered into by the Registrant are
discussed in Parts A and B of this Registration Statement.
ITEM 30. UNDERTAKINGS
None.
<PAGE> 94
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended the Registrant certifies that
it has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Berkley, and the State of
California on the 25th day of January, 2000.
LEND LEASE FUNDS
By: /s/Susan Lloyd-Hurwitz
----------------------
Susan Lloyd-Hurwitz
Title: President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the date(s) indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
Trustee; President; January 25, 2000
Principal Executive
/s/ Susan Lloyd-Hurwitz Officer
- -----------------------
Financial and Accounting January 25, 2000
/s/ Jon Kiekhofer Officer
- -----------------------
Trustee January 25, 2000
/s/ Kevin Malone
- -----------------------
Trustee January 25, 2000
/s/ William J. Klipp
- -----------------------
Trustee January 25, 2000
/s/ Hubbard R. Garber
- -----------------------
Trustee and Vice January 25, 2000
/s/ Michael Torres President
- -----------------------
</TABLE>
<PAGE> 1
EXHIBIT 99(a-2)
LEND LEASE FUNDS
AMENDMENT NO. 1 TO MASTER TRUST AGREEMENT
AMENDMENT NO. 1 to the Master Trust Agreement of LEND LEASE FUNDS,
dated October 28, 1999, made as of the 1st day of November, 1999 by the sole
Trustee hereunder.
WHEREAS, Section 7.3 of the Master Trust Agreement dated October 28,
1999 (the "Agreement") of LEND LEASE FUNDS (the "Trust") provides that the
Agreement may be amended at any time, so long as such amendment does not
materially adversely affect the rights of any shareholder of the Trust and so
long as such amendment is not in contravention of applicable law, including the
Investment Company Act of 1940, as amended, by an instrument in writing signed
by a majority of the Trustees of the Trust.
NOW, THEREFORE, the undersigned, being the sole Trustee of the Trust,
does hereby state:
1. The first sentence of the first paragraph of Section 4.2 of the
Agreement is hereby amended in its entirety to read as follows:
Section 4.2 Establishment and Designation of Sub-Trusts and Classes.
Without limiting the authority of the Trustees set forth in Section 4.1
to establish and designate any further Sub-Trusts, the Trustees hereby
establish and designate the following Sub-Trust: "Lend Lease U.S. Real
Estate Securities Fund."
IN WITNESS WHEREOF, the undersigned hereunto has set her hand for
herself and her assigns, as of the 1st day of November, 1999.
/s/ Susan J. Lloyd-Hurwitz
----------------------------------
Susan J. Lloyd-Hurwitz, as Trustee
<PAGE> 1
EXHIBIT 99(d-1)
LEND LEASE FUNDS
ADVISORY AGREEMENT
AGREEMENT made as of the 1st day of February, 2000 between Lend Lease
Real Estate Investments, Inc, a Delaware corporation (the "Adviser"), and Lend
Lease Funds, a Delaware business trust (the "Trust").
WHEREAS, the Adviser is engaged principally in the business of
rendering investment management services and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust proposes to engage in business as an open-end
management investment company and is so registered under the Investment Company
Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue shares of beneficial interest
in separate series with each such series representing interests in a separate
portfolio of securities and other assets, and in multiple classes of such
series; and
WHEREAS, the Trust has retained Sunstone Financial Group, Inc.
(together with any new administrator engaged by the Trust, the "Administrator")
to provide administration and fund accounting services with respect to the
Trust's operations, subject to the control of the Board of Trustees; and
WHEREAS, the Trust intends to initially offer shares in multiple
classes of shares of one series, the Lend Lease U.S. Real Estate Securities
Fund, such series (the "Initial Fund"), together with all other series
subsequently established by the Trust with respect to which the Adviser renders
management and investment advisory services pursuant to the terms of this
Agreement, being herein collectively referred to as the "Funds" and individually
as a "Fund."
NOW THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF ADVISER.
(a) Initial Fund. The Trust hereby appoints the Adviser to act
as manager and investment adviser to the Initial Fund for the period and on the
terms herein set forth. The Adviser accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided.
<PAGE> 2
(b) Additional Funds. In the event that the Trust establishes one
or more series of shares other than the Initial Fund with respect to which it
desires to retain the Adviser to render management and investment advisory
services hereunder, it shall so notify the Adviser in writing, indicating the
advisory fee to be payable with respect to the additional series of shares. If
the Adviser is willing to render such services on the terms provided for herein,
it shall so notify the Trust in writing, whereupon such series of shares shall
become a Fund hereunder.
2. DUTIES OF ADVISER. The Adviser, at its own expense, shall, subject
to the provisions of paragraph 11 hereof, (a) develop and furnish continuously
an investment program and strategy for each Fund in compliance with that Fund's
investment objective and policies as set forth in the Trust's current
Registration Statement, (b) provide research and analysis relative to the
investment program and investments of each Fund, (c) determine (subject to the
overall supervision and review of the Board of Trustees of the Trust) what
investments shall be purchased, held, sold or exchanged by each Fund and what
portion, if any, of the assets of each Fund shall be held in cash or cash
equivalents, and (d) make changes on behalf of the Trust in the investments of
each Fund. The Adviser shall also oversee the activities of the Administrator,
subject always to the control of the Board of Trustees of the Trust and to the
provisions of the Trust's Master Trust Agreement and By-laws, as amended, and
the 1940 Act. The Adviser is authorized to engage one or more sub-advisers in
connection with the Adviser's duties under this Agreement, which sub-advisers
may be affiliates of the Adviser.
In connection therewith, the Adviser shall:
(i) furnish to the Trust necessary assistance in the
preparation all reports, prospectuses, registration statements and
amendments thereto now or hereafter required by federal or other laws
or by the rules or regulations of any duly authorized commission or
administrative body;
(ii) furnish to the Trust office space in the offices of the
Adviser, or in such other place or places as may be agreed upon from
time to time, and all necessary office facilities, simple business
equipment, supplies, utilities and telephone service.
(iii) furnish to the Trust executive and administrative
personnel to provide management of the affairs of the Trust, including
personnel to perform clerical, bookkeeping, accounting and other office
functions, which services are exclusive of the necessary records or
services, including shareholder services and fund accounting services,
of the Administrator and any dividend disbursing agent, transfer agent,
registrar or custodian, provided that the Adviser shall compensate all
personnel, officers, and directors of the Trust if such persons are
also employees of the Adviser or its affiliates; and
(iv) arrange for providing and maintaining a bond issued by a
reputable insurance company authorized to do business in the place
where the bond is issued against larceny and embezzlement covering each
officer and employee of the Trust, the
<PAGE> 3
Adviser and/or any sub-adviser who may singly or jointly with others
have access to funds or securities of the Trust, with direct or
indirect authority to draw upon such funds or to direct generally the
disposition of such funds, which bond shall be in such reasonable
amount as a majority of the Trustees who are not "interested persons"
of the Trust, as defined in the 1940 Act, shall determine, with due
consideration to the aggregate assets of the Trust to which any such
officer or employee may have access, provided that the premium, or
portion thereof pursuant to an agreement among the insured parties in
the case of a joint insured bond, for the bond shall be payable by the
Trust in accordance with paragraph 3(q).
3. ALLOCATION OF EXPENSES.
The Trust assumes and shall pay all expenses for all other Trust
operations and activities and shall reimburse the Adviser for any such expense
incurred by the Adviser (it being understood that the Trust shall allocate such
expenses between or among the Funds to the extent contemplated by its Master
Trust Agreement). The expenses to be borne by the Trust shall include, without
limitation:
(a) all expenses of organizing the Trust or forming any series
thereof, to the extent now or hereafter permitted under generally accepted
accounting principles applicable to registered investment companies;
(b) all expenses (including information, materials and services
other than services of the Adviser) of preparing, printing and mailing all
annual, semiannual and periodic reports, proxy materials and other
communications (including registration statements, prospectuses and amendments
and revisions thereto) furnished to existing shareholders of the Trust and/or
regulatory authorities;
(c) fees involved in registering and maintaining registration of
the Trust and its shares with the Securities and Exchange Commission and state
regulatory authorities;
(d) any other registration, filing or other fees in connection with
requirements of regulatory authorities;
(e) expenses, including the cost of printing of certificates
relating to the issuance of shares of the Trust;
(f) to the extent not paid by the Trust's distributor, the expenses
of maintaining a shareholder account and furnishing, or causing to be furnished,
to each shareholder a statement of his account, including the expense of
mailing;
(g) taxes and fees payable by the Trust to federal, state or other
governmental agencies;
<PAGE> 4
(h) expenses related to the redemption of its shares, including
expenses attributable to any program of periodic redemption;
(i) all issue and transfer taxes, brokers' commissions, margin
costs, interest on borrowings and other costs chargeable to the Trust in
connection with securities transactions to which the Trust is a party, including
any portion of such commissions attributable to research and brokerage services
as defined by Section 28(e) of the Securities Exchange Act of 1934, as amended;
(j) the charges and expenses of the custodian appointed by the
Trust, or any depository utilized by such custodian, for the safekeeping of its
property;
(k) charges and expenses of the Administrator and any shareholder
servicing agents, transfer agents and registrars appointed by the Trust,
including costs of servicing shareholder investment accounts;
(l) charges and expenses of independent accountants retained by the
Trust (including but not limited to charges and expenses relating to tax
compliance and the preparation and review of tax returns and related tax
matters);
(m) fees and expenses for legal services in connection with the
affairs of the Trust, including reasonable fees charged (including internal
charges and allocations) and expenses incurred by the Adviser, if any, for
performing such legal services for the Trust;
(n) compensation and expenses of Trustees of the Trust who are not
"interested persons" of the Trust (as defined in the 1940 Act);
(o) expenses of shareholders' and Trustees' meetings;
(p) membership dues in, and assessments of, the Investment Company
Institute or similar organizations;
(q) insurance premiums on fidelity, errors and omissions and other
coverages;
(r) expenses incurred in connection with any distribution plan
adopted by the Trust in compliance with Rule 12b-1 of the 1940 Act;
(s) such other non-recurring expenses of the Trust as may arise,
including expenses of actions, suits, or proceedings to which the Trust is a
party and the legal obligation which the Trust may have to indemnify its
Trustees, officers or shareholders with respect thereto;
(t) fees and expenses incurred in connection with registering and
qualifying the Trust's shares with federal and state regulatory authorities,
including reasonable fees
<PAGE> 5
charged (including internal charges and allocations) and expenses incurred by
the Administrator or the Adviser, if any, for performing such services for the
Trust; and
(u) fees and expenses for fund accounting services, including
reasonable fees charged (including internal charges and allocations) and
expenses incurred by the Administrator or the Adviser, if any, for performing
such fund accounting services for the Trust.
4. ADVISORY FEE.
For the services and facilities to be provided by the Adviser as
provided in Sections 1 and 2 of this Agreement, the Trust shall pay to the
Adviser on a monthly basis compensation based on an annual percentage rate
applied to the Fund's average daily net assets as specified in the Schedule(s)
which are attached hereto and made a part of this Agreement. Such compensation
shall be paid to the Adviser as soon as practicable after the last calendar day
of each month.
All rights of compensation under this Agreement for services performed
as of the termination date shall survive the termination of this Agreement.
In the case of commencement or termination of this Agreement with
respect to any Fund during any calendar month, the fee with respect to such Fund
for that month shall be reduced proportionately based upon the number of
calendar days during which it is in effect, and the fee shall be computed upon
the average daily net assets of such Fund for the days during which it is in
effect.
The Adviser may from time to time and for such periods as it deems
appropriate reduce its compensation hereunder to the extent the Adviser may, by
notice to the Trust, voluntarily declare.
<PAGE> 6
5. EXPENSE LIMITATION.
The Adviser agrees that if the total expenses of any Fund (exclusive of
interest, taxes, brokerage expenses, distribution expenses, extraordinary items
and any other items allowed to be excluded by applicable state law) for any
fiscal year of the Trust exceed the lowest expense limitation imposed in any
jurisdiction in which that Fund is then making sales of its shares or in which
its shares are then qualified for sale, the Adviser will pay or reimburse such
Fund for that excess up to the amount of its advisory fee payable with respect
to that Fund during that fiscal year. The amount of the monthly advisory fee
payable under Paragraph 4 hereof shall be reduced to the extent that the monthly
expenses of that Fund, on an annualized basis, would exceed the foregoing
limitation. At the end of each fiscal year of the Trust, if the aggregate annual
expenses chargeable to any Fund for that year exceed the foregoing limitation
based upon the average of the monthly average net asset value of that Fund for
the year, the Adviser will promptly reimburse that Fund for the amount of such
excess to the extent not already reimbursed by reduction of the monthly advisory
fee. In the event that such expenses are within the foregoing limitation, the
Trust shall be obligated to pay the Adviser excess amounts previously withheld
from the advisory fee during that fiscal year, provided that the amount of such
payment would not exceed the foregoing limitation.
In the event that this Agreement (i) is terminated with respect to any
one or more Funds as of a date other than the last day of the fiscal year of the
Trust or (ii) commences with respect to one or more Funds as of a date other
than the first day of the fiscal year of the Trust, then the expenses of such
Fund or Funds shall be annualized and the Adviser shall pay to, or receive from,
the applicable Fund or Funds a pro rata portion of the amount that the Adviser
would have been required to pay or would have received, if any, had this
Agreement remained in effect with respect to such Fund or Funds for the full
fiscal year.
6. RELATIONS WITH TRUST.
Subject to and in accordance with the Master Trust Agreement and
By-Laws of the Trust and the organizational or governing documents of the
Adviser, it is understood that Trustees, officers, agents and shareholders of
the Trust are or may be interested in the Adviser and its affiliates (or any
successor thereof) as directors, officers, or otherwise, that directors,
officers, agents and shareholders of the Adviser and its affiliates (or any
successor) are or may be interested in the Trust as Trustees, officers,
shareholders or otherwise, that the Adviser (or any such successor thereof) is
or may be interested in the Trust as a shareholder or otherwise and that the
effect of any such adverse interests shall be governed by said Master Trust
Agreement, By-Laws and organization or governing documents. In addition,
brokerage transactions for the Trust may be effected through affiliates of the
Adviser if approved by the Board of Trustees, subject to the rules and
regulations of the Securities and Exchange Commission.
<PAGE> 7
7. LIABILITY OF ADVISER.
Neither the Adviser, its officers, directors, members, managers,
employees, agents or controlling persons or their respective affiliates or
assigns shall be liable for any error of judgment or mistake of law or for any
loss suffered by the Trust or its shareholders in connection with the matters to
which this Agreement relates; provided that no provision of this Agreement shall
be deemed to protect the Adviser against any liability to the Trust or its
shareholders to which it might otherwise be subject by reason of any willful
misfeasance, bad faith or negligence in the performance of its duties or the
reckless disregard of its obligations and duties under this Agreement. Nor shall
any provision hereof be deemed to protect any Trustee or officer of the Trust
against any such liability to which he might otherwise be subject by reason of
any willful misfeasance, bad faith or negligence in the performance of his
duties or the reckless disregard of his obligations and duties.
8. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective with respect to
the Initial Fund on the date hereof and, with respect to any additional Fund, on
the date of receipt by the Trust of notice from the Adviser in accordance with
paragraph 1(b) hereof that the Adviser is willing to serve as Adviser with
respect to such Fund. Unless terminated as herein provided, this Agreement shall
remain in full force and effect for two years from the date hereof with respect
to the Initial Fund and, with respect to each additional Fund, for two years
from the date on which such Fund becomes a Fund hereunder. Subsequent to such
initial periods of effectiveness, this Agreement shall continue in full force
and effect for periods of one year thereafter with respect to each Fund so long
as such continuance with respect to such Fund is approved at least annually (a)
by either the Trustees of the Trust or by vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of such Fund, and (b), in either
event, by the vote of a majority of the Trustees of the Trust who are not
parties to this Agreement or "interested persons" (as defined in the 1940 Act)
of any such party, cast in person at a meeting called for the purpose of voting
on such approval. Notwithstanding the foregoing provisions of this Section 8(a),
the continuance of this Agreement with respect to the Initial Fund or any
additional Fund is subject to the approval of this Agreement by a majority of
the outstanding voting securities of that Fund at the first meeting of
shareholders after this Agreement becomes effective with respect to that Fund.
(b) Amendment. Any amendment to this Agreement shall become
effective with respect to a Fund upon approval of the Adviser, the Fund and if
required by applicable law, a majority of the outstanding voting securities (as
defined in the 1940 Act) of that Fund.
(c) Termination. This Agreement may be terminated with respect to
any Fund at any time, without payment of any penalty, by vote of the Trustees or
by vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of that Fund, or by the Adviser, in each case on sixty (60) days'
prior written notice to the other party.
<PAGE> 8
(d) Automatic Termination. This Agreement shall automatically and
immediately terminate in the event of its assignment (as defined in the 1940
Act).
(e) Approval, Amendment or Termination by Individual Fund. Any
approval, amendment or termination of this Agreement by the holders of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
any Fund shall be effective to continue, amend or terminate this Agreement with
respect to any such Fund notwithstanding (i) that such action has not been
approved by the holders of a majority of the outstanding voting securities of
any other Fund affected thereby, and (ii) that such action has not been approved
by the vote of a majority of the outstanding voting securities of the Trust,
unless such action shall be required by any applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE.
The services of the Adviser to the Trust hereunder are not to be deemed
exclusive, and the Adviser and its affiliates shall be free to render similar
services to others so long as the Adviser's services hereunder are not impaired
thereby. It is understood that the persons employed by the Adviser to assist in
the performance of its duties hereunder will not devote their full time to such
services and nothing hereunder contained shall be deemed to limit or restrict
the right of the Adviser to engage in or devote time and attention to other
businesses or to render services of whatever kind or nature.
10. SUBCONTRACTORS.
The Trust hereby agrees that the Adviser may subcontract for the
performance of any of the services contemplated to be rendered by the Adviser to
any Fund hereunder, which subcontractors may be affiliates of the Adviser.
11. LIMITATION OF LIABILITY.
The term "Lend Lease Funds" means and refers to the Trustees from time
to time serving under the Master Trust Agreement of the Trust dated October 28,
1999 as the same may subsequently thereto have been, or subsequently hereto may
be, amended. It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but shall bind only the trust
property of the Trust, as provided in the Master Trust Agreement. The execution
and delivery of this Agreement have been authorized by the Trustees and the
initial shareholder of the Trust and signed by the President of the Trust,
acting as such, and neither such authorization by such Trustees and shareholder
nor such execution and delivery by such officer shall be deemed to have been
made by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Trust as provided in
its Master Trust Agreement.
<PAGE> 9
12. RESERVATION OF NAME.
The parties hereby acknowledge that the Adviser has reserved the right
to grant the non-exclusive use of the name "Lend Lease" or any derivative
thereof to any other investment company, investment adviser, distributor or
other business enterprise, and to withdraw from the Trust the use of the name
"Lend Lease." The name "Lend Lease" will continue to be used by the Trust so
long as such use is mutually agreeable to the Adviser and the Trust.
13. MISCELLANEOUS.
(a) Notice. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate in writing for the receipt of such
notices.
(b) Severability. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
shall not be thereby affected.
(c) Applicable Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Delaware without regard to
principles of conflict of laws.
[Remainder of page intentionally left blank.]
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
ATTEST: LEND LEASE FUNDS
By: /s/ Susan J. Lloyd-Hurwitz
- ------------------------- ------------------------------------
Name: Susan J. Lloyd-Hurwitz, President
Title:
ATTEST: LEND LEASE REAL ESTATE
INVESTMENTS, INC.
By: /s/ Jerrold Barag
- ------------------------- ------------------------------------
Name: Jerrold Barag,
Title: Chief Investment Officer
<PAGE> 11
Schedule A
to the
Advisory Agreement
between Lend Lease Funds
and
Lend Lease Real Estate Investments, Inc.
The Trust shall pay the Adviser compensation at an annual rate
multiplied by the average daily net asset value of each Fund as follows:
<TABLE>
<CAPTION>
Fund Fee (in basis points)
---- ---------------------
<S> <C>
Lend Lease U.S. Real Estate Securities Fund 80
</TABLE>
Such fee shall be accrued daily and paid as soon as practical after the last day
of each calendar month.
From time to time, the Adviser may voluntarily waive all or a portion
of the advisory fee payable with respect to the Lend Lease U.S. Real Estate
Securities Fund and/or, on a class-by-class basis, pay or reimburse the Trust
for expenses of the Fund. In addition to any amounts otherwise payable to the
Adviser as an advisory fee for current services under the Investment Management
Agreement, the Trust shall be obligated to pay the Adviser all amounts
previously waived, paid or reimbursed by the Adviser with respect to the Lend
Lease U.S. Real Estate Securities Fund, provided that the amount of such
additional payment in any year, together with all other expenses of the Lend
Lease U.S. Real Estate Securities Fund (excluding portfolio transaction costs
such as brokerage charges, interest on borrowings, margin expenses and similar
expenses), in the aggregate, would not cause the Lend Lease U.S. Real Estate
Securities Fund's expense ratio for each class of shares in such year to exceed
the following annual rate multiplied by the average daily net asset value of the
respective class of such Fund, and provided further that no additional payments
shall be made with respect to amounts waived, paid or reimbursed more than three
(3) years prior to the date the Fund accrues a liability with respect to such
additional payment:
<TABLE>
<CAPTION>
Class Maximum Expense Ratio (in basis points)
----- ---------------------------------------
<S> <C>
Class A Shares 150
Class K Shares 125
Class Y Shares 97
</TABLE>
<PAGE> 1
EX. 99(d-2)
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the 1st day of February, 2000, between LEND LEASE
REAL ESTATE INVESTMENTS, INC., a Delaware corporation (the "Adviser") and LEND
LEASE ROSEN REAL ESTATE SECURITIES, LLC, a Delaware limited liability company
(the "Sub-Adviser").
WHEREAS, the Adviser is engaged principally in the business of
rendering investment management services and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (the "Advisers
Act"); and
WHEREAS, the Sub-Adviser is engaged principally in the business of
rendering investment management services and is registered as an investment
adviser under the Advisers Act; and
WHEREAS, LEND LEASE FUNDS, a Delaware business trust (the "Trust"),
proposes to engage in business as an open-end management investment company and
is so registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Trust is authorized to issue shares of beneficial interest
in separate series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust currently intends to offer shares in multiple
classes of one series, the Lend Lease U.S. Real Estate Securities Fund, such
series together with all other series subsequently established by the Trust with
respect to which the Sub-Adviser renders management and investment advisory
services pursuant to the terms of this Agreement, being herein collectively
referred to as the "Funds" and individually as a "Fund"; and
WHEREAS, pursuant to the Advisory Agreement, as of even date herewith,
between the Trust and the Adviser (the "Advisory Agreement"), the Adviser is
required to perform investment advisory services for the Funds.
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the
parties hereto as follows:
<PAGE> 2
1. APPOINTMENT OF SUB-ADVISER.
(a) Lend Lease U.S. Real Estate Securities Fund. The Adviser hereby
employs the Sub-Adviser to provide investment advisory services to the Lend
Lease U.S. Real Estate Securities Fund for the period and on the terms herein
set forth. The Sub-Adviser accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
(b) Additional Funds. In the event that the Trust establishes one or
more series of shares other than the Lend Lease U.S. Real Estate Securities Fund
with respect to which the Adviser desires to retain the Sub-Adviser to render
investment advisory services hereunder, the Adviser shall so notify the
Sub-Adviser in writing, indicating the advisory fee to be payable with respect
to the additional series of shares. If the Sub-Adviser is willing to render such
services on the terms provided for herein, it shall so notify the Adviser in
writing, whereupon such series shall become a Fund hereunder.
2. DUTIES OF ADVISER AND SUB-ADVISER.
(i) Delivery of Documents. The Adviser has furnished the Sub-Adviser
with true copies of each of the following:
(a) The Trust's Certificate of Trust as filed with the Secretary
of State of the State of Delaware;
(b) The Trust's Master Trust Agreement, and all amendments and
supplements thereto (such Master Trust Agreement, as presently in
effect and as it shall from time to time be amended or supplemented, is
herein called the "Declaration");
(c) The Trust's By-Laws and amendments and supplements thereto
(such By-Laws, as presently in effect and as it shall from time to time
be amended and supplemented, is herein called the "By-Laws");
(d) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Adviser and Sub-Adviser and approving the Advisory
Agreement and this Agreement and copies of the minutes of the initial
meeting of shareholders of each Fund;
(e) The Trust's Notification of Registration on Form N-8A under
the 1940 Act as filed with the Securities and Exchange Commission on
November 1, 1999 and all amendments thereto;
(f) The Trust's Registration Statement on Form N-1A under the
Securities Act of 1933 as amended (the "1933 Act") and the 1940 Act
(File Nos. 333-90085 and 811-09679) as filed with the Securities and
Exchange Commission on November 1, 1999, and all amendments thereto
(the "Registration Statement");
<PAGE> 3
(g) The most recent prospectus (such prospectus, as in effect
from time to time and all amendments and supplements thereto are herein
called the "Prospectus") of each Fund;
(h) All resolutions of the Board of Trustees of the Trust
pertaining to the objectives, investment policies and investment
restrictions of the each Fund; and
(i) Copies of the executed Advisory Agreement between the Trust
and the Adviser relating to each Fund.
The Adviser will furnish the Sub-Adviser from time to time with copies
of all amendments of or supplements to the foregoing items to the extent such
amendments or supplements relate to or affect the obligations of the Sub-Adviser
hereunder with respect to the Lend Lease U.S. Real Estate Securities Fund or any
other series of the Trust that hereafter becomes a Fund hereunder.
(ii) The Sub-Adviser, at its own expense, shall furnish the following
services to the Trust:
(a) Investment Program. The Sub-Adviser is hereby authorized and
directed and hereby agrees, subject to the stated investment objective
and policies of the Funds as set forth in the Trust's current
Registration Statement and subject to the supervision of the Adviser
and the Board of Trustees of the Trust, to (i) develop and furnish
continuously an investment program and strategy for each Fund in
compliance with that Fund's investment objective and policies as set
forth in the Trust's current Registration Statement, (ii) provide
research and analysis relative to the investment program and
investments of each Fund, (iii) determine (subject to the overall
supervision of the Board of Trustees of the Trust) what investments
shall be purchased, held, sold or exchanged by each Fund and what
portion, if any, of the assets of each Fund shall be held in cash or
cash equivalents, and (iv) make changes on behalf of the Trust in the
investments of each Fund. In accordance with paragraph 2(ii)(b), the
Sub-Adviser shall arrange for the placing of all orders for the
purchase and sale of securities and other investments for each Fund's
account and will exercise full discretion and act for the Trust in the
same manner and with the same force and effect as the Trust might or
could do with respect to such purchases, sales or other transactions,
as well as with respect to all other things necessary or incidental to
the furtherance or conduct of such purchases, sales or transactions.
The Sub-Adviser will make its officers and employees available to meet
with the Adviser's officers and directors on due notice at reasonable
times to review the investments and investment program of each Fund in
the light of current and prospective economic and market conditions.
In the performance of its duties hereunder, the Sub-Adviser is and
shall be an independent contractor and except as expressly provided for herein
or otherwise expressly provided or authorized shall have no authority to act for
or represent any Fund or the Trust in
<PAGE> 4
any way or otherwise be deemed to be an agent of any Fund, the Trust or of the
Adviser. If any occasion should arise in which the Sub-Adviser gives any advice
to its clients concerning the shares of a Fund, the Sub-Adviser will act solely
as investment counsel for such clients and not in any way on behalf of the Trust
or any Fund.
(b) Portfolio Transactions. In connection with the management of
the investment and reinvestment of each Fund, the Sub-Adviser, acting
by its own officers, directors or employees or by a duly authorized
subcontractor, is authorized to select the broker or dealers that will
execute purchase and sale transactions for the Trust.
In executing portfolio transactions and selecting brokers or dealers,
if any, the Sub-Adviser will use its best efforts to seek on behalf of a Fund
the best overall terms available. In assessing the best overall terms available
for any transaction, the sub-Adviser shall consider all factors it deems
relevant, including the breadth of the market in and the price of the security,
the financial condition and execution capability of the broker or dealer, and
the reasonableness of the commission, if any, with respect to the specific
transaction and on a continuing basis. In evaluating the best overall terms
available, and in selecting the broker or dealer, if any, to execute a
particular transaction, the Sub-Adviser may also consider the brokerage and
research services (as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934) provided to the Sub-Adviser with respect to the Lend Lease
U.S. Real Estate Securities Fund and/or other accounts over which the
Sub-Adviser exercises investment discretion. The Sub-Adviser may pay to a broker
or dealer who provides such brokerage and research services a commission for
executing a portfolio transaction which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction if,
but only if, the Sub-Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided.
The Sub-Adviser may buy securities for a Fund at the same time it is
selling such securities for another client account and may sell securities for a
Fund at the time it is buying such securities for another client account. In
such cases, subject to applicable legal and regulatory requirements, and in
compliance with such procedures of the Trust as may be in effect from time to
time, the Sub-Adviser may effectuate cross transactions between a Fund and such
other account if it deems this to be advantageous. The Sub-Adviser also may
cause a Fund to enter into other types of investment transactions (e.g., a long
position on a particular securities index) at the same time it is causing other
client accounts to take opposite economic positions (e.g., a short position on
the same index).
On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of a Fund as well as other clients, the
Sub-Adviser, to the extent permitted by applicable laws and regulations, and in
compliance with such procedures of the Trust as may be in effect from time to
time, may aggregate the securities to be sold or purchased in order to obtain
the best execution and lower brokerage commissions, if any. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Sub-Adviser in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the subject Fund and to such clients.
<PAGE> 5
The Sub-Adviser will advise the Funds' custodian or such depository or
agents as may be designated by the custodian and the Adviser promptly of each
purchase and sale of a portfolio security, specifying the name of the issuer,
the description and amount or number of shares of the security purchased, the
market price, the commission and gross or net price, the trade date and
settlement date and the identity of the effecting broker or dealer. The
Sub-Adviser shall not have possession or custody of any Fund investments. The
Trust shall be responsible for all custodial agreements and the payment of all
custodial charges and fees and, upon the Sub-Adviser giving proper instructions
to the custodian, the Sub-Adviser shall have no responsibility or liability for
the acts, omissions or other conduct of the custodian.
The Sub-Adviser shall, upon due notice from the Adviser, provide such
periodic and special reports describing any such research, advice or other
services received and the incremental commissions, net price or other
consideration to which they relate.
Notwithstanding the foregoing, the Sub-Adviser agrees that the Adviser
shall have the right by written notice to identify securities that may not be
purchased on behalf of any Fund and/or brokers and dealers through which
portfolio transaction on behalf of the Funds may not be effected, including,
without limitation, brokers or dealers affiliated with the Adviser. The
Sub-Adviser shall refrain from purchasing such securities for the Fund or
directing any portfolio transaction to any such broker or dealer on behalf of
the Fund, unless and until the written approval of the Adviser to do so is
obtained, but the Sub-Adviser shall not be liable to the Lend Lease U.S. Real
Estate Securities Fund for so acting. In addition, the Sub-Adviser agrees that
it shall not direct portfolio transactions for the Fund through any broker or
dealer that is an "affiliated person" of the Sub-Adviser (as that term is
defined in the Act or interpreted under applicable rules and regulations of the
Securities and Exchange Commission) without the prior written approval of the
Adviser and in no event shall the Sub-Adviser direct portfolio transactions on
behalf of the Fund to any broker/dealer in recognition of sales of shares of any
investment company or receipt of research or other service without prior written
approval of the Adviser. The Adviser agrees that it will provide the Sub-Adviser
with a list of brokers and dealers that are "affiliated persons" of the Funds.
(c) Reports. The Sub-Adviser shall render to the Board of
Trustees of the Trust such periodic and special reports as the Board of
Trustees may request with respect to matters relating to the duties of
the Sub-Adviser set forth herein.
3. SUB-ADVISORY FEE.
For the services to be provided by the Sub-Adviser as provided in
Paragraph 2 hereof, the Adviser shall pay to the Sub-Adviser an annual fee as
set forth on Schedule A to this Agreement.
In the case of commencement or termination of this Agreement with
respect to any Fund during any calendar month, the fee with respect to such Fund
for that month shall be reduced proportionately based upon the number of
calendar days during which it is in effect,
<PAGE> 6
and the fee shall be computed during the average daily net assets of such Fund
for the days during which it is in effect.
4. EXPENSES.
During the term of this Agreement, the Sub-Adviser will bear all
expenses incurred by it in the performance of its duties hereunder, other than
those expenses specifically assumed by the Trust hereunder. The Trust shall
assume and shall pay (i) issue and transfer taxes chargeable to the Trust in
connection with securities transactions to which any Fund is a party, and (ii)
interest on borrowed money, if any. In addition to these expenses, the Trust
shall pay all brokers' and underwriting commissions chargeable to the Trust in
connection with the securities transactions to which any Fund is a party. The
expenses to be borne by the Trust shall include, without limitation:
(a) all expenses of organizing the Trust or forming any series
thereof, to the extent now or hereafter permitted under generally accepted
accounting principles applicable to registered investment companies;
(b) all expenses (including information, materials and services other
than services of the Adviser (including any services of the Sub-adviser) of
preparing, printing and mailing all annual, semiannual and periodic reports,
proxy materials and other communications (including registration statements,
prospectuses and amendments and revisions thereto) furnished to existing
shareholders of the Trust and/or regulatory authorities;
(c) fees involved in registering and maintaining registration of the
Trust and its shares with the Securities and Exchange Commission and state
regulatory authorities;
(d) any other registration, filing or other fees in connection with
requirements of regulatory authorities;
(e) expenses, including the cost of printing of certificates relating
to the issuance of shares of the Trust;
(f) to the extent not paid by the Trust's distributor, the expenses
of maintaining a shareholder account and furnishing, or causing to be furnished,
to each shareholder a statement of his account, including the expense of
mailing;
(g) taxes and fees payable by the Trust to federal, state or other
governmental agencies;
(h) expenses related to the redemption of its shares, including
expenses attributable to any program of periodic redemption;
(i) all issue and transfer taxes, brokers' commissions, margin costs,
interest on borrowings and other costs chargeable to the Trust in connection
with securities transactions to
<PAGE> 7
which the Trust is a party, including any portion of such commissions
attributable to research and brokerage services as defined by Section 28(e) of
the Securities Exchange Act of 1934, as amended;
(j) the charges and expenses of the custodian appointed by the Trust,
or any depository utilized by such custodian, for the safekeeping of its
property;
(k) charges and expenses of the Administrator and any shareholder
servicing agents, transfer agents and registrars appointed by the Trust,
including costs of servicing shareholder investment accounts;
(l) charges and expenses of independent accountants retained by the
Trust (including but not limited to charges and expenses relating to tax
compliance and the preparation and review of tax returns and related tax
matters);
(m) fees and expenses for legal services in connection with the
affairs of the Trust, including reasonable fees charged (including internal
charges and allocations) and expenses incurred by the Adviser (or the
Sub-adviser), if any, for performing such legal services for the Trust;
(n) compensation and expenses of Trustees of the Trust who are not
"interested persons" of the Trust (as defined in the 1940 Act);
(o) expenses of shareholders' and Trustees' meetings;
(p) membership dues in, and assessments of, the Investment Company
Institute or similar organizations;
(q) insurance premiums on fidelity, errors and omissions and other
coverages;
(r) expenses incurred in connection with any distribution plan
adopted by the Trust in compliance with Rule 12b-1 of the 1940 Act;
(s) such other non-recurring expenses of the Trust as may arise,
including expenses of actions, suits, or proceedings to which the Trust is a
party and the legal obligation which the Trust may have to indemnify its
Trustees, officers or shareholders with respect thereto;
(t) fees and expenses incurred in connection with registering and
qualifying the Trust's shares with federal and state regulatory authorities,
including reasonable fees charged (including internal charges and allocations)
and expenses incurred by the administrator or the Adviser (or the Sub-adviser),
if any, for performing such services for the Trust; and
(u) fees and expenses for fund accounting services, including
reasonable fees charged (including internal charges and allocations) and
expenses incurred by the
<PAGE> 8
administrator or the Adviser (or the Sub-adviser), if any, for performing such
fund accounting services for the Trust.
5. COMPLIANCE WITH APPLICABLE REGULATIONS.
In performing its duties hereunder, the Sub-Adviser
(i) shall establish compliance procedures (copies of which shall be
provided to the Adviser, and shall be subject to review and approval by the
Adviser) reasonably calculated to ensure compliance at all times with: all
applicable provisions of the 1940 Act and the Advisers Act, and any rules and
regulations adopted thereunder; Subchapter M of the Internal Revenue Code of
1986, as amended; the provisions of the Registration Statement; the provisions
of the Declaration and the By-Laws of the Trust, as the same may be amended from
time to time; and any other applicable provisions of state, federal or foreign
law.
(ii) acknowledges that the Trust has adopted a written code of ethics
complying with the requirements of Rule 17j-1 under the Act and that the
Sub-Adviser and certain of its employees, officers and directors may be subject
to reporting requirements thereunder and, accordingly, agrees that it shall, on
a timely basis, furnish, and shall cause its employees, officers and directors
to furnish, to the Adviser and/or to the Trust, all reports and information
required to be provided under such code of ethics with respect to such persons.
(iii) agrees that it will maintain for the Trust all and only such
records as required under Rules 31a-1 and 31a-2 under the 1940 Act in respect to
its services hereunder and that such records are the property of the Trust and
further agrees to surrender promptly to the Trust any such records upon the
Trust's request all in accordance with Rule 31a-3 under the 1940 Act.
6. LIABILITY OF SUB-ADVISER; INDEMNIFICATION.
Neither the Sub-Adviser nor the officers, directors, employees, agents,
or legal representatives (collectively, "Related Persons") of the Sub-Adviser
shall be liable for any error of judgment or mistake of law, or for any loss
suffered by any Fund or its shareholders in connection with the matters to which
this Agreement relates; provided that, except as set forth in the succeeding
paragraph, no provision of this Agreement shall be deemed to protect the
Sub-Adviser or its Related Persons against any liability to which it might
otherwise be subject by reason of any willful misfeasance, bad faith or
negligence or the reckless disregard of the Sub-Adviser's obligations and duties
(each of which is hereby referred to as a "Culpable Act") under this Agreement.
Neither the Sub-Adviser nor its Related Persons shall be liable for any
error of judgment or mistake of law, or for any loss suffered by the Adviser or
its Related Persons in connection with the matters to which this Agreement
relates; provided that this provision shall not be deemed to protect the
Sub-Adviser or its Related Persons against any liability to which
<PAGE> 9
it might otherwise be subject by reason of any Culpable Act by the Sub-Adviser
or its Related Persons.
The Adviser shall indemnify the Sub-Adviser and its Related Persons and
hold them harmless from and against any and all actions, suits or claims whether
groundless or meritorious and from and against any and all losses, damages,
costs, charges, reasonable counsel fees, payments, expenses and liabilities
(collectively, "Damages") arising directly or indirectly out of or in connection
with the performance of services by the Sub-Adviser or its Related Persons
hereunder to the extent such Damages result from any Culpable Act of the Adviser
or any Related Person of the Adviser.
The Sub-Adviser shall indemnify the Adviser and its Related Persons
from and against any Damages arising directly or indirectly out of or in
connection with the performance of services by the Adviser or its Related
Persons under this Agreement or the Advisory Agreement, in each case, to the
extent such Damages result from any Culpable Act of the Sub-Adviser or any of
its Related Persons.
7. REPRESENTATIONS AND WARRANTIES.
(a) Adviser. The Adviser represents and warrants to the Sub-Adviser
that (i) the retention of the Sub-Adviser by the Adviser as contemplated by this
Agreement is authorized by the respective governing documents of the Trust and
the Adviser; (ii) the execution, delivery and performance of each of this
Agreement and the Advisory Agreement does not violate any obligation by which
the Trust or the Adviser or their respective property is bound, whether arising
by contract, operation of law or otherwise; and (iii) each of this Agreement and
the Advisory Agreement has been duly authorized by appropriate action of the
Trust and the Adviser and when executed and delivered by the Adviser will be the
legal, valid and binding obligation of the Trust and the Adviser, enforceable
against the Trust and Adviser in accordance with its terms hereof subject, as to
enforcement, to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general equitable principles (regardless of
whether enforcement is sought in a proceeding in equity or law).
(b) Sub-Adviser. The Sub-Adviser represents and warrants to the
Adviser that (i) the retention of the Sub-Adviser by the Adviser as contemplated
by this Agreement is authorized by the Sub-Adviser's governing documents; (ii)
the execution, delivery and performance of this Agreement does not violate any
obligation by which the Sub-Adviser or its property is bound, whether arising by
contract, operation of law or otherwise; and (iii) this Agreement has been duly
authorized by appropriate action of the Sub-Adviser and when executed and
delivered by the Sub-Adviser will be the legal, valid and binding obligation of
the Sub-Adviser, enforceable against the Sub-Adviser in accordance with its
terms hereof, subject, as to enforcement, to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally and to general equitable
principles (regardless of whether enforcement is sought in a proceeding in
equity or law).
<PAGE> 10
8. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective with respect to
the Lend Lease U.S. Real Estate Securities Fund on the date hereof and, with
respect to any additional Fund, on the date of receipt by the Adviser of notice
from the Sub-Adviser in accordance with Paragraph 1(b) hereof that the
Sub-Adviser is willing to serve as Sub-Adviser with respect to such Fund. Unless
terminated as herein provided, this Agreement shall remain in full force and
effect for two years from the date hereof with respect to the Lend Lease U.S.
Real Estate Securities Fund and, with respect to each additional Fund, for two
years from the date on which such Fund becomes a Fund hereunder. Subsequent to
such initial periods of effectiveness, this Agreement shall continue in full
force and effect for periods of one year thereafter with respect to each Fund so
long as such continuance with respect to any such Fund is approved at least
annually (a) by either the Trustees of the Trust or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of such Fund, and (b)
in either event, by the vote of a majority of the Trustees of the Trust who are
not parties to this Agreement or "interested persons" (as defined in the 1940
Act) of any such party, cast in person at a meeting called for the purpose of
voting on such approval.
(b) Amendment. This Agreement may be amended by agreement of the
parties, provided that the amendment shall be approved both by the vote of a
majority of the Trustees of the Trust, including a majority of the Trustees who
are not parties to this Agreement or interested persons of any such party to
this Agreement cast in person at a meeting called for that purpose, and by the
holders of a majority of the outstanding voting securities of the Trust.
(c) Termination. This Agreement may be terminated with respect to any
Fund at any time, without payment of any penalty, (i) by vote of the Trustees of
the Trust or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of that Fund, (ii) by the Adviser, or (iii) by the
Sub-Adviser, in each case on sixty (60) days' prior written notice to the other
party. Upon the effective date of termination of this Agreement, the Sub-Adviser
shall deliver all books and records of the Trust or any Fund held by it (i) to
such entity as the Trust may designate as a successor sub-adviser, or (ii) to
the Adviser.
(d) Automatic Termination. This Agreement shall automatically and
immediately terminate in the event of its assignment (as defined in the 1940
Act).
(e) Approval, Amendment or Termination by Individual Fund. Any
approval, amendment or termination of this Agreement by the holders of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
any Fund shall be effective to continue, amend or terminate this Agreement with
respect to any such Fund notwithstanding (i) that such action has not been
approved by the holders of a majority of the outstanding voting securities of
any other Fund affected thereby, and (ii) that such action has not been approved
by the vote of a majority of the outstanding voting securities of the Trust,
unless such action shall be required by any applicable law or otherwise.
<PAGE> 11
9. SERVICES NOT EXCLUSIVE.
The services of the Sub-Adviser to the Adviser in connection with the
Funds hereunder are not to be deemed exclusive, and the Sub-Adviser shall be
free to render similar services to others so long as its services hereunder are
not impaired thereby. It is understood that the persons employed by the
Sub-Adviser to assist in the performance of its duties hereunder will not devote
their full time to such services and nothing hereunder contained shall be deemed
to limit or restrict the right of the Sub-Adviser to engage in or devote time
and attention to other businesses or to render services of whatever kind or
nature.
10. MISCELLANEOUS.
(a) Notices. All notices or other communications given under this
Agreement shall be made by guaranteed overnight delivery, telecopy or certified
mail; notice is effective when received. Notice shall be given to the parties at
the following addresses:
Adviser: Lend Lease Real Estate Investments, Inc.
3424 Peachtree Road, N.E.
Atlanta, GA 30326-1113
Attention: General Counsel
Sub-Adviser: Lend Lease Rosen Real Estate Securities, LLC
1995 University Avenue, Suite 550
Berkeley, CA 94704
Attention: Contract Compliance Officer
(b) Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder
shall not be thereby affected.
(c) Applicable Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Delaware.
(d) Counterparties. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(e) Entire Agreement. This Agreement states the entire agreement of
the parties hereto, and is intended to be the complete and exclusive statement
of the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the Investment Company Act of 1940, as amended, when applicable.
[Remainder of page intentionally left blank.]
<PAGE> 12
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused this
Agreement to be executed as of the date first set forth above.
LEND LEASE REAL ESTATE
INVESTMENTS, INC.
By: /s/ Jerrold Barag
------------------------------------------
Jerrold Barag, Chief Investment Officer
LEND LEASE ROSEN REAL ESTATE SECURITIES, LLC
By: /s/ Michael A. Torres
------------------------------------------
Michael A. Torres, President
Acknowledged and agreed to as of the date first set forth above with
respect to the Trust's obligations under Paragraph 10 of this Agreement.
LEND LEASE FUNDS
By: /s/ Susan J. Lloyd-Hurwitz
------------------------------------------
Susan J. Lloyd-Hurwitz, President
<PAGE> 13
SCHEDULE A
Lend Lease U.S. Real Estate Securities Fund
The Adviser shall pay to the Sub-Adviser an annual gross investment
sub-advisory fee equal to .40% of the average daily net assets of the Lend Lease
U.S. Real Estate Securities Fund. Such fee shall be accrued daily and paid as
soon as practical after the last day of each calendar month.
The Sub-Adviser may voluntarily waive all or a portion of the sub-advisory
fee payable from time to time hereunder. The Adviser agrees that, during any
period in which the Sub-Adviser has voluntarily waived all or a portion of the
sub-advisory fee hereunder, if requested by the Sub-Adviser, the Adviser will
waive an equal amount (or such lesser amount as the Sub-Adviser may request) of
the advisory fee payable by the Trust to the Adviser with respect to the Fund
under the Advisory Agreement.
The Sub-Adviser agrees that, during any period in which the Adviser has
waived all or a portion of the advisory fee payable by the Trust to the Adviser
under the Advisory Agreement with respect to the Fund, if requested by the
Adviser, the Sub-Adviser will waive a pro rata share (or such lesser share as
the Adviser may request) of the sub-advisory fee payable hereunder with respect
to the Fund, such that the amount waived by the Sub-Adviser shall bear the same
ratio to the total amount of the sub-advisory fees payable hereunder with
respect to the Fund as the amount waived by the Adviser bears to all fees
payable to the Adviser under the Advisory Agreement with respect to the Fund.
The Adviser agrees that, in addition to any amounts otherwise payable to
the Sub-Adviser with respect to the Fund hereunder, the Adviser shall pay the
Sub-Adviser all amounts previously waived by the Sub-Adviser to the extent that
such amounts are subsequently paid by the Trust to the Adviser under the
Advisory Agreement, it being further agreed that, with respect to any such
amounts subsequently paid by the Trust to the Adviser, the amount to be paid by
the Adviser to the Sub-Adviser shall bear the same ratio to the total amount
paid by the Trust as the total amount previously waived by the Sub-Adviser
during the applicable period bears to the total amount of the fees previously
waived by the Adviser under the Advisory Agreement with respect to the Fund
during the applicable period.
The Sub-Adviser agrees that, during any period in which the Adviser has
agreed to pay or reimburse the Trust for expenses of the Fund, if requested by
the Adviser, the Sub-Adviser shall pay or reimburse the Trust for up to 50% of
all such expenses of the Fund (or such lesser amount as the Adviser may
request). The Adviser agrees that, in addition to any amounts otherwise payable
to the Sub-Adviser with respect to the Fund hereunder, the Adviser shall pay the
Sub-Adviser all amounts previously paid or reimbursed by the Sub-Adviser to the
extent that such amounts are subsequently paid by the Trust to the Adviser under
the Advisory Agreement.
<PAGE> 1
EX. 99(d-3)
EXPENSE AGREEMENT
AGREEMENT made as of the 1st day of February, 2000 between LEND LEASE
REAL ESTATE INVESTMENTS, INC. a Delaware corporation ("REI"), and LEND LEASE
REAL ESTATE SECURITIES, LLC, a limited liability company organized under the
laws of the state of Delaware ("Rosen").
WHEREAS, Lend Lease Funds (the "Trust") is a Delaware business trust,
and is registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end management company of the series type, and Lend
Lease U.S. Real Estate Securities Fund (the "Fund") is a series of the Trust;
WHEREAS, the Trust and REI have entered into an Advisory Agreement
dated as of the date hereof ("Management Agreement"), pursuant to which REI
provides investment management services to the Fund for compensation based on
the value of the average daily net assets of the Fund; and
WHEREAS, REI and Rosen have entered into a Sub-Advisory Agreement dated
as of the date hereof (the "Sub-advisory Agreement"), pursuant to which Rosen
provides investment advisory services to the Fund for compensation based on the
value of the average daily net assets of the Fund; and
WHEREAS, the Trust, REI and Rosen have determined that it is
appropriate and in the best interests of the Fund and its shareholders to
maintain the expenses of the Fund at a level below the level to which the Fund
may normally be subject;
NOW THEREFORE, the parties hereto agree as follows:
1. EXPENSE LIMITATION; RECOUPMENT.
(a) To the extent that the ordinary operating expenses incurred by a
class of the Fund in any fiscal year, including but not limited to investment
management fees of REI, but excluding interest, taxes, brokerage commissions,
other investment-related costs, extraordinary expenses such as litigation, other
expenses not incurred in the ordinary course of such Fund's business, and
expenses of any counsel or other persons or services retained by the Trust's
trustees who are not "interested persons," as that term is defined in the 1940
Act, of the Investment Manager ("Fund Operating Expenses"), exceed the Operating
Expense Limit, as defined below, such excess amount (the "Excess Amount") shall
be the liability of REI, but shall be subject to allocation as describe in
Section 2 below. The "Operating Expense Limit" in any fiscal year with respect
to each class of the Fund shall be as follows (based on a percentage of the
average daily net assets of such class of the Fund):
<PAGE> 2
Class Operating Expense Limit (in basis points)
----- -----------------------------------------
Class A Shares 150
Class K Shares 125
Class Y Shares 97
(b) To determine REI's obligation with respect to the Excess Amount,
each day the Fund Operating Expenses for each class of the Fund shall be
annualized. If the annualized Fund Operating Expenses for any day of a class of
the Fund exceed the Operating Expense Limit of for that class of the Fund, REI
shall remit to the appropriate class of the Fund an amount that, together with
the waived or reduced investment management fee, is sufficient to pay that day's
Excess Amount. The Trust may offset amounts owed to the Fund pursuant to this
Agreement against the advisory fee payable to REI.
(c) If on any day during which the Management Agreement is in effect,
the estimated annualized Fund Operating Expenses of a class of the Fund for that
day are less than the Operating Expense Limit, REI shall be entitled to recoup
from the Fund the investment management fees waived or reduced and other
payments remitted by REI to such class of the Fund pursuant to Section 1 hereof
(the "Recoupment Amount") during any of the previous thirty-six (36) months, to
the extent that such class' annualized Operating Expenses plus the amount so
recouped equals, for such day, the Operating Expense Limit for such class,
provided that such amount paid to REI will in no event exceed the total
Recoupment Amount and will not include any amounts previously recouped.
(d) If necessary, on or before the last day of the first month of each
fiscal year, an adjustment payment shall be made by the appropriate party in
order that (i) the amount of the investment management fees waived or reduced
and other payments remitted by REI to each class of the Fund with respect to the
previous fiscal year shall equal the Excess Amount; and (ii) the actual Fund
Operating Expenses of each class of each the Fund for the prior fiscal year
(including any recoupment payments hereunder with respect to such fiscal year)
do not exceed the Operating Expense Limit.
2. ALLOCATION BETWEEN REI AND ROSEN.
(a) For so long as the fee payable to Rosen under the Sub-advisory
Agreement is equal to 50% of the advisory fee payable to REI by the Fund, Rosen
shall waive or reduce its sub-advisory fee and/or promptly remit to REI an
amount that is sufficient to pay 50% of any Excess Amount paid to the Fund by
REI pursuant to Section 1 of this Agreement, provided that Rosen's obligation to
waive or reduce its sub-advisory fee and to pay 50% of the Excess Amount shall
not in any year exceed $250,000 (the "Annual Cap"). REI may offset amounts owed
to REI pursuant to this Section 2(a) against the sub-advisory fee paid to Rosen.
(b) REI shall promptly remit to Rosen 50% of any amount recouped by REI
pursuant to Section 1(c) of this Agreement, provided, however, that if at any
time the Annual Cap has been in effect for any year, the obligation of REI to
remit recouped amounts with
<PAGE> 3
respect to such year shall cease when recoupments paid to Rosen with respect to
such year are equal to the Annual Cap, using a "first-in, first-out" system.
(c) The Trust and REI will provide Rosen with reasonable access to the
books and records of each for purposes of confirming the amounts contributed and
recouped under this Agreement.
3. TERM OF AGREEMENT. This Agreement shall have an initial term through the
initial term of the Management Agreement. After such initial term, this
Agreement shall automatically renew for one-year terms unless (a) REI provides
notice to the Trust and Rosen of its termination at least thirty days prior to
the end of the then current term, (b) Rosen provides notice to the Trust and REI
of its termination at least thirty days prior to the end of the then current
term; provided, however, that this Agreement shall terminate automatically upon
termination of the Management Agreement and Section 2 shall terminate
automatically upon termination of the Sub-advisory Agreement. In addition, the
Trust may terminate this Agreement without penalty upon ninety days notice to
REI and Rosen.
4. MISCELLANEOUS.
(a) Notices. All notices or other communications given under
this Agreement shall be made by guaranteed overnight delivery, telecopy or
certified mail; notice is effective when received. Notice shall be given to the
parties at the following addresses:
REI: Lend Lease Real Estate Investments, Inc.
3424 Peachtree Road, N.E.
Atlanta, GA 30326-1113
Attention: General Counsel
Rosen: Lend Lease Rosen Real Estate Securities, LLC
1995 University Avenue, Suite 550
Berkeley, CA 94704
Attention: Contract Compliance Officer
Trust: Lend Lease Funds
207 East Buffalo St., Suite 400
Milwaukee, WI 53202
Attention: President
(b) Severability. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder shall not be thereby affected.
(c) Applicable Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware.
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(d) Counterparties. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(e) Entire Agreement. This Agreement states the entire agreement of the
parties hereto, and is intended to be the complete and exclusive statement of
the terms hereof. It may not be added to or changed orally, and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the Investment Company Act of 1940, as amended, when applicable.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first set forth above.
LEND LEASE REAL ESTATE
INVESTMENTS, INC.
By: /s/ Jerrold Barag
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Jerrold Barag, Chief Investment Officer
LEND LEASE ROSEN REAL ESTATE
SECURITIES, LLC
By: /s/ Michael A. Torres
-------------------------------------
Michael A. Torres, President
Acknowledged:
LEND LEASE FUNDS, on behalf of its series
LEND LEASE U.S. REAL ESTATE
SECURITIES FUND
By: /s/ Susan J. Lloyd-Hurwitz
---------------------------------
Susan J. Lloyd-Hurwitz, President
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EXHIBIT 99(e-1)
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of this 11th day of February, 2000 by and
between Lend Lease Funds, a Delaware 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"), is a member of the
National Association of Securities Dealers, Inc. (the "NASD") and is properly
registered and qualified as a broker-dealer under all applicable state and local
laws; 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 limited to,
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advertising, the printing and mailing of prospectuses to other than current
shareholders, and the printing and mailing of sales literature. At the direction
of the Trust, Distributor may enter into agreements with broker/dealers and
other qualified persons with respect to the offer and sale of Shares and/or the
servicing of Share accounts using substantially the form of the Dealer
Assistance Agreement attached hereto or such other form of agreement as may be
approved by the Trust , and if it so chooses Distributor will act as principal
in selling shares. 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 share (the "offering price")
provided in the Funds' then current prospectus. The Distributor shall have no
liability for the payment of the purchase price of the Shares sold pursuant to
this Agreement or with respect to redemptions or repurchases of Shares. The
price the Funds shall receive for any Shares purchased by investors shall be the
net asset value used in determining the public offering price applicable to the
sale of such Shares, as calculated in the manner set forth in the Funds'
Registration Statement (as hereinafter defined). The Distributor may reallocate
any portion of any front-end sales charge that is imposed on such sales to
selected dealers as set forth in the prospectus, subject to applicable NASD
rules. Any portion of the front-end sales charge that is not so reallocated, as
well as any back-end or deferred sales charge or load, shall be retained by the
Distributor as a commission for its services hereunder. Notwithstanding anything
herein to the contrary, Distributor shall not be required to finance the payment
to any dealer or other organization of any sales charges or fees.
2.4 If any shares sold by the Funds are redeemed or repurchased by the
Funds, or by Distributor as agent, or are tendered for redemption, within seven
business days after the date of confirmation of the original purchase of said
Shares, Distributor shall forfeit the amount above the net asset value received
by Distributor in respect of such Shares, provided that the portion, if any, of
such amount re-allowed, by Distributor to broker/dealers or other persons shall
be repayable to the Funds only to the extent recovered by Distributor from the
broker/dealer or other person concerned. Distributor shall include in the forms
of agreement with such broker/dealers and other persons a corresponding
provision for the forfeiture by them of their concession with respect to Shares
sold by them or their principals and redeemed or repurchased by the Funds or by
Distributor as agent (or tendered for redemption) within seven business days
after the date of confirmation of such initial purchases.
2.5 Distributor shall act as distributor of the Shares in compliance in
all material respects with all applicable federal, state and local laws, rules
and regulations, including, without limitation, all rules and regulations made
or adopted by the Securities and Exchange Commission (the "Commission") the NASD
and the states in which Shares are offered and sold.
2.6 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 Trust
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
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any advertising or sales material unless and until such materials have been
approved and authorized for use by the Distributor.
2.7 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 Exhibit 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 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 with 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
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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. Notwithstanding anything to the
contrary in this Section 3.5, the Trust's representations and warranties in this
Section 3.5 are qualified in their entirety with respect to any statement or
omission in a registration statement, prospectus or any other Trust document
prepared in order to comply with the requirements of the 1940 and 1933 Acts made
in reliance upon or in conformity with information relating to the Distributor
and furnished to the Trust or its counsel by the Distributor ("Distributor
Information") in writing for the purposes of, and used in the preparation of,
such registration statement, prospectus of Trust document.
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 any penalty.
If the Trust shall not propose an amendment or amendments and/or supplement or
supplements a reasonable time 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, with advice of its
counsel, 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:
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(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 and
authorized for use by the Trust 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 (a) from and against any and all losses,
claims, 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, 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; and (b) from and
against any and all other Losses which Distributor and each of the Distributor
Indemnitees may incur in connection with this Agreement or the Distributor's
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 made under
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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 current or former officers,
trustees, agents or affiliates in connection with the issue and sale of any of
the Shares.
4.1(c) The Trust acknowledges and agrees that in the event the
Distributor, at the direction of the Trust, is required to give indemnification
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
directors, 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, (a) 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, any annual or interim report or other communication to
shareholders or sales literature, or any amendments or supplements to the
foregoing, 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, its employees officers,
managers, directors or members for the purpose of, and used in, the preparation
thereof, or (b) to the extent any Losses arise out of or result from the
Distributor's
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willful misfeasance, bad faith or negligence of any of the Distributor, its
employees, officers, managers, directors or members in the performance of its
duties, or by reason of its reckless disregard of its obligations and duties,
under this Agreement. 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 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
Trust 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. 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 current or former officers, directors, managers,
members, agents or affiliates 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
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6.1 The Distributor shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust 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, notwithstanding anything herein to the contrary,
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 default, 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.
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 February 11, 2001. Thereafter, if not terminated, this Agreement
shall continue automatically in effect as to each Fund for successive annual
periods, provided 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).
7.3 In the event of termination of this Agreement, all reasonable
expenses associated with movement of records and materials and conversion
thereof shall be borne by the Funds.
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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
other agreements with such other entities.
8.2 The Distributor agrees on behalf of itself, its employees and its
representatives, to treat confidentially and as proprietary information,
information relating to the Trust and its activities, the Trustees, Fund
shareholders and the Trust's other service providers acquired in the course of
negotiating and performing this Agreement, and not to use such information for
any purpose other than performance of its responsibilities and duties
hereunder. In the case of any request or demand for the inspection or
disclosure of such information by another party, the Distributor shall notify
the Trust and follow the Trust's instructions as to permitting or refusing
such inspection or disclosure; provided, however, the Distributor may permit
the inspection or make such disclosures without the approval of the Trust to
any person in any case where it is advised by its counsel that it may be
exposed to potential liability, loss or damage resulting from or relating to
the failure to do so (the costs of counsel in considering the matter to be
borne by the Trust). Notwithstanding anything herein to the contrary, the
Distributor may disclose that the Trust has instructed it not to permit the
inspection or make the disclosures or otherwise limited or restricted its
ability to do so. 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, and information which was already in the possession
of the Distributor prior to receipt thereof, shall not be subject to this
paragraph.
8.3 The Distributor shall not use the name of the Trust or any Fund
(other than in connection with performing its duties and obligations under this
Agreement) in a manner not approved by the Trust prior thereto in writing;
provided, however, that the approval of the Trust shall not be required for the
use of the Trust's name or the name of any Fund in connection with performing
its duties and obligations or exercising its rights under this Agreement, or
which is required by the Securities and Exchange Commission or any state
securities authority or an other appropriate regulatory, governmental or
judicial authority, provided, further, that in no event shall such approval be
unreasonable withheld or delayed and that the Distributor and its affiliates may
use Trust and Fund names pursuant to the terms of other Agreements among them
and the Trust.
8.4 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.
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8.5 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 Lend
Lease Funds, 1995 University Avenue, Suite 550, Berkeley, CA 94704, Attention:
President.
8.6 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.
8.7 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.
8.8 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.
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.
LEND LEASE FUNDS
(the "Trust")
By: /s/Susan J. Lloyd-Hurwitz
-------------------------
President
SUNSTONE DISTRIBUTION SERVICES, LLC
(the "Distributor")
By: /s/Miriam M. Allison
-------------------------
Miriam M. Allison
President
10
<PAGE> 11
SCHEDULE A
TO THE
DISTRIBUTION AGREEMENT
BY AND BETWEEN
LEND LEASE FUNDS
AND
SUNSTONE DISTRIBUTION SERVICES, LLC
NAME OF FUNDS
FUND EFFECTIVE DATE
Lend Lease U.S. Real Estate Securities Fund
11
<PAGE> 12
SCHEDULE B
TO THE
DISTRIBUTION AGREEMENT
BY AND BETWEEN
LEND LEASE FUNDS
AND
SUNSTONE DISTRIBUTION SERVICES, LLC
FEES
ASSET BASED FEES
As compensation for the services performed by the Distributor, the Trust shall
pay the Distributor a fee payable monthly in arrears, equal to the following:
<TABLE>
<CAPTION>
- ------------------------------- -------------------------------------- ----------------------- ----------------------
NAME OF FUND AVERAGE NET ASSETS BASIS POINTS MINIMUM
ANNUAL FEE
- ------------------------------- -------------------------------------- ----------------------- ----------------------
<S> <C> <C> <C>
Lend Lease U.S. Real Estate Up to $250 Million 2.0 $25,000
Securities Fund
- ------------------------------- -------------------------------------- ----------------------- ----------------------
$250 Million up to $500 million 1.0
- ------------------------------- -------------------------------------- ----------------------- ----------------------
$500 Million up to $1 Billion 0.5
- ------------------------------- -------------------------------------- ----------------------- ----------------------
Over $1 Billion 0.3
- ------------------------------- -------------------------------------- ----------------------- ----------------------
</TABLE>
DISTRIBUTION EXPENSES
Expenses of marketing, promoting and distributing the Funds are in addition to
the fees set forth above, including, but not limited to, prospectus development
and printing; advertising; direct mail; public relations activities; trade show
attendance; call management and fulfillment and fees paid to broker/dealers in
connection with their sale of Shares.
ADVERTISING COMPLIANCE
In addition to the above fees, the Trust shall pay to the Distributor a fee
based on the actual time spent by representatives of the Distributor providing
compliance review of sales literature and marketing materials at the rate of
$150 per hour, plus filing fees. The hourly rate shall not apply for any sales
or marketing pieces prepared by the Distributor's affiliate, 2XL.
OUT-OF-POCKET EXPENSES
In addition to the compensation payable to the Distributor, the Trust agrees 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
12
<PAGE> 13
Trust. The Distributor is not required to finance any activities and may arrange
for the Trust to pay such expenses directly, and will not be required to incur
any expense or perform any service until payment is received or made.
PAYMENT OF FEES
The fees and expenses set forth on this Schedule B shall be paid to the
Distributor by the respective Fund pursuant to a Rule 12b-1 Plan. Fees and
expenses shall be payable monthly, promptly after the receipt by the Trust of an
invoice for such fees and/or expenses.
MISCELLANEOUS
Notwithstanding the foregoing, any portion of the front-end sales charge that is
not so reallocated, as well as any back-end or deferred sales charge or load,
shall be retained by the Distributor as a commission for its services hereunder.
13
<PAGE> 1
EXHIBIT-99(e-2)
SUNSTONE DISTRIBUTION SERVICES, LLC
207 East Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202
DEALER AGREEMENT FOR THE SALE OF SHARES
OF LEND LEASE FUNDS
Gentlemen:
We have entered into a Distribution Agreement with Lend Lease Funds (the
"Trust"), a business trust registered as a management investment company under
the Investment Company Act of 1940 (the "1940 Act"), in connection with its
initial series, and such other series as may be added to the Trust in the future
(collectively the "Funds"), pursuant to which we have been appointed distributor
of shares of the Funds.
This Dealer Agreement (the "Agreement") has been adopted pursuant to Rule 12b-1
under the 1940 Act by the Trust on behalf of the Funds under Plans of
Distribution (the "Plan") adopted pursuant to said Rule. This Agreement, being
made between Sunstone Distribution Services, LLC (the "Distributor") and the
undersigned authorized dealer, relates to the services to be provided by the
authorized dealer and for which it is entitled to receive payments pursuant to
the Plan.
1. To the extent that you provide distribution assistance and/or account
maintenance and personal services in accordance with the Plan and applicable
rules of the National Association of Securities Dealers, Inc. (the "NASD") to
those of your customers who may from time to time directly or beneficially own
shares of the Funds, you shall be entitled to a fee periodically pursuant to
this Agreement.
2. The fee paid with respect to each applicable Fund will be computed daily and
paid quarterly at an annual rate of up to ___% of the average net asset value of
the shares of such Fund purchased or acquired by your firm as nominee for your
customers, or are owned by those customers of your firm whose records, as
maintained by the Fund or its transfer agent, designate your firm as the
customers' dealer of record or holder of record (the "Subject Shares"). For
purposes of determining the fees payable under this Agreement, the average daily
net asset value of the Subject Shares will be computed in the manner specified
in the Funds' Registration Statement ("Registration Statement") (as the same is
in effect from time to time) in connection with the computation of the net asset
value of shares for purposes of purchases and redemptions.
3. The total of the fees calculated for each respective Fund for any period
with respect to which such calculations are made will be paid within 45 days
after the close of such period. We reserve the right at any time to impose
minimum fee payment requirements before any periodic payments will be made to
you hereunder. In the event payment due for a period is less than $10.00, such
payment may not be made but will be included with the next scheduled payment
when the aggregate due exceeds $10.00.
<PAGE> 2
4. You shall promptly furnish us and the Funds with such information as shall
reasonably be requested either by the Trustees of the Funds or by us with
respect to the services provided and the fees paid to you pursuant to this
Agreement, including but not limited to blue sky sales reports. We shall furnish
the Trustees of the Funds, for their review on a quarterly basis, a written
report of the amounts expended under the Plan by us and the purposes for which
such expenditures were made.
5. Orders shall be placed either directly with the Funds' Transfer Agent in
accordance with such procedures as may be established by us or the Transfer
Agent, or with the Transfer Agent through the facilities of the National
Securities Clearing Corporation ("NSCC"), if available, in accordance with the
rules of the NSCC. In addition, all orders are subject to acceptance or
rejection by the Distributor or the relevant Fund in the sole discretion of
either. Purchase orders shall be subject to receipt by the Trust's Transfer
Agent of all required documents in proper form and to the minimum initial and
subsequent purchase requirements set forth in the Registration Statement.
6. Settlement of transactions shall be in accordance with such procedures as
may be established by us, the Transfer Agent or, if applicable, the rules of the
NSCC. If payment is not so received, we and the Funds reserve the right
forthwith to cancel the sale, or at the option of us or the Funds to sell the
Shares at the then prevailing net asset value, in which in either case you agree
to be responsible for any loss resulting to the Funds and/or to us from your
failure to make payments as aforesaid.
7. You shall be allowed the concessions from the public offering price, if any,
as set forth in the then current prospectus of the Funds. Unless at the time of
transmitting an order you advise the Fund and its Transfer Agent to the
contrary, a Fund may consider an order for its shares to be the total holding of
an investor and assume that the investor is not entitled to any reduction in
sales price beyond that accorded to the amount of the purchase as determined by
the schedule set forth in the then current prospectus of the Funds.
8. If any shares sold to you are redeemed by the Funds or repurchased for the
account of the Fund or are tendered to the Funds for redemption or repurchase
within seven business days after the date of confirmation to you of your
original purchase order for said Shares, you agree to pay forthwith to us the
full amount of any dealer concession allowed or commission paid to you on the
original sale, and we agree to pay the amount of any such dealer concession to
the Fund when received by us. Alternatively, we may, in our discretion, withhold
payment to you of such shares.
9. For all purposes of this Agreement you will be deemed to be an independent
contractor and neither you nor any of your employees or agents shall have any
authority to act in any matter or in any respect as agent for the Funds or for
the Distributor. Neither you nor any of your employees or agents are authorized
to make any representation concerning shares of the Funds except those contained
in the then current Prospectus and Statement of Additional Information for the
Funds, as amended or supplemented, or in such financial and other statements
which may be furnished to you, or as may properly be included in sales
literature or advertisements in accordance with the provisions of the Securities
Act of 1933 (the "1933 Act"), the 1940 Act and applicable rules of the NASD. By
your written acceptance of this Agreement, you agree to and do release,
indemnify and hold us and the Funds and their trustees, officers, employees and
agents harmless from and against any and all liabilities, losses, claims,
demands, charges, costs and expenses (including reasonable attorneys fees)
resulting from requests, directions, actions or inactions of or by you or your
officers, employees or agents or the purchase, redemption, transfer or
registration of shares of the Funds (or orders relating to the same) by you or
your clients, or from your breach of any of the terms of this agreement. In the
event we or the Funds
<PAGE> 3
determine to refund any amount paid by an investor by reason of any such
violation, you shall return to us or the funds any commission previously paid or
discounts allowed with respect to the transaction for which the refund is made.
Notwithstanding anything herein to the contrary, the foregoing indemnity and
hold harmless agreement shall indefinitely survive the termination of this
Agreement.
10. We may enter into other similar agreements with any other person without
your consent.
11. You represent that you are a member of the NASD and agree to maintain
membership in the NASD. You agree to abide by all the rules and regulations of
the Securities and Exchange Commission and the NASD which are binding upon
underwriters and dealers in the distribution of the securities of open-end
investment companies, including without limitation, Section 2830 of the NASD
Conduct Rules, all of which are incorporated herein as if set forth in full. You
shall comply with all applicable laws including state and Federal laws and the
rules and regulations of authorized regulatory agencies. You will not sell or
offer for sale shares of any Fund in any state or jurisdiction where (i) you are
not qualified to do so or (ii) the shares are not qualified for sale, including
under the Blue Sky laws and regulations for such state, except for jurisdictions
in which they are exempt from qualification. You agree to notify us immediately
if your license or registration to act as a broker-dealer is revoked or
suspended by any Federal, self-regulatory or state agency. We do not assume any
responsibility in connection with your registration under the laws of the
various states or jurisdictions or under federal law or your qualification under
any applicable law or regulation to offer or sell shares.
12. You agree to maintain all records required by law relating to transactions
involving the shares, and upon the request of us, or the Trust, promptly make
such of these records available to us or the Trust's administrator as are
requested. In addition you hereby agree to establish appropriate procedures and
reporting forms and/or mechanisms and schedules in conjunction with us and the
Trust's administrator, to enable the Trust to identify the location, type of,
and sales to all accounts opened and maintained by your customers or by you on
behalf of your customers.
13. This Agreement may be terminated with respect to any Fund at any time
without payment of any penalty, upon notice to the other party, by the
Distributor or the vote of a majority of the Trustees of such Fund who are not
interested persons of that Fund (the "Independent Trustees") or by a vote of a
majority of the Fund's outstanding shares. It will be terminated, without
notice, by any act which terminates either the Distribution Agreement with us or
Distribution Plan, upon your expulsion or suspension from the NASD, and in any
event, shall terminate automatically in the event of its assignment as that term
is defined in the 1940 Act. We may in our sole discretion modify or amend this
Agreement upon written notice to you of such modification or amendment, which
shall be effective on the date stated in such notice.
14. The provisions of the Distribution Agreement, insofar as they relate to our
obligations and the payment of fees hereunder, are incorporated herein by
reference. This Agreement shall become effective upon acceptance and execution
by us. Unless sooner terminated as provided herein, this Agreement shall
continue in full force and effect as long as the continuance of the applicable
Plan of Distribution and this related Agreement are approved at least annually
by a vote of the Trustees, including 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 of Distribution or any agreements related
to the Plan of Distribution, cast in person at a meeting called for the purpose
of voting thereon. All communications to us should be sent to the address shown
on the first page of this Agreement. Any notice to you shall be duly given if
mailed or telegraphed to you at the address specified by you below.
<PAGE> 4
15. You will not use the name of the Trust or any Fund in a manner not approved
by the Trust prior thereto in writing; provided, however, that the approval of
the Trust shall not be required for the use of the Trust's name or the name of
any Fund in connection with communications permitted by Sections, 1, 5, 6 and 12
hereof or which is required by the Securities and Exchange Commission or any
other appropriate regulatory, governmental or judicial authority provided,
further, that in no event shall such approval be unreasonably withheld or
delayed.
16. This Agreement shall be construed in accordance with the laws of the State
of Wisconsin, excluding the laws on conflicts of laws.
- -------------------------------------- SUNSTONE DISTRIBUTION SERVICES, LLC
Name of Dealer (Please Print or Type)* 207 East Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202
- --------------------------------------
Address of Dealer
- --------------------------------------
By: By:
--------------------------------- ---------------------------------
Authorized Officer Authorized Officer
--------------------------------- ---------------------------------
Print Name Print Name
Date: Date:
--------------------------------- ---------------------------------
Phone:
--------------------------------
*NOTE: Please sign and return both copies of this Agreement to Sunstone
Distribution Services, LLC, Attention . Upon acceptance, one
countersigned copy will be returned to you for your files.
<PAGE> 1
EXHIBIT 99(g)
CUSTODY AGREEMENT
This Agreement is made as of the 11th day of February, 2000, between Lend
Lease Funds, a business trust organized under the laws of Delaware (the
"Trust"), having its principal place of business in Milwaukee, Wisconsin, and
Wilmington Trust Company, a Delaware corporation (the "Custodian"), having its
principal place of business in Wilmington, Delaware.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company and
offers for public sale one or more distinct series of shares of beneficial
interest (each series, a "Fund" and collectively, the "Funds"), par value
$0.0001 per share, each Fund corresponding to a distinct portfolio;
WHEREAS, each share of beneficial interest (collectively, "Shares") of a
Fund represents an undivided interest in the assets of that Fund, subject to the
liabilities of that Fund, as more fully described in the Master Trust
Instrument pursuant to which the Trust is governed;
WHEREAS, the Trust desires to employ the Custodian to provide custody
services; and
WHEREAS, the Custodian is willing to furnish custody services to the Trust
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, and intending to be legally bound, the parties agree as follows:
I. Employment of Custodian; Property of the Trust to be Held by the Custodian
The Trust hereby employs the Custodian as a custodian of its assets. The
Trust will deliver to the Custodian securities and cash owned by it on behalf of
the Fund(s) from time to time, and substantially all income, principal, capital
distributions or other payments received by it with respect to such securities,
and cash consideration received for the issuance and sale of Shares of the Trust
from time to time. The Custodian will not be responsible for any property of the
Trust not delivered to the Custodian.
II. Duties of the Custodian with Respect to Property of the Trust Held by the
Custodian
A. Holding Securities
The Custodian will hold, earmark and physically segregate for the account of
each Fund all non-cash property, including all securities owned by the Trust on
behalf of the Fund(s), other than securities maintained pursuant to Article II,
Section J hereof in a clearing agency which acts as a securities depository or
in an authorized book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as a "Securities System."
B. Delivery of Securities
The Custodian will deliver securities held by the Custodian or in a
Securities System account only upon receipt of proper instructions, which may be
continuing instructions, and only in the following cases:
1. Upon sale of such securities for the account of each Fund and receipt
of payment therefor;
<PAGE> 2
2. Upon receipt of payment in connection with any repurchase agreement
related to such securities entered into by the Trust with respect to
any Fund;
3. In the case of a sale effected through a Securities System, in
accordance with the provisions of Article II, Section J hereof;
4. To the depository agent in connection with tenders or other similar
offers for securities of each Fund;
5. To the issuer thereof, or its agent, when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6. To the issuer thereof, or its agent, for registration or
re-registration pursuant to the provisions of Article II, Section C
hereof; or for exchange for a different number of certificates or other
evidence representing the same aggregate face amount or number of
units; provided that, in any such case, the new securities are to be
delivered to the Custodian;
7. To the broker selling such securities for examination in accordance
with the "street delivery" custom; provided that the Custodian will
maintain procedures to ensure prompt return to the Custodian by the
broker in the event the broker elects not to accept such securities;
8. For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash, if any,
are to be delivered to the Custodian;
9. In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
10. For delivery in connection with any loans of securities made by the
Trust on behalf of any Fund, but only against receipt of adequate
collateral, as agreed upon from time to time by the Custodian and the
Trust, which may be in the form of cash or obligations issued by the
United States government, its agencies or instrumentalities or such
other instruments as the Trust may approve;
11. For delivery as security in connection with any borrowing by the Trust
on behalf of any Fund requiring a pledge of assets by the Trust on
behalf of that Fund against receipt of amounts borrowed;
12. For delivery in accordance with the provision of any agreement amount
the Trust on behalf of a Fund, the Custodian and a broker-dealer
registered under the Exchange Act and a member of The National
Association of Securities Dealers, Inc., relating to compliance with
the rules of The Options Clearing Corporation and of any registered
national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by a Fund.
13. For delivery in accordance with the provision of any agreement among
the Trust on behalf of a Fund, the Custodian, and a Futures Commission
Merchant registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading
2
<PAGE> 3
Commission and/or any Contract Market or any similar organization or
organizations, regarding account deposits in connection with
transactions by a Fund.
14. Upon receipt of instructions from the transfer agent for the Trust (the
"Transfer Agent") for delivery to the Transfer Agent or to holders of
Shares in connection with distributions in kind in satisfaction of
requests by holders of Shares for repurchase or redemption; and
15. For any other proper corporate purposes, but only upon receipt of, in
addition to proper instructions, a certified copy of a resolution of
the Board of Trustees signed by an officer of the Trust and certified
by the Secretary or an Assistant Secretary, specifying the securities
to be delivered, setting forth the purpose for which such delivery is
to be made, declaring such purposes to be proper corporate purposes,
and naming the persons to whom delivery of such securities will be
made.
C. Registration of Securities
Securities held by the Custodian (other than bearer securities) will be
registered in the name of the Trust on behalf of the Fund(s), or in the name of
any nominee of the Trust, the Custodian or any Securities System, or in the name
or nominee name of any agent or sub-custodian appointed pursuant to Article II,
Section I hereof, provided that the Custodian will maintain a mechanism for
identifying all securities belonging to each Fund, wherever held or registered.
All securities accepted by the Custodian on behalf of the Trust for the Fund(s)
hereunder will be in "street name" or other good delivery form.
D. Bank Accounts
If requested by the Trust, the Custodian will open and maintain a separate
bank account or accounts in the name of each Fund, subject only to draft or
order by the Custodian acting pursuant to the terms of this Agreement, and will
hold in such account or accounts, subject to the provisions hereof, all cash
received by it from or for the account of the Fund(s), other than cash
maintained by the Trust in a bank account established and used in accordance
with Rule 17f-3 under the 1940 Act.
E. Payment for Shares
The Custodian will receive from the distributor of the Shares of the Fund(s)
or from the Transfer Agent and deposit into each Fund's custody account payments
received for Shares of such Fund issued or sold from time to time by the Trust.
The Custodian will provide timely notification to the Trust and the Transfer
Agent of any receipt by it of cash payments for Shares of the Fund(s).
F. Collection of Income and Other Payments
The Custodian will collect on a timely basis all income and other payments
with respect to securities held hereunder to which the Trust and each of the
Fund(s) will be entitled by law or pursuant to custom in the securities
business, and will credit such income and other payments, as collected, to each
Fund's custody account.
G. Payment of Trust Moneys
Upon receipt of proper instructions, which may be continuing instructions,
the Custodian will pay out moneys of the Trust on behalf of the Fund(s) in the
following cases only:
1. Upon the purchase of securities for the account of each Fund, but only
(a) against the delivery of such securities to the Custodian (or any
bank, banking firm, trust company or other entity doing business in the
United States or abroad which is qualified under the 1940 Act to act as
a custodian and has been designated by the Trust or by the Custodian as
its agent for this
3
<PAGE> 4
purpose); (b) in the case of a purchase effected through a Securities
System, in accordance with the conditions set forth in Article II,
Section J hereof or; (c) in the case of repurchase agreements entered
into between the Trust on behalf of the Fund and the Custodian, or
another party, (i) against delivery of securities either in certificate
form or through an entry crediting the Custodian's account at the
Federal Reserve Bank with such securities and with an indication on the
books of the Custodian that such securities are held for the benefit of
the Fund, and (ii) against delivery of the receipt evidencing purchase
by the Trust on behalf of the Fund of securities owned by the Custodian
or other party along with written evidence of the agreement by the
Custodian or other party to repurchase such securities from the Trust
on behalf of the Fund;
2. In connection with conversion, exchange or surrender of securities
owned by the Trust on behalf of any Fund as set forth in Article II,
Section B hereof;
3. For the redemption or repurchase of Shares as set forth in Article II,
Section H hereof;
4. For the payment of any expense or liability incurred by the Trust with
respect to the Fund(s), including, but not limited to, the following
payments for the account of the Fund(s): interest, dividend
disbursements, taxes, trade association dues, advisory, administration,
accounting, transfer agent and legal fees, and operating expenses
allocated to the Trust or the Fund(s) whether or not such expenses are
to be in whole or part capitalized or treated as deferred expenses;
5. For the payment of any distribution declared on behalf of the Fund(s)
pursuant to the governing documents of the Trust; and
6. For any other proper corporate purposes, but only upon receipt of, in
addition to proper instructions, a certified copy of a resolution of
the Board of Trustees of the Trust signed by an officer of the Trust
and certified by its Secretary or an Assistant Secretary, specifying
the amount of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such payment is to be
made.
7. Notwithstanding anything to the contrary in this Agreement, in order to
permit a Fund to engage in tri-party repurchase agreement transactions
("Tri-party Repos") using one or more additional custodians for the
Fund engaged for the limited purpose of facilitating Tri-party Repos
(each, a "Repo Custodian") (such Repo Custodians to be identified on
Schedule B attached hereto, as amended from time to time), upon receipt
of Proper Instructions, the Custodian shall deliver cash and/or other
assets of any Fund to the account of a Repo Custodian), which delivery
may be made without contemporaneous receipt by the Custodian of cash or
other assets in exchange therefor. Upon such delivery of cash or other
assets in accordance with such Proper Instructions, the Custodian shall
have no further responsibility or obligation to the Fund as a custodian
of the Fund with respect to the cash or assets so delivered. The Trust
may amend Schedule B from time to time to add or delete a Repo
Custodian or change the identification of the account maintained by a
Repo Custodian for the Fund by delivering Special Instructions (as
defined herein) to the Custodian. The term Special Instructions shall
mean written instructions executed by at least two officers of the Fund
holding the office of Vice President or higher.
H. Payments for Repurchase or Redemptions of Shares of the Fund(s)
From such funds as may be available, but subject to the limitations of the
Master Trust Instrument and any applicable votes of the Trust's Board of
Trustees pursuant thereto, the Custodian will, upon receipt of
4
<PAGE> 5
instructions from the Transfer Agent, make funds available for payment to
holders of Shares of the Fund(s) who have delivered to the Transfer Agent a
request for redemption or repurchase of their Shares.
I. Appointment of Agents
The Custodian may at any time in its discretion appoint, but only in
accordance with an applicable vote by the Board of Trustees of the Trust, any
bank or trust company, which is qualified under the 1940 Act to act as a
custodian, as its agent or sub-custodian to carry out such of the provisions of
this Article II as the Custodian may from time to time direct; provided that the
appointment of any such agent or sub-custodian will not relieve the Custodian of
any of its responsibilities or liabilities hereunder.
J. Deposit of Trust Assets in Securities Systems
The Custodian may deposit and/or maintain securities owned by the Trust on
behalf of the Fund(s) in a clearing agency registered with the Securities and
Exchange Commission (the "SEC") under Section 17A of the Securities Exchange Act
of 1934, which acts as a securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and certain federal agencies
(collectively referred to herein as a "Securities System") in accordance with
applicable Federal Reserve Board and SEC rules and regulations, if any, and
subject to the following provisions:
1. The Custodian may keep securities owned by the Trust on behalf of the
Fund(s) in a Securities System provided that such securities are
represented in an account ("Account") of the Custodian in the
Securities System which will not include any assets of the Custodian
other than assets held as a fiduciary, custodian, or otherwise for
customers;
2. The records of the Custodian with respect to securities owned by the
Trust on behalf of the Fund(s) which are maintained in a Securities
System will identify by book-entry those securities belonging to the
Fund(s);
3. The Custodian will pay for securities purchased for the account of the
Fund(s) upon (i) receipt of advice from the Securities System that such
securities have been transferred to the Account, and (ii) the making of
an entry on the records of the Custodian to reflect such payment and
transfer for the account of the Fund(s). The Custodian will transfer
securities sold for the account of the Fund(s) upon (i) receipt of
advice from the Securities System that payment for such securities has
been transferred to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and payment for the
account of the Fund(s). The Custodian will furnish the Trust a monthly
account statement showing confirmation of each transfer to or from the
account of the Fund(s) and each day's transactions in the Securities
System for the account of the Fund(s);
4. The book-entry system of the Federal Reserve System authorized by the
U.S. Department of the Treasury and the Depository Trust Company, a
clearing agency registered with the SEC, each are hereby specifically
approved as a Securities System, provided that any changes in these
arrangements shall be subject to the approval of the Board of Trustees
of the Trust; and
5. The Custodian will be liable to the Trust on behalf of any Fund for any
direct loss or damage to the Trust on behalf of any Fund resulting from
use of the Securities System to the extent caused by the gross
negligence, misfeasance or misconduct of the Custodian or any of its
agents or of any of its or their employees. In no event will the
Custodian be liable for any indirect, special, consequential or
punitive damages.
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K. Segregated Accounts
The Custodian, upon receipt of Proper Instructions (as hereinafter defined)
from the Trust on behalf of any one or more applicable Funds, shall establish a
segregated account for and on behalf of each such Fund into which account or
accounts may be transferred cash and/or securities, including securities
maintained in an account by the Custodian pursuant to Article II(J) hereof:
(a) in accordance with and subject to the provisions of any agreement
("Escrow Agreement") among the Trust, on behalf of each Fund(s), the
Custodian and a broker-dealer registered under the Securities Exchange
Act and a member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act) (collectively,
"Broker-dealer"), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities exchange
(or the Commodity Futures Trading Commission and any registered contract
market), or of any similar organization(s), regarding escrow or other
arrangements in connection with transactions by such Fund(s);
(b) for purposes of segregating cash and for securities in connection with
options purchased, sold or written by the Fund(s) or commodity futures
contracts or options thereon purchased, sold or written by the Fund(s);
(c) for purposes of compliance by the Fund(s) with the procedures required
by Investment Company Act Release 10666, or any subsequent release or
releases of the Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered investment companies;
(d) to hold securities subject to repurchase agreements, to the extent that
certificates for such securities are held in physical custody; and
(e) for other proper Trust purposes, but only, in the case of this clause
(e), upon receipt of proper instructions from the Trust on behalf of the
applicable Fund(s) setting forth the purpose or purposes of such
segregated account and declaring such purposes to be proper Trust
purposes.
L. Ownership Certificates for Tax Purposes
The Custodian will execute ownership and other certificates and affidavits
for all federal and state tax purposes in connection with receipt of income or
other payments with respect to securities of the Fund(s) held by it and in
connection with transfers of securities of the Fund(s).
M. Proxies
The Custodian will cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in the name of
the Trust on behalf of the Fund(s) or a nominee of the Trust, all proxies,
without indication of the manner in which such proxies are to be voted, and will
promptly deliver to the Fund that holds such securities, such proxies, all proxy
soliciting materials and all notices relating to such securities.
N. Communications Relating to Securities of the Fund(s)
The Custodian will transmit promptly to a Fund all written information
(including, without limitation, pendency of calls and maturities of securities
and expirations of rights in connection therewith) received by the Custodian
from issuers of the securities being held for the Fund. With respect to tender
or exchange offers with respect to securities held by a Fund, the Custodian will
transmit promptly to the Fund all written information
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received by the Custodian from issuers of the securities whose tender or
exchange is sought and from the party (or its agents) making the tender or
exchange offer. If a Fund desires to take action with respect to any such tender
offer, exchange offer or any other similar transaction, the Fund will notify the
Custodian at least five business days prior to the date on which the Custodian
is to take such action.
O. Proper Instructions
"Proper Instructions" as used herein mean a writing signed or initialed
by one or more person or persons in such manner as the Board of Trustees will
have authorized from time to time. Each writing will set forth the transaction
involved, including a specific statement of the purpose for which such action is
requested. Oral instructions will be considered proper instructions if the
Custodian reasonably believes them to have been given by a person authorized to
give such instructions with respect to the transaction involved. The Trust will
cause all oral instructions to be confirmed promptly in writing. Upon receipt of
a certificate of the Secretary or an Assistant Secretary as to the authorization
by the Board of Trustees of the Trust accompanied by a detailed description of
procedures approved by the Board of Trustees, proper instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the Board of Trustees and the Custodian are satisfied that
such procedures afford adequate safeguards for the assets of the Trust.
P. Actions Permitted Without Express Authority
The Custodian may, in its discretion, without express authority from the
Trust:
1. make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Agreement, provided that all such payments will be accounted for to
the Trust;
2. surrender securities in temporary form for securities in definitive
form;
3. endorse for collection, in the name of the Trust on behalf of the
Fund(s), checks, drafts and other negotiable instruments; and
4. in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Trust, except as
otherwise directed by the Trust or the Board of Trustees of the
Trust.
Q. Evidence of Authority
The Custodian will be protected in acting upon any instruction, notice,
request, consent, certificate or other instrument or paper reasonably believed
by it to be genuine and to have been properly executed by or on behalf of the
Trust. The Custodian may receive and accept a certified copy of a vote of the
Board of Trustees of the Trust as conclusive evidence (a) of the authority of
any person to act in accordance with such vote, or (b) of any determination or
of any action by the Board of Trustees as described in such vote, and such vote
may be considered as in full force and effect until receipt by the Custodian of
written notice to the contrary.
III. Duties of Custodian with Respect to Books of Account
The Custodian will cooperate with and supply to the entity or entities
appointed to keep the books of account of the Trust such information in the
possession of the Custodian as is reasonably necessary to the maintenance of the
books of account of the Trust.
IV. Records
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The Custodian will create and maintain all records relating to its
activities and obligations under this Agreement in such manner as will meet the
obligations of the Trust under the 1940 Act, including, without limitation,
Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records will
be property of the Trust and will at all times during the regular business hours
of the Custodian be open for inspection by duly authorized officers, employees
or agents of the Trust and employees and agents of the SEC. The Custodian will,
upon request, provide the Trust with a tabulation of securities held by the
Custodian on behalf of the Fund(s), and will, upon request, and for such
compensation as will be agreed upon between the Trust and the Custodian, include
certificate numbers in such tabulations.
V. Opinion of Trust's Independent Accountant
The Custodian will take all reasonable action, as the Trust may from time
to time request, to obtain from year to year favorable opinions from the Trust's
independent accountants with respect to its activities hereunder in connection
with the preparation of the Trust's Form N-1A, Form N-SAR or other annual or
semiannual reports to the SEC and with respect to any other requirements of the
SEC.
VI. Reports to Trust by Auditors
The Custodian will provide the Trust, at such times as the Trust may
reasonably request, with reports by its internal or independent auditors on the
accounting system, internal accounting controls and procedures for safeguarding
securities, including reports available on securities deposited and/or
maintained in a Securities System, relating to the services provided by the
Custodian under this Agreement. Such reports will be of sufficient scope and in
sufficient detail as may reasonably be required by the Trust to provide
reasonable assurance that any material inadequacies would be disclosed, will
state in detail material inadequacies disclosed by such examination, and if
there are no such inadequacies, will so state.
VII. Compensation of Custodian
For the normal services the Custodian provides under this Custody
Agreement, the Custodian will be entitled to reasonable compensation as agreed
to between the Trust and the Custodian from time to time. Until agreed
otherwise, the compensation will be as set forth on Schedule A attached hereto
and made part hereof, as such Schedule may be amended from time to time. After
two years from the date of this Agreement, the fee set forth in Schedule A
hereto is subject to an annual review and adjustment process. In the event the
Custodian provides any extraordinary services hereunder, it will be entitled to
additional reasonable compensation as agreed upon in advance with the Trust.
VIII. Responsibility of Custodian/Indemnification
So long as and to the extent that it has exercised reasonable care, the
Custodian will not be responsible for the title, validity or genuineness of any
property or evidence of title thereto received by it or delivered by it pursuant
to this Agreement and will be held harmless in acting upon any notice, request,
consent, certificate or other instrument reasonably believed by it to be genuine
and to be signed by the proper party or parties.
The Custodian will be entitled to rely on and may act upon advice of
counsel (who may be counsel for the Trust) on all matters, and will be without
liability for any action reasonably taken or omitted pursuant to such advice.
The Custodian will exercise reasonable care in carrying out the
provisions of this Agreement and shall be without liability for any action taken
or omitted by it in good faith and without negligence. The Trust will indemnify
the Custodian and hold it harmless from and against all claims, liabilities, and
expenses (including attorneys' fees) which the Custodian may suffer or incur on
account of being Custodian hereunder, except to the extent such claims,
liabilities and expenses are caused by the Custodian's own negligence or bad
faith.
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Notwithstanding the foregoing, nothing contained in this paragraph is intended
to nor will it be construed to modify the standards of care and responsibility
set forth in Article II, Section I hereof with respect to sub-custodians and in
Article II, Section J(5) hereof with respect to the Securities System.
If the Trust requires the Custodian to take any action with respect to
securities, which involves the payment of money or which may, in the reasonable
opinion of the Custodian, result in liability or expense to the Custodian or its
nominee, the Trust, as a prerequisite to requiring the Custodian to take such
action, will provide indemnity to the Custodian in an amount and form
satisfactory to it.
IX. Effective Period; Termination; Amendment
This Agreement will become effective as of the date hereof and remain
effective until terminated as provided herein. This Agreement may be amended at
any time only by written instrument signed by both parties. This Agreement may
be terminated at any time on sixty (60) days' written notice by either party;
provided that the Trust will not amend or terminate the Agreement in
contravention of any applicable federal or state regulations, or any provision
of the governing documents of the Trust, and further provided, that the Trust
may at any time by action of its Board of Trustees immediately terminate this
Agreement in the event of the appointment of a conservator or receiver for the
Custodian by the applicable federal regulator or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction. Upon termination of this Agreement, the Trust will pay to the
Custodian any fees incurred as a result of the termination transfer of assets,
and reimburse the Custodian for all costs, expenses and disbursements that are
due as of the date of such termination.
X. Successor Custodian
If a successor custodian is appointed by the Board of Trustees of the Trust,
the Custodian will, upon termination, deliver to such successor custodian at the
office of the Custodian, duly endorsed and in the form for transfer, all
securities and other assets of the Trust then held by it hereunder. The
Custodian will also deliver to such successor custodian copies of such books and
records relating to the Trust as the Trust and Custodian may mutually agree.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees will have been delivered to
the Custodian on or before the date when such termination will become effective,
then the Custodian will have the right to deliver to a bank or trust company of
its own selection, doing business in the state in which either the principal
place of business of the Trust or the Custodian is located and having an
aggregate capital, surplus, and undivided profits of not less than $25,000,000,
all securities, funds and other properties held by the Custodian under this
Agreement. Thereafter, such bank or trust company will be the successor of the
Custodian under this Agreement.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Trust to procure the certified copy of vote referred to, or of
the Board of Trustees to appoint a successor custodian, the Custodian will be
entitled to fair compensation for its services during such period as the
Custodian and retain possession of such securities, funds and other properties
and the provisions of this Agreement relating to the duties and obligations of
the Custodian will remain in full force and effect.
XI. Interpretive and Additional Provisions
In connection with the operation of this Agreement, the Custodian and the
Trust may from time to time agree on such provisions interpretive of, or in
addition to, the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. Any such interpretive or
additional provisions will be in writing signed by both parties, provided that
no such interpretive or additional provisions will contravene any
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applicable federal or state regulations or any provision of the governing
documents of the Trust. No interpretive or additional provisions made as
provided in the preceding sentence will be deemed to be an amendment of this
Agreement.
XII. Delaware Law to Apply
This Agreement will be deemed to be a contract made in Delaware and
governed by the internal laws of the State of Delaware without giving effect to
the principles of conflicts of law thereof. If any provision of this Agreement
will be held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement will not be affected thereby. This Agreement
will be binding and will inure to the benefit of the parties hereto and their
respective successors.
XIII. Limitation of Liability
The "Trust" means and refers to the Trustees from time to time serving
under the Master Trust Agreement of Lend Lease Funds, a Delaware business trust,
as the same may be amended from time to time. The obligations of Lend Lease
Funds hereunder shall not be binding upon any of its Trustees, shareholders,
nominees, officers, agents or employees personally, but shall bind only the
trust property of the Trust, as provided in the Master Trust Agreement. The
execution and delivery of this Agreement have been authorized by the Trustees
and signed by an officer of the Trust, acting as such, and neither such
authorization by such Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Trust as provided in its Master Trust Agreement.
XIV. Several Obligations of the Trust
The Trust is a series company with multiple portfolios and has entered
into this Agreement on behalf of those portfolios identified in Exhibit C
hereto, as amended from time to time on notice to the Custodian. With respect to
any obligation of the Trust on behalf of any Fund arising hereunder, the
Custodian shall look for payment or satisfaction of such obligations solely to
the assets and property of the Fund to which such obligation relates as though
the Trust had separately contracted with the Custodian by separate written
instrument with respect to each Fund. In addition, this Agreement may be
terminated with respect to one or more Funds without affecting the rights,
duties or obligations of any of the other Funds.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and on behalf by its duly authorized representative and its
seal to be hereunder affixed as of the date first written above.
[SEAL] LEND LEASE FUNDS
By:
------------------------------
Mark A. Hoopes, Vice President
[SEAL] WILMINGTON TRUST COMPANY
By:
------------------------------
( ), Vice President
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SCHEDULE A
LEND LEASE FUNDS
FEE SCHEDULE
For the services Custodian provides under this Custody Agreement, the Trust, on
behalf of the Fund(s) listed in Schedule C, agrees to pay to the Custodian a
fee, payable monthly, expressed as follows:
FEE SCHEDULE
Custody Administration Fee:
An annual domestic custody administration fee
based upon the calendar month end net asset
value as follows:
.01% on the first $100 million;
.0075% on the next $100 million; and
.0050% on the assets in excess of $200
million;
Or, if applicable, an annual global custody
administration fee based upon the calendar
month end net asset value as follows:
.095% on the first $100 million;
.075% on the next $100 million;
Transactions:
$10 per principal payment for securities such
as GNMA, FNMA, FHLMC, CMO and Corporate Bonds
held at storage locations: Federal Reserve
(FED), Bankers Trust (BTC), Depository Trust
Company (DTC) and Wilmington Trust (WTC);
$10 per domestic purchase and sale at DTC, FED
and other storage locations; free delivery;
call and put option; futures; purchase through
dividend reinvestment;
$50 per foreign purchase and sale; voluntary
tender offer, purchase offer and exchange
offer; purchase and sale held at WTC and BTC;
$65 per Eurodollar purchase and sale;
$10 for each incoming wire and $10 for each
outgoing wire;
Plus any out-of-pocket expenses, including
legal fees.
A Fund's aggregate custody administration and transaction fees under this
Custody Agreement will be subject to an annual minimum amount of $3,000.
<PAGE> 13
SCHEDULE B
LEND LEASE FUNDS
TRI-PARTY REPO'S
<PAGE> 14
EXHIBIT C
LEND LEASE FUNDS
Lend Lease U.S. Real Estate Securities Fund
<PAGE> 1
EXHIBIT 99(h-1)
ADMINISTRATION AND FUND ACCOUNTING AGREEMENT
THIS AGREEMENT is made as of this ___ day of February, 2000, by and
between Lend Lease Funds, a Delaware 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 therein, 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, custodian and
other service providers for the Funds to cooperate with the Administrator and to
provide the Administrator with such information, documents and advice relating
to the Funds and the Trust as requested by the Administrator, 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 Trust when acting in reliance (without investigation or
verification) upon the instruction, advice, information or any documents
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relating to the Funds or the Trust 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) To the extent required by Rule 31a-3 under the 1940 Act, the
Administrator hereby agrees that all records which it maintains for the Trust
pursuant to its duties hereunder 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, and where applicable, the
Administrator further agrees to preserve for the periods prescribed by Rule
31a-2 under the 1940 Act the records described in Schedule B which are
maintained by the Administrator for the Trust.
(d) 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 provided the use of each
such service has been approved by the Board of Trustees and such use is
consistent with such security valuation procedures as may be in effect from time
to time for the Trust. The Administrator shall identify to the Trust and the
Board of Trustees any such pricing service(s) utilized on behalf of the Trust
subject to compliance with such securities valuation procedures as may be in
effect from time to time and subject to the supervision of the Board of
Trustees, the Administrator is authorized to rely on the prices provided by such
service(s) or by the Funds' investment adviser(s) or other authorized
representatives of the Funds, and shall not be liable for losses to the Trust,
its securityholders or otherwise as a result of its reliance on the valuations
provided by the approved pricing service(s) or representatives or its reliance
on security valuation procedures established by the Trust.
(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 1940 Act, the Internal
Revenue Code of 1986, as amended (the "Code"), 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,
plus out-of-pocket expenses, each as provided in Schedule C hereto. 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 value shall be computed in accordance with the Trust's current
Prospectuses, Statements of Additional Information, the Trust's Declaration of
Trust, as amended, and the 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
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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 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.
(c) The Administrator will bear all expenses incurred by it in connection
with the performance of its services under Section 2, except as otherwise
provided herein. The Administrator shall not be required to pay or finance any
costs and expenses incurred in the operation of the Funds, including, but not
limited to: taxes; interest; brokerage fees and commissions; salaries, fees and
expenses of officers and Trustees (except in the case of Trustees and officers
who are employees of the Administrator, their salaries and benefits as employees
of the Administrator); Commission fees and state Blue Sky fees; advisory fees;
charges of custodians, transfer agents, dividend disbursing and accounting
services agents and other service providers; security pricing services;
insurance premiums; outside auditing and legal expenses; costs of organization
and maintenance of corporate existence; taxes and fees payable to federal, state
and other governmental agencies; preparation, 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; preparation, 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 Securities and Exchange Commission (the "Commission") and the
states; research and statistical data services; expenses incidental to holding
meetings of the Fund's shareholders and Trustees; fees and expenses associated
with internet, e-mail and other related activities; and extraordinary expenses.
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 Funds' 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, its employees and
representatives to treat confidentially and as proprietary information of the
Trust all records relative to the Funds' shareholders, and not to use such
information for any purpose other than performance of its responsibilities and
duties hereunder or exercising its rights hereunder. The Administrator agrees on
behalf of itself, its employees and its representatives, to treat confidentially
and as proprietary information, information relating to the Trust and its
activities, the Trustees, Fund shareholders, and the Trust's other service
providers acquired in the course of negotiating and performing this Agreement,
and not to use such information for any purpose other than performance of its
responsibilities and duties hereunder. In the case of any request or demand for
the inspection or disclosure of such information by another party, the
Administrator shall notify the Trust and follow the Trust's instructions as to
permitting or refusing such inspection or disclosure; provided, however, the
Administrator may permit the inspection or make such disclosures without the
approval of the Trust to any person in any case where it is advised by its
counsel that it may be exposed to potential liability, loss or damage resulting
from or relating to the failure to do so (the costs of counsel in considering
the matter to be borne by the Trust). Notwithstanding anything herein to the
contrary, the Administrator may disclose that the Trust has instructed it not to
permit the inspection
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or make the disclosures or otherwise limited or restricted its ability to do so.
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, and information which was already in the possession of the
Administrator prior to the receipt thereof shall not be subject to this
paragraph.
5. USE OF TRUST AND FUND NAMES
The Administrator shall not use the name of the Trust or any Fund (other
than for use in connection with performing its duties under the Agreement) in a
manner not approved by the Trust prior thereto in writing; provided, however,
that the approval of the Trust shall not be required for the use of the Trust's
name or the name of any Fund in connection with performing its duties and
obligations or exercising its rights under this Agreement or which is required
by the Commission or any state securities authority or any other appropriate
regulatory, governmental or judicial authority, provided, further, that in no
event shall such approval be unreasonably withheld or delayed and that the
foregoing shall not limit the ability of the Administrator or its affiliates to
use Trust and Fund names pursuant to any agreement among them and the Trust.
6. 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 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 default, 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 the Administrator, its
affiliates or any of its or their officers, directors, members, 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.
7. 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 February __, 2001 (the "Initial Term").
Thereafter, if
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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.
8. 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 other agreements with such other entities.
9. 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.
5
<PAGE> 6
10. 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, with a copy to General Counsel, and notice to the Trust shall
be sent to Lend Lease Funds, c/o Lend Lease Rosen Real Estate Securities, LLC,
c/o Lend Lease Rosen Real Estate Securities, LLC, 1995 University Avenue, Suite
550, Berkeley, CA 94704, Attention: President.
11. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement of the parties hereto.
12. 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.
13. 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.
LEND LEASE FUNDS
(the "Trust")
By:
----------------------------------------
President
SUNSTONE FINANCIAL GROUP, INC.
("Administrator")
By:
----------------------------------------
6
<PAGE> 7
President
SCHEDULE A
TO THE
ADMINISTRATION AND FUND ACCOUNTING AGREEMENT
BY AND BETWEEN
LEND LEASE FUNDS
AND
SUNSTONE FINANCIAL GROUP, INC.
NAME OF FUNDS
Lend Lease U.S. Real Estate Securities Fund
7
<PAGE> 8
SCHEDULE B
TO THE
ADMINISTRATION AND FUND ACCOUNTING AGREEMENT
BY AND BETWEEN
LEND LEASE FUNDS
AND
SUNSTONE FINANCIAL GROUP, INC.
SERVICES
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 office space, facilities, equipment and personnel to carry out its
services hereunder;
- - compile data for, prepare and file 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;
- - 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;
- - prepare the financial statements for the Annual and Semi-Annual Reports
required pursuant to Section 30(d) under the 1940 Act;
- - prepare initial drafts of the Trust's Registration Statement on Form N-1A,
and thereafter provide financial and Fund performance information for
inclusion in Post-Effective Amendments to the Registration Statement for the
Trust;
- - 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 Trust;
- - calculate daily net asset values and income factors of each Fund;
- - maintain all general ledger accounts and related subledgers;
- - perform security valuations using pricing services or information provided
by the investment adviser or sub-adviser;
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<PAGE> 9
- - assist in the acquisition of the Trust 's fidelity bond required by the 1940
Act, monitor the amount of the bond and make the necessary Commission
filings related thereto;
- - 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 and sub-advisers, if any, of their primary day-to-day responsibility
for assuring such compliance);
- - 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;
- - prepare and/or file state securities registration compliance filings, with
the advice of the Trust's legal counsel, in accordance with instructions
from the Trust, which instructions will include the states to qualify in,
the amounts of Shares to initially and subsequently qualify and the warning
threshold to be maintained;
- - develop with legal counsel and the secretary of the Trust an agenda for each
board meeting and, if requested by the Trustees, attend board meetings,
prepare minutes and provide reports relating to the Adminstrator's duties
and its performance under this Agreement;
- - prepare Form 1099s for Trustees and other fund vendors;
- - calculate dividend and capital gains distributions subject to review and
approval by the Trust and its independent accountants; and
- - generally assist in the Trust's administrative operations as mutually
agreed to by the parties.
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.
9
<PAGE> 10
SCHEDULE C
TO THE
ADMINISTRATION AND FUND ACCOUNTING AGREEMENT
BY AND BETWEEN
LEND LEASE FUNDS
AND
SUNSTONE FINANCIAL GROUP, INC.
ASSET BASED FEES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
NAME OF FUND AVERAGE NET ASSETS BASIS POINTS MINIMUM
- ------------ ------------------ ------------ ANNUAL FEE
----------
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lend Lease U.S. Real Estate Up to $50 Million 17.0 $68,750
Securities Fund
- -----------------------------------------------------------------------------------------------------------
$50 Million to $100 million 9.0
- -----------------------------------------------------------------------------------------------------------
$100 Million to $250 Million 8.0
- -----------------------------------------------------------------------------------------------------------
$250 Million to $500 Million 5.0
- -----------------------------------------------------------------------------------------------------------
Over $500 Million 3.0
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
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 each Fund and the corresponding date each year thereafter. No amendment of
this Schedule B shall be required with each escalation. The foregoing fee
schedule assumes two classes of shares for each Fund and a fiscal year of
January 31. 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 and registration 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.
There shall be a 25% reduction of the minimum annual fee until August __, 2000,
and a 10% reduction of the minimum annual fee for the six-month period ending
February __, 2001, until the earlier of 12 months or the Fund's assets reach $25
million in total assets.
OUT-OF-POCKET AND OTHER RELATED EXPENSES
The Trust shall also pay/reimburse the Administrator's out-of-pocket and other
expenses actually incurred in connection with the performance of its duties
hereunder. Out-of-pocket expenses include, but are not limited to, those for
travel, lodging and meals related to attending Board meetings and other travel
requested by 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,
10
<PAGE> 11
NASDAQ and other service interface fees, EDGAR related fees, long distance
telephone charges, and photocopying, faxes, postage and overnight delivery
expenses. Out-of-pocket expenses do not include salaries and benefits or the
Adminstrator's employees.
EDGAR FILING PRODUCTION MANAGEMENT FEES
<TABLE>
<S> <C>
Annual Registration Statements (e.g., 485) $1,000
Follow-up filings to Annual Registration Statements, $ 850
excluding 497J (see below)
Annual and Semiannual Reports (N30D) $ 650
Quarterly Reports (N30B-2) $ 400
Notice to Accompany SEC Registration Fees (24f-2) $ 300
Certification of No Change to Prospectus and/or SAI (497J) $ 300
Certificate of Accounting of Securities (N17f-2) $ 300
Correspondence $ 300
</TABLE>
11
<PAGE> 1
EXHIBIT 99(h-2)
TRANSFER AGENCY AGREEMENT
THIS TRANSFER AGENCY AGREEMENT is made as of this ___ day of February,
2000, by and between Lend Lease Funds, a Delaware business trust (the "Trust"),
and Sunstone Financial Group, Inc., a Wisconsin corporation ("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.
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.
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<PAGE> 2
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 current Prospectus and Statement of
Additional Information with respect to a Fund including any applicable
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.
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 beneficial interest, 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
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 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.
2
<PAGE> 3
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
(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.
3
<PAGE> 4
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 shall pay Sunstone for any Services added to Schedule C
after the execution of this Agreement at such rate as may be agreed upon between
the parties.
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 and may, at Sunstone's
discretion, pay such expenses directly. Out-of-pocket expense shall include, but
not be limited to, those items specified on Schedule C hereto. If requested by
Sunstone, postage 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.
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.
4
<PAGE> 5
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
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.
5
<PAGE> 6
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 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
6
<PAGE> 7
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, 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
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's Shareholders confidential, except 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 or as otherwise provided in this
paragraph. In the case of any request or demand for the inspection or disclosure
of such information by another party, Sunstone shall notify the Trust and follow
the Trust's instructions as to permitting or refusing such inspection or
disclosure; provided, however, Sunstone may permit the inspection or make such
disclosures without the approval of the Trust to any person in any case where it
is advised by its counsel that it may be exposed to potential liability, loss or
damage resulting from or relating to the failure to do so (the costs of counsel
in considering the matter to be borne by the Trust). Notwithstanding anything
herein to the contrary,
7
<PAGE> 8
Sunstone may disclose that the Trust has instructed it not to permit the
inspection or make the disclosures or otherwise limited or restricted its
ability to do so. Records and information which have become known to the public
through no wrongful act of Sunstone or any of its employees, agents or
representatives, and information which was already in the possession of Sunstone
prior to receipt thereof, 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 Delaware; 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.
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.
8
<PAGE> 9
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.
6.04 ADDITIONAL 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. 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, excluding
any of the foregoing to the extent that they were provided to Sunstone by the
Adviser, Sub-Adviser or the Trust in connection with the Services provided by
Sunstone herein (the "Sunstone System").
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.
9
<PAGE> 10
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.
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;
10
<PAGE> 11
(d) Sunstone's acting upon telephone or electronic
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 except to the extent Sunstone knowingly permits the sale of
shares in a state in which the Trust has instructed Sunstone, in writing, not to
accept sales; 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.
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;
11
<PAGE> 12
(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.
ARTICLE IX
TERM AND TERMINATION
9.01 TERM. This Agreement shall remain in full force and effect until
February , 2001, (the "Initial Term") and thereafter shall automatically
--
extend for additional, successive twelve (12) month terms unless earlier
terminated as provided below.
9.02 TERMINATION. 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,
but not limited to: (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
12
<PAGE> 13
10.01 USE OF TRUST AND FUND NAMES. The Transfer Agent shall not use
the name of the Trust or any Fund in a manner not approved by the Trust prior
thereto in writing; provided, however, that the approval of the Trust shall not
be required for the use of the Trust's name or the name of any Fund in
connection with communications and records permitted by Articles II and IV
hereof or in connection with fulfilling its obligations and duties hereunder, or
in connection with exercising its rights or which is required by the Securities
and Exchange Commission or any state securities authority or any other
appropriate regulatory, governmental or judicial authority or in connection with
the marketing and related materials for the Transfer Agent and its affiliates.
10.02 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:
If to Sunstone: Sunstone Financial Group, Inc.
207 East Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202
Attention: President
with a copy to: General Counsel
If to the Trust: Lend Lease Funds
c/o Lend Lease Rosen Real Estate Securities,LLC
1995 University Ave.
Suite 550
Berkeley, CA 04704
Attention: President
10.03 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 90
days advance written notice to the Trust.
10.04 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.
10.05 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.
13
<PAGE> 14
10.06 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.
10.07 NON-EXCLUSIVITY; OTHER AGREEMENTS. The services of Sunstone
hereunder are not deemed exclusive and Sunstone shall be free to render similar
and other 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.
10.08 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.
10.09 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.
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. LEND LEASE FUNDS
By: By:
------------------------------- -------------------------------
(Signature) (Signature)
------------------------------ --------------------------------
(Name) (Name)
------------------------------ --------------------------------
(Title) (Title)
------------------------------ --------------------------------
(Date Signed) (Date Signed)
14
<PAGE> 15
SCHEDULE A
TO THE
TRANSFER AGENT AGREEMENT
BY AND BETWEEN
LEND LEASE FUNDS
AND
SUNSTONE FINANCIAL GROUP, INC.
NAME OF FUNDS
Lend Lease U.S. Real Estate Securities Fund
15
<PAGE> 16
SCHEDULE B
TO THE
TRANSFER AGENT AGREEMENT
BY AND BETWEEN
LEND LEASE FUNDS
AND
SUNSTONE FINANCIAL GROUP, INC.
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 and shareholder servicing fees
- Provide standards to structure forms and applications for efficient
processing
16
<PAGE> 17
OPTIONAL SERVICES
The Funds 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
- 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
- Give dealers access through NSCC's Fund/SERV and Networking
- Customized forms and applications
17
<PAGE> 18
SCHEDULE C
TO THE
TRANSFER AGENT AGREEMENT
BY AND BETWEEN
THE LEND LEASE FUNDS
AND
SUNSTONE FINANCIAL GROUP, INC.
FEE SCHEDULE
SERVICES
The following fees are charged for standard shareholder services:
<TABLE>
<CAPTION>
BASE FEES
<S> <C> <C>
- Open account fee (per year)
- No load equity and non-daily accrual fixed income funds $ 8.50
- Additional for 12b-1 fee $ 0.75
- Additional for front-end load $ 1.50
- Additional for CDSC or back-end load $ 2.00
- Money market and daily accrual fixed income funds $ 11.00
- Additional for 12b-1 fee $ 0.75
- Additional for front-end load $ 1.50
- Additional for CDSC or back-end load $ 2.00
- Closed account fee (per year) $ 3.00
- Monthly base (per fund)
- One to three funds in fund family $ 1,500*
- 4 or more funds in fund family $ 1,000
- Add for multiclass (per class) 25%
*Discounted to $1,000 per month for the first year of operation.
<CAPTION>
ACCOUNT MAINTENANCE FEES (PER OCCURRENCE)
<S> <C>
- New account set up $ 3.00
- Financial transactions $ 1.50
- Maintenance transactions $ 1.00
- Research/correspondence $ 2.50
- Transfer on death (TOD) set-up $ 7.50
- Fund/SERV
- Initial set-up per fund family $ 3,500
- Set-up fee per subsequent CUSIP $ 1,000
- New account set-up $ 1.00
- Per transaction - no load fund $ 0.25
- Per transaction - load fund $ 0.35
- Adjustments and rebills $ 2.50
- Fund/SERV direct charges at cost
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
<S> <C>
- Commission/SERV (per check) $ 0.25
- ACH/AIP/SWP/automatic exchanges
- Set-up $ 1.00
- Per transaction $ 0.25
- Withholding per eligible account per year $ 0.25
- Account transcripts older than 2 years
(may be charged to shareholders) $ 5.00
- Locating lost shareholders $ 8.00
- Postal clean up per account $ 3.00
- Tax ID number solicitation $ 2.50
<CAPTION>
SHAREHOLDER SERVICING FEES
<S> <C>
- Telephone calls (per call) $ 2.50
- Annual maintenance per omnibus account $ 150
<CAPTION>
TAX AND RETIREMENT FEES
<S> <C>
- Retirement accounts (IRA/Roth/others)
- Annual maintenance per account (may be
charged to shareholders) $ 12.50
- Account distribution (may be charged to shareholders) $ 12.50
- IRA transfer/rollover $ 7.50
<CAPTION>
DOCUMENT SERVICES
<S> <C>
- Per statement, confirmation and check processing $ 0.25
- Per tax form processing $ 0.25
- Per label printing for proxy or marketing purposes $ 0.10
- Bulk mailings/insert handling charge
- 1 insert $ 0.06
- 2 - 3 inserts $ 0.08
- 4 or more inserts as quoted
- Production of ad hoc reports starting at $100
<CAPTION>
SUNSTONE OFFERED MONEY MARKET EXCHANGE VEHICLES
<S> <C>
- One-time set up per money market fund used $ 2,000
- Monthly base fee per money market fund used $ 650
- Money market checkbooks at cost
- Signature verification of check writing $ 2.00
<CAPTION>
FORMS AND APPLICATIONS
<S> <C>
- Standard applications and forms in electronic format no charge
- Customized forms as quoted
</TABLE>
REPROCESSINGS DUE TO NAV ERRORS
This charge applies when shareholder transactions are required to be reprocessed
as a result of NAV errors caused by other than the willful misconduct or
negligence of Sunstone.
<TABLE>
<CAPTION>
<S> <C>
- Base fee (per occurrence, per day, per fund) $ 750
- Transaction fee $ 1.00
</TABLE>
19
<PAGE> 20
<TABLE>
<CAPTION>
FUND/SERV ACCESS
<S> <C>
- Use of Sunstone Fund/SERV membership (per fund/per year)
- First three funds in fund family $ 2,000
- 4 or more funds $ 1,000
</TABLE>
CUSTOM PROGRAMMING
Additional fees at $150 per hour or quoted by project may apply for special
programming to meet your servicing requirements or to create custom reports.
OUT-OF-POCKET EXPENSES
<TABLE>
<CAPTION>
DOCUMENT CHARGES
<S> <C>
- Copying charges (per page) $ 0.15
- Facsimile charges (per fax) $ 1.25
- Inventory and records storage $20.00/pallet
<CAPTION>
SUPPLIES AND SERVICES
<S> <C>
- Statement paper, check stock, envelopes, tax forms at cost
- Postage and express delivery charges at cost
- Tape/disk storage at cost
- Telephone and long distance at cost
- P.O. box rental at cost
- Toll-free number at cost
<CAPTION>
BANK CHARGES
<S> <C>
- Bank account service fees and any other bank charges at cost
- Outgoing wire fee varies by bank
- Non-sufficient funds varies by bank
- Stopped check on money market funds $ 25.00
</TABLE>
OPTIONAL SERVICES
Certain premium services described on Schedule B may be purchased on an
as-needed basis. Fees for premium services will be based on Sunstone's current
rate at the time services are purchased.
20
<PAGE> 1
EXHIBIT 99(i)
February 11, 2000
Lend Lease Funds
207 East Buffalo Street
Suite 400
Milwaukee, Wisconsin 53202
Ladies and Gentlemen:
As counsel to Lend Lease Funds, a Delaware business trust (the
"Trust"), we have been asked to render our opinion in connection with the
issuance by the Trust of an unlimited number of shares, $.0001 par value per
share (the "Shares"), of the Trust representing interests in the Lend Lease U.S.
Real Estate Securities Fund (the "Fund"), the sole series of the Trust, which
has been established and designated pursuant to the Trust's Master Trust
Agreement dated October 28, 1999, as amended to date, and as more fully
described in the prospectus and statement of additional information contained in
the Registration Statement on Form N-1A (Registration No. 333-90085) filed by
the Trust.
We have examined the Master Trust Agreement of the Trust dated October
28, 1999, as amended to date, the By-Laws of the Trust, certain resolutions
adopted by the Board of Trustees of the Trust, the prospectus and statement of
additional information which form a part of the Amendment and such other
documents as we deemed necessary for purposes of this opinion.
Based upon the foregoing, we are of the opinion that the Shares, which
are the subject of the foregoing Registration Statement will, when sold in
accordance with the terms of the prospectus and statement of additional
information relating to the Shares, as in effect at the time of the sale, will
be legally issued, fully-paid and non-assessable by the Trust.
We also hereby consent to the reference to this firm in the prospectus
and statement of additional information and to a copy of this opinion being
filed as an exhibit to the foregoing Registration Statement.
Very truly yours,
/s/ Goodwin, Procter & Hoar LLP
GOODWIN, PROCTER & HOAR LLP
<PAGE> 1
EXHIBIT 99(j)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion in the Statement of Additional Information
constituting part of this Post-effective Amendment No. 1 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 11, 2000, relating to the financial statements of Lend Lease U.S. Real
Estate Securities Fund, a portfolio of Lend Lease Funds, which is also included
in the Registration Statement. We also consent to the reference to us under the
heading "Investment Management and Other Services" in such Statement of
Additional Information.
/s/ PRICEWATERHOUSECOOPERS LLP
San Francisco, California
February 11, 2000
<PAGE> 1
EXHIBIT 99(l)
SUBSCRIPTION
October 28, 1999
To: Board of Trustees of
Lend Lease Funds
Ladies and Gentlemen:
The undersigned hereby subscribes for one (1) share of the Lend Lease
U.S. Real Estate Securities Fund series, on October 28, 1999, with $.0001 par
value, of Lend Lease Funds (the "Trust") at a price of $10.00 per share and
agrees to pay therefore upon demand, cash in the amount of $10.00 to the named
Fund.
In connection with your sale to us of one (1) share of stock
representing interests in Lend Lease U.S. Real Estate Securities Fund, we
understand that: (i) your sale of the share to us is made in reliance on such
sale being exempt under Section 4(2) of the 1933 Act as not involving any public
offering; and (ii) in part, your reliance on such exemption is predicated on our
representation, which we hereby confirm, that we are acquiring the share for
investment for our own account as the sole beneficial owner thereof, and not
with a view to or in connection with any resale or distribution of the share or
of any interest therein. We hereby agree that we will not sell, assign or
transfer the share or any interest therein, except upon repurchase or redemption
by the Trust, unless and until the share has been registered under the 1933 Act
or you have received an opinion of your counsel indicating to your satisfaction
that said sale, assignment or transfer will not violate the provisions of the
1933 Act or any rules or regulations promulgated thereunder.
Very truly yours,
LEND LEASE ROSEN
REAL ESTATE SECURITIES LLC
By: /s/ Michael A. Torres
---------------------------------
Name: Michael A. Torres
Title: President
<PAGE> 1
EXHIBIT 99(m-1)
LEND LEASE FUNDS
LEND LEASE U.S. REAL ESTATE SECURITIES FUND
CLASS A SHARES
PLAN OF DISTRIBUTION
PURSUANT TO RULE 12b-1
WHEREAS, Lend Lease Funds, a Delaware business trust (the "Trust"),
engages in business as an open-end management investment company and is
registered as such under the Investment Company Act of 1940, as amended (the
"Act");
WHEREAS, the Trust is authorized to (i) issue an unlimited number of
shares of beneficial interest in separate series, with the shares of each such
series representing the interests in a separate portfolio of securities and
other assets, and (ii) to divide the shares within each series into two or more
classes;
WHEREAS, the Trust has established Lend Lease U.S. Real Estate
Securities Fund as a series of the Trust (the "Initial Fund," such series,
together with all other series subsequently established by the Trust and made
subject to this Plan, being referred to herein individually as a "Fund" and
collectively as the "Funds");
WHEREAS, the Trust has established a class of shares referred to as
Class A shares;
WHEREAS, the Trust may be deemed a distributor within the meaning of
Rule 12b-1 under the Act, and desires to adopt a plan of distribution pursuant
to the Rule with respect to the Class A shares of the Fund (such shares, and the
Class A shares of any other Fund which adopts this Plan with respect to its
Class A shares, being referred to as the "Shares"); and
WHEREAS, the Board of Trustees as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the Act) and who have no direct
or indirect financial interest in the operation of this Plan or any agreements
relating to this Plan (the "Independent Trustees"), having determined, in the
exercise of their reasonable business judgment and in light of their fiduciary
duties under state law and under Section 36(a) and (b) of the Act, that there is
a reasonable likelihood that this Plan will benefit Lend Lease U.S. Real Estate
Securities Fund and holders of the Fund's Shares to which the Plan applies.
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with
Rule 12b-1 under the Act, on the following terms and conditions:
SECTION 1. DISTRIBUTION AND SHAREHOLDER SERVICING ACTIVITIES
<PAGE> 2
(a) General. Subject to the supervision of the Trustees, the Trust
and the Fund may engage, directly or indirectly, in financing any activities
primarily intended to result in the sale of Shares or the servicing of
shareholder accounts holding Shares, and, in connection therewith, may pay
Distribution Expenses and Shareholder Servicing Expenses subject to the terms of
the Plan.
(b) Distribution Expenses. As used in this Plan, the term
Distribution Expenses shall mean (1) payments by the Fund to any underwriter,
securities dealer or other party, which party may be an affiliate of the Fund,
engaged in the marketing, distribution or sale of Shares (each, a
"Distributor"), whether as compensation for such activities or reimbursement of
expenses incurred by the Distributor in connection with such activities; and (2)
payments by the Fund to a Distributor to be used to compensate or reimburse
another Distributor. Without limiting the foregoing, Distribution Expenses may
include payments for (i) direct out-of-pocket expenses incurred by a Distributor
in connection with the distribution and marketing of Shares, including relating
to the formulation and implementation of marketing strategies and promotional
activities such as direct mail promotions and television, radio, newspaper,
magazine and other mass media advertising, the preparation, printing and
distribution of sales literature, the preparation, printing and distribution of
Prospectuses of the Trust and reports for recipients other than existing
shareholders of the Fund, and obtaining such information, analyses and reports
with respect to marketing and promotional activities and investor accounts as
the Trust may, from time to time, deem advisable; and (ii) indirect expenses
incurred in connection with the promotion and sale of Shares, including, without
limitation, a Distributor's expenses for rent, office supplies, equipment,
travel, communication, compensation, and benefits for sales personnel.
(c) Shareholder Servicing Expenses. As used in this Plan, the term
Shareholder Servicing Expenses shall mean payments to any broker, financial
adviser, bank, trust company, benefit plan administrator or other financial
intermediary, which intermediary may be an affiliate of the Fund, (each, a
"Servicing Agent") that provides (directly or indirectly through another
Servicing Agent) various shareholder services with respect to Shares held by or
for customers of the Servicing Agent, including the following services:
answering inquiries regarding the Fund; assisting customers in changing dividend
options, account designations and addresses; performing sub-accounting for such
customers; establishing and maintaining customer accounts and records;
processing purchase and redemption transactions; providing periodic statements
showing customer's account balances and integrating such statements with those
of other transactions and balances in the customers' other accounts serviced by
the Servicing Agent; arranging for bank wires transferring customers' funds;
providing daily investment ("sweep") functions; and such other services as the
customers may request in connection with the Fund, to the extent permitted by
applicable statute, rule or regulation.
(d) Prospectus. For purposes of this Plan, references to the
Prospectus of the Trust shall be deemed to include all Prospectuses and
Statements of Additional Information of any of the Fund and of the Trust, all as
from time to time amended and in effect.
2
<PAGE> 3
SECTION 2. MAXIMUM EXPENDITURES
The expenditures to be made pursuant to this Plan with respect to a
Fund, and the basis upon which payment of such expenditures will be made, shall
be determined by the Trust, but in no event shall such expenditures exceed an
annual rate of 0.25% of the average daily value of the net assets of the Shares
of that Fund.
SECTION 3. PAYMENTS
Pursuant to this Plan, the Trust shall make payments to any
Distributor, Servicing Agent or any other party engaged by the Trust pursuant to
the Plan as provided for in that party's agreement with respect to each Fund.
Each such party shall apply amounts received for the purposes contemplated by
Section 1.
SECTION 4. TERM AND TERMINATION
(a) Initial Fund. This Plan shall become effective with respect to
Shares of Lend Lease U.S. Real Estate Securities Fund on the date set forth
below, and shall continue in effect with respect to such Shares (subject to
Section 4(c) hereof) until one year from the date of such effectiveness, unless
the continuation of this Plan shall have been approved with respect to the
Shares in accordance with the provisions of Section 4(c) hereof.
(b) Additional Funds. This Plan shall become effective with respect
to Shares of any additional Fund established by the Trust after the date hereof
and made subject to this Plan upon commencement of the initial public offering
thereof (provided that the Plan has previously been approved with respect to
Shares of that Fund by votes of a majority of both (i) the Board of Trustees of
the Trust and (ii) the Independent Trustees, cast in person at a meeting held
before the initial public offering of Shares of such additional Fund thereof and
called for the purpose of voting on such approval) or at such other time as may
be designated by Trustees in connection with their approval of the Plan with
respect to such Shares subject to applicable law, and shall continue in effect
with respect to Shares of each such additional Fund (subject to Section 4(c)
hereof) for one year thereafter, unless the continuation of this Plan shall have
been approved with respect to Shares of such additional Fund in accordance with
the provisions of Section 4(c) hereof.
3
<PAGE> 4
(c) Continuation. This Plan and the Agreement shall continue in
effect with respect to Shares of each Fund subsequent to the initial term
specified in Section 4(a) and (b) for so long as such continuance is
specifically approved at least annually by votes of a majority of both (i) the
Board of Trustees of the Trust and (ii) the Independent Trustees, cast in person
at a meeting called for the purpose of voting on this Plan, subject to any
shareholder approval requirements existing under applicable law.
(d) Termination. This Plan may be terminated at any time with
respect to the Trust or any Fund thereof, as the case may be, by vote of a
majority of the Independent Trustees, or by vote of a majority of the
outstanding Shares of that Fund. For purposes of this Plan, the term "vote of a
majority of the outstanding Shares" of any Fund shall be interpreted in
accordance with Section 2(a)(42) of the Act. The Plan may remain in effect with
respect to a Fund even if it has been terminated in accordance with this Section
4(d) with respect to one or more other Funds.
SECTION 5. AMENDMENTS
This Plan may not be amended to increase materially the amount of
expenditures provided for in Section 2 hereof unless such amendment is approved
by a vote of a majority of the outstanding Shares (within the meaning of the
Act) of Class A shares of each Fund with respect to which a material increase in
the amount of distribution expenditures is proposed, and no material amendment
to the Plan shall be made unless approved in the manner provided for annual
renewal in Section 4(c) hereof. Otherwise, this Plan may be amended with respect
to Shares of a Fund by vote of a majority of the Independent Trustees or the
outstanding voting Shares of that Fund.
SECTION 6. INDEPENDENT TRUSTEES
While this Plan is in effect with respect to any Fund, the selection
and nomination of Trustees who are not interested persons (as defined in the
Act) of the Trust shall be committed to the discretion of the Trustees who are
not interested persons.
SECTION 7. QUARTERLY REPORTS
The Treasurer of the Trust, and such other parties as the Trustees
of the Trust may designate from time to time, shall provide to the Trustees of
the Trust and the Trustees shall review, at least quarterly, a written report of
payment under this Plan and the purposes for which such payments were made.
4
<PAGE> 5
SECTION 8. RECORD KEEPING
The Trust shall preserve copies of this Plan, the Agreement and any
related agreements and all reports made pursuant to Section 7 hereof, for a
period of not less than six years from the date of this Plan and the Agreement,
the agreements or such reports, as the case may be, the first two years in an
easily accessible place.
As adopted by the Trust with respect to Class A shares of Lend Lease U.S. Real
Estate Securities Fund on January 25, 2000.
5
<PAGE> 1
EXHIBIT 99(m-2)
LEND LEASE FUNDS
LEND LEASE U.S. REAL ESTATE SECURITIES FUND
CLASS K SHARES
PLAN OF DISTRIBUTION
PURSUANT TO RULE 12b-1
WHEREAS, Lend Lease Funds, a Delaware business trust (the "Trust"),
engages in business as an open-end management investment company and is
registered as such under the Investment Company Act of 1940, as amended (the
"Act");
WHEREAS, the Trust is authorized to (i) issue an unlimited number of
shares of beneficial interest in separate series, with the shares of each such
series representing the interests in a separate portfolio of securities and
other assets, and (ii) to divide the shares within each series into two or more
classes;
WHEREAS, the Trust has established Lend Lease U.S. Real Estate
Securities Fund as a series of the Trust (the "Initial Fund," such series,
together with all other series subsequently established by the Trust and made
subject to this Plan, being referred to herein individually as a "Fund" and
collectively as the "Funds");
WHEREAS, the Trust has established a class of shares referred to as
Class K shares;
WHEREAS, the Trust may be deemed a distributor within the meaning of
Rule 12b-1 under the Act, and desires to adopt a plan of distribution pursuant
to the Rule with respect to the Class K shares of the Fund (such shares, and the
Class K shares of any other Fund which adopts this Plan with respect to its
Class K shares, being referred to as the "Shares"); and
WHEREAS, the Board of Trustees as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the Act) and who have no direct
or indirect financial interest in the operation of this Plan or any agreements
relating to this Plan (the "Independent Trustees"), having determined, in the
exercise of their reasonable business judgment and in light of their fiduciary
duties under state law and under Section 36(a) and (b) of the Act, that there is
a reasonable likelihood that this Plan will benefit Lend Lease U.S. Real Estate
Securities Fund and holders of the Fund's Shares to which the Plan applies.
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with
Rule 12b-1 under the Act, on the following terms and conditions:
SECTION 1. DISTRIBUTION AND SHAREHOLDER SERVICING ACTIVITIES
<PAGE> 2
(a) General. Subject to the supervision of the Trustees, the Trust
and the Fund may engage, directly or indirectly, in financing any activities
primarily intended to result in the sale of Shares or the servicing of
shareholder accounts holding Shares, and, in connection therewith, may pay
Distribution Expenses and Shareholder Servicing Expenses subject to the terms of
the Plan.
(b) Distribution Expenses. As used in this Plan, the term
Distribution Expenses shall mean (1) payments by the Fund to any underwriter,
securities dealer or other party, which party may be an affiliate of the Fund,
engaged in the marketing, distribution or sale of Shares (each, a
"Distributor"), whether as compensation for such activities or reimbursement of
expenses incurred by the Distributor in connection with such activities; and (2)
payments by the Fund to a Distributor to be used to compensate or reimburse
another Distributor. Without limiting the foregoing, Distribution Expenses may
include payments for (i) direct out-of-pocket expenses incurred by a Distributor
in connection with the distribution and marketing of Shares, including relating
to the formulation and implementation of marketing strategies and promotional
activities such as direct mail promotions and television, radio, newspaper,
magazine and other mass media advertising, the preparation, printing and
distribution of sales literature, the preparation, printing and distribution of
Prospectuses of the Trust and reports for recipients other than existing
shareholders of the Fund, and obtaining such information, analyses and reports
with respect to marketing and promotional activities and investor accounts as
the Trust may, from time to time, deem advisable; and (ii) indirect expenses
incurred in connection with the promotion and sale of Shares, including, without
limitation, a Distributor's expenses for rent, office supplies, equipment,
travel, communication, compensation, and benefits for sales personnel.
(c) Shareholder Servicing Expenses. As used in this Plan, the term
Shareholder Servicing Expenses shall mean payments to any broker, financial
adviser, bank, trust company, benefit plan administrator or other financial
intermediary, which intermediary may be an affiliate of the Fund, (each, a
"Servicing Agent") that provides (directly or indirectly through another
Servicing Agent) various shareholder services with respect to Shares held by or
for customers of the Servicing Agent, including the following services:
answering inquiries regarding the Fund; assisting customers in changing dividend
options, account designations and addresses; performing sub-accounting for such
customers; establishing and maintaining customer accounts and records;
processing purchase and redemption transactions; providing periodic statements
showing customer's account balances and integrating such statements with those
of other transactions and balances in the customers' other accounts serviced by
the Servicing Agent; arranging for bank wires transferring customers' funds;
providing daily investment ("sweep") functions; and such other services as the
customers may request in connection with the Fund, to the extent permitted by
applicable statute, rule or regulation.
(d) Prospectus. For purposes of this Plan, references to the
Prospectus of the Trust shall be deemed to include all Prospectuses and
Statements of Additional Information of any of the Fund and of the Trust, all as
from time to time amended and in effect.
2
<PAGE> 3
SECTION 2. MAXIMUM EXPENDITURES
The expenditures to be made pursuant to this Plan with respect to a
Fund, and the basis upon which payment of such expenditures will be made, shall
be determined by the Trust, but in no event shall such expenditures exceed an
annual rate of 0.25% of the average daily value of the net assets of the Shares
of that Fund.
SECTION 3. PAYMENTS
Pursuant to this Plan, the Trust shall make payments to any
Distributor, Servicing Agent or any other party engaged by the Trust pursuant to
the Plan as provided for in that party's agreement with respect to each Fund.
Each such party shall apply amounts received for the purposes contemplated by
Section 1.
SECTION 4. TERM AND TERMINATION
(a) Initial Fund. This Plan shall become effective with respect to
Shares of Lend Lease U.S. Real Estate Securities Fund on the date set forth
below, and shall continue in effect with respect to such Shares (subject to
Section 4(c) hereof) until one year from the date of such effectiveness, unless
the continuation of this Plan shall have been approved with respect to the
Shares in accordance with the provisions of Section 4(c) hereof.
(b) Additional Funds. This Plan shall become effective with
respect to Shares of any additional Fund established by the Trust after the date
hereof and made subject to this Plan upon commencement of the initial public
offering thereof (provided that the Plan has previously been approved with
respect to Shares of that Fund by votes of a majority of both (i) the Board of
Trustees of the Trust and (ii) the Independent Trustees, cast in person at a
meeting held before the initial public offering of Shares of such additional
Fund thereof and called for the purpose of voting on such approval) or at such
other time as may be designated by Trustees in connection with their approval of
the Plan with respect to such Shares subject to applicable law, and shall
continue in effect with respect to Shares of each such additional Fund (subject
to Section 4(c) hereof) for one year thereafter, unless the continuation of this
Plan shall have been approved with respect to Shares of such additional Fund in
accordance with the provisions of Section 4(c) hereof.
3
<PAGE> 4
(c) Continuation. This Plan and the Agreement shall continue in
effect with respect to Shares of each Fund subsequent to the initial term
specified in Section 4(a) and (b) for so long as such continuance is
specifically approved at least annually by votes of a majority of both (i) the
Board of Trustees of the Trust and (ii) the Independent Trustees, cast in person
at a meeting called for the purpose of voting on this Plan, subject to any
shareholder approval requirements existing under applicable law.
(d) Termination. This Plan may be terminated at any time with
respect to the Trust or any Fund thereof, as the case may be, by vote of a
majority of the Independent Trustees, or by vote of a majority of the
outstanding Shares of that Fund. For purposes of this Plan, the term "vote of a
majority of the outstanding Shares" of any Fund shall be interpreted in
accordance with Section 2(a)(42) of the Act. The Plan may remain in effect with
respect to a Fund even if it has been terminated in accordance with this Section
4(d) with respect to one or more other Funds.
SECTION 5. AMENDMENTS
This Plan may not be amended to increase materially the amount of
expenditures provided for in Section 2 hereof unless such amendment is approved
by a vote of a majority of the outstanding Shares (within the meaning of the
Act) of Class K shares of each Fund with respect to which a material increase in
the amount of distribution expenditures is proposed, and no material amendment
to the Plan shall be made unless approved in the manner provided for annual
renewal in Section 4(c) hereof. Otherwise, this Plan may be amended with respect
to Shares of a Fund by vote of a majority of the Independent Trustees or the
outstanding voting Shares of that Fund.
SECTION 6. INDEPENDENT TRUSTEES
While this Plan is in effect with respect to any Fund, the selection
and nomination of Trustees who are not interested persons (as defined in the
Act) of the Trust shall be committed to the discretion of the Trustees who are
not interested persons.
SECTION 7. QUARTERLY REPORTS
The Treasurer of the Trust, and such other parties as the Trustees of
the Trust may designate from time to time, shall provide to the Trustees of the
Trust and the Trustees shall review, at least quarterly, a written report of
payment under this Plan and the purposes for which such payments were made.
4
<PAGE> 5
SECTION 8. RECORD KEEPING
The Trust shall preserve copies of this Plan, the Agreement and any
related agreements and all reports made pursuant to Section 7 hereof, for a
period of not less than six years from the date of this Plan and the Agreement,
the agreements or such reports, as the case may be, the first two years in an
easily accessible place.
As adopted by the Trust with respect to Class K shares of Lend Lease U.S. Real
Estate Securities Fund on January 25, 2000.
5
<PAGE> 1
EXHIBIT 99(m-3)
FORM OF
SHAREHOLDER SERVICING AGREEMENT
AGREEMENT dated as of by and between Lend Lease Funds
(the "Trust"), a Delaware business trust, having its principal place of business
at 270 East Buffalo Street, Suite 400, Milwaukee, WI 53202, and
(the "Agent"). The Agent wishes to act as the agent of
its customers (the "Customers") in performing certain administrative functions
in connection with purchases and redemptions of shares of beneficial interest of
certain series of the Trust described in Section 1 hereof ("Shares") from time
to time upon the order and for the account of Customers, and to provide related
services to its Customers in connection with their investments in the Trust. It
is in the interest of the Trust to make the services of the Agent available to
Customers who are or may become shareholders of the Trust.
In consideration of the foregoing recitals and the mutual covenants
herein contained, the Trust and the Agent hereby agree as follows:
1. Appointment. The Agent hereby agrees to perform the services set
forth below for Customers. Each series of the Trust for which the Agent acts as
a servicing agent pursuant to this Agreement is hereinafter referred to as a
"Fund." The Agent's appointment hereunder is non-exclusive, and the parties
recognize and agree that, from time to time, the Trust may enter into other
shareholder servicing agreements, with other financial institutions. As used in
this Agreement, "Shares" shall mean: (i) with respect to a Fund whose shares
have no class designation, all shares of beneficial interest in that Fund, and
(ii) with respect to a Fund whose shares do have class designations, the
shares of that Fund.
2. Services to be Performed. The Agent shall be responsible for
performing shareholder account servicing functions, which shall include without
limitation:
(a) assisting in processing Customer purchase and redemption
requests;
(b) answering Customer inquiries regarding account status and
history, the manner in which purchase and redemptions of the Shares may be
effected, and certain other matters pertaining to the Trust;
(c) providing necessary personnel and facilities to establish
and maintain certain shareholder accounts and records, as requested from time to
time by the Trust;
(d) arranging for the wiring of funds;
(e) transmitting and receiving funds in connection with
Customer orders to purchase or redeem Shares;
<PAGE> 2
(f) providing periodic statements showing a Customer's account
balances and, to the extent practicable, integration of such information with
other client transactions otherwise effected with or through the Agent;
(g) furnishing (either separately or on an integrated basis with
other reports sent to a Customer by the Agent) monthly and annual statements and
confirmations of all purchases and redemptions of Shares in a Customer's
account;
(h) aggregating and processing Customer purchase and redemption
requests for Shares and placing net purchase and redemption orders with the
Trust's transfer agent (currently Sunstone Financial Group, Inc. ("Sunstone"),
including any designee of Sunstone, "Transfer Agent") in the manner described in
Section 4 hereof;
(i) providing complete subaccounting services and maintaining
complete subaccounting records regarding Shares beneficially owned by Customers;
(j) processing dividend payments;
(k) transmitting proxy statements, annual and semi-annual
reports, prospectuses and other communications from the Trust to Customers;
(l) receiving, tabulating and transmitting to the Trust proxies
executed by Customers with respect to annual and special meetings of
shareholders of the Trust;
(m) preparing and filing U.S. Treasury Department Forms 1099 and
other appropriate forms required with respect to dividends and distributions by
federal authorities; and
(n) providing such other related services as the Trust or a
Customer may reasonably request.
The Agent shall provide all personnel, facilities and equipment necessary in
order for it to perform the functions described in this paragraph with respect
to its Customers. The Agent shall exercise reasonable care in performing all
such services and shall be liable for any failure to exercise such reasonable
care.
3. Fees.
(a) Fees from the Trust. In consideration for the services
described in Section 2 hereof, the Trust shall pay the Agent a fee as described
in Attachment A hereto. All fees shall be paid quarterly in arrears.
(b) Fees from Customers. It is agreed that the Agent may impose
certain conditions on Customers, in addition to or different from those imposed
by the Trust, such as
2
<PAGE> 3
requiring a minimum initial investment or charging Customers direct fees for the
same or similar services as are provided hereunder by the Agent as Agent (which
fees may either relate specifically to the Agent's services with respect to the
Trust or generally cover services not limited to those with respect to the
Trust). The Agent shall bill Customers directly for such fees. In the event the
Agent charges Customers such fees, it shall make appropriate prior written
disclosure (such disclosure to be in accordance with all applicable laws) to
Customers both of any direct fees charged to the Customer and of the fees
received or to be received by it from the Trust pursuant to Section 3(a) of this
Agreement. It is understood, however, that in no event shall the Agent have
recourse or access to the account of any shareholder of the Trust except to the
extent expressly authorized: (i) by law; (ii) by the Trust; or (iii) by such
shareholder for payment of any direct fees referred to in this Section 3(b).
4. Purchase and Redemption Orders.
(a) Agent will open with Transfer Agent an omnibus account.
Capital gains and dividend distributions payable with respect to Shares held in
the account shall be paid in additional Shares of the Fund. Agent may also open
a second omnibus account with Transfer Agent whose shares' capital gains and
dividend distributions shall be paid to Agent for distribution to Customers.
Transfer Agent shall designate an account number for each omnibus account.
(b) For each business day on which any Customer places with Agent
a purchase or redemption order for Shares of a Fund, Agent shall aggregate all
such purchase orders and aggregate all such redemption orders and communicate to
Transfer Agent, by facsimile or, where feasible, by direct or indirect systems
access, an aggregate purchase order and an aggregate redemption order for each
omnibus account. To be effective on the date received, all orders must:
(i) be received by Agent from Customers prior to the close
of trading on the New York Stock Exchange (typically 4:00 p.m. Eastern time) and
transmitted to Transfer Agent prior to 8:00 a.m. Eastern Time on the next
succeeding business day; and
(ii) in the case of an aggregate purchase request, federal
funds in the amount of the purchase request must be wired from the custodial
account of the Customer to Transfer Agent prior to 4:00 p.m. Eastern time on the
next succeeding business day. Funds should be wired to Transfer Agent at
.
(c) Transfer Agent shall use its best efforts to provide Agent
with the NAV per share prior to 7:00 p.m. Eastern time each business day.
(d) In the case of a redemption order, Transfer Agent will
initiate a wire via federal funds in the amount of the redemption order shall be
wired by 11:00 a.m. Eastern time on the settlement date to the Agent at
. Each party shall bear the cost of any wire
transfer that it sends.
3
<PAGE> 4
If Agent fails to provide payment to the Fund by the close of business
on the applicable settlement date, then, at the option of the Fund, (A) the
transaction may be cancelled or (B) the transaction may be processed at the next
determined NAV for the applicable Fund after purchase and/or funds are received.
In either event, Agent shall be liable to the Fund for all losses suffered or a
result of, its failure to provide payment as required thereon.
(e) In the event adjustments are required to correct any error in
the computation of the net asset value or public offering price of Fund Shares,
the Trust shall notify Agent prior to making any adjustments and describe the
need for such adjustments (including the date of the error, the incorrect price
and the correct price). In such case, an appropriate adjustment shall be made to
the relevant omnibus account(s) and Agent shall make corresponding adjustments
to the accounts of its Customers.
(f) The Trust may cease offering Shares at any time, and in its
sole discretion may refuse any purchase order. Further, the Trust shall not be
required to accept orders for redemption of Shares of a Fund under this Section
4 if the Trust has suspended redemptions with respect to such Fund in
accordance with Section 22(e) of the Investment Company Act of 1940, as amended
(the "1940 Act").
(g) For the purposes of this Agreement, "business day" shall mean
each day that the New York Stock Exchange is open for business.
5. Dividends and Capital Gains Distributions.
(a) As to each Fund, as soon as practicable after the
announcement of a distribution, Agent shall be notified of the ex-date, record
date, payable date, distribution rate per Share, record date Share balances and
cash and reinvestment payment amounts.
(b) On the payable date, the Trust shall wire the cash
distribution from the appropriate Fund to Agent at .
(c) For each Fund that pays daily dividends, the Trust shall
provide on a daily basis, the following record date information: daily rate,
account share balance, account accrual dividend amount (for that day), account
accrual dividend amount (for period to date), and account transfers and
period-to-date accrual amounts. Such information shall be provided by facsimile
to .
(d) For annual tax reporting purposes, the Trust shall inform
Agent of the portion of distributions that include any of the following: foreign
source income, tax exempt income by state of origin, or return of capital.
4
<PAGE> 5
6. Preparation and Distribution of Written Materials.
(a) The Trust shall provide Agent with sufficient numbers of each
Fund's prospectus as requested by Agent and a master copy of each Fund's
Statement of Additional Information ("SAI") offering Shares. As soon as
practicable following the filing under the Securities Act of 1933, as amended,
of an amendment to the Trust's Registration Statement or a definitive Prospectus
or SAI of any Fund or a supplement to the Prospectus or SAI of any Fund, the
Trust shall provide a master copy of the Prospectus and SAI of each Fund
affected by the amendment or a copy of such supplement. Agent shall not be
responsible for the preparing or filing with any governmental authority any
Registration Statement, Prospectus, SAI or Supplement for the Trust or any Fund.
However, upon reasonable request by the Trust or any of the Trust's service
providers, Agent shall timely provide information necessary for the Trust or any
of the Trust's service providers to: (i) prepare and file any of the written
materials mentioned in this Section 6 or (ii) otherwise comply with applicable
law regarding the Trust.
(b) Agent shall timely provide copies of the following materials
to Customers: proxy statements, annual reports and semi-annual reports. At no
expense to Agent, the Trust shall provide Agent with as many copies of such
materials as Agent may reasonably request. Such materials shall be sent to Agent
at the following address: . [Agent agrees to
reimburse the Trust for the cost of materials if and to the extent required by
Attachment B to this Agreement.]
7. Capacity and Authority to Act. The Agent and its officers,
employees and agents are not authorized to make any representations concerning
the Trust or the Shares to Customers or prospective Customers, excepting only
accurate communication of factual information contained in the then-current
Prospectus and SAI offering Shares of the relevant Fund or such other
communications as may be expressly authorized by the Trust. In performing its
services under this Agreement, the Agent shall act as agent for the Customer and
shall have no authority to act as agent for the Trust. Upon request by the
Trust, the Agent shall provide the Trust with copies of any materials which are
generally circulated by the Agent to its Customers or prospective Customers. The
Agent and its officers and employees shall be available during normal business
hours to consult with the Trust and the Trust's other service providers
concerning the performance of the Agent's responsibilities under this Agreement.
8. Use of Trust and Fund Names. The Agent shall not use the name of
the Trust or any Fund (other than for internal use in connection with performing
its duties under this agreement) in a manner not approved by the Trust prior
thereto in writing; provided, however, that the approval of the Trust shall not
be required for the use of the Trust's name or the name of any Fund in
connection with communications permitted by Section 7 hereof or for any use of
the Trust's name or which is required by the Securities and Exchange Commission
or any state securities authority or any other appropriate regulatory,
governmental or judicial
5
<PAGE> 6
authority provided, further, that in no event shall such approval be
unreasonably withheld or delayed.
9. Use of the Agent's Name. The Trust shall not use the name of the
Agent in any prospectus, sales literature or other material relating to the
Trust in a manner not approved by the Agent prior thereto in writing; provided,
however, that the approval of the Agent shall not be required for any use of its
name which merely refers accurately to its appointment hereunder or which is
required by the Securities and Exchange Commission or any state securities
authority or any other appropriate regulatory, governmental or judicial
authority; provided, further, that in no event shall such approval be
unreasonably withheld or delayed.
10. Security. The Agent represents and warrants that, to the best of
its knowledge, the various procedures and systems which it has implemented
(including provision for twenty-four hours a day restricted access) with regard
to safeguarding from loss or damage attributable to fire, theft or any other
cause the Agent's records, data, equipment, facilities and other property used
in the performance of its obligations hereunder are adequate and that it will
make such changes therein from time to time as in its judgment are required for
the secure performance of its obligations hereunder. From time to time and upon
request, Agent shall permit the Trust or its designees to make a reasonable
inspection of Agent's security systems and procedures.
11. Compliance with Laws; Etc. The Agent shall comply with all
applicable federal and state laws and regulations, including securities laws.
The Agent represents and warrants to the Trust that the performance of all its
obligations hereunder will comply with all applicable laws and regulations, the
provisions of its charter documents and by-laws and all material contractual
obligations binding upon the Agent. The Agent furthermore undertakes that it
will promptly inform the Trust of any change in applicable laws or regulations
(or interpretations thereof) or in its charter or by-laws or material contracts
which would prevent or impair full performance of any of its obligations
hereunder.
12. Reports. To the extent requested by the Trust from time to time,
the Agent agrees that it will provide the Trust with a written report of the
amounts expended by the Agent pursuant to this Agreement and the purposes for
which such expenditures were made. Such written reports shall be in a form
satisfactory to the Trust and shall supply all information necessary for the
Trust to discharge its responsibilities under applicable laws and regulations.
13. Record Keeping; Reporting.
(a) Section 31(a), Etc. The Agent shall maintain records in a form
acceptable to the Trust and in compliance with applicable laws and the rules and
regulations of the Securities and Exchange Commission, including, but not
limited to, the record-keeping requirements of Section 31(a) of the 1940 Act and
the rules thereunder. Such records shall be deemed to be the property of the
Trust and will be made available, at the Trust's request, for inspection and use
by the Trust representatives of the Trust and governmental authorities.
6
<PAGE> 7
Agent shall permit the Trust and the Trust's other service providers reasonable
access to such information when necessary for the Trust or any such person to
comply with applicable law. In such case, the Trust shall cause such information
to remain confidential and shall not permit such information to be used by any
party or disclosed to any additional party except with Agent's written consent
or as required by applicable law or judicial process. The Agent agrees that, for
so long as it retains any records of the Trust, it will meet all reporting
requirements pursuant to the 1940 Act with respect to such records. The
record-keeping obligations imposed in this Section 13(a) shall survive the
termination of this Agreement.
(b) Reporting of Payments. From time to time, and upon reasonable
notice from the Trust, the Agent shall provide the Trust a written accounting of
all payments that the Agent receives under this Agreement.
(c) Transfer of Customer Data. In the event this Agreement is
terminated or a successor to the Agent is appointed, the Agent shall, at the
expense of the Trust, transfer to such designee as the Trust may direct a
certified list of the shareholders of the Trust serviced by the Agent (with
name, address and tax identification or Social Security number), a complete
record of the account of each such shareholder and the status thereof, and all
other relevant books, records, correspondence and other data established or
maintained by the Agent under this Agreement. In the event this Agreement is
terminated, the Agent will use its best efforts to cooperate in the orderly
transfer of such duties and responsibilities, including assistance in the
establishment of books, records and other data by the successor.
14. Force Majeure. The Agent shall not be liable or responsible for
delays or errors by reason of circumstances beyond its control, including, but
not limited to, acts of civil or military authority, national emergencies, labor
difficulties, fire, mechanical breakdown, flood or catastrophe, Acts of God,
insurrection, war, riots or failure of communication or power supply.
15. Indemnity.
(a) Indemnification of the Trust. The Agent shall indemnify and
hold the Trust harmless from and against any and all losses, claims, damages,
judgments, assessments, costs and other liabilities ("Trust Liabilities") and
will reimburse all fees and expenses (including the fees and expenses of
counsel) incurred by the Trust, provided such Trust Liabilities and expenses
result from a claim, action or proceeding brought or threatened to be brought
against the Trust arising out of (i) the bad faith or negligence of the Agent,
its officers, employees or agents, or (ii) any breach of its obligations under
this Agreement or applicable law by the Agent, its officers, employees or
agents, or (iii) any false or misleading statement contained in any
communication by the Agent to any Customer or prospective Customer not prepared
by or expressly authorized by the Trust for use of the Agent.
In any case in which the Agent may be asked to indemnify or hold
the Trust harmless, the Agent shall be advised of all pertinent facts
concerning the situation in question
7
<PAGE> 8
and the Trust shall use reasonable care to identify and notify the Agent
promptly concerning any situation which presents or appears likely to present a
claim for indemnification against the Agent. The Agent shall have the option to
defend the Trust against any Claim which may be the subject of indemnification
hereunder. In the event that the Agent elects to defend against such Claim, the
defense shall be conducted by counsel chosen by the Agent and satisfactory to
the Trust. The Trust may retain additional counsel at its expense. Except with
the prior written consent of the agent, the Trust shall not confess any Claim or
make any compromise in any case in which the Agent will be asked to indemnify
the Trust.
(b) Indemnification of the Agent. The Trust shall indemnify and
hold the Agent harmless from and against any and all losses, claims, damages,
judgments, assessments, costs and other liabilities ("Agent Liabilities") and
will reimburse all fees and expenses (including the fees and expenses of
counsel) incurred by the Agent, provided such Agent Liabilities and expenses
result from a claim, action or proceeding brought or threatened to be brought
against the Agent arising out of (i) the bad faith or negligence of the Trust,
its officers, employees or agents, or (ii) any breach of its obligations under
this Agreement or applicable law by the Trust, its officers, employees or
agents, or (iii) any untrue statement, or alleged untrue statement of a material
fact including, without limitation, any such statement or omission made in the
Trust's Registration Statement or any Fund's Prospectus or SAI, or arising out
of or based upon any omission, or alleged omission, to state a material fact
required to be stated in either the Registration Statement or any Prospectus, or
necessary to make the statements in any thereof not misleading; provided,
however, that the Trust's agreement to indemnify such persons shall not be
deemed to cover any losses, claims, demands, liabilities or expenses arising out
of any untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement or any Prospectus or SAI in reliance
upon and in conformity with information furnished to the Trust by Agent
specifically for use in the preparation thereof.
In any case in which the Trust may be asked to indemnify or hold
the Agent harmless, the Trust shall be advised of all pertinent facts concerning
the situation in question and the Agent shall use reasonable care to identify
and notify the Trust promptly concerning any situation which presents or appears
likely to present a claim for indemnification against the Trust. The Trust shall
have the option to defend the Agent against any claim which may be the subject
of indemnification hereunder. In the event that the Trust elects to defend
against such claim the defense shall be conducted by counsel chosen by the Trust
and satisfactory to the Agent. The Agent may retain additional counsel at its
expense. Except with the prior written consent of the Trust, the Agent shall not
confess any claim or make any compromise in any case in which the Trust will be
asked to indemnify the Agent.
(c) Survival of Indemnities. The indemnities granted by the
parties in this Section 15 shall survive the termination of this Agreement.
16. Insurance. The Agent shall maintain reasonable insurance coverage
against any and all liabilities which may arise in connection with the
performance of its duties hereunder.
8
<PAGE> 9
Upon request, Agent shall produce certificates of coverage satisfactory to the
Trust demonstrating compliance with this Section 16.
17. Notices. All notices or other communications hereunder to either
party shall be in writing and shall be deemed sufficient if mailed to such party
at the address of such party set forth in the preamble of this Agreement or at
such other address as such party may have designated by written notice to the
other.
18. Further Assurances. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
19. Termination. This Agreement may be terminated by either party,
without the payment of any penalty, by the Trust at any time upon not more than
60 days' nor less than 30 days' notice, by a vote of a majority of the Board of
Trustees of the Trust who are not "interested persons" of the Trust (as defined
in the 1940 Act) and have no direct or indirect financial interest in the
operation of any Plan of Distribution pursuant to Rule 12b-1 to which this
Agreement is related (a "Plan"), this Agreement or any other agreement related
to any such Plan (the "Qualified Trustees"), or (as to a particular Fund) by the
affirmative vote of the holders of a majority of the outstanding Shares (as
defined in the 1940 Act) of the Fund. The Agent may terminate this Agreement
upon not more than 60 days' nor less than 30 days' notice to the Trust.
Notwithstanding anything herein to the contrary, this Agreement may not be
assigned and shall terminate automatically without notice to either party upon
any assignment. Upon termination hereof, the Trust shall pay such compensation
as may be due the Agent as of the date of such termination. Upon and following
termination the parties shall take such steps as may be necessary or expedient
for the parties and the Trust to comply with applicable law.
20. Changes; Amendments. This Agreement may be changed or amended only
by written instrument signed by both parties.
21. Limitation of Liability. The Trust's Master Trust Agreement, dated
October 28, 1999 (the "Master Trust Agreement"), as amended from time to time,
establishing the Trust, provides that the Trustees from time to time serving (as
Trustees but not personally) under said Master Trust Agreement and it is
expressly acknowledged and agreed that, any and all obligations of the Trust
hereunder shall not be binding upon any of the Shareholders, Trustees, officers,
employees or agents of the Trust, personally, but shall bind only the assets and
property of the Trust, as provided in its Master Trust Agreement. The execution
and delivery of this Agreement have been authorized by the Trustees of the Trust
and signed by an officer of the Trust, acting as such, and neither such
authorization by such Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the assets and property
of the Trust as provided in its Master Trust Agreement.
22. Miscellaneous. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware. The captions
in this Agreement are
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<PAGE> 10
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. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
23. Continuation. Unless sooner terminated pursuant to Section 19
hereof, this Agreement shall continue in effect with respect to each Fund
subsequent to the initial terms specified herein for so long as such continuance
is specifically approved at least annually by votes of a majority of both (i)
the Board of Trustees of the Trust, and (ii) the Qualified Trustees who are not
interested persons (as defined in the 1940 Act) of the Agent, cast in person at
a meeting called for the purpose of voting on this Agreement.
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first set forth above.
TRUST:
Lend Lease Funds
By:
-------------------------------------
AGENT:
By:
-------------------------------------
11
<PAGE> 12
ATTACHMENT A
TO
SHAREHOLDER SERVICING AGREEMENT
Each of the following series of Lend Lease Funds shall be considered a
"Fund" under Section 1 of the Shareholder Servicing Agreement, dated as of
and between Lend Lease Funds and . The fees
to be paid pursuant to Section 3 of this Agreement are indicated opposite the
Fund name.
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------------------- -------------------------------------
PORTFOLIO NAME FEE FROM THE TRUST, BASED ON THE FEE FROM THE TRUST, BASED ON THE
AVERAGE DAILY VALUE OF ALL CLASS A AVERAGE DAILY VALUE OF ALL CLASS K
SHARES OF EACH FUND OWNED BY SHARES OF EACH FUND OWNED BY
CUSTOMERS: CUSTOMERS:
- ---------------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
Lend Lease U.S. Real Estate of 1% of 1%
Securities Fund ---- ----
- ---------------------------------------- ------------------------------------- -------------------------------------
</TABLE>
And such other Funds, as may be established from time to time.
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<PAGE> 13
ATTACHMENT B
TO
SHAREHOLDER SERVICING AGREEMENT
Agent agrees to reimburse Trust as follows:
Prospectuses:
Cost Units
@ Cost* per unit in excess of 1,000
Statements of Additional Information:
Cost Units
@ Cost** per unit in excess of 1
Supplemental Sales Literature
As may be agreed upon in writing from time to time.
- -----------------------
* Est. __(cent) per copy.
** Est. __(cent) per copy.
13
<PAGE> 1
EXHIBIT 99(n)
LEND LEASE FUNDS
Multiple Class Plan
Pursuant to Rule 18f-3
Introduction
This Plan (the "Plan") is adopted pursuant to Rule 18f-3(d) of the
Investment Company Act of 1940, as amended (the "1940 Act"), effective as of
January 25, 2000. The Plan relates to shares of the series of Lend Lease Funds
(the "Trust"), a Delaware business trust, listed on Schedule A as amended from
time to time (each such series, a "Fund" and such series collectively, the
"Funds"). The Fund is distributed pursuant to a system (the "Multiple Class
System") in which each class of shares (each, a "Class" and collectively, the
"Classes") of a Fund represents a pro rata interest in the same portfolio of
investments of the Fund and differs only to the extent outlined below.
I. Distribution Arrangements
One or more Classes of shares of the Fund are offered for purchase by
investors with the sales load structures described below. Additionally, pursuant
to Rule 12b-1 of the 1940 Act, the Fund has adopted Plans of Distribution (each,
a "12b-1 Plan") under which shares of certain Classes are subject to service
and/or distribution fees ("12b-1 fees") assessed at an annual rate of up to
0.25% of average daily net assets as described below. 12b-1 fees may be used to
reimburse (a) Sunstone Distribution Services, LLC (the "Distributor") and other
broker-dealers for distribution expenses incurred by them specifically on behalf
of the Class or (b) shareholder servicing agents who provide administrative and
other related services to their clients who are Class shareholders.
1. Class A Shares
Class A shares are offered with a front-end sales load ("FESL"). The
schedule of sales charges are applicable to the Class and the circumstances
under which the sales charge is subject to reduction are set forth in the Class'
prospectus. Class A shares may be purchased at net asset value (without a FESL):
(i) in the case of certain purchases of such shares; and (ii) by certain limited
categories of investors, in each case under the circumstances and conditions set
forth in the Class' current prospectus. Class A shares are subject to a 1.00%
redemption fee if shares are redeemed within 12 months of purchase. Class A
shares are subject to payments under the Class' 12b-1 Plan.
2. Class I Shares
Class I shares are offered without imposition of a FESL, redemption fee
or 12b-1 fee for purchases of Fund shares by investors meeting an initial
minimum investment requirement as disclosed in the Class' current prospectus.
<PAGE> 2
3. Class K Shares
Class K shares are offered without imposition of a FESL or redemption
fee for purchases of Fund shares by registered investment advisers as disclosed
in the Class' current prospectus. Class K Shares are subject to payments under
the Class' 12b-1 Plan.
4. Additional Classes of Shares
The Board of Trustees of the Fund has the authority to create
additional Classes, or change existing Classes, from time to time, in accordance
with Rule 18f-3 of the 1940 Act.
II. Expense Allocation
Expenses incurred by the Fund are allocated among the various Classes
as follows:
A. Class Expenses. Expenses relating to different arrangements for
shareholder servicing and the distribution of Shares under a 12b-1 Plan shall be
allocated to and paid by the applicable Class. A Class may pay a different share
of other expenses, not including advisory or custodial fees or other expenses
related to the management of the Fund's assets, if (1) such expenses are
actually incurred in a different amount by that Class, or if the class receives
services of a different kind or to a different degree than other Classes and (2)
the Trust's Board of Trustees has approved such allocation.
B. Other Allocations. All expenses of the Fund not allocated to a
particular Class pursuant to Sections I and IIA of this Plan shall be allocated
to each Class on the basis of the net asset value of that Class in relation to
the net asset value of the Series. Notwithstanding the foregoing, the
underwriter, adviser, or other provider of services to a Series may waive or
reimburse the expenses of a specific Class or Classes to the extent permitted
under Rule 18f-3 under the Act; provided, however, that the Board of Trustees
(the "Board") shall monitor the use of such waivers or reimbursements intended
to differ by Class.
III. Conflicts of Interest
The Board does not believe that the implementation of the Plan will
give rise to any conflicts of interest. The Board will monitor the operation of
the Plan on an ongoing basis for the existence of any material conflicts among
the interests of the holders of the various Classes and will take any action
reasonably necessary to eliminate any such conflicts that may develop.
IV. Board Review
This Plan has been approved by a majority of the Trustees of the Fund,
including a majority of the Trustees who are not interested persons of the Fund.
The Trustees have found that this Plan, including the expense allocation, is in
the best interests of each Class
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<PAGE> 3
individually and the Fund as a whole. The Trustees have made this determination
after requesting and reviewing such information as they deemed reasonably
necessary to evaluate this Plan. In making its determination, the Board focused
on, among other things, the relationship between or among the Classes and
examined possible conflicts of interest among Classes (including those
potentially involving cross-subsidization between Classes) regarding the
allocation of expenses, fees, waivers and expense reimbursements. The Board also
evaluated the level of services provided to each Class and the cost of those
services in order to ensure that the services were appropriate and the
allocation of expenses was reasonable. In approving any subsequent amendments to
this Plan, the Board shall focus on and evaluate such factors as well as any
others it deems relevant at the time.
The Board shall review this Plan as frequently as deemed necessary.
Prior to any materials amendment(s) to this Plan, the Fund's Board, including a
majority of the Trustees that are not interested persons of the Fund, shall find
that the Plan, as proposed to be amended (including any proposed amendments to
the method of allocating Class and/or Fund expenses), is in the best interest of
each Class individually and the Fund as a whole. In considering whether to
approve any proposed amendment(s) to the Plan, the Board shall request and
evaluate such information as it considers reasonably necessary to evaluate the
proposed amendment(s) to the Plan. Such information shall address, among other
issues, whether the proposed amendment will result in a cross-subsidization of
one Class by another.
This Plan is intended to conform to Rule 18f-3 of the 1940 Act and any
inconsistencies shall be read to conform with such Rules.
3
<PAGE> 4
SCHEDULE A
(As of January 25, 2000)
LEND LEASE FUNDS
Multiple Class Plan Pursuant to Rule 18f-3
1. Lend Lease U.S. Real Estate Securities Fund
4
