LEND LEASE FUNDS, 497, 2000-03-06

LEND LEASE FUNDS
497, 2000-03-06

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LEND LEASE FUNDS

LEND LEASE U.S. REAL ESTATE SECURITIES FUND

CLASS A SHARES

---------------------

PROSPECTUS

March 1, 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.

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TABLE OF CONTENTS

Page
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KEY INFORMATION ABOUT THE FUND.................................................3
Investment Objective...................................................3
Principal Investment Strategies........................................3
Principal Risk Factors.................................................4

FEES AND EXPENSES OF THE FUND..................................................5
Shareholder Fees.......................................................5
Fees and Expenses......................................................6
Example................................................................6

OTHER INFORMATION REGARDING INVESTMENT PRACTICES...............................7
Companies Principally Engaged in the U.S. Real Estate Industry.........7
Mortgage and Hybrid REITs..............................................7
REOCs..................................................................7
Year 2000..............................................................7
Restricted Securities..................................................8
Defensive Investing....................................................8
Cash Position..........................................................8

INVESTMENT MANAGEMENT..........................................................8
Who are Lend Lease Rosen and Lend Lease Real Estate Investments.......8
Portfolio Managers....................................................9

BUYING, SELLING AND EXCHANGING
SHARES........................................................................10
Before You Invest....................................................10
How to Purchase Shares...............................................11
How to Sell Shares...................................................15
Making Changes to Your Account.......................................19

SPECIAL FEATURES AND SERVICES.................................................19
ACH Transactions.....................................................19
Automated Telephone Service..........................................19
Automatic Investment Plan............................................20

OTHER SHAREHOLDER INFORMATION.................................................20
Shareholder Communications...........................................20
Transactions Through Financial Services Agents and Sub-Agents........21

DIVIDENDS, DISTRIBUTIONS AND TAXES............................................21

</TABLE>

(i)

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<TABLE>

<S> <C>
Dividends and Distributions..........................................21
Taxes................................................................22

</TABLE>

(ii)
<PAGE> 4

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

<PAGE> 5

certain federal tax requirements relating primarily to its organization,
ownership, assets and income and, further, if it distributes the vase
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 capitalization 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.

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<PAGE> 6

- - 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.

- - 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.

- - 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.

- - 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>

<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>

5
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FEES AND EXPENSES
CLASS A SHARES

<TABLE>

<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.
** The Management Fee includes the fees paid to both Lend Lease Real
Estate Investments, Inc., the Fund's investment adviser (the "Adviser") and the
Sub-Adviser.
*** Because the Fund is new, Other Expenses are based on estimated
amounts for the current fiscal year. **** 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+
------- --------
<S> <C> <C>
Class A $933 $1,379

</TABLE>

+ Taking the current expense limitation into account, your costs for the Fund's
Class A shares would be:

1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Class A $816 $1,149

</TABLE>

6
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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 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

7
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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

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.

8
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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 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.

9
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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.

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.

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.

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TYPE OF ACCOUNT INITIAL MINIMUM ADDITIONAL MINIMUM
PURCHASE PURCHASE
- --------------------------------------------------------------------------------
<S> <C> <C>

Regular (Individual, joint, CLASS A CLASS A
business or trust) $10,000 $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 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:

- --------------------------------------------------------------------------------------------------------------------
AMOUNT OF PURCHASE SALES CHARGE SALES CHARGE (AS A % OF NET
(AS A % OF 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%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

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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:

- - 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

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<PAGE> 14

- - 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 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:

- --------------------------------------------------------------------------------------------------------------
TO OPEN AN ACCOUNT TO ADD TO AN EXISTING ACCOUNT
- --------------------------------------------------------------------------------------------------------------
<S> <C>
BY MAIL: BY MAIL:
- - Complete and sign the account application. - Complete the investment slip that is
If you do not complete the application properly, included in your account statement, and
your purchase may be delayed or rejected. write your account number on your check.
- - Make your check payable to "Lend Lease - If you no longer have your investment
Funds." The Fund does not accept cash, third slip, please reference your name,
party checks, travelers checks or checks drawn account number and address on your check.
on banks outside the U.S. - Make your check payable to "Lend
Lease Funds."
- --------------------------------------------------------------------------------------------------------------
MAIL YOUR APPLICATION AND CHECK TO: MAIL THE SLIP AND THE CHECK TO:
Lend Lease U.S. Real Estate Securities Lend Lease U.S. Real Estate Securities Fund
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>

13
<PAGE> 15

<TABLE>

- --------------------------------------------------------------------------------------------------------------
<S> <C>
BY TELEPHONE: BY TELEPHONE:
- You automatically have the privilege to
You may not make your initial purchase by purchase additional shares by telephone
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.

- --------------------------------------------------------------------------------------------------------------
BY WIRE: BY WIRE:
- - To purchase shares by wire, the Fund Send your investment to Lend Lease U.S.
must have received a completed Real Estate Securities Fund by following
application and issued an account the instructions listed in the column to the
number to you. Call 1-877-LND- left.
LEAS (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.

14
<PAGE> 16

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.
- - 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.

15
<PAGE> 17

- --------------------------------------------------------------------------------
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:
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.

- --------------------------------------------------------------------------------

16
<PAGE> 18

- --------------------------------------------------------------------------------
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

- - 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.

- - 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

17
<PAGE> 19

purchased through reinvestment of dividends or distributions. The Fund also
charges a $10 redemption fee for redemptions made by wire.

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 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.

18
<PAGE> 20

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 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
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

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

19
<PAGE> 21

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. 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.

20
<PAGE> 22

Form 1099R. If you received a distribution from an IRA account during the year,
you will receive a Form 1099R.

TRANSACTIONS THROUGH FINANCIAL SERVICES AGENTS AND SUB-AGENTS
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.

21
<PAGE> 23

Buying a dividend. 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 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. Please consult your own
tax adviser about the tax consequences of an investment in the Fund.

22
<PAGE> 24

[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

INDEPENDENT ACCOUNTANTS
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> 25

Milwaukee, Wisconsin 53201-1192

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> 26

LEND LEASE FUNDS

LEND LEASE U.S. REAL ESTATE SECURITIES FUND

CLASS K AND CLASS Y SHARES

---------------------

PROSPECTUS

March 1, 2000

- --------------------------------------------------------------------------------

<PAGE> 27

TABLE OF CONTENTS

Page
----
<S> <C>
KEY INFORMATION ABOUT THE FUND................................................................................3
Investment Objective..................................................................................3
Principal Investment Strategies.......................................................................3
Principal Risk Factors................................................................................4

FEES AND EXPENSES OF THE FUND.................................................................................5
Shareholder Fees......................................................................................5
Fees and Expenses.....................................................................................6
Example...............................................................................................6

OTHER INFORMATION REGARDING INVESTMENT PRACTICES..............................................................7
Companies Principally Engaged in the U.S. Real Estate Industry........................................7
Mortgage and Hybrid REITs.............................................................................7
REOCs.................................................................................................8
Year 2000.............................................................................................8
Restricted Securities.................................................................................8
Defensive Investing...................................................................................8
Cash Position.........................................................................................8

INVESTMENT MANAGEMENT.........................................................................................9
Who are Lend Lease Rosen and Lend Lease Real Estate Investments.......................................9
Portfolio Managers....................................................................................9

BUYING, SELLING AND EXCHANGING
SHARES.......................................................................................................10
Before You Invest....................................................................................10
How to Purchase Shares...............................................................................11
How to Sell Shares...................................................................................14
Making Changes to Your Account.......................................................................18

SPECIAL FEATURES AND SERVICES................................................................................17
ACH Transactions.....................................................................................17
Automated Telephone Service..........................................................................18
Automatic Investment Plan............................................................................18

OTHER SHAREHOLDER INFORMATION................................................................................18
Shareholder Communications...........................................................................18
Transactions Through Financial Services Agents and Sub-Agent.........................................19
Distribution and Service Fees - Class K Shares (12b-1 Plan)..........................................19
DIVIDENDS, DISTRIBUTIONS AND TAXES...........................................................................19
</TABLE>

(i)
<PAGE> 28

<TABLE>
<CAPTION>
<S> <C>
Dividends and Distributions..........................................................................20
Taxes................................................................................................20
</TABLE>

(ii)
<PAGE> 29

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.

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.

3
<PAGE> 30

- REITs invest shareholder capital in 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 capitalizaitons.

- 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

- 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.

4
<PAGE> 31

- 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.

- 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.

- 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.

- 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

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
<S> <C>
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
</TABLE>

5
<PAGE> 32

FEES AND EXPENSES
<TABLE>
<CAPTION>

CLASS K SHARES
<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**.................................................................... 1.67%
Total Annual Fund Operating Expenses***............................................. 2.72%
Fee Waivers and/or Expense Reimbursement............................................ 1.47%
Net Expenses........................................................................ 1.25%
</TABLE>

* The Management Fee includes the fees paid to both Lend Lease Real
Estate Investments, Inc., the Fund's investment adviser (the "Adviser") and the
Sub-Adviser.
** Because the Fund is new, Other Expenses are based on estimated
amounts for the current fiscal year.
*** 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
<S> <C>
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%
</TABLE>

* 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.
*** 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

6
<PAGE> 33

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 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.

7
<PAGE> 34

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 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

CASH POSITION

8
<PAGE> 35

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 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

9
<PAGE> 36

day to day management of the Fund and the selection of the Fund's investments.

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. Class A shares are not currently offered. 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") and such other investors as the Fund may, in its
discretion, permit. 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.

10
<PAGE> 37

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.

<TABLE>
<CAPTION>
- ------------------------------------- --------------------------------- -------------------------------------
TYPE OF ACCOUNT INITIAL MINIMUM PURCHASE ADDITIONAL MINIMUM PURCHASE
- ------------------------------------- --------------------------------- -------------------------------------
<S> <C> <C> <C> <C>
Regular (Individual, joint, CLASS K CLASS Y CLASS K CLASS Y
business or trust) $10,000 $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 *
- ------------------------------------- --------------------------------- -------------------------------------
</TABLE>

* The Automatic Investment Plan is not available for Class Y shares of the Fund.

11
<PAGE> 38

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 and such other
persons as the Fund may permit.

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:

<TABLE>
<CAPTION>
- ------------------------------------------------------- -----------------------------------------------------
TO OPEN AN ACCOUNT TO ADD TO AN EXISTING ACCOUNT
- ------------------------------------------------------- -----------------------------------------------------
<S> <C>
BY MAIL: BY MAIL:
- - Complete and sign the account application. If you - Complete the investment slip that is included in
do not complete the application properly, your your account statement, and write your account
purchase may be delayed or rejected. number on your check.
- - Make your check payable to "Lend Lease Funds." The - If you no longer have your investment slip,
Fund does not accept cash, third party checks, please reference your name, account number and
travelers checks or checks drawn on banks outside address on your check.
the U.S. - Make your check payable to "Lend Lease Funds."
- ------------------------------------------------------- -----------------------------------------------------
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>

<TABLE>
<CAPTION>
- ------------------------------------------------------- -----------------------------------------------------
BY TELEPHONE: BY TELEPHONE:
<S> <C>
- You automatically have the privilege to
You may not make your initial purchase by purchase additional shares by telephone unless
telephone. you have declined this service
- ------------------------------------------------------- -----------------------------------------------------
</TABLE>

12
<PAGE> 39

<TABLE>
<CAPTION>
- ------------------------------------------------------- -----------------------------------------------------
<S> <C>
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.
- ------------------------------------------------------- -----------------------------------------------------
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>

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

13
<PAGE> 40

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.
- - Once you place your order, you may not cancel or revoke it. The Fund may
reject a purchase order for any reason.

HOW TO SELL SHARES

- -------------------------------------------------------
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
- -------------------------------------------------------

14
<PAGE> 41
- -------------------------------------------------------
P.O. Box 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:
- - 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.

- -------------------------------------------------------

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

15
<PAGE> 42

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

- - 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 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.

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 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

16
<PAGE> 43

- - if your redemption is for more than $20,000.

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 UGMA/UTMA accounts.

MAKING CHANGES TO YOUR ACCOUNT

You may call or write the Fund to make changes to your account. Common changes
include:

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.

SPECIAL FEATURES AND SERVICES

17
<PAGE> 44

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).

OTHER SHAREHOLDER INFORMATION

SHAREHOLDER COMMUNICATIONS

18
<PAGE> 45

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.

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

19
<PAGE> 46

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.

Buying a dividend. 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).

20
<PAGE> 47

This tax information provides only a general overview. Please consult your own
tax adviser about the tax consequences of an investment in the Fund.

21
<PAGE> 48

[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

INDEPENDENT ACCOUNTANTS
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

22
<PAGE> 49

INVESTMENT COMPANY ACT REGISTRATION NUMBER 811-9679.

23
<PAGE> 50
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 March 1, 2000
describing the class in which you intend to invest. The Fund's Class A shares
are not currently available for investment. 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 March 1, 2000.

<PAGE> 51

TABLE OF CONTENTS

Page
----

<S> <C>
FUND ORGANIZATION................................................................................3
INVESTMENT POLICIES AND PRACTICES................................................................3
Investment Restrictions.................................................................3
Investment Strategies and Risks.........................................................4
MANAGEMENT OF THE FUND...........................................................................13
Trustees and Officers...................................................................13
Control Persons and Principal Holders of Securities.....................................16
INVESTMENT ADVISORY AND OTHER SERVICES...........................................................16
Adviser.................................................................................16
Sub- Adviser............................................................................17
Administration and Fund Accounting......................................................17
Transfer Agent and Dividend-Paying Agent................................................18
Custodian...............................................................................18
Distributor.............................................................................18
Legal Counsel ..........................................................................18
Independent Accountants.................................................................18
DISTRIBUTION OF SHARES...........................................................................19
PORTFOLIO TRANSACTIONS AND BROKERAGE.............................................................20
THE TRUST........................................................................................21
TAXES............................................................................................23
General.................................................................................23
Taxation of Certain Mortgage REITs......................................................23
Distributions...........................................................................24
Disposition of Shares...................................................................25
Back-up Withholding.....................................................................25
Other Taxation..........................................................................25
PURCHASE, REDEMPTION AND PRICING OF SHARES.......................................................26
Determination of Net Asset Value........................................................26
Reduced Sales Charges...................................................................27
Suspension of Redemptions...............................................................27
Redemptions in Kind.....................................................................27
PERFORMANCE INFORMATION..........................................................................28
MISCELLANEOUS....................................................................................31
FINANCIAL STATEMENTS.............................................................................31
</TABLE>

----------------

<PAGE> 52

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 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.

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<PAGE> 53

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 under the heading "Key
Information About the Fund" and "Other Information Regarding Investment
Practices."

<PAGE> 54

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 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

5
<PAGE> 55

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 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

<PAGE> 56

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 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

7
<PAGE> 57

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.

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

<PAGE> 58

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 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.

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<PAGE> 59

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 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

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<PAGE> 60

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 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.

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<PAGE> 61

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. Before engaging in any
transactions involving futures, the Fund will file 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 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

12
<PAGE> 62

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 PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
THE FUND
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Susan J. Lloyd-Hurwitz* Chairman of the Board, President, Lend Lease Rosen Real Estate Securities
1995 University Avenue President LLC, an investment advisory firm (1999-present);
Suite 550 CEO, Rosen Consulting Group, LLC (1999-Present);
Berkeley, CA 94704 Senior Vice President, (1997-1999), Principal
DOB: 2/15/67 (1999-present) Lend Lease Real Estate Investments,
Inc.; Portfolio Manager, General Property Trust
(1994-1997).
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

13
<PAGE> 63

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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 Investment
San Mateo, CA 94402 Management, Inc., an investment advisory firm
DOB: 12/9/55 (1995-1999); Executive Vice President, Schwab
Funds(R) and Charles Schwab & Co., Inc.
(19995-1999).
- ----------------------------------------------------------------------------------------------------------------------
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, Assistant Vice President, Lend Lease Real Estate
1995 University Avenue 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
- ----------------------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

14
<PAGE> 64

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gage R. Johnson Secretary Principal (1999 to present), Senior Vice President
Lend Lease Real Estate (1999) - Legal Department, Lend Lease Real Estate
Investments, Inc. Investments, Inc.; Of Counsel, Real Estate
Monarch Tower Department - Paul, Hastings, Janofsky & Walker LLP
3424 Peachtree Road, N.E. (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
Hubbard R. Garber $2,000 $2,000
- --------------------------------------------------------------------------------------
</TABLE>

15
<PAGE> 65

<TABLE>
- --------------------------------------------------------------------------------------
<S> <C> <C>
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. 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 and Sub-Adviser have 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 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

16
<PAGE> 66

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.

17
<PAGE> 67

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.

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 ACCOUNTANTS. PricewaterhouseCoopers LLP are the independent
accountants for the Fund. They are responsible for performing an audit of the
Fund's year-end

18
<PAGE> 68

financial statements as well as providing accounting and tax advice to the
management of the Fund.

DISTRIBUTION OF SHARES

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

19
<PAGE> 69

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.

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

20
<PAGE> 70

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 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

21
<PAGE> 71

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.

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

22
<PAGE> 72

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.

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

23
<PAGE> 73

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. 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

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<PAGE> 74

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.

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.

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<PAGE> 75

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 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 will
be 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 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

26
<PAGE> 76

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 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.

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 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.

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<PAGE> 77

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 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.

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<PAGE> 78

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 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

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<PAGE> 79

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.

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.

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<PAGE> 80

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