<PAGE> 1
Filed with the Securities and Exchange Commission on April 29, 1996.
1933 Act Registration File No. 33-24611
1940 Act File No. 811-5659
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. / /
------------------
Post-Effective Amendment No. 10 /x/
------------------
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 12 /x/
-----------------
HEITMAN SECURITIES TRUST
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
180 North LaSalle Street, Suite 3600, Chicago, IL 60601
-----------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 849-4150
--------------
Nancy B. Lynn, Secretary Copy to:
HEITMAN SECURITIES TRUST Philip H. Newman
180 North LaSalle Street, Suite 3600 Goodwin, Procter & Hoar LLP
Chicago, IL 60601 One Exchange Place
(Name and Address of Agent for Service) Boston, MA 02109-2881
It is proposed that this filing will become effective
<TABLE>
<S> <C>
immediately upon filing pursuant to paragraph (b)
------
X on May 1, 1996 pursuant to paragraph (b)
------ ----------------------
60 days after filing pursuant to paragraph (a)(1)
------
on pursuant to paragraph (a)(1)
------ ----------------
75 days after filing pursuant to paragraph (a)(2)
------
on pursuant to paragraph (a)(2) of Rule 485.
------ -----------------
</TABLE>
If appropriate, check the following box:
This post-effective amendment designates a new effective date
------ for a previously filed post-effective amendment.
Registrant has filed a declaration registering an indefinite amount of
securities pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended (the "1940 Act"). Registrant filed the notice required by Rule 24f-2
for its fiscal year ended December 31, 1995 on or about February 29, 1996.
<PAGE> 2
HEITMAN SECURITIES TRUST
Calculation of Registration Fee under the Securities Act of 1933 (1)
<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Maximum Amount of
Securities Being Amount Being Offering Price Aggregate Registration
Registered Registered Per Share (2) Offering Price (3) Fee
---------- ---------- ------------- ------------------ ---
<S> <C> <C> <C> <C>
Shares of 1,064,227 $9.09 $290,000 $100.00
Beneficial Interest
$.001 Par Value
of Heitman Securities
Trust
</TABLE>
(1) The shares being registered as set forth in this table are in addition
to the indefinite number of shares of beneficial interest which
Registrant has Registered under the Securities Act of 1933, as amended
(the "1933 Act"), pursuant to Rule 24f-2 under the Investment Company
Act of 1940, as amended (the "1940 Act"). The Registrant's Rule 24f-2
Notice for its fiscal year ended December 31, 1995 was filed on
February 29, 1996.
(2) Based on the Fund's net asset value at the close of business on April
15, 1996 pursuant to Rule 457(d) under the 1933 Act and Rule 24c-2(a)
under the 1940 Act.
(3) In response to Rule 24c-2(b) under the 1940 Act; (1) the calculation
of the maximum offering price is made pursuant to Rule 24c-2; (2)
4,741, 726 shares of beneficial interest were redeemed by the
Registrant during the fiscal year ended December 31, 1995; (3)
3,709,402 shares are being used for reduction in this amendment
pursuant to Rule 24e-2(a). While no fee is required for the 1,032,324
shares, the Registrant has elected to register, for $100, an
additional $290,000 of shares.
<PAGE> 3
CROSS-REFERENCE SHEET
Pursuant to Rule 481(a)
HEITMAN SECURITIES TRUST
Items Required By Form N-1A
PART A - PROSPECTUS-HEITMAN/PRA INSTITUTIONAL CLASS
<TABLE>
<CAPTION>
Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------
<S> <C>
1. Cover Page Cover Page
2. Synopsis Transaction and Expense Data
3. Condensed Financial Financial Highlights
Information Performance Information
4. General Description of Cover Page; Investment Objective and Policies
Registrant Additional Information
5. Management of the Fund Management of the Fund
Additional Information
5A. Management's Discussion
of Fund Performance Not Applicable
6. Capital Stock and Other Income Dividends and Capital Gains Distributions
Securities Additional Information
7. Purchase of Securities Purchase of Shares
Being Offered Determination of Net Asset Value
8. Redemption or Repurchase Redemptions
9. Pending Legal Proceedings Not Applicable
<CAPTION>
PART A - PROSPECTUS-ADVISOR CLASS
Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------
<S> <C>
1. Cover Page Cover Page
2. Synopsis Transaction and Expense Data
3. Condensed Financial Financial Highlights
Information Performance Information
4. General Description of Cover Page; Investment Objective and Policies
Registrant Additional Information
5. Management of the Fund Management of the Fund
Additional Information
5A. Management's Discussion
of Fund Performance Not Applicable
6. Capital Stock and Other Income Dividends and Capital Gains Distributions
Securities Additional Information
</TABLE>
- i -
<PAGE> 4
CROSS-REFERENCE SHEET
Pursuant to Rule 481(a)
HEITMAN SECURITIES TRUST
Items Required By Form N-1A (continued)
<TABLE>
<S> <C>
7. Purchase of Securities Purchase of Shares
Being Offered Determination of Net Asset Value
8. Redemption or Repurchase Redemptions
9. Pending Legal Proceedings Not Applicable
<CAPTION>
PART B - STATEMENT OF ADDITIONAL INFORMATION
Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ -----------------------
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information General Information
and History Description of the Trust
13. Investment Objectives Additional Information Regarding Investment
and Policies Policies and Limitations
14. Management of the Fund Management of the Trust
15. Control Persons and Principal Investment Manager
Holders of Securities Description of the Trust
16. Investment Advisory and Investment Manager
Other Services Administrative, Accounting and Distribution
Services
17. Brokerage Allocation
and Other Practices Execution of Portfolio Transactions
18. Capital Stock and Other Description of Trust
Securities
19. Purchase, Redemption and Purchase of Shares, Redemption of Shares
Pricing of Securities Valuation of Shares
Being Offered
20. Tax Status Taxes
21. Underwriters Administrative, Accounting, Distribution
and Shareholder Services
22. Calculation of Performance Advertising and Calculation of Performance Data
Data
23. Financial Statements Financial Statements
Report of Independent Auditors
</TABLE>
- ii -
<PAGE> 5
[HEITMAN REAL ESTATE FUND LOGO]
HEITMAN/PRA INSTITUTIONAL CLASS
Heitman Securities Trust (the "Trust") is a series mutual fund which
currently consists of one investment portfolio, the Heitman Real Estate Fund
(the "Fund"). The Fund's investment objective is to obtain high total return
consistent with reasonable risk by investing primarily in equity securities of
public companies principally engaged in the real estate business. Each
investment is selected based upon a determination by the Fund's investment
manager that the anticipated total return, considering both income and
potential for capital appreciation, is high relative to the risk assumed.
The Fund offers two classes of shares. The shares offered by this
Prospectus are the Heitman/PRA Institutional Class (the "Institutional Class")
of shares, which are available only for investment in a minimum initial
investment of $250,000. In addition, the Fund offers by separate Prospectus
the Advisor Class of shares (the "Advisor Class"), which are available for
purchase through certain securities brokers, registered investment advisers and
other service organizations in initial aggregate amounts of $5,000 or more.
This Prospectus contains a concise summary of information regarding the
Fund that a prospective investor should know before investing. Investors
should read this Prospectus carefully and retain it for future reference.
Additional information regarding the Fund is contained in a Statement of
Additional Information dated May 1, 1996, which has been filed with the
Securities and Exchange Commission and which is incorporated into this
Prospectus by reference. Additional copies of this Prospectus and the
Statement of Additional Information are available without charge upon request
to the Trust at the address or telephone number set forth on the outside cover
of this document.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
AN INVESTMENT IN THE HEITMAN REAL ESTATE FUND INVOLVES CERTAIN RISKS
AND IS NOT AN APPROPRIATE INVESTMENT FOR ALL INVESTORS. AN INVESTMENT IN THE
FUND MAY NOT BE SUITABLE FOR INVESTORS WHO REQUIRE A STABLE RETURN OR WHO ARE
SEEKING SAFETY OF PRINCIPAL.
PROSPECTUS DATED MAY 1, 1996
<PAGE> 6
<TABLE>
<S> <C>
INVESTMENT ADVISOR DISTRIBUTOR
Heitman/PRA Securities Advisors, Inc. Rodney Square Distributors, Inc.
180 North LaSalle Street, Suite 3600 Rodney Square North
Chicago, IL 60601 1100 North Market Street
Wilmington, DE 19890-0001
CUSTODIAN TRANSFER AGENT AND ADMINISTRATOR
Wilmington Trust Company Rodney Square Management Corporation
Rodney Square North Rodney Square North
1100 North Market Street 1100 North Market Street
Wilmington, DE 19890-0001 Wilmington, DE 19890-0001
</TABLE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
TRANSACTION AND EXPENSE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
INCOME DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
TAX STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
PURCHASE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
REDEMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
2
<PAGE> 7
TRANSACTION AND EXPENSE DATA
The following table sets forth the costs and expenses that an investor
in Institutional Class shares of the Fund will incur directly or indirectly.
SHAREHOLDER TRANSACTION EXPENSES:
<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fees None
</TABLE>
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average daily net assets)
<TABLE>
<S> <C> <C>
Management Fees 0.75%
Other Expenses:
Professional Fees 0.14%
Trustee Fees and Expenses 0.07%
Other Fees and Expenses(1) 0.34%
-----
Total Other Expenses 0.55%
-----
Total Fund Operating Expenses 1.30%
=====
</TABLE>
EXAMPLE:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following
expenses on a $1,000 investment,
assuming (1) 5% annual return and
(2) redemption at the end
of each time period: $13 $41 $71 $157
</TABLE>
- ---------------------------
(1) Currently the Fund is authorized to issue two classes of shares, the
Institutional Class and the Advisor Class. Effective January 1, 1996,
the Trust began allocating all expenses other than 12b-1 fees and
shareholder servicing expenses, between the Advisor Class and
Institutional Class based on the relative net asset value of each
class. The amounts shown in the table are based on the actual expenses
incurred in 1995, as adjusted to reflect this allocation method.
Except as otherwise indicated, all information in the Transaction and
Expense Data table is based on actual expenses and average daily net assets of
the Fund for the fiscal year ended December 31, 1995. The purpose of the table
is to assist an investor in understanding the various costs and expenses that
an investor will bear directly or indirectly. The Example provided with the
table should not be considered a representation of past or future expenses or
performance. Actual expenses may be more or less than those shown.
Because the sales charges and expenses vary between the Institutional
Class and the Advisor Class, performance will vary with respect to each class.
Additional information concerning the Advisor Class may be obtained by calling
toll-free 1-800-888-REIT.
3
<PAGE> 8
FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS
The following table of financial highlights has been audited by Arthur
Andersen LLP as indicated in their report dated February 26, 1996 on the Fund's
financial statements as of December 31, 1995. This table should be read in
conjunction with the Fund's financial statements and notes thereto which are
found in the Statement of Additional Information under "Financial Statements."
Effective May 15, 1995, the Fund began offering the Advisor Class shares. For
further information about the performance of the Fund, see the Fund's Annual
Report, which may be obtained without charge by contacting the Fund's
Administrator.
<TABLE>
<CAPTION>
Institutional Class
--------------------------------------------------------------------------
For the Period
For the For the January 4, 1989
Fiscal Year Three-Month (Effective Date)
Ended Period Ended For the Fiscal Years Ended September 30, to
December 31, December 31, ------------------------------------------------ September 30,
1995 1994 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ----
<C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $8.30 $9.23 $10.95 $8.29 $7.66 $6.99 $10.25 $10.00
----- ----- ------ ----- ----- ----- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income . 0.33(a) 0.10(a) 0.32(a) 0.40 0.45 0.49 0.64 0.40(c)
Net realized and unrealized gain (loss)
on investments . . . 0.53 (0.05) (0.92) 2.67 0.63 0.67 (3.16) 0.25
---- ------ ------ ---- ---- ---- ------ ----
Total from investment operations 0.86 0.05 (0.60) 3.07 1.08 1.16 (2.52) 0.65
---- ---- ------ ---- ---- ---- ------ ----
DISTRIBUTIONS
From net investment income (0.33)(a) (0.10)(a) (0.31)(a) (0.41) (0.45) (0.49) (0.64) (0.40)
From net realized gain on investments 0.00 (0.77) (0.67) 0.00 0.00 0.00 (0.10) 0.00
From tax return of capital (0.18)(b) (0.11)(b) (0.14)(b) 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ---- ---- ---- ---- ----
Total distributions . (0.51) (0.98) (1.12) (0.41) (0.45) (0.49) (0.74) (0.40)
------ ----- ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $8.65 $8.30 $9.23 $10.95 $8.29 $7.66 $6.99 $10.25
===== ===== ===== ====== ===== ===== ===== ======
Total Return . . . . . . 10.87% 0.65%(d) (5.22%) 37.76% 14.49% 19.56% (26.11%) 4.82%d
Ratios/Supplemental Data
Net assets, end of period (in 000's) $95,692 $105,569 $116,268 $141,672 $ 66,521 $ 54,880 $18,481 $ 23,174
Ratio of expenses to
average net assets . 1.29% 1.28%* 1.22% 1.24% 1.37% 1.25% 1.54% 0.90%c
Ratio of net investment income to
average net assets . 3.97%(a) 4.35%*(a) 2.87%(a) 4.37% 5.75% 7.36% 7.25% 3.88%
Portfolio Turnover . . 65.33% 37.55%* 90.11% 61.47% 28.05% 16.24% 24.98% 12.96%
</TABLE>
- -----------------
* Annualized.
(a) Dividend receipts from REIT investments generally may include a return
of capital. For financial reporting purposes, through
September 30, 1993, the Fund recorded all dividend receipts,
including the returns of capital as net investment income.
As more fully explained in Note 2 to the Financial
Statements, the Fund changed its dividend recognition policy
for the fiscal year ended September 30, 1994. The financial
highlights for the period ended September 30, 1989 and for
the years ended September 30, 1990 through 1993 have not been
restated.
(b) Historically, the Fund has distributed to its shareholders amounts
approximating dividends received from the REITs. As more fully
explained in Note 2 to the Financial Statements, the Fund for fiscal
year ended September 30, 1994, adopted a recently released accounting
pronouncement affecting the presentation of distributions to
shareholders. The financial highlights for the period ended September
30, 1989 and for the years ended September 30, 1990 through 1993 have
not been restated.
(c) The Investment Manager has reimbursed the Fund for certain expenses
during the period from the effective date until investment operations
commenced. The ratio of expenses to average net assets for the period
January 4, 1989 to September 30, 1989 would otherwise have been 1.00%.
(d) The total return figure for the periods ended September 30, 1989 and
December 31, 1994 has not been annualized.
4
<PAGE> 9
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund's investment objective is to obtain high total return consistent
with reasonable risk by investing primarily in equity securities of public
companies principally engaged in the real estate business. Each investment
will be selected based upon a determination by Heitman/PRA Securities Advisors,
Inc. ("Heitman/PRA Advisors" or the "Investment Manager") that the anticipated
total return, considering both income and potential for capital appreciation,
is high relative to the risk assumed. There can be no assurance that the Fund
will achieve its objective and the Fund may not achieve as high a total return
as other investment companies that invest in a broader universe of securities.
The Fund's investment objective is a fundamental policy of the Fund and may be
changed only by the affirmative vote of the holders of a majority of the Fund's
shares.
INVESTMENT POLICIES
The Fund seeks to achieve its objective by investing in equity securities
of public companies principally engaged in the real estate business. A company
is "principally engaged" in the real estate business if at least 50% of the
fair market value of its assets, as determined by the Investment Manager,
consists of interests in, or at least 50% of its gross income or net profits
are derived from the ownership, construction, management, financing or sale of,
residential, commercial, or industrial real estate. Equity securities in which
the Fund may invest are limited to common and preferred stocks, convertible
bonds and convertible preferred stocks and warrants. All equity securities in
which the Fund invests will be listed on a U.S. national securities exchange or
traded in the over-the-counter market.
Total return is composed of current income and capital appreciation.
Under normal circumstances, the Fund will seek to maintain a balanced portfolio
of securities which are income producing and securities which offer potential
for capital appreciation.
Under normal conditions at least 65% of the Fund's assets will be invested
in the equity securities of companies, a majority of whose assets are
represented by the ownership of real property, including leasehold interests.
Such companies may include equity, mortgage and hybrid real estate investment
trusts ("REITs") and other companies with substantial real estate holdings.
Although not an investment policy of the Fund, it is anticipated that under
normal circumstances approximately 60% to 90% of the Fund's assets will be
invested in REITs and that a majority of the Fund's REIT investments will
consist of equity securities of equity and hybrid REITs.
The Fund may invest up to 35% of its total assets in equity securities of
companies not principally engaged in the real estate business (as defined
above) but nonetheless engaged in businesses related thereto. These companies
may include manufacturers and distributors of building supplies, financial
institutions which make or service mortgages, and companies whose real estate
assets are substantial relative to the companies' stock market valuations, such
as retailers, railroads and paper and forest products companies.
REAL ESTATE INVESTMENT TRUSTS
A REIT is a corporation or business trust (that would otherwise be taxed
as a corporation) which meets the definitional requirements of the Internal
Revenue Code of 1986, as amended (the "Code"). The Code permits a qualifying
REIT to deduct the dividends paid, thereby effectively eliminating corporate
level federal income tax and making the REIT a pass-through vehicle for federal
income tax purposes. To meet the definitional requirements of the Code, a REIT
must, among other things: invest substantially all of its assets in interests
in real estate (including mortgages and other REITs), cash and government
securities; derive most of its income from rents from real property or interest
on loans secured by mortgages on real property; and distribute annually 95% or
more of its otherwise taxable income to shareholders.
5
<PAGE> 10
REITs are sometimes informally characterized as equity REITs, mortgage
REITs and hybrid REITs. An equity REIT invests primarily in the fee ownership
or leasehold ownership of land and buildings; a mortgage REIT invests primarily
in mortgages on real property, which may secure construction, development or
long-term loans; and a hybrid REIT invests in both real estate equities and
mortgages.
SHORT-TERM CASH MANAGEMENT AND TEMPORARY DEFENSIVE POLICIES
For liquidity or temporary defensive purposes, the Fund may invest in
money market mutual funds and in the following short-term debt securities
(securities with remaining maturities of less than one year): high grade
corporate debt securities, including commercial paper, notes, bonds and
debentures; certificates of deposit, bankers' acceptances and time deposits;
debt obligations of the U.S. Government including U.S. Treasury bills, bonds
and notes and obligations issued or guaranteed as to principal and interest by
the U.S. Government, its agencies and instrumentalities; and repurchase
agreements that are fully collateralized by U.S. Government obligations,
including repurchase agreements that mature in more than seven days. The Fund
may invest up to 10% of its assets in such short-term securities on a regular
basis to maintain liquidity for purposes of redeeming shares and meeting other
cash obligations of the Fund. When the Investment Manager believes that
financial conditions warrant, it may invest all or any portion of the Fund's
assets in such securities for temporary defensive purposes. The Fund may not
invest more than 25% of its assets in securities or obligations issued by
banks. When the assets of the Fund are invested in short-term securities, the
Fund will not be invested in a manner consistent with achieving its investment
objective.
Repurchase agreements involve transactions by which an investor (such as
the Fund) purchases a security and simultaneously obtains the commitment of the
seller (a bank or broker-dealer) to repurchase the security at an agreed-upon
price on an agreed-upon date within a number of days (usually not more than
seven) from the date of purchase. The Fund may enter into repurchase
agreements with banks or primary dealers of U.S. Government securities,
provided the Fund's custodian always has possession of the securities serving
as collateral whose market value at least equals the amount of the
institution's repurchase obligation. The resale price reflects the purchase
price plus an agreed-upon market rate of interest which is unrelated to the
coupon rate or maturity of the purchased security. A repurchase transaction
involves the obligation of the seller to pay the agreed-upon price, which
obligation is in effect secured by the value of the underlying security. The
holder of a repurchase agreement bears the risk that the issuer thereof will be
unable to meet its repurchase obligation when due; however, since the
repurchase agreement is in effect fully collateralized by the underlying
security, the risk of loss on such an instrument is minimal. Repurchase
agreements may also be viewed as loans made by the Fund which are
collateralized by the securities subject to repurchase. In the event of a
bankruptcy or other default by the seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying security and could
experience losses, including: (i) the possible decline in the value of the
underlying security during the period while the Fund seeks to enforce its
rights thereto; (ii) possible subnormal levels of income and lack of access to
income during this period; and (iii) expenses of enforcing its rights.
COMPANIES WITH LIMITED OPERATING HISTORIES
The Fund's portfolio may include securities of companies which have
limited operating histories and may not yet be profitable. The investments in
such companies offer opportunities for capital gains, but entail significant
risks including, but not limited to, the volatility of the stock price and the
viability of the firms' operations. The Fund will not invest in companies
which together with predecessors have operating histories of less than three
(3) years if immediately thereafter and as a result of such investment the
value of the Fund's holdings of such securities (other than securities of
REITs) exceeds 5% of the value of the Fund's total assets. Although not an
investment policy of the Fund, it is anticipated that under normal
circumstances, approximately 10% to 15% of the REITs in which the Fund invests
will have operating histories of less than three years.
BORROWING
The Fund is authorized to borrow an amount not to exceed 33% of the value
of its total assets (including the amount borrowed) for temporary
administrative purposes, and to pledge all or any portion of its assets in
connection with such borrowings. Such borrowings may be used for ongoing cash
needs of the Fund including the payment of redemptions, dividends and other
administrative and operating expenses. The Fund may not borrow for the purpose
of
6
<PAGE> 11
leveraging its investment portfolio. The Fund may not purchase additional
securities while outstanding borrowings exceed 5% of the value of its total
assets.
PORTFOLIO TURNOVER
The Fund does not intend to use short-term trading as a primary means of
achieving its investment objective. The Fund, however, does expect to engage
in portfolio trading when considered appropriate. Although the Fund cannot
accurately predict its annual portfolio turnover rate, it is not expected to
exceed 75%. A 75% turnover rate would occur, for example, if the lesser of the
value of purchases or sales of portfolio securities for a year (excluding all
securities whose maturities at acquisition were one year or less) were equal to
75% of the average monthly value of the securities held by the Fund during such
year. Higher portfolio turnover rates will increase aggregate brokerage
commission expenses which must be borne directly by the Fund and ultimately by
the Fund's shareholders.
LENDING OF PORTFOLIO SECURITIES
From time to time, the Fund may lend portfolio securities to
broker-dealers for the purpose of realizing additional income. The total
amount of all such loans outstanding will not exceed 33% of the Fund's total
assets. Loans of portfolio securities will be collateralized by cash, letters
of credit or securities issued or guaranteed by the U.S. Government or its
agencies which will be maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities. Although each loan
transaction must be fully collateralized at all times, it will involve some
risk to the Fund if the party borrowing the securities should default on its
obligation and the Fund is delayed in or prevented from recovering the
collateral. Securities loaned by the Fund will remain subject to fluctuations
of market value.
RISK FACTORS RISK FACTORS
The Fund is not intended to constitute a complete investment program.
Under normal circumstances, at least 65% of the Fund's assets will be invested
in the equity securities of companies principally engaged in the real estate
industry. Because the Fund will be concentrated in this industry, the Fund
may be subject to the risks associated with the direct ownership of real
estate. For example, real estate values may fluctuate as a result of general
and local economic conditions, overbuilding and increased competition,
increases in property taxes and operating expenses, changes in zoning laws,
casualty or condemnation losses, regulatory limitations on rents, changes in
neighborhood values, changes in the appeal of properties to tenants, and
increases in interest rates. The value of securities of companies which
service the real estate business sector may also be affected by such risks.
Thus, the value of the Fund's shares may change at different rates compared to
the value of shares of a mutual fund with investments in many industries.
Because the Fund may invest a substantial portion of its assets in REITs,
the Fund may also be subject to certain risks associated with direct
investments in REITs. REITs may be affected by changes in the value of their
underlying properties and by defaults by borrowers or tenants. Furthermore,
REITs are dependent upon specialized management skills, have limited
diversification and are, therefore, subject to risks inherent in financing a
limited number of projects. REITs depend generally on their ability to
generate cash flow to make distributions to shareholders, and certain REITs
have self-liquidation provisions by which mortgages held may be paid in full
and distributions of capital returns may be made at any time. In addition, the
performance of a REIT may be affected by its failure to qualify for tax-free
pass-through of income under the Code or its failure to maintain exemption from
registration under the Investment Company Act of 1940 (the "1940 Act").
Although an investment in the Fund is not without risk, the Fund follows
certain polices in managing its investments which may help to reduce these
risks. Set forth below are the more significant investment restrictions:
1. The Fund may not purchase a security if, as a result: (a) with respect to
75% of its total assets, (i) more than 5% of its total assets would be
invested in the securities of any single issuer or (ii) the Fund would own
more than
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<PAGE> 12
10% of the voting securities of any single issuer; and (b) more than 5% of
its net assets would be invested in the securities of companies (other
than REITs) which together with their predecessors have been in continuous
operation for less than three years. These limitations do not apply to
investments in U.S. Government securities.
2. The Fund may borrow money solely for temporary administrative purposes but
not in an amount exceeding 33% of its total assets (including the amount
borrowed). The Fund may not borrow for the purpose of leveraging its
investment portfolio. The Fund may not purchase additional securities
while outstanding borrowings exceed 5% of the value of its assets.
3. The Fund may temporarily lend its portfolio securities to broker-dealers
but only when the loans are fully collateralized. The Fund will limit
these loans to 33% of its total assets.
4. The Fund may not invest more than 10% of its net assets in illiquid
securities, including securities restricted as to resale, repurchase
agreements extending for more than seven days and other securities which
are not readily marketable.
These investment restrictions may not be changed without shareholder
approval, except that the restriction in paragraph 1(b) may be changed by the
Board without shareholder approval. For a complete listing of the Fund's
fundamental investment restrictions, see the section entitled "Additional
Information Regarding Investment Policies and Limitations" in the Statement of
Additional Information.
MANAGEMENT OF THE FUND MANAGEMENT OF THE FUND
The Board of Trustees is responsible for the overall supervision of the
business and affairs of the Fund and has approved contracts with certain
organizations to provide day-to-day management of the Fund.
The Fund has entered into an Investment Management Agreement with
Heitman/PRA Advisors to furnish investment services to the Fund. The
Investment Management Agreement was approved by the Fund's shareholders on
January 23, 1995. The Investment Manager directs the investments of the Fund
in accordance with the Fund's investment objective and policies subject to
supervision by the Board of Trustees. Specifically, the Investment Manager is
responsible for performing the following services: (a) furnishing continuously
an investment program for the Fund and (b) determining which investments should
be purchased, held, sold or exchanged by the Fund and what portion, if any, of
the Fund's assets should be held uninvested. In connection with the management
of the investment and reinvestment of the Fund's assets, the Investment Manager
is authorized to select brokers or dealers to execute purchase and sale
transactions for the Fund. In addition, the Investment Manager manages,
supervises and conducts such other affairs and business of the Fund as the
Trust and the Investment Manager may determine from time to time. For these
services, the Fund pays Heitman/PRA Advisors a fee, calculated daily and paid
monthly in arrears, at the annual rate of 0.75% of the Fund's first $100
million of average daily net assets and 0.65% of the average daily net assets
of the Fund in excess of $100 million. The Investment Manager has agreed that
if the total expenses of the Fund (exclusive of interest, taxes, brokerage
expenses and extraordinary items) for any fiscal year of the Fund exceed (i)
1.75% of the first $50 million of the Fund's average net assets, or (ii) 1.50%
of the Fund's average net assets in excess of $50 million, the Investment
Manager will pay or reimburse the Fund for that excess up to the amount of its
advisory fee payable with respect to the Fund during that fiscal year. As
required by the State of California, Heitman/PRA Advisors has agreed to exclude
all assets of the Fund which are invested in shares of any money market mutual
fund for purposes of calculating its advisory fee. The fee paid by the Fund,
although higher than the investment advisory fees paid by most other mutual
funds, is comparable to the fees paid for similar services by many funds with
similar investment objectives and policies.
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<PAGE> 13
Heitman/PRA Advisors is a corporation organized on November 14, 1994 under
the laws of Illinois to provide investment advice and discretionary management
primarily with respect to investment in publicly traded securities of issuers
principally engaged in the real estate business. The address of Heitman/PRA
Advisors is 180 North LaSalle Street, Suite 3600, Chicago, Illinois 60601.
Dean A. Sotter, Vice President and Chief Financial Officer of the Trust,
Timothy J. Pire, Assistant Secretary of the Trust and Randall E. Newsome are
primarily responsible for monitoring the day-to-day investment activity of the
Fund. Messrs. Sotter, Pire and Newsome have extensive experience in direct
real estate analysis, securities research and portfolio management of publicly
traded real estate securities. Mr. Sotter is President of Heitman/PRA Advisors
with overall responsibility for portfolio management and marketing. Prior to
joining Heitman/PRA Advisors, Mr. Sotter was a Partner of PRA Securities
Advisors, L.P. He was a Portfolio Manager and Vice President of JMB
Institutional Realty Corporation from 1985-1992, where his responsibilities
included property level analysis, budgeting and valuation as well as financial
reporting and client communications. Mr. Pire is Vice President of Heitman/PRA
Advisors whose responsibilities include investigation and analysis of publicly
traded real estate securities and implementation of the investment strategy
through portfolio management. Prior to joining Heitman/PRA Advisors, Mr. Pire
served as Research Analyst with PRA Securities Advisors, L.P., and he was an
Associate Appraiser with Lyon, Skelte & Speirs in Seattle, Washington from
1990-1992 where he was involved in valuation of commercial real estate and
writing full narrative appraisals. Mr. Newsome is Vice President of
Heitman/PRA Advisors whose responsibilities include investigation and analysis
of publicly traded real estate securities and implementation of the investment
strategy through portfolio management. Mr. Newsome also oversees Heitman/PRA
Advisors' trading positions. Prior to joining Heitman/PRA Advisors, Mr.
Newsome served as Research Analyst with PRA Securities Advisors, L.P. and he
was Vice President with The Stratus Corporation in Chicago, Illinois from
1989-1993 where he was responsible for property management, leasing and
construction management.
Heitman/PRA Advisors is a wholly owned subsidiary of Heitman Financial
Ltd. ("Heitman") which is a wholly owned subsidiary of United Asset Management
Corporation ("UAM"). Affiliates of Heitman and UAM serve as investment
advisers and managers to funds, other collective investment vehicles and
separate accounts established for investment in real estate by pension and
profit sharing trusts, corporations, endowments, foundations and other
tax-exempt institutional investors. As of December 31, 1995, affiliates of
Heitman and UAM had gross assets under management totaling over $142.1 billion.
Since its inception in 1989 through November, 1994, the Fund was advised
by PRA Securities Advisors, L.P. The general partner of PRA Securities
Advisors, L.P. was JMB Institutional Securities Corporation whose assets were
acquired by Heitman in December, 1994.
From time to time, Heitman/PRA Advisors may, without prior notice to
shareholders, voluntarily waive all or a portion of its fees payable by the
Fund. This would have the effect of lowering the overall expense ratio of the
Fund, and of increasing the yield or return to investors while the fee waiver
is in effect. Any such waiver in effect from time to time may be terminated
without prior notice to shareholders.
The Fund has also entered into contracts with Rodney Square Management
Corporation ("Rodney Square"), Rodney Square North, 1100 North Market Street,
Wilmington, DE 19890-0001, and Rodney Square Distributors, Inc. ("RSD"),
Rodney Square North, 1100 North Market Street, Wilmington, DE 19890-0001,
pursuant to which Rodney Square provides administrative, accounting and
transfer agency services to the Fund and RSD provides distribution services to
the Fund. Both Rodney Square and RSD are wholly owned subsidiaries of
Wilmington Trust Company ("WTC"), a Delaware-chartered banking institution and
the Trust's Custodian. For administrative services the Fund pays Rodney Square
a fee, calculated daily and paid monthly in arrears, at the annual rate of .10%
of the Fund's average daily net assets allocable to Institutional Class shares.
For accounting services the Fund pays Rodney Square an annual fee of $45,000
plus an amount equal to .02% of that portion of the Fund's average daily net
assets allocable to Institutional Class shares for the year which are in excess
of $100 million.
Among the services provided by Rodney Square are the following: the
coordination and monitoring of any third parties furnishing services to the
Fund; providing the necessary office space, equipment and personnel to perform
administrative and clerical functions for the Fund; preparing, filing and
distributing proxy materials and periodic reports to shareholders; preparation
and filing of registration statements and other documents or reports required
by federal,
9
<PAGE> 14
state and other laws; preparation and maintenance of financial records of the
Fund; and determination of net asset values and dividends for the Fund.
The Investment Manager and ACG Capital Corporation ("ACG"), which is the
distributor of the Advisor Class shares, have entered into a marketing services
agreement with respect to the sale of certain Institutional Class shares.
Under the marketing services agreement, the Investment Manager will pay ACG
additional compensation in the amount of .25 of 1% of the net asset value of
the Fund represented by Institutional Class shares purchased by investors
introduced to the Investment Manager by ACG. In addition, the Investment
Manager has agreed to make certain continuing payments to ACG in the event that
the marketing services agreement is terminated (as long as ACG remains
registered as a broker/dealer). However, if the Investment Manager terminates
the agreement for "cause" or if ACG terminates its distribution agreement with
the Trust, ACG is not entitled to such continuing payments. Finally, the
agreement provides that ACG will not serve as a distributor of any other
open-end registered investment company that invests primarily in shares of
REITs (subject to a limited exception) and that the Investment Manager will not
offer, sponsor, advise or otherwise promote any open-end registered investment
company for which ACG is not the distributor, subject to certain exceptions.
DETERMINATION OF NET ASSET VALUE DETERMINATION OF NET ASSET VALUE
The net asset value per share of a class of the Fund's shares is
determined by dividing the current value of the Fund's net assets attributable
to that class of shares, by the number of outstanding shares of that class.
The Fund calculates net asset value as of the close of regular trading hours of
each business day the New York Stock Exchange (the "NYSE") is open. The NYSE
is currently closed on the following holidays: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
Generally, the Fund's investments are valued at market value or, in the
absence of a market value, in such manner as the Trustees in good faith deem
appropriate to reflect the investment's fair value. In determining fair value,
the Trustees may employ an independent pricing service. For further
information concerning the Fund's procedures for valuing its assets, see the
section entitled "Valuation of Shares" in the Statement of Additional
Information.
INCOME DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
It is the policy of the Fund to declare and distribute dividends
consisting of substantially all of the Fund's net investment income quarterly
and to declare and distribute dividends of net short-term capital gains, if
any, annually. Net capital gains (the excess of net long-term capital gains
over net short-term capital losses) will be declared and distributed annually.
The Fund intends to make such additional distributions as deemed to be
necessary to avoid the imposition of any federal excise tax. The Fund has
historically and intends to make distributions which represent return of
capital to its shareholders.
Any income, dividend or capital gains distribution paid shortly after a
purchase of shares will reduce the net asset value per share of the Fund by the
amount of the distribution and such distributions are subject to taxes.
Dividends and distributions will be automatically reinvested in additional
shares of the Fund, without charge, at net asset value, unless the shareholder
chooses one of the following options:
X Automatic reinvestment of dividends in shares of the Fund, and
payment of capital gains distributions in cash;
X Automatic reinvestment of capital gains distributions in shares of
the Fund, and payment of dividends in cash; or
X All dividends and capital gains distributions paid in cash.
10
<PAGE> 15
Options for the receipt of dividends and distributions may be changed at
any time by writing to the Trust, c/o Rodney Square Management Corporation,
P.O. Box 8987, Wilmington, DE 19899-9752.
Checks which are sent to shareholders who have requested dividends and/or
capital gains distributions to be paid in cash and which are subsequently
returned by the United States Postal Service as not deliverable or which remain
uncashed for six months or more will be invested in the shareholder's account
at the then current net asset value. Further, subsequent dividends and
distributions will be automatically reinvested in the shareholder's account.
TAX STATUS TAX STATUS
The Fund intends to continue to qualify and elect to be treated each
taxable year as a "regulated investment company" under subchapter M of the
Code. Accordingly, the Fund will not be liable for federal income taxes to the
extent its net investment income and capital gains net income (excess of
capital gains over capital losses) are distributed to shareholders, provided
that at least 90% of its net investment income and net short-term capital gains
for the taxable year are distributed. Dividends from net investment income and
distributions of net short-term capital gains are taxable to shareholders as
ordinary income for federal income tax purposes, whether received in cash or
invested in additional shares of the Fund. Distributions of net capital gains
are taxable to shareholders as long-term capital gains, whether paid in cash or
reinvested in additional shares, and regardless of the length of time the
investor has held his shares of the Fund.
A small portion of the dividends paid by the Fund to corporate
shareholders may qualify for the 70% dividends received deduction available to
corporations; dividends that are attributable to distributions made by a REIT
to the Fund will not qualify. Capital gains distributions paid by the Fund do
not qualify for this deduction. The Fund will notify shareholders each year of
the amount of the dividends qualifying for such deduction.
The Fund is subject to a nondeductible 4% excise tax calculated as a
percentage of certain undistributed amounts of taxable ordinary income and
capital gain net income. The Fund intends to make such additional
distributions of taxable ordinary income and capital gain net income as may be
necessary to avoid this excise tax.
The distributions received by the Fund from its investments may, for
federal income tax purposes, consist of ordinary income, long-term capital
gains, or a return of capital. The characterization of these distributions to
the Fund may, in turn, affect the tax treatment of the Fund's distributions to
its shareholders. Statements as to the tax status of each shareholder's
dividends and distributions are mailed annually by the Fund. Shareholders may
wish to consult their tax advisers about any state and local taxes that may
apply to payments received and, in particular, to determine whether dividends
paid by the Fund that represent interest derived from U.S. Government
securities are exempt from any applicable state or local income taxes.
Shareholders of the Fund should also be aware that, because the share
price of the Fund will fluctuate, redemptions of shares of the Fund will
generally result in the realization of capital gains or losses.
PURCHASE OF SHARES PURCHASE OF SHARES
Institutional Class shares of the Fund may be purchased directly from RSD,
the Distributor of the Institutional Class shares, at the net asset value next
determined after receipt of the order by the Transfer Agent, Rodney Square, and
after acceptance by RSD. There is no sales load in connection with the
purchase of Institutional Class shares. The Trust and RSD each reserve the
right to reject any purchase order and to suspend the offering of Institutional
Class shares of the Fund. The minimum initial investment is $250,000, except
that institutions purchasing shares of the Fund on behalf of accounts
maintained by the institution may aggregate such accounts to satisfy the
minimum initial investment requirement. Shareholders purchasing shares after
May 15, 1995 are required to maintain $250,000 in their account, and the Fund
may involuntarily redeem any account which, as a result of redemptions, falls
and remains below $250,000 for a period of 60 days after notice is mailed to
the applicable shareholder. Subsequent investments will be accepted in any
amount. The Trust reserves the right to vary the initial investment minimum
and institute minimums for additional
11
<PAGE> 16
investments at any time. In addition, the Investment Manager may waive the
minimum initial investment requirement for any investor. It is anticipated
that the minimum initial investment amount will be waived for the following
investors, among others: Trustees and officers of the Trust; officers and
employees of Heitman and each of its subsidiaries (including Heitman/PRA
Advisors); and officers and employees of ACG Capital Corporation, Advisory
Consulting Group, Inc., Rodney Square and RSD.
At the discretion of the Trust, investors may be permitted to purchase
shares by transferring securities to the Fund that: (i) meet the Fund's
investment objectives and policies; (ii) are acquired for investment and not
for resale; (iii) are liquid securities which are not restricted as to transfer
either by law or liquidity of market; and (iv) have a value which is readily
ascertainable (and not established only by evaluation procedures) as evidenced
by a listing on the American Stock Exchange, the NYSE, or NASDAQ. Securities
transferred to the Fund will be valued in accordance with the same procedures
used to determine the Fund's net asset value.
Purchase orders for shares of the Fund which are received by the Transfer
Agent in proper form prior to the close of regular trading hours on the NYSE
(currently 4:00 p.m., New York time) on any day that the Fund calculates its
net asset value are priced according to the net asset value determined on that
day. Purchase orders for shares of the Fund received after the close of the
NYSE are priced as of the time the net asset value per share is next
determined. See "Determination of Net Asset Value."
The Fund may accept telephone orders from certain broker-dealers or
service organizations which have been previously approved by the Fund. It is
the responsibility of such broker-dealers or service organizations to promptly
forward purchase orders and payments for the same to the Fund. Shares of the
Fund may be purchased through certain broker-dealers, banks, and bank trust
departments who may charge the investor a transaction fee or other fee for
their services at the time of purchase. Such fees would not otherwise be
charged if the shares were purchased directly from the Fund.
Purchases may be made in one of the following ways:
PURCHASES BY MAIL
Shares may be purchased initially by completing the Application
accompanying this Prospectus and mailing it to the Trust's Transfer Agent,
together with a check payable to Heitman Securities Trust, c/o Rodney Square
Management Corporation, P.O. Box 8987, Wilmington, DE 19899-9752. A purchase
order sent by overnight mail should be sent to Rodney Square Management
Corporation, 1105 North Market Street, Wilmington, DE 19801. Subsequent
investments in an existing account in the Fund may be made at any time and in
any amount by sending a check payable to the Trust, c/o Rodney Square
Management Corporation, P.O. Box 8987, Wilmington, DE 19899-9752, and using the
deposit slip found at the bottom of each shareholder statement or along with a
letter stating the amount of the investment and the name of the account for
which the investment is to be made.
PURCHASES BY WIRE
To order shares for purchase by wire, the Transfer Agent must first be
notified by calling (800) 435-1405. Shares of the Fund may be purchased by
wiring federal funds to WTC. Following notification to the Transfer Agent,
federal funds and registration instructions should be wired through the Federal
Reserve System to:
Wilmington Trust Company
ABA #0311-0009-2
DDA #2629-5416
Further credit to Heitman Real Estate Fund
Further credit (Shareholder's Name)
Fund Account Number
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<PAGE> 17
All investors making initial investments by wire must promptly complete
the Application accompanying this Prospectus and forward it to the Transfer
Agent. Redemptions will not be processed until the Application has been
received by the Transfer Agent.
AUTOMATIC INVESTMENT PLAN
After the initial purchase, shareholders may purchase additional Fund
shares through an Automatic Investment Plan. Under the Plan, the Transfer
Agent will automatically debit a shareholder's bank checking account on a
monthly basis in an amount of $50 or more (subsequent to the $250,000 minimum
initial investment), as specified by the shareholder. The purchase of Fund
shares will be effected at their offering price at the close of regular trading
hours on the NYSE (currently 4:00 p.m., Eastern time) on or about the 20th day
of the month. For further details about this service check the box on the
Application Form or call (800) 435-1405. This service may also not be
available for Service Organization clients who are provided similar services by
those organizations.
INDIVIDUAL RETIREMENT ACCOUNTS
Shares of the Fund may be purchased for tax-deferred retirement plans such
as individual retirement accounts ("IRAs"). Application forms and brochures
describing investments for IRAs can be obtained from the Transfer Agent by
calling (800) 435-1405. WTC makes available its services as an IRA custodian
for each shareholder account that is established as an IRA. For these
services, WTC receives an annual fee of $10.00 per account, which fee is paid
directly to WTC by the IRA shareholder. If the fee is not paid by the date
due, shares of the Fund owned by the IRA will be redeemed automatically for
purposes of making the payment.
REDEMPTIONS REDEMPTIONS
Shareholders may redeem their shares of the Fund without charge on any day
that the Fund calculates its per share net asset value (see "Determination of
Net Asset Value"). Redemptions will be effective at the net asset value per
share next determined after the receipt by the Transfer Agent of a redemption
request meeting the requirements described below. Except under certain
emergency conditions, your redemption payment will be sent to you within seven
(7) days after receipt of your telephone or written redemption request, in
proper form, by the Transfer Agent. If your redemption request is made with
respect to shares purchased by check within ten (10) days of the purchase date,
the redemption payment will be held until the check has been collected (which
usually takes up to ten (10) days), although the shares redeemed will be priced
for redemption upon receipt of your redemption request in proper form. You can
avoid the inconvenience of this delay by purchasing shares with a certified
treasurer's or cashier's check, or with a federal funds or bank wire.
Except as noted below, redemption requests received in proper form by the
Transfer Agent prior to the close of regular trading hours on the NYSE
(currently 4:00 p.m., New York time) on any business day that the Fund
calculates its per share net asset value are effective that day and the shares
redeemed earn dividends declared through the day of redemption.
Redemption requests received after the close of the NYSE are effective as
of the time the net asset value per share is next determined. NO REDEMPTION
WILL BE PROCESSED UNTIL THE TRANSFER AGENT HAS RECEIVED A COMPLETED
APPLICATION WITH RESPECT TO THE ACCOUNT.
The Fund will satisfy redemption requests in cash to the fullest extent
feasible, so long as such payments would not, in the opinion of the Investment
Manager or the Trustees, result in the necessity of the Fund selling assets
under disadvantageous conditions and to the detriment of the remaining
shareholders of the Fund. The Fund may distribute Fund assets in-kind in
satisfaction or partial satisfaction of the amount payable on redemption of
shares in conformity with applicable Securities and Exchange Commission ("SEC")
rules and valued in the same way as they would be valued for purposes of
computing net asset value of the Fund. In the event that an in-kind
distribution is made, a shareholder may incur additional expenses, such as the
payment of brokerage commissions, on the sale or other disposition of the
securities received from the Fund. In-kind payments need not constitute a
cross-section of the Fund's
13
<PAGE> 18
portfolio. The Fund has elected, however, to be governed by Rule 18f-1 under
the 1940 Act, as a result of which the Fund is obligated to redeem shares
solely in cash if the redemption requests are made by one shareholder account
up to the lesser of $250,000 or 1% of the net assets of the applicable
Portfolio during any 90-day period. This election is irrevocable unless the
SEC permits its withdrawal.
The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption, whose value exceeds $250,000,
by making payment in whole or in part with readily marketable securities chosen
by the Fund and valued in the same way as they would be valued for purposes of
computing the net asset value of the applicable Portfolio. If payment is made
in securities, a shareholder may incur transaction expenses in converting these
securities into cash.
Redemption proceeds in cash or in-kind will be remitted to a redeeming
shareholder by check payable, or securities transferred, only to the redeeming
shareholder or such shareholder's designated representative and only to the
shareholder's address, or that of the shareholder's designated representative,
on the books of the Fund. A shareholder may request that redemption proceeds
be wired directly to the shareholder's account at any commercial bank in the
United States. The redemption proceeds must be paid to the same bank and
account as designated on the application or in written instructions
subsequently received by the Transfer Agent.
Shares may be redeemed in one of the following ways:
REDEMPTION BY MAIL
Shares may be redeemed by submitting a written request for redemption to
the Transfer Agent at P.O. Box 8987, Wilmington, DE 19899-9752. A redemption
request sent by overnight mail should be sent to the Transfer Agent, 1105 North
Market Street, Wilmington, DE 19801.
A written redemption request to the Transfer Agent must (i) identify the
shareholder's account name, (ii) state the number of shares to be redeemed, and
(iii) be signed by each registered owner exactly as the shares are registered.
If the shares to be redeemed were issued in certificate form, the certificates
must be endorsed for transfer (or be accompanied by an endorsed stock power)
and must be submitted to the Transfer Agent together with the redemption
request. A redemption request for any amount, if the proceeds are to be sent
elsewhere than the address of record, must be accompanied by signature
guarantee(s). The guarantor of a signature must be an eligible institution
acceptable to the Fund's Transfer Agent, such as a bank, broker, dealer,
municipal securities dealer, government securities dealer, credit union,
national securities exchange, registered securities association, clearing
agency, or savings association. The Trust may require additional supporting
documents for redemptions made by corporations, executors, administrators,
trustees and guardians. A redemption request will not be deemed to be properly
received until the Transfer Agent receives all required documents in proper
form. Questions with respect to the proper form for redemption requests should
be directed to the Transfer Agent at (800) 435-1405.
REDEMPTION BY TELEPHONE
Shareholders who have so indicated on the Application, or have
subsequently arranged in writing to do so, may redeem shares by instructing the
Transfer Agent by telephone. In order to arrange for redemption by wire or
telephone after an account has been opened or to change the bank or account
designated to receive redemption proceeds, a written request must be sent to
the Transfer Agent at the address listed above. Such requests must be signed
by the shareholder, with signatures guaranteed (see "Redemption by Mail" above
for details regarding signature guarantees). Further documentation may be
requested from corporations, executors, administrators, trustees or guardians.
The Trust reserves the right to refuse a wire or telephone redemption if
it is believed advisable to do so. Procedures for redeeming Fund shares by
wire or telephone may be modified or terminated at any time by the Trust.
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<PAGE> 19
SYSTEMATIC WITHDRAWAL PLAN
Shareholders who own shares with a value of $10,000 or more may
participate in the Systematic Withdrawal Plan. Under the Plan, shareholders
may automatically redeem a portion of their Fund shares monthly, bimonthly,
quarterly, semiannually or annually. The minimum withdrawal available is $100.
The redemption of Fund shares will be effected at their net asset value at the
close of the NYSE on or about the 25th day of the month at the frequency
selected by the shareholder. If you expect to purchase additional Fund shares,
it may not be to your advantage to participate in the Systematic Withdrawal
Plan because contemporary purchases and redemption may result in adverse tax
consequences. This service may also not be available for Service Organization
clients who are provided similar services by those organizations. For further
details about this service, see the Application or call the Transfer Agent at
(800) 435-1405.
PERFORMANCE INFORMATION PERFORMANCE INFORMATION
From time to time, in advertisements or in reports to shareholders or
prospective investors, the Fund may provide yield and average annual total
return information, and the Fund may compare its performance, either in terms
of its total return or its yield, total return or ranking, to that of other
mutual funds with similar investment objectives and to other relevant indices.
The Fund may also include its rating as published by mutual fund statistical
services or major financial publications. For example, the Fund may compare
its performance to rankings prepared by Lipper Analytical Services, Inc., a
widely recognized independent service which monitors the performance of mutual
funds, or to other indices as appropriately determined. Total return and yield
information may be useful in reviewing the Fund's performance and for providing
a basis for comparison with other investment alternatives. However, since the
performance of the Fund changes in response to fluctuations in market
conditions and Fund expenses, no performance quotation should be considered a
representation as to the Fund's performance for any future period. The Fund's
Annual Report to Shareholders will contain detailed information with respect to
the performance of the Fund. The Annual Report will be made available free of
charge to prospective investors upon request.
The yield of the Fund refers to the income generated by an investment in
the Fund over a specified one month period identified in the advertisement and
is computed by dividing the net investment income per share earned for a
specified one month period by the net asset value at the end of the month and
expressing the result as an annualized percentage. In computing net investment
income all recurring charges are recognized.
The Fund's average annual total return generally measures the average
annual percentage growth in the dollar value of an investor's account over a
specified period, based on a hypothetical $1,000 initial investment in the Fund
and assuming the reinvestment of all dividends and distributions. The Fund may
also utilize a total return computed in the same manner but for differing
periods and without annualizing the total return. The Fund may show total
return broken down into its components of investment gain (or loss) and total
income (or distribution).
ADDITIONAL INFORMATION ADDITIONAL INFORMATION
ORGANIZATION, CAPITALIZATION AND VOTING
Heitman Securities Trust is organized as a Massachusetts business trust
under a Master Trust Agreement dated September 15, 1988, as Amended and
Restated on February 28, 1995. The Trust is registered with the SEC as an
open-end management investment company.
Under Massachusetts law and pursuant to the Master Trust Agreement, the
Trust is authorized to issue an unlimited number of shares of beneficial
interest in separate series, with shares of each series representing interests
in a separate portfolio of assets and operating as a separate distinct fund.
In addition, the Trust is authorized to issue an unlimited number of classes of
shares of beneficial interest in each series. To date, the Trust has
established one series, the Heitman Real Estate Fund with two classes of
shares, designated as the Heitman/PRA Institutional Class and the Advisor
Class. Each Fund share represents an equal proportionate interest in the Fund,
has a par value of $.001 per share, and is entitled to such dividends and
distributions earned on the assets belonging to the Fund as may be declared
15
<PAGE> 20
by the Board of Trustees. Shares of the Fund are fully paid and non-assessable
by the Trust and have no preemptive or conversion rights. As of April 1, 1996,
the United Nations owned by virtue of shared or sole voting or investment power
on behalf of its underlying account 26.7% of the Heitman/PRA Institutional
Class shares, which represents 23.03% of all outstanding shares of the Fund.
The Trust is not required to hold annual shareholder meetings. However,
special meetings may be called for purposes such as electing or removing
Trustees, changing fundamental investment policies or approving certain
contracts. Shareholders holding an aggregate of at least 10% of the
outstanding shares of the Fund may request a meeting of shareholders at any
time for the purpose of voting to remove one or more of the Trustees, and the
Trust will assist shareholders in communicating with other shareholders in
connection with such a meeting. At any meeting of shareholders, each share
shall entitle the holder thereof to one vote.
Certificates for Fund shares are issued only upon specific written request
to the Fund's Transfer Agent. However, within five business days from the date
of completion of each purchase or redemption transaction in an account, the
Transfer Agent will mail to the shareholder a confirmation statement which will
indicate the number of shares involved and the balance of shares held in the
account. The Trust also sends annual statements to each shareholder indicating
the status of the shareholder's account. In addition, shareholders will
receive annual financial and semi-annual statements of the Trust. Quarterly
financial statements of the Trust are available upon request. The Trust
reserves the right to eliminate duplicate mailings of such statements and other
materials to shareholders who reside at the same address.
CUSTODIAN, TRANSFER AGENT, DISTRIBUTOR AND INDEPENDENT ACCOUNTANTS
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001 (the "Custodian") serves as Custodian of the
Fund's assets. The Custodian acts as the depository for the Fund, safekeeps
its portfolio securities, collects all income and other payments with respect
to portfolio securities, disburses monies at the Fund's request and maintains
records in connection with its duties.
Rodney Square Management Corporation, P.O. Box 8987, Wilmington, Delaware
19899-9752 serves as the Fund's Transfer Agent. As Transfer Agent, it
maintains the records of each shareholder's account, answers shareholder
inquiries concerning accounts, processes purchases and redemptions of the
Fund's shares, acts as dividend and distribution disbursing agent and performs
all shareholder service functions. All shareholder inquiries with respect to
these services should be directed to Rodney Square at (800) 435-1405.
Rodney Square Distributors, Inc., Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-0001 serves as the Distributor with
responsibility for distributing the Institutional Class shares. Applicable
banking laws prohibit deposit-taking institutions from underwriting or
distributing securities. WTC and its affiliates believe and have been advised
by their counsel that they may perform the services contemplated by their
respective agreements with the Trust without violation of applicable banking
laws or regulations. If WTC or its affiliates were prohibited from performing
these services, it is expected that the Trust's Board of Trustees would
consider entering into agreements with other entities.
Price Waterhouse LLP currently serves as the Fund's independent
accountants with responsibility for auditing the Fund's annual financial
statements. Arthur Andersen LLP served as the Fund's independent accountants
and audited the Fund's financial statements for all periods prior to January 1,
1996.
ADDITIONAL INFORMATION
Additional information regarding the Fund and the Trust may be obtained
from the Trust at the address and telephone number listed on the cover of this
Prospectus.
16
<PAGE> 21
INVESTMENT ADVISOR
Heitman/PRA Securities Advisors, Inc.
180 North LaSalle Street, Suite 3600
Chicago, IL 60601
OFFICERS
William L. Ramseyer, President
Dean A. Sotter, Vice President and Treasurer
Nancy B. Lynn, Secretary
Timothy J. Pire, Assistant Secretary
Laurie V. Brooks, Assistant Secretary
John J. Kelley, Assistant Treasurer
BOARD OF TRUSTEES
Robert W. Beeney
Donald L. Foote
John F. Goydas
William L. Ramseyer
George C. Weir
Maurice Wiener
DISTRIBUTOR
Rodney Square Distributors, Inc.
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
CUSTODIAN
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
TRANSFER AGENT AND ADMINISTRATOR
Rodney Square Management Corporation
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
TRUST HEADQUARTERS
180 North LaSalle Street, Suite 3600
Chicago, IL 60601
(800) 435-1405
[HEITMAN REAL ESTATE FUND LOGO]
HEITMAN/PRA
INSTITUTIONAL
CLASS
PROSPECTUS
MAY 1, 1996
17
<PAGE> 22
[HEITMAN REAL ESTATE FUND LOGO]
ADVISOR CLASS
Heitman Securities Trust (the "Trust") is a series mutual fund which
currently consists of one investment portfolio, the Heitman Real Estate Fund
(the "Fund"). The Fund's investment objective is to obtain high total return
consistent with reasonable risk by investing primarily in equity securities of
public companies principally engaged in the real estate business. Each
investment is selected based upon a determination by the Fund's investment
manager that the anticipated total return, considering both income and
potential for capital appreciation, is high relative to the risk assumed.
The Fund offers two classes of shares. The shares offered by this
Prospectus are the Advisor Class of shares, which are available to shareholders
with a minimum initial investment of $5,000. In addition, the Fund offers by
separate Prospectus the Heitman/PRA Institutional Class of shares, which are
available for purchase in initial aggregate amounts of $250,000 or more.
This Prospectus contains a concise summary of information regarding the
Fund that a prospective investor should know before investing. Investors
should read this Prospectus carefully and retain it for future reference.
Additional information regarding the Fund is contained in a Statement of
Additional Information dated May 1, 1996, which has been filed with the
Securities and Exchange Commission and which is incorporated into this
Prospectus by reference. Additional copies of this Prospectus and the
Statement of Additional Information are available without charge upon request
to the Trust at the address or telephone number set forth on the outside cover
of this document.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
AN INVESTMENT IN THE FUND INVOLVES CERTAIN RISKS AND IS NOT AN
APPROPRIATE INVESTMENT FOR ALL INVESTORS. AN INVESTMENT IN THE FUND MAY NOT BE
SUITABLE FOR INVESTORS WHO REQUIRE A STABLE RETURN OR WHO ARE SEEKING SAFETY OF
PRINCIPAL.
PROSPECTUS DATED MAY 1, 1996
<PAGE> 23
<TABLE>
<S> <C>
INVESTMENT ADVISOR DISTRIBUTOR
Heitman/PRA Securities Advisors, Inc. ACG Capital Corporation
180 North LaSalle Street, Suite 3600 1661 Tice Valley Boulevard, #200
Chicago, IL 60601 Walnut Creek, CA 94595
CUSTODIAN TRANSFER AGENT AND ADMINISTRATOR
Wilmington Trust Company Rodney Square Management Corporation
Rodney Square North Rodney Square North
1100 North Market Street 1100 North Market Street
Wilmington, DE 19890-0001 Wilmington, DE 19890-0001
</TABLE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
TRANSACTION AND EXPENSE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
INCOME DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
TAX STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
PURCHASE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
REDEMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
2
<PAGE> 24
TRANSACTION AND EXPENSE DATA TRANSACTION AND EXPENSE DATA
The following table sets forth the costs and expenses that an investor in
Advisor Class shares of the Fund will incur directly or indirectly.
SHAREHOLDER TRANSACTION EXPENSES:
<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases 4.75%
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fees None
</TABLE>
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average daily net assets)
<TABLE>
<S> <C> <C>
Management Fees 0.75%
12b-1 Fees(1) 0.25%
Other Expenses:
Shareholder Servicing Expenses 0.25%
Other Fees and Expenses (2) 0.55%
Total Other Expenses 0.80%
Total Fund Operating Expenses 1.80%
=====
</TABLE>
- -------------
(1) Because the 12b-1 fee is an annual fee charged against the assets of
the Fund, long-term shareholders may indirectly pay more than the
economic equivalent of the maximum front-end sales charge permitted
under applicable rules. See "Purchase of Shares - Fees and Charges"
and "Purchase of Shares - Distribution Plan."
(2) Currently the Fund is authorized to issue two classes of shares, the
Heitman/PRA Institutional Class (the "Institutional Class") and the
Advisor Class. Effective January 1, 1996, the Trust began allocating
all expenses, other than 12b-1 Fees and Shareholder Servicing
Expenses, between the Advisor Class and Institutional Class based on
the relative net asset value of each class. The amounts shown in the
table are based on the actual expenses incurred in 1995, as adjusted
to reflect this allocation method.
EXAMPLE:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following
expenses on a $1,000 investment,
assuming (1) 5% annual return and
(2) redemption at the end
of each time period: $65 $101 $140 $249
</TABLE>
Except as otherwise indicated, all information in the Transaction and
Expense Data table is based on actual expenses and average daily net assets of
the Fund for the fiscal year ended December 31, 1995. The purpose of the table
is to assist the investor in understanding the various costs and expenses that
an investor will bear directly or indirectly. The Example provided with the
Table should not be considered a representation of past or future expenses or
performance. Actual expenses may be more or less than those shown. For
further information on sales charges and shareholder servicing fees, see
"Purchase of Shares - Fees and Charges"; for further information on 12b-1 fees,
see "Purchase of Shares - Fees and Charges" and "Purchase of Shares -
Distribution Plan"; and for further information on management fees, see
"Management of the Fund."
Institutional Class shares are available in initial aggregate amounts of
$250,000 or more. Because the sales charges and expenses vary between the
classes, performance will vary with respect to each class. Additional
information concerning the Advisor Class may be obtained by calling toll-free
1-800-888-REIT.
3
<PAGE> 25
FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS
The following table of financial highlights has been audited by Arthur
Andersen LLP as indicated in their report dated February 26, 1996 on the Fund's
financial statements as of December 31, 1995. This table should be read in
conjunction with the Fund's financial statements and notes thereto which are
found in the Statement of Additional Information under "Financial Statements."
Effective May 15, 1995, the Fund began offering the Advisor Class shares. For
further information about the performance of the Fund, see the Fund's Annual
Report, which may be obtained without charge by contacting the Fund's
Administrator.
<TABLE>
<CAPTION>
ADVISOR CLASS SHARES
--------------------
For the Period May 15, 1995
(Commencement of Operations
through December 31, 1995)
-------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . $8.00
-----
INCOME FROM INVESTMENT OPERATIONS
Net investment income . . . . . . . . . . . . 0.23(a)
Net realized and unrealized gain
on investments . . . . . . . . . . . . . . . 0.80
----
Total From Investment Operations 1.03
----
DISTRIBUTIONS
From net investment income . . . . . . . . . . (0.23)(a)
From net realized gain
on investments . . . . . . . . . . . . . . . 0.00
From tax return of capital . . . . . . . . . (0.13)(b)
------
Total distributions . . . . . . . . . . . (0.36)
------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . $8.67
=====
Total Return(c) . . . . . . . . . . . . . . . . . 13.19%(c)
Ratios/Supplemental Data
Net assets, end of period (in 000's) $5,520
Ratio of expenses to average net assets 1.99%*(d)
Ratio of net investment income to
average net assets . . . . . . . . . . . . . 4.27%*(a)(d)
Portfolio Turnover . . . . . . . . . . . . . . . 65.33%*
</TABLE>
- ------------------
Annualized.
(a) Dividend receipts from REIT investments generally may include a return of
capital, which the Fund records as a reduction in the cost basis of its
investments.
(b) Historically, the Fund has distributed to its shareholders amounts
approximating dividends received from the REITs. Such distributions may
include a portion which may be a return of capital.
(c) This result does not include the sales charge. If the charge had been
included, the return would have been lower. The total return for the fiscal
period has not been annualized.
(d) The Advisor has agreed to reimburse a portion of the Advisor Shares'
expenses. The annualized expense ratio, had there been no reimbursement of
expenses by the Advisor, would have been 5.34% for the period ended December
31, 1995. The annualized ratio of net investment income to average net
assets, had there been no reimbursement of expenses by the Advisor, would
have been 0.92% for the period ended December 31, 1995.
4
<PAGE> 26
INSTITUTIONAL CLASS SHARES
<TABLE>
<CAPTION>
For the Period
For the For the January 4, 1989
Fiscal Year Three-Month (Effective Date)
Ended Period Ended For the Fiscal Years Ended September 30, to
December 31, December 31, ------------------------------------------------- September 30,
1995 1994 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD. . . $8.30 $9.23 $10.95 $8.29 $7.66 $6.99 $10.25 $10.00
----- ----- ------ ----- ----- ----- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income . . . . . . . . . 0.33(a) 0.10(a) 0.32(a) 0.40 0.45 0.49 0.64 0.40(c)
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . 0.53 (0.05) (0.92) 2.67 0.63 0.67 (3.16) 0.25
---- ------ ------ ---- ---- ---- ------ ----
Total from investment operations 0.86 0.05 (0.60) 3.07 1.08 1.16 (2.52) 0.65
---- ---- ------ ---- ---- ---- ------ ----
DISTRIBUTIONS
From net investment income . . . . . . (0.33)(a) (0.10)(a) (0.31)(a) (0.41) (0.45) (0.49) (0.64) (0.40)
From net realized gain on investments 0.00 (0.77) (0.67) 0.00 0.00 0.00 (0.10) 0.00
From tax return of capital . . . . . . (0.18)(b) (0.11)(b) (0.14)(b) 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ---- ---- ---- ---- ----
Total distributions . . . . . . . . . (0.51) (0.98) (1.12) (0.41) (0.45) (0.49) (0.74) (0.40)
------ ----- ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD. . . . . . $8.65 $8.30 $9.23 $10.95 $8.29 $7.66 $6.99 $10.25
===== ===== ===== ====== ===== ===== ===== ======
Total Return . . . . . . . . . . . . . . 10.87% 0.65%(d) (5.22%) 37.76% 14.49% 19.56% (26.11%) 4.82%(d)
Ratios/Supplemental Data
Net assets, end of period (in 000's) $95,692 $105,569 $116,268 $141,672 $ 66,521 $ 54,880 $18,481 $ 23,174
Ratio of expenses to
average net assets . . . . . . . . . 1.29% 1.28%* 1.22% 1.24% 1.37% 1.25% 1.54% 0.90%(c)
Ratio of net investment income to
average net assets . . . . . . . . . 3.97%(a) 4.35%*(a) 2.87%(a) 4.37% 5.75% 7.36% 7.25% 3.88%
Portfolio Turnover . . . . . . . . . . 65.33% 37.55%* 90.11% 61.47% 28.05% 16.24% 24.98% 12.96%
</TABLE>
- ------------------
* Annualized.
(a) Dividend receipts from REIT investments generally may include a return
of capital. For financial reporting purposes, through September
30, 1993, the Fund recorded all dividend receipts, including the
returns of capital as net investment income. As more fully explained
in Note 2 to the Financial Statements, the Fund changed its dividend
recognition policy for the fiscal year ended September 30, 1994. The
financial highlights for the period ended September 30, 1989 and
for the years ended September 30, 1990 through 1993 have not been
restated.
(b) Historically, the Fund has distributed to its shareholders amounts
approximating dividends received from the REITs. As more fully
explained in Note 2 to the Financial Statements, the Fund for fiscal
year ended September 30, 1994, adopted a recently released accounting
pronouncement affecting the presentation of distributions to
shareholders. The financial highlights for the period ended September
30, 1989 and for the years ended September 30, 1990 through 1993 have
not been restated.
(c) The Investment Manager has reimbursed the Fund for certain expenses
during the period from the effective date until investment
operations commenced. The ratio of expenses to average net assets for
the period January 4, 1989 to September 30, 1989 would otherwise have
been 1.00%.
(d) The total return figure for the periods ended September 30, 1989 and
December 31, 1994 has not been annualized.
5
<PAGE> 27
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund's investment objective is to obtain high total return consistent
with reasonable risk by investing primarily in equity securities of public
companies principally engaged in the real estate business. Each investment
will be selected based upon a determination by Heitman/PRA Securities Advisors,
Inc. ("Heitman/PRA Advisors" or the "Investment Manager") that the anticipated
total return, considering both income and potential for capital appreciation,
is high relative to the risk assumed. There can be no assurance that the Fund
will achieve its objective and the Fund may not achieve as high a total return
as other investment companies that invest in a broader universe of securities.
The Fund's investment objective is a fundamental policy of the Fund and may be
changed only by the affirmative vote of the holders of a majority of the Fund's
shares.
INVESTMENT POLICIES
The Fund seeks to achieve its objective by investing in equity securities
of public companies principally engaged in the real estate business. A company
is "principally engaged" in the real estate business if at least 50% of the
fair market value of its assets, as determined by the Investment Manager,
consists of interests in, or at least 50% of its gross income or net profits
are derived from the ownership, construction, management, financing or sale of,
residential, commercial, or industrial real estate. Equity securities in which
the Fund may invest are limited to common and preferred stocks, convertible
bonds and convertible preferred stocks and warrants. All equity securities in
which the Fund invests will be listed on a U.S. national securities exchange or
traded in the over-the-counter market.
Total return is composed of current income and capital appreciation.
Under normal circumstances, the Fund will seek to maintain a balanced portfolio
of securities which are income producing and securities which offer potential
for capital appreciation.
Under normal conditions at least 65% of the Fund's assets will be invested
in the equity securities of companies, a majority of whose assets are
represented by the ownership of real property, including leasehold interests.
Such companies may include equity, mortgage and hybrid real estate investment
trusts ("REITs") and other companies with substantial real estate holdings.
Although not an investment policy of the Fund, it is anticipated that under
normal circumstances approximately 60% to 90% of the Fund's assets will be
invested in REITs and that a majority of the Fund's REIT investments will
consist of equity securities of equity and hybrid REITs.
The Fund may invest up to 35% of its total assets in equity securities of
companies not principally engaged in the real estate business (as defined
above) but nonetheless engaged in businesses related thereto. These companies
may include manufacturers and distributors of building supplies, financial
institutions which make or service mortgages, and companies whose real estate
assets are substantial relative to the companies' stock market valuations, such
as retailers, railroads and paper and forest products companies.
REAL ESTATE INVESTMENT TRUSTS
A REIT is a corporation or business trust (that would otherwise be taxed
as a corporation) which meets the definitional requirements of the Internal
Revenue Code of 1986, as amended (the "Code"). The Code permits a qualifying
REIT to deduct the dividends paid, thereby effectively eliminating corporate
level federal income tax and making the REIT a pass-through vehicle for federal
income tax purposes. To meet the definitional requirements of the Code, a REIT
must, among other things: invest substantially all of its assets in interests
in real estate (including mortgages and other REITs), cash and government
securities; derive most of its income from rents from real property or interest
on loans secured by mortgages on real property; and distribute annually 95% or
more of its otherwise taxable income to shareholders.
6
<PAGE> 28
REITs are sometimes informally characterized as equity REITs, mortgage
REITs and hybrid REITs. An equity REIT invests primarily in the fee ownership
or leasehold ownership of land and buildings; a mortgage REIT invests primarily
in mortgages on real property, which may secure construction, development or
long-term loans; and a hybrid REIT invests in both real estate equities and
mortgages.
SHORT-TERM CASH MANAGEMENT AND TEMPORARY DEFENSIVE POLICIES
For liquidity or temporary defensive purposes, the Fund may invest in
money market mutual funds and in the following short-term debt securities
(securities with remaining maturities of less than one year): high grade
corporate debt securities, including commercial paper, notes, bonds and
debentures; certificates of deposit, bankers' acceptances and time deposits;
debt obligations of the U.S. Government including U.S. Treasury bills, bonds
and notes and obligations issued or guaranteed as to principal and interest by
the U.S. Government, its agencies and instrumentalities; and repurchase
agreements that are fully collateralized by U.S. Government obligations,
including repurchase agreements that mature in more than seven days. The Fund
may invest up to 10% of its assets in such short-term securities on a regular
basis to maintain liquidity for purposes of redeeming shares and meeting other
cash obligations of the Fund. When the Investment Manager believes that
financial conditions warrant, it may invest all or any portion of the Fund's
assets in such securities for temporary defensive purposes. The Fund may not
invest more than 25% of its assets in securities or obligations issued by
banks. When the assets of the Fund are invested in short-term securities, the
Fund will not be invested in a manner consistent with achieving its investment
objective.
Repurchase agreements involve transactions by which an investor (such as
the Fund) purchases a security and simultaneously obtains the commitment of the
seller (a bank or broker-dealer) to repurchase the security at an agreed-upon
price on an agreed-upon date within a number of days (usually not more than
seven) from the date of purchase. The Fund may enter into repurchase
agreements with banks or primary dealers of U.S. Government securities,
provided the Fund's custodian always has possession of the securities serving
as collateral whose market value at least equals the amount of the
institution's repurchase obligation. The resale price reflects the purchase
price plus an agreed-upon market rate of interest which is unrelated to the
coupon rate or maturity of the purchased security. A repurchase transaction
involves the obligation of the seller to pay the agreed-upon price, which
obligation is in effect secured by the value of the underlying security. The
holder of a repurchase agreement bears the risk that the issuer thereof will be
unable to meet its repurchase obligation when due; however, since the
repurchase agreement is in effect fully collateralized by the underlying
security, the risk of loss on such an instrument is minimal. Repurchase
agreements may also be viewed as loans made by the Fund which are
collateralized by the securities subject to repurchase. In the event of a
bankruptcy or other default by the seller of a repurchase agreement, the Fund
could experience both delays in liquidating the underlying security and could
experience losses, including: (i) the possible decline in the value of the
underlying security during the period while the Fund seeks to enforce its
rights thereto; (ii) possible subnormal levels of income and lack of access to
income during this period; and (iii) expenses of enforcing its rights.
COMPANIES WITH LIMITED OPERATING HISTORIES
The Fund's portfolio may include securities of companies which have
limited operating histories and may not yet be profitable. The investments in
such companies offer opportunities for capital gains, but entail significant
risks including, but not limited to, the volatility of the stock price and the
viability of the firms' operations. The Fund will not invest in companies
which together with predecessors have operating histories of less than three
(3) years if immediately thereafter and as a result of such investment the
value of the Fund's holdings of such securities (other than securities of
REITs) exceeds 5% of the value of the Fund's total assets. Although not an
investment policy of the Fund, it is anticipated that under normal
circumstances, approximately 10% to 15% of the REITs in which the Fund invests
will have operating histories of less than three years.
BORROWING
The Fund is authorized to borrow an amount not to exceed 33% of the value
of its total assets (including the amount borrowed) for temporary
administrative purposes, and to pledge all or any portion of its assets in
7
<PAGE> 29
connection with such borrowings. Such borrowings may be used for ongoing cash
needs of the Fund including the payment of redemptions, dividends and other
administrative and operating expenses. The Fund may not borrow for the purpose
of leveraging its investment portfolio. The Fund may not purchase additional
securities while outstanding borrowings exceed 5% of the value of its total
assets.
PORTFOLIO TURNOVER
The Fund does not intend to use short-term trading as a primary means of
achieving its investment objective. The Fund, however, does expect to engage
in portfolio trading when considered appropriate. Although the Fund cannot
accurately predict its annual portfolio turnover rate, it is not expected to
exceed 75%. A 75% turnover rate would occur, for example, if the lesser of the
value of purchases or sales of portfolio securities for a year (excluding all
securities whose maturities at acquisition were one year or less) were equal to
75% of the average monthly value of the securities held by the Fund during such
year. Higher portfolio turnover rates will increase aggregate brokerage
commission expenses which must be borne directly by the Fund and ultimately by
the Fund's shareholders.
LENDING OF PORTFOLIO SECURITIES
From time to time, the Fund may lend portfolio securities to
broker-dealers for the purpose of realizing additional income. The total
amount of all such loans outstanding will not exceed 33% of the Fund's total
assets. Loans of portfolio securities will be collateralized by cash, letters
of credit or securities issued or guaranteed by the U.S. Government or its
agencies which will be maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities. Although each loan
transaction must be fully collateralized at all times, it will involve some
risk to the Fund if the party borrowing the securities should default on its
obligation and the Fund is delayed in or prevented from recovering the
collateral. Securities loaned by the Fund will remain subject to fluctuations
of market value.
RISK FACTORS
The Fund is not intended to constitute a complete investment program.
Under normal circumstances, at least 65% of the Fund's assets will be invested
in the equity securities of companies principally engaged in the real estate
industry. Because the Fund will be concentrated in this industry, the Fund may
be subject to the risks associated with the direct ownership of real estate.
For example, real estate values may fluctuate as a result of general and local
economic conditions, overbuilding and increased competition, increases in
property taxes and operating expenses, changes in zoning laws, casualty or
condemnation losses, regulatory limitations on rents, changes in neighborhood
values, changes in the appeal of properties to tenants, and increases in
interest rates. The value of securities of companies which service the real
estate business sector may also be affected by such risks. Thus, the value of
the Fund's shares may change at different rates compared to the value of shares
of a mutual fund with investments in many industries.
Because the Fund may invest a substantial portion of its assets in REITs,
the Fund may also be subject to certain risks associated with direct
investments in REITs. REITs may be affected by changes in the value of their
underlying properties and by defaults by borrowers or tenants. Furthermore,
REITs are dependent upon specialized management skills, have limited
diversification and are, therefore, subject to risks inherent in financing a
limited number of projects. REITs depend generally on their ability to
generate cash flow to make distributions to shareholders, and certain REITs
have self-liquidation provisions by which mortgages held may be paid in full
and distributions of capital returns may be made at any time. In addition, the
performance of a REIT may be affected by its failure to qualify for tax-free
pass-through of income under the Code or its failure to maintain exemption from
registration under the Investment Company Act of 1940 (the "1940 Act").
Although an investment in the Fund is not without risk, the Fund follows
certain polices in managing its investments which may help to reduce these
risks. Set forth below are the more significant investment restrictions:
8
<PAGE> 30
1. The Fund may not purchase a security if, as a result: (a) with
respect to 75% of its total assets, (i) more than 5% of its total
assets would be invested in the securities of any single issuer or
(ii) the Fund would own more than 10% of the voting securities of any
single issuer; and (b) more than 5% of its net assets would be
invested in the securities of companies (other than REITs) which
together with their predecessors have been in continuous operation
for less than three years. These limitations do not apply to
investments in U.S. Government securities.
2. The Fund may borrow money solely for temporary administrative purposes
but not in an amount exceeding 33% of its total assets (including the
amount borrowed). The Fund may not borrow for the purpose of
leveraging its investment portfolio. The Fund may not purchase
additional securities while outstanding borrowings exceed 5% of the
value of its assets.
3. The Fund may temporarily lend its portfolio securities to
broker-dealers but only when the loans are fully collateralized. The
Fund will limit these loans to 33% of its total assets.
4. The Fund may not invest more than 10% of its net assets in illiquid
securities, including securities restricted as to resale, repurchase
agreements extending for more than seven days and other securities
which are not readily marketable.
These investment restrictions may not be changed without shareholder
approval, except that the restriction in paragraph 1(b) may be changed by the
Board without shareholder approval. For a complete listing of the Fund's
fundamental investment restrictions, see the section entitled "Additional
Information Regarding Investment Policies and Limitations" in the Statement of
Additional Information.
MANAGEMENT OF THE FUND
The Board of Trustees is responsible for the overall supervision of
the business and affairs of the Fund and has approved contracts with certain
organizations to provide day-to-day management of the Fund.
The Fund has entered into an Investment Management Agreement with
Heitman/PRA Advisors to furnish investment services to the Fund. The
Investment Management Agreement was approved by the Fund's shareholders on
January 23, 1995. The Investment Manager directs the investments of the Fund
in accordance with the Fund's investment objective and policies subject to
supervision by the Board of Trustees. Specifically, the Investment Manager is
responsible for performing the following services: (a) furnishing continuously
an investment program for the Fund and (b) determining which investments should
be purchased, held, sold or exchanged by the Fund and what portion, if any, of
the Fund's assets should be held uninvested. In connection with the management
of the investment and reinvestment of the Fund's assets, the Investment Manager
is authorized to select brokers or dealers to execute purchase and sale
transactions for the Fund. In addition, the Investment Manager manages,
supervises and conducts such other affairs and business of the Fund as the
Trust and the Investment Manager may determine from time to time. For these
services, the Fund pays Heitman/PRA Advisors a fee, calculated daily and paid
monthly in arrears, at the annual rate of 0.75% of the Fund's first $100
million of average daily net assets and 0.65% of the average daily net assets
of the Fund in excess of $100 million. The Investment Manager has agreed that
if the total expenses of the Fund (exclusive of interest, taxes, brokerage
expenses and extraordinary items) for any fiscal year of the Fund exceed (i)
1.75% of the first $50 million of the Fund's average net assets, or (ii) 1.50%
of the Fund's average net assets in excess of $50 million, the Investment
Manager will pay or reimburse the Fund for that excess up to the amount of its
advisory fee payable with respect to the Fund during that fiscal year. As
required by the State of California, Heitman/PRA Advisors has agreed to exclude
all assets of the Fund which are invested in shares of any money market mutual
fund for purposes of calculating its advisory fee. The fee paid by the Fund,
although higher than the investment advisory fees paid by most other mutual
funds, is comparable to the fees paid for similar services by many funds with
similar investment objectives and policies.
Heitman/PRA Advisors is a corporation organized on November 14, 1994 under the
laws of Illinois to provide investment advice and discretionary management
primarily with respect to investment in publicly traded securities
9
<PAGE> 31
of issuers principally engaged in the real estate business. The address of
Heitman/PRA Advisors is 180 North LaSalle Street, Suite 3600, Chicago, Illinios
60601. Dean A. Sotter, Vice President and Chief Financial Officer of the
Trust, Timothy J. Pire, Assistant Secretary of the Trust and Randall E. Newsome
are primarily responsible for monitoring the day-to-day investment activity of
the Fund. Messrs. Sotter, Pire and Newsome have extensive experience in direct
real estate analysis, securities research and portfolio management of publicly
traded real estate securities. Mr. Sotter is President of Heitman/PRA Advisors
with overall responsibility for portfolio management and marketing. Prior to
joining Heitman/PRA Advisors, Mr. Sotter was a Partner of PRA Securities
Advisors, L.P. He was a Portfolio Manager and Vice President of JMB
Institutional Realty Corporation from 1985-1992, where his responsibilities
included property level analysis, budgeting and valuation as well as financial
reporting and client communications. Mr. Pire is Vice President of Heitman/PRA
Advisors whose responsibilities include investigation and analysis of publicly
traded real estate securities and implementation of the investment strategy
through portfolio management. Prior to joining Heitman/PRA Advisors, Mr. Pire
served as Research Analyst with PRA Securities Advisors, L.P., and he was an
Associate Appraiser with Lyon, Skelte & Speirs in Seattle, Washington from
1990-1992 where he was involved in valuation of commercial real estate and
writing full narrative appraisals. Mr. Newsome is Vice President of Heitman/PRA
Advisors whose responsibilities include investigation and analysis of publicly
traded real estate securities and implementation of the investment strategy
through portfolio management. Mr. Newsome also oversees Heitman/PRA Advisors'
trading positions. Prior to joining Heitman/PRA Advisors, Mr. Newsome served
as Research Analyst with PRA Securities Advisors, L.P. and he was Vice
President with The Stratus Corporation in Chicago, Illinois from 1989-1993
where he was responsible for property management, leasing and construction
management.
Heitman/PRA Advisors is a wholly owned subsidiary of Heitman Financial Ltd.
("Heitman") which is a wholly owned subsidiary of United Asset Management
Corporation ("UAM"). Affiliates of Heitman and UAM serve as investment
advisers and managers to funds, other collective investment vehicles and
separate accounts established for investment in real estate by pension and
profit sharing trusts, corporations, endowments, foundations and other
tax-exempt institutional investors. As of December 31, 1995, affiliates of
Heitman and UAM had gross assets under management totaling over $142.1 billion.
Since its inception in 1989 through November, 1994, the Fund was
advised by PRA Securities Advisors, L.P. The general partner of PRA Securities
Advisors, L.P. was JMB Institutional Securities Corporation whose assets were
acquired by Heitman in December, 1994.
From time to time, Heitman/PRA Advisors may, without prior notice to
shareholders, voluntarily waive all or a portion of its fees payable by the
Fund. This would have the effect of lowering the overall expense ratio of the
Fund, and of increasing the yield or return to investors while the fee waiver
is in effect. Any such waiver in effect from time to time may be terminated
without prior notice to shareholders.
The Fund has also entered into contracts with Rodney Square Management
Corporation ("Rodney Square"), Rodney Square North, 1100 North Market Street,
Wilmington, DE 19890-0001, and ACG Capital Corporation ("ACG" or the
"Distributor"), 1661 Tice Valley Boulevard, #200, Walnut Creek, CA 94595,
pursuant to which Rodney Square provides administrative, accounting and
transfer agency services to the Fund and ACG provides distribution services to
the Fund. Rodney Square is a wholly owned subsidiary of Wilmington Trust
Company ("WTC"), a Delaware-chartered banking institution and the Trust's
Custodian. For administrative services the Advisor Class pays Rodney Square a
fee, calculated daily and paid monthly in arrears, at the annual rate of .10%
of the Class' average daily net assets, subject to a minimum fee of $25,000 per
annum. For accounting services the Advisor Class pays Rodney Square a fee
calculated daily and paid monthly in arrears, at the annual rate of .02% of the
Class' average daily net assets, subject to a minimum fee of $25,000 per annum.
Among the services provided by Rodney Square are the following: the
coordination and monitoring of any third parties furnishing services to the
Fund; providing the necessary office space, equipment and personnel to perform
administrative and clerical functions for the Fund; preparing, filing and
distributing proxy materials and periodic reports to shareholders; preparation
and filing of registration statements and other documents or reports required
by federal, state and other laws; preparation and maintenance of financial
records of the Fund; and determination of net asset values and dividends for
the Fund.
10
<PAGE> 32
DETERMINATION OF NET ASSET VALUE
The net asset value per share of a class of the Fund's shares is
determined by dividing the current value of the Fund's net assets attributable
to that class of shares, by the number of outstanding shares of that class.
The Fund calculates net asset value as of the close of regular trading hours of
each business day the New York Stock Exchange (the "NYSE") is open. The NYSE
is currently closed on the following holidays: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
Generally, the Fund's investments are valued at market value or, in the
absence of a market value, in such manner as the Trustees in good faith deem
appropriate to reflect the investment's fair value. In determining fair value,
the Trustees may employ an independent pricing service. For further
information concerning the Fund's procedures for valuing its assets, see the
section entitled "Valuation of Shares" in the Statement of Additional
Information.
INCOME DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS INCOME DIVIDENDS AND
CAPITAL GAINS DISTRIBUTIONS
It is the policy of the Fund to declare and distribute dividends
consisting of substantially all of the Fund's net investment income quarterly
and to declare and distribute dividends of net short-term capital gains, if
any, annually. Net capital gains (the excess of net long-term capital gains
over net short-term capital losses) will be declared and distributed annually.
The Fund intends to make such additional distributions as deemed to be
necessary to avoid the imposition of any federal excise tax. The Fund has
historically and intends to make distributions which represent return of
capital to its shareholders.
Any income, dividend or capital gains distribution paid shortly after a
purchase of shares will reduce the net asset value per share of the Fund by the
amount of the distribution and such distributions are subject to taxes.
Dividends and distributions will be automatically reinvested in
additional shares of the Fund, without charge, at net asset value, unless the
shareholder chooses one of the following options:
X Automatic reinvestment of dividends in shares of the Fund, and
payment of capital gains distributions in cash;
X Automatic reinvestment of capital gains distributions in
shares of the Fund, and payment of dividends in cash; or
X All dividends and capital gains distributions paid in cash.
Options for the receipt of dividends and distributions may be changed
at any time by writing to the Trust, c/o Rodney Square Management Corporation,
P.O. Box 8987, Wilmington, DE 19899-9752.
Checks which are sent to shareholders who have requested dividends
and/or capital gains distributions to be paid in cash and which are
subsequently returned by the United States Postal Service as not deliverable or
which remain uncashed for six months or more will be invested in the
shareholder's account at the then current net asset value. Further, subsequent
dividends and distributions will be automatically reinvested in the
shareholder's account.
TAX STATUS
The Fund intends to continue to qualify and elect to be treated each
taxable year as a "regulated investment company" under subchapter M of the
Code. Accordingly, the Fund will not be liable for federal income taxes to the
extent its net investment income and capital gains net income (excess of
capital gains over capital losses) are distributed to shareholders, provided
that at least 90% of its net investment income and net short-term capital gains
11
<PAGE> 33
for the taxable year are distributed. Dividends from net investment income and
distributions of net short-term capital gains are taxable to shareholders as
ordinary income for federal income tax purposes, whether received in cash or
invested in additional shares of the Fund. Distributions of net capital gains
are taxable to shareholders as long-term capital gains, whether paid in cash or
reinvested in additional shares, and regardless of the length of time the
investor has held his shares of the Fund.
A small portion of the dividends paid by the Fund to corporate
shareholders may qualify for the 70% dividends received deduction available to
corporations; dividends that are attributable to distributions made by a REIT
to the Fund will not qualify. Capital gains distributions paid by the Fund do
not qualify for this deduction. The Fund will notify shareholders each year of
the amount of the dividends qualifying for such deduction.
The Fund is subject to a nondeductible 4% excise tax calculated as a
percentage of certain undistributed amounts of taxable ordinary income and
capital gain net income. The Fund intends to make such additional
distributions of taxable ordinary income and capital gain net income as may be
necessary to avoid this excise tax.
The distributions received by the Fund from its investments may, for
federal income tax purposes, consist of ordinary income, long-term capital
gains, or a return of capital. The characterization of these distributions to
the Fund may, in turn, affect the tax treatment of the Fund's distributions to
its shareholders. Statements as to the tax status of each shareholder's
dividends and distributions are mailed annually by the Fund. Shareholders may
wish to consult their tax advisers about any state and local taxes that may
apply to payments received and, in particular, to determine whether dividends
paid by the Fund that represent interest derived from U.S. Government
securities are exempt from any applicable state or local income taxes.
Shareholders of the Fund should also be aware that, because the share
price of the Fund will fluctuate, redemptions of shares of the Fund will
generally result in the realization of capital gains or losses.
PURCHASE OF SHARES
Advisor Class shares are available only to investors purchasing
directly from the Distributor or through securities brokers who have entered
into sales agreements with the Distributor ("Authorized Brokers") and
registered investment advisers and other service organizations that have
entered into shareholder servicing agreements with the Fund ("Servicing
Organizations").
The Trust and the Distributor each reserve the right to reject any
purchase order and to suspend the offering of shares of the Fund. The minimum
initial investment is $5,000 unless waived by the Distributor based on a
determination by the Distributor that such waiver is in the best interest of
the Fund. Subsequent investments will be accepted in any amount. The Trust
reserves the right to vary the initial investment minimum and institute
minimums for additional investments at any time.
At the discretion of the Trust, investors may be permitted to purchase
shares by transferring securities to the Fund that: (i) meet the Fund's
investment objectives and policies; (ii) are acquired for investment and not
for resale; (iii) are liquid securities which are not restricted as to transfer
either by law or liquidity of market; and (iv) have a value which is readily
ascertainable (and not established only by evaluation procedures) as evidenced
by a listing on the American Stock Exchange, the NYSE or NASDAQ. Securities
transferred to the Fund will be valued in accordance with the same procedures
used to determine the Fund's net asset value.
Shares of the Fund may be purchased at the offering price, which is the
per share net asset value plus the applicable sales charge, next determined
after the order is received by the Distributor or Transfer Agent, as described
below. The Fund determines its net asset value per share as of the close of
regular trading hours on the NYSE (currently 4:00 p.m., New York time). See
"Determination of Net Asset Value." Each Authorized Broker and Servicing
Organization is responsible for transmitting the order promptly to the
Distributor or Transfer Agent to permit the investor to obtain the current
price.
Purchases may be made in one of the following ways:
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<PAGE> 34
PURCHASES BY MAIL
Initial investments in the Fund may be made through an Authorized
Broker or Service Organization by having the Authorized Broker or Service
Organization mail or deliver a completed Application (accompanying this
Prospectus), together with a check for the total purchase price payable to the
Fund, to the address set forth below. Initial investments may also be made
directly from the Distributor by completing the Application and mailing it,
together with a check made payable to the Fund, to:
ACG Capital Corporation
c/o Rodney Square Management Corporation
P.O. Box 8987
Wilmington, DE 19899-9752
Subsequent investments in an existing account in the Fund may be made
at any time and in any amount through an Authorized Broker or Service
Organization, or by sending a check payable to the Fund at the above address
using the deposit slip found at the bottom of each shareholder statement or
along with a letter stating the amount of the investment and the name of the
account for which the investment is to be made.
PURCHASES BY WIRE
To order shares for purchase by wire, the Transfer Agent must first be
notified by calling (800) 435-1405. Following notification to the Transfer
Agent, federal funds and registration instructions should be wired through the
Federal Reserve System to:
Wilmington Trust Company
ABA # 0311-0009-2
DDA # 2629-5416
Further credit to Heitman Real Estate Fund - Advisor Class Shares
Further credit (Shareholder's Name)
Fund Account Number
All investors making initial investments by wire must promptly complete
the Application accompanying this Prospectus and deliver it to the investor's
Authorized Broker or Service Organization or the Distributor. Redemptions will
not be processed until the Application has been received by the Trust or its
agent.
AUTOMATIC INVESTMENT PLAN
After the initial purchase, shareholders may purchase additional Fund
shares through an Automatic Investment Plan. Under the Plan, the Transfer
Agent will automatically debit a shareholder's bank checking account on a
monthly basis in an amount of $50 or more (subsequent to the $5,000 minimum
initial investment), as specified by the shareholder. The purchase of Fund
shares will be effected at their offering price at the close of regular trading
hours on the NYSE (currently 4:00 p.m., Eastern time) on or about the 20th day
of the month. For further details about this service, refer to the Application
or call (800) 435-1405. This service may not be available for Service
Organization clients who are provided similar services by those organizations.
INDIVIDUAL RETIREMENT ACCOUNTS
Shares of the Fund may be purchased for tax-deferred retirement plans
such as individual retirement accounts ("IRAs"). Application forms and
brochures describing investments for IRAs can be obtained from the Transfer
Agent by calling (800) 435-1405. WTC makes available its services as an IRA
custodian for each shareholder account that is established as an IRA. For
these services, WTC receives an annual fee of $10.00 per account, which fee is
paid directly to WTC by the IRA shareholder. If the fee is not paid by the
date due, shares of the Fund owned by the IRA will be redeemed automatically
for purposes of making the payment.
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<PAGE> 35
FEES AND CHARGES
Sales Charges. Except as described under "Special Programs," the
purchase price of an Advisor Class share of the Fund is the Fund's per share
net asset value after the purchase order is duly received, as defined herein,
plus a sales charge that varies depending on the dollar amount of the shares
purchased as set forth below. A major portion of this sales charge is
reallowed by the Distributor to the Authorized Broker responsible for the sale.
<TABLE>
<CAPTION>
DOLLAR AMOUNT SALES CHARGE PAID SALES CHARGE PAID DEALER
OF PURCHASE BY INVESTORS AS % BY INVESTOR AS % CONCESSION AS %
TRANSACTION OF PURCHASE PRICE OF NET ASSET VALUE OF PURCHASE PRICE
----------- ----------------- ------------------ -----------------
<S> <C> <C> <C>
Less than $100,000 4.75 4 .99 4.00
$100,000 or above but less than $250,000 4.00 4 .17 3.50
$250,000 or above but less than $500,000 3.00 3 .09 2.50
$500,000 or above but less than $1 million 2.00 2 .04 1.75
$1 million and above 1.00 1 .01 .75
</TABLE>
The reduced charges described above are applicable to purchases of
$100,000 or more made at any one time by groups of "related investors" such as
immediate family members. See the Statement of Additional Information for more
complete information concerning related investors.
At the discretion of ACG, the entire sales charge may at times be
reallowed to dealers. During periods when 90% or more of the sales charge is
reallowed, such dealers may be deemed to be underwriters as that term is
defined in the Securities Act of 1933. ACG or its affiliates, at their
expense, may also provide additional compensation to dealers in connection with
sales of Advisor Class shares of the Fund. Compensation may include financial
assistance to dealers in connection with conferences, sales or training
programs for their employees, seminars for the public, advertising, sales
campaigns and/or shareholder services and programs regarding the Fund and other
dealer-sponsored programs or events. In some instances, this compensation may
be made available only to certain dealers whose representatives have sold or
are expected to sell significant amounts of such Advisor Class shares.
Compensation may include payment for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
and members of their families to locations within or outside of the United
States. for meetings or seminars of a business nature. Details relating to any
special reallowance or compensation arrangements between the Distributor and
any broker or dealer are set forth in the Statement of Additional Information.
Dealers may not use sales of the Fund's shares to qualify for this compensation
to the extent such may be prohibited by the laws of any state or any
self-regulatory agency, such as the National Association of Securities Dealers,
Inc. (the "NASD"). None of the aforementioned additional compensation is paid
for by the Fund or its shareholders.
Letter of Intent. Investors may purchase shares of the Fund at reduced
sales charges by executing a Letter of Intent to purchase no less than an
aggregate of $100,000 of shares of the Fund within a 13-month period. The
investor will be charged the sales charge applicable to each purchase made
pursuant to a Letter of Intent as if the total dollar amount set forth in the
Letter of Intent were being bought in a single transaction. Purchases made
within a 90-day period prior to the execution of a Letter of Intent may be
included therein; in such case the date of the earliest of such purchases marks
the commencement of the 13-month period.
An investor may include toward completion of a Letter of Intent the
current value of all of the investor's shares of the Fund held of record as of
the date of the Letter of Intent, plus the current value as of such date of all
of such shares held by any "related person" as eligible to join with the
investor in a single purchase.
A Letter of Intent does not bind the investor to purchase the specified
amount. Shares equivalent to 2% of the specified amount will, however, be
taken from the initial purchase (or, if necessary, subsequent purchases) and
held in escrow in the investor's account as collateral against the higher sales
charge which would apply if the total purchase is not completed within the
allotted time. The escrowed shares will be released when the aggregate
purchase specified under the Letter of Intent is completed, or if it is not
completed, when the balance of the higher
14
<PAGE> 36
sales charge is, upon notice, remitted by the investor. All dividends and
capital gains distributions with respect to the escrowed shares will be
credited to the investor's account.
SPECIAL PROGRAMS
Purchases Through Service Organizations, Authorized Brokers and by
Certain Other Investors. Advisor Class shares also may be purchased without a
sales charge by: registered investment advisers exercising discretionary
investment authority with respect to the purchase of Fund shares; accounts of
Service Organizations that charge account management fees; registered
representatives and employees (and their spouses and minor children) of any
Authorized Broker or Service Organization; trust departments of financial
institutions; other investment companies in connection with the sale to the
Fund of cash and securities owned by such other investment companies; separate
accounts established and maintained by an insurance company that are exempt
from registration under Section 3(c)(11) of the 1940 Act; members of
organizations that make recommendations to or permit group solicitations in
connection with the purchase of shares of the Fund; and "eligible employee
benefit plans" of employers who have at least 2,000 U.S. employees to whom
such a plan is made available and, regardless of the number of employees, if
such plan is established and maintained by any Authorized Broker or Service
Organization. An "eligible employee benefit plan" means any plan or
arrangement, whether or not tax qualified, which provides for the purchase of
Fund shares. Sales of shares to such plans must be made in connection with a
payroll deduction system of plan funding or other system acceptable to the
Distributor.
Purchases may also be made at net asset value, without a sales charge,
provided that such purchases are placed through a Service Organization and such
purchases are made by the following:
- 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;
- 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 Service Organization;
and
- retirement and 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."
Purchases by Non-U.S. Investors Residing in Japan Only. Shares of the
Advisor Class are being made available to selected non-U.S. investors residing
in Japan through The Nomura Securities Co., Ltd. ("Nomura"), acting as a
sub-distributor for the Distributor. All purchases by such investors,
regardless of the amount, are subject to a sales charge of 4.00% of the net
asset value of the shares purchased (approximately 3.85% of the purchase
price), all of which will be reallowed by the Distributor to Nomura. In
addition, the Distributor has agreed to pay Nomura .25 of 1% of the net asset
value of the Fund represented by Advisor Class shares sold through Nomura for
distribution services provided to the Fund, and the Fund has agreed to pay
Nomura Securities International, Inc. ("NSI") .25 of 1% of the net asset value
of the shares of the Advisor Class sold through Nomura for shareholder services
provided by NSI or its delegate.
Advisor Class shares sold in Japan will be sold only to residents of
Japan in one or more private placements under Japanese law. In accordance with
Japanese securities laws, such shares may not be transferred without the
consent of a majority of the Trustees, which consent will not be granted if, as
a result of such transfer, there would be fifty or more shareholders of the
Advisor Class (including the underlying beneficial owners) who are residents of
Japan. These transfer restrictions will not affect a shareholder's redemption
rights as described in the Prospectus.
Dividends and distributions on shares of the Fund held by non-U.S.
investors residing in Japan will be subject to U.S. tax withholding
requirements. All distributions, other than distributions of capital gains,
will be subject to a U.S. withholding tax at the rate of 15% under the
applicable tax treaty between the United States and
15
<PAGE> 37
Japan. Japanese residents may be able to obtain a refund of such tax payments
to the extent such distributions are ultimately determined to constitute a
return of capital for tax purposes. Japanese residents purchasing shares of
the Advisor Class should also consult their tax advisers about any taxes under
the laws of Japan or other applicable foreign jurisdictions that may apply to
payments received from the Fund.
DISTRIBUTION PLAN
The Fund has adopted a Plan of Distribution Pursuant to Rule 12b-1
(the "Distribution Plan") in accordance with the regulations under the 1940
Act. Under the provisions of the Distribution Plan, the Fund makes payments to
the Distributor at an annual rate of 0.25% of the daily net assets of Advisor
Class shares of the Fund as a distribution fee. The distribution fees are used
by the Distributor to finance activities primarily intended to result in the
sale of shares of the Fund. Payments to the Distributor under the Plan are not
directly tied to expenses and payments under the Plan may be more or less than
actual expenses incurred by the Distributor. The excess of fees received over
expenditures may constitute a "profit" to the Distributor.
An NASD rule limits the annual expenditures which the Fund may incur
under the Distribution Plan to 1%, of which 0.75% may be used to pay
distribution expenses and 0.25% may be used to pay shareholder services fees.
The NASD rule also limits the aggregate amount which the Fund may pay for such
distribution costs and initial sales charges to 6.25% of gross share sales of a
class since the inception of any asset-based sales charge plus interest at the
prime rate plus 1% on unpaid amounts thereof. Such limitation does not apply to
shareholder service fees.
MARKETING SERVICES AGREEMENT
The Investment Manager and ACG have entered into a marketing services
agreement with respect to the sale of Advisor Class shares and certain
Institutional Class shares. Under the marketing services agreement, the
Investment Manager will pay ACG additional compensation in the amount of .15 of
1% of the net asset value of the Fund represented by the Advisor Class shares
with the exception of Advisor Class shares sold through Nomura. The Investment
Manager has also agreed to pay ACG .10% of 1% of the net asset value of Advisor
Class shares held in omnibus shareholder accounts maintained by certain Service
Organizations. In addition, the Investment Manager has agreed to make certain
continuing payments to ACG in the event that the marketing services agreement is
terminated (as long as ACG remains registered as a broker/dealer) or if the fees
payable to ACG as distributor of the Advisor Class shares are reduced. However,
if the Investment Manager terminates the agreement for "cause" or if ACG
terminates its distribution agreement with the Trust, ACG is not entitled to
such continuing payments. Finally, the agreement provides that ACG will not
serve as a distributor of any other open-end registered investment company that
invests primarily in shares of REITs (subject to a limited exception) and that
the Investment Manager will not offer, sponsor, advise or otherwise promote any
open-end registered investment company for which ACG is not the distributor,
subject to certain exceptions.
SHAREHOLDER SERVICING AGREEMENT
The Fund has also adopted a Shareholder Servicing Plan. Pursuant to
the Shareholder Servicing Plan, the Trust contracts with Service Organizations
to provide a variety of shareholder services, such as maintaining shareholder
accounts and records, answering inquiries regarding the Fund, and processing
purchase and redemption orders. The Fund pays fees to Service Organizations
(which vary depending upon the services provided) in amounts up to an annual
rate of 0.25% of the daily net asset value of Advisor Class shares owned by
shareholders with whom the Service Organization has a servicing relationship.
Some Service Organizations may impose additional or different conditions on
their clients such as requiring their clients to invest more than the minimum
initial or subsequent investments specified by the Trust or charging a direct
fee for servicing. If imposed, these fees would be in addition to any amounts
which might be paid to the Service Organization by the Trust. Shareholders
using Service Organizations are urged to consult them regarding any such fees
or conditions. The Trust has also agreed to pay certain Service Organizations
that maintain omnibus shareholder accounts an additional amount equal to the
savings realized by the Fund from lower transfer agency costs attributable to
the omnibus account arrangements.
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<PAGE> 38
REDEMPTIONS
Shareholders may redeem their shares of the Fund without charge on any
day that the Fund calculates its per share net asset value (see "Determination
of Net Asset Value"). Redemptions will be effective at the net asset value per
share next determined after the receipt by the Transfer Agent of a redemption
request meeting the requirements described below. Except under certain
emergency conditions, your redemption payment will be sent to you within seven
(7) days after receipt of your telephone or written redemption request, in
proper form, by the Transfer Agent. If your redemption request is made with
respect to shares purchased by check within ten (10) days of the purchase date,
the redemption payment will be held until the check has been collected (which
usually takes up to ten (10) days), although the shares redeemed will be priced
for redemption upon receipt of your redemption request in proper form. You can
avoid the inconvenience of this delay by purchasing shares with a certified,
treasurer's or cashier's check, or with a federal funds or bank wire.
Except as noted below, redemption requests received in proper form by
the Transfer Agent prior to the close of regular trading hours on the NYSE
(currently 4:00 p.m., New York time) on any business day that the Fund
calculates its per share net asset value are effective that day and the shares
redeemed earn dividends declared through the day of redemption.
Redemption requests received after the close of the NYSE are effective
as of the time the net asset value per share is next determined. NO REDEMPTION
WILL BE PROCESSED UNTIL THE TRANSFER AGENT HAS RECEIVED A COMPLETED APPLICATION
WITH RESPECT TO THE ACCOUNT.
The Fund will satisfy redemption requests in cash to the fullest
extent feasible, so long as such payments would not, in the opinion of the
Investment Manager or the Trustees, result in the necessity of the Fund selling
assets under disadvantageous conditions and to the detriment of the remaining
shareholders of the Fund. The Fund may distribute Fund assets in-kind in
satisfaction or partial satisfaction of the amount payable on redemption of
shares in conformity with applicable Securities and Exchange Commission ("SEC")
rules and valued in the same way as they would be valued for purposes of
computing net asset value of the Fund. In the event that an in-kind
distribution is made, a shareholder may incur additional expenses, such as the
payment of brokerage commissions, on the sale or other disposition of the
securities received from the Fund. In-kind payments need not constitute a
cross-section of the Fund's portfolio. The Fund has elected, however, to be
governed by Rule 18f-1 under the 1940 Act, as a result of which the Fund is
obligated to redeem shares solely in cash if the redemption requests are made
by one shareholder account up to the lesser of $250,000 or 1% of the net assets
of the applicable Portfolio during any 90-day period. This election is
irrevocable unless the SEC permits its withdrawal.
The Fund reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption, whose value exceeds
$250,000, by making payment in whole or in part with readily marketable
securities chosen by the Fund and valued in the same way as they would be
valued for purposes of computing the net asset value of the applicable
Portfolio. If payment is made in securities, a shareholder may incur
transaction expenses in converting these securities into cash.
Redemption proceeds in cash or in-kind will be remitted to a redeeming
shareholder by check payable, or securities transferred, only to the redeeming
shareholder or such shareholder's designated representative and only to the
shareholder's address, or that of the shareholder's designated representative,
on the books of the Fund. A shareholder may request that redemption proceeds
be wired directly to the shareholder's account at any commercial bank in the
United States. The redemption proceeds must be paid to the same bank and
account as designated on the application or in written instructions
subsequently received by the Transfer Agent.
Shares may be redeemed in one of the following ways:
REDEMPTION BY MAIL
Shares may be redeemed by submitting a written request for redemption
to the Transfer Agent at P.O. Box
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<PAGE> 39
8987, Wilmington, DE 19899-9752. A redemption request sent by overnight mail
should be sent to the Transfer Agent, 1105 North Market Street, Wilmington, DE
19801.
A written redemption request to the Transfer Agent must (i) identify
the shareholder's account name, (ii) state the number of shares to be redeemed,
and (iii) be signed by each registered owner exactly as the shares are
registered. A redemption request for any amount, if the proceeds are to be
sent elsewhere than the address of record, must be accompanied by signature
guarantee(s). The guarantor of a signature must be an eligible institution
acceptable to the Fund's Transfer Agent, such as a bank, broker, dealer,
municipal securities dealer, government securities dealer, credit union,
national securities exchange, registered securities association, clearing
agency, or savings association. The Trust may require additional supporting
documents for redemptions made by corporations, executors, administrators,
trustees and guardians. A redemption request will not be deemed to be properly
received until the Transfer Agent receives all required documents in proper
form. Questions with respect to the proper form for redemption requests should
be directed to the Transfer Agent at (800) 435-1405.
REDEMPTION BY TELEPHONE
Shareholders who have so indicated on the Application, or have
subsequently arranged in writing to do so, may redeem shares by instructing the
Transfer Agent by telephone. In order to arrange for redemption by wire or
telephone after an account has been opened or to change the bank or account
designated to receive redemption proceeds, a written request must be sent to
the Transfer Agent at the address listed above. Such requests must be signed
by the shareholder, with signatures guaranteed (see "Redemption by Mail" above
for details regarding signature guarantees). Further documentation may be
requested from corporations, executors, administrators, trustees or guardians.
The Trust reserves the right to refuse a wire or telephone redemption
if it is believed advisable to do so. Procedures for redeeming Fund shares by
wire or telephone may be modified or terminated at any time by the Trust.
REDEMPTIONS THROUGH AUTHORIZED BROKERS AND SERVICE ORGANIZATIONS
For the convenience of shareholders, the Fund has authorized the
Distributor, as its agent, to accept orders from Authorized Brokers and Service
Organizations by wire or telephone for the repurchase of shares by the
Distributor from the Authorized Broker or Service Organization. The Fund may
revoke or suspend this authorization at any time. The repurchase price is the
net asset value next determined following the time at which the shares are
offered for repurchase by the Authorized Broker or Service Organization to the
Distributor. The Authorized Broker or Service Organization is responsible for
promptly transmitting a shareholder's order to the Distributor. Payment of the
repurchase proceeds is made to the Authorized Broker or Service Organization
who placed the order. Neither the Fund nor the Distributor imposes any charge
upon such a repurchase. However, the Authorized Broker or Service Organization
may impose a charge as agent for a shareholder for the repurchase of shares.
The Trust reserves the right to change, modify or terminate the
services described above at any time.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders who own shares with a value of $10,000 or more may
participate in the Systematic Withdrawal Plan. Under the Plan, shareholders
may automatically redeem a portion of their Fund shares monthly, bimonthly,
quarterly, semiannually or annually. The minimum withdrawal available is $100.
The redemption of Fund shares will be effected at their net asset value at the
close of the NYSE on or about the 25th day of the month at the frequency
selected by the shareholder. If you expect to purchase additional Fund shares,
it may not be to your advantage to participate in the Systematic Withdrawal
Plan because contemporary purchases and redemption may result in adverse tax
consequences and may cause you to pay a sales load on such purchases. This
service may also not be available for Service Organization clients who are
provided similar services by those organizations. For further details above
this service, see the Application or call the Transfer Agent at (800) 435-1405.
18
<PAGE> 40
PERFORMANCE INFORMATION
From time to time, in advertisements or in reports to shareholders or
prospective investors, the Fund may provide yield and average annual total
return information, and the Fund may compare its performance, either in terms
of its total return or its yield, total return or ranking, to that of other
mutual funds with similar investment objectives and to other relevant indices.
The Fund may also include its rating as published by mutual fund statistical
services or major financial publications. For example, the Fund may compare
its performance to rankings prepared by Lipper Analytical Services, Inc., a
widely recognized independent service which monitors the performance of mutual
funds, or to other indices as appropriately determined. Total return and yield
information may be useful in reviewing the Fund's performance and for providing
a basis for comparison with other investment alternatives. However, since the
performance of the Fund changes in response to fluctuations in market
conditions and Fund expenses, no performance quotation should be considered a
representation as to the Fund's performance for any future period. The Fund's
Annual Report to Shareholders will contain detailed information with respect to
the performance of the Fund. The Annual Report will be made available free of
charge to prospective investors upon request.
The yield of the Fund refers to the income generated by an investment
in the Fund over a specified one month period identified in the advertisement
and is computed by dividing the net investment income per share earned for a
specified one month period by the net asset value at the end of the month and
expressing the result as an annualized percentage. In computing net investment
income all recurring charges are recognized.
The Fund's average annual total return generally measures the average
annual percentage growth in the dollar value of an investor's account over a
specified period, based on a hypothetical $1,000 initial investment in the Fund
and assuming the reinvestment of all dividends and distributions. The Fund may
also utilize a total return computed in the same manner but for differing
periods and without annualizing the total return. The Fund may show total
return broken down into its components of investment gain (or loss) and total
income (or distribution).
ADDITIONAL INFORMATION
ORGANIZATION, CAPITALIZATION AND VOTING
Heitman Securities Trust was organized as a Massachusetts business
trust under Master Trust Agreement dated September 15, 1988, as amended. The
Trust is registered with the SEC as an open-end management investment company.
Under Massachusetts law and pursuant to the Master Trust Agreement,
the Trust is authorized to issue an unlimited number of shares of beneficial
interest in separate series, with shares of each series representing interests
in a separate portfolio of assets and operating as a separate distinct fund.
In addition, the Trust is authorized to issue two classes of shares of
beneficial interest in the Fund, designated as the Heitman/PRA Institutional
Class and the Advisor Class. Each fund share represents an equal proportionate
interest in that fund, has a par value of $.001 per share, and is entitled to
such dividends and distributions earned on the assets belonging to such fund as
may be declared by the Board of Trustees. Shares of each fund are fully paid
and non-assessable by the Trust and have no preemptive or conversion rights.
Currently, the Heitman Real Estate Fund is the Trust's sole fund. As of April
1, 1996, Resources Trust Company owned by virtue of shared or sole voting or
investment power on behalf of its underlying customer accounts 65.29% of the
Advisor Class shares of the Fund, which represents 8.99% of all outstanding
shares of the Fund.
The Trust is not required to hold annual shareholder meetings.
However, special meetings may be called for purposes such as electing or
removing Trustees, changing fundamental investment policies or approving
certain contracts. Shareholders holding an aggregate of at least 10% of the
outstanding shares of the Fund may request a meeting of shareholders at any
time for the purpose of voting to remove one or more of the Trustees, and the
Trust
19
<PAGE> 41
will assist shareholders in communicating with other shareholders in connection
with such a meeting. At any meeting of shareholders, each share shall entitle
the holder thereof to one vote.
REPORTS TO SHAREHOLDERS
In the interest of economy and convenience, the Fund does not issue
share certificates. The Trust sends annual statements to each shareholder
indicating the status of the shareholder's account. In addition, shareholders
will receive annual and semi-annual financial statements of the Trust.
Quarterly financial statements of the Trust are available upon request. The
Trust reserves the right to eliminate duplicate mailings of such statements and
other materials to shareholders who reside at the same address.
CUSTODIAN, TRANSFER AGENT, DISTRIBUTOR AND INDEPENDENT ACCOUNTANTS
Wilmington Trust Company, Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-0001 (the "Custodian") serves as Custodian
of the Fund's assets. The Custodian acts as the depository for the Fund,
safekeeps its portfolio securities, collects all income and other payments with
respect to portfolio securities, disburses monies at the Fund's request and
maintains records in connection with its duties.
Rodney Square Management Corporation, P.O. Box 8987, Wilmington,
Delaware 19899-9752 serves as the Fund's Transfer Agent. As Transfer Agent, it
maintains the records of each shareholder's account, answers shareholder
inquiries concerning accounts, processes purchases and redemptions of the
Fund's shares, acts as dividend and distribution disbursing agent and performs
all shareholder service functions. All shareholder inquiries with respect to
these services should be directed to Rodney Square at (800) 435-1405.
ACG Capital Corporation, 1661 Tice Valley Boulevard #200, Walnut
Creek, California 94595 serves as the Fund's Distributor for the Advisor Class
with responsibility for distributing the Fund's shares. Rodney Square
Distributors, Inc., Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890-0001 acts as agent for ACG solely for the purpose of accepting
orders on behalf of the Fund and forwarding those orders to the Transfer Agent
for processing. Applicable banking laws prohibit deposit-taking institutions
from underwriting or distributing securities. WTC and its affiliates believe
and have been advised by their counsel that they may perform the services
contemplated by their respective agreements with the Trust without violation
of applicable banking laws or regulations. If WTC or its affiliates were
prohibited from performing these services, it is expected that the Trust's
Board of Trustees would consider entering into agreements with other entities.
Price Waterhouse LLP currently serves as the Fund's independent
accountants with responsibility for auditing the Fund's annual financial
statements. Arthur Andersen LLP served as the Fund's independent accountants
and audited the Fund's financial statements for all periods prior to January 1,
1996.
ADDITIONAL INFORMATION
Additional information regarding the Fund and the Trust may be
obtained from the Distributor or the Trust at the addresses and telephone
numbers listed on the cover of this Prospectus.
20
<PAGE> 42
INVESTMENT ADVISOR
Heitman/PRA Securities Advisors, Inc.
180 North LaSalle Street, Suite 3600
Chicago, IL 60601
OFFICERS
William L. Ramseyer, President
Dean A. Sotter, Vice President and Treasurer
Nancy B. Lynn, Secretary
Timothy J. Pire, Assistant Secretary
Laurie V. Brooks, Assistant Secretary
John J. Kelley, Assistant Treasurer
BOARD OF TRUSTEES
Robert W. Beeney
Donald L. Foote
John F. Goydas
William L. Ramseyer
George C. Weir
Maurice Wiener
DISTRIBUTOR
ACG Capital Corporation
1661 Tice Valley Boulevard #200
Walnut Creek, CA 94595
(800) 888-REIT
CUSTODIAN
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
TRANSFER AGENT AND ADMINISTRATOR
Rodney Square Management Corporation
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
TRUST HEADQUARTERS
180 North LaSalle Street, Suite 3600
Chicago, IL 60601
(800) 435-1405
[HEITMAN REAL ESTATE FUND LOGO]
HEITMAN SECURITIES TRUST
180 NORTH LASALLE STREET
SUITE 3600
CHICAGO, ILLINOIS 60601
ADVISOR CLASS
PROSPECTUS
MAY 1, 1996
21
<PAGE> 43
HEITMAN REAL ESTATE FUND
STATEMENT OF ADDITIONAL INFORMATION
HEITMAN SECURITIES TRUST
180 North LaSalle Street, Suite 3600
Chicago, Illinois 60601
Advisor Class Shares Institutional Class Shares
(800) 888-REIT (800) 435-1405
May 1, 1996
This Statement of Additional Information expands upon and supplements the
information contained in the current Heitman/PRA Institutional Class Prospectus
of Heitman Securities Trust (the "Trust"), dated May 1, 1996, pursuant to which
the Trust offers Heitman/PRA Institutional Class shares of its sole investment
portfolio, the Heitman Real Estate Fund (the "Fund"), and the Advisor Class
Prospectus of the Trust dated May 1, 1996, pursuant to which the Trust offers
Advisor Class shares of the Fund. This Statement of Additional Information
should be read in connection with the prospectus for the class of shares
offered thereby (each such prospectus hereinafter referred to as the
"Prospectus"). This Statement of Additional Information, although not in itself
a Prospectus, is incorporated by reference into the Prospectus in its entirety.
A copy of the current Prospectus may be obtained, without charge, upon request
to the Trust at the address or telephone number set forth above.
<PAGE> 44
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ADDITIONAL INFORMATION REGARDING INVESTMENT POLICIES AND LIMITATIONS. 1
EXECUTION OF PORTFOLIO TRANSACTIONS.................................. 3
MANAGEMENT OF THE TRUST.............................................. 4
INVESTMENT MANAGER................................................... 7
PURCHASE OF SHARES................................................... 9
ADMINISTRATIVE, ACCOUNTING, DISTRIBUTION AND SHAREHOLDER
SERVICES............................................................. 9
DESCRIPTION OF THE TRUST............................................. 12
REDEMPTION OF SHARES................................................. 15
VALUATION OF SHARES.................................................. 16
ADVERTISING AND CALCULATION OF PERFORMANCE DATA...................... 16
GENERAL INFORMATION.................................................. 18
FINANCIAL STATEMENTS................................................. 19
</TABLE>
i
<PAGE> 45
HEITMAN REAL ESTATE FUND
ADDITIONAL INFORMATION REGARDING
INVESTMENT POLICIES AND LIMITATIONS
The following policies and limitations supplement those set forth in the
Prospectus. The Fund may not:
1. As to 75% of the total assets of the Fund, purchase securities for the
Fund of any issuer, if immediately thereafter (i) more than 5% of the
Fund's total assets (taken at market value) would be invested in the
securities of such issuer, or (ii) more than 10% of the outstanding voting
securities of any class of such issuer would be held by the Fund, provided
that this limitation does not apply to U.S. Government securities.
2. Make investments in real estate (including real estate limited
partnership interests, but excluding readily marketable interest in real
estate investment trusts ("REITs") or readily marketable securities of
companies which invest in real estate) or commodities or commodity
contracts, although the Fund may purchase securities of issuers which deal
in real estate and may purchase securities which are secured by interests
in real estate, and the Fund may invest in futures contracts and related
options.
3. Act as a securities underwriter.
4. Make loans, except that the Fund may (i) purchase bonds, debentures and
other publicly-distributed securities of a like nature, (ii) make loans in
the form of call loans or loans maturing in not more than one year which
are secured by marketable collateral and are in amounts and on terms
similar to those currently in effect in the case of loans made by national
banks, (iii) enter into repurchase agreements with respect to portfolio
securities, and (iv) lend the portfolio securities of the Fund.
5. Borrow money, except that (i) the Fund may borrow money for temporary
administrative purposes provided that the aggregate of all such borrowings
does not exceed 33% of the value of the Fund's total assets and is not for
more than 60 days, and (ii) the Fund may enter into interest-rate futures
contracts. The Fund may not borrow for the purpose of leveraging its
investment portfolio. The Fund may not purchase additional securities
while outstanding borrowings exceed 5% of the value of its assets.
6. Lend the portfolio securities of the Fund in an amount in excess of 33%
of the total assets of the Fund, taken at market value. Any loans of
portfolio securities will be made according to guidelines established by
the Securities and Exchange Commission and the Trustees, including the
borrower's maintaining collateral equal at all times to the value of the
securities loaned.
7. Purchase "illiquid" securities for the Fund, including repurchase
agreements maturing in more than seven days, options traded
"over-the-counter," securities lacking readily available market quotations
and securities which cannot be sold without registration or the filing of
a notification under federal or state securities laws, if, as a result,
more than 10% of the Fund's net assets would then be invested in such
securities.
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<PAGE> 46
8. Purchase securities on margin, except short-term credits as are necessary
for the purchase and sale of securities. For purposes of this
restriction, the deposit or payment of initial or variation margin in
connection with futures contracts or related options will not be deemed to
be a purchase of securities on margin by the Fund.
9. Purchase securities of any other investment company, except in connection
with a merger, consolidation, acquisition or reorganization, and except
that the Fund may purchase securities of money market mutual funds to the
extent permitted by applicable law. This restriction shall not prohibit
the Fund from investing in securities issued by REITs.
10. Purchase securities for the Fund of companies which together with
predecessors have a record of less than three years' continuous operation,
and equity securities of issuers which are not readily marketable, if, as
a result, more than 5% of the Fund's net assets would then be invested in
such securities, except that this restriction shall not apply to the
purchase of securities of REITs.
11. Invest in puts, calls, straddles, spreads and any combination thereof,
except that (i) the Fund may write covered put and call options on
securities and write and purchase put and call options on stock indexes,
and (ii) the Fund may write covered put and call options on U.S.
Government securities.
12. Invest in oil, gas or other mineral exploration or development programs,
or leases, provided, however, this shall not prohibit the Fund from
purchasing publicly traded securities of companies engaging in whole or in
part in such activities.
13. Purchase securities from or sell securities to any of its officers or
Trustees, except with respect to its own shares and as is permissible
under applicable statutes, rules and regulations.
14. Purchase securities of companies for the purpose of exercising control.
15. Invest in warrants except that the Fund may invest in warrants valued at
the lower of cost or market, not exceeding 5% of the value of its net
assets; included within that amount, but not to exceed 2% of the value of
its net assets, warrants not listed on the New York or American Stock
Exchange, provided that this restriction does not apply to warrants
attached to or acquired as units to securities.
16. Make short sales whereby the dollar amount of short sales at any one time
shall not exceed 25% of the net assets of the Fund, and the value of
securities of any one issuer in which the Fund is short may not exceed the
lesser of 2% of the value of the Fund's net assets or 2% of the securities
of any class of any issuer, except that the Fund may make short sales
against the box.
If a percentage restriction is adhered to at the time of an investment, a
later increase or decrease in such percentage resulting from a change in the
values of assets will not constitute a violation of such restriction.
The investment restrictions numbered 1 through 6 above have been adopted
by the Trust as fundamental policies of the Fund. Under the Investment Company
Act of 1940, as amended (the "1940 Act"), a fundamental policy may not be
changed without the vote of a majority of the outstanding voting securities of
the Fund, as defined in the 1940 Act. "Majority" means the lesser of (1) 67%
or more of the shares present at a Trust meeting, if the holders of more than
50% of the outstanding shares of the Fund are present or represented by proxy,
or (2) more than 50% of the outstanding shares of the Trust.
2
<PAGE> 47
Investment restrictions 7 through 16 may be changed by vote of a majority of
the Trust's Board of Trustees at any time.
While the Trust has the power to pledge its assets to secure borrowings,
the Trust has no intention of pledging the assets of the Fund taken at market
value in any amount in excess of 33% of the Fund's total assets taken at market
value. The deposit of assets in escrow in connection with the writing of
covered put or call options and the purchase of securities on a when-issued or
delayed-delivery basis, and collateral arrangements with respect to the
purchase and sale of stock options and stock index options and initial and
variation margin for futures contracts, are not deemed to be pledges of assets
of the Fund. Also, although the Trust has the power to make call loans, it has
no intention to do so.
Government securities in which the Fund may invest include (a) direct
obligations of the U.S. Treasury, including bills, bonds and notes, and (b)
obligations issued or guaranteed as to principal and interest by U.S.
Government agencies or instrumentalities and supported by any of (i) the full
faith and credit of the U.S. Treasury (e.g., Government National Mortgage
Association participation certificates); (ii) the right of the issuer to borrow
a limited amount from the U.S. Treasury (e.g., securities of Federal Farm
Credit Banks); (iii) the discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality (e.g., securities
of the Federal National Mortgage Association); or (iv) the credit of the agency
or instrumentality (e.g., securities of the Student Loan Marketing
Association).
Although the Fund has the ability to invest in futures contracts and
options, the Fund has no current intention of doing so without first notifying
its shareholders and supplying further information in the Prospectus.
In order to permit the sale of the Fund's shares in certain states, the
Trust may make commitments more restrictive than the investment restrictions
described above. Should the Trust determine that any such commitment is no
longer in the best interests of the Trust and its shareholders, it will revoke
the commitment by terminating sales of its shares in the state involved.
Although not an investment policy, it is anticipated that under normal
circumstances approximately 60% to 90% of the Fund's assets will be invested in
REITs which, according to the National Association of Real Estate Investment
Trusts, have grown over five-fold since 1991.
EXECUTION OF PORTFOLIO TRANSACTIONS
The Fund's portfolio securities transactions are placed by Heitman/PRA
Securities Advisors, Inc. ("Heitman/PRA Advisors" or the "Investment Manager"),
the Fund's investment adviser and manager. The objective of the Fund is to
obtain the best available prices in its portfolio transactions, taking into
account the costs, promptness of executions and other qualitative
considerations. There is no agreement or commitment to place orders with any
broker-dealer. Heitman/PRA Advisors evaluates a wide range of criteria in
seeking the most favorable price and market for the execution of transactions,
including the broker's commission rate, execution capability, positioning and
distribution capabilities, back-office efficiency, ability to handle difficult
trades, financial stability, and prior performance in serving Heitman/PRA
Advisors and its clients. In transactions on equity securities and U.S.
Government securities executed in the over-the-counter market, purchases and
sales are transacted directly with principal market-makers except in those
circumstances where, in the opinion of Heitman/PRA Advisors, better prices and
executions are available elsewhere.
3
<PAGE> 48
Subject to the requirement of seeking the best available prices and
execution, Heitman/PRA Advisors may, in circumstances in which two or more
broker-dealers are in a position to offer comparable prices and execution, give
preference to broker-dealers which have provided research, statistical, and
other related services to Heitman/PRA Advisors for the benefit of the Fund
and/or other clients served by Heitman/PRA Advisors if in the judgment of
Heitman/PRA Advisors the Fund will obtain prices and execution comparable with
those available from other qualified firms. The Fund will not pay commissions
to brokers in recognition of their having provided research, statistical or
other related services in excess of commissions other qualified brokers would
have charged for handling comparable transactions.
Heitman/PRA Advisors may from time to time provide investment management
services to other institutional clients, including corporate pension plans,
profit-sharing and other employee benefit trusts, individuals and other
investment pools. There may be occasions on which other investment advisory
clients advised by Heitman/PRA Advisors may also invest in the same securities
as the Fund. When these clients buy or sell the same securities at
substantially the same time, Heitman/PRA Advisors may average the transactions
as to price and allocate the amount of available investments in a manner which
it believes to be equitable to each client, including the Fund. In some
instances, this investment procedure may adversely affect the price paid or
received by the Fund or the size of the position obtainable for the Fund. On
the other hand, to the extent permitted by law, Heitman/PRA Advisors may
aggregate the securities to be sold or purchased for the Fund with those to be
sold or purchased for other clients managed by it in order to obtain lower
brokerage commissions, if any.
During the fiscal year ended December 31, 1995, the three-month period
ended December 31, 1994 and the fiscal years ended September 30, 1994 and 1993
the Fund paid $334,132, $98,851, $510,528 and $330,727, respectively, in
brokerage commissions.
MANAGEMENT OF THE TRUST
The Trustees and executive officers of the Trust, their principal
occupations during the last five years and their current addresses are set
forth below. Those Trustees who are "interested persons" of the Trust (as
defined in the 1940 Act) by virtue of their affiliations with the Fund or
Heitman/PRA Advisors are indicated by an asterisk (*).
*WILLIAM L. RAMSEYER, (BORN 1941)
President and Chairman of the Board of Trustees. Mr. Ramseyer serves as
Chairman of the Board, Chief Executive Officer and Chairman of the Investment
Committee of Heitman/PRA Advisors and as a member of the Executive Committee of
Heitman Financial Ltd. Mr. Ramseyer served as a member of the Executive
Committee of Heitman/JMB Advisory Corporation and Executive Vice President of
JMB Institutional Realty Corp. from September, 1988 to December, 1995.
From June 1982 to August 1988 he was President of Pension Realty Advisors,
Inc., managing Pension Realty Advisors' practice, which focused on assisting
tax-exempt clients with development of equity real estate investment objectives
and policies, selection of managers and advisors, and review of portfolio
performance. The firm's client base was comprised substantial pension plans,
endowments and other tax-exempt institutions. Mr. Ramseyer co-founded the
predecessor to Heitman/PRA Advisors in 1987.
Mr. Ramseyer is a member of the American Society of Real Estate
Counselors, where he serves on the Board of Governors, the National Association
of Real Estate Investment Trusts, and the National Association of Real Estate
Investment Managers. Mr. Ramseyer is past chairman of the Pension Real
Estate Association. Address: Heitman/PRA Securities Advisors, Inc.,
180 North LaSalle Street, Suite
4
<PAGE> 49
3850, Chicago, IL 60601.
ROBERT W. BEENEY, (BORN 1940)
Trustee of the Trust. Mr. Beeney is the Proprietor of Robert Beeney and
Company of San Francisco, Real Estate Consultants and Advisors. He has been
continuously engaged in real estate appraisal, consultancy and brokerage since
1959 and is a Fellow of the Royal Institution of Chartered Surveyors (Harriott
Prize 1963) and a member of the Urban Land Institute, San Francisco Board of
Realtors and the International Real Estate Federation. Mr. Beeney has been a
frequent speaker to real estate industry groups and associations including the
National Association of Realtors, International Real Estate Federation, Royal
Institution of Chartered Surveyors, Building Owners and Managers Association,
Society of Industrial Realtors, and Building Industry Association.
Prior to re-forming Robert Beeney and Company in 1987, Mr. Beeney was a
founding partner of Jones Lang Wootton, USA (1978-1984) and Executive Director
of Marcus and Millichap Capital Markets group (1985-1987). Address: Robert
Beeney and Company, 433 California Street, San Francisco, CA 94104.
DONALD L. FOOTE, (BORN 1929)
Trustee of the Trust. Mr. Foote is the Chairman of the Board of First
National Acceptance Company. He is also the President of 1889 Bankshares, Inc.
Address: First National Acceptance Company, 241 East Saginaw, East Lansing,
MI 48826.
JOHN F. GOYDAS, (BORN 1934)
Trustee of the Trust. Mr. Goydas is a retired Managing Director of J. P.
Morgan Investment Management, Inc. having spent 33 years of employment with the
Morgan Bank. Mr. Goydas was responsible for all corporate and real
estate-related fixed-rate private placement investments; was a member of Morgan
Bank's Special Investments Committee (Convertible, Oil & Gas and Real Estate
investments) and the Credit Committee. Address: 217-55 Peck Avenue, Hollis
Hills, NY 11427.
GEORGE C. WEIR, (BORN 1943)
Trustee of the Trust. Mr. Weir is Executive Vice President of Hawaiian
Trust Company, Limited, the principal trust and investment subsidiary of Bank
of Hawaii. At Hawaiian Trust Company Mr. Weir's responsibilities include the
Real Estate Division and the Employee Benefit Division, Institutional Trust and
the Pacific Island Group.
Prior to joining Hawaiian Trust Company in January of 1990, Mr. Weir spent
25 years in the trust and banking industry, holding key management positions in
commercial, retail and institutional organizations.
Mr. Weir holds an undergraduate degree from Arizona State University and a
JD from the University of San Diego. He is a member of the California and
Hawaii Bar Associations, the American Bar Association, the National Council of
Real Estate Investment Fiduciaries, and the Urban Land Institute. Address:
Hawaiian Trust Company, 111 South King Street, Honolulu, HI 96813.
MAURICE WIENER, (BORN 1942)
Trustee of the Trust. Mr. Wiener is Chairman of the Board and Chief
Executive Officer of HMG/Courtland Properties, Inc., a real estate investment
trust, and Courtland Group, Inc., a real estate advisory company. He is also
Executive Trustee of Transco Realty Trust, a real estate investment company,
and Vice Chairman of the Board of T.G.I.F. Texas, Inc., a real estate
investment company. Address: HMG/Courtland Properties, Inc., 2701 South
Bayshore Drive, Coconut Grove, FL 33133.
5
<PAGE> 50
DEAN A. SOTTER, (BORN 1960)
Vice President, Chief Financial Officer, Chief Accounting Officer and
Treasurer of the Trust. Mr. Sotter is President of Heitman/PRA Advisors and a
member of its Investment Committee. Mr. Sotter has overall responsibility for
portfolio management and marketing.
Prior to joining Heitman/PRA Advisors, Mr. Sotter was a Partner of PRA
Securities Advisors, L.P. He was a Portfolio Manager and Vice President of JMB
Institutional Realty Corporation (1985-1992), where his responsibilities
included property level analysis, budgeting and valuation as well as financial
reporting and client communications. During the last several years, Mr. Sotter
was responsible for servicing approximately 70 institutional clients in 13
states and prospects for new business in those areas. In addition, in 1992,
Mr. Sotter worked extensively on the feasibility of the formation of a publicly
traded REIT.
For three years (1982-1985), Mr. Sotter was employed by Price Waterhouse
in the areas of audit and taxation. Mr. Sotter received a Bachelor of Science
degree from Indiana University and is a CPA. Address: Heitman/PRA Securities
Advisors, Inc., 180 North LaSalle Street, Suite 3600, Chicago, IL 60601.
NANCY B. LYNN, (BORN 1957)
Secretary to the Trust. Ms. Lynn is Vice President of Heitman/PRA
Advisors. Ms. Lynn has overall responsibility for compliance and Trust
administration and is also involved in corporate administration.
Prior to joining Heitman/PRA Advisors, Ms. Lynn served as Administrator
with PRA Securities Advisors, L.P. and with JMB Realty Corporation as
Supervisor of Partnership Operations (1985-1992) where she was responsible for
the transfer agent functions of the JMB sponsored limited partnerships. She
previously served as Retirement Savings Specialist for Bell Federal Savings and
Loan Association of Chicago, Illinois (1979-1983).
Ms. Lynn received a Bachelor of Arts degree from the University of
Illinois at Chicago. Address: Heitman/PRA Securities Advisors, Inc., 180 North
LaSalle Street, Suite 3600, Chicago, IL 60601.
TIMOTHY J. PIRE, (BORN 1962)
Assistant Secretary to the Trust. Mr. Pire is Vice President of
Heitman/PRA Advisors. Mr. Pire's responsibilities include investigation and
analysis of publicly traded real estate securities and implementation of the
investment strategy through portfolio management.
Prior to joining Heitman/PRA Advisors, Mr. Pire served as Research Analyst
with PRA Securities Advisors, L.P., and he was an Associate Appraiser with
Lyon, Skelte & Speirs in Seattle, Washington (1990-1992). He was involved in
valuation of commercial real estate and writing full narrative appraisals. For
over three years, Mr. Pire was employed by First Wisconsin National Bank where
he was involved in underwriting commercial loans.
Mr. Pire received a Bachelor of Science and a Masters of Science degree
from the University of Wisconsin. Address: Heitman/PRA Securities Advisors,
Inc., 180 North LaSalle Street, Suite 3600, Chicago, IL 60601.
JOHN J. KELLEY, (BORN 1959)
Assistant Treasurer to the Trust. Mr. Kelley is a Vice President of
Rodney Square Management Corporation where he oversees the accounting services
provided to the Trust.
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<PAGE> 51
Prior to joining Rodney Square Management Corporation, Mr. Kelley served
as an Officer/Group Supervisor in the Mutual Fund Accounting and Administration
Department of Provident Financial Processing Corporation (1984-1989).
Mr. Kelley received his MBA and Bachelor of Science degree from St.
Joseph's University.
LAURIE V. BROOKS, (BORN 1962)
Assistant Secretary to the Trust. Ms. Brooks is a Mutual Fund
Administrator for Rodney Square Management Corporation where she provides
administrative services to the Trust.
Prior to joining Rodney Square Management Corporation, Ms. Brooks worked
as a legal assistant for Skadden, Arps, Slate Meagher & Flom (1989-1994) and
served in the same capacity at Ballard, Spahr, Andrews and Ingersoll
(1987-1989) and White & Case (1985-1987).
Ms. Brooks received her Bachelor of Arts degree from Dickinson College and
a Paralegal Certificate in Corporate Finance and Business Law from The
Institute for Paralegal Training.
No officer or employee of Heitman/PRA Advisors, or of its affiliates,
receives any compensation from the Trust for serving as an officer or Trustee
of the Trust. The Trust pays each Trustee who is not an officer or employee of
Heitman/PRA Advisors, or of its affiliates, $10,000 per annum, $1,000 per
quarterly meeting attended, $500 for attendance by phone and reimburses each
such Trustee for travel and out-of-pocket expenses. During the calendar year
ended December 31, 1995, the Trustees of the Trust received compensation in the
amounts set forth in the table below:
COMPENSATION TABLE
<TABLE>
<CAPTION>
Aggregate Pension or Retirement
Compensation Benefits Accrued As
Name Position From the Trust Part of Fund Expenses(1)
-------------------- ----------- -------------- ----------------------
<S> <C> <C> <C>
Robert W. Beeney Trustee $15,000 $0
Donald L. Foote Trustee 15,000 0
John F. Goydas Trustee 15,000 0
William L. Ramseyer(2) Trustee 0 0
George C. Weir(3) Trustee 0 0
Maurice Wiener Trustee 14,000 0
</TABLE>
- ------------------------
(1) The Trust does not provide retirement or pension benefits to any of its
Trustees.
(2) Mr. Ramseyer was elected by the Board of Trustees as Trustee effective
January 22, 1996 to fill a vacancy resulting from the resignation of
Michael T. Oliver as Trustee. Mr. Oliver received no compensation from
the Trust in 1995.
(3) Mr. Weir voluntarily waived all compensation as a Trustee for the
calendar year ended December 31, 1995.
INVESTMENT MANAGER
The investment manager of the Fund is Heitman/PRA Advisors, a registered
investment adviser under the Investment Advisers Act of 1940. As of March 31,
1996, Heitman/PRA Advisors managed investment portfolios of publicly traded
REITs totaling approximately $222.9 million. The Fund has
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<PAGE> 52
retained Heitman/PRA Advisors as investment manager to provide day-to-day
discretionary investment management services to the Fund pursuant to an
Investment Management Agreement dated January 31, 1995.
Heitman/PRA Advisors is a wholly owned subsidiary of Heitman Financial
Ltd. ("Heitman") which is a wholly owned subsidiary of United Asset Management
Corporation. Established in 1913, Heitman is one of the nation's largest
institutional real estate advisers with over 940 real estate professionals in
204 offices throughout the United States, currently managing $10.7 billion in
real estate.
The Investment Management Agreement provides that Heitman/PRA Advisors
shall furnish advice to the Fund and, to the extent authorized by the Trustees,
determine what securities shall be purchased or sold. Heitman/PRA Advisors
uses its own personnel and facilities and securities analysis to provide in
depth research to formulate and implement investment strategy. This research
is supplemented by outside services provided by the brokerage and investment
banking community. Heitman/PRA Advisors, at its expense, pays the compensation
of all employees of Heitman/PRA Advisors (if any such person, or other
affiliated person of Heitman/PRA Advisors, is a Trustee of the Trust, or serves
as an employee thereof, such person serves as such without additional
compensation from the Trust). For its services, Heitman/PRA Advisors is
entitled to receive from the Trust an investment management fee as described in
the Prospectus under the caption "Management of the Fund." The investment
management fee is allocated to each class of shares of the Fund on the basis of
the net asset value of that class in relation to the net asset value of the
Fund.
The Investment Management Agreement for the Trust was approved by the
Board of Trustees of the Trust, including a majority of the Trustees who are
not parties to the Investment Management Agreement or "interested persons" (as
defined in the 1940 Act) of any such party on December 5, 1994 and by the
Fund's shareholders on January 23, 1995. The Investment Management Agreement
continues in effect from year to year, provided that its continuance is
approved annually both (i) by the holders of a majority of the outstanding
voting securities of the Trust or by the Board of Trustees, and (ii) by a
majority of the Trustees who are not parties to such Agreement or "interested
persons" of any such party. The Investment Management Agreement was last
approved by the Board of Trustees of the Trust and by a majority of Trustees
who are not parties to such Agreement or "interested persons" of any such party
on March 25, 1996 for the one-year period commencing April 1, 1996. The
Investment Management Agreement may be terminated on sixty (60) days' written
notice by any party and will terminate automatically if it is assigned.
The Trust bears expenses for its own legal and auditing services, taxes,
interest, brokerage fees, fees of Trustees other than Trustees affiliated with
the Investment Manager, governmental fees, certain insurance premiums, the cost
of stock certificates, fees and disbursements of the custodian and transfer
agent, if any, brokerage, interest and other expenses properly payable by the
Trust and not specifically borne by the Investment Manager. The Trust pays all
costs of shareholder notices, reports and Prospectuses used in complying with
laws regulating the issue or sale of securities. The Trust also pays the
charges and expenses of any servicing agent appointed by the Trust to provide
bookkeeping, accounting and administrative services for the Fund. During the
fiscal year ended December 31, 1995, the three-month period ended December 31,
1994 and the fiscal years ended September 30, 1994 and 1993, the fees paid to
the Investment Manager were $724,658, $201,070, $881,646 and $704,939,
respectively. The Investment Manager has agreed that if in any fiscal year the
aggregate expenses of the Fund (including fees pursuant to the Investment
Management Agreement, but excluding interest, brokerage expenses, taxes and
extraordinary items) exceed the expense limitation of any state, or if the
total expenses exceed 1.75% of the first $50 million of the Fund's average net
assets or 1.5% of assets in excess of $50 million, the Investment Manager will
reduce its advisory fee by the amount of such excess expense. Such a fee
reduction, if any, will be reconciled on a monthly basis. The most restrictive
8
<PAGE> 53
regulations, which have been adopted by the State of California, would require
the Investment Manager to reduce or rebate (or both) its management fee in any
year that such expenses exceed 2.5% of the first $30 million of average net
assets, 2.0% of the next $70 million average net assets and 1.5% of the
remaining average net assets of the Trust.
PURCHASE OF SHARES
General information on how to buy shares of the Fund, as well as sales
charges, if any, involved, is set forth under "Purchase of Shares" in the
Prospectus. The following supplements that information.
For purposes of determining whether a purchase of the Advisor class shares
of beneficial interest in the Fund (the "Advisor Class") qualifies for reduced
sales charges and for purposes of determining whether an investor can join with
another investor in a single purchase for inclusion toward completion of a
Letter of Intent with respect to Advisor Class shares, the term "related
person" includes: (i) an individual, or an individual combining with his or
her spouse and their children and purchasing for his, her or their own account;
(ii) a "company" as defined in Section 2(a)(8) of the 1940 Act; (iii) a trustee
or other fiduciary purchasing for a single trust estate or single fiduciary
account (including a pension, profit sharing or other employee benefit trust
created pursuant to a plan qualified under Section 401 of the Internal Revenue
Code); (iv) a tax-exempt organization under Section 501(c)(3) of (13) of the
Internal Revenue Code; and (v) an employee benefit plan of a single employer or
of affiliated employers.
ADMINISTRATIVE, ACCOUNTING, DISTRIBUTION AND SHAREHOLDER SERVICES
Rodney Square Management Corporation ("Rodney Square"), Rodney Square
North, 1100 North Market Street, Wilmington DE 19890-0001, provides certain
administrative and accounting services to the Fund pursuant to an
Administration Agreement and an Accounting Services Agreement, each dated as of
December 4, 1993.
Under the Administration Agreement, Rodney Square (1) coordinates with the
Fund's Custodian and Transfer Agent and monitors the services they provide to
the Fund; (2) coordinates with and monitors any other third parties furnishing
services to the Fund; (3) provides the Fund with necessary office space,
telephones and other communications facilities and personnel competent to
perform administrative and clerical functions for the Fund; (4) supervises the
maintenance by third parties of such books and records of the Fund as may be
required by applicable Federal or state law; (5) prepares and, after approval
by the Fund, files and arranges for the distribution of proxy materials and
periodic reports to shareholders of the Fund as required by applicable law; (6)
prepares and, after approval by the Fund, arranges for the filing of such
registration statements and other documents with the Securities and Exchange
Commission and other Federal and state regulatory authorities as may be
required by applicable law; (7) reviews and submits to the officers of the Fund
for their approval invoices or other requests for payment of Fund expenses and
instructs the Fund's custodian to issue checks in payment thereof; and (8)
takes such other action with respect to the Fund as may be necessary in the
opinion of Rodney Square to perform its duties under the agreement.
As compensation for services performed under the Administration Agreement,
Rodney Square receives a fee payable monthly and computed on the average daily
net assets of the Fund at the end of each business day at an annual rate of
.10%, plus any out-of-pocket expenses. During the fiscal year ended December
31, 1995, the three-month period ended December 31, 1994, and the fiscal period
ended September 30, 1994, the fees paid to Rodney Square by the Trust pursuant
to the Administration Agreement were $107,310, $29,091, and $134,382,
respectively.
9
<PAGE> 54
Under the Accounting Services Agreement, Rodney Square (a) maintains and
keeps current the books, accounts, records, journals or other records of
original entry relating to the business of the Fund; (b) calculates daily net
asset value per share and determines dividends; and (c) performs other related
accounting services including the preparation of periodic financial statements
for the Fund.
As compensation for services performed under the Accounting Services
Agreement, Rodney Square receives a fee payable monthly and computed on the
average daily net assets of the Fund at the end of each business day at an
annual rate of $45,000 plus .02% of the average net assets in excess of $100
million, plus any out-of-pocket expenses. During the fiscal year ended
December 31, 1995, the three-month period ended December 31, 1994, and the
fiscal period ended September 30, 1994, fees paid to Rodney Square by the Fund
pursuant to the Accounting Services Agreement were $56,863, $11,915, and
$50,124, respectively.
Rodney Square Distributors, Inc. ("RSD"), Rodney Square North, 1100 North
Market Street, Wilmington DE 19890-0001, provides distribution services to the
Fund with respect to the Heitman/PRA Institutional class of shares of the Fund
(the "Institutional Class") pursuant to a Distribution Agreement, dated as of
December 4, 1993 (the "RSD Distribution Agreement").
Under the RSD Distribution Agreement, RSD is granted the right to sell
Institutional Class shares of the Fund as agent for the Trust. Institutional
Class shares of the Fund are offered continuously. RSD agrees to use all
reasonable efforts to secure purchasers for Institutional Class shares of the
Fund and to pay expenses of printing and distributing prospectuses, statements
of additional information and reports prepared for use in connection with the
sale of Institutional Class shares and any other literature and advertising
used in connection with the offering, subject to reimbursement from the Fund's
Investment Manager. RSD receives no compensation from the Fund.
The RSD Distribution Agreement was last approved by the Board of Trustees
of the Trust, including a majority of the Trustees who are not interested
persons of the Trust on October 21, 1994, and will remain in effect for one
year and then will continue in effect from year to year as long as its
continuance is approved at least annually by a majority of the Trustees,
including a majority of the Independent Trustees. The RSD Distribution
Agreement terminates automatically in the event of its assignment. The
Agreement is also terminable without payment of any penalty with respect to the
Fund (i) by the Fund (by vote of a majority of the Trustees of the Trust who
are not interested persons of the Trust or by vote of a majority of the
outstanding voting securities of the Trust) on sixty (60) days' written notice
to RSD; or (ii) by RSD on sixty (60) days' written notice to the Trust.
ACG Capital Corporation ("ACG"), 1661 Tice Valley Boulevard, #200, Walnut
Creek, CA 94595, provides distribution services to the Fund with respect to
Advisor Class shares pursuant to a Distribution Agreement, dated as of May 15,
1995 (the "ACG Distribution Agreement").
Under the ACG Distribution Agreement, ACG is granted the right to sell
Advisor Class shares as agent for the Trust. ACG agrees to use all reasonable
efforts to secure purchasers for the Advisor Class shares and to pay expenses
of printing and distributing prospectuses, statements of additional information
and reports prepared for use in connection with the sale of Advisor Class
shares and any other literature and advertising used in connection with the
offering. In connection with the services to be provided by ACG under the ACG
Distribution Agreement, ACG receives from the Fund as compensation for services
provided thereunder, subject to the terms and conditions of the Trust's Plan of
Distribution Pursuant to Rule 12b-1, an amount with respect to Advisor Class
shares determined at an annual rate of .25% of the average daily value of net
assets represented by such shares, such amount to be paid in arrears at the end
of each calendar month. For the fiscal year ended December 31, 1995, the Fund
paid $2,985 in compensation to ACG pursuant to the ACG Distribution Agreement.
10
<PAGE> 55
The ACG Distribution Agreement was last approved by the Board of Trustees
of the Trust, including a majority of the Trustees who are not interested
persons of the Trust, on April 28, 1995, and will remain in effect for one year
and then will continue in effect from year to year as long as its continuance
is approved at least annually by a majority of the Trustees, including a
majority of the Independent Trustees. The ACG Distribution Agreement
terminates automatically in the event of its assignment. The Agreement is also
terminable without payment of any penalty with respect to the Fund (i) by the
Fund (by vote of a majority of the Trustees of the Trust who are not interested
persons of the Trust or by vote of a majority of the outstanding voting
securities of the Advisor Class shares of the Fund) on sixty (60) days' written
notice to ACG; or (ii) by ACG on sixty (60) days' written notice to the Trust.
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 (the
"Distribution Plan") with respect to the distribution of Advisor Class shares
in accordance with the regulations under the 1940 Act. General information
about the Distribution Plan is set forth under "Purchase of Shares -
Distribution Plan" in the Advisor Class Prospectus. The following supplements
that information.
Under the Distribution Plan, the Fund may engage, directly or indirectly,
in financing any activities primarily intended to result in the sale of Advisor
Class shares, including, but not limited to, (1) making payments to
underwriters, securities dealers and others engaged in the sale of shares,
including payments to ACG to be used to compensate or reimburse ACG or
securities dealers (which securities dealers may be affiliates of ACG) engaged
in the distribution and marketing of shares and furnishing ongoing assistance
to investors, and (2) reimbursement of direct out-of-pocket expenditures
incurred by ACG in connection with the distribution and marketing of shares and
the servicing of investor accounts, including expenses relating to the
formulation and implementation of marketing strategies and promotional
activities such as direct mail promotions and television, radio, newspaper,
magazine and other mass media advertising, the preparation, printing and
distribution of Prospectuses of the Fund and reports for recipients other than
existing shareholders of the Fund, and obtaining such information, analyses and
reports with respect to marketing and promotional activities and investor
accounts as the Fund may, from time to time, deem advisable.
The expenditures to be made pursuant to the Distribution Plan may not
exceed an annual rate of 0.25% of the average daily value of net assets
represented by Advisor Class shares. ACG may have also used additional
resources of its own for further expenses on behalf of the Fund.
The Investment Manager and ACG have entered into an amended Marketing
Services Agreement effective as of March 11, 1996 (the "Marketing Services
Agreement"), with respect to the sale of certain Advisor Class and Institutional
Class shares. Under the Marketing Services Agreement, the Investment Manager
will pay ACG, in addition to the compensation paid to ACG under the ACG
Distribution Agreement and the Distribution Plan, compensation at an annual rate
of (i) .15 of 1% of the net asset value of the Fund represented by Advisor Class
shares with the exception of Advisor Class shares sold through The Nomura
Securities Co., Ltd. and (ii) .25 of 1% of the net asset value of the Fund
represented by Institutional Class shares purchased by investors introduced to
the Investment Manager by ACG and acknowledged by the Investment Manager as
introduced by ACG. The Investment Manager has also agreed to pay ACG .10 of 1%
of the net asset value of Advisor Class shares held in omnibus shareholder
accounts maintained by Charles Schwab & Company, Inc. or Resources Trust Company
as well as certain expenses related to the Advisor Class shares.
Pursuant to the Marketing Services Agreement, if the Distribution Plan is
terminated or modified, the Investment Manager will be required to pay to ACG
an amount equal to 50% of any reduction in fees paid to ACG under the
Distribution Agreement as a result of such termination or modification, up to a
maximum of .125 of 1% per annum of the net asset value of the Fund represented
by the Advisor Class shares. In addition, the Investment Manager has agreed to
make certain continuing payments to ACG in the event that the Marketing
Services Agreement is terminated. Depending on the reason for
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<PAGE> 56
termination, the continuing payments are either .25 of 1% or .15 of 1% per
annum of the net asset value of the Fund represented by Advisor Class shares
and qualified Institutional Class shares held by investors as of the date of
termination of the Marketing Services Agreement and are payable for a period of
5 years if the applicable rate is .15 of 1% and for a period of 10 years if the
applicable rate is .25 of 1%. The continuing payments are contingent upon ACG
remaining registered as a broker/dealer. In addition, if the Investment
Manager terminates the Marketing Services Agreement for "cause" or if ACG
terminates the ACG Distribution Agreement, ACG will not be entitled to any
continuing payments.
The Marketing Services Agreement also provides that ACG will not serve as
a distributor of shares of any other open-end registered investment company
that invests primarily in REITs (other than indirectly as a result of marketing
asset management programs of which REIT mutual funds are a component) and that
the Investment Manager and its affiliates will not offer, sponsor, advise or
otherwise promote any mutual fund or class of shares of a mutual fund for which
ACG is not the distributor, with certain exceptions, including Institutional
Class shares, certain offerings of shares of closed-end investment companies,
shares of investment companies offered outside the United States, certain
insurance products and investment products offered to certain qualified
retirement plans.
The Fund has also adopted a Shareholder Servicing Plan which is described
in the Advisor Class Prospectus under the captions "Distribution Plan" and
"Shareholder Servicing Agreement." The Shareholder Servicing Plan provides
that the Advisor Class may spend annually, directly or indirectly, up to 0.25%
of the average daily value of the net assets attributable to Advisor Class
shares for shareholder servicing activities. During the fiscal year ended
December 31, 1995, the Fund paid an aggregate of $2,985 to service
organizations under contracts entered into pursuant to the Shareholder
Servicing Plan.
A quarterly report of the amounts expended under the Distribution Plan and
the Shareholder Servicing Plan, and the purposes for which such expenditures
were incurred, must be made to the Trustees for their review. Neither the
Distribution Plan nor the Shareholder Servicing Plan may be amended without
shareholder approval to increase materially the distribution or shareholder
servicing costs that the Fund may pay with respect to Advisor Class shares. The
Distribution Plan, the Shareholder Servicing Plan and material amendments to
either such Plan must be approved annually by all of the Trustees and by the
Trustees who are neither interested persons of the Fund nor have any direct or
indirect financial interest in the operation of the respective Plan or any
related agreements.
DESCRIPTION OF THE TRUST
The Trust is a diversified, open-end management investment company
organized as a Massachusetts business trust under the laws of the Commonwealth
of Massachusetts under a Master Trust Agreement dated September 15, 1988, as
Amended and Restated on February 28, 1995. In March 1995, the Trust's name was
changed from PRA Securities Trust to Heitman Securities Trust.
The Trustees have authority to issue an unlimited number of shares of
beneficial interest in one or more separate series, $.001 par value per share.
The shares of the Fund offered hereby constitute the sole series authorized to
date. In addition, the Trustees are authorized to issue an unlimited number of
classes of shares of beneficial interest in each series. To date, the Trust
has established one series, the Heitman Real Estate Fund, and two classes of
shares, designated as the Advisor Class and the Heitman/PRA Institutional
Class.
The assets received by the Trust for the issue or sale of shares of the
Fund and all income, earnings, profits and proceeds thereof, subject only to
the rights of creditors, are specially allocated to each class of 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 in
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<PAGE> 57
respect of each class of the Fund and with a share of the general expenses of
the Trust. Except for those differences between the classes of shares
described below and elsewhere in the Prospectuses and this Statement of
Additional Information, each share of the Fund has equal dividend, redemption
and liquidation rights with other shares of the Fund. Upon any liquidation of
the Fund, shareholders thereof are entitled to share pro rata in the net assets
of each class belonging to the Fund available for distribution.
Each share of each class of shares represents an identical interest in the
same portfolio of investments of the Fund and has the same rights, privileges
and preferences, except with respect to: (a) the designation of each class;
(b) the sales charge applicable to the Advisor Class; (c) the distribution and
service fees borne by the Advisor Class; (d) the expenses allocable exclusively
to each class, if any; and (e) voting rights on matters exclusively affecting a
single class. The Trust has adopted an expense allocation plan under which all
expenses other than distribution and service fees borne by the Advisor Class,
are allocated pro rata based on the relative net assets of each class.
Shares of the Fund entitle its holders to one vote per share (with
proportionate voting for fractional shares) irrespective of the relative net
asset value of the Fund's shares.
The Trust does not hold annual meetings of shareholders. There will
normally be no meetings of shareholders for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by shareholders, at which time the Trustees then in
office will call a shareholders' meeting for the election of Trustees.
Shareholders of record of not less than two-thirds of the outstanding shares of
the Trust may remove a Trustee through a declaration in writing or by vote cast
in person or by proxy at a meeting called for that purpose. The Trustees are
required to call a meeting of shareholders for the purposes of voting upon the
question of removal of any Trustee when requested in writing to do so by the
shareholders of record of not less than 10% of the Trust's outstanding shares.
Generally, shares of the Fund will be voted on a Fund-wide basis on all matters
except matters affecting only the interests of one class. The Advisor Class
will have exclusive voting rights with respect to any amendments to the Fund's
Rule 12b-1 Plan of Distribution or Shareholder Servicing Plan that would
materially increase any amounts paid thereunder.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Master Trust Agreement disclaims shareholder liability for acts or obligations
of the Trust and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or a
Trustee. The Master Trust Agreement provides for indemnification from Trust
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Trust. Thus, the risk of a shareholder's incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Trust itself would be unable to meet its obligations, a
possibility which Heitman/PRA Advisors believes is remote. Upon payment of any
liability incurred by the Fund, the shareholder of the Fund paying such
liability will be entitled to reimbursement from the general assets of the
Fund. The Trustees intend to conduct the operations of the Fund in such a way
so as to avoid, to the greatest extent possible, ultimate liability of the
shareholders for liabilities of the Fund.
13
<PAGE> 58
As of April 1, 1996, the following shareholders were known to own of record
more than 5% of the total outstanding shares of either the Institutional Class
or Advisor Class of the Fund, as the case may be:
<TABLE>
<CAPTION>
Percentage Percentage Percentage
Ownership Ownership Ownership
of Institutional of Advisor of All
Name and Address Class Shares Class Shares Fund Shares
- --------------------------------------- ---------------- ------------ -----------
<S> <C> <C> <C>
United Nations, for the United Nations 26.71% - 23.03%
Joint Staff Pension Fund, a United
Nations Organization
c/o Fiduciary Trust International
Two World Trade Center
New York, NY 10048
Charles Schwab & Company, Inc. 14.38% 8.00% 13.50%
101 Montgomery Street
San Francisco, CA 94104
HAWCO 9.45% - 8.14%
Hawaiian Trust Company, Ltd. as Trustee
P.O. Box 3170
Honolulu, HI 96802
Resources Trust Company - 65.29% 8.99%
FBO Meridian Accounts
P.O. Box 3865
Englewood, CO 80155
</TABLE>
The officers and Trustees of the Trust as a group own less than 1% of the
outstanding shares of the Fund.
The following is a summary of selected federal income tax considerations
that may affect the Fund and its shareholders. The summary is not intended as
a substitute for individual tax advice, and investors are urged to consult
their own tax advisers with specific reference to their own federal, state or
local tax situations.
TAXATION OF THE FUND
The Fund intends to continue to qualify and elect to be treated each
taxable year as a "regulated investment company" under subchapter M of the
Internal Revenue Code of 1986, as amended. Accordingly, the Fund will not be
liable for federal income taxes on its net investment income and net capital
gain that are distributed to shareholders, provided that the Fund distributes
at least 90% of its net investment income and net short-term capital gains for
that year.
To qualify as a regulated investment company, the Fund must, among other
things, (i) derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to loans of securities and gains
from the sale or other disposition of stock, securities or foreign currencies,
or other income derived with respect to its business of investing in such
stock, securities or currencies; (ii) derive in each taxable year less than 30%
of its gross income from the sale or other disposition of
14
<PAGE> 59
stock or securities held less than three months; and (iii) satisfy
certain diversification requirements.
The Internal Revenue Code of 1986, as amended, imposes a nondeductible 4%
excise tax on a regulated investment company that fails to distribute during
each calendar year an amount equal to the sum of (i) at least 98% of its
ordinary income for the calendar year, (ii) at least 98% of its capital gain
net income for the twelve-month period ending on October 31 of the calendar
year; and (iii) any portion (not taxed to the Fund) of the respective balances
from the prior year. The Fund intends to make such distributions as are
necessary to avoid imposition of the excise tax.
TAXATION OF INVESTMENTS BY THE FUND
Gains or losses on sales of securities by the Fund will generally be
long-term capital gains or losses if the Fund has held the securities for more
than one year. Gains or losses on sales of securities held for less than one
year will generally be short-term.
TAXATION OF THE FUND'S SHAREHOLDERS-SPECIAL CONSIDERATIONS
The portion of the dividends received from the Fund by its corporate
shareholders which qualifies for the 70% dividends-received deduction will be
reduced to the extent that the Fund holds dividend-paying stock for less than
46 days (91 days for certain preferred stocks). In addition, distributions
that the Fund receives from a REIT will not constitute "dividends" for purposes
of the dividends-received deduction and, thus, Fund dividends attributable to
such distributions will not qualify for the dividends-received deduction.
Accordingly, only a small percentage of dividends from the Fund are expected to
qualify for the dividends-received deduction. Dividends-received deductions
will be allowed only with respect to shares that a corporate shareholder has
held for at least 46 days within the meaning of the same holding period rules
applicable to the Fund.
Dividends paid by the Fund from net investment income and net short-term
capital gains will be taxable to shareholders as ordinary income for federal
income tax purposes, whether received in cash or reinvested in additional
shares. Distributions of net capital gain will be taxable to shareholders as
long-term capital gain, whether paid in cash or reinvested in additional
shares, and regardless of the length of time the shareholder has held his or
her shares of the Fund.
If a shareholder receives a distribution taxable as long-term capital gain
with respect to shares of the Fund, and redeems or exchanges the shares before
he or she has held them for more than six months, any loss on the redemption or
exchange will be treated as a long-term capital loss to the extent of such
capital gain distribution.
If a shareholder fails to furnish a correct taxpayer identification
number, fails to fully report dividend or interest income, or fails to certify
that he or she has provided a correct taxpayer identification number or that he
or she is not subject to "backup withholding," then the shareholder may be
subject to a 31% federal backup withholding tax with respect to (i) taxable
dividends and distributions and (ii) the proceeds of redemptions or exchanges.
The 31% backup withholding tax is not an additional tax and may be credited
against a shareholder's regular federal income tax liability. An individual's
taxpayer identification number is his or her social security number.
REDEMPTION OF SHARES
Detailed information on methods for redemption of shares is included in
the Prospectus. The right to redeem shares of the Fund may be suspended or the
date of payment postponed (i) for any period during which the New York Stock
Exchange ("NYSE") is closed (other than for customary weekend or
15
<PAGE> 60
holiday closings), (ii) when trading in the markets the Fund normally
uses is restricted or when an emergency exists as determined by the
Securities and Exchange Commission ("SEC") so that disposal of the
Fund's investments or determination of its net asset value is not
reasonably practicable, or (iii) for such other periods as the SEC, by
order, may permit for protection of the Fund's shareholders.
VALUATION OF SHARES
The Prospectus describes the time at which the net asset value of the Fund
is determined for purposes of sales and redemptions. The following is a
description of the procedures used by the Fund in valuing its assets.
Readily marketable portfolio securities dually listed on the NYSE and
other national securities exchanges are valued at the last sale price as
reported on the NYSE on the business day as of which such value is being
determined. Readily marketable securities not reported on the NYSE tape, but
listed on national securities exchanges, shall be valued at the last sale
price, on the business day as of which such value is being determined, on the
exchange considered by the Trustees to be the primary trading market for such
securities. If there has been no sale on such day, the security shall be
valued at the average between closing bid and closing offer quoted on such day.
If no bid or offer price is quoted on such day, then the security is valued by
such method as the Trustees shall determine in good faith to reflect its fair
market value. Readily marketable securities traded only in the
over-the-counter market are valued at the last price as reported on the
National Market System, or, if the security is not reported on the National
Market System, at the last reported bid on such day. If market quotations for
over-the-counter traded securities are not readily available, a fair value, as
determined in good faith by the Trustees, will be used. The value of the
securities in the Fund's portfolio may be more or less than cost.
Short-term securities with 60 days or less to maturity will be amortized
to maturity based on their cost to the Fund if acquired within 60 days of
maturity or, if already held by the Fund, on the 60th day, based on the value
determined on the 61st day.
Options are generally valued at the last sale price; in the absence of
last sale price, the average between the highest bid and the lowest offer
quoted on such day is used. When the Fund writes an option, an amount equal to
the premium received by it is included in the Fund's statement of assets and
liabilities as an asset and as an equivalent liability. The amount of the
liability is subsequently marked to market to reflect the current market value
of the option written. When the Fund purchases a stock index option, the
premium paid by the Fund is recorded as an asset and is subsequently adjusted
to the current market value of the option. Investments in U.S. Government
securities (other than short-term securities) are valued at the average of the
quoted bid and asked prices in the over-the-counter market.
Notwithstanding the aforementioned methods of valuation, the Trustees may
in their discretion permit or require some other method or methods of valuation
to be used if they consider that such other methods better reflect the fair
market value of all or a portion of the assets of the Fund.
ADVERTISING AND CALCULATION OF PERFORMANCE DATA
From time to time, the Fund may advertise the performance of the Fund in
terms of its total return or its yield and total return. The yield and total
return calculations give effect to all recurring expenses of the Fund and are
computed separately for each class of shares of the Fund.
AVERAGE ANNUAL TOTAL RETURN. Average annual total return is computed by
determining the average annual compounded rate of return over the designated
periods that, if applied to the initial amount invested would produce the
ending redeemable value, according to the following formula:
16
<PAGE> 61
n
P(1 + T) = ERV
<TABLE>
<S> <C> <C> <C>
WHERE: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the designated period
assuming a hypothetical $1,000 payment made at the beginning
of the designated period
</TABLE>
The calculation is based on the further assumptions that the maximum
initial sales charge is deducted, and that all dividends and distributions by
the Fund are reinvested at net asset value on the reinvestment dates during the
designated periods. Based upon the foregoing calculations, the average annual
total returns of the Institutional Class for the one-year and five-year periods
ended December 31, 1995 and for the life of the Fund were 10.87%,14.80% and
6.59%, respectively and the average annual total returns of the Advisor Class
for the one-year and five-year periods ended December 31, 1995 and for the life
of the Fund were 5.69%, 13.71% and 5.85%, respectively.
AGGREGATE TOTAL RETURN. Aggregate total return is computed by determining
the rate of return over the designated period that, if applied to the initial
amount invested would produce the ending redeemable value, according to the
following formula:
P(1 + T) = ERV
<TABLE>
<S> <C> <C> <C>
WHERE: P = a hypothetical initial payment of one share of the Fund, at
the net asset value reported on the first day of the
designated period
T = the total return for the period
ERV = ending redeemable value at the end of the designated period
for one share of the Fund
</TABLE>
The calculation is based on the further assumptions that the maximum
initial sales charge is deducted, and that all dividends and distributions by
the Fund are reinvested at net asset value on the reinvestment dates during the
designated period.
Based upon the foregoing assumptions, the aggregate total return of the
Institutional Class for the one-year and five-year periods ended December 31,
1995 and from inception to December 31, 1995 was 10.87%, 99.41% and 54.46%,
respectively and the aggregate total return for the Advisor Class from
inception to December 31, 1995 was 7.81%.
MONTHLY YIELD. Yield is computed by dividing the net investment income
per share earned during a specified one month period by the maximum offering
price per share on the last day of the month and analyzing the result,
according to the following formula:
6
YIELD = 2 { ( (a-b) + 1) -1}
cd
<TABLE>
<S> <C> <C> <C>
WHERE: a = dividends and interest earned during the month
b = expenses accrued for the month (net of reimbursements)
c = the average daily number of shares outstanding during the month that were entitled to receive dividends
d = the maximum offering price per share on the last day of the month
</TABLE>
The Fund may also advertise its performance for other time periods than
those discussed above.
From time to time the Fund may include information in advertising
concerning its portfolio
17
<PAGE> 62
holdings. For example, the Fund may advertise its current holding of REITs,
their location and category of real estate held by such REITs, and a sector
analysis of the Fund's portfolio composition.
GENERAL INFORMATION
DISTRIBUTIONS TO SHAREHOLDERS
It is the policy of the Fund to declare and distribute dividends
consisting of substantially all of the Fund's net investment income quarterly
and to declare and distribute dividends from the Fund's net short-term capital
gains, if any, annually. The Fund will make distributions of long-term capital
gains at least annually. All such distributions will be made pro rata to the
shareholders based on the number of shares held by each shareholder as of the
record date for each such distribution. The Fund intends to make such
additional distributions of net investment income and capital gain (net of
capital losses) as may be necessary to avoid the imposition of any federal
excise tax. The Trustees may change the Fund's distribution policy in their
sole discretion.
Quarterly distributions will automatically be reinvested in additional
shares unless a shareholder elects to receive distributions in cash as
described in the Prospectus.
REPORTS TO SHAREHOLDERS
The Trustees will issue to the shareholders semi-annual and annual
financial statements of the Trust. Quarterly financial statements of the Trust
are available upon request. At the end of the year the shareholders will also
receive audited financial statements audited by the Fund's independent public
accountants. In addition, shareholders will receive annual statements of the
status of their accounts reflecting current net asset value per share, and the
total value of the Fund's net assets. Daily pricing will be made available to
shareholders upon request.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP currently serves as independent accountants for the
Fund. Arthur Andersen LLP served as independent public accountants for the
Fund for all periods prior to January 1, 1996. The financial statements in
this Statement of Additional Information and the Financial Highlights included
in the Prospectus have been audited by Arthur Andersen LLP, independent
accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said report.
COUNSEL
Legal matters in connection with the offering of shares hereby and the
formation of the Trust are being passed upon for the Trust by Goodwin, Procter
& Hoar LLP, Boston, Massachusetts.
CUSTODIAN
Wilmington Trust Company, Wilmington, Delaware serves as custodian for the
cash and securities of the Fund.
18
<PAGE> 63
FINANCIAL STATEMENTS
CONTENTS
FINANCIAL STATEMENTS
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
REPORT OF INDEPENDENT ACCOUNTANTS
19
<PAGE> 64
HEITMAN REAL ESTATE FUND
- ------------------------
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS DECEMBER 31, 1995
- ---------------------------------------------------------------------------------------
NAREIT MARKET VALUE
SHARES CLASSIFICATION (NOTE 2)
------- -------------- ------------
<S> <C> <C> <C>
COMMON STOCK - 93.6%
Alexander Haagen Properties, Inc..... 132,700 Equity $ 1,625,575
Avalon Properties, Inc............... 165,272 Equity 3,553,348
Cali Realty Corporation.............. 194,400 Equity 4,252,500
Camden Property Trust................ 97,752 Equity 2,333,829
Carr Realty Corp..................... 114,900 Equity 2,800,687
Centerpoint Properties Corp.......... 168,800 Equity 3,903,500
Charles E. Smith Residential Realty,
Inc................................ 68,700 Equity 1,623,038
Chateau Properties, Inc.............. 156,958 Equity 3,531,555
Chelsea GCA Realty, Inc.............. 88,193 Equity 2,645,790
Colonial Properties Trust............ 117,438 Equity 2,994,669
Debartolo Realty Corp................ 303,700 Equity 3,948,100
Developers Diversified Realty Corp... 140,130 Equity 4,203,900
Equity Residential Properties Trust.. 80,700 Equity 2,471,437
Evans Withycombe Residential, Inc.... 117,300 Equity 2,521,950
Gables Residential Trust............. 71,500 Equity 1,635,563
Grubb & Ellis Realty Income Trust*... 189,700 Mortgage 199,185
Kimco Realty Corp.................... 137,700 Equity 3,752,325
Macerich Company (The)............... 190,100 Equity 3,802,000
Merry Land & Investment Company, Inc. 61,500 Equity 1,452,937
Oasis Residential, Inc............... 120,000 Equity 2,730,000
Patriot American Hospitality, Inc.... 45,400 Equity 1,169,050
Post Properties, Inc................. 68,177 Equity 2,173,142
ROC Communities, Inc................. 149,444 Equity 3,586,656
Rouse Company........................ 134,100 Equity 2,732,288
Security Capital Industrial Trust.... 204,700 Equity 3,582,250
Security Capital Pacific Trust....... 127,530 Equity 2,518,717
South West Property Trust............ 283,966 Equity 3,833,541
Sovran Self Storage, Inc............. 103,200 Equity 2,721,900
Spieker Properties, Inc.............. 156,800 Equity 3,939,600
Storage Trust Realty................. 130,100 Equity 2,959,775
Storage USA Inc...................... 101,400 Equity 3,308,175
Taubman Centers, Inc................. 61,800 Equity 618,000
United Dominion Realty Trust......... 137,000 Equity 2,055,000
Vornado Realty Trust................. 94,600 Equity 3,547,500
------------
TOTAL COMMON STOCK (COST $85,097,964)....................... 94,727,482
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE> 65
HEITMAN REAL ESTATE FUND
- ------------------------
SCHEDULE OF INVESTMENTS-CONTINUED DECEMBER 31, 1995
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR MARKET VALUE
(000) (NOTE 2)
------ ------------
<S> <C>
CONVERTIBLE BOND - 4.1%
Liberty Property Trust, 8.00%,
Due 07/01/01 (COST $4,074,000)....... $4,074 $ 4,180,943
------------
TOTAL INVESTMENTS (COST $89,171,964) - 97.7%........... 98,908,425
OTHER ASSETS AND LIABILITIES, NET - 2.3%............... 2,303,524
------------
NET ASSETS _ 100.0%.................................... $101,211,949
============
</TABLE>
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
21
<PAGE> 66
HEITMAN REAL ESTATE FUND
- ------------------------
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES-DECEMBER 31, 1995
- ------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at market value (identified cost
$89,171,964) (Note 3)............................. $ 98,908,425
Cash................................................. 330,742
Receivables:
Capital shares sold............................... 67,057
Dividends......................................... 884,117
Interest.......................................... 162,960
Investment securities sold........................ 1,368,512
Reimbursement due from Advisor.................... 17,876
Other assets......................................... 12,389
------------
TOTAL ASSETS................................. 101,752,078
------------
LIABILITIES:
Payables:
Capital shares redeemed........................... 184,864
Investment management fees (Note 4)............... 63,766
Investment securities purchased................... 108,957
Accrued expenses.................................. 182,542
------------
TOTAL LIABILITIES............................ 540,129
------------
NET ASSETS:
(Applicable to 11,694,435 shares of
$0.001 par value beneficial interest
issued and outstanding; unlimited
number of shares authorized)..................... $101,211,949
============
Net asset value, offering price and
redemption price per Institutional
class share ($95,692,193 / 11,057,916)........... $8.65
=====
Net asset value and redemption price per
Advisor class share ($5,519,756 / 636,519)....... $8.67
=====
Offering price per Advisor class share
($8.67 / 0.9525)................................. $9.10
=====
SOURCE OF NET ASSETS:
Paid-in capital $ 95,618,745
Accumulated net realized loss on investments......... (4,143,257)
Net unrealized appreciation of investments........... 9,736,461
------------
NET ASSETS.............................................. $101,211,949
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE> 67
HEITMAN REAL ESTATE FUND
- ------------------------
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends (Note 2).................................... $4,671,604
Interest.............................................. 426,351
----------
Total investment income....................... 5,097,955
----------
EXPENSES:
Advisory fees (Note 4)................................ $ 724,658
Administration fees (Note 4).......................... 107,310
Trustees' fees and expenses (Note 5).................. 63,067
Accounting fees (Note 4).............................. 56,863
Professional fees..................................... 132,045
Custodian fees........................................ 36,235
Insurance............................................. 16,424
Federal Registration fees............................. 1,685
State Registration fees............................... 47,845
Shareholder report fees............................... 14,999
Distribution fees - Advisor Shares (Note 4)........... 2,985
Shareholder Servicing fees - Advisor Shares
(Note 4)............................................ 2,985
Transfer agent fees................................... 55,835
Other................................................. 36,001
----------
Total expenses before expense
reimbursement............................... 1,298,937
Reimbursement from Advisor -
Advisor Shares.............................. (40,461)
----------
Expenses, net............................ 1,258,476
----------
Net investment income.................... 3,839,479
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss from security transactions.......... (1,952,399)
Net change in unrealized appreciation of investments.. 7,936,118
----------
Net realized and unrealized gain
on investments......................... 5,983,719
----------
Net increase in net assets resulting from
operations.......................................... $9,823,198
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE> 68
HEITMAN REAL ESTATE FUND
- ------------------------
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------
FOR THE FISCAL YEAR FOR THE THREE-
ENDED MONTH PERIOD ENDED
DECEMBER 31, 1995 DECEMBER 31,1994
------------------- ------------------
<S> <C> <C>
OPERATIONS:
Net investment income (Note 2)........... $ 3,839,479 $ 1,178,235
Net realized loss from security
transactions........................... (1,952,399) (2,179,993)
Net change in unrealized appreciation
of investments......................... 7,936,118 1,423,853
----------- ------------
Net increase in net assets resulting
from operations...................... 9,823,198 422,095
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS -
INSTITUTIONAL SHARES (NOTE 2):
From net investment income ($0.33 and
$0.10 per share, respectively)......... (3,778,062) (1,186,472)
From net capital gains ($0.00 and $0.77
per share, respectively)............... (37,013) (9,104,451)
From tax return of capital ($0.18 and
$0.11 per share, respectively)......... (2,081,064) (1,301,682)
DISTRIBUTIONS TO SHAREHOLDERS - ADVISOR
SHARES (NOTE 2):
From net investment income ($0.23
and $0.00 per share, respectively)..... (69,725) _
From net capital gains ($0.00 and
$0.00 per share, respectively)......... (683) _
From tax return of capital ($0.13
and $0.00 per share, respectively)..... (38,406) _
----------- ------------
Total distributions paid to
shareholders......................... (6,004,953) (11,592,605)
----------- ------------
CAPITAL SHARE TRANSACTIONS:
Receipt from Institutional Shares sold 16,694,861 5,006,204
Receipt from Institutional Shares issued
on reinvestment of distributions....... 3,002,158 6,867,624
Institutional Shares redeemed............ (33,136,352) (11,402,549)
Receipt from Advisor Shares sold......... 10,634,266 _
Receipt from Advisor Shares issued on
reinvestment of distributions.......... 72,560 _
Advisor Shares redeemed.................. (5,442,423) _
----------- ------------
Increase (decrease) in net assets
resulting from capital share
transactions........................... (8,174,930) 471,279
----------- ------------
TOTAL DECREASE IN NET ASSETS......... (4,356,685) (10,699,231)
NET ASSETS:
Beginning of period $105,568,634 $116,267,865
------------ ------------
End of period (including undistributed
net investment income of $0 and
$8,308, respectively)................ $101,211,949 $105,568,634
============ ============
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST WERE:
Institutional Shares sold.............. 2,056,156 579,574
Institutional Shares issued on
reinvestment of distributions........ 368,561 838,537
Institutional Shares redeemed.......... (4,093,559) (1,291,748)
Advisor Shares sold.................... 1,276,166 _
Advisor Shares issued on reinvestment
of distributions..................... 8,519 _
Advisor Shares redeemed................ (648,167) _
------------ ------------
Net increase (decrease) in shares...... (1,032,324) 126,363
Shares outstanding - Beginning balance. 12,726,759 12,600,396
------------ ------------
Shares outstanding - Ending balance.... 11,694,435 12,726,759
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE> 69
HEITMAN REAL ESTATE FUND
- ------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
The table below sets forth financial data for a share of beneficial interest
outstanding throughout each fiscal period presented.
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
FOR
FOR THE THE THREE-
FISCAL MONTH
YEAR PERIOD FOR THE FISCAL YEARS ENDED
ENDED ENDED SEPTEMBER 30,
DEC. 31, DEC. 31, ---------------------------------------
1995 1994 1994 1993 1992 1991
------- -------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $ 8.30 $ 9.23 $10.95 $ 8.29 $ 7.66 $ 6.99
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.... 0.33(a) 0.10(a) 0.32(a) 0.40 0.45 0.49
Net realized and
unrealized gain(loss)
on investments......... 0.53 (0.05) (0.92) 2.67 0.63 0.67
------ ------ ------ ------ ------ ------
Total from investment
operations......... 0.86 0.05 (0.60) 3.07 1.08 1.16
------ ------ ------ ------ ------ ------
DISTRIBUTIONS
From net investment
income................ (0.33)(a) (0.10)(a) (0.31)(a) (0.41) (0.45) (0.49)
From net realized gain
on investments........... 0.00 (0.77) (0.67) 0.00 0.00 0.00
From tax return of
capital................ (0.18)(b) (0.11)(b) (0.14)(b) 0.00 0.00 0.00
------ ------ ------ ------ ------ ------
Total distributions.. (0.51) (0.98) (1.12) (0.41) (0.45) (0.49)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD................... $ 8.65 $ 8.30 $ 9.23 $10.95 $ 8.29 $ 7.66
====== ====== ====== ====== ====== ======
Total Return............... 10.87% 0.65%(c) (5.22)% 37.76% 14.49% 19.56%
Ratios/Supplemental Data
Net assets, end of period
(in 000's)............ $95,692 $105,569 $116,268 $141,672 $66,521 $54,880
Ratio of expenses to
average net assets..... 1.29% 1.28%* 1.22% 1.24% 1.37% 1.25%
Ratio of net investment
income to average net
assets................. 3.97%(a) 4.35%*(a) 2.87%(a) 4.37% 5.75% 7.36%
Portfolio Turnover....... 65.33% 37.55%* 90.11% 61.47% 28.05% 16.24%
</TABLE>
- --------------------
* Annualized.
(a) Dividend receipts from REIT investments generally may include a return of
capital. For financial reporting purposes, through September 30, 1993,
the Fund recorded all dividend receipts, including the returns of
capital, as net investment income. As more fully explained in Note 2,
the Fund changed its dividend recognition policy during the fiscal year
ended September 30, 1994. The financial highlights for the years ended
September 30, 1991 through 1993 have not been restated.
(b) Historically, the Fund has distributed to its shareholders amounts
approximating dividends received from the REITs. As more fully explained
in Note 2, the Fund, for the fiscal year ended September 30, 1994,
adopted an accounting pronouncement affecting the presentation of
distributions to shareholders. The financial highlights for the years
ended September 30, 1991 through 1993 have not been restated.
(c) The total return for the fiscal period ended December 31, 1994 has not
been annualized.
25
<PAGE> 70
HEITMAN REAL ESTATE FUND
- ------------------------
FINANCIAL HIGHLIGHTS-CONTINUED
- -------------------------------------------------------------------------------
The table below sets forth financial data for a share of beneficial interest
outstanding throughout the fiscal period presented.
ADVISOR SHARES
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 15, 1995
(COMMENCEMENT OF OPERATIONS)
THROUGH DEC. 31, 1995
--------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................... $8.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income............................. 0.23(a)
Net realized and unrealized gain
on investments.................................. 0.80
-------
Total from investment operations........ 1.03
-------
DISTRIBUTIONS
From net investment income........................ (0.23)(a)
From net realized gain on
investments..................................... 0.00
From tax return of capital........................ (0.13)(b)
-------
Total distributions..................... (0.36)
-------
NET ASSET VALUE, END OF PERIOD......................... $8.67
=======
Total Return (c) ...................................... 13.19%(c)
Ratios/Supplemental Data
Net assets, end of period (in 000's).............. $5,520
Ratio of expenses to average net assets........... 1.99%*(d)
Ratio of net investment income to
average net assets.............................. 4.27%*(a)(d)
Portfolio Turnover................................ 65.33%*
</TABLE>
- --------------------
* Annualized.
(a) Dividend receipts from REIT investments generally may include a return of
capital, which the Fund records as a reduction in the cost basis of its
investments.
(b) Historically, the Fund has distributed to its shareholders amounts
approximating dividends received from the REITs. Such distributions may
include a portion which may be a return of capital.
(c) This result does not include the sales charge. If the charge had been
included, the return would have been lower. The total return for the
fiscal period has not been annualized.
(d) The Advisor has agreed to reimburse a portion of the Advisor Shares'
expenses. The annualized expense ratio, had there been no reimbursement
of expenses by the Advisor, would have been 5.34% for the period ended
December 31, 1995. The annualized ratio of net investment income to
average net assets, had there been no reimbursement of expenses by the
Advisor, would have been 0.92% for the period ended December 31, 1995.
26
<PAGE> 71
HEITMAN REAL ESTATE FUND
- ------------------------
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995
- ------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
Heitman Securities Trust (the "Trust") is registered as a diversified open-end
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Trust was organized on September 15, 1988, as a
Massachusetts business trust under a Master Trust Agreement. The Master Trust
Agreement permits the issuance of an unlimited number of shares of beneficial
interest in separate series, with shares of each series representing interests
in a separate portfolio of assets. Heitman Real Estate Fund (the "Fund") was
organized as a series of the Trust on September 15, 1988 and shares of the
Trust representing interests in the Fund were registered with the Securities
and Exchange Commission on January 4, 1989. The Fund's investment objective
is to obtain high total return consistent with reasonable risk by investing
primarily in equity securities of public companies principally engaged in the
real estate business.
The Fund offers two classes of shares (Institutional Shares and Advisor
Shares). Institutional Shares and Advisor Shares are substantially identical,
except that Advisor Shares bear the fees that are payable under a Distribution
Plan adopted by the Board of Trustees ( the "Distribution Plan") at an
annual rate of 0.25% of the average daily net assets of
Advisor Shares. Additionally, the Advisor Shares bear the fees
payable to Service Organizations pursuant to a Shareholder
Servicing Plan at an annual rate of 0.25% of the average daily net
assets of Advisor Shares owned by shareholders with whom the Service
Organizations have a servicing relationship. In addition to the
fees paid pursuant to the Distribution Plan and the Shareholder
Servicing Plan, each class bears the expenses associated with
transfer agent fees and expenses, printing of their shareholder
reports, registration fees, administrative, and accounting fees.
Institutional Shares commenced operations on March 13, 1989 and Advisor
Shares commenced operations on May 15, 1995.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT SECURITIES TRANSACTIONS AND INVESTMENT INCOME
The Fund's investment securities portfolio consists primarily of investments
in public companies engaged in the real estate business. Investment securities
transactions are recorded on a trade date basis. Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Interest
income is recorded on the accrual basis. Realized gains or losses on sales of
investment securities are determined on the first-in, first-out ("FIFO")
basis.
The majority of the dividend income recorded by the Fund is from Real Estate
Investment Trusts ("REITs"). For tax purposes, a portion of these dividends
consists of capital gains and returns of capital. For financial reporting
purposes through September 30, 1993, these dividends were recorded as dividend
income, and the investment in the REIT reported at market value. During the
fiscal year ended September 30, 1994, effective October 1, 1993, the Fund
changed its accounting policy to record the return of capital portion of
dividends received, as provided by the REITs, as a reduction in the cost basis
of its investments in the REITs. This change has no effect on the calculation
of net asset value per share.
Generally, the Fund has distributed to its shareholders amounts approximating
dividends received from the REITs. Accordingly, the Fund's distributions to
shareholders have included the return of capital received from the REITs as
well as returns of capital attributed to distributions of other income for
financial reporting purposes which was not subject to current taxation. In
accordance with Statement of Position 93-2, Determination, Disclosure and
Financial Statement Presentation of Income, Capital Gain and Return of Capital
Distributions by Investment Companies ("SOP"), distributions representing a
return of capital for tax purposes are charged to paid-in capital. The Fund
adopted the SOP, effective October 1, 1993, the cumulative effect of which
resulted in a reduction of paid-in capital of $2,751,000, and
27
<PAGE> 72
HEITMAN REAL ESTATE FUND
- ------------------------
NOTES TO FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 1995
- ------------------------------------------------------------------------------
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES-CONTINUED
increases to accumulated undistributed income and realized gains of
$1,584,000 and $1,167,000, respectively. These adjustments had no
impact on the net asset value of the Fund.
The financial highlights for prior periods have not been restated to reflect
the change in accounting policy for recognizing dividends received or the
change in presentation for distributions to shareholders under SOP 93-2. For
the fiscal years September 30, 1993, 1992, 1991 and 1990, the return of
capital portion of such distributions amounted to approximately 27%, 23%, 23%
and 26%, respectively, which was determined by notifications from the REITs in
prior periods.
INVESTMENT SECURITIES VALUATION
Investment securities traded on a national securities exchange are valued at
the last reported sales price on the day of valuation. If there has been no
sale, the investment security is valued at the average between the closing bid
and closing offer quoted on such day. Investment securities traded only in the
over-the-counter market are valued at the last price reported on the National
Market System, or, if the security is not reported on the National Market
System, at the last reported bid on such day. Convertible bonds for which
there has been no sale are valued based on the market value of the underlying
security and the conversion factor. Otherwise, the investment security is
valued by such method as the Trustees shall determine in good faith to reflect
its fair market value.
Because the Fund may invest a substantial portion of its assets in REITs, the
Fund may also be subject to certain risks associated with direct investments
in REITs. REITs may be affected by changes in the value of their underlying
properties and by defaults by borrowers or tenants. Furthermore, REITs are
dependent upon specialized management skills, have limited diversification and
are, therefore, subject to risks inherent in financing a limited number of
projects. REITs depend generally on their ability to generate cash flow to
make distributions to shareholders, and certain REITs have self-liquidation
provisions by which mortgages held may be paid in full and distributions of
capital returns may be made at any time. In addition, the performance of a
REIT may be affected by its failure to qualify for tax-free pass-through of
income under the Internal Revenue Code or its failure to maintain exemption
from registration under the 1940 Act.
Effective May 14, 1992, Grubb & Ellis Realty Trust ("GRIT") completed its
dissolution by transferring all its remaining assets to a liquidating trust.
On the date of the dissolution, GRIT's shares were canceled and replaced by
beneficial interests in a liquidating trust, which are not transferable.
Disclosed in the annual report of GRIT dated December 31, 1991, were an
estimated remaining proceeds per share of $4.17 for the liquidating trust. The
last publicly quoted price on a national securities exchange for GRIT was
$3.00 per share. On March 25, 1994, the Fund received a distribution from GRIT
in the amount of $369,915, representing $1.95 for each share of the GRIT
liquidating trust held by the Fund. The Trustees have determined that the
Fund's ownership in the liquidating trust should be valued at $1.05 per share.
At December 31, 1995, the Fund owned 189,700 shares of the GRIT liquidating
trust for a value of $199,185.
INCOME TAXES
The Fund intends to qualify each year as a "regulated investment company"
under Subchapter M of the Internal Revenue Code of 1986, as amended. As a
regulated investment company, the Fund will be entitled to claim a dividends
paid deduction for distributions of income and capital gains to shareholders.
Accordingly, the Fund will not be liable for federal income taxes to the
extent its taxable investment income and net realized capital gains are fully
distributed to shareholders.
The Fund is also subject to a nondeductible 4% excise tax calculated as a
percentage of certain undistributed amounts of net investment income and net
capital gains. The Fund intends to distribute its net investment income and
capital gains as necessary to avoid this excise tax. Therefore, no federal
income or excise tax provisions are required. At December
28
<PAGE> 73
HEITMAN REAL ESTATE FUND
- ------------------------
NOTES TO FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 1995
- ------------------------------------------------------------------------------
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES-CONTINUED
31, 1995, the Fund had losses deferred due to "wash sales"
transactions of approximately $397,000. The Fund offers two
classes of shares. The Internal Revenue Service has not issued
formal guidance concerning the circumstances in which the allocation of
class specific expenses may result in a fund's distributions being
deemed preferential. Under the Internal Revenue Code, a fund that makes
preferential distributions will not qualify for the dividends paid
deduction. In management's opinion, the fund's distributions to its
respective classes are not preferential within the meaning of the
Internal Revenue Code. Accordingly, the accompanying financial
statements do not include any provision for tax liabilities, on
distributions to the Fund's classes, which amount would be less than 1%
of the Fund's net assets at December 31, 1995.
The Fund has a net tax basis capital loss carryforward of approximately
$3,735,000 as of December 31, 1995, which may be applied against any realized
net taxable capital gains of each succeeding fiscal year until fully utilized
or until the expiration date, whichever occurs first. The carryforward
expires as follows: approximately $2,179,000 on December 31, 2002 and
approximately $1,556,000 on December 31, 2003.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that effect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
EXPENSES
All expenses of the Fund (other than transfer agent fees and expenses, reports
to shareholder expenses, registration and filing fees, administrative and
accounting fees, expenses incurred under the Distribution Plan, and expenses
incurred under the Shareholder Servicing Plan) are allocated to each class on
the basis of the net asset value of that class in relation to the net asset
value of the Fund.
NOTE 3 - INVESTMENT SECURITIES
For the fiscal year ended December 31, 1995, the cost of purchases and the
proceeds from sales of investment securities (excluding short-term
investments) aggregated $62,015,833 and $70,148,394, respectively. Cost for
federal income tax purposes is $89,568,863 and unrealized appreciation
consists of:
<TABLE>
<S> <C>
Gross unrealized appreciation $9,966,623
Gross unrealized depreciation (627,061)
----------
Net unrealized appreciation $9,339,562
==========
</TABLE>
NOTE 4 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund entered into an Investment Management Agreement (the "Agreement")
with Heitman/PRA Securities Advisors, Inc. (the "Advisor") on January 31,
1995. The Advisor is a wholly owned subsidiary of Heitman Financial Ltd.
("Heitman"), a wholly owned subsidiary of United Asset Management Corporation.
The Fund pays the Advisor a fee for its services, calculated daily and paid
monthly, at the annual rate of 0.75% of the Fund's first $100 million of
average daily net assets and 0.65% of the average daily net assets of the Fund
in excess of $100 million, excluding assets invested in any money market
mutual fund. The Agreement provides that in the event total expenses of the
Fund (exclusive of interest, taxes, brokerage expenses, distribution expenses
and extraordinary items) for any fiscal year of the Fund exceed (i) 1.75% of
the Fund's average net assets up to $50 million or (ii) 1.50% if the Fund's
average net
29
<PAGE> 74
HEITMAN REAL ESTATE FUND
- ------------------------
NOTES TO FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 1995
- ------------------------------------------------------------------------------
NOTE 4 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES-CONT.
assets exceed $50 million, the Advisor will pay or reimburse the Fund
for that excess up to the amount of its advisory fee during that fiscal
year.
Prior to January 31, 1995, PRA Securities Advisors, L.P. (the "Prior Advisor")
served as the Fund's advisor pursuant to an Investment Management Agreement
whose terms were substantially the same as the Fund's current Agreement with
the Advisor.
From the commencement of operations (March 13, 1989) through December 2, 1990,
the administrative, accounting and bookkeeping services were provided to the
Fund by the Prior Advisor, while transfer agent services were provided by the
Trust, all costs for which were borne by the Prior Advisor. For the period
December 3, 1990 through September 30, 1991, transfer agent services were
provided to the Fund by Fund/Plan Services, Inc. ("FPS") with the cost being
borne by the Fund. During the period December 3, 1990 through September 18,
1991, the Prior Advisor subcontracted with FPS to perform administrative,
accounting and bookkeeping services to the Fund, at the Prior Advisor's cost.
Under the terms of an administrative services agreement between the Trust and
FPS, effective September 19, 1991, administrative, accounting and bookkeeping
services were provided by FPS with the costs borne by the Fund.
On November 19, 1993, the Board of Trustees elected not to renew the agreement
between the Fund and FPS. Effective December 4, 1993, all services previously
contracted to FPS are now being performed by Rodney Square Management
Corporation ("Rodney Square"), a wholly owned subsidiary of Wilmington Trust
Company ("WTC"), which is wholly owned by Wilmington Trust Corporation, a
publicly held bank holding company. For accounting services provided, Rodney
Square receives an annual fee of $45,000 plus an amount equal to 0.02% of that
portion of the Institutional shares' average daily net assets for the year in
excess of $100 million, plus any out-of-pocket expenses. In addition, for
accounting services provided, Rodney Square also receives an amount equal to
0.02% of the Fund's average daily net assets with respect to the Advisor
Shares, subject to a minimum annual fee of $25,000, plus any out-of-pocket
expenses. Also, for administrative services provided, Rodney Square receives
a monthly administration fee from the Fund at an annual rate of 0.10% of the
Fund's average daily net assets, plus any out-of-pocket expenses.
Additionally, for administrative services provided, the Advisor shares are
subject to a minimum annual fee of $25,000. Finally, effective January 3,
1994, all transfer agent services previously contracted to FPS are now being
performed by Rodney Square.
The Fund has adopted a Distribution Plan for the Advisor Shares in accordance
with the regulations under the 1940 Act. Under the provisions of the
Distribution Plan, the Fund makes payments to ACG Capital Corporation, the
distributor for the Advisor Shares ( "ACG" or the "Distributor") at an annual
rate of 0.25% of the daily net assets of Advisor Shares of the Fund as a
distribution fee. The distribution fees are used by the Distributor to
finance activities primarily intended to result in the sale of Advisor Shares
of the Fund. During the fiscal year ended December 31, 1995, fees paid to the
Distributor amounted to $2,985.
The Fund has also adopted a Shareholder Servicing Plan for the Advisor Shares.
Pursuant to the Shareholder Servicing Plan, the Trust contracts with Service
Organizations to provide a variety of shareholder services, such as
maintaining shareholder accounts and records, answering inquiries regarding
the Fund, and processing purchase and redemption orders. The Fund pays fees
to Service Organizations in amounts up to an annual rate of 0.25% of the daily
net asset value of Advisor Shares owned by shareholders with whom the Service
Organization has a servicing relationship. During the fiscal year ended
December 31, 1995, fees paid to Service Organizations amounted to $2,985.
30
<PAGE> 75
HEITMAN REAL ESTATE FUND
- ------------------------
NOTES TO FINANCIAL STATEMENTS-CONTINUED DECEMBER 31, 1995
- ------------------------------------------------------------------------------
NOTE 5 - REMUNERATION OF TRUSTEES
Independent Trustees are each paid an annual fee of $10,000, plus $1,000 per
meeting attended or $500 for participation by telephone, plus travel expenses
in connection with meetings. Independent Trustees are Robert W. Beeney, Donald
L. Foote, Maurice Wiener, John F. Goydas and George C. Weir. Mr. Weir is
voluntarily waiving his fees.
Certain officers and trustees of the Fund are also officers and/or affiliates
of the Advisor and certain shareholders.
NOTE 6 - THE CUSTODIAN AGREEMENT
WTC serves as Custodian of the assets of the Fund, pursuant to an agreement
dated December 6, 1993.
NOTE 7 - CHANGE IN FISCAL YEAR-END
On December 5, 1994, the Board of Trustees of the Fund voted to change the
fiscal year-end of the Fund from September 30th to December 31st. This change
was implemented beginning with the three-month period ended December 31, 1994.
31
<PAGE> 76
HEITMAN REAL ESTATE FUND
- ------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- ------------------------------------------------------------------------------
To the Shareholders and Trustees of Heitman Real Estate Fund:
We have audited the accompanying statement of assets and liabilities of
Heitman Real Estate Fund, including the schedule of investments, as of
December 31, 1995, and the related statement of operations, statements of
changes in net assets and financial highlights for the periods presented.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Heitman Real Estate Fund as of December 31, 1995, the results of its
operations, changes in its net assets, and financial highlights for the
periods presented, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Philadelphia, PA
February 26, 1996
32
<PAGE> 77
HEITMAN REAL ESTATE FUND
- ------------------------
DIVIDEND NOTICES DECEMBER 31, 1995
- ------------------------------------------------------------------------------
The following information is required by section 854(b)(2) of the Internal
Revenue Code and is based on the Fund's tax year January 1, 1995 through
December 31, 1995:
INSTITUTIONAL CLASS SHARES
<TABLE>
<CAPTION>
ORDINARY INCOME
DISTRIBUTIONS PER SHARE
----------------------- LONG TERM
TOTAL FROM FROM RETURN OF CAPITAL
DATE DIVIDEND INVESTMENT SHORT TERM CAPITAL GAINS
PAID PER SHARE INCOME CAPITAL GAINS PER SHARE PER SHARE
- -------- --------- ---------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C>
03/30/95 $0.133 $0.085 $0.000 $0.047 $0.001
06/29/95 $0.132 $0.084 $0.000 $0.047 $0.001
09/29/95 $0.114 $0.073 $0.000 $0.041 $0.000
12/29/95 $0.128 $0.082 $0.000 $0.045 $0.001
</TABLE>
ADVISOR CLASS SHARES
<TABLE>
<CAPTION>
ORDINARY INCOME
DISTRIBUTIONS PER SHARE
----------------------- LONG TERM
TOTAL FROM FROM RETURN OF CAPITAL
DATE DIVIDEND INVESTMENT SHORT TERM CAPITAL GAINS
PAID PER SHARE INCOME CAPITAL GAINS PER SHARE PER SHARE
- -------- --------- ---------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C>
06/29/95 $0.132 $0.082 $0.000 $0.050 $0.000
09/29/95 $0.110 $0.070 $0.000 $0.039 $0.001
12/29/95 $0.120 $0.077 $0.000 $0.042 $0.001
</TABLE>
By now shareholders to whom year-end tax reporting is required by the IRS
should have received their Form 1099-DIV from the Fund. Form 1099-DIV
provides you with the nature and dollar amounts of all distributions paid in
calendar year 1995 and should be used to complete your 1995 tax return.
33
<PAGE> 78
HEITMAN SECURITIES TRUST
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Included in the Heitman/PRA Institutional Class Prospectus (Part
Financial Highlights for the Fiscal Year Ended
December 31, 1995, for the Three-Month Period Ended
December 31, 1994, Years Ended September 30, 1994,
1993, 1992, 1991 and 1990 and the Period January 4,
1989 (Effective Date) to September 30, 1989
Included in the Advisor Class Prospectus (Part A):
Financial Highlights for the period May 15, 1995
(Commencement of Operations through December 31, 1995
(Advisor Class), for the Fiscal Year ended December
31, 1995, the Three-Month Period Ended December 31,
1994, Years Ended September 30, 1994, 1993, 1992, 1991
and 1990 and the Period January 4, 1989 (Effective
Date) to September 30, 1989 (Institutional Class)
Included in the Statement of Additional Information (Part B):
(i) Report of Independent Public Accountants dated
February 26, 1996 (Except as noted)
(ii) Audited Financial Statements of Heitman
Real Estate Fund for the Fiscal Year Ended December 31, 1995
Included in Part C:
Consent of Independent Public Accountants
(b) Exhibits:
Exhibit No. Description of Exhibit
----------- ----------------------
1(a) First Amended and Restated Master Trust
Agreement dated February 28, 1995. (Incorporated by
reference to Post-Effective Amendment No. 9 to the
Registration Statement on Form N-1A, File No. 33-24611
(the "Registration Statement) filed March 16, 1995.)
1(b) Amendment No. 1 to First Amended and
Restated Master Trust Agreement dated March 3, 1995.
(Incorporated by reference to Post-Effective Amendment
No. 9 to the Registration Statement filed March 16,
1995.)
<PAGE> 79
HEITMAN SECURITIES TRUST
PART C
OTHER INFORMATION -continued
Item 24. FINANCIAL STATEMENTS AND EXHIBITS-continued
1(c) Amendment No. 2 to First Amended and Restated Master
Trust Agreement effective as of August 7, 1995.
2 By-Laws. (Incorporated by reference to initial
filing of Registration Statement No. 33-24611.)
3 Not Applicable.
4(a) Specimen Certificate for Shares of Beneficial
Interest of Heitman Real Estate Fund - Heitman/PRA
Institutional Class. (Incorporated by reference to
Post-Effective Amendment No. 9 to the Registration
Statement filed on March 16, 1995.)
5 Investment Management Agreement between the
Registrant and PRA Securities Advisors, Inc.
("Heitman/PRA Advisors") dated as of January 31, 1995.
(Incorporated by reference to Post-Effective
Amendment No. 9 to the Registration Statement filed
on March 16, 1995.)
6(a) Distribution Agreement between the Registrant
and Rodney Square Distributors, Inc. dated as of
December 3, 1993 with respect to the Institutional
Class. (Incorporated by reference to Post-Effective
Amendment No. 6 to the Registration Statement filed
on December 3, 1993.)
6(b) Distribution Agreement between the Registrant and
ACG Capital Corporation ("ACG") with respect to the
Advisor Class dated May 15, 1995.
6(c) Form of Selected Broker Agreement with respect to
the Advisor Class. (Incorporated by reference to
Post-Effective Amendment No. 9 to the Registration
Statement filed on March 16, 1995.)
6(d) Sub-Distributor Agreement by and between ACG and the
Nomura Securities, Co., Ltd. dated as of August 22,
1995.
7 Not Applicable.
8 Custody Agreement between the Registrant and
Wilmington Trust Company. (Incorporated by reference
to Post-Effective Amendment No. 6 to the Registration
Statement filed on December 3, 1993.)
9(a) Transfer Agency Agreement between the Registrant and
Rodney Square Management Corporation dated December
3, 1993 with Form of Amended Schedule D.
(Incorporated by reference to Post-Effective
Amendment No. 9 to the Registration Statement filed
on March 16, 1995.)
2
<PAGE> 80
HEITMAN SECURITIES TRUST
PART C
OTHER INFORMATION -continued
Item 24. FINANCIAL STATEMENTS AND EXHIBITS-continued
9(b) Administration Agreement between the Registrant
and Rodney Square Management Corporation dated
December 3, 1993 with Form of Amended Schedule A.
(Incorporated by reference to Post-Effective
Amendment No. 9 to the Registration Statement filed
on March 16, 1995.)
9(c) Accounting Services Agreement between the
Registrant and Rodney Square Management Corporation
dated December 3, 1993 with Form of Amended Schedule
A. (Incorporated by reference to Post-Effective
Amendment No. 9 to the Registration Statement filed
on March 16, 1995.)
9(d) Amended Marketing Services Agreement by and
between Heitman/PRA Advisors dated as of March 11,
1996.
10(a) Opinion of Counsel with respect to issuance of
both Heitman/PRA Institutional Class and Advisor
Class shares. (Incorporated by reference to
Post-Effective Amendment No. 9 to the Registration
Statement filed on March 16, 1995.)
10(b) Consent of Counsel
11 Consent of Independent Public Accountants.
12 Not Applicable.
13 Letter of Investment Intent. (Incorporated by
reference to Pre-Effective Amendment No. 2 to the
Registration Statement.)
14 Not Applicable.
15(a) Plan of Distribution Pursuant to Rule 12b-1
with respect to the Advisor Class.
15(b) Shareholder Servicing Plan (Advisor Class Shares).
15(c) Form of Shareholder Servicing Agreement (Advisor
Class Shares).
3
<PAGE> 81
HEITMAN SECURITIES TRUST
PART C
OTHER INFORMATION -continued
Item 24. FINANCIAL STATEMENTS AND EXHIBITS-continued
15(d) Form of Shareholder Servicing Agreement for Omnibus
Account Arrangements (Advisor Class shares).
15(e) Form of Shareholder Servicing Agreement for Omnibus
Account Arrangements (Institutional Class shares).
15(f) Form of Operating Agreement by and between the
Registrant, Charles Schwab & Co., Inc. ("Schwab")
dated as of August 30, 1995, as amended by
Retirement Plan Order Processing Amendment dated as
of March 25, 1996 by and among the Registrant, Schwab
and the Charles Schwab Trust Company.
15(g) Institutional Services Agreement by and between the
Registrant and Schwab dated as of August 30, 1995.
16 Schedule of Performance Calculations.
17 Financial Data Schedules.
18 Multiple Class Expense Allocation Plan Adopted
Pursuant to Rule 18f-3 dated of January 1, 1996.
Powers of Attorney (Included as part of Signature Page).
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
Item 26. NUMBER OF HOLDERS OF SECURITIES
Set forth below are the number of record holders, as of April 22,
1996 of each class of securities of the Registrant:
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
Heitman/PRA Institutional Class 1448
Advisor Class 307
</TABLE>
4
<PAGE> 82
HEITMAN SECURITIES TRUST
PART C
OTHER INFORMATION -continued
Item 27. INDEMNIFICATION
Under a provision of the Registrant's First Amended and Restated Master
Trust Agreement and Declaration of Trust (the "Declaration of Trust"), any past
or present trustee or officer of the Registrant is indemnified to the fullest
extent permitted by law against liability and all expenses reasonably incurred
by him/her in connection with any action, suit or proceeding to which he/she
may be a party or otherwise involved by reason of his being or having been a
trustee or officer of Registrant. This provision does not authorize
indemnification where it is determined, in the manner specified in the
Declaration of Trust, that such trustee or officer has not acted in good faith
in the reasonable belief that his actions were in the best interest of
Registrant. Moreover, this provision does not authorize indemnification where
such trustee or officer is finally adjudged to have been liable to Registrant
or its shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of his duties.
Paragraph 8 of the Investment Management Agreement (the "Management
Agreement") between Registrant and Heitman/PRA Advisors (the "Advisor")
provides that the Advisor shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust or its shareholders in
connection with the performance of its duties under the Management Agreement in
the absence of willful misfeasance, bad faith or gross negligence or reckless
disregard of his duties. Paragraph 11 states that the obligations of the Trust
under the Management Agreement shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents or employees of the Trust personally,
but shall bind only the trust property of the Trust, as provided in the
Declaration of Trust.
Item 27. INDEMNIFICATION (continued)
Paragraph 10(a) of the Distribution Agreement (the "Heitman/PRA
Distribution Agreement") between the Registrant and Rodney Square Distributors,
Inc. ("RSD") provides that the Registrant agrees to indemnify and hold harmless
RSD and each of its directors and officers and each person, if any, who
controls RSD within the meaning of Section 15 of the Securities Act of 1933
(the "1933 Act") against any loss, liability, claim, damages or expense arising
by reason of any person acquiring any shares, based upon the 1933 Act or any
other statute or common law, alleging any wrongful act of the Registrant or any
of its employees or representatives, or based upon the ground that the
registration statements, or other information filed or made public by the
Registrant included an untrue statement of a material fact or omitted to state
a material fact required to be stated or necessary in order to make the
statements not misleading. RSD, however, will not be indemnified to the extent
that the statement or omission is based on information provided in writing by
RSD. In no case is the indemnity of the Registrant in favor of RSD or any
person indemnified to be deemed to protect RSD or any person against any
liability to the Registrant or its security holders to which RSD or such person
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Heitman/PRA Distribution
Agreement. Paragraph 10(b) of the Heitman/PRA Distribution Agreement provides
that RSD agrees to indemnify the Registrant in the same manner as described in
Paragraph 10(a) of the Heitman/PRA Distribution Agreement. Paragraph 15 of the
Heitman/PRA Distribution Agreement is similar to Paragraph 11 of the Management
Agreement.
Paragraph 10(a) of the Distribution Agreement (Advisor Class Shares) (the
"Advisor Class Distribution Agreement") between the Registrant and ACG Capital
Corporation ("ACG") states that the Registrant agrees to indemnify and hold
harmless ACG and each of its directors and officers and each person, if any,
who controls ACG within the meaning of Section 15 of the 1933 Act against any
loss, liability, claim, damages or expense (including
5
<PAGE> 83
HEITMAN SECURITIES TRUST
PART C
OTHER INFORMATION -continued
the reasonable cost of investigating or defending any alleged loss, liability,
claim, damages or expense and reasonable counsel fees) arising out of or based
upon: (i) any violation of the Registrant's representations or covenants
contained in the Advisor Class Distribution Agreement; (ii) any allegation of
any wrongful act of the Registrant or any of its representatives (other than
ACG or any of its employees or representatives or any other person for whose
acts ACG is responsible (including any selected dealer or person through whom
sales are made pursuant to an agreement with ACG)); (iii) any allegation of any
person acquiring any shares, based upon the 1933 Act or any other statute or
common law, that the registration statements, Prospectuses, SAIs, or
shareholder reports of the Registrant included an untrue statement of a
material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements not misleading, to the extent the
statement or omission was made in reliance upon, and in conformity with,
information furnished in writing to the Registrant by or on behalf of ACG; or
(iv) any allegation that any advertising material included an untrue statement
of a material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements not misleading, to the extent that
such statement or omission was made in reliance upon, and in conformity with,
information furnished in writing to ACG by the Registrant. In no case is the
indemnity of the Registrant in favor of ACG or any person indemnified to be
deemed to protect ACG or any person against any liability to the Registrant or
its security holders to which ACG or such person would otherwise be subject by
reason of willful misfeasance, bad faith or ordinary negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under the Advisor Class Distribution Agreement.
Paragraph 10(b) of the Advisor Class Distribution Agreement provides that ACG
agrees to indemnify the Registrant in the same manner as described in Paragraph
10(a) of the Advisor Class Distribution Agreement. Paragraph 16 of the Advisor
Class Distribution Agreement is similar to Paragraph 11 of the Management
Agreement.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The list required by this Item 28 of officers and directors of Heitman/PRA
Advisors, together with information as to any other business profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to Schedules
A and D of FORM ADV filed by Heitman/PRA Advisors pursuant to the Investment
Advisers Act of 1940 (SEC File No. 801-48252).
Item 29. PRINCIPAL UNDERWRITER (Heitman/PRA Institutional Class)
(a) The Rodney Square Fund
The Rodney Square Tax-Exempt Fund
The Rodney Square Strategic Fixed-Income Fund
The Rodney Square Multi-Manager Fund
The Rodney Square International Securities Fund, Inc.
Kiewit Mutual Fund
The Dracena Funds, Inc.
1838 Investment Advisors Funds
The HomeState Group
The Olstein Funds
6
<PAGE> 84
HEITMAN SECURITIES TRUST
PART C
OTHER INFORMATION -continued
(b) The Principal Business Address for the Officers and
Directors of Rodney Square Distributors, Inc. is: 1100 North
Market Street, Wilmington, DE 19890-0001.
<TABLE>
<CAPTION>
(1) (2) (3)
Name and Principal Position and Offices with Position and Offices
Business Address Rodney Square Distributors, Inc. with Registrant
------------------- -------------------------------- --------------------
<S> <C> <C>
Jeffrey O. Stroble President, Secretary, None
Treasurer & Director
Martin L. Klopping Director None
Cornelius G. Curran Vice President None
</TABLE>
(c) None.
PRINCIPAL UNDERWRITER (Advisor Class)
(a) None.
(b)
<TABLE>
<CAPTION>
(1) (2) (3)
Name and Principal Position and Offices with Position and Offices
Business Address ACG Capital Corporation with Registrant
----------------------- ------------------------- --------------------
<S> <C> <C>
Ronald D. Cordes President/CEO & Director None
1661 Tice Valley Blvd.
Suite 200
Walnut Creek CA 94595
Richard E. Steiny Secretary/Treasurer None
1255 Post Street & Director
Suite 700
San Francisco, CA 94109
Richard T. O'Toole Vice President & Director None
100 Galleria Parkway
Suite 1200
Atlanta, GA 30339
Brian R. O'Toole Vice President & Director None
100 Galleria Parkway
Suite 1200
Atlanta, GA 30339
</TABLE>
(c) None.
7
<PAGE> 85
HEITMAN SECURITIES TRUST
PART C
OTHER INFORMATION -continued
Item 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books, records and other documents of the Registrant
relating to portfolio transactions are maintained at the offices of the
Registrant at 180 North LaSalle Street, Suite 3600, Chicago, IL 60601, the
offices of Heitman/PRA Advisors, the Investment Manager, 180 North LaSalle
Street, Suite 3600, Chicago, IL 60601 except certain custodial records which
are maintained at the offices of Wilmington Trust Company, the Custodian, at
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
and certain accounts and records relating to administration, accounting and
transfer agent services which are maintained by Rodney Square Management
Corporation at Rodney Square North, 1100 North Market Street, Wilmington,
Delaware 19890-0001.
Item 31. MANAGEMENT SERVICES
Not applicable.
Item 32. UNDERTAKINGS
1. Registrant undertakes to call a meeting of shareholders for the purpose
of voting upon the question of removal of one or more Trustees when requested
in writing to do so by the holders of at least 10% of the Trust's outstanding
shares, and in connection with such meeting to comply with the provisions of
Section 16(c) of the Investment Company Act of 1940 relating to shareholder
communications.
2. Registrant hereby undertakes to furnish a copy of the Registrant's
latest Annual Report to Shareholders to each person to whom a copy of the
registrant's Prospectus is delivered, upon request and without charge.
8
<PAGE> 86
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Heitman Securities Trust,
certifies that this Post-Effective Amendment to its Registration Statement
meets all of the requirements for effectiveness pursuant to Rule 485(b) under
the Securities Act of 1933 and the Registrant further certifies that it has
duly caused this Post-Effective Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Chicago, Illinois the 26th day of April, 1996.
HEITMAN SECURITIES TRUST
By: /s/ William Ramseyer
------------------------------
William L. Ramseyer, President
Pursuant to the requirements of the Securities Act of 1933, this Post
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ William L. Ramseyer President (Principal Executive April 26, 1996
- ------------------------------------------- Officer) and Trustee
William L. Ramseyer
/s/ Dean A. Sotter Vice President, Chief April 26, 1996
- ------------------------------------------- Accounting Officer
Dean A. Sotter and Treasurer (Principal Accounting
and Financial Officer)
/s/ Rober W. Beeney Trustee April 26, 1996
- -------------------------------------------
Robert W. Beeney *
/s/ Robert W. Beeney Trustee April 26, 1996
- -------------------------------------------
Donald L. Foote *
/s/ John F. Goydas Trustee April 26, 1996
- -------------------------------------------
John F. Goydas *
/s/ George C. Weir Trustee April 26, 1996
- -------------------------------------------
George C. Weir *
/s/ Maurice Wiener Trustee April 26, 1996
- -------------------------------------------
Maurice Wiener *
* By: /s/ Dean A. Sotter
--------------------------------------------------
Dean A. Sotter
</TABLE>
<PAGE> 87
POWER OF ATTORNEY
Each of the undersigned in his capacity as a Trustee or officer, or
both, as the case may be, of the Registrant, does hereby appoint Dean A. Sotter
and Laurie V. Brooks, and each of them, or jointly, his true and lawful
attorney and agent to execute in his name, place and stead (in such capacity)
any and all post-effective amendments to the Registration Statement and all
instruments necessary or desirable in connection therewith, to attest the seal
of the Registrant thereon and to file the same with the Securities and Exchange
Commission. Each of said attorneys and agents have power and authority to do
and perform in the name and on behalf of each of the undersigned, in any and
all capacities, every act whatsoever necessary or advisable to be done in the
premises as fully and to all intents and purposes as each of the undersigned
might or could do in person, hereby ratifying and approving the act of said
attorneys and agents and each of them.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Robert W. Beeney
- ----------------------
Robert W. Beeney Trustee March 25, 1996
/s/ Donald L. Foote
--------------------
Donald L. Foote Trustee March 25, 1996
/s/ John F. Goydas Trustee March 25, 1996
- --------------------
John F. Goydas
/s/ William L. Ramseyer Trustee and March 25, 1996
- ------------------------- Chairman of the Board
William L. Ramseyer
/s/ George C. Weir
- ---------------------
George C. Weir Trustee March 25, 1996
/s/ Maurice Wiener
- --------------------
Maurice Wiener Trustee March 25, 1996
</TABLE>
<PAGE> 88
File No. 33-24611
File No. 811-5659
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 10
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 12
TO THE REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
HEITMAN SECURITIES TRUST
<PAGE> 89
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page Number
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1(c) Amendment No. 2 to First Amended and Restated Master Trust Agreement 1(c)
effective as of August 7, 1995.
6(b) Distribution Agreement between the Registrant and ACG Capital Corporation
("ACG") with respect to the Advisor Class dated May 15, 1995. 6(b)
6(d) Sub-Distributor Agreement by and between ACG and the Nomura Securities,
Co., Ltd. dated as of August 22, 1995. 6(d)
9(d) Marketing Services Agreement by and between Heitman/PRA Advisors dated
as of May 15, 1995. 9(d)
10(b) Consent of Counsel 10(b)
11 Consent of Independent Public Accountants. 10(b)
15(a) Plan of Distribution Pursuant to Rule 12b-1 with respect to the Advisor
Class. 11
15(b) Shareholder Servicing Plan (Advisor Class Shares). 15(b)
15(c) Form of Shareholder Servicing Agreement (Advisor Class Shares). 15(c)
15(d) Form of Shareholder Servicing Agreement for Omnibus Account Arraignments 15(c)
(Advisor Class shares).
15(e) Form of Shareholder Servicing Agreement for Omnibus Account Arraignments 15(e)
(Institutional Class shares).
15(f) Form of Operating Agreement by and between the Registrant, Charles Schwab
& Co., Inc. ("Schwab") dated as of August 30, 1995, as amended by
Retirement Plan Order Processing Amendment dated as of March 25, 1996 by
and among the Registrant, Schwab and the Charles Schwab Trust Company. 15(f)
15(g) Institutional Services Agreement by and between the Registrant and Schwab 15(g)
dated as of August 30, 1995.
16 Schedule of Performance Calculations. 16
17 Financial Data Schedules. 17
18 Multiple Class Expense Allocation Plan Adopted Pursuant to
Rule 18f-3 dated of January 1, 1996. 18
</TABLE>
<PAGE> 1
Exhibit 1(c)
HEITMAN SECURITIES TRUST
AMENDMENT NO. 2
TO
FIRST AMENDED AND RESTATED MASTER TRUST AGREEMENT
AMENDMENT NO. 2 to the First Amended and Restated Master Trust
Agreement of Heitman Securities Trust (the "Trust") dated February 28, 1995
(the "Agreement"), effective as of the 7th day of August, 1995.
W I T N E S S E T H:
WHEREAS, Section 7.3 of the Agreement provides that the Agreement may
be amended at any time, so long as such amendment does not adversely affect the
rights of any shareholder and so long as such amendment is not in contravention
of applicable law, including the Investment Company Act of 1940, by an
instrument in writing signed by a majority of the Trustees; and
WHEREAS, the Trustees desire to make shares of the Advisor Class
representing interests in the Heitman Real Estate Fund available for sale in
Japan; and
WHEREAS, to comply with the requirements of applicable Japanese laws,
it is necessary to amend the Agreement as set forth in this Amendment No. 2.
NOW, THEREFORE, effective as of the date set forth above, the
Agreement is hereby amended as follows:
1. Amendment to Section 4.2(i). Section 4.2(i) of the Agreement is
hereby amended by adding to the end of such section the following:
"Notwithstanding the foregoing, the transfer of Shares shall be subject to such
restrictions as may arise under applicable law. From time to time, Shares of a
Sub-Trust or class thereof may be sold to residents of Japan in one or more
private placements, subject to compliance with the requirements of the
Securities and Exchange Law of Japan (such law being referred to herein as the
"Exchange Law" and the Shares sold in compliance with the Exchange Law being
referred to herein as "Foreign Shares"). In accordance with the Exchange Law
and the Ministerial Ordinance Concerning the Definition in Article 2 of the
Exchange Law, Foreign Shares may not be transferred without the consent of a
majority of the Trustees, which consent shall not be granted if, as a result of
such transfer, there would be 50 or more Shareholders (including the underlying
beneficial owners) of the Sub-trust or class thereof who are residents of
Japan."
<PAGE> 2
Exhibit 1(c)
2. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
EXECUTED as of the day and year first above written.
/s/Rober W. Beeney
----------------------------------
Robert W. Beeney
/s/Donald L. Foote
---------------------------------
Donald L. Foote
/s/John F. Goydas
----------------------------------
John F. Goydas
/s/Micheal T. Oliver
---------------------------------
Michael T. Oliver
/s/George C. Weir
----------------------------------
George C. Weir
/s/ Maurice Wiener
----------------------------------
Maurice Wiener
<PAGE> 1
Exhibit 6(b)
HEITMAN SECURITIES TRUST
DISTRIBUTION AGREEMENT
(ADVISOR CLASS SHARES)
THIS DISTRIBUTION AGREEMENT is made as of the 15th day of May, 1995
between Heitman Securities Trust, a Massachusetts business trust (the "Trust"),
having its principal place of business in Chicago, Illinois, and ACG Capital
Corporation, a corporation organized under the laws of the State of California
(the "Distributor"), having its principal place of business in Walnut Creek,
California.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company
and is authorized (i) to issue shares of beneficial interest in separate series
("Series"), with the shares of each such series representing the interests in a
separate portfolio of securities and other assets, and (ii) to divide such
shares of beneficial interest of each such series into two or more classes;
WHEREAS, at the present time, the Trust has one Series, Heitman Real
Estate Fund (the "Fund"), which is authorized to issue two classes of shares
designated as "Heitman/PRA Institutional Class" shares and "Advisor Class"
shares;
WHEREAS, the Trust wishes to employ the services of Distributor with
respect to the Advisor Class shares of the Fund; and
WHEREAS, the Distributor wishes to provide distribution services to
the Trust with respect to the Advisor Class of shares of the Fund as set forth
below.
NOW, THEREFORE, in consideration of the mutual promises and
undertakings herein contained, the parties agree as follows:
1. SALE OF SHARES. The Trust grants to the Distributor the right
to sell shares of beneficial interest, par value $0.001 per share, of the
Advisor Class of the Fund (the "Advisor Class Shares" or the "Shares") during
the term of this Agreement and subject to the registration requirements of the
Securities Act of 1933, as amended (the "1933 Act"), and of the laws governing
the sale of securities in various states (the "Blue Sky Laws") under the
following terms and conditions: the Distributor (i) shall have the right to
sell, as principal, the Advisor Class Shares authorized for issue and
registered under the 1933 Act and applicable Blue Sky Laws; and (ii) shall sell
such Shares only in compliance with the terms set forth in the Trust's
currently effective registration statement and any Plan of Distribution of the
Trust or its Series ("Plan") as may be in effect from time to time and any
further limitations the Trustees of the Trust may impose. Distributor may
enter into selling agreements with selected dealers and others for the sale of
Advisor Class Shares and will act only on its own behalf as principal in
entering into such selling agreements.
<PAGE> 2
2. SALE OF SHARES BY THE TRUST. The Trust reserves the right to
issue Shares in connection with (a) the merger or consolidation of the assets
of, or acquisition by the Trust through purchase or otherwise, with any other
investment company, trust or personal holding company; (b) a pro rata
distribution directly to the holders of Shares in the nature of a stock
dividend or split-up; and (c) as otherwise may be provided in the then current
registration statement of the Trust.
3. SHARES COVERED BY THIS AGREEMENT. This Agreement shall apply
to issued Advisor Class Shares, Advisor Class Shares held in its treasury in
the event that in the discretion of the Trust treasury Shares of such class
shall be sold, and Advisor Class Shares repurchased for resale.
4. PUBLIC OFFERING PRICE. Except as otherwise noted in the
Trust's Prospectus (the "Prospectus") or Statement of Additional Information
(the "SAI") with respect to Advisor Class Shares, as amended or supplemented
from time to time, all Advisor Class Shares sold to investors by the
Distributor or the Trust will be sold at the public offering price plus any
applicable sales charges described therein. The public offering price for all
accepted subscriptions will be the net asset value per share, determined in the
manner described in the Trust's then current Prospectus or SAI with respect to
the applicable series. The Trust shall in all cases receive the net asset
value per share on all sales and the Distributor shall be entitled to retain
the applicable sales charges, subject to any reallowance obligations of the
Distributor as set forth in any selling agreements with selected dealers and
others for the sale of Advisor Class Shares and/or as set forth in the
Prospectus and/or SAI of the Trust with respect to Advisor Class Shares.
5. SUSPENSION OF SALES. If and whenever the determination of net
asset value is suspended and until such suspension is terminated, no further
orders for Shares shall be processed by the Distributor except such
unconditional orders placed with the Distributor before it had knowledge of the
suspension. In addition, the Trust reserves the right to suspend sales and the
Distributor's authority to sell Shares if, in the judgment of the Trust, it is
in the best interests of the Trust to do so. Suspension will continue for such
period as may be determined by the Trust. In addition, the Trust and
Distributor reserve the right to reject any purchase order.
6. SOLICITATION OF SALES. In consideration of these rights
granted to the Distributor, the Distributor agrees to use all reasonable
efforts, consistent with its other business, to secure purchasers for Shares of
the Trust. This shall not prevent the Distributor from entering into like
arrangements (including arrangements involving the payment of underwriting
commissions) with other issuers. Distributor agrees to use all reasonable
efforts to ensure that taxpayer identification numbers provided for holders of
Shares of the Trust are correct.
7. AUTHORIZED REPRESENTATIONS. The Distributor is not authorized
by the Trust to give any information or to make any representations other than
those contained in the appropriate registration statements, Prospectuses or
SAIs filed with the Securities and Exchange Commission under the 1933 Act and
applicable Blue Sky Laws (as those registration
2
<PAGE> 3
statements, Prospectuses and SAIs may be amended from time to time), or
contained in shareholder reports or other material that may be prepared by or
on behalf of the Trust for the Distributor's use. This shall not be construed
to prevent the Distributor from preparing and distributing, in compliance with
applicable laws and regulations, sales literature or other material as it may
deem appropriate. Distributor will furnish or cause to be furnished copies of
such sales literature or other material to the President of the Trust or his
designee and will provide him with a reasonable opportunity to comment on it.
Distributor agrees to take appropriate action to cease using such sales
literature or other material to which the Trust reasonably objects as promptly
as practicable after receipt of the objection.
Distributor further agrees that in connection with the offer and sale
of Shares, Distributor shall comply with all applicable federal and state
securities laws (including, without limitation, the maintenance of effective
broker-dealer registrations as required) and shall comply with the requirements
of the Rules of Fair Practice of the National Association of Securities
Dealers, Inc.
8. REGISTRATION OF SHARES. The Trust agrees that it will use its
best efforts to register Shares under the 1933 Act (subject to the necessary
approval, if any, of is shareholders) and to qualify and maintain the
registration and qualification of an appropriate number of shares under the
securities laws of such states so that there will be available for sale the
number of Shares the Distributor may reasonably be expected to sell.
Distributor shall furnish such information and other materials relating to its
affairs and activities as shall be required by the Trust in connection with
such registration and qualification. The Trust agrees that it will notify
Distributor of each state where the Shares are qualified or registered for
sale, and the Distributor agrees that it will not offer or sell Shares in any
state where it has not been notified that the offer or sale of Shares has been
so qualified or registered. The Trust shall furnish to the Distributor copies
of all information, financial statements and other papers which the Distributor
may reasonably request for use in connection with the distribution of Shares of
each series of the Trust.
9. EXPENSES, COMPENSATION AND REIMBURSEMENT.
(a) The Trust shall pay all fees and expenses:
(i) in connection with the preparation, setting
in type and filing of any registration statement, Prospectus and SAI under the
1933 Act, and any amendments thereto, for the issue of its Shares;
(ii) in connection with the registration and
qualification of Shares for sale in the various states in which the Board of
Trustees (the "Trustees") of the Trust shall determine it advisable to qualify
such Shares for sale (including registering the Trust or Series as a broker or
dealer or any officer of the Trust as agent or salesperson in any state);
3
<PAGE> 4
(iii) of preparing, setting in type, printing and
mailing any report or other communication to holders of Shares of the Trust in
their capacity as such; and
(iv) of preparing, setting in type, printing and
mailing Prospectuses, SAIS, and any supplements thereto, sent to existing
holders of Shares.
(b) The Distributor shall pay costs of:
(i) printing and distributing Prospectuses, SAIs
and reports prepared for its use in connection with the offering of the Shares
for sale to the public;
(ii) any other literature used in connection with
such offering;
(iii) advertising in connection with such offering
including, but not limited to the following: public relations services, sales
presentations, media charges, preparation, printing and mailing of advertising
and sales literature, data processing necessary to distribution effort,
printing and mailing of prospectuses; and
(iv) any additional out-of-pocket expenses
incurred in connection with these costs.
(c) In addition to the services described above,
Distributor will provide services, including assistance in the production of
marketing and advertising materials for the sale of Shares of the Trust and
their review for compliance with applicable regulatory requirements, entering
into other agreements with broker-dealers to sell Shares of the Trust and
monitoring their financial strength and contractual compliance, providing,
directly or through its affiliates certain investor support services, personal
service, and the maintenance of shareholder accounts.
(d) In connection with the services to be provided by the
Distributor under this Agreement, in addition to any sales charges referred to
in Section 4 hereof, the Distributor shall be entitled to receive from the
Trust as compensation for services provided hereunder, subject to the terms and
conditions of the Trust's Plan of Distribution Pursuant to Rule 12b-1, an
amount with respect to Advisor Class Shares determined at an annual rate of
.25% of the average daily value of net assets represented by such Shares, such
amount to be paid in arrears at the end of each calendar month.
10. INDEMNIFICATION.
(a) The Trust agrees to indemnify and hold harmless the
Distributor and each of its directors and officers and each person, if any, who
controls the Distributor within the meaning of Section 15 of the 1933 Act
against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages, or expense and reasonable counsel fees incurred in connection
therewith)
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arising out of or based upon: (i) any violation of the Trust's representations
or covenants herein contained; (ii) any allegation of any wrongful act of the
Trust or any of its representatives (other than the Distributor or any of its
employees or representatives or any other person for whose acts the Distributor
is responsible or is alleged to be responsible (including any selected dealer
or person through whom sales are made pursuant to an agreement with the
Distributor)); (iii) any allegation of any person acquiring any Shares, based
upon the 1933 Act or any other statute or common law, that the registration
statements, Prospectuses, SAIs, or shareholder reports of the Trust included an
untrue statement of a material fact or omitted to state a material fact
required to be stated or necessary in order to make the statements not
misleading, except to the extent the statement or omission was made in reliance
upon, and in conformity with, information furnished in writing to the Trust by
or on behalf of the Distributor; or (iv) any allegation that any advertising
material included an untrue statement of a material fact or omitted to state a
material fact required to be stated or necessary in order to make the
statements not misleading, to the extent that such statement or omission was
made in reliance upon, and in conformity with, information furnished in writing
to the Distributor by the Trust. In no case (i) is the indemnity of the Trust
in favor of the Distributor or any person indemnified to be deemed to protect
the Distributor or any person against any liability to the Trust or its
security holders to which the Distributor or such person would otherwise be
subject by reason of willful misfeasance, bad faith or ordinary negligence in
the performance of its duties or by reason of its reckless disregard of its
obligations and duties under this agreement, or (ii) is the Trust to be liable
under its indemnity agreement contained in this Section 10(a) with respect to
any claim made against the Distributor or any person indemnified unless the
Distributor or person, as the case may be, shall have notified the Trust in
writing of the claim within a reasonable time after the summons or other first
written notification giving information of the nature of the claim shall have
been served upon the Distributor or any such person or after the Distributor or
such person shall have received notice of service on any designated agent.
However, except to the extent the Trust is harmed thereby, failure to notify
the Trust of any claim shall not relieve the Trust from any liability which it
may have to the Distributor or any person against whom such action is brought
other than on account of its indemnity agreement contained in this Section
10(a). The Trust shall be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense of any suit brought to
enforce any claims, but if the Trust elects to assume the defense, the defense
shall be conducted by counsel chosen by it and satisfactory to the Distributor,
or person or persons, defendant or defendants in the suit. In the event the
Trust elects to assume the defense of any suit and retain counsel, the
Distributor, officers or directors or controlling person(s) or defendant(s) in
the suit, shall bear the fees and expenses of any additional counsel retained
by, them. If the Trust does not elect to assume the defense of any suit, it
will reimburse the Distributor, officers or directors or controlling person(s)
or defendant(s) in the suit, for the reasonable fees and expenses of any
counsel retained by them. The Trust agrees to notify the Distributor promptly
of the commencement of any litigation or proceedings against it or any of its
officers or Trustees in connection with the issuance or sale of any of the
Shares.
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(b) The Distributor agrees to indemnify and hold harmless
the Trust and each of its Trustees and officers and each person, if any, who
controls the Trust within the meaning of Section 15 of the 1933 Act, against
any loss, liability, damages, claim or expense (including the reasonable cost
of investigating or defending any alleged loss, liability, damages, claim or
expense and reasonable counsel fees incurred in connection therewith) arising
out of or based upon: (i) any violation of any of its representations or
covenants herein contained; (ii) any allegation of any wrongful act of the
Distributor or any of its employees or representatives or any other person for
whose acts the Distributor is responsible or is alleged to be responsible
(including any selected dealer or person through whom sales are made pursuant
to an agreement with the Distributor); (iii) any allegation of any person
acquiring any Shares, based on the 1933 Act or any other statute or common law,
that the registration statements, Prospectuses, SAIs or shareholder reports
included an untrue statement of a material fact or omitted to state a material
fact required to be stated or necessary in order to make the statements not
misleading, to the extent that such statement or omission was made in reliance
upon, and in conformity with, information furnished in writing to the Trust by
or on behalf of the Distributor; or (iv) any allegation that any advertising
material included an untrue statement of a material fact or omitted to state a
material fact required to be stated or necessary in order to make the
statements not misleading, except to the extent that such statement or omission
was made in reliance upon, and in conformity with, information furnished in
writing to the Distributor by the Trust. In no case (i) is the indemnity of
the Distributor in favor of the Trust or any person indemnified to be deemed to
protect the Trust or any person against any liability to which the Trust or
such person would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement, or (ii)
is the Distributor to be liable under its indemnity agreement contained in this
Section 10(b) with respect to any claim made against the Trust or any person
indemnified unless the Trust or person, as the case may be, shall have notified
the Distributor in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the nature of
the claim shall have been served upon the Trust or any such person or after the
Trust or such person shall have received notice of service on any designated
agent. However, failure to notify the Distributor of any claim shall not
relieve the Distributor from any liability which it may have to the Trust or
any person against whom the action is brought other than on account of its
indemnity agreement contained in this Section 10(b). In the case of any notice
to the Distributor, it shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any claims, but if the Distributor elects to assume the defense, the
defense shall be conducted by counsel chosen by it and satisfactory to the
Trust, to its officers and Trustees and to any controlling person(s) or any
defendants(s) in the suit. In the event the Distributor elects to assume the
defense of any suit and retain counsel, the Trust or controlling person(s) or
defendant(s) in the suit shall bear the fees and expenses of any additional
counsel retained by them. If the Distributor does not elect to assume the
defense of any suit, it will reimburse the Trust, its officers or Trustees,
controlling person(s) or defendant(s) in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Distributor agrees to notify the
Trust promptly of the commencement of any litigation or proceedings against it
in connection with the issue and sale of any of the Shares.
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<PAGE> 7
(c) The indemnities granted by the parties in this
Section 10 shall survive the termination of this Agreement.
11. EFFECTIVENESS, TERMINATION, ETC. This Agreement shall become
effective as of the date of (i) the date on which an amendment to the
registration statement on Form N-lA with respect to the Advisor Class Shares
becomes effective under the 1933 Act, or (ii) the date on which such class
commences offering its Shares to the public, and unless terminated as provided,
shall continue in force for two (2) years from the date of its execution and
thereafter from year to year, provided continuance is approved at least
annually by either (i) the vote of a majority of the Trustees of the Trust, or
by the vote of a majority of the outstanding voting securities of the Trust,
and (ii) the vote of a majority of those Trustees of the Trust who are not
interested persons of the Trust and who are not parties to this Agreement or
interested persons of any party, cast in person at a meeting called for the
purpose of voting on the approval. This Agreement shall automatically
terminate in the event of its assignment. As used in this Section 11, the
terms "vote of a majority of the outstanding voting securities," "assignment'
and "interested person" shall have the respective meanings specified in the
1940 Act and the rules enacted thereunder as now in effect or as hereafter
amended. In addition to termination by failure to approve continuance or by
assignment, this Agreement may at any time be terminated without the payment of
any penalty by vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust, or by vote of a majority of the outstanding
voting securities of the Trust, on not more than sixty (60) days' written
notice by the Trust. This Agreement may be terminated by the Distributor upon
not less than sixty (60) days' prior written notice to the Trust.
12. INSURANCE. The Distributor shall maintain insurance coverage
in such amounts and in such forms as the Trust reasonably determines against
any and all liabilities which may arise in connection with the performance of
the Distributor's duties hereunder. Upon request, the Distributor shall
provide to the Trust evidence of such coverage.
13. NOTICE. Any notice under this Agreement shall be given in
writing addressed and hand delivered or sent by registered or certified mail,
postage prepaid, to the other party to this Agreement at its principal place of
business.
14. SEVERABILITY. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
15. GOVERNING LAW. To the extent that state law has not been
preempted by the provisions of any law of the United States heretofore or
hereafter enacted, as the same may be amended from time to time, this Agreement
shall be administered, construed and enforced according to the laws of the
Commonwealth of Massachusetts.
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<PAGE> 8
16. LIMITATION OF LIABILITY. The Distributor acknowledges that it
has received notice of and accepts the limitations of liability set forth in
the Trust's Master Trust Agreement. The Distributor agrees that the Trust's
obligations hereunder shall be limited to the Trust, and that the Distributor
shall have recourse solely against the assets of the Series with respect to
which the Trust's obligations hereunder relate and shall have no recourse
against the assets of any other Series or against any shareholder, Trustee,
officer, employee or agent of the Trust.
17. MISCELLANEOUS. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
in two counterparts, each of which taken together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
HEITMAN SECURITIES TRUST
By: /s/ Dean A. Sotter
Name: Dean A. Sotter
Title: Vice President
ACG CAPITAL CORPORATION
By: /s/ Ronald D.Cordes
Name: Ronald D. Cordes
Title: President
8
<PAGE> 1
Exhibit 6(d)
SUB-DISTRIBUTOR AGREEMENT
Walnut Creek, California
Gentlemen:
We have been appointed to serve as principal underwriter as defined in the
Investment Company Act of 1940 (the "1940 Act") for the purpose of selling and
distributing Advisor Class shares (the "Shares") of the Heitman Real Estate
Fund (the "Fund") portfolio series of Heitman Securities Trust (the "Investment
Company"). We are hereby inviting you, as an authorized agent of your
customers, and subject to the terms and conditions set forth below, to make
available to your customers Shares of the Fund. By your acceptance hereof, you
agree that you shall exercise your best efforts to find purchasers for the
Shares, shall purchase Shares only from us or from your customers, and shall
act only as agent for your customers or dealer for your own account, with no
authority to act as agent for the Fund, for us or for any other dealer in any
respect.
1. ACCEPTANCE OF ORDERS. Orders received from you will be accepted only
at the offering price (as defined below in Section 2) applicable to each order.
You agree to place orders for Shares immediately upon the receipt of, and in
the same amount as, orders from your customers. We will not accept a
conditional order from you on any basis. All orders are subject to our receipt
of Shares from the Investment Company and to acceptance and confirmation of
such orders by us and by the Investment Company. The procedures relating to
the handling of orders shall be subject to instructions which we shall provide
from time to time to you. We and the Investment Company reserve the right in
our sole discretion to reject any order.
2. OFFERING PRICE AND SALES CHARGE. The offering price shall be the net
asset value per Share plus any sales charge payable upon the purchase of Shares
as described in the then current prospectus applicable to such Shares, as
amended or supplemented and in effect from time to time (the "Prospectus").
The offering price may reflect scheduled variations in, or the elimination of,
the sales charge on sales of the Shares, as described in the Prospectus and
related Statement of Additional Information. You agree that you will apply any
such scheduled variation in, or elimination of, the sales charge uniformly to
all offerees in the class specified in the Prospectus and Statement of
Additional Information. You may be deemed to be an underwriter in connection
with sales by you of Shares to the extent you receive the entire sales charge
as set forth in the Prospectus, and therefore you may be subject to applicable
provisions of the Securities Act of 1933, as amended (the "Securities Act").
The sales charge applicable to any sale of Shares by you and the dealer
concession or commission applicable to any order from you for the purchase of
Shares accepted by us shall be as set forth in the applicable Prospectus and
related Statement of Additional Information. You agree that you
<PAGE> 2
will not combine customer orders to reach breakpoints in commissions for any
purpose unless authorized by the Prospectus or by us in writing. All
commissions and concessions are subject to change without notice by us. So
long as we are entitled to receive payments from the Fund pursuant to a Plan of
Distribution, pursuant to Rule 12b-1, you shall also be entitled to receive an
amount at an annual rate of 0.25% of average daily value of net assets
represented by such shares of the Advisor Class sold by you, such amount to be
paid in arrears at the end of each calendar month.
3. PAYMENT FOR SHARES. Payment for Shares sold through you shall be made
on or before the settlement date specified in the applicable confirmation, at
the office of our clearing agent by Federal Funds wire for credit to the Fund,
in any case in accordance with the procedures and conditions mutually agreed.
If such payment is not received by us, we reserve the right, without notice,
forthwith to cancel the sale. Unless other instructions are received by us on
or before the settlement date, orders accepted by us may be placed in an Open
Account in your name. If such payment or instruments are not timely received
by us, we may hold you responsible for any expense or loss, including loss of
profit, suffered by us or by such Fund resulting from your failure to make
payment as aforesaid, provided, however, that you shall not be responsible if
your failure to pay shall be caused by any event beyond your reasonable
control.
4. REDEMPTION AND REPURCHASE OF SHARES. If you purchase Shares from any
customer in connection with repurchase arrangements offered by the Investment
Company, you agree to pay such customer not less than the applicable repurchase
price as established by the Prospectus. If you act as agent for your customer
in selling Shares to us or the Fund, you agree not to charge your customer more
than a fair commission for handling the transaction. Any order placed by you
for the repurchase of Shares is subject to the timely receipt by the Fund's
transfer agent of all required documents in good order. If such documents are
not received within a reasonable time after the order is placed, the order is
subject to cancellation, in which case you agree to be responsible for any loss
resulting to the Fund or to us from such cancellation.
5. MANNER OF OFFERING.
(a) No person is authorized to make any representations concerning
Shares except those contained in the applicable registration statements,
Prospectuses, in the related Statements of Additional Information ("SAIs")
filed with the Securities and Exchange Commission under the 1933 Act and with
any foreign regulatory authority under applicable Foreign Laws (as those
registration statements, prospectuses and SAIs may be amended from time to
time) and in any then current sales literature or other material issued by us
supplemental to such Prospectuses or SAIs, which sales literature or other
material is used in conformity with applicable rules or conditions. This shall
not be construed to prevent you from preparing and distributing sales
literature or other material as you may deem appropriate provided that such
sales literature or other material is not false or misleading and is in
compliance with applicable laws and regulations. You will furnish or cause to
be furnished copies of such sales literature or other material, together with
an English-language translation of such sales literature or other material, to
us or the President of the Investment Company or his designee and will provide
us and him with a reasonable opportunity to comment on it. You agree to take
appropriate action to cease using such sale literature or other material to
which we or the Investment Company reasonably objects as promptly as
practicable after receipt of the objection. You further agree that in
connection with the offer and sale of Shares, you shall take all actions
necessary to comply with all applicable securities laws and other laws of the
United States and Japan (including, without limitation,
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<PAGE> 3
the filing of a notification with the Minister of Finance of Japan under the
Foreign Exchange and Foreign Trade Control Law of Japan and the maintenance of
effective broker-dealer registrations as required and the filing of sales
literature with regulatory and self-regulatory organizations in the United
States and/or Japan as required). All offerings of Shares by you shall be
subject to the conditions set forth in the applicable Prospectus and SAI
(including the condition relating to minimum purchases) and to the terms and
conditions herein set forth. We will furnish additional copies of the
Prospectuses and SAIs and such sales literature and other material issued by us
in reasonable quantities upon request. You will provide all customers with the
applicable Prospectus prior to or at the time such customer purchases Shares
and will forward promptly to us any customer request for a copy of the
applicable SAI. Sales and exchanges of Shares may only be made in Japan and
only to residents of Japan who are not U.S. Persons in accordance with laws
governing the sales of securities in Japan (the "Foreign Laws"). For purposes
of this Agreement, the term "U.S. Person" shall have the meaning prescribed in
Regulation S under the Securities Act, and thus shall include, (i) any natural
person resident in the United States; (ii) any partnership or corporation
organized or incorporated under the laws of the United States; (iii) any estate
of which any executor or administrator is a U.S. Person; (iv) any trust of
which any trustee is a U.S. Person; (v) any agency or branch of a foreign
entity located in the United States; (vi) any non-discretionary account or
similar account (other than an estate or trust) held by a dealer or other
fiduciary organized, incorporated, or (if an individual) resident in the United
States. The term shall generally also include a partnership or corporation
organized or incorporated under the laws of any foreign jurisdiction which is
formed by one or more U.S. Persons principally for the purpose of investing in
securities not registered under the Securities Act. We reserve the right to
amend the scope of the term "U.S. Person" at any time.
(b) You agree to conform to any compliance or offering standards that
we may establish from time to time, including without limitation standards as
to when classes of Shares may appropriately be sold to particular investors.
6. NASD MATTERS.
(a) This Agreement is conditioned upon your representation and warranty
that:
(i) You are not required to register in the United States as a
broker/dealer;
(ii) You are not subject to disqualification as defined in Article
II, Section 4 of the NASD By-Laws;
(iii) The compensation arrangements contemplated by this Agreement
do not violate applicable Foreign Laws.
(b) You agree to provide each of your customers who purchase Shares
with a document describing the compensation arrangements contemplated hereby
and confirming delivery of the applicable Prospectus in the form attached
hereto as Exhibit A and you further agree to deliver copies of such document as
countersigned and acknowledged by such customer to us.
(c) You agree that the confirmations of each transaction shall indicate
that a fee is being paid pursuant to this Agreement.
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<PAGE> 4
(d) You and we agree to abide by the Rules and Regulations of the NASD,
including Rule 26 of its Rules of Fair Practice to the extent applicable, and
all applicable federal, state, and foreign laws, rules and regulations.
7. REJECTION OF ORDERS. We shall have the right to accept or reject
orders for the purchase of Shares. It is understood that for the purposes
hereof no Share shall be considered to have been sold by you and no
compensation will be payable to you with respect to any subscription for Shares
which is rejected by us or the Investment Company. Any consideration which you
may receive in connection with a rejected purchase order will be returned
promptly. Confirmations of all accepted purchase orders will be transmitted by
the Transfer Agent for the Fund to the investor or to you, if authorized.
8. STATUS OF SOLICITING BROKER. Nothing herein shall make you a partner
with us or render our relationship an association. You are responsible for
your own conduct, for the employment, control and conduct of your employees and
agents and for injury to such employees or agents or to others through such
employees or agents. You assume full responsibility for your employees and
agents under applicable laws and agree to pay all employer taxes relating
thereto.
9. ACKNOWLEDGMENT OF APPOINTMENT OF NOMURA SECURITIES INTERNATIONAL, INC.
AS SHAREHOLDER SERVICING AGENT. You hereby acknowledge that Nomura Securities
International, Inc. ("Nomura International") has entered into a Shareholder
Servicing Agreement with the Investment Company dated of even date herewith
pursuant to which Nomura International or such third party as Nomura
International may designate shall act as the agent for your customers for
purposes of performing certain administrative functions in connection with the
purchases and redemptions of the Shares and providing related services to such
customers in connection with their investments in the Fund.
10. NO LIABILITY. As distributor of the Shares, we shall have full
authority to take such action as we may deem advisable in respect of all
matters pertaining to the distribution of such Shares. We shall not be under
any liability to you, except for lack of good faith and for obligations
expressly assumed by us in this Agreement; provided, however, that nothing in
this sentence shall be deemed to relieve any of us from any liability imposed
by the Securities Act.
11. INDEMNIFICATION.
(a) We agree to indemnify and hold harmless you and each of your
directors and officers and each person, if any, who controls you within the
meaning of Section 15 of the 1933 Act against any loss, liability, claim,
damages or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damages, or expense and reasonable counsel
fees incurred in connection therewith) arising out of or based upon: (i) any
violation of our representations or covenants herein contained; (ii) any
allegation of any wrongful act by us or any of our representatives (other than
you or any of your employees or representatives or any other person for whose
acts you are responsible or our alleged to be responsible); (iii) any
allegation of any person acquiring any Shares, based upon the 1933 Act, Foreign
Laws or any other statute or common law, that the registration statements,
Prospectuses, SAIs, or shareholder reports of the Investment Company included
an untrue statement of a material fact or omitted to state a material fact
required to be stated or necessary in order to make the statements not
misleading, except to the extent the statement or omission was made in
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<PAGE> 5
reliance upon, and in conformity with, information furnished in writing to the
Investment Company or us by or on behalf of you; or (iv) any allegation that
any advertising material included an untrue statement of a material fact or
omitted to state a material fact required to be stated or necessary in order to
make the statements not misleading, to the extent that such statement or
omission was made in reliance upon, and in conformity with, information
furnished in writing to you by the Investment Company or us. In no case (i) is
our indemnity in favor of you or any person indemnified under this Section
11(a) to be deemed to protect you or any such person against any liability to
us, the Investment Company or its security holders to which the you or such
person would otherwise be subject by reason of willful misfeasance, bad faith
or ordinary negligence in the performance of your duties or by reason of
reckless disregard of your obligations and duties under this agreement, or (ii)
are we to be liable under our indemnity agreement contained in this Section
11(a) with respect to any claim made against you or any such indemnified person
unless you or such person, as the case may be, shall have notified us in
writing of the claim within a reasonable time after the summons or other first
written notification giving information about the nature of the claim shall
have been served upon you or any such person or after you or such person shall
have received notice of service on any designated agent. However, except to
the extent we are harmed thereby, failure to notify us of any claim shall not
relieve us from any liability which we may have to you or any person against
whom such action is brought, other than on account of our, indemnity agreement
contained in this Section 11(a). We shall be entitled to participate at our
own expense in the defense, or, if we so elect, to assume the defense of any
suit brought to enforce any claims, but if we elect to assume the defense, the
defense shall be conducted by counsel chosen by us and satisfactory to you,
your officers, directors, controlling person(s) or defendant(s) in the suit.
In the event we elect to assume the defense of any suit and retain counsel,
you, your officers, directors or controlling person(s) or defendant(s) in the
suit shall bear the fees and expenses of any additional counsel retained by
them. If we do not elect to assume the defense of any suit, we will reimburse
you, your officers or directors or controlling person(s) or defendant(s) in the
suit, for the reasonable fees and expenses of any counsel retained by them. We
agree to notify you promptly of the commencement of any litigation or
proceedings against you or any of your officers or directors in connection with
the issuance or sale of any of the Shares.
(b) You agree to indemnify and hold harmless us and each of our
directors and officers and each person, if any, who controls us within the
meaning of Section 15 of the 1933 Act, against any loss, liability, claim,
damages, or expense (including the reasonable cost of investigating or
defending any alleged loss, liability, claim, damages, or expense and
reasonable counsel fees incurred in connection therewith) arising out of or
based upon: (i) any violation of any of your representations or covenants
herein contained; (ii) any allegation of any wrongful act by you or any of your
employees or representatives or any other person for whose acts you are
responsible or are alleged to be responsible; (iii) any allegation of any
person acquiring any Shares, based on the 1933 Act, Foreign Laws or any other
statute or common law, that the registration statements, Prospectuses, SAIs or
shareholder reports of the Investment Company included an untrue statement of a
material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements not misleading, to the extent that
such statement or omission was made in reliance upon, and in conformity with,
information furnished in writing to the Investment Company or us by or on
behalf of you; or (iv) any allegation that any advertising material included an
untrue statement of a material fact or omitted to state a material fact
required to be stated or necessary in order to make the statements not
misleading, except to the extent that such statement or omission was made in
reliance upon, and in conformity with, information furnished in writing to you
by the Investment Company or us. In no case (i) is your indemnity in favor of
us or any person indemnified under this Section 11(b) to be deemed to protect
us
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<PAGE> 6
or any such person against any liability to which we or such person would
otherwise be subject by reason of willful misfeasance, bad faith or ordinary
negligence in the performance of our or its duties, as the case may be or by
reason of our or its reckless disregard of its obligations and duties under
this Agreement, as the case may be, or (ii) are you to be liable under your
indemnity agreement contained in this Section 11(b) with respect to any claim
made against us or any person indemnified unless we or such person, as the case
may be, shall have notified you in writing of the claim within a reasonable
time after the summons or other first written notification giving information
about the nature of the claim shall have been served upon us or any such person
or after we or such person shall have received notice of service on any
designated agent. However, failure to notify you of any claim shall not
relieve you from any liability which you may have to us or any person against
whom the action is brought other than on account of your indemnity agreement
contained in this Section 11(b). You shall be entitled to participate, at your
own expense, in the defense, or, if you so elect, to assume the defense of any
suit brought to enforce any claims, but if you elect to assume the defense, the
defense shall be conducted by counsel chosen by you and satisfactory to us, our
officers, directors, controlling person(s) or defendant(s) in the suit. In the
event you elect to assume the defense and retain counsel, we, our officers,
directors, controlling person(s) or defendant(s) in the suit shall bear the
fees and expenses of any additional counsel retained by them. If you do not
elect to assume the defense of any suit, you will reimburse us, our officers,
directors, controlling person(s) or defendant(s) in the suit for the reasonable
fees and expenses of any counsel retained by them. You agree to notify us
promptly of the commencement of any litigation or proceedings against us in
connection with the issuance and sale of any of the Shares.
(c) The indemnities in this Section 11 shall survive the termination of
this Agreement.
12. TERM OF CONTRACT; AMENDMENT; TERMINATION. This Agreement shall become
effective on the date hereof. We and the Fund reserve the right, in our
discretion upon notice to you, to amend, modify or terminate this Agreement at
any time, to change any sales charges, commissions, concessions and other fees
described in the applicable Prospectus or to suspend sales or withdraw the
offering of Shares entirely. You agree that any order to purchase Shares
placed by you after notice of any amendment to this Agreement has been sent to
you shall constitute your agreement to such amendment.
13. MISCELLANEOUS. This Agreement supersedes any and all prior agreements
between us. All communications to us should be sent to the above address. Any
notice to you shall be duly given if mailed or telefacsimiled to you at the
address specified by you below. This Agreement shall be effective when
accepted by you below and shall be construed under the laws of the Commonwealth
of Massachusetts.
6
<PAGE> 7
Please confirm your agreement hereto by signing and returning the enclosed
counterpart of this Agreement at once to: ACG Capital Corporation, 1661 Tice
Valley Boulevard, #200, Walnut Creek, California 94595, Attention: President.
Upon receipt thereof, this Agreement and such signed duplicate copy will
evidence the agreement between us.
ACG CAPITAL CORPORATION
By: /s/ Ronald D. Cordes
----------------------------
Name: Ronald D. Cordes
Title: President
ACCEPTED:
THE NOMURA SECURITIES CO., LTD.
(Sub-Distributor)
By: /s/ Ken Tamura
----------------------------------------
Name: Ken Tamura
Title: Executive Managing Director
- ---------------------------------------
- ---------------------------------------
- ---------------------------------------
(Address to which all communications are
to be sent)
Dated: August 22, 1995
7
<PAGE> 8
EXHIBIT A
DESCRIPTION OF COMPENSATION ARRANGEMENTS
AND CONFIRMATION OF RECEIPT OF PROSPECTUS
Shares of the Advisor Class are being made available to selected non-U.S.
investors residing in Japan through The Nomura Securities Co., Ltd. ("Nomura"),
acting as a sub-distributor for the Distributor. All purchases by such
investors, regardless of the amount, are subject to a sales charge of 4.00% of
the net asset value of the shares purchased (approximately 3.85% of the
purchase price), all of which will be reallowed by the Distributor to Nomura.
In addition, the Distributor has agreed to pay Nomura .25 of 1% of the net
asset value of the Fund represented by Advisor Class shares sold through Nomura
for distribution services provided to the Fund, and the Fund has agreed to pay
Nomura Securities International, Inc. ("NSI") .25 of 1% of the net asset value
of the shares of the Advisor Class sold through Nomura for shareholder services
provided by NSI or its delegate.
The undersigned hereby acknowledges receipt of this document and a copy of
the Heitman Securities Trust Advisor Class Prospectus.
--------------------------------
Name:
--------------------------------
--------------------------------
--------------------------------
Address
Date:
--------------------------
8
<PAGE> 1
Exhibit 9(d)
AMENDED MARKETING SERVICES AGREEMENT
THIS AMENDED MARKETING SERVICES AGREEMENT ("Agreement") is entered into,
effective as of March 11, 1996, by and between Heitman/PRA Securities Advisors,
Inc., an Illinois corporation ("PRA"), and ACG Capital Corporation, a
California Corporation ("ACG").
RECITALS
WHEREAS, PRA is in the business of providing investment advisory services
relating to Real Estate Investment Trust ("REIT") securities and investment
companies investing in REIT securities, and PRA is currently the advisor of a
registered investment company named Heitman Securities Trust (the "Trust")
which currently consists of one investment portfolio, the Heitman Real Estate
Fund (the "Fund"); and
WHEREAS, ACG is a member of the National Association of Securities
Dealers, Inc. ("NASD") and has been organized for the purpose of acting as a
mutual fund distributor; and
WHEREAS, the Fund has filed with the Securities and Exchange Commission
(the "Commission") a Post-Effective Amendment No. 9 to its Registration
Statement on Form N-1A dated March 16, 1995 (the "Registration Statement"), for
the purpose, among others, of effecting the following changes: (i) amending
the name of the Trust to the Heitman Securities Trust; (ii) amending the name
of the Fund to the Heitman Real Estate Fund; (iii) creating two classes of Fund
shares, the Heitman/PRA Institutional Class (the "Institutional Shares") and
the Advisor Class (the "Advisor Shares"), as more fully described in the
Registration Statement; and (iv) increasing the minimum initial investment in
the Institutional Shares to $250,000; and
WHEREAS, the Trust has entered into a Distribution Agreement in the form
included in the Registration Statement (the "Distribution Agreement"), and as
an inducement to ACG to act as the distributor of the Advisor Shares, PRA
entered into a Marketing Services Agreement with ACG effective as of May 15,
1995; and
WHEREAS, PRA and ACG desire to amend the Marketing Services Agreement by
these presents;
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties agree as follows:
1. ACG Services. ACG shall be the exclusive distributor of the Advisor
Shares, and shall perform the distribution services outlined on Exhibit "A"
attached hereto. ACG shall use its reasonable best efforts to complete, at its
expense, its registration as a securities broker-dealer in each of the 48
contiguous United States. Notwithstanding ACG's appointment as the exclusive
distributor of the Fund, PRA reserves the right to participate or engage in
activity in connection with (i) the merger or consolidation of the assets of,
or acquisition by the Trust through purchase or otherwise, with any investment
company, trust or personal holding company; (ii) a pro rata distribution
directly to the holders of Advisor Shares in the nature of a stock dividend or
split-up; (iii) the direct purchase of Advisor Shares by PRA, its officers,
directors or employees or any of its
<PAGE> 2
affiliates or their retirement plan accounts; and (iv) as otherwise may be
provided in the current registration statement of the Trust.
2. Marketing Fee.
1 Direct Accounts. In addition to the compensation payable to ACG by the
Fund as provided in the Distribution Agreement, PRA shall pay to ACG a
Marketing Fee equal to 0.15% per annum of daily net asset value of the Advisor
Shares (the "Net Asset Value"), payable in monthly installments in arrears.
PRA will also pay ACG on a monthly basis an amount equal to 0.25% per annum of
the daily net asset value of Institutional Shares purchased by investors
introduced to PRA by ACG and acknowledged by PRA as new Institutional Shares
investors identified by ACG.
2 Omnibus Accounts - Institutional Shares. Subject to the base amounts
stated in this Section 2.2, Institutional Shares investors shall be deemed to
be introduced by ACG to PRA and shall be acknowledged by PRA as such if their
shares are purchased as part of an omnibus account maintained by an
organization with which the Fund, by reason of ACG's introduction, executes a
Shareholder Servicing Agreement. Such omnibus account organizations shall
include, but not be limited to, Charles Schwab & Co., Inc. ("Schwab"), Jack
White & Co. ("Jack White"), First Trust DataLynx and Resources Trust Company;
provided that ACG shall not be entitled to receive a Marketing Fee, or any
compensation, based on the daily net asset value of Institutional Shares held
directly by omnibus account customers of the Schwab Institutional or Jack White
Financial Advisors divisions as of August 31, 1995, which the parties agree is,
respectively, $1,127,476 (Schwab) and $733,230 (Jack White) (said amounts shall
be hereinafter referred to as the "base amounts" and are reflected on Exhibits
"B" and "C" attached hereto). ACG shall, however, be entitled to receive the
Marketing Fee set forth in Section 2.1 in respect of Institutional Shares for
any increase in the daily net asset value of such shares held in the Schwab
Institutional and Jack White Financial Advisors division omnibus accounts as of
August 31, 1995, above the base amounts. To the extent that the Institutional
Shares listed on Exhibits "B" and "C" hereof are redeemed in either the Schwab
Institutional or Jack White Financial Advisers division omnibus accounts, said
redemptions shall reduce the base amounts stated above for which ACG is not
entitled to a Marketing Fee hereunder.
3 Additional Omnibus Account Arrangements. The parties agree that,
notwithstanding Section 18.5 of this Agreement, this Agreement may be amended,
without further procedure, by appending appropriate exhibits to this Agreement
to reflect omnibus account or shareholder services arrangements with
organizations additional to those described in Sections 2.2 and 3.2 as long as
such exhibits are signed and dated by PRA and ACG. Upon being acknowledged by
both parties, said exhibits shall form a part of this Agreement.
4 Advisor Shares - Japan. ACG hereby agrees that it shall not be entitled
to receive a Marketing Fee, or any compensation, including the fees set forth
in Section 8.3 of this Agreement, for any Advisor Shares purchased by investors
residing in Japan through Nomura Securities, Inc. ("Nomura") pursuant to the
Sub-Distributor Agreement executed on August 23, 1995, between ACG and Nomura.
2
<PAGE> 3
3. Additional Marketing Compensation.
1 Reduction or Elimination of 12b-1 Plan. PRA acknowledges that the
compensation payable to ACG under the Distribution Agreement with the Fund
forms a substantial and primary element of the consideration on which ACG is
relying in agreeing to establish and develop the market for Advisor
Shares. The Distribution Agreement provides for payment to ACG of an amount
equal to 0.25% of the Net Asset Value under a Plan of Distribution pursuant to
Rule 12b-1 (the "12b-1 Plan") to be adopted by the Fund. PRA hereby agrees
that if, for any reason, the Trustees of the Fund elect during the term of the
Distribution Agreement to terminate or modify the 12b-1 Plan and such
termination or modification results in any reduction in the compensation
payable to ACG under the Distribution Agreement, PRA will pay ACG additional
marketing compensation in an amount equal to 50% of any such reduction in
compensation under the Distribution Agreement; provided that such additional
marketing compensation under this paragraph will be limited to a maximum amount
equal to 0.125% of the Net Asset Value per annum.
2 Advisor Shares-Schwab and Resources Trust Company. In consideration for
ACG entering into shareholder servicing agreements with Schwab and Resources
Trust Company in respect to Advisor Shares wherein ACG has guaranteed certain
on-going payments to Schwab and Resources Trust Company based on the daily net
asset value of Advisor Shares purchased by their customers, PRA shall pay to
ACG additional marketing compensation in an amount equal to 0.10% per annum of
the daily net asset value of Advisor Shares held in omnibus accounts maintained
by Schwab and Resources Trust Company, payable in monthly installments in
arrears. This additional marketing compensation shall be payable to ACG for as
long as ACG acts as distributor of the Fund pursuant to the Distribution
Agreement and for any additional period during which ACG is entitled to receive
fees under Section 8.3 of this Agreement. In the event that ACG is terminated
as the Fund's distributor and the period for which ACG is entitled to receive
any fees under Section 8.3 of this Agreement has expired, PRA shall then
undertake the obligation to pay on ACG's behalf all amounts due to Schwab under
the Shareholder Servicing Agreement which are not paid by the Fund.
Notwithstanding anything in Sections 3.1 and 3.2, PRA shall have no
obligation to make any payments to ACG, or on behalf of ACG to Schwab or any
other organization, in the event that neither PRA, nor any entity affiliated
with PRA or Heitman Financial, Ltd. to which the Fund's investment management
agreement may be lawfully assigned, acts as investment adviser to the Fund.
4. Selling Agreements. ACG will execute dealer agreements with qualified
NASD member firms, in a form substantially identical to the Selected Broker
Agreement submitted as part of the Trust's Registration Statement, to act as
soliciting dealers for the Advisor Shares. In selecting soliciting dealers,
ACG will conduct due diligence investigation regarding the business, conduct,
affairs and reputation of the dealer to form reasonable ground for belief that
such dealer and its registered representatives participating in the sale of the
Advisor Shares will comply with federal and state securities laws and
regulations, observe high standards of commercial law and
3
<PAGE> 4
conduct themselves in accordance with just and equitable principles of trade,
as those terms are commonly understood in the securities industry and
interpreted by the NASD. The due diligence investigation shall include at a
minimum gathering available public information concerning the dealer and its
principals from the Commission and the Central Registration Depository of the
NASD, conducting personal interviews with compliance officers and/or principals
of each dealer to determine the nature of its sales supervisory and compliance
programs, and making such additional inquiries as may be reasonable under the
circumstances, including inquiries concerning the experience and compliance
record of registered representatives either individually or as a group. ACG
shall document the due diligence investigation made hereunder. ACG shall be
responsible for administering payment of all fees and commissions due the
soliciting broker-dealers and to ACG regional wholesalers, as well as
reimbursement of all travel and administrative expenses involved with
distributing the Advisor Shares.
5. Organization and Registration Expenses. Subject to the obligation of
the Trust to pay expenses as set forth in the Distribution Agreement, PRA shall
bear all expenses of creating the Advisor Shares, registering and maintaining
registration of all Advisor Shares with the Commission, and qualifying the
Advisor Shares for sale in compliance with applicable federal and state
securities laws.
6. Sales Materials. Notwithstanding the obligations of ACG under the
Distribution Agreement, PRA shall be responsible for paying any and all
expenses involved in creating and printing prospectuses, marketing brochures
and other retail sales materials for the Advisor Shares. ACG shall work
together with PRA to develop these materials using ACG's experience in
developing similar materials for other programs.
7. Other Marketing Expenses. All other marketing expenses related to the
offer and sale of the Advisor Shares other than those specified as PRA's
responsibility under Sections 5 and 6 above shall be the responsibility of ACG,
including, but not limited to, commissions and fees payable to selected
broker-dealers (to the extent paid under the Distribution Agreement and
reallowed as provided in the Registration Statement), wholesaling compensation
and expense reimbursement to ACG wholesalers and others, convention and seminar
expenses, the costs of accounting and administration relating to payment of
selling compensation, advertising and public relations expenses, and production
of certain wholesaling sales support materials for broker-dealers and
investment advisers. In addition, ACG shall be responsible for all travel and
administrative expenses incurred by ACG and its personnel in the marketing of
the Advisor Shares.
4
<PAGE> 5
8. Term of Agreement.
8.1 This Agreement shall remain in effect for five (5) years, subject to
the termination provisions set forth in this Section 8 and to early termination
as provided below in Section 9. For the purposes of the foregoing, "cause"
shall be defined as any of the following actions by the parties or their
officers, directors, employees or representatives: (i) a material breach of
this Agreement; (ii) criminal misconduct; (iii) willful violation of federal or
state securities laws or any rule or regulation thereunder or laws relating to
larceny, theft, fraudulent concealment, embezzlement, investment fraud,
misappropriation of funds or securities or substantially equivalent activity;
(iv) willful violation of the rules of any self-regulatory organization (as
defined in Section 3(a)(26) of the Securities Exchange Act of 1934) to which
ACG is subject but, in each case specified in clauses (iii) and (iv) above,
only to the extent that such violation materially and adversely affects the
performance hereunder of the party against which such termination is asserted;
and (v) ACG's or the Trust's material breach of the Distribution Agreement.
This Agreement may also be terminated by either party upon thirty (30) days
advance written notice in the event that the other party is named in a
proceeding or action by a federal or state agency or self-regulatory
organization for alleged misconduct or violations of the laws, rules or
regulations described in clauses (ii), (iii) and (iv) above, regardless of any
finding of wrongdoing on such allegations ("Regulatory Action"); provided that
termination based merely upon the commencement of a Regulatory Action shall not
for purposes of this paragraph be deemed termination for "cause."
Notwithstanding any other provision hereof, either ACG or PRA, in their
discretion, may terminate this Agreement in the event that (x) neither PRA, nor
any entity affiliated with PRA or Heitman Financial, Ltd., to which the Fund's
investment management agreement may be lawfully assigned, continues to act as
investment advisor for the Fund, (y) ACG no longer serves as Distributor of the
Advisor Shares, or (z) there is a change in control by merger, consolidation or
otherwise of ACG or substantially all of ACG's assets are acquired by a party
not presently controlling ACG, or neither Richard O'Toole nor Ronald D. Cordes
is employed by ACG, by giving notice of such termination within 30 days after
receiving notice of any such event.
8.2 If this Agreement has not been earlier terminated as provided herein,
either PRA or ACG shall have the option to extend the term of the Agreement for
one additional five (5) year term by notifying the other party not less than 90
days nor more than one year prior to the fifth anniversary of the execution
hereof. ACG's option to so extend the term shall also be subject to its
satisfaction of the performance standards set forth below in Section 9.
8.3 Upon termination of this Agreement in the circumstances set forth
below, ACG shall be entitled (provided it remains registered as a broker
dealer), or, as the case may be, not entitled to receive a monthly fee
following the expiration or termination of the Agreement. Where ACG is
entitled to receive a fee, such fee shall be payable for a period of either
five (5) or ten (10) years from the date of termination and shall be equal to
either 0.15% or 0.25% per annum, as specified below, of the average monthly Net
Asset Value attributable to the aggregate capital interests in the Fund held
during such period by all holders of Advisor Shares and Institutional Shares
acknowledged by PRA as provided in Section 2, who held any capital interest in
the Fund as of the date of expiration or termination of the Agreement (such
investors are hereinafter collectively referred to as the "ACG Shareholders"):
5
<PAGE> 6
<TABLE>
<CAPTION>
Event Fee
----- ---
<S> <C> <C>
A. Expiration of the term of the Agreement (including the 0.25% per annum for
option term if exercised) as provided in this Section 8; 10 years
B. Termination by ACG for "cause" as defined in Section 8.1; 0.25% per annum for
10 years
C. Termination by either party for commencement of a 0.25% per annum for
Regulatory Action or for any of the events specified in 10 years
Section 8.1(y) or (z);
D. Termination by the Trust (as opposed to ACG) of the 0.25% per annum for
Distribution Agreement; 10 years
E. Early termination by ACG for failure of PRA to meet the 0.25% per annum for
performance standards set forth below in Section 9.3; 10 years
F. Early termination by PRA for failure of ACG to meet the 0.15% per annum for
performance standards set forth below in Section 9.2; 5 years
G. Termination by PRA for "cause" as defined in Section zero
8.1; and
H. Termination by ACG (as opposed to the Trust) of the zero
Distribution Agreement.
</TABLE>
In the event of termination for any reason not specified in this Section 8.3,
ACG shall be entitled to receive a monthly fee equal to 0.25% per annum for 10
years.
Notwithstanding anything in Section 2 and this Section 8.3, in the event
that neither PRA, nor any entity affiliated with PRA or Heitman Financial, Ltd.
to which the Fund's investment management agreement may be lawfully assigned,
continues to act as investment adviser for the Fund, PRA shall have no further
obligation to pay ACG, or any person on ACG's behalf, any marketing fees or
compensation whatsoever.
9. Early Termination.
9.1 From the date of this Agreement to December 31, 1995, the Agreement
may not be terminated by either party except for cause as defined, or as
otherwise provided, in Section 8 above.
9.2 Beginning after December 31, 1995, the Agreement may be terminated by
PRA as of the end of any date specified below if the performance standard set
forth below has not been met by ACG during the year, provided that PRA has
taken all reasonable and commercially
6
<PAGE> 7
feasible actions necessary to maintain the public offering of Advisor Shares
in amounts necessary to meet the performance standards.
<TABLE>
<CAPTION>
Net Asset Value of Advisor Shares and
Institutional Shares Introduced to PRA
Date by ACG by Date Specified
---- --------------------------------------
<S> <C>
December 31, 1995 $15,000,000
June 30, 1996 50,000,000
June 30, 1997 100,000,000
June 30, 1998 200,000,000
June 30, 1999 300,000,000
June 30, 2000 400,000,000
June 30, 2001-June 30, 2005 500,000,000
</TABLE>
9.3 Beginning after the end of the second year following the date of this
Agreement, and continuing as of the end of each following year, the Agreement
may be terminated by ACG if the performance of the Advisor Shares, as measured
by the overall annual compounded rate of return from the inception of the
Advisor Shares to the end of such year, is below the overall annual compounded
rate of return over the same time period for REIT mutual funds ranked in the
top 50% of all REIT mutual funds as reported in published analyses by Lipper,
Morningstar or another comparable nationally recognized mutual fund rating
service.
10. Exclusive Agreement. Throughout the term of this Agreement, ACG shall
at all times be the exclusive promoter and distributor of the Advisor Shares
and PRA and its affiliates (which, for purposes of this paragraph, shall
include entities owned or controlled, directly or indirectly, by Heitman
Financial Ltd. but not United Asset Management Corporation ("UAM") or any other
entities controlled by or under common control with UAM) shall not offer,
sponsor, advise or otherwise promote any other mutual fund or class of mutual
fund shares other than through ACG, with the exception of (i) the Institutional
Shares, (ii) any new fund, separate account, commingled account or class of
shares that is directed solely to institutional investors with a minimum
investment requirement of at least $250,000 and other than through the retail
broker-dealer and registered investment adviser communities, (iii) any
closed-end investment company (as defined in the Investment Company Act of
1940) offering, including rights offerings to existing shareholders, which is
publicly offered for a period of not more than 60 days, (iv) any new fund,
separate account, commingled account or class of shares offered exclusively to
investors residing outside of the United States, (v) any new fund, separate
account or class of shares designed exclusively for inclusion in a variable
life insurance or variable annuity product, and (vi) any new fund, separate
account or class of shares designed exclusively for "qualified plans" (defined
as employee trusts or employer individual retirement accounts), Keogh Plans and
corporate retirement plans qualified under Section 401(a) of the Internal
Revenue Code and marketed exclusively through qualified plan administrators.
ACG shall not distribute, promote or otherwise market any REIT mutual fund
other than the Fund, except to the sole extent that any other REIT mutual funds
may be included as a
7
<PAGE> 8
component in an asset management program created and managed by a third party
and marketed separately by ACG.
11. Other Activities. Nothing in this Agreement shall preclude PRA from
entering into other marketing or distribution agreements relating to the types
of investment products described in Section 10(i), (ii), (iii), (iv), (v) and
(vi) above.
Likewise, ACG shall not be precluded by this Agreement from entering into
marketing and/or distribution relationships with sponsors of other financial
products and/or services, including mutual funds investing in sectors other
than real estate securities.
12. Confidential Information; Non-Solicitation of Employees. The parties
agree and acknowledge that PRA and ACG have certain rights in their
confidential and proprietary information and that their employees are valuable
assets of their respective businesses and accordingly:
12.1 Upon the expiration or the termination of this Agreement, ACG shall
return to PRA all confidential and proprietary information, which shall include
all documents, reports, performance data, portfolio or market research data
(however compiled or maintained), marketing materials and sales literature
described in Section 6 above, lists of shareholders in the Fund, business
plans, management reports, financial statements and other information
concerning the Fund, PRA or its affiliates except for documents filed with the
Commission and distributed to prospective purchasers of Advisor Shares or
Institutional Shares. Such confidential and proprietary information is and
shall remain the sole and exclusive property of PRA or the Fund. ACG shall not
retain copies of, nor use, sell, transfer or make available to others, any such
information; provided that during the term of this Agreement, ACG may disclose
such information in response to a demand by a federal or state regulatory
agency or self-regulatory organization or, with five days' advance notice to
PRA, pursuant to compulsory process of law; provided further that PRA will
cooperate in providing ACG with access to information returned to PRA hereunder
after the termination of this Agreement upon PRA's receipt of compulsory
process of law, subject to a protective order ensuring the confidentiality of
such information.
12.2 PRA covenants that throughout the term of this Agreement, and for a
period of two years from the date of termination of this Agreement, PRA shall
not in any manner solicit, induce, attempt to induce or assist others to
solicit, induce, or attempt to induce any employee, agent or representative of
ACG to terminate its, his or her association with ACG or in any other manner,
directly or indirectly, interfere with the relationship between ACG and any of
such persons.
12.3 ACG covenants that throughout the term of this Agreement, and for a
period of two years from the date of termination of this Agreement, ACG shall
not in any manner solicit, induce, attempt to induce or assist others to
solicit, induce, or attempt to induce any employee, agent or representative of
PRA to terminate its, his or her association with PRA or in any other manner,
directly or indirectly, interfere with the relationship between PRA and any of
such persons.
8
<PAGE> 9
12.4 PRA and ACG acknowledge and agree that the remedy at law available
for any breach of a party's obligations under this Section 12, would be
inadequate, and agree and consent that in addition to any other rights or
remedies which a party may have at law or in equity, temporary and permanent
injunctive relief may be granted in any proceeding which may be brought to
enforce any provision of this Section 12, without the necessity of proof of
actual damage. If the scope of any restrictions contained in this Section 12
is too broad to permit enforcement thereof as written, then such restriction
shall be enforced to the maximum extent permitted by law, and the parties
hereby expressly consent and agree that such scope may be judicially modified
accordingly in any proceeding brought to enforce such restriction.
13. Representations and Warranties of PRA. PRA represents and warrants to
ACG as of the date hereof, the following:
13.1 Organization, Standing and Authority; Execution and Validity of
Agreement. PRA is duly organized, validly existing and in good standing under
the laws of the state of Illinois and has the corporate power to enter into and
take the actions contemplated by this Agreement. This Agreement has been duly
and validly authorized and approved by all requisite corporate action of PRA.
This Agreement has been duly and validly executed and delivered by PRA and
constitutes a valid and binding obligation of PRA, enforceable against PRA in
accordance with its terms, except as enforceability may be limited by
applicable equitable principles or by the laws of bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect
affecting the enforcement of creditors' rights generally.
13.2 No Violation. Neither the execution and delivery by PRA of this
Agreement, nor the performance of the services contemplated hereby will
violate, be in conflict with or constitute a default under (with or without the
giving of notice or lapse of time or both) or result in or permit the
termination or acceleration of, or give anyone the right to accelerate, any
agreement to which PRA is a party or is bound or affected, or constitute a
breach of fiduciary duty by PRA or any of its officers or directors.
13.3 Litigation Claims. As of the date of this Agreement, there is no
litigation, claim, proceeding or government investigation pending or, to PRA's
knowledge, threatened, involving PRA, any of its officers or directors, or any
other person or entity which may have an adverse effect on this Agreement, or
the performance of the services contemplated hereby, except for the matters set
forth in the "General Information" section of the Fund's Statement of
Additional Information. PRA agrees to provide ACG with written notice of any
such litigation, claim, proceeding or government investigation as promptly as
possible after receipt of a document providing notice or threat of any such
action.
13.4 Consents. Except as set forth on a schedule hereto, no consent,
approval, permit, authorization of, declaration to or filing with any
governmental or regulatory authority or any other third party is required to be
made by PRA in connection with the execution and delivery by PRA of this
Agreement, or the performance of the services contemplated hereby.
9
<PAGE> 10
13.5 PRA Status. PRA is registered as an investment adviser under the
Investment Advisers Act of 1940 and with each state where such registration is
necessary and is qualified to do business in each state where such
qualification is necessary. PRA covenants and agrees to remain registered as
an investment adviser under the Advisers Act during the term of this Agreement,
and to register and remain registered as an investment adviser and qualify and
remain qualified to do business in each state where such registration and/or
qualification is required based on the activities of PRA in that state. PRA
further covenants that it will use its best efforts to comply, and ensure
compliance by its officers, directors and employees, with the Advisers Act and
comparable state laws to which it is subject.
14. Representations and Warranties of ACG. ACG represents and warrants to
PRA as of the date hereof, the following:
14.1 Organization, Standing and Authority; Execution and Validity of
Agreement. ACG is duly organized, validly existing and in good standing under
the laws of the State of California and has the corporate power to enter into
and take the actions contemplated by this Agreement. This Agreement has been
duly and validly authorized and approved by all requisite corporate action of
ACG. This Agreement has been duly and validly executed and delivered by ACG
and constitutes a valid and binding obligation of ACG, enforceable against ACG
in accordance with its terms, except as enforceability may be limited by
applicable equitable principles or by the laws of bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect
affecting the enforcement of creditors' rights generally.
14.2 No Violation. Neither the execution and delivery by ACG of this
Agreement, nor the performance of the services contemplated hereby will
violate, be in conflict with or constitute a default under (with or without the
giving of notice or lapse of time or both) or result in or permit the
termination or acceleration of, or give anyone the right to accelerate, any
agreement to which ACG is a party or is bound or affected, or constitute a
breach of fiduciary duty by ACG or any of its officers or directors.
14.3 Litigation, Claims. As of the date of this Agreement, there is no
litigation, claim, proceeding or government investigation pending or, to ACG's
knowledge, threatened, involving ACG, any of its officers or directors, or any
other person or entity, which may have an adverse effect on this Agreement, or
the performance of the services contemplated hereby. ACG agrees to provide PRA
with written notice of any such litigation, claim, proceeding or government
investigation as promptly as possible after receipt of a document providing
notice or threat of any such action.
14.4 Consents. Except as set forth on a schedule hereto, no consent,
approval, permit, authorization of, declaration to or filing with any
governmental or regulatory authority or any other third party is required to be
made by ACG in connection with the execution and delivery by ACG of this
Agreement, or the performance of the services contemplated hereby.
14.5 ACG Status. ACG is a member in good standing of the National
Association of Securities Dealers, Inc., and is registered as a broker-dealer
in 48 states and the District of
10
<PAGE> 11
Columbia. ACG is in the process of registering as a broker-dealer in the
remaining contiguous United States and is in the process of qualifying to do
business in each state where such qualification is necessary. Upon such
registration, ACG covenants and agrees that ACG shall use its reasonable best
efforts to maintain appropriate federal and state licenses during the term of
this Agreement and to remain qualified to do business in each state where such
qualification is required based on the activities of ACG in that state. ACG
further covenants that it will use its best efforts to comply, and ensure
compliance by its officers, directors, employees and registered
representatives, with federal and state securities laws, the rules and
regulations thereunder, and the rules, interpretations and policies of any
self-regulatory organization to which it is subject, including without
limitation Article III, Sections 26 and 35 of the Rules of Fair Practice of the
NASD.
15. Authorized Representations. ACG is not authorized by PRA to give any
information or make any representations relating to the Fund, the Advisor
Shares or PRA, including use of their names, other than those contained in the
appropriate Registration Statement or Prospectuses and Statement of Additional
Information filed with the Commission under the Securities Act of 1933, as
amended (as these documents may be amended from time to time), or contained in
shareholder reports or other material that may be prepared by or on behalf of
the Fund for ACG's use. This shall not be construed to prevent ACG from
preparing and distributing, in compliance with applicable laws and regulations,
sales literature, advertisements or other material provided PRA has been
furnished with a copy of such literature, advertisements or other materials and
has had a reasonable opportunity to disapprove of (for reasons which may
include without limitation the distribution or use of PRA's confidential or
proprietary information) or comment upon such materials prior to their use.
ACG agrees to take appropriate action to revise, modify, refrain from or cease
using any sales literature or material to which PRA reasonably objects as
promptly as practicable after receipt of such materials. For purposes of this
Section 15, "sales literature" and "advertisements" shall have the same meaning
as defined in Article III, Section 35 of the Rules of Fair Practice of the
NASD, and shall also include sales scripts or worksheets.
16. Indemnification.
16.1 ACG will indemnify and hold PRA and any of its officers, directors,
employees, affiliates and agents harmless from and against any liability, loss,
damage, cost or expense (including any judgments, settlements and reasonable
attorneys' fees) suffered or incurred by such party by reason of any action,
suit, investigation or proceeding brought or threatened by, or on behalf of any
third party or parties against PRA or any of its officers, directors,
employees, affiliates or agents by reason of, or based upon, any action or
omission by ACG, or any soliciting dealer selected by ACG, or any of their
officers, directors, employees or agents, whether or not acting in such
capacity, including any violation of law, breach of this Agreement or breach of
fiduciary duty to a third party, except to the extent that such action or
omission was made in reliance upon, and in conformity with, information
contained in the Fund's Registration Statement, Prospectuses or Statement of
Additional Information.
11
<PAGE> 12
16.2 PRA will indemnify and hold ACG and any of its officers, directors,
employees and agents harmless from and against any liability, loss, damage,
cost or expense (including any judgments, settlements and reasonable attorneys'
fees) suffered or incurred by such party by reason of any action, suit,
investigation or proceeding brought or threatened by, or on behalf of any third
party or parties against ACG or any of its officers, directors, employees or
agents by reason of, or based upon, any action or omission by PRA or any of its
officers directors, employees or agents, whether or not acting in such
capacity, including any violation of law, breach of this Agreement or breach of
fiduciary duty to a third party, except to the extent that such action or
omission was made in reliance upon, and in conformity with, information
furnished in writing to PRA by or on behalf of ACG.
16.3 In no case is either party to be liable on the indemnity agreements
contained in this Section 16 with respect to any claim made against the
indemnified party or person, unless the indemnified party or person, as the
case may be, shall have notified the other party in writing of the claim within
a reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon the
indemnified party or person or after the indemnified party or person shall have
received notice of service on any designated agent. However, failure to notify
the other party of any claim shall not release such party from any liability
which it may have to the indemnified party or person against whom the action is
brought other than on account of its indemnity agreement contained in this
Section 16. In the case of any notice to the indemnifying party, it shall be
entitled to participate, at its own expense, in the defense, or if it so elects,
to assume the defense of any suit brought to enforce any claims, but if the
indemnifying party elects to assume the defense, the defense shall be conducted
by counsel chosen by it and acceptable to the indemnified party. In the event
the indemnifying party elects to assume the defense of any suit and retain
counsel as provided herein, the indemnified party shall bear the fees and
expenses of any additional counsel retained by it. If the indemnifying party
does not elect to assume the defense of any suit, or fails to diligently contest
such suit, it will reimburse the indemnified party and any indemnified person
for the reasonable fees and expenses of counsel retained by them.
16.4 In the event that a court rules that any claim for indemnification
under this Agreement is unenforceable or is otherwise to be limited, then the
indemnified party shall be entitled to contribution from the indemnifying party
under equitable principles. Such contribution shall not exceed the amount the
indemnified party would have been entitled to under the indemnification
provisions of the Agreement.
17. Nature of the Relationship. In performing services pursuant to this
Agreement, ACG is acting as an independent contractor and is not an employee,
partner, agent, representative, or joint venturer of PRA. It is understood and
agreed that ACG is responsible for its own conduct and for the employment,
control and conduct of its employees and agents, that PRA shall have no
participation in or responsibility for selecting or monitoring the activities
of soliciting dealers and that ACG is otherwise acting as a principal in the
services rendered hereunder.
12
<PAGE> 13
18. Miscellaneous Provisions.
18.1 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand or mailed by
registered or certified mail, return receipt requested, postage prepaid, to
each party at the address set forth on the signature page of this Agreement or
at such new address designated by such party by notice given pursuant to this
Section 17(i).
18.2 Further Assurances. Each party covenant that at any time, and from
time to time, during the term of this Agreement, it will execute such
additional instruments and take such actions as may reasonably be requested by
the other party to confirm or otherwise to carry out the intent and purposes of
this Agreement.
18.3 Waiver. Any failure on the part of any party to this Agreement to
comply with any of its obligations, agreements or conditions hereunder may be
waived, but only in writing, by the other party to whom such compliance is
owed. No waiver of any provision of this Agreement shall be deemed, or shall
constitute, a waiver of any other provision, whether or not similar, nor shall
any waiver constitute a continuing waiver.
18.4 Headings. The section and other headings in this Agreement are
inserted solely as a matter of convenience and for reference, and are not a
part of this Agreement.
18.5 Entire Agreement. This Agreement, including any Schedules attached
hereto, constitute the entire agreement between the parties hereto and
supersedes and cancels any prior agreements, representations, warranties or
communications, whether oral or written, among the parties hereto relating to
the transactions contemplated hereby or the subject matter herein. Neither
this Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, but only by an agreement in writing signed by the party
against which the enforcement of such change, waiver, discharge or termination
is sought.
18.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois, without regard to the
conflict of laws provisions thereof, and any disputes arising out of or in
connection with this Agreement shall be litigated in federal or state courts
located within Cook County, Illinois, and the parties hereby consent to submit
to the personal jurisdiction of such courts and waive any rights to contest the
venue thereof.
18.7 Assignment. The rights and obligations of a party under this
Agreement may not be assigned by such party except with the express written
consent of the other party.
18.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13
<PAGE> 14
18.9 Survival. Sections 8, 12 and 16 of this Agreement (except as set
forth therein) shall remain operative and in full force and effect regardless
of any termination of this Agreement.
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
executed on its behalf, as of the day and year first above written.
<TABLE>
<S> <C>
HEITMAN/PRA SECURITIES ACG CAPITAL CORPORATION
ADVISORS, INC.
By: /s/ Dean Sotter By: /s/ Ronald D. Cordes
------------------------------------- -----------------------------------
Dean A. Sotter, President Ronald D. Cordes, President
Address: Suite 3600 Address: Suite 200
180 North La Salle Street 1661 Tice Valley Boulevard
Chicago, IL 60601 Walnut Creek, CA 94595
</TABLE>
14
<PAGE> 15
EXHIBIT "A"
SUMMARY OF DISTRIBUTION SERVICES
ACG Capital will distribute the new Advisor Class of shares by offering
them through a group of NASD soliciting dealers which ACG intends to develop
beginning with the dealers with which ACG has an existing relationship through
the ADAM Network.
The role of ACG Capital as the Distributor of the Advisor Class will
include the following:
.1 Packaging the marketing materials of the Fund in such a way
that they will be broadly accepted by both the Soliciting Dealers
and their representatives and the investing public.
.2 Developing a selling group of Soliciting Dealers by
introducing the Fund, coordinating the "due diligence" process at
each soliciting dealer, and executing Soliciting Dealer Agreements
with those that approve the Fund.
.3 Introducing the Fund to the individual representatives of
each of the Soliciting Dealers, primarily through individual and
group meetings and telephone contacts.
.4 Training the individual representatives on the most effective
methods of presenting the Fund to their clients, including training
on the real estate and REIT industries and the role of real estate
in an asset allocation model.
.5 Supporting the sales activities of the individual registered
representative, including large client presentations and group
seminar presentations.
.6 Providing on-going communication to the registered
representatives, including regular data on the performance and
composition of the Fund and items of interest in the REIT and real
estate industries.
.7 Providing on-going support to the Soliciting Dealers,
including attendance at national, regional and local seminars,
conferences and training sessions put on by the Soliciting Dealers
for their registered representatives.
These activities will be performed by the four principals of ACG and eight
(8) Regional Marketing Consultants responsible for covering various territories
throughout the United States. These Regional Marketing Consultants are located
in ACG's corporate branch offices in San Francisco and Atlanta, as well as
satellite locations in Chicago, Los Angeles, Baltimore, New York, Dallas and
Orlando.
<PAGE> 1
Exhibit 10
GOODWIN, PROCTER & HOAR LLP
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
TELEPHONE (617) 570-1000
TELECOPIER (617) 523-1231
April 25, 1996
Heitman Securities Trust
180 North LaSalle Street
Suite 3600
Chicago, Illinois 60601
Ladies and Gentlemen:
We hereby consent to the reference in Post-Effective Amendment No. 10
(the "Amendment") to the Registration Statement (No. 33-24611) on Form N-1A
(the "Registration Statement") of Heitman Securities Trust (the "Registrant"),
a Massachusetts business trust, to our opinion dated March 8, 1995 with respect
to the legality of Advisor Class and Heitman/PRA Institutional Class shares of
beneficial interest, $.001 par value, of the Registrant representing interests
in the Heitman Real Estate Fund of the Registrant, which opinion was filed with
Post-Effective Amendment No. 9 of the Registration Statement.
We also hereby consent to the reference to this firm in the Statement
of Additional Information under the heading "General Information--Counsel"
which forms a part of the Amendment and to the filing of this consent as a
exhibit to the Amendment.
Very truly yours,
/s/ Goodwin, Procter & Hoar LLP
GOODWIN, PROCTER & HOAR LLP
<PAGE> 1
Exhibit 11
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to use in this
Registration Statement of our report dated February 26, 1996 included in the
Post-Effective Amendment No. 10 to the Registration Statement on Form N-1A of
Heitman Securities Trust (No. 33-24611), and to all references to our firm
included in this Registration Statement File No. 33-24611
/s/ Arthur Andersen LLP
Philadelphia, PA
April 25, 1996
<PAGE> 1
Exhibit 15(a)
HEITMAN SECURITIES TRUST
(ADVISOR CLASS)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1
WHEREAS, Heitman Securities Trust, an unincorporated association of
the type commonly known as a business trust organized under the laws of the
Commonwealth of Massachusetts (the "Trust"), engages in business as an open-end
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "Act");
WHEREAS, the Trust is authorized (i) to issue shares of beneficial
interest in separate series, with the shares of each such series representing
the interests in a separate portfolio of securities and other assets, and (ii)
to divide the shares within each such series into two or more classes;
WHEREAS, the Trust has established one portfolio series, Heitman Real
Estate Fund (the Heitman Real Estate Fund portfolio being referred to herein as
the "Initial Series" 3/4 such series, together with all other series
subsequently established by the Trust and made subject to this Plan, being
referred to herein individually as a "Series" and collectively as the
"Series");
WHEREAS, the Trust has established two classes of shares, such classes
being referred to as the "Heitman/PRA Institutional Class" and the "Advisor
Class"; and
WHEREAS, the Trust may be deemed a distributor of the Shares within
the meaning of Rule 12b-1 under the Act, and desires to adopt a Plan of
Distribution with respect to the Advisor Class of shares (the "Shares") of the
Initial Series pursuant to such Rule (the "Plan"); and
WHEREAS, the Trust may enter into one or more agreements (each, an
"Agreement") for distribution of the Shares with one or more underwriters
(each, a "Distributor"); and
WHEREAS, the Board of Trustees as a whole, and the Trustees who are
not interested persons of the Trust (as defined in the Act) and who have no
direct or indirect financial interest in the operation of this Plan or the
Agreement and any agreements relating to it (the "Qualified Trustees"), having
determined, in the exercise of their reasonable business judgment and in light
of their fiduciary duties under state law and under Section 36(a) and (b) of
the Act, that there is a reasonable likelihood that this Plan and the Agreement
will benefit the Advisor Class of the Initial Series and its shareholders, have
accordingly approved this Plan and the Agreement by votes cast in person at a
meeting called for the purpose of voting on this Plan and the Agreement and any
agreements related thereto.
<PAGE> 2
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with
Rule 12b-1 under the Act, on the following terms and conditions:
1. DISTRIBUTION ACTIVITIES. Subject to the supervision of the
Board of Trustees, the Trust may engage, directly or indirectly, in financing
any activities primarily intended to result in the sale of Shares, including,
but not limited to, the following: (1) making payments to underwriters,
securities dealers and others engaged in the sale of Shares, including payments
to the Distributor to be used to compensate or reimburse the Distributor or
securities dealers and others (including affiliates of the Distributor) engaged
in the distribution and marketing of Shares or furnishing assistance to
investors on an ongoing basis, and (2) providing reimbursement of direct
out-of-pocket expenditures incurred by the Distributor in connection with the
distribution and marketing of Shares, including expenses relating to the
formulation and implementation of marketing strategies and promotional
activities such as direct mail promotions and television, radio, newspaper,
magazine and other mass media advertising, the preparation, printing and
distribution of sales literature, the preparation, printing and distribution of
prospectuses of the Trust and reports for recipients other than existing
shareholders of the Trust, and obtaining such information, analyses and reports
with respect to marketing and promotional activities and investor accounts as
the Trust may, from time to time, deem advisable. The Trust and the Series are
authorized to engage in the activities listed above, and in other activities
primarily intended to result in the sale of Shares, either directly or through
other persons with which the Trust has entered into Agreements pursuant to the
Plan.
2. MAXIMUM EXPENDITURES. The expenditures to be made by the
Initial Series pursuant to this Plan and the basis upon which payment of such
expenditures will be made shall be determined from time to time by the
Trustees, but in no event may such expenditures exceed the following: (i) with
respect to Shares of the Initial Series, an annual rate of .25% of the average
daily value of net assets represented by such Shares, and (ii) with respect to
Shares of any Series subsequently established by the Trust and made subject to
this Agreement, the annual rate as agreed upon and specified in an addendum
hereto; plus such amounts as the Distributor may expend from general revenues,
profits and other sources from time to time in accordance with the last
sentence of Section 1. The expenditures to be made pursuant to this Plan shall
commence with respect to Shares of a Series as of the date on which this Plan
becomes effective with respect to each such Series.
3. PAYMENTS. Pursuant to this Plan, the Trust shall make
periodic payments to the Distributor at the annual rate provided for the
Agreement with respect the Shares of each Series. The Distributor shall in
turn remit to and allocate among selected dealers and others (including
affiliates of the Distributor) in consideration of and as reimbursement for
expenses incurred in the provision of distribution and marketing services and
furnishing assistance to investors on an ongoing basis, such amounts as the
Distributor shall determine. Any amounts received by the Distributor and not
so allocated may be retained by the Distributor as
2
<PAGE> 3
compensation to the Distributor for providing services under the Agreement
and/or as reimbursement for expenses incurred in connection with the
distribution and marketing of the Shares and the servicing of investor accounts
as contemplated by Section 1 hereof.
4. TERM AND TERMINATION.
(a) Initial Series. This Plan shall become effective
with respect to the Shares of the Initial Series as of the later of (i) the
date on which an amendment to the Registration Statement on Form N-1A with
respect to the Shares becomes effective under the Securities Act of 1933, as
amended, or (ii) the date on which the Initial Series commences offering the
Shares to the public and shall continue in effect with respect to the Shares
(subject to Section 4(c) hereof) until one year from the date of such
effectiveness, unless the continuation of this Plan shall have been approved
with respect to the Shares in accordance with the provisions of Section 4(c)
hereof.
(b) Additional Series. This Plan shall become effective
with respect to the Shares of each additional Series established by the Trust
after the date hereof and made subject to this Plan upon commencement of the
initial public offering thereof (provided that the Plan has previously been
approved with respect to the Series by votes of a majority of both (i) the
Board of Trustees of the Trust and (ii) the Qualified Trustees, cast in person
at a meeting held before the initial public offering of such additional Series
thereof and called for the purpose of voting on such approval), and shall
continue in effect with respect to each such additional Series or class
(subject to Section 4(c) hereof) for one year thereafter, unless the
continuation of this Plan shall have been approved with respect to such
additional Series in accordance with the provisions of Section 4(c) hereof.
The Distributor and the Trust on behalf of each such additional Series shall
each sign an addendum hereto agreeing to be bound hereby and setting forth such
specific and different terms as the parties may agree upon, including, without
implied limitation, the amount and purpose of payments to be made hereunder.
(c) Continuation. This Plan and the Agreement shall
continue in effect with respect to each Series subsequent to the initial term
specified in Section 4(a) and (b) for so long as such continuance is
specifically approved at least annually by votes of a majority of both (i) the
Board of Trustees of the Trust and (ii) the Qualified Trustees, cast in person
at a meeting called for the purpose of voting on this Plan, subject to any
shareholder approval requirements existing under applicable law.
(d) Termination.
(i) This Plan may be terminated at any time
with respect to the Shares of any Series thereof by vote of a majority
of the Qualified Trustees, or by vote of a majority of the outstanding
voting Shares of that Series. For purposes of this Agreement, the
term "vote of a majority of the outstanding voting Shares" of any
3
<PAGE> 4
Series shall mean the vote of the lesser of (A) 67 percent or
more of the outstanding voting Shares present at such meeting, if the
holders of more than 50 percent of the outstanding voting Shares are
present and represented by proxy; or (B) 50 percent or more of the
Shares. The Plan may remain in effect with respect to a Series even
if it has been terminated in accordance with this Section 4(e) with
respect to one or more other Series of the Trust.
(ii) The Agreement may be terminated at
any time, without penalty, with respect to the Shares of any
Series by vote of a majority of the Qualified Trustees or by vote of a
majority of the outstanding voting Shares of that Series on sixty
days' written notice to the Distributor. In addition, the Agreement
provides for automatic termination in the event of its assignment.
5. AMENDMENTS. This Plan may not be amended to increase
materially the amount of distribution expenditures provided for in Section 2
hereof unless such amendment is approved by a vote of a majority of the
outstanding Shares of each Series with respect to which a material increase in
the amount of distribution expenditures is proposed, and no material amendment
to the Plan shall be made unless approved in the manner provided for annual
renewal in Section 4(c) hereof. Otherwise, this Plan may be amended with
respect to the Shares of a Series by vote of a majority of the Qualified
Trustees or the outstanding voting Shares of that Series.
6. INDEPENDENT TRUSTEES. While this Plan is in effect
with respect to any Series, the selection and nomination of Trustees who are
not interested persons (as defined in the Act) of the Trust shall be committed
to the discretion of the Trustees who are not interested persons.
7. QUARTERLY REPORTS. The Treasurer of the Trust
and the Treasurer of the Distributor shall provide to the Trustees of the Trust
and the Trustees shall review, at least quarterly, a written report of the
amounts expended for distribution pursuant to this Plan and the purposes for
which such expenditures were made.
8. RECORDKEEPING. The Trust shall preserve copies of
this Plan, the Agreement and any related agreements and all reports made
pursuant to Section 7 hereof, for a period of not less than six years from the
date of this Plan and the Agreement, the agreements or such reports, as the
case may be, the first two years in an easily accessible place.
Dated: May 15, 1995
4
<PAGE> 1
Exhibit 15(b)
HEITMAN SECURITIES TRUST
(ADVISOR CLASS)
SHAREHOLDER SERVICING PLAN
WHEREAS, Heitman Securities Trust, an unincorporated association of the
type commonly known as a business trust organized under the laws of the
Commonwealth of Massachusetts (the "Trust"), engages in business as an open-end
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "Act");
WHEREAS, the Trust is authorized (i) to issue shares of beneficial
interest in separate series, with the shares of each such series representing
the interests in a separate portfolio of securities and other assets, and (ii)
to divide the shares within each such series into two or more classes;
WHEREAS, the Trust has established one portfolio series, Heitman Real
Estate Fund (the Heitman Real Estate Fund portfolio being referred to herein as
the "Initial Series" -- such series, together with all other series
subsequently established by the Trust and made subject to this Plan, being
referred to herein individually as a "Series" and collectively as the
"Series");
WHEREAS, the Trust has established two classes of shares, such classes
being referred to as the "Heitman/PRA Institutional Class" and the "Advisor
Class"; and
WHEREAS, the Trust desires to adopt a Shareholder Servicing Plan and has
adopted a related form of Shareholder Servicing Agreement with respect to the
Advisor Class of shares (the "Shares") of the Initial Series for certain
service organizations that wish to act as agent of their customers (the
"Agent") (respectively, the "Plan" and the "Agreement"); and
WHEREAS, the Board of Trustees as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the Act) and who have no direct
or indirect financial interest in the operation of this Plan or the Agreement
and any agreements relating to it (the "Qualified Trustees"), having
determined, in the exercise of their reasonable business judgment and in light
of their fiduciary duties under state law and under Section 36(a) and (b) of
the Act, that there is a reasonable likelihood that this Plan and the Agreement
will benefit the Advisor Class of the Initial Series and its shareholders, have
accordingly approved this Plan and the Agreement by votes cast in person at a
meeting called for the purpose of voting on this Plan and the Agreement and any
agreements related thereto.
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with Rule
12b-1 under the Act, on the following terms and conditions:
1. SHAREHOLDER SERVICING ACTIVITIES. Subject to the supervision
of the Board of Trustees, the Trust may engage, directly or indirectly, in
financing any activities relating to shareholder account administrative and
servicing functions, including without limitation making payments to Agents for
one
<PAGE> 2
or more of the following activities: (a) answering inquiries regarding account
status and history, the manner in which purchases and redemptions of the Shares
may be effected, and certain other matters pertaining to the Trust; (b)
assisting in designating and changing dividend options, account designations
and addresses; (c) providing necessary personnel and facilities to establish
and maintain certain shareholder accounts and records, as requested from time
to time by the Trust; (d) assisting in processing purchase and redemption
transactions; (e) arranging for the wiring of funds; (f) transmitting and
receiving funds in connection with orders to purchase or redeem Shares; (g)
verifying and guaranteeing signatures in connection with redemption orders,
transfers among and changes in designated accounts; (h) providing periodic
statements showing account balances and, to the extent practicable, integration
of such information with other client transactions otherwise effected with or
through the Agent; (i) furnishing (either separately or on an integrated basis
with other reports sent by the Agent) monthly and annual statements and
confirmations of all purchases and redemptions of Shares in an account; (j)
transmitting proxy statements, annual reports, prospectuses and other
communications from the Trust; (k) receiving, tabulating and transmitting to
the Trust proxies executed with respect to annual and special meetings of
shareholders of the Trust; and (l) providing such other related services as the
Trust or customers of the Agent may reasonably request.
The Trust is authorized to engage in the activities listed above either
directly or through other persons with which the Trust has entered into
Agreements pursuant to the Plan.
2. MAXIMUM EXPENDITURES. The expenditures to be made by the
Initial Series pursuant to this Plan and the basis upon which payment of such
expenditures will be made shall be determined from time to time by the
Trustees, but in no event may such expenditures exceed the following: (i) with
respect to Shares of the Initial Series, an annual rate of .25% of the average
daily value of net assets represented by such Shares, and (ii) with respect to
Shares of any Series subsequently established by the Trust and made subject to
this Agreement, the annual rate as agreed upon and specified in an addendum
hereto. The expenditures to be made pursuant to this Plan shall commence with
respect to Shares of a Series as of the date on which this Plan becomes
effective with respect to each such Series.
3. PAYMENTS. Pursuant to this Plan, the Trust shall make
periodic payments to the Agent at the annual rate provided for in the Agreement
with respect to the Shares of each Series. The servicing expenses of a
particular class will be borne solely by that class and no Series will use fees
charged to one class within a Series to support the marketing or servicing
relating to any other class within that Series or any other Series.
4. TERM AND TERMINATION.
(a) Initial Series. This Plan shall become effective
with respect to the Shares of the Initial Series as of the later of (i) the
date on which an amendment to the Registration Statement on Form N-1A with
respect to the Shares becomes effective under the Securities Act of 1933, as
amended, or (ii) the date on which the Initial Series commences offering the
Shares to the public and shall continue in effect with respect to the Shares
(subject to Section 4(c) hereof) until one year from the date of such
effectiveness, unless the continuation of this Plan shall have been approved
with respect to the Shares in accordance with the provisions of Section 4(c)
hereof.
2
<PAGE> 3
(b) Additional Series. This Plan shall become effective
with respect to the Shares of each additional Series established by the Trust
after the date hereof and made subject to this Plan upon commencement of the
initial public offering thereof (provided that the Plan has previously been
approved with respect to the Series by votes of a majority of both (i) the
Board of Trustees of the Trust and (ii) the Qualified Trustees, cast in person
at a meeting held before the initial public offering of such additional Series
thereof and called for the purpose of voting on such approval), and shall
continue in effect with respect to each such additional Series (subject to
Section 4(c) hereof) for one year thereafter, unless the continuation of this
Plan shall have been approved with respect to such additional Series in
accordance with the provisions of Section 4(c) hereof. The Distributor and the
Trust on behalf of each such additional Series shall each sign an addendum
hereto agreeing to be bound hereby and setting forth such specific and
different terms as the parties may agree upon, including, without implied
limitation, the amount and purpose of payments to be made hereunder.
(c) Continuation. This Plan and the Agreement shall
continue in effect with respect to each Series subsequent to the initial term
specified in Section 4(a) and (b) for so long as such continuance is
specifically approved at least annually by votes of a majority of both (i) the
Board of Trustees of the Trust and (ii) the Qualified Trustees, cast in person
at a meeting called for the purpose of voting on this Plan, subject to any
shareholder approval requirements existing under applicable law.
(d) Termination.
(i) This Plan may be terminated at any time with
respect to the Trust or any Series thereof, as the case may be, by
vote of a majority of the Qualified Trustees, or by vote of a majority
of the outstanding voting Shares of that Series. For purposes of this
Agreement, the term "vote of a majority of the outstanding voting
Shares" of any Series shall mean the vote of the lesser of (A) 67
percent or more of the outstanding voting Shares present at such
meeting, if the holders of more than 50 percent of the outstanding
voting Shares are present and represented by proxy; or (B) 50 percent
or more of the Shares. The Plan may remain in effect with respect to
a Series even if it has been terminated in accordance with this
Section 4(e) with respect to one or more other Series of the Trust.
(ii) The Agreement may be terminated at any time,
without penalty, with respect to the Shares of any Series by vote of
a majority of the Qualified Trustees or by vote of a majority of the
outstanding voting Shares of that Series on sixty days' written
notice to the Agent.
5. AMENDMENTS. This Plan may not be amended to increase
materially the amount of expenditures provided for in Section 2 hereof unless
such amendment is approved by a vote of a majority of the outstanding Shares of
each Series with respect to which a material increase in the amount of
distribution expenditures is proposed, and no material amendment to the Plan
shall be made unless approved in the manner provided for annual renewal in
Section 4(c) hereof. Otherwise, this Plan may be amended with respect to the
Shares of a Series by vote of a majority of the Qualified Trustees or the
outstanding voting Shares of that Series.
6. INDEPENDENT TRUSTEES. While this Plan is in effect with
respect to any Series, the selection and nomination of Trustees who are not
interested persons (as defined in the Act) of the Trust shall be committed to
the discretion of the Trustees who are not interested persons.
3
<PAGE> 4
7. QUARTERLY REPORTS. The Treasurer of the Trust and the Treasurer
of the Distributor shall provide to the Trustees of the Trust and the Trustees
shall review, at least quarterly, a written report of the amounts expended
pursuant to this Plan and the purposes for which such expenditures were made.
8. RECORDKEEPING. The Trust shall preserve copies of this Plan, the
Agreement and any related agreements and all reports made pursuant to Section 7
hereof, for a period of not less than six years from the date of this Plan and
the Agreement, the agreements or such reports, as the case may be, the first
two years in an easily accessible place.
Dated: May 15, 1995
4
<PAGE> 1
Exhibit 15(c)
[Letterhead of Heitman Securities Trust]
SHAREHOLDER SERVICING AGREEMENT
Chicago, Illinois
Gentlemen:
We are hereby inviting you, subject to the terms and conditions set
forth below, to serve as the agent of your customers ("Customers") for purposes
of performing certain administrative functions in connection with purchases and
redemptions of Advisor Class shares of beneficial interest ("Shares") of
Heitman Securities Trust (the "Trust") from time to time upon the order and for
the account of Customers, and to provide related services to your Customers in
connection with their investments in the Trust.
1. APPOINTMENT. You hereby agree to perform certain
services for Customers as hereinafter set forth. Your appointment hereunder is
non-exclusive, and the parties recognize and agree that, from time to time, the
Trust may enter into other shareholder servicing agreements, with other
financial institutions.
2. SERVICES TO BE PERFORMED. You shall be responsible
for performing shareholder account administrative and servicing functions,
which shall include, without limitation, one or more of the following
activities: (a) answering Customer inquiries regarding account status and
history, the manner in which purchases and redemptions of the Shares may be
effected, and certain other matters pertaining to the Trust; (b) assisting
Customers in designating and changing dividend options, account designations
and addresses; (c) providing necessary personnel and facilities to establish
and maintain certain shareholder accounts and records, as requested from time
to time by the Trust; (d) assisting in processing purchase and redemption
transactions; (e) arranging for the wiring of funds; (f) transmitting and
receiving funds in connection with Customer orders to purchase or redeem
Shares; (g) verifying and guaranteeing Customer signatures in connection with
redemption orders, transfers among and changes in Customer-designated accounts;
(h) providing periodic statements showing a Customer's account balances and, to
the extent practicable, integration of such information with other client
transactions otherwise effected with or through you; (i) furnishing (either
separately or on an integrated basis with other reports sent to a Customer by
you) monthly and annual statements and confirmations of all purchases and
redemptions of Shares in a Customer's account; (j) transmitting proxy
statements, annual reports, prospectuses and other communications from the
Trust to Customers; (k) receiving, tabulating and transmitting to the Trust
proxies executed by Customers with respect to annual and special meetings of
shareholders of the Trust; and (l) providing such other related services as the
Trust or a Customer may reasonably request. You shall provide all personnel
and facilities necessary in order for you to perform one or more of the
functions described in this paragraph with respect to your Customers. You
shall exercise reasonable care in performing all such services and shall be
liable for any failure to exercise such reasonable care.
<PAGE> 2
3. FEES.
3.1. Fees from the Trust. In consideration for the
services described in section 2 hereof and the incurring of expenses in
connection therewith, you shall receive fees at an annual rate of 0.25% of the
average daily value of all Shares owned by or for all Customers with whom you
maintain a servicing relationship, such fee to be paid in arrears at the end of
each calendar month.
3.2. Fees from Customers. It is agreed that you may
impose certain conditions on Customers, in addition to or different from those
imposed by the Trust, such as requiring a minimum initial investment or
charging Customers direct fees for the same or similar services as are provided
hereunder by you (which fees may either relate specifically to your services
with respect to the Trust or generally cover services not limited to those with
respect to the Trust). You shall bill Customers directly for such fees. In
the event you charge Customers such fees, you shall make appropriate prior
written disclosure (such disclosure to be in accordance with all applicable
laws) to Customers both of any direct fees charged to the Customer and of the
fees received or to be received by you from the Trust pursuant to section 3.1
of this Agreement. It is understood, however, that in no event shall you have
recourse or access to the account of any shareholder of the Trust except to the
extent expressly authorized by law or by the Trust or by such shareholder for
payment of any direct fees referred to in this section 3.2.
4. CAPACITY AND AUTHORITY TO ACT. You and your officers,
employees and agents are not authorized to make any representations concerning
the Trust or the Shares to Customers or prospective Customers, excepting only
accurate communication of factual information contained in the then-current
prospectus and statement of additional information or such other communications
as may be expressly authorized by the Trust. In performing your services under
this Agreement, you shall act as agent for the Customer and shall have no
authority to act as agent for the Trust. Upon request by the Trust, you shall
provide the Trust with copies of any materials which are generally circulated
by you to your Customers or prospective Customers.
5. USE OF THE AGENT'S NAME. The Trust shall not use your name in
any prospectus, sales literature or other material relating to the Trust in a
manner not approved by you prior thereto in writing; provided, however, that
your approval shall not be required for any use of its name which merely refers
accurately to your appointment hereunder or which is required by the Securities
and Exchange Commission or any state securities authority or any other
appropriate regulatory, governmental or judicial authority; provided, further,
that in no event shall such approval be unreasonably withheld or delayed.
6. USE OF THE TRUST'S NAME. You shall not use the name of the
Trust (other than for internal use in connection with performing its duties
under this agreement) in a manner not approved by the Trust prior thereto in
writing; provided, however, that the approval of the Trust shall not be
required for the use of the Trust's name in connection with communications
permitted by section 4 hereof or for any use of the Trust's name which merely
refers accurately to your role hereunder or which is required by the Securities
and Exchange Commission or any state securities authority or any other
appropriate regulatory, governmental or judicial authority; provided, further,
that in no event shall such approval be unreasonably withheld or delayed.
7. SECURITY. You represent and warrant that, to the best of your
knowledge, the various procedures and systems which you have implemented
(including provision for twenty-four hours a day restricted access) with regard
to safeguarding from loss or damage attributable to fire, theft or any other
cause the Trust's records and other data and your records, data, equipment,
facilities and other property used in the performance of your obligations
hereunder are adequate and that you will make
<PAGE> 3
such changes therein from time to time as in its judgment are required for the
secure performance of your obligations hereunder. The parties shall review
such systems and procedures on a periodic basis, and the Trust may from time to
time specify the types of records and other data of the Trust to be safeguarded
in accordance with this section 7.
8. COMPLIANCE WITH LAWS; ETC. You shall comply with all
applicable federal and state laws and regulations, including securities laws.
You hereby agree to maintain all records required by law relating to
transactions on the Shares, and upon our request, or of the Trust, promptly
make such of these records available to us or the Trust's administrator as are
requested. In addition, you hereby agree to establish appropriate procedures
and reporting forms and/or mechanisms and schedules in conjunction with us and
the Trust's administrator, to enable the Trust to identify the location, type
of, and sales to all accounts opened and maintained by your customers or by you
on behalf of your customers. You represent and warrant to the Trust that the
performance of all its obligations hereunder will comply with all applicable
laws and regulations, the provisions of your charter documents and by-laws and
all material contractual obligations binding upon you. You furthermore
undertakes that you will promptly inform the Trust of any change in applicable
laws or regulations (or interpretations thereof) or in your charter or by-laws
or material contracts which would prevent or impair full performance of any of
your obligations hereunder.
9. REPORTS. To the extent requested by the Trust from time to
time, you agree that you will provide the Trust with a written report of the
amounts expended by you pursuant to this Agreement and the purposes for which
such expenditures were made. Such written reports shall be in a form
satisfactory to the Trust and shall supply all information necessary for the
Trust to discharge its responsibilities under applicable laws and regulations.
10. RECORD KEEPING.
10.1. Section 31(a), Etc. You shall maintain records in a
form acceptable to the Trust and in compliance with applicable laws and the
rules and regulations of the Securities and Exchange Commission, including but
not limited to the record-keeping requirements of section 31(a) of the
Investment Company Act 1940, as amended (the "1940 Act"), and the rules
thereunder. Such records shall be deemed to be the property of the Trust and
will be made available, at the Trust's reasonable request, for inspection and
use by the Trust, representatives of the Trust and governmental authorities.
You agree that, for so long as you retain any records of the Trust, you will
meet all reporting requirements pursuant to the 1940 Act with respect to such
records.
10.2. Transfer of Customer Data. In the event this
Agreement is terminated or a successor to you are appointed, you shall, at the
expense of the Trust, transfer to such designee as the Trust may direct a
certified list of the shareholders of the Trust serviced by you (with name,
address and tax identification or Social Security number), a complete record of
the account of each such shareholder and the status thereof, and all other
relevant books, records, correspondence and other data established or
maintained by you under this Agreement. In the event this Agreement is
terminated, you will use your best efforts to cooperate in the orderly transfer
of such duties and responsibilities, including assistance in the establishment
of books, records and other data by the successor.
10.3. Survival of Record-Keeping Obligations. The
record-keeping obligations imposed in this section 10 shall survive the
termination of this Agreement.
11. FORCE MAJEURE. You shall not be liable or responsible for
delays or errors by reason of circumstances beyond its control, including, but
not limited to, acts of civil or military authority, national emergencies,
labor difficulties, fire, mechanical breakdown, flood or catastrophe, Acts of
God, insurrection, war, riots or failure of communication or power supply.
<PAGE> 4
12. INDEMNIFICATION.
12.1. Indemnification of the Agent. The Trust shall
indemnify and hold you harmless from and against any and all losses, claims,
damages, liabilities and expenses incurred by you and resulting from any claim,
demand, action or suit (collectively, "Claims") brought against you and arising
out of or in connection with the performance of your obligations hereunder,
other than any Claim resulting from (i) the bad faith or negligence of you,
your officers, employees or agents, or (ii) any breach of your obligation under
this Agreement or applicable law by you, your officers, employees or agents, or
(iii) any false or misleading statement contained in any communication by you
to any Customer or prospective Customer not prepared by or expressly authorized
by the Trust for your use.
In any case in which the Trust may be asked to indemnify or hold you
harmless, the Trust shall be advised of all pertinent facts concerning the
situation in question and you shall use reasonable care to identify and notify
the Trust promptly concerning any situation which presents or appears likely to
present a claim for indemnification against the Trust. The Trust shall have
the option to defend you against any Claim which may be the subject of
indemnification hereunder. In the event that the Trust elects to defend
against such claim the defense shall be conducted by counsel chosen by the
Trust and satisfactory to you. You may retain additional counsel at its
expense. Except with the prior written consent of the Trust, you shall not
confess any Claim or make any compromise in any case in which the Trust will be
asked to indemnify you.
12.2. Indemnification of the Trust. You shall indemnify
and hold the Trust harmless from and against any and all losses, claims,
damages, liabilities and expenses incurred by the Trust and resulting from any
Claim brought against the Trust and resulting from (i) the bad faith or
negligence of you, your officers, employees or agents, or (ii) any breach of
your obligations under this Agreement or applicable law by you, your officers,
employees or agents, or (iii) any false or misleading statement contained in
any communication by you to any Customer or prospective Customer not prepared
by or expressly authorized by the Trust for your use.
In any case in which you may be asked to indemnify or hold the Trust
harmless, you shall be advised of all pertinent facts concerning the situation
in question and the Trust shall use reasonable care to identify and notify you
promptly concerning any situation which presents or appears likely to present a
claim for indemnification against you. You shall have the option to defend the
Trust against any Claim which may be the subject of indemnification hereunder.
In the event that you elect to defend against such Claim, the defense shall be
conducted by counsel chosen by you and satisfactory to the Trust. The Trust
may retain additional counsel at its expense. Except with the prior written
consent of the agent, the Trust shall not confess any Claim or make any
compromise in any case in which you will be asked to indemnify the Trust.
12.3. Survival of Indemnities. The indemnities granted by
the parties in this section 12 shall survive the termination of this Agreement.
13. INSURANCE. You shall maintain reasonable insurance coverage
against any and all liabilities which may arise in connection with the
performance of its duties hereunder. You shall provide information with
respect to the extent of such coverage upon our request.
<PAGE> 5
14. NOTICES. All notices or other communications hereunder to
either party shall be in writing and shall be deemed sufficient if mailed to
such party at the address of such party set forth in this Agreement or at such
other address as such party may have designated by written notice to the other.
15. FURTHER ASSURANCES. Each party agrees to perform such further
acts and execute such further documents as are necessary to effectuate the
purposes hereof.
16. TERMINATION. This Agreement may be terminated by the Trust,
without the payment of any penalty, at any time upon not more than 60 days' nor
less than 30 days' notice to you, by a vote of a majority of the Board of
Trustees of the Trust who are not "interested persons" of the Trust (as defined
in the 1940 Act) and have no direct or indirect financial interest in the
operation of the Trust's Shareholder Servicing Plan (the "Plan"), this
Agreement or any other agreement related to such Plan, or by "a vote of a
majority of the outstanding voting securities" (as defined in the 1940 Act) of
the Trust. You may terminate this Agreement upon not more than 60 days' nor
less than 30 days' notice to the Trust. Notwithstanding anything herein to the
contrary, but except as provided in section 19 of this Agreement, this
Agreement may not be assigned and shall terminate automatically without notice
to either party upon any assignment. Upon termination hereof, the Trust shall
pay such compensation as may be due you as of the date of such termination.
17. CHANGES; AMENDMENTS. This Agreement may be changed or amended
only by written instrument signed by both parties.
18. LIMITATION OF LIABILITY. The First Amended and Restated
Master Trust Agreement dated February 28, 1995, as amended from time to time,
establishing the Trust, which is hereby referred to and a copy of which is on
file with the Secretary of The Commonwealth of Massachusetts, provides that the
name of the Trust means the Trustees from time to time serving (as Trustees but
not personally) under said Master Trust Agreement. It is expressly
acknowledged and agreed that the obligations of the Trust hereunder shall not
be binding upon any of the shareholders, Trustees, officers, employees or
agents of the Trust, personally, but shall bind only the trust property of the
Trust, as provided in its Master Trust Agreement. The execution and delivery
of this Agreement have been authorized by the Trustees of the Trust and signed
by an officer of the Trust, acting as such, and neither such authorization by
such Trustees nor such execution and delivery by such officer shall be deemed
to have been made by any of them individually or to impose any liability on any
of them personally, but shall bind only the trust property of the Trust as
provided in its Master Trust Agreement.
19. MISCELLANEOUS. This Agreement shall be construed and enforced
in accordance with and governed by the laws of The Commonwealth of
Massachusetts without giving effect to the conflicts of laws provisions
thereof. The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement has been
executed on behalf of the Trust by the undersigned not individually, but in the
capacity indicated. This Agreement shall be effective when accepted by you
below.
<PAGE> 6
Please confirm your agreement hereto by signing and returning the enclosed
counterpart of this Agreement at once to: Heitman Securities Trust, 900 North
Michigan Avenue, Suite 1000, Chicago, Illinois 60611, Attention: President.
Upon receipt thereof, this Agreement and such signed duplicate copy will
evidence the agreement between us.
HEITMAN SECURITIES TRUST
By:
-----------------------------------
Name:
Title:
ATTEST:
-------------------------------
ACCEPTED:
[ ]
(Shareholder Servicing Agent)
By:
----------------------------------
Name:
Title:
ATTEST:______________________________
_______________________________________
_______________________________________
_______________________________________
(Address to which all communications are
to be sent)
Dated:_________________________________
<PAGE> 1
EXHIBIT 15(d)
[Letterhead of Heitman Securities Trust]
SHAREHOLDER SERVICING AGREEMENT
FOR OMNIBUS ACCOUNT ARRANGEMENTS
Chicago, Illinois
Gentlemen:
We are hereby inviting you, subject to the terms and conditions set
forth below, to serve as the agent of your customers ("Customers") for purposes
of performing certain administrative functions in connection with purchases and
redemptions of Advisor Class shares of beneficial interest ("Shares") of
Heitman Securities Trust (the "Trust") from time to time upon the order and for
the account of Customers, and to provide related services to your Customers in
connection with their investments in the Trust. Each series of the Trust for
which you serve as a servicing agent pursuant to this Agreement is hereafter
referred to as a "Fund."
1. APPOINTMENT. You hereby agree to perform certain services for
Customers as hereinafter set forth. Your appointment hereunder is
non-exclusive, and the parties recognize and agree that, from time to time, the
Trust may enter into other shareholder servicing agreements with other
financial institutions.
2. SERVICES TO BE PERFORMED. You shall be responsible for
performing shareholder account administrative and servicing functions, which
shall include, without limitation, one or more of the following activities: (a)
answering Customer inquiries regarding account status and history, the manner
in which purchases and redemptions of the Shares may be effected, and certain
other matters pertaining to the Trust; (b) assisting Customers in designating
and changing dividend options, account designations and addresses; (c)
providing necessary personnel and facilities to establish and maintain certain
shareholder accounts and records, as requested from time to time by the Trust,
including complete subaccounting records regarding Shares beneficially owned by
Customers; (d) assisting in processing purchase and redemption transactions;
(e) arranging for the wiring of funds; (f) transmitting and receiving funds in
connection with Customer orders to purchase or redeem Shares; (g) verifying and
guaranteeing Customer signatures in connection with redemption orders,
transfers among and changes in Customer-designated accounts; (h) providing
periodic statements showing a Customer's account balances and, to the extent
practicable, integration of such information with other client transactions
otherwise effected with or through you; (i) furnishing (either separately or on
an integrated basis with other reports sent to a Customer by you) monthly and
annual statements and confirmations of all purchases and redemptions of Shares
in a Customer's account; (j) transmitting proxy statements, annual reports,
prospectuses and other communications from the Trust to Customers; (k)
receiving, tabulating and transmitting to the Trust proxies executed by
Customers with respect to annual and special meetings of shareholders of the
Trust; (l) aggregating and processing Customer purchase and redemption requests
for Shares and placing net purchase and redemption orders with the Trust's
transfer agent ("Transfer Agent") in the manner described in section 4 hereof;
and (m) providing such other related services as the Trust or a Customer may
reasonably request. You shall provide all personnel and facilities necessary
in order for you to perform one or more of the functions
<PAGE> 2
described in this paragraph with respect to your Customers. You shall exercise
reasonable care in performing all such services and shall be liable for any
failure to exercise such reasonable care.
3. FEES.
3.1. Fees from the Trust. In consideration for the
services described in section 2 hereof and the incurring of expenses in
connection therewith, you shall receive fees at an annual rate of 0.25% of the
average daily value of all Shares owned by or for all Customers with whom you
maintain a servicing relationship, such fee to be paid in arrears at the end of
each calendar month.
3.2. Fees from Customers. It is agreed that you may
impose certain conditions on Customers, in addition to or different from those
imposed by the Trust, such as requiring a minimum initial investment or
charging Customers direct fees for the same or similar services as are provided
hereunder by you (which fees may either relate specifically to your services
with respect to the Trust or generally cover services not limited to those with
respect to the Trust). You shall bill Customers directly for such fees. In
the event you charge Customers such fees, you shall make appropriate prior
written disclosure (such disclosure to be in accordance with all applicable
laws) to Customers both of any direct fees charged to the Customer and of the
fees received or to be received by you from the Trust pursuant to section 3.1
of this Agreement. It is understood, however, that in no event shall you have
recourse or access to the account of any shareholder of the Trust except to the
extent expressly authorized by law or by the Trust or by such shareholder for
payment of any direct fees referred to in this section 3.2.
4. PURCHASE AND REDEMPTION ORDERS.
4.1. Omnibus Accounts. It is agreed that you will open
with the Transfer Agent a minimum of two omnibus accounts per Fund: capital
gains and dividend distributions payable with respect to Shares held in one
account shall be paid in cash, and capital gains and dividend distributions
payable with respect to Shares held in another account shall be paid in
additional Shares of the Fund.
4.2. Aggregation of Orders. For each business day on
which any Customer places with you a purchase or redemption order for Shares of
a Fund, you shall aggregate all such purchase orders and aggregate all such
redemption orders and communicate to Transfer Agent, by facsimile or, where
feasible, by direct or indirect systems access, an aggregate purchase order and
an aggregate redemption order for each omnibus account. To be effective on the
date received, all orders must be received by Transfer Agent in accordance with
the terms set forth in the current prospectus and statement of additional
information for the Trust.
4.3. Notification of Net Asset Value. After 4:00 p.m.
Eastern Time and prior to ___ p.m. Eastern Time on each business day, the Trust
shall notify you of the net asset value per share of each Share of each Fund
for that business day.
4.4. Payment of Redemption Proceeds. In the case of a
redemption order, federal funds, in the amount of the redemption order shall be
wired by [date/time] to you at __________. Each party shall bear
the cost of any wire transfer that it sends.
2
<PAGE> 3
4.5. Net Asset Value Adjustments. In the event
adjustments are required to correct any error in the computation of the net
asset value or public offering price of Fund Shares, the Trust shall notify you
prior to making any adjustments and describe the need for such adjustments
(including the date of the error, the incorrect price and the correct price).
In such case, an appropriate adjustment shall be made to the relevant omnibus
account(s) and you shall make corresponding adjustments to the accounts of your
Customers. If as a result of such error Customers have received accounts in
excess of the amounts to which they otherwise would have been entitled prior to
an adjustment, at the request of the Trust you will make a good faith effort to
collect such excess amounts from such Customers.
4.6. Suspension of Sales or Redemptions. The Trust may
cease offering Shares at any time, and in its sole discretion may refuse any
purchase order. Further, the Trust shall not be required to accept orders for
redemption of Shares of a Fund under this section 4 if the Trust has suspended
redemptions with respect to such Fund in accordance with section 22(e) of the
Investment Company Act of 1940, as amended (the "1940 Act").
4.7. Definition. For the purposes of this Agreement,
"business day" shall mean each day that the New York Stock Exchange is open for
business.
5. DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. As to each Fund,
as soon as practicable after the announcement of a distribution, you shall be
notified of the ex-date, record date, payable date, distribution rate per
Share, record date Share balances and cash and reinvestment payment amounts.
On the payable date, the Trust shall wire the cash distribution from the
appropriate Fund to you at _______________________________________. For annual
tax reporting purposes, the Trust shall inform you of the portion of
distributions that include any of the following: foreign source income, tax
exempt income by state of origin, or return of capital.
6. PREPARATION AND DISTRIBUTION OF WRITTEN MATERIALS.
6.1. Prospectuses and Statements of Additional
Information. The Trust shall provide you with such number of copies of each
Fund's prospectus and statement of additional information ("SAI") relating to
the Shares as is necessary for delivery to Customers in connection with the
purchase of Shares, and you shall be responsible for making timely delivery of
Prospectuses and SAIs to Customers in compliance with applicable law. As soon
as practicable following the filing under the Securities Act of 1933, as
amended, of a definitive prospectus or SAI of any Fund or a supplement to the
prospectus of SAI of any Fund, the Trust shall provide copies of the prospectus
and SAI of each Fund affected by the amendment or a copy of such supplement.
You shall not be responsible for the preparing or filing with any governmental
authority any registration statement, prospectus, SAI or supplement for the
Trust or any Fund. However, upon request by the Trust or any of the Trust's
service providers, you shall timely provide information necessary for the Trust
or any of the Trust's service providers to: (i) prepare and file any of the
written materials mentioned in this section 6 or (ii) otherwise comply with
applicable law regarding the Trust.
6.2. Forwarding of Statements and Reports. You shall
timely provide copies of the following materials to Customers: proxy
statements, annual reports and semi-annual reports. At no
3
<PAGE> 4
expense to you, the Trust shall provide you with as many copies of such
materials as you may reasonably request. Such materials shall be sent to you
at the following address: _______________.
7. COMPLIANCE WITH BLUE SKY LAWS. You will only place purchase
orders for Shares of a Fund on behalf of Customers whose addresses recorded on
your books are in jurisdictions in which the Trust has notified you in writing
that the Shares of the Fund are registered or qualified for sale under
applicable law. You shall immediately cease offering Shares of a Fund in any
jurisdiction where the Trust notifies you in writing that the Fund's
registration or qualification has terminated or if the Trust otherwise wishes
you to cease offering Shares of such Fund in such jurisdiction. You shall
furnish the Trust or its designee with monthly written statements of the number
of Shares of each Fund purchased on behalf of Customers resident in each
jurisdiction.
8. CAPACITY AND AUTHORITY TO ACT. You and your officers,
employees and agents are not authorized to make any representations concerning
the Trust or the Shares to Customers or prospective Customers, excepting only
accurate communication of factual information contained in the then-current
prospectus and statement of additional information or such other communications
as may be expressly authorized by the Trust. In performing your services under
this Agreement, you shall act as agent for the Customer and shall have no
authority to act as agent for the Trust. Upon request by the Trust, you shall
provide the Trust with copies of any materials which are generally circulated
by you to your Customers or prospective Customers.
9. USE OF THE AGENT'S NAME. The Trust shall not use your name in
any prospectus, sales literature or other material relating to the Trust in a
manner not approved by you prior thereto in writing; provided, however, that
your approval shall not be required for any use of its name which merely refers
accurately to your appointment hereunder or which is required by the Securities
and Exchange Commission or any state securities authority or any other
appropriate regulatory, governmental or judicial authority; provided, further,
that in no event shall such approval be unreasonably withheld or delayed.
10. USE OF THE TRUST'S NAME. You shall not use the name of the
Trust (other than for internal use in connection with performing its duties
under this agreement) in a manner not approved by the Trust prior thereto in
writing; provided, however, that the approval of the Trust shall not be
required for the use of the Trust's name in connection with communications
permitted by section 4 hereof or for any use of the Trust's name which merely
refers accurately to your role hereunder or which is required by the Securities
and Exchange Commission or any state securities authority or any other
appropriate regulatory, governmental or judicial authority; provided, further,
that in no event shall such approval be unreasonably withheld or delayed.
11. SECURITY. You represent and warrant that, to the best of your
knowledge, the various procedures and systems which you have implemented
(including provision for twenty-four hours a day restricted access) with regard
to safeguarding from loss or damage attributable to fire, theft or any other
cause the Trust's records and other data and your records, data, equipment,
facilities and other property used in the performance of your obligations
hereunder are adequate and that you will make such changes therein from time to
time as in its judgment are required for the secure performance of your
obligations hereunder. The parties shall review such systems and procedures on
a periodic basis, and the Trust may from time to
4
<PAGE> 5
time specify the types of records and other data of the Trust to be safeguarded
in accordance with this section 11.
12. COMPLIANCE WITH LAWS; ETC. You shall comply with all
applicable federal and state laws and regulations, including securities laws.
You hereby agree to maintain all records required by law relating to
transactions on the Shares, and upon our request, or of the Trust, promptly
make such of these records available to us or the Trust's administrator as are
requested. In addition, you hereby agree to establish appropriate procedures
and reporting forms and/or mechanisms and schedules in conjunction with us and
the Trust's administrator, to enable the Trust to identify the location, type
of, and sales to all accounts opened and maintained by your customers or by you
on behalf of your customers. You represent and warrant to the Trust that the
performance of all its obligations hereunder will comply with all applicable
laws and regulations, the provisions of your charter documents and by-laws and
all material contractual obligations binding upon you. You furthermore
undertakes that you will promptly inform the Trust of any change in applicable
laws or regulations (or interpretations thereof) or in your charter or by-laws
or material contracts which would prevent or impair full performance of any of
your obligations hereunder.
13. REPORTS. To the extent requested by the Trust from time to
time, you agree that you will provide the Trust with a written report of the
amounts expended by you pursuant to this Agreement and the purposes for which
such expenditures were made. Such written reports shall be in a form
satisfactory to the Trust and shall supply all information necessary for the
Trust to discharge its responsibilities under applicable laws and regulations.
14. RECORD KEEPING.
14.1. Section 31(a), Etc. You shall maintain records in a
form acceptable to the Trust and in compliance with applicable laws and the
rules and regulations of the Securities and Exchange Commission, including but
not limited to the record-keeping requirements of section 31(a) of the 1940
Act, and the rules thereunder. Such records shall be deemed to be the property
of the Trust and will be made available, at the Trust's reasonable request, for
inspection and use by the Trust, representatives of the Trust and governmental
authorities. You agree that, for so long as you retain any records of the
Trust, you will meet all reporting requirements pursuant to the 1940 Act with
respect to such records.
14.2. Transfer of Customer Data. In the event this
Agreement is terminated or a successor to you are appointed, you shall, at the
expense of the Trust, transfer to such designee as the Trust may direct a
certified list of the shareholders of the Trust serviced by you (with name,
address and tax identification or Social Security number), a complete record of
the account of each such shareholder and the status thereof, and all other
relevant books, records, correspondence and other data established or
maintained by you under this Agreement. In the event this Agreement is
terminated, you will use your best efforts to cooperate in the orderly transfer
of such duties and responsibilities, including assistance in the establishment
of books, records and other data by the successor.
14.3. Survival of Record Keeping Obligations. The record
keeping obligations imposed in this section 14 shall survive the termination of
this Agreement.
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<PAGE> 6
15. Force Majeure. You shall not be liable or responsible for
delays or errors by reason of circumstances beyond its control, including, but
not limited to, acts of civil or military authority, national emergencies,
labor difficulties, fire, mechanical breakdown, flood or catastrophe, Acts of
God, insurrection, war, riots or failure of communication or power supply.
16. INDEMNIFICATION.
16.1. Indemnification of the Agent. The Trust shall
indemnify and hold you harmless from and against any and all losses, claims,
damages, liabilities and expenses incurred by you and resulting from any claim,
demand, action or suit (collectively, "Claims") brought against you and arising
out of or in connection with the performance of your obligations hereunder,
other than any Claim resulting from (i) the bad faith or negligence of you,
your officers, employees or agents, or (ii) any breach of your obligation under
this Agreement or applicable law by you, your officers, employees or agents, or
(iii) any false or misleading statement contained in any communication by you
to any Customer or prospective Customer not prepared by or expressly authorized
by the Trust for your use.
In any case in which the Trust may be asked to indemnify or hold you
harmless, the Trust shall be advised of all pertinent facts concerning the
situation in question and you shall use reasonable care to identify and notify
the Trust promptly concerning any situation which presents or appears likely
to present a claim for indemnification against the Trust. The Trust shall
have the option to defend you against any Claim which may be the subject of
indemnification hereunder. In the event that the Trust elects to defend
against such claim the defense shall be conducted by counsel chosen by the
Trust and satisfactory to you. You may retain additional counsel at its
expense. Except with the prior written consent of the Trust, you shall not
confess any Claim or make any compromise in any case in which the Trust will
be asked to indemnify you.
16.2. Indemnification of the Trust. You shall indemnify
and hold the Trust harmless from and against any and all losses, claims,
damages, liabilities and expenses incurred by the Trust and resulting from any
Claim brought against the Trust and resulting from (i) the bad faith or
negligence of you, your officers, employees or agents, or (ii) any breach of
your obligations under this Agreement or applicable law by you, your officers,
employees or agents, or (iii) any false or misleading statement contained in
any communication by you to any Customer or prospective Customer not prepared
by or expressly authorized by the Trust for your use.
In any case in which you may be asked to indemnify or hold the Trust
harmless, you shall be advised of all pertinent facts concerning the situation
in question and the Trust shall use reasonable care to identify and notify you
promptly concerning any situation which presents or appears likely to present
a claim for indemnification against you. You shall have the option to defend
the Trust against any Claim which may be the subject of indemnification
hereunder. In the event that you elect to defend against such Claim, the
defense shall be conducted by counsel chosen by you and satisfactory to the
Trust. The Trust may retain additional counsel at its expense. Except with
the prior written consent of the agent, the Trust shall not confess any Claim
or make any compromise in any case in which you will be asked to indemnify the
Trust.
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<PAGE> 7
16.3. Survival of Indemnities. The indemnities granted by
the parties in this section 16 shall survive the termination of this Agreement.
17. INSURANCE. You shall maintain reasonable insurance coverage
against any and all liabilities which may arise in connection with the
performance of its duties hereunder. You shall provide information with
respect to the extent of such coverage upon our request.
18. NOTICES. All notices or other communications hereunder to
either party shall be in writing and shall be deemed sufficient if mailed to
such party at the address of such party set forth in this Agreement or at such
other address as such party may have designated by written notice to the other.
19. FURTHER ASSURANCES. Each party agrees to perform such further
acts and execute such further documents as are necessary to effectuate the
purposes hereof.
20. TERMINATION. This Agreement may be terminated by the Trust,
without the payment of any penalty, at any time upon not more than 60 days' nor
less than 30 days' notice to you, by a vote of a majority of the Board of
Trustees of the Trust who are not "interested persons" of the Trust (as defined
in the 1940 Act) and have no direct or indirect financial interest in the
operation of the Trust's Shareholder Servicing Plan (the "Plan"), this
Agreement or any other agreement related to such Plan or by "a vote of a
majority of the outstanding voting securities" (as defined in the 1940 Act) of
the Trust. You may terminate this Agreement upon not more than 60 days' nor
less than 30 days' notice to the Trust. Notwithstanding anything herein to the
contrary, but except as provided in section 19 of this Agreement, this
Agreement may not be assigned and shall terminate automatically without notice
to either party upon any assignment. Upon termination hereof, the Trust shall
pay such compensation as may be due you as of the date of such termination.
21. CHANGES; AMENDMENTS. This Agreement may be changed or amended
only by written instrument signed by both parties.
22. LIMITATION OF LIABILITY. The First Amended and Restated
Master Trust Agreement dated February 28, 1995, as amended from time to time,
establishing the Trust, which is hereby referred to and a copy of which is on
file with the Secretary of The Commonwealth of Massachusetts, provides that the
name of the Trust means the Trustees from time to time serving (as Trustees but
not personally) under said Master Trust Agreement. It is expressly
acknowledged and agreed that the obligations of the Trust hereunder shall not
be binding upon any of the shareholders, Trustees, officers, employees or
agents of the Trust, personally, but shall bind only the trust property of the
Trust, as provided in its Master Trust Agreement. The execution and delivery
of this Agreement have been authorized by the Trustees of the Trust and signed
by an officer of the Trust, acting as such, and neither such authorization by
such Trustees nor such execution and delivery by such officer shall be deemed
to have been made by any of them individually or to impose any liability on any
of them personally, but shall bind only the trust property of the Trust as
provided in its Master Trust Agreement.
23. MISCELLANEOUS. This Agreement shall be construed and enforced
in accordance with and governed by the laws of The Commonwealth of
Massachusetts without giving effect to the conflicts of laws provisions
thereof. The captions in this Agreement are included for convenience of
reference only and in
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no way define or limit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement has been executed on behalf of the
Trust by the undersigned not individually, but in the capacity indicated. This
Agreement shall be effective when accepted by you below.
Please confirm your agreement hereto by signing and returning the
enclosed counterpart of this Agreement at once to: Heitman Securities
Trust, 900 North Michigan Avenue, Suite 1000, Chicago, Illinois 60611,
Attention: President. Upon receipt thereof, this Agreement and such
signed duplicate copy will evidence the agreement between us.
HEITMAN SECURITIES TRUST
By: /s/ Nancy B. Lynn
---------------------------
Nancy B. Lynn
Secretary
ATTEST:
-----------------------
ACCEPTED:
[ ]
(Shareholder Servicing Agent)
By:
-------------------------------------
Name:
Title:
ATTEST:
---------------------------------
- ----------------------------------------
- ----------------------------------------
- ----------------------------------------
- ----------------------------------------
(Address to which all communications are
to be sent)
Dated:
----------------------------------
8
<PAGE> 1
EXHIBIT 15(e)
SHAREHOLDER SERVICING AGREEMENT
FOR OMNIBUS ACCOUNT ARRANGEMENTS
(Institutional Class)
Chicago, Illinois
Gentlemen:
We are hereby inviting you, subject to the terms and conditions set
forth below, to serve as the agent of your customers ("Customers") for purposes
of performing certain administrative functions in connection with purchases and
redemptions of Institutional Class shares of beneficial interest ("Shares") of
Heitman Securities Trust (the "Trust") from time to time upon the order and for
the account of Customers, and to provide related services to your Customers in
connection with their investments in the Trust. Each series of the Trust for
which you serve as a servicing agent pursuant to this Agreement is hereafter
referred to as a "Fund."
1. APPOINTMENT. You hereby agree to perform certain services for
Customers as hereinafter set forth. Your appointment hereunder is
non-exclusive, and the parties recognize and agree that, from time to time, the
Trust may enter into other shareholder servicing agreements with other
financial institutions.
2. SERVICES TO BE PERFORMED. You shall be responsible for
performing shareholder account administrative and servicing functions, which
shall include, without limitation, one or more of the following activities:
(a) answering Customer inquiries regarding account status and history, the
manner in which purchases and redemptions of the Shares may be effected, and
certain other matters pertaining to the Trust; (b) assisting Customers in
designating and changing dividend options, account designations and addresses;
(c) providing necessary personnel and facilities to establish and maintain
certain shareholder accounts and records, as requested from time to time by the
Trust, including complete subaccounting records regarding Shares beneficially
owned by Customers; (d) assisting in processing purchase and redemption
transactions; (e) arranging for the wiring of funds; (f) transmitting and
receiving funds in connection with Customer orders to purchase or redeem
Shares; (g) verifying and guaranteeing Customer signatures in connection with
redemption orders, transfers among and changes in Customer-designated accounts;
(h) providing periodic statements showing a Customer's account balances and, to
the extent practicable, integration of such information with other client
transactions otherwise effected with or through you; (i) furnishing (either
separately or on an integrated basis with other reports sent to a Customer by
you) monthly and annual statements and confirmations of all purchases and
redemptions of Shares in a Customer's account; (j) transmitting proxy
statements, annual reports, prospectuses and other communications from the
Trust to Customers; (k) receiving, tabulating and transmitting to the Trust
proxies executed by Customers with respect to annual and special meetings of
shareholders of the Trust; (l) aggregating and processing Customer purchase and
redemption requests for Shares and placing net purchase and redemption orders
with the Trust's transfer agent ("Transfer Agent") in the manner described in
section 4 hereof; and (m) providing such other related services as the Trust or
a Customer may reasonably request. You shall provide all personnel and
facilities necessary in order for you to perform one or more of the functions
described in this paragraph with respect to your Customers. You shall exercise
reasonable care in performing all such services and shall be liable for any
failure to exercise such reasonable care.
<PAGE> 2
3. FEES FROM CUSTOMERS. It is agreed that you may impose
certain conditions on Customers, in addition to or different from those imposed
by the Trust, such as requiring a minimum initial investment or charging
Customers direct fees for the same or similar services as are provided
hereunder by you (which fees may either relate specifically to your services
with respect to the Trust or generally cover services not limited to those with
respect to the Trust). You shall bill Customers directly for such fees. In
the event you charge Customers such fees, you shall make appropriate prior
written disclosure (such disclosure to be in accordance with all applicable
laws) to Customers of any direct fees charged to the Customer. It is
understood, however, that in no event shall you have recourse or access to the
account of any shareholder of the Trust except to the extent expressly
authorized by law or by the Trust or by such shareholder for payment of any
direct fees referred to in this section 3.
4. PURCHASE AND REDEMPTION ORDERS.
4.1. Omnibus Accounts. It is agreed that you will open
with the Transfer Agent a minimum of two omnibus accounts per Fund: capital
gains and dividend distributions payable with respect to Shares held in one
account shall be paid in cash, and capital gains and dividend distributions
payable with respect to Shares held in another account shall be paid in
additional Shares of the Fund.
4.2. Aggregation of Orders. For each business day on
which any Customer places with you a purchase or redemption order for Shares of
a Fund, you shall aggregate all such purchase orders and aggregate all such
redemption orders and communicate to Transfer Agent, by facsimile or, where
feasible, by direct or indirect systems access, an aggregate purchase order and
an aggregate redemption order for each omnibus account. To be effective on the
date received, all orders must be received by Transfer Agent in accordance with
the terms set forth in the current prospectus and statement of additional
information for the Trust.
4.3. Notification of Net Asset Value. After 4:00 p.m.
Eastern Time and prior to 5:00 p.m. Eastern Time on each business day, the
Trust shall notify you of the net asset value per share of each Share of each
Fund for that business day.
4.4. Payment of Redemption Proceeds. In the case of a
redemption order, federal funds, in the amount of the redemption order shall be
wired by the next business day at 4:00 p.m. to you at the account you have
established ro receive such distributions. Each party shall bear the cost of
any wire transfer that it sends.
4.5. Net Asset Value Adjustments. In the event
adjustments are required to correct any error in the computation of the net
asset value or public offering price of Fund Shares, the Trust shall notify you
prior to making any adjustments and describe the need for such adjustments
(including the date of the error, the incorrect price and the correct price).
In such case, an appropriate adjustment shall be made to the relevant omnibus
account(s) and you shall make corresponding adjustments to the accounts of your
Customers. If as a result of such error Customers have received accounts in
excess of the amounts to which they otherwise would have been entitled prior to
an adjustment, at the request of the Trust you will make a good faith effort to
collect such excess amounts from such Customers.
4.6. Suspension of Sales or Redemptions. The Trust may
cease offering Shares at any time, and in its sole discretion may refuse any
purchase order. Further, the Trust shall not be required to accept orders for
redemption of Shares of a Fund under this section 4 if the Trust has suspended
redemptions with respect to such Fund in accordance with section 22(e) of the
Investment Company Act of 1940, as amended (the "1940 Act").
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<PAGE> 3
4.7. Definition. For the purposes of this Agreement,
"business day" shall mean each day that the New York Stock Exchange is open for
business.
5. DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. As to each Fund,
as soon as practicable after the announcement of a distribution, you shall be
notified of the ex-date, record date, payable date, distribution rate per
Share, record date Share balances and cash and reinvestment payment amounts.
On the payable date, the Trust shall wire the cash distribution from the
appropriate Fund to you at the account you have established to receive such
distribtions. For annual tax reporting purposes, the Trust shall inform you of
the portion of distributions that include any of the following: foreign source
income, tax exempt income by state of origin, or return of capital.
6. PREPARATION AND DISTRIBUTION OF WRITTEN MATERIALS.
6.1. Prospectuses and Statements of Additional
Information. The Trust shall provide you with such number of copies of each
Fund's prospectus and statement of additional information ("SAI") relating to
the Shares as is necessary for delivery to Customers in connection with the
purchase of Shares, and you shall be responsible for making timely delivery of
Prospectuses and SAIs to Customers in compliance with applicable law. As soon
as practicable following the filing under the Securities Act of 1933, as
amended, of a definitive prospectus or SAI of any Fund or a supplement to the
prospectus of SAI of any Fund, the Trust shall provide copies of the prospectus
and SAI of each Fund affected by the amendment or a copy of such supplement.
You shall not be responsible for the preparing or filing with any governmental
authority any registration statement, prospectus, SAI or supplement for the
Trust or any Fund. However, upon request by the Trust or any of the Trust's
service providers, you shall timely provide information necessary for the Trust
or any of the Trust's service providers to: (i) prepare and file any of the
written materials mentioned in this section 6 or (ii) otherwise comply with
applicable law regarding the Trust.
6.2. Forwarding of Statements and Reports. You shall
timely provide copies of the following materials to Customers: proxy
statements, annual reports and semi-annual reports. At no expense to you, the
Trust shall provide you with as many copies of such materials as you may
reasonably request. Such materials shall be sent to you at the address set
forth on page eight of this Agreement.
7. COMPLIANCE WITH BLUE SKY LAWS. You will only place purchase
orders for Shares of a Fund on behalf of Customers whose addresses recorded on
your books are in jurisdictions in which the Trust has notified you in writing
that the Shares of the Fund are registered or qualified for sale under
applicable law. You shall immediately cease offering Shares of a Fund in any
jurisdiction where the Trust notifies you in writing that the Fund's
registration or qualification has terminated or if the Trust otherwise wishes
you to cease offering Shares of such Fund in such jurisdiction. You shall
furnish the Trust or its designee with monthly written statements of the number
of Shares of each Fund purchased on behalf of Customers resident in each
jurisdiction.
8. CAPACITY AND AUTHORITY TO ACT. You and your officers,
employees and agents are not authorized to make any representations concerning
the Trust or the Shares to Customers or prospective Customers, excepting only
accurate communication of factual information contained in the then-current
prospectus and statement of additional information or such other communications
as may be expressly authorized by the Trust. In performing your services under
this Agreement, you shall act as agent for the Customer and shall have no
authority to act as agent for the Trust. Upon request by the Trust, you shall
provide the Trust with copies of any materials which are generally circulated
by you to your Customers or prospective Customers.
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<PAGE> 4
9. USE OF THE AGENT'S NAME. The Trust shall not use your name in
any prospectus, sales literature or other material relating to the Trust in a
manner not approved by you prior thereto in writing; provided, however, that
your approval shall not be required for any use of its name which merely refers
accurately to your appointment hereunder or which is required by the Securities
and Exchange Commission or any state securities authority or any other
appropriate regulatory, governmental or judicial authority; provided, further,
that in no event shall such approval be unreasonably withheld or delayed.
10. USE OF THE TRUST'S NAME. You shall not use the name of the
Trust (other than for internal use in connection with performing its duties
under this agreement) in a manner not approved by the Trust prior thereto in
writing; provided, however, that the approval of the Trust shall not be
required for the use of the Trust's name in connection with communications
permitted by section 4 hereof or for any use of the Trust's name which merely
refers accurately to your role hereunder or which is required by the Securities
and Exchange Commission or any state securities authority or any other
appropriate regulatory, governmental or judicial authority; provided, further,
that in no event shall such approval be unreasonably withheld or delayed.
11. SECURITY. You represent and warrant that, to the best of your
knowledge, the various procedures and systems which you have implemented
(including provision for twenty-four hours a day restricted access) with regard
to safeguarding from loss or damage attributable to fire, theft or any other
cause the Trust's records and other data and your records, data, equipment,
facilities and other property used in the performance of your obligations
hereunder are adequate and that you will make such changes therein from time to
time as in its judgment are required for the secure performance of your
obligations hereunder. The parties shall review such systems and procedures on
a periodic basis, and the Trust may from time to time specify the types of
records and other data of the Trust to be safeguarded in accordance with this
section 11.
12. COMPLIANCE WITH LAWS; ETC. You shall comply with all
applicable federal and state laws and regulations, including securities laws.
You hereby agree to maintain all records required by law relating to
transactions on the Shares, and upon our request, or of the Trust, promptly
make such of these records available to us or the Trust's administrator as are
requested. In addition, you hereby agree to establish appropriate procedures
and reporting forms and/or mechanisms and schedules in conjunction with us and
the Trust's administrator, to enable the Trust to identify the location, type
of, and sales to all accounts opened and maintained by your customers or by you
on behalf of your customers. You represent and warrant to the Trust that the
performance of all its obligations hereunder will comply with all applicable
laws and regulations, the provisions of your charter documents and by-laws and
all material contractual obligations binding upon you. You furthermore
undertakes that you will promptly inform the Trust of any change in applicable
laws or regulations (or interpretations thereof) or in your charter or by-laws
or material contracts which would prevent or impair full performance of any of
your obligations hereunder.
13. REPORTS. To the extent requested by the Trust from time to
time, you agree that you will provide the Trust with a written report of the
amounts expended by you pursuant to this Agreement and the purposes for which
such expenditures were made. Such written reports shall be in a form
satisfactory to the Trust and shall supply all information necessary for the
Trust to discharge its responsibilities under applicable laws and regulations.
14. RECORD KEEPING.
14.1. Section 31(a), Etc. You shall maintain records in a
form acceptable to the Trust and in compliance with applicable laws and the
rules and regulations of the Securities and Exchange Commission, including but
not limited to the record-keeping requirements of section 31(a) of the 1940
Act,
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<PAGE> 5
and the rules thereunder. Such records shall be deemed to be the property of
the Trust and will be made available, at the Trust's reasonable request, for
inspection and use by the Trust, representatives of the Trust and governmental
authorities. You agree that, for so long as you retain any records of the
Trust, you will meet all reporting requirements pursuant to the 1940 Act with
respect to such records.
14.2. Transfer of Customer Data. In the event this
Agreement is terminated or a successor to you are appointed, you shall, at the
expense of the Trust, transfer to such designee as the Trust may direct a
certified list of the shareholders of the Trust serviced by you (with name,
address and tax identification or Social Security number), a complete record of
the account of each such shareholder and the status thereof, and all other
relevant books, records, correspondence and other data established or
maintained by you under this Agreement. In the event this Agreement is
terminated, you will use your best efforts to cooperate in the orderly transfer
of such duties and responsibilities, including assistance in the establishment
of books, records and other data by the successor.
14.3. Survival of Record Keeping Obligations. The record
keeping obligations imposed in this section 14 shall survive the termination of
this Agreement.
15. FORCE MAJEURE. You shall not be liable or responsible for
delays or errors by reason of circumstances beyond its control, including, but
not limited to, acts of civil or military authority, national emergencies,
labor difficulties, fire, mechanical breakdown, flood or catastrophe, Acts of
God, insurrection, war, riots or failure of communication or power supply.
16. INDEMNIFICATION.
16.1. Indemnification of the Agent. The Trust shall
indemnify and hold you harmless from and against any and all losses, claims,
damages, liabilities and expenses incurred by you and resulting from any claim,
demand, action or suit (collectively, "Claims") brought against you and arising
out of or in connection with the performance of your obligations hereunder,
other than any Claim resulting from (i) the bad faith or negligence of you,
your officers, employees or agents, or (ii) any breach of your obligation under
this Agreement or applicable law by you, your officers, employees or agents, or
(iii) any false or misleading statement contained in any communication by you
to any Customer or prospective Customer not prepared by or expressly authorized
by the Trust for your use.
In any case in which the Trust may be asked to indemnify or hold you
harmless, the Trust shall be advised of all pertinent facts concerning the
situation in question and you shall use reasonable care to identify and notify
the Trust promptly concerning any situation which presents or appears likely to
present a claim for indemnification against the Trust. The Trust shall have
the option to defend you against any Claim which may be the subject of
indemnification hereunder. In the event that the Trust elects to defend
against such claim the defense shall be conducted by counsel chosen by the
Trust and satisfactory to you. You may retain additional counsel at its
expense. Except with the prior written consent of the Trust, you shall not
confess any Claim or make any compromise in any case in which the Trust will be
asked to indemnify you.
16.2. Indemnification of the Trust. You shall indemnify
and hold the Trust harmless from and against any and all losses, claims,
damages, liabilities and expenses incurred by the Trust and resulting from any
Claim brought against the Trust and resulting from (i) the bad faith or
negligence of you, your officers, employees or agents, or (ii) any breach of
your obligations under this Agreement or applicable law by you, your officers,
employees or agents, or (iii) any false or misleading statement contained in
any communication by you to any Customer or prospective Customer not prepared
by or expressly authorized by the Trust for your use.
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<PAGE> 6
In any case in which you may be asked to indemnify or hold the Trust
harmless, you shall be advised of all pertinent facts concerning the situation
in question and the Trust shall use reasonable care to identify and notify you
promptly concerning any situation which presents or appears likely to present a
claim for indemnification against you. You shall have the option to defend the
Trust against any Claim which may be the subject of indemnification hereunder.
In the event that you elect to defend against such Claim, the defense shall be
conducted by counsel chosen by you and satisfactory to the Trust. The Trust
may retain additional counsel at its expense. Except with the prior written
consent of the agent, the Trust shall not confess any Claim or make any
compromise in any case in which you will be asked to indemnify the Trust.
16.3. Survival of Indemnities. The indemnities granted by
the parties in this section 16 shall survive the termination of this Agreement.
17. INSURANCE. You shall maintain reasonable insurance coverage
against any and all liabilities which may arise in connection with the
performance of its duties hereunder. You shall provide information with
respect to the extent of such coverage upon our request.
18. NOTICES. All notices or other communications hereunder to
either party shall be in writing and shall be deemed sufficient if mailed to
such party at the address of such party set forth in this Agreement or at such
other address as such party may have designated by written notice to the other.
19. FURTHER ASSURANCES. Each party agrees to perform such further
acts and execute such further documents as are necessary to effectuate the
purposes hereof.
20. TERMINATION. This Agreement may be terminated by the Trust,
without the payment of any penalty, at any time upon not more than 60 days' nor
less than 30 days' notice to you, by a vote of a majority of the Board of
Trustees of the Trust who are not "interested persons" of the Trust (as defined
in the 1940 Act) and have no direct or indirect financial interest in the
operation of the Trust's Shareholder Servicing Plan (the "Plan"), this
Agreement or any other agreement related to such Plan or by "a vote of a
majority of the outstanding voting securities" (as defined in the 1940 Act) of
the Trust. You may terminate this Agreement upon not more than 60 days' nor
less than 30 days' notice to the Trust. Notwithstanding anything herein to the
contrary, but except as provided in section 19 of this Agreement, this
Agreement may not be assigned and shall terminate automatically without notice
to either party upon any assignment. Upon termination hereof, the Trust shall
pay such compensation as may be due you as of the date of such termination.
21. CHANGES; AMENDMENTS. This Agreement may be changed or amended
only by written instrument signed by both parties.
22. LIMITATION OF LIABILITY. The First Amended and Restated
Master Trust Agreement dated February 28, 1995, as amended from time to time,
establishing the Trust, which is hereby referred to and a copy of which is on
file with the Secretary of The Commonwealth of Massachusetts, provides that the
name of the Trust means the Trustees from time to time serving (as Trustees
but not personally) under said Master Trust Agreement. It is expressly
acknowledged and agreed that the obligations of the Trust hereunder shall not
be binding upon any of the shareholders, Trustees, officers, employees or
agents of the Trust, personally, but shall bind only the trust property of the
Trust, as provided in its Master Trust Agreement. The execution and delivery
of this Agreement have been authorized by the Trustees of the Trust and signed
by an officer of the Trust, acting as such, and neither such authorization by
such Trustees nor such execution and delivery by such officer shall be deemed
to have been made by any of them individually or to
6
<PAGE> 7
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in its Master Trust Agreement.
23. MISCELLANEOUS. This Agreement shall be construed and enforced
in accordance with and governed by the laws of The Commonwealth of
Massachusetts without giving effect to the conflicts of laws provisions
thereof. The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement has been
executed on behalf of the Trust by the undersigned not individually, but in the
capacity indicated. This Agreement shall be effective when accepted by you
below.
Please confirm your agreement hereto by signing and returning the
enclosed counterpart of this Agreement at once to: Heitman Securities Trust,
180 North LaSalle Street, Suite 3600, Chicago, Illinois 60601, Attention:
President. Upon receipt thereof, this Agreement and such signed duplicate copy
will evidence the agreement between us.
HEITMAN SECURITIES TRUST
By: /S/ Nancy B. Lynn
---------------------------------
Nancy B. Lynn
Title:
ATTEST:
-----------------------------
ACCEPTED:
[ ]
(SHAREHOLDER SERVICING AGENT)
By:
---------------------------------
Name:
Title:
ATTEST:
---------------------------------------------
- ----------------------------------------------------
- ----------------------------------------------------
- ----------------------------------------------------
- ----------------------------------------------------
(Address to which all communications are to be sent)
Dated:
----------------------------------------------
7
<PAGE> 1
EXHIBIT 15(f)
OPERATING AGREEMENT
This Agreement is made as of August 30, 1995, between Charles Schwab
& Co., Inc. ("Schwab"), a California corporation, and each registered
investment company executing this Agreement ("Fund Company"), on its own behalf
and on behalf of each of the series or classes of shares, if any, listed on
Schedule I, as amended from time to time (such series or classes being referred
to as the "Fund(s)"). In the event there are no series or classes of shares
listed on Schedule I, then the term "Fund(s)" shall mean "Fund Company".
WHEREAS Fund Company wishes to have shares of the Fund(s) available
for purchase and redemption by Schwab's brokerage customers through Schwab's
Mutual Fund Marketplace(R) ("MFMP");
WHEREAS certain policies, procedures and information are necessary
to enable the Fund(s) to participate in the MFMP; and
WHEREAS Schwab is willing to permit the Fund(s) to participate in
its MFMP pursuant to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises set forth below, the parties agree as follows:
1. Operating Procedures
Schwab will open an omnibus account (the "Account") with
each Fund through which it will purchase and redeem shares, settle
transactions, reconcile transactions, obtain pricing, reinvest distributions
and maintain records in accordance with the Operating Procedures set forth in
Exhibit A hereto. In addition, the parties agree to transfer accounts,
communicate with Fund shareholders and perform other obligations in accordance
with the Operating Procedures.
2. Registration Requirements
a. Schwab will only place purchase orders for shares
of a Fund on behalf of its customers whose addresses recorded on Schwab's books
are in states or other jurisdictions in which Fund Company has advised Schwab
that such Fund has registered or qualified its shares for sale under applicable
law. Fund Company shall advise Schwab immediately if any such registration or
qualification is terminated or if it wishes Schwab not to place purchase orders
for a Fund on behalf of its customers who reside in a particular state or other
jurisdiction.
b. Schwab will, upon request, (i) furnish Fund
Company with monthly written statements of the number of shares of each Fund
purchased on behalf of
<PAGE> 2
Schwab customers resident in one or more states or other jurisdictions
indicated by Fund Company or (ii) on a daily basis, transmit to an electronic
database provider with whom Schwab has established effective systems interfaces
information regarding the number of shares of each Fund sold in each state for
retrieval by Fund Company. Fund Company shall be responsible for all
reasonable fees and other reasonable charges of such database provider in
connection with Schwab's transmission of such information to and Fund Company's
retrieval of such information from such database provider.
c. Fund Company agrees that any rescission offer
that is made to shareholders who own shares directly with a Fund will also be
made to Schwab customers who would be entitled to such rescission offer if they
owned shares directly with the Fund. Fund Company will provide Schwab with a
letter on Fund Company letterhead containing the terms of any such rescission
offer, and Schwab may send this writing, or any derivation thereof, to the
affected Schwab customers. To assist Fund Company in effecting any such
rescission offer, Schwab agrees to provide Fund Company with relevant
information regarding any affected Schwab customer, including the account
number, the number of shares purchased and redeemed, if any, the dates of the
purchase(s) and redemption(s), if any, and the dollar amount of such
transactions.
3. Compliance Responsibilities
a. Fund Company is responsible for (i) the
compliance of each prospectus, registration statement, annual or other periodic
report, proxy statement and item of advertising or marketing material of or
relating to each Fund with all applicable laws, rules and regulations (except
for advertising or marketing material prepared by Schwab which contains an
untrue statement of material fact or an omission of a material fact necessary
in order to make the statements made, in light of the circumstances under which
they were made, not misleading and that was not published or provided to Schwab
by Fund Company or any Affiliate (defined below) or accurately derived from
information published or provided by them), (ii) the distribution and
tabulation of proxies in accordance with all applicable laws, rules and
regulations (except for such proxy related services provided by Schwab's
mailing agent), (iii) the registration or qualification of the shares of each
Fund under all applicable laws, rules and regulations, and (iv) the compliance
by Fund Company and each "affiliated person" of Fund Company as that term is
defined under the Investment Company Act of 1940, as amended ("1940 Act"),
herein referred to as "Affiliate" with all applicable laws, rules and
regulations (including the 1940 Act and the Investment Advisers Act of 1940, as
amended), and the rules and regulations of each self-regulatory organization
with jurisdiction over Fund Company or Affiliate, except to the extent that the
failure to so comply by Fund Company or any Affiliate is caused by Schwab's
breach of this Agreement.
b. In the event that the Account holds more than
five percent (5%) of the outstanding Fund shares, Fund Company will be
responsible for requesting Schwab to confirm its status as shareholder of
record and to confirm whether any Schwab customer beneficially owns more than
five percent (5%) of the outstanding Fund shares through its
2
<PAGE> 3
Schwab brokerage account. For this purpose, Fund Company shall indicate in its
inquiry the number of Fund shares that equal five percent (5%) of outstanding
Fund shares. Schwab shall promptly reply to any such inquiries.
c. Schwab is responsible for Schwab's compliance
with all applicable laws, rules and regulations governing Schwab's performance
under this Agreement, except to the extent that Schwab's failure to comply with
any law, rule or regulation is caused by Fund Company's breach of this
Agreement.
d. Except as set forth in this Agreement or as
otherwise agreed upon in writing by the parties, any communication, instruction
or notice made pursuant to this Agreement shall be made orally, provided that
such oral communication is on a recorded telephone line or is promptly
confirmed in writing by facsimile transmission. Schwab is entitled to rely on
any communications, instructions or notices which it reasonably believes were
provided to it by Fund Company, any Affiliate or their agents authorized to
provide such communications, instructions or notices to Schwab, and on
communications, instructions or notices provided to it by its customers. Fund
Company is entitled to rely on any communications, instructions or notices it
reasonably believes were provided to it by Schwab, or its agents authorized to
provide such communications, instructions or notices to Fund Company.
e. Except to the extent otherwise expressly provided
in this Agreement, neither party assumes any responsibility hereunder, or will
be liable to the other, for any damage, loss of data, delay or any other loss
whatsoever caused by events beyond its reasonable control.
f. Fund Company and each Fund shall indemnify and
hold harmless Schwab and each director, officer, employee and agent of Schwab
from and against any and all losses, claims, liabilities and expenses
(including reasonable attorney's fees) ("Losses") incurred by any of them
arising out of (i) any untrue statement of material fact or any omission of a
material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading in any prospectus,
registration statement, annual or other periodic report or proxy statement of
the Fund or in any advertising or promotional material generated by Fund
Company or any Affiliate or accurately derived from information published or
provided by Fund Company or any Affiliate, (ii) any violation of any law, rule
or regulation relating to the registration or qualification of shares of the
Fund, (iii) any breach by Fund Company of any representation, warranty or
agreement contained in this Agreement, (iv) any willful misconduct or
negligence by Fund Company or a Fund in the performance of, or failure to
perform, its obligations under this Agreement, or (v) any action taken or
omitted to be taken by Schwab pursuant to this Agreement or any other agreement
related to services under this Agreement, except to the extent such Losses are
caused by Schwab's breach of this Agreement or its willful misconduct or
negligence in the performance, or failure to perform, its obligations under
this Agreement. This Section 3(f) shall survive termination of this Agreement.
3
<PAGE> 4
g. In any event, each Fund and the Fund Company shall not be
liable for any special, consequential or incidental damages.
4. Representations and Warranties
a. Fund Company represents and warrants to Schwab
that each Fund is in compliance with the conditions and qualifications set
forth in the Rules of Fair Practice of the National Association of Securities
Dealers, Inc. ("NASD"), Article III, Section 26, as amended from time to time
("Section 26"), which enable an NASD member to offer or sell shares in the
Fund. Fund Company represents and warrants that each Fund marked with an
asterisk on Schedule I is a "no load" or "no sales charge" Fund as defined in
Section 26. If a Fund, for any reason, fails to satisfy the terms and
conditions of Section 26, Fund Company will notify Schwab immediately of the
Fund's disqualification and the reason therefor.
b. Schwab represents and warrants that Schwab is a
member of the NASD.
c. Schwab represents and warrants that it is not
required to register as a transfer agent to perform services hereunder.
5. Use of Parties' Names
a. Without Schwab's prior written consent, Fund
Company will not cause or permit the use, description, or reference to Schwab,
or to the relationship contemplated by this Agreement in any advertisement or
promotional materials or activities, except that if such use, description, or
reference is required under applicable law, such consent shall not be
unreasonably withheld.
b. Fund Company authorizes Schwab to use the names
or other identifying marks of, and certain information about, Fund Company and
Fund in connection with the operation of the MFMP. Fund Company may withdraw
this authorization as to any particular use of any such name or identifying
marks at any time (i) upon Fund Company's reasonable determination that such
use would have a material adverse effect on the reputation or marketing efforts
of Fund Company or such Fund, or (ii) if any of the Funds cease to be available
through the MFMP; provided, however, that Schwab may, in its discretion,
continue to use materials prepared or printed prior to the withdrawal of such
authorization or in the process of being prepared or printed at the time of
such withdrawal.
6. Proprietary Information
Each party hereto acknowledges that the identities of the
other party's customers, information maintained by such other party regarding
those customers, and all
4
<PAGE> 5
computer programs and procedures developed by such other party or such other
party's Affiliates or agents in connection with such other party's performance
of its duties hereunder constitute the valuable property of such other party.
Each party agrees that should it come into possession of any list or
compilation of the identities of or other information about the other party's
customers, or any other property of such party, pursuant to this Agreement or
any other agreement related to services under this Agreement, the party who
acquired such information or property shall use its best efforts to hold such
information or property in confidence and refrain from using, disclosing, or
distributing any of such information or other property, except (i) with the
other party's prior written consent, or (ii) as required by law or judicial
process. Each party acknowledges that any breach of the foregoing agreements
as to another party would result in immediate and irreparable harm to such
other party for which there would be no adequate remedy at law and agrees that
in the event of such a breach such other party will be entitled to equitable
relief by way of temporary and permanent injunctions, as well as such other
relief as any court of competent jurisdiction deems appropriate.
7. Assignability
This Agreement is not assignable by either party without
the other party's prior written consent, and any attempted assignment in
contravention hereof shall be null and void; provided, however, that Schwab
may, without the consent of Fund Company, assign its rights and obligations
under this Agreement to any Affiliate.
8. Exhibits and Schedules
All Exhibits and Schedules to this Agreement, as they may
be amended from time to time, are by this reference incorporated into and made
a part of this Agreement.
9. Amendment
This Agreement may be amended only by a writing executed
by each party hereto that is to be bound by such amendment, except as provided
in this Section 9. Exhibit A may be amended by Schwab on forty (40) days'
written notice to Fund Company or such earlier time as shall be agreed to by
the parties. Exhibits B and C shall be amended by Fund Company in the event of
any change to the information contained therein.
10. Governing Law
This Agreement will be governed by and interpreted under
the laws of the State of California, as applied to contracts entered into and
to be performed entirely within the state.
5
<PAGE> 6
11. Counterparts
This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which
together shall constitute one and the same instrument.
12. Effectiveness and Termination
a. The effective date of this Agreement as to any Fund is
the later of the date set forth opposite the name of the Fund on Schedule I or
the date Schedule I is accepted by Schwab
b. This Agreement may be terminated as to any Fund by
Schwab immediately upon written notice to Fund Company. This Agreement may be
terminated as to any Fund by Fund Company upon thirty (30) days' written notice
to Schwab.
c. Upon the termination date for any Fund, Schwab will no
longer make the Fund shares available for purchase by Schwab's customers
through the MFMP. Schwab reserves the right to transfer the Fund shares of its
customers out of the Account. If Schwab continues to hold the Fund shares on
behalf of its customers in the Account, the parties agree to be obligated
under, and act in accordance with, the terms and conditions of this Agreement
with respect to such shares.
13. Limitation of Liability
The First Amended and Restated Master Trust Account dated
February 28, 1995, as amended from time to time, establishing the Heitman
Securities Trust (the "Trust"), which is hereby referred to and a copy of which
is on file with the Secretary of The Commonwealth of Massachusetts, provides
that the name of the Trust means the Trustees from time to time serving (as
Trustees but not personally) under said Master Trust Agreement. It is
expressly acknowledged and agreed that the obligations of the Trust hereunder
shall not be binding upon any of the shareholders, Trustees, officers,
employees or agents of the Trust, personally, but shall bind only the trust
property of the Trust, as provided in its Master Trust Agreement. The
execution and delivery of this Agreement has been authorized by the Trustees of
the Trust and signed by an officer of the Trust, acting as such, and neither
such authorization by such Trustees nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in its Master Trust Agreement.
6
<PAGE> 7
IN WITNESS WHEREOF, this Agreement has been executed by a duly
authorized representative of the parties hereto.
<TABLE>
<S> <C>
CHARLES SCHWAB & CO., INC. HEITMAN SECURITIES TRUST,
on its own behalf and on behalf of
each of its Funds listed on Schedule
I hereto as amended from time to
time.
By: /S/ Colleen Hummer By: /S/ Nancy B. Lynn
------------------------------------ -------------------------------------
Colleen Hummer
Senior Vice President/Mutual Funds Name: Nancy B. Lynn
Operations Administration -----------------------------------
Title: Secretary
----------------------------------
Date: August 30, 1995 Date: August 24, 1995
---------------------------------- -----------------------------------
</TABLE>
7
<PAGE> 8
SCHEDULE I
TO THE OPERATING AGREEMENT
<TABLE>
<CAPTION>
Funds Effective Date
----- --------------
<S> <C>
Heitman Real Estate Fund, a series of Heitman
Securities Trust, consisting of two classes of
shares:
Advisor Class August 25, 1995
Heitman/PRA Institutional Class * August 25, 1995
</TABLE>
* Indicates that Fund is a "no load" or "no sales charge" Fund as defined in
Section 26 of the NASD's Rules of Fair Practice.
HEITMAN SECURITIES TRUST,
on its own behalf and on behalf of
its Funds listed on this Schedule I as
amended from time to time.
By: /S/ Nancy B. Lynn
---------------------------------------
Name: Nancy B. Lynn
-------------------------------------
Title: Secretary
-----------------------------------
Date: August 24,1 995
------------------------------------
Accepted by: CHARLES SCHWAB & CO., INC.
By: /S/ Colleen Hummer
------------------------------------
Colleen Hummer
Senior Vice President/ Mutual Funds
Operations Administration
Date: August 31, 1995
------------------------------------
8
<PAGE> 9
EXHIBIT A
OPERATING PROCEDURES
1. The Account
a. Schwab will open an omnibus account with each Fund.
The Account shall be registered:
Charles Schwab & Co., Inc.
Special Custody Account for the Exclusive
Benefit of Customers
Attention: Mutual Funds
101 Montgomery Street
San Francisco, California 94104
The Account will be set up for the reinvestment of capital gains and dividend
distributions.
b. The Fund shall designate the Account with account
numbers. Account numbers will be the means of identification when the parties
are transacting in the Account.
c. The parties acknowledge that the Account is an
omnibus account in Schwab's name with shares held by any number of beneficial
owners. Schwab represents that the shares in the Account are customer
securities and are segregated from Schwab's own assets. Fund Company
represents that the shares in the Account are carried free of any charge, lien
or payment of any kind in favor of the Fund or any person claiming through the
Fund.
d. The Account shall be kept open on the Fund's books
regardless of a lack of activity or small position size, except to the extent
that Schwab takes specific action to close the Account, or to the extent the
Fund's prospectus reserves the right to close accounts that are inactive. In
the latter case, Fund Company will give prior notice to Schwab before closing
any Account.
e. Schwab has the right to open additional accounts from
time to time to accommodate other investment options and features, and to
consolidate existing accounts if and when appropriate to meet the needs of the
MFMP. In the event that it is necessary for Schwab to open an account with a
Fund for the payment of distributions in cash, the term "Account" shall mean
both the account for the reinvestment of capital gains and dividend
distributions and the account for the payment of distributions in cash.
f. Schwab reserves the right to issue instructions to
each Fund to move shares between the Account and any other account Schwab may
open.
9
<PAGE> 10
2. Purchase and Redemption Orders
For each day on which any Schwab customer places with Schwab a
purchase or redemption order for shares of a Fund, Schwab shall aggregate all
such purchase orders and aggregate all such redemption orders and communicate
to the Fund an aggregate purchase order and an aggregate redemption order.
Schwab will accept orders to purchase and redeem Fund shares from its customers
no later than the close of the regular trading session of the New York Stock
Exchange ("market close"). Schwab will communicate the order to the Fund prior
to a mutually agreed upon time.
3. Settlement of Transactions
a. Schwab will transmit the purchase price of the
aggregate purchase order to the Fund by wire transfer on the next business day
after the trade date. For purposes of this Agreement, a "business day" is any
day the New York Stock Exchange is open for trading.
b. For each business day on which Schwab places a
redemption order for a Fund within the time designated by the Fund, Fund
Company will cause the Fund(s) to send to Schwab the aggregate proceeds of all
redemption orders for the Fund(s) placed by Schwab on that day. Such
redemption proceeds will be sent by wire transfer on the next business day
following the trade date for the redemption orders; provided that Fund Company
may, in its discretion, send such proceeds by check if the aggregate amount is
less than $250 and provided further that the Fund may take up to three (3) days
to settle a transaction if the investment advisor to the Fund reasonably
determines that earlier settlement would have a material adverse effect on the
Fund. Wire transfers of redemption proceeds shall be separate from wire
transfers for other purposes.
c. Each wire transfer of redemption proceeds shall
indicate, on the Fed Funds wire system, the amount thereof attributable to each
Fund; provided, however, that if the number of entries would be too great to be
transmitted through the Fed Funds wire system, Fund Company shall, on the day
the wire is sent, notify Schwab of such entries. The cost of the wire transfer
is the responsibility of the party sending the wire. The interest cost
associated with any delayed wire is the responsibility of the party sending the
wire.
d. Should a Fund need to extend settlement on a trade
beyond the next business day following the trade date, Fund Company must
contact Schwab on trade date to discuss the extension. For purposes of
determining the length of settlement, Fund Company agrees to treat shareholders
that hold Fund shares through the Account the same as it treats shareholders
that hold Fund shares directly with the Fund.
e. In the event that a Fund cannot verify redemption
proceeds, Fund Company will settle trades and forward redemption proceeds in
accordance with this
10
<PAGE> 11
Agreement based on the information provided by Schwab. Schwab will be
responsible for the accuracy of all trade information provided by it.
f. If a trade is settled in error, Fund Company shall
notify Schwab orally and confirm in writing the name of the Fund, the Account
number and the date and amount of the error. If the error results in an
overpayment to Schwab, it shall be corrected by debiting the Account. If the
error results in an underpayment to Schwab, it shall be corrected by crediting
the Account.
g. Fund Company represents that each Fund that has
reserved the right to redeem in kind has filed Form N-18F-1 with the Securities
and Exchange Commission. For purposes of complying with the Fund's election on
Form N-18F-1, Fund Company agrees that it will treat as a "shareholder" each
shareholder that holds Fund shares through the Account, provided that Schwab
provides to Fund Company, upon request, the name or account number, number of
Fund shares and other relevant information for each such shareholder. Fund
Company acknowledges that treatment of Schwab as the sole shareholder of Fund
shares held in the Account for purposes of applying the limits in Rule 18f-1
under the 1940 Act would be inconsistent with the intent of Rule 18f-1 and the
Fund's election on Form N-18F-1 and could unfairly prejudice shareholders that
hold Fund shares through the Account.
4. Account Reconciliation Requirements
a. Schwab shall verify, on a next day basis, orders
placed for the Account with each Fund. All activity in the Account must be
reflected. Therefore, any "as of" activity must be shown with its corresponding
"as of" dates.
b. The parties agree to notify each other and correct
any error in the Account with any Fund upon discovery. Fund Company agrees to
make best efforts to avoid any errors, made by Fund Company, any Fund or agents
of Fund Company or the Fund and not corrected on a next day basis, from
hindering any routine daily requests such as transactions, transfer, dividends,
etc. Fund Company agrees to promptly notify Schwab of any adjustments to an
Account with any Fund initiated by Fund Company, any Fund, or any agent of
either.
c. Schwab must receive statements on or before the
eighth business day of each month, even if there has been no activity in the
Account during the period, unless Schwab can verify transactions by direct or
indirect systems access.
5. Pricing
Every business day on which there is a transaction in the
Account and for each month-end business day, Fund Company will provide to
Schwab prior to 7:00 p.m., Eastern Time, each Fund's closing net asset value
and public offering price (if applicable)
11
<PAGE> 12
for that day and/or notification of no price for that day. Fund Company shall
provide such information on a reasonable efforts basis taking into
consideration any extraordinary circumstances arising at the Fund (e.g. natural
disasters, etc.).
6. Distributions
a. Fund Company shall provide distribution information
to Schwab in a timely manner to enable Schwab to pay distributions to its
customers on or as close to payable date as practicable. As to each Fund, Fund
Company or such Fund shall provide Schwab with (i) the record date, ex-dividend
date, and payable date with respect to a Fund as soon as practicable after it
is announced, but no later than three (3) business days prior to record date,
(ii) the record date share balance in the Account and the distribution rate per
share on the first business day after record date, and (iii) the reinvest price
per share as soon as it is available. Other distribution information contained
in, and in the same format as, Schwab's Dividend Information Sheet (provided
separately) shall be provided on such dates as are agreed upon between Schwab
and Fund Company, but no later than payable date.
b. As to each Fund, Schwab shall hold the information as
to the amount of the pending distribution in strictest confidence, and shall
use such information only for the purpose of computing the amounts of cash
distributions to be paid to Schwab customers until Fund or Fund Company shall
have made such information generally available to the public. Schwab will
maintain and enforce rules and policies designed to protect against
unauthorized access to, or use of, the information during such period by anyone
other than Schwab employees who have a need to know the information for this
purpose.
c. Prior to 10:00 a.m., Eastern Time on the next
business day following receipt of the reinvest price per share as provided in
paragraph 6(a)(iii) above, Schwab shall notify Fund Company of the aggregate
number of Fund shares with respect to which the purchase is required to be
rescinded in order to pay the distribution in cash to Schwab customers who have
elected to receive their capital gain distributions and/or dividends in cash.
Fund Company agrees that the purchase of such aggregate number of Fund shares
may be rescinded. Fund Company or such Fund shall wire the proceeds of such
rescission from the Fund to the Account on the same business day.
d. For each Fund that pays daily dividends, Fund Company
shall provide on a daily basis, the following record date information: daily
rate, account share balance, account accrual dividend amount (for that day),
account accrual dividend amount (for period to date), and account transfers and
period-to-date accrual amounts.
e. In the event that Schwab maintains an Account with a
Fund for the payment of distributions in cash, Fund Company shall wire, on
payable date, any cash distribution from the Fund to the Account.
12
<PAGE> 13
f. Each Fund shall accrue dividends, commencing on the
settlement date for the purchase of Fund shares and terminating on the trade
date for the redemption of Fund shares.
g. For annual tax reporting purposes, Fund Company shall
inform Schwab of the portion of each Fund's distributions that include any of
the following: foreign source income, tax exempt income by state of origin or
return of capital.
h. Schwab shall prepare and file with the appropriate
governmental agencies, such information, returns and reports as are required to
be so filed for reporting (i) dividends and other distributions made, (ii)
amounts withheld on dividends and other distributions and payments under
applicable federal and state laws, rules and regulations and (iii) gross
proceeds of sales transactions as required.
i. Upon notice from Fund Company, Schwab shall effect
mergers, splits and other reorganization activities of a Fund for its
customers.
7. Price and Distribution Rate Errors
a. In the event adjustments are required to correct any
error in the computation of the net asset value or public offering price of a
Fund's shares or in the distribution rate for a Fund's shares, Fund Company
shall notify Schwab as soon as possible after discovering the need for such
adjustments. Notification can be made orally, but must be confirmed in
writing. The letter shall be written on Fund Company letterhead and must state
for each day on which an error occurred the incorrect price or rate, the
correct price or rate, and the reason for the price or rate change. Fund
Company agrees that Schwab may send this writing, or derivation thereof, to
Schwab's customers whose accounts are affected by the price or rate change.
b. If Schwab's customers have received amounts in excess
of the amounts to which they are entitled, Schwab will, when requested by Fund
Company, and to the extent practicable and permitted by law, debit its
customers brokerage accounts in the amount of such excess and repay it to the
Fund. In no event, however, shall Schwab be liable to Fund Company or the Fund
for any such amounts.
c. If adjustment is necessary to correct an error which
has caused Schwab's customers to receive amounts less than the amounts to which
they are entitled, the Fund shall make all necessary adjustments to the number
of shares owned in the Account and distribute to Schwab any and all amounts of
the underpayment. Schwab will credit the appropriate amount of such payment to
each Schwab customer.
d. For purposes of making adjustments, including the
collection of overpayments, Fund Company agrees to treat shareholders that hold
Fund shares through the Account the same as it treats shareholders that hold
Fund shares directly with the Fund. When making adjustments for an error, a
Fund shall not net same day transactions
13
<PAGE> 14
in the Account. Schwab and Fund Company shall agree promptly and in good faith
to a resolution of the error, and no adjustment for the error shall be taken in
the account until such agreement is reached.
e. Schwab shall provide the Fund with such information
as the Fund may reasonably request to enable the Fund to make such adjustments
due to a pricing error.
8. Record Maintenance
a. Schwab shall maintain records for each of its
customers who holds Fund shares through the Account, which records shall
include:
<TABLE>
<S> <C>
i. Number of shares;
ii. Date, price and amount of purchases and redemptions (including
dividend reinvestments) and date and amounts of dividends paid
for at least the current year to date;
iii. Name and address of each of its customers, including zip codes
and social security numbers or taxpayer identification numbers;
iv. Records of distributions and dividend payments;
v. Any transfers of shares; and
vi. Overall control records.
vii. Records of the date and time of all orders received by Schwab.
</TABLE>
b. Schwab will be responsible for accurately posting
transactions in Fund shares to its customers' brokerage accounts.
9. Transfer of Accounts
a. Fund Company agrees to transfer shares between
accounts for Schwab customers or other street name brokers held directly with a
Fund and the Account on the Fund's records. For the purpose of expediting
direct transfers from accounts for Schwab customers, Fund Company will accept
by facsimile transmission a summary sheet of information indicating the
customers' names, account numbers, the Fund affected and the number of shares
to be re-registered. For record keeping purposes, actual copies of transfer
forms will be forwarded to a Fund upon its request for such forms.
b. Schwab represents and warrants that for each transfer
indicated in the summary sheet of information, it holds each underlying
instruction for re-registration signed by its customer, and that its customer's
signature on such instruction is signature guaranteed by Schwab pursuant to the
New York Stock Exchange's Medallion Signature Program.
c. Schwab agrees to indemnify and hold harmless Fund
Company, the Fund and each director, officer, employee and agent of Fund
Company ("indemnified
14
<PAGE> 15
person") from and against any and all Losses incurred by any of them arising
out of the impropriety of any transfer effected by the Fund in reliance on the
summary sheet of information, except to the extent such Losses arise out of the
failure of any indemnified person to comply with the instructions on the
summary sheet of information.
d. Fund Company shall process all transfer requests into
the appropriate Account. Schwab represents and warrants that it is a custodian
qualified to accept in the Accounts shares from Fund IRA, Keogh or 401(k)
accounts. At no time shall any Fund establish separate accounts registered to
Schwab for the benefit of individual shareholders. In the event any such
account is mistakenly opened, Schwab reserves the right to instruct such Fund
to move Fund shares to the Account.
e. Fund Company must confirm to Schwab the completion of
each transfer on the day it occurs. The confirming information shall include
the number of shares, date ("as of" date if unavoidable delay), transaction
date, account number of the customer and the Account, registration, accrued
dividends and account type (i.e., IRA, Keogh, 401(k), etc.).
f. Transfer processing after record date but prior to
payable date will include all accrued dividends. Each Fund is responsible for
monitoring all completed full transfers for "trailing" dividends. Should a
"trailing" dividend appear in an account, a Fund shall send such dividend to
Schwab within five (5) business days, along with a specific written
notification thereof. Notification shall include details of the dividend and
customer, including the customer's social security number or taxpayer
identification number, and/or the account number for the Account to which the
transfer was made.
g. If Schwab customers submit share certificates for
transfer into their Schwab brokerage accounts, Schwab will send such
certificates, properly endorsed to the applicable Fund, for transfer into the
Account with such Fund. Upon Schwab's request, Fund Company agrees to provide
the status of said certificates and book share balances.
10. Shareholder Communication
a. Fund Company shall arrange with a mailing agent
designated by Schwab for the distribution of the materials listed below to all
of Schwab's customers who hold Fund shares, which distribution shall be so
arranged by Fund Company as to occur immediately upon the effective date of the
materials:
<TABLE>
<S> <C>
i. All proxy or information statements prepared for circulation to
shareholders of record of such Fund;
ii. Annual reports;
iii. Semi-annual reports;
</TABLE>
15
<PAGE> 16
<TABLE>
<S> <C>
iv. Quarterly reports (if applicable); and
v. All updated prospectuses, supplements and amendments
thereto.
</TABLE>
Fund Company shall be responsible for providing the materials and for the
mailing agent's fees in connection with this service as well as for timely
distribution. Fund Company agrees to have the mailing agent consolidate
mailings of material to shareholders of more than one Fund if the mailing is
identical for all Funds in the Fund Company family.
b. In addition to the materials listed above, Fund
Company agrees to provide directly to Schwab all prospectuses, statements of
additional information and supplements and amendments thereto, and annual and
other periodic reports for each Fund in amounts reasonably requested by Schwab
for distribution to its customers. Fund Company is obligated to supply these
materials to Schwab in a timely manner so as to allow Schwab, at its expense,
to send current prospectuses and statements of additional information and
periodic reports, immediately upon their effective dates, to customers and
prospective customers requesting them through Schwab. Schwab will also send a
current Fund prospectus with purchase trade confirmations for the initial
purchase of a Fund. Fund Company shall notify Schwab immediately of any change
to a Fund's prospectus and Schwab will send any such updated prospectus to all
of Schwab's customers who hold Fund shares.
c. Fund Company shall ensure that the foregoing
materials shall be in compliance with all applicable provisions of the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the Shareholder Communications Improvement Act of 1990, all applicable
rules and regulations under any of such statutes, and any and all laws, rules
and regulations that may be adopted and become applicable in the future.
d. Fund Company shall ensure that the prospectus of each
of its Funds discloses, or will be amended to disclose at the next printing
following the effective date of this Agreement, (i) that a broker may charge
transaction fees on the purchase and/or sale of Fund shares, (ii) duplicate
mailings of Fund material to shareholders who reside at the same address may be
eliminated (iii) that 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, (iv) that the performance of the Fund
may be compared in publications to averages, performance rankings, or other
information prepared by recognized mutual fund statistical services, and (v)
that the annual report contains additional performance information and will be
made available to investors upon request and without charge.
e. Schwab shall mail statements to its customers on a
monthly basis (or as to accounts in which there has been no activity in a
particular month, no less frequently than quarterly) showing, among other
things, the number of shares of each
16
<PAGE> 17
Fund owned by such customer and the net asset value of each such Fund as of a
recent date.
f. Schwab shall respond to customer inquiries regarding,
among other things, share prices, account balances, dividend amounts and
dividend payment dates. With respect to Fund shares purchased by customers
after the effective date of this Agreement, Schwab shall provide average cost
basis reporting to assist customers in the preparation of income tax returns.
11. New Processing Systems
Fund Company agrees to cooperate to the extent possible with
Schwab as Schwab develops and seeks to implement new processing systems for the
MFMP.
17
<PAGE> 18
EXHIBIT 15(f)
RETIREMENT PLAN ORDER PROCESSING AMENDMENT
TO THE OPERATING AGREEMENT
This Retirement Plan Order Processing Amendment is made as of
February 15, 1996, by and between Charles Schwab & Co., Inc. ("Schwab"), a
California corporation; The Charles Schwab Trust Company ("CSTC"), a California
banking corporation; and Heitman Securities Trust, a registered investment
company ("Fund Company") listed on Schedule I hereto, executing this Amendment
on its own behalf and on behalf of each of its series or classes of shares
("Fund(s)"), which are parties to an Operating Agreement with Schwab, made as
of August 30, 1995, as amended thereafter ("Operating Agreement"), except such
Funds as are listed on Schedule II hereto, which are excluded from this
Amendment ("Excluded Funds"). This Amendment amends the Operating Agreement.
In the event that there are no Funds, then the term "Fund(s)" shall mean "Fund
Company."
WHEREAS, Schwab and Fund Company, on its own behalf and on
behalf of the Funds, have entered into the Operating Agreement pursuant to
which shares of the Funds are made available for purchase and redemption by
Schwab's brokerage customers through Schwab's Mutual Fund Marketplace(R)
("MFMP");
WHEREAS, Schwab has designated CSTC as its agent to perform
certain functions under the Operating Agreement, including communication of
aggregate purchase and redemption orders for Fund shares to each Fund, for
which Schwab remains fully responsible to Fund Company and the Funds;
WHEREAS, Schwab and Fund Company desire to amend the Operating
Agreement to facilitate the purchase and redemption of Fund shares on behalf of
certain retirement plans ("Plans") for which CSTC acts as trustee of the trust
funds under the Plans and for which an entity identified on Schedule III, as
amended by Schwab from time to time, acts as recordkeeper ("Recordkeeper"),
subject to the terms and conditions of this Amendment ; and
<PAGE> 19
WHEREAS, Fund Company wishes to appoint CSTC as a limited
purpose co-transfer agent to each Fund's named transfer agent to facilitate
such purchases and redemptions on behalf of the Plans, and CSTC wishes to
accept this appointment.
NOW THEREFORE, in consideration of the foregoing and the
mutual promises set forth below, the parties hereto agree as follows:
1. Agency Appointment and Acceptance. Fund Company
hereby appoints CSTC to be a limited purpose co-transfer agent to each Fund's
named transfer agent for the purpose of receiving instructions in proper form
from the persons designated to direct investment of the Plan assets
("Instructions") from which are derived orders for purchases and redemptions of
Fund shares ("Orders"). CSTC hereby accepts the appointment as limited purpose
co-transfer agent to each Fund's named transfer agent.
2. Agents of CSTC. CSTC, as a co-transfer agent, may
engage such sub-agents as it deems necessary, appropriate or desirable to carry
out its obligation as a limited purpose co-transfer agent to each Fund's named
transfer agent under Section 1 of this Amendment, pursuant to such terms as are
consistent with the agreements set forth in this Amendment and as CSTC deems
necessary, appropriate or desirable. CSTC shall, however, remain fully
responsible to Fund Company and the Funds for any obligations performed by
CSTC's agents under this Section 2. These agents of CSTC shall be the
Recordkeepers and shall each be a service company and a limited purpose
sub-transfer agent to CSTC as co-transfer agent to each Fund's named transfer
agent.
3. CSTC's Receipt and Transmission of Orders. CSTC
agrees that (a) Orders derived from Instructions received by Recordkeepers
prior to the close of the New York Stock Exchange (generally, 4:00 p.m. Eastern
Time) ("Market Close") on any Business Day ("Day 1") will be transmitted by
CSTC to the Fund by 10:00 a.m. Eastern Time on the next Business Day ("Day 2")
(such Orders are referred to herein as "Day 1 Trades"); and (b) Orders derived
from Instructions received by Recordkeepers after Market Close on any Business
Day ("Day 1") will
2
<PAGE> 20
be transmitted by CSTC to the Fund by 10:00 a.m. Eastern Time on the
second Business Day following Day 1 ("Day 3") (such Orders are referred to
herein as "Day 2 Trades").
4. Fund's Pricing of Orders. Fund Company agrees that
Day 1 Trades will be effected at the net asset value of each Fund's shares
("Net Asset Value") calculated as of Market Close on Day 1, provided such
trades are received by the Fund by 10:00 a.m. Eastern Time on Day 2; and Day 2
Trades will be effected at the Net Asset Value calculated as of Market Close on
Day 2, provided such trades are received by the Fund by 10:00 a.m. Eastern Time
on Day 3. Fund Company agrees that, consistent with the foregoing, Day 1
Trades will have been received by the Fund prior to Market Close on Day 1, and
Day 2 Trades will have been received by the Fund prior to Market Close on Day 2
for all purposes, including, without limitation, effecting distributions.
5. Settlement. In accordance with the Operating
Agreement, Schwab and Fund Company will settle Day 1 Trades on Day 2 and will
settle Day 2 Trades on Day 3.
6. Provision of Net Asset Value. In accordance with the
Operating Agreement, Fund Company will provide Schwab the Net Asset Value
calculated as of Market Close on each Business Day by 7:00 p.m. Eastern Time on
such Business Day.
7. Representations and Warranties as to Transfer Agency.
CSTC represents and warrants that it is registered as a transfer agent under
Section 17A of the Securities Exchange Act of 1934, as amended ("1934 Act"),
and CSTC will amend its TA-1 filing to disclose its appointment pursuant to
this Amendment as a limited purpose co-transfer agent to each Fund's named
transfer agent. CSTC further represents and warrants that each Recordkeeper
appointed by CSTC pursuant to Section 2 of this Amendment shall be registered
as a transfer agent under Section 17A of the 1934 Act, and that it shall cause
each Recordkeeper to amend its TA-1 to disclose its appointment as a service
company and a limited purpose sub-transfer agent to CSTC as co-transfer agent
to each Fund's named transfer agent.
Fund Company represents and warrants that the Funds' named
transfer agent is set forth on Schedule IV hereto, as amended by Fund Company
from time to time.
3
<PAGE> 21
8. Books and Records. To the extent required under
the Investment Company Act of 1940, as amended ("1940 Act"), and the rules
thereunder, CSTC agrees that such records maintained by it or each Recordkeeper
hereunder are the property of the Funds and will be preserved, maintained, and
made available in accordance with the 1940 Act and the rules thereunder.
Copies, or if required originals, of such records shall be surrendered promptly
to a Fund and its agents (or independent accountants) upon request. This
Section 8 shall survive termination of this Amendment.
9. Role and Relationship of CSTC. The parties
acknowledge and agree that, except as specifically provided in this Amendment,
and for the sole and limited purpose set forth herein, CSTC acts as an agent
for Schwab under the Operating Agreement in connection with the effectuation of
Orders subject to this Amendment. CSTC shall not be nor hold itself out as an
agent of any Fund other than as provided herein.
10. Role and Relationship of Recordkeepers. The parties
acknowledge and agree that, except as specifically provided in this Amendment
and for the sole and limited purpose set forth herein, the Recordkeepers act as
agents of the Plans in connection with the effectuation of Orders subject to
this Amendment. The parties agree that the Recordkeepers are not agents of the
Funds other than as provided herein, and CSTC shall ensure that the
Recordkeepers do not hold themselves out as an agent of any Fund other than as
provided herein.
11. Insurance Coverage. CSTC shall maintain, and
shall cause each Recordkeeper to maintain, general liability insurance, at all
times that this Amendment is in effect, that is reasonable and customary in
light of its duties hereunder. Such general liability insurance coverage shall
be issued by a qualified insurance carrier, with limits of not less than $5
million.
12. Effectiveness and Termination. This Amendment shall
become effective 10 days after written notice by Schwab to Fund Company.
Once effective, Fund Company will provide Schwab and CSTC 90 days'
prior written notice if purchase orders for a Fund's shares may no longer be
effected in accordance with this
4
<PAGE> 22
Amendment. Such termination shall not affect the remaining provisions of this
Amendment as to such Fund, and redemption orders shall continue to be effected
pursuant to this Amendment. Schwab and CSTC may terminate this Amendment as to
a Fund upon 90 days' prior written notice to Fund Company.
Any termination of the Operating Agreement by Fund Company
shall not apply to transactions effected pursuant to this Amendment prior to 90
days after the date the Fund Company provides written notice of such
termination to Schwab and CSTC.*1
13. Indemnification. Schwab and CSTC, on the one hand,
and Fund Company, on the other, agree to indemnify and hold harmless Fund
Company, on the one hand, and Schwab and CSTC, on the other, together with each
of its directors, officers, employees and agents, from and against any and all
losses, liabilities, demands, claims, actions and expenses (including, without
limitation, reasonable attorney's fees) ("Losses") arising out of or in
connection with any breach by Schwab or CSTC, on the one hand, and Fund
Company, on the other, of its obligations under this Amendment, except to the
extent such breach was a direct consequence of an act or omission of an
indemnified party constituting negligence or willful misconduct. In no event
will any party be liable for consequential, incidental, special or indirect
damages resulting to an indemnified party subject to this Amendment. This
Section 13 shall survive termination of this Amendment.
14. Proprietary Information. The parties agree that all
books, records, information, and data pertaining to the business of the other
party which are exchanged or received pursuant to the negotiation or carrying
out of this Amendment, including but not limited to the information on Schedule
III, as amended by Schwab from time to time, and any reports regarding Fund
shareholdings of the Plans or the Recordkeepers that CSTC may provide to Fund
Company from time to time as part of its obligations as a limited purpose
co-transfer agent to
- --------------------
* Notwithstanding the foregoing, Fund Company may terminate this Amendment
immediately, if continuing to perform under this Amendment would violate any
applicable federal or state laws, rules, regulations or judicial orders.
5
<PAGE> 23
each Fund's named transfer agent, shall be kept confidential and shall not be
otherwise used or voluntarily disclosed to any other person, except as may be
required by law or judicial process. Fund Company expressly agrees not to use
nor permit others to use any such books, records, information, or data to
solicit Plans, sponsors of Plans, or Recordkeepers. This Section 14 shall
survive termination of this Amendment.
15. Effect of Amendment. This Amendment is intended to
amend and supplement the provisions of the Operating Agreement. In the event
of a conflict between the provisions of this Amendment and the provisions of
the Operating Agreement, the provisions of this Amendment shall control. All
other provisions of the Operating Agreement shall remain in full force and
effect.
<TABLE>
<S> <C>
CHARLES SCHWAB & CO., INC. HEITMAN SECURITIES TRUST, on its own behalf and on
behalf of each Fund, except Excluded Funds listed on
By: Schedule II hereto
------------------------------------------
Colleen Hummer
Senior Vice President/Mutual Funds
Operations Administration By: /S/ William L. Ramseyer
------------------------------------------------
Date: Name: William L. Ramseyer
------------------------------------------ -------------------------------------------
Title: President
-------------------------------------------
THE CHARLES SCHWAB
TRUST COMPANY Date: March 25, 1996
-------------------------------------------
By:
------------------------------------------
Joann Ferguson
Vice President
Date:
------------------------------------------
</TABLE>
16. Limitation of Liability.
The First Amended and Restated Master Trust Account dated
February 28, 1995, as amended from time to time, establishing the Heitman
Securities Trust (the "Trust"), which is hereby referred to and a copy of
which is on file with the Secretary of The Commonwealth of Massachusetts,
provides that the name of the Trust means the Trustees from time to time
serving (as Trustees but not personally) under said Master Trust Agreement. It
is expressly acknowledged and agreed that the obligations of the Trust
hereunder shall not be binding upon any of the shareholders, Trustees,
officers, employees or agents of the Trust, personally, but shall bind only the
trust property of the Trust, as provided in its Master Trust Agreement. The
execution and delivery of this Agreement has been authorized by the Trustees of
the Trust and signed by an officer of the Trust, acting as such, and neither
such authorization by such Trustees nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in its Master Trust Agreement.
6
<PAGE> 24
SCHEDULE I
TO THE RETIREMENT PLAN ORDER PROCESSING AMENDMENT TO THE OPERATING AGREEMENT,
MADE AS OF FEBRUARY 15, 1996
FUND COMPANY
Heitman Securities Trust
Date: March 25, 1996
7
<PAGE> 25
SCHEDULE II
TO THE RETIREMENT PLAN ORDER PROCESSING AMENDMENT TO THE OPERATING AGREEMENT,
MADE AS OF FEBRUARY 15, 1996
EXCLUDED FUNDS
Date: March 25, 1996
8
<PAGE> 26
SCHEDULE III
TO THE RETIREMENT PLAN ORDER PROCESSING AMENDMENT TO THE OPERATING AGREEMENT,
MADE AS OF FEBRUARY 15, 1996
RECORDKEEPERS
The Hampton Company
Date: March 25, 1996
9
<PAGE> 27
SCHEDULE IV
TO THE RETIREMENT PLAN ORDER PROCESSING AMENDMENT TO THE OPERATING AGREEMENT,
MADE AS OF FEBRUARY 15, 1996
NAMED TRANSFER AGENT
Rodney Square Management Corporation
Date: March 25, 1996
10
<PAGE> 1
EXHIBIT 15(g)
INSTITUTIONAL
SERVICES AGREEMENT
This Agreement is made as of August 30, 1995, between Charles Schwab
& Co., Inc. ("Schwab"), a California corporation, each registered investment
company ("Fund Company") executing this Agreement , on its own behalf and on
behalf of each of the series or classes of shares, if any, listed on Schedule
I, as amended from time to time (such series or classes being referred to as
the "Fund(s)"), and Fund Affiliate (defined below) that has executed this
Agreement. Fund Company and Fund Affiliate are collectively referred to herein
as "Fund Parties." In the event that there are no series or classes of shares
listed on Schedule I, the term "Fund(s)" shall mean "Fund Company".
WHEREAS Fund Affiliate is either (i) an investment adviser to or
administrator for the Funds or (ii) the principal underwriter or distributor
for the Funds,
WHEREAS Fund Parties wish to have Schwab perform certain
recordkeeping, shareholder communication, and other services for each Fund, and
WHEREAS Schwab is willing to perform such services on the terms and
conditions set forth herein,
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises set forth below, the parties agree as follows:
1. Services
a. During the term of this Agreement, Schwab shall
perform the services set forth on Exhibit A hereto, as such exhibit may be
amended from time to time by mutual consent of the parties (the "Services").
b. In processing purchase, redemption, transfer and
exchange orders placed by Schwab on behalf of its customers, and in order to
facilitate Schwab's performance of Services, the parties agree that the
Operating Agreement, dated as of August 30, 1995, between Schwab and Fund
Company, as amended from time to time ("Operating Agreement"), is incorporated
herein by this reference. All terms and conditions of the Operating Agreement
shall be binding as between Schwab and Fund Parties, and the references to Fund
Company therein shall be deemed to mean Fund Parties for the purposes of this
Agreement. In the event of any inconsistency between the Operating Agreement
and this Agreement, this Agreement shall control.
2. Fees
For the Services, Schwab shall receive a fee (the "Fee")
which shall be calculated and paid in accordance with Exhibit B hereto.
Schedule II reflects the amount
<PAGE> 2
of the Fee that each Fund Party has agreed, as between them, to pay. Should
Exhibit A be amended to revise the Services, the parties shall also amend
Exhibit B and Schedule II, if necessary, in order to reflect any changes in the
Fee.
3. Transaction Charges
Schwab shall not, during the term of this Agreement,
assess against or collect from its customers any transaction fee upon the
purchase or redemption of any Fund's shares that are considered in calculating
the Fee. The parties acknowledge that Schwab may collect such transaction fees
from certain customers (including "Active Traders," as Schwab may define that
term) for certain special trading services and from other customers upon such
other customers' redemption of certain shares. The value of shares as to which
such transaction fees are charged will not be included in the calculation of
the Fee.
4. Indemnification
a. Schwab shall indemnify and hold harmless Fund
Parties and their directors, officers, employees, and agents ("Indemnified
Parties") from and against any and all losses, claims, liabilities and expenses
(including reasonable attorney's fees) ("Losses") incurred by any of them
arising out of (i) Schwab's dissemination of information regarding Fund Parties
or a Fund that is materially incorrect and that was not provided to Schwab, or
approved, by a Fund Party, its affiliated persons ("Affiliates") as defined
under the Investment Company Act of 1940, as amended (the "1940 Act"), or
agents, (ii) any breach by Schwab of any representation, warranty or agreement
contained in this Agreement or (iii) Schwab's willful misconduct or negligence
in the performance of, or failure to perform, its obligations under this
Agreement, except to the extent such Losses result from the negligence, willful
misconduct or breach of this Agreement by an Indemnified Party.
b. In any event, no party shall be liable for any
special, consequential or incidental damages.
5. Role and Relationship of Schwab
The parties acknowledge that the Services under this
Agreement are recordkeeping, shareholder communication and related services
only and are not the services of an underwriter or a principal underwriter of
any Fund within the meaning of the Securities Act of 1933, as amended, or the
1940 Act. This Agreement does not grant Schwab any right to purchase shares
from any Fund (although it does not preclude Schwab from purchasing any such
shares), nor does it constitute Schwab an agent of Fund Parties or any Fund for
purposes of selling shares of any Fund to any dealer or the public. To the
extent Schwab is involved in the purchase of shares of any Fund by Schwab's
customers, such involvement will be as agent of such customer only.
2
<PAGE> 3
6. Information to be Provided
Fund Parties shall provide to Schwab prior to the
effectiveness of this Agreement or as soon thereafter as practicable:
a. Certified resolutions of the board of directors
of each Fund Party authorizing the Fund Party to enter into this Agreement and
indicating the officers authorized to execute this Agreement on behalf of the
Fund Party; and
b. Two (2) copies of the then-current prospectus and
statement of additional information of each Fund. Fund Party shall provide
Schwab with written copies of any amendments to or changes in the Fund's
prospectus or statement of additional information as soon as practicable after
such amendments or changes become available.
7. Notices
All notices required by this Agreement (excluding the
Operating Agreement) shall be in writing and delivered personally or sent by
first class mail. Such notices will be deemed to have been received as of the
earlier of actual physical receipt or three (3) days after deposit, first class
postage prepaid, in the United States mail. All such notices shall be made:
<TABLE>
<S> <C>
if to Schwab, to: Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94104
Attention: John McGonigle
Senior Vice President/Mutual Funds
</TABLE>
with a copy to: General Counsel, at the same address;
if to Fund Party, to the address given below in the
signature block.
8. Nonexclusivity
Each Party acknowledges that the other may enter into
agreements similar to this Agreement with other parties for the performance of
services similar to those to be provided under this Agreement, unless otherwise
agreed to in writing by the parties.
9. Assignability
This Agreement is not assignable by any party without the
other parties' prior written consents and any attempted assignment in
contravention hereof shall be null
3
<PAGE> 4
and void; provided, however, that Schwab may, without the consent of Fund
Parties, assign its rights and obligations under this Agreement to any
Affiliate.
10. Exhibits and Schedules
All Exhibits and Schedules attached to this Agreement, as
they may be amended from time to time, are by this reference incorporated into
and made a part of this Agreement.
11. Entire Agreement; Amendment
This Agreement (including the Exhibits and Schedules
hereto), together with the Operating Agreement, constitute the entire agreement
between the parties as to the subject matter hereof and supersede any and all
agreements, representations and warranties, written or oral, regarding such
subject matter made prior to the time at which this Agreement has been executed
and delivered by Schwab and Fund Parties. This Agreement and the Exhibits and
Schedules hereto may be amended only by a writing executed by each party hereto
that is to be bound by such amendment.
12. Governing Law
This Agreement will be governed by and interpreted under
the laws of the State of California as applied to contracts entered into and to
be performed entirely within that state.
13. Counterparts
This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which
together shall constitute one and the same instrument.
14. Effectiveness of Agreement; Termination
a. This Agreement will become effective as to a Fund
as of the later of (i) the date set forth on Schedule I opposite the name of
the Fund or (ii) such later date as Schwab may, in its discretion, designate.
b. This Agreement may be terminated as to a Fund by
any party (i) upon sixty (60) days' written notice to the other parties or (ii)
upon such shorter notice as is required by law, order, or instruction by a
court of competent jurisdiction or a regulatory body or self-regulatory
organization with jurisdiction over the terminating party or (iii)
automatically, effective on the day following the termination of any
shareholder servicing plan adopted in accordance with Rule 12b-1 under the 1940
Act ("Shareholder Servicing Plan") by any Fund that has a Shareholder Servicing
Plan in
4
<PAGE> 5
effect as of the effective date of this Agreement, provided that a portion of
the Fee is paid pursuant to the Shareholder Servicing Plan.
c. After the date of termination as to a Fund, Fund
Parties will not be obligated to pay the Fee with respect to any shares of the
Fund that are first held in Schwab customer accounts after the date of such
termination, as set forth on Schedule II, Fund Parties will remain obligated to
pay Schwab the Fee as to each share of the Fund that was considered in the
calculation of the Fee as of the date of termination (a "Pre-Termination
Share"), for so long as such Pre-Termination Share is held in any Schwab
brokerage account and Schwab continues to perform substantially all of the
Services as to such Pre-Termination Share. Further, for so long as Schwab
continues to perform the Services as to any Pre-Termination Shares, this
Agreement will otherwise remain in full force and effect as to such
Pre-Termination Shares. Fund Parties shall reimburse Schwab promptly for any
reasonable expenses Schwab incurs in effecting any termination of this
Agreement, including delivery to a Fund Party of any records, instruments, or
documents reasonably requested by the Fund Party.
15. Limitation of Liability
The First Amended and Restated Master Trust Account dated
February 28, 1995, as amended from time to time, establishing the Heitman
Securities Trust (the "Trust"), which is hereby referred to and a copy of which
is on file with the Secretary of The Commonwealth of Massachusetts, provides
that the name of the Trust means the Trustees from time to time serving (as
Trustees but not personally) under said Master Trust Agreement. It is
expressly acknowledged and agreed that the obligations of the Trust hereunder
shall not be binding upon any of the shareholders, Trustees, officers,
employees or agents of the Trust, personally, but shall bind only the trust
property of the Trust, as provided in its Master Trust Agreement. The
execution and delivery of this Agreement has been authorized by the Trustees of
the Trust and signed by an officer of the Trust, acting as such, and neither
such authorization by such Trustees nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in its Master Trust Agreement.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed this Agreement by a
duly authorized representative of the parties hereto.
<TABLE>
<S> <C>
CHARLES SCHWAB & CO., INC. HEITMAN SECURITIES TRUST
By: /S/ John McGonigle By: /S/ Nancy B. Lynn
---------------------------------------- -------------------------------
John McGonigle, Senior Vice Name: Nancy B. Lynn
President/Mutual Funds -----------------------------
Title: Secretary
----------------------------
Date: August 30, 1995
--------------------------------------
Address: 180 North LaSalle Street,
Suite 3600, Chicago, IL 60601
Attn: Nancy B. Lynn
------------------------------
Date: August 24, 1995
------------------------------
ACG CAPITAL CORPORATION
By: /S/ Ronald D. Gordes
------------------------------------------------
Name: Ronald D. Gordes
----------------------------------------------
Title: President
---------------------------------------------
Address: 1661 Tice Valley Boulevard,
Suite 200, Walnut Creek, CA 94595
Attn: Ronald D. Cordes
----------------------------------------------
Date: August 25, 1995
----------------------------------------------
</TABLE>
6
<PAGE> 7
EXHIBIT A
SERVICES
1. Record Maintenance
Schwab shall maintain the following records with respect to a
Fund for each customer who holds Fund shares in a Schwab brokerage account:
a. Number of shares;
b. Date, price and amount of purchases and redemptions
(including dividend reinvestments) and dates and amounts of dividends paid for
at least the current year to date;
c. Name and address of the customer, including zip codes
and social security numbers or taxpayers identification numbers;
d. Records of distributions and dividend payments;
e. Any transfers of shares; and
f. Overall control records.
g. Records of the date and time of all orders received
by Schwab.
h. The number of Schwab brokerage accounts which
contain Qualifying Shares, (as defined in Exhibit B hereto), on a monthly
basis, to enable the Fund Parties to calculate the Transfer Agency Savings (as
defined in Schedule II hereto).
Schwab shall provide the information described in item h.
above to the Fund Parties on a monthly basis in connection with invoicing for
payment of the Fee.
2. Shareholder Communications
Schwab shall:
a. Provide to a shareholder mailing agent employed by
each Fund for the purpose of mailing certain Fund-related materials the names
and addresses of all Schwab customers who hold shares of such Fund in their
Schwab brokerage accounts. Such shareholder mailing agent shall be a person or
entity engaged by such Fund in accordance with the Operating Agreement and the
Fund-related materials to be sent by such agent shall consist of updated
prospectuses and any supplements and amendments thereto, annual and other
periodic reports, proxy or information statements and other appropriate
shareholder communications.
b. Mail current Fund prospectuses and statements of
additional information and annual and other periodic reports upon customer
request and, as applicable, with confirmation statements;
7
<PAGE> 8
c. Mail statements to customers on a monthly basis (or,
as to accounts in which there has been no activity in a particular month, no
less frequently than quarterly) showing, among other things, the number of
shares of each Fund owned by such customer and the net asset value of such Fund
as of a recent date;
d. Produce and mail to customers confirmation statements
reflecting purchases and redemptions of shares of each Fund in Schwab brokerage
accounts;
e. Respond to customer inquiries regarding, among other
things, share prices, account balances, dividend amounts and dividend payment
dates; and
f. With respect to Fund shares purchased by customers
after the effective date of this Agreement, provide average cost basis
reporting to the customers to assist them in preparation of income tax returns.
3. Transactional Services
Schwab shall communicate, as to shares of each Fund, purchase,
redemption and exchange orders reflecting the orders it receives from its
customers. Schwab shall also communicate, as to shares of each Fund, mergers,
splits and other reorganization activities.
4. Tax Information Returns and Reports
Schwab shall prepare and file with the appropriate
governmental agencies, such information, returns and reports as are required to
be so filed for reporting (i) dividends and other distributions made, (ii)
amounts withheld on dividends and other distributions and payments under
applicable federal and state laws, rules and regulations, and (iii) gross
proceeds of sales transactions as required.
5. Fund Communications
Schwab shall, on a daily basis and for each Fund, report the
number of shares on which the Fee is to be paid pursuant to this Agreement and
the number of shares on which no such Fee is to be paid. Schwab shall also
provide each Fund with monthly summaries of reports. Such summaries shall be
expressed in both shares and dollar amounts.
8
<PAGE> 9
EXHIBIT B
CALCULATION OF FEE
1. The Fee shall be calculated by multiplying the Daily Value of
Qualifying Shares (defined below) times the appropriate Fee Rate (indicated
below). The Fee shall be computed daily and paid monthly in arrears.
2. The Daily Value of Qualifying Shares is the aggregate daily
value of all shares of the Fund held in Schwab brokerage accounts, subject to
the following exclusions ("Qualifying Shares"). There shall be excluded from
the shares (i) shares as to which a brokerage customer paid Schwab a
transaction fee upon the purchase of such shares, (ii) shares held in a Schwab
brokerage account prior to the effective date of this Agreement as to the Fund
and (iii) shares first held in a Schwab brokerage account after the termination
of this Agreement as to the Fund.
3. The Fee Rate is determined based on the aggregate value of the
Qualifying Shares of all Funds listed on all Schedule I's, as amended from time
to time as of the prior review date. The review dates are December 31and June
30. The Fee Rate is effective from the next business day following the review
date up to and including the next review date. The Fee Rates are as follows:
<TABLE>
<CAPTION>
Aggregate Value of Qualifying Shares Fee Rate
- ------------------------------------ --------
<S> <C>
Up to and including $500 million 35 basis points per annum
Over $500 million 30 basis points per annum
</TABLE>
The rate scale is not intended to produce a "blended rate". Rather, once a
threshold is reached, the rate applicable to the total amount of assets will be
used for all assets. Thus, if the aggregate value of Qualifying Shares of all
such Funds is $501 million as of a review date, the Fee Rate will be 30 basis
points (to be applied to the Daily Value of Qualifying Shares) until the next
review date.
4. For purposes of this Exhibit, the daily value of the shares of
each Fund will be the net asset value reported by such Fund to the National
Association of Securities Dealers, Inc. Automated Quotation System. No
adjustments will be made to the net asset values to correct errors in the net
asset values so reported for any day unless such error is corrected and the
corrected net asset value per share is reported to Schwab before 5 o'clock,
p.m., San Francisco time, on the first business day after the day to which the
error relates.
5. At the request of Fund Parties, Schwab shall provide, on each
business day, a statement detailing the calculation for each Fund, the
aggregate value of the
9
<PAGE> 10
Qualifying Shares of each Fund and the amount of the Fee for each Fund. As
soon as practicable after the end of the month, Schwab shall also provide to
Fund Parties an invoice for the amount of the Fee due for each Fund. In the
calculation of such Fee, Schwab's records shall govern unless an error can be
shown in the number of shares used in such calculation.
6. Fund Parties shall pay Schwab the Fee within thirty (30) days
after Fund Parties' receipt of such statement. Such payment shall be by wire
transfer, unless the amount thereof is less than $250. Such wire transfers
shall be separate from wire transfers of redemption proceeds or distributions
under the Operating Agreement. Amounts less than $250 may, at Fund Parties'
discretion, be paid by check.
10
<PAGE> 11
SCHEDULE I
TO THE INSTITUTIONAL SERVICES AGREEMENT
<TABLE>
<CAPTION>
Fund Effective Date
---- --------------
<S> <C>
Advisor Class of Shares of Heitman Real August 25, 1995
Estate Fund, a series of Heitman Securities
Trust.
</TABLE>
*Indicates that Fund is a "no load" or "no sales charge" Fund as defined in
Section 26 of the NASD's Rules of Fair Practice.
<TABLE>
<S> <C>
HEITMAN SECURITIES TRUST
By: /S/ Nancy B. Lynn
-------------------------------
Name: Nancy B. Lynn
------------------------------
Title: Secretary
-----------------------------
Date: August 24, 1995
-----------------------------
Acknowledged by
ACG CAPITAL CORPORATION Accepted by CHARLES SCHWAB &
CO., INC.
By: /S/ Ronald D. Cordes By: /S/ John McGonigle
---------------------------------------- --------------------------------
John McGonigle
Name: Ronald D. Cordes Senior Vice President/Mutual Funds
--------------------------------------
Title: President
-------------------------------------
Date: August 25, 1995 Date: August 30, 1995
-------------------------------------- ------------------------------
</TABLE>
11
<PAGE> 12
SCHEDULE II
TO THE INSTITUTIONAL SERVICES AGREEMENT
Fees to be Paid by the Fund Company. The Fund Company shall be
obligated to pay the Fee, provided that in no event shall it pay more than the
sum of (i) the product of the Daily Value of Qualifying Shares times .25 of 1%
(per annum) (the "Shareholder Servicing Portion") and (ii) an amount equal to
the fees that would have been charged by the Trust's transfer agent with
respect to the Qualifying Shares had such shares been held in accounts for
which the Trust's transfer agent acted as transfer agent (the "Transfer Agency
Savings"). Notwithstanding the foregoing, after termination of this Agreement
or termination of the Shareholder Servicing Plan, the Fund Company shall only
be obligated to pay an amount equal to the lesser of (i) the Fee and (ii) the
Transfer Agency Savings.
Fees to be Paid by the Fund Affiliate. At all times during the term
of this Agreement and after the termination of this Agreement, the Fund
Affiliate shall be responsible for payment of the Fee less any amounts payable
by the Fund Company.
12
<PAGE> 1
Exhibit 16
FUND NAME: HEITMAN/PRA REAL ESTATE FUND - ADVISOR CLASS
(NON-STANDARDIZED RETURN)
The aggregate total return from May 15, 1995 (commencement of operations)
through December 31, 1995 is 13.19%.
Aggregate Total Return
----------------------
(ERV/P) -1 = T
($1,131.86/1,000) -1 = T
.1319 = T
13.19% = T
<PAGE> 2
Exhibit 16
FUND NAME: HEITMAN/PRA REAL ESTATE FUND - ADVISOR CLASS
(STANDARDIZED RETURN)
The aggregate total return from May 15, 1995 (commencement of operations)
through December 31, 1995, assuming the maximum sales charge of 4.75%, is
7.81%.
Aggregate Total Return
----------------------
(ERV/P) -1 = T
($1,078.10/1,000) -1 = T
.0781 = T
7.81% = T
<PAGE> 3
EXHIBIT 16
FUND NAME: HEITMAN/PRA REAL ESTATE FUND - INSTITUTIONAL CLASS
(STANDARDIZED RETURNS)
<TABLE>
<CAPTION>
1 YR 5 YR INCEPTION
-------- -------- ---------
<S> <C> <C> <C>
# YEARS IN PERIOD 1 5 6.808219
AVERAGE ANNUAL TOTAL RETURN 10.87% 14.80% 6.59%
CUMULATIVE TOTAL RETURN 10.87% 99.41% 54.46%
MAXIMUM SALES LOAD 0.00% 0.00% 0.00%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL
AVERAGE ANNUAL TOTAL RETURN CUMULATIVE TOTAL RETURN
- --------------------------- -----------------------
<S> <C>
1/N
(ERV/P) -1 = T (ERV/P) - 1 = T
1
(1,108.72/1,000) -1 = T (1,108.72/1,000) -1 = T
0.1087 = T 0.1087 = T
10.87% = T 10.87% = T
</TABLE>
<TABLE>
<CAPTION>
5 YEARS ENDING 12/31/95
AVERAGE ANNUAL TOTAL RETURN CUMULATIVE TOTAL RETURN
- --------------------------- -----------------------
<S> <C>
1/N
(ERV/P) -1 = T (ERV/P) - 1 = T
1/5
(1,994.10/1,000) -1 = T (1,994.10/1,000) -1 = T
0.1480 = T .9941 = T
14.80% = T 99.41% = T
</TABLE>
<TABLE>
<CAPTION>
INCEPTION THROUGH 12/31/95
AVERAGE ANNUAL TOTAL RETURN CUMULATIVE TOTAL RETURN
- --------------------------- -----------------------
<S> <C>
1/N
(ERV/P) -1 = T (ERV/P) - 1 = T
1/6.808219
(1,544.64/1,000) -1 = T (1,544.64/1,000) -1 = T
0.0659 = T .5446 = T
6.59% = T 54.46% = T
</TABLE>
<PAGE> 1
[ARTICLE] 6
[LEGEND]
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
HEITMAN REAL ESTATE FUND'S ANNUAL REPORT FOR THE ADVISOR CLASS DATED
DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
ANNUAL REPORT DATED DECEMBER 31, 1995.
[/LEGEND]
[CIK] 0000840084
[NAME] HEITMAN SECURITIES TRUST
[SERIES]
[NUMBER] 1
[NAME] HEITMAN REAL ESTATE FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 89172
[INVESTMENTS-AT-VALUE] 98908
[RECEIVABLES] 2501
[ASSETS-OTHER] 343
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 101752
[PAYABLE-FOR-SECURITIES] 109
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 431
[TOTAL-LIABILITIES] 540
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 95619
[SHARES-COMMON-STOCK] 11694
[SHARES-COMMON-PRIOR] 12727
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (4143)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 9736
[NET-ASSETS] 101212
[DIVIDEND-INCOME] 4672
[INTEREST-INCOME] 426
[OTHER-INCOME] 0
[EXPENSES-NET] 1259
[NET-INVESTMENT-INCOME] 3839
[REALIZED-GAINS-CURRENT] (1952)
[APPREC-INCREASE-CURRENT] 7936
[NET-CHANGE-FROM-OPS] 9823
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 70
[DISTRIBUTIONS-OF-GAINS] 1
[DISTRIBUTIONS-OTHER] 38
[NUMBER-OF-SHARES-SOLD] 1276
[NUMBER-OF-SHARES-REDEEMED] 648
[SHARES-REINVESTED] 9
[NET-CHANGE-IN-ASSETS] (4357)
[ACCUMULATED-NII-PRIOR] 8
[ACCUMULATED-GAINS-PRIOR] (2153)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 725
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1299
[AVERAGE-NET-ASSETS] 1916
[PER-SHARE-NAV-BEGIN] 8.00
[PER-SHARE-NII] 0.23
[PER-SHARE-GAIN-APPREC] 0.80
[PER-SHARE-DIVIDEND] 0.23
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0.13
[PER-SHARE-NAV-END] 8.67
[EXPENSE-RATIO] 1.99
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
[ARTICLE] 6
[LEGEND]
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
HEITMAN REAL ESTATE FUND'S ANNUAL REPORT FOR THE HEITMAN/PRA INSTITUTIONAL
CLASS DATED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE ANNUAL REPORT DATED DECEMBER 31, 1995.
[/LEGEND]
[CIK] 0000840084
[NAME] HEITMAN SECURITIES TRUST
[SERIES]
[NUMBER] 1
[NAME] HEITMAN REAL ESTATE FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 89172
[INVESTMENTS-AT-VALUE] 98908
[RECEIVABLES] 2501
[ASSETS-OTHER] 343
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 101752
[PAYABLE-FOR-SECURITIES] 109
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 431
[TOTAL-LIABILITIES] 540
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 95619
[SHARES-COMMON-STOCK] 11694
[SHARES-COMMON-PRIOR] 12727
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (4143)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 9736
[NET-ASSETS] 101212
[DIVIDEND-INCOME] 4672
[INTEREST-INCOME] 426
[OTHER-INCOME] 0
[EXPENSES-NET] 1259
[NET-INVESTMENT-INCOME] 3839
[REALIZED-GAINS-CURRENT] (1952)
[APPREC-INCREASE-CURRENT] 7936
[NET-CHANGE-FROM-OPS] 9823
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 3778
[DISTRIBUTIONS-OF-GAINS] 37
[DISTRIBUTIONS-OTHER] 2081
[NUMBER-OF-SHARES-SOLD] 2056
[NUMBER-OF-SHARES-REDEEMED] 4094
[SHARES-REINVESTED] 369
[NET-CHANGE-IN-ASSETS] (4357)
[ACCUMULATED-NII-PRIOR] 8
[ACCUMULATED-GAINS-PRIOR] (2153)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 725
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1299
[AVERAGE-NET-ASSETS] 95461
[PER-SHARE-NAV-BEGIN] 8.30
[PER-SHARE-NII] 0.33
[PER-SHARE-GAIN-APPREC] 0.53
[PER-SHARE-DIVIDEND] 0.33
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0.18
[PER-SHARE-NAV-END] 8.65
[EXPENSE-RATIO] 1.29
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE> 1
Exhibit 18
HEITMAN SECURITIES TRUST
MULTIPLE CLASS EXPENSE ALLOCATION PLAN
ADOPTED PURSUANT TO RULE 18F-3
WHEREAS, Heitman Securities Trust, an unincorporated association of the
type commonly known as a business trust organized under the laws of the
Commonwealth of Massachusetts (the "Trust"), engages in business as an open-end
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "Act");
WHEREAS, the Trust is authorized to (i) issue shares of beneficial
interest (the "Shares") in separate series, with the Shares of each such series
representing the interests in a separate portfolio of securities and other
assets, and (ii) divide the Shares within each such series into two or more
classes;
WHEREAS, the Trust has established one portfolio series, Heitman Real
Estate Fund (the portfolio being referred to herein as the "Initial Series" --
such series, together with all other series subsequently established by the
Trust and made subject to this Plan, being referred to herein individually as a
"Series" and collectively as the "Series"), and two classes thereof designated
as the "Heitman/PRA Institutional Class" (the "Institutional Class") and the
"Advisor Class" (the "Advisor Class"); and
WHEREAS, the Board of Trustees as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the Act) (the "Qualified
Trustees"), having determined in the exercise of their reasonable business
judgment that this Plan is in the best interest of each class of the Initial
Series and of the Initial Series and the Trust as a whole, have accordingly
approved this Plan.
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with Rule
18f-3 under the Act, on the following terms and conditions:
1. CLASS DIFFERENCES. Each class of Shares of the Initial Series
shall represent interests in the same portfolio of investments of the Initial
Series and shall be identical in all respects, except that each class shall
differ with respect to: (i) distribution, shareholder and other charges and
expenses, as provided for in Sections 2 and 3 of this Plan; (ii) the exclusive
right of the Advisor Class to vote on certain matters relating to the Plan of
Distribution Pursuant to Rule 12b-1 and Shareholder Servicing Plan adopted by
the Trust with respect to the Advisor Class; (iii) such differences relating to
purchase minimums and eligible investors as may be set forth in the
prospectuses and Statement of Additional Information of the Initial Series, as
the same may be amended or supplemented from time to time (the "Prospectuses"
and "SAI"); and (iv) the designation of each class of Shares.
<PAGE> 2
2. DIFFERENCES IN DISTRIBUTION AND SHAREHOLDER SERVICES. Shares
of the Advisor Class and Institutional Class of the Initial Series shall differ
in the manner in which such Shares are distributed and in the services provided
to shareholders of each such class as follows:
(a) Distribution. The Advisor Class of Shares shall be
sold subject to a front-end sales charge as set forth in the Prospectuses and
SAI. The Advisor Class of Shares shall also be subject to an annual fee
pursuant to Rule 12b-1 of up to 0.25 of 1% of the nets assets of the Initial
Series allocable to the Advisor Class of Shares. Such fee may be used to
finance distribution activities in accordance with Rule 12b-1 under the Act and
the Plan of Distribution pursuant to Rule 12b-1 adopted by the Trust. The
Institutional Class of Shares shall not be subject to any distribution fees.
(b) Shareholder Services. The Advisor Class of Shares
shall be subject to an annual fee pursuant to a Shareholder Service Plan of up
to 0.25 of 1% of the average daily value of the net assets of the Initial
Series allocable to the Advisor Class of Shares. Such fee may be used to
finance shareholder servicing activities in accordance with the Shareholder
Servicing Plan adopted by the Trust. The Institutional Class of Shares shall
not be subject to any Shareholder Servicing fees.
3. ALLOCATION OF EXPENSES. Expenses of the Series, other than
the fees set forth in Section 2 of this Plan, shall be allocated to each class
on the basis of the net asset value of that class in relation to the net asset
value of the Series.
4. TERM AND TERMINATION. (a) Initial Series. This Plan shall
become effective with respect to the Initial Series as of January 1, 1996, and
shall continue in effect with respect to such class of Shares (subject to
Section 4(c) hereof) until terminated in accordance with the provisions of
Section 4(c) hereof.
(b) Additional Series or Classes. This Plan shall become
effective with respect to any class of the Initial Series other than the
Advisor Class and Institutional Class and with respect to each additional
Series or class thereof established by the Trust after the effective date
hereof and made subject to this Plan upon commencement of the initial public
offering thereof (provided that the Plan has previously been approved with
respect to such additional series or class by votes of a majority of both (i)
the Board of Trustees of the Trust and (ii) the Qualified Trustees, cast at a
meeting held before the initial public offering of such additional Series or
classes thereof), and shall continue in effect with respect to each such
additional Series or class (subject to Section 4(c) hereof) until terminated in
accordance with the provisions of Section 4(c) hereof. An addendum hereto
setting forth such specific and different terms of such additional series of
classes shall be attached to this Plan.
(c) Termination. This Plan may be terminated at any time
with respect to the Trust or any Series or class thereof, as the case may be,
by vote of a majority of both the Trustees of the Trust and the Qualified
Trustees. The Plan may remain in effect with respect to a Series or class
thereof even if it has been terminated in accordance with this Section 4(e)
with respect to such Series or class or one or more other Series of the Trust.
2
<PAGE> 3
5. AMENDMENTS. Any material amendment to this Plan shall require
the affirmative vote of a majority of both the Trustees of the Trust and the
Qualified Trustees.
Dated as of: January 1, 1996
3
