As filed with the Securities and Exchange Commission on September 29,
1995
Securities Act File No. 33-62312
Investment Company Act File No. 811-7706
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. ____
Post-Effective Amendment No. 9 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 11 /X/
Lehman Brothers Funds, Inc.
(Exact Name of Registrant as Specified in Charter)
3 World Financial Center
New York, N.Y. 10285
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 526-7000
Andrew D. Gordon
Lehman Brothers Funds, Inc.
3 World Financial Center, New York, New York 10285
(Name and Address of Agent for Service)
Copies to:
Patricia L. Bickimer, Esq. Sarah Cogan, Esq.
The Shareholder Services Group, Inc. Simpson Thacher & Exchange Place
Bartlett
Boston, Massachusetts 02109 425 Lexington Avenue
(Name and Address of Agent for Service) New York, New York 10017
*Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of the
Registration Statement.
It is proposed that this filing will become effective
(check appropriate box):
immediately upon filing pursuant to paragraph (b), or
on pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a)(i), or
___ on pursuant to paragraph (a)(i)
75 days after filing pursuant to paragraph (a)(ii)
on pursuant to paragraph (a)(ii) of Rule 485
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant has registered an indefinite number of shares of Common Stock,
$0.001 par value per share, of all series and classes of the Registrant, then
existing or thereafter created, and will file a Rule 24f-2 Notice, for the
fiscal year ended July 31, 1995, no later than September 29, 1995.
LEHMAN BROTHERS FUNDS, INC.
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
under the Securities Act of 1933
Form N-1A Location
Item in
No. Prospectus
Item 1. Cover Page Cover Page
Item 2. Synopsis Background and
Expense
Information
Item 3. Condensed Financial
Information Not Applicable
Item 4. General Description of
Registrant Investment
Objective and
Policies;
Additional
Information
Item 5. Management of the Fund Management of the
Fund;
Additional
Information
Item 5A. Management's Discussion
of Fund Performance Not Applicable
Item 6. Capital Stock and Other
Securities Dividends; Taxes;
Additional
Information
Item 7. Purchase of Securities Valuation of
Being Offered.................... Shares;
Purchase of Shares;
Exchange Privilege
Item 8. Redemption or Repurchase Redemption of
Shares
Item 9. Legal Proceedings Not Applicable
Location in
N-1A Statement of Additional
Item Information
No.
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and
History Not Applicable
Item 13. Investment Objectives and
Policies Investment Objective and
Policies
Item 14. Management of the Fund Management of the Fund
Item 15. Control Persons and Principal
Holders of Securities Management of the Fund
Item 16. Investment Advisory and
Other Services Management of the
Fund;
Auditors
Item 17. Brokerage Allocation Investment
and Other Practices Objective and
Policies;
Additional
Purchase
and Redemption
Information
Item 18. Capital Stock and Other
Securities Investment
Objective and
Policies
Item 19. Purchase, Redemption and
Pricing of Securities Additional
Purchase and
Redemption
Information
Item 20. Tax Status Additional
Information
Concerning Taxes
Item 21. Underwriters Additional
Purchase and
Redemption
Information
Item 22. Calculation of Performance Data Performance Data
Item 23. Financial Statements Not Applicable
LEHMAN BROTHERS FUNDS, INC.
Registration Statement on Form N-1A
The purpose of filing Post-Effective Amendment No. 9 is to add Global
Clearing Shares to the Lehman Brothers Daily Income Fund and the Lehman
Brothers Municipal Income Fund and to make other material language changes as
the Registrant deems appropriate.
PART A
Prospectuses for Select Shares and CDSC Shares of Lehman Brothers Daily
Income Fund and Lehman Brothers Municipal Income Fund and for Lehman
Selected Growth Stock Portfolio are incorporated by reference to Registrant's
submission pursuant to Rule 497(e) under the Securities Act of 1933, as
amended, as filed with the Securities and Exchange Commission ("SEC") on
December 8, 1994; Prospectuses for Lehman Mexican Growth and Income Portfolio
and Lehman Latin America Dollar Income Portfolio are incorporated by reference
to Post-Effective Amendment No. 2, as filed with the SEC on January 14, 1994;
Prospectuses for Lehman Brothers International Bond Fund, Lehman Brothers
Global Emerging Markets Equity Fund, Lehman Brothers Global Emerging Markets
Bond Fund, Lehman Brothers Large Capitalization U.S. Equity Fund, Lehman
Brothers International Equity Fund, Lehman Brothers Municipal Bond Fund,
Lehman Brothers New York Municipal Bond Fund and Lehman Brothers High-Grade
Fixed Income Fund are incorporated by reference to Post-Effective Amendment
No. 3, as filed with the SEC on September 8, 1994; and the Prospectus for
Lehman Brothers New York Municipal Money Market Fund is incorporated by
reference to Post-Effective Amendment No. 8, as filed with the SEC on July 21,
1995.
PART B
Statements of Additional Information for Lehman Brothers Daily Income Fund,
Lehman Brothers Municipal Income Fund and Lehman Selected Growth Stock
Portfolio are incorporated by reference to Registrant's submission pursuant to
Rule 497(e) under the Securities Act of 1933, as amended, as filed with the
SEC on December 8, 1994; Statements of Additional Information for Lehman
Mexican Growth and Income Portfolio and Lehman Latin America Dollar Income
Portfolio are incorporated by reference to Post-Effective Amendment No. 2, as
filed with the SEC on January 14, 1994; Statements of Additional Information
for Lehman Brothers International Bond Fund, Lehman Brothers Global Emerging
Markets Equity Fund, Lehman Brothers Global Emerging Markets Bond Fund, Lehman
Brothers Large Capitalization U.S. Equity Fund, Lehman Brothers International
Equity Fund, Lehman Brothers Municipal Bond Fund, Lehman Brothers New York
Municipal Bond Fund and Lehman Brothers High-Grade Fixed Income Fund are
incorporated by reference to Post-Effective Amendment No. 3, as filed with the
SEC on September 8, 1994; and the Statement of Additional Information for
Lehman Brothers New York Municipal Money Market Fund is incorporated by
reference to Post-Effective Amendment No. 8, as filed with the SEC on July 21,
1995; except that in all cases the following change is made: the section
entitled "Financial Statements" is hereby deleted in its entirety and the
following section is substituted therefor: "The Company's annual report for
the fiscal year ended July 31, 1995, which contains audited financial
statements for the Funds for the fiscal year ended July 31, 1995, is
incorporated into this Statement of Additional Information by reference in its
entirety."
Lehman Brothers Funds, Inc.
Lehman Brothers Daily Income Fund
Global Clearing Shares
Prospectus begins on page one.
Dated November 29, 1995
Lehman Brothers Daily Income Fund
Prospectus November 29,
1995
This Prospectus describes Lehman Brothers Daily Income Fund (the "Fund"), a
separate, diversified money market portfolio of Lehman Brothers Funds, Inc.
(the "Company"), an open-end management investment company. This Prospectus
relates to Global Clearing Shares, a class of shares offered by the Fund.
[Continued on next page.]
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and such shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
government agency. Shares of the Fund involve certain investment risks,
including the possible loss of principal. There can be no assurance that the
Fund will be able to maintain a net asset value of $1.00 per share.
Lehman Brothers Inc. ("Lehman Brothers" or the "Distributor") sponsors the
Fund and acts as Distributor of the Fund's shares. Lehman Brothers Global
Asset Management Inc. ("LBGAM" or the "Investment Adviser") serves as the
Fund's Investment Adviser.
The address of the Fund is 3 World Financial Center, New York, New York 10285.
Yield and other information regarding the Fund may be obtained through a
Lehman Brothers Investment Representative or by calling 1-800-861-4171.
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about
the Fund, contained in a Statement of Additional Information dated November
29, 1995, as amended or supplemented from time to time, has been filed with
the Securities and Exchange Commission (the "SEC") and is available to
investors without charge by calling 1-800-861-4171. The Statement of
Additional Information is incorporated in its entirety by reference into this
Prospectus.
_____________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
_____________
LEHMAN BROTHERS
[Continued from previous page.]
The Fund's investment objective is to provide investors with as high a level
of current income as is consistent with stability of principal. The Fund
invests in a portfolio consisting of a broad range of U.S. dollar-denominated
short-term instruments, including U.S. Government and U.S. and non-U.S. bank
and commercial obligations and repurchase agreements relating to such
obligations. Under normal market conditions, at least 25% of the Fund's total
assets will be invested in obligations of issuers in the banking industry and
repurchase agreements relating to such obligations.
_____________
TABLE OF CONTENTS
Page
Benefits to Investors
3
Background and Expense Information
3
Investment Objective and Policies
4
Purchase of Shares
9
Redemption of Shares
10
Exchange Privilege
11
Valuation of Shares
11
Management of the Fund
12
Dividends
13
Taxes
14
Yields
15
Additional Information
15
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or in the Fund's Statement
of Additional Information incorporated herein by reference, in connection with
the offering made by this Prospectus and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Fund or its Distributor. This Prospectus does not constitute an offering by
the Fund or by the Distributor in any jurisdiction in which such offering may
not lawfully be made.
Benefits to Investors
The Fund offers investors several important benefits:
o A professionally managed portfolio of high quality money market
instruments, providing investment diversification that is otherwise beyond the
means of many individual investors.
o Investment liquidity through convenient purchase and redemption
procedures.
o Stability of principal through maintenance of a constant net asset value
of $1.00 per share (although there is no assurance that it can do so on a
continuing basis).
o A convenient way to invest without the administrative and recordkeeping
burdens normally associated with the direct ownership of securities.
Background and Expense Information
The Fund is authorized to offer multiple classes of shares. One class of
shares, Global Clearing Shares, is offered by this Prospectus. Each share of
the Fund accrues income in the same manner, but certain expenses differ based
upon the class. See "Additional Information." The following Expense Summary
lists the costs and expenses that a shareholder can expect to incur as an
investor in Global Clearing Shares of the Fund based upon estimated operating
expenses for the current fiscal year.
Expense Summary
SHAREHOLDER TRANSACTION EXPENSES
GLOBAL CLEARING
SHARES
ANNUAL FUND OPERATING EXPENSES
[as a percentage of average net assets]
Advisory Fees [after waivers]*
%
Rule 12b-1 Fees [after waivers]**
%
Other Expenses - including Administration Fees [after
waivers]
%
Total Fund Operating Expenses [after waivers]
%
* Reflects voluntary waivers of advisory fees, which would not be changed
without 60-days prior notice to shareholders. Absent such voluntary waivers,
the ratio of advisory fees to average net assets would be %.
** Reflects voluntary waivers of Rule 12b-1 fees, which would not be
changed without 60-days prior notice to shareholders. Absent such voluntary
waivers, the ratio of Rule 12b-1 fees to average net assets would be %.
As of the date of this Prospectus, the Fund had not commenced selling
Global Clearing Shares to the public. The amount set forth for "Other
Expenses" is, therefore, based on estimates for the current fiscal year after
giving effect to voluntary waivers of administration fees, which would not be
changed without 60-days prior notice to shareholders. Absent such voluntary
waivers, the ratio of other expenses to average net assets would be %.
Absent the voluntary waivers referred to above, the ratio of total fund
operating expenses to average net assets would be .
Example
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return and complete redemption at the end of each time period:
1
YEAR
3
YEARS
Global Clearing Shares:
$
$
The foregoing should not be considered a representation of actual expenses and
rates of return, which may be greater or less than those shown. The foregoing
table has not been audited by the Fund's independent auditors.
Long-term holders of mutual fund shares which bear 12b-1 fees, such as the
Global Clearing Shares, may pay more than the economic equivalent of the
maximum front-end sales charge permitted by rules of the National Association
of Securities Dealers, Inc.
Investment Objective and Policies
The Fund's investment objective is to provide investors with as high a level
of current income as is consistent with stability of principal. In pursuing
its investment objective, the Fund, which operates as a diversified investment
company, invests in a broad range of U.S. dollar-denominated short-term
instruments, including U.S. Government and U.S. and non-U.S. bank and
commercial obligations. There can be no assurance that the Fund will achieve
its investment objective.
The Fund invests only in securities which are purchased with and payable in
U.S. dollars and which have (or, pursuant to regulations adopted by the SEC,
will be deemed to have) remaining maturities of thirteen months or less at the
date of purchase by the Fund. The Fund maintains a dollar-weighted average
portfolio maturity of 90 days or less. The Fund follows these policies to
maintain a constant net asset value of $1.00 per share, although there is no
assurance that it can do so on a continuing basis.
The Fund will limit its portfolio investments to securities that are
determined by its Investment Adviser to present minimal credit risks pursuant
to guidelines established by the Company's Board of Directors and which are
"Eligible Securities" at the time of acquisition by the Fund. The term
"Eligible Securities" includes securities rated by the "Requisite NRSROs" in
one of the two highest short-term rating categories, securities of issuers
that have received such ratings with respect to other short-term debt
securities and comparable unrated securities. "Requisite NRSROs" means (a) any
two nationally recognized statistical rating organizations ("NRSROs") that
have issued a rating with respect to a security or class of debt obligations
of an issuer, or (b) one NRSRO, if only one NRSRO has issued such a rating at
the time that the Fund acquires the security. A discussion of the ratings
categories of the NRSROs is contained in the Appendix to the Statement of
Additional Information.
The Fund generally may not invest more than 5% of its total assets in the
securities of any one issuer, except for securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities ("U.S. Government
securities"). In addition, the Fund may not invest more than 5% of its total
assets in Eligible Securities that have not received the highest rating from
the Requisite NRSROs and comparable unrated securities ("Second Tier
Securities") and may not invest more than 1% of its total assets in the Second
Tier Securities of any one issuer. The Fund may invest more than 5% (but no
more than 25%) of the then-current value of the Fund's total assets in the
securities of a single issuer for a period of up to three business days,
provided that (a) the securities either are rated by the Requisite NRSROs in
the highest short-term rating category or are securities of issuers that have
received such rating with respect to other short-term debt securities or are
comparable unrated securities, and (b) the Fund does not make more than one
such investment at any one time.
The following descriptions illustrate the kinds of instruments in which the
Fund invests:
The Fund may purchase obligations of issuers in the banking industry, such as
commercial paper, notes, certificates of deposit, bankers' acceptances and
time deposits and U.S. dollar-denominated instruments issued or supported by
the credit of U.S. or non-U.S. banks or savings institutions having total
assets at the time of purchase in excess of $1 billion. The Fund may also make
interest-bearing savings deposits in commercial and savings banks in amounts
not in excess of 5% of its assets.
The Fund may invest in commercial paper, other short-term obligations and
repurchase agreements. The Fund may invest without limit in U.S.
dollar-denominated commercial paper and obligations of non-U.S. issuers.
The Fund may invest substantially in U.S. dollar-denominated securities of
non-U.S. issuers, including obligations of non-U.S. banks or non-U.S. branches
of U.S. banks and debt securities of non-U.S. issuers, where the Investment
Adviser deems the instrument to present minimal credit risks. Investments in
non-U.S. banks or non-U.S. issuers present certain risks, including those
resulting from future political and economic developments and the possible
imposition of non-U.S. governmental laws or restrictions and reduced
availability of public information. Non-U.S. issuers are not generally subject
to uniform accounting, auditing and financial reporting standards or to other
regulatory practices and requirements applicable to domestic issuers.
The Fund may purchase obligations issued or guaranteed by the U.S. Government
or its agencies and instrumentalities. Obligations of certain agencies and
instrumentalities of the U.S. Government are backed by the full faith and
credit of the United States. Others are backed by the right of the issuer to
borrow from the U.S. Treasury or are backed only by the credit of the agency
or instrumentality issuing the obligation.
In addition, the Fund may, when deemed appropriate in light of the Fund's
investment objective, invest in high quality, short-term obligations issued by
state and local governmental issuers which carry yields that are competitive
with those of other types of money market instruments of comparable quality.
INVESTMENT LIMITATIONS
The investment limitations enumerated below are fundamental and may not be
changed by the Company's Board of Directors without the affirmative vote of
the holders of a majority of the Fund's outstanding shares. The Fund's
investment objective and the other investment policies described herein may be
changed by the Board of Directors at any time. If there is a change in the
investment objective of the Fund, shareholders of the Fund should consider
whether the Fund remains an appropriate investment in light of their then
current financial position and needs. (A complete list of the Fund's
investment limitations that cannot be changed without a vote of shareholders
is contained in the Statement of Additional Information under "Investment
Objectives and Policies.") The percentage limitations set forth below, as
well as those contained elsewhere in this Prospectus and the Statement of
Additional Information, apply at the time a transaction is effected, and
subsequent change in a percentage resulting from market fluctuations or any
other cause other than action by the Fund will not require the Fund to dispose
of portfolio securities or to take other action to satisfy the percentage
limitation.
* The Fund may not borrow money, except from banks for temporary purposes
and then in amounts not exceeding one-third of the value of its total assets
at the time of such borrowing; or mortgage, pledge or hypothecate any assets
except in connection with any such borrowing and in amounts not in excess of
the lesser of the dollar amounts borrowed or one-third of the value of its
total assets at the time of such borrowing. Additional investments will not be
made by the Fund when borrowings exceed 5% of its total assets.
* The Fund may not purchase any securities which would cause 25% or more
of the value of its total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal business
activities in the same industry, except that the Fund will invest 25% or more
of the value of its total assets in obligations of issuers in the banking
industry or in obligations, such as repurchase agreements, secured by such
obligations (unless the Fund is in a temporary defensive position); provided
that there is no limitation with respect to investments in U.S. Government
securities.
* The Fund may not purchase the securities of any one issuer if as a
result more than 5% of the value of its total assets would be invested in the
securities of such issuer, except that up to 25% of the value of its total
assets may be invested without regard to this 5% limitation and provided that
there is no limitation with respect to investments in U.S. Government
securities.
The third investment limitation listed above will give the Fund the ability to
invest, with respect to 25% of the value of its total assets, more than 5% of
its assets in any one issuer (excluding investments in U.S. Government
securities) only in the event that Rule 2a-7 under the Investment Company Act
of 1940, as amended (the "1940 Act"), is amended in the future. The Fund's
operating policy, which complies with Rule 2a-7 as currently in effect,
provides that, with certain exceptions, the Fund may not invest more than 5%
of its total assets in the securities of any one issuer, except for U.S.
Government securities.
OTHER INVESTMENT PRACTICES
Floating and Variable Rate Notes. The Fund may purchase variable or floating
rate notes, which are instruments that provide for adjustments in the interest
rate on certain reset dates or whenever a specified interest rate index
changes, respectively. Such notes might not be actively traded in a secondary
market but, in some cases, the Fund may be able to resell such notes in the
dealer market. Variable and floating rate notes typically are rated by credit
rating agencies, and their issuers must satisfy the same quality criteria as
set forth above. The Fund invests in variable or floating rate notes only when
the Investment Adviser deems the investment to involve minimal credit risk.
Certain of the floating or variable rate notes that may be purchased by the
Fund may carry a demand feature that would permit the holder to tender them
back to the issuer of the underlying instrument, or to a third party, at par
value prior to maturity. Where necessary to ensure that such a note is an
Eligible Security, the Fund will require that the issuer's obligation to pay
the principal of the note be backed by an unconditional third-party letter or
line of credit, guarantee or commitment to lend. If a floating or variable
rate demand note is not actively traded in a secondary market, it may be
difficult for the Fund to dispose of the note if the issuer were to default on
its payment obligation or during periods that the Fund is not entitled to
exercise its demand rights, and the Fund could, for this or other reasons,
suffer a loss to the extent of the default. While, in general, the Fund will
invest only in securities that mature within thirteen months of purchase, the
Fund may invest in floating or variable rate demand notes which have nominal
maturities in excess of thirteen months, if such instruments carry demand
features that comply with conditions established by the SEC.
When-Issued and Delayed Delivery Securities. The Fund may purchase securities
on a "when-issued" or delayed delivery basis. When-issued and delayed delivery
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and yield. The Fund generally will not pay for such
securities or start earning interest on them until they are received.
Securities purchased on a when-issued or delayed delivery basis are recorded
as an asset and are subject to changes in value based upon changes in the
general level of interest rates. The Fund expects that commitments to purchase
when-issued and delayed delivery securities will not exceed 25% of the value
of its total assets absent unusual market conditions. The Fund does not intend
to purchase when-issued or delayed delivery securities for speculative
purposes but only in furtherance of its investment objective. When the Fund
purchases securities on a when-issued or delayed delivery basis, it will set
aside securities or cash with its custodian equal to the payment that will be
due.
Participation Interests. The Fund may purchase participation certificates
issued by a bank, insurance company or other financial institution in
obligations owned by such institutions or affiliated organizations that may
otherwise be purchased by the Fund, and loan participation certificates. A
participation certificate gives the Fund an undivided interest in the
underlying obligations in the proportion that the Fund's interest bears to the
total principal amount of such obligations. Certain of such participation
certificates may carry a demand feature that would permit the holder to tender
them back to the issuer or to a third party prior to maturity. See "Floating
and Variable Rate Notes" for additional information with respect to demand
instruments that may be purchased by the Fund. The Fund may invest in
participation certificates even if the underlying obligations carry stated
maturities in excess of thirteen months, upon compliance with certain
conditions contained in Rule 2a-7. Loan participation certificates are
considered by the Fund to be "illiquid" for purposes of its investment
policies with respect to illiquid securities as set forth under "Illiquid
Securities" below.
Illiquid Securities. The Fund will not knowingly invest more than 10% of the
value of its total assets in illiquid securities, including time deposits and
repurchase agreements having maturities longer than seven days. Securities
that have readily available market quotations are not deemed illiquid for
purposes of this limitation (irrespective of any legal or contractual
restrictions on resale). The Fund may invest in commercial obligations issued
in reliance on the so-called "private placement exemption" from registration
afforded by Section 4(2) of the Securities Act of 1933, as amended
("Section 4(2) paper"). The Fund may also purchase securities that are not
registered under the Securities Act of 1933, as amended, but which can be sold
to qualified institutional buyers in accordance with Rule 144A under that Act
("Rule 144A securities"). Section 4(2) paper is restricted as to disposition
under the federal securities laws, and generally is sold to institutional
investors such as the Fund who agree that they are purchasing the paper for
investment and not with a view to public distribution. Any resale by the
purchaser must be in an exempt transaction. Section 4(2) paper normally is
resold to other institutional investors like the Fund through or with the
assistance of the issuer or investment dealers who make a market in the
Section 4(2) paper, thus providing liquidity. Rule 144A securities generally
must be sold to other qualified institutional buyers. If a particular
investment in Section 4(2) paper or Rule 144A securities is not determined to
be liquid, that investment will be included within the 10% limitation on
investment in illiquid securities. The Fund's Investment Adviser will monitor
the liquidity of such restricted securities under the supervision of the Board
of Directors. See "Investment Objectives and Policies - Additional Information
on Portfolio Instruments and Investment Practices - Illiquid and Restricted
Securities" in the Statement of Additional Information.
Repurchase Agreements. The Fund may purchase instruments from financial
institutions, such as banks and broker-dealers, subject to the seller's
agreement to repurchase them at an agreed upon time and price ("repurchase
agreements"). The seller under a repurchase agreement will be required to
maintain the value of the securities subject to the agreement at not less than
the repurchase price. Default by the seller would, however, expose the Fund to
possible loss because of adverse market action or delay in connection with the
disposition of the underlying obligations.
Reverse Repurchase Agreements. The Fund may borrow funds for temporary
purposes by entering into reverse repurchase agreements in accordance with its
investment limitations described above. Pursuant to such agreements, the Fund
would sell portfolio securities to financial institutions and agree to
repurchase them at an agreed upon date and price. The Fund would consider
entering into reverse repurchase agreements to avoid otherwise selling
securities during unfavorable market conditions to meet redemptions. Reverse
repurchase agreements involve the risk that the market value of the portfolio
securities sold by the Fund may decline below the price of the securities the
Fund is obligated to repurchase.
Other Money Market Funds. The Fund may invest up to 10% of the value of its
total assets in shares of other money market funds. The Fund will invest in
other money market funds only if such funds are subject to the requirements of
Rule 2a-7 and are considered to present minimal credit risks. The Fund's
Investment Adviser will monitor the policies and investments of other money
market funds in which it invests, based on information furnished to
shareholders of those funds, with respect to their compliance with their
investment objectives and Rule 2a-7.
Stand-by Commitments. The Fund may enter into put transactions, including
transactions sometimes referred to as stand-by commitments, with respect to
securities held in its portfolio. In a put transaction, the Fund acquires the
right to sell a security at an agreed upon price within a specified period
prior to its maturity date, and a stand-by commitment entitles the Fund to
same-day settlement and to receive an exercise price equal to the amortized
cost of the underlying security plus accrued interest, if any, at the time of
exercise. In the event that the party obligated to purchase the underlying
security from the Fund defaults on its obligation to purchase the underlying
security, then the Fund might be unable to recover all or a portion of any
loss sustained from having to sell the security elsewhere. Acquisition of puts
will have the effect of increasing the cost of securities subject to the put
and thereby reducing the yields otherwise available from such securities.
Loans of Portfolio Securities. The Fund may lend its portfolio securities
consistent with its investment policies. The Fund may lend portfolio
securities against collateral, consisting of cash or securities which are
consistent with its permitted investments, which is equal at all times to at
least 100% of the value of the securities loaned. There is no limitation on
the amount of securities that may be loaned. Such loans would involve risks of
delay in receiving additional collateral or in recovering the securities
loaned or even loss of rights in the collateral should the borrower of the
securities fail financially. However, loans will be made only to borrowers
deemed by the Fund's Investment Adviser to be of good standing and only when,
in the Investment Adviser's judgment, the income to be earned from the loans
justifies the attendant risks.
STRIPS. The Fund may invest in separately traded principal and interest
components of securities backed by the full faith and credit of the U.S.
Treasury. The principal and interest components of U.S. Treasury bonds with
remaining maturities of longer than ten years are eligible to be traded
independently under the Separate Trading of Registered Interest and Principal
of Securities ("STRIPS") program. Under the STRIPS program, the principal and
interest components are separately issued by the U.S. Treasury at the request
of depository financial institutions, which then trade the component parts
separately. Under the stripped bond rules of the Internal Revenue Code of
1986, as amended (the "Code"), investments by the Fund in STRIPS will result
in the accrual of interest income on such investments in advance of the
receipt of the cash corresponding to such income. The interest component of
STRIPS may be more volatile than that of U.S. Treasury bills with comparable
maturities. In accordance with Rule 2a-7, the Fund's investments in STRIPS are
limited to those with maturity components not exceeding thirteen months. The
Fund will not actively trade in STRIPS. The Fund will limit investments in
STRIPS to 20% of its total assets.
Purchase of Shares
Purchases of Global Clearing Shares may only be made through certain brokers
that clear transactions through Lehman Brothers on a fully disclosed basis (an
"Introducing Broker"). Introducing Brokers through whom Global Clearing Shares
are purchased may charge fees for their services. The Fund reserves the right
to reject any purchase order and to suspend the offering of shares for a
period of time.
The minimum initial investment in Global Clearing Shares of the Fund is $5,000
and the minimum subsequent investment is $1,000. In addition, for
participants with an automatic purchase arrangement in connection with their
brokerage accounts, there is no minimum initial or subsequent investment. The
Fund reserves the right at any time to vary the initial and subsequent
investment minimums. No certificates are issued for Fund shares.
The Fund's shares are sold continuously at their net asset value next
determined after a purchase order is received and becomes effective. A
purchase order for Global Clearing Shares becomes effective when the Fund's
Transfer Agent receives from the Introducing Broker sufficient federal funds
to cover the purchase price. See "Valuation of Shares." Investors should
note that there may be a delay between the time when an Introducing Broker
receives purchase proceeds and the time when those proceeds are transmitted to
the Fund and that the Introducing Broker may benefit from the use of
temporarily uninvested funds. Shares will begin to accrue income dividends on
the day the purchase order becomes effective.
Redemption of Shares
Holders of Global Clearing Shares may redeem their shares without charge on
any day on which the Fund calculates its net asset value. Redemption requests
received in proper form prior to noon, Eastern time, on any day the Fund
calculates its net asset value will be priced at the net asset value per share
determined at noon on that day and redemption requests received after such
time will be priced at the net asset value next determined. The Fund will
normally transmit redemption proceeds on Global Clearing Shares for credit to
the shareholder's account at the Introducing Broker at no charge on the day of
receipt of the redemption request.
A shareholder who pays for Fund shares by personal check will be credited with
the proceeds of a redemption of those shares only after the purchase check has
been collected, which may take up to 15 days or more. A shareholder who
anticipates the need for more immediate access to his or her investment should
purchase shares with federal funds, by bank wire or with a certified or
cashier's check.
Shareholders who purchase securities through an Introducing Broker may take
advantage of special redemption procedures under which Fund shares will be
redeemed automatically to the extent necessary to satisfy debit balances
arising in the shareholder's account. One example of how an automatic
redemption may occur involves the purchase of securities. If a shareholder
purchases securities but does not pay for them by the settlement date, the
number of Global Clearing Shares necessary to cover the debit will be redeemed
automatically as of the settlement date, which currently occurs three business
days after the trade date. Shareholders not wishing to participate in these
arrangements should notify their Introducing Broker.
A Fund account that is reduced by a shareholder to a value of $1,000 or less
may be subject to redemption by the Fund, but only after the shareholder has
been given at least 30 days in which to increase the account balance to more
than $1,000. In addition, the Fund may redeem shares involuntarily or suspend
the right of redemption as permitted under the 1940 Act, as described in the
Statement of Additional Information under "Additional Purchase and Redemption
Information."
Requests for the redemption of Global Clearing Shares must be made through an
Introducing Broker. Shares held by an Introducing Broker on behalf of
investors may be redeemed by submitting a written request for redemption to
the Fund's Transfer Agent:
Lehman Brothers Funds, Inc.
c/o The Shareholder Services Group, Inc.
P.O. Box 9184
Boston, Massachusetts 02009-9184
A written redemption request to the Fund's Transfer Agent must (a) state the
class and number of shares to be redeemed, (b) indicate the name of the Fund
from which such shares are to be redeemed, (c) identify the shareholder's
account number and (d) be signed by each registered owner exactly as the
shares are registered. Any signature appearing on a redemption request must be
guaranteed by a domestic bank, a savings and loan institution, a domestic
credit union, a member bank of the Federal Reserve System or a member firm of
a national securities exchange. The Fund's Transfer Agent 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 Fund's Transfer Agent receives
all required documents in proper form.
Exchange Privilege
Global Clearing Shares of the Fund may be exchanged without charge for shares
of the same class of certain other funds offered by Lehman Brothers through an
Introducing Broker. In exchanging shares, a shareholder must meet the minimum
initial investment requirement of the fund into which the exchange is being
made and the shares involved must be legally available for sale in the state
where the shareholder resides.
Orders for exchanges will only be accepted on days on which both funds
involved determine their respective net asset values. To obtain information
regarding the availability of funds into which shares of the Fund may be
exchanged, investors should contact an Investment Representative at the
Introducing Broker.
Tax Effect. The exchange of shares of one fund for shares of another fund is
treated for federal income tax purposes as a sale of the shares given in
exchange by the shareholder. Therefore, an exchanging shareholder may realize
a taxable gain or loss in connection with an exchange.
Additional Information Regarding the Exchange Privilege. Shareholders
exercising this exchange privilege should review the prospectus of the fund
they are exhanging into carefully prior to making an exchange. The Fund's
Distributor reserves the right to reject any exchange request. The exchange
privilege may be modified or terminated at any time after notice to
shareholders. For further information regarding the exchange privilege or to
obtain current prospectuses, investors should contact the Fund at 1-800-861-
4171.
Valuation of Shares
The net asset value of a Global Clearing Share is calculated on each day,
Monday through Friday, except on days on which the New York Stock Exchange
(the "NYSE") or the Federal Reserve Bank of Boston is closed. Currently one or
both of these institutions are scheduled to be closed on the customary
national business holidays of New Year's Day, Martin Luther King, Jr's.
Birthday (observed), Presidents' Day (observed), Good Friday, Memorial Day
(observed), Independence Day, Labor Day, Columbus Day (observed), Veterans
Day, Thanksgiving and Christmas and on the preceding Friday or subsequent
Monday when one of these holidays falls on a Saturday or Sunday, respectively.
The net asset value per Global Clearing Share is calculated at noon, Eastern
time, on each day on which the Fund computes its net asset value. The net
asset value per Global Clearing Share is computed by dividing the value of the
net assets of the Fund attributable to the Global Clearing Shares by the total
number of such shares outstanding. The Fund's assets are valued on the basis
of amortized cost, which involves valuing a portfolio instrument at its cost
and, thereafter, assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the
market value of the instrument. The Fund seeks to maintain a constant net
asset value of $1.00 per share, although there can be no assurance that it can
do so on a continuing basis. Further information regarding the Fund's
valuation policies is contained in the Statement of Additional Information.
Management of the Fund
The business and affairs of the Fund are managed under the direction of the
Company's Board of Directors. The Board of Directors approves all significant
agreements between the Company and the persons or companies that furnish
services to the Fund, including agreements with its Distributor, Investment
Adviser, Administrator, Custodian and Transfer Agent. The day-to-day
operations of the Fund are delegated to its Investment Adviser and
Administrator. One of the directors and all of the Company's officers are
affiliated with Lehman Brothers, The Shareholder Services Group, Inc. ("TSSG")
or one of their affiliates. The Statement of Additional Information relating
to the Fund contains general background information regarding each director
and executive officer of the Company.
INVESTMENT ADVISER - LEHMAN BROTHERS GLOBAL ASSET MANAGEMENT INC.
LBGAM serves as the Investment Adviser to the Fund. LBGAM, together with other
Lehman Brothers investment advisory affiliates, had approximately $____
billion in assets under management as of September 30, 1995. Subject to the
supervision and direction of the Company's Board of Directors, LBGAM manages
the Fund's portfolio in accordance with the Fund's investment objective and
policies, makes investment decisions for the Fund and places orders to
purchase and sell securities. As compensation for the services of LBGAM as
Investment Adviser to the Fund, LBGAM is entitled to receive a monthly fee
from the Fund at the annual rate of 0.30% of the value of the Fund's average
daily net assets.
LBGAM is located at 3 World Financial Center, New York, New York 10285. LBGAM
is a wholly-owned subsidiary of Lehman Brothers Holdings Inc. ("Holdings").
ADMINISTRATOR AND TRANSFER AGENT -
THE SHAREHOLDER SERVICES GROUP, INC.
TSSG, located at 53 State Street, Boston, Massachusetts 02109, serves as the
Fund's Administrator and Transfer Agent. TSSG is a wholly-owned subsidiary of
First Data Corporation. As Administrator, TSSG calculates the net asset value
of the Fund's shares and generally assists in all aspects of the Fund's
administration and operation. As compensation for TSSG's services as
Administrator, TSSG is entitled to receive a monthly fee from the Fund at the
annual rate of 0.20% of the value of the Fund's average daily net assets. TSSG
is also entitled to receive a fee from the Fund for its services as Transfer
Agent.
On May 6, 1994, TSSG acquired the third party mutual fund administration
business of The Boston Company Advisors, Inc., an indirect wholly-owned
subsidiary of Mellon Bank Corporation ("Mellon"). In connection with this
transaction, Mellon assigned to TSSG its agreement with Lehman Brothers (then
named Shearson Lehman Brothers Inc.) that Lehman Brothers and its affiliates,
consistent with their fiduciary duties and assuming certain service quality
standards are met, would recommend TSSG as the provider of administration
services to the Fund. This duty to recommend expires on May 21, 2000.
DISTRIBUTOR AND PLAN OF DISTRIBUTION
Lehman Brothers, located at 3 World Financial Center, New York, New York
10285, is the Distributor of the Fund's shares. Lehman Brothers, a leading
full service investment firm, meets the diverse financial needs of
individuals, institutions and governments around the world.
The Company has adopted a plan of distribution with respect to each class of
the Fund (the "Plan of Distribution") pursuant to Rule 12b-1 under the 1940
Act. Under the Plan of Distribution, the Fund has agreed with respect to the
Global Clearing Shares to pay Lehman Brothers monthly for advertising,
marketing and distributing its shares at an annual rate of up to 0.50% of its
average daily net assets. Under the Plan of Distribution, Lehman Brothers may
retain all or a portion of the payments made to it pursuant to the Plan and
may make payments to its Investment Representatives or Introducing Brokers
that engage in the sale of such classes of Fund shares. The Plan of
Distribution also provides that Lehman Brothers may make payments to assist in
the distribution of each class of the Fund's shares out of the other fees
received by it or its affiliates from the Fund, its past profits or any other
sources available to it. From time to time, Lehman Brothers may waive receipt
of fees under the Plan of Distribution while retaining the ability to be paid
under such Plan thereafter. The fees payable to Lehman Brothers under the Plan
of Distribution for advertising, marketing and distributing such shares of the
Fund and payments by Lehman Brothers to its Investment Representatives or
Introducing Brokers are payable without regard to actual expenses incurred.
Investment Representatives of Lehman Brothers, Introducing Brokers and any
other person entitled to receive compensation for selling or servicing shares
of the Fund may receive different levels of compensation for selling or
servicing one particular class of shares in the Fund over another.
CUSTODIAN - BOSTON SAFE DEPOSIT AND TRUST COMPANY
Boston Safe Deposit and Trust Company ("Boston Safe"), an indirect wholly-
owned subsidiary of Mellon, is located at One Boston Place, Boston,
Massachusetts 02108, and serves as the Fund's Custodian. Under the terms of
the Stock Purchase Agreement dated September 14, 1992 between Mellon and
Lehman Brothers (then named Shearson Lehman Brothers Inc.), Lehman Brothers
agreed to recommend Boston Safe, an indirect wholly-owned subsidiary of
Mellon, as custodian of mutual funds affiliated with Lehman Brothers until
May 21, 2000 to the extent consistent with its fiduciary duties and other
applicable law.
EXPENSES
The Fund's expenses include taxes, interest, fees and salaries of the
directors and officers who are not directors, officers or employees of the
Fund's service contractors, SEC fees, state securities qualification fees,
costs of preparing and printing prospectuses for regulatory purposes and for
distribution to existing shareholders, advisory and administration fees,
charges of the custodian, transfer agent and dividend disbursing agent,
certain insurance premiums, outside auditing and legal expenses, costs of
shareholder reports and shareholder meetings and any extraordinary expenses.
The Fund also pays for brokerage fees and commissions (if any) in connection
with the purchase and sale of portfolio securities. Fund expenses are
allocated to a particular class based on either expenses identifiable to the
class or relative net assets of the class and other classes of Fund shares.
LBGAM and TSSG have agreed to reimburse the Fund to the extent required by
applicable state law for certain expenses that are described in the Statement
of Additional Information relating to the Fund.
Dividends
The Fund declares dividends from its net investment income (i.e., income other
than net realized long- and short-term capital gains) on each day the Fund is
open for business and pays dividends monthly. Distributions of net realized
long- and short-term capital gains, if any, are declared and paid annually
after the close of the Fund's fiscal year in which they have been earned.
Unless a shareholder instructs the Fund to pay dividends or capital gains
distributions in cash and credit them to the shareholder's brokerage account,
dividends and distributions from the Fund will be reinvested automatically in
additional shares of the same class of the Fund at net asset value. Shares
redeemed during a month will be entitled to dividends up to, but not
including, the date of redemption, and purchased shares will be entitled to
dividends and distributions declared on the day the purchase order becomes
effective. The Fund does not expect to realize net long-term capital gains.
Taxes
The Fund will be treated as a separate entity for federal income tax purposes,
and thus the provisions of the Code applicable to regulated investment
companies generally will be applied to each series of the Company separately,
rather than to the Company as a whole. In addition, net realized long-term
capital gains, net investment income and operating expenses will be determined
separately for each series of the Company. The Fund intends to qualify each
year as a "regulated investment company" under Subchapter M of the Code. A
regulated investment company is exempt from federal income tax on amounts
distributed to its shareholders.
Qualification as a regulated investment company under the Code for a taxable
year requires, among other things, that the Fund distribute to its
shareholders each taxable year (a) at least 90% of its investment company
taxable income for such year and (b) at least 90% of the excess of its
tax-exempt interest income over certain deductions disallowed with respect to
such income. In general, the Fund's investment company taxable income will be
its taxable income (including dividends and short-term capital gains, if any)
subject to certain adjustments and excluding the excess of any net long-term
capital gain for the taxable year over the net short-term capital loss, if
any, for such year. The Fund intends to distribute substantially all of its
investment company taxable income each year. Such distributions will be
taxable as ordinary income to Fund shareholders who are not currently exempt
from federal income taxes, whether such income is received in cash or
reinvested in additional shares. (Federal income taxes for distributions to an
individual retirement account ("IRA") or a qualified retirement plan are
deferred under the Code.) It is not anticipated that a significant portion of
the Fund's distributions will be eligible for the dividends received deduction
for corporations. The Fund does not expect to realize long-term capital gains
and, therefore, does not contemplate payment of any "capital gain dividends"
as described in the Code.
Dividends and distributions by the Fund are generally taxable to the
shareholders at the time the dividend or distribution is made. Dividends
declared in October, November or December of any year payable to shareholders
of record on a specified date in such months will be deemed to have been
received by the shareholders and paid by the Fund on December 31 of such year
in the event such dividends are actually paid during January of the following
year.
Dividends and distributions of capital gains paid to shareholders by the Fund
will be subject to federal income tax, whether such dividends are paid in the
form of cash or additional shares, and may also be subject to state and local
taxes.
Shareholders will be advised at least annually as to the federal income tax
status of distributions made to them each year.
_____________
The foregoing discussion is only a brief summary of some of the important
federal tax considerations generally affecting the Fund and its shareholders.
As noted above, IRAs receive special tax treatment. No attempt is made to
present a detailed explanation of the federal, state or local income tax
treatment of the Fund or its shareholders, and this discussion is not intended
as a substitute for careful tax planning. Accordingly, potential investors in
the Fund should consult their tax advisers with specific reference to their
own tax situation.
Yields
From time to time, the "yields" and "effective yields" for Global Clearing
Shares of the Fund may be quoted in advertisements or in reports to
shareholders. Yield quotations are computed separately for each class of
shares of the Fund. The "yield" quoted in advertisements for Global Clearing
Shares of the Fund refers to the income generated by an investment in such
shares over a specified period (such as a seven-day period) identified in the
advertisement. This income is then "annualized"; that is, the amount of income
generated by the investment during that period is assumed to be generated each
such period over a 52-week or one-year period and is shown as a percentage of
the investment. The "effective yield" is calculated similarly but, when
annualized, the income earned by an investment in Global Clearing Shares is
assumed to be reinvested. The "effective yield" will be slightly higher than
the "yield" because of the compounding effect of this assumed reinvestment.
The Fund's yields may be compared to those of other mutual funds with similar
objectives, to bond or other relevant indices, or to rankings prepared by
independent services or other financial or industry publications that monitor
the performance of mutual funds, or to the average yields reported by the Bank
Rate Monitor from money market deposit accounts offered by the 50 leading
banks and thrift institutions in the top five standard metropolitan
statistical areas. For example, such data are reported in national financial
publications such as IBC/Donoghue's Money Fund Report, Ibbotson Associates of
Chicago, The Wall Street Journal and The New York Times, reports prepared by
Lipper Analytical Service, Inc. and publications of a local or regional
nature.
The Fund's yield figures represent past performance, will fluctuate and should
not be considered as representative of future results. The yield of any
investment is generally a function of portfolio quality and maturity, type of
investment and operating expenses. The methods used to compute the yields on
each class of the Fund's shares are described in more detail in the Statement
of Additional Information. Investors may call 1-800-861-4171 to obtain current
yield information.
Additional Information
The Company was incorporated under the laws of the State of Maryland on May 5,
1993. The authorized capital stock of the Company consists of 10,000,000,000
shares having a par value of $.001 per share. The Company's Charter currently
authorizes the issuance of several series of shares, corresponding to shares
of the Fund as well as shares of other investment portfolios of the Company
and multiple classes of shares in each series. The Company's Board of
Directors may, in the future, authorize the issuance of additional series of
capital stock representing shares of additional investment portfolios or
additional classes of shares of the Fund or the Company's other investment
portfolios.
The Company's Board of Directors has authorized the establishment of multiple
classes of shares in the Fund. This Prospectus relates only to Global Clearing
Shares, one class of shares that the Fund is authorized to issue, and the Fund
offers other classes of shares. The categories of investors that are eligible
to purchase shares may be different for each class of Fund shares. In
addition, other classes of Fund shares may be subject to differences in sales
charge arrangements, exchange privileges, ongoing distribution and service fee
levels, and levels of certain other expenses, which may affect the relative
performance of the different classes of Fund shares. Certain Fund expenses,
such as transfer agency expenses, are allocated separately to each class of
the Fund's shares based on expenses identifiable by class. Investors may call
the Company at 1-800-861-4171 to obtain additional information about other
classes of shares of the Fund that are offered.
The shares of each class of the Fund represent interests in the Fund in
proportion to their relative net asset values. All shares of the Company have
equal voting rights and will be voted in the aggregate, and not by series or
class, except where voting by series or class is required by law or where the
matter involved affects only one series or class. Under the corporate law of
Maryland, the Company's state of incorporation, and the Company's By-Laws
(except as required under the 1940 Act), the Company is not required and does
not currently intend to hold annual meetings of shareholders for the election
of directors. Shareholders, however, do have the right to call for a meeting
to consider the removal of one or more of the Company's directors if such a
request is made, in writing, by the holders of at least 10% of the Company's
outstanding voting securities.
All shares of the Company, when issued, will be fully paid and nonassessable.
The Fund sends shareholders a semi-annual and audited annual report, which
includes listings of investment securities held by the Fund at the end of the
period covered. In an effort to reduce the Fund's printing and mailing costs,
the Fund may consolidate the mailing of its semi-annual and annual reports by
household. This consolidation means that a household having multiple accounts
with the identical address of record would receive a single copy of each
report. In addition, the Fund may consolidate the mailing of its Prospectus so
that a shareholder having multiple accounts would receive a single Prospectus
annually. Any shareholder who does not want this consolidation to apply to
his or her account should contact the Fund's Transfer Agent. Shareholders may
direct inquiries regarding the Fund to their Introducing Broker, or to the
Fund by calling 1-800-861-4171.
LEHMAN BROTHERS
Member SIPC
3 THREE WORLD FINANCIAL CENTER, NEW YORK, NEW YORK 10285
Lehman Brothers Funds, Inc.
Lehman Brothers Municipal Income Fund
Global Clearing Shares
Prospectus begins on page one.
Dated November 29, 1995
Lehman Brothers Municipal Income Fund
Prospectus November 29,
1995
This Prospectus describes Lehman Brothers Municipal Income Fund (the "Fund"),
a separate, diversified money market portfolio of Lehman Brothers Funds, Inc.
(the "Company"), an open-end management investment company. This Prospectus
relates to Global Clearing Shares, a class of shares offered by the Fund.
[Continued on next page.]
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and such shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
government agency. Shares of the Fund involve certain investment risks,
including the possible loss of principal. There can be no assurance that the
Fund will be able to maintain a net asset value of $1.00 per share.
Lehman Brothers Inc. ("Lehman Brothers" or the "Distributor") sponsors the
Fund and acts as Distributor of the Fund's shares. Lehman Brothers Global
Asset Management Inc. ("LBGAM" or the "Investment Adviser") serves as the
Fund's Investment Adviser.
The address of the Fund is 3 World Financial Center, New York, New York 10285.
Yield and other information regarding the Fund may be obtained through a
Lehman Brothers Investment Representative or by calling 1-800-861-4171.
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about
the Fund, contained in a Statement of Additional Information dated November
29, 1995, as may be amended or supplemented from time to time, has been filed
with the Securities and Exchange Commission (the "SEC") and is available to
investors without charge by calling 1-800-861-4171. The Statement of
Additional Information is incorporated in its entirety by reference into this
Prospectus.
_____________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
_____________
LEHMAN BROTHERS
[Continued from previous page.]
The Fund's investment objective is to provide investors with as high a level
of current income exempt from federal income tax as is consistent with
stability of principal. The Fund invests substantially all of its assets in
short-term tax-exempt obligations issued by state and local governments and
tax-exempt derivative securities. All or a portion of the Fund's dividends may
be a specific preference item for purposes of the federal individual and
corporate alternative minimum taxes.
_____________
TABLE OF CONTENTS
Page
Benefits to Investors
3
Background and Expense Information
3
Investment Objective and Policies
4
Purchase of Shares
10
Redemption of Shares
11
Exchange Privilege
12
Valuation of Shares
12
Management of the Fund
13
Dividends
14
Taxes
15
Yields
16
Additional Information
17
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or in the Fund's Statement
of Additional Information incorporated herein by reference, in connection with
the offering made by this Prospectus and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Fund or its Distributor. This Prospectus does not constitute an offering by
the Fund or by the Distributor in any jurisdiction in which such offering may
not lawfully be made.
Benefits to Investors
The Fund offers investors several important benefits:
o A professionally managed portfolio of high quality money market
instruments exempt from federal income taxes, providing investment
diversification that is otherwise beyond the means of many individual
investors.
o Investment liquidity through convenient purchase and redemption
procedures.
o Stability of principal through maintenance of a constant net asset value
of $1.00 per share (although there is no assurance that it can do so on a
continuing basis).
o A convenient way to invest without the administrative and recordkeeping
burdens normally associated with the direct ownership of securities.
Background and Expense Information
The Fund is authorized to offer multiple classes of shares. One class of
shares, Global Clearing Shares, is offered by this Prospectus. Each share of
the Fund accrues income in the same manner, but certain expenses differ based
upon the class. See "Additional Information." The following Expense Summary
lists the costs and expenses that a shareholder can expect to incur as an
investor in Global Clearing Shares of the Fund based upon estimated operating
expenses for the current fiscal year.
Expense Summary
SHAREHOLDER TRANSACTION EXPENSES
GLOBAL CLEARING
SHARES
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Advisory Fees [after waivers]*
____%
Rule 12b-1 Fees [after waivers]**
____%
Other Expenses - including Administration Fees
[after waivers]
____%
Total Fund Operating Expenses
[after waivers]
____%
* Reflects voluntary waivers of advisory fees, which would not be changed
without 60-days prior notice to shareholders. Absent such voluntary waivers,
the ratio of advisory fees to average net assets would be ____%.
** Reflects voluntary waivers of Rule 12b-1 fees, which would not be
changed without 60-days prior notice to shareholders. Absent such voluntary
waivers, the ratio of Rule 12b-1 fees to average net assets would be ____%.
As of the date of this Prospectus, the Fund had not commenced selling
Global Clearing Shares to the public. The amount set forth for "Other
Expenses" is, therefore, based on estimates for the current fiscal year after
giving effect to voluntary waivers of administration fees, which would not be
changed without 60-days prior notice to shareholders. Absent such voluntary
waivers, the ratio of other expenses to average net assets would be ____%.
Absent the voluntary waivers referred to above, the ratio of total fund
operating expenses to average net assets would be ____%.
Example
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return and complete redemption at the end of each time period:
1
YEAR
3
YEAR
Global Clearing Shares:
$____
$____
The foregoing should not be considered a representation of actual expenses and
rates of return, which may be greater or less than those shown. The foregoing
table has not been audited by the Fund's independent auditors.
Long-term holders of mutual fund shares which bear 12b-1 fees, such as the
Global Clearing Shares, may pay more than the economic equivalent of the
maximum front-end sales charge permitted by rules of the National Association
of Securities Dealers, Inc.
Investment Objective and Policies
The Fund's investment objective is to provide investors with as high a level
of current income exempt from federal income tax as is consistent with
stability of principal. All or a portion of the Fund's dividends may be a
specific tax preference item for purposes of the federal individual and
corporate alternative minimum taxes. There can be no assurance that the Fund
will achieve its investment objective.
The Fund invests only in securities which are purchased with and payable in
U.S. dollars and which have (or, pursuant to regulations adopted by the SEC,
will be deemed to have) remaining maturities of thirteen months or less at the
date of purchase by the Fund. The Fund maintains a dollar-weighted average
portfolio maturity of 90 days or less. The Fund follows these policies to
maintain a constant net asset value of $1.00 per share, although there is no
assurance that it can do so on a continuing basis.
The Fund will limit its portfolio investments to securities that are
determined by its Investment Adviser to present minimal credit risks pursuant
to guidelines established by the Company's Board of Directors and which are
"Eligible Securities" at the time of acquisition by the Fund. The term
"Eligible Securities" includes securities rated by the "Requisite NRSROs" in
one of the two highest short-term rating categories, securities of issuers
that have received such ratings with respect to other short-term debt
securities and comparable unrated securities. "Requisite NRSROs" means (a) any
two nationally recognized statistical rating organizations ("NRSROs") that
have issued a rating with respect to a security or class of debt obligations
of an issuer, or (b) one NRSRO, if only one NRSRO has issued such a rating at
the time that the Fund acquires the security. A discussion of the ratings
categories of the NRSROs is contained in the Appendix to the Statement of
Additional Information.
In pursuing its investment objective, the Fund, which operates as a
diversified investment company, invests substantially all of its assets in a
diversified portfolio of short-term tax-exempt obligations issued by or on
behalf of states, territories and possessions of the United States, the
District of Columbia, and their respective authorities, agencies,
instrumentalities and political subdivisions and tax-exempt derivative
securities such as tender option bonds, participations, beneficial interests
in trusts and partnership interests (collectively "Municipal Obligations").
Except as described below, the Fund will not knowingly purchase securities the
interest on which is subject to federal income tax. (See, however, "Taxes"
below concerning the treatment of dividends paid by the Fund for purposes of
the federal alternative minimum tax applicable to particular categories of
investors.)
Opinions relating to the validity of Municipal Obligations and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance, and opinions
relating to the validity of and the tax-exempt status of payments received by
the Fund from tax-exempt derivative securities are rendered by bond counsel to
the respective sponsors of such securities. The Fund and its Investment
Adviser will rely on such opinions and will not review independently the
underlying proceedings relating to the issuance of Municipal Obligations, the
creation of any tax-exempt derivative securities or the bases for such
opinions.
Except during temporary defensive periods, the Fund will invest substantially
all, but in no event less than 80%, of its total assets in Municipal
Obligations. The Fund may hold uninvested cash reserves pending investment and
during temporary defensive periods including when suitable tax-exempt
obligations are unavailable. There is no percentage limitation on the amount
of assets which may be held uninvested. Uninvested cash reserves will not earn
income. In addition to or in lieu of holding uninvested cash reserves under
the aforementioned circumstances, the Fund may elect to invest in high
quality, short-term instruments, including U.S. Government and U.S. and
non-U.S. bank and commercial obligations, and repurchase agreements with
respect to such instruments, the income from which is subject to federal
income tax.
Types of Municipal Obligations
The two principal classifications of Municipal Obligations that may be held by
the Fund are "general obligation" securities and "revenue" securities. General
obligation securities are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue
securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. Revenue securities include private activity bonds.
Such bonds may be issued by or on behalf of public authorities to finance
various privately operated facilities and are not payable from the
unrestricted revenues of the issuer. As a result, the credit quality of
private activity bonds is frequently related directly to the credit standing
of private corporations or other entities.
The Fund's portfolio may also include "moral obligation" securities, which are
normally issued by special purpose public authorities. If the issuer of moral
obligation securities is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality that
created the issuer.
Although the Fund may invest more than 25% of its net assets in (a) Municipal
Obligations whose issuers are in the same state and (b) Municipal Obligations
the interest on which is paid solely from revenues of similar projects, it
does not presently intend to do so on a regular basis. To the extent the
Fund's assets are concentrated in Municipal Obligations that are payable from
the revenues of similar projects, are issued by issuers located in the same
state or are private activity bonds, the Fund will be subject to the peculiar
risks presented by the laws and economic conditions relating to such states,
projects and bonds to a greater extent than it would be if its assets were not
so concentrated.
INVESTMENT LIMITATIONS
The investment limitations enumerated below, as well as the Fund's policy with
respect to investing at least 80% of its total assets in Municipal
Obligations, are fundamental and may not be changed by the Company's Board of
Directors without the affirmative vote of the holders of a majority of the
Fund's outstanding shares. The Fund's investment objective and the other
investment policies described herein may be changed by the Board of Directors
at any time. If there is a change in the investment objective of the Fund,
shareholders of the Fund should consider whether the Fund remains an
appropriate investment in light of their then current financial position and
needs. (A complete list of the Fund's investment limitations that cannot be
changed without a vote of shareholders is contained in the Statement of
Additional Information under "Investment Objectives and Policies.") The
percentage limitations set forth below, as well as those contained elsewhere
in this Prospectus and the Statement of Additional Information, apply at the
time a transaction is effected, and a subsequent change in a percentage
resulting from market fluctuations or any other cause other than an action by
the Fund will not require the Fund to dispose of portfolio securities or to
take other action to satisfy the percentage limitation.
* The Fund may not borrow money, except from banks for temporary purposes
and then in amounts not exceeding one-third of the value of its total assets
at the time of such borrowing; or mortgage, pledge or hypothecate any assets
except in connection with any such borrowing and in amounts not in excess of
the lesser of the dollar amounts borrowed or one-third of the value of its
total assets at the time of such borrowing. Additional investments will not be
made by the Fund when borrowings exceed 5% of its total assets.
* The Fund may not purchase any securities which would cause 25% or more
of the value of its total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to investments in U.S. Government securities or Municipal Obligations
(other than those backed only by the assets and revenues of non-governmental
users).
* The Fund may not purchase the securities of any one issuer if as a
result more than 5% of the value of its total assets would be invested in the
securities of such issuer, except that up to 25% of the value of its total
assets may be invested without regard to this 5% limitation and provided that
there is no limitation with respect to investments in U.S. Government
securities.
OTHER INVESTMENT PRACTICES
Floating and Variable Rate Notes. The Fund may purchase variable or floating
rate notes, which are instruments that provide for adjustments in the interest
rate on certain reset dates or whenever a specified interest rate index
changes, respectively. Such notes might not be actively traded in a secondary
market but, in some cases, the Fund may be able to resell such notes in the
dealer market. Variable and floating rate notes typically are rated by credit
rating agencies, and their issuers must satisfy the same quality criteria as
set forth above. The Fund invests in variable or floating rate notes only when
the Investment Adviser deems the investment to involve minimal credit risk.
Certain of the floating or variable rate notes that may be purchased by the
Fund may carry a demand feature that would permit the holder to tender them
back to the issuer of the underlying instrument, or to a third party, at par
value prior to maturity. Where necessary to ensure that such a note is an
Eligible Security, the Fund will require that the issuer's obligation to pay
the principal of the note be backed by an unconditional third-party letter or
line of credit, guarantee or commitment to lend. If a floating or variable
rate demand note is not actively traded in a secondary market, it may be
difficult for the Fund to dispose of the note if the issuer were to default on
its payment obligation or during periods that the Fund is not entitled to
exercise its demand rights, and the Fund could, for this or other reasons,
suffer a loss to the extent of the default. While, in general, the Fund will
invest only in securities that mature within thirteen months of purchase, the
Fund may invest in floating or variable rate demand notes which have nominal
maturities in excess of thirteen months, if such instruments carry demand
features that comply with conditions established by the SEC.
When-Issued and Delayed Delivery Securities. The Fund may purchase securities
on a "when-issued" or delayed delivery basis. When-issued and delayed delivery
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and yield. The Fund generally will not pay for such
securities or start earning interest on them until they are received.
Securities purchased on a when-issued or delayed delivery basis are recorded
as an asset and are subject to changes in value based upon changes in the
general level of interest rates. The Fund expects that commitments to purchase
when-issued and delayed delivery securities will not exceed 25% of the value
of its total assets absent unusual market conditions. The Fund does not intend
to purchase when-issued or delayed delivery securities for speculative
purposes but only in furtherance of its investment objective. When the Fund
purchases securities on a when-issued or delayed delivery basis, it will set
aside securities or cash with its Custodian equal to the payment that will be
due.
Tender Option Bonds. The Fund may purchase tender option bonds. A tender
option bond is a municipal obligation (generally held pursuant to a custodial
arrangement) having a maturity longer than 13 months and bearing interest at a
fixed rate substantially higher than prevailing short-term tax-exempt rates,
that has been coupled with the agreement of a third party, such as a bank,
broker-dealer or other financial institution, pursuant to which such
institution grants the security holders the option, at periodic intervals, to
tender their securities to the institution and receive the face value thereof.
As consideration for providing the option, the financial institution receives
periodic fees equal to the difference between the municipal obligation's fixed
coupon rate and the rate, as determined by remarketing or similar agent at or
near the commencement of such period, that would cause the securities coupled
with the tender option, to trade at or near par on the date of such
determination. Thus, after payment of this fee, the security holder
effectively holds a demand obligation that bears interest at the prevailing
short-end tax-exempt rate. LBGAM will consider on an ongoing basis the
creditworthiness of the issuer of the underlying municipal obligation, of any
custodian and of the third party provider of the tender option. In certain
instances and for certain tender option bonds, the option may be terminable in
the event of a default in payment of principal or interest on the underlying
municipal obligation and for other reasons.
Municipal Lease Obligations. The Fund may invest in municipal obligations that
constitute participations in a lease obligation or installment purchase
contract obligation (hereafter collectively called "municipal lease
obligations") of a municipal authority or entity. Although municipal lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a municipal lease obligation
is ordinarily backed by the municipality's covenant to budget for, appropriate
and make the payments due under the lease obligation. However, certain
municipal lease obligations contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on a
yearly basis. Although non-appropriation municipal lease obligations are
secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult. The Fund will seek to minimize the special
risks associated with such securities by not investing more than 10% of its
assets in municipal lease obligations that contain non-appropriation clauses,
and by only investing in those non-appropriation leases where (a) the nature
of the leased equipment or property is such that its ownership or use is
essential to a governmental function of the municipality, (b) appropriate
covenants will be obtained from the municipal obligor prohibiting the
substitution or purchase of similar equipment if lease payments are not
appropriated, (c) the lease obligor has maintained good market acceptability
in the past, (d) the investment is of a size that will be attractive to
institutional investors, and (e) the underlying leased equipment has elements
of portability and/or use that enhance its marketability in the event
foreclosure on the underlying equipment were ever required. Municipal lease
obligations provide a premium interest rate which along with regular
amortization of the principal may make them attractive for a portion of the
assets of the Fund.
Custodial Receipts and Certificates. The Fund may acquire custodial receipts
or certificates underwritten by securities dealers or banks that evidence
ownership of future interest payments, principal payments or both, on certain
municipal obligations. The underwriter of these certificates or receipts
typically purchases municipal obligations and deposits the obligations in an
irrevocable trust or custodial account with a custodian bank, which then
issues receipts or certificates that evidence ownership of the periodic
unmatured coupon payments and the final principal payment on the obligations.
Although under the terms of a custodial receipt, the Fund typically would be
authorized to assert its rights directly against the issuer of the underlying
obligation, the Fund could be required to assert through the custodian bank
those rights as may exist against the underlying issuer. Thus, in the event
the underlying issuer fails to pay principal and/or interest when due, the
Fund may be subject to delays, expenses and risks that are greater than those
that would have been involved if the Fund had purchased a direct obligation of
the issuer. In addition, in the event that the trust or custodial account in
which the underlying security has been deposited is determined to be an
association taxable as a corporation instead of a non-taxable entity, the
yield on the underlying security would be reduced in recognition of any taxes
paid.
Participation Interests. The Fund may purchase participation certificates
issued by a bank, insurance company or other financial institution in
obligations owned by such institutions or affiliated organizations that may
otherwise be purchased by the Fund, and loan participation certificates. A
participation certificate gives the Fund an undivided interest in the
underlying obligations in the proportion that the Fund's interest bears to the
total principal amount of such obligations. Certain of such participation
certificates may carry a demand feature that would permit the holder to tender
them back to the issuer or to a third party prior to maturity. See "Floating
and Variable Rate Notes" for additional information with respect to demand
instruments that may be purchased by the Fund. The Fund may invest in
participation certificates even if the underlying obligations carry stated
maturities in excess of thirteen months, upon compliance with certain
conditions contained in Rule 2a-7. Loan participation certificates are
considered by the Fund to be "illiquid" for purposes of its investment
policies with respect to illiquid securities as set forth under "Illiquid
Securities" below.
Illiquid Securities. The Fund will not knowingly invest more than 10% of the
value of its total assets in illiquid securities, including time deposits and
repurchase agreements having maturities longer than seven days. Securities
that have readily available market quotations are not deemed illiquid for
purposes of this limitation (irrespective of any legal or contractual
restrictions on resale). The Fund may invest in commercial obligations issued
in reliance on the so-called "private placement exemption" from registration
afforded by Section 4(2) of the Securities Act of 1933, as amended ("Section
4(2) paper"). The Fund may also purchase securities that are not registered
under the Securities Act of 1933, as amended, but which can be sold to
qualified institutional buyers in accordance with Rule 144A under that Act
("Rule 144A securities"). Section 4(2) paper is restricted as to disposition
under the federal securities laws, and generally is sold to institutional
investors such as the Fund who agree that they are purchasing the paper for
investment and not with a view to public distribution. Any resale by the
purchaser must be in an exempt transaction. Section 4(2) paper normally is
resold to other institutional investors like the Fund through or with the
assistance of the issuer or investment dealers who make a market in the
Section 4(2) paper, thus providing liquidity. Rule 144A securities generally
must be sold to other qualified institutional buyers. If a particular
investment in Section 4(2) paper or Rule 144A securities is not determined to
be liquid, that investment will be included within the 10% limitation on
investment in illiquid securities. The Fund's Investment Adviser will monitor
the liquidity of such restricted securities under the supervision of the Board
of Directors. See "Investment Objectives and Policies - Additional Information
on Portfolio Instruments and Investment Practices - Illiquid and Restricted
Securities" in the Statement of Additional Information.
Repurchase Agreements. The Fund may purchase instruments from financial
institutions, such as banks and broker-dealers, subject to the seller's
agreement to repurchase them at an agreed upon time and price ("repurchase
agreements"). The seller under a repurchase agreement will be required to
maintain the value of the securities subject to the agreement at not less than
the repurchase price. Default by the seller would, however, expose the Fund to
possible loss because of adverse market action or delay in connection with the
disposition of the underlying obligations.
Reverse Repurchase Agreements. The Fund may borrow funds for temporary
purposes by entering into reverse repurchase agreements in accordance with its
investment limitations described above. Pursuant to such agreements, the Fund
would sell portfolio securities to financial institutions and agree to
repurchase them at an agreed upon date and price. The Fund would consider
entering into reverse repurchase agreements to avoid otherwise selling
securities during unfavorable market conditions to meet redemptions. Reverse
repurchase agreements involve the risk that the market value of the portfolio
securities sold by the Fund may decline below the price of the securities the
Fund is obligated to repurchase.
Other Money Market Funds. The Fund may invest up to 10% of the value of its
total assets in shares of other money market funds. The Fund will invest in
other money market funds only if such funds are subject to the requirements of
Rule 2a-7 and are considered to present minimal credit risks. The Fund's
Investment Adviser will monitor the policies and investments of other money
market funds in which it invests, based on information furnished to
shareholders of those funds, with respect to their compliance with their
investment objectives and Rule 2a-7.
Stand-by Commitments. The Fund may enter into put transactions, including
transactions sometimes referred to as stand-by commitments, with respect to
securities held in its portfolio. In a put transaction, the Fund acquires the
right to sell a security at an agreed upon price within a specified period
prior to its maturity date, and a stand-by commitment entitles the Fund to
same-day settlement and to receive an exercise price equal to the amortized
cost of the underlying security plus accrued interest, if any, at the time of
exercise. In the event that the party obligated to purchase the underlying
security from the Fund defaults on its obligation to purchase the underlying
security, then the Fund might be unable to recover all or a portion of any
loss sustained from having to sell the security elsewhere. Acquisition of puts
will have the effect of increasing the cost of securities subject to the put
and thereby reducing the yields otherwise available from such securities.
Loans of Portfolio Securities. The Fund may lend its portfolio securities
consistent with its investment policies. The Fund may lend portfolio
securities against collateral, consisting of cash or securities which are
consistent with its permitted investments, which is equal at all times to at
least 100% of the value of the securities loaned. There is no limitation on
the amount of securities that may be loaned. Such loans would involve risks of
delay in receiving additional collateral or in recovering the securities
loaned or even loss of rights in the collateral should the borrower of the
securities fail financially. However, loans will be made only to borrowers
deemed by the Fund's Investment Adviser to be of good standing and only when,
in the Investment Adviser's judgment, the income to be earned from the loans
justifies the attendant risks.
STRIPS. The Fund may invest in separately traded principal and interest
components of securities backed by the full faith and credit of the U.S.
Treasury. The principal and interest components of U.S. Treasury bonds with
remaining maturities of longer than ten years are eligible to be traded
independently under the Separate Trading of Registered Interest and Principal
of Securities ("STRIPS") program. Under the STRIPS program, the principal and
interest components are separately issued by the U.S. Treasury at the request
of depository financial institutions, which then trade the component parts
separately. Under the stripped bond rules of the Internal Revenue Code of
1986, as amended (the "Code"), investments by the Fund in STRIPS will result
in the accrual of interest income on such investments in advance of the
receipt of the cash corresponding to such income. The interest component of
STRIPS may be more volatile than that of U.S. Treasury bills with comparable
maturities. In accordance with Rule 2a-7, the Fund's investments in STRIPS are
limited to those with maturity components not exceeding thirteen months. The
Fund will not actively trade in STRIPS. The Fund will limit investments in
STRIPS to 20% of its total assets.
Purchase of Shares
Purchases of Global Clearing Shares may only be made through certain brokers
that clear transactions through Lehman Brothers on a fully disclosed basis (an
"Introducing Broker"). Introducing Brokers through whom Global Clearing Shares
are purchased may charge fees for their services. The Fund reserves the right
to reject any purchase order and to suspend the offering of shares for a
period of time.
The minimum initial investment in Global Clearing Shares of the Fund is $5,000
and the minimum subsequent investment is $1,000. In addition, for participants
with an automatic purchase arrangement in connection with their brokerage
accounts, there is no minimum initial or subsequent investment. The Fund
reserves the right at any time to vary the initial and subsequent investment
minimums. No certificates are issued for Fund shares.
The Fund's shares are sold continuously at their net asset value next
determined after a purchase order is received and becomes effective. A
purchase order for Global Clearing Shares becomes effective when the Fund's
Transfer Agent receives from the Introducing Broker sufficient federal funds
to cover the purchase price. See "Valuation of Shares." Investors should
note that there may be a delay between the time when an Introducing Broker
receives purchase proceeds and the time when those proceeds are transmitted to
the Fund and that the Introducing Broker may benefit from the use of
temporarily uninvested funds. Shares will begin to accrue income dividends on
the day the purchase order becomes effective.
Redemption of Shares
Holders of Global Clearing Shares may redeem their shares without charge on
any day on which the Fund calculates its net asset value. Redemption requests
received in proper form prior to noon, Eastern time, on any day the Fund
calculates its net asset value will be priced at the net asset value per share
determined at noon on that day and redemption requests received after such
time will be priced at the net asset value next determined. The Fund will
normally transmit redemption proceeds on Global Clearing Shares for credit to
the shareholder's account at the Introducing Broker at no charge on the day of
receipt of the redemption request.
A shareholder who pays for Fund shares by personal check will be credited with
the proceeds of a redemption of those shares only after the purchase check has
been collected, which may take up to 15 days or more. A shareholder who
anticipates the need for more immediate access to his or her investment should
purchase shares with federal funds, by bank wire or with a certified or
cashier's check.
Shareholders who purchase securities through an Introducing Broker may take
advantage of special redemption procedures under which Fund shares will be
redeemed automatically to the extent necessary to satisfy debit balances
arising in the shareholder's account. One example of how an automatic
redemption may occur involves the purchase of securities. If a shareholder
purchases securities but does not pay for them by the settlement date, the
number of Global Clearing Shares necessary to cover the debit will be redeemed
automatically as of the settlement date, which currently occurs three business
days after the trade date. Shareholders not wishing to participate in these
arrangements should notify their Introducing Broker.
A Fund account that is reduced by a shareholder to a value of $1,000 or less
may be subject to redemption by the Fund, but only after the shareholder has
been given at least 30 days in which to increase the account balance to more
than $1,000. In addition, the Fund may redeem shares involuntarily or suspend
the right of redemption as permitted under the Investment Company Act of 1940,
as amended (the "1940 Act"), as described in the Statement of Additional
Information under "Additional Purchase and Redemption Information."
Requests for the redemption of Global Clearing Shares must be made through an
Introducing Broker. Shares held by an Introducing Broker on behalf of
investors may be redeemed by submitting a written request for redemption to
the Fund's Transfer Agent:
Lehman Brothers Funds, Inc.
c/o The Shareholder Services Group, Inc.
P.O. Box 9184
Boston, Massachusetts 02009-9184
A written redemption request to the Fund's Transfer Agent must (a) state the
class and number of shares to be redeemed, (b) indicate the name of the Fund
from which such shares are to be redeemed, (c) identify the shareholder's
account number and (d) be signed by each registered owner exactly as the
shares are registered. Any signature appearing on a redemption request must be
guaranteed by a domestic bank, a savings and loan institution, a domestic
credit union, a member bank of the Federal Reserve System or a member firm of
a national securities exchange. The Fund's Transfer Agent 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 Fund's Transfer Agent receives
all required documents in proper form.
Exchange Privilege
Global Clearing Shares of the Fund may be exchanged without charge for shares
of the same class of certain other funds offered by Lehman Brothers through an
Introducing Broker. In exchanging shares, a shareholder must meet the minimum
initial investment requirement of the fund into which the exchange is being
made and the shares involved must be legally available for sale in the state
where the shareholder resides.
Orders for exchanges will only be accepted on days on which both funds
involved determine their respective net asset values. To obtain information
regarding the availability of funds into which shares of the Fund may be
exchanged, investors should contact an Investment Representative at the
Introducing Broker.
Tax Effect. The exchange of shares of one fund for shares of another fund is
treated for federal income tax purposes as a sale of the shares given in
exchange by the shareholder. Therefore, an exchanging shareholder may realize
a taxable gain or loss in connection with an exchange.
Additional Information Regarding the Exchange Privilege. Shareholders
exercising this exchange privilege should review the prospectus of the fund
they are exchanging into carefully prior to making an exchange. The Fund's
Distributor reserves the right to reject any exchange request. The exchange
privilege may be modified or terminated at any time after notice to
shareholders. For further information regarding the exchange privilege or to
obtain current prospectuses, investors should contact the Fund at 1-800-861-
4171.
Valuation of Shares
The net asset value of a Global Clearing Share is calculated on each day,
Monday through Friday, except on days on which the New York Stock Exchange
(the "NYSE") or the Federal Reserve Bank of Boston is closed. Currently one or
both of these institutions are scheduled to be closed on the customary
national business holidays of New Year's Day, Martin Luther King, Jr's.
Birthday (observed), Presidents' Day (observed), Good Friday, Memorial Day
(observed), Independence Day, Labor Day, Columbus Day (observed), Veterans
Day, Thanksgiving and Christmas and on the preceding Friday or subsequent
Monday when one of these holidays falls on a Saturday or Sunday, respectively.
The net asset value per Global Clearing Share is calculated at noon, Eastern
time, on each day on which the Fund computes its net asset value. The net
asset value per Global Clearing Share is computed by dividing the value of the
net assets of the Fund attributable to the Global Clearing Shares by the total
number of such shares outstanding. The Fund's assets are valued on the basis
of amortized cost, which involves valuing a portfolio instrument at its cost
and, thereafter, assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the
market value of the instrument. The Fund seeks to maintain a constant net
asset value of $1.00 per share, although there can be no assurance that it can
do so on a continuing basis. Further information regarding the Fund's
valuation policies is contained in the Statement of Additional Information.
Management of the Fund
The business and affairs of the Fund are managed under the direction of the
Company's Board of Directors. The Board of Directors approves all significant
agreements between the Company and the persons or companies that furnish
services to the Fund, including agreements with its Distributor, Investment
Adviser, Administrator, Custodian and Transfer Agent. The day-to-day
operations of the Fund are delegated to its Investment Adviser and
Administrator. One of the directors and all of the Company's officers are
affiliated with Lehman Brothers, The Shareholder Services Group, Inc. ("TSSG")
or one of their affiliates. The Statement of Additional Information relating
to the Fund contains general background information regarding each director
and executive officer of the Company.
INVESTMENT ADVISER - LEHMAN BROTHERS GLOBAL ASSET MANAGEMENT INC.
LBGAM serves as the Investment Adviser to the Fund. LBGAM, together with other
Lehman Brothers investment advisory affiliates, had approximately $__ billion
in assets under management as of September 30, 1995. Subject to the
supervision and direction of the Company's Board of Directors, LBGAM manages
the Fund's portfolio in accordance with the Fund's investment objective and
policies, makes investment decisions for the Fund and places orders to
purchase and sell securities. As compensation for the services of LBGAM as
Investment Adviser to the Fund, LBGAM is entitled to receive a monthly fee
from the Fund at the annual rate of 0.30% of the value of the Fund's average
daily net assets.
LBGAM is located at 3 World Financial Center, New York, New York 10285. LBGAM
is a wholly-owned subsidiary of Lehman Brothers Holdings Inc. ("Holdings").
ADMINISTRATOR AND TRANSFER AGENT -
THE SHAREHOLDER SERVICES GROUP, INC.
TSSG, located at 53 State Street, Boston, Massachusetts 02109, serves as the
Fund's Administrator and Transfer Agent. TSSG is a wholly-owned subsidiary of
First Data Corporation. As Administrator, TSSG calculates the net asset value
of the Fund's shares and generally assists in all aspects of the Fund's
administration and operation. As compensation for TSSG's services as
Administrator, TSSG is entitled to receive a monthly fee from the Fund at the
annual rate of 0.20% of the value of the Fund's average daily net assets. TSSG
is also entitled to a monthly fee from the Fund for its services as Transfer
Agent.
On May 6, 1994, TSSG acquired the third party mutual fund administration
business of The Boston Company Advisors, Inc., an indirect wholly-owned
subsidiary of Mellon Bank Corporation ("Mellon"). In connection with this
transaction, Mellon assigned to TSSG its agreement with Lehman Brothers (then
named Shearson Lehman Brothers Inc.) that Lehman Brothers and its affiliates,
consistent with their fiduciary duties and assuming certain service quality
standards are met, would recommend TSSG as the provider of administration
services to the Fund. This duty to recommend expires on May 21, 2000.
DISTRIBUTOR AND PLAN OF DISTRIBUTION
Lehman Brothers, located at 3 World Financial Center, New York, New York
10285, is the Distributor of the Fund's shares. Lehman Brothers, a leading
full service investment firm, meets the diverse financial needs of
individuals, institutions and governments around the world.
The Company has adopted a plan of distribution with respect to each class of
the Fund (the "Plan of Distribution") pursuant to Rule 12b-1 under the 1940
Act. Under the Plan of Distribution, the Fund has agreed with respect to the
Global Clearing Shares to pay Lehman Brothers monthly for advertising,
marketing and distributing its shares at an annual rate of up to 0.50% of its
average daily net assets. Under the Plan of Distribution, Lehman Brothers may
retain all or a portion of the payments made to it pursuant to the Plan and
may make payments to its Investment Representatives or Introducing Brokers
that engage in the sale of such classes of Fund shares. The Plan of
Distribution also provides that Lehman Brothers may make payments to assist in
the distribution of each class of the Fund's shares out of the other fees
received by it or its affiliates from the Fund, its past profits or any other
sources available to it. From time to time, Lehman Brothers may waive receipt
of fees under the Plan of Distribution while retaining the ability to be paid
under such Plan thereafter. The fees payable to Lehman Brothers under the Plan
of Distribution for advertising, marketing and distributing such shares of the
Fund and payments by Lehman Brothers to its Investment Representatives or
Introducing Brokers are payable without regard to actual expenses incurred.
Investment Representatives of Lehman Brothers, Introducing Brokers and any
other person entitled to receive compensation for selling or servicing shares
of the Fund may receive different levels of compensation for selling or
servicing one particular class of shares in the Fund over another.
CUSTODIAN - BOSTON SAFE DEPOSIT AND TRUST COMPANY
Boston Safe Deposit and Trust Company ("Boston Safe"), an indirect wholly-
owned subsidiary of Mellon, is located at One Boston Place, Boston,
Massachusetts 02108, and serves as the Fund's Custodian. Under the terms of
the Stock Purchase Agreement dated September 14, 1992 between Mellon and
Lehman Brothers (then named Shearson Lehman Brothers Inc.), Lehman Brothers
agreed to recommend Boston Safe, an indirect wholly-owned subsidiary of
Mellon, as custodian of mutual funds affiliated with Lehman Brothers until
May 21, 2000 to the extent consistent with its fiduciary duties and other
applicable law.
EXPENSES
The Fund's expenses include taxes, interest, fees and salaries of the
directors and officers who are not directors, officers or employees of the
Fund's service contractors, SEC fees, state securities qualification fees,
costs of preparing and printing prospectuses for regulatory purposes and for
distribution to existing shareholders, advisory and administration fees,
charges of the custodian, transfer agent and dividend disbursing agent,
certain insurance premiums, outside auditing and legal expenses, costs of
shareholder reports and shareholder meetings and any extraordinary expenses.
The Fund also pays for brokerage fees and commissions (if any) in connection
with the purchase and sale of portfolio securities. Fund expenses are
allocated to a particular class based on either expenses identifiable to the
class or relative net assets of the class and the other classes of Fund
shares. LBGAM and TSSG have agreed to reimburse the Fund to the extent
required by applicable state law for certain expenses that are described in
the Statement of Additional Information relating to the Fund.
Dividends
The Fund declares dividends from its net investment income (i.e., income other
than net realized long- and short-term capital gains) on each day the Fund is
open for business and pays dividends monthly. Distributions of net realized
long- and short-term capital gains, if any, are declared and paid annually
after the close of the Fund's fiscal year in which they have been earned.
Unless a shareholder instructs the Fund to pay dividends or capital gains
distributions in cash and credit them to the shareholder's brokerage account,
dividends and distributions from the Fund will be reinvested automatically in
additional shares of the same class of the Fund at net asset value. Shares
redeemed during a month will be entitled to dividends up to, but not
including, the date of redemption, and purchased shares will be entitled to
dividends and distributions declared on the day the purchase order becomes
effective. The Fund does not expect to realize net long-term capital gains.
Taxes
The Fund will be treated as a separate entity for federal income tax purposes,
and thus the provisions of the Code applicable to regulated investment
companies generally will be applied to each series of the Company separately,
rather than to the Company as a whole. In addition, net realized long-term
capital gains, net investment income and operating expenses will be determined
separately for each series of the Company. The Fund intends to qualify each
year as a "regulated investment company" under Subchapter M of the Code. A
regulated investment company is exempt from federal income tax on amounts
distributed to its shareholders.
Qualification as a regulated investment company under the Code for a taxable
year requires, among other things, that the Fund distribute to its
shareholders each taxable year (a) at least 90% of its investment company
taxable income for such year and (b) at least 90% of the excess of its
tax-exempt interest income over certain deductions disallowed with respect to
such income. In general, the Fund's investment company taxable income will be
its taxable income (including dividends and short-term capital gains, if any)
subject to certain adjustments and excluding the excess of any net long-term
capital gain for the taxable year over the net short-term capital loss, if
any, for such year. The Fund intends to distribute substantially all of its
investment company taxable income each year. Such distributions will be
taxable as ordinary income to Fund shareholders who are not currently exempt
from federal income taxes, whether such income is received in cash or
reinvested in additional shares. (Federal income taxes for distributions to an
individual retirement account ("IRA") or a qualified retirement plan are
deferred under the Code.) It is not anticipated that a significant portion of
the Fund's distributions will be eligible for the dividends received deduction
for corporations. The Fund does not expect to realize long-term capital gains
and, therefore, does not contemplate payment of any "capital gain dividends"
as described in the Code.
The Fund may hold without limit certain private activity bonds issued after
August 7, 1986. Shareholders must include, as an item of tax preference, the
portion of dividends paid by the Fund that is attributable to interest on such
bonds in determining liability (if any) for the federal alternative minimum
tax. Noncorporate taxpayers, depending on their individual tax status, may be
subject to alternative minimum tax at a blended rate between 26% and 28%.
Corporate taxpayers may be subject to (1) alternative minimum tax at a rate of
20% of the excess of their alternative minimum taxable income ("AMTI") over
the exemption amount, and (2) the environmental tax. Corporate investors must
also take all exempt-interest dividends into account in determining certain
adjustments for federal alternative minimum and environmental tax purposes.
The environmental tax applicable to corporations is imposed at the rate of
0.12% on the excess of the corporation's modified federal alternative minimum
taxable income over $2,000,000. Shareholders receiving Social Security
benefits should note that all exempt-interest dividends will be taken into
account in determining the taxability of such benefits.
Dividends and distributions by the Fund are generally taxable to the
shareholders at the time the dividend or distribution is made. Dividends
declared in October, November or December of any year payable to shareholders
of record on a specified date in such months will be deemed to have been
received by the shareholders and paid by the Fund on December 31 of such year
in the event such dividends are actually paid during January of the following
year.
Dividends paid by the Fund which are derived from exempt-interest income may
be treated by the Fund's shareholders as items of interest excludable from
their gross income under Section 103(a) of the Code, unless under the
circumstances applicable to the particular shareholder the exclusion would be
disallowed. (See the Statement of Additional Information under "Additional
Information Concerning Taxes.")
To the extent, if any, dividends paid to shareholders by the Fund are derived
from taxable income or from long-term or short-term capital gains, such
dividends will not be exempt from federal income tax, whether such dividends
are paid in the form of cash or additional shares, and may also be subject to
state and local taxes. Under state or local law, the Fund's distributions of
net investment income may be taxable to investors as dividend income though a
substantial portion of such distributions may be derived from interest on
tax-exempt obligations which, if realized directly, would be exempt from such
income taxes.
Shareholders will be advised at least annually as to the federal income tax
status of distributions made to them each year.
_____________
The foregoing discussion is only a brief summary of some of the important
federal tax considerations generally affecting the Fund and its shareholders.
As noted above, IRAs receive special tax treatment. No attempt is made to
present a detailed explanation of the federal, state or local income tax
treatment of the Fund or its shareholders, and this discussion is not intended
as a substitute for careful tax planning. Accordingly, potential investors in
the Fund should consult their tax advisers with specific reference to their
own tax situation.
Yields
From time to time, the "yields," "effective yields" and "tax-equivalent
yields" for Global Clearing Shares of the Fund may be quoted in advertisements
or in reports to shareholders. Yield quotations are computed separately for
each class of shares of the Fund. The "yield" quoted in advertisements for
Global Clearing Shares of the Fund refers to the income generated by an
investment in such shares over a specified period (such as a seven-day period)
identified in the advertisement. This income is then "annualized"; that is,
the amount of income generated by the investment during that period is assumed
to be generated each such period over a 52-week or one-year period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in Global
Clearing Shares is assumed to be reinvested. The "effective yield" will be
slightly higher than the "yield" because of the compounding effect of this
assumed reinvestment. The "tax-equivalent yield" demonstrates the level of
taxable yield necessary to produce an after tax yield equivalent to the Fund's
tax-free yield. It is calculated by increasing the yield (calculated as above)
by the amount necessary to reflect the payment of federal taxes at a stated
rate. The "tax-equivalent yield" will always be higher than the "yield."
The Fund's yields may be compared to those of other mutual funds with similar
objectives, to bond or other relevant indices, or to rankings prepared by
independent services or other financial or industry publications that monitor
the performance of mutual funds, or to the average yields reported by the Bank
Rate Monitor from money market deposit accounts offered by the 50 leading
banks and thrift institutions in the top five standard metropolitan
statistical areas. For example, such data are reported in national financial
publications such as IBC/Donoghue's Money Fund Report, Ibbotson Associates of
Chicago, The Wall Street Journal and The New York Times, reports prepared by
Lipper Analytical Service, Inc. and publications of a local or regional
nature.
The Fund's yield figures represent past performance, will fluctuate and should
not be considered as representative of future results. The yield of any
investment is generally a function of portfolio quality and maturity, type of
investment and operating expenses. The methods used to compute the yields on
each class of the Fund's shares are described in more detail in the Statement
of Additional Information. Investors may call 1-800-861-4171 to obtain current
yield information.
Additional Information
The Company was incorporated under the laws of the State of Maryland on May 5,
1993. The authorized capital stock of the Company consists of 10,000,000,000
shares having a par value of $.001 per share. The Company's Charter currently
authorizes the issuance of several series of shares, corresponding to shares
of the Fund as well as shares of the other investment portfolios of the
Company and multiple classes of shares in each series. The Company's Board of
Directors may, in the future, authorize the issuance of additional series of
capital stock representing shares of additional investment portfolios or
additional classes of shares of the Fund or the Company's other investment
portfolios.
The Company's Board of Directors has authorized the establishment of multiple
classes of shares in the Fund. This Prospectus relates only to Global Clearing
Shares, one class of shares that the Fund is authorized to issue, and the Fund
offers other classes of shares. The categories of investors that are eligible
to purchase shares may be different for each class of Fund shares. In
addition, other classes of Fund shares may be subject to differences in sales
charge arrangements, exchange privileges, ongoing distribution and service fee
levels, and levels of certain other expenses, which may affect the relative
performance of the different classes of Fund shares. Certain Fund expenses,
such as transfer agency expenses, are allocated separately to each class of
the Fund's shares based on expenses identifiable by class. Investors may call
the Company at 1-800-861-4171 to obtain additional information about other
classes of shares of the Fund that are offered.
The shares of each class of the Fund represent interests in the Fund in
proportion to their relative net asset values. All shares of the Company have
equal voting rights and will be voted in the aggregate, and not by series or
class, except where voting by series or class is required by law or where the
matter involved affects only one series or class. Under the corporate law of
Maryland, the Company's state of incorporation, and the Company's By-Laws
(except as required under the 1940 Act), the Company is not required and does
not currently intend to hold annual meetings of shareholders for the election
of directors. Shareholders, however, do have the right to call for a meeting
to consider the removal of one or more of the Company's directors if such a
request is made, in writing, by the holders of at least 10% of the Company's
outstanding voting securities.
All shares of the Company, when issued, will be fully paid and nonassessable.
The Fund sends shareholders a semi-annual and audited annual report, which
includes listings of investment securities held by the Fund at the end of the
period covered. In an effort to reduce the Fund's printing and mailing costs,
the Fund may consolidate the mailing of its semi-annual and annual reports by
household. This consolidation means that a household having multiple accounts
with the identical address of record would receive a single copy of each
report. In addition, the Fund may consolidate the mailing of its Prospectus so
that a shareholder having multiple accounts would receive a single Prospectus
annually. Any shareholder who does not want this consolidation to apply to his
or her account should contact his or her Lehman Brothers Investment
Representative or the Fund's Transfer Agent. Shareholders may direct inquiries
regarding the Fund to their Lehman Brothers Investment Representatives.
LEHMAN BROTHERS
Member SIPC
3 WORLD FINANCIAL CENTER, NEW YORK, NEW YORK 10285
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
None
Included in Part B:
None
Included in Part C:
None
(b) Exhibits:
Exhibit
Number Description
1(a)
- --
Registrant's Amended Articles of
Incorporation and Certificate of Correction
of Amended Articles of Incorporation are
incorporated by reference to Exhibit 1(a)
of Post-Effective Amendment No. 2, filed
January 14, 1994 ("Post-Effective Amendment
No. 2") to the Registrant's Registration
Statement on Form N-1A, filed May 6, 1993,
Registration Nos. 33-62312 and 811-7706
(the "Registration Statement").
1(b)
- --
Articles Supplementary to Registrant's
Articles of Incorporation dated March 15,
1994 is incorporated by reference to
Exhibit 1(b) of Post-Effective Amendment
No. 3, filed September 8, 1994 ("Post-
Effective Amendment No. 3").
1(c)
- --
Articles Supplementary to Registrant's
Articles of Incorporation, dated July 27,
1994, is incorporated by reference to
Exhibit 1(c) of Post-Effective Amendment
No. 3.
1(d)
- --
Articles Supplementary to Registrant's
Articles of Incorporation with respect to
Lehman Brothers International Bond Fund,
Lehman Brothers Global Emerging Markets
Equity Fund, Lehman Brothers Global
Emerging Markets Bond Fund, Lehman Brothers
Large Capitalization U.S. Equity Fund,
Lehman Brothers International Equity Fund,
Lehman Brothers Municipal Bond Fund, Lehman
Brothers New York Municipal Bond Fund,
Lehman Brothers High-Grade Fixed Income
Fund and Lehman Brothers New York Municipal
Money Market Fund will be filed by
amendment.
2
- --
Registrant's By-Laws are incorporated by
reference to Exhibit 2 of Pre-Effective
Amendment No. 1, filed July 22, 1993 ("Pre-
Effective Amendment No. 1") to the
Registration Statement.
3
- --
Not Applicable.
4(a)</R
>
- --
Form of Stock Certificate for shares of
Registrant's Capital Stock is incorporated
by reference to Exhibit 4 of Pre-Effective
Amendment No. 1.
4(b)
- --
Multi-Class Plan adopted by Registrant's
Board of Directors pursuant to Rule 18f-3
under the Investment Company Act of 1940,
as amended, is filed herein.
5(a)
- --
Executed Investment Advisory Agreements
between Registrant and Lehman Brothers
Global Asset Management Inc.("LBGAM Inc.")
relating to Lehman Brothers Daily Income
Fund and Lehman Brothers Municipal Income
Fund are filed herein.
5(b)
- --
Executed Investment Advisory Agreement
between Registrant and LBGAM Inc. relating
to Lehman Selected Growth Stock Portfolio
is filed herein.
5(c)
- --
Form of Investment Advisory Agreements
between Registrant and Lehman Brothers
Global Asset Management Limited ("LBGAM
Ltd.") relating to Lehman Mexican Growth
and Income Portfolio and Lehman Latin
America Dollar Income Portfolio is
incorporated by reference to Exhibit 5(c)
of Post-Effective Amendment No 2.
5(d)
- --
Form of Research Service Agreements between
Lehman Brothers Inc. and LBGAM Ltd. is
incorporated by reference to Exhibit 10 of
Post-Effective Amendment No. 2.
5(e)
- --
Form of Investment Advisory Agreements
between Registrant and LBGAM Ltd. relating
to Lehman Brothers International Bond Fund,
Lehman Brothers Global Emerging Markets
Equity Fund, Lehman Brothers Global
Emerging Markets Bond Fund, Lehman Brothers
Large Capitalization U.S. Equity Fund and
Lehman Brothers International Equity Fund
are incorporated by reference to Exhibit
5(e) of Post-Effective Amendment No. 3.
5(f)
- --
Form of Investment Advisory Agreements
between Registrant and LBGAM Inc. relating
to Lehman Brothers Municipal Bond Fund,
Lehman Brothers New York Municipal Bond
Fund and Lehman Brothers High-Grade Fixed
Income Fund are incorporated by reference
to Exhibit 5(f) of Post-Effective Amendment
No. 3.
5(g)
- --
Form of Investment Advisory Agreement
between Registrant and LBGAM Inc. relating
to Lehman Brothers New York Municipal Money
Market Fund is incorporated by reference to
Exhibit 5(g) of Post-Effective Amendment
No. 6.
6
- --
Executed Distribution Agreement between
Registrant and Lehman Brothers Inc. is
filed herein.
7
- --
Not Applicable.
8(a)
- --
Executed Custody Agreement between
Registrant and Boston Safe Deposit and
Trust Company is filed herein.
8(b)
- --
Executed Amendment to Custody Agreement
between Registrant and Boston Safe Deposit
and Trust Company is filed herein.
8(c)
- --
Executed Administration Agreement between
Registrant and The Boston Company Advisors,
Inc. as assigned to The Shareholder
Services Group, Inc. is filed herein.
9(a)
- --
Executed Transfer Agency and Registrar
Agreement between Registrant and The
Shareholder Services Group, Inc. is filed
herein.
9(b)
- --
Executed Amendment to Transfer Agency
Agreement between Registrant and The
Shareholder Services Group, Inc. is filed
herein.
9(c)
- --
Form of Amended Schedule A to Transfer
Agency and Registrar Agreement between
Registrant and The Shareholder Services
Group, Inc. is filed herein.
10
- --
Opinion and Consent of Counsel with
respect to the legality of Lehman Brothers
New York Municipal Money Market Fund shares
is filed herein.
11
- --
Consent of independent auditors will be
filed by amendment.
12
- --
Not Applicable.
13(a)
- --
Executed Share Purchase Agreement
between Registrant and Lehman Brothers Inc.
relating to Lehman Brothers Daily Income
Fund and Lehman Brothers Municipal Income
Fund is filed herein.
13(b)
- --
Form of Executed Share Purchase Agreement
between Registrant and Lehman Brothers Inc.
relating to the addition of Selected Growth
Stock Portfolio, Lehman Latin America
Dollar Income Portfolio and Lehman Mexican
Growth and Income Portfolio is incorporated
by reference to Exhibit 13(b) of Post-Effective
Amendment No. 2.
13(c)
- --
Form of Share Purchase Agreement between
Registrant and Lehman Brothers Inc.
relating to Global Clearing Shares, dated
July 21, 1994, is incorporated by reference
to Exhibit 13(c) of Post-Effective
Amendment No. 3.
13(d)
- --
Form of Share Purchase Agreement between
Registrant and Lehman Brothers Inc.
relating to Lehman Brothers International
Bond Fund, Lehman Brothers Global Emerging
Markets Equity Fund, Lehman Brothers Global
Emerging Markets Bond Fund, Lehman Brothers
Large Capitalization U.S. Equity Fund,
Lehman Brothers International Equity Fund,
Lehman Brothers Municipal Bond Fund, Lehman
Brothers New York Municipal Bond Fund and
Lehman Brothers High-Grade Fixed Income
Fund is incorporated by reference to
Exhibit 13(d) of Post-Effective Amendment
No. 3.
13(e)
- --
Form of Share Purchase Agreement between
Registrant and Lehman Brothers Inc.
relating to Lehman Brothers New York
Municipal Money Market Fund and additional
shares of Lehman Brothers Daily Income Fund
and Lehman Brothers Municipal Income Fund
is incorporated by reference to Exhibit
13(e) of Post-Effective Amendment No. 6.
14
- --
Not Applicable.
15(a)
- --
Amended and Restated Distribution Plan
relating to Lehman Brothers Daily Income
Fund, Lehman Brothers Municipal Income Fund
and Lehman Brothers New York Municipal
Money Market Fund is filed herein.
15(b)
- --
Amended and Restated Services and
Distribution Plan is filed herein.
15(c)
- --
Form of Shareholder Servicing Agreement
between Registrant and Service
Organizations relating to the Select Shares
of Lehman Brothers International Bond Fund,
Lehman Brothers Global Emerging Markets
Equity Fund, Lehman Brothers Global
Emerging Markets Bond Fund, Lehman Brothers
Large Capitalization U.S. Equity Fund,
Lehman Brothers International Equity Fund,
Lehman Brothers Municipal Bond Fund, Lehman
Brothers New York Municipal Bond Fund and
Lehman Brothers High-Grade Fixed Income
Fund is incorporated by reference to
Exhibit 15(e) of Post-Effective Amendment
No. 3.
16
- --
Not Applicable.
17
- --
Financial Data Schedules for the
Company's financial statements dated
January 31, 1995 are filed herein.
18
- --
Powers of Attorney of Mr. Dorsett, Mr.
Hatsopoulos and Ms. Holmes dated November
2, 1994 are incorporated by reference to
Exhibit 18 of Post-Effective Amendment No.
4.
Item 25. Persons Controlled by or under Common Control with
Registrant
None.
Item 26 . Number of Holders of Securities
Title of Class
Common Stock, par value
$.001 per share
Number of Holders as of September 25, 1995
FUND
Lehman Brothers Daily Income Fund 31,890
(Select Shares)
Lehman Brothers Daily Income Fund 2
(CDSC Shares)
Lehman Brothers Municipal Income Fund 3,500
(Select Shares)
Lehman Brothers Municipal Income Fund 1
(CDSC Shares)
Lehman Brothers Selected Growth Stock Portfolio 920
(CDSC Shares)
Item 27. Indemnification.
Reference is made to Articles VII and VIII of Registrant's Amended
Articles of Incorporation filed as Exhibit 1(a) to Post-Effective Amendment
No. 2 to the Registration Statement, Article V of Registrant's By-Laws filed
as Exhibit 2 to Pre-Effective Amendment No. 1, and paragraph 4 of the
Distribution Agreement filed as Exhibit 6 to Pre-Effective Amendment No. 1.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities of Act") may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant understands that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser.
Lehman Brothers Global Asset Management Inc. ("LBGAM Inc."), which
serves as investment adviser to Lehman Brothers Daily Income Fund, Lehman
Brothers Municipal Income Fund and Lehman Selected Growth Stock Portfolio, and
will serve as investment adviser to Lehman Brothers Municipal Bond Fund,
Lehman Brothers New York Municipal Bond Fund, Lehman Brothers New York
Municipal Money Market Fund and Lehman Brothers High-Grade Fixed Income Fund,
is a wholly owned subsidiary of Lehman Brothers Holdings Inc. ("Holdings").
LBGAM Inc. is an investment adviser registered under the Investment Advisers
Act of 1940 (the "Advisers Act") and serves as investment counsel for
individuals with substantial capital, executors, trustees and institutions.
It also serves as investment adviser or sub-investment adviser to several
investment companies.
The list required by this Item 28 of officers and directors of LBGAM
Inc., 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 LBGAM Inc. pursuant to the Advisers Act (SEC File
No. 801-42006).
Lehman Brothers Global Asset Management Limited ("LBGAM Ltd."), which
will serve as investment adviser to Lehman Mexican Growth and Income
Portfolio, Lehman Latin America Dollar Income Portfolio, Lehman Brothers
International Bond Fund, Lehman Brothers Global Emerging Markets Equity Fund,
Lehman Brothers Global Emerging Markets Bond Fund, Lehman Brothers Large
Capitalization U.S. Equity Fund, and Lehman Brothers International Equity
Fund, is an affiliate of Lehman Brothers and is an indirect, wholly owned
subsidiary of Holdings. LBGAM Ltd. is an investment adviser registered under
the Advisers Act and serves as investment adviser or sub-investment adviser to
several U.S. registered and offshore investment funds.
The list required by this Item 28 of officers and directors of LBGAM
Ltd., 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 LBGAM Ltd. pursuant to the Advisers Act (SEC File
No. 801-21068).
Item 29. Principal Underwriters.
(a) In addition to acting as distributor for the shares of the
Registrant's funds, Lehman Brothers Inc.("Lehman Brothers") acts as
distributor for Lehman Brothers Institutional Funds Group Trust, The Latin
American Bond Fund N.V., Mexican Short-Term Investment Portfolio N.V., The
Mexican Appreciation Fund N.V., The Mexico Premium Income Portfolio N.V., ECU
Fixed-Income Fund N.V., European Equity Investments N.V., Pacific Equity
Investments N.V., Global Bond Investments N.V., U.S. Money Market Investments
N.V., U.S. Appreciation Fund N.V., U.S. Government Securities Investments
N.V., The Asian Dragon Portfolio N.V., Offshore Diversified Strategic Income
Fund N.V., Lehman Brothers Series I Mortgage-Related Securities Portfolio
N.V., TBC Enhanced Tactical Asset Allocation Portfolio N.V., U.S. Tactical
Asset Allocation Portfolio N.V., Short-Term World Income Portfolio (Cayman),
The Global Advisors Portfolio N.V., The Global Advisors Portfolio II N.V.,
Short Duration U.S. Government Fund N.V., The Global Natural Resources Fund
N.V. and various series of unit investment trusts.
(b) Lehman Brothers is a wholly-owned subsidiary of Holdings. The
information required by this Item 29 with respect to each director, officer
and partner of Lehman Brothers is incorporated by reference to Schedule A of
Form BD filed by Lehman Brothers pursuant to the Securities Exchange Act of
1934 (SEC File No. 8-12324).
(c) Not Applicable.
Item 30. Location of Accounts and Records.
(1) Lehman Brothers Funds, Inc.
One Exchange Place
53 State Street
Boston, Massachusetts 02109
(2) Lehman Brothers Global Asset Management Inc.
3 World Financial Center
New York, New York 10285
(3) Lehman Brothers Global Asset Management Limited
Two Broadgate
London EC2M 7HA
England
(4) Boston Safe Deposit and Trust Company
One Boston Place
Boston, Massachusetts 02108
(5) The Shareholder Services Group, Inc.
One Exchange Place
53 State Street
Boston, Massachusetts 02109
Item 31. Management Services.
Not Applicable
Item 32. Undertakings.
The undersigned Registrant hereby undertakes to file a post-effective
amendment, using financial statements which need not be certified, within four
to six months from the date the Registrant commences selling shares of each of
Lehman Mexican Growth and Income Portfolio, Lehman Latin America Dollar Income
Portfolio, Lehman Brothers International Bond Fund, Lehman Brothers Global
Emerging Markets Equity Fund, Lehman Brothers Global Emerging Markets Bond
Fund, Lehman Brothers Large Capitalization U.S. Equity Fund, Lehman Brothers
International Equity Fund, Lehman Brothers Municipal Bond Fund, Lehman
Brothers New York Municipal Bond Fund, Lehman Brothers High-Grade Fixed Income
Fund and Lehman Brothers New York Municipal Money Market Fund.
The undersigned Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
The undersigned Registrant hereby undertakes to call a meeting of
shareholders for the purpose of voting upon the question of removal of one or
more of Registrant's directors when requested in writing to do so by the
holders of at least 10% of Registrant's outstanding shares of common stock
and, in connection with such meeting, to assist in communications with other
shareholders in this regard, as provided under Section 16(c) of the 1940 Act.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant has
duly caused this Post-Effective Amendment No. 8 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of New York, State of New York on the 29th day of September,
1995.
LEHMAN BROTHERS FUNDS, INC.
Registrant
By:/s/ Andrew D. Gordon
Andrew D. Gordon, President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 8 to the Registration Statement of Lehman Brothers
Funds, Inc. has been signed below by the following persons in the capacities
and on the dates indicated.
Signature Title Date
/s/ Michael Kardok Treasurer and Chief September 29, 1995
Michael Kardok Financial Officer
(Principal Financial and Accounting Officer)
* Director September 29, 1995
Burt N. Dorsett
* Director September 29, 1995
John Hatsopoulos
* Director September 29, 1995
Kathleen C. Holmes
*By: /s/ Andrew Gordon
Attorney-in-Fact
Exhibit Index
Exhibit
No. Exhibit
4(b) Multi-Class Plan adopted pursuant to Rule
18f-3 under the Investment Company Act of
1940, as amended
5(a) Executed Daily Income and Municipal Income
Investment Advisory Agreements
5(b) Executed Selected Growth Investment
Advisory Agreement
6 Executed Distribution Agreement
8(a) Executed Custody Agreement
8(b) Executed Amendment to Custody Agreement
8(c) Executed Administration Agreement
9(a) Executed Transfer Agency and Registrar
Agreement
9(b) Executed Amendment To Transfer Agency
Agreement
9(c) Form of Amended Schedule A to
Transfer Agency and Registrar
Agreement
10 Opinion and Consent of Counsel
13(a) Executed Share Purchase Agreement
15(a) Amended and Restated Distribution
Plan
15(b) Amended and Restated Services and
Distribution Plan
17 Financial Data Schedules
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Exhibit 4(b)
Lehman Brothers Funds, Inc.
Multi-Class Plan
Introduction
The purpose of this Plan is to specify the attributes of the classes of
shares offered by the various investment portfolios of Lehman Brothers Funds,
Inc. (the "Company"), including the sales loads (when applicable), expense
allocations, conversion features and exchange features of each class, as
required by Rule 18f-3 under the Investment Company Act of 1940, as amended
(the "1940 Act"). In general, shares of each class of a particular investment
portfolio have the same rights and obligations except for one or more expense
variables (which will result in different yields, dividends and, in the case
of the Company's non-money market portfolios, net asset values for the
different classes), certain related voting and other rights, exchange
privileges, conversion features, class designations and sales loads assessed
due to differing distribution methods.
The Company is an open-end series investment company registered under
the 1940 Act, the shares of which are registered on Form N-1A under the
Securities Act of 1933, as amended. On May 11, 1995, the Company elected to
offer multiple classes of shares in its investment portfolios pursuant to the
provisions of Rule 18f-3 and this Plan. This Plan does not make any material
changes to the multiple class arrangements and expense allocations previously
approved by the Board of Directors of the Company pursuant to the exemptive
order issued by the Securities and Exchange Commission to the Company under
Section 6(c) of the 1940 Act.
The Board of Directors of the Company has authorized the following
fourteen separate investment portfolios: Lehman Brothers Daily Income Fund,
Lehman Brothers Municipal Income Fund and Lehman Brothers New York Municipal
Money Market Fund (collectively, the "Money Market Funds"); Lehman Selected
Growth Stock Portfolio, Lehman Brothers International Bond Fund, Lehman
Brothers Global Emerging Markets Equity Fund, Lehman Brothers Global Emerging
Markets Bond Fund, Lehman Brothers Large Capitalization U.S. Equity Fund,
Lehman Brothers International Equity Fund, Lehman Brothers Municipal Bond
Fund, Lehman Brothers New York Municipal Bond Fund and Lehman Brothers High-
Grade Fixed Income Fund (collectively, the "Core Funds"); and Lehman Latin
America Dollar Income Portfolio and Lehman Mexican Growth and Income Portfolio
(together, the "Single Class Funds").
The above-listed investment portfolios of the Company (the "Funds") are
authorized to issue the following classes of shares representing interests in
the Funds:
(i) Money Market Funds (except Lehman Brothers New York Municipal
Money Market Fund) - Class A Shares, Class B Shares (formerly CDSC Shares),
Class C Shares, Class W Shares, Global Clearing Shares, Investment Shares,
Premier Shares and Select Shares;
(ii) Lehman Brothers New York Municipal Money Market Fund - Global
Clearing Shares and Select Shares;
(iii) Single Class Funds - CDSC Shares; and
(iv) Core Funds - Class A Shares, Class B Shares, Class C Shares, Class
W Shares, Investment Shares and Premier Shares.
Allocation of Expenses
Pursuant to Rule 18f-3 under the 1940 Act, the Company shall allocate to
each class of shares in a Fund (i) any fees and expenses incurred by the
Company in connection with the distribution of such class of shares under a
distribution plan adopted for such class of shares pursuant to Rule 12b-1, and
(ii) any fees and expenses incurred by the Company under a shareholder
servicing plan in connection with the provision of shareholder services to the
holders of such class of shares. In addition, the President and Treasurer of
the Company shall determine, subject to Board approval or ratification, which
additional fees and expenses may be appropriately allocated to a particular
class of shares in a Fund, such as (but not limited to):
(i) transfer agent fees identified by the transfer agent as being
attributable to such class of shares;
(ii) printing and postage expense related to preparing and distributing
materials such as shareholder reports, prospectuses, reports, and proxies to
current shareholders of such class of shares or to regulatory agencies with
respect to such class of shares;
(iii) blue sky registration or qualification fees incurred by such class
of shares;
(iv) Securities and Exchange Commission registration fees incurred by
such class of shares;
(v) the expense of administrative personnel and services (including,
but not limited to, those of a portfolio accountant, custodian or dividend
paying agent charged with calculating net asset values or determining or
paying dividends) as required to support the shareholders of such class of
shares;
(vi) litigation or other legal expenses relating solely to such class
of shares;
(vii) fees of the Company's Directors incurred as a result of issues
relating solely to such class of shares; and
(viii) independent accountants' fees relating solely to such class
of shares.
Any changes to the determination of class expenses allocated to a
particular class of shares will be approved by a vote of the Directors of the
Company, including a majority of the Directors who are not "interested
persons" of the Company as defined under the 1940 Act.
For purposes of this Plan, a "Daily Dividend Portfolio" shall be a Fund
which declares distributions of net investment income daily and/or maintains
the same net asset value per share in each class. Income, realized and
unrealized capital gains and losses, and any expenses of a non-Daily Dividend
Portfolio of the Company not allocated to a particular class of such Fund
pursuant to this Plan shall be allocated to each class of such Fund on the
basis of the net asset value of that class in relation to the net asset value
of the Fund. Income, realized and unrealized capital gains and losses, and
any expenses of a Daily Dividend Portfolio, including a money market fund, of
the Company not allocated to a particular class of the Fund pursuant to this
Plan shall be allocated to each class of such Fund on the basis of the
relative net assets (settled shares), as defined in Rule 18f-3, of that class
in relation to the net assets of the Fund.
Attributes of Classes of Shares
Voting Rights
All shares of the Company have equal voting rights and are voted in the
aggregate, and not by Fund or class, except where voting by the Fund or class
is required by law or where the matter involved affects one Fund or class.
Other Features of Each Class
Select Shares
Select Shares of a Fund are offered at net asset value to individual
investors without an initial sales charge or contingent deferred sales charge
("CDSC") upon redemption. Select Shares pay a distribution fee of 0.25%
(annualized) of the average daily net assets of a Fund's Select Shares to the
Fund's distributor for services it provides to the beneficial owners of such
shares. Select Shares of a Fund may be exchanged only for Select Shares of
another Fund of the Company.
Global Clearing Shares
Global Clearing Shares of a Fund are offered at net asset value to
individual investors. Global Clearing Shares of a Fund may be exchanged only
for Global Clearing Shares of another Fund of the Company or comparable shares
of Lehman Brothers Institutional Funds Group Trust.
Global Clearing Shares pay a distribution fee of up to 0.50%
(annualized) of the average daily net assets of a Fund's Global Clearing
Shares. Global Clearing Shares are available only through brokers that clear
securities transactions through Lehman Brothers on a fully disclosed basis (an
"Introducing Broker").
CDSC Shares
CDSC Shares of a Fund are offered at net asset value to individual
investors without an initial sales charge. CDSC Shares of a Fund may be
exchanged only for CDSC Shares of another Fund. CDSC Shares may pay a CDSC at
the time of redemption of shares calculated as a percentage of the redemption
proceeds imposed in accordance with the following schedule:
Year 1 Year 2 Thereafter
2% 1% 0%
CDSC Shares pay a service fee of up to 0.25% (annualized) and a
distribution fee of up to 0.75% (annualized) of the average daily net assets
of a Fund's CDSC Shares. The distribution fee payable with respect to CDSC
Shares may be used by the Fund's distributor to cover advertising, marketing
and distribution expenses intended to result in the sale of the Fund's shares,
including, without limitation, compensation for the distributor's initial
expense of paying its investment representatives or introducing brokers a
commission upon the sale of the Fund's CDSC Shares and accruals for interest
on the amount of the foregoing expenses that need the distribution fee and, if
applicable, the CDSC received by the distributor. In addition, the service
fee payable with respect to a Fund may be used by the Fund's distributor
primarily to pay its financial consultants or introducing brokers for
servicing shareholder accounts, including a continuing fee to each such
financial consultant or introducing broker, which fee shall begin to accrue
immediately after the sale of such shares. The amount of the distribution fee
and service fee payable by any Fund with respect to its CDSC Shares is not
related directly to expenses incurred by the Fund's distributor and a Fund is
not obligated to reimburse the distributor for such expenses.
Class A Shares
Class A Shares of a Fund are offered at net asset value to individual
investors, plus an initial sales charge imposed in accordance with the
following schedule:
Amount of Investment
Sales Charge as %
of Offering Price
Less than $100,000
4.75%
$100,000 but under $250,000
3.50%
$250,000 but under $500,000
2.50%
$500,000 but under $1,000,000
2.00%
$1,000,000 or more
0.00%
Class A Shares of a Fund may be exchanged only for Class A Shares of
another Fund of the Company.
Purchasers who invest more than $1,000,000 in Class A Shares will not
pay a front-end sales load, but a CDSC of 0.75% will be imposed on redemptions
of such shares during the first year after purchase.
Class A Shares pay a service fee of up to 0.25% (annualized) of the
average daily net assets of the Fund's Class A Shares to the Fund's
distributor who uses the service fees to pay its Investment Representatives or
Introducing Brokers for servicing shareholder accounts.
Class B Shares
Class B Shares of a Fund are offered at net asset value to individual
investors without an initial sales charge. Class B Shares of a Fund may be
exchanged only for Class B Shares of another Fund. Class B Shares may pay a
CDSC at the time of redemption of shares calculated as a percentage of the
redemption proceeds imposed in accordance with the following schedule:
Year 1 Year 2 Year 3 Year 4
Year 5 Thereafter
4.75% 4.0% 3.0% 2.0% 1.0% 0.0%
Class B Shares of a Fund will automatically convert to Class A Shares of
the Fund on the first business day of the month in which the eighth
anniversary of the issuance of the Class B Shares occurs. The conversion will
be effected at the relative net asset value per share of the two classes.
Class B Shares pay a service fee of up to 0.25% (annualized) and a
distribution fee of up to 0.75% (annualized) of the average daily net assets
of a Fund's Class B Shares. The service fee payable with respect to Class B
Shares of a Fund is used by the Fund's distributor to pay its Investment
Representatives or Introducing Brokers for servicing shareholder accounts.
The distribution fee payable with respect to Class B Shares of a Fund may be
used by the Fund's distributor to cover advertising, marketing and
distribution expenses intended to result in the sale of the Fund's Class B
Shares including, without limitation, compensation for the distributor's
initial expense of paying its investment representatives or introducing
brokers a commission upon the sale of the Fund's Class B Shares and accruals
for interest on the amount of the foregoing expenses that exceed the
distribution fee and, if applicable, the CDSC received by the distributor. In
addition, the service fee payable with respect to a Fund's Class B Shares may
be used by the Fund's distributor primarily to pay its financial consultants
or introducing brokers for servicing shareholder accounts, including a
continuing fee to each such financial consultant or introducing broker, which
fee shall begin to accrue immediately after the sale of such shares. The
amount of the distribution fee and service fee payable by any Fund with
respect to its Class B Shares is not related directly to expenses incurred by
the distributor and a Fund is not obligated to reimburse the distributor for
such expenses.
Class C Shares
Class C Shares of a Fund are offered without an initial sale charge and
are subject to no CDSC upon redemption. Class C Shares of a Fund may be
exchanged only for Class C Shares of another Fund.
Class C Shares pay a service fee of up to 0.25% (annualized) and a
distribution fee of up to 0.75% (annualized) of the average daily net assets
of a Fund's Class C Shares. The service fee payable with respect to Class C
Shares of a Fund is used by the Fund's distributor to pay its Investment
Representatives or Introducing Brokers for servicing shareholder accounts.
The distribution fee payable with respect to Class C Shares of a Fund may be
used by the Fund's distributor to cover advertising, marketing and
distribution expenses intended to result in the sale of the Fund's Class C
Shares including, without limitation, compensation for the distributor's
initial expense of paying its investment representatives or introducing
brokers a commission upon the sale of the Fund's Class C Shares and accruals
for interest on the amount of the foregoing expenses that exceed the
distribution fee and, if applicable, the CDSC received by the distributor. In
addition, the service fee payable with respect to a Fund's Class C Shares may
be used by the Fund's distributor primarily to pay its financial consultants
or introducing brokers for servicing shareholder accounts, including a
continuing fee to each such financial consultant or introducing broker, which
fee shall begin to accrue immediately after the sale of such shares. The
amount of the distribution fee and service fee payable by any Fund with
respect to its Class C Shares is not related directly to expenses incurred by
the distributor and a Fund is not obligated to reimburse the distributor for
such expenses.
Class W Shares
Class W Shares of a Fund are offered at net asset value to individual
investors, are subject to no initial sales charge or CDSC and bear no service
or distribution fees. Class W Shares are only available to participants in
the proposed Lehman Brothers WRAP Program ("WRAP"), an investment advisory
service that will directly provide to investors asset allocation
recommendations in certain Lehman Brothers funds based on an evaluation of an
investor's investment objectives and risk tolerances, and other similar
programs. Class W shares of the Fund are also available for purchase by
certain registered investment advisers as a means of implementing asset
allocation recommendations based on an investor's investment objectives and
risk tolerances. In order to qualify to purchase Class W shares on behalf of
its clients the investment adviser must be approved by Lehman Brothers Inc.
Investors purchasing shares through investment advisory programs other than
WRAP will bear different fees for different levels of services as agreed upon
with the investment advisors offering the programs. Investors in Class W
Shares through WRAP pay fees based upon the aggregate value of their
investments in participating mutual funds. The maximum annual wrap fee is
1.50% of the value of the shares of the mutual funds held in WRAP on the last
calendar day of the previous quarter.
Investment Shares
Investment Shares of a Fund are offered at net asset value to
institutional investors without an initial sales charge or CDSC upon
redemption. Investment Shares of a Fund may be exchanged only for Investment
Shares of another Fund of the Company.
Investment Shares pay a service fee of up to 0.25% (annualized) of the
average daily net assets of a Fund's Investment Shares. The Fund's
distributor may retain all of the service fee paid to it or may enter into
agreements with, and make payments of all or a portion of the service fees to,
investors such as banks, savings and loan organizations and other financial
institutions ("Service Organizations") for the provision of services to
shareholders. Service Organizations may maintain Investment shareholder
accounts and provide personal services to Investment shareholders. Services
relating to the sale of Investment Shares may include, but are not limited to:
(i) aggregating and processing purchase and redemption requests for Investment
Shares from clients and placing net purchase and redemption orders with the
distributor of the Investment Shares; (ii) processing dividend payments from
the Fund on behalf of clients; (iii) providing information periodically to
clients showing their positions in Investment Shares; (iv) arranging for bank
wires; (v) responding to Client inquiries relating to the services performed
by the Service Organization and handling correspondence; (vi) forwarding
shareholder communications from the Fund (such as proxies, shareholder
reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to clients; (vii) acting as shareholder of
record and nominee; and (viii) providing such other similar services as the
Fund may reasonably request to the extent the Service Organization is
permitted to do so under applicable statutes, rules or regulations. The
Service Organization, at its option, may also (ix) provide clients with a
service that invests the assets of their accounts in Investment Shares
pursuant to specific or pre-authorized instructions; (x) provide sub-
accounting with respect to Investment Shares beneficially owned by clients or
the information necessary for sub-accounting; and (xi) provide checkwriting
services. In addition, Service Organization shall provide assistance in
connection with the distribution of Investment Shares to clients, which shall
include marketing assistance and the forwarding of sales literature and
advertising provided by the distributor of the Investment Shares for clients
to the extent the Service Organization is permitted to do so under applicable
statutes, rules or regulations. The Service Organization will provide such
office space and equipment, telephone facilities and personnel (which may be
any part of the space, equipment and facilities currently used in its
business, or any personnel employed by it) as may be reasonably necessary or
beneficial in order to provide the aforementioned services and assistance.
Premier Shares
Premier Shares of a Fund are offered at net asset value to institutional
investors and are subject to no initial sales charge or CDSC and bear no
service or distribution fees. Premier Shares of a Fund may be exchanged only
for Premier Shares of another Fund.
Amendments
No material amendment to this Plan may be made unless it is first
approved by a majority of both (a) the full Board of Directors of the Company
and (b) those Directors of the Company who are not "interested persons" of the
Company as defined under the 1940 Act.
Exhibit 5(a)
LEHMAN BROTHERS FUNDS, INC.
Lehman Brothers Daily Income Fund
INVESTMENT ADVISORY AGREEMENT
August 2, 1993
Lehman Brothers Global Asset Management Inc.
New York, NY 10285
Ladies and Gentlemen:
Lehman Brothers Funds, Inc. (the "Company"), a corporation
organized under the laws of the State of Maryland, confirms its agreement with
Lehman Brothers Global Asset Management Inc. (the "Advisor") regarding
investment advisory services to be provided by the Advisor to Lehman Brothers
Daily Income Fund (the "Fund"), a portfolio of the Company. The Advisor
agrees to provide services upon the following terms and conditions:
1. Investment Description; Appointment.
The Company anticipates that the Fund will employ its capital by
investing and reinvesting in investments of the kind and in accordance with
the limitations specified in the Company's Articles of Incorporation dated May
5, 1993, as amended from time to time (the "Articles of Incorporation "), in
the prospectus (the "Prospectus") and the statement of additional information
(the "Statement") describing the Fund filed with the Securities and Exchange
Commission as part of the Company's Registration Statement on Form N-1A, as
amended from time to time, and in the manner and to the extent as may from
time to time be approved by the Board of Directors of the Company. Copies of
the Prospectus, the Statement and the Articles of Incorporation have been or
will be submitted to the Advisor. The Company desires to employ and appoints
the Advisor to act as the Fund's investment adviser. The Advisor accepts the
appointment and agrees to furnish the services for the compensation set forth
below.
2. Services as Investment Advisor.
Subject to the supervision and direction of the Board of Directors
of the Company, the Advisor has general responsibility for the investment
advisory services provided to the Fund and will exercise this responsibility
in accordance with the Articles of Incorporation, the Investment Company Act
of 1940 and the Investment Advisers Act of 1940, as the same may from time to
time be amended, and with the Fund's investment objective and policies as
stated in the Prospectus and Statement relating to the Fund as from time to
time in effect. In connection therewith, the Advisor will, among other
things, (a) manage the Fund's portfolio in accordance with the Fund's
investment objective and policies as stated in the Prospectus and the
Statement; (b) make investment decisions for the Fund; (c) place orders to
purchase and sell securities on behalf of the Fund; (d) employ professional
portfolio managers and securities analysts who provide research services to
the Fund; (e) participate in the formulation of the Fund's investment
policies; (f) analyze economic trends affecting the Fund; and (g) monitor the
brokerage and research services (as those terms are defined in Section 28(e)
of the Securities Act of 1934) that are provided to the Fund and may be
considered in selecting brokers or dealers to execute particular transactions.
In providing those services, the Advisor will conduct a continual program of
investment, evaluation and, if appropriate, sale and reinvestment of the
Fund's assets. In addition, the Advisor will furnish the Fund with whatever
statistical information the Fund may reasonably request with respect to the
instruments that the Fund may hold or contemplate purchasing.
3. Information Provided to the Company.
The Advisor will keep the Company informed of developments
materially affecting the Fund, and will, on its own initiative, furnish the
Company from time to time with whatever information the Advisor believes is
appropriate for this purpose.
4. Standard of Care.
The Advisor will exercise its best judgment in rendering the
services described in paragraph 2 of this Agreement. The Advisor will not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which this Agreement relates,
except that nothing in this Agreement may be deemed to protect or purport to
protect the Advisor against any liability to the Company or to shareholders of
the Fund to which the Advisor would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of
its duties or by reason of the Advisor's reckless disregard of its obligations
and duties under this Agreement.
5. Compensation.
In consideration of the services rendered pursuant to this
Agreement, the Company will pay the Advisor on the first business day of each
month a fee for the previous month at the annual rate of .30% of the value of
the Fund's average daily net assets. The fee for the period from the date the
Fund commences its investment operations to the end of the month during which
the Fund commences its investment operations will be prorated according to the
proportion that the period bears to the full monthly period. Upon any
termination of this Agreement before the end of a month, the fee for such part
of that month will be prorated according to the proportion that the period
bears to the full monthly period and will be payable upon the date of
termination of this Agreement. For the purpose of determining fees payable to
the Advisor, the value of the Fund's net assets will be computed at the times
and in the manner specified in the Prospectus and/or the Statement.
6. Expenses.
The Advisor will bear all expenses in connection with the
performance of its services under this Agreement. The Company will be
responsible for all of the Fund's other expenses and liabilities, including
but not limited to: costs incurred in connection with the Company's
organization; investment advisory, sub-investment advisory and administration
fees; fees for necessary professional and brokerage services; fees for any
pricing service; the costs of regulatory compliance; the costs associated with
maintaining the Company's legal existence; and the costs of corresponding with
shareholders of the Fund.
7. Reduction of Fee.
If in any fiscal year of the Fund, the aggregate expenses of the
Fund (including fees pursuant to this Agreement, but excluding interest,
taxes, brokerage fees and, if permitted by the relevant state securities
commissions, extraordinary expenses or other expenses) exceed the expense
limitation of any state having jurisdiction over the Fund, the Advisor will
reduce its fee to the Fund for that excess expense, to the extent required by
state law. A fee reduction pursuant to this paragraph 7, if any, will be
estimated, reconciled and paid on a monthly basis.
8. Services to Other Companies or Accounts.
(a) The Company understands that the Advisor now acts, will
continue to act and may act in the future as investment adviser to fiduciary
and other managed accounts, and may act in the future as investment adviser to
other investment companies, and the Company has no objection to the Advisor so
acting, provided that whenever the Fund and one or more fiduciary and other
managed accounts or other investment companies advised by the Advisor have
available funds for investment, investments suitable and appropriate for each
will be allocated in accordance with a formula believed by the Advisor to be
equitable to each. The Company recognizes that in some cases this procedure
may adversely affect the price paid or received by the Fund or the size of the
position obtained or disposed of by the Fund.
(b) The Company understands that the persons employed by the
Advisor to assist in the performance of the Advisor's duties under this
Agreement will not devote their full time to such service and nothing
contained in this Agreement will be deemed to limit or restrict the right of
the Advisor or any affiliate of the Advisor to engage in and devote time and
attention to other businesses or to render services of whatever kind or
nature.
9. Term of Agreement.
(a) This Agreement will become effective as of the date the Fund
commences its investment operations and will continue for an initial two-year
term and will continue thereafter so long as the continuance is specifically
approved at least annually by (i) the Board of Directors of the Company or
(ii) a vote of a "majority" (as defined in the Investment Company Act of 1940,
as amended (the "1940 Act")) of the Fund's outstanding voting securities,
provided that in either event the continuance is also approved by a majority
of the Directors who are not "interested persons" (as defined in the 1940 Act)
of any party to this Agreement, by vote cast in person at a meeting called for
the purpose of voting on the approval.
(b) This Agreement is terminable, without penalty, on 60 days'
written notice, by the Board of Directors of the Company or by vote of holders
of a majority of the Fund's outstanding voting securities, or upon 60 days'
written notice, by the Advisor.
(c) This Agreement will terminate automatically in the event of
its "assignment" (as defined in the 1940 Act).
10. Representation by the Company.
The Company represents that a copy of the Articles of
Incorporation are on file with the Secretary of the State of Maryland.
11. Limitation of Liability.
The execution and delivery of this Agreement have been authorized
by the Board of Directors of the Company. No series of the Company, including
the Fund, will be liable for any claims against any other series.
12. Governing Law.
This agreement shall be governed by, and construed and interpreted
in accordance with, the laws of the State of New York.
13. Other.
Upon expiration or earlier termination of this Agreement, the
Company shall, if reference to "Lehman" is made in the corporate name of the
Company or in the name of the Fund and if the Advisor requests in writing, as
promptly as practicable change its corporate name and the name of the Fund so
as to eliminate all reference to "Lehman", and thereafter the Company and the
Fund shall cease transacting business in any corporate name using the word
"Lehman" or containing any other reference to the Advisor or "Lehman." The
foregoing rights of the Advisor and the obligations of the Company shall not
deprive the Advisor, or any affiliate thereof which has "Lehman" in its name,
of, but shall be in addition to, any other rights or remedies to which the
Advisor and any such affiliate may be entitled in law or equity by reason of
any breach of this Agreement by the Company, and the failure and omission of
the Advisor to request a change of the Company's or the Fund's name or a
cessation of the use of the name of "Lehman" as described in this paragraph 10
shall not under any circumstances be deemed a waiver of the right to require
such change or cessation at any time thereafter for the same or any subsequent
breach.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the
enclosed copy of this Agreement.
Very truly yours,
LEHMAN BROTHERS FUNDS, INC.
By:/s/ Deepak Chowdhury
Name: Deepak Chowdhury
Title: President
Accepted:
LEHMAN BROTHERS GLOBAL
ASSET MANAGEMENT INC.
By: /s/ Steven Spiegel
Authorized Signatory
SHARED\GLOBAL\LEHMBROS\AGRMTS\INVADVIS\DLYINCOM.DOC
LEHMAN BROTHERS FUNDS, INC.
Lehman Brothers Municipal Income Fund
INVESTMENT ADVISORY AGREEMENT
August 2, 1993
Lehman Brothers Global Asset Management Inc.
New York, NY 10285
Ladies and Gentlemen:
Lehman Brothers Funds, Inc. (the "Company"), a corporation
organized under the laws of the State of Maryland, confirms its agreement with
Lehman Brothers Global Asset Management Inc. (the "Advisor") regarding
investment advisory services to be provided by the Advisor to Lehman Brothers
Municipal Income Fund (the "Fund"), a portfolio of the Company. The Advisor
agrees to provide services upon the following terms and conditions:
1. Investment Description; Appointment.
The Company anticipates that the Fund will employ its capital by
investing and reinvesting in investments of the kind and in accordance with
the limitations specified in the Company's Articles of Incorporation dated May
5, 1993, as amended from time to time (the "Articles of Incorporation "), in
the prospectus (the "Prospectus") and the statement of additional information
(the "Statement") describing the Fund filed with the Securities and Exchange
Commission as part of the Company's Registration Statement on Form N-1A, as
amended from time to time, and in the manner and to the extent as may from
time to time be approved by the Board of Directors of the Company. Copies of
the Prospectus, the Statement and the Articles of Incorporation have been or
will be submitted to the Advisor. The Company desires to employ and appoints
the Advisor to act as the Fund's investment adviser. The Advisor accepts the
appointment and agrees to furnish the services for the compensation set forth
below.
2. Services as Investment Advisor.
Subject to the supervision and direction of the Board of Directors
of the Company, the Advisor has general responsibility for the investment
advisory services provided to the Fund and will exercise this responsibility
in accordance with the Articles of Incorporation, the Investment Company Act
of 1940 and the Investment Advisers Act of 1940, as the same may from time to
time be amended, and with the Fund's investment objective and policies as
stated in the Prospectus and Statement relating to the Fund as from time to
time in effect. In connection therewith, the Advisor will, among other
things, (a) manage the Fund's portfolio in accordance with the Fund's
investment objective and policies as stated in the Prospectus and the
Statement; (b) make investment decisions for the Fund; (c) place orders to
purchase and sell securities on behalf of the Fund; (d) employ professional
portfolio managers and securities analysts who provide research services to
the Fund; (e) participate in the formulation of the Fund's investment
policies; (f) analyze economic trends affecting the Fund; and (g) monitor the
brokerage and research services (as those terms are defined in Section 28(e)
of the Securities Act of 1934) that are provided to the Fund and may be
considered in selecting brokers or dealers to execute particular transactions.
In providing those services, the Advisor will conduct a continual program of
investment, evaluation and, if appropriate, sale and reinvestment of the
Fund's assets. In addition, the Advisor will furnish the Fund with whatever
statistical information the Fund may reasonably request with respect to the
instruments that the Fund may hold or contemplate purchasing.
3. Information Provided to the Company.
The Advisor will keep the Company informed of developments
materially affecting the Fund, and will, on its own initiative, furnish the
Company from time to time with whatever information the Advisor believes is
appropriate for this purpose.
4. Standard of Care.
The Advisor will exercise its best judgment in rendering the
services described in paragraph 2 of this Agreement. The Advisor will not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which this Agreement relates,
except that nothing in this Agreement may be deemed to protect or purport to
protect the Advisor against any liability to the Company or to shareholders of
the Fund to which the Advisor would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of
its duties or by reason of the Advisor's reckless disregard of its obligations
and duties under this Agreement.
5. Compensation.
In consideration of the services rendered pursuant to this
Agreement, the Company will pay the Advisor on the first business day of each
month a fee for the previous month at the annual rate of .30% of the value of
the Fund's average daily net assets. The fee for the period from the date the
Fund commences its investment operations to the end of the month during which
the Fund commences its investment operations will be prorated according to the
proportion that the period bears to the full monthly period. Upon any
termination of this Agreement before the end of a month, the fee for such part
of that month will be prorated according to the proportion that the period
bears to the full monthly period and will be payable upon the date of
termination of this Agreement. For the purpose of determining fees payable to
the Advisor, the value of the Fund's net assets will be computed at the times
and in the manner specified in the Prospectus and/or the Statement.
6. Expenses.
The Advisor will bear all expenses in connection with the
performance of its services under this Agreement. The Company will be
responsible for all of the Fund's other expenses and liabilities, including
but not limited to: costs incurred in connection with the Company's
organization; investment advisory, sub-investment advisory and administration
fees; fees for necessary professional and brokerage services; fees for any
pricing service; the costs of regulatory compliance; the costs associated with
maintaining the Company's legal existence; and the costs of corresponding with
shareholders of the Fund.
7. Reduction of Fee.
If in any fiscal year of the Fund, the aggregate expenses of the
Fund (including fees pursuant to this Agreement, but excluding interest,
taxes, brokerage fees and, if permitted by the relevant state securities
commissions, extraordinary expenses or other expenses) exceed the expense
limitation of any state having jurisdiction over the Fund, the Advisor will
reduce its fee to the Fund for that excess expense, to the extent required by
state law. A fee reduction pursuant to this paragraph 7, if any, will be
estimated, reconciled and paid on a monthly basis.
8. Services to Other Companies or Accounts.
(a) The Company understands that the Advisor now acts, will
continue to act and may act in the future as investment adviser to fiduciary
and other managed accounts, and may act in the future as investment adviser to
other investment companies, and the Company has no objection to the Advisor so
acting, provided that whenever the Fund and one or more fiduciary and other
managed accounts or other investment companies advised by the Advisor have
available funds for investment, investments suitable and appropriate for each
will be allocated in accordance with a formula believed by the Advisor to be
equitable to each. The Company recognizes that in some cases this procedure
may adversely affect the price paid or received by the Fund or the size of the
position obtained or disposed of by the Fund.
(b) The Company understands that the persons employed by the
Advisor to assist in the performance of the Advisor's duties under this
Agreement will not devote their full time to such service and nothing
contained in this Agreement will be deemed to limit or restrict the right of
the Advisor or any affiliate of the Advisor to engage in and devote time and
attention to other businesses or to render services of whatever kind or
nature.
9. Term of Agreement.
(a) This Agreement will become effective as of the date the Fund
commences its investment operations and will continue for an initial two-year
term and will continue thereafter so long as the continuance is specifically
approved at least annually by (i) the Board of Directors of the Company or
(ii) a vote of a "majority" (as defined in the Investment Company Act of 1940,
as amended (the "1940 Act")) of the Fund's outstanding voting securities,
provided that in either event the continuance is also approved by a majority
of the Directors who are not "interested persons" (as defined in the 1940 Act)
of any party to this Agreement, by vote cast in person at a meeting called for
the purpose of voting on the approval.
(b) This Agreement is terminable, without penalty, on 60 days'
written notice, by the Board of Directors of the Company or by vote of holders
of a majority of the Fund's outstanding voting securities, or upon 60 days'
written notice, by the Advisor.
(c) This Agreement will terminate automatically in the event of
its "assignment" (as defined in the 1940 Act).
10. Representation by the Company.
The Company represents that a copy of the Articles of
Incorporation are on file with the Secretary of the State of Maryland.
11. Limitation of Liability.
The execution and delivery of this Agreement have been authorized
by the Board of Directors of the Company. No series of the Company, including
the Fund, will be liable for any claims against any other series.
12. Governing Law.
This agreement shall be governed by, and construed and interpreted
in accordance with, the law of the State of New York.
13. Other.
Upon expiration or earlier termination of this Agreement, the
Company shall, if reference to "Lehman" is made in the corporate name of the
Company or in the name of the Fund and if the Advisor requests in writing, as
promptly as practicable change its corporate name and the name of the Fund so
as to eliminate all reference to "Lehman", thereafter the Company and the Fund
shall cease transacting business in any corporate name using the word "Lehman"
or any other reference to the Advisor or "Lehman." The foregoing rights of
the Advisor and the obligations of the Company shall not deprive the Advisor,
or any affiliate thereof which has "Lehman" in its name, of, but shall be in
addition to, any other rights or remedies to which the Advisor and any such
affiliate may be entitled in law or equity by reason of any breach of this
Agreement by the Company, and the failure and omission of the Advisor to
request a change of the Company's or the Fund's names or a cessation of the
use of the name of "Lehman" as described in this paragraph 10 shall not under
any circumstances be deemed a waiver of the right to require such change or
cessation at any time thereafter for the same or any subsequent breach.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the
enclosed copy of this Agreement.
Very truly yours,
LEHMAN BROTHERS FUNDS, INC.
By:/s/ Deepak Chowdhury
Name: Deepak Chowdhury
Title: President
Accepted:
LEHMAN BROTHERS GLOBAL
ASSET MANAGEMENT INC.
By:/s/ Steven Spiegel
Authorized Signatory
SHARED\GLOBAL\LEHMBROS\AGRMTS\INVADVIS\MUNIICO.DOC
Exhibit 5(b)
LEHMAN BROTHERS FUNDS, INC.
Lehman Selected Growth Stock Portfolio
INVESTMENT ADVISORY AGREEMENT
January 27, 1994
Lehman Brothers Global Asset Management Inc.
3 World Financial Center
New York, NY 10285
Ladies and Gentlemen:
Lehman Brothers Funds, Inc. (the "Company"), a corporation
organized under the laws of the State of Maryland, confirms its agreement with
Lehman Brothers Global Asset Management Inc. (the "Advisor") regarding
investment advisory services to be provided by the Advisor to Lehman Brothers
Selected Growth Stock Portfolio (the "Fund"), a portfolio of the Company. The
Advisor agrees to provide services upon the following terms and conditions:
1. Investment Description; Appointment.
The Company anticipates that the Fund will employ its capital by
investing and reinvesting in investments of the kind and in accordance with
the limitations specified in the Company's Articles of Incorporation dated May
5, 1993, as amended from time to time (the "Articles of Incorporation "), in
the prospectus (the "Prospectus") and the statement of additional information
(the "Statement") describing the Fund filed with the Securities and Exchange
Commission as part of the Company's Registration Statement on Form N-1A, as
amended from time to time, and in the manner and to the extent as may from
time to time be approved by the Board of Directors of the Company. Copies of
the Prospectus, the Statement and the Articles of Incorporation have been or
will be submitted to the Advisor. The Company desires to employ and appoints
the Advisor to act as the Fund's investment adviser. The Advisor accepts the
appointment and agrees to furnish the services for the compensation set forth
below.
2. Services as Investment Advisor.
Subject to the supervision and direction of the Board of Directors
of the Company, the Advisor has general responsibility for the investment
advisory services provided to the Fund and will exercise this responsibility
in accordance with the Articles of Incorporation, the Investment Company Act
of 1940 and the Investment Advisers Act of 1940, as the same may from time to
time be amended, and with the Fund's investment objective and policies as
stated in the Prospectus and Statement relating to the Fund as from time to
time in effect. In connection therewith, the Advisor will, among other
things, (a) manage the Fund's portfolio in accordance with the Fund's
investment objective and policies as stated in the Prospectus and the
Statement; (b) make investment decisions for the Fund; (c) place orders to
purchase and sell securities on behalf of the Fund; (d) employ professional
portfolio managers and securities analysts who provide research services to
the Fund; (e) participate in the formulation of the Fund's investment
policies; (f) analyze economic trends affecting the Fund; and (g) monitor the
brokerage and research services (as those terms are defined in Section 28(e)
of the Securities Act of 1934) that are provided to the Fund and may be
considered in selecting brokers or dealers to execute particular transactions.
In providing those services, the Advisor will conduct a continual program of
investment, evaluation and, if appropriate, sale and reinvestment of the
Fund's assets. In addition, the Advisor will furnish the Fund with whatever
statistical information the Fund may reasonably request with respect to the
instruments that the Fund may hold or contemplate purchasing.
3. Information Provided to the Company.
The Advisor will keep the Company informed of developments
materially affecting the Fund, and will, on its own initiative, furnish the
Company from time to time with whatever information the Advisor believes is
appropriate for this purpose.
4. Standard of Care.
The Advisor will exercise its best judgment in rendering the
services described in paragraph 2 of this Agreement. The Advisor will not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which this Agreement relates,
except that nothing in this Agreement may be deemed to protect or purport to
protect the Advisor against any liability to the Company or to shareholders of
the Fund to which the Advisor would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of
its duties or by reason of the Advisor's reckless disregard of its obligations
and duties under this Agreement.
5. Compensation.
In consideration of the services rendered pursuant to this
Agreement, the Company will pay the Advisor on the first business day of each
month a fee for the previous month at the annual rate of 0.75% of the value of
the Fund's average daily net assets. The fee for the period from the date the
Fund commences its investment operations to the end of the month during which
the Fund commences its investment operations will be prorated according to the
proportion that the period bears to the full monthly period. Upon any
termination of this Agreement before the end of a month, the fee for such part
of that month will be prorated according to the proportion that the period
bears to the full monthly period and will be payable upon the date of
termination of this Agreement. For the purpose of determining fees payable to
the Advisor, the value of the Fund's net assets will be computed at the times
and in the manner specified in the Prospectus and/or the Statement.
6. Expenses.
The Advisor will bear all expenses in connection with the
performance of its services under this Agreement. The Company will be
responsible for all of the Fund's other expenses and liabilities, including
but not limited to: costs incurred in connection with the Company's
organization; investment advisory, sub-investment advisory and administration
fees; fees for necessary professional and brokerage services; fees for any
pricing service; the costs of regulatory compliance; the costs associated with
maintaining the Company's legal existence; and the costs of corresponding with
shareholders of the Fund.
7. Reduction of Fee.
If in any fiscal year of the Fund, the aggregate expenses of the
Fund (including fees pursuant to this Agreement, but excluding interest,
taxes, brokerage fees and, if permitted by the relevant state securities
commissions, extraordinary expenses or other expenses) exceed the expense
limitation of any state having jurisdiction over the Fund, the Advisor will
reduce its fee to the Fund for that excess expense, to the extent required by
state law. A fee reduction pursuant to this paragraph 7, if any, will be
estimated, reconciled and paid on a monthly basis.
8. Services to Other Companies or Accounts.
(a) The Company understands that the Advisor now acts, will
continue to act and may act in the future as investment adviser to fiduciary
and other managed accounts, and may act in the future as investment adviser to
other investment companies, and the Company has no objection to the Advisor so
acting, provided that whenever the Fund and one or more fiduciary and other
managed accounts or other investment companies advised by the Advisor have
available funds for investment, investments suitable and appropriate for each
will be allocated in accordance with a formula believed by the Advisor to be
equitable to each. The Company recognizes that in some cases this procedure
may adversely affect the price paid or received by the Fund or the size of the
position obtained or disposed of by the Fund.
(b) The Company understands that the persons employed by the
Advisor to assist in the performance of the Advisor's duties under this
Agreement will not devote their full time to such service and nothing
contained in this Agreement will be deemed to limit or restrict the right of
the Advisor or any affiliate of the Advisor to engage in and devote time and
attention to other businesses or to render services of whatever kind or
nature.
9. Term of Agreement.
(a) This Agreement will become effective as of the date the Fund
commences its investment operations and will continue for an initial two-year
term and will continue thereafter so long as the continuance is specifically
approved at least annually by (i) the Board of Directors of the Company or
(ii) a vote of a "majority" (as defined in the Investment Company Act of 1940,
as amended (the "1940 Act")) of the Fund's outstanding voting securities,
provided that in either event the continuance is also approved by a majority
of the Directors who are not "interested persons" (as defined in the 1940 Act)
of any party to this Agreement, by vote cast in person at a meeting called for
the purpose of voting on the approval.
(b) This Agreement is terminable, without penalty, on 60 days'
written notice, by the Board of Directors of the Company or by vote of holders
of a majority of the Fund's outstanding voting securities, or upon 60 days'
written notice, by the Advisor.
(c) This Agreement will terminate automatically in the event of
its "assignment" (as defined in the 1940 Act).
10. Representation by the Company.
The Company represents that a copy of the Articles of
Incorporation are on file with the Secretary of the State of Maryland.
11. Limitation of Liability.
The execution and delivery of this Agreement have been authorized
by the Board of Directors of the Company. No series of the Company, including
the Fund, will be liable for any claims against any other series.
12. Governing Law.
This agreement shall be governed by, and construed and interpreted
in accordance with, the laws of the State of New York.
13. Other.
Upon expiration or earlier termination of this Agreement, the
Company shall, if reference to "Lehman" is made in the corporate name of the
Company or in the name of the Fund and if the Advisor requests in writing, as
promptly as practicable change its corporate name and the name of the Fund so
as to eliminate all reference to "Lehman", and thereafter the Company and the
Fund shall cease transacting business in any corporate name using the word
"Lehman" or containing any other reference to the Advisor or "Lehman." The
foregoing rights of the Advisor and the obligations of the Company shall not
deprive the Advisor, or any affiliate thereof which has "Lehman" in its name,
of, but shall be in addition to, any other rights or remedies to which the
Advisor and any such affiliate may be entitled in law or equity by reason of
any breach of this Agreement by the Company, and the failure and omission of
the Advisor to request a change of the Company's or the Fund's name or a
cessation of the use of the name of "Lehman" as described in this paragraph 10
shall not under any circumstances be deemed a waiver of the right to require
such change or cessation at any time thereafter for the same or any subsequent
breach.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the
enclosed copy of this Agreement.
Very truly yours,
LEHMAN BROTHERS FUNDS, INC.
By:/s/ Clinton J. Kendrick
Name: Clinton Kendrick
Title: Chairman of the Board
Accepted:
LEHMAN BROTHERS GLOBAL
ASSET MANAGEMENT INC.
By:/s/ Andrew Gordon
Name: Andrew Gordon
Title: Managing Director
G:\SHARED\LEHMAN\RETAIL\AGRMTS\INVADVIS\SELGROW.DOC 5
G:\SHARED\LEHMAN\RETAIL\AGRMTS\INVADVIS\SELGROW.DOC
Exhibit 6
LEHMAN BROTHERS FUNDS, INC.
DISTRIBUTION AGREEMENT
August 2, 1993
Lehman Brothers Incorporated
American Express Tower
World Financial Center
New York, New York 10285
Ladies and Gentlemen:
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, Lehman Brothers Funds, Inc. (the "Company"), a
Maryland corporation organized under the laws of the State of Maryland, has
agreed that Lehman Brothers Incorporated ("Lehman Brothers") will be, for the
period of this Agreement, a distributor of shares of common stock (the
"Shares") of each investment fund currently offered by the Company or to be
offered in the future (individually, a "Fund" and collectively, the "Funds").
1. Services as Distributor.
1.1 Lehman Brothers will act as agent for the distribution of Shares
covered by the Company's registration statement, prospectuses and statements
of additional information then in effect (the "Registration Statement") under
the Securities Act of 1933, as amended (the "1933 Act"), and the Investment
Company Act of 1940, as amended (the "1940 Act").
1.2 Lehman Brothers agrees to use its best efforts to solicit orders
for the sale of Shares at the public offering price, as determined in
accordance with the Registration Statement, and will undertake such
advertising and promotion as it believes is reasonable in connection with such
solicitation. Lehman Brothers shall not be obligated to sell any certain
number of Shares.
1.3 All activities by Lehman Brothers as distributor of the Shares
will comply with all applicable laws, rules and regulations, including,
without limitation, all rules and regulations made or adopted by the
Securities and Exchange Commission (the "SEC") or by any securities
association registered under the Securities Exchange Act of 1934, as amended.
1.4 Lehman Brothers will provide one or more persons during normal
business hours to respond to telephone questions concerning the Funds.
1.5 Lehman Brothers will transmit any orders received by it for
purchase or redemption of Shares to The Shareholder Services Group, Inc.
("TSSG"), the Company's transfer agent, or any successor to TSSG of which the
Company has notified Lehman Brothers in writing.
1.6 Whenever in their judgment such action is warranted for any
reason, including, without limitation, market, economic or political
conditions, the Company's officers may decline to accept any orders for, or
make any sales of, the Shares until such time as those officers deem it
advisable to accept such orders and to make such sales.
1.7 Lehman Brothers will act only on its own behalf as principal
should it choose to enter into selling agreements with selected dealers or
others.
2. Duties of the Company.
2.1 The Company agrees at its own expense to execute any and all
documents, to furnish any and all information and to take any other actions
that may be reasonably necessary in connection with the qualification of the
Shares for sale in those states that Lehman Brothers may designate.
2.2 The Company shall furnish from time to time, for use in
connection with the sale of the Shares, such information reports with respect
to the Funds and the Shares as Lehman Brothers may reasonably request, all of
which shall be signed by one or more of the Company's duly authorized
officers; and the Company warrants that the statements contained in any such
reports, when so signed by the Company's officers, will be true and correct.
The Company will also furnish Lehman Brothers upon request with (a) annual
audits of the books and accounts of the Funds made by independent certified
public accountants regularly retained by the Company; (b) semi-annual
unaudited financial statements pertaining to each Fund; (c) quarterly earnings
statements prepared by the Company with respect to each Fund; (d) a monthly
itemized list of the securities in the portfolio of each Fund; (e) monthly
balance sheets with respect to each Fund as soon as practicable after the end
of each month; and (f) from time to time such additional information regarding
the financial condition of each Fund as Lehman Brothers may reasonably
request.
3. Representations and Warranties.
The Company represents to Lehman Brothers that all registration
statements, prospectuses and statements of additional information filed by the
Company with the SEC under the 1933 Act and the 1940 Act with respect to the
Shares have been carefully prepared in conformity with the requirements of the
1933 Act, the 1940 Act and the rules and regulations of the SEC thereunder.
As used in this Agreement, the terms "registration statement," "prospectus"
and "statement of additional information" mean any registration statement,
prospectus and statement of additional information filed by the Company with
the SEC and any amendments and supplements to the registration statement,
prospectus and statement of additional information that at any time has been
filed with the SEC. The Company represents and warrants to Lehman Brothers
that any registration statement, prospectus and statement of additional
information, when the registration statement becomes effective, will include
all statements required to be contained in it in conformity with the 1933 Act,
the 1940 Act and the rules and regulations of the SEC; that all statements of
fact contained in any registration statement, prospectus or statement of
additional information will be true and correct when the registration
statement becomes effective; and that the registration statement, the
prospectus and the statement of additional information, when the registration
statement becomes effective, will include no untrue statement of a material
fact and will not omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading to a purchaser of
the Shares. Lehman Brothers may, but is not be obligated to, propose from
time to time such amendment or amendments to any registration statement and
such supplement or supplements to any prospectus or statement of additional
information as, in the light of future developments, may, in the opinion of
Lehman Brothers' counsel, be necessary or advisable. If the Company does not
propose such amendment or amendments and/or supplement or supplements within
fifteen days after receipt by the Company of a written request from Lehman
Brothers to do so, Lehman Brothers may, at its option, terminate this
Agreement. The Company will not file any amendment to any registration
statement or supplement to any prospectus or statement of additional
information without giving Lehman Brothers reasonable advance notice except
that nothing contained in this Agreement will in any way limit the Company's
right to file at any time such amendments to any registration statement and/or
supplements to any prospectus or statement of additional information, of
whatever character, as the Company may deem advisable, such right being in all
respects absolute and unconditional.
4. Indemnification.
4.1 The Company authorizes Lehman Brothers and any dealers with
whom Lehman Brothers has entered into dealer agreements to use any prospectus
or statement of additional information furnished by the Company from time to
time, in connection with the sale of the Shares. The Company agrees to
indemnify, defend and hold Lehman Brothers, its several officers and
directors, and any person who controls Lehman Brothers within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending those claims, demands or liabilities and any related counsel
fees) that Lehman Brothers, its officers and directors, or any such
controlling person, may incur under the 1933 Act, the 1940 Act or common law
or otherwise, arising out of or on the basis of any untrue statement, or
alleged untrue statement, of a material fact contained in any registration
statement, any prospectus or any statement of additional information or
arising out of or based upon any omission, or alleged omission, to state a
material fact required to be stated in any registration statement, any
prospectus or any statement of additional information or necessary to make the
statements in any of them not misleading, except that the Company's agreement
to indemnify Lehman Brothers, its officers or directors, and any such
controlling person will not be deemed to cover any claims, demands,
liabilities or expenses arising out of or based upon any statements or
representations made by Lehman Brothers or its representatives or agents other
than those statements and representations as are contained in any registration
statement, prospectus or statement of additional information and in the
financial and other statements as are furnished to Lehman Brothers pursuant to
paragraph 2.2 of this Agreement; and except that the Company's agreement to
indemnify Lehman Brothers and the Company's representations and warranties set
out in paragraph 3 of this Agreement will not be deemed to cover any liability
to the Funds or their shareholders to which Lehman Brothers would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of Lehman Brothers' reckless disregard
of its obligations and duties under this Agreement. The Company's agreement to
indemnify Lehman Brothers, its officers and directors, and any such
controlling person, as described above, is expressly conditioned upon the
Company's being notified of any action brought against Lehman Brothers, its
officers or directors, or any such controlling person, the notification to be
given by letter, via facsimile or by telegram addressed to the Company at its
principal office in New York, New York and sent to the Company by the person
against whom the action is brought, within ten days after the summons or other
first legal process has been served. The failure so to notify the Company of
any such action will not relieve the Company from any liability that the
Company may have to the person against whom the action is brought by reason of
any such untrue, or alleged untrue, statement or omission, or alleged
omission, otherwise than on account of the Company's indemnity agreement
contained in this paragraph 4.1. The Company will be entitled to assume the
defense of any suit brought to enforce any such claim, demand or liability,
but, in such case, the defense will be conducted by counsel of good standing
chosen by the Company and approved by Lehman Brothers. In the event the
Company elects to assume the defense of any such suit and retains counsel of
good standing approved by Lehman Brothers, the defendant or defendants in the
suit will bear the fees and expenses of any additional counsel retained by any
of them; but if the Company does not elect to assume the defense of any such
suit, or if Lehman Brothers does not approve of counsel chosen by the Company,
the Company will reimburse Lehman Brothers, its officers and directors, or the
controlling person or persons named as defendant or defendants in the suit,
for the fees and expenses of any counsel retained by Lehman Brothers or them.
The Company's indemnification agreement contained in this paragraph 4.1 and
the Company's representations and warranties in this Agreement will remain
operative and in full force and effect regardless of any investigation made by
or on behalf of Lehman Brothers, its officers and directors, or any
controlling person, and will survive the delivery of any of the Shares. This
agreement of indemnity will inure exclusively to Lehman Brothers' benefit, to
the benefit of its several officers and directors, and their respective
estates, and to the benefit of the controlling persons and their successors.
The Company agrees to notify Lehman Brothers promptly of the commencement of
any litigation or proceedings against the Company or any of its officers or
Directors in connection with the issuance and sale of any of the Shares.
4.2 Lehman Brothers agrees to indemnify, defend and hold the
Company, its several officers and Directors, and any person who controls the
Company within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, demands, liabilities and expenses
(including the costs of investigating or defending those claims, demands or
liabilities and any related counsel) that the Company, its officers or
Directors or any such controlling person may incur under the 1933 Act, the
1940 Act or common law or otherwise, but only to the extent that the liability
or expense incurred by the Company, its officers or Directors or such
controlling person resulting from the claims or demands arise out of or are
based upon (a) any unauthorized sales literature, advertisements, information,
statements or representations or (b) any untrue, or alleged untrue, statement
of a material fact contained in information furnished in writing by Lehman
Brothers to the Company and used in the answers to any of the items of the
registration statement or in the corresponding statements made in the
prospectus or statement of additional information, or arise out of or are
based upon any omission, or alleged omission, to state a material fact in
connection with the information furnished in writing by Lehman Brothers to the
Company and required to be stated in such answers or necessary to make such
information not misleading. Lehman Brothers' agreement to indemnify the
Company, its officers and Directors, and any such controlling person, as
described above, is expressly conditioned upon Lehman Brothers' being notified
of any action brought against the Company, its officers or Directors, or any
such controlling person, the notification to be given by letter via facsimile
or telegram addressed to Lehman Brothers at its principal office in New York,
New York, and sent to Lehman Brothers by the person against whom such action
is brought, within ten days after the summons or other first legal process has
been served. Lehman Brothers will have the right to control the defense of
such action, with counsel of its own choosing, satisfactory to the Company, if
the action is based solely upon such alleged misstatement or omission on
Lehman Brothers' part, and in any other event the Company, its officers or
Directors or such controlling person each will have the right to participate
in the defense or preparation of the defense of any such action. The failure
so to notify Lehman Brothers of any such action will not relieve Lehman
Brothers from any liability that Lehman Brothers may have to the Company, its
officers or Directors, or to such controlling person by reason of the untrue,
or alleged untrue, statement or omission, or alleged omission, otherwise than
on account of Lehman Brothers' indemnity agreement contained in this paragraph
4.2. Lehman Brothers agrees to notify the Company promptly of the
commencement of any litigation or proceedings against Lehman Brothers or any
of its officers or directors in connection with the issuance and sale of any
of the Company's shares.
5. Effectiveness of Registration.
None of the Shares may be offered by either Lehman Brothers or the
Company under any of the provisions of this Agreement and no orders for the
purchase or sale of the Shares under this Agreement may be accepted by the
Company if and so long as the effectiveness of the registration statement then
in effect or any necessary amendments to the registration statement is
suspended under any of the provisions of the 1933 Act or if and so long as a
current prospectus as required by Section 5(b)(2) of the 1933 Act is not on
file with the SEC; except that nothing contained in this paragraph 5 will in
any way restrict or have an application to or bearing upon the Company's
obligation to repurchase Shares from any shareholder in accordance with the
provisions of the prospectuses or statement of additional information relating
to the Company's Articles of Incorporation dated May 5, 1993, as amended from
time to time (the "Articles of Incorporation").
6. Notice to Lehman Brothers.
The Company agrees to advise Lehman Brothers immediately in
writing:
(a) of any request by the SEC for amendments to the registration
statement, prospectus or statement of additional information then in effect or
for additional information;
(b) in the event of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement, prospectus or
statement of additional information then in effect or the initiation of any
proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement of a
material fact made in the registration statement, prospectus or statement of
additional information then in effect or that requires the making of a change
in the registration statement, prospectus or statement of additional
information in order to make the statements in those documents not misleading;
and
(d) of all actions of the SEC with respect to any amendment to any
registration statement, prospectus or statement of additional information that
may from time to time be filed with the SEC.
7. Term of the Agreement.
7.1 This Agreement will become effective with respect to a Fund
as of the date the Fund commences its investment operations and will continue
for an initial two-year term and will continue thereafter so long as such
continuance is specifically approved at least annually by the Company's Board
of Directors (all Directors voting) and by a majority of the Directors of the
Company who are not "interested persons" (as defined in the 1940 Act) of the
Company and have no direct or indirect financial interest in the operation of
this Agreement or in any agreements related hereto by vote cast in person at a
meeting called for the purpose of voting on the approval.
7.2 This Agreement is terminable with respect to a Fund, without
penalty, on 60 days' written notice, by a majority of the Directors of the
Company who are not "interested persons" of the Company and have no direct or
indirect financial interest in the operation of this Agreement or in any
agreements related hereto or by vote of holders of a majority of the Fund's
outstanding voting securities, or upon 60 days' written notice, by Lehman
Brothers.
7.3 This Agreement will terminate automatically in the event of
its "assignment" (as defined in the 1940 Act).
8. Miscellaneous.
The Company recognizes that directors, officers and employees of
Lehman Brothers, may from time to time serve as directors, trustees, officers
and employees of corporations and business trusts (including other investment
companies) and that such other corporations and trusts may include the name
"Shearson," "Shearson Lehman," "Lehman Brothers" or any variant, including
initials, as part of their names, and that Lehman Brothers or its affiliates
may enter into distribution or other agreements with such other corporations
and trusts. If Lehman Brothers ceases to act as a distributor of the
Company's shares, the Company agrees that, at Lehman Brothers' request, the
Company's license to use the words "Lehman Brothers" will terminate and that
the Company will take all necessary action to change the name of the Company
to a name not including the words "Lehman Brothers" or any other name
referring to Lehman Brothers.
9. Representation by the Company.
The Company represents that a copy of its Amended Articles of
Incorporation is on file with the Secretary of the State of Maryland.
10. Limitation of Liability.
The Company and Lehman Brothers agree that the obligations of the
Company under this Agreement will not be binding upon any of the Directors of
the Company, shareholders of the Funds, nominees, officers, employees or
agents, whether past, present or future, of the Company, individually, but are
binding only upon the assets and property of the Funds, as provided in the
Articles of Incorporation. The execution and delivery of this Agreement have
been authorized by the Directors of the Company, and signed by an authorized
officer of the Company, acting as such, and neither the authorization by the
Directors nor the execution and delivery by the officer will be deemed to have
been made by any of them individually or to impose any liability on any of
them or any shareholder of the Company personally, but will bind only the
property of the Company as provided in its Articles of Incorporation. No Fund
will be liable for any claims against any other Fund.
11. Governing Law.
This agreement shall be governed by, and construed and interpreted
in accordance with, the law of the State of New York.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning to us the
enclosed copy of this Agreement.
Very truly yours,
LEHMAN BROTHERS FUNDS, INC.
By:/s/ Deepak Chowdhury
Name: Deepak Chowdhury
Title: President
Accepted:
LEHMAN BROTHERS INCORPORATED
By: /s/ Steven Spiegel
Authorized Signatory
SHARED\GLOBAL\LEHMBROS\AGRMTS\DISTRIB.DOC
Exhibit 8(a)
LEHMAN BROTHERS FUNDS, INC.
CUSTODY AGREEMENT
THIS AGREEMENT is made as of August 2, 1993 between Lehman Brothers
Funds, Inc. (the "Company"), on behalf of its Daily Income Fund and Municipal
Income Fund (each a "Fund" and collectively the "Funds"), a Maryland
corporation having its principal office and place of business at 200 Vesey
Street, New York, New York 10285, and BOSTON SAFE DEPOSIT AND TRUST COMPANY
(the "Custodian"), a Massachusetts trust company having its principal place of
business at One Boston Place, Boston, Massachusetts 02108.
W I T N E S S E T H:
That for and in consideration of the mutual premises and covenants
hereinafter set forth, the Company and the Custodian agree as follows:
1. Definitions.
Whenever used in this Agreement or in any Schedules to this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of Incorporation
dated May 5, 1993 of the Company filed with the State of Maryland, as now in
effect and as the same may be amended from time to time.
(b) "Authorized Person" shall be deemed to include the President, any Vice
President, the Secretary, any Assistant Secretary, the Treasurer or Assistant
Treasurer or any other person, whether or not any such person is an officer or
employee of the Company, duly authorized by the Board of Directors of the
Company to give Oral Instructions and Written Instructions on behalf of the
Fund and listed in a certification in the form annexed hereto as Appendix A or
such other certification as may be received by the Custodian from time to
time.
(c) "Book-Entry System" shall mean the Federal Reserve/ Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees.
(d) "Depository" shall mean The Depository Trust Company ("DTC"), a clearing
agency registered with the Securities and Exchange Commission under Section
17(a) of the Securities Exchange Act of 1934, as amended, its successor or
successors and its nominee or nominees, in which the Custodian is specifically
authorized by the Company's Board to make deposits. The term "Depository"
shall further mean and include any other person to be named in Written
Instructions authorized to act as a depository under the 1940 Act, its
successor or successors and its nominee or nominees.
(e) "Money Market Securities" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to interest and principal
by the Government of the United States or agencies or instrumentalities
thereof, commercial paper, bank certificates of deposit, bankers' acceptances
and short-term corporate obligations, where the purchase or sale of such
securities normally requires settlement in federal funds on the same day as
such purchase or sale, and repurchase and reverse repurchase agreements with
respect to any of the foregoing types of securities.
(f) "Oral Instructions" shall mean verbal instructions actually received by
the Custodian from an Authorized Person or a person reasonably believed by the
Custodian to be an Authorized Person.
(g) "Prospectus" shall mean the Fund's current prospectus and statement of
additional information relating to the registration of the Funds' Shares under
the Securities Act of 1933, as amended.
(h) "Shares" refers to the shares of common stock, par value $.001 per
share, as may be issued by the Funds from time to time.
(i) "Security" or Securities" shall be deemed to include bonds, debentures,
notes, stocks, shares, evidences of indebtedness, and other securities and
investments from time to time of the Fund, including futures contracts and
options on futures contracts.
(j) "Transfer Agent" shall mean the person which performs the transfer
agent, dividend disbursing agent and shareholder servicing agent functions for
the Fund.
(k) "Written Instructions" shall mean a written communication actually
received by the Custodian from two Authorized Persons or from persons
reasonably believed by the Custodian to be Authorized Persons by telex or
facsimile machine or any other such system whereby the receiver of such
communication is able to verify through codes or otherwise with a reasonable
degree of certainty the authenticity of the sender of such communication.
(l) The "1940 Act" refers to the Investment Company Act of 1940, and the
rules and regulations thereunder, all as amended from time to time.
2. Appointment of Custodian.
(a) The Company hereby constitutes and appoints the Custodian as custodian
of all of the Securities and monies at any time owned by or in the possession
of the Funds during the period of this Agreement.
(b) The Custodian hereby accepts appointment as such custodian for the Funds
and agrees to perform the duties thereof as hereinafter set forth.
3. Compensation.
(a) The Company will compensate the Custodian for its services rendered
under this Agreement in accordance with the fees set forth in Schedule I
attached hereto, as the same may be amended from time to time (the "Fee
Schedule"). Such Fee Schedule does not include out-of-pocket disbursements of
the Custodian for which the Custodian shall be entitled to bill separately.
Out-of-pocket disbursements shall include, but shall not be limited to, the
items specified in Schedule II and incorporated herein (the "Expense
Schedule"), which Expense Schedule may be modified by the Custodian upon not
less than sixty (60) days' prior written notice to the Company.
(b) The Custodian will bill the Company in respect of out-of-pocket expenses
as soon as practicable after the end of each calendar month, and said billings
will be detailed in accordance with the Expense Schedule. The Company will
promptly pay to the Custodian the amount of such billing.
4. Custody of Cash and Securities.
(a) Receipt and Holding of Assets. The Company will deliver or cause to be
delivered to the Custodian all Securities and monies owned by the Fund,
including cash received from the issuance of its Shares, at any time during
the period of this Agreement. The Custodian will not be responsible for such
Securities and monies until actually received by it. The Company shall
instruct the Custodian from time to time in its sole discretion, by means of
Written Instructions, or in connection with the purchase or sale of Money
Market Securities, by means of Oral Instructions or Written Instructions, as
to the manner in which and in what amounts Securities and monies of the Fund
are to be deposited on behalf of the Fund in the Book-Entry System or a
Depository and specifically allocated on the books of the Custodian to the
Fund; provided, however, that prior to the initial deposit of Securities of
the Fund in the Book-Entry System or the Depository, the Custodian shall have
received Written Instructions specifically approving such deposit by the
Custodian in the Book-Entry System or a Depository.
(b) Accounts and Disbursements. The Custodian shall establish and maintain
a separate account for the Fund and shall credit to the separate account of
the Fund all monies received by it for the account of such Fund and shall
disburse the same only:
(i) In payment for Securities purchased for the Fund, as provided in Section
5 hereof;
(ii) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the account of the
Fund: interest, taxes, management, accounting, transfer agent and legal fees
and operating expenses of the Fund whether or not such expenses are, in whole
or in part, to be capitalized or treated as deferred expenses;
(iii) For payment of the amount of dividends received in respect of Securities
sold short;
(iv) In payment of dividends or distributions with respect to the Shares of
the Funds, as provided in Section 7 hereof;
(v) In payment of original issue or other taxes with respect to the Shares
of the Funds;
(vi) In payment for Shares which have been repurchased by the Funds, in the
open market or otherwise;
(vii) Pursuant to Written Instructions or, with respect to Money Market
Securities, Oral Instructions or Written Instructions, setting forth the name
and address of the person to whom the payment is to be made, the amount to be
paid and the purpose for which payment is to be made; or
(viii) In payment of fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to the Funds, as provided in Section
3(a) and Section 10(h) hereof.
(c) Confirmation and Statements. Promptly after the close of business on
each day, the Custodian shall furnish the Company with confirmations and a
summary of all transfers to or from the account of each Fund during said day.
Where securities purchased by a Fund are in a tangible bulk of securities
registered in the name of the Custodian (or its nominee) or shown on the
Custodian's account on the books of the Depository or the Book-Entry System,
the Custodian shall by book entry or otherwise identify the quantity of those
securities belonging to the Fund. At least monthly, the Custodian shall
furnish each Fund with a detailed statement of the Securities and monies held
for the Fund under this Agreement.
(d) Registration of Securities and Physical Separation. All Securities held
for a Fund which are issued or issuable only in bearer form, except such
Securities as are held in the Book-Entry System, shall be held by the
Custodian in that form; all other Securities held for a Fund may be registered
in the name of the Fund, in the name of any duly appointed registered nominee
of the Custodian as the Custodian may from time to time determine, or in the
name of the Book-Entry System or a Depository or their successor or
successors, or their nominee or nominees. The Company reserves the right to
instruct the Custodian as to the method of registration and safekeeping of the
Securities of a Fund. The Company agrees to furnish to the Custodian
appropriate instruments to enable the Custodian to hold or deliver in proper
form for transfer, or to register in the name of its registered nominee or in
the name of the Book-Entry System or a Depository, any Securities which it may
hold for the account of a Fund and which may from time to time be registered
in the name of the Company. The Custodian shall hold all such Securities
which are not held in the Book-Entry System or the Depository in a separate
account for each Fund in the name of the Fund physically segregated at all
times from those of any other person or persons.
(e) Collection of Income and Other Matters Affecting Securities. Unless
otherwise instructed to the contrary by Written Instructions, the Custodian by
itself, or through the use of the Book-Entry System or the Depository with
respect to Securities therein deposited, shall with respect to all Securities
held for a Fund in accordance with this Agreement:
(i) Collect on a timely basis all income due or payable;
(ii) Present on a timely basis for payment and collect the amount payable
upon all Securities which may mature or be called, redeemed or retired, or
otherwise become payable. Notwithstanding the foregoing, the Custodian shall
have no responsibility to the Company or a Fund for monitoring or ascertaining
any call, redemption or retirement dates with respect to any put bonds which
are owned by a Fund and held by the Custodian or its nominee, nor shall the
Custodian have any responsibility or liability to the Company or a Fund for
any loss by the Fund for any missed payment or other default resulting
therefrom; unless the Custodian received timely notification from the Company
or a Fund specifying the time, place and manner for the presentment of any
such put bond owned by a Fund and held by the Custodian or its nominee. The
Custodian shall not be responsible and assumes no liability to the Company or
a Fund for the accuracy or completeness of any notification the Custodian may
furnish to the Company or the Fund with respect to put bonds;
(iii) Surrender Securities in temporary form for definitive Securities;
(iv) Execute any necessary declarations or certificates of ownership under
the Federal income tax laws or the laws or regulations of any other taxing
authority now or hereafter in effect; and
(v) Hold directly, or through the Book-Entry System or a Depository with
respect to Securities therein deposited, for the account of each Fund all
rights and similar Securities issued with respect to any Securities held by
the Custodian hereunder for such Fund.
(f) Delivery of Securities and Evidence of Authority. Upon receipt of
Written Instructions and not otherwise, except for subparagraphs (v) - (xii)
below which may be effected by Oral or Written Instructions, the Custodian,
directly or through the use of the Book-Entry System or a Depository, shall:
(i) Execute and deliver or cause to be executed and delivered to such
persons as may be designated in such Written Instructions proxies, consents,
authorizations and any other instruments whereby the authority of the Company
as owner of any Securities may be exercised;
(ii) Deliver or cause to be delivered any Securities held for a Fund in
exchange for other Securities or cash issued or paid in connection with the
liquidation, reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any conversion
privilege;
(iii) Deliver or cause to be delivered any Securities held for a Fund to any
protective committee, reorganization committee or other person in connection
with the reorganization, refinancing, merger, consolidation or
recapitalization or sale of assets of any corporation, and receive and hold
under the terms of this Agreement in the separate account for each Fund such
certificates of deposit, interim receipts or other instruments or documents as
may be issued to it to evidence such delivery;
(iv) Make or cause to be made such transfers or exchanges of the assets
specifically allocated to the separate account of each Fund and take such
other steps as shall be stated in said Written Instructions to be for the
purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of any Fund or the
Company;
(v) Deliver Securities owned by any Fund upon sale of such Securities for
the account of such Fund pursuant to Section 5;
(vi) Deliver Securities owned by any Fund upon the receipt of payment in
connection with any repurchase agreement related to such Securities entered
into by such Fund;
(vii) Deliver Securities owned by any Fund to the issuer thereof or its agent
when such Securities are called, redeemed, retired or otherwise become
payable; provided, however, that in any such case the cash or other
consideration is to be delivered to the Custodian. Notwithstanding the
foregoing, the Custodian shall have no responsibility to the Company or a Fund
for monitoring or ascertaining any call, redemption or retirement dates with
respect to any put bonds which are owned by a Fund and held by the Custodian
or its nominee, nor shall the Custodian have any responsibility or liability
to the Company or a Fund for any loss by a Fund for any missed payment or
other default resulting therefrom unless the Custodian received timely
notification from the Company or the Fund specifying the time, place and
manner for the presentment of any such put bond owned by the Fund and held by
the Custodian or its nominee. The Custodian shall not be responsible and
assumes no liability to the Company or any Fund for the accuracy or
completeness of any notification the Custodian may furnish to the Company or
any Fund with respect to put bonds;
(viii) Deliver Securities owned by any Fund to the issuer thereof, or its
agent, for transfer into the name of the Fund or into the name of any nominee
or nominees of the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 10(f) or into the name or nominee name of any
sub-custodian appointed pursuant to Section 10(e); or for exchange for a
different number of bonds, certificates or other evidence representing the
same aggregate face amount or number of units; provided, however, that in any
such case, the new Securities are to be delivered to the Custodian;
(ix) Deliver Securities owned by the Fund to the broker for examination in
accordance with "street delivery" custom;
(x) Deliver Securities owned by the Fund in accordance with the provisions
of any agreement among the Fund, the Custodian and a broker-dealer registered
under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of
the National Association of Securities Dealers, Inc. (the "NASD"), relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Fund;
(xi) Deliver Securities owned by the Fund in accordance with the provisions
of any agreement among the Fund, the Custodian, and a futures commission
merchant registered under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations, regarding account
deposits in connection with transactions by the Fund;
(xii) Deliver Securities owned by any Fund for delivery in connection with any
loans of Securities made by a Fund but only against receipt of adequate
collateral as agreed upon from time to time by the Custodian and the Company
which may be in the form of cash or obligations issued by the United States
government, its agencies or instrumentalities;
(xiii) Deliver Securities owned by any Fund for delivery as security in
connection with any borrowings by such Fund requiring a pledge of Fund assets,
but only against receipt of amounts borrowed;
(xiv) Deliver Securities owned by any Fund upon receipt of instructions from
the Fund for delivery to the Transfer Agent or to the holders of Shares in
connection with distributions in kind, as may be described from time to time
in the Fund's Prospectus, in satisfaction of requests by holders of Shares for
redemption; and
(xv) Deliver Securities owned by any Fund for any other proper business
purpose, but only upon receipt of, in addition to Written Instructions, a
certified copy of a resolution of the Board of Directors signed by an
Authorized Person and certified by the Secretary of the Company specifying the
Securities to be delivered, setting forth the purpose for which such delivery
is to be made, declaring such purpose to be a proper business purpose, and
naming the person or persons to whom delivery of such Securities shall be
made.
(g) Endorsement and Collection of Checks, Etc. The Custodian is hereby
authorized to endorse and collect all checks, drafts or other orders for the
payment of money received by the Custodian for the account of a Fund;
provided, however, that the Custodian shall not be liable for any money,
whether or not represented by any check, draft, or other instrument for the
payment of money, received by it on behalf of a Fund until the Custodian
actually receives and collects such money directly or by the final crediting
of the account representing a Fund's interest in the Book-Entry System or the
Depository.
5. Purchase and Sale of Investments of the Fund.
(a) Promptly after each purchase of Securities for a Fund, the Fund shall
deliver to the Custodian (i) with respect to each purchase of Securities which
are not Money Market Securities, Written Instructions, and (ii) with respect
to each purchase of Money Market Securities, either Written Instructions or
Oral Instructions, in either case specifying with respect to each purchase:
(1) the name of the Fund to which the securities are to be specifically
allocated; (2) the name of the issuer and the title of the Securities; (3) the
number of shares or the principal amount purchased and accrued interest, if
any; (4) the date of purchase and settlement; (5) the purchase price per unit;
(6) the total amount payable upon such purchase; (7) the name of the person
from whom or the broker through whom the purchase was made, if any; (8)
whether or not such purchase is to be settled through the Book-Entry System or
the Depository; and (9) whether the Securities purchased are to be deposited
in the Book-Entry System or the Depository. The Custodian shall receive the
Securities purchased by or for a Fund and upon receipt of such Securities
shall pay out of the monies held for the account of such Fund the total amount
payable upon such purchase, provided that the same conforms to the total
amount payable as set forth in such Written Instructions or Oral Instructions.
(b) Promptly after each sale of Securities of a Fund, the Fund shall deliver
to the Custodian (i) with respect to each sale of Securities which are not
Money Market Securities, Written Instructions, and (ii) with respect to each
sale of Money Market Securities, either Written or Oral Instructions, in
either case specifying with respect to such sale: (1) the name of the Fund to
which such Securities are to be specifically allocated; (2) the name of the
issuer and the title of the Securities; (3) the number of shares or principal
amount sold, and accrued interest, if any; (4) the date of sale; (5) the sale
price per unit; (6) the total amount payable to the Fund upon such sale; (7)
the name of the broker through whom or the person to whom the sale was made;
and (8) whether or not such sale is to be settled through the Book-Entry
System or the Depository. The Custodian shall deliver or cause to be
delivered the Securities to the broker or other person designated by the
Company upon receipt of the total amount payable to the Company upon such
sale, provided that the same conforms to the total amount payable to the
Company as set forth in such Written or such Oral Instructions. Subject to
the foregoing, the Custodian may accept payment in such form as shall be
satisfactory to it, and may deliver Securities and arrange for payment in
accordance with the customs prevailing among dealers in Securities.
6. Lending of Securities.
(a) If a Fund is permitted as disclosed in its current Prospectus to lend
Securities, within 24 hours after each loan of Securities, the Company shall
deliver or cause to be delivered to the Custodian Written Instructions
specifying with respect to each such loan: (1) the name of the Fund to which
the loaned Securities are specifically allocated; (2) the name of the issuer
and the title of the Securities; (3) the number of shares or the principal
amount loaned; (4) the date of loan and delivery; (5) the total amount to be
delivered to the Custodian, including the amount of cash collateral and the
premium, if any, separately identified; (6) the name of the broker, dealer or
financial institution to which the loan was made; and (7) whether the
Securities loaned are to be delivered through the Book-Entry System or the
Depository. Promptly after each termination of a loan of Securities, the
Company shall deliver to the Custodian Written Instructions specifying with
respect to each such loan termination and return of Securities: (1) the name
of the Fund to which the loand Securities are specifically allocated; (2) the
name of the issuer and the title of the Securities to be returned; (3) the
number of shares or the principal amount to be returned; (4) the date of
termination; (5) the total amount to be delivered by the Custodian (including
the cash collateral for such Securities minus any offsetting credits as
described in said Written Instructions); (6) the name of the broker, dealer or
financial institution from which the Securities will be returned; and (7)
whether such return is to be effected through the Book-Entry System or the
Depository. The Custodian shall receive all Securities returned from the
broker, dealer or financial institution to which such Securities were loaned
and upon receipt thereof shall pay, out of the monies held for the account of
such Fund, the total amount payable upon such return of Securities as set
forth in the Written Instructions. Securities returned to the Custodian shall
be held as they were prior to such loan.
7. Payment of Dividends or Distributions.
(a) The Company shall furnish to the Custodian a copy of the resolution of
the Board of Directors of the Company certified by the Secretary or an
Assistant Secretary (i) authorizing the declaration of dividends or
distributions with respect to a Fund on a specified periodic basis and
authorizing the Custodian to rely on Oral or Written Instructions specifying
the date of the declaration of such dividend or distribution, the date of
payment thereof, the record date as of which shareholders entitled to payment
shall be determined and the amount payable per share to the shareholders of
record as of the record date, or (ii) setting forth the date of declaration of
any dividend or distribution with respect to such Fund, the date of payment
thereof, the record date as of which shareholders entitled to payment shall be
determined and the amount payable per share to the shareholders of record as
of the record date.
(b) Prior to the payment date specified in such resolution, Oral
Instructions or Written Instructions, as the case may be, the Company shall
deliver to the Custodian Oral Instructions or Written Instructions specifying
the total amount payable to the Transfer Agent.
(c) Upon the payment date specified in such resolution, Oral Instructions or
Written Instructions, as the case may be, the Custodian shall pay to the
Transfer Agent out of monies specifically allocated to and held for the
account of the relevant Fund the total amount payable to the Transfer Agent.
8. Sale and Redemption of Shares of a Fund.
(a) Whenever a Fund shall sell any Shares, the Fund shall deliver or cause
to be delivered to the Custodian a Written Instruction duly specifying:
1. The name of Shares sold, trade date, and price; and
2. The amount of money to be received by the Custodian for the sale of such
Shares.
The Custodian understands and agrees that Written Instructions may be
furnished subsequent to the purchase of Shares and that the information
contained therein will be derived from the sales of Shares as reported to the
Fund by the Transfer Agent.
(b) Upon receipt of such money from the Transfer Agent, the Custodian shall
credit such money to the separate account of the relevant Fund.
(c) Upon issuance of any Shares in accordance with the foregoing provisions
of this Section 8, the Custodian shall pay all original issue or other taxes
required to be paid in connection with such issuance upon the receipt of a
Written Instruction specifying the amount to be paid.
(d) Except as provided hereafter, whenever any Shares are redeemed, the
relevant Fund shall cause the Transfer Agent to promptly furnish to the
Custodian Written Instructions, specifying:
1. The number of Shares redeemed; and
2. The amount to be paid for the Shares redeemed.
The Custodian further understands that the information contained in such
Written Instructions will be derived from the redemption of Shares as reported
to the Fund by the Transfer Agent.
(e) Upon receipt from the Transfer Agent of advice setting forth the number
of Shares received by the Transfer Agent for redemption and that such Shares
are valid and in good form for redemption, the Custodian shall make payment to
the Transfer Agent of the total amount specified in a Written Instruction
issued pursuant to paragraph (d) of this Section 8.
(f) Notwithstanding the above provisions regarding the redemption of Shares,
whenever such Shares are redeemed pursuant to any check redemption privilege
which may from time to time be offered by a Fund, the Custodian, unless
otherwise instructed by a Written Instruction shall, upon receipt of advice
from the Fund or its agent stating that the redemption is in good form for
redemption in accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege out of the monies
specifically allocated to the Fund in such advice for such purpose.
9. Indebtedness.
(a) The Company will cause to be delivered to the Custodian by any bank
(excluding the Custodian) from which the Company borrows money using
Securities as collateral for such borrowings, a notice or undertaking in the
form currently employed by any such bank setting forth the amount which such
bank will loan to the Company against delivery of a stated amount of
collateral. The Company shall promptly deliver to the Custodian Written or
Oral Instructions stating with respect to each such borrowing: (1) the name
of the Fund for which the borrowing is made; (2) the name of the bank; (3) the
amount and terms of the borrowing, which may be set forth by incorporating by
reference an attached promissory note, duly endorsed by the Company, or other
loan agreement; (4) the time and date, if known, on which the loan is to be
entered into (the "Borrowing Date"); (5) the date on which the loan becomes
due and payable; (6) the total amount payable to the Company on the Borrowing
Date; (7) the market value of Securities to be delivered as collateral for
such loan, including the name of the issuer, the title and the number of
shares or the principal amount of any particular Securities; (8) whether the
Custodian is to deliver such collateral through the Book-Entry System or the
Depository; and (9) a statement that such loan is in conformance with the 1940
Act and the Company's Prospectus.
(b) Upon receipt of the Written or Oral Instructions referred to in
subparagraph (a) above, the Custodian shall deliver on the Borrowing Date the
specified collateral and the executed promissory note, if any, against
delivery by the lending bank of the total amount of the loan payable, provided
that the same conforms to the total amount payable as set forth in the Written
or Oral Instructions. The Custodian may, at the option of the lending bank,
keep such collateral in its possession, but such collateral shall be subject
to all rights therein given the lending bank by virtue of any promissory note
or loan agreement. The Custodian shall deliver as additional collateral in
the manner directed by the Company from time to time such Securities as may be
specified in Written or Oral Instructions to collateralize further any
transaction described in this Section 9. The Company shall cause all
Securities released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Company fails to
specify in Written or Oral Instructions all of the information required by
this Section 9, the Custodian shall not be under any obligation to deliver any
Securities or to seek the return of the collateral; provided, however, that
the Custodian shall promptly notify the Company of any information required by
this Section 9 and not specified in Written or Oral Instructions. Collateral
returned to the Custodian shall be held hereunder as it was prior to being
used as collateral.
10. Persons Having Access to Assets of the Company.
(a) No Director, employee or agent of the Company, and no officer, director,
employee or agent of the Funds' investment adviser, shall have physical access
to the assets of the Company held by the Custodian or be authorized or
permitted to withdraw any investments of the Company, nor shall the Custodian
deliver any assets of the Company to any such person. No officer, director,
employee or agent of the Custodian who holds any similar position with the
Company or its investment adviser shall have access to the assets of the
Company.
(b) The individual employees of the Custodian duly authorized by the Board
of Directors of the Custodian to have access to the assets of the Company are
listed in the certification annexed hereto as Appendix A. The Custodian shall
advise the Company of any change in the individuals authorized to have access
to the assets of the Company by written notice to the Custodian and the
Company accompanied by a certified copy of the authorizing resolution of the
Custodian's Board of Directors approving such change.
(c) Nothing in this Section shall prohibit any officer, employee or agent of
the Company, or any officer, director, employee or agent of the Funds'
investment adviser, from giving Oral Instructions or Written Instructions to
the Custodian or executing a certificate so long as it does not result in
delivery of or access to assets of the Company as prohibited by subparagraph
(a) of this Section.
11. Concerning the Custodian.
(a) Standard of Conduct. Except as otherwise provided herein, neither the
Custodian nor its nominee shall be liable for any loss or damage, including
counsel fees, resulting from its action or omission to act or otherwise,
except for any such loss or damage arising out of its own negligence, bad
faith or willful misconduct. The Custodian may, with respect to questions of
law, apply for and obtain the advice and opinion of counsel to the Company (at
the expense of the Company) or of its own counsel and shall be fully protected
with respect to anything done or omitted by it in good faith in conformity
with such advice or opinion. The Custodian shall be liable to the Fund for
any loss or damage resulting from the use of the Book-Entry System or the
Depository arising by reason of any negligence, misfeasance or misconduct on
the part of the Custodian or any of its employees or agents.
(b) Limit of Duties. Without limiting the generality of the foregoing, the
Custodian shall be under no duty or obligation to inquire into, and shall not
be liable for:
(i) The validity of the issue of any Securities purchased by any Fund, the
legality of the purchase thereof, or the propriety of the amount paid
therefor;
(ii) The legality of the sale of any Securities by any Fund or the propriety
of the amount for which the same are sold;
(iii) The legality of the issue or sale of any Shares, or the sufficiency of
the amount to be received therefor;
(iv) The legality of the repurchase of any Shares, or the propriety of the
amount to be paid therefor;
(v) The legality of the declaration or payment of any dividend or other
distribution of any Fund; or
(vi) The legality of any borrowing for temporary or emergency administrative
purposes.
(c) Amounts Due from Transfer Agent. The Custodian shall not be under any
duty or obligation to take action to effect collection of any amount due to
any Fund from the Transfer Agent nor to take any action to effect payment or
distribution by the Transfer Agent of any amount paid by the Custodian to the
Transfer Agent in accordance with this Agreement.
(d) Collection Where Payment Refused. The Custodian shall not be under any
duty or obligation to take action to effect collection of any amount, if the
Securities upon which such amount is payable are in default, or if payment is
refused after due demand or presentation, unless and until (i) it shall be
directed to take such action by Written Instructions and (ii) it shall be
assured to its satisfaction of reimbursement of its costs and expenses in
connection with any such action.
(e) Appointment of Sub-Custodians. The Custodian may appoint one or more
qualified institutions, including but not limited to banking institutions, to
act as Depository or Depositories or as Sub-Custodian or Sub-Custodians of
Securities and monies at any time owned by the Company, upon terms and
conditions specified in Written Instructions. The Custodian shall use
reasonable care in selecting any such Depository and/or Sub-Custodian and
shall oversee the maintenance of any Securities or monies of the Company by
the Sub-Custodian. In addition, the Custodian may from time to time appoint
one or more of the institutions listed in Appendix C hereto, or such other
institutions as may hereafter be approved by vote of the Directors of the
Company, as foreign sub-custodians for the Company's securities located
outside the United States, provided that any such institution shall constitute
an "Eligible Foreign Custodian" within the meaning of Rule 17f-5 under the
1940 Act.
The Custodian shall maintain such records as shall be necessary to identify
the assets of the Company held by any foreign sub-custodians. The Custodian
shall furnish to the Company such periodic reports as the Company shall
reasonably request with respect to the assets of the Company held by each
foreign sub-custodian, and shall furnish to the Company such notices of
transfers of securities, deposits or other assets to or from the Company's
account by any foreign sub-custodian as the Company shall request.
The Custodian shall advise the Company promptly if it learns that any foreign
agent or sub-custodian no longer constitutes an "Eligible Foreign Custodian"
and of any failure by any foreign sub-custodian to observe any material term
of its appointment.
The Custodian may authorize one or more of the foreign sub-custodians to use
the facilities of one or more foreign central securities depositories or
clearing agencies listed in Appendix D hereto, or as may hereafter be approved
by vote of the Directors of the Company; provided that any such organization
shall constitute an "Eligible Foreign Custodian."
In the event that any foreign sub-custodian fails to perform any of its
obligations under the terms of its appointment, the Custodian shall use its
best efforts to cause such foreign sub-custodian to perform such obligations.
At the written request of the Company, the Custodian shall use its best
efforts to assert and collect any claim for liability for any loss or damage
incurred by the Company arising out of the failure of any such sub-custodian
to perform such obligations.
(f) Appointment of Agents. The Custodian may at any time or times in its
discretion appoint, and may at any time remove, any other bank or company
which is itself qualified under the 1940 Act to act as a custodian, as its
agent to carry out such of the provisions of this Agreement as the Custodian
may from time to time direct. The Custodian shall be liable for the actions
of its agents.
(g) No Duty to Ascertain Authority. The Custodian shall not be under any
duty or obligation to ascertain whether any Securities at any time delivered
to or held by it for the Fund are such as may properly be held by the Company
under the provisions of its Articles of Incorporation and the Prospectus.
(h) Payments to the Custodian. The Custodian may charge against any money
held by it for the account of the Company any expenses incurred by the
Custodian in the performance of its duties pursuant to this Agreement with
respect to the Company. The Custodian shall also be entitled to charge
against any money of the Company held by it the amount of any loss, damage,
liability or expense incurred with respect to the Company including counsel
fees, for which it shall be entitled to reimbursement under the provisions of
this Agreement.
(i) Reliance on Certificates and Instructions. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by the Custodian and reasonably believed by the Custodian to be
genuine and to be signed by an Authorized Person. The Custodian shall be
entitled to rely upon any Written Instructions or Oral Instructions actually
received by the Custodian pursuant to the applicable Sections of this
Agreement and reasonably believed by the Custodian to be genuine and to be
given by an Authorized Person. The Company agrees to forward to the Custodian
Written Instructions from an Authorized Person confirming such Oral
Instructions in such manner so that such Written Instructions are received by
the Custodian, whether by hand delivery, telex or otherwise, by the close of
business on the same day that such Oral Instructions are given to the
Custodian. The Company agrees that the fact that such confirming instructions
are not received by the Custodian shall in no way affect the validity of the
transactions or enforceability of the transactions hereby authorized by the
Company. The Company agrees that the Custodian shall incur no liability to
the Company in acting upon Oral Instructions given to the Custodian hereunder
concerning such transactions, provided such instructions reasonably appear to
have been received from a duly Authorized Person.
12. Records. The Custodian shall create and maintain all records relating
to its activities and obligations under this Agreement in such a manner as
will meet the obligations of the Fund under the 1940 Act, with particular
attention to Section 31 thereof, Rules 31a-1 and 31a-2 thereunder, applicable
federal and state tax laws and any law or administrative rules or procedures
which may be applicable to the Fund. All such records shall be the property
of the Company and shall at all times during regular business hours of the
Custodian be open for inspection by duly authorized officers, employees or
agents of the Company and employees and agents of the Securities and Exchange
Commission.
13. Opinion of the Company's Independent Accountants. The Custodian shall
take all reasonable action as the Company may from time to time request, to
obtain from year to year favorable opinions from the Company's independent
accountants with respect to the activities hereunder in connection with the
preparation of Amendments to the Company's Registration Statement, and Form N-
SAR or other annual reports to the Securities and Exchange Commission, and
with respect to any other requirements of such Commission.
14. Reports to Fund by Independent Public Accountants. The Custodian shall
provide the Company with reports by independent public accountants on the
accounting system, internal accounting controls and procedures for
safeguarding Securities, including securities deposited and/or maintained in a
Depository or Book-Entry System, relating to the services provided by the
Custodian under this Agreement.
15. Miscellaneous.
(a) Annexed hereto as Appendix A is a certification signed by the Secretary
or an Assistant Secretary of the Company setting forth the names and the
signatures of the present Authorized Persons. The Company agrees to furnish
to the Custodian a new certification in similar form in the event that any
such present Authorized Person ceases to be such an Authorized Person or in
the event that other or additional Authorized Persons are elected or
appointed. Until such new certification shall be received, the Custodian
shall be fully protected in acting under the provisions of this Agreement upon
Oral Instructions or signatures of the present Authorized Persons as set forth
in the last delivered certification.
(b) Annexed hereto as Appendix B is a certification signed by the Secretary
or an Assistant Secretary of the Company setting forth the names and the
signatures of the present officers of the Company. The Company agrees to
furnish to the Custodian a new certification in similar form in the event that
any such present officer ceases to be an officer of the Company or in the
event that other or additional officers are elected or appointed. Until such
new certification shall be received, the Custodian shall be fully protected in
acting under the provisions of this Agreement upon the signature of the
officer as set forth in the last delivered certification.
(c) Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at One
Boston Place, Boston, Massachusetts 02108, or at such other place as the
Custodian may from time to time designate in writing.
(d) Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Company, shall be sufficiently given if
addressed to the Company and mailed or delivered to it at One Exchange Place,
Boston, MA 02109, Attention: Mary E. Moran, Assistant Secretary or at such
other place as the Company may from time to time designate in writing.
(e) This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement.
(f) This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Company without the written
consent of the Custodian, or by the Custodian without the written consent of
the Company authorized or approved by a resolution of the Board of Directors
of the Company, and any attempted assignment without such written consent
shall be null and void.
(g) This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original but such counterparts shall, together,
constitute only one agreement.
(h) The captions of this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect.
16. Termination of Agreement
(a) This Agreement shall become effective on the date hereof and shall
remain in force unless terminated pursuant to the provisions of subparagraph
(b) of this Section 16.
(b) This Agreement may be terminated at any time without payment of any
penalty, upon sixty (60) days' written notice, by vote of the holders of a
majority of the outstanding voting securities of the Company, by vote of a
majority of the Board of Directors of the Company, or by the Custodian. In
the event such notice is given by the Company, it shall be accompanied by a
certified vote of the Board of Directors of the Company, electing a successor
custodian or custodians. In the event such notice is given by the Custodian,
the Company shall, on or before the termination date, deliver to the Custodian
a certified resolution of the Board of Directors of the Company, designating a
successor custodian or custodians. In the absence of such designation, the
Custodian may designate a successor custodian which shall be qualified to so
act under the 1940 Act. If the Company fails to designate a successor
custodian, upon the delivery by the Custodian of all Securities and monies
then owned by the Company to a successor custodian designated by the
Custodian, the Custodian shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement.
(c) Upon the date set forth in such notice under this Section 16, this
Agreement shall terminate to the extent specified in such notice, and the
Custodian shall upon receipt of a notice of acceptance by the successor
custodian on that date deliver directly to the successor custodian all
Securities and monies then held by the Custodian, after deducting all fees,
expenses and other amounts for the payment or reimbursement of which it shall
then be entitled.
17. Governing Law.
This agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their duly authorized officers as of the date
first set forth above.
LEHMAN BROTHERS FUNDS, INC.
By: /s/ Deepak Chowdhury
Name: Deepak Chowdhury
BOSTON SAFE DEPOSIT AND TRUST COMPANY
By: /s/ Merton E. Thompson
Name: Merton E. Thompson
Title: Senior Vice President
CUSTODY AGREEMENT
APPENDIX A
I, Francis J. McNamara, III, Secretary of Lehman Brothers Funds,
Inc. (the "Company"), do hereby certify that the following
individuals have been duly authorized by the Board of Directors of
the Company in conformity with the Company's Articles of
Incorporation and By-Laws to give Oral Instructions and Written
Instructions on behalf of the Daily Income Fund and Municipal Income
Fund and the signatures set forth opposite their respective names are
their true and correct signatures:
Name Signature
Diane Contardo /s/ Diane Contardo
Marie F. Culleton /s/ Marie F. Culleton
Karen D. Devitto /s/ Karen D. Devitto
Joan M. Donahue /s/ Joan M. Donohue
Claire J. Lurie /s/ Claire J. Lurie
Eleanor L. Millan /s/ Eleanor L. Millan
Cynthia E. Peluso /s/ Cynthia E. Peluso
Geraldine E. Ryan /s/ Geraldine E. Ryan
Mary A. Sannella /s/ Mary A. Sannella
Daniel J. Smith /s/ Daniel J. Smith
Merton E. Thompson III /s/ Merton E. Thompson III
George H. Whitney III /s/ George H. Whitney III
/s/ Francis J. McNamara, III
Francis J. McNamara, III
Secretary
CUSTODY AGREEMENT
APPENDIX B
I, Francis J. McNamara, III, Secretary of Lehman Brothers Funds,
Inc. (the "Company"), do hereby certify that the following
individuals serve in the following positions with the Company and
each individual has been duly elected or appointed by the Board of
Directors of the Company to each such position and qualified therefor
in conformity with the Company's Articles of Incorporation and By-
Laws, and the signature set forth opposite their respective names are
their true and correct signatures:
Name Position Signature
Steven Spiegel Chairman /s/ Steven Spiegel
Deepak Chowdhury President /s/Deepak Chowdhury
John M. Winters Vice President /s/ John M. Winters
Vincent Nave Treasurer /s/ Vincent Nave
Francis J. McNamara, III Secretary /s/ Francis J. McNamara, III
Mary E. Moran Assistant Secretary /s/ Mary E. Moran
Gary M. Gardner Assistant Secretary /s/ Gary M. Gardner
Elizabeth Nystedt Assistant Secretary /s/ Elizabeth Nystedt
Michael Kardok Assistant Treasurer /s/ Michael Kardok
Richard W. Ingram Assistant Treasurer /s/ Richard W. Ingram
/s/ Francis J. McNamara, III
Francis J. McNamara, III
Secretary
CUSTODY AGREEMENT
APPENDIX C
Non
CUSTODY AGREEMENT
APPENDIX D
Transnational Depositories:
Euro-clear Clearance System, Belgium
Centrale de Livraison de Valeures Mobilieres (Cedel), Luxembourg
LEHMAN BROTHERS FUNDS, INC.
SCHEDULE I
BOSTON SAFE DEPOSIT AND TRUST COMPANY
CUSTODY FEE SCHEDULE
A. Domestic Safekeeping:
First $ 50 million - .033%
Next $ 50 million - .017%
Next $900 million - .010%
Next $ 2 billion - .0085%
Excess - .007%
B. PLUS $5/security holding charge per month
C. PLUS Transaction charges:
DTC eligible - $10
Non-DTC eligible - $30
Fed Book Entry - $10
Options - $25
Futures - $ 8
GNMA Paydowns - $ 5
Repo - depository - $10
- non-deposit - $17
Physical - Govt - $30
Physical - Corp/Muni - $30
Commercial Paper - $30
Euro-CDs (London) - $30
BOSTON SAFE DEPOSIT AND TRUST COMPANY
GLOBAL CUSTODY FEE SCHEDULE
D. Global Safekeeping:
Group I Assets 5.0 BP
* Group II Assets
First $50 million 12.0 BP
Next $50 million 9.0 BP
Next $200 million 6.0 BP
Excess 4.0 BP
Group III Assets 12.0 BP
Group IV Assets 15.0 BP
Group V Assets 18.0 BP
Group VI Assets 25.0 BP
E. PLUS Transaction Charges:
Group I Transactions $25
Group II Transactions $30
Group III Transactions $30
Group IV Transactions $45
Group V Transactions $60
Group VI Transactions $75
* Third Party F/X $20
___________________________
* The breakpoint levels are based upon assets within each category.
** A Third Party F/X is one in which Boston Safe is not the currency
broker. This charge will be assessed only on transactions where funds are
actually transferred.
Country Groups
Group I Group II Group III Group IV Group V Group VI
Japan Cedel Austria Australia Brazil Argentina
Euroclear Canada Belgium Denmark Greece
Germany Luxembourg Finland Indonesia
Netherlands France Jordan
New Zealand Hong Kong Mexico
Switzerland Ireland Philippines
Italy Spain
Malaysia Sweden
Norway Turkey
Pakistan Venezuela
Peru
Poland
Portugal
Shanghai
Shenzen
Singapore
Thailand
United Kingdom
Uruguay
CUSTODY AGREEMENT
SCHEDULE II
Out-of-Pocket Expenses
The Company will pay to the Custodian as soon as possible after the end of
each month all out-of-pocket expenses reasonably incurred in connection with
the assets of the Company.
Out of pocket expenses include, but are not limited to, the following:
- - Telephone
- - Wire charges ($5.25 per wire)
- - Postage and Insurance
- - Courier Charges
- - Supplies
- - Duplicating
- - Transfer Fees
- - Sub-custodian charges
- - Single Audit Letter
- - Stamp duties
SHARED\GLOBAL\LEHMANBROS\AGRMTS\CUSTODY.DOC
- -20-
Exhibit 8(b)
LEHMAN BROTHERS FUNDS, INC.
AMENDMENT TO CUSTODY AGREEMENT
This Amendment to the Custody Agreement (the "Custody Agreement") dated
August 2, 1993 by and between Lehman Brothers Funds, Inc. (the "Company") and
Boston Safe Deposit and Trust Company is entered into as of the 27th day of
January, 1994.
WHEREAS, the Company currently anticipates adding several new portfolios
to the Company's two existing portfolios, Daily Income Fund and Municipal
Income Fund (together, the "Existing Funds"); and
WHEREAS, the Custody Agreement makes reference to the Existing Funds
only;
NOW, THEREFORE, the parties hereto hereby agree to amend the Custody
Agreement as follows:
1. The phrase "on behalf of its Daily Income Fund and Municipal
Income Fund" contained in the first sentence of the introductory paragraph of
the Custody Agreement is hereby deleted and the phrase "on behalf of each
investment portfolio offered by the Company and to be offered by the Company"
is hereby substituted therefor.
2. Paragraph (a) of Section 16 of the Custody Agreement is hereby
deleted in its entirety and the following paragraph is substituted therefor:
"(a) This Agreement will become effective with respect to a
series of the Company as of the day on which such series commences its
investment operations and shall remain in force unless terminated pursuant to
the provisions of subparagraph (b) of this Section 16."
3. All other terms and conditions of the Custody Agreement shall
remain in full force and effect.
* * * * * * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed on the date set forth above.
LEHMAN BROTHERS FUNDS, INC.
By: /s/ Clinton J. Kendrick
Name: Clinton J. Kendrick
Title: Chairman of the Board
BOSTON SAFE DEPOSIT AND TRUST COMPANY
By: /s/ Sheila S. Crawford
Name: Sheila S. Crawford
Title: Vice President
SHARED\GLOBAL\LEHMBROS\AGRMTS\AMENCUST.DOC
Exhibit 8(c)
LEHMAN BROTHERS FUNDS, INC.
ADMINISTRATION AGREEMENT
August 2, 1993
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
Ladies and Gentlemen:
Lehman Brothers Funds, Inc. (the "Company"), a Maryland corporation
organized under the laws of the State of Maryland, confirms its agreement with
The Boston Company Advisors, Inc. ("Boston Advisors") regarding administration
services to be provided by Boston Advisors to each investment fund offered by
the Company or to be offered in the future (individually, a "Fund" and
collectively, the "Funds"). Boston Advisors agrees to provide services upon
the following terms and conditions:
1. Appointment.
The Company desires to employ and hereby appoints Boston Advisors to act
as the administrator of each Fund. Boston Advisors accepts this appointment
and agrees to furnish the services for the compensation set forth below.
2. Services.
(a) As administrator, and subject to the supervision of the Company's
Board of Directors, Boston Advisors will assist in supervising all aspects of
the operations of the Funds, other than those functions which are to be
performed by the other service providers to the Funds. Boston Advisors'
responsibilities include:
(i) Providing the supervision of the operation of an automated data
processing system to process purchase and redemption orders;
(ii) Providing information concerning the Funds to their shareholders
of record; distributing regular written communications to their record
shareholders such as dividend letters and listings of each Fund's portfolio
securities; and handling shareholder inquiries; and
(iii) Supervising the services of employees ("shareholder
representatives") whose principal responsibility and function shall be to
preserve and strengthen the Company's relationships with its shareholders.
(b) Boston Advisors will prepare reports to the Funds' shareholders
and prepare tax returns and reports to and filings with the Securities and
Exchange Commission.
(c) Boston Advisors will compute the respective net asset value per
share of each of the Funds on each business day.
(d) Boston Advisors shall be responsible for the maintenance of the
registration or qualification of the shares of the Funds for sale under state
securities laws. Payment of share registration fees and any fees for
qualifying or continuing the qualification of the Company as a dealer or
broker shall be made by the Company.
(e) Boston Advisors shall provide the services of certain persons who
may be elected as directors or appointed as officers of the Company by the
Board of Directors.
3. Compensation.
In consideration of services rendered pursuant to this Agreement, each
Fund will pay Boston Advisors on the first business day of each month a fee
for the previous month at the annual rate of .20% of the value of such Fund's
average daily net assets. The fee for the period from the date a Fund
commences its investment operations to the end of the month during which the
Fund commences its investment operations will be prorated according to the
proportion that the period bears to the full monthly period. Upon any
termination of this Agreement with respect to a Fund before the end of any
month, the fee for such part of a month will be prorated according to the
proportion that the period bears to the full monthly period and will be
payable upon the date of termination of this Agreement with respect to the
Fund. For the purpose of determining fees payable to Boston Advisors, the
value of a Fund's net assets will be computed at the times and in the manner
specified in the prospectus and/or the statement of additional information
describing the Fund filed with the Securities and Exchange Commission.
4. Expenses.
Boston Advisors will bear all expenses in connection with the
performance of its services under this Agreement. Each Fund will bear certain
other expenses to be incurred in its operation, including, but not limited to:
costs incurred in connection with the Company's organization; investment
advisory and administration fees for necessary professional and brokerage
services; fees for any pricing service; the costs of regulatory compliance;
and the costs associated with maintaining the Company's legal existence; and
the costs of corresponding with shareholders of the Fund.
5. Reduction of Fee.
If in any fiscal year of a Fund, the aggregate expenses of the Fund
(including fees pursuant to this Agreement and the Company's investment
advisory agreement relating to the Fund, but excluding interest, taxes,
brokerage fees, and, if permitted by the relevant state securities
commissions, extraordinary expenses or other expenses) exceed the expense
limitations of any state having jurisdiction over the Fund, Boston Advisors
will reduce its fee to the Fund for that excess expense, to the extent
required by state law in the same proportion as its administration fee bears
to the Fund's aggregate fees for investment advice and administration. A fee
reduction pursuant to this paragraph 5, if any, will be estimated, reconciled
and paid on a monthly basis.
6. Standard of Care.
Boston Advisors will exercise its best judgment in rendering the
services listed in paragraph 2 above. Boston Advisors will not be liable for
any error of judgment or mistake of law or for any loss suffered by a Fund in
connection with the matters to which this Agreement relates, except that
nothing in this Agreement may be deemed to protect or purport to protect
Boston Advisors against liability to the Company or to shareholders of the
Fund to which Boston Advisors would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of
its duties or by reason of Boston Advisors' reckless disregard of its
obligations and duties under this Agreement.
7. Term of Agreement.
(a) This Agreement will become effective with respect to a Fund as of
the date the Fund commences its investment operations and will continue in
effect until terminated in accordance with paragraph 7(b).
(b) This Agreement is terminable with respect to a Fund, without
penalty, on 60 days' written notice, by the Board of Directors of the Company
or by vote of holders of a majority of the Fund's outstanding voting
securities, or upon 90 days' written notice, by Boston Advisors.
8. Service to Other Companies or Accounts.
(a) The Company understands that Boston Advisors now acts, will
continue to act and may act in the future as investment adviser to fiduciary
and other managed accounts, and as investment adviser, sub-investment adviser
and/or administrator to other investment companies, and the Company has no
objection to Boston Advisors so acting, provided that whenever a Fund and one
or more fiduciary and other managed accounts or other investment companies
advised by Boston Advisors have available funds for investment, investments
suitable and appropriate for each will be allocated in accordance with a
formula believed by Boston Advisors to be equitable to each company.
(b) The Company understands that the persons employed by Boston
Advisors to assist in the performance of Boston Advisors' duties under this
Agreement will not devote their full time to such service and nothing
contained in this Agreement will be deemed to limit or restrict the right of
Boston Advisors or any affiliate of Boston Advisors to engage in and devote
time and attention to other businesses or to render services of whatever kind
or nature.
9. Representation by the Company.
The Company represents that a copy of the Amended Articles of
Incorporation are on file with the Secretary of the State of Maryland.
10. Limitation of Liability.
The execution and delivery of this Agreement have been authorized by the
Directors and signed by an authorized officer of the Company. No Fund will be
liable for any claims against any other Fund.
11. Governing Law.
This agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning to us the
enclosed copy of this Agreement.
Very truly yours,
LEHMAN BROTHERS FUNDS, INC.
By:/s/ Deepak Chowdhury
Name: Deepak Chowdhury
Title: President
Accepted:
THE BOSTON COMPANY ADVISORS, INC.
By:/s/ Peter Gallary
Name: Peter Gallary
Title: President
SHARED\GLOBAL\LEHMBROS\AGRMTS\ADMIN.DOC
Exhibit 9(a)
TRANSFER AGENCY AND REGISTRAR AGREEMENT
AGREEMENT, dated as of August 2, 1993 between LEHMAN BROTHERS FUNDS,
INC. (the "Fund"), a corporation organized under the laws of Maryland and
having its principal place of business at 200 Vesey Street, New York, NY
10285, and THE SHAREHOLDER SERVICES GROUP, INC. (MA) (the "Transfer Agent"), a
Massachusetts corporation with principal offices at One Exchange Place, 53
State Street, Boston, Massachusetts 02109.
W I T N E S S E T H
That for and in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and the Transfer Agent agree as follows:
1. Definitions. Whenever used in this Agreement, the following words
and phrases, unless the context otherwise requires, shall have the following
meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, Partnership Agreement, or similar
organizational document as the case may be, of the Fund as the same may be
amended from time to time.
(b) "Authorized Person" shall be deemed to include any person,
whether or not such person is an officer or employee of the Fund, duly
authorized to give Oral Instructions or Written Instructions on behalf of the
Fund as indicated in a certificate furnished to the Transfer Agent pursuant to
Section 4(c) hereof as may be received by the Transfer Agent from time to
time.
(c) "Board of Directors" shall mean the Board of Directors, Board
of Trustees or, if the Fund is a limited partnership, the General Partner(s)
of the Fund, as the case may be.
(d) "Commission" shall mean the Securities and Exchange
Commission.
(e) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time deposit, or
cause to be deposited or held under the name or account of such a custodian
pursuant to a Custodian Agreement.
(f) "Fund" shall mean the entity executing this Agreement, and if
it is a series fund, as such term is used in the 1940 Act, such term shall
mean each series of the Fund hereafter created, except that appropriate
documentation with respect to each series must be presented to the Transfer
Agent before this Agreement shall become effective with respect to each such
series.
(g) "1940 Act" shall mean the Investment Company Act of 1940.
(h) "Oral Instructions" shall mean instructions, other than
Written Instructions, actually received by the Transfer Agent from a person
reasonably believed by the Transfer Agent to be an Authorized Person;
(i) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any supplements
thereto if any, which has become effective under the Securities Act of 1933
and the 1940 Act.
(j) "Shares" refers collectively to such shares of capital stock,
beneficial interest or limited partnership interests, as the case may be, of
the Fund as may be issued from time to time and, if the Fund is a closed-end
or a series fund, as such terms are used in the 1940 Act any other classes or
series of stock, shares of beneficial interest or limited partnership
interests that may be issued from time to time.
(k) "Shareholder" shall mean a holder of shares of capital stock,
beneficial interest or any other class or series, and also refers to partners
of limited partnerships.
(l) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by the Transfer Agent to be an
Authorized Person and actually received by the Transfer Agent. Written
Instructions shall include manually executed originals and authorized
electronic transmissions, including telefacsimile of a manually executed
original or other process.
2. Appointment of the Transfer Agent. The Fund hereby appoints and
constitutes the Transfer Agent as transfer agent, registrar and dividend
disbursing agent for Shares of the Fund and as shareholder servicing agent for
the Fund. The Transfer Agent accepts such appointments and agrees to perform
the duties hereinafter set forth.
3. Compensation.
(a) The Fund will compensate or cause the Transfer Agent to be
compensated for the performance of its obligations hereunder in accordance
with the fees set forth in the written schedule of fees annexed hereto as
Schedule A and incorporated herein. The Transfer Agent will transmit an
invoice to the Fund as soon as practicable after the end of each calendar
month which will be detailed in accordance with Schedule A, and the Fund will
pay to the Transfer Agent the amount of such invoice within thirty (30) days
after the Fund's receipt of the invoice.
In addition, the Fund agrees to pay, and will be billed
separately for, reasonable out-of-pocket expenses incurred by the Transfer
Agent in the performance of its duties hereunder. Out-of-pocket expenses shall
include, but shall not be limited to, the items specified in the written
schedule of out-of-pocket charges annexed hereto as Schedule B and
incorporated herein. Unspecified out-of-pocket expenses shall be limited to
those out-of-pocket expenses reasonably incurred by the Transfer Agent in the
performance of its obligations hereunder. Reimbursement by the Fund for
expenses incurred by the Transfer Agent in any month shall be made as soon as
practicable but no later than 15 days after the receipt of an itemized bill
from the Transfer Agent.
(b) Any compensation agreed to hereunder may be adjusted from
time to time by attaching to Schedule A, a revised fee schedule executed and
dated by the parties hereto.
4. Documents. In connection with the appointment of the Transfer Agent
the Fund shall deliver or caused to be delivered to the Transfer Agent the
following documents on or before the date this Agreement goes into effect, but
in any case within a reasonable period of time for the Transfer Agent to
prepare to perform its duties hereunder:
(a) If applicable, specimens of the certificates for Shares of
the Fund;
(b) All account application forms and other documents relating to
Shareholder accounts or to any plan, program or service offered by the Fund;
(c) A signature card bearing the signatures of any officer of the
Fund or other Authorized Person who will sign Written Instructions or is
authorized to give Oral Instructions.
(d) A certified copy of the Articles of Incorporation, as
amended;
(e) A certified copy of the By-laws of the Fund, as amended;
(f) A copy of the resolution of the Board of Directors
authorizing the execution and delivery of this Agreement;
(g) A certified list of Shareholders of the Fund with the name,
address and taxpayer identification number of each Shareholder, and the number
of Shares of the Fund held by each, certificate numbers and denominations (if
any certificates have been issued), lists of any accounts against which stop
transfer orders have been placed, together with the reasons therefore, and the
number of Shares redeemed by the Fund; and
(h) An opinion of counsel for the Fund with respect to the
validity of the Shares and the status of such Shares under the Securities Act
of 1933, as amended.
5. Further Documentation. The Fund will also furnish the Transfer
Agent with copies of the following documents promptly after the same shall
become available:
(a) each resolution of the Board of Directors authorizing the
issuance of Shares;
(b) any registration statements filed on behalf of the Fund and
all pre-effective and post-effective amendments thereto filed with the
Commission;
(c) a certified copy of each amendment to the Articles of
Incorporation or the By-laws of the Fund;
(d) certified copies of each resolution of the Board of Directors
or other authorization designating Authorized Persons; and
(e) such other certificates, documents or opinions as the
Transfer Agent may reasonably request in connection with the performance of
its duties hereunder.
6. Representations of the Fund. The Fund represents to the Transfer
Agent that all outstanding Shares are validly issued, fully paid and
non-assessable. When Shares are hereafter issued in accordance with the terms
of the Fund's Articles of Incorporation and its Prospectus, such Shares shall
be validly issued, fully paid and non-assessable.
7. Distributions Payable in Shares. In the event that the Board of
Directors of the Fund shall declare a distribution payable in Shares, the Fund
shall deliver or cause to be delivered to the Transfer Agent written notice of
such declaration signed on behalf of the Fund by an officer thereof, upon
which the Transfer Agent shall be entitled to rely for all purposes,
certifying (i) the identity of the Shares involved, (ii) the number of Shares
involved, and (iii) that all appropriate action has been taken.
8. Duties of the Transfer Agent. The Transfer Agent shall be
responsible for administering and/or performing those functions typically
performed by a transfer agent; for acting as service agent in connection with
dividend and distribution functions; and for performing shareholder account
and administrative agent functions in connection with the issuance, transfer
and redemption or repurchase (including coordination with the Custodian) of
Shares in accordance with the terms of the Prospectus and applicable law. The
operating standards and procedures to be followed shall be determined from
time to time by agreement between the Fund and the Transfer Agent and shall
initially be as described in Schedule C attached hereto. In addition, the
Fund shall deliver to the Transfer Agent all notices issued by the Fund with
respect to the Shares in accordance with and pursuant to the Articles of
Incorporation or By-laws of the Fund or as required by law and shall perform
such other specific duties as are set forth in the Articles of Incorporation
including the giving of notice of any special or annual meetings of
shareholders and any other notices required thereby.
9. Record Keeping and Other Information. The Transfer Agent shall
create and maintain all records required of it pursuant to its duties
hereunder and as set forth in Schedule C in accordance with all applicable
laws, rules and regulations, including records required by Section 31(a) of
the 1940 Act. All records shall be available during regular business hours
for inspection and use by the Fund. Where applicable, such records shall be
maintained by the Transfer Agent for the periods and in the places required by
Rule 31a-2 under the 1940 Act.
Upon reasonable notice by the Fund, the Transfer Agent shall make
available during regular business hours such of its facilities and premises
employed in connection with the performance of its duties under this Agreement
for reasonable visitation by the Fund, or any person retained by the Fund as
may be necessary for the Fund to evaluate the quality of the services
performed by the Transfer Agent pursuant hereto.
10. Other Duties. In addition to the duties set forth in Schedule C,
the Transfer Agent shall perform such other duties and functions, and shall be
paid such amounts therefor, as may from time to time be agreed upon in writing
between the Fund and the Transfer Agent. The compensation for such other
duties and functions shall be reflected in a written amendment to Schedule A
or B and the duties and functions shall be reflected in an amendment to
Schedule C, both dated and signed by authorized persons of the parties hereto.
11. Reliance by Transfer Agent; Instructions
(a) The Transfer Agent will have no liability when acting upon
Written or Oral Instructions believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice
of any change of authority of any person until receipt of a Written
Instruction thereof from the Fund pursuant to Section 4(c). The Transfer
Agent will also have no liability when processing Share certificates which it
reasonably believes to bear the proper manual or facsimile signatures of the
officers of the Fund and the proper countersignature of the Transfer Agent.
(b) At any time, the Transfer Agent may apply to any Authorized
Person of the Fund for Written Instructions and may seek advice from legal
counsel for the Fund, or its own legal counsel, with respect to any matter
arising in connection with this Agreement, and it shall not be liable for any
action taken or not taken or suffered by it in good faith in accordance with
such Written Instructions or in accordance with the opinion of counsel for the
Fund or for the Transfer Agent. Written Instructions requested by the
Transfer Agent will be provided by the Fund within a reasonable period of
time. In addition, the Transfer Agent, its officers, agents or employees,
shall accept Oral Instructions or Written Instructions given to them by any
person representing or acting on behalf of the Fund only if said
representative is an Authorized Person. The Fund agrees that all Oral
Instructions shall be followed within one business day by confirming Written
Instructions, and that the Fund's failure to so confirm shall not impair in
any respect the Transfer Agent's right to rely on Oral Instructions. The
Transfer Agent shall have no duty or obligation to inquire into, nor shall the
Transfer Agent be responsible for, the legality of any act done by it upon the
request or direction of a person reasonably believed by the Transfer Agent to
be an Authorized Person.
(c) Notwithstanding any of the foregoing provisions of this
Agreement, the Transfer Agent shall be under no duty or obligation to inquire
into, and shall not be liable for: (i) the legality of the issuance or sale
of any Shares or the sufficiency of the amount to be received therefor; (ii)
the legality of the redemption of any Shares, or the propriety of the amount
to be paid therefor; (iii) the legality of the declaration of any dividend by
the Board of Directors, or the legality of the issuance of any Shares in
payment of any dividend; or (iv) the legality of any recapitalization or
readjustment of the Shares.
12. Acts of God, etc. The Transfer Agent will not be liable or
responsible for delays or errors by acts of God or by reason of circumstances
beyond its control, including acts of civil or military authority, national
emergencies, labor difficulties, mechanical breakdown, insurrection, war,
riots, or failure or unavailability of transportation, communication or power
supply, fire, flood or other catastrophe.
13. Duty of Care and Indemnification. Each party hereto (the
"Indemnifying Party') will indemnify the other party (the "Indemnified Party")
against and hold it harmless from any and all losses, claims, damages,
liabilities or expenses of any sort or kind (including reasonable counsel fees
and expenses) resulting from any claim, demand, action or suit or other
proceeding (a "Claim") unless such Claim has resulted from a negligent failure
to act or omission to act or bad faith of the Indemnified Party in the
performance of its duties hereunder. In addition, the Fund will indemnify the
Transfer Agent against and hold it harmless from any Claim, damages,
liabilities or expenses (including reasonable counsel fees) that is a result
of: (i) any action taken in accordance with Written or Oral Instructions, or
any other instructions, or share certificates reasonably believed by the
Transfer Agent to be genuine and to be signed, countersigned or executed, or
orally communicated by an Authorized Person; (ii) any action taken in
accordance with written or oral advice reasonably believed by the Transfer
Agent to have been given by counsel for the Fund or its own counsel; or (iii)
any action taken as a result of any error or omission in any record (including
but not limited to magnetic tapes, computer printouts, hard copies and
microfilm copies) delivered, or caused to be delivered by the Fund to the
Transfer Agent in connection with this Agreement.
In any case in which the Indemnifying Party may be asked to indemnify or
hold the Indemnified Party harmless, the Indemnifying Party shall be advised
of all pertinent facts concerning the situation in question. The Indemnified
Party will notify the Indemnifying Party promptly after identifying any
situation which it believes presents or appears likely to present a claim for
indemnification against the Indemnifying Party although the failure to do so
shall not prevent recovery by the Indemnified Party. The Indemnifying Party
shall have the option to defend the Indemnified Party against any Claim which
may be the subject of this indemnification, and, in the event that the
Indemnifying Party so elects, such defense shall be conducted by counsel
chosen by the Indemnifying Party and satisfactory to the Indemnified Party,
and thereupon the Indemnifying Party shall take over complete defense of the
Claim and the Indemnified Party shall sustain no further legal or other
expenses in respect of such Claim. The Indemnified Party will not confess any
Claim or make any compromise in any case in which the Indemnifying Party will
be asked to provide indemnification, except with the Indemnifying Party's
prior written consent. The obligations of the parties hereto under this
Section shall survive the termination of this Agreement.
14. Consequential Damages. In no event and under no circumstances
shall either party under this Agreement be liable to the other party for
indirect loss of profits, reputation or business or any other special damages
under any provision of this Agreement or for any act or failure to act
hereunder.
15. Term and Termination.
(a) This Agreement shall be effective on the date first written
above and shall continue until _____________, and thereafter shall
automatically continue for successive annual periods ending on the anniversary
of the date first written above, provided that it may be terminated by either
party upon written notice given at least 60 days prior to termination.
(b) In the event a termination notice is given by the Fund, it
shall be accompanied by a resolution of the Board of Directors, certified by
the Secretary of the Fund, designating a successor transfer agent or transfer
agents. Upon such termination and at the expense of the Fund, the Transfer
Agent will deliver to such successor a certified list of shareholders of the
Fund (with names and addresses), and all other relevant books, records,
correspondence and other Fund records or data in the possession of the
Transfer Agent, and the Transfer Agent will cooperate with the Fund and any
successor transfer agent or agents in the substitution process.
16. Confidentiality. Both parties hereto agree that any non public
information obtained hereunder concerning the other party is confidential and
may not be disclosed to any other person without the consent of the other
party, except as may be required by applicable law or at the request of the
Commission or other governmental agency. The parties further agree that a
breach of this provision would irreparably damage the other party and
accordingly agree that each of them is entitled, without bond or other
security, to an injunction or injunctions to prevent breaches of this
provision.
17. Amendment. This Agreement may only be amended or modified by a
written instrument executed by both parties.
18. Subcontracting. The Fund agrees that the Transfer Agent may, in
its discretion, subcontract for certain of the services described under this
Agreement or the Schedules hereto; provided that the appointment of any such
Transfer Agent shall not relieve the Transfer Agent of its responsibilities
hereunder.
19. Miscellaneous.
(a) Notices. Any notice or other instrument authorized or
required by this Agreement to be given in writing to the Fund or the Transfer
Agent, shall be sufficiently given if addressed to that party and received by
it at its office set forth below or at such other place as it may from time to
time designate in writing.
To the Fund:
Smith Barney Shearson Investment Funds
Two World Trade Center, Floor 100
New York, NY 10048
Attention:Richard Roelofs
To the Transfer Agent:
The Shareholder Services Group
One Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: Robert F. Radin, President
with a copy to TSSG Counsel
(b) Successors. This Agreement shall extend to and shall be
binding upon the parties hereto, and their respective successors and assigns,
provided, however, that this Agreement shall not be assigned to any person
other than a person controlling, controlled by or under common control with
the assignor without the written consent of the other party, which consent
shall not be unreasonably withheld.
(c) Governing Law. This Agreement shall be governed exclusively
by the laws of the State of New York without reference to the choice of law
provisions thereof. Each party hereto hereby agrees that (i) the Supreme
Court of New York sitting in New York County shall have exclusive jurisdiction
over any and all disputes arising hereunder; (ii) hereby consents to the
personal jurisdiction of such court over the parties hereto, hereby waiving
any defense of lack of personal jurisdiction; and (iii) appoints the person to
whom notices hereunder are to be sent as agent for service of process.
(d) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
(e) Captions. The captions of this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(f) Use of Transfer Agent's Name. The Fund shall not use the
name of the Transfer Agent in any Prospectus, Statement of Additional
Information, shareholders' report, sales literature or other material relating
to the Fund in a manner not approved prior thereto in writing; provided, that
the Transfer Agent need only receive notice of all reasonable uses of its name
which merely refer in accurate terms to its appointment hereunder or which are
required by any government agency or applicable law or rule. Notwithstanding
the foregoing, any reference to the Transfer Agent shall include a statement
to the effect that it is a wholly owned subsidiary of First Data Corporation.
(g) Use of Fund's Name. The Transfer Agent shall not use the
name of the Fund or material relating to the Fund on any documents or forms
for other than internal use in a manner not approved prior thereto in writing;
provided, that the Fund need only receive notice of all reasonable uses of its
name which merely refer in accurate terms to the appointment of the Transfer
Agent or which are required by any government agency or applicable law or
rule.
(h) Independent Contractors. The parties agree that they are
independent contractors and not partners or co-venturers.
(i) Entire Agreement; Severability. This Agreement and the
Schedules attached hereto constitute the entire agreement of the parties
hereto relating to the matters covered hereby and supersede any previous
agreements. If any provision is held to be illegal, unenforceable or invalid
for any reason, the remaining provisions shall not be affected or impaired
thereby.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers, as of the day and
year first above written.
LEHMAN BROTHERS FUNDS, INC.
By: /s/ Deepak Chowdhury
Title: President
THE SHAREHOLDER SERVICES
GROUP, INC.
By: /s/ Michael G. McCarthy
Title: Vice President
A-1
Transfer Agent Fee
Schedule A
Class A shares
The Fund shall pay the Transfer Agent an annualized fee of $11.00 per
shareholder account that is open during any monthly period. Such fee shall be
billed by the Transfer Agent monthly in arrears on a prorated basis of 1/12 of
the annualized fee for all accounts that are open during such a month.
The Fund shall pay the Transfer Agent an additional fee of $.125 per closed
account per month applicable to those shareholder accounts which close in a
given month and remain closed through the following month-end billing cycle.
Such fee shall be billed by the Transfer Agent monthly in arrears.
Class B shares
The Fund shall pay the Transfer Agent an annualized fee of $12.50 per
shareholder account that is open during any monthly period. Such fee shall be
billed by the Transfer Agent monthly in arrears on a prorated basis of 1/12 of
the annualized fee for all accounts that are open during such a month.
The Fund shall pay the Transfer Agent an additional fee of $.125 per closed
account per month applicable to those shareholder accounts which close in a
given month and remain closed through the following month-end billing cycle.
Such fee shall be billed by the Transfer Agent monthly in arrears.
Class C shares
The Fund shall pay the Transfer Agent an annualized fee of $8.50 per
shareholder account that is open during any monthly period. Such fee shall be
billed by the Transfer Agent monthly in arrears on a prorated basis of 1/12 of
the annualized fee for all accounts that are open during such a month.
The Fund shall pay the Transfer Agent an additional fee of $.125 per closed
account per month applicable to those shareholder accounts which close in a
given month and remain closed through the following month-end billing cycle.
Such fee shall be billed by the Transfer Agent monthly in arrears.
A-2
Class D shares
The Fund shall pay the Transfer Agent an annualized fee of $9.50 per
shareholder account that is open during any monthly period. Such fee shall be
billed by the Transfer Agent monthly in arrears on a prorated basis of 1/12 of
the annualized fee for all accounts that are open during such a month.
The Fund shall pay the Transfer Agent an additional fee of $.125 per closed
account per month applicable to those shareholder accounts which close in a
given month and remain closed through the following month-end billing cycle.
Such fee shall be billed by the Transfer Agent monthly in arrears.
B-1
Schedule B
OUT-OF-POCKET EXPENSES
The Fund shall reimburse the Transfer Agent monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:
- Microfiche/microfilm production
- Magnetic media tapes and freight
- Printing costs, including certificates, envelopes,
checks and stationery
- Postage (bulk, pre-sort, ZIP+4, barcoding, first
class) direct pass through to the Fund
- Due diligence mailings
- Telephone and telecommunication costs, including
all lease, maintenance and line costs
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings
- Shipping, Certified and Overnight mail and
insurance
- Year-end form production and mailings
- Terminals, communication lines, printers and other
equipment and any expenses incurred in
connection with such terminals and lines
- Duplicating services
- Courier services
- Incoming and outgoing wire charges
- Federal Reserve charges for check clearance
- Record retention, retrieval and destruction costs,
including, but not limited to exit fees
charged by third party record keeping vendors
- Third party audit reviews
- Insurance
- Such other miscellaneous expenses reasonably
incurred by the Transfer Agent in performing its
duties and responsibilities under this Agreement.
The Fund agrees that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with the Transfer Agent. In addition,
the Fund will promptly reimburse the Transfer Agent for any other unscheduled
expenses incurred by the Transfer
Agent whenever the Fund and the Transfer Agent mutually agree that such
expenses are not otherwise properly borne by the Transfer Agent as part of its
duties and obligations under the Agreement.
C-1
Schedule C
DUTIES OF THE TRANSFER AGENT
1. Shareholder Information. The Transfer Agent or its agent
shall maintain a record of the number of Shares held by each holder of record
which shall include name, address, taxpayer identification and which shall
indicate whether such Shares are held in certificates or uncertificated form.
2. Shareholder Services. The Transfer Agent or its agent will
investigate all inquiries from shareholders of the Fund relating to
Shareholder accounts and will respond to all communications from Shareholders
and others relating to its duties hereunder and such other correspondence as
may from time to time be mutually agreed upon between the Transfer Agent and
the Fund. The Transfer Agent shall provide the Fund with reports concerning
shareholder inquires and the responses thereto by the Transfer Agent, in such
form and at such times as are agreed to by the Fund and the Transfer Agent.
3. Share Certificates.
(a) At the expense of the Fund, it shall supply the Transfer
Agent or its agent with an adequate supply of blank share certificates to meet
the Transfer Agent or its agent's requirements therefor. Such Share
certificates shall be properly signed by facsimile. The Fund agrees that,
notwithstanding the death, resignation, or removal of any officer of the Fund
whose signature appears on such certificates, the Transfer Agent or its agent
may continue to countersign certificates which bear such signatures until
otherwise directed by Written Instructions.
(b) The Transfer Agent or its agent shall issue replacement Share
certificates in lieu of certificates which have been lost, stolen or
destroyed, upon receipt by the Transfer Agent or its agent of properly
executed affidavits and lost certificate bonds, in form satisfactory to the
Transfer Agent or its agent, with the Fund and the Transfer Agent or its agent
as obligees under the bond.
(c) The Transfer Agent or its agent shall also maintain a record
of each certificate issued, the number of Shares represented thereby and the
holder of record. With respect to Shares held in open accounts or
uncertificated form, i.e., no certificate being issued with respect thereto,
the Transfer Agent or its agent shall maintain comparable records of the
record holders thereof, including their names, addresses and taxpayer
identification. The Transfer Agent or its agent shall further maintain a stop
transfer record on lost and/or replaced certificates.
C-2
4. Mailing Communications to Shareholders; Proxy Materials. The
Transfer Agent or its agent will address and mail to
Shareholders of the Fund, all reports to Shareholders, dividend and
distribution notices and proxy material for the Fund's meetings of
Shareholders. In connection with meetings of Shareholders, the Transfer Agent
or its Agent will prepare Shareholder lists, mail and certify as to the
mailing of proxy materials, process and tabulate returned proxy cards, report
on proxies voted prior to meetings, act as inspector of election at meetings
and certify Shares voted at meetings.
5. Sales of Shares
(a) Suspension of Sale of Shares. The Transfer Agent or its
agent shall not be required to issue any Shares of the Fund where it has
received a Written Instruction from the Fund or official notice from any
appropriate authority that the sale of the Shares of the Fund has been
suspended or discontinued. The existence of such Written Instructions or such
official notice shall be conclusive evidence of the right of the Transfer
Agent or its agent to rely on such Written Instructions or official notice.
(b) Returned Checks. In the event that any check or other order
for the payment of money is returned unpaid for any reason, the Transfer Agent
or its agent will: (i) give prompt notice of such return to the Fund or its
designee; (ii) place a stop transfer order against all Shares issued as a
result of such check or order; and (iii) take such actions as the Transfer
Agent may from time to time deem appropriate.
6. Transfer and Repurchase
(a) Requirements for Transfer or Repurchase of Shares. The
Transfer Agent or its agent shall process all requests to transfer or redeem
Shares in accordance with the transfer or repurchase procedures set forth in
the Fund's Prospectus.
The Transfer Agent or its agent will transfer or repurchase Shares
upon receipt of Oral or Written Instructions or otherwise pursuant to the
Prospectus and Share certificates, if any, properly endorsed for transfer or
redemption, accompanied by such documents as the Transfer Agent or its agent
reasonably may deem necessary.
The Transfer Agent or its agent reserves the right to refuse to
transfer or repurchase Shares until it is satisfied that the endorsement on
the instructions is valid and genuine. The Transfer Agent or its agent also
reserves the right to refuse to transfer or repurchase Shares until it is
satisfied that the requested transfer or repurchase is legally authorized, and
it shall incur no liability for the refusal, in good faith, to make transfers
or repurchases which the Transfer Agent or its agent, in
C-3
its good judgement, deems improper or unauthorized, or until it is reasonably
satisfied that there is no basis to any claims adverse
to such transfer or repurchase.
(b) Notice to Custodian and Fund. When Shares are redeemed, the
Transfer Agent or its agent shall, upon receipt of the instructions and
documents in proper form, deliver to the Custodian and the Fund or its
designee a notification setting forth the number of Shares to be repurchased.
Such repurchased shares shall be reflected on appropriate accounts maintained
by the Transfer Agent or its agent reflecting outstanding Shares of the Fund
and Shares attributed to individual accounts.
(c) Payment of Repurchase Proceeds. The Transfer Agent or its
agent shall, upon receipt of the moneys paid to it by the Custodian for the
repurchase of Shares, pay such moneys as are received from the Custodian, all
in accordance with the procedures described in the written instruction
received by the Transfer Agent or its agent from the Fund.
The Transfer Agent or its agent shall not process or effect any
repurchase with respect to Shares of the Fund after receipt by the Transfer
Agent or its agent of notification of the suspension of the determination of
the net asset value of the Fund.
7. Dividends
(a) Notice to Agent and Custodian. Upon the declaration of each
dividend and each capital gains distribution by the Board of Directors of the
Fund with respect to Shares of the Fund, the Fund shall furnish or cause to be
furnished to the Transfer Agent or its agent a copy of a resolution of the
Fund's Board of Directors certified by the Secretary of the Fund setting forth
the date of the declaration of such dividend or distribution, the ex-dividend
date, the date of payment thereof, the record date as of which shareholders
entitled to payment shall be determined, the amount payable per Share to the
shareholders of record as of that date, the total amount payable to the
Transfer Agent or its agent on the payment date and whether such dividend or
distribution is to be paid in Shares of such class at net asset value.
On or before the payment date specified in such resolution of the
Board of Directors, the Custodian of the Fund will pay to the Transfer Agent
sufficient cash to make payment to the shareholders of record as of such
payment date.
(b) Insufficient Funds for Payments. If the Transfer Agent or
its agent does not receive sufficient cash from the Custodian to make total
dividend and/or distribution payments to all shareholders of the Fund as of
the record date, the Transfer
C-4
Agent or its agent will, upon notifying the Fund, withhold payment to all
Shareholders of record as of the record date until sufficient cash is provided
to the Transfer Agent or its agent.
C-5
Exhibit 1
to
Schedule C
Summary of Services
The services to be performed by the Transfer Agent or its agent shall be
as follows:
A. DAILY RECORDS
Maintain daily the following information with respect to each
Shareholder account as received:
o Name and Address (Zip Code)
o Class of Shares
o Taxpayer Identification Number
o Balance of Shares held by Agent
o Beneficial owner code: i.e., male, female, joint tenant,
etc.
o Dividend code (reinvestment)
o Number of Shares held in certificate form
B. OTHER DAILY ACTIVITY
o Answer written inquiries relating to Shareholder accounts
(matters relating to portfolio management, distribution of Shares and other
management policy questions will be referred to the Fund).
o Process additional payments into established Shareholder
accounts in accordance with Written Instruction from the Agent.
o Upon receipt of proper instructions and all required
documentation, process requests for repurchase of Shares.
o Identify redemption requests made with respect to accounts
in which Shares have been purchased within an agreed-upon period of time for
determining whether good funds have been collected with respect to such
purchase and process as agreed by the Agent in accordance with written
instructions set forth by the Fund.
o Examine and process all transfers of Shares, ensuring that
all transfer requirements and legal documents have been supplied.
C-6
o Issue and mail replacement checks.
o Open new accounts and maintain records of exchanges between
accounts
C. DIVIDEND ACTIVITY
o Calculate and process Share dividends and distributions as
instructed by the Fund.
o Compute, prepare and mail all necessary reports to
Shareholders or various authorities as requested by the Fund. Report to the
Fund reinvestment plan share purchases and determination of the reinvestment
price.
D. MEETINGS OF SHAREHOLDERS
o Cause to be mailed proxy and related material for all
meetings of Shareholders. Tabulate returned proxies (proxies must be
adaptable to mechanical equipment of the Agent or its agents) and supply daily
reports when sufficient proxies have been received.
o Prepare and submit to the Fund an Affidavit of Mailing.
o At the time of the meeting, furnish a certified list of
Shareholders, hard copy, microfilm or microfiche and, if requested by the
Fund, Inspection of Election.
E. PERIODIC ACTIVITIES
o Cause to be mailed reports, Prospectuses, and any other enclosures
requested by the Fund (material must be adaptable to mechanical equipment of
Agent or its agents).
o Receive all notices issued by the Fund with respect to the
Preferred Shares in accordance with and pursuant to the Articles of
Incorporation and the Indenture and perform such other specific duties as are
set forth in the Articles of Incorporation including a giving of notice of a
special meeting and notice of redemption in the circumstances and otherwise in
accordance with all relevant provisions of the Articles of Incorporation.
Exhibit 9(b)
LEHMAN BROTHERS FUNDS, INC.
AMENDMENT TO TRANSFER AGENCY AGREEMENT
This Amendment to the Transfer Agency Agreement (the "Transfer Agency
Agreement") dated August 2, 1993 by and between Lehman Brothers Funds, Inc.
(the "Company") and The Shareholder Services Group Inc. is entered into as of
the 27th day of January, 1994.
WHEREAS, the Company currently anticipates adding several new portfolios
to the Company's two existing portfolios, Daily Income Fund and Municipal
Income Fund (together, the "Existing Funds"); and
WHEREAS, the Transfer Agency Agreement makes reference to the Existing
Funds only;
NOW, THEREFORE, the parties hereto hereby agree to amend the Transfer
Agency Agreement as follows:
1. The phrase "composed of: Daily Income Fund and Municipal Income
Fund" contained in the first sentence of the introductory paragraph of the
Transfer Agency Agreement is hereby deleted and the phrase "on behalf of each
investment portfolio offered by the Company and to be offered by the Company"
is hereby substituted therefor.
2. The first sentence of paragraph (a) of Section 15 of the Transfer
Agency Agreement is hereby deleted in its entirety and the following sentence
is substituted therefor:
"This Agreement shall be effective with respect to a series of the
Company as of the day on which such series commences its investment operations
and shall continue in effect until August 2, 1995; provided, however, that it
may be terminated by the Company in the event of a material breach, as set
forth in Section 2 of Schedule D attached hereto."
3. All other terms and conditions of the Transfer Agency Agreement
shall remain in full force and effect.
* * * * * * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed on the date set forth above.
LEHMAN BROTHERS FUNDS, INC.
By: /s/ Clinton J. Kendrick
Name: Clinton J. Kendrick
Title: Chairman of the Board
THE SHAREHOLDERS SERVICES GROUP INC.
By: /s/ Michael G. McCarthy
Name: Michael G. McCarthy
Title: Vice President
SHARED\GLOBAL\LEHMBROS\AGRMTS\AMENTRAN.DOC
Exhibit 9(c)
Form of Amended Schedule A
to
Transfer Agency and Registrar Agreement
As amended on October ___, 1993
Schedule A
Lehman Brothers Daily Income Fund
Lehman Brothers Municipal Income Fund
Lehman Selected Growth Stock Portfolio
Lehman Mexican Growth and Income Portfolio
Lehman Latin America Dollar Income Portfolio
Each Fund shall pay the Transfer Agent an annualized fee of $15.00 per
shareholder account that is open during any monthly period. Such fee shall be
billed by the Transfer Agent monthly in arrears on a prorated basis of 1/12 of
the annualized fee for all accounts that are open during such month.
Each Fund shall pay the Transfer Agent an additional fee of $.125 per
closed amount per month applicable to those shareholder accounts which close
in a given month and remain closed through the following month-end billing
cycle. Such fee shall be billed by the Transfer Agent monthly in arrears.
Lehman Brothers International Equity Fund
Lehman Brothers International Bond Fund
Lehman Brothers Global Emerging Markets Equity Fund
Lehman Brothers Global Emerging Markets Bond Fund
Lehman Brothers High Grade Fixed-Income Fund
Lehman Brothers Large Capitalization U.S. Equity Fund
Lehman Brothers New York Municipal Bond Fund
Lehman Brothers Municipal Bond Fund
Class A shares
Each Fund shall pay the Transfer Agent an annualized fee of $11.00 per
shareholder account that is open during any monthly period. Such fee shall be
billed by the Transfer Agent monthly in arrears on a prorated basis of 1/12 of
the annualized fee for all accounts that are open during such a month.
Class B shares
Each Fund shall pay the Transfer Agent an annualized fee of $12.50 per
shareholder account that is open during any monthly period. Such fee shall be
billed by the Transfer Agent monthly in arrears on a prorated basis of 1/12 of
the annualized fee for all accounts that are open during such a month.
Class C shares
Each Fund shall pay the Transfer Agent an annualized fee of $9.50 per
shareholder account that is open during any monthly period. Such fee shall be
billed by the Transfer Agent monthly in arrears on a prorated basis of 1/12 of
the annualized fee for all accounts that are open during such a month.
Class W shares
Each Fund shall pay the Transfer Agent an annualized fee of $8.50 per
shareholder account that is open during any monthly period. Such fee shall be
billed by the Transfer Agent monthly in arrears on a prorated basis of 1/12 of
the annualized fee for all accounts that are open during such a month.
Additional fees
In addition to the fees specified above, each Fund shall pay the
Transfer Agent an additional fee of $.125 per closed account per month
applicable to the accounts of those holders of Class A shares, Class B shares,
Class C shares and Class W shares which close in a given month and remain
closed through the following month-end billing cycle. Such fee shall be
billed by the Transfer Agent monthly in arrears.
Premier Shares and Select Shares
Each Fund shall pay the Transfer Agent an annualized fee of one and one-
half points (.00015%) of the first $5 billion of assets under management by
the Fund, one basis points (.0001%) of the first assets under management by
the Fund between $5 billion and $10 billion, and eight-tenths of one basis
points (.0008%) of the first assets under management by the Fund in excess of
$10 billion. Such fee shall be based solely on the assets under management of
the relevant Fund allocated to the Select Shares and Premier Shares of the
Fund. Such fee shall be billed by the Transfer Agent monthly in arrears on a
prorated basis of 1/12 of the annualized fee.
Each Fund shall pay the Transfer Agent a minimum monthly payment of
$2,500 and an additional minimum per-class charge of $500 if the Fund adds a
third class of shares offered to institutional investors and of $1,000 for
each institutional class in excess of three classes.
These fees, on October __, 1996 and on each subsequent October __
thereafter, shall be increased by a percentage amount equal to the percentage
increase for the then previous twelve month in the then current Consumer Price
Index (all urban consumers) or its successor index.
Notwithstanding the foregoing, if all other service providers to a
particular Fund waive all of their respective fees, charges and other payments
from the Fund for the same period, the Transfer Agent shall waive all fees,
but not the out-of-pocket reimbursements, for the 180 days immediately
following October __, 1994. If some or all of the other service providers to
a Fund waive some portion of their respective fees, charges and other payments
from the Fund for the same period, the Transfer Agent shall consider waiving a
proportional amount of its fees, but not the out-of-pocket reimbursements, for
the 180 days immediately following such date.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed on the date set forth above.
LEHMAN BROTHERS FUNDS, INC.
By:
Name:
Title:
THE SHAREHOLDERS SERVICES GROUP, INC.
By:
Name:
Title:
- - 3 -
lehman\retail\agrmts\amentra2.doc
Exhibit 13(a)
LEHMAN BROTHERS FUNDS, INC.
PURCHASE AGREEMENT
Lehman Brothers Funds, Inc. (the "Company"), a Maryland corporation, and
Shearson Lehman Brothers Inc. (the "Distributor"), hereby agree as follows:
1. The Company hereby offers the Distributor and the Distributor hereby
purchases 100,000 shares (the "Shares") at $1.00 per share in such classes of
the Company's Daily Income Fund and Municipal Income Fund, each with par value
of $.001 per share (the "Portfolios") as determined by the Distributor. The
Shares are the "initial shares" of the Portfolios. The Distributor hereby
acknowledges receipt of a purchase confirmation reflecting the purchase of
100,000 Shares, and the Company hereby acknowledges receipt from the
Distributor of funds in the amount of $100,000 in full payment for the Shares.
2. The Distributor represents and warrants to the Company that the
Shares are being acquired for investment purposes and not for the purpose of
distribution.
3. The Distributor agrees that if it or any direct or indirect
transferee of the Shares redeems the Shares prior to the fifth anniversary of
the date that the Company begins its investment activities, the Distributor
will pay to the Company an amount equal to the number resulting from
multiplying the Company's total unamortized organizational expenses by a
fraction, the numerator of which is equal to the number of Shares redeemed by
the Distributor or such transferee and the denominator of which is equal to
the number of Shares outstanding as of the date of such redemption, as long as
the administrative position of the staff of the Securities and Exchange
Commission requires such reimbursement.
4. The Company represents that a copy of its Amended Articles of
Incorporation is on file in the Office of the Secretary of the State of
Maryland.
5. This Agreement has been executed on behalf of the Company by the
undersigned officer of the Company in his capacity as an officer of the
Company. The obligations of this Agreement shall be binding only upon the
assets and property of each individual Portfolio and not upon the assets and
property of any other portfolio of the Company and shall not be binding upon
any Director, officer or shareholder of a Portfolio or the Company
individually.
6. This agreement shall be governed by, and construed and interpreted
in accordance with, the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 14th day of July, 1993.
LEHMAN BROTHERS FUNDS, INC.
Attest:
/s/ Peter Kennedy By: /s/ Deepak
Chowdhury
Name: Deepak Chowdhury
Title: President
Attest: SHEARSON LEHMAN BROTHERS INC.
/s/ Richard P. Roelofs By: /s/ Heath B.
McLendon
Name: Heath B. McLendon
Title: Chairman of the Board
SHARED\GLOBAL\LEHMBROS\AGRMTS\PURCHASE.DOC
Exhibit 15(a)
LEHMAN BROTHERS FUNDS, INC.
AMENDED AND RESTATED DISTRIBUTION PLAN
This Distribution Plan (the "Plan") is adopted in accordance with Rule
12b-1 (the " Rule") under the Investment Company Act of 1940, as amended (the
"1940 Act"), by Lehman Brothers Funds, Inc., a corporation organized under the
laws of the State of Maryland (the "Company"), with respect to those classes
(each a Class) of its investment portfolios (each, a "Fund") listed in
Appendix A, as amended from time to time, subject to the following terms and
conditions:
Section 1. Annual Fee.
(a) Distribution Fee. Each Fund will pay to the distributor of its
shares, Lehman Brothers Incorporated, a corporation organized under the laws
of the State of Delaware ( the "Distributor"), on behalf of each Class of such
Fund listed on Appendix A, a distribution fee in connection with the
distribution of shares of each such Class under the Plan at the annual rate of
0.25% of the average daily net assets of such Fund attributable to each such
Class (other than Global Clearing Shares) and at the annual rate of 0.50% of
the average daily net assets of such Fund attributable to the Global Clearing
Shares (the "Distribution Fee").
(b) Payment of Fees. The Distribution Fee will be calculated daily and
paid monthly by each Fund with respect to each Class at the annual rates
indicated above.
Section 2. Expenses Covered by the Plan.
The annual Distribution Fee paid by a Fund to the Distributor under
Section 1 of the Plan may be used by the Distributor to cover advertising,
marketing and distribution expenses intended to result in the sale of the
Fund's shares, including without limitation, payments to Distributor's
financial consultants or introducing brokers.
Section 3. Approval of Shareholders.
The Plan will not take effect with respect to a particular Class of a
Fund, and no fee will be payable in accordance with Section 1 of the Plan,
until the Plan has been approved by a vote of at least a majority of the
outstanding voting securities of such Class.
Section 4. Approval of Directors.
Neither the Plan nor any related agreements will take effect with
respect to a Class of a Fund until approved by a majority vote of both (a) the
full Board of Directors of the Company and (b) those Directors who are not
interested persons of the Company and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to it (the
"Independent Directors"), cast in person at a meeting called for the purpose
of voting on the Plan and the related agreements.
Section 5. Continuance of the Plan.
The Plan will continue in effect from year to year with respect to each
Class of a Fund, so long as its continuance is specifically approved annually
by vote of the Company's Board of Directors in the manner described in Section
4 above.
Section 6. Termination
The Plan may be terminated with respect to a Class of a Fund at any
time, without the payment of any penalty, by the vote of majority of the
outstanding voting securities (as so defined) of such Class of such Fund or by
a vote of a majority of the Independent Directors, in any such event on sixty
days' written notice to the Distributor. The Plan will remain in effect with
respect to a particular Class of a Fund even if the Plan has been terminated
in accordance with this Section 6 with respect to any other Class of the Fund
or of any other Fund.
Section 7. Amendments
The Plan may not be amended with respect to a Class of a Fund to
increase materially the amounts of the fees described in Section 1 above,
unless the amendment is approved by a vote of the holders of at least a
majority of the outstanding voting securities of such Class of such Fund. No
material amendment to the Plan may be made unless approved by the Company's
Board of Directors in the manner described in Section 4 above.
Section 8. Selection of Certain Directors.
While the Plan is in effect, the selection and nomination of the
Company's Directors who are not interested persons of the Company will be
committed to the discretion of the Directors then in office who are not
interested persons of the Company.
Section 9. Written Reports
In each year during which the Plan remains in effect, any person
authorized to direct the disposition of monies paid or payable by a Fund with
respect to a Class pursuant to the Plan or any related agreement will prepare
and furnish to the Company's Board of Directors and the Board will review, at
least quarterly, written reports, complying with the requirements of the Rule,
which set out the amounts expended under the Plan and the purposes for which
those expenditures were made.
Section 10. Preservation of Materials.
The Company will preserve copies of the Plan, any agreement relating to
the Plan and any report made pursuant to Section 9 above, for a period of not
less than six years (the first two years in an easily accessible place) from
the date of the Plan, agreement or report.
Section 11. Meanings of Certain Terms.
As used in the Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning that
those terms have under the 1940 Act and the rules and regulations under the
1940 Act, subject to any exemption that may be granted to the Company under
the 1940 Act by the Securities and Exchange Commission.
Section 12. Filing of Articles of Incorporation.
The Company represents that a copy of its Amended Articles of
Incorporation, as amended from time to time (the "Articles of Incorporation"),
is on file with the Secretary of the State of Maryland.
Section 13. Limitation of Liability.
The obligations of the Company under this Plan will not be binding upon
any of the Directors of the Company, shareholders of the Funds, nominees,
officers, employees or agents, whether past, present or future, of the
Company, individually, but are binding only upon the assets and property of
the Funds, as provided in the Articles of Incorporation. The execution and
delivery of this Plan have been authorized by the Directors of the Company,
and signed by an authorized officer of the Company, acting as such, and
neither the authorization by the Directors nor the execution and delivery by
the officer will be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but will bind only the
property of the Funds as provided in the Articles of Incorporation. No Fund or
Class will be liable for any claims against any other Fund or Class.
Section 14. Dates.
The Plan has been executed by the Company with respect to each Fund as
of January 27, 1994 and will become effective with respect to each Class of a
Fund upon the date such Fund first commences its investment operations.
Section 15. Governing Law.
This Plan shall be governed by, and construed and interpreted in
accordance with, the law of the State of New York.
LEHMAN BROTHERS FUNDS, INC.
By: /s/ Andrew Gordon
Name: Andrew Gordon
Title: President
Dated: February 1, 1995
APPENDIX A
Name of Fund Name of
Class
Lehman Brothers Daily Select Shares
Income Fund
Lehman Brothers Daily CDSC Shares
Income Fund
Lehman Brothers Daily Global Clearing
Income Fund Shares
Lehman Brothers Municipal Select
Shares
Income Fund
Lehman Brothers Municipal CDSC Shares
Income Fund
Lehman Brothers Municipal Global
Clearing
Income Fund Shares
Lehman Brothers New York Select
Shares
Municipal Money Market Fund
Lehman Brothers New York Global
Clearing
Municipal Money Market Fund Shares
G:\SHARED\LEHMAN\RETAIL\AGRMTS\DIST\DISTPLN2.DOC 3
G:\SHARED\LEHMAN\RETAIL\AGRMTS\DIST\DISTPLN2.DOC
G:\SHARED\LEHMAN\RETAIL\AGRMTS\DIST\DISTPLN2.DOC 4
G:\SHARED\LEHMAN\RETAIL\AGRMTS\DIST\DISTPLN2.DOC
Exhibit 15(b)
LEHMAN BROTHERS FUNDS, INC.
AMENDED AND RESTATED
SERVICES AND DISTRIBUTION PLAN
This Services and Distribution Plan (the "Plan") is adopted in
accordance with Rule 12b-1 (the "Rule") under the Investment Company Act of
1940, as amended (the "1940 Act"), by Lehman Brothers Funds, Inc., a
corporation organized under the laws of the State of Maryland (the "Company"),
with respect to those classes (each, a "Class") of its investment portfolios
(each, a "Fund") listed in Appendix A, as amended from time to time, subject
to the following terms and conditions:
Section 1. Annual Fees.
(a) Service Fee. Each Fund will pay to the distributor of its shares,
Lehman Brothers Incorporated, a corporation organized under the laws of the
State of Delaware (the "Distributor"), on behalf of each Class of such Fund
(other than Premier Shares, Class W Shares, Investment Shares, CDSC Shares and
Global Clearing Shares, where applicable), a service fee under the Plan at the
annual rate of 0.25% of the average daily net assets of such Fund attributable
to each such Class (the "Service Fee").
(b) Distribution Fee. In addition to the Service Fee, each Fund will
pay to the Distributor, on behalf of each Class of such Fund, a distribution
fee under the Plan at the annual rate set forth opposite the name of such
Class on Appendix A hereto of the average daily net assets of such Fund
attributable to each such Class (the "Distribution Fee").
(c) Payment of Fees. The Service Fee and Distribution Fee will be
calculated daily and paid monthly by each Fund with respect to each Class at
the annual rates indicated above. The Distributor may make payments to assist
in the distribution of all classes of shares of the Funds out of any portion
of any fee paid to the Distributor or any of its affiliates by a Fund, its
past profits or any other sources available to it.
Section 2. Expenses Covered by the Plan.
(a) The Service Fee payable with respect to Select Shares is in return
for certain administrative and shareholder services provided by the
Distributor to the institutional investors that purchase Select Shares. Such
administrative and shareholder services may include processing purchase,
exchange and redemption requests from customers and placing orders with the
Fund's transfer agent; processing dividend and distribution payments from the
Fund on behalf of customers; providing information periodically to customers
showing their positions in shares; responding to inquiries from customers
concerning their investment in shares; arranging for bank wires; and providing
such other similar services as may be reasonably requested.
The Distributor may retain all or a portion of the payments made to it
pursuant to the Plan for the provision of services to holders of each Fund's
Select Shares pursuant to Shareholder Servicing Agreements entered into by the
Distributor in its sole discretion and may make payments to third parties to
assist in providing the services provided to the Select Shares of each Fund.
The Distributor may waive receipt of fees under the Plan for a period of time.
All expenses incurred by the Company in connection with the Shareholder
Servicing Agreements and the implementation of this Plan with respect to the
Select Shares of a Fund shall be borne entirely by the holders of that Class
of shares of the Fund.
(b) The Distribution Fee with respect to a Fund may be used by the
Distributor to cover advertising, marketing and distribution expenses intended
to result in the sale of the Fund's shares, including, without limitation,
compensation for the Distributor's initial expense of paying its investment
representatives or introducing brokers a commission upon the sale of the
Fund's shares and accruals for interest on the amount of the foregoing
expenses that exceed the Distribution Fee and if applicable, the contingent
deferred sales charge received by the Distributor. In addition, the Service
Fee with respect to a Fund may be used by the Distributor primarily to pay its
financial consultants or introducing brokers for servicing shareholder
accounts, including a continuing fee to each such financial consultant or
introducing broker, which fee shall begin to accrue immediately after the sale
of such shares.
(c) The amount of the Distribution Fee and Service Fee payable by any
Fund under Section 1 hereof is not related directly to expenses incurred by
the Distributor and this Section 2 does not obligate a Fund to reimburse the
Distributor for such expenses. The Distribution Fee and Service Fee set forth
in Section 1 will be paid by a Fund to the Distributor unless and until the
Plan is terminated or not renewed with respect to a Fund or Class thereof, and
any distribution or service expenses incurred by the Distributor on behalf of
a Fund in excess of payments of the Distribution and Service Fees specified in
Section 1 hereof which the Distributor has accrued through the termination
date are the sole responsibility and liability of the Distributor and not an
obligation of a Fund.
Section 3. Approval of Shareholders.
The Plan will not take effect with the respect to a particular Class of
a Fund, and no fee will be payable in accordance with Section 1 of the Plan,
until the Plan has been approved by a vote of at least a majority of the
outstanding voting securities of such Class.
Section 4. Approval of Directors.
Neither the Plan nor any related agreements will take effect with
respect to a Class of a Fund until approved by a majority of both (a) the full
Board of Directors of the Company and (b) those Directors who are not
interested persons of the Company and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to it (the
"Independent Directors"), cast in person at a meeting called for the purpose
of voting on the Plan and the related agreements.
Section 5. Continuance of the Plan.
The Plan will continue in effect from year to year with respect to each
Class of a Fund, so long as its continuance is specifically approved at least
annually by the vote of the Company's Board of Directors in the manner
described in Section 4 above.
Section 6. Termination.
The Plan may be terminated with respect to a Class of a Fund at any
time, without the payment of any penalty, by the vote of a majority of the
outstanding voting securities (as so defined) of such Class of such Fund or by
a vote of the Independent Directors, in any such event on sixty days' notice
to the Distributor. The Plan may remain in effect with respect to a
particular Class of a Fund even if the Plan has been terminated in accordance
with this Section 6 with respect to any other Class of the Fund or of any
other Fund.
Section 7. Amendments.
The Plan may not be amended with respect to a Class of a Fund so as to
increase materially the amounts of the fees described in Section 1 above,
unless the amendment is approved by a vote of the holders of at least a
majority of the outstanding voting securities of such Class of such Fund. No
material amendment to the Plan may be made unless approved by the Company's
Board of Directors in the manner described in Section 4 above.
Section 8. Selection of Certain Directors.
While the Plan is in effect, the selection and nomination of the
Company's Directors who are not interested persons of the Company will be
committed to the discretion of the Directors then in office who are not
interested persons of the Company.
Section 9. Written Reports.
In each year during which the Plan remains in effect, a person
authorized to direct the disposition of monies paid or payable by a Fund with
respect to a Class pursuant to the Plan or any related agreement will prepare
and furnish to the Company's Board of Directors, and the Board will review, at
least quarterly, written reports complying with the requirements of the Rule
which set out the amounts expended under the Plan and the purposes for which
those expenditures were made.
Section 10. Preservation of Materials.
The Company will preserve copies of the Plan, any agreement relating to
the Plan and any report made pursuant to Section 9 above, for a period of not
less than six years (the first two years in an easily accessible place) from
the date of the Plan, agreement or report.
Section 11. Meanings of Certain Terms.
As used in the Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning that
those terms have under the 1940 Act and the rules and regulations under the
1940 Act, subject to any exemption that may be granted to the Company under
the 1940 Act by the Securities and Exchange Commission.
Section 12. Filing of Articles of Incorporation.
The Company represents that a copy of its Amended Articles of
Incorporation, as amended from time to time (the "Articles of Incorporation"),
is on file with the Secretary of the State of Maryland.
Section 13. Limitation of Liability.
The obligations of the Company under this Plan will not be binding upon
any of the Directors of the Company, shareholders of the Funds, nominees,
officers, employees or agents, whether past, present or future, of the
Company, individually, but are binding only upon the assets and property of
the Funds, as provided in the Articles of Incorporation. The execution and
delivery of this Plan have been authorized by the Directors of the Company,
and signed by an authorized officer of the Company, acting as such, and
neither the authorization by the Directors nor the execution and delivery by
the officer will be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but will bind only the
property of the Funds as provided in the Articles of Incorporation. No Fund
or Class will be liable for any claims against any other Fund or Class.
Section 14. Effective Dates.
The Plan will become effective with respect to each Class of a Fund upon
the date such Fund first commences its investment operations.
Section 15. Governing Law.
This Plan shall be governed by, and construed and interpreted in
accordance with, the law of the State of New York.
LEHMAN BROTHERS FUNDS, INC.
By: /s/ Andrew Gordon
Name: Andrew Gordon
Title: President
Dated: February 1, 1995
APPENDIX A
Name of Fund
Name of Class
Distribution Fee
(expressed as an
annual rate of the
average daily net
assets of the Fund
attributable to that
Class)
Lehman Mexican Growth
and Income Portfolio
(the only existing
class)
0.75%
Lehman Latin America
Dollar Income Portfolio
(the only existing
class)
0.50%
Lehman Selected Growth
Stock Portfolio
(the only existing
class)
0.75%
Lehman Brothers Municipal
Income Fund
Class A
0.00%
Lehman Brothers Municipal
Income Fund
Class B
0.50%
Lehman Brothers Municipal
Income Fund
Class C
0.50%
Lehman Brothers Municipal
Income Fund
Class W
0.00%
Lehman Brothers Municipal
Income Fund
Select Shares
0.00%
Lehman Brothers Municipal
Income Fund
Premier Shares
0.00%
Lehman Brothers Daily
Income Fund
Class A
0.00%
Lehman Brothers Daily
Income Fund
Class B
0.50%
Lehman Brothers Daily
Income Fund
Class C
0.50%
Lehman Brothers Daily
Income Fund
Class W
0.00%
Lehman Brothers Daily
Income Fund
Select Shares
0.00%
Lehman Brothers Daily
Income Fund
Premier Shares
0.00%
Lehman Brothers Global
Emerging Markets Bond Fund
Class A
0.00%
Lehman Brothers Global
Emerging Markets Bond Fund
Class B
0.75%
Lehman Brothers Global
Emerging Markets Bond Fund
Class C
0.75%
Lehman Brothers Global
Emerging Markets Bond Fund
Class W
0.00%
Lehman Brothers Global
Emerging Markets Bond Fund
Select Shares
0.00%
Lehman Brothers Global
Emerging Markets Bond Fund
Premier Shares
0.00%
Lehman Brothers Municipal
Bond Fund
Class A
0.00%
Lehman Brothers Municipal
Bond Fund
Class B
0.50%
Lehman Brothers Municipal
Bond Fund
Class C
0.50%
Lehman Brothers Municipal
Bond Fund
Class W
0.00%
Lehman Brothers Municipal
Bond Fund
Select Shares
0.00%
Lehman Brothers Municipal
Bond Fund
Premier Shares
0.00%
Lehman Brothers Large
Capitalization U.S. Equity
Fund
Class A
0.00%
Lehman Brothers Large
Capitalization U.S. Equity
Fund
Class B
0.75%
Lehman Brothers Large
Capitalization U.S. Equity
Fund
Class C
0.75%
Lehman Brothers Large
Capitalization U.S. Equity
Fund
Class W
0.00%
Lehman Brothers Large
Capitalization U.S. Equity
Fund
Select Shares
0.00%
Lehman Brothers Large
Capitalization U.S. Equity
Fund
Premier Shares
0.00%
Lehman Brothers
International
Equity Fund
Class A
0.00%
Lehman Brothers
International
Equity Fund
Class B
0.75%
Lehman Brothers
International
Equity Fund
Class C
0.75%
Lehman Brothers
International
Equity Fund
Class W
0.00%
Lehman Brothers
International
Equity Fund
Select Shares
0.00%
Lehman Brothers
International
Equity Fund
Premier Shares
0.00%
Lehman Brothers
International
Bond Fund
Class A
0.00%
Lehman Brothers
International
Bond Fund
Class B
0.50%
Lehman Brothers
International
Bond Fund
Class C
0.50%
Lehman Brothers
International
Bond Fund
Class W
0.00%
Lehman Brothers
International
Bond Fund
Select Shares
0.00%
Lehman Brothers
International
Bond Fund
Premier Shares
0.00%
Lehman Brothers Global
Emerging Markets Equity
Fund
Class A
0.00%
Lehman Brothers Global
Emerging Markets Equity
Fund
Class B
0.75%
Lehman Brothers Global
Emerging Markets Equity
Fund
Class C
0.75%
Lehman Brothers Global
Emerging Markets Equity
Fund
Class W
0.00%
Lehman Brothers Global
Emerging Markets Equity
Fund
Select Shares
0.00%
Lehman Brothers Global
Emerging Markets Equity
Fund
Premier Shares
0.00%
Lehman Brothers New York
Municipal Bond Fund
Class A
0.00%
Lehman Brothers New York
Municipal Bond Fund
Class B
0.50%
Lehman Brothers New York
Municipal Bond Fund
Class C
0.50%
Lehman Brothers New York
Municipal Bond Fund
Class W
0.00%
Lehman Brothers New York
Municipal Bond Fund
Select Shares
0.00%
Lehman Brothers New York
Municipal Bond Fund
Premier Shares
0.00%
Lehman Brothers High-Grade
Fixed Income Fund
Class A
0.00%
Lehman Brothers High-Grade
Fixed Income Fund
Class B
0.50%
Lehman Brothers High-Grade
Fixed Income Fund
Class C
0.50%
Lehman Brothers High-Grade
Fixed Income Fund
Class W
0.00%
Lehman Brothers High-Grade
Fixed Income Fund
Select Shares
0.00%
Lehman Brothers High-Grade
Fixed Income Fund
Premier Shares
0.00%
G:\SHARED\LEHMAN\RETAIL\AGRMTS\DIST\AMSERPLN.DOC 5
G:\SHARED\LEHMAN\RETAIL\AGRMTS\DIST\AMSERPLN.DOC
Name of Fund
Name of Class
Distribution Fee
(expressed as an annual
rate of the average daily
net assets of the Fund
attributable to that Class)
G:\SHARED\LEHMAN\RETAIL\AGRMTS\DIST\AMSERPLN.DOC
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<OTHER-ITEMS-LIABILITIES> 18,159,697
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<PAID-IN-CAPITAL-COMMON> 605,629,311
<SHARES-COMMON-STOCK> 605,689,946
<SHARES-COMMON-PRIOR> 818,538,261
<ACCUMULATED-NII-CURRENT> 60,635
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<OVERDISTRIBUTION-GAINS> 0
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<EXPENSES-NET> 2,617,523
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<REALIZED-GAINS-CURRENT> (9,307)
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<NET-CHANGE-FROM-OPS> 15,708,786
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<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 2,029,642,924
<NUMBER-OF-SHARES-REDEEMED> (2,258,825,257)
<SHARES-REINVESTED> 16,334,018
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<OTHER-ITEMS-LIABILITIES> 199,803
<TOTAL-LIABILITIES> 2,030,383
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30,936,260
<SHARES-COMMON-STOCK> 3,129,171
<SHARES-COMMON-PRIOR> 2,706,412
<ACCUMULATED-NII-CURRENT> (140,402)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 614,925
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 710,062
<NET-ASSETS> 32,120,845
<DIVIDEND-INCOME> 69,598
<INTEREST-INCOME> 117,848
<OTHER-INCOME> 0
<EXPENSES-NET> 327,747
<NET-INVESTMENT-INCOME> (140,301)
<REALIZED-GAINS-CURRENT> 834,879
<APPREC-INCREASE-CURRENT> 839,337
<NET-CHANGE-FROM-OPS> 1,533,915
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (38,213)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 742,448
<NUMBER-OF-SHARES-REDEEMED> (322,392)
<SHARES-REINVESTED> 2,703
<NET-CHANGE-IN-ASSETS> 5,779,651
<ACCUMULATED-NII-PRIOR> 38,112
<ACCUMULATED-GAINS-PRIOR> (219,954)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 379,556
<AVERAGE-NET-ASSETS> 30,262,565
<PER-SHARE-NAV-BEGIN> 9.73
<PER-SHARE-NII> (0.05)
<PER-SHARE-GAIN-APPREC> 0.59
<PER-SHARE-DIVIDEND> (0.01)
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