UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number 811-09679
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Lend Lease Funds
----------------
(Exact name of Registrant as specified in charter)
803 West Michigan Street, Suite A
Milwaukee, WI 53233
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(Address of principal executive offices) (Zip code)
Constance Dye Shannon
UMB Fund Services, Inc.
803 West Michigan Street, Suite A
Milwaukee, WI 53233
Copy to:
Elizabeth Shea Fries, Esq., P.C.
Goodwin Procter LLP
Exchange Place
Boston, MA 02109-2881
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(Name and address of agent for service)
Registrant's telephone number, including area code: (414) 271-5885
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Date of fiscal year end: January 31
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Date of reporting period: July 31, 2004
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ITEM 1. REPORTS TO STOCKHOLDERS.
The following is a copy of the report transmitted to shareholders pursuant to
Rule 30e-1 under the Investment Company Act of 1940, as amended (the "1940
Act"):
- --------------------------------------------------------------------------------
LEND LEASE FUNDS:
LEND LEASE U.S. REAL ESTATE SECURITIES FUND
SEMI-ANNUAL REPORT
JULY 31, 2004
[GRAPHIC OMITTED]
Shares of Lend Lease Funds are distributed by an independent
third party, UMB Distribution Services, LLC.
- --------------------------------------------------------------------------------
To Our Shareholders
-------------------------------------------------------------
We are pleased to present Lend Lease Funds' 2004 Semi-Annual Report. In the
following pages, you will find detailed financial information for Lend Lease
U.S. Real Estate Securities Fund for the six months ended July 31, 2004.
In the event you have questions regarding this report, or Lend Lease Funds in
general, please call a shareholder services representative at 1-877-563-5327.
Thank you for your continued support of Lend Lease Funds. We look forward to
serving you in the months and years ahead.
Sincerely,
Lend Lease Funds
UMB Distribution Services, LLC, Distributor
LEND LEASE U.S. REAL ESTATE SECURITIES FUND
EXPENSE EXAMPLE
FOR THE SIX MONTHS ENDED JULY 31, 2004
As a shareholder of the Lend Lease U.S. Real Estate Securities Fund (the
"Fund"), you incur ongoing costs, including management fees; distribution
(12b-1) fees; and other Fund expenses. If you invest through a financial
intermediary, you may also incur additional costs such as a transaction fee
charged on the purchase or sale of the Fund or an asset-based management fee.
This Example is intended to help you understand your ongoing costs (in dollars)
of investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period from February 1, 2004 to July 31, 2004.
ACTUAL EXPENSES
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading entitled "Expenses Paid During Period" to estimate the
expenses you paid on your account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Funds' actual expense
ratios and an assumed rate of return of 5% per year before expenses, which is
not the Funds' actual return. The hypothetical account values and expenses may
not be used to estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any costs that may be associated with
investing in the Fund through a financial intermediary. Therefore, the second
line of the table is useful in comparing the ongoing costs only, and will not
help you determine the relative total costs of owning different funds. In
addition, if any costs associated with investing through a financial
intermediary were included, your costs would have been higher.
Class K Class Y
--------------------------------------------------------------
Expenses Expenses
paid paid
Beginning Ending during Beginning Ending during
account account period account account period
value value 2/1/04- value value 2/1/04-
2/1/04 7/31/04 7/31/04(1) 2/1/04 7/31/04 7/31/04(1)
--------------------------------------------------------------
Actual $1,000.00 $1,027.00 $6.30 $1,000.00 $1,028.50 $4.89
Hypothetical
(5% return
before expenses) 1,000.00 1,037.50 6.33 1,000.00 1,040.30 4.92
(1) Expenses are equal to the Funds' annualized expense ratios (1.25% for
Class K shares and 0.97% for Class Y shares), multiplied by the average
account value over the period, and multiplied by 0.4973 (to reflect the
one-half year period).
LEND LEASE U.S. REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS
JULY 31, 2004 (UNAUDITED)
Number
of Shares Value
- --------- -----
COMMON STOCKS 89.8%
APARTMENTS 20.5%
10,490 Apartment Investment & Management Company $ 335,365
38,070 Archstone-Smith Trust 1,120,400
21,700 AvalonBay Communities, Inc. 1,262,940
19,210 BRE Properties, Inc. 665,626
13,280 Camden Property Trust 597,600
73,270 Equity Residential 2,165,128
14,860 Essex Property Trust, Inc. 979,274
6,620 Gables Residential Trust 218,791
11,430 Home Properties of New York, Inc. 429,768
81,200 United Dominion Realty Trust, Inc. 1,574,468
-------------
9,349,360
-------------
DIVERSIFIED/SPECIALTY 8.1%
27,000 Catellus Development Corp. 675,000
4,190 Colonial Properties Trust 159,220
7,070 Cousins Properties, Inc. 227,159
42,710 Vornado Realty Trust 2,481,024
4,640 Washington Real Estate Investment Trust 129,642
-------------
3,672,045
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INDUSTRIAL 10.8%
34,570 AMB Property Corporation 1,214,790
11,720 CenterPoint Properties Corporation 449,814
14,080 Duke Realty Corporation 433,101
22,590 Liberty Property Trust 867,456
50,910 ProLogis 1,732,976
5,110 PS Business Parks, Inc. 205,422
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4,903,559
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OFFICE 19.6%
9,610 Alexandria Real Estate Equities, Inc. 577,465
26,300 American Financial Realty Trust 348,475
25,120 Arden Realty, Inc. 763,648
31,100 Boston Properties, Inc. 1,645,190
17,040 Brandywine Realty Trust 465,192
20,540 CarrAmerica Realty Corporation 626,265
36,300 Corporate Office Properties Trust 919,479
27,700 Crescent Real Estate Equities Company 435,167
37,409 Equity Office Properties Trust 970,763
4,590 Kilroy Realty Corporation 162,486
7,790 Mack-Cali Realty Corporation 318,611
18,300 Maguire Properties, Inc. 452,925
13,160 Prentiss Properties Trust 450,862
15,540 SL Green Realty Corporation 763,014
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8,899,542
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LEND LEASE U.S. REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2004 (UNAUDITED)
Number
of Shares Value
- --------- -----
RETAIL - LOCAL 10.5%
6,290 Developers Diversified Realty Corporation $ 225,685
24,440 Federal Realty Investment Trust 1,031,368
11,320 Kimco Realty Corporation 544,492
34,710 Pan Pacific Retail Properties, Inc. 1,756,326
23,730 Regency Centers Corporation 1,008,525
7,100 Weingarten Realty Investors 218,680
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4,785,076
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RETAIL - REGIONAL 20.3%
40,000 Acadia Realty Trust 566,800
8,070 CBL & Associates Properties, Inc. 444,657
62,810 General Growth Properties, Inc. 1,889,325
37,290 The Macerich Company 1,786,191
18,920 The Rouse Company 923,296
50,690 Simon Property Group, Inc. 2,616,111
44,100 Taubman Centers, Inc. 1,018,710
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9,245,090
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TOTAL COMMON STOCKS (COST $30,188,161) 40,854,672
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PREFERRED STOCKS 7.7%
29,100 CBL & Associates Properties, Series C 745,251
15,600 Developers Diversified Realty Corporation, Series G 406,380
54,200 Equity Office Properties Trust, Series G 1,411,368
17,500 Lexington Corporate Properties Trust, Series B 442,575
7,300 Mills Corporation, Series C 192,647
12,500 New Plan Excel Realty Trust, Series E 322,375
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TOTAL PREFERRED STOCKS (COST $3,422,749) 3,520,596
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LEND LEASE U.S. REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2004 (UNAUDITED)
Principal
Amount
- ---------
$1,067,229 SHORT-TERM INVESTMENT 2.4%
UMB Bank Money Market Fiduciary $ 1,067,229
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TOTAL SHORT-TERM INVESTMENT (COST $1,067,229) 1,067,229
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TOTAL INVESTMENTS (COST $34,678,139) 99.9% 45,442,497
OTHER ASSETS LESS LIABILITIES 0.1% 30,946
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NET ASSETS 100.0% $45,473,443
=============
See notes to financial statements.
SUMMARY OF INVESTMENTS BY SECTOR
PERCENT OF
REAL ESTATE SECTOR TOTAL INVESTMENTS
------------------ -----------------
REAL ESTATE - OFFICE 22.7%
REAL ESTATE - RETAIL - REGIONAL 22.4%
REAL ESTATE - APARTMENTS 20.6%
REAL ESTATE - RETAIL - LOCAL 12.1%
REAL ESTATE - INDUSTRIAL 10.8%
REAL ESTATE - DIVERSIFIED/SPECIALTY 9.1%
SHORT-TERM INVESTMENTS 2.3%
----
TOTAL INVESTMENTS 100.0%
LEND LEASE U.S. REAL ESTATE SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 2004 (UNAUDITED)
ASSETS:
Investments, at value (cost $34,678,139) $45,442,497
Interest and dividends receivable 80,406
Receivable for capital stock sold 9,134
Due from advisor 2,013
Prepaid expenses and other assets 52,742
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Total assets 45,586,792
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LIABILITIES:
Payable for capital stock redeemed 46,879
Accrued distribution fees 441
Other accrued expenses 66,029
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Total liabilities 113,349
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NET ASSETS $45,473,443
=============
NET ASSETS CONSIST OF:
Paid-in-capital $33,649,273
Undistributed net investment income 468,001
Accumulated undistributed net realized gain on investments 591,811
Net unrealized appreciation on investments 10,764,358
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NET ASSETS $45,473,443
=============
SHARES OUTSTANDING, $0.0001 PAR VALUE,
(UNLIMITED SHARES AUTHORIZED)
CLASS K 1,639,463
CLASS Y 966,750
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
CLASS K $17.49
=============
CLASS Y $17.38
=============
See notes to financial statements.
LEND LEASE U.S. REAL ESTATE SECURITIES FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JULY 31, 2004 (UNAUDITED)
INVESTMENT INCOME:
Dividends $1,223,603
Interest 1,029
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Total investment income 1,224,632
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EXPENSES:
Investment advisory fees (see note 5) 178,758
Professional fees 51,759
Administration and accounting fees 37,986
Shareholder servicing fees 37,607
Distribution fees (see note 5) 34,805
Insurance expense 25,553
Trustees' fees and expenses 22,378
Reports to shareholders 18,713
Federal and state registration fees 14,849
Custody fees 6,773
Other expenses 2,048
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Total expenses before waiver and reimbursement of expenses 431,229
Less: Waiver and reimbursement of expenses (175,503)
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Net expenses 255,726
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NET INVESTMENT INCOME 968,906
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REALIZED AND UNREALIZED GAIN:
Net realized gain on investments 639,825
Change in unrealized appreciation on investments (522,333)
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Net gain on investments 117,492
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NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $1,086,398
==============
See notes to financial statements.
LEND LEASE U.S. REAL ESTATE SECURITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
JULY 31, 2004 JANUARY 31
(UNAUDITED) 2004
------------- -----------
OPERATIONS:
Net investment income $968,906 $1,738,010
Net realized gain on investments 639,825 170,844
Change in unrealized appreciation on investments (522,333) 10,443,702
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Net increase in net assets
resulting from operations 1,086,398 12,352,556
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CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares
Class K shares 2,304,447 6,099,862
Class Y shares 4,245,423 9,531,886
Shares issued to shareholders in
reinvestment of distributions
Class K shares 331,983 1,105,895
Class Y shares 215,913 569,998
Payments for shares redeemed
Class K shares (3,470,133) (4,027,874)
Class Y shares (4,750,348) (2,992,119)
------------- -------------
Net increase (decrease) from
capital share transactions (1,122,715) 10,287,648
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DISTRIBUTIONS PAID FROM:
Net investment income
Class K shares (333,456) (932,399)
Class Y shares (234,968) (495,243)
Net realized gains
Class K shares - (176,598)
Class Y shares - (104,280)
------------- -------------
Total distributions (568,424) (1,708,520)
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TOTAL INCREASE (DECREASE) IN NET ASSETS (604,741) 20,931,684
NET ASSETS:
Beginning of year 46,078,184 25,146,500
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End of year (includes undistributed net
investment income of $468,001 and
$67,519, respectively) $45,473,443 $46,078,184
============= =============
See notes to financial statements.
FINANCIAL HIGHLIGHTS
For a Fund Share Outstanding
Throughout the Year/Period.
CLASS K CLASS K CLASS K CLASS K CLASS K
------------- ------------- ------------- ------------- -------------
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
JULY 31, 2004 JANUARY 31, JANUARY 31, JANUARY 31, JANUARY 31,
(UNAUDITED) 2004 2003 2002 2001(1)
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, BEGINNING OF $17.23 $12.76 $12.91 $12.55 $10.00
YEAR/PERIOD
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.36 0.70 0.64 0.70 0.53
Net realized and
unrealized gain/(loss)
on investments 0.11 4.46 (0.19) 0.66 2.58
------------ ------------- ------------- ------------- -------------
Total from investment
operations 0.47 5.16 0.45 1.36 3.11
------------ ------------- ------------- ------------- -------------
DISTRIBUTIONS TO
SHAREHOLDERS:
Dividends from net
investment income (0.21) (0.58) (0.55) (0.66) (0.54)
Distributions from
capital gains - (0.11) (0.05) (0.34) (0.02)
------------ ------------- ------------- ------------- -------------
Total distributions
(0.21) (0.69) (0.60) (1.00) (0.56)
------------ ------------- ------------- ------------- -------------
NET ASSET VALUE, END OF YEAR/PERIOD $17.49 $17.23 $12.76 $12.91 $12.55
============ ============= ============= ============= =============
TOTAL RETURN 2.70%(2) 41.21% 3.29% 11.01% 31.33%2
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of year/period $28,667,019 $28,984,996 $18,727,963 $13,364,481 $11,727,066
Ratio of expenses to
average net assets 1.25%(3) 1.25% 1.25% 1.25% 1.25%(3)
Ratio of expenses before
waivers to average
net assets 2.02%(3) 2.23% 2.75% 2.96% 7.36%(3)
Ratio of net investment
income to average
net assets 4.22%(3) 4.75% 5.21% 5.54% 5.02%(3)
Ratio of net investment
income before waivers to
average net assets 3.45%(3) 3.77% 3.71% 3.83% (1.09)%(3)
Portfolio turnover rate 14%(2) 15% 30% 54% 25%(2)
(1) Commenced operations on February 16, 2000
(2) Not annualized for periods less than a year
(3) Annualized
See notes to financial statements.
------------- ------------- ------------- ------------- -------------
CLASS Y CLASS Y CLASS Y CLASS Y CLASS Y
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
JULY 31, 2004 JANUARY 31, JANUARY 31, JANUARY 31, JANUARY 31,
(UNAUDITED) 2004 2003 2002 2001(1)
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE, BEGINNING OF $17.12 $12.64 $12.78 $12.40 $10.00
YEAR/PERIOD
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.39 0.70 0.67 0.74 0.66
Net realized and
unrealized gain/(loss)
on investments 0.10 4.49 (0.17) 0.65 2.49
------------ ------------- ------------- ------------- -------------
Total from investment
operations 0.49 5.19 0.50 1.39 3.15
------------ ------------- ------------- ------------- -------------
DISTRIBUTIONS TO
SHAREHOLDERS:
Dividends from net
investment income (0.23) (0.60) (0.59) (0.67) (0.72)
Distributions from
capital gains - (0.11) (0.05) (0.34) (0.03)
------------ ------------- ------------- ------------- -------------
Total distributions
(0.23) (0.71) (0.64) (1.01) (0.75)
------------ ------------- ------------- ------------- -------------
NET ASSET VALUE, END OF YEAR/PERIOD $17.38 $17.12 $12.64 $12.78 $12.40
============ ============= ============= ============= =============
TOTAL RETURN 2.85%(2) 41.88% 3.69% 11.39% 31.66%(2)
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of year/period $16,806,424 $17,093,188 $6,418,537 $3,520,190 $686,703
Ratio of expenses to
average net assets 0.97%(3) 0.97% 0.97% 0.97% 0.97%(3)
Ratio of expenses before
waivers to average
net assets 1.79%(3) 2.06% 2.90% 3.85% 22.69%(3)
Ratio of net investment
income to average
net assets 4.53%(3) 5.01% 5.58% 5.82% 5.80%(3)
Ratio of net investment
income before waivers to
average net assets 3.71%(3) 3.92% 3.65% 2.94% (15.91)%(3)
Portfolio turnover rate 14%(2) 15% 30% 54% 25%(2)
(1) Commenced operations on February 16, 2000
(2) Not annualized for periods less than a year
(3) Annualized
See notes to financial statements.
LEND LEASE U.S. REAL ESTATE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2004 (UNAUDITED)
1. ORGANIZATION
Lend Lease Funds (the "Trust") was organized on October 28, 1999 as a
Delaware business trust and registered under the Investment Company Act of
1940 (the "1940 Act"), as amended, as an open-end management investment
company. The Trust currently consists of one investment portfolio: Lend
Lease U.S. Real Estate Securities Fund (the "Fund"). The Fund is a
non-diversified portfolio of the Trust and is authorized to issue three
classes of shares: Class A, Class K and Class Y. The Fund's share classes
differ in terms of sales charges, fees and eligibility requirements. The
Fund's Class K and Class Y commenced operations on February 16, 2000. As of
July 31, 2004, the Fund's Class K and Class Y shares are outstanding. A
substantial portion of the shares issued by the Fund are held by Lend Lease
Real Estate Investments, Inc., (the "Adviser") and an affiliate in an
amount equaling 37%.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
financial statements have been prepared in accordance with accounting
policies generally accepted in the United States of America that require
management to make certain estimates and assumptions at the date of the
financial statements. Actual results may differ from such estimates.
INVESTMENT VALUATION - Equity securities for which market quotations are
readily available are valued at the most recent closing price. If a closing
price is not reported, equity securities for which reliable bid quotations
are available are valued at the mean between bid and asked prices.
Short-term securities having a maturity of 60 days or less are valued at
amortized cost, which approximates market value. Securities and assets for
which market quotations are not readily available are valued at fair value
as determined in good faith by or under the direction of the Board of
Trustees.
FEDERAL INCOME TAXES - It is the Fund's policy to meet the requirements of
the Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all investment company net taxable income and
net capital gains each year to shareholders in a manner which results in no
tax cost to the Fund. Therefore, no federal income tax or excise tax
provision has been made.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME - Securities transactions are
accounted for on a trade date basis. Realized gains and losses from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income is
recognized daily on an accrual basis. Return of capital distributions from
investments will decrease the cost of investment in the investment security
and thus may impact unrealized appreciation or depreciation of the
investment security.
LEND LEASE U.S. REAL ESTATE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 2004 (UNAUDITED)
DISTRIBUTIONS TO SHAREHOLDERS - Dividends from net investment income are
declared and paid quarterly. Distributions of net realized capital gains,
if any, are declared and paid at least annually.
Distributions to shareholders are determined in accordance with federal
income tax regulations and are recorded on the ex-dividend date. The
character of distributions made during the year from net investment income
or net realized gains may differ from the characterization for federal
income tax purposes due to differences in the recognition of income,
expense and gain items for financial statement and tax purposes. Where
appropriate, reclassifications between net asset accounts are made for such
differences that are permanent in nature.
EXPENSES - Each class of shares is charged for those expenses directly
attributable to the class. Expenses that are not directly attributable to a
class of shares are typically allocated among the classes in proportion to
their relative shares outstanding.
INDEMNIFICATIONS - Under the Fund's organizational documents, their
officers and trustees are indemnified against certain liability arising out
of the performance of their duties to the Fund. Additionally, in the normal
course of business, the Fund enters into contracts with service providers
that contain general indemnification clauses. The Fund's maximum exposure
under these arrangements is unknown as this would involve future claims
that may be made against the Fund that have not yet occurred. However, the
Fund expects the risk of loss to be remote.
3. CAPITAL TRANSACTIONS
Transactions of the Fund were as follows:
SIX MONTHS ENDED YEAR ENDED
JULY 31, 2004 JANUARY 31, 2004
---------------- ----------------
CLASS K SHARES: SHARES DOLLARS SHARES DOLLARS
Shares sold 135,284 $2,304,447 409,549 $6,099,862
Shares issued to
holders in
reinvestment of
dividends and
capital gains 18,816 331,983 71,911 1,105,895
Shares redeemed (197,355) (3,470,133) (266,179) (4,027,874)
--------- ----------- --------- ----------
Net increase (decrease) (43,255) $(833,703) 215,281 $3,177,883
--------- ----------- --------- ----------
LEND LEASE U.S. REAL ESTATE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 2004 (UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
JULY 31, 2004 JANUARY 31, 2004
---------------- ----------------
CLASS Y SHARES: SHARES DOLLARS SHARES DOLLARS
Shares sold 244,680 $4,245,423 650,319 $9,531,886
Shares issued to
holders in
reinvestment of 12,287 215,913 36,986 569,998
dividends and
capital gains
Shares redeemed (288,451) (4,750,348) (196,899) (2,992,119)
--------- ----------- --------- ----------
Net increase (decrease) (31,484) $(289,012) 490,406 $7,109,765
--------- ----------- --------- ----------
Net increase
(decrease) from
capital share
transactions (74,739) $(1,122,715) 705,687 $10,287,648
========= ============ ========= ===========
4. INVESTMENT TRANSACTIONS
Purchases and sales of securities for the Fund, excluding short-term
investments, for the six months ended July 31, 2004 were $6,162,629 and
$7,054,364 respectively. There were no purchases or sales of U.S.
Government securities for the six months ended July 31, 2004.
5. INVESTMENT ADVISORY AGREEMENT
The Fund has entered into an Investment Advisory Agreement with the
Adviser. The Adviser has entered into a Sub-Advisory Agreement with Lend
Lease Rosen Real Estate Securities LLC (the "Sub-Adviser") which is
responsible for the day to day management of the Fund's investment program.
The Fund pays a fee based on the Fund's average daily net assets at the
annual rate of 0.80% for the services provided by the Adviser and
Sub-Adviser. The Adviser and Sub-Adviser have contractually agreed to limit
the annual operating expenses of Class K and Class Y shares of the Fund to
1.25% and 0.97%, respectively, through January 31, 2005, subject to later
reimbursement by the Fund in certain circumstances. The expense limitation
has been renewed through January 31, 2005. The Adviser has contractually
agreed that in the event that the foregoing Fund expense limitation is not
renewed, the Adviser will limit the Fund's Class K and Y shares total
annual fund operating expense to 2.25% through January 31, 2011. During the
six months ended July 31, 2004, the Adviser and Sub-Adviser waived
investment advisory fees for the Fund of $175,503. The Adviser is entitled
to recoup from the Fund amounts waived or reimbursed for a period of up to
three years from the date such amounts were waived or reimbursed, provided
the Fund's expenses, including such recouped amounts, do not exceed the
stated expense limitations. At July 31, 2004, $690,086 and $349,279 was
subject to potential recoupment for Class K and Class Y, respectively.
LEND LEASE U.S. REAL ESTATE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 2004 (UNAUDITED)
Pursuant to Rule 12b-1 of the 1940 Act, the Trust has adopted a plan of
distribution for the Class K shares of the Fund (the "Plan") which permits
the Fund to pay for certain expenses associated with the distribution of
its Class K shares and for services provided to its Class K shareholders.
Under the Plan, the Fund's Class K shares may pay expenses pursuant to the
distribution plan equal to a maximum of 0.25% of the average daily net
assets of such class. During the six months ended July 31, 2004, the Fund
incurred distribution expenses of $34,805.
6. INVESTMENT RISKS
As an investor in real estate investment trusts and other public companies
in the real estate industry, the Fund is subject to certain risks generally
incidental to the development, ownership and management of real property.
These risks include the cyclical nature of real estate markets; changes in
general economic, business and credit conditions, including interest rate
levels and availability of financing; applicable federal, state, and local
regulations; changes in availability and cost of insurance; increases in
the costs of labor and materials; material shortages; strikes; changes in
market rental rates; competition for tenants; the bankruptcy or insolvency
of tenants; and potential liability under environmental and other laws.
7. FEDERAL INCOME TAX INFORMATION
At July 31, 2004, gross unrealized appreciation and depreciation on
investments, based on cost for federal income tax purposes was as follows:
Cost of investments $34,564,218
===========
Gross unrealized appreciation $11,168,411
Gross unrealized depreciation (290,132)
-----------
Net unrealized appreciation on investments $10,878,279
===========
The difference between cost amounts for financial statement and federal
income tax purposes is due primarily to timing differences in recognizing
certain gains and losses in security transactions.
LEND LEASE U.S. REAL ESTATE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 2004 (UNAUDITED)
The tax basis of components of distributable net earnings at January 31,
2004 were as follows:
Undistributed ordinary income $82,948
Accumulated capital and other losses (3,606)
Unrealized appreciation 11,226,854
-----------
Total accumulated earnings $11,306,196
===========
The differences between book-basis and tax-basis unrealized appreciation is
attributable primarily to the tax deferral from return of capital
adjustments from real estate investment trusts and losses on wash sales.
At January 31, 2004, the Fund had realized net long-term capital losses
from transactions between November 1, 2003 and January 31, 2004 of $3,606.
Post-October losses for tax purposes are deferred and will be recognized in
the fiscal year ending January 31, 2005.
The tax components of distributions paid during the fiscal years ending
January 31, 2004 and January 31, 2003 were as follows:
Year Ended Year Ended
January 31, 2004 January 31, 2003
---------------- ----------------
Distributions paid from:
Ordinary income $1,560,537 $904,420
Net long-term capital gains 101,798 45,728
Unrecaptured section 1250 gain 46,185 38,455
---------- --------
Total distributions paid $1,708,520 $988,603
========== ========
LEND LEASE U.S. REAL ESTATE SECURITIES FUND
PROXY VOTING POLICIES AND PROCEDURES
For a description of the policies and procedures that the Fund uses to
determine how to vote proxies relating to portfolio securities, please call
1-877-563-5327 and request a Statement of Additional Information. One will
be mailed to you free of charge. The Statement of Additional Information is
also available on the website of the Securities and Exchange Commission at
http://www.sec.gov. After August 31, 2004, information on how the Fund
voted proxies relating to portfolio securities during the twelve month
period ending June 30, 2004, will be available without charge, upon
request, by calling 1-877-563-5327 or by accessing the website of the
Securities and Exchange Commission.
TRUSTEES William J. Klipp
Scott MacKillop
Kevin Malone
Michael A. Torres
INVESTMENT ADVISER LEND LEASE REAL ESTATE INVESTMENTS, INC.
Monarch Tower
3424 Peachtree Road N.E.
Suite 800
Atlanta, GA 30326
INVESTMENT SUB-ADVISER LEND LEASE ROSEN REAL ESTATE SECURITIES LLC
1995 University Avenue, Suite 550
Berkeley, CA 94704
ADMINISTRATOR AND UMB FUND SERVICES, INC.
FUND ACCOUNTANT 803 West Michigan Avenue, Suite A
Milwaukee, Wisconsin 53233
CUSTODIAN UMB BANK, N.A.
928 Grand Blvd.
Kansas City, MO 64106
INDEPENDENT ACCOUNTANTS PRICEWATERHOUSECOOPERS LLP
333 Market Street
San Francisco, CA 94105
LEGAL COUNSEL GOODWIN PROCTER LLP
Exchange Place
Boston, MA 02109
DISTRIBUTOR UMB DISTRIBUTION SERVICES, LLC
803 West Michigan Avenue, Suite A
Milwaukee, Wisconsin 53233
DIVIDEND-DISBURSING UMB FUND SERVICES, INC.
AND TRANSFER AGENT c/o Lend Lease Funds
803 West Michigan Avenue, Suite A
Milwaukee, Wisconsin 53233
This report is submitted for the general information of shareholders of Lend
Lease Funds. It is not authorized for distribution to prospective investors
unless accompanied or preceded by an effective Prospectus for the Lend Lease
U.S. Real Estate Securities Fund. The Prospectus provides more complete
information, including fees and expenses, the investment objectives, risks and
operating policies of the Fund. Read the Prospectus carefully.
LE 410 0704
ITEM 2. CODE OF ETHICS.
Not applicable to semi-annual reports for the period ended July 31, 2004.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to semi-annual reports for the period ended July 31, 2004.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to semi-annual reports for the period ended July 31, 2004.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures (as defined
in Rule 30a-3(c) under the 1940 Act) provide reasonable assurances that
information required to be disclosed by the Registrant on Form N-CSR is
recorded, processed, summarized and reported within the required time periods
and that information required to be disclosed by the Registrant in the reports
that it files or submits on Form N-CSR is accumulated and communicated to the
Registrant's management, including its principal executive and principal
financial officers, as appropriate to allow timely decisions regarding required
disclosure, based on their evaluation of the disclosure controls and procedures
as of a date within 90 days of the filing date of this report.
(b) There was no change in the Registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during
the Registrant's last fiscal half-year that has materially affected, or is
reasonably likely to materially affect, the Registrant's internal control over
financial reporting.
ITEM 11. EXHIBITS.
(a)(1) Code of Ethics. Not applicable to semi-annual reports for the period
ended July 31, 2004.
(a)(2) The certifications required by Rule 30a-2(a) under
the 1940 Act.
(a)(3) Not applicable.
(b) The certifications required by Rule 30a-2(b) under the 1940 Act.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Lend Lease Funds
By: /s/ Michael A. Torres
-----------------------------------
Michael A. Torres
Principal Executive Officer
Date: September 24, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By: /s/ Michael A. Torres
-----------------------------------
Michael A. Torres
Principal Executive Officer
Date: September 24, 2004
By: /s/ Mark A. Hoopes
------------------------------------
Mark A. Hoopes
Principal Financial Officer
Date: September 24, 2004