<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_]Preliminary Proxy Statement [_]Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to (S)240.14a-11(c) or (S) 240.14-12
Security Capital Employee REIT Fund Incorporated
- - - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1)Title of each class of securities to which transaction applies:
(2)Aggregate number of securities to which transaction applies:
(3)Per unit or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4)Proposed maximum aggregate value of transaction:
(5)Total fee paid:
[_]Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1)Amount previously paid:
- - - --------------------------------------------------------------------------------
(2)Form, Schedule or Registration Statement no.:
- - - --------------------------------------------------------------------------------
(3)Filing Party:
- - - --------------------------------------------------------------------------------
(4)Date Filed:
- - - --------------------------------------------------------------------------------
<PAGE>
SECURITY CAPITAL EMPLOYEE REIT FUND INCORPORATED
Notice of
Meeting of Shareholders
December 12, 1997
To the Shareholders:
A special meeting ("Meeting") of the shareholders of Security Capital
Employee REIT Fund Incorporated ("Fund") will be held at the principal executive
offices of Security Capital (US) Management Group Incorporated, 11 South LaSalle
Street, Second Floor, Chicago, Illinois 60603, on December 12, 1997 at 10:00
a.m., Central time for the following purposes:
1. To approve a Distribution and Service Plan for Class I shares and a
Distribution and Service Plan for Class R shares pursuant to Rule 12b-
1 under the Investment Company Act of 1940, as amended;
2. To approve an amended investment advisory agreement between the Fund
and Security Capital (US) Management Group Incorporated (formerly
Security Capital Investment Research Group Incorporated) with a
reduced management fee;
3. To elect two (2) directors to hold office until their successors are
elected and qualified;
4. To amend the fundamental investment objective of the Fund to clarify
that the Fund will invest primarily in real estate securities; and
5. To transact such other business as may properly come before the
meeting and any adjournments thereof.
You will be entitled to notice of, and to vote at, the Meeting and any
adjournments thereof, if you owned shares of the Fund at the close of business
on November 25, 1997. If you attend the meeting, you may vote your shares in
person. If you do not expect to attend the meeting please complete, date, sign
and return the enclosed proxy card in the enclosed postage paid envelope.
By Order of the Board of Directors,
/s/ Jeffrey C. Nellessen
Jeffrey C. Nellessen
Secretary
December 2, 1997
<PAGE>
SECURITY CAPITAL EMPLOYEE REIT FUND INCORPORATED
11 South LaSalle Street
Second Floor
Chicago, Illinois 60603
-----------------------------
PROXY STATEMENT
-----------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors ("Board") of Security Capital
Employee REIT Fund Incorporated ("Fund") for use at the special meeting
("Meeting") of the Fund's shareholders on December 12, 1997. The Meeting will
be held at the principal executive offices of the Fund's investment adviser,
Security Capital (US) Management Group Incorporated ("SC(US)MG"), at 11 South
LaSalle Street, Second Floor, Chicago, Illinois 60603, at 10:00 a.m. Central
time, for the purposes set forth in the Notice of Meeting.
The Fund's shareholders of record as of the close of business on November
25, 1997 ("Record Date"), are entitled to notice of and to vote at the Meeting
and any adjournment thereof. Each full share outstanding is entitled to one
vote, each fractional share outstanding is entitled to the corresponding
proportion of one vote, with respect to each matter voted upon by the
shareholders of the Fund. Class I shareholders have exclusive voting rights
with respect to matters relating solely to Class I shares and Class R
shareholders have exclusive voting rights with respect to matters relating
solely to Class R shares.
All costs associated with the Meeting, including the solicitation of
proxies, will be borne by the Fund. The solicitation of proxies will be made
primarily by mail but also may be made by telephone and/or personal contact by
directors and officers of the Fund and by regular employees of SC(US)MG of its
affiliates.
The individuals named as proxies on the enclosed proxy card will vote in
accordance with your directions as indicated thereon if your proxy is received
properly executed by you or by your duly appointed agent or attorney-in-fact.
If you properly execute your proxy card and give no voting instructions, your
shares will be voted in favor of the proposals described in this Proxy
Statement. You may revoke your proxy statement at any time prior to its
exercise at the Meeting by written notice to the Fund, by execution of a
subsequent proxy or by voting in person at the Meeting.
A quorum of a majority of the Fund's issued and outstanding Class I shares
and Class R shares as of the close of business on the Record Date represented in
person or by proxy, must be present for the transaction of business at the
Meeting. In the absence of a quorum or in the event that a quorum is present at
the meeting but sufficient votes to approve the proposals are not
<PAGE>
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of those shares represented at the Meeting in
person or by proxy. If a quorum is present, the persons named as proxies will
vote those proxies which they are entitled to vote FOR the proposal in favor of
such an adjournment, and will vote those required to vote AGAINST any such
proposal against such adjournment.
Broker non-votes are shares held in street name for which the broker
indicates that instructions have not been received from the beneficial owners or
other persons entitled to vote and the broker does not have discretionary voting
authority. Abstentions and broker non-votes will be counted as shares present
for the purpose of determining whether a quorum is present but will not be
counted as votes cast for the purposes of determining whether sufficient votes
have been received to approve a proposal. Accordingly, abstentions and broker
non-votes effectively will be a vote against adjournment or against any proposal
where the required vote is a percentage of the shares present.
The Notice and Proxy Statement are being mailed to shareholders on or about
December 2, 1997.
2
<PAGE>
BACKGROUND
Currently, the Fund issues one class of shares to directors, trustees and
employees of Security Capital Group Incorporated ("Security Capital Group") and
its affiliates and members of their families ("SC Employees"). On November 25,
1997, the Board adopted a multiple class plan pursuant to Rule 18f-3 under the
Investment Company Act of 1940, as amended ("1940 Act"), pursuant to which Class
I shares will be offered to institutional investors and Class R shares will be
offered to SC Employees and other retail investors. Accordingly, shares of the
Fund owned by existing shareholders who have invested $250,000 or more will be
designated Class I shares and shares of the Fund owned by shareholders who have
invested less than $250,000 will be designated Class R shares.
At present, the Fund receives no distribution services and incurs no
distribution expenses. On November 25, 1997, the Board approved, subject to
shareholder approval, a Distribution and Service Plan for Class I shares and a
Distribution and Service Plan for Class R shares ("Plans") pursuant to Rule 12b-
1 under the 1940 Act to finance the distribution of the Fund's shares and the
provision of services to the Fund's shareholders by the Fund's distributor,
Security Capital Markets Group Incorporated ("Capital Markets"). The annual
compensation payable to Capital Markets under each Plan is .25% of the average
daily net assets of the applicable class, on an annual basis. On November 25,
1997, the Board also approved, and recommended that the shareholders approve, an
amended investment advisory agreement between the Fund and SC(US)MG ("Amended
Advisory Agreement"). The Amended Advisory Agreement provides for SC(US)MG to
furnish the same investment management services to the Fund that SC(US)MG
provides under the investment advisory agreement currently in effect ("Advisory
Agreement"), for compensation equal to .25% less, on an annual basis, than the
compensation payable under the Advisory Agreement. Proposal 1 requests
shareholder approval of the Plans and Proposal 2 requests shareholder approval
of the Amended Advisory Agreement.
On October 9, 1997 the Board elected George F. Keane, Director, and on
November 25, 1997, the Board elected Robert H. Abrams, Director; each to serve
until elected by the Fund's shareholders. Proposal 3 requests that
shareholders elect George F. Keane and Robert H. Abrams to serve on the Board
until their successors are elected and qualified.
On November 25, 1997 the Board voted to change the Fund's name to Security
Capital U.S. Real Estate Shares Incorporated to reflect the future offering of
the Fund's shares to institutional and retail investors. In connection with the
name change, the Board has determined, subject to shareholder approval, to
modify the Fund's fundamental investment policy to provide that the Fund will
invest primarily in real estate securities. Proposal 4 requests that
shareholders approve of the amendment of the Fund's fundamental investment
objective to clarify that the Fund will invest primarily in real estate
securities.
3
<PAGE>
The following tables and examples reflect the current fees paid by the
Fund's Class I and Class R shareholders and the fees that would be paid by each
class if Proposal 1 and Proposal 2 are adopted.
Class I Fee Table
<TABLE>
<CAPTION>
Shareholder Transaction Expenses: Current Proposed
-------- ---------
<S> <C> <C>
Maximum sales charge on purchases and
Reinvested distributions............................. None None
Redemption Fee....................................... None None
Annual Fund Operating Expenses (after expense waivers
and/or reimbursements, as a percentage of
average net assets):
Management fees...................................... 0.85% 0.60%
12b-1 fees........................................... None 0.25%
Other expenses (1)(2)................................ 0.29% 0.15%
Total Fund operating expenses (2).................... 1.14% 1.00%
</TABLE>
- - - -----------
(1) Based upon the experience of the Fund, since April 23, 1997, the effective
date of the Fund's registration statement under the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended, management
estimates a reduction in other expenses in connection with the offering of
Class I shares to institutional investors.
(2) Under the Advisory Agreement, SC(US)MG has committed to waive fees and/or
reimburse expenses to maintain the Fund's total operating expenses, other
than brokerage fees and commissions, interest, taxes and other extraordinary
expenses, at no more than 1.20% of the Fund's average daily net assets for
the year ending December 31, 1997. Under a sponsorship agreement with the
Fund, SC(US)MG has committed to waive fees and/or reimburse expenses to
maintain the Fund's total Class I operating expenses, other than brokerage
fees and commissions, interest, taxes and other extraordinary expenses, at
no more than 1.00% of the Fund's Class I average daily net assets for the
year ending December 31, 1998. Management estimates that without such waiver
or reimbursement, actual total fund operating expenses would be 1.10% of the
Fund's Class I average daily net assets.
4
<PAGE>
Example
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
---- ----- ----- -----
<S> <C> <C> <C> <C>
Current Proposed Current Proposed Current Proposed Current Proposed
------- -------- ------- -------- ------- -------- ------- --------
A shareholder would bear
the following expenses on
a $1,000 investment,
assuming: a five percent
annual return and
operating expenses as
outlined in the fee table
above $12 $11 $36 $35 N/A $61 N/A $134
</TABLE>
Class R Fee Table
<TABLE>
<CAPTION>
Shareholder Transaction Expenses: Current Proposed
-------- ---------
<S> <C> <C>
Maximum sales charge on purchases and
Reinvested distributions............................. None None
Redemption Fee....................................... None None
Annual Fund Operating Expenses (after expense waivers
and/or reimbursements, as a percentage of
average net assets):
Management fees...................................... 0.85% 0.60%
12b-1 fees........................................... None 0.25%
Other expenses (1).................................. 0.29% 0.30%
Total Fund operating expenses (2).................... 1.14% 1.15%
</TABLE>
- - - -----------
(1) Based upon the experience of the Fund, since April 23, 1997, the effective
date of the Fund's registration statement under the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended, management
estimates a .01% increase in other expenses in connection with the offering
of Class R shares to a broader market of retail investors.
(2) Under the Advisory Agreement, SC(US)MG has committed to waive fees and/or
reimburse expenses to maintain the Fund's total operating expenses, other
than brokerage fees and commissions, interest, taxes and other extraordinary
expenses, at no more than 1.20% of the Fund's average daily net assets for
the year ending December 31, 1997. Under a sponsorship agreement with the
Fund, SC(US)MG has committed to waive fees and/or
5
<PAGE>
reimburse expenses to maintain the Fund's total Class R operating expenses,
other than brokerage fees and commissions, interest, taxes and other
extraordinary expenses, at no more than 1.15% of the Fund's Class R average
daily net assets for the year ending December 31, 1998.
Example
<TABLE>
<CAPTION>
One Three Five Ten
Year Years Years Years
---- ----- ----- -----
<S> <C> <C> <C> <C>
Current Proposed Current Proposed Current Proposed Current Proposed
------- -------- ------- -------- ------- -------- ------- --------
A shareholder would bear
the following expenses on
a $1,000 investment,
assuming: a five percent
annual return and
operating expenses as
outlined in the fee table
above $12 $12 $36 $37 N/A $63 N/A $140
</TABLE>
PROPOSAL 1
TO APPROVE A DISTRIBUTION AND SERVICE PLAN FOR CLASS I SHARES
AND A DISTRIBUTION AND SERVICE PLAN FOR CLASS R SHARES
PURSUANT TO RULE 12b-1 UNDER THE 1940 ACT
Existing Distribution Arrangements
Currently, Capital Markets, an affiliate of SC(US)MG, serves without charge
as distributor of the Fund's shares. In this capacity, Capital Markets, as
agent for the Fund, sells the Fund's shares on a best efforts continuous basis
to SC Employees against orders to purchase shares.
The Plans
In connection with the implementation of a multi-class structure, the Board
has determined that it is in the best interests of the Fund and its shareholders
to adopt the Plans to facilitate the distribution of the Fund's shares and the
provision of services to maintain shareholder accounts. The terms of the Plan
for Class R shares and the Plan for Class I shares are identical. Class R
shareholders will vote exclusively on the Plan for Class R shares and Class I
shareholders will vote exclusively on the Plan for Class I shares. A copy of
the Plan for Class R shares is attached to this Proxy Statement as Exhibit A and
a copy of the Plan for Class I shares is attached to this Proxy Statement as
Exhibit B.
6
<PAGE>
Under a Plan, the Class I shares or the Class R shares of the Fund, as
applicable, would pay Capital Markets a fee for distribution activities in
connection with the sale of shares and services provided to maintain shareholder
accounts. The aggregate distribution fee and service fee payable under each Plan
would be .25%, on an annual basis, of the average daily net assets of the
applicable class of shares. To the extent the distribution and service fee
exceeds the expenses of distribution and shareholder servicing activities,
Capital Markets could retain such excess as compensation for its services and
may realize a profit from these arrangements. Capital Markets does not
anticipate that the distribution and service fee will exceed distribution and
service expenses. Payments would be made under the Plans pursuant to a
distribution and servicing agreement ("Distribution Agreement").
Under the Distribution Agreement, Capital Markets, as principal underwriter
of the Class I and the Class R shares would provide distribution services
primarily intended to result in the sale of Class I and Class R shares. Capital
Markets also would provide services to Class I and Class R shareholders, which
may include the provision of information and explanations concerning Class I and
Class R shareholder investments and the status of shareholder accounts. Capital
Markets would be compensated under the Plans for compensation paid to and
expenses incurred by officers, employees and sales representatives, allocable
overhead, telephone and travel expenses, the printing of prospectuses and
reports for other than the existing shareholders, the preparation and
distribution of sales literature, advertising of any type and all other expenses
incurred in connection with the provision of distribution and shareholder
services. The Plans would authorize Capital Markets to pay a portion of the
distribution and service fee it receives from the Fund to other broker-dealers
who sell Class I and Class R shares to compensate such other broker-dealers for
providing distribution and shareholder services.
The Plans are compensation plans which provide for the payment of a specified
distribution and service fee to Capital Markets without regard to the
distribution and service expenses actually incurred by Capital Markets. If a
Plan is terminated by the Board and no successor Plan is adopted, the applicable
class of shares would cease to make payments to Capital Markets, and Capital
Markets would be unable to recover the amount of any of its unreimbursed
distribution or shareholder servicing expenditures.
Each Plan would require that Capital Markets furnish to the Board, at least
quarterly, a written report of the amounts expended pursuant to the Plan and the
purposes for which such expenditures were made. While a Plan is in effect, the
selection and nomination of the Directors who are not "interested persons" of
the Fund within the meaning of Section 2(a)(19) of the 1940 Act ("Independent
Directors") would be committed to the discretion of the Independent Directors
who have no financial interest in the operation of the Plan or any related
agreement ("Independent Plan Directors").
As required by Rule 12b-1 under the 1940 Act, if approved by the Class I
shareholders and the Class R shareholders, the Plans would continue in effect
from year to year, provided such continuance is approved annually by a vote of
the Board, including a majority of the Independent Plan Directors. A Plan may
be terminated at any time, without penalty, by the vote of a majority
7
<PAGE>
of the Independent Plan Directors or by a vote of a majority of the outstanding
Class I or Class R shares of the Fund. All material amendments of a Plan must be
approved by a vote of a majority of the outstanding Class I or Class R shares,
as applicable, and by a vote of the Directors, including a vote of the
Independent Plan Directors, cast in person at a meeting called for that purpose.
Director Consideration of the Distribution Plans
At a meeting held on November 25, 1997, the Directors, including a majority
of the Independent Plan Directors, approved the Plans and recommended that each
Plan be submitted to shareholders for approval. Prior to approving the Plans,
the Directors reviewed detailed information relating to the Plans including
financial evaluations furnished by the Fund's sub-administrator. Among the
matters considered by the Board with respect to the Class I and the Class R
shares were:
1. the cost of the Plans to Class I and Class R shareholders;
2. whether the distribution and shareholder services to be provided by Capital
Markets under the Plans would result in the sale and retention of Class I and
Class R shares;
3. the benefits to the Class I and Class R shares of the Fund from Capital
Market's ability to attract and retain a professional staff to provide
distribution and shareholder services under the Plans;
4. the effect of the cost of the Plans on the performance of Class I and Class
R shareholder investments over various periods of time;
5. the mutual fund industry's practices in the past several years of adopting
and maintaining plans similar to the Plans;
6. the benefit to SC(US)MG, an affiliate of Capital Markets, whose fees for
providing investment management and administrative services to the Fund are
based on the level of the Fund's assets, if distribution services provided
under the Plans result in increased sales of the Fund's Class I and Class R
shares; and
7. the merits of possible alternatives to the Plans.
Following its consideration, the Board, including the Independent Plan
Directors, concluded that the fees payable pursuant to the Plans were reasonable
in view of the services that would be provided by Capital Markets and the
benefits of the Plans to the Class I and the Class R shares of the Fund. The
Directors, including the Independent Plan Directors, determined that the
implementation of the Plans would be in the best interests of the shareholders
and would have a reasonable likelihood of benefitting the Fund and its
shareholders. The Directors,
8
<PAGE>
however, recognized that there was no assurance that the benefits sought
pursuant to the Plans would be achieved nor when or in what period of time the
benefits might be realized.
If this Proposal is not approved by either the Class I or Class R
shareholders, there will be no distribution arrangement in effect for that class
of shares. In this event, the Board may consider such further action as may be
appropriate, and Capital Markets has advised the Board that, if a Plan is not
approved by one or both classes of shares, it may consider the development of a
modified Plan for presentation to the Board and the shareholders.
Required Vote
Approval of each Plan requires the affirmative vote of the holders of the
lesser of (i) 67% of the Class I shares or the Class R shares of the Fund
present at the Meeting, if the holders of more than 50% of the outstanding Class
I shares or the Class R shares are present or represented by proxy at the
Meeting; or (ii) more than 50% of the outstanding Class I shares or Class R
shares of the Fund entitled to vote at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" THE DISTRIBUTION AND
SERVICE PLANS PURSUANT TO RULE 12b-1 UNDER THE 1940 ACT
PROPOSAL 2
TO APPROVE AN AMENDED INVESTMENT ADVISORY AGREEMENT
BETWEEN THE FUND AND
SECURITY CAPITAL (US) MANAGEMENT GROUP INCORPORATED
Description of the Advisory Agreement
Under the Advisory Agreement, SC(US)MG provides a continuous investment
program for the Fund and is responsible for the investment and reinvestment of
the Fund's assets, including the placement of orders for the purchase and sale
of the Fund's portfolio securities. Pursuant to this authority, SC(US)MG
selects brokers and dealers to execute purchase and sale orders for the Fund's
portfolio transactions. Under the Advisory Agreement, SC(US)MG has agreed, at
its own expense, to pay the fees and expenses associated with the printing and
mailing of the Fund's prospectus and sales literature to parties other than
existing shareholders. SC(US)MG also has committed to waive fees, and/or
reimburse expenses to maintain the Fund's total operating expenses, other than
brokerage fees and commissions, interest, taxes and other extraordinary
expenses, at no more than 1.20% of the Fund's average daily net assets for the
year ending December 31, 1997.
As compensation for SC(US)MG's services under the Advisory Agreement, the
Fund has paid SC(US)MG, each month, an amount equal to 1/12 of .85% of the
Fund's average daily net
9
<PAGE>
assets (approximately .85% on an annual basis). The advisory fee is payable in
arrears on the last day of each calendar month. If the Advisory Agreement
terminates prior to the end of a month, the Advisory Fee is prorated to cover
the portion of the month during which services were provided. For the period
April 23, 1997 (the effective date of the Fund's registration statement under
the Securities Act of 1933, as amended) through September 30, 1997, the Fund
paid SC(US)MG advisory fees in the amount of $393,502.
Under the Advisory Agreement, SC(US)MG will not be liable to the Fund or any
Fund shareholder for any act or failure to act in connection with the rendering
of services under the Advisory Agreement or for any mistake of judgment in the
absence of wilful misfeasance, bad faith, gross negligence, or reckless
disregard of obligations or duties by the Adviser. By its terms, the Advisory
Agreement is effective for a two-year period and may be continued for successive
twelve month periods (computed from each January 1) provided its continuance is
approved annually (i) by the vote of a majority of the Board, including a
majority of the Independent Directors, or (ii) by the vote of the holders of a
majority of the outstanding voting securities of the Fund. The Advisory
Agreement is terminable, without penalty, by the Fund, by a vote of a majority
of the outstanding voting securities or by a vote of the Board on 60 days'
written notice to SC(US)MG, or by SC(US)MG on sixty days prior written notice to
the Fund. The Advisory Agreement terminates automatically upon its assignment.
The Advisory Agreement was initially approved by the Board and by the
unanimous written consent of the Fund's sole shareholder on April 11, 1997.
The Amended Advisory Agreement
On November 25, 1997, the Board, including a majority of the Independent
Directors, approved the Amended Advisory Agreement subject to shareholder
approval. The terms and conditions of the Amended Advisory Agreement are
identical to the terms and conditions of the Advisory Agreement, except as to
the effective and termination dates, the reduction of the advisory fee, and the
expense waiver and/or reimbursement, described below. The Amended Advisory
Agreement also reflects the existence of the new multi-class structure. The
duties that SC(US)MG is required to perform under the Amended Advisory Agreement
are identical to those performed by SC(US)MG under the Advisory Agreement and
would be performed by the same personnel. Accordingly, the Fund would receive
the same advisory services under the Amended Advisory Agreement as it receives
under the Advisory Agreement.
Under the Amended Advisory Agreement, SC(US)MG would receive a monthly fee in
an amount equal to 1/12 of .60% of the Fund's average daily net assets
(approximately .60% of an annual basis). Under a separate sponsorship
agreement, SC(US)MG has committed to waive fees and/or reimburse expenses to
maintain the total operating expenses, other than brokerage fees and
commissions, interests, taxes and other extraordinary expenses, of the Class I
shares at no more than 1.00% of the Class I average daily net assets and the
Class R shares at no more than 1.15% of the Class R average daily net assets for
the year ending December 31, 1998. If the Amended Advisory Agreement had been
in effect from April 23, 1997 (the effective date of the
10
<PAGE>
Fund's registration statement under the 1933 Act) through September 30, 1997,
the Fund would have paid SC(US)MG advisory fees in the amount of $277,806 which
is 68% of the amount of advisory fees paid to SC(US)MG under the Advisory
Agreement.
A copy of the Amended Advisory Agreement is attached to this Proxy Statement
as Exhibit C.
If the Amended Advisory Agreement is approved by the shareholders, it will
become effective immediately for an initial two-year period. Thereafter, the
Amended Advisory Agreement will continue in effect for successive twelve-month
periods, provided that such continuance is specifically approved at least
annually by the Board, including a majority of the Independent Directors, or by
a vote of a majority of the outstanding voting securities of the Fund.
Security Capital (US) Management Group Incorporated
SC(US)MG, the Fund's investment adviser, is a Maryland corporation organized
in December 1996. SC(US)MG is a wholly-owned subsidiary of Security Capital
Group, a real estate research, investment and management company. The principal
business address of Security Capital Group is 125 Lincoln Avenue, Santa Fe, New
Mexico 87501 and the principal business address of SC(US)MG is 11 LaSalle
Street, Second Floor, Chicago, Illinois 60603.
SC(US)MG's directors and principal executive officers and their principal
occupations are listed below. Anthony R. Manno Jr., the Chairman of the Board,
Managing Director and President of the Fund, serves as Managing Director and
President of SC(US)MG, John H. Gardner, Jr., Managing Director of the Fund
serves as Managing Director of SC(US)MG and Kenneth D. Statz, Managing Director
of the Fund serves as Managing Director of SC(US)MG. Jeffrey C. Nellessen, Vice
President, Secretary and Treasurer of the Fund, is Vice President, Secretary and
Treasurer of SC(US)MG, and Kevin W. Bedell, Senior Vice President of the Fund,
is Senior Vice President of SC(US)MG. The business address of each director and
principal executive officer of SC(US)MG is 11 South LaSalle Street, Second
Floor, Chicago, Illinois 60603.
11
<PAGE>
DIRECTORS AND PRINCIPAL EXECUTIVE OFFICERS OF SC(US)MG
<TABLE>
<CAPTION>
Position(s) with Principal Occupation(s) During
Name Adviser Past 5 Years
- - - ---- ---------------- ------------------------------
<S> <C> <C>
Anthony R. Manno Jr.*/ Managing Managing Director and President
Director and of SC(US)MG since March 1997
President where he is responsible for
overseeing all investment and
capital allocation matters for
SC(US)MG's public market
securities activities and also
responsible for company and
industry analysis, market
strategy and trading and
reporting; Chairman of the
Board, President and Managing
Director of the Fund since April
1997; from January 1995 to March
1997, he was Managing Director
of SC(US)MG where he performed
the same functions. Mr. Manno
was a member of the Investment
Committee of Security Capital
Group from March 1994 to June
1996. Prior to joining Security
Capital, Mr. Manno was a
Managing Director of LaSalle
Partners Limited from March 1980
to March 1994. Mr. Manno
received his M.B.A. from the
University of Chicago Graduate
School of Business, an M.A. and
B.A. in Economics from
Northwestern University and is a
Certified Public Accountant.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Position(s) with Principal Occupation(s) During
Name Adviser Past 5 Years
- - - ---- ---------------- ------------------------------
<S> <C> <C>
John H. Gardner, Jr.*/ Managing Managing Director of SC(US)MG
Director since July 1997 and Managing
Director of the Fund since July
1997. Prior thereto, Director
of Security Capital Pacific
Trust ("PTR") and the PTR REIT
Manager from February 1995 to
June 1997 and Senior Vice
President of Security Capital
Atlantic Incorporated
("ATLANTIC"), PTR and the PTR
REIT Manager from September 1994
to June 1997, where he had
overall responsibility for asset
management and multifamily
dispositions. Prior to joining
Security Capital, Mr. Gardner
was with Copley Real Estate
Advisors as a Managing Director
and Principal responsible for
portfolio management from
January 1991 to September 1994
and as a Vice President and
Principal of asset management
from December 1984 to December
1990. From July 1977 to
November 1984, Mr. Gardner was a
Real Estate Manager with the
John Hancock Companies. Mr.
Gardner received his M.S. in
Computer Information Systems
from Bentley College and his
B.S. in Accounting from
Stonehill College.
Jeffrey C. Nellessen */ Vice President, Vice President, Secretary and
Secretary and Treasurer of SC(US)MG since
Treasurer March 1997, Vice President of the
Fund since November 1997 and
Secretary and Treasurer of the
Fund since April 1997. Prior
thereto, from June 1988 to March
1997, he was Controller, Manager
of Client Administration and
Compliance Officer at Strong
Capital Management, Inc. Mr.
Nellessen is a Certified Public
Accountant, Certified Management
Accountant and Certified
Financial Planner. He received
his B.A. from the University of
Wisconsin, Madison.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Position(s) with Principal Occupation(s) During
Name Adviser Past 5 Years
- - - ---- ---------------- ------------------------------
<S> <C> <C>
Kenneth D. Statz */ Managing Managing Director of SC(US)MG
Director since November 1997 where he is
responsible for the development
and implementation of portfolio
investment strategy. Prior
thereto, Senior Vice President
from July 1996 to October 1997
and Vice President from May 1995
to June 1996. Prior to joining
Security Capital, Mr. Statz was
a Vice President in the
investment research department
of Goldman, Sachs & Co., from
February 1993 to January 1995,
concentrating on research and
underwriting for the REIT
industry. Prior thereto, Mr.
Statz was a real estate stock
portfolio manager and a managing
director of Chancellor Capital
Management from August 1982 to
February 1992. Mr. Statz
received his M.B.A. and B.B.A.
from the University of
Wisconsin, Madison.
Kevin W. Bedell */ Senior Vice Senior Vice President of SC(US)MG
President since November 1997 and Vice
President of SC(US)MG since July
1996, where he is responsible for
directing the activities of the
industry/company research group
and providing in-depth
proprietary research on publicly
traded real estate companies in
the office and industrial
sectors. Prior to joining
SC(US)MG, Mr. Bedell spent 9
years with LaSalle Partners
Limited where he was Equity Vice
President and Portfolio Manager
responsible for the strategic,
operational and financial
management of a private REIT with
commercial real estate
investments of $600-800 million.
Mr. Bedell received his M.B.A.
from the University of Chicago
and his B.A. from Kenyon College.
</TABLE>
- - - --------------------
*/ Mr. Manno owns 1,128 shares of Security Capital Group Class A Common Stock;
- - - -
Mr. Gardner owns 3,600 shares of Security Capital Group Class A Common Stock;
Mr. Nellessen owns 4,800 shares of Security Capital Group Class A Common Stock;
Mr. Statz owns 5,000 shares of Security Capital Group Class A Common Stock; and
Mr. Bedell owns 1,858 shares of Security Capital Group Class A Common Stock.
14
<PAGE>
SC(US)MG does not serve as investment adviser or investment sub-adviser to
any registered investment companies with similar investment objectives to the
Fund.
Affiliated Broker
The Fund's distributor, Capital Markets, a registered broker-dealer, is a
wholly-owned subsidiary of Security Capital Group Incorporated. The Fund has
not and does not intend to utilize the services of Capital Markets to execute
trades. Accordingly, the Fund has paid no commissions to Capital Markets.
Evaluation by the Board of Directors
At a meeting held on November 25, 1997, the Board, including the
Independent Directors, approved the Amended Advisory Agreement and recommended
that the Amended Advisory Agreement be submitted to the shareholders for their
approval. The Directors approved the Amended Advisory Agreement because they
believed that the reduced advisory fee would benefit both the Fund and the
shareholders. The factor the Board considered most important was that the
reduction in the advisory fee would not reduce the quality or the scope of the
investment advisory services provided to the Fund by SC(US)MG and that
SC(US)MG's obligations to the Fund would remain the same in all respects.
Required Vote
Approval of the Amended Advisory Agreement requires the affirmative vote of
the holders of the lesser of: (i) 67% of the shares present at the Meeting, if
the holders of more than 50% of the outstanding share are present or represented
by proxy at the Meeting; or (ii) more than 50% of the outstanding shares
entitled to vote at the Meeting. If the Amended Advisory Agreement is not
approved by shareholders at the Meeting, the Board will take such action as it
deems appropriate.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE AMENDED ADVISORY AGREEMENT
PROPOSAL 3
ELECTION OF DIRECTORS
The Fund currently has four Directors, Anthony R. Manno Jr., Stephen F.
Kasbeer, George F. Keane and Robert H. Abrams. Two of the Funds's four
Directors, Mr. Manno and Mr. Kasbeer, have been elected by shareholders to hold
office until their successors are elected and qualified. Mr. Manno, who serves
as Chairman of the Board and President of the Fund, is an "interested person" of
the Fund within the meaning of Section 2(a)(19) of the 1940 Act
15
<PAGE>
("Interested Director") by virtue of his association with SC(US)MG. Mr. Kasbeer
is an Independent Director.
On October 9, 1997, the Board elected Mr. Keane, and on November 25, 1997,
the Board elected Mr. Abrams, to serve as Independent Directors of the Fund
until elected to the Board by the Fund's shareholders. On November 25, 1997,
the Board recommended that Class R shareholders elect Mr. Keane and Mr. Abrams
at the Meeting to serve as Independent Directors of the Fund until their
successors are elected and qualified.
The Board has appointed an Audit Committee to make recommendations to the
Board regarding the selection of auditors for the Fund and to confer with the
auditors concerning the scope and results of each audit. Mr. Kasbeer is the
sole member of the Audit Committee. As of the date of this Proxy Statement, the
Audit Committee has held no meetings.
It is the intention of the persons named in the accompanying Proxy to vote
for the election of each of the persons named below. The nominees have
indicated a willingness to serve if elected by shareholders. If a nominee
should not be available for election due to unforseen circumstances, it is the
intention of the persons named in the accompanying Proxy to vote for such other
person as the Directors may recommend.
16
<PAGE>
Director/Nominee Information
<TABLE>
<CAPTION>
Name, Age, Business Experience Class R Shares
During Past Five Years and Other Beneficially Held As of
Relevant Information Director Since November 1, 1997
- - - -------------------- --------------- ----------------
<S> <C> <C>
George F. Keane* 68 November None
Chairman of the Trigen Energy 25, 1997
Corporation since 1994. As founding
chief executive of The Common Fund
in 1971 and Endowment Realty Investors
in 1988, Mr. Keane for many years
headed an investment management
service for colleges, universities
and independent schools that managed
$15 billion for 1,200 education
institutions when he became
President Emeritus of The Common
Fund in 1993. He has served as a
member of the Investment Advisory
Committee of the $75 billion New
York State Common Retirement Fund
since 1982. He has been a Director
of the RCB Trust Company since
1991, a Trustee of the Nicholas
Applegate Investment Trust since
1993 and a Director of the Bramwell
Funds since 1994. He is also a
Director of Universal Stainless &
Alloy Products, Global
Pharmaceutical Corporation, United
Water Resources and United
Properties Group Gulf Resources
Corporation, and the Universal Bond
Fund, and is an advisor to
Associated Energy Managers. Mr.
Keane also serves as a Trustee of
his alma mater, Fairfield
University, and as a Director and
Chairman of the Investment
Committee of the United Negro
College Fund.
Robert H. Abrams * 65 November None
Founder of Colliers ABR, Inc. 26, 1997
(formerly Abrams Benisch Riker
Inc.), a property management firm.
Mr. Abrams was Principal of Colliers
ABR, Inc. from 1978 to 1992 and
since 1992, has served as a
Consultant. From 1959 to 1978, Mr.
Abrams was Executive Vice President
and Director of Cross and Brown
Company. Mr. Abrams also serves as a
Director of Greater New York Mutual
Insurance Company and Trustee
Emeritus and Presidential Counselor
of his alma mater, Cornell
University. Mr. Abrams received his
M.B.A. from Harvard University and
his B.S. from Cornell University.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Name, Age, Business Experience Class R Shares
During Past Five Years and Other Beneficially Held As of
Relevant Information Director Since November 1, 1997
- - - -------------------- --------------- ----------------
<S> <C> <C>
Anthony R. Manno Jr.** 45 April 11, 4,863.813
Managing Director and President of 1997
SC(US)MG since March 1997 where he
is responsible for overseeing all
investment and capital allocation
matters for SC(US)MG's public market
securities activities and also
responsible for company and industry
analysis, market strategy and
trading and reporting; from January
1995 to March 1997, he was Managing
Director of SC(US)MG where he
performed the same functions. Mr.
Manno was a member of the Investment
Committee of Security Capital Group
from March 1994 to June 1996. Prior
to joining Security Capital, Mr.
Manno was a Managing Director of
LaSalle Partners Limited from March
1980 to March 1994. 1994. Mr. Manno
received his M.B.A. from the
University of Chicago Graduate
School of Business, an M.A. and B.A.
in Economics from Northwestern
University and is a Certified Public
Accountant.
Stephen F. Kasbeer*** 72 April 11, None
Retired; Senior Vice President for 1997
Administration and Treasurer for
Loyola University, Chicago from 1981
to July 1994, where he was responsible
for administration, investment, real
estate and treasurer functions,
served as Chief Investment Officer,
was Chairman of the Operations
Committee, was a member of the
Investment and Finance
Committees of the Board of Trustees
and was President and a Director of
the Loyola Management Company. Mr.
Kasbeer received his J.D. from John
Marshall Law School and his M.A. and
B.S. from Northwestern University.
</TABLE>
______________
(*) Nominee.
(**) Interested Director.
(***) Member of the Audit Committee.
Board Compensation
Interested Directors receive no remuneration from the Fund. Each of
the Independent Directors is paid an annual retainer of $14,000, an additional
retainer of $1,000 for each meeting attended and is reimbursed for the expenses
of attendance at any such meetings. The following
18
<PAGE>
information sets forth information regarding estimated compensation of Directors
by the Fund for the fiscal year ending December 31, 1997.
Compensation Table(1)
Fiscal Year Ending December 31, 1997
<TABLE>
<CAPTION>
Pension or
----------
Retirement
----------
Benefits Estimated
-------- ---------
Aggregate Accrued as Annual Total
--------- ---------- ------- -----
Compensation Part of Benefits Compensation
------------ ------- -------- ------------
From Fund Upon From Fund
---- ---- ---- ---------
Name of Person, Position Fund Expenses Retirement Paid To Directors
- - - ------------------------ ---- -------- ---------- -----------------
<S> <C> <C> <C> <C>
George F. Keane
Director.................. $ 2,167 N/A N/A $ 2,167
Stephen F. Kasbeer
Director................. $13,500 N/A N/A $13,500
Robert H. Abrams
Director................. 0 N/A N/A 0
**Anthony R. Manno Jr.
Chairman, Managing 0 N/A N/A 0
Director and
President
</TABLE>
- - - ---------------------------
** Interested Director.
(1) Estimated compensation is prorated from April 23, 1997, the effective date
of the Fund's registration statement under the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended.
Executive Officers and Significant Employees of the Fund
<TABLE>
<CAPTION>
Position with Fund Business Experience
Name and Age and Term During Past 5 Years
- - - ------------ ------------------ -------------------
<S> <C> <C>
Anthony R. Manno Jr., 45 Chairman, See "Proposal 2,
Managing Director Director/Nominee Information"
and President above, for biographical
since April 1997 information.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Position with Fund Business Experience
Name and Age and Term During Past 5 Years
- - - ------------ ------------------ -------------------
<S> <C> <C>
John H. Gardner, Jr., 43 Managing See "Proposal 2, Directors and
Director since Principal Executive Officers
July 1997 of SC(US)MG" above, for
biographical information.
Jeffrey C. Nellessen, 36 Vice President See "Proposal 2, Directors and
since December Principal Executive Officers
1997 and Secretary of SC(US)MG" above, for
and Treasurer biographical information.
since April 199
Kenneth D. Statz, 38 Managing Director See "Proposal 2, Directors and
since November Principal Executive Officers
1997, Senior of SC(US)MG" above, for
Vice President biographical information.
from April 1997
to November 1997
Kevin W. Bedell, 41 Senior Vice See "Proposal 2, Directors and
President since Principal Executive Officers
November 1997 of SC(US)MG" above, for
biographical information.
</TABLE>
Required Vote
The election of a Director requires the affirmative vote of a majority of
the shareholders present at the Meeting in person or by proxy and entitled to
vote, provided a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" THE NOMINEES TO THE BOARD
PROPOSAL 4
TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT
OBJECTIVE TO CLARIFY THAT THE FUND SHALL INVEST
PRIMARILY IN REAL ESTATE SECURITIES
Currently, the Fund's investment objective is to provide above-average
total returns, including current income and capital appreciation, primarily
through investments in real estate securities in the United States. The Fund's
long-term objective is to achieve top-quartile total returns as compared with
other mutual funds that invest primarily in the securities of publicly traded
REITs in the United States by integrating in-depth proprietary real estate
market research with sophisticated capital markets research and modeling
techniques. These fundamental investment objectives may be changed only upon
the approval of the Fund's shareholders.
20
<PAGE>
The Board has concluded that it would be in the best interests of the Fund
and its shareholders to amend the Fund's long-term investment objective to
clarify that the Fund will invest primarily in real estate securities, which may
include publicly-traded REITs or other securities of real estate companies. For
purposes of the Fund's investment policies, a "real estate company" is one that
derives at least 50% of its revenues from the ownership, construction,
financing, management or sale of commercial, industrial or residential real
estate or that has at least 50% of its assets invested in such real estate.
Amendment of the Fund's long-term investment policy would broaden the scope
of permissible portfolio investments and provide the Fund with the flexibility
to continue both to invest in publicly-traded REITS and to take advantage of
investment opportunities in other securities of real estate companies. Enhanced
investment flexibility would enable the Fund to diversify its investment
portfolio and thereby reduce the risk to shareholders of a down-turn in the
market for publicly-traded REITS. Thus, the Board recommends changing the
Fund's long-term investment objective to state that the Fund intends "to achieve
top-quartile total returns as compared with other mutual funds that invest
primarily in real estate securities in the United States, by integrating in-
depth proprietary real estate market research with sophisticated capital markets
research and modeling techniques."
Required Vote
Amendment of this fundamental policy requires the affirmative vote of the
holders of the lesser of: (i) 67% of the shares of the Fund present at the
Meeting, if the holders of more than 50% of the outstanding shares are present
or represented by proxy at the Meeting; or (ii) more than 50% of the outstanding
shares of the Fund entitled to vote at the Meeting.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR AMENDING THE FUND'S FUNDAMENTAL INVESTMENT
POLICY TO CLARIFY THAT THE FUND WILL INVEST
PRIMARILY IN REAL ESTATE SECURITIES
OTHER MATTERS
The Fund's management does not know of any matters to be presented to the
Meeting other than the matters set forth in this statement. If other business
should properly come before the Meeting, the proxy holders will vote thereon in
accordance with their best judgment.
SECURITIES OWNERSHIP
As of November 25, 1997, there were 9,750,437.375 Class I shares and
53,409.61 Class R shares of the Fund issued and outstanding.
21
<PAGE>
The following table sets forth information, as of November 25, 1997,
regarding the beneficial ownership of the Fund's Class I and Class R shares by
shareholders owning more than 5% of either Class. As of November 25, 1997, no
director, nominee, or executive officer of the Fund beneficially owned,
individually or as a group, any of the Fund's Class I shares.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature
Title of Class Beneficial Owner of Beneficial Ownership Percent of Class
- - - --------------- ----------------- ----------------------- ----------------
<S> <C> <C> <C>
Class I SCERF Incorporated 9,646,032.884 98.93%
3753 Howard Hughes Parkway
Las Vegas, Nevada 89109-0952
Class R Dennis G. Lopez 18,498.266 34.63%
117 Beekman Street, 4E
New York, New York 10038-2001
Class R Trustees FBO Alexia DeGunzburg 4,987.15 9.34%
c/o Joseph Cooper
1675 Broadway
Floor 16
New York, New York 10019
Class R Gerard DeGunzburg 4,987.15 9.34%
Peter F. DeGaetano, Jr.
Gregory DeGunzburg Trust
1675 Broadway
Floor 16
New York, New York 10019
Class R Anthony R. Manno Jr.* 4,863.813 9.11%
85 East Westminster Road
Lake Forest, Illinois 60045-1803
Class R Directors, Nominees and 8,512.634 15.94%
Executive Officers as a
Group**/
--
</TABLE>
______________
(*) Director, Chairman of the Board and President of the Fund.
(**) Anthony R. Manno Jr., Director, Chairman of the Board and President,
beneficially owns 4,863.813 Class R shares, John H. Gardner, Jr., Managing
Director, beneficially owns 1,364.412 Class R shares, Jeffrey C. Nellessen,
Secretary and Treasurer beneficially owns 843.883 Class R shares and Kevin W.
Bedell, Senior Vice President beneficially owns 1,440.526 Class R shares.
22
<PAGE>
INFORMATION ABOUT THE FUND
Security Capital Employee REIT Fund Incorporated is a non-diversified, no-
load, open-end management investment company. The Fund was incorporated under
Maryland law as SCERF Incorporated ("SCERF"), a wholly-owned subsidiary of
Security Capital Group, on December 20, 1996. On January 23, 1997, all the
assets and liabilities of SCERF were transferred to the Fund in a reorganization
transaction.
To date, the Fund has issued one class of shares to directors, trustees,
and employees of Security Capital Group and its affiliates, and members of their
families. Upon the implementation of the multi-class structure, the Fund will
issue two or more classes of shares to institutional and to retail investors.
At that time, the Fund's name will be changed to Security Capital U.S. Real
Estate Shares Incorporated.
The Fund's investment objective is to provide above-average total returns,
including current income and capital appreciation, primarily through investment
in real estate securities in the United States. The Fund's long-term objective
is to achieve top-quartile total returns as compared with other mutual funds
that invest primarily in the securities of publicly traded REITs in the United
States by integrating in-depth proprietary real estate market research with
sophisticated capital markets research and modeling techniques. If Proposal 4
is approved by the Fund's shareholders, the Fund's long-term objective will be
to achieve top-quartile total returns as compared with other mutual funds that
invest primarily in real estate securities in the United States by integrating
in-depth proprietary real estate market research with sophisticated capital
markets research and modeling techniques.
Under normal conditions, the Fund will invest at least 65% of its assets in
REITs. The Fund will also invest in equity securities consisting of (i) common
stocks, (ii) rights or warrants to purchase common stocks, (iii) securities
convertible into common stocks where the conversion feature represents, in
SC(US)MG's view, a significant element of the securities' value, and (iv)
preferred stock. The Fund will not invest more than 10% of its nets assets in
illiquid securities. For this purpose, illiquid securities include, among
others, securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale. The Fund also
may engage in short sale transactions in securities listed on one or more
national securities exchanges or on the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ"). These investment policies
are not "fundamental" and, therefore, may be changed by the Board without
shareholder approval.
CUSTODIAN, TRANSFER AGENT
Firstar Trust Company which has its principal business at 615 East Michigan
Street, Milwaukee, Wisconsin 53202 has been retained to act as Custodian of he
Fund's investments and as the Fund's transfer and dividend disbursing gent.
Firstar Trust Company does not
23
<PAGE>
determine the investment policies of the Fund or decide which securities
the Fund will buy or sell.
GENERAL INFORMATION
Shareholder Proposals and Shareholders' Meetings
Any shareholder who wishes to submit a proposal for consideration at the
Meeting should submit the proposal promptly to the Fund.
The Fund is not required to hold regular annual shareholders' meetings. A
shareholders' meeting shall, however, be called by the Secretary of the Fund
upon the written request of holders of not less than 10% of the outstanding
shares of the Fund entitled to vote at the meeting. The Fund will assist
shareholders wishing to communicate with one another for the purpose of
requesting such a meeting.
Semi-Annual Report
Copies of the Fund's semi-annual report have previously been delivered to
shareholders. Shareholders of the Fund may obtain without charge additional
copies of the semi-annual report by writing to: Security Capital Employee REIT
Fund Incorporated, c/o Firstar Trust Company, Mutual Fund Services, P.O. Box
701, Milwaukee, Wisconsin 53201-0701 or by calling (800) 699-4594 (toll free).
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE MEETING MAY BE ASSURED,
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY IS REQUESTED. A SELF-
ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
By Order of the Board of Directors,
/s/ Jeffrey C. Nellessen
Jeffrey C. Nellessen, Secretary
December 2, 1997
24
<PAGE>
SECURITY CAPITAL EMPLOYEE REIT FUND INCORPORATED
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints John H. Gardner, Jr. and Jeffrey C.
Nellessen as proxies, each with the powers to act alone and to appoint his or
her substitute, and hereby authorizes them to represent and vote, as designated
herein, all the shares of Security Capital Employee REIT Fund Incorporated which
the undersigned is entitled to vote as of November 25, 1997, the record date, at
the special meeting of shareholders to be held December 12, 1997, or any
adjournment thereof.
THIS PROXY IS CONTINUED ON THE REVERSE.
PLEASE SIGN ON THE REVERSE AND RETURN PROMPTLY
SECURITY CAPITAL EMPLOYEE REIT FUND INCORPORATED
SPECIAL MEETING OF SHAREHOLDERS
THURSDAY, DECEMBER 12, 1997
10:00 A.M.
11 SOUTH LASALLE STREET
SECOND FLOOR
CHICAGO, ILLINOIS 60603
<PAGE>
This proxy when properly executed will be voted in the Please mark your vote
manner directed herein by the undersigned shareholder. as indicated in this
If no direction is made, this Proxy will be voted FOR example
the approval of the Distribution and Service Plan, FOR
the approval of the Amended Advisory Agreement, FOR the
nominees named in Item 3, and FOR the Proposal in Item 4. X
All items are proposed by Security Capital Employee
REIT Fund Incorporated.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE FUND'S CLASS R SHAREHOLDERS VOTE
"FOR" EACH OF THE FOLLOWING PROPOSALS:
Item 1 - Proposal to approve a Distribution and Service Plan for Class I shares
and a Distribution and Service Plan for Class R shares pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended.
Class I shares: Class R shares:
For Against Abstain For Against Abstain
[_] [_] [_] [_] [_] [_]
Item 2 - Proposal to approve an amended investment advisory agreement between
the Fund and Security Capital (US) Management Group Incorporated
(formerly Security Capital Investment Research Group Incorporated) with
a reduced management fee.
For Against Abstain
[_] [_] [_]
Item 3 - Proposal to elect George F. Keane and Robert H. Abrams as Directors of
the Fund. You may withhold authority to vote for a nominee by lining
through or otherwise striking out the name of the nominee.
For Against
[_] [_]
Item 4 - Proposal to amend the Fund's fundamental investment objective to
clarify that the Fund will invest primarily in real estate securities.
For Against Abstain
[_] [_] [_]
Item 5 - In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please sign as name appears herein. Joint owners
should each sign. When signing as attorney,
executor, administrator, trustee or guardian,
please give full title as such.
Dated: ________________________, 1997
-------------------------------------
Signature
-------------------------------------
Name
-------------------------------------
Signature
-------------------------------------
Name
PLEASE SIGN, DATE AND MAIL YOUR PROXY CARD PROMPTLY!
<PAGE>
EXHIBIT A
---------
DISTRIBUTION AND SERVICE PLAN
FOR CLASS R SHARES
This Plan is adopted by Security Capital U.S. Real Estate Shares Incorporated
(the "Company"), pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "Act"), to provide for payment by the Company of certain
expenses in connection with the distribution of the Company's Class R shares,
the provision of personal services to the Company's Class R shareholders and/or
the maintenance of its Class R shareholder accounts. Payments under the Plan
are to be made to Security Capital Markets Group Incorporated ("SCMGI") which
serves as the principal underwriter for the Company under the terms of the
Distribution and Servicing Agreement pursuant to which SCMGI offers and sells
the shares of the Company.
Distribution Fee and Service Fee
The annual compensation payable by the Company to SCMGI is an amount equal to
.25 of 1% on an annual basis of the Company's average net assets of the Class R
shares as either (1) a "distribution fee" to finance the distribution of the
Company's Class R shares, or (2) a "service fee" to finance shareholder
servicing by SCMGI, its affiliated companies and broker-dealers who may sell
Class R shares and to encourage and foster the maintenance of Class R
shareholder accounts, or as a combination of the two fees. The amounts shall be
payable to SCMGI monthly or at such other intervals as the board of directors
may determine to compensate SCMGI for services provided hereunder. The amount
of the distribution fee and service fee payable to SCMGI hereunder is not
related directly to expenses incurred by SCMGI on behalf of the Company and the
Company is not obligated to reimburse SCMGI for such expenses.
NASD Definition
For purposes of this Plan, the "distribution fee" may be considered as a sales
charge that is deducted from the Class R net assets of the Company and does not
include the service fee. The "service fee" shall be considered a payment made
by the Company of personal service and/or maintenance of Class R shareholder
accounts, as such is now defined by the National Association of Securities
Dealers Regulation, Inc. ("NASD"), provided , however, if the NASD adopts a
definition of "service fee" for purposes of Rule 2830 of the NASD Conduct Rules
that differs from the definition of "service fee" as presently used, or if the
NASD adopts a related definition intended to define the same concept, the
definition of "service fee" as used herein shall be automatically amended to
conform to the NASD definition.
Quarterly Reports
SCMGI shall provide to the board of directors of the Company and the board of
directors shall review at least quarterly a written report of the amounts so
expended of the distribution fee and/or service fee paid under this Plan and the
purposes for which such expenditures were made.
<PAGE>
Approval of Plan
This Plan shall become effective when it has been approved by a vote of at least
a majority of the outstanding Class R voting securities of the Company (as
defined in the Act) and by a vote of the board of directors of the Company and
of the directors who are not interested persons of the Company and have no
direct or indirect financial interest in the operation of the Plan or any
agreement related to this Plan (other than as directors or shareholders of the
Company) ("independent directors") cast in person at a meeting called for the
purposes of voting on such Plan.
Continuance
This Plan shall continue in effect for a period of one (1) year and thereafter
from year to year only so long as such continuance is approved by the directors,
including the independent directors, as specified hereinabove for the adoption
of the Plan by the directors and independent directors.
Director Continuation
In considering whether to adopt, continue or implement this Plan, the directors
shall have a duty to request and evaluate, and SCMGI shall have a duty to
furnish, such information as may be reasonably necessary to an informed
determination of whether this Plan should be adopted, implemented or continued.
Termination
This Plan may be terminated at any time by a vote of a majority of the
independent directors of the Company or by a vote of the majority of the
outstanding Class R voting securities of the Company without penalty. The
distribution fee and service fee will be paid by the Company to SCMGI unless and
until this Plan is terminated or not renewed, in which event, the Company shall
pay SCMGI for services provided on a pro-rata basis up through the date of
termination. Any expenses incurred by SCMGI on behalf of the Company in excess
of the distribution fee and service fee payable hereunder through the date of
termination are the sole responsibility and liability of SCMGI, and are not
obligations of the Company.
Amendments
This Plan may not be amended to increase materially the amount to be spent for
distribution of Class R shares, personal service and/or maintenance of
shareholder accounts without approval of the Class R shareholders, and all
material amendments of this Plan must be approved in the manner prescribed for
the adoption of the Plan as provided hereinabove.
Directors
While this Plan is in effect, the selection and nomination of the directors who
are not interested persons of the Company shall be committed to the discretion
of the directors who are not interested persons of the Company.
Records
Copies of this Plan, the Distribution Agreement and reports made pursuant to
this Plan shall be preserved as provided in Rule 12b-1(f) under the Act.
2
<PAGE>
EXHIBIT B
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DISTRIBUTION AND SERVICE PLAN
FOR CLASS I SHARES
This Plan is adopted by Security Capital U.S. Real Estate Shares Incorporated
(the "Company"), pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "Act"), to provide for payment by the Company of certain
expenses in connection with the distribution of the Company's Class I shares,
the provision of personal services to the Company's Class I shareholders and/or
the maintenance of its Class I shareholder accounts. Payments under the Plan
are to be made to Security Capital Markets Group Incorporated ("SCMGI") which
serves as the principal underwriter for the Company under the terms of the
Distribution and Servicing Agreement pursuant to which SCMGI offers and sells
the shares of the Company.
Distribution Fee and Service Fee
The annual compensation payable by the Company to SCMGI is an amount equal to
.25 of 1% on an annual basis of the Company's average net assets of the Class I
shares as either (1) a "distribution fee" to finance the distribution of the
Company's Class I shares, or (2) a "service fee" to finance shareholder
servicing by SCMGI, its affiliated companies and broker-dealers who may sell
Class I shares and to encourage and foster the maintenance of Class I
shareholder accounts, or as a combination of the two fees. The amounts shall be
payable to SCMGI monthly or at such other intervals as the board of directors
may determine to compensate SCMGI for services provided hereunder. The amount
of the distribution fee and service fee payable to SCMGI hereunder is not
related directly to expenses incurred by SCMGI on behalf of the Company and the
Company is not obligated to reimburse SCMGI for such expenses.
NASD Definition
For purposes of this Plan, the "distribution fee" may be considered as a sales
charge that is deducted from the Class I net assets of the Company and does not
include the service fee. The "service fee" shall be considered a payment made
by the Company for personal service and/or maintenance of Class I shareholder
accounts, as such is now defined by the National Association of Securities
Dealers Regulation, Inc. ("NASD"), provided , however, if the NASD adopts a
definition of "service fee" for purposes of Rule 2830 of the NASD Conduct Rules
that differs from the definition of "service fee" as presently used, or if the
NASD adopts a related definition intended to define the same concept, the
definition of "service fee" as used herein shall be automatically amended to
conform to the NASD definition.
Quarterly Reports
SCMGI shall provide to the board of directors of the Company and the board of
directors shall review at least quarterly a written report of the amounts so
expended of the distribution fee and/or service fee paid under this Plan and the
purposes for which such expenditures were made.
<PAGE>
Approval of Plan
This Plan shall become effective when it has been approved by a vote of at least
a majority of the outstanding Class I voting securities of the Company (as
defined in the Act) and by a vote of the board of directors of the Company and
of the directors who are not interested persons of the Company and have no
direct or indirect financial interest in the operation of the Plan or any
agreement related to this Plan (other than as directors or shareholders of the
Company) ("independent directors") cast in person at a meeting called for the
purposes of voting on such Plan.
Continuance
This Plan shall continue in effect for a period of one (1) year and thereafter
from year to year only so long as such continuance is approved by the directors,
including the independent directors, as specified hereinabove for the adoption
of the Plan by the directors and independent directors.
Director Continuation
In considering whether to adopt, continue or implement this Plan, the directors
shall have a duty to request and evaluate, and SCMGI shall have a duty to
furnish, such information as may be reasonably necessary to an informed
determination of whether this Plan should be adopted, implemented or continued.
Termination
This Plan may be terminated at any time by a vote of a majority of the
independent directors of the Company or by a vote of the majority of the
outstanding Class I voting securities of the Company without penalty. The
distribution fee and service fee will be paid by the Company to SCMGI unless and
until this Plan is terminated or not renewed, in which event the Company shall
pay SCMGI for services provided on a pro-rata basis up through the date of
termination. Any expenses incurred by SCMGI on behalf of the Company in excess
of the distribution fee and service fee payable hereunder through the date of
termination are the sole responsibility and liability of SCMGI, and are not
obligations of the Company.
Amendments
This Plan may not be amended to increase materially the amount to be spent for
distribution of Class I shares, personal service and/or maintenance of
shareholder accounts without approval of the Class I shareholders, and all
material amendments of this Plan must be approved in the manner prescribed for
the adoption of the Plan as provided hereinabove.
Directors
While this Plan is in effect, the selection and nomination of the directors who
are not interested persons of the Company shall be committed to the discretion
of the directors who are not interested persons of the Company.
Records
Copies of this Plan, the Distribution Agreement and reports made pursuant to
this Plan shall be preserved as provided in Rule 12b-1(f) under the Act.
2
<PAGE>
EXHIBIT C
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INVESTMENT ADVISORY AGREEMENT
Security Capital U.S. Real Estate Shares Incorporated
Amended and Restated December __, 1997
Security Capital (US) Management Group Incorporated
11 South LaSalle Street, Second Floor
Chicago, Illinois 60603
Dear Sirs:
We, the undersigned Security Capital U.S. Real Estate Shares Incorporated,
herewith confirm our agreement with you as follows:
1. We are an open-end, non-diversified management investment company.
Our Directors are authorized to reclassify and issue any unissued shares to any
number of additional classes or series (portfolios), each having its own
investment objective, policies and restrictions, without shareholder approval,
all as more fully described in our prospectus and statement of additional
information.
We propose to engage in the business of investing and reinvesting our
assets in securities of the type and in accordance with the limitations
specified in our Articles of Incorporation, By-Laws and any representations made
in our prospectus and statement of additional information, all in such manner
and to such extent as may from time to time be authorized by our Board of
Directors. We enclose copies of the documents listed above and will from time
to time furnish you with any amendments thereof.
<PAGE>
2. (a) We hereby employ you to manage the investment and reinvestment of
our assets as above specified and, without limiting the generality of the
foregoing, to provide management, investment, advisory and other services
specified below.
(b) You will make decisions with respect to all purchases and sales of
our portfolio securities. To carry out such decisions, you are hereby
authorized, as our agent and attorney-in-fact, for our account and at our risk
and in our name, to place orders for the investment and reinvestment of our
assets. In all purchases, sales and other transactions in our portfolio
securities you are authorized to exercise full discretion and act for us in the
same manner and with the same force and effect as we might or could do with
respect to such purchases, sales or other transactions, as well as with respect
to all other things necessary or incidental to the furtherance or conduct of
such purchases, sales or other transactions.
(c) You will report to our Board of Directors at each meeting thereof
all changes in our portfolio since the prior report, and will also keep us in
touch with important developments affecting our portfolio and on your own
initiative will furnish us from time to time with such information as you may
believe appropriate for this purpose, whether concerning the individual issuers
whose securities are included in our portfolio, the industries in which they
engage, or the conditions prevailing in the economy generally. You will also
furnish us with such statistical and analytical information with respect to our
portfolio securities as you may believe appropriate or as we reasonably may
request. In making such purchases and sales of our portfolio securities, you
will bear in mind the policies set from time to time by our Board of Directors
as well as the limitations imposed by our Articles of Incorporation, the
Investment
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<PAGE>
Company Act of 1940 (the "Act") and the Securities Act of 1933, and of the
Internal Revenue Code of 1986, as amended, in respect of regulated investment
companies.
(d) It is understood that you will from time to time employ or
associate with yourselves such persons as you believe to be particularly fitted
to assist you in the execution of your duties hereunder, the cost of performance
of such duties to be borne and paid by you. No obligation may be incurred on
our behalf in any such respect. During the continuance of this Agreement at our
request you will provide us persons satisfactory to our Board of Directors to
serve as our officers.
3. We propose to retain the services of an administrator, which shall be
a firm acceptable to you, to administer all aspects of our operations except
those which are your responsibility pursuant to this Agreement. We will bear
the cost of and pay the fee of the administrator. Our initial Administrator
will be Security Capital (US) Management Group Incorporated.
4. It is further agreed that you shall pay the fees and expenses
associated with the printing and mailing of our prospectus and statement of
additional information, and any other sales literature, to parties other than
existing shareholders. We hereby confirm that, subject to the foregoing, we
shall be responsible and hereby assume the obligation for payment of all our
other expenses, including: (a) payment of the fee payable to you under paragraph
6 hereof; (b) charges and expenses of our administrator, custodian, transfer,
and dividend disbursing agent; (c) fees of directors who are not your affiliated
persons; (d) legal and auditing expenses; (e) compensation of our officers,
Directors and employees who do not devote any part of their time to your affairs
or the affairs of your affiliates other than us; (f) costs of printing our
prospectuses
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<PAGE>
and stockholder reports; (g) costs of proxy solicitation; (h) costs of
maintenance of corporate existence; (i) interest charges, taxes, brokerage fees
and commissions; (j) costs of stationery and supplies; (k) expenses and fees
related to registration and filing with the Securities and Exchange Commission
and with state regulatory authorities; and (l) upon the approval of the Board of
Directors, costs of your personnel or your affiliates rendering clerical,
accounting and other office services.
5. We shall expect of you, and you will give us the benefit of, your best
judgment and efforts in rendering these services to us, and we agree as an
inducement to your undertaking these services that you shall not be liable
hereunder for any mistake of judgment or in any event whatsoever, except for
lack of good faith, provided that nothing herein shall be deemed to protect, or
purport to protect, you against any liability to us or to our security holders
to which you would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of your duties hereunder, or by
reason of your reckless disregard of your obligations and duties hereunder.
6. In consideration of the foregoing we will pay you a monthly fee at an
annualized rate of .60 of 1% of the average daily net assets of each class of
shares. Such fee shall be payable in arrears on the last day of each calendar
month for services performed hereunder during such month. If this Agreement
terminates prior to the end of a month, such fee shall be prorated according to
the proportion which such portion of the month bears to the full month.
7. This Agreement shall become effective on the date it is approved by
the vote of a majority of the Company's outstanding voting securities, as
defined in the Act, and shall continue in effect until the second anniversary of
the date hereof and may be continued for
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<PAGE>
successive twelve-month periods (computed from each January 1) with respect to
each portfolio provided that such continuance is specifically approved at least
annually by the Board of Directors or by majority vote of the holders of the
outstanding voting securities of such portfolio (as defined in the Act), and, in
either case, by a majority of the Board of Directors who are not interested
persons, as defined in the Act, of any party to this Agreement (other than as
Directors of our corporation), provided further, however, that if the
continuation of this Agreement is not approved, you may continue to render the
services described herein in the manner and to the extent permitted by the Act
and the rules and regulations thereunder. Upon the effectiveness of this
Agreement, it shall supersede all previous agreements between us covering the
subject matter hereof. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of a majority of the outstanding voting
securities (as so defined) or by a vote of a majority of the Board of Directors
on 60 days' written notice to you, or by you on 60 days' written notice to
us.
8. This Agreement may not be transferred, assigned, sold or in any manner
hypothecated or pledged by you and this Agreement shall terminate automatically
in the event of any such transfer, assignment, sale, hypothecation or pledge by
you. The terms "transfer", "assignment" and "sale" as used in this paragraph
shall have the meanings ascribed thereto by governing law and any interpretation
thereof contained in rules or regulations promulgated by the Securities and
Exchange Commission thereunder.
9. Except to the extent necessary to perform your obligations hereunder,
nothing herein shall be deemed to limit or restrict your right, or the right of
any of your officers, directors or employees, who may also be a Director,
officer or employee of ours, or persons otherwise
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<PAGE>
affiliated with us (within the meaning of the Act) to engage in any other
business or to devote time and attention to the management or other aspects of
any other business, whether of a similar or dissimilar nature, or to render
services of any kind to any other trust, corporation, firm, individual or
association.
10. This Agreement shall be construed in accordance with the laws of the
State of Illinois, provided, however, that nothing herein shall be construed as
being inconsistent with the Act.
If the foregoing is in accordance with your understanding, will you kindly
so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
Security Capital U.S. Real Estate Shares
Incorporated
By:
----------------------------------------
Anthony R. Manno Jr.
President
Agreed to and accepted as
of the date first set forth above
By:
------------------------------
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