<PAGE> PAGE 1
000 B000000 10/31/98
000 C000000 0001046029
000 D000000 N
000 E000000 NF
000 F000000 Y
000 G000000 N
000 H000000 N
000 I000000 3.0.a
000 J000000 U
001 A000000 PRINCIPAL REAL ESTATE FUND, INC.
001 B000000 811-08379
001 C000000 5152475476
002 A000000 PRINCIPAL FINANCIAL GROUP
002 B000000 DES MOINES
002 C000000 IA
002 D010000 50392
002 D020000 0200
003 000000 N
004 000000 N
005 000000 N
006 000000 N
007 A000000 N
007 B000000 0
020 A000001 MERRILL LYNCH
020 B000001 13-5674085
020 C000001 12
020 A000002 MORGAN STANLEY & CO.
020 B000002 13-2655998
020 C000002 12
020 A000003 MORGAN, J.P. SECURITIES
020 B000003 13-3224016
020 C000003 5
020 A000004 PAINEWEBBER, INC.
020 B000004 13-2638166
020 C000004 4
020 A000005 LEHMAN BROTHERS
020 B000005 13-2501865
020 C000005 2
020 A000006 GREEN STREET, INC.
020 B000006 33-0275837
020 C000006 2
020 A000007 SALOMON BROTHERS, SMITH BARNEY
020 B000007 13-3082694
020 C000007 1
020 A000008 GOLDMAN SACHS CO.
020 B000008 13-5108880
020 C000008 1
020 A000009 A.G. EDWARDS
020 B000009 43-0895447
020 C000009 1
020 A000010 PRUDENTIAL SECURITIES, INC.
<PAGE> PAGE 2
020 B000010 22-2347336
020 C000010 0
021 000000 41
022 A000001 FIRST CHICAGO CAPITAL MARKETS
022 B000001 36-3595942
022 C000001 246134
022 D000001 0
022 A000002 ASSOCIATES CORPORATION OF NORTH AMERICA
022 B000002 74-1494554
022 C000002 29166
022 D000002 0
022 A000003 GENERAL ELECTRIC CAPITAL CORP.
022 B000003 13-1500700
022 C000003 984
022 D000003 0
022 A000004 MORGAN, J.P. SECURITIES
022 B000004 13-3224016
022 C000004 500
022 D000004 0
022 A000005 A.G. EDWARDS
022 B000005 43-0895447
022 C000005 283
022 D000005 0
022 A000006 LEHMAN BROTHERS
022 B000006 13-2501865
022 C000006 113
022 D000006 0
022 A000007 MERRILL LYNCH
022 B000007 13-5674085
022 C000007 98
022 D000007 0
023 C000000 277299
023 D000000 4
024 000000 N
027 000000 Y
028 A010000 336
028 A020000 0
028 A030000 0
028 A040000 7
028 B010000 317
028 B020000 83
028 B030000 0
028 B040000 50
028 C010000 390
028 C020000 4
028 C030000 0
028 C040000 74
028 D010000 170
028 D020000 0
028 D030000 0
028 D040000 42
<PAGE> PAGE 3
028 E010000 615
028 E020000 104
028 E030000 0
028 E040000 42
028 F010000 201
028 F020000 0
028 F030000 0
028 F040000 119
028 G010000 2029
028 G020000 191
028 G030000 0
028 G040000 334
028 H000000 821
029 000000 Y
030 A000000 52
030 B000000 4.75
030 C000000 0.00
031 A000000 11
031 B000000 0
032 000000 5
033 000000 36
034 000000 Y
035 000000 1
036 A000000 N
036 B000000 0
042 A000000 0
042 B000000 0
042 C000000 100
042 D000000 0
042 E000000 0
042 F000000 0
042 G000000 0
042 H000000 0
043 000000 34
044 000000 0
055 A000000 N
055 B000000 N
062 A000000 N
062 B000000 0.0
062 C000000 0.0
062 D000000 0.0
062 E000000 0.0
062 F000000 0.0
062 G000000 0.0
062 H000000 0.0
062 I000000 0.0
062 J000000 0.0
062 K000000 0.0
062 L000000 0.0
062 M000000 0.0
062 N000000 0.0
<PAGE> PAGE 4
062 O000000 0.0
062 P000000 0.0
062 Q000000 0.0
062 R000000 0.0
066 A000000 Y
066 B000000 N
066 C000000 N
066 D000000 N
066 E000000 N
066 F000000 N
066 G000000 Y
067 000000 N
068 A000000 N
068 B000000 N
069 000000 N
071 A000000 18324
071 B000000 5192
071 C000000 10309
071 D000000 50
072 A000000 12
072 B000000 68
072 C000000 438
072 D000000 0
072 E000000 0
072 F000000 88
072 G000000 0
072 H000000 0
072 I000000 76
072 J000000 2
072 K000000 0
072 L000000 0
072 M000000 3
072 N000000 4
072 O000000 0
072 P000000 0
072 Q000000 0
072 R000000 5
072 S000000 1
072 T000000 34
072 U000000 0
072 V000000 0
072 W000000 1
072 X000000 214
072 Y000000 0
072 Z000000 292
072AA000000 0
072BB000000 613
072CC010000 0
072CC020000 1395
072DD010000 119
072DD020000 138
<PAGE> PAGE 5
072EE000000 0
073 A010000 0.0000
073 A020000 0.0000
073 B000000 0.0000
073 C000000 0.0000
074 A000000 2
074 B000000 0
074 C000000 408
074 D000000 0
074 E000000 0
074 F000000 11128
074 G000000 0
074 H000000 0
074 I000000 0
074 J000000 0
074 K000000 0
074 L000000 21
074 M000000 0
074 N000000 11559
074 O000000 0
074 P000000 0
074 Q000000 0
074 R010000 0
074 R020000 0
074 R030000 0
074 R040000 21
074 S000000 0
074 T000000 11538
074 U010000 654
074 U020000 721
074 V010000 0.00
074 V020000 0.00
074 W000000 0.0000
074 X000000 952
074 Y000000 0
075 A000000 0
075 B000000 11053
076 000000 0.00
077 A000000 Y
077 B000000 Y
077 Q010000 Y
080 A000000 ICI MUTUAL INSURANCE COMPANY
080 C000000 21000
081 A000000 Y
081 B000000 20
082 A000000 N
082 B000000 0
083 A000000 N
083 B000000 0
084 A000000 N
084 B000000 0
<PAGE> PAGE 6
085 A000000 Y
085 B000000 N
SIGNATURE ARTHUR S. FILEAN
TITLE V. PRES. & SECRETARY
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 12930842
<INVESTMENTS-AT-VALUE> 11535535
<RECEIVABLES> 21174
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2195
<TOTAL-ASSETS> 11558904
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 21167
<TOTAL-LIABILITIES> 21167
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13510453
<SHARES-COMMON-STOCK> 654401
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 35698
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (613107)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1395307)
<NET-ASSETS> 11537737
<DIVIDEND-INCOME> 438265
<INTEREST-INCOME> 68103
<OTHER-INCOME> 0
<EXPENSES-NET> (214199)
<NET-INVESTMENT-INCOME> 292169
<REALIZED-GAINS-CURRENT> (613107)
<APPREC-INCREASE-CURRENT> (1395307)
<NET-CHANGE-FROM-OPS> (1716245)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (118861)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 684793
<NUMBER-OF-SHARES-REDEEMED> (43437)
<SHARES-REINVESTED> 13045
<NET-CHANGE-IN-ASSETS> 11537737
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 87653
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 214199
<AVERAGE-NET-ASSETS> 10976435
<PER-SHARE-NAV-BEGIN> 10.15
<PER-SHARE-NII> .20
<PER-SHARE-GAIN-APPREC> (1.76)
<PER-SHARE-DIVIDEND> (.20)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.39
<EXPENSE-RATIO> 2.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 12930842
<INVESTMENTS-AT-VALUE> 11535535
<RECEIVABLES> 21174
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2195
<TOTAL-ASSETS> 11558904
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 21167
<TOTAL-LIABILITIES> 21167
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13510453
<SHARES-COMMON-STOCK> 372195
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 35698
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (613107)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1395307)
<NET-ASSETS> 11537737
<DIVIDEND-INCOME> 438265
<INTEREST-INCOME> 68103
<OTHER-INCOME> 0
<EXPENSES-NET> (214199)
<NET-INVESTMENT-INCOME> 292169
<REALIZED-GAINS-CURRENT> (613107)
<APPREC-INCREASE-CURRENT> (1395307)
<NET-CHANGE-FROM-OPS> (1716245)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (70429)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 377186
<NUMBER-OF-SHARES-REDEEMED> (12937)
<SHARES-REINVESTED> 7946
<NET-CHANGE-IN-ASSETS> 11537737
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 87653
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 214199
<AVERAGE-NET-ASSETS> 10976435
<PER-SHARE-NAV-BEGIN> 10.15
<PER-SHARE-NII> .20
<PER-SHARE-GAIN-APPREC> (1.78)
<PER-SHARE-DIVIDEND> (.19)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.38
<EXPENSE-RATIO> 2.47
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 12930842
<INVESTMENTS-AT-VALUE> 11535535
<RECEIVABLES> 21174
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2195
<TOTAL-ASSETS> 11558904
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 21167
<TOTAL-LIABILITIES> 21167
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13510453
<SHARES-COMMON-STOCK> 348440
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 35698
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (613107)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1395307)
<NET-ASSETS> 11537737
<DIVIDEND-INCOME> 438265
<INTEREST-INCOME> 68103
<OTHER-INCOME> 0
<EXPENSES-NET> (214199)
<NET-INVESTMENT-INCOME> 292169
<REALIZED-GAINS-CURRENT> (613107)
<APPREC-INCREASE-CURRENT> (1395307)
<NET-CHANGE-FROM-OPS> (1716245)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (67181)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 346800
<NUMBER-OF-SHARES-REDEEMED> (7688)
<SHARES-REINVESTED> 7946
<NET-CHANGE-IN-ASSETS> 11537737
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 87653
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 214199
<AVERAGE-NET-ASSETS> 10976435
<PER-SHARE-NAV-BEGIN> 10.15
<PER-SHARE-NII> .23
<PER-SHARE-GAIN-APPREC> (1.78)
<PER-SHARE-DIVIDEND> (.20)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.40
<EXPENSE-RATIO> 1.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Report of Independent Auditors
The Board of Directors and Shareholders
Principal Real Estate Fund, Inc.
In planning and performing our audit of the financial statements of Principal
Real Estate Fund, Inc. for the period from December 11, 1997 (date operations
commenced) through October 31, 1998, we considered its internal control,
including control activities for safeguarding securities, in order to determine
our auditing procedures for the purpose of expressing our opinion on the
financial statements and to comply with the requirements of Form N-SAR, not to
provide assurance on internal control.
The management of Principal Real Estate Fund, Inc. is responsible for
establishing and maintaining internal control. In fulfilling this
responsibility, estimates and judgments by management are required to assess the
expected benefits and related costs of controls. Generally, controls that are
relevant to an audit pertain to the entity's objective of preparing financial
statements for external purposes that are fairly presented in conformity with
generally accepted accounting principles. These controls include the
safeguarding of assets against unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, errors or instances of
fraud may occur and not be detected. Also, projection of any evaluation of
internal control to future periods is subject to the risk that it may become
inadequate because of changes in conditions or that the effectiveness of the
design and operation may deteriorate.
Our consideration of internal control would not necessarily disclose all matters
in internal control that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or operation of one or more
of the specific internal control components does not reduce to a relatively low
level the risk that errors or instances of fraud in amounts that would be
material in relation to the financial statements being audited may occur and not
be detected within a timely period by employees in the normal course of
performing their assigned functions. However, we noted no matters involving
internal control and its operation, including control for safeguarding
securities, that we consider to be material weaknesses as defined above as of
October 31, 1998.
This report is intended solely for the information and use of management and the
Board of Directors of Principal Real Estate Fund, Inc. and the Securities and
Exchange Commission and is not intended to be and should not be used by anyone
other than these specified parties.
/s/ ERNST & YOUNG LLP
Des Moines, Iowa
November 25, 1998
BYLAWS
OF
PRINCIPAL REAL ESTATE FUND, INC.
ARTICLE 1
Name, Fiscal Year
1.01 The name of this corporation shall be Principal Real Estate Fund,
Inc., Inc. Except as otherwise from time to time provided by the board of
directors, the fiscal year of the corporation shall begin November 1 and end
October 31.
ARTICLE 2
Stockholders' Meetings
2.01 Place of Meetings. All meetings of the stockholders shall be held
at such place within or without the State of Maryland, as is stated in the
notice of meeting.
2.02 Annual Meetings. The Board of Directors of the Fund shall
determine whether or not an annual meeting of stockholders shall be held. In the
event that an annual meeting of stockholders is held, such meeting shall be held
on the first Tuesday after the first Monday of February in each year or on such
other day during the 31-day period following the first Tuesday after the first
Monday of February as the directors may determine.
2.03 Special Meetings. Special meetings of the stockholders shall be
held whenever called by the chairman of the board, the president or the board of
directors, or when requested in writing by 10% of the Fund's outstanding shares.
2.04 Notice of Stockholders' Meetings. Notice of each stockholders'
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called shall be given by mailing such notice
to each stockholder of record at his address as it appears on the records of the
corporation not less than 10 nor more than 90 days prior to the date of the
meeting. Any meeting at which all stockholders entitled to vote are present
either in person or by proxy or of which those not present have waived notice in
writing shall be a legal meeting for the transaction of business notwithstanding
that notice has not been given as herein provided.
2.05 Quorum. Except as otherwise expressly required by law, these
bylaws or the Articles of Incorporation, as from time to time amended, at any
meeting of the stockholders the presence in person or by proxy of the holders of
one-third of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote, shall constitute a quorum, but a lesser
interest may adjourn any meeting from time to time and the meeting may be held
as adjourned without further notice. When a quorum is present at any meeting a
majority of the stock represented thereat shall decide any question brought
before such meeting unless the question is one upon which by express provision
of law or of these bylaws or the Articles of Incorporation a larger or different
vote is required, in which case such express provision shall govern.
2.06 Proxies and Voting Stockholders of record may vote at any meeting
either in person or by written proxy signed by the stockholder or by the
stockholder's duly authorized attorney-in-fact dated not more than eleven months
before the date of exercise, which shall be filed with the Secretary of the
meeting before being voted. Each stockholder shall be entitled to one vote for
each share of stock held, and to a fraction of a vote equal to any fractional
share held.
2.07 Stock Ledger. The Corporation shall maintain at the office of the
stock transfer agent of the Corporation, or at the office of any successor
thereto as stock transfer agent of the Corporation, an original stock ledger
containing the names and addresses of all stockholders and the number of shares
of each class held by each stockholder. Such stock ledger may be in written form
or any other form capable of being converted into written form within a
reasonable time for visual inspection.
ARTICLE 3
Board of Directors
3.01 Number, Service. The Corporation shall have a Board of Directors
consisting of not less than three and no more than fifteen members. The number
of Directors to constitute the whole board within the limits above-stated shall
be fixed by the Board of Directors. The Directors may be chosen (i) by
stockholders at any annual meeting of stockholders held for the purpose of
electing directors or at any meeting held in lieu thereof, or at any special
meeting called for such purpose, or (ii) by the Directors at any regular or
special meeting of the Board to fill a vacancy on the Board as provided in these
bylaws and Maryland General Corporation Law. Each director should serve until
the next annual meeting of shareholders and until a successor is duly qualified
and elected, unless sooner displaced.
3.02 Powers. The board of directors shall be responsible for the entire
management of the business of the Corporation. In the management and control of
the property, business and affairs of the Corporation the board of directors is
hereby vested with all the powers possessed by the corporation itself so far as
this designation of authority is not inconsistent with the laws of the State of
Maryland, but subject to the limitations and qualifications contained in the
Articles of Incorporation and in these bylaws.
3.03 Executive Committee and Other Committees. The board of directors
may elect from its members an executive committee of not less than three which
may exercise certain powers of the board of directors when the board is not in
session pursuant to Maryland law. The executive committee may make rules for the
holding and conduct of its meetings and keeping the records thereof, and shall
report its action to the board of directors.
The board of directors may elect from its members such other committees
from time to time as it may desire. The number composing such committees and the
powers conferred upon them shall be determined by the board of directors at its
own discretion.
3.04 Meetings. Regular meetings of the board of directors may be held
in such places within or without the State of Maryland, and at such times as the
board may from time to time determine, and if so determined, notices thereof
need not be given. Special meetings of the board of directors may be held at any
time or place whenever called by the president or a majority of the directors,
notice thereof being given by the secretary or the president, or the directors
calling the meeting, to each director. Special meetings of the board of
directors may also be held without formal notice provided all directors are
present or those not present have waived notice thereof.
3.05 Quorum. A majority of the members of the board of directors from
time to time in office but in no event not less than one-third of the number
constituting the whole board shall constitute a quorum for the transaction of
business provided, however, that where the Investment Company Act of 1940
requires a different quorum to transact business of a specific nature, the
number of directors so required shall constitute a quorum for the transaction of
such business.
A lesser number may adjourn a meeting from time to time and the meeting
may be held without further notice. When a quorum is present at any meeting a
majority of the members present thereat shall decide any question brought before
such meeting except as otherwise expressly required by law, the Articles of
Incorporation or these bylaws.
3.06 Action by Directors Other than at a Meeting. Any action required
or permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting, if a written consent to such
action is signed by all members of the Board of Directors or such committee, as
the case may be, and such written consent is filed with the minutes of
proceedings of the Board of Directors or committee.
3.07 Holding of Meetings by Conference Telephone Call. At any regular
or special meeting, members of the Board of Directors or any committee thereof
may participate by conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this Section shall constitute presence in
person at such meeting.
ARTICLE 4
Officers
4.01 Selection. The officers of the corporation shall be a president,
one or more vice presidents, a secretary and a treasurer. The board of directors
may, if it so determines, also elect a chairman of the board. All officers shall
be elected by the board of directors and shall serve at the pleasure of the
board. The same person may hold more than one office except the offices of
president and vice president.
4.02 Eligibility. The chairman of the board, if any, and the president
shall be directors of the corporation. Other officers need not be directors.
4.03 Additional Officers and Agents. The board of directors may appoint
one or more assistant treasurers, one or more assistant secretaries and such
other officers or agents as it may deem advisable, and may prescribe the duties
thereof.
4.04 Chairman of the Board of Directors. The chairman of the board, if
any, shall preside at all meetings of the board of directors at which he is
present. He shall have such other authority and duties as the board of directors
shall from time to time determine.
4.05 The President. The president shall be the chief executive officer
of the corporation; he shall have general and active management of the business,
affairs and property of the corporation, and shall see that all orders and
resolutions of the board of directors are carried into effect. He shall preside
at meetings of stockholders, and of the board of directors unless a chairman of
the board has been elected and is present.
4.06 The Vice Presidents. The vice presidents shall respectively have
such powers and perform such duties as may be assigned to them by the board of
directors or the president. In the absence or disability of the president, the
vice presidents, in the order determined by the board of directors, shall
perform the duties and exercise the powers of the president.
4.07 The Secretary. The secretary shall keep accurate minutes of all
meetings of the stockholders and directors, and shall perform all duties
commonly incident to his office and as provided by law and shall perform such
other duties and have such other powers as the board of directors shall from
time to time designate. In his absence an assistant secretary or secretary pro
tempore shall perform his duties.
4.08 The Treasurer. The treasurer shall, subject to the order of the
board of directors and in accordance with any arrangements for performance of
services as custodian, transfer agent or disbursing agent approved by the board,
have the care and custody of the money, funds, securities, valuable papers and
documents of the corporation, and shall have and exercise under the supervision
of the board of directors all powers and duties commonly incident to his office
and as provided by law. He shall keep or cause to be kept accurate books of
account of the corporation's transactions which shall be subject at all times to
the inspection and control of the board of directors. He shall deposit all funds
of the corporation in such bank or banks, trust company or trust companies or
such firm or firms doing a banking business as the board of directors shall
designate. In his absence, an assistant treasurer shall perform his duties.
ARTICLE 5
Vacancies
5.01 Removals. The stockholders may at any meeting called for the
purpose, by vote of the holders of a majority of the capital stock issued and
outstanding and entitled to vote, remove from office any director and, unless
the number of directors constituting the whole board is accordingly decreased,
elect a successor. To the extent consistent with the Investment Company Act of
1940, the board of directors may by vote of not less than a majority of the
directors then in office remove from office any director, officer or agent
elected or appointed by them and may for misconduct remove any thereof elected
by the stockholders.
5.02 Vacancies. If the office of any director becomes or is vacant by
reason of death, resignation, removal, disqualification, an increase in the
authorized number of directors or otherwise, the remaining directors may by vote
of a majority of said directors choose a successor or successors who shall hold
office for the unexpired term; provided that vacancies on the board of directors
may be so filled only if, after the filling of the same, at least two-thirds of
the directors then holding office would be directors elected to such office by
the stockholders at a meeting or meetings called for the purpose. In the event
that at any time less than a majority of the directors were so elected by the
stockholders, a special meeting of the stockholders shall be called forthwith
and held as promptly as possible and in any event within sixty days for the
purpose of electing an entire new board of directors.
ARTICLE 6
Certificates of Stock
6.01 Certificates. The board of directors may adopt a policy of not
issuing certificates except in extraordinary situations as may be authorized
from time to time by an officer of the Corporation. If such a policy is adopted,
a stockholder may obtain a certificate or certificates of the capital stock of
the Corporation owned by such stockholder only if the stockholder demonstrates a
specific reason for needing a certificate. If issued, the certificate shall be
in such form as shall, in conformity to law, be prescribed from time to time by
the board of directors. Such certificates shall be signed by the chairman of the
board of directors or the president or a vice president and by the treasurer or
an assistant treasurer or the secretary or an assistant secretary. If such
certificates are countersigned by a transfer agent or registrar other than the
Corporation or an employee of the Corporation, the signatures of the
aforementioned officers upon such certificates may be facsimile. In case any
officer or officers who have signed, or whose facsimile signature or signatures
have been used on, any such certificate or certificates shall cease to be such
officer or officers of the Corporation, whether because of death, resignation or
otherwise, before such certificate or certificates have been delivered by the
Corporation, such certificate or certificates may nevertheless be adopted by the
Corporation and be issued and delivered as though the person or persons who
signed such certificate or certificates or whose facsimile signature or
signatures have been used thereon had not ceased to be such officer or officers
of the Corporation.
6.02 Replacement of Certificates. The board of directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost or
destroyed. When authorizing such issue of a new certificate or certificates, the
board of directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost or destroyed certificate or
certificates, or its legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost or destroyed.
6.03 Stockholder Open Accounts. The corporation may maintain or cause
to be maintained for each stockholder a stockholder open account in which shall
be recorded such stockholder's ownership of stock and all changes therein, and
certificates need not be issued for shares so recorded in a stockholder open
account unless requested by the stockholder and such request is approved by an
officer.
6.04 Transfers. Transfers of stock for which certificates have been
issued will be made only upon surrender to the Corporation or the transfer agent
of the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, whereupon
the Corporation will issue a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction on its books. Transfers of
stock evidenced by open account authorized by Section 6.03 will be made upon
delivery to the Corporation or the transfer agent of the Corporation of
instructions for transfer or evidence of assignment or succession, in each case
executed in such manner and with such supporting evidence as the Corporation or
transfer agent may reasonably require.
6.05 Closing Transfer Books. The transfer books of the stock of the
corporation may be closed for such period (not to exceed 20 days) from time to
time in anticipation of stockholders' meetings or the declaration of dividends
as the directors may from time to time determine.
6.06 Record Dates. The board of directors may fix in advance a date,
not exceeding ninety days preceding the date of any meeting of stockholders, or
the date for the payment of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or exchange of capital stock
shall go into effect, or a date in connection with obtaining any consent or for
any other lawful purpose, as a record date for the determination of the
stockholders entitled to notice of, and to vote at, any such meeting, and any
adjournment thereof, or entitled to receive payment of any such dividend, or to
any such allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock, or to give such consent, and in
such case such stockholders and only such stockholders as shall be stockholders
of record on the date as fixed shall be entitled to such notice of, and to vote
at, such meeting, and any adjournment thereof, or to receive payment of such
dividend, or to receive such allotment of rights, or to exercise such rights, or
to give such consent, as the case may be, notwithstanding any transfer of any
stock on the books of the Corporation after any such record date fixed as
aforesaid.
6.07 Registered Ownership. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner and shall not be bound
to recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Maryland.
ARTICLE 7
Notices
7.01 Manner of Giving. Whenever under the provisions of the statutes or
of the Articles of Incorporation or of these bylaws notice is required to be
given to any director, committee member, officer or stockholder, it shall not be
construed to mean personal notice, but such notice may be given, in the case of
stockholders, in writing, by mail, by depositing the same in a United States
post office or letter box, in a postpaid sealed wrapper, addressed to each
stockholder at such address as it appears on the books of the corporation, or,
in default to other address, to such stockholder at the General Post Office in
the City of Baltimore, Maryland, and, in the case of directors, committee
members and officers, by telephone, or by mail or by telegram to the last
business address known to the secretary of the corporation, and such notice
shall be deemed to be given at the time when the same shall be thus mailed or
telegraphed or telephoned.
7.02 Waiver. Whenever any notice is required to be given under the
provisions of the statutes or of the Articles of Incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE 8
General Provisions
8.01 Disbursement of Funds. All checks, drafts, orders or instructions
for the payment of money and all notes of the corporation shall be signed by
such officer or officers or such other person or persons as the board of
directors may from time to time designate.
8.02 Voting of Stock in Other Corporations. Unless otherwise ordered by
the board of directors, any officer or, at the direction of any such officer,
any Manager shall have full power and authority to attend and act and vote at
any meeting of stockholders of any corporation in which this Corporation may
hold stock, at of any such meeting may exercise any and all the rights and
powers incident to the ownership of such stock. Any officer of this corporation
or, at the direction of any such officer, any Manager may execute proxies to
vote shares of stock of other corporations standing in the name of this
Corporation."
8.03 Execution of Instruments. Except as otherwise provided in these
bylaws, all deeds, mortgages, bonds, contracts, stock powers and other
instruments of transfer, reports and other instruments may be executed on behalf
of the corporation by the president or any vice president or by any other
officer or agent authorized to act in such matters, whether by law, the Articles
of Incorporation, these bylaws, or any general or special authorization of the
board of directors. If the corporate seal is required, it shall he affixed by
the secretary or an assistant secretary.
8.04 Seal. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its incorporation and the words "Corporate Seal,
Maryland." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE 9
Regulations
9.01 Investment and Related Matters. The Corporation shall not purchase
or hold securities in violation of the investment restrictions enumerated in its
then current prospectus and the registration statement or statements filed with
the Securities and Exchange Commission pursuant to the Securities Act of 1933
and the Investment Company Act of 1940, as amended, nor shall the Corporation
invest in securities the purchase of which would cause the Corporation to
forfeit its rights to continue to publicly offer its shares under the laws,
rules or regulations of any state in which it may become authorized to so offer
its shares unless, by specific resolution of the board of directors, the
Corporation shall elect to discontinue the sale of its shares in such state.
9.02 Other Matters. When used in this section the following words shall
have the following meanings: "Sponsor" shall mean any one or more corporations,
firms or associations which have distributor's contracts in effect with this
Corporation. "Manager" shall mean any corporation, firm or association which may
at the time have an investment advisory contract with this Corporation.
(a) Limitation of Holdings by this
Corporation of Certain Securities and of Dealings with Officers or Directors.
This Corporation shall not purchase or retain securities of any issuer if those
officers and directors of the Fund or its Manager owning beneficially more than
one-half of one per cent (0.5%) of the shares or securities of such issuer
together own beneficially more than five per cent (5%) of such shares or
securities; and each officer and director of this Corporation shall keep the
treasurer of this Corporation informed of the names of all issuers (securities
of which are held in the portfolio of this Corporation) in which such officer or
director owns as much as one-half of one percent (1/2 of 1%) of the outstanding
shares or securities and (except in the case of a holding by the treasurer) this
Corporation shall not be charged with knowledge of any such security holding in
the absence of notice given if as aforesaid if this Corporation has requested
such information not less often than quarterly. The Corporation will not lend
any of its assets to the Sponsor or Manager or to any officer or director of the
Sponsor or Manager or of this Corporation and shall not permit any officer or
director, and any officer or director of the Sponsor or Manager, to deal for or
on behalf of the Corporation with himself as principal agent, or with any
partnership, association or corporation in which he has a financial interest.
Nothing contained herein shall prevent (1) officers and directors of the
Corporation from buying, holding or selling shares in the Corporation, or from
being partners, officers or directors of or otherwise financially interested in
the Sponsor or the Manager or any company controlling the Sponsor or the
Manager; (2) employment of legal counsel, registrar, transfer agent, dividend
disbursing agent or custodian who is, or has a partner shareholder, officer or
director who is, an officer or director of the Corporation, if only customary
fees are charged for services to the Corporation; (3) sharing statistical and
research expenses and office hire and expenses with any other investment company
in which an officer or director of the Corporation is an officer or director or
otherwise financially interested.
(b) Limitation Concerning Participating by
Interested Persons in Investment Decisions. In any case where an officer or
director of the Corporation or of the Manager, or a member of an advisory
committee or portfolio committee of the Corporation, is also an officer or a
director of another corporation, and the purchase or sale of shares issued by
that other corporation is under consideration, the officer or director or
committee member concerned will abstain from participating in any decision made
on behalf of the Corporation to purchase or sell any securities issued by such
other corporation.
(c) Limitation on Dealing in Securities of
this Corporation by certain Officers, Directors, Sponsor or Manager. Neither the
Sponsor nor Manager, nor any officer or director of this Corporation or of the
Sponsor or Manager shall take long or short positions in securities issued by
this Corporation, provided, however, that:
(1) The Sponsor may purchase from this Corporation
shares issued by this Corporation if the orders to purchase from this
Corporation are entered with this Corporation by the Sponsor upon receipt by the
Sponsor of purchase orders for shares of this Corporation and such purchases are
not in excess of purchase orders received by the Sponsor.
(2) The Sponsor may in the capacity of agent for
this Corporation buy securities issued by this Corporation offered for sale by
other persons.
(3) Any officer or director of this Corporation or
of the Sponsor or Manager or any Company controlling the Sponsor or
Manager may at any time, or from time to time, purchase from this Corporation or
from the Sponsor shares issued by this Corporation at a price not lower than the
net asset value of the shares, no such purchase to be in contravention of any
applicable state or federal requirement.
(d) Securities and Cash of this Corporation to be held by
Custodian subject to certain Terms and Conditions.
(1) All securities and cash owned by this
Corporation shall as hereinafter provided, be held by or deposited with a
bank or trust company having (according to its last published report) not less
than two million dollars ($2,000,000) aggregate capital, surplus and undivided
profits (which bank or trust company is hereby designated as "Custodian"),
provided such a Custodian can be found ready and willing to act.
(2) This Corporation shall enter into a written
contract with the Custodian regarding the powers, duties and
compensation of the Custodian with respect to the cash and securities of this
Corporation held by the Custodian. Said contract and all amendments thereto
shall be approved by the board of directors of this Corporation.
(3) This Corporation shall upon the resignation or
inability to serve of its Custodian or upon change of the Custodian:
(aa) in case of such resignation or
inability to serve, use its best efforts to obtain a successor Custodian;
(bb) require that the cash and securities
owned by this Corporation be delivered directly to the successor Custodian; and
(cc) In the event that no successor
Custodian can be found, submit to the stockholders, before permitting delivery
of the cash and securities owned by this Corporation otherwise than
to a successor Custodian, the question whether or not this Corporation
shall be liquidated or shall function without a Custodian.
(e) Amendment of Investment Advisory Contract. Any
investment advisory contract entered into by this Corporation shall not be
subject to amendment except by (1) affirmative vote at a shareholders meeting,
of the holders of a majority of the outstanding stock of this Corporation, or
(2) a majority of such Directors who are not interested persons (as the term is
defined in the Investment Company Act of 1940) of the Parties to such
agreements, cast in person at a board meeting called for the purpose of voting
on such amendment.
(f) Reports relating to Certain Dividends. Dividends paid
from net profits from the sale of securities shall be clearly revealed by
this Corporation to its shareholders and the basis of calculation shall be
set forth.
(g) Maximum Sales Commission. The Corporation shall,
in any distribution contract with respect to its shares of common stock entered
into by it, provide that the maximum sales commission to be charged upon any
sales of such shares shall not be more than nine per cent (9%) of the offering
price to the public of such shares. As used herein, "offering price to the
public" shall mean net asset value per share plus the commission charged
adjusted to the nearest cent.
ARTICLE 10
Purchases and Redemption of Shares:
Suspension of Sales
10.01 Purchase by Agreement. The Corporation may purchase its shares by
agreement with the owner at a price not exceeding the net asset value next
computed following the time when the purchase or contract to purchase is made.
10.02 Redemption. The Corporation shall redeem such shares as are
offered by any stockholder for redemption upon the presentation of a written
request therefor, duly executed by the record owner, to the office or agency
designated by the corporation. If the shareholder has received stock
certificates, the request must be accompanied by the certificates, duly endorsed
for transfer, in acceptable form; and the Corporation will pay therefor the net
asset value of the shares next effective following the time at which the
request, in acceptable form, is so presented. Payment for said shares shall
ordinarily be made by the Corporation to the stockholder within seven days after
the date on which the shares are presented.
10.03 Suspension of Redemption. The obligations set out in Section
10.02 may be suspended (i) for any period during which the New York Stock
Exchange, Inc. is closed other than customary week-end and holiday closings, or
during which trading on the New York Stock Exchange, Inc. is restricted, as
determined by the rules and regulations of the Securities and Exchange
Commission or any successor thereto; (ii) for any period during which an
emergency, as determined by the rules and regulations of the Securities and
Exchange Commission or any successor thereto, exists as a result of which
disposal by the Corporation of securities owned by it is not reasonably
practicable or as a result of which it is not reasonably practicable for the
Corporation to fairly determine the value of its net assets; or (iii) for such
other periods as the Securities and Exchange Commission or any successor thereto
may by order permit for the protection of security holders of the Corporation.
Payment of the redemption or purchase price may be made in cash or, at the
option of the Corporation, wholly or partly in such portfolio securities of the
Corporation as the Corporation may select.
10.04 Suspension of Sales. The Corporation reserves the right to
suspend sales of its shares if, in the judgment of the majority of the board of
directors or a majority of the executive committee of its Board, if such
committee exists, it is in the best interest of the Corporation to do so, such
suspension to continue for such period as may be determined by such majority.
ARTICLE 11
Fractional Shares
11.01 The board of directors may authorize the issue from time to time
of shares of the capital stock of the corporation in fractional denominations,
provided that the transactions in which and the terms upon which shares in
fractional denominations may be issued may from time to time be determined and
limited by or under authority of the board of directors.
ARTICLE 12
Indemnification
12.01 (a) Every person who is or was a director, officer or employee of
this Corporation or of any other corporation which he served at the request of
this Corporation and in which this Corporation owns or owned shares of capital
stock or of which it is or was a creditor shall have a right to be indemnified
by this Corporation against all liability and reasonable expenses incurred by
him in connection with or resulting from a claim, action, suit or proceeding in
which he may become involved as a party or otherwise by reason of his being or
having been a director, officer or employee of this Corporation or such other
corporation, provided (1) said claim, action, suit or proceeding shall be
prosecuted to a final determination and he shall be vindicated on the merits, or
(2) in the absence of such a final determination vindicating him on the merits,
the board of directors shall determine that he acted in good faith and in a
manner he reasonably believed to be in the best interest of the Corporation in
the case of conduct in the director's official capacity with the Corporation and
in all other cases, that the conduct was at least not opposed to the best
interest of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful; said
determination to be made by the board of directors acting through a quorum of
disinterested directors, or in its absence on the opinion of counsel.
(b) For purposes of the preceding subsection:
(1) "liability and reasonable expenses" shall include hut not be limited to
reasonable counsel fees and disbursements, amounts of any judgment, fine or
penalty, and reasonable amounts paid in settlement; (2) "claim, action,
suit or proceeding" shall include every such claim, action, suit or proceeding,
whether civil or criminal, derivative or otherwise, administrative, judicial or
legislative, any appeal relating thereto, and shall include any reasonable
apprehension or threat of such a claim, action, suit or proceeding; (3) the
termination of any proceeding by judgment, order, settlement, conviction or upon
a plea of nolo contendere or its equivalent creates a rebuttable presumption
that the director did not meet the standard of conduct set forth in subsection
(a)(2), supra.
(c) Notwithstanding the foregoing, the following
limitations shall apply with respect to any action by or in the right of the
Corporation: (1) no indemnification shall be made in respect of claim, issue or
matter as to which the person seeking indemnification shall have been adjudged
to be liable for negligence or misconduct in the performance of his duty to
the Corporation unless and only to the extent that the Court of Chancery of the
State of Maryland or the court in which such action or suit was brought shall
determine upon application that despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper; and (2) indemnification shall extend only to
reasonable expenses, including reasonable counsel's fees and disbursements.
(d) The right of indemnification shall extend to any
person otherwise entitled to it under this bylaw whether or not that person
continues to be a director, officer or employee of this Corporation or such
other corporation at the time such liability or expense shall be incurred.
The right of indemnification shall extend to the legal representative
and heirs of any person otherwise entitled to indemnification. If a person meets
the requirements of this bylaw with respect to some matters in a claim, action
suit, or proceeding, but not with respect to others, he shall be entitled
to indemnification as to the former. Advances against liability and expenses may
be made by the Corporation on terms fixed by the board of directors subject to
an obligation to repay if indemnification proves unwarranted.
(e) This bylaw shall not exclude any other rights of
indemnification or other rights to which any director, officer or employee
may be entitled to by contract, vote of the stockholders or as a matter of law.
If any clause, provision or application of this section shall be determined to
be invalid, the other clauses, provisions or applications of this section shall
not be affected but shall remain in full force and effect. The provisions of
this bylaw shall be applicable to claims, actions, suits or proceedings made or
commenced after the adoption hereof, whether arising from acts or omissions to
act occurring before or after the adoption hereof.
(f) Nothing contained in this bylaw shall be construed to
protect any director or officer of the Corporation against any liability
to the Corporation or its security holders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
ARTICLE 13
Amendments
13.01 These bylaws may be amended or added to, altered or repealed at
any annual or special meeting of the stockholders by the affirmative vote of the
holders of a majority of the shares of capital stock issued and outstanding and
entitled to vote, provided notice of the general purport of the proposed
amendment, addition, alteration or repeal is given in the notice of said
meeting, or, at any meeting of the board of directors by vote of a majority of
the directors then in office, except that the board of directors may not amend
Article 5 to permit removal by said board without cause of any director elected
by the stockholders.
