File No. 333-
ICA No. 811-08649
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 10, 1998
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No.
Post-Effective Amendment No.
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No.
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THE EII REALTY SECURITIES FUND
(Exact Name of Registrant as Specified in Charter)
667 Madison Avenue, 16th Floor
New York, New York 10021
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 575-5500
Richard J. Adler
European Investors Incorporated
667 Madison Avenue, 16th Floor
New York, New York 10021
(Name and Address of Agent for Service)
Copies to:
Susan J. Penry-Williams, Esq.
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Approximate date of proposed public offering: As soon as practicable
after this registration statement becomes effective.
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The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
E.I.I. REALTY SECURITIES FUND
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
under the Securities Act of 1933
<TABLE>
<CAPTION>
Item Number
Form N-1A
Part A Prospectus Caption
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<S> <C> <C>
1. Cover Page Cover Page; Introduction
2. Synopsis Fund Expenses
3. Condensed Financial Information Inapplicable
4. General Description of Registrant Introduction; Investment Objectives and Policies;
Risk Factors; Investment Limitations; Additional
Information
5. Management of the Fund Fund Description; The Organization,
Management, and Service Providers of the Fund
5.A. Management's Discussion of Fund Investment Philosphy
Performance
6. Capital Stock and Other Securities How to Purchase Shares; How to Redeem Shares;
Dividends, Distributions and Taxes; Fund
Organization and Fees; Additional Information
7. Purchase of Securities Being Offered How to Purchase Shares
8. Redemption or Repurchase How to Redeem Shares
9. Pending Legal Proceedings Inapplicable
</TABLE>
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<PAGE>
E.I.I. REALTY SECURITIES FUND
CROSS REFERENCE SHEET
Item Number
<TABLE>
<CAPTION>
Form N-1A Statement of Additional
Part B Information Caption
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<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Additional Information
13. Investment Objectives and Policies Investment Policies and Risks
14. Management of the Fund Managment
15. Control Persons and Principal General Information
Holders of Securities
16. Investment Advisory and Other Investment Advisor and Investment Advisory
Services Agreements; Distribution Plans; Administrative
Services Agreement
17. Brokerage Allocation and Other Practices Portfolio Transactions and Brokerage;
Allocation of Investments
18. Capital Stock and Other Securities General Information
19. Purchase, Redemption and Pricing Purchase and Redemption of Shares
of Securities Being Offered
20. Tax Status Tax Matters
21. Underwriters Distribution Plans
21. Calculation of Performance Data Performace Calculation
22. Financial Statements Inapplicable
</TABLE>
Part C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of the Registration Statement.
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission but has not yet become effective. These
securities may not be sold nor may offers to buy be accepted prior to the time
the registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any State in which such offer,
solicitation, or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.
Subject to completion February 9, 1998
E.I.I. REALTY SECURITIES FUND
Prospectus
_____, 1998
Institutional Shares
Adviser Shares
Investor Shares
800 phone number
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY SUCH STATE AUTHORITY PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
FUND EXPENSES
The following information is provided to assist you in understanding the various
costs and expenses that an investor in the Fund will bear directly or
indirectly.
Shareholder Transaction Expenses
(as a percentage of the offering price)
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Sales Charge Imposed on Purchases None
Sales Charge Imposed on Reinvested Dividends None
Deferred Sales Charge None
Redemption Fees None
Exchange Fees None
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You may be charged additional fees if you purchase, exchange, or redeem shares
through a broker or agent.
The Annual Fund Operating Expenses table below illustrates the estimated
operating expenses that you will incur as a shareholder of the Fund. These
expenses are charged directly to the Fund. Expenses include management fees as
well as the costs of maintaining accounts, administering the Fund, providing
shareholder services, and other activities. The expenses shown are estimated
based on projected expenses of the Fund.
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
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Institutional Adviser Investor
Shares Shares Shares
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Management Fees 0.75% 0.75% 0.75%
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Administration Fees 0.15%* 0.25% 0.25%
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Shareholder Servicing Fees 0.00% 0.25% 0.25%
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Rule 12b-1 Distribution Fees 0.00% 0.00% 0.75%
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Other Expenses [0.10%] [0.10%] [0.10%]
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Total Fund Operating Expenses [1.00+%] [1.35+%] [2.10+%]
*After fee waiver.
The following example, which is in the prospectus of every mutual fund, is
intended to provide investors with an opportunity to compare the expenses of the
Fund to the expenses of other mutual funds. The example is only an illustration
and does not depict the actual expenses or returns of the Fund. The expenses
used in the example are those listed in the Annual Fund Operating Expenses
Table. The example assumes a $1,000 investment, a 5% annual return, and
redemption at the end of each time period.
Institutional Adviser Investor
Shares Shares Shares
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1 Year 40 36 29
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3 Years 125 113 89
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<PAGE>
INTRODUCTION
This prospectus describes the E.I.I. Realty Securities Fund (the "Fund"). The
Fund is a non-diversified, open-end investment management company. This
prospectus explains the objectives, policies, strategies, and risks of the Fund.
You should read this prospectus before investing in the Fund and keep it for
future reference. A detailed Statement of Additional Information (the "SAI")
describing the Fund also is available for your review. The SAI has been filed
with the Securities and Exchange Commission (the "SEC") and is incorporated by
reference into, and is legally a part of, this prospectus. If you would like a
free copy of the SAI, please request one by calling us at 800-phone number.
Additional information, including this Prospectus and the SAI, may be obtained
by accessing the Internet Web site maintained by the SEC (http://www.sec.gov).
Investment Objective and Policies
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The investment objective of the Fund is to provide the diversification and total
return potential of investments in real estate. The Fund will seek to achieve
this objective by buying the shares of companies whose business it is to own,
operate, develop, and manage real estate. Typically, an investment in commercial
real estate provides a significant current return, with additional appreciation
potential. As such, a critical objective of the Fund is to achieve total returns
which include a significant component of current income, which may serve to
provide portfolio stability during periods of overall market fluctuations. (Over
the 10 year period ending 12/31/97, the National Association of Real Estate
Investment Trusts ("NAREIT") Equity Index achieved an annualized total return of
14.17%, which was comprised of 8.15% in current income and 5.57% of capital
appreciation.) Capital appreciation within the Fund also will be pursued by
targeting companies with the highest risk-adjusted total return potential. The
Fund intends to invest at least 80% of its assets in the securities of companies
in the real estate industry, with a primary emphasis on Real Estate Investment
Trusts ("REITs"). In addition, the Fund may invest in other securities as
described in "Other Investments."
The Fund may achieve its investment objective by investing all of its assets in
another investment company having substantially the same investment objective
and policies as the Fund instead of investing directly in the underlying
securities.
E.I.I. Realty Securities, Inc. ("EII"), the Fund's investment adviser, believes
that investments in real estate offer a total return potential which may serve
as an effective portfolio diversified for many investors. In addition, EII
believes that, for most investors, the most convenient and effective way to
invest in real estate is through the ownership of a diversified portfolio of
real estate securities. Real estate securities, and more specifically, REITs,
provide investors with many of the features particular to both real estate
investments and publicly-traded securities, providing investors with a practical
and efficient means to include professionally-managed real estate in an
investment portfolio.
WHY REAL ESTATE? Investments in real estate offer the following benefits over
investments in other asset classes:
o Relatively low historical correlation to the equity market
o Relatively high levels of potential current income from contractual
rental streams
o A potential hedge against inflation from rising asset values and the
possibility of passing through higher costs to tenants
WHY REAL ESTATE SECURITIES? An investment in a portfolio of real estate
securities offers the following benefits in addition to those provided by direct
real estate investments:
o Market pricing of publicly-traded shares (instead of appraisal-based
valuations)
o Enhanced liquidity, which aids in investment speed as well as
portfolio rebalancing
WHY EII? EII and its parent company, European Investors Incorporated, have been
professionally managing real estate securities portfolios on behalf of their
clients for more than a decade and have consistently outperformed their primary
benchmark (the NAREIT Equity Index) by an average margin of
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more than 300 basis points on an annualized basis, before fees. The collective
client base of EII and European Investors Incorporated includes an array of
investors ranging from foreign and domestic high net worth individuals to U.S.
foundations, endowments, and corporate pension plans. In addition, European
Investors Incorporated serves as the adviser or sub-adviser for several offshore
funds investing with substantially the same investment objective as the Fund.
The chart below shows the historical performance of real estate accounts managed
by European Investors Incorporated and EII that have substantially the same
investment objective as the Fund. The data, calculated on an average annual
total return basis, is provided to illustrate EII's past performance in managing
accounts in accordance with the same investment objective, policies, and process
as those of the Fund. These accounts consist of separate and distinct portfolios
and their performance is not indicative of past or future performance of the
Fund. As of ___, the Fund had not commenced investment operations and therefore
did not have a performance record of its own.
<TABLE>
EUROPEAN INVESTORS INCORPORATED & E.I.I. REALTY SECURITIES (EII)
REAL ESTATE SECURITIES COMPOSITE
AS OF DECEMBER 31, 1997
<CAPTION>
ANNUAL RETURNS STANDARD
THROUGH DECEMBER 31, 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 DEVIATION
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EII* 13.06% 12.09% -11.69% 34.39% 19.34% 19.60% 6.53% 17.06% 35.80% 22.15% 13.61%
Wilshire Real Estate 24.18% 2.37% -33.46% 20.03% 7.40% 15.23% 1.64% 13.65% 36.87% 19.80% 18.79%
Securities Index
NAREIT Equity Index 13.49% 8.84% -15.35% 35.70% 14.59% 19.65% 3.17% 15.27% 35.27% 20.26% 14.87%
<CAPTION>
CUMULATIVE RETURNS AFTER 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
FEES ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EII* 13.06% 26.73% 11.92% 50.41% 79.50% 114.68% 128.70% 167.71% 263.53% 344.04%
Wilshire Real Estate 24.18% 27.12% -15.41% 1.54% 9.05% 25.66% 27.73% 45.16% 98.68% 138.01%
Securities Index
NAREIT Equity Index 13.49% 23.52% 4.56% 41.88% 62.58% 94.54% 100.70% 131.34% 212.93% 276.33%
<CAPTION>
Cumulative Summary
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1 YEAR 3 YEAR 5 YEAR 10 YEAR
<S> <C> <C> <C> <C>
EII* 22.15% 94.20% 147.40% 344.00%
Wilshire Real Estate Securities Index 19.80% 86.35% 137.17% 138.01%
NAREIT Equity Index 20.26% 87.51% 131.84% 276.33%
</TABLE>
*Net of investment management fees.
PERFORMANCE COMPARISON
[GRAPH OMITTED]
DESCRIPTION OF OMIITED GRAPH: A chart comparing the performance of EII, the
Wilshire Real Estate Securities Index, and the NAREIT Equity Index.
Performance is shown net of a 1% management fee, as well as all brokerage and
trading expenses. The Composite includes all of the real estate securities
accounts of European Investors Incorporated and EII except for: (i) foreign
funds where the performance is stated net of fees and withholding taxes and is
therefore not comparable and (ii) new accounts where the cash position is not
yet comparable to other portfolios and certain accounts with unique objectives
and restrictions. As these accounts become fully invested they are added to the
Composite.
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<PAGE>
FUND DESCRIPTION
Investment Philosophy
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EII's investment philosophy is to achieve attractive risk-adjusted total returns
by investing primarily in a diversified portfolio of real estate securities of
companies which it deems to be of the highest quality available in the
marketplace. In this regard, EII deems high-quality companies to be candidates
for the portfolio when a number of the following conditions are met:
o Experienced, dedicated management teams are in place which have
significant inside ownership of shares, have capital markets
expertise, and have a pro-shareholder orientation
o The companies have long term strategies which position them for
sustainable cash flow growth
o The balance sheets of the individual companies are positioned to
enable significant growth
Investment Policies
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The Fund will pursue its investment objective by investing at least 80% of its
total assets in the equity or convertible securities of U.S. companies (with a
primary emphasis on REITs) which are principally engaged in the ownership,
construction, management, financing, or sale of residential, commercial, or
industrial real estate. Principally engaged means at least 50% of its revenues
are derived from such real estate activities or at least 50% of the fair market
value of its assets are invested in real estate.
Under normal market conditions, the Fund will invest substantially all of its
assets in:
o Income producing real estate securities (including equity, mortgage,
and hybrid REITs)
o Real Estate Operating Companies (REOCs)
o Securities convertible into common stocks (including convertible
preferred stocks, rights, warrants, etc.)
o Real estate related fixed income securities (such as convertible
debentures, unsecured debentures, mortgage backed securities, etc.)
The Fund also may invest:
o up to 20% of its total assets in securities of foreign real estate
companies, many of which have substantial holdings of U.S. real estate
securities
Investment Process
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EII's investment process employs a combination of a "top-down," macro level
analysis by its Investment Committee, together with rigorous "bottom-up,"
fundamental securities research and analysis on individual companies by its
analyst team.
Investment Committee Decision Process:
EII's Investment Committee analyzes national and regional economic trends and
the market for different types of real estate including residential, retail,
hotel, industrial, and office properties. In addition, the Investment Committee
makes assessments of the economic environment, securitization trends, etc., and
then derives an investment strategy formulated to take advantage of perceived
opportunities.
Analyst Team Decision Process:
EII's analyst team tracks a universe of more than 125 individual companies which
are analyzed for potential investment. Companies are evaluated on both a
quantitative and a qualitative basis in order to determine which companies may
provide attractive risk-adjusted returns.
EII's analyst team evaluates and analyzes companies based upon the following
criteria:
Qualitative Analysis:
o Management strength
o Business strategy
o Financial strength
o Competitive advantages within the marketplace
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<PAGE>
Quantitative Analysis:
o Cash flow and dividend growth prospects
o Risk-adjusted total return expectations using numerous
methodologies
o Real estate analysis using capitalization rates,
values on a square footage basis, etc.
o Balance sheet strength and relative cost of capital
Integral parts of EII's investment process include
o performing individual property and market evaluations which are
important to understanding the company's portfolio
o verifying that the company's assets are consistent with
management's stated strategy
o finding and reviewing any problems relating to the company's
properties
o evaluating the company's properties and their position in the
markets
o assessing the quality of property management.
About the Investment Adviser
- ----------------------------
The Fund has entered into an investment advisory agreement with EII. EII was
formed in 1993 and is a registered investment adviser providing real estate
securities portfolio management services to U.S. tax-exempt institutions and
other investors. EII is a wholly owned subsidiary of European Investors
Incorporated, which is a registered investment adviser providing both general
securities and real estate securities portfolio management services. EII and
European Investors Incorporated are owned by management.
European Investors Incorporated was founded in 1983 to provide investment
services primarily to foreign investors (with a focus in Europe) in the United
States by managing securities portfolios as well as providing direct real estate
advisory services and corporate advisory services. From these combined efforts,
European Investors Incorporated determined that securitized real estate could
serve as an alternative means of acquiring real estate assets and developed a
portfolio management service specifically in this area, which now caters to both
foreign and domestic investors. European Investors Incorporated commenced
research into real estate securities as a separate portfolio product in 1986,
began managing real estate securities portfolios in 1987, and is a recognized
leader in real estate securities investment management.
EII and European Investors Incorporated collectively have a diversified client
base which includes investors in twelve countries, encompassing taxable and
tax-exempt investors, individuals, and institutions, including over 60 domestic
institutional investors. The combined companies currently have approximately
$1.6 billion invested in real estate securities on behalf of clients. They also
manage several offshore real estate investment funds in Europe and the Middle
East.
Portfolio Management Personnel
- ------------------------------
RICHARD J. ADLER is a Managing Director of EII. Mr. Adler serves as investment
strategist for EII and co-portfolio manager of the Fund, to which he provides
investment strategy as well as expertise in convertible and other securities.
Mr. Adler is a 1968 graduate of Yale University with a B.A. degree in Economics
and earned an M.B.A. from Harvard Business School with Honors in 1973. He has
served as an officer in the U.S. Navy and was a Vice President of Goldman, Sachs
& Co. in New York from 1973 to 1983, where he worked with foreign investors.
CYDNEY C. DONNELL is a Managing Director of EII. Ms. Donnell serves as
co-portfolio manager of the Fund, jointly responsible for its day-to-day
operations. Ms. Donnell has served as a REIT analyst or portfolio manager for
EII since the inception of its real estate securities investment management
business in 1987. Prior to joining EII, Ms. Donnell was a real estate lending
officer at Republic Bank Corporation from 1983 to 1986. Ms. Donnell graduated
magna cum laude from Texas A&M in 1981 with a degree in
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<PAGE>
Finance and received an M.B.A. from Southern Methodist University in 1982. She
has served as a member of the NAREIT Board of Governors.
DAVID P. O'CONNOR is a Managing Director of EII. Mr. O'Connor serves as
co-portfolio manager of the Fund, jointly responsible for its day-to-day
operations. Mr. O'Connor has served as a REIT analyst or co-portfolio manager
for EII since February, 1994. Prior to joining EII, Mr. O'Connor served as an
investment executive at Kidder, Peabody, and Co., Inc., where he specialized in
real estate securities. From 1987 to 1992, Mr. O'Connor was employed by a
management affiliate of Presidential Realty Corp. (an AMEX Listed REIT) and
subsequently served as a real estate analyst at Lane Webber Properties, a
private real estate development and investment firm. Mr. O'Connor is a 1986
graduate of the Boston College School of Management and received an M.S. in Real
Estate Development and Investment from New York University.
SECURITIES IN WHICH THE FUND INVESTS
A REIT is a corporation or a business trust that combines the capital of many
investors for investment primarily in income-producing real estate or real
estate-related loans or interests. The shares of a REIT are often freely traded
on a major stock exchange. A REIT must meet certain requirements contained in
the Internal Revenue Code of 1986, as amended (the "Code"), in which case it
generally does not pay federal corporate income tax. Generally, a REIT is
required to invest substantially all of its assets in interests in real estate
(including mortgages and other REITs) or cash and government securities, derive
most of its income from rents from real property or interest on loans secured by
mortgages on real property, and distribute to shareholders annually a
substantial portion of its otherwise taxable income. Most states honor this
federal income tax treatment and do not require REITs to pay state income tax.
As a result, nearly all of a REIT's income can be distributed to shareholders
without the imposition of a corporate level income tax. However, unlike a
partnership, a REIT cannot pass its tax losses onto its investors.
REITs are characterized as equity REITs, mortgage REITs, and hybrid REITs.
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Equity REITs, which may include operating or finance companies, own real estate
directly and the value of, and income earned by, these REITs depends upon the
income of the underlying properties and the rental income they earn. Equity
REITs also can realize capital gains (or losses) by selling properties that have
appreciated (or depreciated) in value. Mortgage REITs can make construction,
development, or long-term mortgage loans and are sensitive to the credit quality
of the borrower. Mortgage REITs derive their income from interest payments on
such loans. Hybrid REITs combine the characteristics of both equity and mortgage
REITs, generally by holding both ownership interests and mortgage interests in
real estate. The value of securities issued by REITs are affected by tax and
regulatory requirements and by perceptions of management skill. REITs also are
subject to heavy cash flow dependency, defaults by borrowers or tenants,
self-liquidation, and the possibility of failing to qualify for tax-free status
under the Code or to maintain exemption from the Investment Company Act of 1940,
as amended (the "Investment Company Act").
For more information about other securities in which the Fund can invest, see
"Other Securities in Which the Fund May Invest and Investment Techniques" and
the SAI.
PORTFOLIO TURNOVER
It is anticipated that the portfolio turnover rate for the Fund in any one year
will not exceed 60%, which is lower than the turnover rate for many comparable
real estate funds. A lower portfolio turnover rate will result in a lower rate
of net realized capital gains to the Fund and will decrease the portion of the
Fund's distributions constituting taxable capital gains.
RISK FACTORS
The Fund is designed for long-term investors. The Fund is subject to the risks
common to all mutual funds and the risks common to mutual funds that invest in
equity securities, real estate securities, foreign
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<PAGE>
securities, and fixed-income securities. In addition, the Fund is subject to the
risks related to direct investment in real estate. By itself, the Fund does not
constitute a complete investment plan and should be considered a long-term
investment for investors who can afford to weather changes in the value of their
investment.
This prospectus describes some of the risks that you may assume as an investor
in the Fund. Some limitations on the Fund's investments are described in the
section that follows. "Other Securities in Which the Fund May Invest and
Investment Techniques" at the end of this prospectus provides additional
information on the securities in which the Fund can invest. As with any mutual
fund, there is no guarantee that the Fund will earn income or show a positive
total return over time. The Fund's price, yield, and total return will
fluctuate.
THE FOLLOWING RISKS ARE COMMON TO ALL MUTUAL FUNDS:
MARKET RISK is the risk that the market value of a security will
fluctuate, depending on the supply and demand for that type of
security. As a result of this fluctuation, a security may be
worth less than the price the Fund originally paid for it, or
less than the security was worth at an earlier time. Market
risk may affect a single security, an industry, a sector of
the economy, or the entire market, and is common to all
investments.
MANAGER RISK is the risk that the Fund's investment adviser may use a
strategy that does not produce the intended result. Manager
risk also refers to the possibility that the Fund's investment
adviser may fail to execute an investment strategy effectively
and thus fail to achieve its objective.
THE FOLLOWING RISK IS COMMON TO MUTUAL FUNDS THAT INVEST IN EQUITY SECURITIES:
EQUITY RISK is the risk that the value of the security will fluctuate
in response to changes in earnings or other conditions
affecting the issuer's profitability. Unlike debt securities,
which have preference to a company's earnings and cash flow,
equity securities are entitled to the residual value after the
company meets its other obligations. For example, holders of
debt securities have priority over holders of equity
securities to a company's assets in the event of bankruptcy.
THE FOLLOWING RISKS ARE COMMON TO MUTUAL FUNDS THAT INVEST IN REAL ESTATE
SECURITIES:
REAL ESTATE RISK is the risk that the value of a security will
fluctuate because of changes in property values, vacancies of
rental properties, overbuilding, changes in local laws,
increased property taxes and operating expenses, and other
risks associated with real estate. While the Fund will not
invest directly in real estate, it may be subject to the risks
associated with direct ownership. Equity REITs may be affected
by changes in property value, while mortgage REITs may be
affected by credit quality.
REGULATORY RISK is the risk that certain REITs may fail to qualify for
pass-through of income under federal tax law or to maintain
their exemption from the registration requirements under
federal securities laws.
THE FOLLOWING RISKS ARE COMMON TO MUTUAL FUNDS THAT INVEST IN FOREIGN
SECURITIES:
FOREIGN ISSUER RISK is the risk that foreign issuers may not be
subject to uniform accounting, auditing and financial
reporting standards and practices used by domestic issuers. In
addition, foreign securities markets may be less liquid, more
volatile, and less subject to governmental supervision than in
the U.S. Investments in foreign countries could be affected by
factors not present in the U.S., including expropriation,
confiscation of property, and difficulties in enforcing
contracts.
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<PAGE>
CURRENCY RISK is the risk that fluctuations in the exchange rates
between the U.S. dollar and foreign currencies may negatively
affect an investment. Adverse changes in rates may erode or
reverse gains produced by investments denominated in foreign
currencies.
THE FOLLOWING RISKS ARE COMMON TO MUTUAL FUNDS THAT INVEST IN FIXED INCOME
SECURITIES:
INTEREST RATE RISK. The value of a fixed income security typically
changes in the opposite direction from a change in interest
rates. When interest rates go up, the value of a fixed-rate
security typically goes down. When interest rates go down, the
value of these securities typically goes up. Generally, the
market values of securities with longer maturities are more
sensitive to changes in interest rates.
INFLATION RISK is the risk that inflation will erode the purchasing
power of the cash flows generated by fixed income securities
held by the Fund. Fixed-rate debt securities are more
susceptible to this risk than floating-rate debt securities.
REINVESTMENT RISK is the risk that when interest income is reinvested,
interest rates will have declined so that income must be
reinvested at a lower interest rate. Generally, interest rate
risk and reinvestment risk have offsetting effects.
CREDIT (OR DEFAULT) RISK is the risk that the issuer of a fixed
income security will be unable to make timely payments of
interest or principal.
OTHER INFORMATION ABOUT THE FUND
Diversification Requirements.
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The SEC and IRS have certain restrictions with which all mutual funds must
comply. The Fund monitors these limitations on an ongoing basis. These
diversification provisions and requirements are discussed further in the SAI.
o SEC Requirement: The Fund is not "diversified" according to certain
federal securities provisions regarding diversification of its assets. As a
non-diversified investment company, the Fund may devote a larger portion of
its assets to the securities of a single issuer than if it were
diversified.
o IRS Requirement: The Fund intends to comply with certain federal tax
requirements regarding the diversification of its assets. Generally, under
those requirements, the Fund must invest at least 50% of its total assets
so that no more than 5% of its total assets are invested in the securities
of any one issuer (excluding U.S. Government securities).
Investment Performance
- ----------------------
The performance of the Fund may be advertised by comparing it to other mutual
funds with similar objectives and policies. Performance information may also
appear in various publications. Any fees charged by a salesperson, financial
planner, investment adviser, or trust officer that provides investment
information (an "Investment Professional") may not be reflected in these
performance calculations. Performance information is contained in the annual and
semi-annual reports. You may obtain a copy of the annual and semi-annual reports
free of charge by calling 800-PHONE NUMBER. The "30-day yield" is an
"annualized" figure-the amount you would earn if you stayed in the Fund for a
year and the Fund continued to earn the same net interest income throughout that
year. To calculate 30-day yield, the Fund's net investment income per share for
the most recent 30 days is divided by the maximum offering price per share. To
calculate "total return," the Fund starts with the total number of shares that
you can buy for $1,000 at the beginning of the period. Then the Fund adds all
dividends and distributions paid as if they were reinvested in additional
shares. This takes into account the Fund's dividend distributions, if any. The
total number of shares is multiplied by the net asset value on the last day of
the period and the result is divided by the initial $1,000 investment to
determine the percentage gain or loss. For periods of more than one year, the
cumulative total return is adjusted to get an average annual total return. Yield
is a measure of net dividend income. Average annual total return is a
hypothetical measure of past dividend income plus capital appreciation. It is
the sum of all parts of the Fund's investment return for periods greater than
one year. Total return is the sum of all parts of the Fund's investment return.
Whenever you see information on a Fund's performance, do not consider the past
performance to be an indication of the performance you could expect by making an
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<PAGE>
investment in the Fund today.
Past performance does not guarantee future results. You may obtain the current
30-day yield by calling 800-PHONE NUMBER. Shareholder Servicing representatives
are available from [8:00 a.m. to 7:00 p.m. Eastern Time Monday through Friday].
Share Price
- -----------
The Fund's daily share price, called its net asset value is useful to you as a
shareholder because the NAV, multiplied by the number of Fund shares you own,
gives you the dollar amount and value of your investment. The Fund's NAV is
calculated each business day as of the close of the New York Stock Exchange
(normally at 4:00 p.m. Eastern time). Shares are purchased at the next share
price calculated after your investment instructions are received and accepted. A
business day is a day on which the New York Stock Exchange is open for trading
or any day in which enough trading has occurred in the securities held by the
Fund to affect the NAV materially.
The NAV is calculated by adding up the total value of the Fund's investments and
other assets, subtracting its liabilities, and then dividing that figure by the
number of outstanding shares of the Fund:
NAV = Total Assets - Liabilities
----------------------------
Number of Shares Outstanding
Dividends, Distributions, and Taxes
- -----------------------------------
As a shareholder, you are entitled to your share of net income and capital gains
on the Fund's investments. The Fund passes its earnings along to investors in
the form of dividends. Dividend distributions are the net dividends or interest
earned on investments after expenses. As with any investment, you should
consider the tax consequences of an investment in the Fund.
Ordinarily, the Fund declares and pays dividends from its net investment income
quarterly. The Fund pays any net capital gains realized as dividends at least
annually. Distributions can be received in one of the following ways:
REINVESTMENT OPTION: You can have distributions automatically reinvested in
additional shares of the Fund. If you do not indicate another choice on your
Account Application, this option will be assigned to you automatically.
CASH OPTION: A check will be mailed to you no later than 7 days after the pay
date.
INCOME EARNED OPTION: Dividends can be reinvested automatically in the Fund and
your capital gains can be paid in cash, or capital gains can be reinvested and
dividends paid in cash.
DIRECTED BANK ACCOUNT OPTION: In most cases, you can have distributions
automatically transferred to your bank checking or savings account. Under normal
circumstances, a dividend will be transferred within 7 days of the dividend
payment date. The bank account must have a registration identical to that of
your Fund account.
Your choice of distribution should be set up on the original Account
Application. If you would like to change the option you selected, please call
the Transfer Agent at 800-PHONE NUMBER.
You should check the Fund's distribution schedule before you invest. If you buy
shares of the Fund shortly before it makes a distribution, some of your
investment may come back to you as a taxable distribution.
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<PAGE>
Important Information about Taxes
- ---------------------------------
o The Fund intends to qualify as a regulated investment company, in which
case it will pay no federal income tax on the earnings or capital gains it
distributes to its shareholders.
o Ordinary dividends from the Fund are taxable as ordinary income; dividends
from the Fund's long-term capital gains are taxable as capital gain.
o Dividends are treated in the same manner for federal income tax purposes
whether you receive them in cash or in additional shares. It is likely that
they will also be subject to state and local taxes.
o Dividends from interest on certain U.S. Government obligations held by the
Fund may be exempted from some state and local taxes. You will receive a
statement at the end of each year showing which dividends are exempt. The
Fund, however, expects dividends of this kind to be minimal.
o Certain dividends paid to you in January will be taxable as if they had
been paid to you the previous December.
o Tax statements will be mailed from the Fund every January showing the
amounts and tax status of distributions made to you.
o Because your tax treatment depends on your purchase price and tax
position, you should keep your regular account statements for use in
determining your tax.
o You should review the more detailed discussion of federal income tax
considerations in the SAI.
THE TAX INFORMATION IN THIS PROSPECTUS IS PROVIDED AS GENERAL INFORMATION. YOU
SHOULD CONSULT YOUR OWN TAX ADVISER ABOUT THE TAX CONSEQUENCES OF AN INVESTMENT
IN THE FUND.
Statements and Reports
- ----------------------
You will receive a periodic statement reflecting any transactions that affect
the balance or registration of your account. You will receive a confirmation
after any purchase, exchange, or redemption. If your account has been set up by
an Investment Professional, account activity will be detailed in their
statements to you. Share certificates are not issued. Twice a year, you will
receive the financial reports of the Fund. By January 31 of each year, you will
be mailed an IRS form reporting distributions for the previous year, which also
will be filed with the IRS.
INVESTING WITH EII
The following sections describe how to open an account, how to access
information on your account, and how to purchase, exchange, and redeem shares of
the Fund.
The Fund offers three classes of shares: Institutional Shares, Adviser Shares,
and Investor Shares.
INSTITUTIONAL SHARES. The minimum investment for Institutional Shares is
$1,000,000. This minimum may be reduced to certain institutional clients of EII
in EII's sole discretion.
ADVISER SHARES. The minimum investment for Adviser Shares is $100,000. Employees
and officers of EII and its affiliates and immediate family members can purchase
Adviser Shares without being subject to the minimum investment.
INVESTOR SHARES. The minimum investment for Investor Shares is $5,000.
How to Purchase Shares
- ----------------------
Shares can be purchased in a number of different ways. You can send in your
investment by check, wire transfer, or through arrangements with your Investment
Professional. Sometimes your Investment Professional will charge you for these
services. Their fee will be in addition to, and unrelated to, the fees and
expenses charged by the Fund. All you need to do to get started is to fill out
an application.
All purchases must be made in U.S. Dollars and drawn on U.S. banks. The Transfer
Agent may reject any purchase order in its sole discretion. If your check is
returned for any reason, you may be charged for any resulting fees and/or
losses. Third party checks will not be accepted. You may only invest or exchange
into fund shares legally available in your state. If your account falls below
the minimum initial
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<PAGE>
investment as a result of redemptions by you, we may ask you to re-establish the
minimum investment. If you do not do so within 60 days, we may close your
account and send you the value of your account. If you would like to make
additional investments after your account is already established, use the
Investment Stub attached to your statement and send it with your check to the
address indicated.
SYSTEMATIC INVESTMENT PLAN
To enroll in the Systematic Investment Plan, you should check this box on the
Account Application. We will need your bank account information and the amount
and frequency of your investment. You can select monthly, quarterly,
semi-annual, or annual investments. You should attach a voided personal check so
the proper information can be obtained. You must first meet the minimum
investment requirement of $5,000, then we will make automatic withdrawals of the
amount you indicate ($25 or more) from your bank account and invest it into
shares of the Fund.
RETIREMENT PLANS
You can use the Fund as part of your retirement portfolio. Your Investment
Professional can set up your new account under one of several tax sheltered
plans. Please contact your Investment Professional or the Fund for details
regarding an IRA or other retirement plan that works best for your financial
situation.
How to Redeem Shares
- --------------------
If we receive your request by 4:00 p.m. Eastern time, your redemption will be
processed the same day. Shares can be redeemed in one of the following ways:
o BY TELEPHONE The easiest way to redeem shares is by calling 800-PHONE
NUMBER. When you fill out your original application, be sure to check the
box marked "Telephone Authorization." Then when you are ready to redeem,
call us and tell us which one of the following options you would like to
use:
o Mail a check to the address of record;
o Wire funds to a domestic financial institution;
o Mail to a previously designated alternate address; or
o Electronically transfer the funds via Automatic Clearing House
("ACH").
All telephone calls are recorded for your protection and measures are taken
to verify the identity of the caller. If we properly act on telephone
instructions and follow reasonable procedures to ensure against
unauthorized transactions, neither EII, nor its servicing agents nor the
Transfer Agent will be responsible for any losses. If these procedures are
not followed, the Transfer Agent may be liable to you for losses resulting
from unauthorized instructions. If there is an unusual amount of market
activity and you cannot reach the Transfer Agent by telephone, consider
placing your order by mail.
o BY MAIL Use the Regular U.S. Mail or Overnight Mail Address to redeem
shares. Send us a letter of instruction indicating your Fund account
number, amount of redemption, and where to send the proceeds. All account
owners must sign. A signature guarantee is required for the following
redemption requests:
o Redemptions over $10,000;
o Your account registration has changed within the last 15 days;
o The check is not being mailed to the address on your account; or
o The check is not being made payable to the owner of the account;
A signature guarantee can be obtained from a financial institution such as
a bank, broker-dealer, credit union, clearing agency, or savings
association. There are a number of convenient ways to redeem shares of the
Fund. You can use the same mailing addresses listed for purchases. You will
earn dividends up to the date your redemption request is processed.
o BY WIRE If you want to redeem funds by wire, you must establish a Fund
account which will accommodate wire transactions. If you call by 4:00 p.m.
Eastern time, your funds will be wired on the next business day.
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<PAGE>
BY ACH Normally, your redemption will be processed on the same day or the next
day if we receive your instructions after 4:00 p.m. Eastern Time. It will be
transferred by ACH as long as the transfer is to a domestic bank. If you check
this box on the Account Application, we will send monthly, quarterly,
semi-annual, or annual payments to the person you designate. Under certain
emergency circumstances, the right of redemption may be suspended. Redemption
proceeds from the sale of shares purchased by a check may be held until the
purchase check has cleared. If you request a complete redemption, any dividends
declared will be included with the redemption proceeds.
Keep the following addresses handy for purchases, exchanges, or redemptions.
o Regular U.S. Mail Address Send completed Account Application with your
check, bank draft, or money order to:
o Overnight Mail Address Use the following address ONLY for overnight
packages:
o Wire Address The Transfer Agent does not charge a wire fee, but your
originating bank may charge a fee. Always call the Transfer Agent at
800-PHONE NUMBER BEFORE wiring funds to obtain a control number. Telephone
800-PHONE NUMBER 800-_________ Fax Number: 800-___________
Telecommunication Device for the Deaf (TDD): 800-_____ Make your check
payable to: EII Realty Securities Fund
o ACH After your account is set up, your purchase amount can be transferred
by ACH. Only domestic members banks may be used. It takes about 15 days to
set up the ACH feature. A fee is not currently being charged for ACH
transfers.
THE ORGANIZATION, MANAGEMENT, AND SERVICE PROVIDERS OF THE FUND
Organization of the Fund
- ------------------------
The Fund is a series of the EII Realty Securities Fund, a Delaware Business
Trust that was formed on December 22, 1997. The Fund's business affairs are
managed under the general supervision of the Board of Trustees. The Statement of
Additional Information contains the name and general business experience of each
Trustee. The Board of Trustees has the ability to establish new portfolios of
shares without shareholder approval.
[Trustees]
Investment Adviser
- ------------------
EII is the Fund's investment adviser. The investment adviser manages the Fund's
business and investment activities.
The Administrator and Fund Accountant
- -------------------------------------
EII is the Fund's administrator. EII is paid a fee at an annual rate of 0.25%
(reduced to 0.15% for the Institutional Shares) of the Fund's average daily net
assets as the Administrator. EII may subcontract some of its administrative
duties to other service providers.
Shareholder Servicing
- ---------------------
The Fund has adopted a Shareholder Servicing Plan for the Adviser Shares and the
Investor Shares. Under the Shareholder Servicing Plan, the Fund may enter into
shareholder service agreements pursuant to which a shareholder servicing agent
performs a number of services for its customers who are shareholders of the
Fund, such as establishing and maintaining accounts and records, processing
dividend and distribution payments, arranging for bank wires, assisting in
transactions, and changing account information. In exchange for these services,
the Fund pays up to 0.25% of the average daily net assets of the Adviser or
Investor Shares serviced by the agent. The Fund may enter into agreements with
various shareholder servicing agents, other financial institutions, and
securities brokers. Shareholder servicing agents may waive all or a portion of
their fee periodically.
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<PAGE>
Transfer Agent
- --------------
[Transfer Agent]
Distribution Plan
- -----------------
Under Rule 12b-1 of the Investment Company Act, the Fund has adopted a
Distribution and Service Plan for the Investor Shares.
Independent Auditors
- --------------------
Ernst & Young LLP serves as independent auditors to the Fund.
Legal Counsel
- -------------
Kramer, Levin, Naftalis & Frankel serves as legal counsel to the Fund.
ADDITIONAL INFORMATION
Some additional information you should know about the Fund appears in the SAI.
If you would like to receive additional copies of any materials, please call the
Fund at 800-phone number. The Fund offers only the classes of shares described
in this prospectus, but at some future date, the Fund may offer additional
classes of shares through a separate prospectus.
Code of Ethics
- --------------
EII and the Fund have each adopted a Code of Ethics to which all investment
personnel and all other access persons to the Fund must conform. Investment
personnel must refrain from certain trading practices and are required to report
certain personal investment activities. Violations of the Code of Ethics can
result in penalties, suspension, or termination of employment.
Shareholder Communications
- --------------------------
You will receive unaudited Semi-Annual Reports and audited Annual Reports on a
regular basis from the Fund. In addition, you also will receive updated
prospectuses or supplements to this prospectus. The securities described in this
prospectus and the SAI are not offered in any state in which they may not be
sold lawfully. No sales representative, dealer, or other person is authorized to
give any information or make any representation other than those contained in
this prospectus and the SAI.
OTHER SECURITIES IN WHICH THE FUND MAY INVEST AND INVESTMENT TECHNIQUES
The majority of the Fund's portfolio is made up of equity securities; however,
the Fund also is permitted to invest in the securities discussed below and in
the SAI.
The Fund may, for temporary defensive purposes, invest up to 100% of its assets
in cash, cash equivalents, and money market instruments.
OTHER SECURITIES IN WHICH THE FUND MAY INVEST
- ---------------------------------------------
ASSET-BACKED SECURITIES--Asset-backed securities are a form of complex security.
The securitization techniques used for asset-backed securities are similar to
those used for mortgage-related securities. Asset-backed securities present
certain risks that are not presented by mortgage-backed securities. Primarily,
these securities may provide the Fund with a less effective security interest in
the related collateral than do mortgage-backed securities. Therefore, there is
the possibility that recoveries on the underlying collateral may not, in some
cases, be available to support payments on these securities.
CONVERTIBLE SECURITIES--Convertible securities have characteristics similar to
both fixed-income and equity securities. Convertible securities include bonds,
debentures, notes, preferred stocks, or other securities that may be converted
into or exchanged for a prescribed amount of common stock of the same or a
different issuer within a particular period of time at a specified price or
formula. A convertible security entitles the holder to receive interest
generally paid or accrued on debt or the dividend paid on preferred stock until
the convertible security matures or is redeemed, converted, or exchanged.
- 14 -
<PAGE>
CORPORATE DEBT SECURITIES--Corporate debt securities include corporate bonds,
debentures, notes, and other similar instruments, including convertible
securities. Debt securities may be acquired with warrants attached. Corporate
income-producing securities also may include forms of preferred or preference
stock.
ILLIQUID SECURITIES--The Fund will not invest more than 10% of its net assets in
illiquid securities, not including restricted securities sold pursuant to Rule
144A, as described below.
INVESTMENT COMPANIES--The Fund may invest in securities issued by other
investment companies. Under the Investment Company Act, the Fund's investment in
such securities, subject to certain exceptions, currently is limited to (i) 3%
of the total voting stock of any one investment company, (ii) 5% of the Fund's
total assets with respect to any one investment company, (iii) 10% of the Fund's
total assets in the aggregate, and (iv) 100% of the Fund's total assets in
another investment company with a similar investment objective. Investments in
the securities of other investment companies may involve duplication of advisory
fees and certain other expenses.
MONEY MARKET INSTRUMENTS--The Fund may invest in the following types of money
market instruments:
U.S. GOVERNMENT SECURITIES. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury
securities that differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities are supported by the full faith and credit of the
U.S. Treasury; others by the right of the issuer to borrow from the
Treasury; others by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others
only by the credit of the agency or instrumentality.
BANK OBLIGATIONS. The Fund may purchase certificates of deposit, time
deposits, bankers' acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations, and other banking institutions.
COMMERCIAL PAPER. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs.
MORTGAGE-RELATED SECURITIES--Mortgage-related securities are secured, directly
or indirectly, by pools of mortgage loans, including mortgage loans made by
savings and loan institutions, mortgage bankers, commercial banks and others,
assembled as securities for sale to investors by various governmental,
government-related and private organizations. The mortgage-related securities in
which the Fund may invest include the following:
o Commercial Mortgage-Related Securities. The Fund may invest in
commercial mortgage-related securities, which generally are
multi-class debt or pass-through certificates secured by mortgage
loans on commercial properties.
o Residential Mortgage-Related Securities. The Fund may invest in
mortgage-related securities representing participation interests in
pools of one- to four-family residential mortgage loans issued or
guaranteed by governmental agencies or instrumentalities, such as the
Government National Mortgage Association ("GNMA"), the Federal
National Mortgage Association ("FNMA"), and the Federal Home Loan
Mortgage Corporation ("FHLMC"), or issued by private entities.
o Collateral Mortgage Obligations and Multi-Class Pass-Through
Securities. Collateralized mortgage obligations or "CMOs" are
multiclass bonds backed by pools of mortgage pass-through certificates
or mortgage loans.
RESTRICTED SECURITIES--The Fund may invest in securities that are subject to
restrictions on resale because they have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"). These securities are
sometimes referred to as private placements. Although securities which may be
resold only to "qualified institutional buyers" in accordance with the
provisions of Rule 144A under the 1933 Act are technically considered
"restricted securities," the Fund may purchase Rule 144A securities without
regard to the limitation on investments in illiquid securities described above,
provided that a determination is made that such securities have a readily
available trading market. EII will determine the liquidity of Rule 144A
securities under the supervision of the Fund's Board of
- 15 -
<PAGE>
Trustees. The liquidity of Rule 144A securities will be monitored by EII, and if
as a result of changed conditions, it is determined that a Rule 144A security is
no longer liquid, the Fund's holdings of illiquid securities will be reviewed to
determine what, if any, action is required to assure that the Fund does not
exceed the applicable percentage limitation for investments in illiquid
securities. ZERO COUPON SECURITIES--The market prices of zero coupon securities
generally are more volatile than the market prices of securities that pay
interest periodically and are likely to respond to a greater degree to changes
in interest rates than non-zero coupon securities having similar maturities and
credit qualities.
INVESTMENT TECHNIQUES
FORWARD COMMITMENTS--The Fund may purchase or sell securities on a forward
commitment, when-issued, or delayed delivery basis, which means delivery and
payment take place a number of days after the date of the commitment to purchase
or sell the securities at a predetermined price and/or yield. The Fund intends
to engage in forward commitments to increase its portfolio's financial exposure
to the types of securities in which it invests. Leveraging the portfolio in this
manner will increase the Fund's exposure to changes in interest rates and will
increase the volatility of its returns. At no time will the Fund have more than
15% of its assets committed to purchase securities on a forward commitment
basis.
LENDING PORTFOLIO SECURITIES--The Fund may lend securities from its portfolio to
brokers, dealers, and other financial institutions needing to borrow securities
to complete certain transactions. Loans of portfolio securities may not exceed
33-1/3% of the value of the Fund's total assets.
LEVERAGE--Leveraging exaggerates the effect on net asset value of any increase
or decrease in the market value of the Fund's portfolio. The Fund may borrow on
a short term basis in order to meet redemptions. Money borrowed for such
purposes is limited to 33 1/3% of the value of the Fund's total assets.
Typically, the Fund borrows by entering into reverse repurchase agreements with
banks, brokers, or dealers.
USE OF COMPLEX SECURITIES--The Fund may invest for hedging purposes in
derivative securities, such as futures and options. These instruments and
certain related risks are described more specifically under "Investment
Objective and Management Policies--Management Policies--Complex Securities" in
the Statement of Additional Information. Complex Securities can be volatile and
involve various types and degrees of risk, depending upon the characteristics of
the particular security and the portfolio as a whole. Such investments permit
the Fund to increase or decrease the level of risk, or change the character of
the risk, to which its portfolio is exposed in much the same way as the Fund can
increase or decrease the level of risk, or change the character of the risk, of
its portfolio by making investments in specific securities.
- 16 -
<PAGE>
Table of Contents
FUND EXPENSES:.................................................................2
INTRODUCTION...................................................................3
FUND DESCRIPTION...............................................................5
SECURITIES IN WHICH THE FUND INVESTS...........................................7
RISK FACTORS...................................................................7
OTHER INFORMATION ABOUT THE FUND...............................................9
INVESTING WITH EII............................................................11
THE ORGANIZATION, MANAGEMENT, AND SERVICE PROVIDERS OF THE FUND...............13
ADDITIONAL INFORMATION........................................................14
OTHER SECURITIES AND INVESTMENT PRACTICES.....................................14
- 17 -
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
April __, 1998
E.I.I. REALTY SECURITIES FUND
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information is incorporated by reference in its entirety
into the Prospectus and should be read in conjunction with the Trust's current
Prospectus, copies of which may be obtained by writing [the trust c/o the
administrator] or calling (800) ________.
This Statement of Additional Information relates to the Trust's
Prospectus which is dated April __, 1998.
TABLE OF CONTENTS
PAGE
----
Investment Policies and Risks.............................................. 2
Investment Restrictions.................................................... 6
Management................................................................. 7
Investment Adviser and Investment Advisory Agreements...................... 9
Distribution Plans......................................................... 10
Administrative Services Agreement......................................... 11
Portfolio Transactions and Brokerage....................................... 11
Allocation of Investments.................................................. 12
Computation of Net Asset Value............................................. 12
Purchase and Redemption of Shares.......................................... 13
Tax Matters................................................................ 13
Performance Calculation.................................................... 19
General Information........................................................ 21
Reports .................................................................. 22
Financial Statements....................................................... 22
<PAGE>
E.I.I. Realty Securities Fund (the "Trust") is a Delaware business
trust currently consisting of one fund (the "Fund"). The Fund is an open-end,
non-diversified management investment company. The Fund's investment objective
is to provide the diversification and total return potential of investments in
real estate. The Fund will seek to achieve this objective by buying the shares
of companies whose business it is to own, operate, develop, and manage real
estate. Much of the information contained in this Statement of Additional
Information expands on subjects discussed in the Prospectus. Capitalized terms
not defined herein are used as defined in the Prospectus. No investment in
shares of the Fund should be made without first reading the Funds' Prospectus.
INVESTMENT POLICIES AND RISKS
The following descriptions supplement the investment policies of the Fund set
forth in the Prospectus. The Fund's investments in the following securities and
other financial instruments are subject to the investment policies and
limitations described in the Prospectus and this Statement of Additional
Information.
1. BORROWING
The Fund may, from time to time, borrow money to the maximum extent
permitted by the Investment Company Act of 1940, as amended (the "Investment
Company Act"), from banks at prevailing interest rates for temporary or
emergency purposes and investing in additional securities. The Fund's borrowings
are limited so that immediately after such borrowings the value of assets
(including borrowings) less liabilities (not including borrowings) is at least
three times the amount of the borrowings. Should the Fund, for any reason, have
borrowings that do not meet the above test then, within three business days,
then the Fund must reduce such borrowings so as to meet the necessary test.
Under such a circumstance, the Fund may have to liquidate portfolio securities
at a time when it is disadvantageous to do so. Gains made with additional funds
borrowed generally will cause the net asset value of the Fund's shares to rise
faster than could be the case without borrowings. Conversely, if investment
results fail to cover the cost of borrowings, the net asset value of the Fund
could decrease faster than if there had been no borrowings.
2. REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements subject to resale to a
bank or dealer at an agreed upon price which reflects a net interest gain for
the Fund. The Fund will receive interest from the institution until the time
when the repurchase is to occur.
The Fund will always receive as collateral U.S. Government or
short-term money market securities whose market value is equal to at least 100%
of the amount invested by the Fund, and the Fund will make payment for such
securities only upon the physical delivery or evidence by book entry transfer to
the account of its custodian. If the seller institution defaults, the Fund might
incur a loss or delay in the realization of proceeds if the value of the
collateral securing the repurchase agreement declines and it might incur
disposition costs in liquidating the collateral. The Fund will attempt to
minimize such risks by entering into such transactions only with
well-capitalized financial institutions and specifying the required value of the
underlying collateral.
-2-
<PAGE>
Unlike the fundamental investment objective of the Fund set forth above
and the investment restrictions set forth below which may not be changed without
shareholder approval, the Fund has the right to modify the investment policies
described above without shareholder approval.
INVESTMENT RESTRICTIONS
The following fundamental policies and investment restrictions have
been adopted by the Fund and, except as noted, such policies and restrictions
cannot be changed without approval by the vote of a majority of the outstanding
voting shares of the Fund which, as defined by the Investment Company Act, means
the affirmative vote of the lesser of (a) 67% or more of the shares of the Fund
present at a meeting at which the holders of more than 50% of the outstanding
shares of the Fund are represented in person or by proxy or (b) more than 50% of
the outstanding shares of the Fund.
The Fund may not:
(1) issue senior securities;
(2) concentrate its investments in particular industries other
than the real estate industry. No more than 25% of the value of a
Fund's assets will be invested in any one industry other than the real
estate industry. The Fund will concentrate its investments in the real
estate industry;
(3) make loans of money or securities other than (a) through the
purchase of publicly distributed bonds, debentures, or other corporate
or governmental obligations, (b) by investing in repurchase
agreements, and (c) by lending its portfolio securities, provided the
value of such loaned securities does not exceed 33-1/3% of its total
assets;
(4) borrow money in excess of 33-1/3% of the value of a Fund's
total assets from banks;
(5) buy or sell commodities or commodity contracts, except the
Fund may purchase or sell futures or options on futures; and
(6) underwrite securities.
The following restrictions are non-fundamental and may be changed by
the Fund's Board of Trustees. Pursuant to such restrictions, the Fund will not:
(1) make short sales of securities, other than short sales
"against the box," or purchase securities on margin except for
short-term credits necessary for clearance of portfolio transactions,
provided that this restriction will not be applied to limit the use of
options, futures contracts, and related options, in the manner
otherwise permitted by the investment restrictions, policies, and
investment program of the Fund;
(2) purchase the securities of any other investment company, the
Fund, immediately after such purchase or acquisition, owns in the
aggregate, (i) more than 3% of the total outstanding voting stock of
such investment company, (ii) securities issued by such investment
company having an aggregate value in excess of 5% of the value of
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<PAGE>
the total assets of the Fund, (iii) securities issued by such
investment company and all other investment companies having an
aggregate value in excess of 10% of the value of the total assets of
the Fund, or (iv) unless the 100% of the due of the total assets of
the fund are invested in the securities of another investment company
with the same investment objective;
(3) invest more than 10% of its net assets in illiquid
securities. Illiquid securities are securities that are not readily
marketable or cannot be disposed of promptly within seven days and in
the usual course of business without taking a materially reduced
price. Such securities include, but are not limited to, time deposits
and repurchase agreements with maturities longer than seven days.
Securities that may be resold under Rule 144A or securities offered
pursuant to Section 4(2) of the Securities Act of 1933, as amended,
shall not be deemed illiquid solely by reason of being unregistered.
The Investment Adviser shall determine whether a particular security
is deemed to be liquid based on the trading markets for the specific
security and other factors;
(4) invest more than 20% of its total assets in securities of
foreign issuers and ADRS are not considered to be foreign securities
for this purpose.
MANAGEMENT
The overall management of the business and affairs of the Fund is
vested with the Board of Trustees. The Board of Trustees approves all
significant agreements between the Trust or the Fund and persons or companies
furnishing services to the Fund, including the Fund's agreement with an
investment adviser, custodian, and transfer agent. The day-to-day operations of
the Fund are delegated to the Fund's officers subject always to the investment
objectives and policies of each Fund and to general supervision by the Trust's
Board of Trustees.
The Trustees and officers and their principal occupations are noted
below. Unless otherwise indicated the address of each Trustee and executive
officer is 667 Madison Avenue, New York, New York 10021.
[List Trustees]
[List of Officers]
The Fund may indemnify any person who was or is a Trustee, officer, or
employee of the Fund to the maximum extent permitted by the Delaware business
trust law; provided, however, that any such indemnification (unless ordered by a
court) shall be made by the Fund only as authorized in the specific case upon a
determination that indemnification of such persons is proper in the
circumstances. Such determination shall be made (i) by the Board of Trustees, by
a majority vote of a quorum which consists of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a)(19) of the
Investment Company Act, nor parties to the proceeding, or (ii) if the required
quorum is not obtained or if a quorum of such Trustees so directs, by
independent legal counsel in a written opinion. No indemnification will be
provided by the Fund to any Trustee or officer of the Fund for any liability to
the Fund or it shareholders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of duty.
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As of ________________, the Trustees and officers as a group owned
beneficially ___% of the Fund's outstanding shares, all of which were acquired
for investment purposes. Each disinterested Trustee received $______ per annum,
plus expenses of attendance at Trustees meetings. "Interested" Trustees do not
receive Trustees' fees.
[The table below illustrates the compensation paid to each Trustee for
the Trust's most recently completed fiscal year:]
[Compensation Chart]
INVESTMENT ADVISER AND INVESTMENT ADVISORY AGREEMENTS
E.I.I. Realty Securities Inc. (the "Investment Adviser"), 667 Madison
Avenue, New York, New York 10021, acts as the Investment Adviser to the Fund
under an investment advisory agreement (the "Agreement"). The Agreement provides
that the Investment Adviser identify and analyze possible investments for the
Fund, determine the amount and timing of such investments, and the form of
investment. The Investment Adviser has the responsibility of monitoring and
reviewing the Fund's portfolio, and, on a regular basis, to recommend the
ultimate disposition of such investments. It is the Investment Adviser's
responsibility to cause the purchase and sale of securities in the Fund's
portfolio, subject at all times to the policies set forth by the Trust's Board
of Trustees. In addition, the Investment Adviser provides certain administrative
and managerial services to the Fund.
The Investment Adviser receives a fee from the Fund calculated daily
and payable monthly, for the performance of its services at an annual rate of
.75% of the average daily net assets of the Fund. The fee is accrued daily for
the purposes of determining the offering and redemption price of the Fund's
shares.
Under the terms of the Agreement, the Fund pays all of its expenses
(other than those expenses specifically assumed by the Investment Adviser and
the Fund's distributor) including the costs incurred in connection with the
maintenance of its registration under the Securities Act of 1933, as amended,
and the Investment Company Act, printing of prospectuses distributed to
shareholders, taxes or governmental fees, brokerage commissions, custodial,
transfer and shareholder servicing agents, expenses of outside counsel and
independent accountants, preparation of shareholder reports, and expenses of
Trustee and shareholder meetings.
The Agreement may be terminated without penalty on 60 days' written
notice by a vote of the majority of the Trust's Board of Trustees or by the
Investment Adviser, or by holders of a majority of the Fund's outstanding
shares. The Fund's Agreement will continue for two years from its effective date
and from year-to-year thereafter provided it is approved, at least annually, in
the manner described in the Investment Company Act. This requires that the
Agreement and any renewal thereof be approved by a vote of the majority of the
Fund's Trustees who are not parties thereto or interested persons of any such
party, cast in person at a meeting specifically called for the purpose of voting
on such approval.
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DISTRIBUTION PLANS
The Fund has adopted a distribution plan pursuant to Rule 12b-1 of the
Investment Company Act (the "Plan") with respect to the Investor shares of the
Fund. The Plan provides that the Fund's Investor shares may incur distribution
expenses related to the sale of shares of up to .75% per annum of the average
daily net assets of the Fund's Investor shares.
The Plan provides that the Fund's Investor shares may finance
activities which are primarily intended to result in the sale of the Fund's
Investor shares, including, but not limited to, advertising, printing of
prospectuses and reports for other than existing shareholders, preparation and
distribution of advertising material and sales literature, and payments to
dealers and shareholder servicing agents including any affiliates who enter into
agreements with the Fund or its distributor.
In approving the Plan in accordance with the requirements of Rule 12b-1
under the Investment Company Act, the Trustees (including the "disinterested"
Trustees, as defined in the Investment Company Act) considered various factors
and determined that there is a reasonable likelihood that the Plan will benefit
the Fund and its shareholders. The Plan will continue in effect from year to
year if specifically approved annually (a) by the majority of the Fund's
outstanding Investor shares or by the Board of Trustees and (b) by the vote of a
majority of the disinterested Trustees. While the Plan remains in effect, the
Fund's Principal Financial Officer shall prepare and furnish to the Board of
Trustees a written report setting forth the amounts spent by the Fund under the
Plan and the purposes for which such expenditures were made. The Plan may not be
amended to increase materially the amount to be spent for distribution without
shareholder approval and all material amendments to the Plan must be approved by
the Board of Trustees and by the disinterested Trustees cast in person at a
meeting called specifically for that purpose. While the Plan is in effect, the
selection and nomination of the disinterested Trustees shall be made by those
disinterested Trustees then in office.
ADMINISTRATIVE SERVICES AGREEMENT
The EII will serve as the Fund's Administrator and has retained as the
Sub-Administrator
Administrator supervises administration of the Fund pursuant to an
Administrative Services Agreement with the Fund. Under the Administrative
Services Agreement, the Administrator supervises the administration of all
aspects of the Fund's operations, including the Fund's receipt of services for
which the Fund is obligated to pay, provides the Fund with general office
facilities, and provides, at the Fund's expense, the services of persons
necessary to perform such supervisory, administrative, and clerical functions as
are needed to operate the Fund effectively. Those persons, as well as certain
employees and Trustees of the Fund, may be directors, officers, or employees of
(and persons providing services to the Fund may include) EII and its affiliates.
For these services and facilities, EII receives with respect to the Fund a fee
computed and paid monthly at an annual rate of 0.25% of the average daily net
assets of the Fund, out of which EII, and not the Fund, _________ the
Sub-Administrator.
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<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the supervision of the Board of Trustees, decisions to buy
and sell securities for the Fund are made by the Investment Adviser. The
Investment Adviser is authorized to allocate the orders placed by it on behalf
of the Fund to such unaffiliated brokers who also provide research or
statistical material or other services to the Fund or the Investment Adviser for
the Fund's use. Such allocation shall be in such amounts and proportions as the
Investment Adviser shall determine and the Investment Adviser will report on
said allocations regularly to the Board of Trustees indicating the unaffiliated
brokers to whom such allocations have been made and the basis therefor. In
addition, the Investment Adviser may consider sales of shares of the Fund and of
any other funds advised or managed by the Investment Adviser as a factor in the
selection of unaffiliated brokers to execute portfolio transactions for the
Fund, subject to the requirements of best execution. At times, the Fund also may
purchase portfolio securities directly from dealers acting as principals,
underwriters, or market makers. As these transactions are usually conducted on a
net basis, no brokerage commissions are paid by the Fund.
In selecting a broker to execute each particular transaction, the
Investment Adviser will take the following into consideration: the best net
price available; the reliability, integrity, and financial condition of the
broker; the size and difficulty in executing the order; and the value of the
expected contribution of the broker to the investment performance of the Fund on
a continuing basis. Accordingly, the cost of the brokerage commissions to the
Fund in any transaction may be greater than that available from other brokers if
the difference is reasonably justified by other aspects of the portfolio
execution services offered. Subject to such policies and procedures as the Board
of Trustees may determine, the Investment Adviser shall not be deemed to have
acted unlawfully or to have breached any duty solely by reason of its having
caused the Fund to pay an unaffiliated broker that provides research services to
the Investment Adviser for the Fund's use an amount of commission for effecting
a portfolio investment transaction in excess of the amount of commission another
broker would have charged for effecting the transaction, if the Investment
Adviser determines in good faith that such amount of commission was reasonable
in relation to the value of the research service provided by such broker viewed
in terms of either that particular transaction of the Investment Adviser's
ongoing responsibilities with respect to the Fund.
ALLOCATION OF INVESTMENTS
The Investment Adviser has other advisory clients, some of which have
similar investment objectives to the Fund. As such, there will be times when the
Investment Adviser may recommend purchases and/or sales of the same portfolio
securities for the Fund and its other clients. In such circumstances, it will be
the policy of the Investment Adviser to allocate purchases and sales among the
Fund and its other clients in a manner which the Investment Adviser deems
equitable, taking into consideration such factors as size of account,
concentration of holdings, investment objectives, tax status, cash availability,
purchase cost, holding period, and other pertinent factors relative to each
account. Simultaneous transactions may have an adverse effect upon the price or
volume of a security purchased by the Fund.
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<PAGE>
COMPUTATION OF NET ASSET VALUE
The Fund will determine the net asset value of its shares once daily as
of the close of trading on the New York Stock Exchange (the "Exchange") on each
day that the Exchange is open. It is expected that the Exchange will be closed
on Saturdays and Sundays and on New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
The Fund may make or cause to be made a more frequent determination of the net
asset value and offering price, which determination shall reasonably reflect any
material changes in the value of securities and other assets held by the Fund
from the immediately preceding determination of net asset value. The net asset
value is determined by dividing the market value of the Fund's investments as of
the close of trading plus any cash or other assets (including dividends
receivable and accrued interest) less all liabilities (including accrued
expenses) by the number of the Fund's shares outstanding. Securities traded on
the New York Stock Exchange or the American Stock Exchange will be valued at the
last sale price, or if no sale, at the mean between the latest bid and asked
price. Securities traded in any other U.S. or foreign market shall be valued in
a manner as similar as possible to the above, or if not so traded, on the basis
of the latest available price. Securities sold short "against the box" will be
valued at market as determined above; however, in instances where the Fund has
sold securities short against a long position in the issuer's convertible
securities, for the purpose of valuation, the securities in the short position
will be valued at the "asked" price rather than the mean of the last "bid" and
"asked" prices. Where there are no readily available quotations for securities
they will be valued at a fair value as determined by the Board of Trustees
acting in good faith.
PURCHASE AND REDEMPTION OF SHARES
A complete description of the manner by a which the Fund's shares may
be purchased and redeemed appears in the Prospectus under the headings "Purchase
of Shares" and "Redemption of Shares" respectively.
[Subject to review by KL tax department and E&Y]
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Fund and its shareholders that are not
described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussions here and in the Prospectus are not intended as substitutes for
careful tax planning.
Qualification as a Regulated Investment Company
The Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, a Fund is not subject to federal
income tax on the portion of its net investment income (i.e., taxable interest,
dividends and other taxable ordinary income, net of expenses) and capital gain
net income (i.e., the excess of capital gains over capital losses) that it
distributes to shareholders, provided that it distributes at least 90% of its
investment company taxable income (i.e., net investment income and the excess of
net short-term capital gain over net long-term capital loss) for the taxable
year (the "Distribution Requirement"), and satisfies certain other requirements
of the Code that are described below. Distributions by a Fund made during the
taxable year or, under specified circumstances, within
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<PAGE>
twelve months after the close of the taxable year, will be considered
distributions of income and gains of the taxable year and can therefore satisfy
the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must: (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or options, futures or forward contracts thereon) held for less than
three months (the "Short-Short Gain Test"). However, foreign currency gains,
including those derived from options, futures and forwards, will not in any
event be characterized as Short-Short Gain if they are directly related to the
regulated investment company's investments in stock or securities (or options or
futures thereon). Because of the Short-Short Gain Test, a Fund may have to limit
the sale of appreciated securities that it has held for less than three months.
However, the Short-Short Gain Test will not prevent a Fund from disposing of
investments at a loss, since the recognition of a loss before the expiration of
the three-month holding period is disregarded for this purpose. Interest
(including original issue discount) received by a Fund at maturity or upon the
disposition of a security held for less than three months will not be treated as
gross income derived from the sale or other disposition of such security within
the meaning of the Short-Short Gain Test. However, income that is attributable
to realized market appreciation will be treated as gross income from the sale or
other disposition of securities for this purpose.
In general, gain or loss recognized by a Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by a Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation. In
addition, under the rules of Code Section 988, gain or loss recognized on the
disposition of a debt obligation denominated in a foreign currency or an option
with respect thereto (but only to the extent attributable to changes in foreign
currency exchange rates), and gain or loss recognized on the disposition of a
foreign currency forward contract, futures contract, option or similar financial
instrument, or of foreign currency itself, except for regulated futures
contracts or non-equity options subject to Code Section 1256 (unless a Fund
elects otherwise), will generally be treated as ordinary income or loss.
In general, for purposes of determining whether capital gain or loss
recognized by the International Fund on the disposition of an asset is long-term
or short-term, the holding period of the asset may be affected if (1) the asset
is used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset so
used, (2) the asset is otherwise held by the Fund as part of a "straddle" (which
term generally excludes a situation where the asset is stock and the Fund grants
a qualified covered call option (which, among other things, must not be
deep-in-the-money) with respect thereto) or (3) the asset is stock and the Fund
grants an in-the-money qualified covered call option with respect thereto.
However, for purposes of the Short-Short Gain Test, the holding period of the
asset disposed of may be reduced only in the case of clause (1) above. In
addition, the Government Fund, and the International Fund may be required to
defer the recognition of a loss on the disposition of an asset held as part of a
straddle to the extent of any unrecognized gain on the offsetting position.
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Any gain recognized by the Government Fund and the International Fund
on the lapse of, or any gain or loss recognized by the Government Fund, and the
International Fund from a closing transaction with respect to, an option written
by the Fund will be treated as a short-term capital gain or loss. For purposes
of the Short-Short Gain Test, the holding period of an option written by a Fund
will commence on the date it is written and end on the date it lapses or the
date a closing transaction is entered into. Accordingly, a Fund may be limited
in its ability to write options which expire within three months and to enter
into closing transactions at a gain within three months of the writing of
options.
Transactions that may be engaged in by the Government Fund and the
International Fund (such as regulated futures contracts, certain foreign
currency contracts, and options on stock indexes and futures contracts) will be
subject to special tax treatment as "Section 1256 contracts." Section 1256
contracts are treated as if they are sold for their fair market value on the
last business day of the taxable year, even though a taxpayer's obligations (or
rights) under such contracts have not terminated (by delivery, exercise,
entering into a closing transaction or otherwise) as of such date. Any gain or
loss recognized as a consequence of the year-end deemed disposition of Section
1256 contracts is taken into account for the taxable year together with any
other gain or loss that was previously recognized upon the termination of
Section 1256 contracts during that taxable year. Any capital gain or loss for
the taxable year with respect to Section 1256 contracts (including any capital
gain or loss arising as a consequence of the year-end deemed sale of such
contracts) is generally treated as 60% long-term capital gain or loss and 40%
short-term capital gain or loss. The Fund, however, may elect not to have this
special tax treatment apply to Section 1256 contracts that are part of a "mixed
straddle" with other investments of the Fund that are not Section 1256
contracts. Gains arising from Section 1256 contracts will be treated for
purposes of the Short-Short Gain Test as being derived from securities held for
not less than three months if the gains arise as a result of a constructive sale
under Code Section 1256.
The International Fund may purchase securities of certain foreign
investment funds or trusts which constitute passive foreign investment companies
("PFICs") for federal income tax purposes. If the Fund invests in a PFIC, it may
elect to treat the PFIC as a qualifying electing fund (a "QEF") in which event
the Fund will each year have ordinary income equal to its pro rata share of the
PFIC's ordinary earnings for the year and long-term capital gain equal to its
pro rata share of the PFIC's net capital gain for the year, regardless of
whether the Fund receives distributions of any such ordinary earning or capital
gain from the PFIC. If the Fund does not (because it is unable to, chooses not
to or otherwise) elect to treat the PFIC as a QEF, then in general (1) any gain
recognized by the Fund upon sale or other disposition of its interest in the
PFIC or any excess distribution received by the Fund from the PFIC will be
allocated ratably over the Fund's holding period of its interest in the PFIC,
(2) the portion of such gain or excess distribution so allocated to the year in
which the gain is recognized or the excess distribution is received shall be
included in the Fund's gross income for such year as ordinary income (and the
distribution of such portion by the Fund to shareholders will be taxable as an
ordinary income dividend, but such portion will not be subject to tax at the
Fund level), (3) the Fund shall be liable for tax on the portions of such gain
or excess distribution so allocated to prior years in an amount equal to, for
each such prior year, (i) the amount of gain or excess distribution allocated to
such prior year multiplied by the highest tax rate (individual or corporate) in
effect for such prior year plus (ii) interest on the amount determined under
clause (i) for the period from the due date for filing a return for such prior
year until the date for filing a return for the year in which the gain is
recognized or the excess distribution is received at the rates and methods
applicable to underpayments of tax for such period, and (4) the distribution by
the Fund to shareholders of the portions of such gain or excess distribution so
allocated to prior years (net of the tax payable by the Fund thereon) will again
be taxable to the shareholders as an ordinary income dividend.
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Under proposed Treasury Regulations the International Fund can elect to
recognize as gain the excess, as of the last day of its taxable year, of the
fair market value of each share of PFIC stock over the Fund's adjusted tax basis
in that share ("mark to market gain"). Such mark to market gain will be included
by the Fund as ordinary income, such gain will not be subject to the Short-Short
Gain Test, and the Fund's holding period with respect to such PFIC stock
commences on the first day of the next taxable year. If the Fund makes such
election in the first taxable year it holds PFIC stock, the Fund will include
ordinary income from any mark to market gain, if any, and will not incur the tax
described in the previous paragraph.
Treasury Regulations permit a regulated investment company, in
determining its investment company taxable income and net capital gain (i.e.,
the excess of net long-term capital gain over net short-term capital loss) for
any taxable year, to elect (unless it has made a taxable year election for
excise tax purposes as discussed below) to treat all or any part of any net
capital loss, any net long-term capital loss or any net foreign currency loss
incurred after October 31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, the Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of a Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses. Generally, an option (call
or put) with respect to a security is treated as issued by the issuer of the
security not the issuer of the option.
If for any taxable year a Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year (a "taxable year election")). The
balance of such income must be distributed during the next calendar year. For
the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall:
(1) reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year; and (2) exclude
foreign currency gains and losses incurred after October 31 of any year
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(or after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar year
(and, instead, include such gains and losses in determining ordinary taxable
income for the succeeding calendar year).
The Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that a Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.
Fund Distributions
The Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal income
tax purposes. Such dividends paid by the Tocqueville Fund and the Small Cap Fund
will qualify for the 70% dividends-received deduction for corporate shareholders
only to the extent discussed below. Such dividends paid by the Government and
the International Fund generally should not qualify for the 70%
dividends-received deduction for corporate shareholders.
A Fund may either retain or distribute to shareholders its net capital
gain for each taxable year. The Fund currently intends to distribute any such
amounts. If net capital gain is distributed and designated as a capital gain
dividend, it will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by a Fund prior to the date on which the shareholder
acquired his shares. The Code provides, however, that under certain conditions
only 50% of the capital gain recognized upon a Fund's disposition of domestic
"small business" stock will be subject to tax.
Conversely, if a Fund elects to retain its net capital gain, the Fund
will be taxed thereon (except to the extent of any available capital loss
carryovers) at the 35% corporate tax rate. If a Fund elects to retain its net
capital gain, it is expected that the Fund also will elect to have shareholders
of record on the last day of its taxable year treated as if each received a
distribution of his pro rata share of such gain, with the result that each
shareholder will be required to report his pro rata share of such gain on his
tax return as long-term capital gain, will receive a refundable tax credit for
his pro rata share of tax paid by the Fund on the gain, and will increase the
tax basis for his shares by an amount equal to the deemed distribution less the
tax credit.
Ordinary income dividends paid by the Tocqueville Fund and the Small
Cap Fund with respect to a taxable year will qualify for the 70%
dividends-received deduction generally available to corporations (other than
corporations, such as S corporations, which are not eligible for the deduction
because of their special characteristics and other than for purposes of special
taxes such as the accumulated earnings tax and the personal holding company tax)
to the extent of the amount of qualifying dividends received by the Fund from
domestic corporations for the taxable year. A dividend received by the Fund will
not be treated as a qualifying dividend (1) if it has been received with respect
to any share of stock that the Fund has held for less than 46 days (91 days in
the case of certain preferred stock), excluding for this purpose under the rules
of Code Section 246(c)(3) and (4): (i) any day more than 45 days (or 90 days in
the case of certain preferred stock) after the date on which the stock becomes
ex-dividend and (ii) any period during which the Fund has an option to sell, is
under a contractual obligation to sell, has made and not closed a short sale of,
is the grantor of a deep-in-the-money or otherwise nonqualified option to buy,
or has otherwise diminished its risk of loss by holding other positions with
respect to, such (or substantially identical) stock; (2) to the extent that the
Fund is under an obligation (pursuant to a short sale or otherwise) to make
related payments with respect to positions
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in substantially similar or related property; or (3) to the extent the stock on
which the dividend is paid is treated as debt-financed under the rules of Code
Section 246A. Moreover, the dividends-received deduction for a corporate
shareholder may be disallowed or reduced (1) if the corporate shareholder fails
to satisfy the foregoing requirements with respect to its shares of the Fund or
(2) by application of Code Section 246(b) which in general limits the
dividends-received deduction to 70% of the shareholder's taxable income
(determined without regard to the dividends-received deduction and certain other
items). Since an insignificant portion of the International Fund will be
invested in stock of domestic corporations, the ordinary dividends distributed
by the Fund will not qualify for the dividends-received deduction for corporate
shareholders.
Alternative minimum tax ("AMT") is imposed in addition to, but only to
the extent it exceeds, the regular tax and is computed at a maximum marginal
rate of 28% for noncorporate taxpayers and 20% for corporate taxpayers on the
excess of the taxpayer's alternative minimum taxable income ("AMTI") over an
exemption amount. For purposes of the corporate AMT, the corporate
dividends-received deduction is not itself an item of tax preference that must
be added back to taxable income or is otherwise disallowed in determining a
corporation's AMTI. However, a corporate shareholder will generally be required
to take the full amount of any dividend received from the Fund into account
(without a dividends-received deduction) in determining its adjusted current
earnings, which are used in computing an additional corporate preference item
(i.e., 75% of the excess of a corporate taxpayer's adjusted current earnings
over its AMTI (determined without regard to this item and the AMT net operating
loss deduction)) includable in AMTI.
Investment income that may be received by the International Fund from
sources within foreign countries may be subject to foreign taxes withheld at the
source. The United States has entered into tax treaties with many foreign
countries which entitle the Fund to a reduced rate of, or exemption from, taxes
on such income. It is impossible to determine the effective rate of foreign tax
in advance since the amount of the Fund's assets to be invested in various
countries is not known. If more than 50% of the value of the Fund's total assets
at the close of its taxable year consist of the stock or securities of foreign
corporations, the Fund may elect to "pass through" to the Fund's shareholders
the amount of foreign taxes paid by the Fund. If the Fund so elects, each
shareholder would be required to include in gross income, even though not
actually received, his pro rata share of the foreign taxes paid by the Fund, but
would be treated as having paid his pro rata share of such foreign taxes and
would therefore be allowed to either deduct such amount in computing taxable
income or use such amount (subject to various Code limitations) as a foreign tax
credit against federal income tax (but not both). For purposes of the foreign
tax credit limitation rules of the Code, each shareholder would treat as foreign
source income his pro rata share of such foreign taxes plus the portion of
dividends received from a Fund representing income derived from foreign sources.
No deduction for foreign taxes could be claimed by an individual shareholder who
does not itemize deductions. Each shareholder should consult his own tax adviser
regarding the potential application of foreign tax credits.
Distributions by a Fund that do not constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital to
the extent of (and in reduction of) the shareholder's tax basis in his shares;
any excess will be treated as gain from the sale of his shares, as discussed
below.
Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of a Fund
-13-
<PAGE>
reflects undistributed net investment income or recognized capital gain net
income, or unrealized appreciation in the value of the assets of the Fund,
distributions of such amounts will be taxable to the shareholder in the manner
described above, although such distributions economically constitute a return of
capital to the shareholder.
Ordinarily, shareholders are required to take distributions by a Fund
into account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by a Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
The Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends, and
the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding by the IRS for failure to report the
receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that it is not subject to backup withholding or that it is a
corporation or other "exempt recipient."
Sale or Redemption of Shares
A shareholder will recognize gain or loss on the sale or redemption of
shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of a Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of a Fund will be considered capital gain
or loss and will be long-term capital gain or loss if the shares were held for
longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares. For this purpose, the special holding period rules of Code Section
246(c)(3) and (4) (discussed above in connection with the dividends-received
deduction for corporations) generally will apply in determining the holding
period of shares. Long-term capital gains of noncorporate taxpayers are
currently taxed at a maximum rate 11.6% lower than the maximum rate applicable
to ordinary income. Capital losses in any year are deductible only to the extent
of capital gains plus, in the case of a noncorporate taxpayer, $3,000 of
ordinary income.
If a shareholder (1) incurs a sales load in acquiring shares of a Fund,
(2) disposes of such shares less than 91 days after they are acquired and (3)
subsequently acquires shares of the Fund or another fund at a reduced sales load
pursuant to a right to reinvest at such reduced sales load acquired in
connection with the acquisition of the shares disposed of, then the sales load
on the shares disposed of (to the extent of the reduction in the sales load on
the shares subsequently acquired) shall not be taken into account in determining
gain or loss on the shares disposed of but shall be treated as incurred on the
acquisition of the shares subsequently acquired.
Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, foreign trust or estate, foreign corporation, or
foreign partnership ("foreign shareholder"), depends on
-14-
<PAGE>
whether the income from a Fund is "effectively connected" with a U.S. trade or
business carried on by such shareholder.
If the income from a Fund is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, ordinary income dividends
paid to a foreign shareholder will be subject to U.S. withholding tax at the
rate of 30% (or lower treaty rate) upon the gross amount of the dividend.
Furthermore, such a foreign shareholder may be subject to U.S. withholding tax
at the rate of 30% (or lower treaty rate) on the gross income resulting from the
Asia-Pacific Fund's or the International Fund's election to treat any foreign
taxes paid by it as paid by its shareholders, but may not be allowed a deduction
against this gross income or a credit against this U.S. withholding tax for the
foreign shareholder's pro rata share of such foreign taxes which it is treated
as having paid. Such a foreign shareholder would generally be exempt from U.S.
federal income tax on gains realized on the sale of shares of a Fund, capital
gain dividends and amounts retained by the Fund that are designated as
undistributed capital gains.
If the income from a Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends, and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
In the case of foreign noncorporate shareholders, a Fund may be
required to withhold U.S. federal income tax at a rate of 31% on distributions
that are otherwise exempt from withholding tax (or taxable at a reduced treaty
rate) unless such shareholders furnish the Fund with proper notification of
their foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a Fund,
including the applicability of foreign taxes.
Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of U.S. federal income tax
consequences is based on the Code and the Treasury Regulations issued thereunder
as in effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court decisions may significantly
change the conclusions expressed herein, and any such changes or decisions may
have a retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are urged
to consult their tax advisers as to the consequences of these and other state
and local tax rules affecting investment in a Fund.
Additionally, the REITs held by the Fund will not know how much of each
year's distributions was a return of capital and how much was dividend income
until January of the following year. When all the REITs in the Fund have
reported the breakdown of their distributions to the Fund, then the Fund can
calculate the appropriate tax breakdown for its shareholders. This means that
the Fund may request yearly extensions from the Internal Revenue Service for
reporting income to shareholders. If extensions are granted, the Fund plans to
mail tax forms to shareholders in February. Shareholders in the Fund should file
their tax returns only after receiving those forms.
-15-
<PAGE>
PERFORMANCE CALCULATION
For purposes of quoting and comparing the performance of the Fund to
that of other mutual funds and to other relevant market indices in
advertisements or in reports to shareholders, performance may be stated in terms
of total return. Under rules promulgated by the Securities and Exchange
Commission ("SEC"), a fund's advertising performance must include total return
quotations calculated according to the following formula:
P(1 + T)^n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5, or 10)
ERV = ending redeemable value of a
hypothetical $1,000 payment, made at
the beginning of the 1, 5, or 10
year period, at the end of such
period (or fractional portion
thereof.)
Under the foregoing formula, the time periods used in advertising will
be based on rolling calendar quarters, updated to the last day of the most
recent quarter prior to submission of the advertising for publication, and will
cover 1, 5, and 10 year periods of the Fund's existence or such shorter period
dating from the effectiveness of the Fund's Registration Statement. In
calculating the ending redeemable value, all dividends and distributions by the
Fund are assumed to have been reinvested at net asset value as described in the
Prospectus on the reinvestment dates during the period. Total return, or "T" in
the formula above, is computed by finding the average annual compounded rates of
return over the 1, 5, and 10 year periods (or fractional portion thereof) that
would equate the initial amount invested to the ending redeemable value. Any
recurring account charges that might in the future be imposed by the Fund would
be included at that time.
In addition to the total return quotations discussed above, the Fund
may advertise its yield based on a 30-day (or one month) period ended on the
date of the most recent balance sheet included in the Fund's Post-Effective
Amendment to its Registration Statement, computed by dividing the net investment
income per share earned during the period by the maximum offering price per
share on the last day of the period, according to the following formula:
a-b
YIELD = 2[( ----- +1)^6-1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
Under this formula, interest earned on debt obligations for purposes of
"a" above, is calculated by (1) computing the yield to maturity of each
obligation held by the Fund based on the market value of the obligation
(including actual accrued interest) at the close of business on the last day of
each month, or, with respect to obligations purchased during the month, the
purchase price (plus actual accrued interest), (2) dividing that figure by 360
and multiplying the quotient by the market value of the obligation (including
actual accrued interest as referred to above) to determine the interest income
on the obligation
-16-
<PAGE>
for each day of the subsequent month that the obligation is in the Fund's
portfolio (assuming a month of 30 days), and (3) computing the total of the
interest earned on all debt obligations and all dividends accrued on all equity
securities during the 30-day or one month period. In computing dividends
accrued, dividend income is recognized by accruing 1/360 of the stated dividend
rate of a security each day that the security is in the Fund's portfolio. For
purposes of "b" above, Rule 12b-1 expenses are included among the expenses
accrued for the period. Undeclared earned income, computed in accordance with
generally accepted accounting principles, may be subtracted from the maximum
offering price calculation required pursuant to "d" above.
Any quotation of performance stated in terms of yield will be given no
greater prominence than the information prescribed under the SEC's rules. In
addition, all advertisements containing performance data of any kind will
include a legend disclosing that such performance data represents past
performance and that the investment return and principal value of an investment
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES OF THE FUND
The Trust was organized as a Delaware business trust under the laws of
the state of Delaware. The Trust's Certificate of Trust was filed December 22,
1997. The Trust's Declaration of Trust, dated as of December 22, 1997, permits
the Trustees to issue an unlimited number of shares of beneficial interest with
a par value of $0.01 per share in the Trust in an unlimited number of series of
shares. The Trust consists of one series, E.I.I. Realty Securities Fund. Each
share of beneficial interest has one vote and shares equally in dividends and
distributions when and if declared by the Fund and in the Fund's net assets upon
liquidation. All shares, when issued, are fully paid and nonassessable. There
are no preemptive, conversion, or exchange rights. Fund shares do not have
cumulative voting rights and, as such, holders of at least 50% of the shares
voting for Trustees can elect all Trustees and the remaining shareholders would
not be able to elect any Trustees. The Board of Trustees may classify or
reclassify any unissued shares of the Trust into shares of any series by setting
or changing in any one or more respects, from time to time, prior to the
issuance of such shares, the preference, conversion, or other rights, voting
powers, restrictions, limitations as to dividends, or qualifications of such
shares. Any such classification or reclassification will comply with the
provisions of the Investment Company Act. Shareholders of each series as created
will vote as a series to change, among other things, a fundamental policy of the
Fund and to approve the Investment Advisory Agreement and Distribution Plan.
The Trust is not required to hold annual meetings of shareholders but
will hold special meetings of shareholders when, in the judgment of the
Trustees, it is necessary or desirable to submit matters for a shareholder vote.
Shareholders have, under certain circumstances, the right to communicate with
other shareholders in connection with requesting a meeting of shareholders for
the purpose of removing one or more Trustees. Shareholders also have, in certain
circumstances, the right to remove one or more Trustees without a meeting.
REPORTS
Shareholders receive reports at least semi-annually showing the Fund's
holdings and other information. In addition, shareholders receive financial
statements examined by the Fund's independent auditors.
-17-
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
List all financial statements and exhibits filed as part of the
Registration Statement.
(a) Financial statements:
In Part A: None.
In Part B: To be filed by amendment.
In Part C: None.
(b) Exhibits
EX-99.B1 Certificate of Trust.(1)
EX-99.B2 Trust Instrument.(1)
EX-99.B3 None.
EX-99.B4 None
EX-99.B5 Form of Investment Advisory Agreement between
Registrant and E.I.I. Realty Securities, Inc.(2)
EX-99.B6 Distribution Agreement between the Registrant
and ________.(2)
EX-99.B7 None.
EX-99.B8 Custody Agreement between Registrant and
______________.(2)
EX-99.B9(a) Administration Agreement between Registrant and
E.I.I. Realty Securities, Inc.(2)
(b) Shareholder Servicing Plan on behalf of the Adviser
Shares and the Investor Shares of E.I.I. Realty
Securities Fund.(2)
(c) Transfer Agency Agreement between Registrant and
_______.(2)
EX-99.B10 Opinion of Kramer, Levin, Naftalis & Frankel.(2)
EX-99.B11(a) Consent of Kramer, Levin, Naftalis & Frankel,
Counsel for the Registrant.(1)
- --------------------
(1)Filed herewith.
(2)To be filed by amendment.
<PAGE>
EX-99.B11(b) Consent of Ernst & Young LLP, independent auditors
for the Registrant.(1)
EX-99.B12 None.
EX-99.B13 Investment letter re: initial $100,000 capital.(2)
EX-99.B14 None.
EX-99.B15 Distribution and Service Plan pursuant to Rule 12b-1
for the Investor Shares of E.I.I. Securities Realty
Securities Fund.(2)
EX-99.B16 Schedule for computation of performance quotation.(2)
EX-99.B17 Not applicable.
EX-99.B18 Rule 18f-3 Multiple Class Plan.(2)
- --------------------
(1)Filed herewith.
(2)To be filed by amendment.
ITEM 25. Persons Controlled By or Under Common Control with Registrant
None.
ITEM 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of February __, 1998
- -------------- -----------------------
Shares of beneficial interest
E.I.I. Realty Securities Fund
($.001 par value)
Institutional Shares 0
Adviser Shares 0
Investor Shares 0
ITEM 27. Indemnification
Section 10.02 of the Registrant's Trust Instrument provides as follows:
"(a) Subject to the exceptions and limitations contained in Subsection
10.02(b):
(i) every person who is, or has been, a Trustee or officer of
the Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest extent
- 5 -
<PAGE>
permitted by law against liability and against all expenses reasonably
incurred or paid by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or otherwise by
virtue of his being or having been a Trustee or officer and against
amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal or
other, including appeals), actual or threatened while in office or
thereafter, and the words "liability" and "expenses" shall include,
without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office or (B) not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, (A) by the court or other
body approving the settlement; (B) by at least a majority of those
Trustees who are neither Interested Persons of the Trust nor are
parties to the matter based upon a review of readily available facts
(as opposed to a full trial-type inquiry); or (C) by written opinion of
independent legal counsel based upon a review of readily available
facts (as opposed to a full trial-type inquiry).
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may
now or hereafter be entitled, shall continue as to a person who has
ceased to be a Covered Person and shall inure to the benefit of the
heirs, executors and administrators of such a person. Nothing contained
herein shall affect any rights to indemnification to which Trust
personnel, other than Covered Persons, and other persons may be
entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character
described in Subsection (a) of this Section 10.02 may be paid by the
Trust or Series from time to time prior to final disposition thereof
upon receipt of an undertaking by or on behalf of such Covered Person
that such amount will be paid over by him to the Trust or Series if it
is ultimately determined that he is not entitled to indemnification
under this Section 10.02; provided, however, that either (i) such
Covered Person shall have provided appropriate security for such
undertaking, (ii) the Trust is insured against losses arising out of
any such advance payments or (iii) either a majority of the Trustees
who are neither Interested Persons of the Trust nor parties to the
matter, or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed
to a trial-type inquiry or full investigation), that there is reason
to believe that such Covered Person will be found entitled to
indemnification under this Section 10.02."
- 6 -
<PAGE>
ITEM 28. Business and Other Connections of Investment Adviser
[To be filed by amendment]
ITEM 29. Principal Underwriters
(a) None.
(b) The following information is furnished with respect to the officers
and partners of E.I.I. Realty Securites, Inc., the Registrant's principal
underwriter. The business address for all persons listed below is 667 Madison
Avenue, 16th Floor, New York, NY 10110.
Name and Principal Positions and Offices with Positions and Offices
Business Address Principal Underwriter with Registrant
Richard J. Adler Managing Director __________
Cydney C. Donnell Managing Director __________
David P. O'Connor Managing Director __________
(c) Not Applicable. The Registrant's principal underwriter is an
affiliated person of the Registrant.
ITEM 30. Location of Accounts and Records
As required by Section 31(a) of the Investment Company Act of 1940, the
accounts, books or other documents relating to the E.I.I. Realty Securities
Fund's budget and accruals will be kept by E.I.I. Realty Securites, Inc., 667
Madison Avenue, 16th Floor, New York, NY 10110. The accounts, books or other
documents of the Fund relating to shareholder accounts and records and dividend
disbursements will also be kept by E.I.I. Realty Securites, Inc. at the above
address.
ITEM 31. Management Services
There are no management-related service contracts not discussed in
Parts A and B.
ITEM 32. Undertakings
(1) Registrant undertakes to call a meeting of shareholders for the
purpose of voting upon the question of removal of a director or directors if
requested to do so by the holders of at least 10% of the Registrant's
outstanding voting securities, and to assist in communications with other
shareholders as required by Section 16(c) of the 1940 Act.
(2) Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified within four to six months from
the effective date of registrant's 1933 Act registration statement.
- 7 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement on Form N-1A to be signed on its behalf by the undersigned, thereto
duly authorized in the city of New York, and the state of New York on this 10th
day of February, 1998.
E.I.I. REALTY SECURITIES FUND
(Registrant)
By:/s/Richard J. Adler
--------------------------
Richard J. Adler, Chairman
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities indicated on the 10th
day of February, 1998.
/s/Richard J. Adler Chairman
- --------------------------
Richard J. Adler
/s/Susan J. Penry-Williams Trustee
- --------------------------
Susan J. Penry-Williams
/s/Peter J. O'Rourke Trustee
- --------------------------
Peter J. O'Rourke
/s/David P. O'Connor Chief Financial Officer
- --------------------------
David P. O'Connor
<PAGE>
INDEX TO EXHIBITS
Exhibit Caption
- ------- -------
EX-99.B1 Certificate of Trust
EX-99.B2 Trust Instrument
EX-99.B11(a) Consent of Kramer, Levin, Naftalis & Frankel,
counsel for Registrant.
EX-99.B11(b) Consent of Ernst & Young LLP, independent auditors
for Registrant.
CERTIFICATE OF TRUST
OF
THE EII REALTY SECURITIES FUND
This Certificate of Trust is being executed as of December 22, 1997 for
the purpose of organizing a business trust pursuant to the Delaware Business
Trust Act, 12 Del. C. ss.ss. 3801 et seq.
The undersigned hereby certifies as follows:
1. Name. The name of the business trust is The EII Realty Securities
Fund ("Fund").
2. Registered Investment Company. The Fund is or will become a
registered investment company under the Investment Company Act of 1940, as
amended.
3. Registered Office and Registered Agent. The registered office of the
Fund in the State of Delaware is located at 1201 North Market Street, P.O. Box
1347, Wilmington, Delaware 19899-1347. The name of the registered agent of the
Fund for service of process at such location is Delaware Corporation Organizers,
Inc.
4. Notice of Limitation of Liabilities of Series. Notice is hereby
given that the Fund is or may hereafter be constituted a series fund. The debts,
liabilities, obligations, and expenses incurred, contracted for, or otherwise
existing with respect to any particular series shall be enforceable against the
assets of such series only, and not against the assets of the Fund generally.
<PAGE>
IN WITNESS WHEREOF, the undersigned, being all the trustees of the
Trust, have duly executed this Certificate of Trust as of the day and year first
above written.
Trustees
/s/Susan J. Penry-Williams
--------------------------
Susan J. Penry-Williams
/s/Peter J. O'Rourke
--------------------
Peter J. O'Rourke
- 2 -
THE EII REALTY SECURITIES FUND
TRUST INSTRUMENT
DATED AS OF DECEMBER 22, 1997
<PAGE>
THE EII REALTY SECURITIES FUND
TABLE OF CONTENTS
Page
ARTICLE I - NAME AND DEFINITION........................................... 1
Section 1.01 Name............................................... 1
Section 1.02 Definitions........................................ 1
ARTICLE II - BENEFICIAL INTEREST.......................................... 2
Section 2.01 Shares of Beneficial Interest...................... 2
Section 2.02 Issuance of Shares................................. 2
Section 2.03 Register of Shares and Share Certificates.......... 3
Section 2.04 Transfer of Shares................................. 3
Section 2.05 Treasury Shares.................................... 3
Section 2.06 Establishment of Series............................ 3
Section 2.07 Investment in the Fund............................. 4
Section 2.08 Assets and Liabilities of Series................... 4
Section 2.09 No Preemptive Rights............................... 5
Section 2.10 No Personal Liability of Shareholder............... 5
Section 2.11 Assent to Trust Instrument......................... 5
ARTICLE III - THE TRUSTEES................................................ 6
Section 3.01 Management of the Fund............................. 6
Section 3.02 Initial Trustees................................... 6
Section 3.03 Term of Office..................................... 6
Section 3.04 Vacancies and Appointments......................... 7
Section 3.05 Temporary Absence.................................. 7
Section 3.06 Number of Trustees................................. 7
Section 3.07 Effect of Ending of a Trustee's Service............ 7
Section 3.08 Ownership of Assets of the Fund.................... 7
ARTICLE IV - POWERS OF THE TRUSTEES....................................... 8
Section 4.01 Powers............................................. 8
Section 4.02 Issuance and Repurchase of Shares.................. 10
Section 4.03 Trustees and Officers as Shareholders.............. 11
Section 4.04 Action by the Trustees............................. 11
Section 4.05 Chairman of the Trustees........................... 11
Section 4.06 Principal Transactions............................. 11
ARTICLE V - EXPENSES OF THE FUND.......................................... 12
ARTICLE VI - INVESTMENT ADVISER, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT................................. 12
Section 6.01 Investment Adviser................................. 12
Section 6.02 Principal Underwriter.............................. 13
Section 6.03 Administration..................................... 13
i
<PAGE>
Section 6.04 Transfer Agent..................................... 13
Section 6.05 Parties to Contract................................ 13
Section 6.06 Provisions and Amendments.......................... 14
ARTICLE VII - SHAREHOLDERS' VOTING POWERS AND MEETINGS.................... 14
Section 7.01 Voting Powers...................................... 14
Section 7.02 Meetings........................................... 15
Section 7.03 Quorum and Required Vote........................... 15
ARTICLE VIII - CUSTODIAN.................................................. 16
Section 8.01 Appointment and Duties............................. 16
Section 8.02 Central Certificate System......................... 16
ARTICLE IX - DISTRIBUTIONS AND REDEMPTIONS................................ 17
Section 9.01 Distributions...................................... 17
Section 9.02 Redemptions........................................ 17
Section 9.03 Determination of Net Asset Value and
Valuation of Portfolio Assets.................................... 17
Section 9.04 Suspension of the Right of Redemption.............. 18
Section 9.05 Redemption of Shares in Order to
Qualify as Regulated Investment Company.......................... 18
Section 9.06 Redemption of Small Accounts....................... 19
ARTICLE X - LIMITATION OF LIABILITY AND INDEMNIFICATION................... 19
Section 10.01 Limitation of Liability........................... 19
Section 10.02 Indemnification................................... 19
Section 10.03 Shareholders...................................... 20
ARTICLE XI - MISCELLANEOUS................................................ 21
Section 11.01 Fund Not A Partnership............................ 21
Section 11.02 Trustee's Good Faith Action, Expert Advice,
No Bond or Surety...................................... 21
Section 11.03 Establishment of Record Dates..................... 21
Section 11.04 Termination of Fund............................... 22
Section 11.05 Reorganization.................................... 22
Section 11.06 Filing of Copies, References, Headings............ 23
Section 11.07 Applicable Law.................................... 23
Section 11.08 Amendments........................................ 24
Section 11.09 Fiscal Year....................................... 24
Section 11.10 Name Reservation.................................. 24
Section 11.11 Provisions in Conflict With Law................... 25
ii
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THE EII REALTY SECURITIES FUND
as of December 22, 1997
Trust Instrument, made by Susan J. Penry-Williams and Peter J. O'Rourke
(the "Trustees").
WHEREAS, the Trustees desire to establish a business trust for the
investment and reinvestment of funds contributed thereto;
NOW THEREFORE, the Trustees declare that all money and property
contributed to the trust hereunder shall be held and managed in trust under this
Trust Instrument as herein set forth below.
ARTICLE I
NAME AND DEFINITION
SECTION 1.01 NAME. The name of the trust created hereby is "The EII
Realty Securities Fund."
SECTION 1.02 DEFINITIONS. Wherever used herein, unless otherwise
required by the context or specifically provided:
(a) The "Investment Company Act" means the Investment Company Act of
1940, as amended from time to time. Whenever reference is made hereunder to the
Investment Company Act, such references shall be interpreted as including any
applicable order or orders of the Commission or any rules or regulations adopted
by the Commission thereunder or interpretive releases of the Commission staff;
(b) "Bylaws" means the Bylaws of the Fund as adopted by the Trustee, as
amended from time to time;
(c) "Commission" has the meaning given it in the Investment Company
Act. In addition, "Affiliated Person," "Interested Person" and "Principal
Underwriter" shall have the respective meanings given them in the Investment
Company Act;
(d) "Delaware Act" means the Delaware Business Trust Act, to Chapter 38
of Title 12 of the Delaware Code, as amended from time to time;
(e) "Net Asset Value" means the net asset value of each Series of the
Fund determined in the manner provided in Article IX, Section 9.03 hereof;
(f) "Outstanding Shares" means those Shares shown from time to time in
the books of the Fund or its transfer agent as then issued and outstanding, but
shall not include Shares which have been redeemed or repurchased by the Fund and
which are at the time held in the treasury of the Fund;
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(g) "Series" means a series of Shares of the Fund established in
accordance with the provisions of Article II, Section 2.06 hereof;
(h) "Shareholder" means a record owner of Outstanding Shares of the
Fund;
(i) "Shares" means the equal proportionate transferable units of
beneficial interest into which the beneficial interest of each Series of the
Fund or class thereof shall be divided and may include fractions of Shares as
well as whole Shares;
(j) The "Fund" means The EII Realty Securities Fund, a Delaware
business trust, and reference to the Fund when applicable to one or more Series
of the Fund, shall refer to any such Series;
(k) The "Trustees" means the person or persons who has or have signed
this Trust Instrument so long as he or they shall continue in office in
accordance with the terms hereof and all other persons who may from time to time
be duly qualified and serving as Trustees in accordance with the provisions of
Article III hereof, and reference herein to a Trustee or to the Trustees shall
refer to the individual Trustees in their respective capacity as Trustees
hereunder;
(l) "Fund Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of one or
more of the Fund or any Series, or the Trustees on behalf of the Fund or any
Series.
ARTICLE II
BENEFICIAL INTEREST
SECTION 2.01 SHARES OF BENEFICIAL INTEREST. The beneficial interest in
the Fund shall be divided into such Shares of one or more separate and distinct
Series or classes of a Series as set forth in Section 2.06 or as the Trustees
shall otherwise from time to time create and establish as provided in Section
2.06. The number of Shares of each Series and class thereof authorized hereunder
is unlimited. Except as otherwise determined by the Trustees, each Share shall
have a par value of $.001. All Shares issued hereunder, including without
limitation Shares issued in connection with a dividend paid in Shares or a split
or reverse split of Shares, shall be fully paid and nonassessable.
SECTION 2.02 ISSUANCE OF SHARES. The Trustees in their discretion may,
from time to time, without a vote of the Shareholders, issue Shares, in addition
to the then issued and outstanding Shares and Shares held in the treasury, to
such party or parties and for such amount and type of consideration, subject to
applicable law, including cash or securities, at such time or times and on such
terms as the Trustees may deem appropriate, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in connection with,
the assumption of liabilities) and businesses. In connection with any issuance
of Shares, the Trustees may issue fractional Shares and Shares held in the
treasury. The Trustees may from time to time divide or combine the Shares into a
greater or lesser number without thereby changing the proportionate beneficial
interests in the Fund. Contributions to the Fund may be accepted for, and Shares
shall be redeemed as, whole Shares and/or 1/1000th of a Share or
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integral multiples thereof. The Trustees or any person the Trustees may
authorize for the purpose may, in their discretion, reject any application for
the issuance of shares.
SECTION 2.03 REGISTER OF SHARES AND SHARE CERTIFICATES. A register
shall be kept at the principal office of the Fund or an office of the Fund's
transfer agent which shall contain the names and addresses of the Shareholders
of each Series, the number of Shares of that Series (or any class or classes
thereof) held by them respectively and a record of all transfers thereof. No
share certificates shall be issued by the Fund except as the Trustees may
otherwise authorize, and the persons indicated as shareholders in such register
shall be entitled to receive dividends or other distributions or otherwise to
exercise or enjoy the rights of Shareholders. No Shareholder shall be entitled
to receive payment of any dividend or other distribution, nor to have notice
given to him as herein or in the Bylaws provided, until he has given his address
to the transfer agent or such officer or other agent of the Trustees as shall
keep the said register for entry thereon.
SECTION 2.04 TRANSFER OF SHARES. Except as otherwise provided by the
Trustees, Shares shall be transferable on the records of the Fund only by the
record holder thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Fund's transfer agent of a duly executed
instrument of transfer and such evidence of the genuineness of such execution
and authorization and of such other matters as may be required by the Trustees.
Upon such delivery the transfer shall be recorded on the register of the Fund.
Until such record is made, the Shareholder of record shall be deemed to be the
holder of such Shares for all purposes hereunder and neither the Trustees nor
the Fund, nor any transfer agent or registrar nor any officer, employee or agent
of the Fund shall be affected by any notice of the proposed transfer.
SECTION 2.05 TREASURY SHARES. Shares held in the treasury shall, until
reissued pursuant to Section 2.02 hereof, not confer any voting rights on the
Trustees, nor shall such Shares be entitled to any dividends or other
distributions declared with respect to the Shares.
SECTION 2.06 ESTABLISHMENT OF SERIES AND CLASSES. The Fund created
hereby shall consist initially of one Series which is specified by name on
Schedule A attached hereto, and such Series shall initially consist of such
classes of Shares as are designated on Schedule A. Such initial Series (or class
thereof, as applicable) shall have the investment objectives, purposes and
policies, and such relative rights, powers, duties and other attributes, as are
specified in the Registration Statement and related prospectus and statement of
additional information approved by the Trustees in connection with the
registration and offer of Shares of such Series (or class thereof). Distinct
records shall be maintained by the Fund for each Series and the assets and
liabilities associated with the Series shall be held and accounted for
separately from the assets and liabilities of the Fund or any other Series. The
Trustees shall have full power and authority, in their sole discretion and
without obtaining any prior authorization or vote of the Shareholders of any
Series, to establish and designate and to change in any manner any Series or any
classes of initial or additional Series and to fix such preferences, voting
powers, rights and privileges of such Series or classes thereof as the Trustees
may from time to time determine, to divide or combine the Shares or any Series
or classes thereof into a greater or lesser number, to classify or reclassify
any issued Shares or any Series or classes thereof into one or more Series or
classes of Shares, and to take such other action with respect to the Shares as
the Trustees may deem desirable. The establishment and designation of any Series
(other than those established pursuant
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to the first sentence of this Section 2.06) shall be effective upon the adoption
of a resolution by a majority of the Trustees setting forth such establishment
and designation and the relative rights and preferences of the Shares of such
Series. A Series may issue any number of Shares, but need not issue Shares. At
any time that there are no Shares outstanding of any particular Series
previously established and designated, the Trustees may by a majority vote
abolish that Series and the establishment and designation thereof.
All references to Shares in this Trust Instrument shall be deemed to be
Shares of any or all Series, or classes thereof as the context may require. All
provisions herein relating to the Fund shall apply equally to each Series of the
Fund, and each class thereof, except as the context otherwise requires.
Each Share of a Series of the Fund shall represent an equal beneficial
interest in the net assets of such Series. Each holder of Shares of a Series
shall be entitled to receive his proportionate share of all distributions made
with respect to such Series, based upon the number of full and fractional Shares
of the Series held. Upon redemption of his Shares, such Shareholder shall be
paid solely out of the funds and property of such Series of the Fund.
SECTION 2.07 INVESTMENT IN THE FUND. The Trustees shall accept
investments in any Series from such persons and on such terms as they may from
time to time authorize. At the Trustees' discretion, such investments, subject
to applicable law, may be in the form of cash or securities in which the
affected Series is authorized to invest, valued as provided in Article IX
Section 9.03 hereof. Investments in a Series shall be credited to each
Shareholder's account in the form of full and fractional Shares at the net asset
value per Share next determined after the investment is received or accepted as
may be determined by the Trustees; provided, however, that the Trustees may, in
their sole discretion, (a) fix minimum amounts for initial and subsequent
investments or (b) impose a sales charge upon investments in such manner and at
such time determined by the Trustees.
SECTION 2.08 ASSETS AND LIABILITIES OF SERIES. All consideration
received by the Fund for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever form the
same may be, shall be held and accounted for separately from the other assets of
the Fund and of every other Series and may be referred to herein as "assets
belonging to" that Series. The assets belonging to a particular Series shall
belong to that Series for all purposes, and to no other Series, and shall be
subject only to the rights of creditors of that Series. In addition, any assets,
income, earnings, profits or funds, or payments and proceeds with respect
thereto, which are not readily identifiable as belonging to any particular
Series shall be allocated by the Trustees between and among one or more of the
Series in such manner as the Trustees, in their sole discretion, deem fair and
equitable. Each such allocation shall be conclusive and binding upon the
Shareholders of all Series for all purposes, and such assets, income, earnings,
profits or funds, or payments and proceeds with respect thereto shall be assets
belonging to that Series. The assets belonging to a particular Series shall be
so recorded upon the books of the Fund, and shall be held by the Trustees in
fund for the benefit of the holders of Shares of that Series. The assets
belonging to each particular Series shall be charged with the liabilities of
that Series and
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<PAGE>
all expenses, costs, charges and reserves attributable to that Series. Any
general liabilities, expenses, costs, charges or reserves of the Fund which are
not readily identifiable as belonging to any particular Series shall be
allocated and charged by the Trustees between or among any one or more of the
Series in such manner as the Trustees in their sole discretion deem fair and
equitable. Each such allocation shall be conclusive and binding upon the
Shareholders of all Series for all purposes. Without limitation of the foregoing
provisions of this Section 2.08, but subject to the right of the Trustees in
their discretion to allocate general liabilities, expenses, costs, changes or
reserves as herein provided, the debts, liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect to a particular
Series shall be enforceable against the assets of such Series only, and not
against the assets of the Fund generally. Notice of this contractual limitation
on inter-Series liabilities may, in the Trustee's sole discretion, be set forth
in the certificate of fund of the Fund (whether originally or by amendment) as
filed or to be filed in the Office of the Secretary of State of the State of
Delaware pursuant to the Delaware Act, and upon the giving of such notice in the
certificate of fund, the statutory provisions of Section 3804 of the Delaware
Act relating to limitations on inter-Series liabilities (and the statutory
effect under Section 3804 of setting forth such notice in the certificate of
fund) shall become applicable to the Fund and each Series. Any person extending
credit to, contracting with or having any claim against any Series may look only
to the assets of that Series to satisfy or enforce any debt, with respect to
that Series. No Shareholder or former Shareholder of any Series shall have a
claim on or any right to any assets allocated or belonging to any other Series.
SECTION 2.09 NO PREEMPTIVE RIGHTS. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Fund or the Trustees, whether of the same or other
Series.
SECTION 2.10 NO PERSONAL LIABILITY OF SHAREHOLDER. No Shareholder shall
be personally liable for the debts, liabilities, obligation and expenses
incurred by, contracted for, or otherwise existing with respect to, the Fund or
by or on behalf of any Series. The Trustees shall have no power to bind any
Shareholder personally or to call upon any Shareholder for the payment of any
sum of money or assessment whatsoever other than such as the Shareholder may at
any time personally agree to pay by way of subscription for any Shares or
otherwise.
SECTION 2.11 ASSENT TO TRUST INSTRUMENT. Every Shareholder, by virtue
of having purchased a Share shall become a Shareholder and shall be held to have
expressly assented and agreed to be bound by the terms hereof.
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ARTICLE III
THE TRUSTEES
SECTION 3.01 MANAGEMENT OF THE FUND. The Trustees shall have exclusive
and absolute control over the Fund Property and over the business of the Fund to
the same extent as if the Trustees were the sole owners of the Fund Property and
business in their own right, but with such powers of delegation as may be
permitted by this Trust Instrument. The Trustees shall have power to conduct the
business of the Fund and carry on its operations in any and all of its branches
and maintain offices both within and without the State of Delaware, in any and
all states of the United States of America, in the District of Columbia, in any
and all commonwealths, territories, dependencies, colonies, or possessions of
the United States of America, and in any foreign jurisdiction and to do all such
other things and execute all such instruments as they deem necessary, proper or
desirable in order to promote the interests of the Fund although such things are
not herein specifically mentioned. Any determination as to what is in the
interests of the Fund made by the Trustees in good faith shall be conclusive. In
construing the provisions of this Trust Instrument, the presumption shall be in
favor of a grant of power to the Trustees.
The enumeration of any specific power in this Trust Instrument shall
not be construed as limiting the aforesaid power. The powers of the Trustees may
be exercised without order of or resort to any court.
Except for the Trustees named herein or appointed to fill vacancies
pursuant to Section 3.04 of this Article III and except as otherwise provided in
Section 3.02 of this Article III, the Trustees shall be elected by the
Shareholders owning of record a plurality of the Shares voting at a meeting of
Shareholders. Any Shareholder meeting held for such purpose shall be held on a
date fixed by the Trustees. In the event that less than a majority of the
Trustees holding office have been elected by Shareholders, the Trustees then in
office will call a Shareholders' meeting for the election of Trustees in
accordance with the provisions of the Investment Company Act.
SECTION 3.02 INITIAL TRUSTEES. The initial Trustees shall be the person
named herein. The initial Trustees shall appoint additional or substitute
Trustees at an organizational meeting of Trustees. Thereafter, Trustees shall be
appointed or elected as provided in Sections 3.01 and 3.04 of this Article III.
SECTION 3.03 TERM OF OFFICE. The Trustees shall hold office during the
lifetime of this Fund, and until its termination as herein provided; except (a)
that any Trustee may resign his fund by written instrument signed by him and
delivered to the other Trustees, which shall take effect upon such delivery or
upon such later date as is specified therein; (b) that any Trustee may be
removed at any time by written instrument, signed by at least two-thirds of the
number of Trustees prior to such removal specifying the date when such removal
shall become effective; (c) that any Trustee who requests in writing to be
retired or who has died, become physically or mentally incapacitated by reason
of illness or otherwise, or is otherwise unable to serve, may be retired by
written instrument signed by a majority of the other Trustees, specifying the
date of his retirement; and (d) that a Trustee may be removed at any meeting of
the Shareholders of the Fund by a vote of Shareholders owning at least
two-thirds of the Outstanding Shares of the Fund.
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SECTION 3.04 VACANCIES AND APPOINTMENTS. In case of a Trustee's
declination to serve, death, resignation, retirement, removal, physical or
mental incapacity by reason of illness, disease or otherwise, or if a Trustee is
otherwise unable to serve, or if there is an increase in the number of Trustees,
a vacancy shall occur. Whenever a vacancy in the Board of Trustees shall occur,
until such vacancy is filled, the other Trustees shall have all the powers
hereunder and the certificate of the other Trustees of such vacancy shall be
conclusive. In the case of a vacancy, the remaining Trustees shall fill such
vacancy by appointing such other person as they in their discretion see fit, to
the extent consistent with the limitations provided under the Investment Company
Act. Such appointment shall be evidenced by a written instrument signed by a
majority of the Trustees in office or by resolution of the Trustees, duly
adopted, which shall be recorded in the minutes of a meeting of the Trustees,
whereupon the appointment shall take effect.
An appointment of a Trustee may be made by the Trustees then in office
in anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any person
appointed as a Trustee pursuant to this Section 3.04 shall have accepted this
Fund, the fund estate shall vest in the new Trustee or Trustees, together with
the continuing Trustees, without any further act or conveyance, and such person
shall be deemed a Trustee.
SECTION 3.05 TEMPORARY ABSENCE. Any Trustee may, by power of attorney,
delegate his power for a period not exceeding six months at any time to any
other Trustee or Trustees, provided that in no case shall fewer than two
Trustees personally exercise the other powers hereunder except as herein
otherwise expressly provided.
SECTION 3.06 NUMBER OF TRUSTEES. From and after the date of appointment
of Trustees by the initial Trustees named herein, the number of Trustees shall
be at least three (3), and thereafter shall be such number as shall be fixed
from time to time by a majority of the Trustees, provided, however, that the
number of Trustees shall in no event be more than twelve (12).
SECTION 3.07 EFFECT OF ENDING OF A TRUSTEE'S SERVICE. The declination
to serve, death, resignation, retirement, removal, incapacity, or inability of
the Trustees, or any one of them, shall not operate to terminate the Fund or to
revoke any existing agency created pursuant to the terms of this Trust
Instrument.
SECTION 3.08 OWNERSHIP OF ASSETS OF THE FUND. The assets of the Fund
and of each Series shall be held separate and apart from any assets now or
hereafter held in any capacity other than as Trustee hereunder by the Trustees
or any successor Trustees. Legal title in all of the assets of the Fund and the
right to conduct any business shall at all times be considered as vested in the
Trustees on behalf of the Fund, except that the Trustees may cause legal title
to any Fund Property to be held by, or in the name of, the Fund or in the name
of any person as nominee. No Shareholder shall be deemed to have a severable
ownership in any individual asset of the Fund or of any Series or any right of
partition or possession thereof but each Shareholder shall have, except as
otherwise provided for herein, a proportionate undivided beneficial interest in
the Fund or Series based upon the number of Shares owned. The Shares shall be
personal property giving only the rights specifically set forth in this Trust
Instrument.
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ARTICLE IV
POWERS OF THE TRUSTEES
SECTION 4.01 POWERS. The Trustees in all instances shall act as
principals, and are and shall be free from the control of the Shareholders. The
Trustees shall have full power and authority to do any and all acts and to make
and execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Fund. The
Trustees shall not in any way be bound or limited by present or future laws or
customs in regard to fund investments, but shall have full authority and power
to make any and all investments which they, in their sole discretion, shall deem
proper to accomplish the purpose of this Fund without recourse to any court or
other authority. Subject to any applicable limitation in this Trust Instrument
or the Bylaws of the Fund, the Trustees shall have the power and authority:
(a) To invest and reinvest cash and other property (including
investment, notwithstanding any other provision hereof, of all of the assets of
any Series in a single open-end investment company, including investment by
means of transfer of such assets in exchange for an interest or interests in
such investment company), and to hold cash or other property of the Fund
uninvested, without in any event being bound or limited by any present or future
law or custom in regard to investments by trustees, and to sell, exchange, lend,
pledge, mortgage, hypothecate, write options on and lease any or all of the
assets of the Fund:
(b) To operate as and carry on the business of an investment company,
and exercise all the powers necessary and appropriate to the conduct of such
operations;
(c) To borrow money and in this connection issue notes or other
evidence of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Fund Property; to endorse, guarantee, or
undertake the performance of an obligation or engagement of any other Person and
to lend Fund Property;
(d) To provide for the distribution of interests of the Fund either
through a principal underwriter in the manner hereinafter provided for or by the
Fund itself, or both, or otherwise pursuant to a plan of distribution of any
kind;
(e) To adopt Bylaws not inconsistent with this Trust Instrument
providing for the conduct of the business of the Fund and to amend and repeal
them to the extent that they do not reserve that right to the Shareholders; such
Bylaws shall be deemed incorporated and included in this Trust Instrument;
(f) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate;
(g) To employ one or more banks, fund companies or companies that are
members of a national securities exchange or such other entities as the
Commission may permit as custodians of any assets of the Fund subject to any
conditions set forth in this Trust Instrument or in the Bylaws;
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(h) To retain one or more transfer agents and shareholder servicing
agents, or both;
(i) To set record dates in the manner provided herein or in the Bylaws;
(j) To delegate such authority as they consider desirable (with power
of subdelegation) to any officers or employees of the Fund and to any investment
adviser, manager, custodian, underwriter or other agent or independent
contractor;
(k) To sell or exchange any or all of the assets of the Fund, subject
to the provisions of Article XI, subsection 11.04(b) hereof;
(l) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property, and to execute and deliver
powers of attorney to such person or persons as the Trustees shall deem proper,
granting to such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
(m) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(n) To hold any security or property in a form not indicating any fund,
whether in bearer, book entry, unregistered or other negotiable form; or either
in the name of the Fund or in the name of a custodian or a nominee or nominees,
subject in either case to proper safeguards according to the usual practice of
Delaware business funds or investment companies;
(o) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article II hereof and to establish classes of
such Series having relative rights, powers and duties as they may provide
consistent with applicable law;
(p) Subject to the provisions of Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Fund to a particular Series or
to apportion the same between or among two or more Series, provided that any
liabilities or expenses incurred by a particular Series shall be payable solely
out of the assets belonging to that Series as provided for in Article II hereof;
(q) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which is
held in the Fund; to consent to any contract, lease, mortgage, purchase, or sale
of property by such corporation or concern, and to pay calls or subscriptions
with respect to any security held in the Fund;
(r) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Fund or any matter in controversy including, but not limited to,
claims for taxes;
(s) To make distributions of income and of capital gains to
Shareholders in the manner provided herein;
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(t) To establish, from time to time, a minimum investment for
Shareholders in the Fund or in one or more Series or class, and to require the
redemption of the Shares of any Shareholders whose investment is less than such
minimum upon giving notice to such Shareholder;
(u) To establish one or more committees, to delegate any of the powers
of the Trustees to said committees and to adopt a committee charter providing
for such responsibilities, membership (including Trustees, officers or other
agents of the Fund therein) and any other characteristics of said committees as
the Trustees may deem proper. Notwithstanding the provisions of this Article IV,
and in addition to such provisions or any other provision of this Trust
Instrument or of the Bylaws, the Trustees may by resolution appoint a committee
consisting of less than the whole number of Trustees then in office, which
committee may be empowered to act for and bind the Trustees and the Fund, as if
the acts of such committee were the acts of all the Trustees then in office,
with respect to the institution, prosecution, dismissal, settlement, review or
investigation of any action, suit or proceeding which shall be pending or
threatened to be brought before any court, administrative agency or other
adjudicatory body;
(v) To interpret the investment policies, practices or limitations of
any Series;
(w) To establish a registered office and have a registered agent in the
state of Delaware; and
(x) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either alone or in
association with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed as objects and powers, and the
foregoing enumeration of specific powers shall not be held to limit or restrict
in any manner the general powers of the Trustees. Any action by one or more of
the Trustees in their capacity as such hereunder shall be deemed an action on
behalf of the Fund or the applicable Series, and not an action in an individual
capacity.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Fund.
No one dealing with the Trustees shall be under any obligation to make
any inquiry concerning the authority of the Trustees, or to see the application
of any payments made or property transferred to the Trustees or upon their
order.
SECTION 4.02 ISSUANCE AND REPURCHASE OF SHARES. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of and otherwise deal in Shares and, subject to the
provisions set forth in Article II and Article IX, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares any
funds or property of the Fund, or the particular Series of the Fund, with
respect to which such Shares are issued.
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SECTION 4.03 TRUSTEES AND OFFICERS AS SHAREHOLDERS. Any Trustee,
officer or other agent of the Fund may acquire, own and dispose of Shares to the
same extent as if he were not a Trustee, officer or agent; and the Trustees may
issue and sell or cause to be issued and sold Shares to and buy such Shares from
any such person or any firm or company in which he is interested, subject only
to the general limitations herein contained as to the sale and purchase of such
Shares; and all subject to any restrictions which may be contained in the
Bylaws.
SECTION 4.04 ACTION BY THE TRUSTEES. In any action taken by the
Trustees hereunder, unless otherwise specified, the Trustees shall act by
majority vote at a meeting duly called or by unanimous written consent without a
meeting or by telephone meeting provided a quorum of Trustees participate in any
such telephone meeting, unless the Investment Company Act requires that a
particular action be taken only at a meeting at which the Trustees are present
in person. At any meeting of the Trustees, a majority of the Trustees shall
constitute a quorum. Meetings of the Trustees may be called orally or in writing
by the Chairman of the Board of Trustees or by any two other Trustees. Notice of
the time, date and place of all meetings of the Trustees shall be given by the
person calling the meeting to each Trustee by telephone, facsimile or other
electronic mechanism sent to his home or business address at least twenty-four
hours in advance of the meeting or by written notice mailed to his home or
business address at least seventy-two hours in advance of the meeting. Notice
need not be given to any Trustee who attends the meeting without objecting to
the lack of notice or who executes a written waiver of notice with respect to
the meeting. Any meeting conducted by telephone shall be deemed to take place at
the principal office of the Fund, as determined by the Bylaws or by the
Trustees. Subject to the requirements of the Investment Company Act, the
Trustees by majority vote may delegate to any one or more of their number their
authority to approve particular matters or take particular actions on behalf of
the Fund. Written consents or waivers of the Trustees may be executed in one or
more counterparts. Execution of a written consent or waiver and delivery thereof
to the Fund may be accomplished by facsimile or other similar electronic
mechanism.
SECTION 4.05 CHAIRMAN OF THE TRUSTEES. The Trustees shall appoint one
of their number to be Chairman of the Board of Trustees. The Chairman shall
preside at all meetings of the Trustees, shall be responsible for the execution
of policies established by the Trustees and the administration of the Fund, and
may be (but is not required to be) the chief executive, financial and/or
accounting officer of the Fund.
SECTION 4.06 PRINCIPAL TRANSACTIONS. Except to the extent prohibited by
applicable law, the Trustees may, on behalf of the Fund, buy any securities from
or sell any securities to, or lend any assets of the Fund to, any Trustee or
officer of the Fund or any firm of which any such Trustee or officer is a member
acting as principal, or have any such dealings with any investment adviser,
administrator, distributor or transfer agent for the Fund or with any Interested
Person of such person; and the Fund may employ any such person, or firm or
company in which such person is an Interested Person, as broker, legal counsel,
registrar, investment adviser, administrator, distributor, transfer agent,
dividend disbursing agent, custodian or in any other capacity upon customary
terms.
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ARTICLE V
EXPENSES OF THE FUND
Subject to the provisions of Article II, Section 2.08 hereof, the
Trustees are authorized to pay or cause to be paid from the Fund estate or the
assets belonging to the appropriate Series, expenses and disbursements,
including, without limitation, interest charges, taxes, brokerage fees and
commissions; expenses of issue, repurchase and redemption of Shares; certain
insurance premiums; applicable fees, interest charges and expenses of third
parties, including the Fund's investment advisers, managers, administrators,
distributors, custodian, transfer agent and fund accountant; fees of pricing,
interest, dividend, credit and other reporting services; costs of membership in
trade associations; telecommunications expenses; funds transmission expenses;
auditing, legal and compliance expenses; costs of forming the Fund and
maintaining its existence; costs of preparing and printing the Fund's
prospectuses, statements of additional information and shareholder reports and
delivering them to existing Shareholders; expenses of meetings of Shareholders
and proxy solicitations therefor; costs of maintaining books and accounts; costs
of reproduction, stationery and supplies; fees and expenses of the Fund's
trustees; compensation of the Fund's officers and employees and costs of other
personnel performing services for the Fund; costs of Fundee meetings; Commission
registration fees and related expenses; state or foreign securities laws
registration fees and related expenses and for such non-recurring items as may
arise, including litigation to which the Fund (or a Trustee acting as such) is a
party, and for all losses and liabilities by them incurred in administering the
Fund, and for the payment of such expenses, disbursements, losses and
liabilities the Trustees shall have a lien on the assets belonging to the
appropriate Series, or in the case of an expense allocable to more than one
Series, on the assets of each such Series, prior to any rights or interests of
the Shareholders thereto. This section shall not preclude the Fund from directly
paying any of the aforementioned fees and expenses.
ARTICLE VI
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT
SECTION 6.01 INVESTMENT ADVISER. (a) The Trustees may in their
discretion, from time to time, enter into an investment advisory contract or
contracts with respect to the Fund or any Series whereby the other party or
parties to such contract or contracts shall undertake to furnish the Trustees
with such investment advisory, statistical and research facilities and services
and such other facilities and services, if any, all upon such terms and
conditions (including any Shareholder vote) that may be required under the
Investment Company Act, as may be prescribed in the Bylaws, or as the Trustees
may in their discretion determine (such terms and conditions not to be
inconsistent with the provisions of this Trust Instrument or of the Bylaws).
Notwithstanding any other provision of this Trust Instrument, the Trustees may
authorize any investment adviser (subject to such general or specific
instructions as the Trustees may from time to time adopt) to effect purchases,
sales or exchanges of portfolio securities, other investment instruments of the
Fund, or other Fund Property on behalf of the Trustees, or may authorize any
officer, agent, or Trustee to effect such purchases, sales or exchanges pursuant
to recommendations of the investment adviser (and all without further action by
the Trustees). Any such purchases, sales and exchanges shall be deemed to have
been authorized by all of the Trustees.
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(b) The Trustees may authorize the investment adviser to employ, from
time to time, one or more sub-advisers to perform such of the acts and services
of the investment adviser, and upon such terms and conditions, as may be agreed
upon between the investment adviser and sub- adviser (such terms and conditions
not to be inconsistent with the provisions of this Trust Instrument or of the
Bylaws). Any reference in this Trust Instrument to the investment adviser shall
be deemed to include such sub-advisers, unless the context otherwise requires;
provided that no Shareholder approval shall be required with respect to any
sub-adviser unless required under the Investment Company Act or other law,
contract or order applicable to the Fund.
SECTION 6.02 PRINCIPAL UNDERWRITER. The Trustees may in their
discretion from time to time enter into an exclusive or non-exclusive
underwriting contract or contracts providing for the sale of Shares, whereby the
Fund may either agree to sell Shares to the other party to the contract or
appoint such other party its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as may be prescribed in the
Bylaws and as the Trustees may in their discretion determine (such terms and
conditions not to be inconsistent with the provisions of this Trust Instrument
or of the Bylaws); and such contract may also provide for the repurchase or sale
of Shares by such other party as principal or as agent of the Fund.
SECTION 6.03 ADMINISTRATION. The Trustees may in their discretion from
time to time enter into one or more management or administrative contracts
whereby the other party or parties shall undertake to furnish the Trustees with
management or administrative services. The contract or contracts shall be on
such terms and conditions as may be prescribed in the Bylaws and as the Trustees
may in their discretion determine (such terms and conditions not to be
inconsistent with the provisions of this Trust Instrument or of the Bylaws).
SECTION 6.04 TRANSFER AGENT. The Trustees may in their discretion from
time to time enter into one or more transfer agency and shareholder service
contracts whereby the other party or parties shall undertake to furnish the
Trustees with transfer agency and shareholder services. The contract or
contracts shall be on such terms and conditions as may be prescribed in the
Bylaws and as the Trustees may in their discretion determine (such terms and
conditions not to be inconsistent with the provisions of this Trust Instrument
or of the Bylaws).
SECTION 6.05 PARTIES TO CONTRACT. Any contract of the character
described in Sections 6.01, 6.02, 6.03 and 6.04 of this Article VI or any
contract of the character described in Article VIII hereof may be entered into
with any corporation, firm, partnership, fund or association, although one or
more of the Trustees or officers of the Fund may be an officer, director,
trustee, shareholder, or member of such other party to the contract, and no such
contract shall be invalidated or rendered void or voidable by reason of the
existence of any relationship, nor shall any person holding such relationship be
disqualified from voting on or executing the same in his capacity as Shareholder
and/or Trustee, nor shall any person holding such relationship be liable merely
by reason of such relationship for any loss or expense to the Fund under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article VI or Article VIII hereof or of
the Bylaws. The same person (including a corporation, firm, partnership, fund,
or association) may be the other party to contracts entered into pursuant to
Sections 6.01, 6.02, 6.03 and 6.04 of this Article VI or pursuant to Article
VIII hereof and any
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individual may be financially interested or otherwise affiliated with persons
who are parties to any or all of the contracts mentioned in this Section 6.05.
SECTION 6.06 PROVISIONS AND AMENDMENTS. Any contract entered into
pursuant to Section 6.01 or 6.02 of this Article VI shall be consistent with and
subject to the requirements of Section 15 of the Investment Company Act, if
applicable, or other applicable Act of Congress hereafter enacted with respect
to its continuance in effect, its termination, and the method of authorization
and approval of such contract or renewal thereof, and no amendment to any
contract entered into pursuant to Section 6.01 of this Article VI shall be
effective unless assented to in a manner consistent with the requirements of
said Section 15, as modified by any applicable rule, regulation or order of the
Commission.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 7.01 VOTING POWERS. (a) The Shareholders shall have power to
vote only (a) for the election of Trustees to the extent provided in Article
III, Section 3.01 hereof, (b) for the removal of Trustees to the extent provided
in Article III, Section 3.03(d) hereof, (c) with respect to any investment
advisory contract to the extent provided in Article VI, Section 6.01 hereof, (d)
with respect to an amendment of this Trust Instrument, to the extent provided in
Article XI, Section 11.08, and (e) with respect to such additional matters
relating to the Fund as may be required by law, by this Trust Instrument, or any
registration of the Fund with the Commission or any State, or as the Trustees
may consider desirable.
(b) Notwithstanding paragraph (a) of this Section 7.01 or any other
provision of this Trust Instrument (including the Bylaws) which would by its
terms provide for or require a vote of Shareholders, the Trustees may take
action without a Shareholder vote if (i) the Trustees shall have obtained an
opinion of counsel that a vote or approval of such action by Shareholders is not
required under (A) the Investment Company Act or any other applicable laws, or
(B) any registrations, undertakings or agreements of the Fund known to such
counsel, and the Trustees determine in good faith that the taking of such action
without a Shareholder vote would be consistent with the best interests of the
Shareholders.
(c) On any matter submitted to a vote of the Shareholders, all Shares
shall be voted separately by individual Series, and whenever the Trustees
determine that the matter affects only certain Series, may be submitted for a
vote by only such Series, except (i) when required by the Investment Company
Act, Shares shall be voted in the aggregate and not by individual Series; and
(ii) when the Trustees have determined that the matter affects the interests of
more than one Series and that voting by shareholders of all Series would be
consistent with the Investment Company Act, then the Shareholders of all such
Series shall be entitled to vote thereon (either by individual Series or by
Shares voted in the aggregate, as the Trustees in their discretion may
determine). The Trustees may also determine that a matter affects only the
interests of one or more classes of a Series, in which case (or if required
under the Investment Company Act) such matter shall be voted on by such class or
classes. Each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote, and each fractional Share shall be entitled to a
proportionate fractional vote. There shall be no cumulative voting in the
election of Trustees. Shares may be
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voted in person or by proxy or in any manner provided for in the Bylaws. A proxy
may be given in writing. The Bylaws may provide that proxies may also, or may
instead, be given by any electronic or telecommunications device or in any other
manner. Notwithstanding anything else herein or in the Bylaws, in the event a
proposal by anyone other than the officers or Trustees of the Fund is submitted
to a vote of the Shareholders, or in the event of any proxy contest or proxy
solicitation or proposal in opposition to any proposal by the officers or
Trustees of the Fund, Shares may be voted only in person or by written proxy.
Until Shares are issued, the Trustees may exercise all rights of Shareholders
and may take any action required or permitted by law, this Trust Instrument or
any of the Bylaws of the Fund to be taken by Shareholders.
SECTION 7.02 MEETINGS. Meetings of Shareholders may be held within or
without the State of Delaware. Special meetings of the Shareholders of any
Series for the purpose of voting upon the removal of a Trustee or Trustees may
be called by the Trustees and shall be called by the Trustees upon the written
request of Shareholders owning at least one tenth of the Outstanding Shares of
the Fund entitled to vote. Whenever ten or more Shareholders meeting the
qualifications set forth in Section 16(c) of the Investment Company Act, as the
same may be amended from time to time, seek the opportunity of furnishing
materials to the other Shareholders with a view to obtaining signatures on such
a request for a meeting, the Trustees shall comply with the provisions of said
Section 16(c) with respect to providing such Shareholders access to the list of
the Shareholders of record of the Fund or the mailing of such materials to such
Shareholders of record, subject to any rights provided to the Fund or any
Trustees provided by said Section 16(c). Notice shall be sent, by First Class
Mail or such other means determined by the Trustees, at least 10 days prior to
any such meeting. Notwithstanding anything to the contrary in this Section 7.02,
the Trustees shall not be required to call a special meeting of the Shareholders
of any Series or to provide Shareholders seeking the opportunity of furnishing
the materials to other Shareholders with a view to obtaining signatures on a
request for a meeting except to the extent required under the Investment Company
Act.
SECTION 7.03 QUORUM AND REQUIRED VOTE. One-third of Shares outstanding
and entitled to vote in person or by proxy as of the record date for a
Shareholders' meeting shall be a quorum for the transaction of business at such
Shareholders' meeting, except that where any provision of law or of this Trust
Instrument permits or requires that holders of any Series shall vote as a Series
(or that holders of a class shall vote as a class), then one-third of the
aggregate number of Shares of that Series (or that class) entitled to vote shall
be necessary to constitute a quorum for the transaction of business by that
Series (or that class). Any meeting of Shareholders may be adjourned from time
to time by a majority of the votes properly cast upon the question of adjourning
a meeting to another date and time, whether or not a quorum is present. Any
adjourned session or sessions may be held, within a reasonable time after the
date set for the original meeting, without the necessity of further notice.
Except when a larger vote is required by law or by any provision of this Trust
Instrument or the Bylaws, a majority of the Shares voted in person or by proxy
at a meeting at which a quorum is present shall decide any questions and a
plurality shall elect a Trustee, provided that where any provision of law or of
this Trust Instrument permits or requires that the holders of any Series shall
vote as a Series (or that the holders of any class shall vote as a class), then
a majority of the Shares voted in person or by proxy at a meeting of that Series
(or class), at which a quorum is present shall decide that matter insofar as
that Series (or class) is concerned. Shareholders may act by unanimous written
consent, to the extent not inconsistent with the Investment Company Act, and any
such actions taken by
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a Series (or class) may be consented to unanimously in writing by Shareholders
of that Series (or class).
ARTICLE VIII
CUSTODIAN
SECTION 8.01 APPOINTMENT AND DUTIES. The Trustees shall employ a bank,
a company that is a member of a national securities exchange, or a fund company,
that in each case shall have capital, surplus and undivided profits of at least
twenty million dollars ($20,000,000) and that is a member of the Depository Fund
Company (or such other person or entity as may be permitted to act as custodian
of the Fund's assets under the Investment Company Act) as custodian with
authority as its agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in the Bylaws of the Fund: (a) to hold
the securities owned by the Fund and deliver the same upon written order or oral
order confirmed in writing; (b) to receive and receipt for any moneys due to the
Fund and deposit the same in its own banking department or elsewhere as the
Trustees may direct; and (c) to disburse such funds upon orders or vouchers.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a bank, a company that is a member of a
national securities exchange, or a fund company organized under the laws of the
United States or one of the states thereof and having capital, surplus and
undivided profits of at least twenty million dollars ($20,000,000) and that is a
member of the Depository Trust Company or such other person or entity as may be
permitted by the Commission or is otherwise able to act as custodian of the
Fund's assets in accordance with the Investment Company Act.
SECTION 8.02 CENTRAL CERTIFICATE SYSTEM. Subject to the Investment
Company Act and such other rules, regulations and orders as the Commission may
adopt, the Trustees may direct the custodian to deposit all or any part of the
securities owned by the Fund in a system for the central handling of securities
established by a national securities exchange or a national securities
association registered with the Commission under the Securities Exchange Act of
1934, as amended, or such other person as may be permitted by the Commission, or
otherwise in accordance with the Investment Company Act, pursuant to which
system all securities of any particular class or series of any issuer deposited
within the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities, provided that
all such deposits shall be subject to withdrawal only upon the order of the Fund
or its custodians, sub-custodians or other agents.
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ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
SECTION 9.01 DISTRIBUTIONS.
(a) The Trustees may from time to time declare and pay dividends or
other distributions with respect to any Series and/or class of a Series. The
amount of such dividends or distributions and the payment of them and whether
they are in cash or any other Fund Property shall be wholly in the discretion of
the Trustees.
(b) Dividends and other distributions may be paid or made to the
Shareholders of record at the time of declaring a dividend or other distribution
or among the Shareholders of record at such other date or time or dates or times
as the Trustees shall determine, which dividends or distributions, at the
election of the Trustees, may be paid pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as the Trustees
shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary notwithstanding,
the Trustees may at any time declare and distribute a share dividend to the
Shareholders of a particular Series, or class thereof, as of the record date of
that Series fixed as provided in Subsection 9.01(b) hereof.
SECTION 9.02 REDEMPTIONS. In case any holder of record of Shares of a
particular Series desires to dispose of his Shares or any portion thereof he may
deposit at the office of the transfer agent or other authorized agent of that
Series a written request or such other form of request as the Trustees may from
time to time authorize, requesting that the Series purchase the Shares in
accordance with this Section 9.02; and, subject to Section 9.04 hereof, the
Shareholder so requesting shall be entitled to require the Series to purchase,
and the Series or the principal underwriter of the Series shall purchase his
said Shares, but only at the Net Asset Value thereof (as described in Section
9.03 of this Article IX). The Series shall make payment for any such Shares to
be redeemed, as aforesaid, in cash or property from the assets of that Series
and, subject to Section 9.04 hereof, payment for such Shares shall be made by
the Series or the principal underwriter of the Series to the Shareholder of
record within seven (7) days after the date upon which the request is effective.
Upon redemption and unless otherwise determined by the Trustees shares shall
become Treasury shares and may be re-issued from time to time.
SECTION 9.03 DETERMINATION OF NET ASSET VALUE AND VALUATION OF
PORTFOLIO ASSETS. The term "Net Asset Value" of any Series shall mean that
amount by which the assets of that Series exceed its liabilities, all as
determined by or under the direction of the Trustees. The Trustees may delegate
any of their powers and duties under this Section 9.03 with respect to valuation
of assets and liabilities. Such value shall be determined separately for each
Series and shall be determined on such days and at such times as the Trustees
may determine. Such determination shall be made with respect to securities for
which market quotations are readily available, at the market value of such
securities; and with respect to other securities and assets, at the fair value
as determined in good faith by the Trustees; provided, however, that the
Trustees, without Shareholder approval, may alter the method of valuing
portfolio securities insofar as permitted under the Investment Company Act. The
resulting amount, which shall represent the total Net
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Asset Value of the particular Series, shall be divided by the total number of
shares of that Series outstanding at the time and the quotient so obtained shall
be the Net Asset Value per Share of that Series. At any time the Trustees may
cause the Net Asset Value per Share last determined to be determined again in
similar manner and may fix the time when such redetermined value shall become
effective.
The Trustees shall not be required to adopt, but may at any time adopt,
discontinue or amend a practice of seeking to maintain the Net Asset Value per
Share of the Series at a constant amount. If, for any reason, the net income of
any Series, determined at any time, is a negative amount, the Trustees shall
have the power with respect to that Series (a) to offset each Shareholder's pro
rata share of such negative amount from the accrued dividend account of such
Shareholder, (b) to reduce the number of Outstanding Shares of such Series by
reducing the number of Shares in the account of each Shareholder by a pro rata
portion of that number of full and fractional Shares which represents the amount
of such excess negative net income, (c) to cause to be recorded on the books of
such Series an asset account in the amount of such negative net income (provided
that the same shall thereupon become the property of such Series with respect to
such Series and shall not be paid to any Shareholder), which account may be
reduced by the amount of dividends declared thereafter upon the Outstanding
Shares of such Series on the day such negative net income is experienced, until
such asset account is reduced to zero; (d) to combine the methods described in
clauses (a) and (b) and (c) of this sentence; or (e) to take any other action
they deem appropriate, in order to cause (or in order to assist in causing) the
Net Asset Value per Share of such Series to remain at a constant amount per
Outstanding Share immediately after each such determination and declaration. The
Trustees shall also have the power not to declare a dividend out of net income
for the purpose of causing the Net Asset Value per Share to be increased.
In the event that any Series is divided into classes, the provisions of
this Section 9.03, to the extent applicable as determined in the discretion of
the Trustees and consistent with the Investment Company Act and other applicable
law, may be equally applied to each such class.
SECTION 9.04 SUSPENSION OF THE RIGHT OF REDEMPTION. The Trustees may
declare a suspension of the right of redemption or postpone the date of payment
if permitted under the Investment Company Act. Such suspension shall take effect
at such time as the Trustees shall specify but not later than the close of
business on the business day next following the declaration of suspension, and
thereafter there shall be no right of redemption or payment until the Trustees
shall declare the suspension at an end. In the case of a suspension of the right
of redemption, a Shareholder may either withdraw his request for redemption or
receive payment based on the Net Asset Value per Share next determined after the
termination of the suspension.
SECTION 9.05 REDEMPTION OF SHARES IN ORDER TO QUALIFY AS REGULATED
INVESTMENT COMPANY. If the Trustees shall, at any time and in good faith, be of
the opinion that direct or indirect ownership of Shares of any Series has or may
become concentrated in any Person to an extent which would disqualify any Series
as a regulated investment company under the Internal Revenue Code, then the
Trustees shall have the power (but not the obligation) by lot or other means
deemed equitable by them (a) to call for redemption by any such person of a
number, or principal amount, of Shares sufficient to maintain or bring the
direct or indirect ownership of Shares into conformity with the requirements for
such qualification and (b) to refuse to transfer or issue Shares to any person
whose acquisition of Shares in question would result in such disqualification.
The redemption shall be effected at the redemption price and in the manner
provided in this Article IX.
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The holders of Shares shall upon demand disclose to the Trustees in
writing such information with respect to direct and indirect ownership of Shares
as the Trustees deem necessary to comply with the requirements of any taxing
authority or this Section 9.05.
SECTION 9.06 REDEMPTION OF SMALL ACCOUNTS. Subject to the
requirements of the Investment Company Act, the Trustees may cause the Fund to
redeem, at the price and in the manner provided in this Article IX, Shares of
any Series or class of a Series held by any Shareholder (i) if such Shareholder
is no longer qualified to hold such Shares in accordance with such
qualifications as may be established by the Trustees, (ii) if the net asset
value of such Shares is below $500 or such other amount as determined by the
Trustees or (iii) if otherwise deemed by the Trustees to be in the best interest
of the Fund or that particular Series (or class) as a whole.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
SECTION 10.01 LIMITATION OF LIABILITY. Neither a Trustee nor an officer
of the Fund, when acting in such capacity, shall be personally liable to any
person other than the Fund or the Shareholders for any act, omission or
obligation of the Fund, any Trustee or any officer of the Fund. Neither a
Trustee nor an officer of the Fund shall be liable for any act or omission or
any conduct whatsoever in his capacity as Trustee or as an officer of the Fund,
provided that nothing contained herein or in the Delaware Act shall protect any
Trustee or any officer of the Fund against any liability to the Fund or to
Shareholders 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 the office of Trustee or officer of the Fund
hereunder.
SECTION 10.02 INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in Subsection
10.02(b):
(i) every person who is, or has been, a Trustee or officer of
the Fund (hereinafter referred to as a "Covered Person") shall be
indemnified by the Fund to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him
in connection with any claim, action, suit or proceeding in which he
becomes involved as a party or otherwise by virtue of his being or
having been a Trustee or officer and against amounts paid or incurred
by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened while in
office or thereafter, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts
paid in settlement, fines, penalties and other liabilities.
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(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Fund or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office or (B) not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Fund; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, (A) by the court or other
body approving the settlement; (B) by at least a majority of those
Trustees who are neither Interested Persons of the Fund nor are parties
to the matter based upon a review of readily available facts (as
opposed to a full trial-type inquiry); or (C) by written opinion of
independent legal counsel based upon a review of readily available
facts (as opposed to a full trial-type inquiry).
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Fund, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a person who has ceased to be a
Covered Person and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Fund personnel, other than Covered Persons,
and other persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
Subsection (a) of this Section 10.02 may be paid by the Fund or Series from time
to time prior to final disposition thereof upon receipt of an undertaking by or
on behalf of such Covered Person that such amount will be paid over by him to
the Fund or Series if it is ultimately determined that he is not entitled to
indemnification under this Section 10.02; provided, however, that either (i)
such Covered Person shall have provided appropriate security for such
undertaking, (ii) the Fund is insured against losses arising out of any such
advance payments or (iii) either a majority of the Trustees who are neither
Interested Persons of the Fund nor parties to the matter, or independent legal
counsel in a written opinion, shall have determined, based upon a review of
readily available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such Covered Person will be
found entitled to indemnification under this Section 10.02.
SECTION 10.03 SHAREHOLDERS. In case any Shareholder of any Series shall
be held to be personally liable solely by reason of his being or having been a
Shareholder of such Series and not because of his acts or omissions or for some
other reason, the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives, or, in the case of a corporation
or other entity, its corporate or other general successor) shall be entitled out
of the assets belonging to the applicable Series to be held harmless from and
indemnified against all loss and expense arising from such liability. The Fund,
on behalf of the affected Series, shall, upon request by the Shareholder, assume
the defense of any claim made against the Shareholder
20
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for any act or obligation of the Series and satisfy any judgment thereon from
the assets of the Series.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 FUND NOT A PARTNERSHIP. It is hereby expressly declared
that a fund and not a partnership is created hereby. No Trustee hereunder shall
have any power to bind personally either the Fund officers or any Shareholder.
All persons extending credit to, contracting with or having any claim against
the Fund or the Trustees shall look only to the assets of the appropriate Series
or (if the Trustees shall have yet to have established Series) of the Fund for
payment under such credit, contract or claim; and neither the Shareholders nor
the Trustees, nor any of their agents, whether past, present or future, shall be
personally liable therefor. Nothing in this Trust Instrument shall protect a
Trustee against any liability to the Fund or a Shareholder to which the Trustee
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee hereunder.
SECTION 11.02 TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR
SURETY. The exercise by the Trustees or the officers of the Fund of their powers
and discretion hereunder in good faith and with reasonable care under the
circumstances then prevailing shall be binding upon everyone interested. Subject
to the provisions of Article X hereof and to Section 11.01 of this Article XI,
the Trustees and the officers of the Fund shall not be liable for errors of
judgment or mistakes of fact or law. The Trustees and the officers of the Fund
may take advice of counsel or other experts with respect to the meaning and
operation of this Trust Instrument, and subject to the provisions of Article X
hereof and Section 11.01 of this Article XI, shall be under no liability for any
act or omission in accordance with such advice or for failing to follow such
advice. The Trustees and the officers of the Fund shall not be required to give
any bond as such, nor any surety if a bond is obtained.
SECTION 11.03 ESTABLISHMENT OF RECORD DATES. The Trustees may close the
Share transfer books of the Fund for a period not exceeding sixty (60) days
preceding the date of any meeting of Shareholders, or the date for the payment
of any dividends or other distributions, or the date for the allotment of
rights, or the date when any change or conversion or exchange of Shares shall go
into effect; or in lieu of closing the stock transfer books as aforesaid, the
Trustees may fix in advance a date, not exceeding sixty (60) days preceding the
date of any meeting of Shareholders, or the date for payment of any dividend or
other distribution, or the date for the allotment of rights, or the date when
any change or conversion or exchange of Shares shall go into effect, as a record
date for the determination of the Shareholders entitled to notice of, and to
vote at, any such meeting, or entitled to receive payment of any such dividend
or other distribution, or to any such allotment of rights, or to exercise the
rights in respect of any such change, conversion or exchange of Shares, and in
such case such Shareholders and only such Shareholders as shall be Shareholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting, or to receive payment of such dividend or other distribution,
or to receive such allotment or rights, or to exercise such rights, as the case
may be, notwithstanding any transfer of any Shares on the books of the Fund
after any such record date fixed as aforesaid.
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SECTION 11.04 TERMINATION OF FUND.
(a) This Fund shall continue without limitation of time but subject to
the provisions of Subsection 11.04(b).
(b) The Trustees may, subject to any necessary Shareholder, Trustee,
and regulatory approvals:
(i) sell and convey all or substantially all of the assets of
the Trust or any affected Series to another fund, partnership,
association or corporation, or to a separate series of shares thereof,
organized under the laws of any state which fund, partnership,
association or corporation is an open-end management investment company
as defined in the Investment Company Act, or is a series thereof, for
adequate consideration which may include the assumption of all
outstanding obligations, taxes and other liabilities, accrued or
contingent, of the Fund or any affected Series, and which may include
shares of beneficial interest, stock or other ownership interests of
such fund, partnership, association or corporation or of a series
thereof;
(ii) enter into a plan of liquidation in order to terminate
and liquidate any Series (or class) of the Fund, or the Fund; or
(iii) at any time sell and convert into money all of the
assets of the Fund or any affected Series.
Upon making reasonable provision, in the determination of the Trustees, for the
payment of all liabilities by assumption or otherwise, the Trustees shall
distribute the remaining proceeds or assets (as the case may be) of each Series
(or class) ratably among the holders of Shares of the affected Series, based
upon the ratio that each Shareholder's Shares bears to the number of Shares of
such Series (or class) then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in Subsection 11.04(b), the Fund or any
affected Series shall terminate and the Trustees and the Fund shall be
discharged of any and all further liabilities and duties hereunder and the
right, title and interest of all parties with respect to the Fund or Series
shall be cancelled and discharged.
Upon termination of the Fund, following completion of winding up of its
business, the Trustees shall cause a certificate of cancellation of the Fund's
certificate of fund to be filed in accordance with the Delaware Act, which
certificate of cancellation may be signed by any one Trustee.
SECTION 11.05 REORGANIZATION.
(a) Notwithstanding anything else herein, the Trustees, in order to
change the form or jurisdiction of organization of the Fund, may (i) cause the
Fund to merge or consolidate with or into one or more funds, partnerships
(general or limited), associations or corporations so long as the surviving or
resulting entity is an open-end management investment company under the
22
<PAGE>
Investment Company Act, or is a series thereof, that will succeed to or assume
the Fund's registration under that Act and which is formed, organized or
existing under the laws of a state, commonwealth, possession or colony of the
United States or (ii) cause the Fund to incorporate under the laws of Delaware.
(b) The Trustees may, subject to a vote of a majority of the Trustees
and any shareholder vote required under the Investment Company Act, if any,
cause the Fund to merge or consolidate with or into one or more Funds,
partnerships (general or limited), associations, limited liability companies or
corporations formed, organized or existing under the laws of a state,
commonwealth, possession or colony of the United States.
(c) Any agreement of merger or consolidation or certificate of merger
or consolidation may be signed by a majority of Trustees and facsimile
signatures conveyed by electronic or telecommunication means shall be valid.
(d) Pursuant to and in accordance with the provisions of Section
3815(f) of the Delaware Act, and notwithstanding anything to the contrary
contained in this Trust Instrument, an agreement of merger or consolidation
approved by the Trustees in accordance with paragraph (a) or (b) this Section
11.05 may effect any amendment to the Trust Instrument or effect the adoption of
a new fund instrument of the Fund if it is the surviving or resulting fund in
the merger or consolidation.
SECTION 11.06 FILING OF COPIES, REFERENCES, HEADINGS. The original or a
copy of this Trust Instrument and of each amendment hereof or Trust Instrument
supplemental hereto shall be kept at the office of the Fund where it may be
inspected by any Shareholder. Anyone dealing with the Fund may rely on a
certificate by an officer or Trustee of the Fund as to whether or not any such
amendments or supplements have been made and as to any matters in connection
with the Fund hereunder, and with the same effect as if it were the original,
may rely on a copy certified by an officer or Trustee of the Fund to be a copy
of this Trust Instrument or of any such amendment or supplemental Trust
Instrument. In this Trust Instrument or in any such amendment or supplemental
Trust Instrument, references to this Trust Instrument, and all expressions such
as "herein," "hereof" and "hereunder," shall be deemed to refer to this Trust
Instrument as amended or affected by any such supplemental Trust Instrument. All
expressions such as "his," "he" and "him," shall be deemed to include the
feminine and neuter, as well as masculine, genders. Headings are placed herein
for convenience of reference only and in case of any conflict, the text of this
Trust Instrument, rather than the headings, shall control. This Trust Instrument
may be executed in any number of counterparts each of which shall be deemed an
original.
SECTION 11.07 APPLICABLE LAW. The fund set forth in this instrument is
made in the State of Delaware, and the Fund and this Trust Instrument, and the
rights and obligations of the Trustees and Shareholders hereunder, are to be
governed by and construed and administered according to the Delaware Act and the
laws of said State; provided, however, that there shall not be applicable to the
Fund, the Trustees or this Trust Instrument (a) the provisions of Section 3540
of Title 12 of the Delaware Code or (b) any provisions of the laws (statutory or
common) of the State of Delaware (other than the Delaware Act) pertaining to
funds which relate to or regulate (i) the filing with any court or governmental
body or agency of trustee accounts or schedules of
23
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trustee fees and charges, (ii) affirmative requirements to post bonds for
trustees, officers, agents or employees of a fund, (iii) the necessity for
obtaining court or other governmental approval concerning the acquisition,
holding or disposition of real or personal property, (iv) fees or other sums
payable to trustees, officers, agents or employees of a fund, (v) the allocation
of receipts and expenditures to income or principal, (vi) restrictions or
limitations on the permissible nature, amount or concentration of fund
investments or requirements relating to the titling, storage or other manner of
holding of fund assets, or (vii) the establishment of fiduciary or other
standards of responsibilities or limitations on the acts or powers of trustees,
which are inconsistent with the limitations or liabilities or authorities and
powers of the Trustees set forth or referenced in this Trust Instrument. The
Fund shall be of the type commonly called a "business fund," and without
limiting the provisions hereof, the Fund may exercise all powers which are
ordinarily exercised by such a fund under Delaware law. The Fund specifically
reserves the right to exercise any of the powers or privileges afforded to funds
or actions that may be engaged in by funds under the Delaware Act, and the
absence of a specific reference herein to any such power, privilege or action
shall not imply that the Fund may not exercise such power or privilege or take
such actions.
SECTION 11.08 AMENDMENTS. Except as specifically provided herein, the
Trustees may, without shareholder vote, amend or otherwise supplement this Trust
Instrument by making an amendment, a Trust Instrument supplemental hereto or an
amended and restated fund instrument. Shareholders shall have the right to vote
(a) on any amendment as may be required by law or by the Fund's registration
statement filed with the Commission and (b) on any amendment submitted to them
by the Trustees. Any amendment required or permitted to be submitted to
Shareholders which, as the Trustees determine, shall affect the Shareholders of
one or more Series shall be authorized by vote of the Shareholders of each
Series affected and no vote of shareholders of a Series not affected shall be
required. Notwithstanding any other provision of this Trust Instrument, any
amendment to Article X hereof shall not limit the rights to indemnification or
insurance provided therein with respect to action or omission of Covered Persons
prior to such amendment.
SECTION 11.09 FISCAL YEAR. The fiscal year of the Fund shall end on a
specified date as set forth in the Bylaws, provided, however, that the Trustees
may change the fiscal year of the Fund.
SECTION 11.10 NAME RESERVATION. The Trustees on behalf of the Fund
acknowledge that E.I.I. Realty Securities, Inc. has licensed to the Fund the
non-exclusive right to use the words "E.I.I." as part of the name of the Fund
and has reserved the right to grant the non-exclusive use of the words "E.I.I."
or any derivative thereof to any other party. In addition, E.I.I. Realty
Securities, Inc. reserves the right to grant the non-exclusive use of the words
"E.I.I." to, and to withdraw such right from, any other business or other
enterprise. E.I.I. Realty Securities, Inc. reserves the right to withdraw from
the Fund the right to use the words "E.I.I." and will withdraw such right if
the Fund ceases to employ, for any reason, E.I.I. Realty Securities, Inc., an
affiliate, or any successor as adviser of the Fund.
24
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SECTION 11.11 PROVISIONS IN CONFLICT WITH LAW. The provisions of this
Trust Instrument are severable, and if the Trustees shall determine, with the
advice of counsel, that any of such provisions is in conflict with the
Investment Company Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Trust Instrument; provided, however, that such determination shall not affect
any of the remaining provisions of this Trust Instrument or render invalid or
improper any action taken or omitted prior to such determination. If any
provision of this Trust Instrument shall be held invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall attach only to such
provision in such jurisdiction and shall not in any matter affect such provision
in any other jurisdiction or any other provision of this Trust Instrument in any
jurisdiction.
IN WITNESS WHEREOF, the undersigned, being the initial Trustees of the
Fund, have executed this instrument as of date first written above.
/s/Susan J. Penry-Williams
--------------------------
Susan J. Penry-Williams, as Trustee
and not individually
/s/Peter J. O'Rourke
--------------------------
Peter J. O'Rourke, as Trustee
and not individually
25
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SCHEDULE A
The EII Realty Securities Fund
26
Kramer, Levin, Naftalis & Frankel
919 THIRD AVENUE
NEW YORK, N.Y. 10022 - 3852
(212) 715 - 9100
Arthur H. Aufses III Monica C. Lord Sherwin Kamin
Thomas D. Balliett Richard Marlin Arthur B. Kramer
Jay G. Baris Thomas Moers Mayer Maurice N. Nessen
Philip Bentley Thomas E. Molner Founding Partners
Saul E. Burian Thomas H. Moreland Counsel
Barry Michael Cass Ellen R. Nadler _____
Thomas E. Constance Gary P. Naftalis
Michael J. Dell Michael J. Nassau Martin Balsam
Kenneth H. Eckstein Michael S. Nelson Joshua M. Berman
Charlotte M. Fischman Jay A. Neveloff Jules Buchwald
David S. Frankel Michael S. Oberman Rudolph de Winter
Marvin E. Frankel Paul S. Pearlman Meyer Eisenberg
Alan R. Friedman Susan J. Penry-Williams Arthur D. Emil
Carl Frischling Bruce Rabb Maria T. Jones
Mark J. Headley Allan E. Reznick Maxwell M. Rabb
Robert M. Heller Scott S. Rosenblum James Schreiber
Philip S. Kaufman Michele D. Ross Counsel
Peter S. Kolevzon Howard J. Rothman _____
Kenneth P. Kopelman Max J. Schwartz
Michael Paul Korotkin Mark B. Segall M. Frances Buchinsky
Shari K. Krouner Judith Singer Abbe L. Dienstag
Kevin B. Leblang Howard A. Sobel Ronald S. Greenberg
David P. Levin Jeffrey S. Trachtman Debora K. Grobman
Ezra G. Levin Jonathan M. Wagner Christian S. Herzeca
Randy Lipsitz Harold P. Weinberger Jane Lee
Larry M. Loeb E. Lisk Wyckoff, Jr. Pinchas Mendelson
Lynn R. Saidenberg
Special Counsel
-----
FAX
(212) 715-8000
---
WRITER'S DIRECT NUMBER
(212)715-9100
-------------
February 10, 1998
E.I.I. Realty Securities Fund
667 Madison Avenue
New York, New York 10021
Re: E.I.I. Realty Securities Fund
-----------------------------
Dear Madam/Sir:
We hereby consent to the reference to our firm as Counsel in this
Registration Statement on Form N-1A.
Very truly yours,
/s/ Kramer Levin, Naftalis & Frankel
------------------------------------
INDEPENDENT AUDITOR'S CONSENT
We consent to the reference to our firm under the caption "Independent Auditors"
in the Prospectus of The E.I.I. Realty Securities Fund.
/s/ERNST & YOUNG LLP
--------------------
ERNST & YOUNG LLP
New York, New York
February 10, 1998
