File No. 333- 45959
ICA No. 811-08649
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 5, 1998
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 2 [X]
Post-Effective Amendment No.
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 2
E.I.I. REALTY SECURITIES TRUST
(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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E.I.I. REALTY SECURITIES TRUST
E.I.I. REALTY SECURITIES FUND
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
under the Securities Act of 1933
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Item Number
Form N-1A
Part A Prospectus Caption
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<S> <C>
1. Cover Page Cover Page; Introduction
2. Synopsis Fund Expenses
3. Condensed Financial Information Inapplicable
4. General Description of Registrant Introduction; Investment Objective and Policies;
Investment Philosophy; Investment Policies;
Investment Strategies; Risk Factors; 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 Inapplicable
Performance
6. Capital Stock and Other Securities Investing with E.I.I.; Dividends, Distributions
and Taxes; Important Information About Taxes;
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
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E.I.I. REALTY SECURITIES TRUST
E.I.I. REALTY SECURITIES FUND
CROSS REFERENCE SHEET
Item Number
Form N-1A Statement of Additional
Part B Information Caption
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10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History General Information
13. Investment Objectives and Policies Investment Policies and Risks
14. Management of the Fund Management
15. Control Persons and Principal Management
Holders of Securities
16. Investment Advisory and Other Investment Adviser and Investment Advisory
Services Agreements; Distribution Plan; Shareholder
Servicing Plan; 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 Computation of Net Asset Value;
of Securities Being Offered Purchase and Redemption of Shares
20. Tax Status Tax Matters
21. Underwriters Distribution Plan
21. Calculation of Performance Data Performance 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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E.I.I. REALTY SECURITIES FUND
Prospectus
June __, 1998
Institutional Shares
Adviser Shares
Investor Shares
(888) 323-8912
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>
Table of Contents
FUND EXPENSES................................................................2
INTRODUCTION.................................................................3
FUND DESCRIPTION.............................................................5
SECURITIES IN WHICH THE FUND INVESTS.........................................7
RISK FACTORS.................................................................8
OTHER INFORMATION ABOUT THE FUND............................................10
INVESTING WITH E.I.I........................................................12
THE ORGANIZATION, MANAGEMENT, AND SERVICE PROVIDERS OF THE FUND.............14
ADDITIONAL INFORMATION......................................................15
OTHER SECURITIES IN WHICH THE FUND MAY INVEST AND INVESTMENT TECHNIQUES.....16
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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%
</TABLE>
*After fee waiver. Without the fee waiver, the Administration Fee for the
Institutional Shares would have been 0.25%. **Long-term shareholders may pay
more than the economic equivalent of the maximum front-end sales loads permitted
by the National Association of Securities Dealers.
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 $10 $14 $21
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3 Years $32 $43 $66
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INTRODUCTION
This prospectus describes the E.I.I. Realty Securities Fund (the "Fund"), a
series of the E.I.I. Realty Securities Trust. 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 (888) 323-8912. 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
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. ("E.I.I."), the Fund's investment adviser,
believes that investments in real estate offer a total return potential which
may serve as an effective portfolio diversifier for many investors. In addition,
E.I.I. 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 Diversification of risk of 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
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WHY E.I.I.? E.I.I. 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 more than
300 basis points on an annualized basis, before fees. The collective client base
of E.I.I. 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 all of the real estate
accounts managed by E.I.I. and European Investors Incorporated, which have
substantially the same investment objective as the Fund. E.I.I. manages domestic
accounts and European Investors Incorporated manages offshore accounts using the
same personnel and philosophy. The data, calculated on an average annual total
return basis, is provided to illustrate E.I.I.'s past performance in managing
accounts in accordance with the same investment objective, policies, and
strategies 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 June o, 1998, the Fund had not commenced investment
operations and therefore did not have a performance record of its own.
PAST PERFORMANCE OF ALL REAL ESTATE SECURITIES ACCOUNTS OF E.I.I.
REALTY SECURITIES (E.I.I.) & EUROPEAN INVESTORS INCORPORATED
REAL ESTATE SECURITIES COMPOSITE AS OF DECEMBER 31, 1997
<TABLE>
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STANDARD
ANNUAL RETURNS THROUGH DECEMBER 31, 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 DEVIATION
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
E.I.I. Composite* 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 Securities 24.18% 2.37% -33.46% 20.03% 7.40% 15.23% 1.64% 13.65% 36.87% 19.80% 18.79%
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%
CUMULATIVE RETURNS 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
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E.I.I. Composite* 13.06% 26.73% 11.92% 50.41% 79.50% 114.68% 128.70% 167.71% 263.53% 344.04%
Wilshire Real Estate Securities 24.18% 27.12% -15.41% 1.54% 9.05% 25.66% 27.73% 45.16% 98.68% 138.01%
Index
NAREIT Equity Index 13.49% 23.52% 4.56% 41.88% 62.58% 94.54% 100.70% 131.34% 212.93% 276.33%
CUMULATIVE SUMMARY
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1 YEAR 3 YEAR 5 YEAR 10 YEAR
E.I.I. Composite* 22.15% 94.20% 147.40% 344.00%
Wilshire Real Estate Securities 19.80% 86.35% 137.17% 138.01%
Index
NAREIT Equity Index 20.26% 87.51% 131.84% 276.33%
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*The above performance is calculated on a time weighted basis by geometrically
linking each quarter in the year and is shown net of fees. This method of
calculation differs from the SEC method. These accounts were not subject to the
restrictions and diversification requirements of the Investment Company Act of
1940, as amended, or the restrictions and diversification requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended. However, these
accounts historically have been run in a manner that would have been in
compliance with these restrictions and requirements but for the fact that income
was predominantly reinvested rather than distributed as required by Subchapter
M. If the accounts had been subject to these restrictions and requirements, the
returns might have been adversely affected.
4
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[Chart comparing performance of E.I.I., Wilshire Real Estate Securities Index,
and 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 E.I.I. and European Investors Incorporated 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.
FUND DESCRIPTION
Investment Philosophy
E.I.I.'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, E.I.I. 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
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 a company's
revenues are derived from such real estate activities or at least 50% of the
fair market value of a company's 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.) of real estate companies
o Real estate related fixed-income securities (such as convertible
debentures, unsecured debentures, mortgage backed securities, etc.)
The Fund also may invest:
5
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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 Strategies
E.I.I.'s investment process employs a combination of a "top-down," macro level
analysis by its Investment Committee, together with rigorous "bottom-up,"
fundamental securities and real estate research and analysis on individual
companies by its analyst team.
Investment Committee Decision Process:
E.I.I.'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:
E.I.I.'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.
E.I.I.'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
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 E.I.I.'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 E.I.I. E.I.I.
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. E.I.I. 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. E.I.I. 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
6
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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.
E.I.I. and European Investors Incorporated collectively have a diversified
client base that includes investors in twelve countries, encompassing taxable
and tax-exempt investors, individuals, and institutions, including over 60
domestic institutional investors. As of December 31, 1997, the combined
companies have approximately $1.6 billion invested in real estate securities on
behalf of clients. They also manage several offshore real estate investment
funds with assets of approximately $300 million.
Portfolio Management Personnel
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RICHARD J. ADLER is a Managing Director of E.I.I. Mr. Adler serves as investment
strategist for E.I.I. 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 E.I.I. 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
E.I.I. since the inception of its real estate securities investment management
business in 1987. Prior to joining E.I.I., 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 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 E.I.I. 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 E.I.I. since February, 1994. Prior to joining E.I.I., 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 a substantial portion 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
substantially all 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
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corporate level income tax. However, unlike a partnership, a REIT cannot pass
its tax losses through to its investors.
REITs are characterized as equity REITs, mortgage REITs, and hybrid REITs.
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The Fund will invest predominantly in equity REITs. 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 securities 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 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.
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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.
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.
INFLATIONRISK 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.
9
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OTHER INFORMATION ABOUT THE FUND
Diversification Requirements.
- -----------------------------
The SEC and IRS have certain requirements 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 also may
appear in various publications. 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 (888) 323-8912.
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 investment in the Fund today.
Past performance does not guarantee future results. You may obtain the current
30-day yield by calling (888) 323-8912. Shareholder Servicing representatives
are available from 8:00 a.m. to 6:00 p.m. Eastern time Monday through Friday.
Share Price
- -----------
The Fund's daily share price, called its net asset value (the "NAV") 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.
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<PAGE>
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 (888) 323-8912.
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.
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 exempt 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 Generally, any gain or loss from a sale (redemption) of shares of the
Fund must be recognized for tax purposes. This gain or loss generally
will be long-term capital gain or loss if you held your shares of the
Fund for more than one year. If you are an individual, your long-term
capital gain will be taxed
11
<PAGE>
at the lowest rate applicable to capital gains if you held your shares
for more than 18 months at the time of the sale or redemption.
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 E.I.I.
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
E.I.I. in E.I.I.'s sole discretion.
ADVISER SHARES. The minimum investment for Adviser Shares is $100,000. Employees
and officers of E.I.I. 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 or wire transfer. 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 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
12
<PAGE>
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.
SYSTEMATIC WITHDRAWAL PLAN
To enroll in the Systematic Withdrawal Plan, you should check this box on the
Account Application. This option permits investors to request withdrawal of a
specified dollar amount (minimum of $500) on either a monthly, quarterly, or
annual basis. We will need your bank account information and the amount and
frequency of your withdrawal. You should attach a voided personal check or
savings account deposit slip so the proper information can be obtained.
RETIREMENT PLANS
You can use the Fund as part of your retirement portfolio. Please contact 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 (888) 323-8912.
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 E.I.I., 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.
BY ACH A redemption will be transferred by ACH as long as the transfer is to a
domestic bank.
13
<PAGE>
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:
E.I.I. Realty Securities Fund
c/o PFPC
P.O. Box 8910
Wilmington, DE 19899-8910
o Overnight Mail Address
Use the following address ONLY for overnight packages:
E.I.I. Realty Securities Fund
c/o PFPC
400 Bellevue Parkway, Suite 108
Wilmington, DE 19809-3710
o Wiring Instructions
The Transfer Agent does not charge a wire fee, but your originating bank
may charge a fee. Always call the Transfer Agent at (888) 323-8912 BEFORE
wiring funds to obtain a control number.
PNC Bank, N.A.
Philadelphia, PA
ABA # 0310-0005-3
Credit DDA # 86-0195-6004
For credit to E.I.I. Realty Securities Fund
Shareholder Name___________________________
Account No.________________________________
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. Currently, there is no fee for ACH transfers.
THE ORGANIZATION, MANAGEMENT, AND SERVICE PROVIDERS OF THE FUND
Organization of the Fund
The Fund is a series of the E.I.I. Realty Securities Trust, 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
The Board of Trustees consists of Richard J. Adler, David P. O'Connor, Warren K.
Greene, Richard W. Hutson, and Samuel R. Karetsky. Mr. Adler is the Chairman of
the Board of Trustees and Mr. O'Connor is the President and Treasurer of the
Fund. Mr. Adler and Mr. O'Connor are Managing Directors of E.I.I. Mr. Greene is
a Senior Vice President of TrendLogic Associates, Inc., a registered investment
adviser and commodity trading advisor, and was formerly the president of the
American Investors family of no-load mutual funds. Mr. Hutson is retired from
Hewitt Associates, an international human resources consulting firm, where he
was a senior principal. Mr. Karetsky is an asset management consultant and was
formerly a managing director of Morgan Stanley Global Asset Management.
14
<PAGE>
Investment Adviser and Administrator
- ------------------------------------
E.I.I. is the Fund's investment adviser. The investment adviser manages the
Fund's business and investment activities. E.I.I. also serves as the Fund's
administrator, for which it 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.
E.I.I. may subcontract some of its administrative duties to other service
providers. E.I.I. has entered into a sub-administration contract with PFPC Inc.
under which E.I.I. pays PFPC Inc. to provide certain administrative services to
E.I.I.
The Sub-Administrator, Transfer Agent, and Custodian
- ----------------------------------------------------
PFPC Inc., a subsidiary of PNC Bank, N.A., is the Fund's sub-administrator and
transfer agent. PNC Bank, N.A. is the Fund's custodian.
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.
Shareholder Servicing
- ---------------------
The Fund has adopted a Shareholder Servicing Plan for the Adviser Shares and the
Investor Shares. Under the Shareholder Servicing Plan, the Adviser will provide
shareholder services to its clients that invest in the Fund. The Fund also may
enter into shareholder service agreements pursuant to which a shareholder
servicing agent other than the Adviser performs shareholder services for its
customers who are shareholders of the Fund. In both instances, such services may
include 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 Adviser or 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.
Distribution Plan
- -----------------
Under Rule 12b-1 of the Investment Company Act, the Fund has adopted a
Distribution and Service Plan for the Investor Shares, pursuant to which the
Fund may pay up to 0.75% of the average daily net assets of the Investor Shares
for distribution assistance.
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 (888) 323-8912. 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
- --------------
E.I.I. 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
15
<PAGE>
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.
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.
16
<PAGE>
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. E.I.I. will determine the liquidity of Rule 144A
securities under the supervision of the Fund's Board of Trustees. The liquidity
of Rule 144A securities will be monitored by E.I.I., 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.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
June _, 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 E.I.I. Realty
Securities Fund c/o PFPC Inc., P.O. Box 8910, Wilmington, DE 19899-8910 or
calling (888) 323-8912.
This Statement of Additional Information relates to the E.I.I.
Realty Securities Fund Prospectus which is dated June _, 1998.
TABLE OF CONTENTS
PAGE
INVESTMENT POLICIES AND RISKS................................................ 2
INVESTMENT RESTRICTIONS...................................................... 3
MANAGEMENT................................................................... 4
INVESTMENT ADVISER AND INVESTMENT ADVISORY AGREEMENTS........................ 5
DISTRIBUTION PLAN............................................................ 6
SHAREHOLDER SERVICING PLAN................................................... 7
ADMINISTRATIVE SERVICES AGREEMENT............................................ 7
PORTFOLIO TRANSACTIONS AND BROKERAGE......................................... 8
ALLOCATION OF INVESTMENTS.................................................... 8
COMPUTATION OF NET ASSET VALUE............................................... 9
PURCHASE AND REDEMPTION OF SHARES............................................ 9
TAX MATTERS.................................................................. 9
PERFORMANCE CALCULATION......................................................14
GENERAL INFORMATION..........................................................15
REPORTS......................................................................16
<PAGE>
E.I.I. Realty Securities Trust (the "Trust") is a Delaware
business trust currently consisting of one series, E.I.I. Realty Securities 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 Fund's 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, 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, if 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 the total
assets of the Fund, (iii) securities issued by such investment
company and all
- 3 -
<PAGE>
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 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.
<TABLE>
<CAPTION>
Position(s) held Principal Occupation
Name, Address, and Age with the Fund During Past 5 Years
- ---------------------- ------------- -------------------
<S> <C> <C>
Richard J. Adler, Chairman of the Managing Director, E.I.I. Realty
667 Madison Avenue, Board of Trustees, Securities, Inc., June, 1993 to present;
New York, NY 10021, Chief Executive Managing Director, European Investors
51 Officer Incorporated and Vice President,
European Investors Corporate Finance,
Inc., April, 1983 to present.
David P. O'Connor Trustee, President, Managing Director, E.I.I. Realty
667 Madison Avenue, Treasurer Securities, Inc. and Vice President,
New York, NY 10021, European Investors Incorporated,
34 February, 1994 to present; Investment
Executive, Kidder, Peabody, and Co.,
Inc., 1992 to January, 1994
- 4 -
<PAGE>
Warren K. Greene, Trustee Senior Vice President,
One Fawcett Place, Suite 220 TrendLogic Associates, Inc.
Greenwich, CT 06830, January, 1995 to present; President,
62 Baker Weeks & Co., October, 1993 to
June, 1994.
Richard W. Hutson Trustee Retired/Part-time consultant to Hewitt
615 Innsbruck Court, Associates; November, 1996 to present;
Libertyville, IL 60048, Senior Principal, Hewitt Associates,
59 December, 1964 to October, 1996.
Samuel R. Karetsky, Trustee Managing Member, Samuel R. Karetsky
180 East 79th Street, LLC, March, 1997 to present;
New York, NY 10021, Managing Director, Morgan Stanley &
53 Co., June, 1995 to March, 1997;
Managing Director, OFFITBANK,
January, 1993 to June, 1995.
Cydney C. Donnell Vice President Managing Director, E.I.I. Realty
667 Madison Avenue, Securities, Inc., June, 1993 to present;
New York, NY 10021, Vice President, European Investors
39 Incorporated, and Vice President, EII
Realty Corp., September, 1986 to
present.
Peter J. Gavey Secretary Director of Business Development,
667 Madison Avenue, E.I.I. Realty Securities, Inc. February,
New York, NY 10021, 1998 to present; Director Rogers, Casey
31 Alternative Investments, May, 1993 to
February, 1998.
</TABLE>
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.
As of June 5, 1998, the Trustees and officers as a group did
not own beneficially any of the Fund's outstanding shares. Each disinterested
Trustee will receive $4,000 per annum and $1,500 per meeting, plus expenses of
attendance at Trustees meetings. "Interested" Trustees do not receive Trustees'
fees.
- 5 -
<PAGE>
INVESTMENT ADVISER AND INVESTMENT ADVISORY AGREEMENTS
E.I.I. Realty Securities, Inc. (the "Investment Adviser" or
"E.I.I."), 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.
DISTRIBUTION PLAN
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
- 6 -
<PAGE>
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.
SHAREHOLDER SERVICING PLAN
The Fund has adopted a Shareholder Servicing Plan on behalf of
its Advisor Shares and Investor Shares. The Plan provides that the Fund may pay
financial institutions or other persons who provide certain services to the
Shares of the Fund (each, a "Service Provider") a shareholder services fee at
the annual rate of 0.25% of the average daily net assets of such Shares for
which the Service Provider provides services. Under the Plan, Service Providers
may make payments to financial institutions and other persons who provide
administrative services to their customers who may own Advisor or Investor
Shares of the Fund, which services may include, but are not limited to: (i)
establishing and maintaining accounts and records relating to shareholders; (ii)
processing dividend and distribution payments from the Fund on behalf of
shareholders; and (iii) responding to shareholder inquiries.
The Plan must be approved by a majority vote of the Board of
Trustees cast in person at a meeting called for the purpose of voting on the
Plan. The Plan will continue for two years from its effective date and from
year-to-year thereafter provided it is approved at least annually by the
Trustees of the Fund.
ADMINISTRATIVE SERVICES AGREEMENT
E.I.I. will serve as the Fund's Administrator and has retained
PFPC, Inc. 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) E.I.I. and its
affiliates. For these services and facilities, E.I.I. 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 E.I.I., and not the Fund,
pays the Sub- Administrator.
- 7 -
<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.
- 8 -
<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.
TAX MATTERS
The following is only a summary of certain additional federal
income 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 will elect 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, the Fund will not be 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)
for a taxable year 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 the Fund made during the taxable year or, under specified
circumstances, within twelve months after the close of the taxable year, will be
considered distributions
- 9 -
<PAGE>
of income and gains of the taxable year and will, therefore, count towards
satisfaction of the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a
regulated investment company must 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 Fund also 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 the 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 (limited, for this purpose, in respect of any one issuer to no
more than 5% of the value of the Fund's total assets and to no 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 (other than U.S.
Government securities and securities of other regulated investment companies) of
any one issuer or of two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses. Generally, an option with
respect to a security is treated as issued by the issuer of the security rather
than the issuer of the option.
If for any taxable year the 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 to the extent that it fails to distribute in each calendar
year an amount equal to 98% of its ordinary income for such calendar year and
98% of its 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
(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
- 10 -
<PAGE>
the excise tax. However, investors should note that the Fund may in certain
circumstances be required to liquidate portfolio investments to make sufficient
distributions to avoid excise tax liability.
Fund Distributions
Distributions by the Fund from net investment income and net
short-term capital gains are taxable to shareholders as ordinary income. To the
extent attributable to qualifying dividends received by the Fund, ordinary
income dividends may 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). However, because
distributions received by the Fund from real estate investment trusts ("REITs")
are not qualifying dividends, distributions by the Fund generally will not be
eligible for the dividends-received deduction. In addition, 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) 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 in substantially similar or related property; or (3) to the extent
that the stock on which the dividend is paid is treated as debt-financed under
the rules of Code section 246A. The 46-day holding period must be satisfied
during the 90-day period beginning 45 days prior to each applicable ex-dividend
date; the 91-day holding period must be satisfied during the 180-day period
beginning 90 days before each applicable ex-dividend date. 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).
Alternative minimum tax ("AMT") is imposed in addition to, but
only to the extent that 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 generally will 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.
Distributions by the Fund from net long-term capital gains are
taxable to a shareholder as long-term capital gains regardless of the length of
time the shares on which such distributions are paid have been held by the
shareholder. However, shareholders should note that any loss realized upon 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 any distribution of long-term capital
gain to the shareholder with respect to such shares.
- 11 -
<PAGE>
If the 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.
Distributions by the 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 the 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. 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 the Fund 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
the 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 the 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.
Backup Withholding
The Fund will be required in certain cases to withhold and
remit to the Internal Revenue Service 31% of ordinary income dividends and
capital gain dividends and the proceeds of redemption of shares paid to any
shareholder (1) who failed to provide to the Fund a correct taxpayer
identification number, (2) who is subject to backup withholding for failure to
report properly the receipt of interest or dividend income, 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."
Redemption of Shares
A shareholder will recognize gain or loss on the redemption of
shares of the Fund in an amount equal to the difference between the proceeds of
the redemption and the shareholder's adjusted tax basis in the shares redeemed.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within 30 days before or after the
redemption. In general, any gain or loss arising from (or treated as arising
from) the redemption of shares of the 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. Long-term capital gain recognized by an individual
shareholder will be taxed at the lowest rates applicable to capital gains if the
holder has held such shares for more than 18 months at the time
- 12 -
<PAGE>
of the redemption. Any capital loss arising from the 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.
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.
Taxation of Certain Mortgage REITs
The Fund may invest in REITs that hold residual interests in
real estate mortgage investment conduits ("REMICs"). Under Treasury Regulations
that have not yet been issued, but may apply retroactively, the portion of the
Fund's income from a REIT that is attributable to the REIT's residual interest
in a REMIC (referred to in the Code as an "excess inclusion") will be allocated
to shareholders of the Fund in proportion to the dividends received by them with
the same consequences as if the shareholders held their proportionate share of
the REMIC residual interest directly. In general, excess inclusion income
allocated to shareholders (1) cannot be offset by net operating losses (subject
to a limited exception for certain thrift institutions) and (2) will constitute
unrelated business taxable income to entities that are subject to tax on
unrelated business income (including a qualified pension plan, an individual
retirement account, a 401(k) plan, a Keogh plan, or other tax-exempt entity),
thereby potentially requiring such entity to file a federal income tax return
and remit tax on its excess inclusion income. In addition, if at any time during
any taxable year a "disqualified organization" (as defined in the Code) is a
record holder of a share in the Fund, then the Fund will be subject to tax, at
the highest federal income tax rate imposed on corporations, on that portion of
its excess inclusion income for the taxable year that is allocable to the
disqualified organization.
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 whether the income from
the Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
If the income from the Fund is not effectively connected with
a U.S. trade or business carried on by a foreign shareholder, ordinary income
dividends paid to such foreign shareholder will be subject to U.S. withholding
tax at the rate of 30% (or lower applicable treaty rate) upon the gross amount
of the dividend. Such foreign shareholder generally would be exempt from U.S.
federal income tax on gains realized on the sale of shares of the Fund, capital
gain dividends, and amounts retained by the Fund that are designated as
undistributed capital gains.
If the income from the Fund is (or is treated as) 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. If at least
50% of the value of the Fund is represented by shares of REITs that are
"domestically controlled" within the meaning of section 897(h) of the Code or is
represented by shares of classes of REIT stock that (1) constitute not more than
5% of such classes and (2) are "regularly traded on an established securities
market" within the meaning of section 897(c)(3) of the Code, a foreign
shareholder should not be subject to withholding tax under the Foreign
Investment in Real Property Tax Act ("FIRPTA") with respect to gain arising from
the sale or redemption of shares. In addition, foreign shareholders should not
be subject to withholding under FIRPTA on distributions of the Fund's net
capital gain (designated as capital gain by the Fund).
- 13 -
<PAGE>
In the case of foreign shareholders other than corporations,
the Fund may be required to withhold U.S. federal income tax at a rate of 31% on
distributions and the proceeds of redemptions 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 the 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.
Rules of state and local taxation of ordinary income dividends
and capital gain dividends from regulated investment companies may 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.
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.
- 14 -
<PAGE>
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 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
- 15 -
<PAGE>
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
annual financial statements that have been audited by the Fund's independent
auditors.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholder and Board of Trustees
E.I.I. Realty Securities Fund
We have audited the accompanying statement of assets and liabilities of E.I.I.
Realty Securities Fund (the "Fund"), a series of the E.I.I. Realty Securities
Trust, as of May 11, 1998. This statement of assets and liabilities is the
responsibility of the Fund's management. Our responsibility is to express an
opinion on this statement of assets and liabilities based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material aspects, the financial position of E.I.I.
Realty Securities Fund at May 11, 1998, in conformity with generally accepted
accounting principles.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
New York, New York
June 1, 1998
<PAGE>
FINANCIAL STATEMENT
E.I.I. Realty Securities Trust
Statement of Assets and Liabilities
May 11, 1998
E.I.I. Realty
Securities Fund
---------------
Assets:
Cash.................................................. $100,000
Deferred organization expenses (Note 1)............... 182,799
-------
Total Assets....................................... 282,799
-------
Liabilities:
Organization expenses payable (Note 1)................ 182,799
-------
Net Assets: $100,000
=======
Net Assets:
Common Stock, $0.01 par value,
unlimited shares authorized;
10,000 shares (Institutional
Class) issued and outstanding ........................ $ 100
Capital surplus....................................... 99,900
--------
Net Assets............................................ $100,000
=======
Net Asset value per share............................. $ 10.00
========
NOTE 1
E.I.I. Realty Securities Trust was incorporated in the State of
Delaware on December 22, 1997 and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company. E.I.I. Realty
Securities Trust may offer one or more portfolios of its shares; at present only
shares of E.I.I. Realty Securities Fund (the "Fund") are being offered. The Fund
may offer three classes of shares; Institutional, Adviser and Investor. Shares
of all classes represent equal pro-rata interests in the Fund, except that each
class will bear different expenses which will reflect the difference in the
range of services to be provided to them.
<PAGE>
Costs incurred and to be incurred in connection with the organization
of E.I.I. Realty Securities Trust and the Fund will be paid or advanced by E.I.I
Realty Securities, Inc. and reimbursed by the Fund over a period of not more
than five years. Organizational costs will be deferred and amortized on a
straight line basis over a period not to exceed five years from the commencement
of the Fund's operations. If any of the 10,000 initial shares (the "Initial
Shares") of the Fund are redeemed by a holder thereof during the amortization
period, the redemption proceeds will be reduced by the pro-rata share of the
unamortized organizational expenses in the same ratio as the number of Initial
Shares being redeemed bears to the number of Initial Shares outstanding at the
time of redemption. As of May 11, 1998, the Fund has had no operations other
than the sale to E.I.I. Realty Securities, Inc. of 10,000 Institutional Shares
for $100,000 on May 11, 1998.
NOTE 2
The Fund has entered into an Investment Advisory Agreement with E.I.I.
Realty Securities, Inc. (the "Adviser" or "E.I.I.") for day-to-day portfolio
management services to be provided by the Adviser. The Investment Advisory
Agreement provides for the Adviser to receive a fee calculated daily and payable
monthly at an annual rate of 0.75% of the Fund's average daily net assets. The
Investment Advisory Agreement will initially be effective for a two-year period
and thereafter will be approved on an annual basis.
E.I.I. will also provide administrative services to the Fund. Under the
Administrative Services Agreement, E.I.I. will receive a fee payable monthly at
an annual rate of 0.25% of the Fund's average daily net assets for the Adviser
and Investor Share Classes and reduced to 0.15% for the Institutional Share
Class. E.I.I. has entered into a sub-administration contract with PFPC Inc.
under which E.I.I. pays PFPC Inc. to provide certain administrative services to
E.I.I.
The Fund has also adopted a Distribution and Service Plan for the
Investor Share Class under which the Fund may pay up to 0.75% of the average
daily net assets of the Investor Share Class for distribution assistance.
The Fund has adopted a Shareholder Servicing Plan for the Adviser and
Investor Share Classes. Under the Shareholder Servicing Plan, the Adviser will
provide shareholder services to its clients that invest in the Fund. The Fund
may also enter into shareholder service agreements pursuant to which a
shareholder servicing agent other than the Adviser performs shareholder services
for its customers who are shareholders of the Fund. 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 Adviser or the agent (collectively,
the "Shareholder Servicing Agents"). Shareholder Servicing Agents may waive all
or a portion of their fee periodically.
<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: Statement of Assets and Liabilities
as of May 11, 1998
In Part C: None.
(b) Exhibits
EX-99.B1(a) Corrected Certificate of Trust as of December 22, 1997. (2)
EX-99.B1(b) Trust Instrument.(2)
EX-99.B2 By-Laws.(2)
EX-99.B3 None.
EX-99.B4 None.
EX-99.B5 Investment Advisory Agreement between Registrant and
E.I.I. Realty Securities, Inc.(3)
EX-99.B6 None.
EX-99.B7 None.
EX-99.B8 Custodian Services Agreement between PNC Bank,
National Association and Registrant.(3)
EX-99.B9(a) Administration Agreement between Registrant and
E.I.I. Realty Securities, Inc.(3)
EX-99.B9(b) Sub-Administration Agreement and Accounting Services
Agreement between European Investors Incorporated, the
Registrant and PFPC INC.(3)
- -------------------
(1) Filed as an Exhibit to Registrant's Registration Statement on Form N-1A
on February 10, 1998, accession number 0000922423-98-000122
(2) Filed as an Exhibit to Pre-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A on May 6, 1998, accession number
0000922423-98-000453.
(3) Filed herewith.
<PAGE>
EX-99.B9(c) Transfer Agency Services Agreement between PFPC INC.
and Registrant.(3)
EX-99.B9(d) Shareholder Servicing Plan, with Form of Shareholder
Servicing Agreement for the Investor Shares and Adviser
Shares of the Registrant.(3)
EX-99.B10 Opinion of Kramer, Levin, Naftalis & Frankel.(3)
EX-99.B11(a) Consent of Kramer, Levin, Naftalis & Frankel, Counsel for
the Registrant.(3)
EX-99.B11(b) Consent of Ernst & Young LLP, independent auditors for the
Registrant.(3)
EX-99.B12 None.
EX-99.B13 Investment letter re: initial $100,000 capital.(3)
EX-99.B14 None.
EX-99.B15 Distribution Plan pursuant to Rule 12b-1, with Form of
Shareholder Servicing Agreement and Form of Selected-Dealer
Agreement, for the Investor Shares of Registrant.(3)
EX-99.B16 None.
EX-99.B17 Not applicable.
EX-99.B18 Rule 18f-3 Multiple Class Plan.(3)
EX-99.B19 Powers of Attorney of Warren K. Greene, Richard W. Hutson,
and Samuel R. Karetsky.(2)
- --------------------
(1) Filed as an Exhibit to Registrant's Registration Statement on Form N-1A
on February 10, 1998, accession number 0000922423-98-000122.
(2) Filed as an Exhibit to Pre-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A on May 6, 1998, accession number
0000922423-98-000453.
(3) Filed herewith.
ITEM 25. Persons Controlled By or Under Common Control with Registrant
None.
- 2 -
<PAGE>
ITEM 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of June 4, 1998
- -------------- ------------------------
Shares of beneficial interest
E.I.I. Realty Securities Fund
($.001 par value)
Institutional Shares 1
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 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).
- 3 -
<PAGE>
(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."
ITEM 28. Business and Other Connections of Investment Adviser
Registrant is fulfilling the requirement of this Item 28 to provide a
list of the officers and directors of E.I.I. Realty Securities, Inc. ("E.I.I."),
the investment adviser of the Registrant, together with information as to any
other business, profession, vocation or employment of a substantial nature
engaged in by E.I.I. or those of its officers and directors during the past two
years, by incorporating by reference the information contained in the Form ADV
filed with the SEC pursuant to the Investment Advisers Act of 1940 by E.I.I.
(SEC File No. 801-44099).
ITEM 29. Principal Underwriters
(a) None.
(b) The following information is furnished with respect to the officers
and partners of E.I.I. Realty Securities, 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 Chairman of the Board
David P. O'Connor Managing Director Trustee, President and
Treasurer
Cydney C. Donnell Managing Director Vice President
(c) Not Applicable. The Registrant's principal underwriter is an
affiliated person of the Registrant.
- 4 -
<PAGE>
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 Securities, 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 Securities, 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.
- 5 -
<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
Pre-Effective Amendment No. 1 to the 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 5th day of June, 1998.
E.I.I. REALTY SECURITIES FUND
(Registrant)
By:/s/ Richard J. Adler
--------------------
Richard J. Adler, Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 5th day of June, 1998.
SIGNATURE TITLE
/s/Richard J. Adler Chairman of the Board and
- ------------------- Chief Executive Officer
Richard J. Adler
/s/David P. O'Connor President and Treasurer
- --------------------
David P. O'Connor
/s/Warren K. Greene Trustee
- -------------------
Warren K. Greene
/s/Richard W. Hutson Trustee
- --------------------
Richard W. Hutson
/s/Samuel R. Karetsky Trustee
- ---------------------
Samuel R. Karetsky
<PAGE>
INDEX TO EXHIBITS
Exhibit Caption
- ------- -------
EX-99.B5 Investment Advisory Agreement between Registrant and
E.I.I. Realty Securities, Inc.
EX-99.B8 Custodian Services Agreement between PNC Bank,
National Association and Registrant
EX-99.B9(a) Administration Agreement between Registrant and
E.I.I. Realty Securities, Inc.
EX-99.B9(b) Sub-Administration Agreement and Accounting Services
Agreement between European Investors Incorporated, the
Registrant and PFPC INC.
EX-99.B9(c) Transfer Agency Services Agreement between PFPC INC.
and Registrant
EX-99.B9(d) Shareholder Servicing Plan, with Form of Shareholder
Servicing Agreement, for the Investor Shares and Adviser
Shares of the Registrant
EX-99.B10 Opinion of Kramer, Levin, Naftalis & Frankel
EX-99.B11(a) Consent of Kramer, Levin, Naftalis & Frankel, Counsel for
the Registrant
EX-99.B11(b) Consent of Ernst & Young LLP, independent auditors for the
Registrant
EX-99.B13 Investment letter re: initial $100,000 capital.
EX-99.B15 Distribution Plan pursuant to Rule 12b-1, with Form of
Shareholder Servicing Agreement and Form of Selected-Dealer
Agreement, for the Investor Shares of Registrant.
EX-99.B18 Rule 18f-3 Multiple Class Plan
INVESTMENT ADVISORY AGREEMENT
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INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this 4th day of June, 1998 by and between the
E.I.I. REALTY SECURITIES TRUST, a Delaware business trust (the "Trust"), on
behalf of the E.I.I. REALTY SECURITIES FUND (the "Fund"), and E.I.I. REALTY
SECURITIES, INC., a Delaware corporation (the "Investment Adviser");
W I T N E S S E T H
WHEREAS, the Trust is registered as an open-end, non-diversified
management investment company under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), and the rules and regulations
promulgated thereunder; and
WHEREAS, the Investment Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Investment Advisers
Act"), and engages in the business of acting as an investment adviser; and
WHEREAS, the Trust and the Investment Adviser desire to enter into an
agreement to provide for the management of the assets of the Fund on the terms
and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Management. The Investment Adviser shall act as investment adviser
for the Fund and shall, in such capacity, supervise the investment and
reinvestment of the cash, securities or other properties comprising the Fund's
assets, subject at all times to the policies and control of the Trust's Board of
Trustees. The Investment Adviser shall give the Fund the benefit of its best
judgment, efforts and facilities in rendering its services as investment
adviser.
2. Duties of Investment Advisor. In carrying out its obligation under
paragraph 1 hereof, the Investment Adviser shall:
(a) provide the Board of Trustees of the Trust on a regular basis
with financial reports and analyses on the Fund's operations and the operations
of comparable investment companies;
(b) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally or the Fund, and whether
concerning the individual issuers whose securities are included in the Fund or
the activities in which they engage, or with respect to securities which the
Investment Adviser considers desirable for inclusion in the Fund;
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(c) determine what issuers and securities shall be represented in
the Fund's portfolio and regularly report them to the Board of Trustees of the
Trust;
(d) formulate and implement continuing programs for the purchases
and sales of the securities of such issuers and regularly report thereon to the
Board of Trustees of the Trust; and
(e) take, on behalf of the Fund, all actions which appear to the
Fund necessary to carry into effect such purchase and sale programs as
aforesaid, including the placing of orders for the purchase and sale of
portfolio securities.
3. Broker-Dealer Relationships. The Investment Adviser is responsible
for decisions to buy and sell securities for the Fund, broker-dealer selection,
and negotiation of brokerage commission rates. The Investment Adviser's primary
consideration in effecting a security transaction will be execution at a price
that is reasonable and fair compared to the commission, fee or other
remuneration received or to be received by other brokers in connection with
comparable transactions, including similar securities being purchased or sold on
a securities exchange during a comparable period of time.
In selecting abroker-dealer 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-dealer; the size of and difficulty in executing the order; and the value
of the expected contribution of the broker-dealer to the investment performance
of the Fund on a continuing basis. Accordingly, the price to the Fund in any
transaction may be less favorable than that available from another broker-dealer
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 created by this Agreement or
otherwise solely by reason of its having caused the Fund to pay a broker or
dealer that provides brokerage and 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 or dealer would
have charged for effecting that transaction, if the Investment Adviser
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Investment Adviser's overall responsibilities with respect to the Fund. The
Investment Adviser is further authorized to allocate the orders placed by it on
behalf of the Fund to such brokers and dealers 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 of the Trust indicating the
brokers to whom such allocations have been made and the basis therefor.
4. Control by Board of Trustees. Any investment program undertaken by
the Investment Adviser pursuant to this Agreement, as well as any other
activities undertaken by the Investment Adviser on behalf of the Fund pursuant
thereto, shall at all times be subject to any directives of the Board of
Trustees of the Trust.
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5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Investment Adviser shall at all times
conform to:
(a) all applicable provisions of the Investment Company Act and
the Investment Advisers Act and any rules and regulations adopted thereunder as
amended; and
(b) the provisions of the Registration Statements of the Fund
under the Securities Act of 1933, as amended, and the Investment Company Act;
and
(c)the provisions of the Agreement and Declaration of Trust of the
Trust, as amended; and
(d) the provisions of the By-laws of the Trust, as amended; and
(e)any other applicable provisions of state and federal law.
6. Expenses. The expenses connected with the Fund shall be allocable
between the Fund and the Investment Adviser as follows:
(a)The Investment Adviser shall bear the expenses connected with
carrying out its obligations under this Agreement.
(b) The Investment Adviser shall further maintain, at its expense
and without cost to the Fund, a trading function in order to carry out its
obligations under subparagraph (e) of paragraph 2 hereof to place orders for the
purchase and sale of portfolio securities for the Fund.
(c) Nothing in subparagraph (a) hereof shall be construed to
require the Investment Adviser to bear:
(i) any of the costs (including applicable office space,
facilities and equipment) of the services of a principal financial
officer of the Fund whose normal duties consist of maintaining the
financial accounts and books and records of the Fund; including the
reviewing of calculations of net asset value and preparing tax
returns; or
(ii) any of the costs (including applicable office space,
facilities and equipment) of the services of any of the personnel
operating under the direction of such principal financial officer.
Notwithstanding the obligation of the Fund to bear the expense of the
functions referred to in clauses (i) and (ii) of this subparagraph
(c), the Investment Adviser may pay the salaries, including any
applicable employment or payroll taxes and other salary costs, of the
principal financial officer and other personnel carrying out such
functions and the Fund shall reimburse the Investment Adviser therefor
upon proper accounting.
(d) All of the ordinary business expenses incurred in the
operations of the Fund and the offering of its shares shall be borne by the Fund
unless specifically provided otherwise in this paragraph 6. These expenses
include but are not limited to brokerage commissions, legal, auditing, taxes or
governmental fees, the cost of preparing share certificates, custodian,
depository, transfer and shareholder service agent costs, expenses of issue,
sale, redemption and repurchase of shares, expenses of registering and
qualifying shares for sale, insurance premiums on property or personnel
(including officers and trustees if available) of the Fund which inure to its
benefit, expenses relating to trustee and shareholder meetings, the cost of
preparing and distributing reports and notices to
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shareholders, the fees and other expenses incurred by the Fund in connection
with membership in investment company organizations and the cost of printing
copies of prospectuses and statements of additional information distributed to
shareholders.
7. Delegation of Responsibilities. The Investment Adviser, with the
consent of the Board of Trustees, may delegate the performance of certain
investment advisory services to a subadviser as permitted under the Investment
Company Act.
8. Compensation. The Fund shall pay the Investment Adviser in full
compensation for services rendered hereunder an annual investment advisory fee,
payable monthly, of 0.75% of the Fund's average daily net assets. The average
daily net asset value of the Fund shall be determined in the manner set forth in
the Registration Statement of the Fund.
9. Name. The Fund hereby acknowledges that any and all rights in or to
the name "E.I.I." which exist on the date of this Agreement or which may arise
hereafter are, and under any and all circumstances shall continue to be, the
sole property of the Investment Adviser; that the Investment Adviser may assign
any or all of such rights to another party or to parties without the consent of
the Fund; and that the Investment Adviser may permit other parties, including
other investment companies, to use the term "E.I.I." in their names. If the
Investment Adviser, or its assignee as the case may be, ceases to serve as an
adviser to the Fund, the Fund hereby agrees to take promptly any and all actions
which are necessary or desirable to change its name and the name of the Fund so
as to delete the term "E.I.I.".
10. Non-Exclusivity. The services of the Investment Adviser to the Fund
are not to be deemed to be exclusive, and the Investment Adviser shall be free
to render investment advisory or other services to others (including other
investment companies) and to engage in other activities. It is understood and
agreed that officers of the Investment Adviser may serve as officers or trustees
of the Trust, and that officers or trustees of the Trust may serve as officers
of the Investment Adviser to the extent permitted by law; and that the officers
of the Investment Adviser are not prohibited from engaging in any other business
activity or from rendering services to any other person, or from serving as
partners or officers of any other firm or corporation, including other
investment companies.
11. Term and Approval. This Agreement shall become effective at the
close of business on the date hereof and shall remain in force and effect for
two years and thereafter from year to year, provided that such continuance is
specifically approved at least annually:
(a) (i) by the Trust's Board of Trustees or (ii) by the vote
of a majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the Investment Company Act); and
(b) (i) by the affirmative vote of a majority of the Trustees
who are not parties to this Agreement or interested persons of a party to this
Agreement (other than as Trust trustees), by votes cast in person at a meeting
specifically called for such purpose.
12. Termination. This Agreement may be terminated at any time, without
the payment of any penalty, by vote of the Trust's Board of Trustees or by vote
of a majority of
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the Fund's outstanding voting securities, or by the Investment Adviser, on sixty
(60) days' written notice to the other party. The notice provided for herein may
be waived by either party. This Agreement shall automatically terminate in the
event of its assignment, the term "assignment" for the purpose having the
meaning defined in Section 2(a)(4) of the Investment Company Act.
13. Liability of Investment Adviser and Indemnification. In the absence
of willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Investment Adviser or any of
its officers, directors or employees, it shall not be subject to liability to
the Fund or to any shareholder of the Fund for any omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
14. Liability of Trustees and Shareholders. A copy of the Agreement and
Declaration of Trust of the Trust is on file with the Secretary of The State of
Delaware, and notice is hereby given that this instrument is executed on behalf
of the trustees of the Trust as trustees and not individually and that the
obligations of this instrument are not binding upon any of the trustees or
shareholders individually but are binding only upon the assets and property of
the Trust.
15. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Trust
and that of the Investment Adviser shall be 667 Madison Avenue, New York, New
York 10021.
16. Questions of Interpretation. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the Investment Company Act shall be resolved by
reference to such term or provision of the Act and to interpretations thereof,
if any, by the United States Courts or in the absence of any controlling
decision of any such court, by rules, regulations or orders of the Securities
and Exchange Commission issued pursuant to said Act. In addition, where the
effect of a requirement of the Investment Company Act reflected in any provision
of this Agreement is released by rules, regulation or order of the Securities
and Exchange Commission, such provision shall be deemed to incorporate the
effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
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E.I.I. REALTY SECURITIES TRUST, on
behalf of the E.I.I. Realty Securities Fund
By: /s/ Richard J. Adler
-----------------------------------------
Chairman of the Board and Chief Executive
Officer
Attest:
/s/ David P. O'Connor
- ---------------------
President
E.I.I. REALTY SECURITIES, INC.
By: /s/ Richard J. Adler
-----------------------------------------
Managing Director
Attest:
/s/ David P. O'Connor
- ---------------------
Managing Director
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AGREEMENT
CUSTODIAN SERVICES AGREEMENT
THIS AGREEMENT is made as of June 4, 1998 by and between PNC BANK,
NATIONAL ASSOCIATION, a national banking association ("PNC Bank"), and E.I.I.
Realty Securities Trust, a Delaware business trust (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PNC Bank to provide custodian
services, and PNC Bank wishes to furnish custodian services, either directly or
through an affiliate or affiliates, as more fully described herein.
NOW, THEREFORE, In consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(c) "Authorized Person" means any officer of the Fund and any
other person duly authorized by the Fund's Board of Trustees to give Oral
Instructions and Written Instructions on behalf of the Fund and listed on the
Authorized Persons Appendix attached hereto and made a part hereof or any
amendment thereto as may be received by PNC Bank. An Authorized Person's scope
of authority may be limited by the Fund by setting forth such limitation in the
Authorized
<PAGE>
Persons Appendix.
(d) "Book-Entry System" means Federal Reserve Treasury book-entry
system for United States and federal agency securities, its successor or
successors, and its nominee or nominees and any book-entry system maintained by
an exchange registered with the SEC under the 1934 Act.
(e) "CEA" means the Commodities Exchange Act, as amended.
(f) "Oral Instructions" mean oral instructions received by PNC
Bank from an Authorized Person or from a person reasonably believed by PNC Bank
to be an Authorized Person.
(g) "PNC Bank" means PNC Bank, National Association or a
subsidiary or affiliate of PNC Bank, National Association.
(h) "SEC" means the Securities and Exchange Commission.
(i) "Securities Laws" mean the 1933 Act, the 1934 Act, the 1940
Act and the CEA.
(j) "Shares" mean the shares of beneficial interest of any series
or class of the Fund.
(k) "Property" means:
(i) any and all securities and other investment items which the
Fund may from time to time deposit, or cause to be
deposited, with PNC Bank or which PNC Bank may from time to
time hold for the Fund;
(ii) all income in respect of any of such securities or other
investment items;
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(iii) all proceeds of the sale of any of such securities
or investment items; and
(iv) all proceeds of the sale of securities issued by the
Fund, which are received by PNC Bank from time to
time, from or on behalf of the Fund.
(l) "Written Instructions" mean written instructions signed by
two Authorized Persons and received by PNC Bank. The instructions may be
delivered by hand, mail, tested telegram, cable, telex or facsimile sending
device.
2. APPOINTMENT. The Fund hereby appoints PNC Bank to provide custodian
services to the Fund, on behalf of each of its investment portfolios (each, a
"Portfolio"), and PNC Bank accepts such appointment and agrees to furnish such
services.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable,
will provide PNC Bank with the following:
(a) certified or authenticated copies of the resolutions of the
Fund's Board of Trustees, approving the appointment of PNC
Bank or its affiliates to provide services;
(b) a copy of the Fund's most recent effective registration
statement;
(c) a copy of each Portfolio's advisory agreements;
(d) a copy of the distribution agreement with respect to each
class of Shares;
(e) a copy of each Portfolio's administration agreement if PNC
Bank is not providing the Portfolio with such services;
(f) copies of any shareholder servicing agreements made in
respect of the Fund or a Portfolio; and
(g) certified or authenticated copies of any and all amendments
or supplements to the foregoing.
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4. COMPLIANCE WITH LAWS.
PNC Bank undertakes to comply with all applicable requirements of the
Securities Laws and any laws, rules and regulations of governmental authorities
having jurisdiction with respect to the duties to be performed by PNC Bank
hereunder. Except as specifically set forth herein, PNC Bank assumes no
responsibility for such compliance by the Fund or any Portfolio.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PNC Bank
shall act only upon Oral Instructions and Written Instructions.
(b) PNC Bank shall be entitled to rely upon any Oral
Instructions and Written Instructions it receives from an Authorized Person (or
from a person reasonably believed by PNC Bank to be an Authorized Person)
pursuant to this Agreement. PNC Bank may assume that any Oral Instructions or
Written Instructions received hereunder are not in any way inconsistent with the
provisions of organizational documents of the Fund or of any vote, resolution or
proceeding of the Fund's Board of Trustees or of the Fund's shareholders, unless
and until PNC Bank receives Written Instructions to the contrary.
(c) The Fund agrees to forward to PNC Bank Written
Instructions confirming Oral Instructions (except where such Oral Instructions
are given by PNC Bank or its affiliates) so that PNC Bank receives the Written
Instructions by the close of business on the same day that such Oral
Instructions are received. The fact that such confirming Written Instructions
are not received by PNC Bank shall in no way invalidate the transactions or
enforceability of the transactions authorized by the Oral Instructions. Where
Oral Instructions or Written Instructions reasonably appear to have been
received from an Authorized Person, PNC Bank shall incur no liability to the
Fund in acting upon such Oral Instructions or Written Instructions provided that
PNC Bank's actions comply with the other provisions of this Agreement.
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6. RIGHT TO RECEIVE ADVICE.
(a) Advice of the Fund. If PNC Bank is in doubt as to any
action it should or should not take, PNC Bank may request directions or advice,
including Oral Instructions or Written Instructions, from the Fund.
(b) Advice of Counsel. If PNC Bank shall be in doubt as to any
question of law pertaining to any action it should or should not take, PNC Bank
may request advice at its own cost from such counsel of its own choosing (who
may be counsel for the Fund, the Fund's investment adviser or PNC Bank, at the
option of PNC Bank).
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral Instructions or Written Instructions PNC Bank
receives from the Fund, and the advice it receives from counsel, PNC Bank shall
be entitled to rely upon and follow the advice of counsel. In the event PNC Bank
so relies on the advice of counsel, PNC Bank remains liable for any action or
omission on the part of PNC Bank which constitutes willful misfeasance, bad
faith, gross negligence or reckless disregard by PNC Bank of any duties,
obligations or responsibilities set forth in this Agreement.
(d) Protection of PNC Bank. PNC Bank shall be protected in any
action it takes or does not take in reliance upon directions, advice or Oral
Instructions or Written Instructions it receives from the Fund or from counsel
and which PNC Bank believes, in good faith, to be consistent with those
directions, advice or Oral Instructions or Written Instructions. Nothing in this
section shall be construed so as to impose an obligation upon PNC Bank (i) to
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seek such directions, advice or Oral Instructions or Written Instructions, or
(ii) to act in accordance with such directions, advice or Oral Instructions or
Written Instructions unless, under the terms of other provisions of this
Agreement, the same is a condition of PNC Bank's properly taking or not taking
such action. Nothing in this subsection shall excuse PNC Bank when an action or
omission on the part of PNC Bank constitutes willful misfeasance, bad faith,
gross negligence or reckless disregard by PNC Bank of any duties, obligations or
responsibilities set forth in this Agreement.
7. RECORDS; VISITS. The books and records pertaining to the Fund and
any Portfolio, which are in the possession or under the control of PNC Bank,
shall be the property of the Fund. Such books and records shall be prepared and
maintained as required by the 1940 Act and other applicable securities laws,
rules and regulations. The Fund and Authorized Persons shall have access to such
books and records at all times during PNC Bank's normal business hours. Upon the
reasonable request of the Fund, copies of any such books and records shall be
provided by PNC Bank to the Fund or to an authorized representative of the Fund,
at the Fund's expense.
8. CONFIDENTIALITY. PNC Bank agrees to keep confidential all records of
the Fund and information relating to the Fund and its shareholders, unless the
release of such records or information is otherwise consented to, in writing, by
the Fund. The Fund agrees that such consent shall not be unreasonably withheld
and may not be withheld where PNC Bank may be exposed to civil or criminal
contempt proceedings or when required to divulge such information or records to
duly constituted authorities.
9. COOPERATION WITH ACCOUNTANTS. PNC Bank shall cooperate with the
Fund's independent public accountants and shall take all reasonable action in
the performance of its
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obligations under this Agreement to ensure that the necessary information is
made available to such accountants for the expression of their opinion, as
required by the Fund.
10. DISASTER RECOVERY. PNC Bank shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment failures,
PNC Bank shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions. PNC Bank shall have no liability with respect to
the loss of data or service interruptions caused by equipment failure provided
such loss or interruption is not covered by PNC Bank's own willful misfeasance,
bad faith, gross negligence or reckless disregard of its duties or obligations
under this Agreement.
11. COMPENSATION. As compensation for custody services rendered by PNC
Bank during the term of this Agreement, the Fund, on behalf of each of the
Portfolios, will pay to PNC Bank a fee or fees as may be agreed to in writing
from time to time by the Fund and PNC Bank.
12. INDEMNIFICATION. The Fund, on behalf of each Portfolio, agrees to
indemnify and hold harmless PNC Bank and its affiliates from all taxes, charges,
expenses, assessments, claims and liabilities (including, without limitation,
liabilities arising under the Securities Laws and any state and foreign
securities and blue sky laws, and amendments thereto, and expenses, including
(without limitation) attorneys' fees and disbursements, arising directly or
indirectly from any action or omission to act which PNC Bank takes (i) at the
request or on the direction of or in reliance on the advice of the Fund or (ii)
upon Oral Instructions or Written Instructions. Neither PNC Bank, nor any of its
affiliates, shall be indemnified against any liability (or any expenses incident
to such liability) arising out of PNC Bank's or its affiliates' own willful
misfeasance,
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bad faith, gross negligence or reckless disregard of its duties under this
Agreement.
13. RESPONSIBILITY OF PNC BANK.
(a) PNC Bank shall be under no duty to take any action on
behalf of the Fundor any Portfolio except as specifically set forth herein or as
may be specifically agreed to by PNC Bank in writing. PNC Bank shall be
obligated to exercise care and diligence in the performance of its duties
hereunder, to act in good faith and to use its best efforts, within reasonable
limits, in performing services provided for under this Agreement. PNC Bank shall
be liable for any damages arising out of PNC Bank's failure to perform its
duties under this agreement to the extent such damages arise out of PNC Bank's
willful misfeasance, bad faith, gross negligence or reckless disregard of its
duties under this Agreement.
(b) Without limiting the generality of the foregoing or of any
other provision of this Agreement, (i) PNC Bank shall not be under any duty or
obligation to inquire into and shall not be liable for (A) the validity or
invalidity or authority or lack thereof of any Oral Instruction or Written
Instruction, notice or other instrument which conforms to the applicable
requirements of this Agreement, and which PNC Bank reasonably believes to be
genuine; or (B) subject to section 10, delays or errors or loss of data
occurring by reason of circumstances beyond PNC Bank's control, including acts
of civil or military authority, national emergencies, fire, flood, catastrophe,
acts of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
(c) Notwithstanding anything in this Agreement to the
contrary, neither PNC Bank nor its affiliates shall be liable to the Fund or to
any Portfolio for any consequential, special or indirect losses or damages which
the Fund may incur or suffer by or as a consequence of PNC
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Bank's or its affiliates' performance of the services provided hereunder,
whether or not the likelihood of such losses or damages was known by PNC Bank or
its affiliates.
14. DESCRIPTION OF SERVICES.
(a) Delivery of the Property. The Fund will deliver or arrange
for delivery to PNC Bank, all the Property owned by the Portfolios, including
cash received as a result of the distribution of Shares, during the period that
is set forth in this Agreement. PNC Bank will not be responsible for such
property until actual receipt.
(b) Receipt and Disbursement of Money. PNC Bank, acting upon
Written Instructions, shall open and maintain separate accounts in the Fund's
name using all cash received from or for the account of the Fund, subject to the
terms of this Agreement. In addition, upon Written Instructions, PNC Bank shall
open separate custodial accounts for each separate series or Portfolio of the
Fund (collectively, the "Accounts") and shall hold in the Accounts all cash
received from or for the Accounts of the Fund specifically designated to each
separate series or Portfolio.
PNC Bank shall make cash payments from or for the Accounts of a
Portfolio only for:
(i) purchases of securities in the name of a Portfolio
or PNC Bank or PNC Bank's nominee as provided in
sub-section (j) and for which PNC Bank has received
a copy of the broker's or dealer's confirmation or
payee's invoice, as appropriate;
(ii) purchase or redemption of Shares of the Fund
delivered to PNC Bank;
(iii) payment of, subject to Written Instructions,
interest, taxes, administration, accounting,
distribution, advisory, management fees or similar
expenses which are to be borne by a Portfolio;
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(iv) payment to, subject to receipt of Written
Instructions, the Fund's transfer agent, as agent
for the shareholders, an amount equal to the amount
of dividends and distributions stated in the Written
Instructions to be distributed in cash by the
transfer agent to shareholders, or, in lieu of
paying the Fund's transfer agent, PNC Bank may
arrange for the direct payment of cash dividends and
distributions to shareholders in accordance with
procedures mutually agreed upon from time to time by
and among the Fund, PNC Bank and the Fund's transfer
agent.
(v) payments, upon receipt Written Instructions, in
connection with the conversion, exchange or
surrender of securities owned or subscribed to by
the Fund and held by or delivered to PNC Bank;
(vi) payments of the amounts of dividends received with
respect to securities sold short;
(vii) payments made to a sub-custodian pursuant to
provisions in sub-section (c) of this Section; and
(viii) payments, upon Written Instructions, made for other
proper Fund purposes.
PNC Bank is hereby authorized to endorse and collect all checks, drafts
or other orders for the payment of money received as custodian for the Accounts.
(c) Receipt of Securities; Subcustodians.
(i) PNC Bank shall hold all securities
received by it for the Accounts in a
separate account that physically
segregates such securities from those of
any other persons, firms or
corporations, except for securities held
in a Book-Entry System. All such
securities shall be held or disposed of
only upon Written Instructions of the
Fund pursuant to the terms of this
Agreement. PNC Bank shall have no power
or authority to assign, hypothecate,
pledge or otherwise dispose of any such
securities or investment, except upon
the express terms of this Agreement and
upon Written Instructions, accompanied
by a certified resolution of the Fund's
Board of Trustees, authorizing the
transaction. In no case may any member
of the Fund's Board of Trustees, or any
officer, employee or agent of the Fund
withdraw any securities.
At PNC Bank's own expense and for its
own convenience, PNC Bank may enter into
sub-custodian agreements with other
United
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<PAGE>
States banks or trust companies to
perform duties described in this
sub-section (c). Such bank or trust
company shall have an aggregate capital,
surplus and undivided profits, according
to its last published report, of at
least one million dollars ($1,000,000),
if it is a subsidiary or affiliate of
PNC Bank, or at least twenty million
dollars ($20,000,000) if such bank or
trust company is not a subsidiary or
affiliate of PNC Bank. In addition, such
bank or trust company must be qualified
to act as custodian and agree to comply
with the relevant provisions of the 1940
Act and other applicable rules and
regulations. Any such arrangement will
not be entered into without prior
written notice to the Fund.
PNC Bank shall remain responsible for
the performance of all of its duties as
described in this Agreement and shall
hold the Fund and each Portfolio
harmless from its own acts or omissions,
under the standards of care provided for
herein, or the acts and omissions of any
sub-custodian chosen by PNC Bank under
the terms of this sub-section (c).
(d) Transactions Requiring Instructions. Upon receipt of
Oral Instructions or Written Instructions and not
otherwise, PNC Bank, directly or through the use of
the Book-Entry System, shall:
(i) deliver any securities held for a
Portfolio against the receipt of payment
for the sale of such securities;
(ii) execute and deliver to such persons as
may be designated in such Oral
Instructions or Written Instructions,
proxies, consents, authorizations, and
any other instruments whereby the
authority of a Portfolio as owner of any
securities may be exercised;
(iii) deliver any securities to the issuer
thereof, or its agent, when such
securities are called, redeemed, retired
or otherwise become payable; provided
that, in any such case, the cash or
other consideration is to be delivered
to PNC Bank;
(iv) deliver any securities held for a
Portfolio against receipt of other
securities or cash issued or paid in
connection with the liquidation,
reorganization, refinancing, tender
offer, merger, consolidation or
recapitalization of any corporation, or
the exercise of any conversion
privilege;
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<PAGE>
(v) deliver any securities held for a
Portfolio to any protective committee,
reorganization committee or other person
in connection with the reorganization,
refinancing, merger, consolidation,
recapitalization or sale of assets of
any corporation, and receive and hold
under the terms of this Agreement such
certificates of deposit, interim
receipts or other instruments or
documents as may be issued to it to
evidence such delivery;
(vi) make such transfer or exchanges of the
assets of the Portfolios and take such
other steps as shall be stated in said
Oral Instructions or Written
Instructions to be for the purpose of
effectuating a duly authorized plan of
liquidation, reorganization, merger,
consolidation or recapitalization of the
Fund;
(vii) release securities belonging to a
Portfolio to any bank or trust company
for the purpose of a pledge or
hypothecation to secure any loan
incurred by the Fund on behalf of that
Portfolio; provided, however, that
securities shall be released only upon
payment to PNC Bank of the monies
borrowed, except that in cases where
additional collateral is required to
secure a borrowing already made subject
to proper prior authorization, further
securities may be released for that
purpose; and repay such loan upon
redelivery to it of the securities
pledged or hypothecated therefor and
upon surrender of the note or notes
evidencing the loan;
(viii) release and deliver securities owned by
a Portfolio in connection with any
repurchase agreement entered into on
behalf of the Fund, but only on receipt
of payment therefor; and pay out moneys
of the Fund in connection with such
repurchase agreements, but only upon the
delivery of the securities;
(ix) release and deliver or exchange
securities owned by the Fund in
connection with any conversion of such
securities, pursuant to their terms,
into other securities;
(x) release and deliver securities owned by
the fund for the purpose of redeeming in
kind shares of the Fund upon delivery
thereof to PNC Bank; and
(xi) release and deliver or exchange
securities owned by the Fund for other
corporate purposes.
PNC Bank must also receive a certified
resolution describing the nature of the
corporate purpose and the name and
address of the person(s) to whom
delivery shall be made when such action
is pursuant to sub-paragraph d.
(e) Use of Book-Entry System. The Fund shall deliver to PNC
Bank certified
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<PAGE>
resolutions of the Fund's Board of Trustees approving, authorizing and
instructing PNC Bank on a continuous basis, to deposit in the Book-Entry System
all securities belonging to the Portfolios eligible for deposit therein and to
utilize the Book-Entry System to the extent possible in connection with
settlements of purchases and sales of securities by the Portfolios, and
deliveries and returns of securities loaned, subject to repurchase agreements or
used as collateral in connection with borrowings. PNC Bank shall continue to
perform such duties until it receives Written Instructions or Oral Instructions
authorizing contrary actions.
PNC Bank shall administer the Book-Entry System as follows:
(i) With respect to securities of each Portfolio which are
maintained in the Book-Entry System, the records of PNC
Bank shall identify by Book-Entry or otherwise those
securities belonging to each Portfolio. PNC Bank shall
furnish to the Fund a detailed statement of the Property
held for each Portfolio under this Agreement at least
monthly and from time to time and upon written request.
(ii) Securities and any cash of each Portfolio deposited in the
Book-Entry System will at all times be segregated from any
assets and cash controlled by PNC Bank in other than a
fiduciary or custodian capacity but may be commingled with
other assets held in such capacities. PNC Bank and its
sub-custodian, if any, will pay out money only upon receipt
of securities and will deliver securities only upon the
receipt of money.
(iii) All books and records maintained by PNC Bank which relate
to the Fund's participation in the Book-Entry System will
at all times during PNC Bank's regular business hours be
open to the inspection of Authorized Persons, and PNC Bank
will furnish to the Fund all information in respect of the
services rendered as it may require.
PNC Bank will also provide the Fund with such reports on its own system
of internal control as the Fund may reasonably request from time to time.
(f) Registration of Securities. All Securities held for a
Portfolio which are issued or issuable only in bearer form, except such
securities held in the Book-Entry System, shall be
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<PAGE>
held by PNC Bank in bearer form; all other securities held for a Portfolio may
be registered in the name of the Fund on behalf of that Portfolio, PNC Bank, the
Book-Entry System, a sub-custodian, or any duly appointed nominees of the Fund,
PNC Bank, Book-Entry System or sub-custodian. The Fund reserves the right to
instruct PNC Bank as to the method of registration and safekeeping of the
securities of the Fund. The Fund agrees to furnish to PNC Bank appropriate
instruments to enable PNC Bank to hold or deliver in proper form for transfer,
or to register in the name of its nominee or in the name of the Book-Entry
System, any securities which it may hold for the Accounts and which may from
time to time be registered in the name of the Fund on behalf of a Portfolio.
(g) Voting and Other Action. Neither PNC Bank nor its nominee
shall vote any of the securities held pursuant to this Agreement by or for the
account of a Portfolio, except in accordance with Written Instructions. PNC
Bank, directly or through the use of the Book-Entry System, shall execute in
blank and promptly deliver all notices, proxies and proxy soliciting materials
to the registered holder of such securities. If the registered holder is not the
Fund on behalf of a Portfolio, then Written Instructions or Oral Instructions
must designate the person who owns such securities.
(h) Transactions Not Requiring Instructions. In the absence of
contrary Written Instructions, PNC Bank is authorized to take the following
actions:
(i) Collection of Income and Other Payments.
(A) collect and receive for the account of each
Portfolio, all income, dividends,
distributions, coupons, option premiums,
other payments and similar items, included or
to be included in the Property, and, in
addition, promptly advise each Portfolio of
such receipt and credit such income, as
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<PAGE>
collected, to each Portfolio's custodian
account;
(B) endorse and deposit for collection, in the
name of the Fund, checks, drafts, or other
orders for the payment of money;
(C) receive and hold for the account of each
Portfolio all securities received as a
distribution on the Portfolio's securities as
a result of a stock dividend, share split-up
or reorganization, recapitalization,
readjustment or other rearrangement or
distribution of rights or similar securities
issued with respect to any securities
belonging to a Portfolio and held by PNC Bank
hereunder;
(D) present for payment and collect the amount
payable upon all securities which may mature
or be called, redeemed, or retired, or
otherwise become payable on the date such
securities become payable; and
(E) take any action which may be necessary and
proper in connection with the collection and
receipt of such income and other payments and
the endorsement for collection of checks,
drafts, and other negotiable instruments.
- 15 -
<PAGE>
(ii) Miscellaneous Transactions.
(A) deliver or cause to be delivered Property
against payment or other consideration or
written receipt therefor in the following
cases:
(1) for examination by a broker or
dealer selling for the account
of a Portfolio in accordance
with street delivery custom;
(2) for the exchange of interim
receipts or temporary
securities for definitive
securities; and
(3) for transfer of securities
into the name of the Fund on
behalf of a Portfolio or PNC
Bank or nominee of either, or
for exchange of securities for
a different number of bonds,
certificates, or other
evidence, representing the
same aggregate face amount or
number of units bearing the
same interest rate, maturity
date and call provisions, if
any; provided that, in any
such case, the new securities
are to be delivered to PNC
Bank.
(B) Unless and until PNC Bank receives Oral
Instructions or Written Instructions to the
contrary, PNC Bank shall:
(1) pay all income items held by
it which call for payment upon
presentation and hold the cash
received by it upon such
payment for the account of
each Portfolio;
(2) collect interest and cash
dividends received, with
notice to the Fund, to the
account of each Portfolio;
(3) hold for the account of each
Portfolio all stock dividends,
rights and similar securities
issued with respect to any
securities held by PNC Bank;
and
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<PAGE>
(4) execute as agent on behalf of
the Fund all necessary
ownership certificates
required by the Internal
Revenue Code or the Income Tax
Regulations of the United
States Treasury Department or
under the laws of any state
now or hereafter in effect,
inserting the Fund's name, on
behalf of a Portfolio, on such
certificate as the owner of
the securities covered
thereby, to the extent it may
lawfully do so.
(i) Segregated Accounts.
(i) PNC Bank shall upon receipt of Written Instructions
or Oral Instructions establish and maintain a
segregated accounts on its records for and on behalf
of each Portfolio. Such accounts may be used to
transfer cash and securities, including securities
in the Book-Entry System:
(A) for the purposes of compliance by the Fund
with the procedures required by a securities
or option exchange, providing such procedures
comply with the 1940 Act and any releases of
the SEC relating to the maintenance of
segregated accounts by registered investment
companies; and
(B) Upon receipt of Written Instructions, for
other proper corporate purposes.
(ii) PNC Bank shall arrange for the establishment of IRA
custodian accounts for such shareholders holding
Shares through IRA accounts, in accordance with the
Fund's prospectuses, the Internal Revenue Code of
1986, as amended (including regulations promulgated
thereunder), and with such other procedures as are
mutually agreed upon from time to time by and among
the Fund, PNC Bank and the Fund's transfer agent.
(j) Purchases of Securities. PNC Bank shall settle purchased
securities upon receipt of Oral Instructions or Written Instructions from the
Fund or its investment advisers that specify:
(i) the name of the issuer and the title of the
securities, including CUSIP number if applicable;
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<PAGE>
(ii) the number of shares or the principal amount
purchased and accrued interest, if any;
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase;
(vi) the Portfolio involved; and
(vii) the name of the person from whom or the broker
through whom the purchase was made. PNC Bank shall
upon receipt of securities purchased by or for a
Portfolio pay out of the moneys held for the account
of the Portfolio the total amount payable to the
person from whom or the broker through whom the
purchase was made, provided that the same conforms
to the total amount payable as set forth in such
Oral Instructions or Written Instructions.
(k) Sales of Securities. PNC Bank shall settle sold securities
upon receipt of Oral Instructions or Written Instructions from the Fund that
specify:
(i) the name of the issuer and the title of the
security, including CUSIP number if applicable;
(ii) the number of shares or principal amount sold, and
accrued interest, if any;
(iii) the date of trade and settlement;
(iv) the sale price per unit;
(v) the total amount payable to the Fund upon such sale;
(vi) the name of the broker through whom or the person to
whom the sale was made; and
(vii) the location to which the security must be delivered
and delivery deadline, if any; and (viii) the
Portfolio involved.
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<PAGE>
PNC Bank shall deliver the securities upon receipt of the total amount
payable to the Portfolio upon such sale, provided that the total amount payable
is the same as was set forth in the Oral Instructions or Written Instructions.
Subject to the foregoing, PNC Bank may accept payment in such form as shall be
satisfactory to it, and may deliver securities and arrange for payment in
accordance with the customs prevailing among dealers in securities.
(l) Reports; Proxy Materials.
(i) PNC Bank shall furnish to the Fund the following
reports:
(A) such periodic and special reports as the Fund
may reasonably request;
(B) a monthly statement summarizing all
transactions and entries for the account of
each Portfolio, listing each Portfolio
securities belonging to each Portfolio with
the adjusted average cost of each issue and
the market value at the end of such month and
stating the cash account of each Portfolio
including disbursements;
(C) the reports required to be furnished to the
Fund pursuant to Rule 17f-4; and
(D) such other information as may be agreed upon
from time to time between the Fund and PNC
Bank.
(ii) PNC Bank shall transmit promptly to the Fund any proxy
statement, proxy material, notice of a call or conversion
or similar communication received by it as custodian of the
Property. PNC Bank shall be under no other obligation to
inform the Fund as to such actions or events.
(m) Collections. All collections of monies or other property in
respect, or which are to become part, of the Property (but not the safekeeping
thereof upon receipt by PNC Bank) shall be at the sole risk of the Fund. If
payment is not received by PNC Bank within a reasonable time after proper
demands have been made, PNC Bank shall notify the Fund in
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<PAGE>
writing, including copies of all demand letters, any written responses,
memoranda of all oral responses and shall await instructions from the Fund. PNC
Bank shall not be obliged to take legal action for collection unless and until
reasonably indemnified to its satisfaction. PNC Bank shall also notify the Fund
as soon as reasonably practicable whenever income due on securities is not
collected in due course and shall provide the Fund with periodic status reports
of such income collected after a reasonable time.
15. DURATION AND TERMINATION. This Agreement shall be effective on the
date first above written and shall continue in effect for an initial period of
one (1) year. Thereafter, this Agreement shall continue automatically for
successive terms of one (1) year; provided, however, that this Agreement may be
terminated by either party upon 120 days' prior written notice to the other
party. In the event this Agreement is terminated (pending appointment of a
successor to PNC Bank or vote of the shareholders of the Fund to dissolve or to
function without a custodian of its cash, securities or other property), PNC
Bank shall not deliver cash, securities or other property of the Portfolios to
the Fund. It may deliver them to a bank or trust company of PNC Bank's choice,
having an aggregate capital, surplus and undivided profits, as shown by its last
published report, of not less than twenty million dollars ($20,000,000), as a
custodian for the Fund to be held under terms similar to those of this
Agreement. PNC Bank shall not be required to make any such delivery or payment
until full payment shall have been made to PNC Bank of all of its fees,
compensation, costs and expenses. PNC Bank shall have a security interest in and
shall have a right of setoff against the Property as security for the payment of
such fees, compensation, costs and expenses.
16. NOTICES. All notices and other communications, including Written
Instructions,
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<PAGE>
shall be in writing or by confirming telegram, cable, telex or facsimile sending
device. Notice shall be addressed (a) if to PNC Bank at Airport Business Center,
International Court 2, 200 Stevens Drive, Lester, Pennsylvania 19113, marked for
the attention of the Custodian Services Department (or its successor) (b) if to
the Fund, at 667 Madison Avenue, 16th Floor, New York, NY 10021, Attn: or (c) if
to neither of the foregoing, at such other address as shall have been given by
like notice to the sender of any such notice or other communication by the other
party. If notice is sent by confirming telegram, cable, telex or facsimile
sending device, it shall be deemed to have been given immediately. If notice is
sent by first-class mail, it shall be deemed to have been given five days after
it has been mailed. If notice is sent by messenger, it shall be deemed to have
been given on the day it is delivered.
17. AMENDMENTS. This Agreement, or any term hereof, may be changed or
waived only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
18. DELEGATION; ASSIGNMENT. PNC Bank may assign its rights and delegate
its duties hereunder to any wholly-owned direct or indirect subsidiary of PNC
Bank, National Association or PNC Bank Corp., provided that (i) PNC Bank gives
the Fund thirty (30) days' prior written notice; (ii) the delegate (or assignee)
agrees with PNC Bank and the Fund to comply with all relevant provisions of the
1940 Act; and (iii) PNC Bank and such delegate (or assignee) promptly provide
such information as the Fund may request, and respond to such questions as the
Fund may ask, relative to the delegation (or assignment), including (without
limitation) the capabilities of the delegate (or assignee).
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts,
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<PAGE>
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
20. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
21. MISCELLANEOUS.
(a) Entire Agreement. This Agreement embodies the entire
agreement and understanding between the parties and supersedes all prior
agreements and understandings relating to the subject matter hereof, provided
that the parties may embody in one or more separate documents their agreement,
if any, with respect to delegated duties and Oral Instructions.
(b) Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(c) Governing Law. This Agreement shall be deemed to be a
contract made in Pennsylvania and governed by Pennsylvania law, without regard
to principles of conflicts of law.
(d) Partial Invalidity. If any provision of this Agreement
shall be held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
(e) Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(f) Facsimile Signatures. The facsimile signature of any party
to this Agreement shall constitute the valid and binding execution hereof by
such party.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PNC BANK, NATIONAL ASSOCIATION
By:/s/ Sam Sparhawk, IV
---------------------------
Title: Vice President
E.I.I. REALTY SECURITIES TRUST
By: /s/ Richard J. Adler
---------------------------
Title: Chairman of the Board and
Chief Executive Officer
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<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
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ADMINISTRATION AGREEMENT
THIS AGREEMENT is made this 4th day of June, 1998 by and between the
E.I.I. REALTY SECURITIES TRUST, a Delaware business trust (the "Trust"), on
behalf of the E.I.I. REALTY SECURITIES FUND (the "Fund"), and E.I.I. REALTY
SECURITIES, INC. (the "Administrator");
W I T N E S S E T H
WHEREAS, the Trust is registered as an open-end, non-diversified
management investment company under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), and the rules and regulations
promulgated thereunder; and
WHEREAS, the Administrator is an investment adviser and wishes to act
as an administrator of the Fund; and
WHEREAS, the Trust and the Administrator desire to enter into an
agreement to provide for the administration of the assets of the Fund on the
terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Administration. The Administrator shall act as administrator to the
Fund and shall, in such capacity, provide administrative and other services to
the Fund, subject at all time to the policies and control of the Trust's Board
of Trustees. In rendering its services as Administrator, the Administrator shall
give the Fund the benefit of its best judgment, efforts and facilities. The
Administrator shall, for all purposes herein, be deemed an independent
contractor and shall have, unless otherwise expressly provided or authorized, no
authority to act for or represent the Fund in any way or otherwise be deemed an
agent of the Fund.
2. Duties of Administrator. In carrying out its obligation under this
Agreement the Administrator shall:
(a) supervise and manage all aspects of the Fund's operations;
(b) provide the Fund or obtain for it, and thereafter supervise,
such executive, administrative, clerical and shareholder servicing services as
are deemed advisable by the Trust's Board of Trustees;
(c) arrange, but not pay for, the periodic updating of
prospectuses and supplements thereto, proxy material, tax returns, reports to
the Fund's shareholders and
<PAGE>
reports to and filings with the Securities and Exchange Commission and state
Blue Sky authorities;
(d) provide the Fund with, or obtain for it, adequate office space
and all necessary office equipment and services, including telephone service,
heat, utilities, stationery supplies and similar items for the Fund's principal
office; and
(e) take, on behalf of the Fund, all actions which appear to the
Fund necessary to carry into effect such administrative and supervisory
functions as aforesaid.
3. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Administrator shall at all times conform
to:
(a) all applicable provisions of the Investment Company Act and
any rules and regulations adopted thereunder as amended; and
(b) the provisions of the Registration Statements of the Fund
under the Securities Act of 1933, as amended, and the Investment Company Act;
and
(c) the provisions of the Declaration of Trust of the Trust, as
amended; and
(d) the provisions of the By-laws of the Trust, as amended; and
(e) any other applicable provisions of state and federal law.
4. Expenses. The expenses connected with the Fund shall be allocable
between the Fund and the Administrator as follows:
(a) The Administrator shall furnish, at its expense and without
cost to the Trust, the services of a President, Secretary and one or more Vice
Presidents of the Fund, to the extent that such additional officers may be
required by the Fund for the proper conduct of its affairs.
(b) Nothing in subparagraph (a) hereof shall be construed to
require the Administrator to bear:
(i) any of the costs (including applicable office space,
facilities and equipment) of the services of a principal financial
officer of the Fund whose normal duties consist of maintaining the
financial accounts and books and records of the Fund; including the
reviewing of calculations of net asset value and preparing tax
returns; or
(ii) any of the costs (including applicable office space,
facilities and equipment) of the services of any of the personnel
operating under the direction of such principal financial officer.
Notwithstanding the obligation of the Fund to bear the expense of the
functions referred to in clauses (i) and (ii) of this subparagraph
(b), the Administrator may pay the salaries, including any applicable
employment or payroll taxes and other salary costs, of the principal
financial officer and other personnel carrying out such functions and
the Fund shall reimburse the Administrator therefor upon proper
accounting.
(c) All of the ordinary business expenses incurred in the
operations of the Fund and the offering of its shares shall be borne by the Fund
unless specifically provided otherwise in this paragraph 4. These expenses
include but are not limited to
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<PAGE>
brokerage commissions, legal, auditing, taxes or governmental fees, the cost of
preparing share certificates, custodian, depository, transfer and shareholder
service agent costs, expenses of issue, sale, redemption and repurchase of
shares, expenses of registering and qualifying shares for sale, insurance
premiums on property or personnel (including officers and trustees if available)
of the Fund which inure to its benefit, expenses relating to trustee and
shareholder meetings, the cost of preparing and distributing reports and notices
to shareholders, the fees and other expenses incurred by the Fund in connection
with membership in investment company organizations and the cost of printing
copies of prospectuses and statements of additional information distributed to
shareholders.
5. Delegation of Responsibilities. The Administrator may in its
discretion delegate the performance of certain administrative services to a
subadministrator.
6. Compensation. The Fund shall pay the Administrator in full
compensation for services rendered hereunder an annual administration fee,
payable monthly, of 0.15%, 0.25% and 0.25% of the average daily net assets of
the Fund's Institutional Shares, Adviser Shares and Investor Shares,
respectively. The average daily net asset value of the Fund shall be determined
in the manner set forth in the Registration Statement of the Fund.
7. Non-Exclusivity. The services of the Administrator to the Fund are
not to be deemed to be exclusive, and the Administrator shall be free to render
administrative or other services to others (including other investment
companies) and to engage in other activities. It is understood and agreed that
officers of the Administrator may serve as officers or trustees of the Trust,
and that officers or trustees of the Trust may serve as officers of the
Administrator to the extent permitted by law; and that the officers of the
Administrator are not prohibited from engaging in any other business activity or
from rendering services to any other person, or from serving as partners or
officers of any other firm or corporation, including other investment companies.
8. Term and Approval. This Agreement shall become effective at the
close of business on the date hereof and shall remain in force and effect for
two years and thereafter from year to year, provided that such continuance is
specifically approved at least annually by the Board of Trustees.
9. Termination. This Agreement may be terminated at any time, without
the payment of any penalty, by vote of the Trust's Board of Trustees or by vote
of a majority of the Fund's outstanding voting securities, or by the
Administrator, on sixty (60) days' written notice to the other party. The notice
provided for herein may be waived by either party.
10. Liability of Administrator and Indemnification. In the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Administrator or any of its
officers, trustees or employees, it
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<PAGE>
shall not be subject to liability to the Fund or to any shareholder of the Fund
for any omission in the course of, or connected with, rendering services
hereunder.
11. Liability of Trustees and Shareholders. A copy of the Agreement and
Declaration of Trust of the Trust is on file with the Secretary of The State of
Delaware, and notice is hereby given that this instrument is executed on behalf
of the trustees of the Trust as trustees and not individually and that the
obligations of this instrument are not binding upon any of the trustees or
shareholders individually but are binding only upon the assets and property of
the Trust.
12. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Trust
and that of the Administrator shall be 667 Madison Avenue, New York, New York
10021.
13. Questions of Interpretation. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the Investment Company Act shall be resolved by
reference to such term or provision of the Act and to interpretations thereof,
if any, by the United States Courts or in the absence of any controlling
decision of any such court, by rules, regulations or orders of the Securities
and Exchange Commission issued pursuant to said Act. In addition, where the
effect of a requirement of the Investment Company Act reflected in any provision
of this Agreement is released by rules, regulation or order of the Securities
and Exchange Commission, such provision shall be deemed to incorporate the
effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
E.I.I. REALTY SECURITIES TRUST, on
behalf of the E.I.I. Realty Securities Fund
By: /s/ Richard J. Adler
-----------------------------------------
Chairman of the Board and Chief Executive
Officer
Attest:
/s/ David P. O'Connor
- ---------------------
President
E.I.I. REALTY SECURITIES, INC.
By: /s/ Richard J. Adler
-----------------------------------------
Managing Director
Attest:
/s/ David P. O'Connor
- ---------------------
Managing Director
-4-
SUB-ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made as of June 4, 1998 by and between European
Investors Incorporated, a Delaware corporation ("EII"), E.I.I. Realty Securities
Fund, a Delaware business trust (the "Fund"), and PFPC INC., a Delaware
corporation ("PFPC"), which is an indirect wholly owned subsidiary of PNC Bank
Corp.
W I T N E S S E T H :
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, EII wishes to retain PFPC to provide sub-administration and
accounting services to the Fund's investment portfolios listed on Exhibit A
attached hereto and made a part hereof, as such Exhibit A may be amended from
time to time (each a "Portfolio"), and PFPC wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and intending to be legally bound hereby the parties
hereto agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(c) "Authorized Person" means any officer of the Fund and any
other person duly authorized by the Fund's Board of Trustees to give Oral
Instructions and Written Instructions on behalf of the Fund and listed on the
Authorized Persons Appendix attached hereto and made a part hereof or any
amendment thereto as may be received by PFPC. An Authorized
<PAGE>
Person's scope of authority may be limited by the Fund by setting forth such
limitation in the Authorized Persons Appendix.
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "Oral Instructions" mean oral instructions received by PFPC
from an Authorized Person or from a person reasonably believed by PFPC to be an
Authorized Person.
(f) "SEC" means the Securities and Exchange Commission.
(g) "Securities Laws" means the 1933 Act, the 1934 Act, the 1940
Act and the CEA.
(h) "Shares" mean the shares of beneficial interest of any series
or class of the Fund.
(i) "Written Instructions" mean written instructions signed by an
Authorized Person and received by PFPC. The instructions may be delivered by
hand, mail, tested telegram, cable, telex or facsimile sending device.
2. APPOINTMENT. EII hereby appoints PFPC to provide sub-administration
and accounting services to the each of the Portfolios, in accordance with the
terms set forth in this Agreement. PFPC accepts such appointment and agrees to
furnish such services.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable,
will provide PFPC with the following:
(a) certified or authenticated copies of the resolutions of the
Fund's Board of Trustees, approving the appointment of PFPC
or its affiliates to provide services to each Portfolio and
approving this Agreement;
(b) a copy of the Fund's most recent effective registration
statement;
(c) a copy of each Portfolio's advisory agreement or agreements;
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<PAGE>
(d) a copy of the distribution agreement with respect to each
class of Shares representing an interest in a Portfolio;
(e) a copy of any additional administration agreement with
respect to a Portfolio;
(f) a copy of any shareholder servicing agreement made in
respect of the Fund or a Portfolio; and
(g) copies (certified or authenticated, where applicable) of any
and all amendments or supplements to the foregoing.
4. COMPLIANCE WITH RULES AND REGULATIONS.
PFPC undertakes to comply with all applicable requirements of the
Securities Laws, and any laws, rules and regulations of governmental authorities
having jurisdiction with respect to the duties to be performed by PFPC
hereunder. Except as specifically set forth herein, PFPC assumes no
responsibility for such compliance by the Fund or any Portfolio.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC shall act
only upon Oral Instructions and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral Instructions and
Written Instructions it receives from an Authorized Person (or from a person
reasonably believed by PFPC to be an Authorized Person) pursuant to this
Agreement. PFPC may assume that any Oral Instruction or Written Instruction
received hereunder is not in any way inconsistent with the provisions of
organizational documents or this Agreement or of any vote, resolution or
proceeding of the Fund's Board of Trustees or of the Fund's shareholders, unless
and until PFPC receives Written Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Written Instructions
confirming Oral
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<PAGE>
Instructions (except where such Oral Instructions are given by PFPC or its
affiliates) so that PFPC receives the Written Instructions by the close of
business on the same day that such Oral Instructions are received. The fact that
such confirming Written Instructions are not received by PFPC shall in no way
invalidate the transactions or enforceability of the transactions authorized by
the Oral Instructions. Where Oral Instructions or Written Instructions
reasonably appear to have been received from an Authorized Person, PFPC shall
incur no liability to the Fund in acting upon such Oral Instructions or Written
Instructions provided that PFPC's actions comply with the other provisions of
this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) Advice of the Fund. If PFPC is in doubt as to any action it
should or should not take, PFPC may request directions or advice, including Oral
Instructions or Written Instructions, from the Fund or EII.
(b) Advice of Counsel. If PFPC shall be in doubt as to any
question of law pertaining to any action it should or should not take, PFPC may
request advice at its own cost from such counsel of its own choosing (who may be
counsel for the Fund, the Fund's investment adviser or PFPC, at the option of
PFPC).
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral Instructions or Written Instructions PFPC receives
from EII or the Fund and the advice PFPC receives from counsel, PFPC may rely
upon and follow the advice of counsel. In the event PFPC so relies on the advice
of counsel, PFPC remains liable for any action or omission on the part of PFPC
which constitutes willful misfeasance, bad faith, gross negligence or reckless
disregard by PFPC of any duties, obligations or responsibilities set forth in
this Agreement.
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<PAGE>
(d) Protection of PFPC. PFPC shall be protected in any action it
takes or does not take in reliance upon directions, advice or Oral Instructions
or Written Instructions it receives from EII, the Fund or from counsel and which
PFPC believes, in good faith, to be consistent with those directions, advice and
Oral Instructions or Written Instructions. Nothing in this section shall be
construed so as to impose an obligation upon PFPC (i) to seek such directions,
advice or Oral Instructions or Written Instructions, or (ii) to act in
accordance with such directions, advice or Oral Instructions or Written
Instructions unless, under the terms of other provisions of this Agreement, the
same is a condition of PFPC's properly taking or not taking such action. Nothing
in this subsection shall excuse PFPC when an action or omission on the part of
PFPC constitutes willful misfeasance, bad faith, gross negligence or reckless
disregard by PFPC of any duties, obligations or responsibilities set forth in
this Agreement.
7. RECORDS; VISITS.
(a) The books and records pertaining to the Fund and the
Portfolios which are in the possession or under the control of PFPC shall be the
property of the Fund. Such books and records shall be prepared and maintained as
required by the 1940 Act and other applicable securities laws, rules and
regulations. The Fund, EII and Authorized Persons shall have access to such
books and records at all times during PFPC's normal business hours. Upon the
reasonable request of the Fund or EII, copies of any such books and records
shall be provided by PFPC to the Fund, EII or to an Authorized Person, at the
Fund's expense.
(b) PFPC shall keep the following records:
(i) all books and records with respect to each Portfolio's books
of account;
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<PAGE>
(ii) records of each Portfolio's securities transactions; and
(iii) all other books and records as PFPC is required to maintain
pursuant to Rule 31a-1 of the 1940 Act in connection with
the services provided hereunder.
8. CONFIDENTIALITY. PFPC agrees to keep confidential all records of the
Fund and information relating to the Fund and its shareholders, unless the
release of such records or information is otherwise consented to, in writing, by
the Fund or EII. The Fund and EII agree that such consent shall not be
unreasonably withheld and may not be withheld where PFPC may be exposed to civil
or criminal contempt proceedings or when required to divulge such information or
records to duly constituted authorities.
9. LIAISON WITH ACCOUNTANTS. PFPC shall act as liaison with the Fund's
independent public accountants and shall provide account analyses, fiscal year
summaries, and other audit-related schedules with respect to each Portfolio.
PFPC shall take all reasonable action in the performance of its duties under
this Agreement to assure that the necessary information is made available to
such accountants for the expression of their opinion, as required by the Fund.
10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment failures,
PFPC shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions. PFPC shall have no liability with respect to the
loss of data or service interruptions caused by equipment failure, provided such
loss or interruption is not caused by PFPC's own willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties or obligations under this
Agreement.
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<PAGE>
11. COMPENSATION. As compensation for services rendered by PFPC during
the term of this Agreement, EII and the Fund, on behalf of each Portfolio, will
pay to PFPC a fee or fees as may be agreed to in writing by EII, the Fund and
PFPC.
12. INDEMNIFICATION. EII and the Fund, on behalf of each Portfolio,
agree to indemnify and hold harmless PFPC and its affiliates from all taxes,
charges, expenses, assessments, claims and liabilities (including, without
limitation, liabilities arising under the Securities Laws and any state or
foreign securities and blue sky laws, and amendments thereto), and expenses,
including (without limitation) attorneys' fees and disbursements arising
directly or indirectly from any action or omission to act which PFPC takes (i)
at the request or on the direction of or in reliance on the advice of the Fund
or (ii) upon Oral Instructions or Written Instructions. Neither PFPC, nor any of
its affiliates', shall be indemnified against any liability (or any expenses
incident to such liability) arising out of PFPC's or its affiliates' own willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties and
obligations under this Agreement. Any amounts payable by the Fund hereunder
shall be satisfied only against the relevant Portfolio's assets and not against
the assets of any other investment portfolio of the Fund.
13. RESPONSIBILITY OF PFPC.
(a) PFPC shall be under no duty to take any action on behalf of
EII, the Fund or any Portfolio except as specifically set forth herein or as may
be specifically agreed to by PFPC in writing. PFPC shall be obligated to
exercise care and diligence in the performance of its duties hereunder, to act
in good faith and to use its best efforts, within reasonable limits, in
performing services provided for under this Agreement. PFPC shall be liable for
any damages
- 8 -
<PAGE>
arising out of PFPC's failure to perform its duties under this Agreement to the
extent such damages arise out of PFPC's willful misfeasance, bad faith, gross
negligence or reckless disregard of such duties.
(b) Without limiting the generality of the foregoing or of any
other provision of this Agreement, (i) PFPC shall not be liable for losses
beyond its control, provided that PFPC has acted in accordance with the standard
of care set forth above; and (ii) PFPC shall not be liable for (A) the validity
or invalidity or authority or lack thereof of any Oral Instruction or Written
Instruction, notice or other instrument which conforms to the applicable
requirements of this Agreement, and which PFPC reasonably believes to be
genuine; or (B) subject to Section 10, delays or errors or loss of data
occurring by reason of circumstances beyond PFPC's control, including acts of
civil or military authority, national emergencies, labor difficulties, fire,
flood, catastrophe, acts of God, insurrection, war, riots or failure of the
mails, transportation, communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary,
neither PFPC nor its affiliates shall be liable to the Fund or to any Portfolio
for any consequential, special or indirect losses or damages which the Fund or
any Portfolio may incur or suffer by or as a consequence of PFPC's or any
affiliates' performance of the services provided hereunder, whether or not the
likelihood of such losses or damages was known by PFPC or its affiliates.
14. DESCRIPTION OF ACCOUNTING SERVICES ON A CONTINUOUS BASIS.
PFPC will perform the following accounting services with respect
to each Portfolio:
(i) Journalize investment, capital share and income and
expense activities;
(ii) Verify investment buy/sell trade tickets when
received from the investment
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<PAGE>
adviser for a Portfolio (the "Adviser") and transmit
trades to the Fund's custodian (the "Custodian") for
proper settlement;
(iii) Maintain individual ledgers for investment
securities;
(iv) Maintain historical tax lots for each security;
(v) Reconcile cash and investment balances of the Fund
with the Custodian, and provide the Adviser with the
beginning cash balance available for investment
purposes;
(vi) Update the cash availability throughout the day as
required by the Adviser;
(vii) Post to and prepare the Statement of Assets and
Liabilities and the Statement of Operations;
(viii) Calculate various contractual expenses (e.g.,
advisory and custody fees);
(ix) Monitor the expense accruals and notify an officer
of the Fund of any proposed adjustments;
(x) Control all disbursements and authorize such
disbursements upon Written Instructions;
(xi) Calculate capital gains and losses;
(xii) Determine net income;
(xiii) Obtain security market quotes from independent
pricing services approved by the Adviser, or if such
quotes are unavailable, then obtain such prices from
the Adviser, and in either case calculate the market
value of each Portfolio's Investments;
(xiv) Transmit or mail a copy of the daily portfolio
valuation to the Adviser;
(xv) Compute net asset value;
(xvi) Asappropriate, compute yields, total return, expense
ratios, portfolio turnover rate, and, if required,
portfolio average dollar-weighted maturity; and
(xvii) Prepare a monthly financial statement, which will
include the following items:
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<PAGE>
Schedule of Investments Statement of Assets and
Liabilities Statement of Operations Statement of
Changes in Net Assets Cash Statement Schedule of
Capital Gains and Losses.
15. DESCRIPTION OF SUB-ADMINISTRATION SERVICES ON A CONTINUOUS BASIS.
PFPC will perform the following sub-administration services with
respect to each Portfolio:
(i) Prepare quarterly broker security transactions summaries;
(ii) Prepare monthly security transaction listings;
(iii)Supply various normal and customary Portfolio and Fund
statistical data as requested on an ongoing basis;
(iv) Prepare for execution and file the Fund's Federal and state
tax returns;
(v) Prepare and file the Fund's Semi-Annual Reports with the SEC
on Form N-SAR;
(vi) Prepare and file with the SEC the Fund's annual,
semi-annual, and quarterly shareholder reports;
(vii)Assist in the preparation of registration statements and
other filings relating to the registration of Shares;
(viii) Monitor each Portfolio's status as a regulated investment
company under Sub-chapter M of the Internal Revenue Code of
1986, as amended;
(ix) Coordinate contractual relationships and communications
between the Fund and its contractual service providers; and
(x) Monitor the Fund's compliance with the amounts and
conditions of each state qualification;
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<PAGE>
(xi) Maintain the qualification of Fund shares in the
jurisdictions it is authorized to sell and prepare and file,
if necessary, reports with the Blue Sky authorities;
(xii)Prepare and file, if necessary, sales reports with each
state in which the Fund has qualified.
16. DURATION AND TERMINATION. This Agreement shall be effective on the
date first above written and shall continue in effect for an initial period of
one (1) years. Thereafter, this Agreement shall continue automatically for
successive terms of one (1) year; provided, however, that this Agreement may be
terminated by either party upon 120 days' prior written notice to the other
party.
17. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. If notice is sent by confirming telegram, cable, telex
or facsimile sending device, it shall be deemed to have been given immediately.
If notice is sent by first-class mail, it shall be deemed to have been given
three days after it has been mailed. If notice is sent by messenger, it shall be
deemed to have been given on the day it is delivered. Notices shall be addressed
(a) if to PFPC, at 400 Bellevue Parkway, Wilmington, Delaware 19809; (b) if to
the Fund, at 667 Madison Avenue, 16th Floor, New York, NY 10021; or (c) if to
neither of the foregoing, at such other address as shall have been provided by
like notice to the sender of any such notice or other communication by the other
party.
18. AMENDMENTS. This Agreement, or any term thereof, may be changed or
waived only by written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
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<PAGE>
19. DELEGATION; ASSIGNMENT. PFPC may assign its rights and delegate its
duties hereunder to any wholly-owned direct or indirect subsidiary of PNC Bank,
National Association or PNC Bank Corp., provided that (I) PFPC gives the Fund
thirty (30) days' prior written notice; (ii) the delegate (or assignee) agrees
with PFPC and the Fund to comply with all relevant provisions of the 1940 Act;
and (iii) PFPC and such delegate (or assignee) promptly provide such information
as the Fund may request, and respond to such questions as the Fund may ask,
relative to the delegation (or assignment), including (without limitation) the
capabilities of the delegate (or assignee).
20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
21.FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
22. MISCELLANEOUS.
(a) Entire Agreement. This Agreement embodies the entire agreement
and understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to delegated duties and Oral Instructions.
(b) Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
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<PAGE>
(c) Governing Law. This Agreement shall be deemed to be a contract
made in Delaware and governed by Delaware law, without regard to principles of
conflicts of law.
(d) Partial Invalidity. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
(e) Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(f) Facsimile Signatures. The facsimile signature of any party to
this Agreement shall constitute the valid and binding execution hereof by such
party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By: /s/ Robert F. Krause
------------------------
Name: Robert F. Krause
Title: Vice President
E.I.I. REALTY SECURITIES TRUST
By: /s/ Richard J. Adler
------------------------
Name: Richard J. Adler
Title: Chairman of the Board and
Chief Executive Officer
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<PAGE>
EUROPEAN INVESTORS INCORPORATED
By: /s/ Richard J. Adler
------------------------
Name: Richard J. Adler
Title: Managing Director
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<PAGE>
EXHIBIT A
THIS EXHIBIT A, dated as of June 4, 1998, is Exhibit A to that certain
Sub-Administration and Accounting Services Agreement dated as of June 4, 1998
between PFPC Inc., European Investors Incorporated and E.I.I. Realty Securities
Trust.
PORTFOLIOS
E.I.I. Realty Securities Fund
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<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
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- 17 -
TRANSFER AGENCY SERVICES AGREEMENT
THIS AGREEMENT is made as of June 4, 1998 by and between PFPC INC., a
Delaware corporation ("PFPC"), and E.I.I. Realty Securities Trust, a Delaware
business trust (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PFPC to serve as transfer agent,
registrar, dividend disbursing agent and shareholder servicing agent to its
investment portfolios listed on Exhibit A attached hereto and made a part
hereof, as such Exhibit A may be amended from time to time (each a "Portfolio"),
and PFPC wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(c) "Authorized Person" means any officer of the Fund and any
other person duly authorized by the Fund's Board of Trustees to give Oral
Instructions and Written Instructions on behalf of the Fund and listed on the
Authorized Persons Appendix attached hereto and made a part hereof or any
amendment thereto as may be received by PFPC. An Authorized Person's
<PAGE>
scope of authority may be limited by the Fund by setting forth such limitation
in the Authorized Persons Appendix.
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "Oral Instructions" mean oral instructions received by
PFPC from an Authorized Person or from a person reasonably believed by PFPC to
be an Authorized Person.
(f) "SEC" means the Securities and Exchange Commission.
(g) "Securities Laws" mean the 1933 Act, the 1934 Act, the
1940 Act and the CEA.
(h) "Shares" mean the shares of beneficial interest of any
series or class of the Fund.
(i) "Written Instructions" mean written instructions signed by
an Authorized Person and received by PFPC. The instructions may be delivered by
hand, mail, tested telegram, cable, telex or facsimile sending device.
2. APPOINTMENT. The Fund hereby appoints PFPC to serve as transfer
agent, registrar, dividend disbursing agent and shareholder servicing agent to
the Fund in accordance with the terms set forth in this Agreement. PFPC accepts
such appointment and agrees to furnish such services.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable,
will provide PFPC with the following:
(a) Certified or authenticated copies of the resolutions of
the Fund's Board of Trustees, approving the appointment of PFPC or its
affiliates to provide services to the Fund and approving this Agreement;
(b) A copy of the Fund's most recent effective registration
statement;
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<PAGE>
(c) A copy of the advisory agreement with respect to each
investment Portfolio of the Fund (each, a Portfolio);
(d) A copy of the distribution agreement with respect to each
class of Shares of the Fund;
(e) A copy of each Portfolio's administration agreements if
PFPC is not providing the Portfolio with such services;
(f) Copies of any shareholder servicing agreements made in
respect of the Fund or a Portfolio; and
(g) Copies (certified or authenticated where applicable) of
any and all amendments or supplements to the foregoing.
4. COMPLIANCE WITH RULES AND REGULATIONS. PFPC undertakes to comply
with all applicable requirements of the Securities Laws and any laws, rules and
regulations of governmental authorities having jurisdiction with respect to the
duties to be performed by PFPC hereunder. Except as specifically set forth
herein, PFPC assumes no responsibility for such compliance by the Fund or any of
its investment portfolios.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC shall
act only upon Oral Instructions and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral Instructions
and Written Instructions it receives from an Authorized Person (or from a person
reasonably believed by PFPC to be an Authorized Person) pursuant to this
Agreement. PFPC may assume that any Oral Instruction or Written Instruction
received hereunder is not in any way inconsistent with the provisions of
organizational documents or this Agreement or of any vote, resolution or
proceeding of the Fund's Board of Trustees or of the Fund's shareholders, unless
and until
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<PAGE>
PFPC receives Written Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Written Instructions
confirming Oral Instructions so that PFPC receives the Written Instructions by
the close of business on the same day that such Oral Instructions are received.
The fact that such confirming Written Instructions are not received by PFPC
shall in no way invalidate the transactions or enforceability of the
transactions authorized by the Oral Instructions. Where Oral Instructions or
Written Instructions reasonably appear to have been received from an Authorized
Person, PFPC shall incur no liability to the Fund in acting upon such Oral
Instructions or Written Instructions provided that PFPC's actions comply with
the other provisions of this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) Advice of the Fund. If PFPC is in doubt as to any action
it should or should not take, PFPC may request directions or advice, including
Oral Instructions or Written Instructions, from the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to any
question of law pertaining to any action it should or should not take, PFPC may
request advice at its own cost from such counsel of its own choosing (who may be
counsel for the Fund, the Fund's investment adviser or PFPC, at the option of
PFPC).
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral Instructions or Written Instructions PFPC receives
from the Fund, and the advice it receives from counsel, PFPC may rely upon and
follow the advice of counsel. In the event PFPC so relies on the advice of
counsel, PFPC remains liable for any action or omission on the part of PFPC
which constitutes willful misfeasance, bad faith, gross negligence or reckless
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<PAGE>
disregard by PFPC of any duties, obligations or responsibilities set forth in
this Agreement.
(d) Protection of PFPC. PFPC shall be protected in any action
it takes or does not take in reliance upon directions, advice or Oral
Instructions or Written Instructions it receives from the Fund or from counsel
and which PFPC believes, in good faith, to be consistent with those directions,
advice or Oral Instructions or Written Instructions. Nothing in this section
shall be construed so as to impose an obligation upon PFPC (i) to seek such
directions, advice or Oral Instructions or Written Instructions, or (ii) to act
in accordance with such directions, advice or Oral Instructions or Written
Instructions unless, under the terms of other provisions of this Agreement, the
same is a condition of PFPC's properly taking or not taking such action. Nothing
in this subsection shall excuse PFPC when an action or omission on the part of
PFPC constitutes willful misfeasance, bad faith, gross negligence or reckless
disregard by PFPC of any duties, obligations or responsibilities set forth in
this Agreement.
7. RECORDS; VISITS. The books and records pertaining to the Fund, which
are in the possession or under the control of PFPC, shall be the property of the
Fund. Such books and records shall be prepared and maintained as required by the
1940 Act and other applicable securities laws, rules and regulations. The Fund
and Authorized Persons shall have access to such books and records at all times
during PFPC's normal business hours. Upon the reasonable request of the Fund,
copies of any such books and records shall be provided by PFPC to the Fund or to
an Authorized Person, at the Fund's expense.
8. CONFIDENTIALITY. PFPC agrees to keep confidential all records of the
Fund and information relating to the Fund and its shareholders, unless the
release of such records or
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<PAGE>
information is otherwise consented to, in writing, by the Fund. The Fund agrees
that such consent shall not be unreasonably withheld and may not be withheld
where PFPC may be exposed to civil or criminal contempt proceedings or when
required to divulge such information or records to duly constituted authorities.
9. COOPERATION WITH ACCOUNTANTS. PFPC shall cooperate with the Fund's
independent public accountants and shall take all reasonable actions in the
performance of its obligations under this Agreement to ensure that the necessary
information is made available to such accountants for the expression of their
opinion, as required by the Fund.
10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment failures,
PFPC shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions. PFPC shall have no liability with respect to the
loss of data or service interruptions caused by equipment failure, provided such
loss or interruption is not caused by PFPC's own willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties or obligations under this
Agreement.
11. COMPENSATION. As compensation for services rendered by PFPC during
the term of this Agreement, the Fund will pay to PFPC a fee or fees as may be
agreed to from time to time in writing by the Fund and PFPC.
12. INDEMNIFICATION. The Fund agrees to indemnify and hold harmless
PFPC and its affiliates from all taxes, charges, expenses, assessments, claims
and liabilities (including, without limitation, liabilities arising under the
Securities Laws and any state and foreign securities and
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<PAGE>
blue sky laws, and amendments thereto), and expenses, including (without
limitation) attorneys' fees and disbursements, arising directly or indirectly
from (i) any action or omission to act which PFPC takes (a) at the request or on
the direction of or in reliance on the advice of the Fund or (b) upon Oral
Instructions or Written Instructions or (ii) the acceptance, processing and/or
negotiation of checks or other methods utilized for the purchase of Shares.
Neither PFPC, nor any of its affiliates, shall be indemnified against any
liability (or any expenses incident to such liability) arising out of PFPC's or
its affiliates' own willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties and obligations under this Agreement, provided that in
the absence of a finding to the contrary the acceptance, processing and/or
negotiation of a fraudulent payment for the purchase of Shares shall be presumed
not to have been the result of PFPC's or its affiliates own willful misfeasance,
bad faith, gross negligence or reckless disregard of such duties and
obligations.
13. RESPONSIBILITY OF PFPC.
(a) PFPC shall be under no duty to take any action on behalf
of the Fund except as specifically set forth herein or as may be specifically
agreed to by PFPC in writing. PFPC shall be obligated to exercise care and
diligence in the performance of its duties hereunder, to act in good faith and
to use its best efforts, within reasonable limits, in performing services
provided for under this Agreement. PFPC shall be liable for any damages arising
out of PFPC's failure to perform its duties under this Agreement to the extent
such damages arise out of PFPC's willful misfeasance, bad faith, gross
negligence or reckless disregard of such duties.
(b) Without limiting the generality of the foregoing or of any
other provision of this Agreement, (i) PFPC, shall not be liable for losses
beyond its control, provided that PFPC
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<PAGE>
has acted in accordance with the standard of care set forth above; and (ii) PFPC
shall not be under any duty or obligation to inquire into and shall not be
liable for (A) the validity or invalidity or authority or lack thereof of any
Oral Instruction or Written Instruction, notice or other instrument which
conforms to the applicable requirements of this Agreement, and which PFPC
reasonably believes to be genuine; or (B) subject to Section 10, delays or
errors or loss of data occurring by reason of circumstances beyond PFPC's
control, including acts of civil or military authority, national emergencies,
labor difficulties, fire, flood, catastrophe, acts of God, insurrection, war,
riots or failure of the mails, transportation, communication or power supply.
(c) Notwithstanding anything in this Agreement to the
contrary, neither PFPC nor its affiliates shall be liable to the Fund for any
consequential, special or indirect losses or damages which the Fund may incur or
suffer by or as a consequence of PFPC's or its affiliates' performance of the
services provided hereunder, whether or not the likelihood of such losses or
damages was known by PFPC or its affiliates.
14. DESCRIPTION OF SERVICES.
(a) Services Provided on an Ongoing Basis, If Applicable.
(i) Calculate 12b-1 payments;
(ii) Maintain proper shareholder registrations;
(iii) Review new applications and correspond with
shareholders to complete or correct information;
(iv) Direct payment processing of checks or wires;
(v) Prepare and certify stockholder lists in con-
junction with proxy solicitations;
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<PAGE>
(vi) Countersign share certificates;
(vii) Prepare and mail to shareholders confirmation of
activity;
(viii) Provide toll-free lines for direct shareholder use,
plus customer liaison staff for on-line inquiry
response;
(ix) Mail duplicate confirmations to broker-dealers of
their clients' activity, whether executed through
the broker-dealer or directly with PFPC;
(x) Provide periodic shareholder lists and statistics to
the clients;
(xi) Provide detailed data for underwriter/broker
confirmations;
(xii) Prepare periodic mailing of year-end tax and
statement information;
(xiii) Notify on a timely basis the investment adviser,
accounting agent, and custodian of fund activity;
and
(xiv) Perform other participating broker-dealer
shareholder services as may be agreed upon from time
to time.
(b) Services Provided by PFPC Under Oral Instructions or
Written Instructions.
(i) Accept and post daily Fund purchases and
redemptions;
(ii) Accept, post and perform shareholder transfers and
exchanges;
(iii) Pay dividends and other distributions;
(iv) Solicit and tabulate proxies; and
(v) Issue and cancel certificates (when requested in
writing by the shareholder).
(c) Purchase of Shares. PFPC shall issue and credit an account
of an investor, in the manner described in the Fund's prospectus, once it
receives:
(i) A purchase order;
(ii) Proper information to establish a shareholder
account; and
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<PAGE>
(iii) Confirmation of receipt or crediting of funds for
such order to the Fund's custodian.
(d) Redemption of Shares. PFPC shall redeem Shares only if
that function is properly authorized by the certificate of incorporation or
resolution of the Fund's Board of Trustees. Shares shall be redeemed and payment
therefor shall be made in accordance with the Fund's prospectus, when the
recordholder tenders Shares in proper form and directs the method of redemption.
If Shares are received in proper form, Shares shall be redeemed before the funds
are provided to PFPC from the Fund's custodian (the "Custodian"). If the
recordholder has not directed that redemption proceeds be wired, when the
Custodian provides PFPC with funds, the redemption check shall be sent to and
made payable to the recordholder, unless:
(i) the surrendered certificate is drawn to the order of
an assignee or holder and transfer authorization is
signed by the recordholder; or
(ii) Transfer authorizations are signed by the
recordholder when Shares are held in book-entry
form.
When a broker-dealer notifies PFPC of a redemption desired by
a customer, and the Custodian provides PFPC with funds, PFPC shall prepare and
send the redemption check to the broker-dealer and made payable to the
broker-dealer on behalf of its customer.
(e) Dividends and Distributions. Upon receipt of a resolution
of the Fund's Board of Trustees authorizing the declaration and payment of
dividends and distributions, PFPC shall issue dividends and distributions
declared by the Fund in Shares, or, upon shareholder election, pay such
dividends and distributions in cash, if provided for in the Fund's prospectus.
Such issuance or payment, as well as payments upon redemption as described
above, shall be made after deduction and payment of the required amount of funds
to be withheld in accordance
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<PAGE>
with any applicable tax laws or other laws, rules or regulations. PFPC shall
mail to the Fund's shareholders such tax forms and other information, or
permissible substitute notice, relating to dividends and distributions paid by
the Fund as are required to be filed and mailed by applicable law, rule or
regulation. PFPC shall prepare, maintain and file with the IRS and other
appropriate taxing authorities reports relating to all dividends above a
stipulated amount paid by the Fund to its shareholders as required by tax or
other law, rule or regulation.
(f) Shareholder Account Services.
(i) PFPC may arrange, in accordance with the prospectus,
for issuance of Shares obtained through:
- Any pre-authorized check plan; and
- Direct purchases through broker wire orders, checks
and applications.
(ii) PFPC may arrange, in accordance with the prospectus,
for a shareholder's:
- Exchange of Shares for shares of another fund with
which the Fund has exchange privileges;
- Automatic redemption from an account where that
shareholder participates in a automatic redemption
plan; and/or
- Redemption of Shares from an account with a
checkwriting privilege.
(g) Communications to Shareholders. Upon timely Written
Instructions, PFPC shall mail all communications by the Fund to its
shareholders, including:
(i) Reports to shareholders;
(ii) Confirmations of purchases and sales of Fund shares;
(iii) Monthly or quarterly statements;
(iv) Dividend and distribution notices;
(v) Proxy material; and
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<PAGE>
(vi) Tax form information.
In addition, PFPC will receive and tabulate the proxy cards
for the meetings of the Fund's shareholders.
(h) Records. PFPC shall maintain records of the accounts for
each shareholder showing the following information:
(i) Name, address and United States Tax Identification
or Social Security number;
(ii) Number and class of Shares held and number and class
of Shares for which certificates, if any, have been
issued, including certificate numbers and
denominations;
(iii) Historical information regarding the account of each
shareholder, including dividends and distributions
paid and the date and price for all transactions on
a shareholder's account;
(iv) Any stop or restraining order placed against a
shareholder's account;
(v) Any correspondence relating to the current
maintenance of a shareholder's account;
(vi) Information with respect to withholdings; and
(vii) Any information required in order for the transfer
agent to perform any calculations contemplated or
required by this Agreement.
(i) Lost or Stolen Certificates. PFPC shall place a stop
notice against any certificate reported to be lost or stolen and comply with all
applicable federal regulatory requirements for reporting such loss or alleged
misappropriation. A new certificate shall be registered and issued only upon:
(i) The shareholder's pledge of a lost instrument bond
or such other appropriate indemnity bond issued by a
surety company approved by PFPC; and
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<PAGE>
(ii) Completion of a release and indemnification
agreement signed by the shareholder to protect PFPC
and its affiliates.
(j) Shareholder Inspection of Stock Records. Upon a request
from any Fund shareholder to inspect stock records, PFPC will notify the Fund
and the Fund will issue instructions granting or denying each such request.
Unless PFPC has acted contrary to the Fund's instructions, the Fund agrees and
does hereby, release PFPC from any liability for refusal of permission for a
particular shareholder to inspect the Fund's stock records.
(k) Withdrawal of Shares and Cancellation of Certificates.
Upon receipt of Written Instructions, PFPC shall cancel outstanding certificates
surrendered by the Fund to reduce the total amount of outstanding shares by the
number of shares surrendered by the Fund.
15. DURATION AND TERMINATION. This Agreement shall be effective on the
date first above written and shall continue in effect for an initial period of
one (1) year. Thereafter, this Agreement shall continue automatically for
successive terms of one (1) year; provided, however, that this Agreement may be
terminated by either party upon 120 days' prior written notice to the other
party.
16. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notices shall be addressed (a) if to PFPC, at 400
Bellevue Parkway, Wilmington, Delaware 19809; (b) if to the Fund, at 667 Madison
Avenue, 16th Floor, New York, NY 10021; (c) if to neither of the foregoing, at
such other address as shall have been given by like notice to the sender of any
such notice or other communication by the other party. If notice is
- 13 -
<PAGE>
sent by confirming telegram, cable, telex or facsimile sending device, it shall
be deemed to have been given immediately. If notice is sent by first-class mail,
it shall be deemed to have been given three days after it has been mailed. If
notice is sent by messenger, it shall be deemed to have been given on the day it
is delivered.
17. AMENDMENTS. This Agreement, or any term thereof, may be changed or
waived only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
18. DELEGATION; ASSIGNMENT. PFPC may assign its rights and delegate its
duties hereunder to any wholly-owned direct or indirect subsidiary of PNC Bank,
National Association or PNC Bank Corp., provided that (i) PFPC gives the Fund
thirty (30) days' prior written notice; (ii) the delegate (or assignee) agrees
with PFPC and the Fund to comply with all relevant provisions of the 1940 Act;
and (iii) PFPC and such delegate (or assignee) promptly provide such information
as the Fund may request, and respond to such questions as the Fund may ask,
relative to the delegation (or assignment), including (without limitation) the
capabilities of the delegate (or assignee).
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
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<PAGE>
21. MISCELLANEOUS.
(a) Entire Agreement. This Agreement embodies the entire
agreement and understanding between the parties and supersedes all prior
agreements and understandings relating to the subject matter hereof, provided
that the parties may embody in one or more separate documents their agreement,
if any, with respect to delegated duties and Oral Instructions.
(b) Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(c) Governing Law. This Agreement shall be deemed to be a
contract made in Delaware and governed by Delaware law, without regard to
principles of conflicts of law.
(d) Partial Invalidity. If any provision of this Agreement
shall be held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
(e) Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(f) Facsimile Signatures. The facsimile signature of any party
to this Agreement shall constitute the valid and binding execution hereof by
such party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
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<PAGE>
PFPC INC.
By: /s/ Robert F. Krause
------------------------
Name: Robert F. Krause
Title: Vice President
E.I.I. REALTY SECURITIES TRUST
By: /s/ Richard J. Adler
------------------------
Name: Richard J. Adler
Title: Chairman of the Board and
Chief Executive Officer
- 16 -
<PAGE>
EXHIBIT A
THIS EXHIBIT A, dated as of June 4, 1998, is Exhibit A to that certain
Transfer Agency Services Agreement dated as of June 4, 1998 between PFPC Inc.
and E.I.I. Realty Securities Trust.
PORTFOLIOS
E.I.I. Realty Securities Fund
- 17 -
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
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- 18-
THE E.I.I. REALTY SECURITIES TRUST
SHAREHOLDER SERVICING PLAN
ADVISER SHARES
INVESTOR SHARES
This Shareholder Servicing Plan (the "Plan") is adopted by the E.I.I.
Realty Securities Trust, a business trust organized under the laws of Delaware
(the "Trust"), on behalf of the Adviser Shares and Investor Shares (the
"Shares") of the E.I.I. Realty Securities Fund (the "Fund"), subject to the
following terms and conditions:
SECTION 1. ANNUAL FEES.
Shareholder Services Fee. The Shares of the Fund may pay to financial
institutions or other persons that provide certain services to the Shares of the
Fund (each, a "Service Provider"), a shareholder services fee under the Plan at
the annual rate of 0.25% of the average daily net assets of such Shares of the
Fund for which the Service Provider provides services (the "Services Fee").
Adjustment to Fees. Any Fund may pay a Services Fee to the Service
Provider at a lesser rate than the fees specified in Section 1 hereof as agreed
upon by the Board of Trustees and each Service Provider and approved in the
manner specified in Section 3 of this Plan.
Payment of Fees. The Services Fees will be calculated daily and paid
monthly by the Shares of the Fund at the annual rates indicated above.
SECTION 2. EXPENSES COVERED BY THE PLAN.
Services Fees may be used by the Service Provider for payments to
financial institutions and persons who provide administrative and support
services to their customers who may from time to time beneficially own Shares,
which may include: (i) establishing and maintaining accounts and records
relating to shareholders; (ii) processing dividend and distribution payments
from the Fund on behalf of shareholders; (iii) providing information
periodically to shareholders showing their positions in shares and integrating
such statements with those of other transactions and balances in shareholders'
other accounts serviced by such financial institution; (iv) arranging for bank
wires; (v) responding to shareholder inquiries relating to the services
performed; (vi) responding to routine inquiries from shareholders concerning
their investments; (vii) providing subaccounting with respect to shares
beneficially owned by shareholders, or the information to the Fund necessary for
subaccounting; (viii) if required by law, forwarding shareholder communications
from the Fund (such as proxies, shareholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices) to
shareholders; (ix) assisting in processing purchase, exchange and redemption
requests from shareholders and in placing such orders with service contractors;
(x) assisting shareholders in changing dividend options, account designations
and addresses; (xi) providing shareholders with a service that invests the
assets of their accounts in shares pursuant to specific or pre-authorized
instructions; and (xii) providing such other similar
<PAGE>
services as the Fund may reasonably request to the extent the Service Provider
is permitted to do so under applicable statutes, rules and regulations.
SECTION 3. APPROVAL OF TRUSTEES.
Neither the Plan nor any related agreements will take effect until
approved by a majority of the Board of Trustees of the Trust cast in person at a
meeting called for the purpose of voting on the Plan and the related agreements.
SECTION 4. CONTINUANCE OF THE PLAN.
The Plan will continue in effect until two years from the date of
effectiveness as it pertains to the Shares of the Fund, and thereafter for
successive twelve-month periods; provided, however, that such continuance is
specifically approved at least annually by the Trustees of the Fund.
SECTION 5. TERMINATION.
The Plan may be terminated at any time with respect to the Shares of
the Fund (i) by the Fund without the payment of any penalty, by the vote of a
majority of the outstanding voting securities of the Shares of the Fund or (ii)
by a vote of the Trustees. The Plan may remain in effect with respect to the
Shares of the Fund even if the Plan has been terminated in accordance with this
Section 5 with respect to any other Fund.
SECTION 6. AMENDMENTS.
No material amendment to the Plan may be made unless approved by the
Trust's Board of Trustees in the manner described in Section 3 above.
SECTION 7. LIMIT OF LIABILITY.
The obligations of the Fund under this Plan, if any, shall not be
binding upon the Trustees individually or upon holders of Shares of the Fund
individually but shall be binding only upon the assets and property of the Fund.
SECTION 8. MEANINGS OF CERTAIN TERMS.
As used in the Plan, the term "majority of the outstanding voting
securities" will be deemed to have the same meaning that term has under the
Investment Company Act of 1940, as amended, by the Securities and Exchange
Commission.
Approved: April 28, 1998
2
<PAGE>
SHAREHOLDER SERVICING AGREEMENT
ADVISER SHARES
INVESTOR SHARES
THE E. I. I. REALTY SECURITIES TRUST
C/O PFPC
P.O. BOX 8910
WILMINGTON, DELAWARE 19899-8910
To: _______________
We (the "Trust") wish to enter into this Servicing Agreement with you
concerning the provision of support services to your client ("Clients") who may
from time to time beneficially own Adviser Shares or Investor Shares ("Shares")
of the E.I.I. Realty Securities Fund (the "Fund").
The terms and conditions of this Servicing Agreement are as follows:
SECTION 1. You agree to provide the following support services to
Clients who may from time to time beneficially own Shares:/1/ (i) establishing
and maintaining accounts and records relating to Clients that invest in Shares;
(ii) processing dividend and distribution payments from us on behalf of Clients;
(iii) providing information periodically to Clients showing their positions in
Shares and integrating such statements with those of other transactions and
balances in Clients' other accounts serviced by you; (iv) arranging for bank
wires; (v) responding to Client inquiries relating to the services performed by
you; (vi) responding to routine inquiries from Clients concerning their
investments in Shares; (vii) providing subaccounting with respect to Shares
beneficially owned by Clients, or the information to us necessary for
subaccounting; (viii) if required by law, forwarding shareholder communications
from us (such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to Clients; (ix)
assisting in processing purchase, exchange and redemption requests from Clients
and in placing such orders with our service contractors; (x) assisting Clients
in changing dividend options, account designations and addresses; (xi) providing
Clients with a service that invests the assets of their accounts in Shares
pursuant to specific or pre-authorized instructions; and (xii) providing such
other similar services as we may reasonably request to the extent you are
permitted to do so under applicable statutes, rules and regulations.
SECTION 2. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonably necessary or beneficial in order to provide the aforementioned
services and assistance to Clients.
- --------
/1/ Series may be modified or omitted in the particular case and items
renumbered.
<PAGE>
SECTION 3. Neither you nor any of your officers, employees or agents
are authorized to make any representations concerning us or the Shares except
those contained in our then current prospectuses and statement of additional
information, copies of which will be supplied by us to you, or in such
supplemental literature or advertising as may be authorized by us in writing.
SECTION 4. For all purposes of this Agreement you will be deemed to be
an independent contractor, and will have no authority to act as agent for us in
any matter or in any respect. By your written acceptance of this Agreement, you
agree to and do release, indemnify and hold us harmless from and against any and
all direct or indirect liabilities or losses resulting from requests,
directions, actions, or inactions of or by you or your officers, employees or
agents regarding your responsibilities hereunder or the purchase, redemption,
transfer or registration of Shares (or orders relating to the same) by or on
behalf of Clients. You and your employees will, upon request, be available
during normal business hours to consult with us or our designees concerning the
performance of your responsibilities under this Agreement.
SECTION 5. In consideration of the services and facilities provided by
you hereunder, we will pay to you, and you will accept as full payment therefor,
a fee at the annual rate of __ one-hundredths of one percent (.__%) of the
average daily net asset value of the Shares beneficially owned by your Clients
for whom you are the dealer of record or holder of record or with whom you have
a servicing relationship (the "Clients' Shares"), which fee will be computed
daily (on the basis of 360-day year) and payable monthly. For purposes of
determining the fees payable under this Section 5, the average daily net asset
value of the Clients' Shares will be computed in the manner specified in our
Registration Statement (as the same is in effect from time to time) in
connection with the computation of the net asset value of Shares for purposes of
purchases and redemptions. By your written acceptance of this Agreement, you
agree to and do waive such portion of any fee payable to you hereunder to the
extent necessary to assure that such fee and other expenses required to be
accrued by us on any day with respect to the Clients' Shares in the Fund to the
extent that the Fund declares its net investment income as a dividend to
shareholders on a daily basis does not exceed the income to be accrued by us to
such Shares on that day. The fee rate stated above may be prospectively
increased or decreased by us, in our sole discretion, at any time upon notice to
you. Further, we may, in our discretion and without notice, suspend or withdraw
the sale of Shares, including the sale of Shares to you for the account of any
Client or Clients.
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by us pursuant to this Agreement will provide to our Board of
Trustees, and our trustees will review, at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures were made.
In addition, you will furnish us or our designees with such information as we or
they may reasonably request (including, without limitation, periodic
certifications confirming the provision to Clients of the services described
herein), and will otherwise cooperate with us and our designees (including,
without limitation, any auditors designated by us), in connection with the
preparation of reports to our Board of
2
<PAGE>
Trustees concerning this Agreement and the monies paid or payable by us pursuant
hereto, as well as any other reports or filings that may be required by law.
SECTION 7. We may enter into other similar Servicing Agreements with
any other person or persons without your consent.
SECTION 8. By your written acceptance of this Agreement, you represent,
warrant and agree that: (i) the compensation payable to you in connection with
the investment of your Clients' assets in Shares will be disclosed by you to
your Clients, will be authorized by your Clients and will not be excessive; and
(ii) the services provided by you under this Agreement will in no event be
primarily intended to result in the sale of Shares.
SECTION 9. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or our designee. This
Agreement is terminable without penalty at any time by us (which termination may
be by a vote of a majority of the Trustees) or by you upon written notice to the
other party hereto.
SECTION 10. All notices and other communications to either you or us
will be duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunication device to the appropriate address stated herein, or to such
other address as either party shall so provide the other.
SECTION 11. This Agreement will be construed in accordance with the
laws of the State of Delaware and is non-assignable by the parties hereto.
SECTION 12. This Agreement has been approved by vote of a majority of
our Board of Trustees cast in person at a meeting called for the purpose of
voting on such approval.
SECTION 13. The names the "E. I. I. Realty Securities Trust" and the
"Board of Trustees" refer respectively to the Trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under a
Certificate of Trust filed at the office of the State Secretary of Delaware on
December 22, 1997. The obligations of the "E. I. I. Realty Securities Trust"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually but in such capacities, and
are not binding upon any of the Trustees, Shareholders or representatives of the
Trust personally, but bind only the Trust Property (as defined in the Trust
Instrument), and all persons dealing with any class of Shares of our must look
solely to the Trust Property belonging to such class for the enforcement of any
claims against us.
3
<PAGE>
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to us, c/o PFPC, P.O. Box 8910, Wilmington, Delaware 19899-8910.
Very truly yours,
E. I. I. REALTY SECURITIES TRUST
Date: ________________________ By: ________________________
(Authorized Officer)
Title:
Accepted and Agreed to:
Date: ________________________ By: ________________________
(Authorized Officer)
Title:
4
[LETTERHEAD OF KRAMER, LEVIN, NAFTALIS & FRANKEL]
June 2, 1998
E.I.I. Realty Securities Trust
667 Madison Avenue
New York, New York 10021
Re: The E.I.I. Realty Securities Trust
Ladies/Gentlemen:
We have acted as counsel for The E.I.I. Realty Securities Trust, a
Delaware business trust (the "Trust"), in connection with the proposed public
offering of shares of beneficial interest, having a par value of $.001 (the
"Shares") of The E.I.I. Realty Securities Fund, a series of the Trust, pursuant
to a registration statement on Form N-1A (File No. 811- 08649) (the
"Registration Statement"), filed with the Securities and Exchange Commission
under the Securities Act of 1933, and the Investment Company Act of 1940, as
amended.
We have reviewed the Trust's Certificate of Trust, its Delaware Trust
Instrument and its By-Laws, resolutions of the Board of Trustees of the Trust,
and the Registration Statement (including all Pre-Effective Amendments and
exhibits thereto). We have also made such inquiries and have examined originals,
certified copies or copies otherwise identified to our satisfaction of such
documents, records and other instruments as we have deemed necessary or
appropriate for the purposes of this opinion. For purposes of such examination,
we have assumed the genuineness of all signatures on original documents and the
conformity to the original documents of all copies submitted.
<PAGE>
The E.I.I. Realty Securities Trust
June 2, 1998
page 2
We are members of the Bar of the State of New York and do not hold
ourselves out as experts as to the law of any other state or jurisdiction. We
have received and relied upon an opinion from Morris, Nichols, Arsht & Tunnell,
special Delaware counsel, a copy of which is attached herewith, concerning the
organization of the Trust and the authorization and issuance of the Shares.
Based upon and subject to the foregoing, we are of the opinion, and so
advise you as follows:
i. The Trust is duly organized and validly existing as a business
trust in good standing under the laws of the State of Delaware.
ii. The shares of The E.I.I. Realty Securities Fund to be offered for
sale pursuant to the Prospectus are duly authorized and, when
sold, issued and paid for as contemplated by the Prospectus, will
have been validly and legally issued and will be fully paid and
nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Kramer, Levin, Naftalis & Frankel
-------------------------------------
<PAGE>
[LETTERHEAD OF MORRIS, NICHOLS, ARSHT & TUNNELL]
May 22, 1998
The EII Realty Securities Trust
667 Madison Avenue
New York, New York 10021
Re: The Ell Realty Securities Trust
-------------------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel to The Ell Realty Securities
Trust, a Delaware business trust (the "Trust"), in connection with certain
matters relating to the organization of the Trust and the issuance of Shares of
beneficial interest in the Trust. Capitalized terms used herein and not
otherwise herein defined are used as defined in the Trust Instrument of the
Trust dated December 22, 1997 (the "Governing Instrument").
In rendering this opinion, we have examined copies of the following
documents, each in the form provided to us: the Certificate of Trust of the
Trust as filed in the Office of the Secretary of State of the State of Delaware
(the "Recording Office") on December 23, 1997 (the "Certificate"); the Corrected
Certificate of Trust of the Trust as filed in the Recording Office on April 30,
1998; the Governing Instrument; the Bylaws of the Trust; certain resolutions
prepared for adoption at the April 28, 1998 meeting of the Board of Trustees;
the Trust's Notification Of Registration Filed Pursuant to Section 8(a) of the
Investment Company Act of 1940 on Form N-8A as filed with the Securities and
Exchange Commission on February 10, 1998; the Trust's Registration Statement on
Form N-IA as filed with the Securities and Exchange Commission on February 10,
1998 (the "Registration Statement"); and a certification of good standing of the
Trust obtained as of a recent date from the Recording Office. In such
examinations, we have assumed the genuineness of all signatures, the conformity
to original documents of all documents submitted to us as copies or drafts of
documents to be executed, and the legal capacity of natural persons to complete
the execution of documents. We have further assumed for the purpose of this
opinion: (i) the due authorization, execution, adoption and delivery by, or on
behalf of, each of the parties thereto of the above-referenced instruments,
resolutions, certificates and other documents, and of all documents contemplated
by the Governing Instrument and applicable resolutions of the Trustees, to be
executed by investors desiring to become Shareholders; (ii) the payment of
consideration for Shares, and the application of such consideration, as provided
in the Governing Instrument, and compliance with the other terms, conditions and
restrictions set forth in the Governing Instrument and all applicable
resolutions of the Trustees in connection with the issuance of Shares
(including, without limitation, the taking of all appropriate action by the
Trustees to designate Series of Shares and the rights and preferences
attributable thereto as contemplated by the Governing
<PAGE>
The EII Realty Securities Trust
May 22, 1998
Instrument); (iii) that appropriate notation of the names and addresses of, the
number of Shares held by, and the consideration paid by, Shareholders will be
maintained in the appropriate registers and other books and records of the Trust
in connection with the issuance or transfer of Shares; (iv) that no event has
occurred subsequent to the filing of the Certificate that would cause a
termination or dissolution of the Trust under Sections 11.04 or 11.05 of the
Governing Instrument; (v) that the activities of the Trust have been and will be
conducted in accordance with the terms of the Governing Instrument and the
Delaware Act; and (vi) that each of the documents examined by us is in full
force and effect and has not been modified, supplemented or otherwise amended
except as herein referenced. No opinion is expressed herein with respect to the
requirements of, or compliance with, federal or state securities or blue sky
laws. Further, we express no opinion on the sufficiency or accuracy of the
Registration Statement or any other registration or offering material relating
to the Trust or the Shares. As to any facts material to our opinion other than
those assumed, we have relied without independent investigation on the
above-referenced documents and on the accuracy, as of the date hereof, of the
matters therein contained.
Based on and subject to the foregoing, and limited in all
respects to matters of Delaware law, it is our opinion that:
1. The Trust is a duly organized and validly existing business
trust in good standing under the laws of the State of Delaware.
2. The Shares, when issued to Shareholders in accordance with the
terms, conditions, requirements and procedures set forth in the Governing
Instrument, will constitute legally issued, fully paid and non-assessable Shares
of beneficial interest in the Trust.
3 . Under the Delaware Act and the terms of the Governing
Instrument, each Shareholder of the Trust in such capacity, will be entitled to
the same limitation of personal liability as that extended to stockholders of
private corporations for profit organized under the general corporation law of
the State of Delaware; provided, however, that we express no opinion with
respect to the liability of any Shareholder who is, was or may become a named
Trustee of the Trust.
We hereby consent to the filing of a copy of this opinion with
the Securities and Exchange Commission as an exhibit to a pre-effective
amendment to the Registration Statement. In giving this consent we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder. Except as
provided in this paragraph, the opinion set forth above is expressed solely for
the benefit of the
<PAGE>
The EII Realty Securities Trust
May 22, 1998
addressee hereof in connection with the matters contemplated hereby and may not
be relied upon by, or filed with, any other person or entity or for any other
purpose without our prior written consent.
Sincerely,
/s/ MORRIS, NICHOLS, ARSHT & TUNNELL
------------------------------------
MORRIS, NICHOLS, ARSHT & TUNNELL
[LETTERHEAD OF KRAMER, LEVIN, NAFTALIS & FRANKEL]
June 4, 1998
E.I.I. Realty Securities Trust
667 Madison Avenue, 16th Floor
New York, New York 10021
Re: E.I.I. Realty Securities Trust
File No. 333-45959
------------------
Gentlemen:
We hereby consent to the reference to our firm as counsel in this
Pre-Effective Amendment No. 2 to the Registration Statement on Form N-1A.
Very truly yours,
/s/Kramer, Levin, Naftalis & Frankel
------------------------------------
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our report dated June 1, 1998, in this Registration Statement
(Form N-1A No. 333- 45959) of E.I.I. Realty Securities Trust.
/s/ERNST & YOUNG LLP
ERNST & YOUNG LLP
New York, New York
June 1, 1998
E.I.I. REALTY SECURITIES, INC.
667 Madison Avenue
New York, NY 10021
May 4, 1998
E.I.I. Realty Securities Fund
667 Madison Avenue
New York, NY 10021
Ladies/Gentlemen:
E.I.I. Realty Securities, Inc. ("E.I.I.") hereby offers to purchase
10,000 shares of E.I.I. Realty Securities Fund (the "Seed Capital Shares"). This
letter will confirm that E.I.I. is purchasing the Seed Capital Shares for its
own account for investment purposes only and not with a view to reselling or
otherwise distributing such shares.
E.I.I. agrees and hereby undertakes that, in the event any of the Seed
Capital Shares are redeemed during the period of amortization of the Fund's
organizational expenses, the redemption proceeds will be reduced by any
unamortized organizational expenses in the same proportion as the number of Seed
Capital Shares being redeemed bears to the number of Seed Capital Shares
outstanding at the time of redemption.
Sincerely,
/s/Richard J. Adler
-------------------
Richard J. Adler
Managing Director
E.I.I. Realty Securities, Inc.
RULE 12b-1 DISTRIBUTION PLAN
<PAGE>
PLAN FOR PAYMENT OF CERTAIN EXPENSES
FOR DISTRIBUTION OF SHARES
A Plan (the "Plan") pertaining to Investor Shares of the
E.I.I. Realty Securities Fund (the "Fund"), a series of the E.I.I. Realty
Securities Trust (the "Trust"), a Delaware business trust and an open-end,
diversified management investment company registered under the Investment
Company Act of 1940, as amended (the "Act"), adopted pursuant to Section 12(b)
of the Act and Rule 12b-1 promulgated thereunder ("Rule 12b-1").
1. Distribution Payments. (a) The Fund, either directly or
through E.I.I. Realty Securities, Inc. (the "Investment Adviser"), may make
payments periodically (i) to a distributor of Investor Shares of the Fund (the
"Distributor") or to any broker-dealer (a "Broker") who is registered under the
Securities Exchange Act of 1934 and a member in good standing of the National
Association of Securities Dealers, Inc. and who has entered into a selected
dealer agreement with the Distributor, (ii) to other persons or organizations
("Distribution Agents") who have entered into shareholder servicing agreements
with the Trust on behalf of the Fund for the distribution of the Fund's Investor
Shares, or (iii) to the Distributor, a Broker, the Investment Advisor, a
Distribution Agent, or any other person for expenses associated with
distribution of the Fund's Investor Shares, including the compensation of the
sales personnel of the Distributor.
(b) The schedule of such fees and the basis upon which such
fees will be paid shall be determined from time to time by the Distributor and
the Investment Adviser subject to approval by the Board of Trustees of the
Trust.
<PAGE>
(c) Payments may also be made for any advertising and
promotional expenses relating to selling efforts, including but not limited to
the incremental costs of printing prospectuses, statements of additional
information, annual reports and other periodic reports for distribution to
persons who are not shareholders of the Fund; costs of preparing and
distributing any other supplemental sales literature; costs of radio,
television, newspaper and other advertising; telecommunications expenses,
including the cost of telephones, telephone lines and other communications
equipment, incurred by or for the Distributor or other person in carrying out
its obligations under an agreement with the Trust.
(d) The aggregate amount of all payments by the Fund in any
fiscal year, to the Distributor, Brokers, the Investment Advisor, Distribution
Agents and for advertising and promotional expenses pursuant to paragraphs (a),
(b), (c) of this Section 2 shall not exceed 0.75% of the average daily net asset
value attributable to Investor Shares of the Fund on an annual basis for such
fiscal year, or such lesser amounts as determined appropriate. The Plan will
only make payments for expenses actually incurred on a first-in, first-out
basis. The amount of expenses incurred in any year may not exceed the rate of
reimbursement set forth in the Plan. The unreimbursed amounts may be recovered
through future payments under the Plan. Carry-over amounts are not limited in
the number of years they may be carried forward. If the Plan is terminated in
accordance with its terms, the obligations of the Fund to make payments pursuant
to the Plan will cease and the Fund will not be required to make any payments
past the date the Plan terminates.
2. Reports. Quarterly, in each year that this Plan remains in
effect, the Trust's Principal Financial Officer shall prepare and furnish to the
Board of Trustees of the
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<PAGE>
Trust a written report, complying with the requirements of Rule 12b-l, setting
forth the amounts expended by the Fund under the Plan and purposes for which
such expenditures were made.
3. Approval of Plan. This Plan shall become effective upon
approval of the Plan as it pertains to the Fund, the form of Selected Dealer
Agreement and the form of Shareholder Servicing Agreement, by a majority vote of
the Board of Trustees, including a majority of those Trustees who are not
interested persons of the Trust (as defined in Section 2(a)(19) of the Act) and
who have no direct or indirect financial interest in the operation of the Plan
or in any agreements related to it (the "Qualified Trustees"), cast in person at
a meeting called for the purpose of voting on the Plan.
4. Term. This Plan as it pertains to the Fund shall remain in
effect for one year from its adoption date and may be continued thereafter if
this Plan and all related agreements are approved at least annually by a
majority vote of the Trustees, including the Qualified Trustees, cast in person
at a meeting called for the purpose of voting on such Plan and agreements. This
Plan may not be amended as it pertains to the Fund in order to increase
materially the amount to be spent for distribution assistance without
shareholder approval. All material amendments to this Plan must be approved by a
vote of the Board of Trustees, and of the Qualified Trustees, cast in person at
a meeting called for the purpose of voting thereon.
5. Termination. This Plan may be terminated as it pertains to
the Fund at any time by a majority vote of the Qualified Trustees or by vote of
a majority of the outstanding voting securities of the Fund, as defined in
section 2(a)(42) of the Act.
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<PAGE>
6. Nomination of "Disinterested" Trustees. While this Plan
shall be in effect, the selection and nomination of the "disinterested" Trustees
of the Trust shall be committed to the discretion of the Qualified Trustees then
in office.
7. Miscellaneous. (a) Any termination or noncontinuance of (i)
a Selected Dealer Agreement between the Distributor and a particular Broker, or
(ii) any other Agreement between the Investment Advisor or the Trust on behalf
of the Fund and a particular person or organization, shall have no effect on any
similar agreements between Brokers or other persons and the Fund, the Investment
Advisor or the Distributor pursuant to this Plan.
(b) Neither the Distributor, the Investment Advisor nor the
Fund shall be under any obligation because of this Plan to execute any Selected
Dealer Agreement with any Broker or any other Agreement with any person or
organization.
(c) All agreements with any person or organization relating to
the implementation of this Plan shall be in writing and any agreement related to
this Plan shall be subject to termination, without penalty, pursuant to the
provisions of Section 5 hereof.
dated: April 28, 1998
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<PAGE>
EXHIBIT A
SHAREHOLDER SERVICING AGREEMENT
INVESTOR SHARES
THE E.I.I. REALTY SECURITIES TRUST
C/O PFPC
P.O. BOX 8910
WILMINGTON, DELAWARE 19899-8910
To: _______________
We (the "Trust") wish to enter into this Servicing Agreement with you
concerning the provision of support services to your client ("Clients") who may
from time to time beneficially own Investor Shares ("Shares") of the E.I.I.
Realty Securities Fund (the "Fund").
The terms and conditions of this Servicing Agreement are as follows:
SECTION 1. You agree to provide the following support services to
Clients who may from time to time beneficially own Shares:/1/ (i) establishing
and maintaining accounts and records relating to Clients that invest in Shares;
(ii) processing dividend and distribution payments from us on behalf of Clients;
(iii) providing information periodically to Clients showing their positions in
Shares and integrating such statements with those of other transactions and
balances in Clients' other accounts serviced by you; (iv) arranging for bank
wires; (v) responding to Client inquiries relating to the services performed by
you; (vi) responding to routine inquiries from Clients concerning their
investments in Shares; (vii) providing subaccounting with respect to Shares
beneficially owned by Clients, or the information to us necessary for
subaccounting; (viii) if required by law, forwarding shareholder communications
from us (such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to Clients; (ix)
assisting in processing purchase, exchange and redemption requests from Clients
and in placing such orders with our service contractors; (x) assisting Clients
in changing dividend options, account designations and addresses; (xi) providing
Clients with a service that invests the assets of their accounts in Shares
pursuant to specific or pre-authorized instructions; and (xii) providing such
other similar services as we may reasonably request to the extent you are
permitted to do so under applicable statutes, rules and regulations.
SECTION 2. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in
- --------
/1/ Series may be modified or omitted in the particular case and items
renumbered.
<PAGE>
your business, or any personnel employed by you) as may be reasonably necessary
or beneficial in order to provide the aforementioned services and assistance to
Clients.
SECTION 3. Neither you nor any of your officers, employees or agents
are authorized to make any representations concerning us or the Shares except
those contained in our then current prospectuses and statement of additional
information, copies of which will be supplied by us to you, or in such
supplemental literature or advertising as may be authorized by us in writing.
SECTION 4. For all purposes of this Agreement you will be deemed to be
an independent contractor, and will have no authority to act as agent for us in
any matter or in any respect. By your written acceptance of this Agreement, you
agree to and do release, indemnify and hold us harmless from and against any and
all direct or indirect liabilities or losses resulting from requests,
directions, actions, or inactions of or by you or your officers, employees or
agents regarding your responsibilities hereunder or the purchase, redemption,
transfer or registration of Shares (or orders relating to the same) by or on
behalf of Clients. You and your employees will, upon request, be available
during normal business hours to consult with us or our designees concerning the
performance of your responsibilities under this Agreement.
SECTION 5. In consideration of the services and facilities provided by
you hereunder, we will pay to you, and you will accept as full payment therefor,
a fee at the annual rate of __ one-hundredths of one percent (.__%) of the
average daily net asset value of the Shares beneficially owned by your Clients
for whom you are the dealer of record or holder of record or with whom you have
a servicing relationship (the "Clients' Shares"), which fee will be computed
daily (on the basis of 360-day year) and payable monthly. For purposes of
determining the fees payable under this Section 5, the average daily net asset
value of the Clients' Shares will be computed in the manner specified in our
Registration Statement (as the same is in effect from time to time) in
connection with the computation of the net asset value of Shares for purposes of
purchases and redemptions. By your written acceptance of this Agreement, you
agree to and do waive such portion of any fee payable to you hereunder to the
extent necessary to assure that such fee and other expenses required to be
accrued by us on any day with respect to the Clients' Shares in the Fund to the
extent that the Fund declares its net investment income as a dividend to
shareholders on a daily basis does not exceed the income to be accrued by us to
such Shares on that day. The fee rate stated above may be prospectively
increased or decreased by us, in our sole discretion, at any time upon notice to
you. Further, we may, in our discretion and without notice, suspend or withdraw
the sale of Shares, including the sale of Shares to you for the account of any
Client or Clients.
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by us pursuant to this Agreement will provide to our Board of
Trustees, and our trustees will review, at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures were made.
In addition, you will furnish us or our designees with
- 2 -
<PAGE>
such information as we or they may reasonably request (including, without
limitation, periodic certifications confirming the provision to Clients of the
services described herein), and will otherwise cooperate with us and our
designees (including, without limitation, any auditors designated by us), in
connection with the preparation of reports to our Board of Trustees concerning
this Agreement and the monies paid or payable by us pursuant hereto, as well as
any other reports or filings that may be required by law.
SECTION 7. We may enter into other similar Servicing Agreements with
any other person or persons without your consent.
SECTION 8. By your written acceptance of this Agreement, you represent,
warrant and agree that: (i) the compensation payable to you in connection with
the investment of your Clients' assets in Shares will be disclosed by you to
your Clients, will be authorized by your Clients and will not be excessive; and
(ii) the services provided by you under this Agreement will in no event be
primarily intended to result in the sale of Shares.
SECTION 9. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or our designee. This
Agreement is terminable without penalty at any time by us (which termination may
be by a vote of a majority of the Disinterested Trustees as defined in Section
12) or by you upon written notice to the other party hereto.
SECTION 10. All notices and other communications to either you or us
will be duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunication device to the appropriate address stated herein, or to such
other address as either party shall so provide the other.
SECTION 11. This Agreement will be construed in accordance with the
laws of the State of Delaware and is non-assignable by the parties hereto.
SECTION 12. This Agreement has been approved by vote of a majority of
(i) our Board of Trustees and (ii) those Trustees who are not "interested
persons" (as defined in the Investment Company Act of 1940) of us and have no
direct or indirect financial interest in this Agreement ("Disinterested
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval.
SECTION 13. The names the "E. I. I. Realty Securities Trust" and the
"Board of Trustees" refer respectively to the Trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under a
Certificate of Trust filed at the office of the State Secretary of Delaware on
December 22, 1997. The obligations of the "E.I.I. Realty Securities Trust"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually but in such capacities, and
are not binding upon any of the Trustees, Shareholders or representatives of the
Trust personally, but bind only the Trust Property (as defined in the Trust
Instrument), and all persons dealing
- 3 -
<PAGE>
with any class of Shares of our must look solely to the Trust Property belonging
to such class for the enforcement of any claims against us.
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to us, c/o PFPC, P.O. Box 8910, Wilmington, Delaware 19899-8910.
Very truly yours,
E. I. I. REALTY SECURITIES TRUST
Date: ________________________ By: ________________________
(Authorized Officer)
Title:
Accepted and Agreed to:
Date: ________________________ By: ________________________
(Authorized Officer)
Title:
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<PAGE>
EXHIBIT B
[Name and Address of Distributor]
Re: Selected Dealer Agreement for
the E.I.I. Realty Securities Trust
-----------------------------------
Gentlemen:
We understand that the E.I.I. Realty Securities Trust (the
"Trust"), on behalf of the E.I.I. Realty Securities Fund (the "Fund"), has
adopted a plan (the "Plan") pertaining to its Investor Shares pursuant to Rule
12b-l of the Investment Company Act of 1940, as amended (the "Act"), for making
payments to selected brokers for distribution assistance of the Fund's Investor
Shares.
We desire to enter into an agreement with you (the
"Agreement") for the sale and distribution of the Investor Shares of the Fund
for which you are Distributor and whose Investor Shares are offered to the
public at net asset value plus any initial sales charge as set forth in the
current prospectus. Upon acceptance of this Agreement by you, we understand that
we may offer and sell Investor Shares of the Fund, subject, however, to all of
the terms and conditions hereof and to your right to suspend or terminate the
sale of such securities.
1. We understand that the Investor Shares of the Fund covered
by this Agreement will be offered and sold at the public offering price. The
public offering price is the net asset value described in the Fund's current
Prospectus in effect at the time the order for such Investor Shares is confirmed
and accepted on your behalf by the Fund plus any initial sales charge. We
further understand that all purchase requests and applications submitted by us
are subject to acceptance or rejection in the Fund's or your sole discretion.
2. We certify that we are members of the National Association
of Securities Dealers, Inc. ("NASD") and agree to maintain membership in said
association, or in the alternative, that we are foreign brokers not eligible for
membership in said association. In either case, we agree to abide by all the
rules and regulations of the NASD which are binding upon underwriters and
brokers in the distribution of the shares of open-end investment companies,
including without limitation, Section 26 of Article III of the Rules of Fair
Practice, all of which are incorporated herein as if set forth in full. We
further agree to comply with all applicable state and Federal laws and the rules
and regulations of authorized regulatory agencies. We agree that we will not
sell or offer for sale, shares of the Fund in any state or jurisdiction where
they are not exempt from registration or have not been qualified for sale.
3. We will offer and sell the Investor Shares of the Fund
covered by this Agreement only in accordance with the terms and conditions of
its then current Prospectus,
<PAGE>
and we will make no representations not included in said Prospectus or in any
authorized supplemental material supplied by you. We will use our best efforts
in the development and promotion of sales of the Investor Shares covered by this
Agreement and agree to be responsible for the proper instruction and training of
all sales personnel employed by us, in order that the Investor Shares will be
offered in accordance with the terms and conditions of this Agreement and all
applicable laws, rules and regulations. We agree to hold you harmless and
indemnify you in the event that we, or any of our sales representatives, should
violate any law, rule or regulation, or any provisions of this Agreement, which
may result in liability to you; and in the event you determine to refund any
amount paid by any investor by reason of any such violation on our part, we
shall return to you any distribution assistance payments previously paid or
allowed by you to us with respect to the transaction for which the refund is
made. All expenses which we incur in connection with our activities under this
Agreement shall be borne by us.
4. For purposes of this Agreement "Qualified Accounts" shall
mean: accounts of customers of ours who have purchased Investor Shares of the
Fund and who use our facilities to communicate with the Fund or to effect
redemptions or additional purchases of Investor Shares and with respect to which
we provide shareholder and administration services, which services may include,
without limitation: answering inquiries regarding the Fund; assistance to
customers in changing dividend options, account designations and addresses;
performance of sub-accounting; establishment and maintenance of shareholder
accounts and records; processing purchase and redemption transactions; automatic
investment in Investor Shares of customer account cash balances; providing
periodic statements showing a customer's account balance and the integration of
such statements with those of other transactions and balances in the customer's
other accounts serviced by us; arranging for bank wires; and such other
information and services as you reasonably may request, to the extent we are
permitted by applicable statute, rule or regulation.
5. In consideration of the services and facilities described
herein, we shall be entitled to receive from you such fees as are set forth in
the Plan for Payment of Certain Expenses for Distribution Shares (the "Plan").
We understand that the payment of such fees has been authorized pursuant to a
Plan approved by the Board of Trustees and shareholders of the Fund and shall be
paid only so long as this Agreement is in effect.
6. The frequency of payment, the terms of any right to sell in
a territory, and any other supplemental terms, conditions or qualifications for
us to receive such payments are subject to change by you from time to time, upon
30 days' written notice. Any orders placed after the effective date of such
change shall be subject to the fee rates in effect at the time of receipt of the
payment by the Fund or you. Such 30-day period may be waived at your sole option
in the event such change increases the distribution assistance payments due us.
7. Payment for Investor Shares shall be made to the Fund and
shall be received by the Fund promptly after the acceptance of our order. If
such payment is not
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<PAGE>
received by the Fund, we understand that the Fund reserves the right without
notice, forthwith to cancel the sale, or, at the Fund's option, to sell the
Investor Shares ordered by us back to the Fund in which latter case we may be
held responsible for any loss, including loss of profit, suffered by the Fund
resulting from our failure to make payments aforesaid.
8. Your obligations to us under this Agreement are subject to
all the provisions of any underwriting agreements you have or may enter into
with the Fund. We understand and agree that in performing our services covered
by this Agreement we are acting as principal, and you are in no way responsible
for the manner of our performance or for any of our acts or omissions in
connection therewith. Nothing in this Agreement or in the Plan shall be
construed to constitute us or any of our agents, employees or representatives as
your agent, partner or employee, or the agent, partner or employee of the Fund.
9. This Agreement shall terminate automatically (i) in the
event of its assignment, the term "assignment" for this purpose having the
meaning defined in Section 2(a)(4) of the Act or (ii) in the event the Plan is
terminated.
10. This Agreement may be terminated at any time (without
payment of any penalty) by a majority of the "Qualified Trustees" as defined in
the Plan or by a vote of a majority of the outstanding voting securities of the
Fund as defined in the Plan (on not more than 60 days' written notice to us at
our principal place of business). We, on 60 days' written notice addressed to
you at your principal place of business, may terminate this Agreement. You may
also terminate this Agreement for cause on violation by us of any of the
provisions of this Agreement, said termination to become effective on the date
of mailing notice to us of such termination. Without limiting the generality of
the foregoing and any provision hereof to the contrary notwithstanding, our
expulsion from the NASD will automatically terminate this Agreement without
notice; our suspension from the NASD or violation of applicable state or Federal
laws or rules and regulations of authorized regulatory agencies will terminate
this Agreement effective upon date of mailing notice to us of such termination.
Your failure to terminate for any cause shall not constitute a waiver of your
right to terminate at a later date for any such cause.
11. A copy of the Certificate of Trust is on file with the
Secretary of State of Delaware, and notice is hereby given that this instrument
is executed on behalf of the Trustees as Trustees and not individually and that
the obligations of this instrument are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets and property of
the Fund.
12. All communications to you shall be sent to you at your
offices at __________________________. Any notice to us shall be duly given if
mailed or telegraphed to us at the address shown on this Agreement.
- 3 -
<PAGE>
13. This Agreement shall become effective as of the date when
it is executed and dated by you below. This Agreement and all the rights and
obligations of the parties hereunder shall be governed by and construed under
the laws of the State of Delaware.
______________________________________
(Broker/Dealer)
By:___________________________________
Name:
Title:
______________________________________
(Address)
______________________________________
(City) (State) (Zip Code)
ACCEPTED:
[Distributor]
By:______________________________________
Name:
Title:
Dated:
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E.I.I. REALTY SECURITIES TRUST
FORM OF
RULE 18f-3 MULTI-CLASS PLAN
I. INTRODUCTION.
Pursuant to Rule 18f-3 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the following sets forth the method for allocating
fees and expenses among each class of shares of the various series (each series
a "Fund") of E.I.I. Realty Securities Trust (the "Trust") that issue multiple
classes of shares, whether now existing or subsequently established (the
"Multi-Class Funds"). In addition, this Rule 18f-3 Multi-Class Plan (the "Plan")
sets forth the shareholder servicing arrangements, distribution arrangements,
conversion features, exchange privileges, and other shareholder services of each
class of shares in the Multi-Class Funds.
The Trust is an open-end series investment company registered under the
1940 Act, the shares of which are registered on Form N-1A under the Securities
Act of 1933 (Registration Nos. 333-45959 and 811-08649). Upon the effective date
of this Plan, the Trust hereby elects to offer multiple classes of shares in the
Multi-Class Funds pursuant to the provisions of Rule 18f-3 and this Plan. This
Plan does not make any material changes to the general class arrangements and
expense allocations previously approved by the Board of Trustees of the Trust
(the "Board of Trustees").
The Trust currently consists of one Fund: E.I.I. Realty Securities
Fund.
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The Funds are authorized to issue the following classes of shares
representing interests in the same underlying portfolio of assets of the
respective Fund:
THE MULTI-CLASS FUNDS
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INSTITUTIONAL SHARES, ADVISERS SHARES, AND INVESTOR SHARES
E.I.I. Realty Securities Fund
I. CLASS ARRANGEMENTS.
The following summarizes the front-end sales charges, contingent
deferred sales charges, Rule 12b-1 distribution fees, shareholder servicing
fees, conversion features, exchange privileges, and other shareholder services
applicable to each particular class of shares of the Funds. Additional details
regarding such fees and services are set forth in each Fund's current Prospectus
and Statement of Additional Information.
A. INSTITUTIONAL SHARES:
1. Rule 12b-1 Distribution Fees: None.
2. Administration Fees: Up to 0.25% per annum of average daily net
assets.
3. Shareholder Servicing Fees: None.
4. Other Expenses: Up to 0.10% per annum of average daily net
assets.
B. ADVISER SHARES:
1. Rule 12b-1 Distribution Fees: None.
2. Administration Fees: Up to 0.25% per annum of average daily net
assets.
3. Shareholder Servicing Fees: Up to 0.25% per annum of average
daily net assets.
4. Other Expenses: Up to 0.10% per annum of average daily net
assets.
C. INVESTOR SHARES:
1. Rule 12b-1 Distribution Fees: Up to 0.75% per annum of average
daily net assets.
2. Administration Fees: Up to 0.25% per annum of average daily net
assets.
<PAGE>
3. Shareholder Servicing Fees: Up to 0.25% per annum of average
daily net assets.
4. Other Expenses: Up to 0.10% per annum of average daily net
assets.
II. ALLOCATION OF EXPENSES.
Pursuant to Rule 18f-3 under the 1940 Act, the Trust shall allocate to
each class of shares in a Multi-Class Fund (i) any fees and expenses incurred by
the Trust in connection with the distribution of such class of shares (other
than with respect to any money market Funds) under a distribution plan adopted
for such class of shares pursuant to Rule 12b-1 ("Rule 12b-1 Fees") and (ii) any
fees and expenses incurred by the Trust under a shareholder servicing plan in
connection with the provision of shareholder services to the holders of such
class of shares ("Service Plan Fees"). In addition, pursuant to Rule 18f-3, the
Trust may allocate the following fees and expenses (the "Class Expenses") to a
particular class of shares in a single Multi-Class Fund:
1. transfer agent fees identified by the transfer agent as being
attributable to such class of shares;
2. printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses,
reports, and proxies to current shareholders of such class of
shares or to regulatory agencies with respect to such class of
shares;
3. blue sky registration or qualification fees incurred by such
class of shares;
4. Securities and Exchange Commission registration fees incurred by
such class of shares;
5. the expense of administrative personnel and services (including,
but not limited to, those of a fund accountant or dividend paying
agent charged with calculating net asset values or determining or
paying dividends) as required to support the shareholders of such
class of shares;
6. litigation or other legal expenses relating solely to such class
of shares;
7. fees of the Board of Trustees incurred as result of issues
relating to such class of shares;
8. independent accountants' fees relating solely to such class of
shares; and shareholder meeting expenses for meetings of a
particular class.
Class Expenses, Rule 12b-1 Fees, and Service Plan Fees are the only
expenses allocated to the classes disproportionately. The Class Expenses
allocated to each share of a class
<PAGE>
during a year will differ from the Class Expenses allocated to each share of any
other class by less than 50 basis points of the average daily net asset value of
the class of shares with the smallest average daily net asset value.
The initial determination of fees and expenses that will be allocated
by the Trust to a particular class of shares and any subsequent changes thereto
will be reviewed by the Board of Trustees and approved by a vote of the Board of
Trustees including a majority of the Trustees who are not interested persons of
the Trust. The Board of Trustees will monitor conflicts of interest among the
classes and agree to take any action necessary to eliminate conflicts.
Income, realized and unrealized capital gains and losses, and any
expenses of any money market Fund not allocated to a particular class of such
Fund by this Plan shall be allocated to each class of such Fund on the basis of
the relative net assets (settled shares), as defined in Rule 18f-3, of that
class in relation to the net assets of such Fund.
Income, realized and unrealized capital gains and losses, and any
expenses of a non-money market Fund not allocated to a particular class of any
such Fund pursuant to this Plan shall be allocated to each class of the Fund on
the basis of the net asset value of that class in relation to the net asset
value of the Fund.
Any dividends and other distributions on shares of a class will differ
from dividends and other distributions on shares of other classes only as a
result of the allocation of Class Expenses, Rule 12b-1 Fees, Service Plan Fees,
and the effects of such allocations.
The Investment Adviser will waive or reimburse its management fee in
whole or in part only if the fee is waived or reimbursed to all shares of a Fund
in proportion to their relative average daily net asset values. The Investment
Adviser, and any entity related to the Investment Adviser, who charges a fee for
a Class Expense will waive or reimburse that fee in whole or in part only if the
revised fee more accurately reflects the relative costs of providing to each
class the service for which the Class Expense is charged.
III. BOARD REVIEW.
The Board of Trustees shall review this Plan as frequently as it deems
necessary. Prior to any material amendment(s) to this Plan, the Board of
Trustees, including a majority of the Trustees that are not interested persons
of the Trust, shall find that the Plan, as proposed to be amended (including any
proposed amendments to the method of allocating Class Expenses and/or Fund
expenses), is in the best interest of each class of shares of a Multi-Class Fund
individually and the Fund as a whole. In considering whether to approve any
proposed amendment(s) to the Plan, the Board of Trustees shall request and
evaluate such information as it considers reasonably necessary to evaluate the
proposed amendment(s) to the Plan. Such information shall address the issue of
whether any waivers or reimbursements of advisory or administrative fees could
be considered a cross-subsidization of one class by another and other potential
conflicts of interest between classes.
<PAGE>
In making its initial determination to approve this Plan, the Board of
Trustees has focused on, among other things, the relationship between or among
the classes and has examined potential conflicts of interest among classes
(including those potentially involving a cross-subsidization between classes)
regarding the allocation of fees, services, waivers and reimbursements of
expenses, and voting rights. The Board of Trustees has evaluated the level of
services provided to each class and the cost of those services to ensure that
the services are appropriate and the allocation of expenses is reasonable. In
approving any subsequent amendments to this Plan, the Board of Trustees shall
focus on and evaluate such factors as well as any others it deems necessary.
Adopted April 28, 1998.
Amended and Restated:
