E.I.I. Realty Securities Trust
E.I.I. Realty Securities Fund
Annual Report
For the Period From June 11, 1998
(Commencement of Operations)
To June 30, 1998
<PAGE>
E.I.I. REALTY SECURITIES TRUST
E.I.I. REALTY SECURITIES FUND
Schedule of Investments
June 30, 1998
Shares Value+
------ ------
COMMON STOCK - 98.9%
- --------------------
Arden Realty Group, Inc. 500 $12,937
Avalon Bay Communities, Inc. 300 11,400
Boston Properties, Inc. 300 10,350
Bradley Real Estate, Inc. 400 8,450
BRE Properties, Inc. Class A 400 10,425
Carramerica Realty Corp. 300 8,512
Catellus Development Corp. 600 10,613
Chateau Communities, Inc. 400 11,500
Cornerstone Properties, Inc. 700 12,338
Equity Office Properties Trust 1,000 28,375
Equity Residental Properties Trust 300 14,231
Federal Realty Investment Trust 200 4,812
Franchise Finance Corp. of America 600 15,562
General Growth Properties 300 11,212
Kilroy Realty Corp. 400 10,000
Kimco Realty Corp. 500 20,500
Liberty Property Trust 400 10,225
Macerich Co. 400 11,725
Mack-Cali Realty Corp. 300 10,312
Manufactured Home Communities, Inc. 200 4,825
Nationwide Health Properties, Inc. 1,000 23,875
Patriot American Hospitality, Inc. 400 9,575
Post Properties, Inc. 300 11,550
Reckson Associates Realty Corp. 800 18,900
Security Capital Industrial Trust 558 13,950
Security Capital Pacific Trust 1,400 31,500
Simon Debartolo Group, Inc. 1,000 32,500
SL Green Realty Corp. 500 11,250
Smith (Charles E.) Residential Realty, 300 9,600
Spieker Properties, Inc. 300 11,625
Starwood Hotels & Resorts Trust 400 19,325
Storage Trust Realty 300 7,013
Sun Communities, Inc. 400 13,250
Taubman Centers, Inc. 700 9,975
Tower Realty Trust, Inc. 300 6,713
Urban Shopping Centers, Inc. 200 6,300
Vornado Realty Trust 500 19,844
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TOTAL COMMON STOCKS
(Cost $ 481,534) 495,049
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PREFERRED STOCK - 1.1%
- ----------------------
Vornado Realty Trust Preferred Convert 100 5,738
(Cost $ 5,356) -------
TOTAL INVESTMENTS - 100.0%
(Cost $ 486,890) ++ $500,787
========
+See Note B to Financial Statements
++Approximates cost for federal income tax purposes
See accompanying Notes to Financial Statements.
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E.I.I. Realty Securities Trust
E.I.I. Realty Securities Fund
Statement of Assets and Liabilities
June 30, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments at value (Cost $486,890) ....................... $500,787
Cash ....................................................... 15,063
Receivable from advisor .................................... 8,608
Dividends receivable ....................................... 2,758
Organization expenses ...................................... 180,797
--------
Total Assets .................................... 708,013
--------
LIABILITIES
Organization costs payable ................................. 182,799
Accrued expenses ........................................... 6,846
Payable for investment securities purchased ................ 4,512
--------
Total Liabilities ............................... 194,157
--------
NET ASSETS (Applicable to 50,091
Institutional Class shares outstanding, $.01
par value, unlimited shares authorized) ....................... $513,856
========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER INSTITUTIONAL
CLASS SHARE ................................................... $ 10.26
========
</TABLE>
See accompanying Notes to Financial Statements.
2
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E.I.I. Realty Securities Trust
E.I.I. Realty Securities Fund
Statement of Operations
<TABLE>
<CAPTION>
Period from
June 11, 1998 (a)
through
June 30, 1998
-------------
<S> <C>
Investment Income
Dividends ............................................... $ 2,758
--------
Expenses
Investment advisory fee ................................. 180
Administrative fee ...................................... 60
Organization expenses ................................... 2,002
Audit fee ............................................... 1,922
Legal fee ............................................... 1,558
Trustees' fees and expenses ............................. 1,558
Insurance expense ....................................... 631
Custodian fee ........................................... 594
Shareholders' reports ................................... 416
Other expenses .......................................... 131
--------
Total Expenses .......................................... 9,052
Less: Expenses Waived or Reimbursable .................. (8,812)
--------
Net Expenses ............................................ 240
--------
Net Investment Income ................................... 2,518
--------
Net Realized and Unrealized Gain (Loss)
on Investment Securities
Net Realized Loss on Investment Securities .................... (2,559)
Change in Unrealized Appreciation (Depreciation)
of Investment Securities ..................................... 13,897
--------
Net Gain on Investment Securities ....................... 11,338
--------
Net Increase in Net Assets
Resulting from Operations .................................... $ 13,856
========
</TABLE>
(a) Commencement of Operations
See accompanying Notes to Financial Statements.
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E.I.I. Realty Securities Trust
E.I.I. Realty Securities Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Period from
June 11, 1998 (a)
through
June 30, 1998
-------------
<S> <C>
Increase (Decrease) in Net Assets
Operations:
Net Investment Income ...................................... $ 2,518
Net Realized Loss on Investment Securities ................ (2,559)
Change in Unrealized Appreciation (Depreciation)
of Investment Securities .................................. 13,897
---------
Net Increase in Net Assets Resulting
from Operations ....................................... 13,856
---------
Distributions From:
Net Investment Income ...................................... --
Net Realized Gains ......................................... --
---------
Total Distributions .................................... --
---------
Capital Share Transactions - Institutional Class: (1)
Shares Issued .............................................. 400,000
Shares Issued in Reinvestment of Distributions ............. --
Shares Redeemed ............................................ --
---------
Net Increase From Capital Share
Transactions .......................................... 400,000
---------
Total Increase in Net Assets ................................... 413,856
Net Assets
Beginning of Period ........................................ 100,000
---------
End of Period .............................................. $ 513,856
=========
(1) Shares Issued and Redeemed - Institutional Class:
Shares Issued .................................................. 40,091
Shares Reinvested .............................................. --
Shares Redeemed ................................................ --
---------
40,091
=========
(a) Commencement of Operations .................................
</TABLE>
See accompanying Notes to Financial Statements.
4
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E.I.I. Realty Securities Trust
E.I.I. Realty Securities Fund
Financial Highlights
For an Institutional Class Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
Period from
June 11, 1998 (a)
through
June 30, 1998
-------------
<S> <C>
Net Asset Value, Beginning of Period ...................... $ 10.00
----------
Income from Investment Operations
Net Investment Income ................................... 0.05
Net Gain on Securities (Realized and Unrealized) ........ 0.21
-----------
Total from Investment Operations .................... 0.26
-----------
Less Distributions
Net Investment Income ................................... --
Net Realized Gains ...................................... --
-----------
Total Distributions ................................. --
-----------
Net Asset Value, End of Period ............................ $ 10.26
==========
Total Return .............................................. 2.60%#
Net Assets, End of Period ................................. $ 513,856
Ratio of Expenses to Average Net Assets .................. 1.00%(b)*
Ratio of Net Investment Income to Average
Net Assets ............................................... 10.50%(b)*
Portfolio Turnover Rate ................................... 22.23%
</TABLE>
* Annualized
# Non-Annualized
(a) Commencement of Operations.
(b) Had certain waivers and reimbursements not been in effect, the ratio of
expenses to average net assets, for the period ended June 30, 1998, would
have been 37.75%, and the ratio of net investment income (loss) to average
net assets, for the period ended June 30, 1998 would have been (26.25%).
Because of commencement of operations and related preliminary transaction
costs these ratios are not necessarily indicative of future ratios.
See accompanying Notes to Financial Statements.
5
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E.I.I. Realty Securities Trust
E.I.I. Realty Securities Fund
Notes to Financial Statements
A. Organization:
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. The Fund commenced
operations on June 11, 1998 by selling shares of the Institutional share class.
As of June 30, 1998, the Adviser and Investor Classes had not commenced
operations. 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.
B. Significant Accounting Policies:
The following significant accounting policies are in conformity with generally
accepted accounting principles. Such policies are consistently followed by the
Fund in preparation of its financial statements.
The preparation of financial statements in accordance with generally accepted
accounting principles may require management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates. Estimates include the
classification of distributions received by the Fund from the issuers of the
Fund's portfolio securities. These distributions may be classified as either
dividend income, capital gains or as non-taxable distributions. The final
classifications of these distributions can not be determined until reported to
the Fund by the issuers of the Fund's portfolio securities, which normally
occurs in January after the end of the calendar year. Reclassification of
distributions made to the Fund will not affect the net assets of the Fund. The
reclassification of distributions received by the Fund may require the Fund to
reclassify a portion of its distributions to Fund shareholders.
Security Valuation: Securities traded on a nationally recognized securities
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
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price. 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.
Federal Income Taxes: The Fund's policy is to comply with the requirements of
the Internal Revenue Code that are applicable to regulated investment companies
and to distribute all its taxable income to its shareholders. Therefore, no
federal income tax provision is required.
Organizational Costs: Organizational costs have been capitalized and are being
amortized on a straight line basis over a period of 60 months.
Other: Security transactions are accounted for on the date the securities are
purchased or sold. Costs used in determining realized gains and losses on the
sale of investment securities are those of specific securities sold. Dividend
income and distributions to shareholders are recorded on the ex-dividend date.
Interest income is recorded on an accrual basis.
C. Investment Advisory and Administrative Services:
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
Institutional Share Class, E.I.I. has agreed to waive 0.10% of its
administrative fee resulting in a net annual rate of 0.15% of average daily net
assets. 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.
E.I.I. has agreed to waive a portion of its Investment Advisory Fee and/or
assume the expenses of the Fund to the extent necessary to keep the annual
expenses of the Fund to not more than 1.00% of the average daily net assets of
the Institutional Share Class of the Fund.
D. Distribution and Shareholder Servicing Plans:
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.
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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.
E. Investment Transactions:
For the period ended June 30, 1998, the Fund made the following purchases and
sales of investment securities other than U.S. Government Securities:
Purchases................................... $567,548
Sales....................................... 78,097
At June 30, 1998, gross unrealized appreciation and depreciation for federal
income tax purposes on investment securities for the Fund was as follows:
Gross Unrealized Appreciation............... $16,485
Gross Unrealized Depreciation............... (2,588)
-------
Net......................................... $13,897
=======
At June 30, 1998, the Fund had a capital loss carryover for federal income tax
purposes of $2,559 which expires on June 30, 2006.
F. Components of Net Assets:
At June 30, 1998, net assets consisted of:
Paid-In Capital............................. $500,000
Undistributed Net Investment Income......... 2,518
Accumulated Net Realized Loss............... (2,559)
Net Unrealized Appreciation of
Investment Securities...................... 13,897
--------
$513,856
========
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REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Trustees
E.I.I. Realty Securities Fund
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of E.I.I. Realty Securities Fund (the
"Fund"), a series of the E.I.I. Realty Securities Trust, as of June 30, 1998,
and the related statements of operations and changes in net assets and financial
highlights for the period from June 11, 1998 (commencement of operations) to
June 30, 1998. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights 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 financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1998 by correspondence with the custodian and broker. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
E.I.I. Realty Securities Fund at June 30, 1998, the results of its operations,
the changes in its net assets and the financial highlights for the period from
June 11, 1998 to June 30, 1998, in conformity with generally accepted accounting
principles.
New York, New York
July 17, 1998
9
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