As filed via EDGAR with the Securities and Exchange Commission on October 27,
2000
File No. 333-45959
ICA No. 811-08649
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 3 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 5
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 LLP
919 Third Avenue
New York, New York 10022
Approximate date of proposed public offering: As soon as practicable
after this registration statement becomes effective.
---------------------------------------------------
It is proposed that this filing will become effective:
|X| Immediately upon filing pursuant |_| on (date) pursuant to paragraph (b)
to paragraph (b)
|_| 60 days after filing pursuant |_| on (date) pursuant to paragraph (a)(1)
to paragraph (a)(1)
|_| 75 days after filing pursuant |_| on (date) pursuant to paragraph (a)(2) to
paragraph (a)(2) of rule 485.
---------------------------------------------------
|_| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
E.I.I. REALTY SECURITIES FUND
Prospectus
October 27, 2000
General Information (888) 323-8912
Table of Contents
Introduction....................................................................
Risk/Return Summary.............................................................
Fund Expenses...................................................................
Investment Objectives, Principal Strategies and Related Risks...................
Portfolio Management............................................................
Securities in Which the Fund Invests............................................
Investing in the Fund...........................................................
Dividends, Distributions and Taxes..............................................
Additional Information..........................................................
Other Information About the Fund................................................
Other Securities and Investment Practices.......................................
Investment Techniques...........................................................
Financial Highlights............................................................
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THE FUND'S SECURITIES OR DETERMINED WHETHER THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING
A CRIME.
-1-
<PAGE>
INTRODUCTION
This Prospectus sets forth information you should consider before investing in
the E.I.I. Realty Securities Fund (the Fund"). The Fund is a non-diversified
series of the E.I.I. Realty Securities Trust, which is an open-end managed
investment company commonly known as a mutual fund.
RISK/RETURN SUMMARY
Investment Objective
The Fund's investment objective is to provide the diversification and total
return potential of investments in real estate. The Fund also seeks to achieve a
total return that includes a significant component of current income, which may
provide portfolio stability during periods of market fluctuation.
Investment Strategies
The Fund seeks to achieve its investment objective by investing primarily in
companies whose business is to own, operate, develop and manage real estate. 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"). 20% of the Fund's total assets may be invested in securities
of foreign real estate companies. The investment adviser's analyst team analyzes
companies on a qualitative and quantitative basis to determine whether they are
appropriate for investment. Qualitative analysis includes management strength,
business strategy, financial strength and competitive advantages within the
marketplace. Quantitative analysis entails review of cash flow and dividend
growth prospects, risk-adjusted total return expectations, real estate analysis
using criteria such as capitalization rates and values on a square footage basis
and balance sheet strength and relative cost of capital. Portfolio managers and
analysts comprise an investment committee which selects companies for
investment.
Investment Risks
The Fund is subject to the risks common to all mutual funds that invest in
equity securities, foreign securities, real estate securities and fixed-income
securities. You may lose money by investing in this Fund if any of the following
occur:
o the stock markets or the real estate markets of the United States,
Canada, Western Europe, Hong Kong or Japan go down;
o there are changes in the markets for REITs, which are subject to more
abrupt or erratic price movements than equity securities markets;
o one or more stocks in the Fund's portfolio do not perform as well as
expected;
o there are changes in interest rates;
o there are increases in operating costs generally of real estate
properties or increases in competition, property taxes or capital
expenditures regarding real estate properties;
o there are increases in defaults relating to real estate properties,
including defaults by borrowers or tenants;
o certain economic, political or regulatory occurrences affecting the
real estate industry.
In addition, the Fund is non-diversified, which means that the Fund may devote a
larger portion of its assets to the securities of a single issuer. This could
make the Fund more susceptible to certain risks than a diversified fund. In
addition, the Fund will devote a larger portion of its assets to a single
industry.
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. You may lose money if the Fund's investments do not perform
well.
Fund Performance
The bar chart and the table below show how the Fund has performed in the past
and provide an indication of the risks of investing in the Portfolio by showing
changes in the Fund's performance compared with two indices which are broad
measures of market performance. Both the bar chart and the table assume that all
dividends and distributions are reinvested in the Fund. How the Fund has
performed in the past does not necessarily show how it will perform in the
future.
-2-
<PAGE>
[BAR CHART OMITTED]
E.I.I. Realty Securities Fund Returns for Each Full Calendar Year
Since the Fund's Inception on June 11, 1998*
1999 -3.77
The best calendar quarter return during the period shown above was 9.21% in the
second quarter of 1999; the worst calendar quarter was (8.41)% in the third
quarter of 1999.
*The Calendar year-to-date Total Return as of September 30, 2000 was 24.41%
Average Annual Return
(for the Periods Ended December 31, 1999)
One Year Since Inception**
E.I.I. Realty Securities Fund (3.77%) (6.85%)
NAREIT Equity Index(1) (4.62%) (9.95%)
Wilshire Real Estate Securities Index(1) (3.19%) (8.86%)
-----------------------
** Inception date was June 11, 1998.
(1) For the period from June 11, 1998 through June 30, 1998, the Morgan
Stanley REIT Index was used.
Returns are historical and include change in share price and reinvestment of
dividends and capital gains. Past performance does not guarantee future
results. Investment performance fluctuates. Fund shares, when redeemed, may
be worth more or less than original cost. The Fund's performance takes into
account all applicable fees and expenses. The benchmarks are widely accepted
unmanaged indices of overall market performance and do not take into account
charges, fees and other expenses.
The Wilshire Real Estate Securities Index is an unmanaged market
capitalization weighted index of publicly traded real estate securities and
is a widely accepted benchmark for real estate securities.
Investor Profile
The Fund may be appropriate for investors who:
o seek to grow capital over the long term
o are willing to take on the increased risks of an investment
concentrated in securities of companies that operate within the same
industry
o can withstand volatility in the value of their shares of the Fund
o wish to add to their personal investment portfolio a fund that invests
primarily in companies operating in the real estate industry.
An investment in the Fund may not be appropriate for all investors. The Fund is
not intended to be a complete investment program. An investment in the Fund
should be a long-term investment and the Fund is not intended to be used as a
trading vehicle.
FUND EXPENSES
The following tables describe the fees and expenses you may pay if you buy and
hold shares of the Fund:
-3-
<PAGE>
Shareholder Fees
(fees paid directly from your investment as a percentage of the offering price)
-------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
Maximum Deferred Sales Charge None
Redemption Fees None
Exchange Fees None
Maximum Account Fee None
You may be charged additional fees if you purchase, exchange or redeem shares
through a broker or agent.
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets
as a percentage of average daily net assets)
----------------------------------------------
Institutional Shares
-------------------------------------------- -----------------------
Management Fees 0.75%
-------------------------------------------- -----------------------
Administration Fees 0.15%
-------------------------------------------- -----------------------
Rule 12b-1 Distribution Fees 0.00%
-------------------------------------------- -----------------------
Other Expenses 0.39%
-------------------------------------------- -----------------------
Total Fund Operating Expenses * 1.29%
-------------------------------------------- -----------------------
---------------
*Until further notice to shareholders, the Adviser has voluntarily 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.
Example
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of our shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions yours costs would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$ 131 $ 409 $ 708 $ 1,556
INVESTMENT OBJECTIVE, PRINCIPAL STRATEGIES AND RELATED RISKS
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 ("SAI") contains the name and general business experience
of each Trustee. The Fund presently may offer three classes of shares:
Institutional, Adviser and Investor. The Fund began selling shares of the
Institutional class on June 11, 1998. As of June 30, 2000, the Adviser and
Investor classes had not yet commenced operations. The Fund's Board of Trustees
has the ability to establish new series of the Trust without shareholder
approval.
Investment Objective
The Fund's investment objective is to provide the diversification and total
return potential of investments in real estate. The Fund also seeks to achieve a
total return that includes a significant component of current income, which may
provide portfolio stability during periods of overall market fluctuation.
-4-
<PAGE>
Principal Investment Strategies
The Fund seeks to achieve its objectives by investing in companies that own,
operate, develop and manage real estate. Typically, an investment in commercial
real estate provides a significant current return, customarily in the form of
dividends, and additional appreciation potential, which means that the price of
the investment increases over time. As such, a critical objective of the Fund is
to achieve total returns which include a significant component of current
income, or dividends, which may serve to provide portfolio stability during
periods of overall market fluctuations. (Over the 10 year period ending
12/31/99, the National Association of Real Estate Investment Trusts ("NAREIT")
Equity Index achieved an annualized total return of 9.14%.) To pursue capital
appreciation, the Fund will target companies with the highest risk-adjusted
total return potential. The Fund intends to invest 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 and warrants) of real estate companies
o Real estate related fixed-income securities (such as convertible
debentures, unsecured debentures and mortgage backed securities)
The Fund also may invest:
o Up to 20% of its total assets in securities of foreign real estate
companies, many of which have substantial holdings of U.S. real estate
securities
In addition, the Fund may invest in other securities as described in the section
entitled "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.
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
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. E.I.I.'s Investment Committee is composed of its
three Portfolio Managers as well as analysts and strategists.
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 and securitization trends, 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.
-5-
<PAGE>
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 criteria such as capitalization rates and
values on a square footage basis 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
Risk Factors
The Fund is designed for long-term investors who can weather changes in the
value of their investment. 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.
This prospectus describes the principal 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 and Investment Practices" at the end of
this prospectus provides additional information on the securities in which the
Fund can invest.
The following risks are common to all mutual funds:
Market risk is the risk that the market value of a security will fluctuate
depending on the supply and demand for that type of security. As a result of
this fluctuation, a security may be worth less than the price the Fund
originally paid for it, or less than the security was worth at an earlier time.
Market risk may affect a single security, an industry, a sector of the economy,
or the entire market, and is common to all investments.
Manager risk is the risk that the Fund's investment adviser may use a strategy
that does not produce the intended result. Manager risk also refers to the
possibility that the Fund's investment adviser may fail to execute an investment
strategy effectively and thus fail to achieve its objective.
The following risk is common to mutual funds that invest in equity securities:
Equity risk is the risk that the value of a 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.
-6-
<PAGE>
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.
Inflation risk is the risk that inflation will erode the purchasing power of the
cash flows generated by fixed income securities held by the Fund. Fixed-rate
debt securities are more susceptible to this risk than floating-rate debt
securities.
Reinvestment risk is the risk that when interest income is reinvested, interest
rates will have declined so that income must be reinvested at a lower interest
rate. Generally, interest rate risk and reinvestment risk have offsetting
effects.
Credit (or default) risk is the risk that the issuer of a fixed income security
will be unable to make timely payments of interest or principal.
The following risk is common to mutual funds that invest in CMOs:
Prepayment risk is the risk that a mortgage-related security's maturity will be
shortened by unscheduled prepayments on the underlying mortgages. Prepayments
may result in a gain or loss to the Fund and may reduce the return on the Fund's
investments.
PORTFOLIO MANAGEMENT
Advisory Services
The Fund has entered into an investment advisory agreement with E.I.I. Realty
Securities, Inc. ("E.I.I."), 667 Madison Avenue, New York, New York 10021.
E.I.I. provides the Fund with investment management and financial advisory
services, including purchasing and selling the securities in the Fund's
portfolio, at all times subject to the policies set forth by the Board of
Trustees. E.I.I. identifies and analyzes possible investments for the Fund,
determines the amount and timing of such investments, and determines the forms
of investments. E.I.I. also monitors and reviews the Fund's portfolio. Under the
Fund's investment advisory agreement with E.I.I., as of June 30, 2000, the Fund
paid a monthly advisory fee calculated at an annual rate of 0.75% of the Fund's
average daily net assets.
Portfolio Management Personnel
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.
-7-
<PAGE>
CYDNEY C. DONNELL is a Managing Director of E.I.I. Ms. Donnell serves as
co-portfolio manager of the Fund, jointly responsible with David P. O'Connor 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 with Cydney C. Donnell 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 & 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.
About the Investment Adviser
E.I.I. was formed in 1993 and is registered with the SEC as an investment
adviser. It provides 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 as providing direct real estate
advisory services and corporate advisory services.
Performance Charts
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.
-8-
<PAGE>
<TABLE>
<CAPTION>
Past Performance of All Real Estate Securities Accounts of E.I.I. Realty Securities, Inc. (E.I.I.)
& European Investors Incorporated
Real Estate Securities Composite ("E.I.I. Composite")
3 mos For the 12 months ending Dec. 31st 6 mos
--------------------------------------------------------------------------------------------------------
Annual Returns 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
E.I.I. Composite* -5.34% 12.87% 12.27% -11.59% 34.39% 19.40% 19.05% 6.25% 16.95% 35.66% 22.33% -14.08% -3.71% 15.37%
NAREIT Equity Index -9.89% 13.49% 8.84% -15.35% 35.70% 14.59% 19.65% 3.17% 15.27% 35.27% 20.26% -17.50% -4.62% 13.19%
Wilshire Real Estate
Securities Index -15.00% 24.18% 2.37% -33.46% 20.03% 7.40% 15.23% 1.64% 13.65% 36.87% 19.80% -17.43% -3.19% 15.21%
For the cumulative periods since inception ending Dec. 31st 6 mos
------------------------------------------------------------------------------------------------------------
Cumulative Returns 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
E.I.I. Composite* -5.34% 6.85% 19.96% 6.06% 42.53% 70.19% 102.61% 115.27% 151.75% 241.51% 317.76% 258.92% 245.62% 298.75%
NAREIT Equity Index -9.89% 2.26% 11.30% -5.79% 27.84% 46.49% 75.29% 80.84% 108.45% 181.97% 239.09% 179.74% 166.82% 202.02%
Wilshire Real Estate
Securities Index -15.00% 5.55% 8.05% -28.10% -13.70% -7.31% 6.81% 8.56% 23.38% 68.87% 102.31% 67.05% 61.73% 86.34%
For the periods ending June 30, 2000
----------------------------------------------
Annualized Summary 1 Year 3 Year 5 Year 10 Year Since Inception**
E.I.I. Composite* 6.30% 3.12% 12.08% 12.93% 11.45%
NAREIT Equity Index 3.04% 0.44% 9.58% 10.95% 9.05%
Wilshire Real Estate
Securities Index 4.46% 1.18% 10.38% 6.38% 5.00%
For the periods ending June 30, 2000
------------------------------------------------
Cumulative Summary 1 Year 3 Year 5 Year 10 Year Since Inception**
E.I.I. Composite* 6.30% 9.66% 76.86% 237.31% 298.75%
NAREIT Equity Index 3.04% 1.33% 58.00% 182.62% 202.02%
Wilshire Real Estate
Securities Index 4.46% 3.59% 63.86% 85.52% 86.34%
</TABLE>
[Mountain chart and key omitted]
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Index Value
------------------------------------------------------------------------------------------------------------------------------------
Sep-87 Dec-87 Dec-88 Dec-89 Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Jun-00
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
E.I.I. Composite* 0.00% -5.34% 6.85% 19.96% 6.06% 42.53% 70.19% 102.61% 115.27 151.75% 241.51% 317.76 258.92% 245.62% 298.75%
-----------------------------------------------------------------------------------------------------------------------------------
NAREIT Equity
Index 0.00% -9.89% 2.26% 11.30% -5.79% 27.84% 46.49% 75.29% 80.84% 108.45% 181.97% 239.09 179.74% 166.82% 202.02%
-----------------------------------------------------------------------------------------------------------------------------------
Wilshire Real
Estate Securities 0.00% -15.00% 5.55% 8.05% -28.10% -13.70 -7.31% 6.81% 8.56% 23.38% 68.87% 102.316 7.05% 61.73% 86.34%
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
---------------
* 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. 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.
** Inception Date September 30, 1987.
-9-
<PAGE>
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 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. The
Fund will invest predominantly in equity REITs. The Fund may also invest in
mortgage and hybrid 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
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 its exemption from the
Investment Company Act of 1940.
INVESTING IN THE FUND
Share Price
Shares are purchased and redeemed at the Fund's daily share price, called its
net asset value (the "NAV"). 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.
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.
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 and redeem shares of the Fund.
The minimum investment for Institutional Shares is $1,000,000. This minimum may
be reduced at E.I.I.'s sole discretion. Employees and officers of E.I.I. and its
affiliates and immediate family members can purchase Institutional Shares
without being subject to the minimum investment.
How To Open Your Account
To open an account, complete the appropriate sections of the Purchase
Application, carefully following instructions. Please be sure to include your
Social Security or Taxpayer Identification number on the Purchase Application.
Additional documentation may be required. If you have any questions, please
contact E.I.I. Realty Securities directly at (212) 644-0794 or the Transfer
Agent at (888) 323-8912.
-10-
<PAGE>
How To Purchase Shares
Shares can be purchased in a number of different ways. You can send in your
investment by wire transfer (see instructions below) or by check payable to
E.I.I. Realty Securities Fund.
All purchases must be made in U.S. Dollars and drawn on U.S. banks. The Fund
reserves the right in its sole discretion to (i) suspend or modify the offering
of a Portfolio's shares, (ii) to reject purchase orders, and (iii) to modify or
eliminate the minimum initial investment in the Fund. 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 in 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 by wire transfer after your
account is already established, you must call the Transfer Agent at (888)
323-8912 to advise the Fund of the incoming wire transfer.
The wiring instructions are:
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. (required)_______________
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.
You may also send a check to the address listed on the following page.
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 at the NAV determined as of the close of the New York
Stock Exchange on that 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 purchase application, be sure to check the
box in #6 for 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 to send you your proceeds:
o Mail a check to the address of record;
o Wire funds to a domestic financial institution. If you want your
proceeds 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. The Fund will not
accept any bank instruction changes via telephone.
o Mail to a previously designated alternate address.
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.
-11-
<PAGE>
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. You
can use the same mailing addresses listed for purchases.
A medallion signature guarantee is required for the following redemption
requests:
o Your account registration has changed within the last 15 days;
o The check is not being mailed to the address on your account;
o The check is not being made payable to the owner of the account, or
o The redemption or cash distribution bank instructions have changed.
A medallion signature guarantee can be obtained from a financial institution.
You will earn dividends up to the date your redemption request is processed.
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
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
-12-
<PAGE>
DIVIDENDS, DISTRIBUTIONS, AND TAXES
Dividends and Distributions
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 capital gain
distributions at least annually. Both dividend and capital gain 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
Purchase Application, this option will be assigned to you automatically.
Cash Option: You can have distributions paid to you in cash. 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 distribution will be transferred within 7 days of the 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 Purchase
Application. If you would like to change the option you selected, please call
the Transfer Agent at (888) 323- 8912. Additional documentation may be required.
The Fund will not accept any changes in wire transfer instructions via
telephone.
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) or exchange 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.
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. Share certificates are not issued.
Twice a
-13-
<PAGE>
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.
ADDITIONAL INFORMATION
The SAI dated October 27, 2000 containing additional information you should know
about the Fund has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference in this prospectus. If you would like
to receive additional copies of any materials, please call the Fund at (888)
323- 8912.
Shareholder Communications
You will receive unaudited Semi-Annual Reports and audited Annual Reports on a
regular basis from the Fund. In addition, you also will receive updated
prospectuses or supplements to this prospectus. The securities described in this
prospectus and the SAI are not offered in any state in which they may not be
sold lawfully. No sales representative, dealer, or other person is authorized to
give any information or make any representation other than those contained in
this prospectus and the SAI.
OTHER INFORMATION ABOUT THE FUND
Share Classes
The Fund currently offers only the class of shares described in this Prospectus.
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.
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).
Portfolio Turnover
The Fund anticipates that its portfolio turnover rate for 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.
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.
OTHER SECURITIES AND INVESTMENT PRACTICES
The following are some of the types of securities the Fund may purchase under
normal market conditions. The majority of the Fund's portfolio is made up of
equity securities. For cash-management or temporary defensive purposes in
response to market conditions, the Fund may hold all of its assets in cash or
short-term money market instruments. This may reduce the benefit from any
upswing in the market and may cause the Fund to fail to meet its investment
objective(s). For more information and a more complete description, see the SAI.
-14-
<PAGE>
ASSET-BACKED SECURITIES--a form of complex security, similar to mortgage-related
securities, but with a less effective security interest in the related
collateral.
CONVERTIBLE SECURITIES--including 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.
CORPORATE DEBT SECURITIES--including corporate bonds, debentures, notes, and
other similar instruments and convertible securities, and some forms of
preferred or preferenced stock.
MONEY MARKET INSTRUMENTS--The Fund may invest in the following types of money
market instruments:
o U.S. Government Securities. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities. Some are direct
obligations of the U.S. Treasury; others are obligations only of the U.S.
agency.
o Bank Obligations. 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.
o Commercial Paper. Short-term, unsecured promissory notes issued to short-
term credit needs.
MORTGAGE-RELATED SECURITIES--securities backed by a mortgage or a pool of
mortgages. These securities are derivative instruments, because their value is
linked to or derived from another security, instrument or index.
o Commercial Mortgage-Related Securities. Generally multi-class debt or
pass-through certificates secured by mortgage loans on commercial
properties.
o Residential Mortgage-Related Securities. Securities representing interests
in pools of one- to four-family residential mortgage loans issued or
guaranteed by governmental agencies or issued by private entities.
o Collateral Mortgage Obligations and Multi-Class Pass-Through Securities.
Multiclass bonds backed by pools of mortgage pass-through certificates or
mortgage loans.
ZERO COUPON SECURITIES--securities purchased at a discount from face value. The
face value of the security is received at its maturity, with no periodic
interest payments before maturity. These securities may be subject to greater
risks of price fluctuation than securities that periodically pay interest.
ILLIQUID SECURITIES--securities that are not readily marketable. 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.
RESTRICTED SECURITIES--unregistered securities that are subject to restrictions
on resale, 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.
INVESTMENT COMPANIES--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.
INVESTMENT TECHNIQUES
FORWARD COMMITMENTS--delivery and payment for securities takes place a number of
days after the date of the commitment to purchase or sell the securities at a
predetermined price and/or yield. At no time will the Fund have more than 15% of
its assets committed to purchase securities on a forward commitment basis.
-15-
<PAGE>
LENDING PORTFOLIO SECURITIES--generating interest income by lending 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 331/3% of the value of the Fund's total assets.
LEVERAGE--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 331/3% 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--investing for hedging purposes in derivative
securities, such as futures and options. 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.
These instruments and investment techniques and certain related risks are
described more specifically under "Other Securities and Investment Practices" in
the Statement of Additional Information.
FINANCIAL HIGHLIGHTS
This financial highlight table is intended to help you understand the Fund's
financial performance since its inception on June 11, 1998. Certain information
reflects financial results for a single Institutional share of the Fund. The
total returns in the table represents the rate that an investor would have
earned (or lost) on an investment in the Fund assuming reinvestment of all
dividends and distributions. This financial information has been audited by the
Fund's independent auditors, Ernst & Young LLP. A more complete statement is
available in the Fund's annual report which is available upon request.
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD:
<TABLE>
<CAPTION>
(a) June 11, 1998
Year Ended Year Ended through
June 30, 2000 June 30, 1999 June 30, 1998
------------- ------------- -------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period............................... $9.38 $10.26 $10.00
----- ------ ------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net Investment Income......................................... 0.47 0.39 0.05
Net Gain (Loss) on Securities (Realized and Unrealized).. 0.06 (0.95) 0.21
---- ----- ----
Total from Investment Operations.......................... 0.53 (0.56) 0.26
---- ----- ----
LESS DISTRIBUTIONS
Net Investment Income......................................... (0.43) (0.32) -
Net Realized Gains............................................ - - -
-------- -------- ---------
Total Distributions....................................... (0.43) (0.32) -
----- ----- ---------
Net Asset Value, End of Period..................................... $9.48 $9.38 $10.26
===== ===== ======
Total Return....................................................... 6.25% (5.18)% 2.60%#
Net Assets, End of Period (thousands).............................. $130,068 $52,348 $514
Ratio of Expenses to Average Net Assets............................ 1.00% 1.00% 1.00%*
Ratio of Expenses to Average Net Assets (Excluding
Waivers and Assumptions of Expenses)............................ 1.39% 1.83% 37.75%*
Ratio of Net Investment Income to Average Net Assets............... 6.34% 6.11% 10.50%*
Ratio of Net Investment Income to Average Net Assets
(Excluding Waivers and Assumptions of Expenses)................. 5.95% 5.28% (26.25)%*
Portfolio Turnover Rate............................................ 25% 17% 22%
</TABLE>
---------------
* Annualized
# Non-Annualized
(a) Commencement of Operations
-16-
<PAGE>
OFFICERS AND TRUSTEES TRANSFER AGENT
Richard J. Adler, Chairman, Chief PFPC, Inc.
Executive Officer & Trustee Bellevue Corporate Center
David P. O'Connor, President & Trustee 400 Bellevue Parkway
Alissa R. Fox, Treasurer Wilmington, DE 19809-3710
Peter J. Gavey, Secretary
Cydney C. Donnell, Vice President
Warren K. Greene, Independent Trustee CUSTODIAN & SUB-ADMINISTRATOR
Joseph Gyourko, Independent Trustee PFPC Trust Company
Richard W. Hutson, Independent Trustee 400 Bellevue Parkway
Samuel R. Karetsky, Trustee Wilmington, DE 19809-3710
Carl W. Schafer, Independent Trustee
INDEPENDENT AUDITORS
INVESTMENT ADVISER AND ADMINISTRATOR Ernst & Young LLP
E.I.I. Realty Securities, Inc. 787 7th Avenue
667 Madison Avenue New York, NY 10019
16th Floor
New York, NY 10021
(212) 644-0794 LEGAL COUNSEL
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022-3852
Statement of Additional Information. The Statement of Additional Information
("SAI") provides a more complete discussion about the Fund and is incorporated
by reference into this Prospectus, which means that it is considered a part of
this Prospectus.
Annual and Semi-Annual Reports. The annual and semi-annual reports to
shareholders contain additional information about the Fund's investments,
including a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
To Review or Obtain This Information. The SAI and annual and semi-annual reports
are available without charge upon request by calling the E.I.I. Realty
Securities Fund toll-free at (888) 323-8912 or by calling or writing a
broker-dealer or other financial intermediary that sells the Fund. This
information may be reviewed at the Public Reference Room of the Securities and
Exchange Commission or by visiting the SEC's World Wide Web site at
http://www.sec.gov. In addition, this information may be obtained for a fee by
writing of calling the Public Reference Room of the Securities and Exchange
Commission, Washington, DC 20549-6009, telephone (800) SEC-0330.
(Logo) E.I.I. REALTY SECURITIES FUND
(888) 323-8912
<PAGE>
Part B
STATEMENT OF ADDITIONAL INFORMATION
October 27, 2000
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
toll-free (888) 323-8912.
This Statement of Additional Information relates to the E.I.I. Realty
Securities Fund Prospectus which is dated October 27, 2000.
TABLE OF CONTENTS
Page
INVESTMENT POLICIES AND RISKS................................................2
INVESTMENT RESTRICTIONS......................................................3
MANAGEMENT...................................................................7
INVESTMENT ADVISER AND INVESTMENT ADVISORY AGREEMENT........................10
DISTRIBUTION PLAN...........................................................12
ADMINISTRATIVE SERVICES AGREEMENT...........................................13
PORTFOLIO TRANSACTIONS AND BROKERAGE........................................14
ALLOCATION OF INVESTMENTS...................................................14
COMPUTATION OF NET ASSET VALUE..............................................15
PURCHASE AND REDEMPTION OF SHARES...........................................15
TAX MATTERS.................................................................16
PERFORMANCE CALCULATION.....................................................21
GENERAL INFORMATION.........................................................23
REPORTS.....................................................................23
-1-
<PAGE>
E.I.I. Realty Securities Fund (the "Fund") is a non-diversified series
of the E.I.I. Realty Securities Trust, a Delaware business trust (the "Trust"),
which is an open-end managed investment company commonly known as a mutual fund.
The Fund's investment objective is to provide the diversification and total
return potential of investments in real estate. The Fund also seeks to achieve a
total return that includes a significant component of current income which may
provide portfolio stability during periods of market fluctuation. The Fund seeks
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.
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 to invest 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, 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.
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 investment objective of the Fund set forth above and the
investment restrictions set forth below, which are fundamental and which may not
be changed without shareholder approval, the Fund has the right to modify its
investment policies without shareholder approval.
The Fund's investment strategies are also discussed in the Prospectus.
INVESTMENT RESTRICTIONS
The following fundamental investment restrictions have been adopted by
the Fund and, except as noted, 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 except the Fund may borrow money from
banks;
(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
other investment companies having an aggregate value in excess
of 10% of the value of the
-3-
<PAGE>
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 (ADRs are not considered to be foreign
securities for this purpose).
OTHER SECURITIES AND INVESTMENT PRACTICES
OTHER SECURITIES
The Fund may invest in the following types of securities:
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.
MONEY MARKET INSTRUMENTS--The Fund may invest in the following types of money
market instruments:
o 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.
-4-
<PAGE>
o 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.
o 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 forms of derivative
securities collateralized, 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. CMOs may be collateralized by:
o pass-through certificates issued or guaranteed by GNMA, FNMA
or FHLMC;
o unsecuritized mortgage loans insured by the Federal Housing
Administration ("FHA") or guaranteed by the Department of
Veterans' Affairs;
o unsecuritized conventional mortgages;
o other mortgage-related securities; or
o any combination of these.
Each class of a CMO, referred to as a "tranche," is issued at a
specific coupon rate and has a stated maturity or final distribution
date. Principal prepayments on the underlying mortgages may cause the
CMO to be retired much earlier than the stated maturity or final
distribution date. The principal and interest on the underlying
mortgages may be allocated among the several classes of a series of a
CMO in different ways. One or more tranches may have coupon rates that
reset periodically at a specified increase over an index. These are
floating rate CMOs, and typically have a cap on the coupon rate.
Inverse floating rate CMOs have coupon rates that move in the reverse
direction to an applicable index. The coupon rates on these CMOs will
increase as general interest rates decrease. These are usually much
more volatile than fixed rate CMOs or floating rate CMOs.
Information about Mortgage-related Securities. Mortgage-related securities are
sensitive to changes in interest rates. The following risks apply to
mortgage-related securities generally:
o Mortgage-related securities that are issued or guaranteed by agencies
or instrumentalities of the U.S. government have relatively little
credit risk (depending upon the nature of the issuer) but are subject
to interest rate risks and repayment risks. As with other debt
securities, the prices
-5-
<PAGE>
of mortgage-related securities tend to move inversely to changes in
general interest rates, based on a multiple of a specific index.
Although the value of a mortgage-related security may decline when
interest rates rise, the converse is not always the case.
o In periods of declining interest rates, mortgages are more likely to
be prepaid. A mortgage-related security's maturity can be shortened by
unscheduled prepayments on the underlying mortgages. Therefore, it is
not always possible to predict accurately the security's yield. The
principal that is returned earlier than expected may have to be
reinvested in other investments having a lower yield than the prepaid
security. Therefore, these securities may be less effective as a means
of "locking in" attractive long-term interest rates, and they may have
less potential for appreciation during periods of declining interest
rates, than conventional bonds with comparable stated maturities.
o Prepayment risks can lead to substantial fluctuations in the value of
a mortgage-related security. In turn, this can affect the value of the
Fund's shares. If a mortgage-related security has been purchased at a
premium, all of part of the premium the Fund paid may be lost if there
is a decline in the market value of the security, whether that results
from interest rate changes or prepayments on the underlying mortgages.
In the case of stripped mortgage-related securities, if they experience
greater rates of prepayment than were anticipated, the Fund may fail to
recoup its initial investment on the security.
o During periods of rapidly rising interest rates, prepayments of
mortgage-related securities may occur at slower than expected rates.
Slower prepayments effectively may lengthen a mortgage-related
security's expected maturity. Generally, that would cause the value of
the security to fluctuate more widely in responses to changes in
interest rates. If the prepayments on the Fund's mortgage-related
securities were to decrease broadly, the Fund's effective duration, and
therefore its sensitivity to interest rate changes, would increase.
o As with other debt securities, the values of mortgage-related
securities may be affected by changes in the market's perception of the
creditworthiness of the entity issuing the securities or guaranteeing
them. Their values may also be affected by changes in government
regulations and tax policies.
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.
-6-
<PAGE>
INVESTMENT PRACTICES
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
331/3% 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 331/3% 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. 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.
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, 53 Chairman of the Board of Managing Director, E.I.I. Realty Securities,
667 Madison Avenue Trustees, Chief Inc., June, 1993 to present; Managing
New York, NY 10021 Executive Officer Director, European Investors Incorporated and
Vice President, European Investors Corporate
Finance, Inc., April, 1983 to present.
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
Position(s) held Principal Occupation
Name, Address, and Age with the Fund During Past 5 Years
---------------------- ------------- -------------------
<S> <C> <C>
*David P. O'Connor, 36 Trustee, President, Managing Director, E.I.I. Realty Securities,
667 Madison Avenue Treasurer Inc. and Vice President, European Investors
New York, NY 10021 Incorporated, February, 1994 to present;
Investment Executive, Kidder, Peabody, and
Co., Inc., 1992 to January, 1994
Warren K. Greene, 64 Trustee Senior Vice President, TrendLogic Associates,
One Fawcett Place, Suite 220 Inc. January, 1995 to present; President, Baker
Greenwich, CT 06830 Weeks & Co., October, 1993 to June, 1994.
Joseph Gyourko, 44 Trustee Associate Professor, 1994-96 and Professor,
256 South 37th Street 1996-, The Wharton School, University of
The Zell/Lurie Real Estate Center Pennsylvania; Director, The Zell/Lurie Real
The Wharton School Estate Center at The Wharton School;
Philadelphia, PA 19104-6330 Nonresident Fellow, the Brookings Institution;
Fellow, The Urban Land Institute.
Richard W. Hutson, 61 Trustee Retired/Part-time consultant to Hewitt
615 Innsbruck Court Associates; November, 1996 to present; Senior
Libertyville, IL 60048 Principal, Hewitt Associates, December, 1964
to October, 1996.
*Samuel R. Karetsky, 55 Trustee Managing Director, E.I.I. Realty Securities,
180 East 79th Street Inc., November, 1998 to present; Managing
New York, NY 10021 Member, Samuel R. Karetsky LLC, March, 1997 to
November, 1998; Managing Director, Morgan
Stanley & Co., June, 1995 to March, 1997;
Managing Director, OFFITBANK, January, 1993
to June, 1995.
Carl W. Schafer, 63 Trustee President, The Atlantic Foundation
66 Witherspoon Street (Oceanographic Research), 1990 to present.
Princeton, NJ 08542
Alissa R. Fox, 30 Treasurer Director of Fund Administration and
667 Madison Avenue Compliance, E.I.I. Realty Securities, Inc.,
New York, NY 10021 January, 2000 to present; Vice President, Bank
of New York, June, 1999 to January 2000;
Senior Associate, Investors Capital Services
Inc., May, 1995 to June 1999.
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
Position(s) held Principal Occupation
Name, Address, and Age with the Fund During Past 5 Years
---------------------- ------------- -------------------
<S> <C> <C>*
Peter J. Gavey, 33 Secretary Director of Business Development, E.I.I.
667 Madison Avenue Realty Securities, Inc. February, 1998 to
New York, NY 10021 present; Director Rogers, Casey Alternative
Investments, May, 1993 to February, 1998.
</TABLE>
* An "interested person" of the Trust, as defined by section 2(a)(19) of the
Investment Company Act of 1940.
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 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 September 30, 2000, the Trustees and officers collectively did
not own more than 1% of the Fund's outstanding shares. Each disinterested
Trustee will receive $4,000 per annum, and $2,500 per regular meeting and $500
per audit committee meeting, plus expenses of attendance at Trustees meetings.
"Interested" Trustees do not receive Trustees' fees. The table below illustrates
the compensation paid to each Trustee for the most recently completed fiscal
year:
<TABLE>
<CAPTION>
Total
Pension or Estimated Compensation
Aggregate Retirement Benefits Annual from all Funds in
Compensation Accrued as Part of Benefits Upon the Complex
Name of Person, Position from the Fund Fund Expenses Retirement Paid to Trustees
------------------------ ------------- ------------- ---------- ----------------
<S> <C> <C> <C> <C>
Richard J. Adler, $ 0 $0 $0 $0
Trustee
David P. O'Connor, $0 $0 $0 $0
Trustee
Warren K. Greene, $11,500 $0 $0 $11,500
Trustee
Joseph Gyourko, $11,500 $0 $0 $11,500
Trustee
Richard W. Hutson, $11,500 $0 $0 $11,500
Trustee
Samuel R. Karetsky, $0 $0 $0 $0
Trustee
Carl W. Schafer, $8,500 $0 $0 $8,500
Trustee (1)
</TABLE>
(1) This director was appointed on November 23, 1999.
-9-
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of September 30, 2000, the following persons held 5 percent or more
of the outstanding shares of the Fund as indicated and may be deemed principal
holders of the Fund:
<TABLE>
<CAPTION>
Amount and Nature of
Title of Class Name and Address of Beneficial Owner Beneficial Ownership Percent of Fund
--------------------- ---------------------------------------------------------- ----------------------- ----------------
<S> <C> <C> <C>
Common Stock, $0.01 Northern Trust FBO CYMI Equity LP Direct Ownership 8.36%
per share PO Box 92956
Chicago, IL 60675
Common Stock, $0.01 National Gallery of Art Direct Ownership 7.45%
per share 4th And Constitution Ave NW
Washington, DC 20565
Common Stock, $0.01 The Children's Museum of Indianapolis Direct Ownership 7.22%
per share PO Box 3000
3000 N Meridian St
Indianapolis, IN 46206
Common Stock, $0.01 State Street Bank & Trust Co NA Direct Ownership 6.46%
per share Trustee for USAA Savings & Investment Plan Dtd 05/23/95
105 Rosemont Ave
Westwood, Ma 02090
Common Stock, $0.01 Soka University of America Direct Ownership 6.16%
per share 85 Argonaut Suite 200
Aliso Viejo, Ca 926564105
</TABLE>
The Investment Company Act of 1940 defines control persons as owning more that
25% of the shares of the Fund. As of September 30, 2000 there were no
shareholders deemed to be control persons of the Fund.
INVESTMENT ADVISER AND INVESTMENT ADVISORY AGREEMENT
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.
About the Investment Adviser
E.I.I. provides 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
-10-
<PAGE>
portfolios as well as providing direct real estate advisory services and
corporate advisory services. From these combined efforts, European Investors
Incorporated determined that securitized real estate could serve as an
alternative means of acquiring real estate assets and developed a portfolio
management service specifically in this area, which now caters to both foreign
and domestic investors. European Investors Incorporated commenced research into
real estate securities as a separate portfolio product in 1986, began managing
real estate securities portfolios in 1987, and is a recognized leader in real
estate securities investment management.
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 June 30, 2000, the
combined companies have approximately $2.9 billion invested in real estate
securities on behalf of clients. They also manage several offshore real estate
investment funds with assets of approximately $380 million.
E.I.I. 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
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.
-11-
<PAGE>
Investment Advisory Agreement
E.I.I. 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. Until further notice to shareholders, E.I.I.
has voluntarily 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.
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 E.I.I.,
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.
For the last two fiscal years ended June 30th, the amount of advisory fees paid
by the Fund were as follows:
Gross Advisory Waiver/ Net Advisory
Fees Reimbursement Fee
-------------- ------------ ------------
Year ended June 30, 1999 $203,743 $(200,053) $3,690
Year ended June 30, 2000 597,897 (230,288) 367,609
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 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
-12-
<PAGE>
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. also serves as the Fund's Administrator. The 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, for Institutional Shares, E.I.I. receives with respect
to the Fund a fee calculated daily and paid monthly at an annual rate of 0.15%
of the average daily net assets of the Fund.
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 PFPC Inc. will act as sub-administrator and E.I.I. will
pay PFPC Inc. to provide certain administrative services to E.I.I. Payment for
these services is made by E.I.I. and not the Fund.
For the last two fiscal years ended June 30th, the amount of administration fees
paid by the Fund were as follows:
Net Administration Fees
Year ended June 30, 1999 $40,752
Year ended June 30, 2000 119,582
-13-
<PAGE>
The Sub-Administrator, Transfer Agent, and Custodian
PFPC Inc., a subsidiary of PNC Financial Services Group, Inc., is the
Fund's sub-administrator, transfer agent and custodian.
Independent Auditors
Ernst & Young LLP serves as independent auditors to the Fund.
Legal Counsel
Kramer Levin Naftalis & Frankel LLP serves as legal counsel to the
Fund.
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 E.I.I.. E.I.I. 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 E.I.I. for the Fund's use. Such allocation shall be in such amounts
and proportions as E.I.I. shall determine and E.I.I. 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, E.I.I. may consider sales of shares of the Fund and of any other funds
advised or managed by E.I.I. 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, E.I.I.
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, E.I.I. 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 E.I.I. 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 E.I.I. 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
E.I.I.'s ongoing responsibilities with respect to the Fund.
PORTFOLIO TURNOVER
The Fund anticipates that its portfolio turnover rate for 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.
ALLOCATION OF INVESTMENTS
E.I.I. has other advisory clients, some of which have similar
investment objectives to the Fund. As such, there will be times when E.I.I. may
recommend purchases and/or sales of the same
-14-
<PAGE>
portfolio securities for the Fund and its other clients. In such circumstances,
it will be the policy of E.I.I. to allocate purchases and sales among the Fund
and its other clients in a manner which E.I.I. 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.
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.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Fund has elected to be governed by Rule 18f-1 of the 1940 Act,
under which a fund is obligated to redeem the shares of any shareholders solely
in cash up to the lesser of 1% of the net asset value of the fund or $250,000
during any 90 day period. Pursuant to the operating agreement between Charles
Schwab & Co. Inc. ("Schwab") and the Fund, the Fund agrees that it will treat as
a "shareholder" each shareholder that holds Fund shares through the Schwab
omnibus account (the "Account"), provided that Schwab provides to the Fund, upon
request, the name or account number, number of Fund shares and other relevant
information for each such shareholder. The Fund acknowledges that treatment of
Schwab as the sole shareholder of Fund shares held in the Account for purposes
of applying the limits in Rule 18f-1 under the 1940 Act would be inconsistent
with the intent of Rule 18f-1 and the Fund's election on Form N-18F-1 and could
unfairly prejudice shareholders that hold Fund shares through the Account.
Should any shareholder's redemption exceed the limitation described in
the paragraph above, the Fund can, at its sole option, redeem the excess in cash
or in readily marketable portfolio securities. Such securities would be selected
solely by the Fund and valued as in computing net asset value. In these
circumstances, a shareholder selling such securities would probably incur a
brokerage
-15-
<PAGE>
charge and there can be no assurance that the price realized by a shareholder
upon the sale of such securities will not be less than the value used in
computing net asset value for the purpose of such redemption.
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 has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Fund is not subject to federal
income tax on the portion of its net investment income (i.e., taxable interest,
dividends, and other taxable ordinary income, net of expenses) and capital gain
net income (i.e., the excess of capital gains over capital losses) that it
distributes to shareholders, provided that it distributes at least 90% of its
investment company taxable income (i.e., net investment income and the excess of
net short-term capital gain over net long-term capital loss) for the taxable
year (the "Distribution Requirement") and satisfies certain other requirements
of the Code that are described below. Distributions by 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 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 may purchase securities of certain foreign investment funds or
trusts which constitute passive foreign investment companies ("PFICs") for
federal income tax purposes. If the Fund invests in a PFIC, it has three
separate options. First, it may elect to treat the PFIC as a qualifying electing
fund (a "QEF"), in which case it will each year have ordinary income equal to
its pro rata share of the PFIC's ordinary earnings for the year and long-term
capital gain equal to its pro rata share of the PFIC's net capital gain for the
year, regardless of whether the Fund receives distributions of any such ordinary
earnings or capital gains from the PFIC. Second, the Fund may make a
mark-to-market election with respect to its PFIC stock. Pursuant to such an
election, the Fund will include as ordinary income any excess of the fair market
value of such stock at the close of any taxable year over its adjusted tax basis
in the stock. If the adjusted tax basis of the PFIC stock exceeds the fair
market value of such stock at the end of a given taxable year, such excess will
be deductible as ordinary loss in the amount equal to the lesser of the amount
of such excess or the net mark-to-market gains on the stock that the Fund
included in income in previous years. The Fund's holding period with respect to
its PFIC stock subject to the election will commence on the first day of the
following taxable year. If the Fund makes the mark-to-market election in the
first taxable year it holds PFIC stock, it will not incur the tax described
below under the third option.
Finally, if the Fund does not elect to treat the PFIC as a QEF and does
not make a mark-to-market election, then, in general, (1) any gain recognized by
the Fund upon a sale or other
-16-
<PAGE>
disposition of its interest in the PFIC or any "excess distribution" (as
defined) received by the Fund from the PFIC will be allocated ratably over the
Fund's holding period in the PFIC stock, (2) the portion of such gain or excess
distribution so allocated to the year in which the gain is recognized or the
excess distribution is received shall be included in the Fund's gross income for
such year as ordinary income (and the distribution of such portion by the Fund
to shareholders will be taxable as an ordinary income dividend, but such portion
will not be subject to tax at the Fund level), (3) the Fund shall be liable for
tax on the portions of such gain or excess distribution so allocated to prior
years in an amount equal to, for each such prior year, (i) the amount of gain or
excess distribution allocated to such prior year multiplied by the highest tax
rate (individual or corporate, as the case may be) in effect for such prior
year, plus (ii) interest on the amount determined under clause (i) for the
period from the due date for filing a return for such prior year until the date
for filing a return for the year in which the gain is recognized or the excess
distribution is received, at the rates and methods applicable to underpayments
of tax for such period, and (4) the distribution by the Fund to shareholders of
the portions of such gain or excess distribution so allocated to prior years
(net of the tax payable by the Fund thereon) will be taxable to the shareholders
as an ordinary income dividend.
Treasury Regulations permit a regulated investment company, in
determining its investment company taxable income and net capital gain (i.e.,
the excess of net long-term capital gain over net short-term capital loss) for
any taxable year, to elect (unless it made a taxable year election for excise
tax purposes as discussed below) to treat all or any part of any net capital
loss, any net long-term capital loss or any net foreign currency loss
(including, to the extent provided in Treasury Regulations, losses recognized
pursuant to the PFIC mark-to-market election) incurred after October 31 as if it
had been incurred in the succeeding year.
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 (a
call or a put) 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 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
-17-
<PAGE>
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 and ordinary gains and loses arising as a
result of a PFIC mark-to-market election (or upon an actual disposition of the
PFIC stock subject to such election) 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 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 of 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) 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 income 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
-18-
<PAGE>
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
and ordinary gains and loses arising as a result of a PFIC mark-to-market
election (or upon an actual disposition of the PFIC stock subject to such
election). 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.
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 paid 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."
-19-
<PAGE>
Redemption of Shares
A shareholder will recognize gain or loss on the redemption of shares
of the Fund (including an exchange of shares of the Fund for shares of another
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. 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) (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 more than 50% of the
value of the Fund is
-20-
<PAGE>
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 at any time during the five-year period ending either on the
date of disposition or other applicable determination date (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).
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:
n
P(1 + T) = 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
-21-
<PAGE>
value, all dividends and distributions by the Fund are assumed to have been
reinvested at net asset value as described in the Prospectus on the reinvestment
dates during the period. Total return, or "T" in the formula above, is computed
by finding the average annual compounded rates of return over the 1, 5, and 10
year periods (or fractional portion thereof) that would equate the initial
amount invested to the ending redeemable value. Any recurring account charges
that might in the future be imposed by the Fund would be included at that time.
In addition to the total return quotations discussed above, the Fund
may advertise its yield based on a 30-day (or one month) period ended on the
date of the most recent balance sheet included in the Fund's Post-Effective
Amendment to its Registration Statement, computed by dividing the net investment
income per share earned during the period by the maximum offering price per
share on the last day of the period, according to the following formula:
a-b 6
YIELD = 2[( ----- +1) -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.
30-day Yield
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
-22-
<PAGE>
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.
Any quotation of performance stated in terms of yield will be given no
greater prominence than the information prescribed under the SEC's rules. In
addition, all advertisements containing performance data of any kind will
include a legend disclosing that such performance data represents past
performance and that the investment return and principal value of an investment
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
GENERAL INFORMATION
Organization And Description Of Shares Of the Fund
The Trust was organized as a Delaware business trust under the laws of
the state of Delaware. The Trust's Certificate of Trust was filed December 22,
1997. The Trust's Declaration of Trust, dated as of December 22, 1997, permits
the Trustees to issue an unlimited number of shares of beneficial interest with
a par value of $0.01 per share in the Trust in an unlimited number of series of
shares. The Trust consists of one series, E.I.I. Realty Securities Fund. Each
share of beneficial interest has one vote and shares equally in dividends and
distributions when and if declared by the Fund and in the Fund's net assets upon
liquidation. All shares, when issued, are fully paid and nonassessable. There
are no preemptive, conversion, or exchange rights. Fund shares do not have
cumulative voting rights and, as such, holders of at least 50% of the shares
voting for Trustees can elect all Trustees and the remaining shareholders would
not be able to elect any Trustees. The Board of Trustees may classify or
reclassify any unissued shares of the Trust into shares of any series by setting
or changing in any one or more respects, from time to time, prior to the
issuance of such shares, the preference, conversion, or other rights, voting
powers, restrictions, limitations as to dividends, or qualifications of such
shares. Any such classification or reclassification will comply with the
provisions of the Investment Company Act. Shareholders of each series as created
will vote as a series to change, among other things, a fundamental policy of the
Fund and to approve the Investment Advisory Agreement and Distribution Plan.
The Trust is not required to hold annual meetings of shareholders but
will hold special meetings of shareholders when, in the judgment of the
Trustees, it is necessary or desirable to submit matters for a shareholder vote.
Shareholders have, under certain circumstances, the right to communicate with
other shareholders in connection with requesting a meeting of shareholders for
the purpose of removing one or more Trustees. Shareholders also have, in certain
circumstances, the right to remove one or more Trustees without a meeting.
REPORTS
Shareholders receive reports at least semi-annually showing
the Fund's holdings and other information. In addition, shareholders receive
annual financial statements that have been audited by the Fund's independent
auditors.
FINANCIAL STATEMENTS
The Fund's audited Financial statements, including the Financial
Highlights, for the period ended June 30, 2000, appearing in the Annual Report
to Shareholders and the report thereon of Ernst & Young LLP, independent
auditors, appearing therein are incorporated by reference in this Statement of
Additional Information.
-23-
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. Exhibits
(a)(1) Corrected Certificate of Trust as of December 22, 1997.(1)
(a)(2) Trust Instrument.(2)
(b) By-Laws.(1)
(c) The rights of holders of the securities being registered are set out in
Articles II, VII, IX and X of the Trust Instrument referenced in
Exhibit (a)(2) and Article IV of the By-Laws referenced in Exhibit (b)
above.
(d) Investment Advisory Agreement between Registrant and E.I.I. Realty
Securities, Inc.(3)
(e) None.
(f) None.
(g) Custodian Services Agreement between PNC Bank, National Association and
Registrant.(3)
(h)(1) Administration Agreement between Registrant and E.I.I. Realty
Securities, Inc. (3)
(h)(2) Sub-Administration Agreement and Accounting Services Agreement between
European Investors Incorporated, the Registrant and PFPC INC. (3)
(h)(3) Transfer Agency Services Agreement between PFPC INC. and Registrant.
(3)
(h)(4) Shareholder Servicing Plan, with Form of Shareholder Servicing
Agreement, for the Investor Shares and Adviser Shares of the
Registrant. (3)
(i) Opinion of Kramer Levin Naftalis & Frankel LLP.(2)
(j)(1) Consent of Kramer Levin Naftalis & Frankel LLP, Counsel for the
Registrant. (2)
(j)(2) Consent of Ernst & Young LLP, independent auditors for the Registrant.
(2)
---------------
(1) 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.
(2) Filed herewith.
(3) Filed as an Exhibit to Pre-Effective Amendment No. 2 to Registrant's
Registration Statement on Form N-1A on June 5, 1998, accession number
0000922423-98-000585.
C-1
<PAGE>
(k) Not Applicable.
(l) Investment letter re: initial $100,000 capital.(3)
(m) 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)
(o) Rule 18f-3 Multiple Class Plan.(3)
(p)(1) Registrant's Code of Ethics. (2)
(p)(2) Code of Ethics of E.I.I. Realty Securities, Inc., Adviser to
Registrant. (2)
Powers of Attorney of Warren K. Greene, Joseph Gyourko, Richard W.
Hutson, Samuel R. Karetsky, and Carl W. Shafer. (2)
ITEM 24. Persons Controlled By or Under Common Control with Registrant
None.
ITEM 25. 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
C-2
<PAGE>
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, (A) by the court or other
body approving the settlement; (B) by at least a majority of those
Trustees who are neither Interested Persons of the Trust nor are
parties to the matter based upon a review of readily available facts
(as opposed to a full trial-type inquiry); or (C) by written opinion of
independent legal counsel based upon a review of readily available
facts (as opposed to a full trial-type inquiry).
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may
now or hereafter be entitled, shall continue as to a person who has
ceased to be a Covered Person and shall inure to the benefit of the
heirs, executors and administrators of such a person. Nothing contained
herein shall affect any rights to indemnification to which Trust
personnel, other than Covered Persons, and other persons may be
entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character
described in Subsection (a) of this Section 10.02 may be paid by the
Trust or Series from time to time prior to final disposition thereof
upon receipt of an undertaking by or on behalf of such Covered Person
that such amount will be paid over by him to the Trust or Series if it
is ultimately determined that he is not entitled to indemnification
under this Section 10.02; provided, however, that either (i) such
Covered Person shall have provided appropriate security for such
undertaking, (ii) the Trust is insured against losses arising out of
any such advance payments or (iii) either a majority of the Trustees
who are neither Interested Persons of the Trust nor parties to the
matter, or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed
to a trial-type inquiry or full investigation), that there is reason to
believe that such Covered Person will be found entitled to
indemnification under this Section 10.02."
ITEM 26. Business and Other Connections of Investment Adviser
Registrant is fulfilling the requirement of this Item 26 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 27. Principal Underwriters
(a) Not Applicable. Registrant's securities are not currently
being distributed by a principal underwriter.
(b) Not Applicable.
C-3
<PAGE>
(c) Not Applicable.
ITEM 28. 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 10021. 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 29. Management Services
There are no management-related service contracts not discussed in
Parts A and B.
ITEM 30. Undertakings
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.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this registration statement under Rule
485(b) under the Securities Act and has duly caused this Post-Effective
Amendment to the registration statement 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 27th day of October, 2000.
E.I.I. REALTY SECURITIES FUND
(Registrant)
By:/s/ Richard J. Adler
----------------------
Richard J. Adler, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to its Registration Statement has been signed by the
following persons in the capacities indicated on the 27th day of October, 2000.
SIGNATURE TITLE DATE
--------- ----- ----
/s/Richard J. Adler Chairman of the Board October 27, 2000
----------------------- and Chief Executive
Richard J. Adler Officer
/s/David P. O'Connor President and Chief October 27, 2000
----------------------- Financial Officer
David P. O'Connor
*/s/Warren K. Greene Trustee October 27, 2000
-----------------------
Warren K. Greene
*/s/Joseph Gyourko Trustee October 27, 2000
-----------------------
Joseph Gyourko
*/s/Richard W. Hutson Trustee October 27, 2000
-----------------------
/Richard W. Hutson
*/s/Samuel R. Karetsky Trustee October 27, 2000
-----------------------
Samuel R. Karetsky
*/s/Carl W. Shafer Trustee October 27, 2000
-----------------------
Carl W. Shafer
* By: /s/ Susan J. Penry-Williams
----------------------------
Susan J. Penry-Williams
(Attorney-in-Fact)
C-5
<PAGE>
INDEX TO EXHIBITS
EX-99.a Trust Instrument
EX-99.i Opinion of Kramer Levin Naftalis & Frankel LLP
EX-99.j(1) Consent of Kramer Levin Naftalis & Frankel LLP, Counsel for the
Registrant.
EX-99.j(2) Consent of Ernst & Young LLP, independent auditors for the
Registrant.
EX-99.p(1) Registrant's Code of Ethics.
EX-99.p(2) Code of Ethics of E.I.I. Realty Securities, Inc., Adviser to
Registrant.
EX-99 Power of Attorney.
