<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER __, 1999
FILE NOS. 33-____
811-___
________________________________________________________________________________
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. [ ]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
AMENDMENT NO. [ ]
------------------------
COHEN & STEERS INSTITUTIONAL REALTY SHARES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
757 THIRD AVENUE, NEW YORK, NY 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 832-3232
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ROBERT H. STEERS COPY TO:
COHEN & STEERS INSTITUTIONAL REALTY SHARES, INC. SARAH E. COGAN
757 THIRD AVENUE, SIMPSON THACHER & BARTLETT
NEW YORK, NY 10017 425 LEXINGTON AVENUE
(NAME AND ADDRESS OF AGENT OF SERVICE OF PROCESS) NEW YORK, NY 10017
</TABLE>
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APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of this registration statement
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE
BOX):
[ ] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B)
[ ] ON [DATE] PURSUANT TO PARAGRAPH (B)
[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1)
[ ] ON [DATE] PURSUANT TO PARAGRAPH (A)(1)
[ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(2)
[ ] ON [DATE] PURSUANT TO PARAGRAPH (A)(2) OF RULE 485
________________________________________________________________________________
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, Registrant declares that an indefinite number of its shares of common
stock are being registered under the Securities Act of 1933 by this registration
statement.
The Registrant hereby amends this Registration Statement under the Securities
Act of 1933 on such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in
accordance with the provisions of Section 8(a) of the Securities Act of 1933 or
until the Registration Statement shall become effective on such date as the
Commission, acting pursuant to Section 8(a), may determine.
<PAGE>
[LOGO]
757 THIRD AVENUE
NEW YORK, NEW YORK 10017
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A NO-LOAD MUTUAL FUND
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PROSPECTUS
Manager
Cohen & Steers Capital Management, Inc.
757 Third Avenue
New York, New York 10017
Telephone: (212) 832-3232
Transfer Agent
Chase Global Funds Services Company
P.O. Box 2798
Boston, Massachusetts 02208-2798
Telephone: (800) 437-9912
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED OF THE FUND'S SHARES OR DETERMINED WHETHER THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANYONE WHO INDICATES OTHERWISE
IS COMMITTING A CRIME.
JANUARY , 2000
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<PAGE>
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TABLE OF CONTENTS
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PAGE
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RISK/RETURN SUMMARY......................................... 1
Investment Objective and Principal Investment
Strategies........................................... 1
Who Should Invest..................................... 1
Principal Risks....................................... 1
FEES AND EXPENSES OF THE FUND............................... 2
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND
RELATED RISKS............................................ 3
Objective............................................. 3
Principal Investment Strategies....................... 3
Principal Risks of Investing in the Fund.............. 4
MANAGEMENT OF THE FUND...................................... 5
The Manager........................................... 5
Portfolio Managers.................................... 5
HOW TO PURCHASE AND SELL FUND SHARES........................ 6
Pricing of Fund Shares................................ 6
Purchase Minimums..................................... 6
Form of Payment....................................... 6
Purchases of Fund Shares.............................. 6
Exchange Privilege.................................... 7
How To Sell Fund Shares............................... 8
DIVIDENDS AND DISTRIBUTIONS................................. 9
TAX CONSIDERATIONS.......................................... 9
RELATED PERFORMANCE......................................... 10
</TABLE>
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COHEN & STEERS INSTITUTIONAL REALTY SHARES, INC.
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RISK/RETURN SUMMARY
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INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
The investment goal of Cohen & Steers Institutional Realty Shares, Inc. (the
'Fund') is total return through investment in real estate securities. In
pursuing total return, the Fund equally emphasizes both capital appreciation and
current income.
Normally, the Fund invests substantially all of its assets in common stocks and
other equity securities issued by real estate companies, such as 'real estate
investment trusts' ('REITs'). A real estate company generally derives at least
50% of its revenue from real estate or has at least 50% of its assets in real
estate. A REIT is a company dedicated to owning, and usually operating, income
producing real estate, or to financing real estate. The Fund invests primarily
in shares of Equity REITs, which are companies that invest the majority of their
assets directly in real property and derive income primarily from the collection
of rents. Equity REITs can also realize capital gains by selling properties that
have appreciated in value. REITs are not taxed on income distributed to
shareholders provided they comply with the requirements of the Internal Revenue
Code.
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WHO SHOULD INVEST
Cohen & Steers Institutional Realty Shares may be suitable for you if you are
seeking:
Some exposure to real estate to add to your portfolio mix;
A fund that may perform differently than a general stock or bond fund to add to
your portfolio;
Liquidity in a real estate-related investment;
The potential for high current income;
The potential for long-term capital growth; and
A fund intended for institutional investors.
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PRINCIPAL RISKS
Investment Risk. An investment in the Fund is subject to investment risk,
including the possible loss of the entire principal amount that you invest.
Stock Market Risk. Your investment in Fund shares represents an indirect
investment in the REIT shares and other real estate securities owned by the
Fund. The value of these equity securities, like other stock market investments,
may move up or down, sometimes rapidly and unpredictably. Your Fund shares at
any point in time may be worth less than what you invested, even after taking
into account the reinvestment of Fund dividends and distributions.
Real Estate Markets and REIT Risk. Additionally, since the Fund concentrates its
assets in the real estate industry, your investment in the Fund will be closely
linked to the performance of the real estate markets. Property values may fall
due to increasing vacancies or declining rents resulting from unanticipated
economic, legal, cultural or technological developments. REIT prices also may
drop because of the failure of borrowers to pay their loans and poor management.
Smaller Companies. Even the larger REITs in the industry tend to be small to
medium-sized companies in relation to the equity markets as a whole. REIT shares
therefore can be more volatile than, and perform differently from, larger
company stocks.
Less Diversification. As a 'non-diversified' investment company, the Fund can
invest in fewer individual companies than a diversified investment company.
Because a concentrated portfolio is more likely to experience large market price
fluctuations, the Fund could be subject to a greater risk of loss than a fund
that does not have a concentrated portfolio.
Your investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
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FEES AND EXPENSES OF THE FUND
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THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU COULD PAY IF YOU BUY AND
HOLD SHARES OF THE FUND.
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SHAREHOLDER FEES (fees paid directly from your
investment): None
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted
from Fund assets):
MANAGEMENT FEE................................................ 0.75%
OTHER EXPENSES*............................................... NONE
----
TOTAL ANNUAL FUND OPERATING EXPENSES:......................... 0.75%
</TABLE>
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* Other expenses, which include the fees and expenses of the Fund's independent
directors, interest charged on borrowings, trade organization membership dues,
federal and state registration fees and extraordinary expenses, are expected
to be less than 0.005% for the current fiscal year.
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
YOUR 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 YOUR COSTS WOULD BE:
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1 YEAR 3 YEARS
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$77 $241
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BECAUSE THE FUND IS NEW, IT DOES NOT HAVE PERFORMANCE OR FINANCIAL HIGHLIGHTS TO
REPORT.
2
<PAGE>
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INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES
AND RELATED RISKS
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OBJECTIVE
The investment objective of Cohen & Steers Institutional Realty Shares, Inc.
(the 'Fund') is total return through investment in real estate securities. The
Fund pursues its investment objective of total return by seeking, with
approximately equal emphasis, capital appreciation and current income. There can
be no assurance that the Fund will achieve its investment objective. The Fund,
of course, will concentrate its investments in the real estate industry.
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PRINCIPAL INVESTMENT STRATEGIES
In making investment decisions on behalf of the Fund, the manager relies on a
fundamental analysis of each company. The investment adviser reviews each
company's potential for success in light of the company's current financial
condition, its industry position, and economic, and market conditions. The
manager evaluates a number of factors, including growth potential, earnings
estimates and the quality of management.
The following are the Fund's principal investment strategies. A more detailed
description of the Fund's investment policies and restrictions and more detailed
information about the Fund's investments are contained in the Fund's Statement
of Additional Information ('SAI').
Real Estate Companies
For purposes of the Fund's investment policies, a real estate company is one
that:
derives at least 50% of its revenues from the ownership, construction,
financing, management or sale of commercial, industrial or residential real
estate; or
has at least 50% of its assets in such real estate.
Under normal circumstances, the Fund will invest substantially all of its assets
in the equity securities of real estate companies. These equity securities can
consist of:
common stocks (including REIT shares);
rights or warrants to purchase common stocks;
securities convertible into common stocks where the conversion feature
represents, in the manager's view, a significant element of the securities'
value; and
preferred stocks.
Real Estate Investment Trusts
The Fund may invest without limit in shares of real estate investment trusts
('REITs'). REITs pool investors' funds for investment primarily in income
producing real estate or real estate related loans or interests. A REIT is not
taxed on income distributed to shareholders if, among other things, it
distributes to its shareholders at least 95% of its taxable income (other than
net capital gains) for each taxable year.
Types of REITs. REITs can generally be classified as Equity REITs, Mortgage
REITs and Hybrid REITs. Equity REITs invest the majority of their assets
directly in real property and derive their income primarily from rents. Equity
REITs can also realize capital gains by selling properties that have appreciated
in value. Mortgage REITs invest the majority of their assets in real estate
mortgages and derive their income primarily from interest payments. Hybrid REITs
combine the characteristics of both Equity REITs and Mortgage REITs. The Fund
invests primarily in Equity REITs.
Defensive Position
When the Fund's manager believes that market or general economic conditions
justify a temporary defensive position, the Fund may deviate from its investment
objective and invest all or any portion of its assets in high-grade debt
securities without regard to whether the issuer is a real estate company. When
and to the extent the Fund assumes a temporary defensive position, it may not
pursue or achieve its investment objective.
3
<PAGE>
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PRINCIPAL RISKS OF INVESTING IN THE FUND
Because prices of equity securities fluctuate from day to day, the value of the
Fund's portfolio and the Fund's price per share will vary based upon general
market conditions.
General Risks of Securities Linked to the Real Estate Market
The Fund will not invest in real estate directly, but only in securities issued
by real estate companies. However, because of its policy of concentration in the
securities of companies in the real estate industry, the Fund is also subject to
the risks associated with the direct ownership of real estate. These risks
include:
declines in the value of real estate;
risks related to general and local economic conditions;
possible lack of availability of mortgage funds;
overbuilding;
extended vacancies of properties;
increased competition;
increases in property taxes and operating expenses;
changes in zoning laws;
losses due to costs resulting from the clean-up of environmental problems;
liability to third parties for damages resulting from environmental problems;
casualty or condemnation losses;
limitations on rents;
changes in neighborhood values and the appeal of properties to tenants; and
changes in interest rates
Thus, the value of the Fund's shares may change at different rates compared to
the value of shares of a mutual fund with investments in a mix of different
industries.
In addition to these risks, Equity REITs may be affected by changes in the value
of the underlying property owned by the trusts, while Mortgage REITs may be
affected by the quality of any credit extended. Further, Equity and Mortgage
REITs are dependent upon management skills and generally may not be diversified.
Equity and Mortgage REITs are also subject to heavy cash flow dependency,
defaults by borrowers and self-liquidation. In addition, Equity and Mortgage
REITs could possibly fail to qualify for tax free pass-through of income under
the Internal Revenue Code ('Code'), or to maintain their exemptions from
registration under the Investment Company Act of 1940 ('1940 Act'), as amended.
The above factors may also adversely affect a borrower's or a lessee's ability
to meet its obligations to the REIT. In the event of a default by a borrower or
lessee, the REIT may experience delays in enforcing its rights as a mortgagee or
lessor and may incur substantial costs associated with protecting its
investments.
In addition, even the larger REITs in the industry tend to be small to
medium-sized companies in relation to the equity markets as a whole.
Accordingly, REIT shares can be more volatile than -- and at times will perform
differently from -- large-capitalization stocks such as those found in the Dow
Jones Industrial Average. In addition, because smaller-capitalization stocks are
typically less liquid than large-capitalization stocks, REIT shares may
sometimes experience greater share-price fluctuations than the stocks of larger
companies.
Portfolio Turnover
The Fund anticipates that its annual portfolio turnover rate will not exceed
150%, but the turnover rate will not be a limiting factor when the manager deems
portfolio changes appropriate. The turnover rate may vary greatly from year to
year. An annual turnover rate of 150% occurs, for example, when all of the
securities held by the Fund are replaced one and one-half times in a period of
one year. A higher turnover rate results in correspondingly greater brokerage
commissions and other transactional expenses which are borne by the Fund. High
portfolio turnover may result in the realization of net short-term capital gains
by the Fund which, when distributed to shareholders, will be taxable as ordinary
income. See 'Tax Considerations.'
4
<PAGE>
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MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
THE MANAGER
Cohen & Steers Capital Management, Inc., with offices located at 757 Third
Avenue, New York, New York 10017, has been retained to provide investment
advice, and, in general, to conduct the management and investment program of the
Fund under the overall supervision and control of the Board of Directors of the
Fund. Cohen & Steers Capital Management, Inc., a registered investment adviser,
was formed in 1986 and is a leading U.S. manager of portfolios dedicated to
investments in REITs. Its current clients include pension plans, endowment funds
and mutual funds, including Cohen & Steers Realty Income Fund, Inc. and Cohen &
Steers Total Return Realty Fund, Inc., which are closed-end investment
companies, and Cohen & Steers Equity Income Fund, Inc., Cohen & Steers Realty
Shares, Inc. and Cohen & Steers Special Equity Fund, Inc., which are open-end
investment companies. All of Cohen & Steers' client accounts are invested
principally in real estate securities.
Under its Management Agreement with the Fund, the manager furnishes a continuous
investment program for the Fund's portfolio, makes the day-to-day investment
decisions for the Fund, and generally manages the Fund's investments in
accordance with the stated policies of the Fund, subject to the general
supervision of the Board of Directors of the Fund. The manager also performs
certain administrative services for the Fund and provides persons satisfactory
to the Board of Directors of the Fund to serve as officers of the Fund. Such
officers, as well as certain other employees and Directors of the Fund, may be
directors, officers, or employees of the manager.
The manager selects brokers and dealers to execute the Fund's portfolio
transactions. Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc., and subject to seeking best price and execution, the
manager may consider sales of shares of the Fund as a factor in the selection of
brokers and dealers to execute portfolio transactions on behalf of the Fund. For
its services under the Management Agreement, the Fund pays the manager a monthly
management fee at the annual rate of 0.75% of the average daily net asset value
of the Fund. The manager pays all expenses of the Fund except for brokerage
fees, taxes, interest, fees and expenses of the Independent Directors (including
fees and expenses of their independent counsel and other independent
consultants), trade organization membership dues, federal and state registration
fees and extraordinary expenses.
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
The Fund's portfolio managers, who have managed the Fund since its inception,
are
Martin Cohen -- Mr. Cohen is a Director, President and Treasurer of the Fund. He
is, and has been since their inception, President of Cohen & Steers Capital
Management, Inc., the Fund's manager, and Vice President of Cohen & Steers
Securities, Inc., the Fund's distributor.
Robert H. Steers -- Mr. Steers is a Director, Chairman and Secretary of the
Fund. He is, and has been since their inception, Chairman of Cohen & Steers
Capital Management, Inc., the Fund's manager, and President of Cohen & Steers
Securities, Inc., the Fund's distributor.
5
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HOW TO PURCHASE AND SELL FUND SHARES
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PRICING OF FUND SHARES
The price at which you can purchase and redeem the Fund's shares is the net
asset value of the shares next determined after we receive your order in proper
form. We calculate our net asset value per share as of the close of trading on
the New York Stock Exchange on each day the Exchange is open for trading. We
determine net asset value per share by adding the market value of all securities
and other assets in the Fund's portfolio, subtracting the Fund's liabilities,
and dividing by the total number of shares of the Fund then outstanding.
- --------------------------------------------------------------------------------
PURCHASE MINIMUMS
You may open an account with the Fund with a minimum investment of $5,000,000.
(We are authorized to waive these minimums for particular investors.) Additional
investments must be at least $10,000. The Fund reserves the right, on 30 days
notice, to automatically redeem any account that falls below $100,000 (because
of any voluntary redemption) unless within 30 days the account value is
increased to $5,000,000. We are free to reject any purchase order.
You may invest in the Fund through accounts with certain financial
intermediaries, in which case your intermediary may charge you a transaction fee
when you purchase or redeem shares or other fees for their services.
Intermediaries who, in the aggregate, invest more than $5,000,000 on behalf of
their clients are free to increase or decrease the investment minimums for their
clients, except that the minimum for initial investments may not be reduced
below $100,000.
- --------------------------------------------------------------------------------
FORM OF PAYMENT
We will accept payment for shares in two forms:
1. A check drawn on any bank or domestic savings institution. Checks must be
payable in U.S. dollars and will be accepted subject to collection at full face
value.
2. A bank wire or Federal Reserve Wire of federal funds.
- --------------------------------------------------------------------------------
PURCHASES OF FUND SHARES
Initial Purchase By Wire
1. Telephone toll free from any continental state: (800) 437-9912. When you
contact the transfer agent, you will need the following information:
name of the Fund;
name(s) in which shares are to be registered;
address;
social security or tax identification number (where applicable);
dividend payment election;
amount to be wired;
name of the wiring bank; and
name and telephone number of the person to be contacted in connection with the
order.
The transfer agent will assign you an account number and a wire reference
control number.
2. Instruct the wiring bank to transmit at least the required minimum amount
(see 'Purchase Minimums' above) to the custodian:
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, NY 10081-1000
ABA # 021000021
Account: DDA #
Attn: Cohen & Steers Institutional Realty Shares
For further credit to: (Account name)
Account Number: (provided by Transfer Agent)
6
<PAGE>
Wire Reference Control #: (provided by Transfer Agent)
3. Complete the Subscription Agreement attached to the end of this Prospectus.
Mail the Subscription Agreement to the transfer agent:
Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Initial Purchase By Mail
1. Complete the Subscription Agreement included at the end of this Prospectus.
2. Mail the Subscription Agreement and a check in at least the required minimum
amount (see 'Purchase Minimums' above), payable to the Fund, to the transfer
agent at the above address.
Additional Purchases By Wire
1. Telephone toll free from any continental state: (800) 437-9912. When you
contact the transfer agent, you will need the following information:
name of the Fund;
account number;
amount to be wired;
name of the wiring bank; and
name and telephone number of the person to be contacted in connection with the
order.
The transfer agent will assign you a wire reference control number.
2. Instruct the wiring bank to transmit at least the required minimum amount
(see 'Purchase Minimums' above) to the custodian:
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, NY 10081-1000
ABA # 021000021
Account: DDA # 910-2-733012
Attn: Cohen & Steers Institutional Realty Shares
For further credit to: (Account Name)
Account Number: (provided by Transfer Agent)
Wire Reference Control #: (provided by Transfer Agent)
Additional Purchases By Mail
1. Make a check payable to the Fund in at least the required minimum amount (see
'Purchase Minimums' above). Write your Fund account number on the check.
2. Mail the check and the detachable stub from your account statement (or a
letter providing your account number) to the transfer agent at the address set
forth above.
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EXCHANGE PRIVILEGE
You may exchange some or all of your Fund shares for shares of the other mutual
funds managed by Cohen & Steers, or for shares of Cohen & Steers Vista Cash
Management Fund, subject to any applicable initial sales charges. You may
exchange shares of any other Cohen & Steers mutual fund for shares of the Fund,
subject to any applicable contingent deferred sales charge at the time you sell
your Fund shares.
An exchange of shares may result in your realizing a taxable gain or loss for
income tax purposes. See 'Tax Considerations.' The exchange privilege is
available to shareholders residing in any state in which the shares being
acquired may be legally sold. Before you exercise the exchange privilege, you
should read the prospectus of the fund whose shares you are acquiring. Your
broker may limit or prohibit your right to use the exchange privilege.
There is no charge for the exchange privilege (although your broker may impose a
transaction fee). We may limit or terminate your exchange privilege if you make
exchanges more than four times a year. WE MAY MODIFY OR REVOKE THE EXCHANGE
PRIVILEGE FOR ALL SHAREHOLDERS UPON 60 DAYS PRIOR WRITTEN NOTICE. For additional
information concerning exchanges, or to make an exchange, please call the
transfer agent at (800) 437-9912.
7
<PAGE>
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HOW TO SELL FUND SHARES
You may sell or 'redeem' your shares by telephone or through the transfer agent.
Redemption By Telephone
To redeem shares by telephone, call the Fund's transfer agent at
(800) 437-9912. In order to be honored at that day's price, we must receive any
telephone redemption requests by 4:00 p.m., Eastern time. If we receive your
telephone redemption request after 4:00 p.m., Eastern time, your redemption will
be honored at the next day's price.
If you would like to change your telephone redemption instructions, you must
send the transfer agent written notification signed by all of the account's
registered owners, accompanied by signature guarantee(s), as described below.
We may modify or suspend telephone redemption privileges without notice during
periods of drastic economic or market changes. WE MAY MODIFY OR TERMINATE THE
TELEPHONE REDEMPTION PRIVILEGE AT ANY TIME ON 30 DAYS NOTICE TO SHAREHOLDERS.
Redemption By Mail
You can redeem Fund shares by sending a written request for redemption to the
transfer agent:
Chase Global Funds Services Company
P.O. Box 2798
Boston, Massachusetts 02208-2798
Attn: Cohen & Steers Institutional Realty Shares
A written redemption request must:
state the number of shares or dollar amount to be redeemed;
identify your account number and tax identification number; and
be signed by each registered owner exactly as the shares are registered.
If the shares to be redeemed were issued in certificate form, the certificate
must be endorsed for transfer (or be accompanied by a duly executed stock power)
and must be submitted to the transfer agent together with a redemption request.
Other Redemption Information
Payment of Redemption Proceeds. The Fund will send you the proceeds by check. If
you made the election to receive redemption proceeds by wire on the Subscription
Agreement, the Fund will send you the proceeds by wire to your designated bank
account. When proceeds of a redemption are to be paid to someone other than the
shareholder, either by wire or check, you must send a letter of instruction and
the signature(s) on the letter of instruction must be guaranteed, as described
below, regardless of the amount of the redemption. The transfer agent will
normally mail checks for redemption proceeds within five business days.
Redemptions by wire will normally be sent within two business days. The Fund
will delay the payment of redemption proceeds, however, if your check used to
pay for the shares to be redeemed has not cleared, which may take up to 15 days
or more.
The Fund will pay redemption proceeds in cash, by check or wire, unless the
Board of Directors believes that economic conditions exist which make redeeming
in cash detrimental to the best interests of the Fund. In the unlikely event
that this were to occur, all or a portion of your redemption proceeds would
consist of readily marketable portfolio securities of the Fund transferred into
your name. You would then incur brokerage costs in converting the securities to
cash.
Signature Guarantee. The guarantor of a signature must be a trust company or
national bank, a member bank of the Federal Reserve System, a member firm of a
national securities exchange or any other guarantor approved by the Fund's
transfer agent. For redemptions made by corporations, executors, administrators
or guardians, the transfer agent may require additional supporting documents
evidencing the authority of the person making the redemption (including evidence
of appointment or incumbency). For additional information regarding the specific
documentation required,
8
<PAGE>
contact the transfer agent at (800) 437-9912. The transfer agent will not
consider your redemption request to be properly made until it receives all
required documents in proper form.
Redemption of Small Accounts. If your Fund account has a value of $100,000 or
less as the result of any voluntary redemption, we may redeem your remaining
shares. We will, however, give you 30 days notice of our intention to do so.
During this 30-day notice period, you may make additional investments to
increase your account value to $5,000,000 or more and avoid having the Fund
automatically liquidate your account.
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DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
The Fund will declare and pay dividends from its investment income quarterly.
The Fund intends to distribute net realized capital gains, if any, at least once
each year, normally in December. The transfer agent will automatically reinvest
your dividends and distributions in additional shares of the Fund unless you
elected on your Subscription Agreement to have them paid to you in cash.
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TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
The following brief tax discussion assumes you are a U.S. shareholder. In the
SAI we have provided more detailed information regarding the tax consequences of
investing in the Fund.
Dividends paid to you out of the Fund's 'investment company taxable income'
(which includes dividends the Fund receives on REIT shares, interest income, and
net short-term capital gains) will be taxable to you as ordinary income.
Distributions of net capital gains (the excess of net long-term capital gains
over net short-term capital losses), if any, are taxable to you as long-term
capital gains, regardless of how long you have held your Fund shares. A
distribution of an amount in excess of the Fund's earnings is treated as a
non-taxable return of capital that reduces your tax basis in your Fund shares;
any such distributions in excess of your tax basis are treated as gain from a
sale of your shares. The tax treatment of your dividends and distributions will
be the same regardless of whether they were paid to you in cash or reinvested in
additional Fund shares.
A distribution will be treated as paid to you on December 31 of the current
calendar year if it is declared by the Fund in October, November or December
with a record date in such a month and paid during January of the following
year.
Each year, we will notify you of the tax status of dividends and other
distributions.
If you redeem your Fund shares, or exchange them for shares of another Cohen &
Steers fund, you may realize a capital gain or loss which will be long-term or
short-term, depending on your holding period for the shares.
We may be required to withhold U.S. federal income tax at the rate of 31% of all
taxable distributions payable if you:
fail to provide us with your correct tax payer identification number;
fail to make required certifications; or
have been notified by the IRS that you are subject to backup withholding.
9
<PAGE>
Backup withholding is not an additional tax. Any amounts withheld may be
credited against your U.S. federal income tax liability.
Fund distributions also may be subject to state and local taxes.
You should consult with your own tax advisor regarding the particular
consequences of investing in the Fund.
- --------------------------------------------------------------------------------
RELATED PERFORMANCE
- --------------------------------------------------------------------------------
Set forth below is prior performance information for Cohen & Steers Capital
Management, Inc. in managing accounts and registered investment companies with
investment objectives, policies, techniques and restrictions substantially
similar, although not necessarily identical, to the Fund. The chart below shows
average annual returns for a composite of the actual performance of all accounts
and registered investment companies with an investment objective of total return
('total return accounts') managed during the periods indicated. This performance
data was prepared in compliance with the performance presentation standards of
the Association for Investment Management and Research ('AIMR'). AIMR did not
prepare or review this information. The prior performance of Cohen & Steers
Capital Management, Inc. does not represent the performance of the Fund, which
has no history of operations and is not an indication or guarantee of the Fund's
future performance, which may be higher or lower. The prior performance of Cohen
& Steers Capital Management, Inc. reflects all management fees (and in some
cases expenses) charged to each total return account. The Fund's fees and
expenses are higher than those charged to certain of the total return accounts.
Had the Fund's expenses been applied, the composite performance numbers may have
been lower. The Fund's performance will be influenced by a number of factors,
including the timing of money flowing into and out of the Fund. These factors
may be different for the Fund than for the other total return accounts managed
by Cohen & Steers Capital Management, Inc. and therefore may result in different
performance results for the Fund and these other accounts. With the exception of
the registered investment companies, the total return accounts included in the
composite are generally not subject to the diversification requirements,
specific tax restrictions and investment limitations imposed on the Fund by the
1940 Act or the Code. The performance results for these accounts might have been
adversely affected had the accounts been subjected to these requirements,
restrictions and limitations. These potential differences do not adversely
affect the determination that the accounts included in this composite are
managed in a substantially similar manner to the Fund. The prior performance of
Cohen & Steers Capital Management, Inc. is provided merely to indicate the
experience of Cohen & Steers Capital Management, Inc. in managing substantially
similar accounts.
These figures reflect the reinvestment of dividends and distributions. Included
for comparison purposes are performance figures for the NAREIT Equity REIT Index
and the Wilshire Real Estate Securities Index, which are unmanaged indices
designed to be reflective of the performance of the Equity REIT and real estate
securities markets in general. The performance of the indices has not been
adjusted for any fees or expenses.
AVERAGE ANNUAL TOTAL RETURNS
(For periods ended December 31, 1999)
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
<S> <C> <C> <C>
Cohen & Steers Capital Management, Inc. ....................
NAREIT Equity REIT Index....................................
Wilshire Real Estate Securities Index.......................
</TABLE>
10
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
COHEN & STEERS INSTITUTIONAL REALTY SHARES, INC.
- -------------------------------------------------------------------------------
SUBSCRIPTION AGREEMENT
1 ACCOUNT TYPE (Please print; indicate only one registration type)
[ ] INDIVIDUAL OR JOINT ACCOUNT
-------------------------------------------------- -----------------------
Name Social Security Number
--------------------------------------------------
Name of Joint Registrant, if any.
(For joint registrations, the account registrants
will be joint tenants with the right of survivorship
and not tenants in common unless tenants in common or
community property registrations are requested.)
[ ] TRUST [ ] CORPORATION [ ] PARTNERSHIP [ ] OTHER ENTITY
-------------------------------------------------- -----------------------
Name of Entity Tax Identification Number
-------------------------------------------------- -----------------------
Name of Trust Agreement (if applicable) Date of Trust Agreement (if applicable)
[ ] UNIFORM GIFT TO MINORS, OR [ ] UNIFORM TRANSFER TO MINORS (where allowed by Law)
Under the
-------------------------------------------------- ---------------------------------------------
Name of Adult Custodian (only one permitted) (state of residence of minor) Uniform Gifts/
Transfer to Minor's Act
-------------------------------------------------- ---------------------------------------------
Name of Minor (only one permitted) Minor's Social Security Number
2 MAILING ADDRESS
( )
-------------------------------------------------- ---------------------------------------------
Street or P.O. Box Home Telephone Number
( )
-------------------------------------------------- ---------------------------------------------
City and State Zip Code Business Telephone Number
3 INVESTMENT INFORMATION
$--------- Amount to invest ($5,000,000 minimum investment). Do not send cash. Investment will be paid for by
(please check one):
[ ] Check or draft made payable to 'Cohen & Steers Institutional Realty Shares, Inc.'
[ ] Wire through the Federal Reserve System.* ----------------------------------------------
Wire Reference Control Number
* Call (800) 437-9912 to notify the Fund of investments by wire and to obtain a Wire Reference Control Number.
See the PURCHASE OF FUND SHARES section of the Prospectus for wire instructions.
4 EXCHANGE PRIVILEGES
Exchange privileges will be automatically granted unless you check the box below. Shareholders wishing to
exchange into other Cohen & Steers Funds should consult the EXCHANGE PRIVILEGE section of the Prospectus. (Note:
If shares are being purchased through a dealer, please contact your dealer for availability of this service.)
[ ] I decline the exchange privilege.
PLEASE CONTINUE APPLICATION ON REVERSE SIDE.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
5 REDEMPTION PRIVILEGES
Shareholders may select the following redemption privileges by checking the box(es) below. See HOW TO SELL FUND
SHARES section of the Prospectus for further details. Redemption privileges will be automatically declined for
boxes not checked.
[ ] I authorize the Transfer Agent to redeem shares in my account(s) by telephone, in accordance with the
procedures and conditions set forth in the Fund's current Prospectus.
[ ] I wish to have redemption proceeds paid by wire (please complete Section 7).
6 DISTRIBUTION OPTIONS
Dividends and capital gains may be reinvested or paid in cash. If no options are selected below, both dividends
and capital gains will be reinvested in additional Fund shares.
Dividends [ ] Reinvest. [ ] Pay in cash.
Capital Gains [ ] Reinvest. [ ] Pay in cash.
[ ] I wish to have my distributions paid by wire (please complete Section 7).
7 BANK OF RECORD (FOR WIRE INSTRUCTIONS)
PLEASE ATTACH A VOIDED CHECK FROM YOUR BANK ACCOUNT.
---------------------------------------------- ---------------------------------------
Bank Name Bank ABA Number
---------------------------------------------- ---------------------------------------
Street or P.O. Box Bank Account Number
---------------------------------------------- ---------------------------------------
City and State Zip Code Account Name
8 SIGNATURE AND TAXPAYER CERTIFICATION
By signing this form, the Investor represents and warrants that: (a) the Investor has the full right, power and
authority to invest in the Fund; and (b) the Investor has received a current prospectus of the Fund and agrees to
be bound by its terms. Persons signing as representatives or fiduciaries of corporations, partnerships, trusts or
other organizations are required to furnish corporate resolutions or similar documents providing evidence that
they are authorized to effect securities transactions on behalf of the Investor (alternatively, the secretary or
designated officer of the organization may certify the authority of the persons signing on the space provided
below). In addition, signatures of representatives or fiduciaries of corporations and other entities must be
accompanied by a signature guarantee by a commercial bank that is a member of the Federal Deposit Insurance
Corporation, a trust company or a member of a national securities exchange.
- -------------------------------------------------------------------------------------------------------------------
PLEASE CHECK ONE:
[ ] U.S. CITIZEN/TAXPAYER
UNDER THE PENALTIES OF PERJURY, THE UNDERSIGNED CERTIFIES THAT: (1) THE TAXPAYER IDENTIFICATION NUMBER PROVIDED
IS CORRECT, AND (2) I/WE ARE NOT SUBJECT TO BACKUP WITHHOLDING BECAUSE: (a) I/WE ARE EXEMPT FROM BACKUP
WITHHOLDING, OR (b) I/WE HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE ('IRS') THAT I/WE ARE SUBJECT TO
BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR (C) THE IRS HAS NOTIFIED ME
THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. NOTE: IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE
CURRENTLY SUBJECT TO BACKUP WITHHOLDING BECAUSE OF UNDER-REPORTING INTEREST OF DIVIDENDS ON YOUR TAX RETURN, YOU
MUST CROSS OUT ITEM 2 ABOVE.
[ ] NON U.S. CITIZEN/TAXPAYER (FORM W-8 ATTACHED)
INDICATE COUNTRY OF RESIDENCE FOR TAX PURPOSES -------------------------------
UNDER PENALTY OF PERJURY, I/WE CERTIFY THAT I/WE ARE NOT U.S. CITIZENS AND I/WE ARE EXEMPT FOREIGN PERSONS AS
DEFINED BY THE IRS. THE IRS DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE
CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
- ---------------------------------------------------------------------------------------------------------------------
I certify that (1) the information provided on this Subscription Agreement is true, correct and complete, (2) I
have read the prospectus for the Fund and agree to the terms thereof, and (3) I am of legal age or an emancipated
minor.
x x
------------------------------- ----------- ----------------------------------- -------
Signature (Owner, Trustee, Etc.) Date Signature (Joint Owner, Co-Trustee) Date
</TABLE>
Mail to: Chase Global Funds Services Company, P.O. Box 2798, Boston, MA 02208
<PAGE>
[LOGO]
TO OBTAIN ADDITIONAL INFORMATION ABOUT THE FUND
Additional information about the Fund's structure and operations can be found in
the SAI. The information presented in the SAI is incorporated by reference into
the prospectus and is legally considered to be part of this prospectus.
To request a free copy of any of the materials described above, or to make any
other inquiries, please contact us:
<TABLE>
<S> <C>
By telephone (800) 437-9912
Cohen & Steers Institutional Realty Shares
c/o Chase Global Fund Services Company
P.O. Box 2798
Boston, Massachusetts 02208-2798
By mail
[email protected]
By e-mail
http://www.cohenandsteers.com
On the Internet
</TABLE>
Our prospectus and SAI may also be available from financial advisor or other
intermediary. Reports and other information about the Fund (including the Fund's
SAI) may also be obtained from the SEC:
By going to the SEC's Public Reference Room in Washington, D.C. where you can
review and copy the information. Information on the operation of the Public
Reference Room may be obtained by calling the Commission at 1-800-SEC-0330.
By accessing the SEC's Internet site at http://www.sec.gov where you can view,
download and print the information.
By writing to the Public Reference Section of the SEC, Washington, D.C.
20549-6009 where, upon payment of a duplicating fee, copies of the information
will be sent to you.
SEC File No. 811-
757 THIRD AVENUE, NEW YORK, NEW YORK 10017
<PAGE>
[LOGO]
757 THIRD AVENUE
NEW YORK, NEW YORK 10017
(800) 437-9912
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 14, 2000
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS,
BUT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS OF
COHEN & STEERS INSTITUTIONAL REALTY, INC., DATED THE SAME DATE AS THE
STATEMENT OF ADDITIONAL INFORMATION,
AS SUPPLEMENTED FROM TIME TO TIME (THE 'PROSPECTUS'). THIS
STATEMENT OF ADDITIONAL INFORMATION IS INCORPORATED BY REFERENCE IN ITS
ENTIRETY INTO THE PROSPECTUS. THE FINANCIAL STATEMENTS AND NOTES
CONTAINED IN THE ANNUAL REPORT AND SEMI-ANNUAL REPORT
ARE INCORPORATED BY REFERENCE INTO THIS STATEMENT OF
ADDITIONAL INFORMATION. COPIES OF THE STATEMENT OF ADDITIONAL
INFORMATION, PROSPECTUS, ANNUAL AND SEMI-ANNUAL REPORTS MAY BE
OBTAINED FREE OF CHARGE BY WRITING OR CALLING THE ADDRESS
OR PHONE NUMBER SHOWN ABOVE.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Objective and Policies........................... 3
Investment Restrictions..................................... 9
Management of the Fund...................................... 11
Compensation of Directors and Certain Officers.............. 12
Investment Advisory and Other Services...................... 13
Portfolio Transactions and Brokerage........................ 15
Organization and Description of Capital Stock............... 16
Determination of Net Asset Value............................ 16
Sales of Fund Shares........................................ 17
Taxation.................................................... 17
Performance Information..................................... 23
Counsel and Independent Accountants......................... 24
Financial Statements........................................ 25
Report of Independent Accountants........................... 26
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
Cohen & Steers Institutional Realty Shares, Inc. (the 'Fund') is a
non-diversified, no-load, open-end, investment company organized as a Maryland
corporation on October 13, 1999.
Much of the information contained in this Statement of Additional Information
expands on subjects discussed in the Prospectus. No investment in Shares of the
Fund should be made without first reading the Prospectus.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION REGARDING FUND INVESTMENTS
The following descriptions supplement the descriptions of the principal
investment objective, strategies and risks as set forth in the Prospectus.
Except as otherwise provided below, the Fund's investment policies are not
fundamental and may be changed by the Board of Directors of the Fund without the
approval of the shareholders; however, the Fund will not change its investment
policies without written notice to shareholders.
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS
REITs are sometimes informally characterized as EQUITY REITs, MORTGAGE REITs and
HYBRID REITs. An EQUITY REIT invests primarily in the fee ownership or leasehold
ownership of land and buildings and derives its income primarily from rental
income. An EQUITY REIT may also realize capital gains (or losses) by selling
real estate properties in its portfolio that have appreciated (or depreciated)
in value. A MORTGAGE REIT invests primarily in mortgages on real estate, which
may secure construction, development or long-term loans. A MORTGAGE REIT
generally derives its income primarily from interest payments on the credit it
has extended. A HYBRID REIT combines the characteristics of EQUITY REITs and
MORTGAGE REITs, generally by holding both ownership interests and mortgage
interests in real estate. It is anticipated, although not required, that under
normal circumstances a majority of the Fund's investments in REITs will consist
of EQUITY REITs.
- --------------------------------------------------------------------------------
FOREIGN SECURITIES
The Fund may invest up to 10% of its total assets in securities of foreign real
estate companies. Investing in securities issued by foreign corporations
involves considerations and possible risks not typically associated with
investing in securities issued by domestic corporations. The values of foreign
investments are affected by changes in currency rates or exchange control
regulations, application of foreign tax laws, including withholding taxes,
changes in governmental administration or economic or monetary policy (in the
United States or abroad) or changed circumstances in dealings between nations.
Costs are incurred in connection with conversions between various currencies. In
addition, foreign brokerage commissions are generally higher than in the United
States, and foreign securities markets may be less liquid, more volatile and
less subject to governmental supervision than in the United States. Investments
in foreign countries could be affected by other factors not present in the
United States, including expropriation, confiscatory taxation, lack of uniform
accounting and auditing standards and potential difficulties in enforcing
contractual obligations and could be subject to extended settlement periods.
3
<PAGE>
- --------------------------------------------------------------------------------
ILLIQUID SECURITIES
The Fund will not invest in illiquid securities if immediately after such
investment more than 15% of the Fund's net assets (taken at market value) would
be invested in such securities. For this purpose, illiquid securities include,
among others, securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale. Securities that
have legal or contractual restrictions on resale but have a readily available
market are not deemed illiquid for purposes of this limitation.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the 'Securities Act')
and securities which are otherwise not readily marketable. Securities which have
not been registered under the Securities Act are referred to as private
placements or restricted securities and are purchased directly from the issuer
or in the secondary market. Mutual funds do not typically hold a significant
amount of these restricted or other illiquid securities because of the potential
for delays on resale and uncertainty in valuation. Limitations on resale may
have an adverse effect on the marketability of portfolio securities and a mutual
fund might be unable to dispose of restricted or other illiquid securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days. A mutual fund might also have to
register restricted securities in order to dispose of them, resulting in
additional expense and delay. Adverse market conditions could impede such a
public offering of securities.
In recent years, however, a large institutional market has developed for certain
securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
The Securities and Exchange Commission (the 'SEC') has adopted Rule 144A, which
allows a broader institutional trading market for securities otherwise subject
to restriction on resale to the general public. Rule 144A establishes a 'safe
harbor' from the registration requirements of the Securities Act of resales of
certain securities to qualified institutional buyers. The Manager anticipates
that the market for certain restricted securities will expand further as a
result of this new regulation and the development of automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers.
The Manager will monitor the liquidity of restricted securities in the Fund's
portfolio under the supervision of the Board of Directors. In reaching liquidity
decisions, the Manager will consider, among other things, the following factors:
(1) the frequency of trades and quotes for the security; (2) the number of
dealers wishing to purchase or sell the security and the number of other
potential purchasers; (3) dealer undertakings to make a market in the security;
and (4) the nature of the security and the nature of the marketplace trades
(e.g., the time needed to dispose of the security, the method of soliciting
offers and the mechanics of the transfer).
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
The Fund may also enter into repurchase agreements. A repurchase agreement is an
instrument under which an investor, such as the Fund, purchases a U.S.
Government security
4
<PAGE>
from a vendor, with an agreement by the vendor to repurchase the security at the
same price, plus interest at a specified rate. In such a case, the security is
held by the Fund, in effect, as collateral for the repurchase obligation.
Repurchase agreements may be entered into with member banks of the Federal
Reserve System or 'primary dealers' (as designated by the Federal Reserve Bank
of New York) in U.S. Government securities. Repurchase agreements usually have a
short duration, often less than one week. In entering into the repurchase
agreement for the Fund, the Manager will evaluate and monitor the
creditworthiness of the vendor. In the event that a vendor should default on its
repurchase obligation, the Fund might suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price.
If the vendor becomes bankrupt, the Fund might be delayed, or may incur costs or
possible losses of principal and income, in selling the collateral.
- --------------------------------------------------------------------------------
FUTURES CONTRACTS
The Fund may purchase and sell financial futures contracts. A futures contract
is an agreement to buy or sell a specific security or financial instrument at a
particular price on a stipulated future date. Although some financial futures
contracts call for making or taking delivery of the underlying securities, in
most cases these obligations are closed out before the settlement date. The
closing of a contractual obligation is accomplished by purchasing or selling an
identical offsetting futures contract. Other financial futures contracts by
their terms call for cash settlements.
The Fund may also buy and sell index futures contracts with respect to any stock
or bond index traded on a recognized stock exchange or board of trade. An index
futures contract is a contract to buy or sell units of an index on a specified
future date at a price agreed upon when the contract is made. The stock index
futures contract specifies that no delivery of the actual stocks making up the
index will take place. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the difference between
the contract price and the actual level of the stock index at the expiration of
the contract.
At the time the Fund purchases a futures contract, an amount of cash or liquid
portfolio securities equal to the market value of the futures contract will be
deposited in a segregated account with the Fund's custodian. When writing a
futures contract, the Fund will maintain with its custodian similar liquid
assets that, when added to the amounts deposited with a futures commission
merchant or broker as margin, are equal to the market value of the instruments
underlying the contract. Alternatively, the Fund may 'cover' its position by
owning the instruments underlying the contract (or, in the case of an index
futures contract, a portfolio with a volatility substantially similar to that of
the index on which the futures contract is based), or holding a call option
permitting the Fund to purchase the same futures contract at a price no higher
than the price of the contract written by the Fund (or at a higher price if the
difference is maintained in liquid assets with the Fund's custodian).
The Fund will be authorized to use financial futures contracts and related
options for 'bona fide hedging' purposes, as such term is defined in applicable
regulations of the Commodity Futures Trading Commission ('CFTC'). The Fund will
also be authorized to enter into such contracts and related options for
nonhedging purposes, for example to enhance total return or provide market
exposure pending the investment of cash balances, but only to the extent that
aggregate initial margin deposits plus premiums paid by it for open futures
options positions, less the amount by which any such positions are
'in-the-money,' would not exceed 5% of the Fund's total assets. The Fund may
lose the expected benefit of the transactions if
5
<PAGE>
interest rates, currency exchange rates or securities prices change in an
unanticipated manner. Such unanticipated changes in interest rates, currency
exchange rates or securities prices may also result in poorer overall
performance than if the Fund had not entered into any futures transactions.
- --------------------------------------------------------------------------------
OPTIONS ON SECURITIES AND STOCK INDICES
The Fund may write covered call and put options and purchase call and put
options on securities or stock indices that are traded on U.S. exchanges.
An option on a security is a contract that gives the purchaser of the option, in
return for the premium paid, the right to buy a specified security (in the case
of a call option) or to sell a specified security (in the case of a put option)
from or to the writer of the option at a designated price during the term of the
option. An option on a securities index gives the purchaser of the option, in
return for the premium paid, the right to receive from the seller cash equal to
the difference between the closing price of the index and the exercise price of
the option.
The Fund may write a call or put option only if the option is 'covered.' A call
option on a security written by the Fund is covered if the Fund owns the
underlying security covered by the call or has an absolute and immediate right
to acquire that security without additional cash consideration (or for
additional cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other securities held in its portfolio. A call
option on a security is also covered if the Fund holds a call on the same
security and in the same principal amount as the call written where the exercise
price of the call held (a) is equal to or less than the exercise price of the
call written or (b) is greater than the exercise price of the call written if
the difference is maintained by the Fund in cash or liquid portfolio securities
in a segregated account with its custodian. A put option on a security written
by the Fund is 'covered' if the Fund maintains similar liquid assets with a
value equal to the exercise price in a segregated account with its custodian, or
else holds a put on the same security and in the same principal amount as the
put written where the exercise price of the put held is equal to or greater than
the exercise price of the put written. The value of the underlying securities on
which options may be written at any one time will not exceed 25% of the total
assets of the Fund. The Fund will not purchase put or call options if the
aggregate premium paid for such options would exceed 5% of its total assets at
the time of purchase.
The Fund will cover call options on stock indices by owning securities whose
price changes, in the opinion of the Manager are expected to be similar to those
of the index, or in such other manner as may be in accordance with the rules of
the exchange on which the option is traded and applicable laws and regulations.
Nevertheless, where the Fund covers a call option on a stock index through
ownership of securities, such securities may not match the composition of the
index. In that event, the Fund will not be fully covered and could be subject to
risk of loss in the event of adverse changes in the value of the index. The Fund
will cover put options on stock indices by segregating assets equal to the
option's exercise price, or in such other manner as may be in accordance with
the rules of the exchange on which the option is traded and applicable laws and
regulations.
The Fund will receive a premium from writing a put or call option, which
increases the Fund's gross income in the event the option expires unexercised or
is closed out at a profit. If the value of a security or an index on which the
Fund has written a call option falls or remains the same, the Fund will realize
a profit in the form of the premium received (less transaction costs) that could
offset all or a portion of any
6
<PAGE>
decline in the value of the portfolio securities being hedged. If the value of
the underlying security or index rises, however, the Fund will realize a loss in
its call option position, which will reduce the benefit of any unrealized
appreciation in the Fund's stock investments. By writing a put option, the Fund
assumes the risk of a decline in the underlying security or index. To the extent
that the price changes of the portfolio securities being hedged correlate with
changes in the value of the underlying security or index, writing covered put
options on securities or indices will increase the Fund's losses in the event of
a market decline, although such losses will be offset in part by the premium
received for writing the option.
The Fund may also purchase put options to hedge its investments against a
decline in value. By purchasing a put option, the Fund will seek to offset a
decline in the value of the portfolio securities being hedged through
appreciation of the put option. If the value of the Fund's investments does not
decline as anticipated, or if the value of the option does not increase, the
Fund's loss will be limited to the premium paid for the option plus related
transaction costs. The success of this strategy will depend, in part, on the
accuracy of the correlation between the changes in value of the underlying
security or index and the changes in value of the Fund's security holdings being
hedged.
The Fund may purchase call options on individual securities to hedge against an
increase in the price of securities that the Fund anticipates purchasing in the
future. Similarly, the Fund may purchase call options to attempt to reduce the
risk of missing a broad market advance, or an advance in an industry or market
segment, at a time when the Fund holds uninvested cash or short-term debt
securities awaiting investment. When purchasing call options, the Fund will bear
the risk of losing all or a portion of the premium paid if the value of the
underlying security or index does not rise.
There can be no assurance that a liquid market will exist when the Fund seeks to
close out an option position. Trading could be interrupted, for example, because
of supply and demand imbalances arising from a lack of either buyers or sellers,
or the options exchange could suspend trading after the price has risen or
fallen more than the maximum specified by the exchange. Although the Fund may be
able to offset to some extent any adverse effects of being unable to liquidate
an option position, the Fund may experience losses in some cases as a result of
such inability.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY CONTRACTS AND CURRENCY HEDGING TRANSACTIONS
In order to hedge against foreign currency exchange rate risks, the Fund may
enter into forward foreign currency exchange contracts and foreign currency
futures contracts, as well as purchase put or call options on foreign
currencies, as described below. The Fund may also conduct its foreign currency
exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign currency exchange market.
The Fund may enter into forward foreign currency exchange contracts ('forward
contracts') to attempt to minimize the risk to the Fund from adverse changes in
the relationship between the U.S. dollar and foreign currencies. A forward
contract is an obligation to purchase or sell a specific currency for an agreed
price on a future date which is individually negotiated and privately traded by
currency traders and their customers. The Fund may enter into a forward
contract, for example, when it enters into a contract for the purchase or sale
of a security denominated in a foreign currency in order to 'lock in' the U.S.
dollar price of the security. In addition, for example, when the Fund believes
that a foreign currency may suffer or enjoy a substantial movement against
another currency, it may enter into a forward contract to sell an amount of the
former foreign currency (or another currency which
7
<PAGE>
acts as a proxy for that currency) approximating the value of some or all of the
Fund's portfolio securities denominated in such foreign currency. This second
investment practice is generally referred to as 'cross-hedging.' Because in
connection with the Fund's foreign currency forward transactions an amount of
the Fund's assets equal to the amount of the purchase will be held aside or
segregated to be used to pay for the commitment, the Fund will always have cash
or other liquid assets available sufficient to cover any commitments under these
contracts or to limit any potential risk. The segregated account will be
marked-to-market on a daily basis. In addition, the Fund will not enter into
such forward contracts if, as a result, the Fund will have more than 15% of the
value of its total assets committed to such contracts. While these contracts are
not presently regulated by the CFTC, the CFTC may in the future assert authority
to regulate forward contracts. In such event, the Fund's ability to utilize
forward contracts in the manner set forth above may be restricted. Forward
contracts may limit potential gain from a positive change in the relationship
between the U.S. dollar and foreign currencies. Unanticipated changes in
currency prices may result in poorer overall performance for the Fund than if it
had not engaged in such contracts.
The Fund may purchase and write put and call options on foreign currencies for
the purpose of protecting against declines in the dollar value of foreign
portfolio securities and against increases in the dollar cost of foreign
securities to be acquired. As is the case with other kinds of options, however,
the writing of an option on foreign currency will constitute only a partial
hedge, up to the amount of the premium received, and the Fund could be required
to purchase or sell foreign currencies at disadvantageous exchange rates,
thereby incurring losses. The purchase of an option on foreign currency may
constitute an effective hedge against fluctuation in exchange rates although, in
the event of rate movements adverse to the Fund's position, the Fund may forfeit
the entire amount of the premium plus related transaction costs.
The Fund may enter into exchange-traded contracts for the purchase or sale for
future delivery of foreign currencies ('foreign currency futures'). This
investment technique will be used only to hedge against anticipated future
changes in exchange rates which otherwise might adversely affect the value of
the Fund's portfolio securities or adversely affect the prices of securities
that the Fund intends to purchase at a later date. The successful use of
currency futures will usually depend on the Manager's ability to forecast
currency exchange rate movements correctly. Should exchange rates move in an
unexpected manner, the Fund may not achieve the anticipated benefits of foreign
currency futures or may realize losses.
- --------------------------------------------------------------------------------
RISKS OF OPTIONS, FUTURES AND FOREIGN CURRENCY CONTRACTS
Options, futures and foreign currency contracts are forms of derivatives. The
use of options and futures as hedging techniques may not succeed where the price
movements of the securities underlying the options and futures do not follow the
price movements of the portfolio securities subject to the hedge. Gains on
investments in options and futures depend on the portfolio manager's ability to
predict correctly the direction of stock prices, interest rates and other
economic factors. Where a liquid secondary market for options or futures does
not exist, the Fund may not be able to close its position and, in such an event
would be unable to control its losses. The loss from investing in futures
contracts is potentially unlimited. The use of forward foreign currency
contracts may limit gains from a positive change in the
8
<PAGE>
relationship between the U.S. dollar and foreign currencies. Unanticipated
changes in currency prices may cause poorer overall performance for the Fund
than if it had not engaged in such contracts.
- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment objective and the general investment policies and investment
techniques of the Fund are described in the Prospectus. The Fund has also
adopted certain investment restrictions limiting the following activities except
as specifically authorized:
The Fund may not:
1. Borrow money, or pledge its assets, except that the Fund may borrow money
from banks for temporary or emergency purposes, including the meeting of
redemption requests which might require the untimely disposition of securities.
Borrowing in the aggregate may not exceed 15%, and borrowing for purposes other
than meeting redemptions may not exceed 5%, of the value of the Fund's total
assets (including the amount borrowed) less liabilities (not including the
amount borrowed) at the time the borrowing is made. Outstanding borrowings in
excess of 5% of the value of the Fund's total assets will be repaid before any
subsequent investments are made;
2. Issue any senior securities, except that collateral arrangements with respect
to transactions such as forward contracts, futures contracts, short sales or
options, including deposits of initial and variation margin, shall not be
considered to be the issuance of a senior security for purposes of this
restriction;
3. Act as an underwriter of securities issued by the other persons, except
insofar as the Fund may be deemed an underwriter in connection with the
disposition of securities;
4. Purchase or sell real estate or commodities, except that the Fund may invest
in securities of companies that deal in real estate or are engaged in the real
estate business, including real estate investment trusts, and securities secured
by real estate or interests therein and the Fund may hold and sell real estate
acquired through default, liquidation, or other distributions of an interest in
real estate as a result of the Fund's ownership of such securities;
5. Purchase or sell commodities or commodity futures contracts, except that the
Fund may invest in financial futures contracts, options thereon and similar
instruments;
6. Make loans to other persons except through the lending of securities held by
it (but not to exceed a value of one-third of total assets), through the use of
repurchase agreements, and by the purchase of debt securities, all in accordance
with its investment policies;
7. Purchase restricted or 'illiquid' securities, including repurchase agreements
maturing in more than seven days, if as a result, more than 15% of the Fund's
net assets would then be invested in such securities (excluding securities which
are eligible for resale pursuant to Rule 144A under the Securities Act);
8. Acquire or retain securities of any investment company, except that the Fund
may (a) acquire securities of investment companies up to the limits permitted by
Section 12(d)(1) of the Investment Company Act of 1940, as amended (the '1940
Act'), and (b) acquire securities of any investment company as part of a merger,
consolidation or similar transaction;
9. Make short sales whereby the dollar amount of short sales at any one time
would exceed 25% of the net assets of the Fund; provided the Fund maintains
collateral in a segregated account consisting of cash or liquid portfolio
securities with a value equal to the current market value of the shorted
securities, which is marked-to-market daily. If the Fund owns an equal amount of
such securities or securities convertible into or
9
<PAGE>
exchangeable for, without payment of any further consideration, securities of
the same issuer as, and equal in amount to, the securities sold short (which
sales are commonly referred to as 'short sales against the box'), such
restrictions shall not apply;
10. Invest in puts, calls, straddles, spreads or any combination thereof, except
that the Fund may (a) purchase put and call options on securities and securities
indices, and (b) write covered put and call options on securities and securities
indices, provided that (i) the securities underlying such options are within the
investment policies of the Fund; (ii) at the time of such investment, the value
of the aggregate premiums paid for such securities does not exceed 5% of the
Fund's total assets; and (iii) the value of the underlying securities on which
options may be written at any one time does not exceed 25% of total assets;
11. Pledge, mortgage or hypothecate its assets except in connection with
permitted borrowings; or
12. Purchase securities on margin, except short-term credits as are necessary
for the purchase and sale of securities, provided that the deposit or payment of
initial or variation margin in connection with futures contracts or related
options will not be deemed to be a purchase on margin.
The investment objective and policies set forth in the Prospectus and the
investment restrictions numbered 1 through 6 in this Statement of Additional
Information have been adopted as fundamental policies of the Fund. Under the
1940 Act, a fundamental policy may not be changed without the vote of a majority
of the outstanding voting securities of the Fund, as defined under the 1940 Act.
'Majority of the outstanding voting securities' means the lesser of (1) 67% or
more of the shares present at a meeting of shareholders of the Fund, if the
holders of more than 50% of the outstanding shares of the Fund are present or
represented by proxy, or (2) more than 50% of the outstanding shares of the
Fund. Investment restrictions numbered 7 through 12 above, are non-fundamental
and may be changed at any time by vote of a majority of the Board of Directors.
10
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
The overall management of the business and affairs of the Fund is vested with
the Board of Directors. The Directors approve all significant agreements between
the Fund and persons or companies furnishing services to it, including the
Fund's agreements with the Manager, custodian and transfer agent. The management
of the Fund's day-to-day operations is delegated to its officers and the Fund's
Manager, subject always to the investment objective and policies of the Fund and
to the general supervision of the Directors. As of December 31, 1999, the
Directors and officers as a group beneficially owned, directly or indirectly,
less than 1% of the outstanding shares of the Fund.
The Directors and officers of the Fund and their principal occupations during
the past five years are set forth below. Each Director and officer of the Fund
is also a director or officer of Cohen & Steers Realty Income Fund, Inc. and
Cohen & Steers Total Return Realty Fund, Inc., both of which are closed-end
investment companies sponsored by the Manager, and Cohen & Steers Realty Shares,
Inc., Cohen & Steers Equity Income Fund, Inc. and Cohen & Steers Special Equity
Fund, Inc., which are open-end investment companies also sponsored by the
Manager. An asterisk (*) has been placed next to the name of each Director who
is an 'interested person' of the Fund, as such term is defined in the 1940 Act,
by virtue of such person's affiliation with the Fund or the Manager.
<TABLE>
<CAPTION>
POSITION(S)
HELD WITH
NAME, ADDRESS AND AGE FUND PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS
--------------------- ---- -----------------------------------------------
<S> <C> <C>
Robert H. Steers* Director, Chairman Chairman of Cohen & Steers Capital Management, Inc., the Fund's Manager.
757 Third Avenue and Secretary President of Cohen & Steers Securities, Inc.
New York, New York
Age: 46
Martin Cohen* .................. Director, President of Cohen & Steers Capital Management, Inc., the Fund's
757 Third Avenue President and Manager. Vice President of Cohen & Steers Securities, Inc.
New York, New York Treasurer
Age: 50
Gregory C. Clark ............... Director Principal of Wellspring Management Group.
376 Mountain Laurel Drive
Aspen, Colorado
Age: 52
George Grossman ................ Director Attorney at law.
17 Elm Place
Rye, New York
Age: 45
Jeffrey H. Lynford ............. Director Chairman of Wellsford Group Inc. since 1986 and of Wellsford Residential
610 Fifth Avenue Property Trust from 1992 to May 1997. Mr. Lynford is also a Trustee of
New York, New York Equity Residential Properties Trust and an Emeritus Trustee of the
Age: 51 National Trust for Historic Preservation.
Willard H. Smith Jr. ........... Director Board member of Essex Property Trust, Inc., Highwoods Properties, Inc.,
7 Slayton Drive Realty Income Corporation and Willis Lease Finance Corporation. Managing
Short Hills, New Jersey director at Merrill Lynch & Co., Equity Capital Markets Division from
Age: 62 1983 to 1995.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
POSITION(S)
HELD WITH
NAME, ADDRESS AND AGE FUND PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS
--------------------- ---- -----------------------------------------------
<S> <C> <C>
Elizabeth O. Reagan ............ Vice President Senior Vice President of Cohen & Steers Capital
757 Third Avenue Management, Inc., the Fund's Manager, since 1996 and
New York, New York prior to that Vice President of Cohen & Steers
Age: 37 Capital Management, Inc.
Adam Derechin .................. Vice President and Senior Vice President of Cohen & Steers Capital
757 Third Avenue Assistant Management, Inc., the Fund's Manager, since 1998 and
New York, New York Treasurer prior to that Vice President of Cohen & Steers
Age: 35 Capital Management, Inc.
Lawrence B. Stoller ............ Assistant Senior Vice President and General Counsel, Cohen &
757 Third Avenue Secretary Steers Capital Management, Inc., the Fund's Manager,
New York, New York since 1999. Prior to that, Associate General
Age: 36 Counsel, Neuberger Berman Management Inc. (money
manager); Assistant General Counsel, The Dreyfus
Corporation (money manager); and Associate, Dechert
Price & Rhoads (law firm).
</TABLE>
- --------------------------------------------------------------------------------
COMPENSATION OF DIRECTORS AND CERTAIN OFFICERS
- --------------------------------------------------------------------------------
The following table sets forth information regarding compensation of Directors
by the fund complex of which the Fund is a part for the fiscal year ended
December 31, 1999. Officers of the Fund and Directors who are interested persons
of the Fund do not receive any compensation from the Fund or any other fund in
the fund complex which is a U.S. registered investment company. Each of the
other Directors is paid an annual retainer of $5,500, and a fee of $500 for each
meeting attended and is reimbursed for the expenses of attendance at such
meetings. In the Column headed 'Total Compensation to Directors by Fund
Complex,' the compensation paid to each Director represents the six funds that
each Director serves in the fund complex. The Directors do not receive any
pensions or retirement benefits from the fund complex.
<TABLE>
<CAPTION>
COMPENSATION TABLE
FISCAL YEAR ENDED DECEMBER 31, 1999***
TOTAL
COMPENSATION
AGGREGATE FROM FUND
COMPENSATION COMPLEX PAID TO
NAME OF PERSON, POSITION FROM FUND DIRECTORS
------------------------ --------- ---------
<S> <C> <C>
Gregory C. Clark*, Director................................. $7,500 $45,000
Martin Cohen**, Director and President...................... -- --
George Grossman*, Director.................................. 7,500 45,000
Jeffrey H. Lynford*, Director............................... 7,500 45,000
Willard H. Smith Jr.*, Director............................. 7,500 45,000
Robert H. Steers**, Director and Chairman................... -- --
</TABLE>
- ------------
* Member of the Audit Committee.
** 'Interested person,' as defined in the 1940 Act, of the Fund because of the
affiliation with Cohen & Steers Capital Management, Inc., the Fund's
Manager.
*** Since the Fund is new, these amounts represent estimated future payments to
be made to the Directors during the Fund's fiscal year ended December 31,
2000.
12
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT ADVISORY AND OTHER SERVICES
- --------------------------------------------------------------------------------
THE MANAGER
Cohen & Steers Capital Management, Inc. ('Cohen & Steers'), with offices located
at 757 Third Avenue, New York, New York 10017 is the Manager of the Fund.
Cohen & Steers, a registered investment adviser, was formed in 1986 and
specializes in the management of real estate securities portfolios. Its current
clients include pension plans of leading corporations, endowment funds and
mutual funds, including Cohen & Steers Realty Income Fund, Inc. and Cohen &
Steers Total Return Realty Fund, Inc., both of which are closed-end investment
companies and Cohen & Steers Realty Shares, Inc., Cohen & Steers Equity Income
Fund, Inc. and Cohen & Steers Special Equity Fund, Inc., which are open-end
investment companies. Mr. Cohen and Mr. Steers may be deemed 'controlling
persons' of the Manager on the basis of their ownership of the Manager's stock.
Pursuant to a management agreement (the 'Management Agreement'), the Manager
furnishes a continuous investment program for the Fund's portfolio, makes the
day-to-day investment decisions for the Fund, executes the purchase and sale
orders for the portfolio transactions of the Fund and generally manages the
Fund's investments in accordance with the stated policies of the Fund, subject
to the general supervision of the Board of Directors of the Fund.
Under the Management Agreement, the Fund will pay the Adviser a monthly
management fee in an amount equal to 1/12th of 0.75% of the average daily value
of the net assets of the Fund. The Manager pays all expenses of the Fund except
for brokerage fees, taxes, interest, fees and expenses of the Independent
Directors (including fees and expenses of independent counsel and other
independent consultants to the Independent Directors), trade organization
membership dues, federal and state registration fees and extraordinary expenses.
The Manager also provides the Fund with such personnel as the Fund may from time
to time request for the performance of clerical, accounting and other office
services, such as coordinating matters with the sub-administrator, the transfer
agent and the custodian. The personnel rendering these services, who may act as
officers of the Fund, may be employees of the Manager or its affiliates. These
services are provided at no additional cost to the Fund. The Fund does not pay
any additional amounts for services performed by officers of the Manager or its
affiliates.
- --------------------------------------------------------------------------------
ADMINISTRATIVE SERVICES
Pursuant to the Management Agreement, the Manager also performs certain
administrative functions for the Fund, including (i) providing office space,
telephone, office equipment and supplies for the Fund; (ii) paying compensation
of the Fund's officers for services rendered as such; (iii) authorizing
expenditures and approving bills for payment on behalf of the Fund;
(iv) supervising preparation of the periodic updating of the Fund's registration
statement, including the Prospectus and Statement of Additional Information, for
the purpose of filings with the SEC and state securities administrators and
monitoring and maintaining the effectiveness of such filings, as appropriate;
(v) supervising preparation of quarterly reports to the Fund's shareholders,
notices of dividends, capital gains distributions and tax credits, and attending
to routine correspondence and other communications with individual shareholders;
(vi) supervising the daily pricing of the Fund's investment portfolio and the
publication of the net asset value of the Fund's shares, earnings reports and
other
13
<PAGE>
financial data; (vii) monitoring relationships with organizations providing
services to the Fund, including the custodian, transfer agent and printers;
(viii) providing trading desk facilities for the Fund; (ix) supervising
compliance by the Fund with recordkeeping requirements under the 1940 Act and
regulations thereunder, maintaining books and records for the Fund (other than
those maintained by the custodian and transfer agent) and preparing and filing
of tax reports other than the Fund's income tax returns; and (x) providing
executive, clerical and secretarial help needed to carry out these
responsibilities. The Manager provides these services for no additional fee to
the Fund except for the fee under the Management Agreement.
In accordance with the terms of the Management Agreement and with the approval
of the Fund's Board of Directors, the Manager has caused the Fund to retain
Chase Manhattan Bank ('Chase') as sub-administrator under a fund accounting and
administration agreement (the 'Sub-Administration Agreement'). Under the
Sub-Administration Agreement, Chase has assumed responsibility for performing
certain of the foregoing administrative functions, including determining the
Fund's net asset value and preparing these figures for publication, maintaining
certain of the Fund's books and records that are not maintained by the Manager,
custodian or transfer agent, preparing financial information for the Fund's
income tax returns, proxy statements, shareholders reports, and SEC filings, and
responding to shareholder inquiries. The Manager remains responsible for
monitoring and overseeing the performance by Chase and Chase Global Funds
Services Company of their obligations to the Fund under their respective
agreements with the Fund, subject to the overall authority of the Fund's Board
of Directors.
The Manager pays for the cost of Chase's services without any additional charge
to the Fund. Chase Global Funds Services Company, P.O. Box 2798, Boston,
Massachusetts 02208, a wholly-owned subsidiary of Chase, has been retained by
Chase to provide to the Fund the administrative services described above. Chase
also serves as the Fund's custodian and transfer agent. See 'Custodian and
Transfer and Dividend Disbursing Agent,' below. Chase Global Funds Services
Company has been similarly retained by Chase to provide transfer agency services
to the Fund and is hereafter sometimes referred to as the 'Transfer Agent.'
- --------------------------------------------------------------------------------
DISTRIBUTOR
Cohen & Steers Securities, Inc., an affiliate of the Manager, serves without
charge as the Distributor of shares of the Fund. Cohen & Steers Securities, Inc.
is not obligated to sell any specific amount of shares and will sell shares, as
agent for the Fund, on a continuous basis only against orders to purchase
shares.
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Chase, which has its principal business at One Chase Manhattan Plaza, New York,
New York 10081-1000, has been retained to act as custodian of the Fund's
investments and as the Fund's transfer and dividend disbursing agent. Chase has
retained its wholly-owned subsidiary, Chase Global Funds Services Company, to
provide transfer and dividend disbursing agency services to the Fund. Neither
Chase nor Chase Global Funds Services Company has any part in deciding the
Fund's investment policies or which securities are to be purchased or sold for
the Fund's portfolio. The Manager pays for the cost of these services without
any additional charge to the Fund.
- --------------------------------------------------------------------------------
CODES OF ETHICS
The Fund, and the Manager and Distributor, have adopted codes of ethics that are
designed to ensure that the interests of Fund shareholders come before the
interests of those
14
<PAGE>
involved in managing the Fund. The codes of ethics, among other things, prohibit
management personnel from investing in REITs and real estate securities,
prohibit purchases in an initial public offering and require pre-approval for
investments in private placements. The Fund's Independent Directors are
prohibited from purchasing or selling any security if they knew or reasonably
should have known at the time of the transaction that, within the most recent 15
days, the security is being or has been considered for purchase or sale by a
Fund, or is being purchased or sold by a Fund.
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
Subject to the supervision of the Directors, decisions to buy and sell
securities for the Fund and negotiation of its brokerage commission rates are
made by the Manager. Transactions on U.S. stock exchanges involve the payment by
the Fund of negotiated brokerage commissions. There is generally no stated
commission in the case of securities traded in the over-the-counter market but
the price paid by the Fund usually includes an undisclosed dealer commission or
mark-up. In certain instances, the Fund may make purchases of underwritten
issues at prices which include underwriting fees.
In selecting a broker to execute each particular transaction, the Manager 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 Directors may
determine, the Manager 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 a broker
that provides research services to the Manager an amount of commission for
effecting a portfolio investment transaction in excess of the amount of
commission another broker would have charged for effecting that transaction, if
the Manager 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 or the Manager's
ongoing responsibilities with respect to the Fund. Research and investment
information is provided by these and other brokers at no cost to the Manager and
is available for the benefit of other accounts advised by the Manager and its
affiliates, and not all of the information will be used in connection with the
Fund. While this information may be useful in varying degrees and may tend to
reduce the Manager's expenses, it is not possible to estimate its value and in
the opinion of the Manager it does not reduce the Manager's expenses in a
determinable amount. The extent to which the Manager makes use of statistical,
research and other services furnished by brokers is considered by the Manager in
the allocation of brokerage business but there is no formula by which such
business is allocated. The Manager does so in accordance with its judgment of
the best interests of the Fund and its shareholders. The Manager may also take
into account payments made by brokers to organizations for providing services to
the Fund. In addition, consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking best price and
execution, the Manager may consider sales of shares of the Fund as a factor in
the selection of brokers and dealers to enter into portfolio transactions with
the Fund.
15
<PAGE>
- --------------------------------------------------------------------------------
ORGANIZATION AND DESCRIPTION OF CAPITAL STOCK
- --------------------------------------------------------------------------------
The Fund was incorporated on October 13, 1999, as a Maryland corporation and is
authorized to issue 100,000,000 shares of Common Stock, $0.001 par value. The
Fund presently has one class of shares. The Fund's shares have no preemptive,
conversion, exchange or redemption rights. Each share has equal voting,
dividend, distribution and liquidation rights. All shares of the Fund, when duly
issued, will be fully paid and nonassessable. Shareholders are entitled to one
vote per share. All voting rights for the election of Directors are
noncumulative, which means that the holders of more than 50% of the shares
outstanding can elect 100% of the Directors then nominated for election if they
choose to do so and, in such event, the holders of the remaining shares will not
be able to elect any Directors. The foregoing description is subject to the
provisions contained in the Fund's Articles of Incorporation and By-Laws.
The Board of Directors is authorized to reclassify and issue any unissued shares
of the Fund without shareholder approval. Accordingly, in the future, the
Directors may create additional classes and/or series of shares with different
investment objectives, policies or restrictions. Any issuance of shares of
another class and/or series would be governed by the 1940 Act and Maryland law.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
Net asset value per share is determined by the Fund on each day the New York
Stock Exchange is open for trading, and on any other day during which there is a
sufficient degree of trading in the investments of the Fund to affect materially
the Fund's net asset value.
For purposes of determining the Fund's net asset value per share, readily
marketable portfolio securities listed on the New York Stock Exchange are
valued, except as indicated below, at the last sale price reflected on the
consolidated tape at the close of the New York Stock Exchange on the business
day as of which such value is being determined. If there has been no sale on
such day, the securities are valued at the mean of the closing bid and asked
prices on such day. If no bid or asked prices are quoted on such day, then the
security is valued by such method as the Directors shall determine in good faith
to reflect its fair market value. Readily marketable securities not listed on
the New York Stock Exchange but listed on other domestic or foreign securities
exchanges or admitted to trading on the National Association of Securities
Dealers Automatic Quotations, Inc. ('NASDAQ') National List are valued in a like
manner. Portfolio securities traded on more than one securities exchange are
valued at the last sale price on the business day as of which such value is
being determined as reflected on the tape at the close of the exchange
representing the principal market for such securities.
Readily marketable securities traded in the over-the-counter market, including
listed securities whose primary market is believed by the Manager to be
over-the-counter, but excluding securities admitted to trading on the NASDAQ
National List, are valued at the mean of the current bid and asked prices as
reported by NASDAQ or, in the case of securities not quoted by NASDAQ, the
National Quotation Bureau or such other comparable sources as the Directors deem
16
<PAGE>
appropriate to reflect their fair market value. Where securities are traded on
more than one exchange and also over-the-counter, the securities will generally
be valued using the quotations the Board of Directors believes reflect most
closely the value of such securities.
For purposes of determining the Fund's net asset value per share, all assets and
liabilities initially expressed in foreign currencies will be converted into
U.S. dollars at the mean of the bid and asked prices of such currencies against
the U.S. dollar last quoted by a major bank which is a regular participant in
the institutional foreign exchange markets or on the basis of a pricing service
which takes into account the quotes provided by a number of such major banks.
- --------------------------------------------------------------------------------
SALES OF FUND SHARES
- --------------------------------------------------------------------------------
Payment of the price for shares that are sold or 'redeemed' may be made either
in cash or in portfolio securities (selected in the discretion of the Board of
Directors of the Fund and taken at their value used in determining the Fund's
net asset value per share as described in the Prospectus and in this Statement
of Additional Information), or partly in cash and partly in portfolio
securities. However, payments will be made wholly in cash unless the Board of
Directors believes that economic conditions exist which would make such a
practice detrimental to the best interests of the Fund. If payment for shares
redeemed is made wholly or partly in portfolio securities, brokerage costs may
be incurred by the investor in converting the securities to cash. The Fund will
not distribute in kind portfolio securities that are not readily marketable.
- --------------------------------------------------------------------------------
TAXATION
- --------------------------------------------------------------------------------
Set forth below is a discussion of certain U.S. federal income tax issues
concerning the Fund and the purchase, ownership, and disposition of Fund shares.
This discussion does not purport to be complete or to deal with all aspects of
federal income taxation that may be relevant to shareholders in light of their
particular circumstances. This discussion is based upon present provisions of
the Internal Revenue Code of 1986, as amended (the 'Code'), the regulations
promulgated thereunder, and judicial and administrative ruling authorities, all
of which are subject to change, which change may be retroactive. Prospective
investors should consult their own tax advisors with regard to the federal tax
consequences of the purchase, ownership, or disposition of Fund shares, as well
as the tax consequences arising under the laws of any state, foreign country, or
other taxing jurisdiction.
- --------------------------------------------------------------------------------
TAXATION OF THE FUND
The Fund intends to qualify annually and to elect to be treated as a regulated
investment company under the Code.
To qualify as a regulated investment company, the Fund must, among other things,
(a) derive in each taxable year at least 90% of its gross income from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of stock, securities or foreign currencies or other income
derived with respect to its business of investing in such stock, securities or
currencies; (b) diversify its
17
<PAGE>
holdings so that, at the end of each quarter of the taxable year, (i) at least
50% of the market value of the Fund's assets is represented by cash and cash
items (including receivables), U.S. Government securities, the securities of
other regulated investment companies and other securities, with such other
securities of any one issuer limited for the purposes of this calculation to an
amount not greater than 5% of the value of the Fund's total assets and not
greater than 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of its total assets is invested in the
securities of any one issuer (other than U.S. Government securities or the
securities of other regulated investment companies); and (c) distribute at least
90% of its investment company taxable income (which includes, among other items,
dividends, interest and net short-term capital gains in excess of net long-term
capital losses) each taxable year.
As a regulated investment company, the Fund generally will not be subject to
U.S. federal income tax on its investment company taxable income and net capital
gains (the excess of net long-term capital gains over net short-term capital
losses), if any, that it distributes to shareholders. The Fund intends to
distribute to its shareholders, at least annually, substantially all of its
investment company taxable income and net capital gains. Amounts not distributed
on a timely basis in accordance with a calendar year distribution requirement
are subject to a nondeductible 4% excise tax. To prevent imposition of the
excise tax, the Fund must distribute during each calendar year an amount equal
to the sum of (1) at least 98% of its ordinary income (not taking into account
any capital gains or losses) for the calendar year, (2) at least 98% of its
capital gains in excess of its capital losses (adjusted for certain ordinary
losses) for the one-year period ending on October 31 of the calendar year, and
(3) any ordinary income and capital gains for previous years that was not
distributed during those years. A distribution will be treated as paid on
December 31 of the current calendar year if it is declared by the Fund in
October, November or December with a record date in such a month and paid by the
Fund during January of the following calendar year. Such distributions will be
taxable to shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
To prevent application of the excise tax, the Fund intends to make its
distributions in accordance with the calendar year distribution requirement.
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends paid out of the Fund's investment company taxable income will be
taxable to a U.S. shareholder as ordinary income. If a portion of the Fund's
income consists of dividends paid by U.S. corporations, a portion of the
dividends paid by the Fund may be eligible for the corporate dividends-received
deduction. Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses), if any, designated as capital
gain dividends are taxable to a shareholder as long-term capital gains,
regardless of how long the shareholder has held Fund shares. Shareholders
receiving distributions in the form of additional shares, rather than cash,
generally will have a cost basis in each such share equal to the net asset value
of a share of the Fund on the reinvestment date. A distribution of an amount in
excess of the Fund's current and accumulated earnings and profits will be
treated by a shareholder as a return of capital which is applied against and
reduces the shareholder's basis in his or her shares. To the extent that the
amount of any such distribution exceeds the shareholder's
18
<PAGE>
basis in his or her shares, the excess will be treated by the shareholder as
gain from a sale or exchange of the shares.
Shareholders will be notified annually as to the U.S. federal tax status of
distributions, and shareholders receiving distributions in the form of
additional shares will receive a report as to the net asset value of those
shares.
- --------------------------------------------------------------------------------
OPTIONS AND HEDGING TRANSACTIONS
The taxation of equity options and over-the-counter options on debt securities
is governed by Code section 1234. Pursuant to Code section 1234, the premium
received by the Fund for selling a put or call option is not included in income
at the time of receipt. If the option expires, the premium is short-term capital
gain to the Fund. If the Fund enters into a closing transaction, the difference
between the amount paid to close out its position and the premium is received is
short-term capital gain or loss. If a call option written by the Fund is
exercised, thereby requiring the Fund to sell the underlying security, the
premium will increase the amount realized upon the sale of such security and any
resulting gain or loss will be capital gain or loss, and will be long-term or
short-term depending upon the holding period of the security. With respect to a
put or call option that is purchased by the Fund, if the option is sold, any
resulting gain or loss will be a capital gain or loss, and will be long-term or
short-term, depending upon the holding period of the option. If the option
expires, the resulting loss is a capital loss and is long-term or short-term
depending upon the holding period of the option. If the option is exercised, the
cost of the option, in the case of a call option, is added to the basis of the
purchased security and, in the case of a put option, reduces the amount realized
on the underlying security in determining gain or loss.
Certain options, futures contracts and forward contracts in which the Fund may
invest are 'section 1256 contracts.' Gains or losses on section 1256 contracts
generally are considered 60% long-term and 40% short-term capital gains or
losses; however, foreign currency gains or losses (as discussed below) arising
from certain section 1256 contracts may be treated as ordinary income or loss.
Also, section 1256 contracts held by the Fund at the end of each taxable year
(and, generally, for purposes of the 4% excise tax, on October 31 of each year)
are 'marked-to-market' (that is, treated as sold at fair market value),
resulting in unrealized gains or losses being treated as though they were
realized.
Generally, the hedging transactions undertaken by the Fund may result in
'straddles' for U.S. federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by the Fund. In addition, losses
realized by the Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to the Fund of engaging in hedging
transactions are not entirely clear. Hedging transactions may increase the
amount of short-term capital gain realized by the Fund which is taxed as
ordinary income when distributed to shareholders.
The Fund may make one or more of the elections available under the Code which
are applicable to straddles. If the Fund makes any of the elections, the amount,
character and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under certain of the elections may
19
<PAGE>
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because the straddle rules may affect the character of gains or losses, defer
losses and/or accelerate the recognition of gains or losses from the affected
straddle positions, the amount which may be distributed to shareholders, and
which will be taxed to them as ordinary income or long-term capital gain, may be
increased or decreased as compared to a fund that did not engage in such hedging
transactions.
Notwithstanding any of the foregoing, the Fund may recognize gain (but not loss)
from a constructive sale of certain 'appreciated financial positions' if the
Fund enters into a short sale, offsetting notional principal contract, futures
or forward contract transaction with respect to the appreciated position or
substantially identical property. Appreciated financial positions subject to
this constructive sale treatment are interests (including options, futures and
forward contracts and short sales) in stock, partnership interests, certain
actively traded trust instruments and certain debt instruments. Constructive
sale treatment does not apply to certain transactions closed in the 90-day
period ending with the 30th day after the close of the taxable year, if certain
conditions are met.
- --------------------------------------------------------------------------------
CURRENCY FLUCTUATIONS -- 'SECTION 988' GAINS OR LOSSES
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time the Fund accrues receivables or liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables, or pays such liabilities, generally are treated as ordinary income
or ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency, gains or losses attributable to fluctuations in the value of
foreign currency between the date of acquisition of the security and the date of
disposition also are treated as ordinary gain or loss. These gains or losses,
referred to under the Code as 'section 988' gains or losses, may increase or
decrease the amount of the Fund's investment company taxable income to be
distributed to its shareholders as ordinary income.
- --------------------------------------------------------------------------------
SALE OR EXCHANGE OF FUND SHARES
Upon the sale or other disposition of shares of the Fund, including an exchange
of shares in the Fund for shares of another Cohen & Steers fund, a shareholder
may realize a capital gain or loss which will be long-term or short-term,
depending upon the shareholder's holding period for the shares. A shareholder
who exchanges shares in the Fund for shares of another Cohen & Steers fund will
have a tax basis in the newly-acquired fund shares equal to the amount invested
and will begin a new holding period for federal income tax purposes.
If a shareholder exchanges shares in the Fund for shares in another Cohen &
Steers fund pursuant to a reinvestment right, the sales charge incurred in the
purchase of the Fund shares exchanged may not be added to tax basis in
determining gain or loss for federal income tax purposes. Instead, the sales
charge for the exchanged Fund shares shall be added to basis for purposes of
determining gain or loss on the disposition of the newly-acquired fund shares,
if such newly-acquired fund shares are not disposed of in a similar exchange
transaction. Any loss realized on a sale or exchange will be disallowed to the
extent the shares disposed of are replaced (including through reinvestment of
dividends) within a period of 61 days beginning 30 days before and ending 30
days after disposition of the shares. Any loss realized by a shareholder on a
disposition of Fund shares held by the shareholder for six months or less will
be treated as a long-term capital loss to the extent of any distributions of net
capital gains received by the shareholder with respect to such shares.
20
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN REAL ESTATE INVESTMENT TRUSTS
The Fund may invest in real estate investment trusts ('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,
a 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 subject to federal income tax in all events. These regulations are also
expected to provide that excess inclusion income of a regulated investment
company, such as the Fund, will be allocated to shareholders of the regulated
investment company in proportion to the dividends received by such shareholders,
with the same consequences as if the shareholders held the related REMIC
residual interest directly. In general, excess inclusion income allocated to
shareholders (i) cannot be offset by net operating losses (subject to a limited
exception for certain thrift institutions), (ii) will constitute unrelated
business taxable income to entities (including a qualified pension plan, an
individual retirement account, a 401(k) plan, a Keogh plan or other tax-exempt
entity) subject to tax on unrelated business income, thereby potentially
requiring such an entity that is allocated excess inclusion income, and
otherwise might not be required to file a tax return, to file a tax return and
pay tax on such income, and (iii) in the case of a foreign shareholder, will not
qualify for any reduction in U.S. federal withholding tax. 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 a regulated investment company, then
the regulated investment company will be subject to a tax equal to that portion
of its excess inclusion income for the taxable year that is allocable to the
disqualified organization, multiplied by the highest federal income tax rate
imposed on corporations. The Manager does not intend on behalf of the Fund to
invest in REITs, a substantial portion of the assets of which consists of
residual interests in REMICs.
- --------------------------------------------------------------------------------
PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund may invest in shares of foreign corporations that may be classified
under the Code as passive foreign investment companies ('PFICs'). In general, a
foreign corporation is classified as a PFIC if at least one-half of its assets
constitute investment-type assets, or 75% or more of its gross income is
investment-type income. If the Fund receives a so-called `excess distribution'
with respect to PFIC stock, the Fund itself may be subject to a tax on a portion
of the excess distribution, whether or not the corresponding income is
distributed by the Fund to shareholders. In general, under the PFIC rules, an
excess distribution is treated as having been realized ratably over the period
during which the Fund held the PFIC shares. The Fund will itself be subject to
tax on the portion, if any, of an excess distribution that is so allocated to
prior Fund taxable years and an interest factor will be added to the tax, as if
the tax had been payable in such prior taxable years. Certain distributions from
a PFIC as well as gain from the sale of PFIC shares are treated as excess
distributions. Excess distributions are characterized as ordinary income even
though, absent application of the PFIC rules, certain excess distributions might
have been classified as capital gain.
The Fund may be eligible to elect alternative tax treatment with respect to PFIC
shares. Under an election that currently is available in come circumstances, the
Fund would be required to include in its gross income its share of the earnings
of a PFIC on a current basis, regardless of whether distributions were received
from the PFIC in a given year. If this election were made, the special rules,
discussed above, relating to the taxation of
21
<PAGE>
excess distributions, would not apply. In addition, another election would
involve marking to market the Fund's PFIC shares at the end of each taxable
year, with the result that unrealized gains would be treated as though they were
realized and reported as ordinary income. Any mark-to-market losses and any loss
from an actual disposition of PFIC shares would be deductible as ordinary losses
to the extent of any net mark-to-market gains included in income in prior years.
- --------------------------------------------------------------------------------
FOREIGN WITHHOLDING TAXES
Income received by the Fund from sources within foreign countries may be subject
to withholding and other taxes imposed by such countries.
- --------------------------------------------------------------------------------
BACKUP WITHHOLDING
The Fund may be required to withhold U.S. federal income tax at the rate of 31%
of all taxable distributions payable to shareholders who fail to provide the
Fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Corporate shareholders and certain other
shareholders specified in the Code generally are exempt from such backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against the shareholder's U.S. federal income tax liability.
- --------------------------------------------------------------------------------
FOREIGN SHAREHOLDERS
U.S. taxation of income from the Fund to a shareholder who is a nonresident
alien individual, a foreign trust or estate, a foreign corporation or foreign
partnership ('foreign shareholder') depends on whether the income of the Fund is
'effectively connected' with a U.S. trade or business carried on by the
shareholder.
Income Not Effectively Connected. If the income from the Fund is not
'effectively connected' with a U.S. trade or business carried on by the foreign
shareholder, distributions of investment company taxable income will be subject
to a U.S. tax of 30% (or lower treaty rate, except in the case of any excess
inclusion income allocated to the shareholder (see 'Taxation -- Investments in
Real Estate Investment Trusts,' above)), which tax is generally withheld from
such distributions.
Distributions of capital gain dividends and any amounts retained by the Fund
which are designated as undistributed capital gains will not be subject to U.S.
tax at the rate of 30% (or lower treaty rate) unless the foreign shareholder is
a nonresident alien individual and is physically present in the United States
for more than 182 days during the taxable year and meets certain other
requirements. However, this 30% tax on capital gains of nonresident alien
individuals who are physically present in the United States for more than the
182 day period only applies in exceptional cases because any individual present
in the United States for more than 182 days during the taxable year is generally
treated as a resident for U.S. income tax purposes; in that case, he or she
would be subject to U.S. income tax on his or her worldwide income at the
graduated rates applicable to U.S. citizens, rather than the 30% U.S. tax. In
the case of a foreign shareholder who is a nonresident alien individual, the
Fund may be required to withhold U.S. income tax at a rate of 31% of
distributions of net capital gains unless the foreign shareholder certifies his
or her non-U.S. status under penalties of perjury or otherwise establishes an
exemption. See 'Taxation -- Backup Withholding,' above. If a foreign shareholder
is a nonresident alien
22
<PAGE>
individual, any gain such shareholder realizes upon the sale or exchange of such
shareholder's shares of the Fund in the United States will ordinarily be exempt
from U.S. tax unless (i) the gain is U.S. source income and such shareholder is
physically present in the United States for more than 182 days during the
taxable year and meets certain other requirements, or is otherwise considered to
be a resident alien of the United States, or (ii) at any time during the shorter
of the period during which the foreign shareholder held shares of the Fund and
the five year period ending on the date of the disposition of those shares, the
Fund was a `U.S. real property holding corporation' and the foreign shareholder
held more than 5% of the shares of the Fund, in which event the gain would be
taxed in the same manner as for a U.S. shareholder as discussed above and a 10%
U.S. withholding tax would be imposed on the amount realized on the disposition
of such shares to be credited against the foreign shareholder's U.S. income tax
liability on such disposition. A corporation is a 'U.S. real property holding
corporation' if the fair market value of its U.S. real property interests equals
or exceeds 50% of the fair market value of such interests plus its interests in
real property located outside the United States plus any other assets used or
held for use in a business. In the case of the Fund, U.S. real property
interests include interests in stock in U.S. real property holding corporations
(other than stock of a REIT controlled by U.S. persons and holdings of 5% or
less in the stock of publicly traded U.S. real property holding corporations)
and certain participating debt securities.
Income Effectively Connected. If the income from the Fund is 'effectively
connected' with a U.S. trade or business carried on by a foreign shareholder,
then distributions of investment company taxable income and capital gain
dividends, any amounts retained by the Fund which are designated as
undistributed capital gains and any gains realized upon the sale or exchange of
shares of the Fund will be subject to U.S. income tax at the graduated rates
applicable to U.S. citizens, residents and domestic corporations. Foreign
corporate shareholders may also be subject to the branch profits tax imposed by
the Code.
The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may differ from those described herein. Foreign
shareholders are advised to consult their own tax advisors with respect to the
particular tax consequences to them of an investment in the Fund.
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund may quote the Fund's total return, aggregate total
return or yield in advertisements or in reports and other communications to
shareholders. The Fund's performance will vary depending upon market conditions,
the composition of its portfolio and its operating expenses. Consequently, any
given performance quotation should not be considered representative of the
Fund's performance in the future. In addition, because performance will
fluctuate, it may not provide a basis for comparing an investment in the Fund
with certain bank deposits or other investments that pay a fixed yield for a
stated period of time. Investors comparing the Fund's performance with that of
other mutual funds should give consideration to the quality and maturity of the
respective investment companies' portfolio securities.
23
<PAGE>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
The Fund's 'average annual total return' figures will be computed according to a
formula prescribed by the SEC. The formula can be expressed as follows:
P(1 + T)'pp'n = ERV
<TABLE>
<S> <C> <C>
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 investment
made at the beginning of a 1-, 5-, or 10-year period at the
end of a 1-, 5-, or 10-year period (or fractional portion
thereof), assuming reinvestment of all dividends and
distributions.
</TABLE>
- --------------------------------------------------------------------------------
YIELD
Quotations of yield for the Fund will be based on all investment income per
share earned during a particular 30-day period (including dividends and
interest), less expenses accrued during the period ('net investment income') and
are computed by dividing net investment income by the maximum offering price per
share on the last day of the period, according to the following formula:
a - b
----
2[( cd + 1)='pp'6 - 1]
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, and
d = the maximum offering price per share on the last day of the
period.
In reports or other communications to shareholders of the Fund or in advertising
materials, the Fund may compare its performance with that of (i) other mutual
funds listed in the rankings prepared by Lipper Analytical Services, Inc.,
publications such as Barrons, Business Week, Forbes, Fortune, Institutional
Investor, Kiplinger's Personal Finance, Money, Morningstar Mutual Fund Values,
The New York Times, The Wall Street Journal and USA Today or other industry or
financial publications or (ii) the Standard and Poor's Index of 500 Stocks, the
Dow Jones Industrial Average and other relevant indices and industry
publications. The Fund may also compare the historical volatility of its
portfolio to the volatility of such indices during the same time periods.
(Volatility is a generally accepted barometer of the market risk associated with
a portfolio of securities and is generally measured in comparison to the stock
market as a whole -- the beta -- or in absolute terms -- the standard
deviation.)
- --------------------------------------------------------------------------------
COUNSEL AND INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Simpson Thacher & Bartlett serves as counsel to the Fund, and is located at 425
Lexington Avenue, New York, New York 10017-3909.
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036, have been appointed as independent accountants for the Fund.
24
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
COHEN & STEERS INSTITUTIONAL
REALTY SHARES, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER , 1999
<TABLE>
<S> <C>
Cash........................................................ $100,000
--------
Total Assets........................................... $100,000
--------
--------
Paid-in-Capital............................................. $100,000
--------
--------
Net Capital............................................ $100,000
--------
--------
Net Assets applicable to 4,000 shares of $.001 par value
common stock outstanding.................................. $100,000
--------
Net Asset Value and offering price per share
($100,000 [div] 4,000 shares outstanding)........... $25.00
========
</TABLE>
- --------------------------------------------------------------------------------
NOTES:
1. ORGANIZATION
Cohen & Steers Institutional Realty, Inc. (the 'Fund') was incorporated under
the laws of the State of Maryland on October 13, 1999 and is registered under
the Investment Company Act of 1940, as amended (the 'Act') as an open-end,
non-diversified management investment company. The Fund has been inactive since
that date except for matters relating to the Fund's establishment, designation,
registration of the Fund's shares of common stock, par value $0.001 per share
('Shares'), under the Securities Act of 1933, as amended, and the sale of 4,000
Shares ('Initial Shares') for $100,000 to Cohen & Steers Capital Management,
Inc. (the 'Manager'). The proceeds received by the Fund for the sale of the
Initial Shares were invested in cash. There are 200,000,000 Shares authorized
for issuance.
The preparation of the financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements. Actual results could differ from these
estimates.
2. AGREEMENT
The Fund has entered into a Management Agreement with the Manager pursuant to
which the Manager will provide general investment advisory and management
services for the Fund. For providing these services and facilities, and for
bearing the related expenses, the Manager will receive a fee from the Fund,
accrued daily and paid monthly, at an annual rate equal to 0.75% of the Fund's
average daily net assets. As described in the Management Agreement, the Manager
shall be responsible for paying certain of the Fund's operating expenses at no
additional charge to the Fund.
3. ORGANIZATION COSTS
All costs incurred in connection with organizing and establishing the Fund will
be assumed by the Manager, which will not be required to be reimbursed by the
Fund. The Manager has estimated these costs at $ .
25
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholder and Board of Directors of
Cohen & Steers Institutional Realty Shares, Inc.:
In our opinion, the accompanying statement of assets and liabilities
presents fairly, in all material respects, the financial position of Cohen &
Steers Institutional Realty Shares, Inc. (the 'Fund') at December , 1999 in
conformity with generally accepted accounting principles. This statement of
assets and liabilities is the responsibility of the Fund's management; our
responsibility is to express an opinion on this statement of assets and
liabilities based on our audit. We conducted our audit in accordance with
generally accepted auditing standards, which require that we plan and perform
the audit to obtain reasonable, assurance about whether the statement of assets
and liabilities is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
[Name of Auditor]
New York, New York
December , 1999
26
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Articles of Incorporation
(b) By-Laws
(c) The rights of security holders are defined in the Registrant's Articles
of Incorporation (Article FIFTH and Article SEVENTH, Sections (b) and (c)) and
the Registrant's By-Laws (Article II and Article VI).
(d) Form of Management Agreement*
(e) Distribution Agreement*
(f) Not Applicable
(g) Form of Custodian Agreement*
(h) Form of Transfer Agency Agreement*
(i) (i) Opinion and Consent of Simpson Thacher & Bartlett*
(ii) Opinion and Consent of Venable, Baetjer and Howard*
(j) Consent of Independent Accountants*
(k) Not Applicable
(l) Investment Representation Letter*
(m) Not Applicable
(n) Financial Data Schedule*
(o) Not Applicable
- ------------
* To be filed by Amendment.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 25. INDEMNIFICATION
It is the Registrant's policy to indemnify its directors, officers,
employees and other agents to the maximum extent permitted by Section 2-418 of
the General Corporation Law of the State of Maryland as set forth in Article
EIGHTH of Registrant's Articles of Incorporation, and Article VIII, Section 1,
of the Registrant's By-Laws. The Liability of the Registrant's directors and
officers is dealt with in Article EIGHTH of Registrant's Articles of
Incorporation and Article VIII, Section 1 through Section 6, of the Registrant's
By-Laws. The liability of Cohen & Steers Capital Management, Inc., the
Registrant's Manager (the 'Manager'), for any loss suffered by the Registrant or
its shareholders is set forth in Section 5 of the Management Agreement.
C-1
<PAGE>
The liability of Cohen & Steers Securities, Inc., the Registrant's distributor,
for any loss suffered by the Registrant of its shareholders is set forth in
Section 8 of the Distribution Agreement.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The descriptions of the Manager under the caption 'Management of the Fund'
in the Prospectus and in the Statement of Additional Information constituting
Parts A and B, respectively, of this Registration Statement are incorporated by
reference herein.
The following is a list of the Directors and Officers of the Manager. None
of the persons listed below has had other business connections of a substantial
nature during the past two fiscal years.
<TABLE>
<CAPTION>
NAME TITLE
- ---------------------------------------------- ----------------------------------------------
<S> <C>
Robert H. Steers.............................. Chairman, Director
Martin Cohen.................................. President, Director
Joseph M. Harvey.............................. Senior Vice President & Director of Research
Steven R. Brown............................... Senior Vice President
Elizabeth O. Reagan........................... Senior Vice President
John J. McCombe............................... Senior Vice President
Adam Derechin................................. Senior Vice President
Lawrence B. Stoller........................... Senior Vice President and General Counsel
Scott G. Ramsey............................... Vice President
James S. Corl................................. Vice President
Sheila J. Stoltz.............................. Vice President
Michael J. Kozoriz............................ Vice President
</TABLE>
Cohen & Steers Capital Management, Inc. acts as investment adviser/manager
of, in addition to the Registrant, the following investment companies:
Cohen & Steers Equity Income Fund, Inc.
Cohen & Steers Realty Income Fund, Inc.
Coehn & Steers Realty Shares, Inc.
Cohen & Steers Total Return Realty Fund, Inc.
Cohen & Steers Special Equity Fund, Inc.
Frank Russell Investment Management Company Real Estate Securities
Fund
Russell Insurance Funds--Real Estate Securities Fund
American Skandia Trust--AST Cohen & Steers Realty Portfolio
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Cohen & Steers Securities, Inc. is the principal underwriter for the
Registrant.
(b) The following are directors and officers of Cohen & Steers Securities,
Inc. The principal address of these persons is 757 Third Avenue, N.Y., N.Y.
10017.
<TABLE>
<CAPTION>
POSITION AND POSITION AND
NAME OFFICES WITH DISTRIBUTOR OFFICES WITH REGISTRANT
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C>
Robert H. Steers.............. President Chairman, Director and
Secretary
Martin Cohen.................. Vice President President, Director and
Treasurer
Jay Chen...................... Assistant Treasurer None
</TABLE>
(c) Not applicable.
C-2
<PAGE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940, as amended
and the Rules thereunder will be maintained as follows: journals, ledgers,
securities records and other original records will be maintained principally
at the offices of the Registrant's Sub-Administrator and Custodian, The Chase
Manhattan Bank, One Chase Manhattan Plaza, New York, New York 10081-1000. All
other records so required to be maintained will be maintained at the offices of
Cohen & Steers Capital Management, Inc. 757 Third Avenue, New York, New York
10017.
ITEM 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. UNDERTAKINGS
Not applicable
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and the State of New York,
on the 15th day of October, 1999.
COHEN & STEERS INSTITUTIONAL REALTY SHARES, INC.
By: /s/ MARTIN COHEN
...................................
NAME: MARTIN COHEN
TITLE: PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<S> <C> <C>
By: /s/ MARTIN COHEN President, Treasurer and Director October 15, 1999
.........................................
(MARTIN COHEN)
By: /s/ ROBERT H. STEERS Director, Chairman and Secretary October 15, 1999
.........................................
(ROBERT H. STEERS)
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STATEMENT OF DIFFERENCES
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Characters normally expressed as superscript shall be preceded by.......... 'pp'
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ARTICLES OF INCORPORATION
OF
COHEN & STEERS INSTITUTIONAL REALTY SHARES, INC.
FIRST: (1) The name of the incorporator is Lawrence B. Stoller.
(2) The incorporator's post office address is 757 Third
Avenue, New York, New York 10017.
(3) The incorporator is over eighteen years of age.
(4) The incorporator is forming the corporation named in these
Articles of Incorporation under the general laws of the State of Maryland.
SECOND: The name of the corporation (hereinafter called the
"Corporation") is Cohen & Steers Institutional Realty Shares, Inc.
THIRD: (1) The purpose for which the Corporation is formed is to
conduct, operate and carry on the business of an investment company registered
under the Investment Company Act of 1940.
(2) The Corporation may engage in any other business and shall
have all powers conferred upon or permitted to corporations by the Maryland
General Corporation Law.
FOURTH: The post office address of the principal office of the
Corporation within the State of Maryland is 300 East Lombard Street, Baltimore,
Maryland 21202 in care of The Corporation Trust, Incorporated; and the resident
agent of the Corporation in the State of Maryland is The Corporation Trust,
Incorporated, 300 East Lombard Street, Baltimore, Maryland 21202.
FIFTH: (1) The total number of shares of stock of all classes which
the Corporation shall have authority to issue is one hundred million
(100,000,000), all of which shall be Common Stock having a par value of
one-tenth of one cent ($.001) per share and an aggregate par value of one
hundred thousand dollars ($100,000). Such shares and the holders thereof
shall be subject to the following provisions:
(a) Each holder of Common Stock may require the Corporation to
redeem all or any part of the Common Stock owned by that holder, upon request to
the Corporation or its
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designated agent, at the net asset value of the shares of Common Stock next
determined after receipt of the request in a form approved by the Corporation
and accompanied by surrender of the certificate or certificates for the shares,
if any. The redemption proceeds may be reduced by the amount of any deferred
sales charge, redemption fee or other charge imposed by the Board of Directors
in accordance with law. The Board of Directors may establish procedures for
redemption of Common Stock. The right of a holder of Common Stock redeemed by
the Corporation to receive dividends thereon and all other rights with respect
to the shares shall terminate at the time as of which the redemption price has
been determined, except the right to receive the redemption price and any
dividend or distribution to which that holder had become entitled as the record
stockholder on the record date for that dividend, and the right to vote the
shares to the extent permitted by Maryland law.
(b) (i) The term "Minimum Amount" when used herein shall mean
five million dollars ($5,000,000) unless otherwise fixed by the Board
of Directors from time to time. The Board of Directors may establish
differing Minimum Amounts for categories of holders of Common Stock
based on such criteria as the Board of Directors may deem appropriate.
(ii) If the net asset value of the shares of Common Stock held
by a stockholder shall be less than the Minimum Amount then in effect
with respect to the category of holders in which the stockholder is
included, the Corporation may redeem all of those shares, upon notice
given to the holder in accordance with paragraph (iii) of this
subsection (b), to the extent that the Corporation may lawfully effect
such redemption under the laws of the State of Maryland.
(iii) The notice referred to in paragraph (ii) of this
subsection (b) shall be in writing personally delivered or deposited in
the mail, at least thirty days (or such other number of days as may be
specified from time to time by the Board of Directors) prior to such
redemption. If mailed, the notice shall be addressed to the stockholder
at his post office address as shown on the books of the Corporation,
and sent by first class mail, postage prepaid. The price for shares
acquired by the Corporation pursuant to this subsection (b) shall be an
amount equal to the net asset value of such shares, subject, however,
to any deferred sales charge, redemption fee or other charge imposed by
the
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Board of Directors in accordance with law.
(c) Payment for shares of Common Stock redeemed by the
Corporation shall be made by the Corporation within seven business days of such
surrender out of the funds legally available therefor, provided that the
Corporation may suspend the right of the stockholders to redeem shares of Common
Stock and may postpone the right of those holders to receive payment for any
shares when permitted or required to do so by applicable statutes or
regulations. Payment of the aggregate price of shares surrendered for redemption
may be made in cash or, at the option of the Corporation, wholly or partly in
such portfolio securities of the Corporation as the Corporation shall select.
(d) Shares of Common Stock shall be entitled to dividends or
distributions, in cash, in property or in shares of Common Stock of any class,
as may be declared from time to time by the Board of Directors, acting in its
sole discretion, out of the assets lawfully available therefor. The Board of
Directors may provide that dividends shall be payable only with respect to those
shares of Common Stock that have been held of record continuously by the
stockholder for a specified period, not to exceed 72 hours, prior to the record
date of the dividend.
(e) Except as hereinafter provided, on each matter submitted
to a vote of the stockholders, each holder of Common Stock shall be entitled to
one vote for each share standing in his name on the books of the Corporation.
All holders of shares of stock shall vote as a single class except with respect
to any matter which affects only one or more classes of stock, in which case
only the holders of shares of the class or classes affected shall be entitled to
vote.
(f) The Board of Directors is authorized to classify,
reclassify, designate as to series or class, change the designation of,
exchange, convert, rename, redeem, purchase or otherwise acquire, hold dispose
of, resell, transfer, reissue or cancel (all without the vote or consent of the
stockholders of the Corporation), from time to time, any unissued shares of
stock of the Corporation, whether now or hereafter authorized, by setting,
changing or eliminating the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications or terms and
conditions of or rights to require redemption of the stock, and otherwise in any
manner and to the extent now or hereafter permitted by Maryland General
Corporation Law.
(g) The Corporation may issue shares of Common Stock in
fractional
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denominations to the same extent as its whole shares, and shares in fractional
denominations shall be shares of stock having proportionately to the respective
fractions represented thereby all the rights of whole shares, including without
limitation, the right to vote, the right to receive dividends and distributions,
and the right to participate upon the liquidation of the Corporation, but
excluding any right to receive a stock certificate representing fractional
shares.
(2) No stockholder shall be entitled to any preemptive right
other than as the Board of Directors may establish.
SIXTH: The number of Directors of the Corporation shall be two. The
number of Directors of the Corporation may be changed pursuant to the By-Laws of
the Corporation. The names of the initial Directors, each of whom shall serve
until the first annual meeting of stockholders or until his successor is duly
chosen and qualified, are Robert H. Steers and Martin Cohen.
SEVENTH: The following provisions are inserted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the Board
of Directors and stockholders.
(a) In addition to its other powers explicitly or implicitly
granted under these Articles of incorporation, by law or otherwise, the Board of
Directors of the Corporation:
(i) is expressly authorized to make, alter, amend or repeal
the By-Laws of the Corporation;
(ii) may from time to time determine whether, to what extent,
at what times and places, and under what conditions and regulations the
accounts and books of the Corporation, or any of them, shall be open to
the inspection of the stockholders, and no stockholder shall have any
right to inspect any account, book or document of the Corporation
except as conferred by statute or as authorized by the Board of
Directors of the Corporation;
(iii) is empowered to authorize, without stockholder approval,
the issuance and sale from time to time of shares of stock of the
Corporation of any class, and securities convertible into stock of the
Corporation of any class, whether now or hereafter authorized for such
consideration as the Board may deem advisable;
(iv) is authorized to adopt procedures for determination of
the net asset value of shares of any class of the Corporation's stock;
and
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(v) is authorized to declare dividends out of funds legally
available therefor on shares of each class of stock of the Corporation
payable in such amounts and at such times as it determines, including
declaration by means of a formula or similar method and including
dividends declared or payable more frequently than meetings of the
Board of Directors.
(b) Notwithstanding any provision of the Maryland General
Corporation Law requiring a greater proportion than a majority of the votes of
all classes or any class of the Corporation's stock entitled to be cast in order
to take or authorize any action, any such action may be taken or authorized upon
the concurrence of a majority of the aggregate number of votes entitled to be
cast thereon.
(c) The presence in person or by proxy of the holders of
shares entitled to cast one-third of the votes entitled to be cast shall
constitute a quorum at any meeting of the stockholders, except with respect to
any matter which, under applicable statutes or regulatory requirements, requires
approval by a separate vote of one or more classes of stock, in which case the
presence in person or by proxy of the holders of shares entitled to cast
one-third of the votes entitled to be cast on the matter shall constitute a
quorum.
(d) Any determination made in good faith by or pursuant to the
direction of the Board of Directors, as to the amount of the assets, debts,
obligations, or liabilities of the Corporation, as to the amount of any reserves
or charges set up and the propriety thereof, as to the time of or purpose for
creating such reserves or charges, as to the use, alteration or cancellation of
any reserves or charges (whether or not any debt, obligation, or liability for
which such reserves or charges shall have been created shall be then or
thereafter required to be paid or discharged), as to the value of or the method
of valuing any investment owned or held by the Corporation, as to market value
or fair value of any investment or fair value of any other asset of the
Corporation, as to the allocation of any asset of the Corporation to a
particular class or classes of the Corporation's stock, as to the charging of
any liability of the Corporation to a particular class or classes of the
Corporation's stock, as to the number of shares of the Corporation outstanding,
as to the estimated expense to the Corporation in connection with purchases of
its shares, as to the ability to liquidate investments in orderly fashion, or as
to any other matters relating to the issue, sale, redemption or other
acquisition or disposition of investments or shares
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of the Corporation, shall be final and conclusive and shall be binding upon the
Corporation and all holders of its shares, past, present and future, and shares
of the Corporation are issued and sold on the condition and understanding that
any and all such determinations shall be binding as aforesaid.
EIGHTH: (1) To the full extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law, no
director or officer of the Corporation shall have any liability to the
Corporation or its stockholders for damages. This limitation on liability
applies to events occurring at the time a person serves as a director or officer
of the Corporation whether or not that person is a director or officer at the
time of any proceeding in which liability is asserted.
(2) The Corporation shall indemnify and advance expenses to
its currently acting and its former directors to the full extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify and advance expenses to it officers to the
same extent as its directors and may do so to such further extent as is
consistent with law. The Board of Directors may by By-Law, resolution or
agreement make further provision for indemnification of directors, officers,
employees and agents to the full extent permitted by the Maryland General
Corporation Law.
(3) No provision of the Article shall be effective to protect
or purport to protect any director or officer of the Corporation against any
liability to the Corporation or its stockholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
(4) References to the Maryland General Corporation Law in this
Article are to that law as from time to time amended. No amendment to the
charter of the Corporation shall affect any right of any person under this
Article based on any event, omission or proceeding prior to the amendment.
NINTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in its Charter in the manner now or hereafter
prescribed by the laws of the State of Maryland, including any amendment which
alters the contract rights, as expressly set forth in the Charter, of any
outstanding stock, and all rights conferred upon stockholders herein are granted
subject to this reservation.
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IN WITNESS WHEREOF, the undersigned, being the incorporator of the
Corporation, has adopted and signed these Articles of Incorporation and does
hereby acknowledge that the adoption and signing are his act.
/s/ Lawrence B. Stoller
--------------------------------
Lawrence B. Stoller
Incorporator
Dated: October 12, 1999
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BY-LAWS
OF
COHEN & STEERS INSTITUTIONAL REALTY SHARES, INC.
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ARTICLE I
Offices
Section 1. Principal Office in Maryland. The Corporation shall
have a principal office in the City of Baltimore, State of Maryland.
Section 2. Other Offices. The Corporation may have offices
also at such other places within and without the State of Maryland as the Board
of Directors may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
Meetings of Stockholders
Section 1. Place of Meeting. Meetings of stockholders shall be
held at such place, either within the State of Maryland or at such other place
within or outside the United States, as shall be fixed from time to time by the
Board of Directors.
Section 2. Annual Meetings. The Corporation shall not be
required to hold an annual meeting of stockholders in any year in which the
election of directors is not required to be acted on by stockholders under the
Investment Company Act of 1940. If the Corporation is required to hold a meeting
of stockholders to elect directors, the meeting shall be designated as the
annual meeting of stockholders for that year and shall be held no later than 120
days after the occurrence of the event requiring the meeting. Any business may
be considered at an annual meeting of stockholders without the purpose of the
meeting having been specified in the notice.
Section 3. Notice of Annual Meeting. Written or printed notice
of the annual meeting, stating the place, date and hour thereof, shall be given
to each stockholder entitled to vote thereat and each other shareholder entitled
to notice thereof not less than ten nor more than ninety days before the date of
the meeting.
Section 4. Special Meetings. Special meetings of stockholders
may be called by the chairman, the president or by the Board of Directors and
shall be called by the secretary upon
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the written request of holders of shares entitled to cast not less than
twenty-five percent of all the votes entitled to be cast at such meeting. Such
request shall state the purpose or purposes of such meeting and the matters
proposed to be acted on thereat. In the case of such request for a special
meeting, upon payment by such stockholders to the Corporation of the estimated
reasonable cost of preparing and mailing a notice of such meeting, the secretary
shall give the notice of such meeting. The secretary shall not be required to
call a special meeting to consider any matter which is substantially the same as
a matter acted upon at any special meeting of stockholders held within the
preceding twelve months unless requested to do so by holders of shares entitled
to cast not less than a majority of all votes entitled to be cast at such
meeting. Notwithstanding the foregoing, to the extent required by the Investment
Company Act of 1940, special meetings of stockholders for the purpose of voting
upon the question of removal of any director or directors of the Corporation
shall be called by the secretary upon the written request of holders of shares
entitled to cast not less than ten percent of all the votes entitled to be cast
at such meeting.
Section 5. Notice of Special Meeting. Written or printed
notice of a special meeting of stockholders, stating the place, date, hour and
purpose thereof, shall be given by the secretary to each stockholder entitled to
vote thereat and each other shareholder entitled to notice thereof not less than
ten nor more than ninety days before the date fixed for the meeting.
Section 6. Business of Special Meetings. Business transacted
at any special meeting of stockholders shall be limited to the purposes stated
in the notice thereof.
Section 7. Quorum. The holders of shares entitled to cast
one-third of the votes entitled to be cast thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business, except with respect to any matter
which, under applicable statutes or regulatory requirements or the Corporation's
charter, requires approval by a separate vote of one or more classes of stock,
in which case the presence in person or by proxy of the holders of shares
entitled to cast one-third of the votes entitled to be cast on the matter shall
constitute a quorum. A meeting of stockholders convened on the date for which it
is called may be adjourned from time to time without further notice to a date
not more than 120 days after the record date.
Section 8. Adjournment. Any meeting of the stockholders
convened on the date for which it was called may be adjourned from time to time,
without notice other than by
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announcement at the meeting at which the adjournment was taken. In the absence
of a quorum, the stockholders present in person or by proxy, by majority vote of
those present and without notice other than by announcement at the meeting, may
adjourn the meeting from time to time as provided for in the Section 8 of
Article II. At any adjourned meeting at which a quorum shall be present, any
action may be taken that could have been taken a the meeting originally called.
A meeting of the stockholders may not be adjourned without further notice to a
date more than 120 days after the original record date determined pursuant to
Section 11 of this Article II.
Section 9. Voting. When a quorum is present at any meeting,
the affirmative vote of a majority of the votes cast by stockholders entitled to
vote on the matter, shall decide any question brought before such meeting
(except that directors may be elected by the affirmative vote of a plurality of
the votes cast), unless the question is one upon which by express provision of
the Investment Company Act of 1940, as from time to time in effect, or other
statutes or rules or orders of the Securities and Exchange Commission or any
successor thereto or of the Charter a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Section 10. Proxies. Each stockholder shall at every meeting
of stockholders be entitled to vote in person or by proxy appointed in such
manner as may be permitted by Maryland law. No proxy shall be voted after eleven
months from its date, unless otherwise provided in the proxy.
Section 11. Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, to express consent to corporate action
in writing without a meeting, or to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date
which shall be not more than ninety days and, in the case of a meeting of
stockholders, not less than ten days prior to the date on which the particular
action requiring such determination of stockholders is to be taken. In lieu of
fixing a record date, the Board of Directors may provide that the stock transfer
books shall be closed for a stated period, but not to exceed, in any case,
twenty days. If the stock transfer books are closed for the purpose of
determining stockholders entitled to notice of or to
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vote at a meeting of stockholders, such books shall be closed for at least ten
days immediately preceding such meeting. If no record date is fixed and the
stock transfer books are not closed for the determination of stockholders: (1)
The record date for the determination of stockholders entitled to notice of, or
to vote at, a meeting of stockholders shall be at the close of business on the
day on which notice of the meeting of stockholders is mailed or the day thirty
days before the meeting, whichever is the closer date to the meeting; and (2)
The record date for the determination of stockholders entitled to receive
payment of a dividend or an allotment of any rights shall be at the close of
business on the day on which the resolution of the Board of Directors, declaring
the dividend or allotment of rights, is adopted, provided that the payment or
allotment date shall not be more than sixty days after the date of the adoption
of such resolution. If a record date has been fixed for the determination of
stockholders entitled to vote at a meeting, only the stockholders of record on
the record date shall be entitled to vote at the meeting and such stockholders
shall be entitled to vote at the meeting notwithstanding the subsequent transfer
or redemption of the shares owned of record on such date.
Section 12. Inspectors of Election. The directors, in advance
of any meeting, may, but need not, appoint one or more inspectors to act at the
meeting or any adjournment thereof. If an inspector or inspectors are not
appointed, the person presiding at the meeting may, but need not, appoint one or
more inspectors. In case any person who may be appointed as an inspector fails
to appear or act, the vacancy may be filled by appointment made by the directors
in advance of the meeting or at the meeting by the person presiding thereat.
Each inspector, if any, before entering upon the discharge of his duties, may be
required to take and sign an oath faithfully to execute the duties of inspector
at such meeting with strict impartiality and according to the best of his
ability. The inspectors, if any, shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting or any stockholder, the inspector or
inspectors, if any, shall make a report in writing of any challenge, question or
matter determined by him or them and execute a certificate of any fact
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found by him or them.
Section 13. Informal Action by Stockholders. Except to the
extent prohibited by the Investment Company Act of 1940, as from time to time in
effect, or rules or orders of the Securities and Exchange Commission or any
successor thereto, any action required or permitted to be taken at any meeting
of stockholders may be taken without a meeting if a consent in writing, setting
forth such action, is signed by all the stockholders entitled to vote on the
subject matter thereof and any other stockholders entitled to notice of a
meeting of stockholders (but not to vote thereat) have waived in writing any
rights which they may have to dissent from such action, and such consent and
waiver are filed with the records of the Corporation.
ARTICLE III
Board of Directors
Section 1. Number of Directors. The number of directors
constituting the entire Board of Directors (which initially was fixed at two in
the Corporation's Articles of Incorporation) may be increased or decreased from
time to time by the vote of a majority of the entire Board of Directors within
the limits permitted by law but at no time may be more than twenty, but the
tenure of office of a director in office at the time of any decrease in the
number of directors shall not be affected as a result thereof. The directors
shall be elected to hold offices at the annual meeting of stockholders and each
director shall hold office until the next annual meeting of stockholders or
until his successor is elected and qualifies. Any director may resign at any
time upon written notice to the Corporation. Any director may be removed, either
with or without cause, at any meeting of stockholders duly called and at which a
quorum is present by the affirmative vote of the majority of the votes entitled
to be cast thereon, and the vacancy in the Board of Directors caused by such
removal may be filled by the stockholders at the time of such removal. Directors
need not be stockholders.
Section 2. Vacancies and Newly-Created Directorships. Any
vacancy occurring in the Board of Directors for any cause other than by reason
of an increase in the number of directors may be filled by a majority of the
remaining members of the Board of Directors although such majority is less than
a quorum. Any vacancy occurring by reason of an increase in the number of
directors may be filled by a majority of the entire Board of Directors. A
director
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elected by the Board of Directors to fill a vacancy shall be elected to hold
office until the next annual meeting of stockholders or until his successor is
elected and qualifies.
Section 3. Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Charter or by these By-Laws conferred
upon or reserved to the stockholders.
Section 4. Meetings. The Board of Directors of the Corporation
or any committee thereof may hold meetings, both regular and special, either
within or without the State of Maryland. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board of Directors. Special meetings of
the Board of Directors may be called by the chairman, the president or by two or
more directors. Notice of special meetings of the Board of Directors shall be
given by the secretary to each director at least three days before the meeting
if by mail or at least 24 hours before the meeting if given in person or by
telephone or by telegraph. The notice need not specify the business to be
transacted.
Section 5. Quorum and Voting. During such times when the Board
of Directors shall consist of more than one director, a quorum for the
transaction of business at meetings of the Board of Directors shall consist of
one-third of the entire Board of Directors, but in no event less than two
directors. The action of a majority of the directors present at a meeting at
which a quorum is present shall be the action of the Board of Directors. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 6. Committees. The Board of Directors may appoint from
among its members an executive committee and other committees of the Board of
Directors, each committee to be composed of one or more of the directors of the
Corporation. The Board of Directors may delegate to such committees any of the
powers of the Board of Directors except those which may not by law be delegated
to a committee. Such committee or committees shall have the name or names as may
be determined from time to time by resolution adopted by the Board of Directors.
Unless the Board of Directors designates one or more directors as alternate
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members of any committee, who may replace an absent or disqualified member at
any meeting of the committee, the members of any such committee present at any
meeting and not disqualified from voting may, whether or not they constitute a
quorum, appoint another member of the Board of Directors to act at the meeting
in the place of any absent or disqualified member of such committee. At meetings
of any such committee, a majority of the members or alternate members of such
committee shall constitute a quorum for the transaction of business and the act
of a majority of the members or alternate members present at any meeting at
which a quorum is present shall be the act of the committee.
Section 7. Minutes of Committee Meetings. The committees shall
keep regular minutes of their proceedings.
Section 8. Informal Action by Board of Directors and
Committees. Any action required or permitted to be taken at any meeting of the
Board of Directors or of any committee thereof may be taken without a meeting if
a written consent thereto is signed by all members of the Board of Directors or
of such committee, as the case may be, and such written consent is filed with
the minutes of proceedings of the Board of Directors or committee, provided,
however, that such written consent shall not constitute approval of any matter
which pursuant to the Investment Company Act of 1940 and the rules thereunder
requires the approval of directors by vote cast in person at a meeting.
Section 9. Meeting by Conference Telephone. The members of the
Board of Directors or any committee thereof may participate in a meeting of the
Board of Directors or committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and such participation shall
constitute presence in person at such meeting, provided, however, that such
participation shall not constitute presence in person with respect to matters
which pursuant to the Investment Company Act of 1940 and the rules thereunder
require the approval of directors by vote cast in person at a meeting.
Section 10. Fees and Expenses. The directors may be paid their
expenses of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors, a stated
salary as director or such other compensation as the Board of Directors may
approve. No such payment shall preclude any director from
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serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
reimbursement and compensation for attending committee meetings.
ARTICLE IV
Notices
Section 1. General. Notices to directors and stockholders
mailed to them at their post office addresses appearing on the books of the
Corporation shall be deemed to be given at the time when deposited in the United
States mail.
Section 2. Waiver of Notice. Whenever any notice is required
to be given under the provisions of the statutes, of the Charter or of these
By-Laws, each person entitled to said notice waives notice if, before or after
the meeting he signs a written waiver of notice and such waiver is filed with
the records of the meeting. Attendance of a person at a meeting shall constitute
a waiver of notice of such meeting except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
ARTICLE V
Officers
Section 1. General. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a chairman of the Board of
Directors, a president, a secretary and a treasurer. The Board of Directors may
choose also such vice presidents and additional officers or assistant officers
as it may deem advisable. Any number of offices, except the offices of president
and vice president and chairman and vice president, may be held by the same
person. No officer shall execute, acknowledge or verify any instrument in more
than one capacity if such instrument is required by law to be executed,
acknowledged or verified by two or more officers.
Section 2. Other Officers and Agents. The Board of Directors
may appoint such other officers and agents as it desires who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
Section 3. Tenure of Officers. The officers of the Corporation
shall hold office at
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the pleasure of the Board of Directors. Each officer shall hold his office until
his successor is elected and qualifies or until his earlier resignation or
removal. Any officer may resign at any time upon written notice to the
Corporation. Any officer elected or appointed by the Board of Directors may be
removed at any time by the Board of Directors when, in its judgment, the best
interests of the Corporation will be served thereby. Any vacancy occurring in
any office of the Corporation by death, resignation, removal or otherwise shall
be filled by the Board of Directors.
Section 4. Chairman of the Board of Directors. The chairman of
the Board of Directors shall preside at all meetings of the stockholders and of
the Board of Directors. Unless otherwise determined by the Board of Directors,
he shall be the chief executive officer and shall have general and active
management of the business of the Corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect. He shall be ex
officio a member of all committees designated by the Board of Directors except
as otherwise determined by the Board of Directors. He shall have authority to
execute instruments and contracts on behalf of the Corporation except where
required by law to be otherwise signed and executed and except where the signing
and execution thereof shall be expressly delegated by the Board of Directors to
some other officer or agent of the Corporation.
Section 5. President. The president shall act under the
direction of the chairman and in the absence or disability of the chairman shall
perform the duties and exercise the powers of the chairman. Unless otherwise
determined by the Board of Directors, he shall be the chief operating officer
and shall perform such other duties and have such other powers as the chairman
or the Board of Directors may from time to time prescribe. He shall have
authority to execute instruments and contracts on behalf of the Corporation
except where required by law to be otherwise signed and except where the signing
and execution thereof shall be expressly delegated by the Board of Directors to
some other officer or agent of the Corporation.
Section 6. Vice Presidents. The vice presidents shall act
under the direction of the chairman and the president and in the absence or
disability of the president shall perform the duties and exercise the powers of
the president. They shall perform such other duties and have such other powers
as the chairman, the president or the Board of Directors may from time to time
prescribe. The Board of Directors may designate one or more executive vice
presidents or may otherwise specify the order of seniority of the vice
presidents and, in that event, the duties and
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powers of the president shall descend to the vice presidents in the specified
order of seniority.
Section 7. Secretary. The secretary shall act under the
direction of the chairman and the president. Subject to the direction of the
chairman and the president he shall attend all meetings of the Board of
Directors and all meetings of stockholders and record the proceedings in a book
to be kept for that purpose and shall perform like duties for the committees
designated by the Board of Directors when required. He shall give, or cause to
be given, notice of all meetings of stockholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the chairman or the Board of Directors. He shall keep in safe custody the seal
of the Corporation and shall affix the seal or cause it to be affixed to any
instrument requiring it.
Section 8. Assistant Secretaries. The assistant secretaries in
the order of their seniority, unless otherwise determined by the chairman, the
president or the Board of Directors, shall, in the absence or disability of the
secretary, perform the duties and exercise the powers of the secretary. They
shall perform such other duties and have such other powers as the chairman, the
president or the Board of Directors may from time to time prescribe.
Section 9. Treasurer. The treasurer shall act under the
direction of the chairman and the president. Subject to the direction of the
chairman and the president he shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. He shall
disburse the funds of the Corporation as may be ordered by the chairman, the
president or the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the chairman, the president and the Board of
Directors, at its regular meetings, or when the Board of Directors so requires,
an account of all his transactions as treasurer and of the financial condition
of the Corporation.
Section 10. Assistant Treasurers. The assistant treasurers in
the order of their seniority, unless otherwise determined by the chairman, the
president or the Board of Directors, shall, in the absence or disability of the
treasurer, perform the duties and exercise the powers of the treasurer. They
shall perform such other duties and have such other powers as the chairman, the
president or the Board of Directors may from time to time prescribe.
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ARTICLE VI
Certificates of Stock
Section 1. General. Every holder of stock of the Corporation
who has made full payment of the consideration for such stock shall be entitled
upon request to have a certificate, signed by, or in the name of the Corporation
by, the chairman, the president or a vice president and countersigned by the
treasurer or an assistant treasurer or the secretary or an assistant secretary
of the Corporation, certifying the number of whole shares of each class of stock
owned by him in the Corporation.
Section 2. Fractional Share Interests. The Corporation may
issue fractions of a share of stock. Fractional shares of stock shall have
proportionately to the respective fractions represented thereby all the rights
of whole shares, including the right to vote, the right to receive dividends and
distributions and the right to participate upon liquidation of the Corporation,
excluding, however, the right to receive a stock certificate representing such
fractional shares.
Section 3. Signatures on Certificates. Any of or all the
signatures on a certificate may be a facsimile. In case any officer who has
signed or whose facsimile signature has been placed upon a certificate shall
cease to be such officer before such certificate is issued, it may be issued
with the same effect as if he were such officer at the date of issue. The seal
of the Corporation or a facsimile thereof may, but need not, be affixed to
certificates of stock.
Section 4. Lost, Stolen or Destroyed Certificates. The Board
of Directors may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the Corporation alleged
to have been lost, stolen or destroyed, upon the making of any affidavit of that
fact by the person claiming the certificate or certificates to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate or
certificates alleged to have been lost, stolen or destroyed.
Section 5. Transfer of Shares. Upon request by the registered
owner of shares,
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and if a certificate has been issued to represent such shares upon surrender to
the Corporation or a transfer agent of the Corporation of a certificate for
shares of stock duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, it shall be the duty of the Corporation, if
it is satisfied that all provisions of the Charter, of the By-Laws and of the
law regarding the transfer of shares have been duly complied with, to record the
transaction upon its books, issue a new certificate to the person entitled
thereto upon request for such certificate, and cancel the old certificate, if
any.
Section 6. Registered Owners. The Corporation shall be
entitled to recognize the person registered on its books as the owner of shares
to be the exclusive owner for all purposes including voting and dividends, and
the Corporation shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Maryland.
ARTICLE VII
Miscellaneous
Section 1. Reserves. There may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for such other purpose as the
Board of Directors shall think conducive to the interest of the Corporation, and
the Board of Directors may modify or abolish any such reserve.
Section 2. Dividends. Dividends upon the stock of the
Corporation may, subject to the provisions of the Charter and of applicable law,
be declared by the Board of Directors at any time. Dividends may be paid in
cash, in property or in shares of the Corporation's stock, subject to the
provisions of the Charter and of applicable law.
Section 3. Capital Gains Distributions. The amount and number
of capital gains distributions paid to the stockholders during each fiscal year
shall be determined by the Board of Directors. Each such payment shall be
accompanied by a statement as to the source of such payment, to the extent
required by law.
Section 4. Checks. All checks or demands for money and notes
of the
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Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 5. Fiscal Year. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
Section 6. Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Maryland." The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or in another manner reproduced or by placing
the word "(seal)" adjacent to the signature of the person authorized to sign the
document on behalf of the Corporation.
ARTICLE VIII
Indemnification
Section 1. Indemnification of Directors and Officers. The
Corporation shall indemnify its directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify its officers to the same extent as its
directors and to such further extent as is consistent with law. The Corporation
shall indemnify its directors and officers who while serving as directors or
officers also serve at the request of the Corporation as a director, officer,
partner, trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, other enterprise or employee benefit plan to
the fullest extent consistent with law. The indemnification and other rights
provided by this Article shall continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. This Article shall not protect any such person
against any liability to the Corporation or any stockholder thereof to which
such person would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office ("disabling conduct").
Section 2. Advances. Any current or former director or officer
of the Corporation seeking indemnification within the scope of this Article
shall be entitled to advances from the Corporation for payment of the reasonable
expenses incurred by him in connection with the matter as to which he is seeking
indemnification without requiring a preliminary determination of
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ultimate entitlement to indemnification except as provided below, to the fullest
extent permissible under the Maryland General Corporation Law. The person
seeking indemnification shall provide to the Corporation a written affirmation
of his good faith belief that the standard of conduct necessary for
indemnification by the Corporation has been met and a written undertaking to
repay any such advance if it should ultimately be determined that the standard
of conduct has not been met. In addition, at least one of the following
additional conditions shall be met: (a) the person seeking indemnification shall
provide a security in form and amount acceptable to the Corporation for his
undertaking; (b) the Corporation is insured against losses arising by reason of
the advance; or (c) a majority of a quorum of directors of the Corporation who
are neither "interested persons" as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended, nor parties to the proceeding
("disinterested non-party directors"), or independent legal counsel, in a
written opinion, shall have determined, based on a review of facts readily
available to the Corporation at the time the advance is proposed to be made,
that there is reason to believe that the person seeking indemnification will
ultimately be found to be entitled to indemnification.
Section 3. Procedure. At the request of any person claiming
indemnification under this Article, the Board of Directors shall determine, or
cause to be determined, in a manner consistent with the Maryland General
Corporation Law, whether the standards required by this Article have been met.
Indemnification shall be made only following: (a) a final decision on the merits
by a court or other body before whom the proceeding was brought that the person
to be indemnified was not liable by reason of disabling conduct, (b) dismissal
of the proceeding against the person to be indemnified for insufficiency of
evidence of any disabling conduct, or (b) in the absence of such a decision or
dismissal, a reasonable determination, based upon a review of the facts, that
the person to be indemnified was not liable by reason of disabling conduct by
(i) the vote of a majority of a quorum of disinterested non-party directors or
(ii) an independent legal counsel in a written opinion. Any determination
pursuant to this Section 3 shall not prevent recovery from any person of any
amount paid to be in accordance with this By-Law as indemnification if such
person is subsequently adjudicated by a court of competent jurisdiction to be
liable by reason of disabling conduct.
Section 4. Indemnification of Employees and Agents. Employees
and agents who
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are not officers or directors of the Corporation may be indemnified, and
reasonable expenses may be advanced to such employees or agents, as may be
provided by action of the Board of Directors or by contract, subject to any
limitations imposed by the Investment Company Act of 1940.
Section 5. Other Rights. The Board of Directors may make
further provision consistent with law for indemnification and advance of
expenses to directors, officers, employees and agents by resolution, agreement
or otherwise. The indemnification provided by this Article shall not be deemed
exclusive of any other right, with respect to indemnification or otherwise, to
which those seeking indemnification may be entitled under any insurance or other
agreement or resolution of stockholders or disinterested directors or otherwise.
Th Corporation shall not be liable for any payment under this By-Law in
connection with a claim made by a director, officer, employee or agent to the
extent such director, officer, employee or agent has otherwise actually received
payment under an insurance policy, agreement, resolution or otherwise. The
rights provided to any person by this Article shall be enforceable against the
Corporation by such person who shall be presumed to have relied upon it in
serving or continuing to serve as a director, officer, employee, or agent as
provided above.
Section 6. Amendments. References in this Article are to the
Maryland General Corporation Law and to the Investment Company Act of 1940 as
from time to time amended. No amendment of these By-laws shall effect any right
of any person under this Article based on any event, omission or proceeding
prior to the amendment.
ARTICLE IX
Amendments
The Board of Directors shall have the power to make, alter and
repeal by-laws of the Corporation.
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