<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY , 2000
FILE NOS. 333-89183
811-09631
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. 1 [x]
POST-EFFECTIVE AMENDMENT NO. [ ]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 1 [x]
------------------------
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, NEW YORK, NY 10017 SIMPSON THACHER & BARTLETT
(NAME AND ADDRESS OF AGENT OF SERVICE OF PROCESS) 425 LEXINGTON AVENUE
NEW YORK, NY 10017
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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.
________________________________________________________________________________
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[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 12, 2000
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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
HISTORICAL FUND PERFORMANCE................................. 2
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.................................... 6
HOW TO PURCHASE AND SELL FUND SHARES........................ 6
Pricing of Fund Shares................................ 6
Purchase Minimums..................................... 6
Form of Payment....................................... 6
Purchases of Fund Shares.............................. 7
Exchange Privilege.................................... 8
How To Sell Fund Shares............................... 8
DIVIDENDS AND DISTRIBUTIONS................................. 9
TAX CONSIDERATIONS.......................................... 9
RELATED PERFORMANCE......................................... 10
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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 seeks both capital appreciation and current
income with approximately equal emphasis.
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. One of the most important characteristics of REITs is that they are
not subject to tax if they distribute to their shareholders substantially all of
their income. As a result, REITs generally pay a higher dividend than other
types of companies.
In making investment decisions on behalf of the Fund, the manager seeks real
estate companies that it believes have strong growth prospects and are
attractively priced relative to their projected growth rates.
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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;
A fund offering the potential for both current income and 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. There may be less trading in a smaller company's stock, which
means that buy and sell transactions in that stock could have a larger impact on
the stock's price than is the case with larger company stocks. Further, smaller
companies may have fewer business lines; changes in any one line of business,
therefore, may have a greater impact
1
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on a smaller company's stock price than is the case for a larger company.
As of November 30, 1990, the market capitalization of REITs ranged in size from
approximately $5 million to $5.5 billion.
Non-Diversification. As a 'non-diversified' investment company, the Fund can
invest in fewer individual companies than a diversified investment company.
Because a non-diversified 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 has a diversified 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.
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HISTORICAL FUND PERFORMANCE
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BECAUSE THE FUND HAS LESS THAN ONE CALENDAR YEAR OF PERFORMANCE, IT DOES NOT
HAVE ANNUAL TOTAL RETURNS TO REPORT IN A BAR CHART OR PERFORMANCE TABLE.
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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*............................................... 0.03%
----
TOTAL ANNUAL FUND OPERATING EXPENSES:......................... 0.78%
EXPENSE REIMBURSEMENT......................................... 0.03%
NET EXPENSES.................................................. 0.75%
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* Cohen & Steers Capital Management, Inc. has contractually agreed to reimburse
the Fund so that its total annual operating expenses never exceed 0.75% of
average net assets. This commitment will remain in place for the life of the
Fund. These other expenses include the fees and expenses of the Fund's
independent directors, taxes, interest charged on borrowings, trade
organization membership dues, federal and state registration fees. This
arrangement does not cover extraordinary expenses. Other expenses are based on
estimated amounts 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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2
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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 seeks real
estate companies that it believes have strong growth prospects and are
attractively priced relative to their projected growth rates. This approach is
generally referred to as 'growth at a reasonable price.' In selecting
investments, the manager relies on a fundamental analysis of each company. The
manager 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 substantially all of its taxable income (other
than net capital gains) for each taxable year. As a result, REITs tend to pay
relatively higher dividends than other types of companies and the Fund intends
to use these REIT dividends in an effort to meet the current income goal of its
investment objective.
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
3
<PAGE>
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.
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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. There may
be less trading in a smaller company's stock, which means that buy and sell
transactions in that stock could have a larger impact on the stock's price than
is the case with larger company stocks. Smaller companies also may have fewer
lines of business so that changes in any one line of business may have a greater
impact on a smaller company's stock price than
4
<PAGE>
is the case for a larger company. Further, smaller company stocks may perform in
different cycles than larger company stocks. Accordingly, REIT shares can be
more volatile than -- and at times will perform differently from -- large
company stocks such as those found in the Dow Jones Industrial Average.
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.'
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MANAGEMENT OF THE FUND
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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.
5
<PAGE>
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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.
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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. Proper form means that your request includes the Fund name and account
number, states the amount of the transaction (in dollars or shares), includes
the signatures of all owners exactly as registered in the account, includes
signature guarantees (if necessary), includes any supporting legal documentation
that may be required and includes any outstanding certificates representing
shares to be redeemed. We calculate our net asset value per share as of the
close of trading on the New York Stock Exchange generally 4:00 p.m. Eastern
time, 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.
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PURCHASE MINIMUMS
You may open an account with the Fund with a minimum investment of $3,000,000.
(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 $3,000,000. 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 $3,000,000 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.
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FORM OF PAYMENT
We will accept payment for shares in three 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.
3. At the Fund's discretion, marketable securities having a value that meets the
investment minimum.
6
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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)
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.
7
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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.
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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
8
<PAGE>
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, 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 $3,000,000 or more and avoid having the Fund
automatically liquidate your account.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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
9
<PAGE>
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.
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 a chart containing prior performance information for Cohen &
Steers Capital Management, Inc. in managing accounts, including registered
investment companies, with investment objectives, policies, techniques and
restrictions substantially similar, although not necessarily identical, to the
Fund. The chart shows average annual returns for a composite of the actual
performance of all accounts with an investment objective of total return ('total
return accounts') managed during the periods indicated. This information was
prepared in compliance with the performance presentation standards of the
Association for Investment Management and Research ('AIMR'), which are different
from the SEC's standards. 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 performance information has been prepared in accordance
with relevant legal requirements.
The Fund's fees and expenses are higher than those charged to certain of the
total return accounts. In addition, not all of the accounts are subject to the
same types of expenses as the Fund. Had the Fund's fees and 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 not subject to the specific tax
restrictions and investment limitations imposed on the Fund by the 1940 Act or
the Code. The
10
<PAGE>
performance results for these accounts may otherwise have been lower.
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>
11
<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
</TABLE>
<TABLE>
<S> <C> <C>
---------------------------------------------------------------------- ----------------------------------------
Name Social Security Number
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
----------------------------------------------------------------------
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 _________ (state of residence
Name of Adult Custodian (only one permitted) 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 ($3,000,000 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
[ ] Investment of Marketable Securities (call the Fund at 1-800-330-REIT for details).
* 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.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
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
By mail Cohen & Steers Institutional Realty Shares
c/o Chase Global Fund Services Company
P.O. Box 2798
Boston, Massachusetts 02208-2798
By e-mail [email protected]
On the Internet http://www.cohenandsteers.com
</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. 811-09631
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 12, 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. With the exception of the real estate industry, concentrate its investments
in any one industry or group of industries;
8. 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);
9. 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;
10. 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
9
<PAGE>
the shorted securities, which is marked-to-market daily. If the Fund owns an
equal amount of such securities or securities convertible into or 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;
11. 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;
12. Pledge, mortgage or hypothecate its assets except in connection with
permitted borrowings; or
13. 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 7 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 8 through 13 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
<S> <C> <C>
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.,
5208 Renaissance Avenue Realty Income Corporation and Willis Lease Finance Corporation. Managing
San Diego, California 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
13
<PAGE>
and the publication of the net asset value of the Fund's shares, earnings
reports and other 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.
14
<PAGE>
- --------------------------------------------------------------------------------
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 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, or exchange 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.
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
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
16
<PAGE>
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 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
17
<PAGE>
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 basis in his or her
shares, the excess will be treated by the shareholder as gain from a sale or
exchange of the shares.
18
<PAGE>
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
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
19
<PAGE>
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:
<TABLE>
<S> <C> <C>
a-b
---
2[( cd + 1)'pp'6 - 1]
</TABLE>
<TABLE>
<S> <C> <C>
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.
</TABLE>
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
January 12, 2000
<TABLE>
<S> <C>
Cash........................................................ $100,000
--------
Total Assets........................................... $100,000
Liabilites.................................................. 0
Net Assets applicable to 4,000 shares of $.001 par value
common stock outstanding.................................. $100,000
--------
Net Asset Value, offering and redemption 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 100,000,000 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 $95,000.
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 January 12, 2000 in
conformity with generally accepted accounting principles in the United States.
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 in the United States, 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.
PricewaterhouseCoopers LLP
New York, New York
January 12, 2000
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) Form of Distribution Agreement
(f) Not Applicable
(g) Form of Custody Agreement
(h) Form of Mutual Funds Service Agreement
(i) Opinion and Consent of Counsel
(j) Consent of Independent Accountants
(k) Not Applicable
(l) Investment Representation Letter
(m) Not Applicable
(n) Not Applicable
- ------------
* Previously filed with Registration Statement.
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.
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.
C-1
<PAGE>
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>
Chairman, Director
Robert H. Steers...............................
President, Director
Martin Cohen...................................
Senior Vice President & Director of Research
Joseph M. Harvey...............................
Senior Vice President
Steven R. Brown................................
Senior Vice President
Elizabeth O. Reagan............................
Senior Vice President
John J. McCombe................................
Senior Vice President
Adam Derechin..................................
Senior Vice President and General Counsel
Lawrence B. Stoller............................
Senior Vice President
William J. Frischling..........................
Vice President
Scott G. Ramsey................................
Vice President
James S. Corl..................................
Vice President
Sheila J. Stoltz...............................
Vice President
Michael J. Kozoriz.............................
Vice President
Jay J. Chen....................................
</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.
Cohen & 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 POSITIONS 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.
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-2
<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 12 day of January, 2000.
COHEN & STEERS INSTITUTIONAL REALTY
SHARES, INC.
By /s/ MARTIN COHEN
...................................
MARTIN COHEN
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>
/s/ MARTIN COHEN President, Treasurer and Diector January 12, 2000
...........................................
(MARTIN COHEN)
By /s/ ROBERT H. STEERS Director, Chairman and Secretary January 12, 2000
.........................................
(ROBERT H. STEERS)
By /s/ GREGORY C. CLARK Director January 12, 2000
.........................................
(GREGORY C. CLARK)
By /s/ GEORGE GROSSMAN Director January 12, 2000
.........................................
(GEORGE GROSSMAN)
By /s/ JEFFREY H. LYNFORD Director January 12, 2000
.........................................
(JEFFREY H. LYNFORD)
By /s/ WILLARD H. SMITH JR. Director January 12, 2000
.........................................
(WILLARD H. SMITH JR.)
</TABLE>
C-3
STATEMENT OF DIFFERENCES
The British pound sterling sign shall be expressed as..................... 'L'
The section symbol shall be expressed as.................................. 'SS'
The division sign shall be expressed as...................................[div]
Characters normally expressed as superscript shall be preceded by......... 'pp'
<PAGE>
MANAGEMENT AGREEMENT
COHEN & STEERS INSTITUTIONAL REALTY SHARES, INC.
757 Third Avenue
New York, New York 10017
December__, 1999
COHEN & STEERS CAPITAL MANAGEMENT, INC.
757 Third Avenue
New York, New York 10017
Dear Sirs:
Cohen & Steers Institutional Realty Shares, Inc. ("We" or the
"Company") herewith confirm its agreement (the "Agreement") with Cohen & Steers
Capital Management, Inc. ("You") as follows:
1. We are an open-end, non-diversified management investment company
registered under the Investment Company Act of 1940 (the "Act"). We propose to
engage in the business of investing and reinvesting our assets in securities of
the type and in accordance with the limitations specified in our Articles of
Incorporation, By-Laws, and Registration Statement filed with the Securities and
Exchange Commission, as these documents may be amended from time to time. You
agree, during the term of this Agreement, to continuously furnish the Company
with an investment program for the assets of the Company, to manage and
supervise the investment and reinvestment of the assets of the Company, and to
arrange for the purchase and sale of securities and other assets held in the
investment portfolio of the Company consistent with our Articles of
Incorporation, By-Laws, and Registration Statement filed with the Securities and
Exchange Commission, as these documents may be amended or modified from time to
time. On your own initiative, You will furnish us from time to time with such
information as You may believe appropriate for this purpose, whether concerning
the individual issuers whose securities
<PAGE>
are included in our portfolio, the industries in which they engage, or the
conditions prevailing in the economy generally. You will also furnish us with
such statistical and analytical information with respect to our portfolio
securities as You may believe appropriate or as we reasonably may request. In
making such purchases and sales of our portfolio securities, You will bear in
mind the policies set from time to time by our Board of Directors as well as the
limitations imposed by our Articles of Incorporation and in our Registration
Statement under the Act and the Securities Act of 1933, the limitations in the
Act and of the Internal Revenue Code of 1986, as amended, in respect of
regulated investment companies.
2. You also agree, during the term of this Agreement, to be responsible
for:
(a) providing office space, telephone, office equipment and
supplies for the Company;
(b) paying compensation of the Company's officers for services
rendered as such;
(c) authorizing expenditures and approving bills for payment
on behalf of the Company;
(d) supervising preparation of the periodic updating of the
Company's registration statement, including prospectus and
statement of additional information, for the purpose of
filings with the Securities and Exchange Commission and state
securities administrators and monitoring and maintaining the
effectiveness of such filings, as appropriate;
(e) supervising preparation of periodic reports to the Company's
shareholders and filing of these reports with the Securities
and Exchange Commission, Forms N-SAR filed with the Securities
and Exchange Commission, notices of dividends, capital gains
distributions and tax credits, and attending to routine
correspondence and other communications with individual
shareholders;
(f) supervising the daily pricing of the Company's investment
portfolio and the publication of the net asset value of the
Company's shares, earnings reports and other financial data;
(g) monitoring relationships with organizations providing services
to the Company, including the Custodian, Transfer Agent and
printers;
-2-
<PAGE>
(h) providing trading desk facilities for the Company;
(i) supervising compliance by the Company with recordkeeping
requirements under the Act and regulations thereunder,
maintaining books and records for the Company (other than
those maintained by the Custodian and Transfer Agent) and
preparing and filing of tax reports other than the Company's
income tax returns; and
(j) providing executive, clerical and secretarial help needed to
carry out these responsibilities.
3. In rendering the services specified in paragraph 2 of this
Agreement, You may, subject to the approval of the Company's Board of Directors,
cause such services or any portion thereof to be provided by another person
pursuant to a sub-administration agreement; provided that in such event You
shall remain responsible for monitoring and overseeing the performance by such
person of its obligations to the Company under such sub-administration
agreement. You shall be responsible for the payment of the fees and
out-of-pocket expenses charged by such person in performing these services.
4. It is understood that You will from time to time employ or associate
with yourselves such persons as You believe to be particularly fitted to assist
You in the execution of your duties hereunder, the cost of performance of such
duties to be borne and paid by You. No obligation may be incurred on our behalf
in any such respect. During the continuance of this Agreement at our request You
will provide us persons satisfactory to our Board of Directors to serve as our
officers.
3. We hereby confirm that We shall be responsible and hereby assume the
obligation for payment of the fee payable to You under paragraph 7 of this
Agreement. You hereby confirm that You shall be responsible and hereby assume
the obligation for payment of all of our other fees and expenses, except as
follows: (a) fees of directors who are not affiliated persons of You;
-3-
<PAGE>
(b) fees and expenses of any legal counsel or other consultants retained by the
directors who are not affiliated persons of You; (c) interest charges (including
charges related to the Company's line of credit), taxes, brokerage fees and
commissions; (d) trade organization membership dues; (e) federal and state
registration fees; and (f) upon the approval of the Board of Directors,
extraordinary expenses.
6. We shall expect of You, and You will give us the benefit of, your
best judgment and efforts in rendering these services to us, and We agree as an
inducement to your undertaking these services that You shall not be liable
hereunder for any mistake of judgment or in any event whatsoever, except for
lack of good faith, provided that nothing herein shall be deemed to protect, or
purport to protect, You against any liability to us or to our security holders
to which You would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of your duties hereunder, or by
reason of your reckless disregard of your obligations and duties hereunder.
7. In consideration of the foregoing, We will pay You a monthly fee at
an annualized rate of .75 of 1% of our average daily net assets. Such fee shall
be payable in arrears on the last day of each calendar month for services
performed hereunder during such month. If our initial Registration Statement is
declared effective by the Securities and Exchange Commission after the beginning
of a month or this Agreement terminates prior to the end of a month, such fee
shall be prorated according to the proportion which such portion of the month
bears to the full month.
8. This Agreement shall become effective on the date on which our
pending Registration Statement on Form N-1A relating to our shares becomes
effective and shall remain in effect until December 31, 2002, and may be
continued for successive twelve-month periods (computed from each January 1),
provided that such continuance is specifically approved at least
-4-
<PAGE>
annually by the Board of Directors or by majority vote of the holders of the
outstanding voting securities of the Company (as defined in the Act), and, in
either case, by a majority of the Board of Directors who are not interested
persons as defined in the Act, of any party to this Agreement (other than as
Directors of the Company), provided further, however, that if the continuation
of this Agreement is not approved, You may continue to render the services
described herein in the manned to the extent permitted by the Act and the rules
and regulations thereunder. Upon the effectiveness of this Agreement, it shall
supersede all previous agreements between us covering the subject matter hereof.
This Agreement may be terminated at any time, without the payment of any
penalty, by vote of a majority of the outstanding voting securities (as so
defined) or by a vote of a majority of the Board of Directors on 60 days'
written notice to You, or by You on 60 days' written notice to the Company.
9. This Agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged by You and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by You. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and any
interpretation thereof contained in rules or regulations promulgated by the
Securities and Exchange Commission thereunder.
10. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, or
the right of any of your officers, directors or employees, who may also be a
Director, officer or employee of the Company, or persons otherwise affiliated
with the Company (within the meaning of the Act) to engage in any other business
or to devote time and attention to the management or other aspects of any other
business, whether of a similar or dissimilar nature, or to render services of
any kind to any other
-5-
<PAGE>
trust, corporation, firm, individual or association.
11. If You cease to act as our Manager, or, in any event, if You so
request in writing, We agree to take all necessary action to change our name to
a name not including the term "Cohen & Steers." You may from time to time make
available without charge to Us for our use such marks or symbols owned by You,
including marks or symbols containing the term "Cohen & Steers" or any variation
thereof, as You may consider appropriate. Any such marks or symbols so made
available will remain the property of You and You shall have the right, upon
notice in writing, to require Us to cease the use of such mark or symbol at any
time.
10. This Agreement shall be construed in accordance with the laws of
the State of New York, provided, however, that nothing herein shall be construed
as being inconsistent with the Act.
If the foregoing is in accordance with your understanding, will You
kindly so indicate by signing and returning to Us the enclosed copy hereof.
Very truly yours,
COHEN & STEERS INSTITUTIONAL REALTY SHARES, INC.
By: ______________________________
Name:
Title:
Agreed to and accepted
as of the date first set
forth above
COHEN & STEERS CAPITAL MANAGEMENT, INC.
By: ___________________________
Name:
Title:
-6-
<PAGE>
COHEN & STEERS INSTITUTIONAL REALTY SHARES, INC.
757 Third Avenue
New York, New York 10017
January __, 2000
Cohen & Steers Securities, Inc.
757 Third Avenue
New York, New York 10017
Dear Sirs:
Cohen & Steers Institutional Realty Shares, Inc., a Maryland
corporation (the "Company"), is engaged in the business of an investment
company. The Company's Board of Directors has selected you to act as principal
underwriter (as such term is defined in Section 2(a)(29) of the Investment
Company Act of1940, as amended (the "1940 Act")) of the Company's Common Stock
(the "Shares"), and you are willing to act as principal underwriter and to
perform the duties and functions of principal underwriter in the manner and on
the conditions hereinafter set forth. Accordingly, the Company hereby agrees
with you as follows:
1. Copies of Corporate Documents. The Company will furnish you promptly
with copies of any registration statements filed by it with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, and the 1940
Act, as amended, together with any financial statements and exhibits included
therein, and all amendments or supplements thereto hereafter filed.
2. Registration and Sale of Additional Shares. The Company shall
register under the Securities Act of 1933, as amended, an unlimited number of
Shares and shall, from time to time as may be necessary, increase the number of
Shares that it is authorized under Maryland law to issue. This Agreement relates
to the issue and sale of Shares that
<PAGE>
are duly authorized, registered and available for sale by the Company, including
repurchased and redeemed Shares if and to the extent that they may be legally
sold and if, but only if, the Company sees fit to sell them. You and the Company
will cooperate in taking such action as may be necessary from time to time to
qualify Shares for sale in any state mutually agreeable to you and the Company,
and to maintain such qualification, provided that such Shares are duly
registered under the Securities Act of 1933, as amended.
3. Solicitation of Orders. You will use your best efforts (but only in
states in which you may lawfully do so) to obtain from investors orders for Act
of 1933, as amended, provided that you may in your discretion refuse to accept
orders for Shares from any particular applicant. You may, as agent for the
Company, solicit dealers for orders to purchase Shares and may enter into
selling agreements to be as mutually agreed upon, from time to time, by you and
the Company. Each dealer must be a member of the National Association of
Securities Dealers, Inc. (the "NASD") or a foreign dealer not eligible for
membership in the NASD who has agreed in acting under the selling agreement to
abide by the rules and regulations ofthe NASD and not to use the United States
mails or any means of interstate commerce in connection with the sales of such
Shares unless such foreign dealer is registered under the Securities Exchange
Act of 1934.
4. Sale of Shares. Subject to the provisions of paragraph 5 hereof and
to such minimum purchase requirements as may from time to time be currently
indicated in the Company's Prospectus (as hereinafter defined), you are
authorized to sell as agent on behalf of the Company authorized and unissued
Shares registered under the Securities
<PAGE>
Act of 1933, as amended. Such sales may be made by you on behalf of the Company
by accepting orders to such Shares placed with you by investors. The sales
price of such Shares shall be the public offering price as defined in
paragraph 6 hereof. All orders through you shall be subject to acceptance and
confirmation by the Company. The Company reserves the right to sell its Shares
to purchasers to the extent that the Company or its transfer agent receives
such purchase requests.
5. Sale of Shares to Investors. Any right granted to you to accept
orders for Shares or make sales on behalf of the Company will not apply to
Shares issued in connection with the merger or consolidation of any other
investment company with the Company or its acquisition, by purchase or
otherwise, of all or substantially all the assets of any investment company or
substantially all the outstanding shares of any such company, and such right
shall not apply to Shares that may be offered by the Company to shareholders by
virtue of their being shareholders of the Company, including Shares issued in
payment of any dividend or distribution by the Company.
6. Public Offering Price. All Shares sold to investors by you as agent
for the Company will be sold at the public offering price in effect at the time
of such sale, as described in the Company's then-current Prospectus and
Statement of Additional Information. The public offering price for all accepted
orders will be the net asset value per Share next computed after receipt of such
an order, plus any applicable sales charge adjusted to the nearest full cent, as
may from time to time be currently indicated in the Company's Prospectus with
respect to such order Net asset value per Share shall be computed in the manner
provided in the Company's then-current Prospectus. The time of receipt of such
an order to purchase (or redeem) Shares shall be the time of its receipt
<PAGE>
by you or by a dealer appointed by you as agent for the purpose of accepting
transaction orders.
7. Suspension of Sales and Redemptions. If and whenever the
determination of asset value is suspended pursuant to the Company's Articles of
Incorporation, and such suspension has become effective, until such suspension
is terminated, no further orders for the sale or redemption of Shares shall be
accepted by you except such orders placed with you before you had knowledge of
the suspension. In addition, the Company reserves the right to suspend sales and
redemptions and your authority to accept orders for sales and redemptions of
Shares on behalf of the Company if, in the judgment of a majority of its Board
of Directors or a majority of the Executive Committee of its Board of Directors,
if such Committee exists, it is in the best interests of the Company to do so,
such suspension to continue for such period as may be determined by such
majority. and in that event, no Shares will be sold or redeemed by the Company
or by you on behalf of the Company while such suspension remains in effect
except for Shares necessary to cover orders accepted by you before you had
knowledge of the suspension. Further, no Shares shall be sold through you or by
the Company and no orders for the redemption of Shares shall be confirmed or
accepted by the Company if and as long as the effectiveness of the Company's
Registration Statement shall be suspended under any of the provisions of the
1933 Act or the 1940 Act. The Company will notify you promptly of any such
suspension of the determination of net asset value or of any such suspension of
sales and redemptions of Shares.
8. Expenses. You shall have no responsibility for payment of any fees
and expenses in connection with the preparation and filing of any registration
statement
<PAGE>
(including the prospectus or statement of additional information) or any
amendments or supplements thereto under the Securities Act of 1933, as amended,
covering the issue and sale of the Company's Shares and in connection with the
qualification of such Shares for sale in the various states and countries in
which the Company shall determine it advisable to qualify such Shares for
sale, the costs of all stock certificates, the fees and expenses of the
Company's transfer agent or registrar, or any issue taxes. you will pay all
expenses of printing prospectuses and other sales literature (except copies
of prospectuses and other sales literature which may from time to time be sent
to existing shareholders of the Fund and except as may otherwise be provided
pursuant to a plan of distribution, if any, adopted by the Company pursuant to
Rule 12b-l under the 1940 Act), all fees and expenses in connection with your
qualification as a dealer in the various states and countries, and all other
expenses in connection with the sale and offering for sale of the Shares of the
Company which are not payable by the Company pursuant to the provisions of
this paragraph 9.
9. Conformity with Law. You agree that in providing services pursuant
to this Agreement you will duly conform in all respects with the laws of the
United States and any state or country in which such Shares may be offered for
sale by you pursuant to this Agreement.
10. Indemnification. You agree to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act of
1933, as amended, against any and all losses, claims, damages, liabilities or
litigation expenses (including legal and other expenses) to which the Company or
such directors, officers or controlling person
<PAGE>
may become subject under such Act, under any other statute, at common law or
otherwise, arising out of the acquisition of any Shares by any person or the
sale of any Shares by any person to the Company through you which (i) may be
based upon any wrongful act by you or any of your employees or representatives,
or (ii) may be based upon any untrue statement or alleged untrue statement of
a material fact contained in a registration statement or prospectus covering
Shares of the Company or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading if
such statement or omission was made in reliance upon information furnished or
confirmed in writing to the Company by you, provided, however, that in no case
is your indemnity in favor of a director or officer or any other person deemed
to protect such director or officer or other person against any liability to
which any such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties
or by reason of his reckless disregard of obligations and duties under this
Agreement.
The Company agrees to indemnify and hold harmless you and each of your
directors and officers and each person, if any, who controls you within the
meaning of Section 15 of the Securities Act of 1933, as amended, against any and
all losses, claims, damages, liabilities or litigation expenses (including legal
and other expenses) to which you or such directors, officers or controlling
person may become subject under such Act, under any other statute, at common law
or otherwise, arising out of the acquisition of any Shares by any person or the
sale of any Shares by any person to the Company through you which (i) may be
based upon any wrongful act by the Company or any of its
<PAGE>
employees or representatives, or (ii) except as described in clause (ii) of
the preceding paragraph, may be based upon any untrue statement or alleged
untrue statement or a material fact contained in a registration statement or
prospectus covering Shares of the Company or any amendment thereof or
supplement thereto or omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, provided, however, that in no case is the Company's indemnity
in favor of a director or officer or any other person deemed to protect such
director or officer or other person against any liability to which any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of his duties or by reason of his
reckless disregard of obligations and duties under this Agreement. You hereby
waive any rights to indemnification concerning your obligations and duties
hereunder to which you might be entitled under the Company's By-Laws.
You are not authorized to give any information or to make any
representations on behalf of the Company in connection with the sale or
redemption of Shares of the Company other than the information and
representations contained in a registration statement or prospectus covering
Shares of the Company, as such registration statement and prospectus may be
amended or supplemented from time to time.
11. Duration and Termination of this Agreement. This Agreement shall
remain in force until January 31, 2002 and from year to year thereafter, but
only so long as such continuance is specifically approved at least annually by
the Board of Directors of the Company or by vote of a majority of the
outstanding voting securities ofthe Company. In addition, the Company may not
renew or perform this Agreement unless
<PAGE>
the terms thereof and any renewal thereof have been approved by the vote of a
majority of directors of the Company who are not interested persons of you or
of the Company, cast in person at a meeting called for the purpose of voting on
such approval. This Agreement may, on 60 days' written notice, be terminated
at any time without the payment of any penalty, by the Board of Directors of the
Company, by vote of a majority ofthe outstanding voting securities of the
Company, or by you. This Agreement shall automatically terminate in the event
of its assignment. In interpreting the provisions of this paragraph 11, the
definitions contained in Section 2(a) ofthe 1940 Act and Rules thereunder
(particularly the definitions of "interested person," "assignment," "voting
security" and "vote of a majority of the outstanding voting securities") and
related interpretations shall be applied.
12. Amendment of this Agreement. No provision ofthis Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver
discharge or termination is sought. If the Company should at any time deem it
necessary or advisable in the best interests of the Company that any amendment
of this Agreement be made in order to comply with the recommendations or
requirements ofthe Securities and Exchange Commission or other governmental
authority or to obtain any advantage under state or federal tax laws and should
notify you of the form of such amendment, and the reasons therefor, and if you
should decline to agree to such amendment, the Company may terminate this
Agreement forthwith. If you should at any time request that a change be made in
the Company's Articles of Incorporation or By-Laws, or in its methods of doing
business, in order to comply with any requirements of federal law or regulations
of
<PAGE>
the Securities and Exchange Commission or of a national securities association
ofwhich you are or may be a member, relating to the sale of Shares of the
Company, and the Company should not make such necessary change within a
reasonable time, you may terminate this Agreement.
13. Choice of Law. This Agreement shall be construed in accordance with
the laws of the State of New York, provided that nothing herein shall be
construed in a manner inconsistent with the 1933 Act or the 1940 Act.
14. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
If you are in agreement with the foregoing, please sign below to
indicate your acceptance and return to the Company the enclosed copy hereof.
Yours very truly,
COHEN & STEERS INSTITUTIONAL REALTY
SHARES, INC.
By:_______________________________
Name:
Title:
The foregoing Agreement is
hereby accepted as of the
date hereof.
COHEN & STEERS SECURITIES, INC.
By:_______________________________
Name:
Title:
<PAGE>
[CHASE LOGO]
GLOBAL CUSTODY AGREEMENT
BETWEEN
COHEN & STEERS INSTITUTIONAL REALTY SHARES, INC.
AND
THE CHASE MANHATTAN BANK
January 1, 2000
<PAGE>
GLOBAL CUSTODY AGREEMENT
This Agreement, dated January 1, 2000, is between THE CHASE MANHATTAN
BANK ("BANK"), with a place of business at 4 New York Plaza, New York, New York,
10004; and COHEN & STEERS INSTITUTIONAL REALTY SHARES, INC. ("CUSTOMER") with a
place of business at 757 Third Avenue, New York, NY 10017.
1. INTENTION OF THE PARTIES; DEFINITIONS
1.1 INTENTION OF THE PARTIES.
(a) This Agreement sets out the terms governing custodial,
settlement and certain other associated services offered by Bank to Customer.
Bank will be responsible for the performance of only those duties that are set
forth in this Agreement or expressly contained in Instructions that are
consistent with the provisions of this Agreement and with Bank's operations and
procedures. Customer acknowledges that Bank is not providing any legal, tax or
investment advice in providing the services hereunder.
(b) Investing in foreign markets may be a risky enterprise. The holding
of Financial Assets and cash in foreign jurisdictions may involve risks of loss
or other special features. Bank will not be liable for any loss that results
from the general risks of investing or Country Risk.
1.2 DEFINITIONS.
(a) As used herein, the following terms have the meaning hereinafter
stated.
"ACCOUNT" has the meaning set forth in Section 2.1 of this Agreement.
"AFFILIATE" means an entity controlling, controlled by, or under common
control with, Bank.
"AFFILIATED SUBCUSTODIAN" means a Subcustodian that is an Affiliate.
"APPLICABLE LAW" means any statute, whether national, state or local,
applicable in the United States or any other country, the rules of the
treaty establishing the European Community, any other law, rule,
regulation or interpretation of any governmental entity, any applicable
common law, and any decree, injunction, judgment, order, ruling, or
writ of any governmental entity.
<PAGE>
"AUTHORIZED PERSON" means any person (including an investment manager or
other agent) who has been designated by written notice from Customer or
its designated agent to act on behalf of Customer hereunder. Such
persons will continue to be Authorized Persons until such time as Bank
receives Instructions from Customer or its designated agent that any
such person is no longer an Authorized Person.
"BANK INDEMNITEES" means Bank, its Subcustodians, and their respective
nominees, directors, officers, employees and agents.
"BANK'S LONDON BRANCH" means the London branch office of The Chase
Manhattan Bank.
"CASH ACCOUNT" has the meaning set forth in Section 2.1(a)(ii).
"CORPORATE ACTION" means any subscription right, bonus issue, stock
repurchase plan, redemption, exchange, tender offer, or similar matter
with respect to a Financial Asset in the Securities Account that
require discretionary action by the holder, but does not include proxy
voting.
"COUNTRY RISK" means the risk of investing or holding assets in a
particular country or market, including, but not limited to, risks
arising from: nationalization, expropriation or other governmental
actions; the country's financial infrastructure, including prevailing
custody and settlement practices; laws applicable to the safekeeping
and recovery of Financial Assets and cash held in custody; the
regulation of the banking and securities industries, including changes
in market rules; currency restrictions, devaluations or fluctuations;
and market conditions affecting the orderly execution of securities
transactions or the value of assets.
"ENTITLEMENT HOLDER" means the person named on the records of a Securities
Intermediary as the person having a Securities Entitlement against the
Securities Intermediary.
"FINANCIAL ASSET" means, as the context requires, either the asset itself
or the means by which a person's claim to it is evidenced, including a
Security, a security certificate, or a Securities Entitlement.
"FINANCIAL ASSET" does not include cash.
"INSTRUCTIONS" has the meaning set forth in Section 3.1 of this Agreement.
"LIABILITIES" means any liabilities, losses, claims, costs, damages,
penalties, fines, obligations, or expenses of any kind whatsoever
(including, without limitation, reasonable attorneys', accountants',
consultants' or experts' fees and disbursements).
"SECURITIES" means stocks, bonds, rights, warrants and other negotiable and
nonnegotiable instruments, whether issued in certificated or
uncertificated form, that are commonly traded or dealt in on securities
exchanges or financial markets. "SECURITIES"
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also means other obligations of an issuer, or shares, participations
and interests in an issuer recognized in the country in which it is
issued or dealt in as a medium for investment and any other property
as may be acceptable to Bank for the Securities Account.
"SECURITIES ACCOUNT" means each Securities custody account on Bank's
records to which Financial Assets are or may be credited pursuant
hereto.
"SECURITIES DEPOSITORY" has the meaning set forth in Section 5.1 of this
Agreement.
"SECURITIES ENTITLEMENT" means the rights and property interest of an
Entitlement Holder with respect to a Financial Asset as set forth in
Part 5 of Article 8 of the Uniform Commercial Code of the State of New
York, as the same may be amended from time to time.
"SECURITIES INTERMEDIARY" means Bank, a Subcustodian, a Securities
Depository, and any other financial institution which in the ordinary
course of business maintains custody accounts for others and acts in
that capacity.
"SUBCUSTODIAN" has the meaning set forth in Section 5.1 and includes
Affiliated Subcustodians.
(b) All terms in the singular will have the same meaning in the plural
unless the context otherwise provides and visa versa.
2. WHAT BANK IS REQUIRED TO DO
2.1 SET UP ACCOUNTS.
(a) Bank will establish and maintain the following accounts
("ACCOUNTS"):
(i) a Securities Account in the name of Customer for
Financial Assets, which may be received by Bank or
its Subcustodian for the account of Customer,
including as an Entitlement Holder; and
(ii) an account in the name of Customer ("CASH ACCOUNT")
for any and all cash in any currency received by Bank
or its Subcustodian for the account of Customer.
Notwithstanding paragraph (ii), cash held in respect of those markets where
Customer is required to have a cash account in its own name held directly with
the relevant Subcustodian will be held in that manner and will not be part of
the Cash Account.
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(b) At the request of Customer, additional Accounts may be opened in
the future, which will be subject to the terms of this Agreement.
2.2 CASH ACCOUNT.
Except as otherwise provided in Instructions acceptable to Bank, all
cash held in the Cash Account will be deposited during the period it is credited
to the Accounts in one or more deposit accounts at Bank or at Bank's London
Branch. Any cash so deposited with Bank's London Branch will be payable
exclusively by Bank's London Branch in the applicable currency, subject to
compliance with any applicable laws, regulations, governmental decrees or
similar orders.
2.3 SEGREGATION OF ASSETS; NOMINEE NAME.
(a) Bank will identify in its records that Financial Assets credited to
Customer's Securities Account belong to Customer (except as otherwise may be
agreed by Bank and Customer).
(b) Bank will require each Subcustodian to identify in its own records
that Financial Assets credited to Customer's Securities Account belong to
customers of Bank (to the extent permitted by Applicable Law or market
practice), such that it is readily apparent that the Financial Assets do not
belong to Bank or the Subcustodian.
(c) Bank is authorized, in its discretion, to hold in bearer form, such
Financial Assets as are customarily held in bearer form; and to register in the
name of the Customer, Bank, a Subcustodian, a Securities Depository, or their
respective nominees, such Financial Assets as are customarily held in registered
form. Customer authorizes Bank or its Subcustodian to hold Financial Assets in
omnibus accounts and will accept delivery of Financial Assets of the same class
and denomination as those deposited with Bank or its Subcustodian.
2.4 SETTLEMENT OF TRADES.
When Bank receives an Instruction directing settlement of a trade in
Financial Assets that includes all information required by Bank, Bank will use
reasonable care to effect such settlement as instructed. Settlement of purchases
and sales of Financial Assets will be conducted in accordance with prevailing
standards of the market in which the transaction occurs. The risk of loss will
be Customer's whenever Bank delivers Financial Assets or payment in accordance
with applicable market practice in advance of receipt or settlement of the
expected consideration. In the case of the failure of Customer's counterparty to
deliver the expected consideration as agreed, Bank will contact the counterparty
to seek settlement, but Bank will not be obligated to institute legal
proceedings, file proof of claim in any insolvency proceeding, or take any
similar action.
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2.5 CONTRACTUAL SETTLEMENT DATE ACCOUNTING.
(a) Bank will effect book entries on a "contractual settlement date
accounting" basis as described below with respect to the settlement of trades in
those markets where Bank generally offers contractual settlement day accounting
and will notify Customer of these markets from time to time.
(i) SALES: On the settlement date for a sale, Bank will
credit the Cash Account with the sale proceeds of the
sale and transfer the relevant Financial Assets to an
account pending settlement of the trade if not
already delivered.
(ii) PURCHASES: On the settlement date for the purchase
(or earlier, if market practice requires delivery of
the purchase price before the settlement date), Bank
will debit the Cash Account with the settlement
monies and credit a separate account. Bank then will
post the Securities Account as awaiting receipt of
the expected Financial Assets. Customer will not be
entitled to the delivery of Financial Assets that are
awaiting receipt until Bank or a Subcustodian
actually receives them.
Bank reserves the right to restrict in good faith the availability of
contractual day settlement accounting for credit reasons.
(b) Bank may (in its absolute discretion) upon oral or written
notification to Customer reverse any debit or credit made pursuant to Section
2.5(a) prior to a transaction's actual settlement, and Customer will be
responsible for any costs or liabilities resulting from such reversal. Customer
acknowledges that the procedures described in this subsection are of an
administrative nature, and Bank does not undertake to make loans and/or
Financial Assets available to Customer.
2.6 ACTUAL SETTLEMENT DATE ACCOUNTING.
With respect to any sale or purchase transaction that is not posted to
the Account on the contractual settlement date as referred to in Section 2.5,
Bank will post the transaction on the date on which the cash or Financial Assets
received as consideration for the transaction is actually received by Bank.
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2.7 INCOME COLLECTION; AUTOCREDIT.
(a) Bank will credit the Cash Account with income and redemption
proceeds on Financial Assets in accordance with the times notified by Bank from
time to time on or after the anticipated payment date, net of any taxes that are
withheld by Bank or any third party. Where no time is specified for a particular
market, income and redemption proceeds from Financial Assets will be credited
only after actual receipt and reconciliation. Bank may reverse such credits upon
oral or written notification to Customer that Bank believes that the
corresponding payment will not be received by Bank within a reasonable period or
such credit was incorrect.
(b) Bank will make reasonable endeavors in its discretion to contact
appropriate parties to collect unpaid interest, dividends or redemption
proceeds, but neither Bank nor its Subcustodians will be obliged to file any
formal notice of default, institute legal proceedings, file proof of claim in
any insolvency proceeding, or take any similar action.
2.8 FRACTIONS/REDEMPTIONS BY LOT.
Bank may sell fractional interests in Financial Assets and credit the
Cash Account with the proceeds of the sale. If some, but not all, of an
outstanding class of Financial Asset is called for redemption, Bank may allot
the amount redeemed among the respective beneficial holders of such class of
Financial Asset in any manner Bank deems to be fair and equitable.
2.9 PRESENTATION OF COUPONS; CERTAIN OTHER MINISTERIAL ACTS.
Until Bank receives Instructions to the contrary, Bank will:
(a) present all Financial Assets for which Bank has
received notice of a call for redemption or that have
otherwise matured, and all income and interest
coupons and other income items that call for payment
upon presentation;
(b) execute in the name of Customer such certificates as
may be required to obtain payment in respect of
Financial Assets; and
(c) exchange interim or temporary documents of title held
in the Securities Account for definitive documents of
title.
2.10 CORPORATE ACTIONS.
(a) Bank will follow Corporate Actions and advise Customer of those
Corporate Actions of which Bank's central corporate actions department receives
notice from the issuer or from the Securities Depository in which such Financial
Assets are maintained or notice published in publications and reported in
reporting services routinely used by Bank for this purpose.
(b) If an Authorized Person fails to provide Bank with timely
Instructions with respect to any Corporate Action, neither Bank nor its
Subcustodians or their respective nominees will take any action in relation to
that Corporate Action, except as otherwise agreed in writing by Bank and
Customer or as may be set forth by Bank as a default action in the advice it
provides under Section 2.10 (a) with respect to that Corporate Action.
2.11 PROXY VOTING.
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(a) Subject to and upon the terms of this subsection, Bank will
provide Customer with information which it receives on matters to be voted upon
at meetings of holders of Financial Assets ("NOTIFICATIONS"), and Bank will act
in accordance with Customer's Instructions in relation to such Notifications
("THE ACTIVE PROXY VOTING SERVICE"). If information is received by Bank at its
proxy voting department too late to permit timely voting by Customer, Bank's
only obligation is to provide, so far as reasonably practicable, a Notification
(or summary information concerning a Notification) on an "information only"
basis.
(b) The active proxy voting service is available only in certain
markets, details of which are available from Bank on request. Provision of the
active proxy voting service is conditional upon receipt by Bank of a duly
completed enrollment form as well as additional documentation that may be
required for certain markets.
(c) Bank will act upon Instructions to vote on matters referred to in a
Notification, provided Instructions are received by Bank at its proxy voting
department by the deadline referred to in the relevant Notification. If
Instructions are not received in a timely manner, Bank will not be obligated to
provide further notice to Customer.
(d) Bank reserves the right to provide Notifications or parts thereof
in the language received. Bank will attempt in good faith to provide accurate
and complete Notifications, whether or not translated.
(e) Customer acknowledges that Notifications and other information
furnished pursuant to the active proxy voting service ("INFORMATION") are
proprietary to Bank and that Bank owns all intellectual property rights,
including copyrights and patents, embodied therein. Accordingly, Customer will
not make any use of such information except in connection with the active proxy
voting service.
(f) In markets where the active proxy voting service is not available
or where Bank has not received a duly completed enrollment form or other
relevant documentation, Bank will not provide Notifications to Customer but will
endeavor to act upon Instructions to vote on matters before meetings of holders
of Financial Assets where it is reasonably practicable for Bank (or its
Subcustodians or nominees as the case may be) to do so and where such
Instructions are received in time for Bank to take timely action (the "PASSIVE
PROXY VOTING SERVICE").
(g) Customer acknowledges that the provision of proxy voting services
(whether active or passive) may be precluded or restricted under a variety of
circumstances. These circumstances include, but are not limited to: (i) the
Financial Assets being on loan or out for registration, (ii) the pendency of
conversion or another corporate action, or (iii) Financial Assets being held at
Customer's request in a name not subject to the control of Bank or its
Subcustodian, in a margin or collateral account at Bank or another bank or
broker, or otherwise in a manner which affects voting, local market regulations
or practices, or
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restrictions by the issuer. Additionally, in some cases Bank may be required to
vote all shares held for a particular issue for all of Bank's customers in the
same way. Bank will inform Customer where this is the case.
(h) Notwithstanding the fact that Bank may act in a fiduciary capacity
with respect to Customer under other agreements or otherwise hereunder, in
performing active or passive voting proxy services Bank will be acting solely as
the agent of Customer, and will not exercise any discretion with regard to such
proxy services or vote any proxy except when directed by an Authorized Person.
2.12 STATEMENTS AND INFORMATION AVAILABLE ON-LINE.
(a) Bank will issue statements to Customer at times mutually agreed
identifying the Financial Assets and cash in the Accounts. Bank also will
provide additional statements containing this information upon Customer's
request. Additionally, Bank will send (or make available on-line to) Customer an
advice or notification of any transfers of cash or Financial Assets with respect
to the Accounts. Bank will be not be liable with respect to any matter set forth
in those portions of any such statement (or reasonably implied therefrom) to
which Customer has not given Bank a written exception or objection within sixty
(60) days of receipt of the statement.
(b) Prices and other information obtained from third parties which may
be contained in any statement sent to Customer have been obtained from sources
Bank believes to be reliable. Bank does not, however, make any representation as
to the accuracy of such information or that the prices specified necessarily
reflect the proceeds that would be received on a disposal of the relevant
Financial Assets. References in this Agreement to statements include any
statements in electronic form.
(c) Customer acknowledges that records and unaudited reports available
to it on-line will be unaudited and may not be accurate due to inaccurate
pricing, delays in updating Account records, and other causes. Bank will not be
liable for any loss or damage arising out of the inaccuracy of any such records
or unaudited reports accessed on-line.
2.13 ACCESS TO BANK'S RECORDS.
Bank will allow Customer's independent public accountants such
reasonable access to the records of Bank relating to Financial Assets as is
required in connection with their examination of books and records pertaining to
Customer's affairs. Subject to restrictions under Applicable Law, Bank will also
obtain an undertaking to permit Customer's independent public accountants
reasonable access to the records of any Subcustodian of Securities held in the
Securities Account as may be required in connection with such examination.
2.14 MAINTENANCE OF FINANCIAL ASSETS AT BANK AND SUBCUSTODIAN LOCATIONS.
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(a) Unless Instructions (as detailed in Article 3) require another
location acceptable to Bank, Financial Assets will be held in the country or
jurisdiction in which their principal trading market is located, where such
Financial Assets may be presented for payment, where such Financial Assets were
acquired, or where such Financial Assets are held. Bank reserves the right to
refuse to accept delivery of Financial Assets or cash in countries and
jurisdictions other than those referred to in Schedule 1 to this Agreement, as
in effect from time to time.
(b) Bank will not be obliged to follow an Instruction to hold Financial
Assets with, or have them registered or recorded in the name of, any person not
chosen by Bank. However, if Customer does instruct Bank to hold Securities with
or register or record Securities in the name of a person not chosen by Bank, the
consequences of doing so are at Customer's own risk and Bank will not be liable
therefor.
2.15 TAX RECLAIMS.
Bank will provide tax reclamation services as provided in Section 8.2.
2.16 FOREIGN EXCHANGE TRANSACTIONS.
To facilitate the administration of Customer's trading and investment
activity, Bank may, but will not be obliged to, enter into spot or forward
foreign exchange contracts with Customer, or an Authorized Person, and may also
provide foreign exchange contracts and facilities through its Affiliates or
Subcustodians. Instructions, including standing instructions, may be issued with
respect to such contracts, but Bank may establish rules or limitations
concerning any foreign exchange facility made available. In all cases where
Bank, its Affiliates or Subcustodians enter into a master foreign exchange
contract that covers foreign exchange transactions for the Accounts, the terms
and conditions of that foreign exchange contract and, to the extent not
inconsistent, this Agreement, will apply to such transactions.
3. INSTRUCTIONS
3.1 ACTING ON INSTRUCTIONS; UNCLEAR INSTRUCTIONS.
(a) Bank is authorized to act under this Agreement (or to refrain from
taking action) in accordance with the instructions received by Bank, via
telephone, telex, facsimile transmission, or other teleprocess or electronic
instruction or trade information system acceptable to Bank ("Instructions").
Bank will have no responsibility for the authenticity or propriety of any
Instructions that Bank believes in good faith to have been given by Authorized
Persons or which are transmitted with proper testing or authentication pursuant
to terms and conditions that Bank may specify. Customer authorizes Bank to
accept and act upon any Instructions received by it without inquiry. Customer
will indemnify the Bank
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Indemnitees against, and hold each of them harmless from, any Liabilities that
may be imposed on, incurred by, or asserted against the Bank Indemnitees as a
result of any action or omission taken in accordance with any Instructions or
other directions upon which Bank is authorized to rely under the terms of this
Agreement.
(b) Unless otherwise expressly provided, all Instructions will continue
in full force and effect until canceled or superseded.
(c) Bank may (in its sole discretion and without affecting any part of
this Section 3.1) seek clarification or confirmation of an Instruction from an
Authorized Person and may decline to act upon an Instruction if it does not
receive clarification or confirmation satisfactory to it. Bank will not be
liable for any loss arising from any delay while it seeks such clarification or
confirmation.
(d) In executing or paying a payment order Bank may rely upon the
identifying number (e.g. Fedwire routing number or account) or any party as
instructed in the payment order. Customer assumes full responsibility for any
inconsistency between the name and identifying number of any party in payment
orders issued to Bank in Customer's name.
3.2 CONFIRMATION OF ORAL INSTRUCTIONS/SECURITY DEVICES.
Any Instructions delivered to Bank by telephone will promptly
thereafter be confirmed in writing by an Authorized Person. Each confirmation is
to be clearly marked "Confirmation." Bank will not be liable for having followed
such Instructions notwithstanding the failure of an Authorized Person to send
such confirmation in writing or the failure of such confirmation to conform to
the telephone Instructions received. Either party may record any of their
telephonic communications. Customer will comply with any security procedures
reasonably required by Bank from time to time with respect to verification of
Instructions. Customer will be responsible for safeguarding any test keys,
identification codes or other security devices that Bank will make available to
Customer or any Authorized Person.
3.3 INSTRUCTIONS; CONTRARY TO LAW/MARKET PRACTICE.
Bank need not act upon Instructions which it reasonably believes to be
contrary to law, regulation or market practice but will be under no duty to
investigate whether any Instructions comply with Applicable Law or market
practice.
3.4 CUT-OFF TIMES.
Bank has established cut-off times for receipt of some categories of
Instruction, which will be made availableto Customer. If Bank receives an
Instruction after its established cut-off time, it will attempt to act upon the
Instruction on the day requested if Bank deems it practicable to do so or
otherwise as soon as practicable after that day.
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4. FEES, EXPENSES AND OTHER AMOUNTS OWING TO BANK
4.1 FEES AND EXPENSES.
Customer will pay Bank for its services hereunder the fees set forth in
Schedule B hereto or such other amounts as may be agreed upon in writing from
time to time, together with Bank's reasonable out-of-pocket or incidental
expenses, including, but not limited to, legal fees. Customer authorizes Bank to
charge any Cash Accounts, for any such fees or expenses.
4.2 OVERDRAFTS.
If a debit to any currency in the Cash Account results in a debit
balance in that currency (without regard to any Cash Account investments) then
Bank may, in its discretion, advance an amount equal to the overdraft and such
an advance will be deemed a loan to Customer, payable on demand, bearing
interest at the rate charged by Bank from time to time, for overdrafts incurred
by customers similar to Customer, from the date of such advance to the date of
payment (both after as well as before judgment) and otherwise on the terms on
which Bank makes similar overdrafts available from time to time. No prior action
or course of dealing on Bank's part with respect to the settlement of
transactions on Customer's behalf will be asserted by Customer against Bank for
Bank's refusal to make advances to the Cash Account or to settle any transaction
for which Customer does not have sufficient available funds in the applicable
currency in the Account.
4.3 BANK'S RIGHT OVER SECURITIES; SET-OFF.
(a) Customer grants Bank a security interest in and a lien on the
Financial Assets held in the Securities Account as security for any and all
amounts which are now or become owing to Bank under any provision of this
Agreement, whether or not matured or contingent ("Indebtedness").
(b) Bank will be further entitled to set any such Indebtedness off
against any cash or deposit account with Bank or any of its Affiliates of which
Customer is the beneficial owner, regardless of the currency involved. Bank will
notify Customer in advance of any such charge unless Bank reasonably believes
that it might prejudice its interests to do so and, in such event, Bank will
notify Customer promptly afterwards.
5. SUBCUSTODIANS, SECURITIES DEPOSITORIES, AND OTHER AGENTS
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5.1 APPOINTMENT OF SUBCUSTODIANS; USE OF SECURITIES DEPOSITORIES.
(a) Bank is authorized under this Agreement to act through and hold
Customer's Financial Assets with subcustodians, being at the date of this
Agreement the entities listed in Schedule 1 and/or such other entities as Bank
may appoint as subcustodians ("SUBCUSTODIANS"). Bank will use reasonable care in
the selection and continued appointment of such Subcustodians. In addition, Bank
and each Subcustodian may deposit Financial Assets with, and hold Financial
Assets in, any securities depository, settlement system, dematerialized book
entry system or similar system (together a "SECURITIES DEPOSITORY") on such
terms as such systems customarily operate and Customer will provide Bank with
such documentation or acknowledgements that Bank may require to hold the
Financial Assets in such systems.
(b) Any agreement Bank enters into with a Subcustodian for holding
Bank's customers' assets shall provide that such assets shall not be subject to
any right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian or its creditors except a claim of payment for their safe custody
or administration or, in the case of cash deposits, except for liens or rights
in favor of creditors of the Subcustodian arising under bankruptcy, insolvency
or similar laws, and that the beneficial ownership of such assets shall be
freely transferable without the payment of money or value other than for safe
custody or administration. Where a Subcustodian deposits Securities with a
Securities Depository, Bank will cause the Subcustodian to identify on its
records as belonging to Bank, as agent, the Securities shown on the
Subcustodian's account at such Securities Depository. The foregoing will not
apply to the extent of any special agreement or arrangement made by Customer
with any particular Subcustodian.
(c) Bank will have no responsibility for any act or omission by (or the
insolvency of) any Securities Depository. In the event Customer incurs a loss
due to the negligence, willful misconduct, or insolvency of a Securities
Depository, Bank will make reasonable endeavors, in its discretion, to seek
recovery from the Securities Depository.
5.2 LIABILITY FOR SUBCUSTODIANS.
(a) Subject to Section 7.1(b), Bank will be liable for direct losses
incurred by Customer that result from:
(i) the failure by the Subcustodian to use reasonable
care in the provision of custodial services by it in
accordance with the standards prevailing in the
relevant market or from the fraud or willful default
of such Subcustodian in the provision of custodial
services by it; or
(ii) the insolvency of any Affiliated Subcustodian.
(b) Subject to Section 5.1(a) (i) and Bank's duty to use reasonable
care in the monitoring of a Subcustodian's financial condition as reflected in
its published financial
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statements and other publicly available financial information concerning it,
Bank will not be responsible for the insolvency of any Subcustodian which is not
a branch or an Affiliated Subcustodian.
(c) Bank reserves the right to add, replace or remove Subcustodians.
Bank will give prompt notice of any such action, which will be advance notice if
practicable. Upon request by Customer, Bank will identify the name, address and
principal place of business of any Subcustodian and the name and address of the
governmental agency or other regulatory authority that supervises or regulates
such Subcustodian.
5.3 USE OF AGENTS.
(a) Bank may provide certain services under this Agreement through
third parties. These third parties may be Affiliates. Except to the extent
provided in Section 5.2 with respect to Subcustodians, Bank will not be
responsible for any loss as a result of a failure by any broker or any other
third party that it selects and retains using reasonable care to provide
ancillary services, such as pricing, proxy voting, and corporate action
services, that it does not customarily provide itself. Nevertheless, Bank will
be liable for the performance of any such service provider selected by Bank that
is an Affiliate to the same extent as Bank would have been liable if it
performed such services itself.
(b) Bank will execute transactions involving Financial Assets of United
States origin through a broker which is an Affiliate (i) in the case of the sale
under Section 2.8 of a fractional interest or (ii) if an Authorized Person
directs Bank to use the affiliated broker or otherwise requests that Bank select
a broker for that transaction, unless, in either case, the Affiliate does not
execute similar transactions in such Financial Assets. The affiliated broker may
charge its customary commission (or retain its customary spread) with respect to
either such transaction.
6. ADDITIONAL PROVISIONS RELATING TO CUSTOMER
6.1 REPRESENTATIONS OF CUSTOMER.
Customer represents and warrants that (i) it has full authority and
power, and has obtained all necessary authorizations and consents, to deposit
and control the Financial Assets and cash in the Accounts, to use Bank as its
custodian in accordance with the terms of this Agreement and to incur
indebtedness, pledge Financial Assets as contemplated by Section 4.3, and enter
into foreign exchange transactions; and (ii) this Agreement is its legal, valid
and binding obligation, enforceable in accordance with its terms and it has full
power and authority to enter into and has taken all necessary corporate action
to authorize the execution of this Agreement. Bank may rely upon the above or
the certification of such other facts as may be required to administer Bank's
obligations hereunder.
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6.2 CUSTOMER TO PROVIDE CERTAIN INFORMATION TO BANK.
Upon request, Customer will promptly provide to Bank such information
about itself and its financial status as Bank may reasonably request, including
Customer's organizational documents and its current audited and unaudited
financial statements.
6.3 CUSTOMER IS LIABLE TO BANK EVEN IF IT IS ACTING FOR ANOTHER PERSON.
If Customer is acting as an agent for a disclosed or undisclosed
principal in respect of any transaction, cash, or Financial Asset, Bank
nevertheless will treat Customer as its principal for all purposes under this
Agreement. In this regard, Customer will be liable to Bank as a principal in
respect of any transactions relating to the Account. The foregoing will not
affect any rights Bank might have against Customer's principal.
7. WHEN BANK IS LIABLE TO CUSTOMER
7.1 STANDARD OF CARE; LIABILITY.
(a) Bank will use reasonable care in performing its obligations under
this Agreement. Bank will not be in violation of this Agreement with respect to
any matter as to which it has satisfied its obligation of reasonable care.
(b) Bank will be liable for Customer's direct damages to the extent
they result from Bank's negligence or willful misconduct in performing its
duties as set out in this Agreement and to the extent provided for in Section
5.2(a). Nevertheless, under no circumstances will Bank be liable for any
indirect, consequential or special damages (including, without limitation, lost
profits) of any form, whether or not foreseeable and regardless of the type of
action in which such a claim may be brought, with respect to the Accounts or
Bank's performance hereunder or its role as custodian.
(c) Customer will indemnify the Bank Indemnitees against, and hold them
harmless from, any Liabilities that may be imposed on, incurred by or asserted
against any of the Bank Indemnitees in connection with or arising out of Bank's
performance under this Agreement, provided the Bank Indemnitees have not acted
with negligence or engaged in fraud or willful misconduct in connection with the
Liabilities in question. Nevertheless, Customer will not be obligated to
indemnify any Bank Indemnitee under the preceding sentence with respect to any
Liability for which Bank is liable under Section 5.2 of this Agreement.
(d) Without limiting Subsections 7.1 (a), (b) or (c), Bank will have no
duty or responsibility to: (i) question Instructions or make any suggestions to
Customer or an Authorized Person regarding such Instructions; (ii) supervise or
make recommendations with respect to investments or the retention of Financial
Assets; (iii) advise Customer or an Authorized Person regarding any default in
the payment of principal or income of any
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security other than as provided in Section 2.7(b) of this Agreement; (iv)
evaluate or report to Customer or an Authorized Person regarding the financial
condition of any broker, agent or other party to which Bank is instructed to
deliver Financial Assets or cash; or (v) review or reconcile trade confirmations
received from brokers (and Customer or its Authorized Persons issuing
Instructions will bear any responsibility to review such confirmations against
Instructions issued to and statements issued by Bank).
7.2 FORCE MAJEURE.
Bank will maintain and update from time to time business continuation
and disaster recovery procedures with respect to its global custody business
that it determines from time to time meet reasonable commercial standards. Bank
will have no liability, however, for any damage, loss, expense or liability of
any nature that Customer may suffer or incur, caused by an act of God, fire,
flood, civil or labor disturbance, war, act of any governmental authority or
other act or threat of any authority (de jure or de facto), legal constraint,
fraud or forgery, malfunction of equipment or software (except to the extent
such malfunction is primarily attributable to Bank's negligence in maintaining
the equipment or software), failure of or the effect of rules or operations of
any external funds transfer system, inability to obtain or interruption of
external communications facilities, or any cause beyond the reasonable control
of Bank (including without limitation, the nonavailability of appropriate
foreign exchange).
7.3 BANK MAY CONSULT WITH COUNSEL.
Bank will be entitled to rely on, and may act upon the advice of
professional advisers in relation to matters of law, regulation or market
practice (which may be the professional advisers of Customer), and will not be
liable to Customer for any action reasonably taken or omitted pursuant to such
advice.
7.4 BANK PROVIDES DIVERSE FINANCIAL SERVICES AND MAY GENERATE PROFITS AS A
RESULT.
Customer acknowledges that Bank or its Affiliates may have a material
interest in the transaction or that circumstances are such that Bank may have a
potential conflict of duty or interest. For example, Bank or its Affiliates may
act as a market maker in the Financial Assets to which Instructions relate,
provide brokerage services to other customers, act as financial adviser to the
issuer of such Financial Assets, act in the same transaction as agent for more
than one customer, have a material interest in the issue of the Financial
Assets; or earn profits from any of these activities. Customer acknowledges that
Bank or its Affiliates may be in possession of information tending to show that
the Instructions received may not be in the best interests of Customer. Bank is
not under any duty to disclose any such information.
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<PAGE>
8. TAXATION
8.1 TAX OBLIGATIONS.
(a) Customer confirms that Bank is authorized to deduct from any cash
received or credited to the Cash Account any taxes or levies required by any
revenue or governmental authority for whatever reason in respect of Customer's
Accounts.
(b) If Bank does not receive appropriate declarations, documentation
and information then additional United Kingdom taxation will be deducted from
all income received in respect of the Financial Assets issued outside the United
Kingdom (WHICH SHALL FOR THIS PURPOSE include United Kingdom Eurobonds) and any
applicable United States tax (including, but not limited to, non-resident alien
tax) will be deducted from United States source income. Customer will provide to
Bank such certifications, documentation, and information as it may require in
connection with taxation, and warrants that, when given, this information is
true and correct in every respect, not misleading in any way, and contains all
material information. Customer undertakes to notify Bank immediately if any
information requires updating or correcting.
(c) Customer will be responsible for the payment of all taxes relating
to the Financial Assets in the Securities Account, and Customer will pay,
indemnify and hold Bank harmless from and against any and all liabilities,
penalties, interest or additions to tax with respect to or resulting from, any
delay in, or failure by, Bank (1) to pay, withhold or report any U.S. federal,
state or local taxes or foreign taxes imposed on, or (2) to report interest,
dividend or other income paid or credited to the Cash Account, whether such
failure or delay by Bank to pay, withhold or report tax or income is the result
of (x) Customer's failure to comply with the terms of this paragraph, or (y)
Bank's own acts or omissions; provided however, Customer will not be liable to
Bank for any penalty or additions to tax due as a result of Bank's failure to
pay or withhold tax or to report interest, dividend or other income paid or
credited to the Cash Account solely as a result of Bank's negligent acts or
omissions.
8.2 TAX RECLAIMS.
(a) Subject to the provisions of this Section, Bank will apply for a
reduction of withholding tax and any refund of any tax paid or tax credits in
respect of income payments on Financial Assets credited to the Securities
Account that Bank believes may be available.
(b) The provision of a tax reclamation service by Bank is conditional
upon Bank receiving from Customer (i) a declaration of its identity and place of
residence and (ii) certain other documentation (pro forma copies of which are
available from Bank). If Financial Assets credited to the Account are
beneficially owned by someone other than Customer, this information will be
necessary with respect to the beneficial owner. Customer acknowledges that Bank
will be unable to perform tax reclamation services unless it receives this
information.
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<PAGE>
(c) Bank will perform tax reclamation services only with respect to
taxation levied by the revenue authorities of the countries advised to Customer
from time to time and Bank may, by notification in writing, in its absolute
discretion, supplement or amend the countries in which the tax reclamation
services are offered. Other than as expressly provided in this Section 8.2 Bank
will have no responsibility with regard to Customer's tax position or status in
any jurisdiction.
(d) Customer confirms that Bank is authorized to disclose any
information requested by any revenue authority or any governmental body in
relation to the processing of any tax reclaim.
9. TERMINATION
Either party may terminate this Agreement on sixty days' notice in
writing to the other party. If Customer gives notice of termination, it must
provide full details of the persons to whom Bank must deliver Financial Assets
and cash. If Bank gives notice of termination, then Customer must, within sixty
days, notify Bank of details of its new custodian, failing which Bank may elect
(at any time after the sixty day notice period) either to retain the Financial
Assets and cash until such details are given, continuing to charge fees due (in
which case Bank's sole obligation will be for the safekeeping of the Financial
Assets and cash), or deliver the Financial Assets and cash to Customer. Bank
will in any event be entitled to deduct any amounts owing to it prior to
delivery of the Financial Assets and cash (and, accordingly, Bank will be
entitled to sell Financial Assets and apply the sale proceeds in satisfaction of
amounts owing to it). Customer will reimburse Bank promptly for all
out-of-pocket expenses it incurs in delivering Financial Assets upon
termination. Termination will not affect any of the liabilities either party
owes to the other arising under this Agreement prior to such termination.
10. MISCELLANEOUS
10.1 NOTICES.
Notices (other than Instructions) will be served by registered mail or
hand delivery to the address of the respective parties as set out on the first
page of this Agreement, unless notice of a new address is given to the other
party in writing. Notice will not be deemed to be given unless it has been
received.
10.2 SUCCESSORS AND ASSIGNS.
This Agreement will be binding on each of the parties' successors and
assigns, but the parties agree that neither party can assign its rights and
obligations under this Agreement without the prior written consent of the other
party, which consent will not be unreasonably withheld.
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10.3 INTERPRETATION.
Headings are for convenience only and are not intended to affect
interpretation. References to sections are to sections of this Agreement and
references to sub-sections and paragraphs are to sub-sections of the sections
and paragraphs of the sub-sections in which they appear.
10.4 ENTIRE AGREEMENT.
(a) The following Rider(s) are incorporated into this Agreement:
___ Cash Trade Execution;
___ Mutual Fund
___ Domestic
(b) This Agreement, including the Schedules, Exhibits, and Riders (and
any separate agreement which Bank and Customer may enter into with respect to
any Cash Account), sets out the entire Agreement between the parties in
connection with the subject matter, and this Agreement supersedes any other
agreement, statement, or representation relating to custody, whether oral or
written. Amendments must be in writing and signed by both parties.
10.5 INFORMATION CONCERNING DEPOSITS AT BANK'S LONDON BRANCH.
Bank's London Branch is a member of the United Kingdom Deposit
Protection Scheme (the "SCHEME") established under Banking Act 1987 (as
amended). The Scheme provides that in the event of Bank's insolvency payments
may be made to certain customers of Bank's London Branch. Payments under the
Scheme are limited to 90% of a depositor's total cash deposits subject to a
maximum payment to any one depositor of 'L'18,000 (or ECU 20,000 if
greater). Most deposits denominated in sterling and other European Economic Area
Currencies and ECU made with Bank within the United Kingdom are covered. Further
details of the Scheme are available on request.
10.6 CONFIDENTIALITY.
Bank will not disclose any confidential information concerning the
Financial Assets and/or cash held for Customer except as is reasonably necessary
to provide services to Customer, as required by law or regulation or the
organizational documents of the issuer of any Financial Asset, or otherwise with
the consent of Customer. Customer agrees to keep this Agreement confidential
and, except where disclosure is required by law or regulation, will only
disclose it (or any part of it) with the prior written consent of Bank.
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<PAGE>
10.7 INSURANCE.
Bank will not be required to maintain any insurance coverage for the
benefit of Customer.
10.8 GOVERNING LAW AND JURISDICTION. CERTIFICATION OF RESIDENCY.
This Agreement will be construed, regulated, and administered under the
laws of the United States or State of New York, as applicable, without regard to
New York's principles regarding conflict of laws. The United States District
Court for the Southern District of New York will have the sole and exclusive
jurisdiction over any lawsuit or other judicial proceeding relating to or
arising from this Agreement. If that court lacks federal subject matter
jurisdiction, the Supreme Court of the State of New York, New York County will
have sole and exclusive jurisdiction. Either of these courts will have proper
venue for any such lawsuit or judicial proceeding, and the parties waive any
objection to venue or their convenience as a forum. The parties agree to submit
to the jurisdiction of any of the courts specified and to accept service of
process to vest personal jurisdiction over them in any of these courts. The
parties further hereby knowingly, voluntarily and intentionally waive, to the
fullest extent permitted by applicable law, any right to a trial by jury with
respect to any such lawsuit or judicial proceeding arising or relating to this
Agreement or the transactions contemplated hereby. (B) Customer certifies that
it is a resident of the United States and shall notify Bank of any changes in
residency. Bank may rely upon this certification or the certification of such
other facts as may be required to administer Bank's obligations hereunder.
Customer shall indemnify Bank against all losses, liability, claims or demands
arising directly or indirectly from any such certifications.
10.9 SEVERABILITY AND WAIVER.
(a) If one or more provisions of this Agreement are held invalid,
illegal or unenforceable in any respect on the basis of any particular
circumstances or in any jurisdiction, the validity, legality and enforceability
of such provision or provisions under other circumstances or in other
jurisdictions and of the remaining provisions will not in any way be affected or
impaired.
(b) Except as otherwise provided herein, no failure or delay on the
part of either party in exercising any power or right hereunder operates as a
waiver, nor does any single or partial exercise of any power or right preclude
any other or further exercise, or the exercise of any other power or right. No
waiver by a party of any provision of this Agreement, or waiver of any breach or
default, is effective unless in writing and signed by the party against whom the
waiver is to be enforced.
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10.10 COUNTERPARTS.
This Agreement may be executed in several counterparts each of which
will be deemed to be an original and together will constitute one and the same
agreement.
COHEN & STEERS INSTITUTIONAL REALTY
SHARES, INC.
By:_______________________________________
Title:
Date:
THE CHASE MANHATTAN BANK
By:_______________________________________
Title:
Date:
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<PAGE>
Investment Company Rider to Global Custody Agreement
Between The Chase Manhattan Bank and
Cohen & Steers Institutional Realty Shares, Inc.
effective January 1, 2000
The following modifications are made to the Agreement:
A. Add a new Section 2.17 to the Agreement as follows:
"2.17. COMPLIANCE WITH SEC RULE 17F-5.
(a) Customer's board of directors (or equivalent body) (hereinafter
`Board') hereby delegates to Bank, and, except as to the country or countries as
to which Bank may, from time to time, advise Customer that it does not accept
such delegation, Bank hereby accepts the delegation to it, of the obligation to
perform as Customer's `Foreign Custody Manager' (as that term is defined in
Securities and Exchange Commission ("SEC") rule 17f-5(a)(2) as promulgated under
the Investment Company Act of 1940, as amended ("1940 Act")), both for the
purpose of selecting Eligible Foreign Custodians (as that term is defined in SEC
rule 17f-5(a)(1), and as the same may be amended from time to time, or that have
otherwise been made exempt pursuant to an SEC exemptive order) to hold Financial
Assets and Cash and of evaluating the contractual arrangements with such
Eligible Foreign Custodians (as set forth in SEC rule 17f-5(c)(2)); provided
that, the term Eligible Foreign Custodian shall not include any `Eligible
Securities Depository.' An Eligible Securities Depository for purposes hereof
shall have the same meaning as in SEC rule 17f-7 as proposed on April 29, 1999.
(Eligible Securities Depositories used by Bank as of the date hereof are set
forth in Appendix 1-A hereto, and as the same may be amended on notice to
Customer from time to time.)
(b) In connection with the foregoing, Bank shall:
(i) provide written reports notifying Customer's Board of the placement
of Financial Assets and Cash with particular Eligible Foreign
Custodians and of any material change in the arrangements with such
Eligible Foreign Custodians, with such reports to be provided to
Customer's Board at such times as the Board deems reasonable and
appropriate based on the circumstances of Customer's foreign custody
arrangements (and until further notice from Customer such reports shall
be provided not less than quarterly with respect to the placement of
Financial Assets and Cash with particular Eligible Foreign Custodians
and with reasonable promptness upon the occurrence of any material
change in the arrangements with such Eligible Foreign Custodians);
(ii) exercise such reasonable care, prudence and diligence in
performing as Customer's Foreign Custody Manager as a person having
responsibility for the safekeeping of Financial Assets and cash would
exercise;
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<PAGE>
(iii) in selecting an Eligible Foreign Custodian, first have determined
that Financial Assets and cash placed and maintained in the safekeeping
of such Eligible Foreign Custodian shall be subject to reasonable care,
based on the standards applicable to custodians in the relevant market,
after having considered all factors relevant to the safekeeping of such
Financial Assets and cash, including, without limitation, those factors
set forth in SEC rule 17f-5(c)(1)(i)-(iv);
(iv) determine that the written contract with an Eligible Foreign
Custodian requires that the Eligible Foreign Custodian will provide
reasonable care for Financial Assets and Cash based on the standards
applicable to custodians in the relevant market.
(v) have established a system to monitor the continued appropriateness
of maintaining Financial Assets and cash with particular Eligible
Foreign Custodians and of the governing contractual arrangements; it
being understood, however, that in the event that Bank shall have
determined that the existing Eligible Foreign Custodian in a given
country would no longer afford Financial Assets and cash reasonable
care and that no other Eligible Foreign Custodian in that country would
afford reasonable care, Bank shall promptly so advise Customer and
shall then act in accordance with the Instructions of Customer with
respect to the disposition of the affected Financial Assets and cash.
Subject to (b)(i)-(v) above, Bank is hereby authorized to place and maintain
Financial Assets and cash on behalf of Customer with Eligible Foreign Custodians
pursuant to a written contract deemed appropriate by Bank.
(c) Except as expressly provided herein, Customer shall be solely
responsible to assure that the maintenance of Financial Assets and cash
hereunder complies with the rules, regulations, interpretations and exemptive
orders as promulgated by or under the authority of the SEC.
(d) Bank represents to Customer that it is a U.S. Bank as defined in
Rule 17f-5(a)(7). Customer represents to Bank that: (1) the Financial Assets and
cash being placed and maintained in Bank's custody are subject to the 1940 Act,
as the same may be amended from time to time; (2) its Board: (i) has determined
that it is reasonable to rely on Bank to perform as Customer's Foreign Custody
Manager (ii) or its investment adviser shall have determined that Customer may
maintain Financial Assets and cash in each country in which Customer's Financial
Assets and cash shall be held hereunder and determined to accept Country Risk.
Nothing contained herein shall require Bank to make any selection or to engage
in any monitoring on behalf of Customer that would entail consideration of
Country Risk.
(e) Bank shall provide to Customer such information relating to Country
Risk as is specified in Appendix 1-B hereto. Customer hereby acknowledges that:
(i) such information is solely designed to inform Customer of market conditions
and procedures and is not intended as a recommendation to invest or not invest
in particular markets; and
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<PAGE>
(ii) Bank has gathered the information from sources it considers reliable, but
that Bank shall have no responsibility for inaccuracies or incomplete
information.
B. Add the following after the first sentence of Section 5.1(a) of the
Agreement: "At the request of Customer, Bank may, but need not, add to Schedule
1-A an Eligible Foreign Custodian where Bank has not acted as Foreign Custody
Manager with respect to the selection thereof. Bank shall notify Customer in the
event that it elects to add any such entity."
C. Add the following language as Section 5.1(d) of the Agreement:
" (d) The term Subcustodian as used herein shall mean the following:
(i) a `U.S. Bank,' which shall mean a U.S. bank as defined in
SEC rule 17f-5(a)(7);
(ii) an `Eligible Foreign Custodian,' which shall mean: (i) a
banking institution or trust company, incorporated or
organized under the laws of a country other than the United
States, that is regulated as such by that country's government
or an agency thereof, (ii) a majority-owned direct or indirect
subsidiary of a U.S. bank or bank holding company which
subsidiary is incorporated or organized under the laws of a
country other than the United States; and (iii) any other
entity (other than an Eligible Securities Depository) that
shall have been so qualified by exemptive order, rule or other
appropriate action of the SEC.
For purposes of clarity, it is agreed that as used in Section 5.3(a),
the term Subcustodian shall not include any Eligible Foreign Custodian
as to which Bank has not acted as Foreign Custody Manager."
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<PAGE>
Appendix 1-A
DEPOSITORIES
<PAGE>
Appendix 1-B
Information Regarding Country Risk
1. To aid Customer in its determinations regarding Country Risk, Bank
shall furnish annually and upon the initial placing of Financial Assets and cash
into a country the following information (check items applicable):
A. Opinions of local counsel concerning:
___ i. Whether applicable foreign law would restrict the access
afforded Customer's independent public accountants to books
and records kept by an eligible foreign custodian located in
that country.
___ ii. Whether applicable foreign law would restrict the
Customer's ability to recover its Financial Assets and cash in
the event of the bankruptcy of an Eligible Foreign Custodian
located in that country.
___ iii. Whether applicable foreign law would restrict the
Customer's ability to recover Financial Assets that are lost
while under the control of an Eligible Foreign Custodian
located in the country.
B. Written information concerning:
___ i. The foreseeability of expropriation, nationalization, freezes, or
confiscation of Customer's Financial Assets.
___ ii. Whether difficulties in converting Customer's cash and cash
equivalents to U.S. dollars are reasonably foreseeable.
C. A market report with respect to the following topics:
(i) securities regulatory environment, (ii) foreign ownership
restrictions, (iii) foreign exchange, (iv) securities settlement and
registration, (v) taxation, and (vi) depositories (including depository
evaluation), if any.
2. To aid Customer in monitoring Country Risk, Bank shall furnish board
the following additional information:
Market flashes, including with respect to changes in the
information in market reports.
<PAGE>
DOMESTIC AND GLOBAL
SPECIAL TERMS AND CONDITIONS RIDER
Domestic Corporate Actions and Proxies
With respect to domestic U.S. and Canadian Financial Assets (the latter if held
in The Depository Trust Company), the following provisions shall apply rather
than the pertinent provisions of Sections 2.10-2.11 of the Agreement:
Bank shall send to Customer or the Authorized Person for a Custody
Account, such proxies (signed in blank, if issued in the name of Bank's
nominee or the nominee of a central depository) and communications with
respect to Financial Assets in the Custody Account as call for voting
or relate to legal proceedings within a reasonable time after
sufficient copies are received by Bank for forwarding to its customers.
In addition, Bank shall follow coupon payments, redemptions, exchanges
or similar matters with respect to Financial Assets in the Custody
Account and advise Customer or the Authorized Person for such Account
of rights issued, tender offers or any other discretionary rights with
respect to such Financial Assets, in each case, of which Bank has
received notice from the issuer of the Financial Assets, or as to which
notice is published in publications routinely utilized by Bank for this
purpose.
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
FUND ADMINISTRATION SERVICES
FUND ACCOUNTING SERVICES
TRANSFER AGENCY SERVICES
COHEN & STEERS INSTITUTIONAL REALTY SHARES, INC.
JANUARY 1, 2000
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
<TABLE>
TABLE OF CONTENTS
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
1. Appointment..................................................................... 1
2. Representations and Warranties.................................................. 1
3. Delivery of Documents........................................................... 3
4. Services Provided............................................................... 3
5. Fees and Expenses............................................................... 4
6. Limitation of Liability and Indemnification..................................... 6
7. Term............................................................................ 9
8. Notices......................................................................... 9
9. Waiver.......................................................................... 9
10. Force Majeure.................................................................. 9
11. Amendments..................................................................... 10
12. Severability................................................................... 10
13. Governing Law................................................................... 10
Signatures......................................................................... 10
</TABLE>
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
<TABLE>
TABLE OF CONTENTS (CONTINUED)
<CAPTION>
PAGE
----
<S> <C>
Schedule A -- Fees and Expenses.................................................. A-1
Schedule B -- Fund Administration Services Description........................... B-1
Schedule C -- Fund Accounting Services Description............................... C-1
Schedule D -- Transfer Agency Services Description............................... D-1
</TABLE>
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
AGREEMENT made as of November , 1999 by and between COHEN & STEERS
INSTITUTIONAL REALTY SHARES, INC. (the "Fund"), a corporation, and CHASE GLOBAL
FUNDS SERVICES COMPANY ("Chase"), a Delaware corporation.
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to contract with Chase to provide certain
services with respect to the Fund;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Fund hereby appoints Chase to provide services for the
Fund, as described hereinafter, subject to the supervision of the Board of
Directors [Trustees] of the Fund (the "Board"), for the period and on the terms
set forth in this Agreement. Chase accepts such appointment and agrees to
furnish the services herein set forth in return for the compensation as provided
in Section 5 of and Schedule A to this Agreement.
2. REPRESENTATIONS AND WARRANTIES.
(a) Chase represents and warrants to the Fund that:
(i) Chase is a corporation, duly organized and existing under the
laws of the State of Delaware;
(ii) Chase is duly qualified to carry on its business in the
Commonwealth of Massachusetts;
(iii) Chase is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform this Agreement;
(iv) all requisite corporate proceedings have been taken to
authorize Chase to enter into and perform this Agreement;
(v) Chase has, and will continue to have, access to the facilities,
personnel and equipment required to fully perform its duties and obligations
hereunder;
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(vi) no legal or administrative proceedings have been instituted or
threatened which would impair Chase's ability to perform its duties and
obligations under this Agreement; and
(vii) Chase's entrance into this Agreement shall not cause a material
breach or be in material conflict with any other agreement or obligation of
Chase or any law or regulation applicable to Chase;
(b) The Fund represents and warrants to Chase that:
(i) the Fund is a _________ corporation [business trust],
duly organized and existing and in good standing under the laws of _________ ;
(ii) the Fund is empowered under applicable laws and by its Charter
Document and By-Laws to enter into and perform this Agreement;
(iii) all requisite proceedings have been taken to authorize the
Fund to enter into and perform this Agreement;
(iv) the Fund is an investment company properly registered under
the 1940 Act;
(v) a registration statement under the Securities Act of 1933, as
amended ("1933 Act") and the 1940 Act on Form N-1A has been filed and will be
effective and will remain effective during the term of this Agreement, and all
necessary filings under the laws of the states will have been made and will be
current during the term of this Agreement;
(vi) no legal or administrative proceedings have been instituted or
threatened which would impair the Fund's ability to perform its duties and
obligations under this Agreement;
(vii) the Fund's registration statements comply in all material
respects with the 1933 Act and the 1940 Act (including the rules and regulations
thereunder) and none of the Fund's prospectuses and/or statements of additional
information contain any untrue statement of material fact or omit to state a
material fact necessary to make the statements therein not misleading; and
(viii) the Fund's entrance into this Agreement shall not cause a
material breach or be in material conflict with any other agreement or
obligation of the Fund or any law or regulation applicable to it.
2
<PAGE>
3. DELIVERY OF DOCUMENTS. The Fund will promptly furnish to Chase such
copies, properly certified or authenticated, of contracts, documents and other
related information that Chase may request or requires to properly discharge its
duties. Such documents may include but are not limited to the following:
(a) Resolutions of the Board authorizing the appointment of Chase to
provide certain services to the Fund and approving this Agreement;
(b) The Fund's Charter Document;
(c) The Fund's By-Laws;
(d) The Fund's Notification of Registration on Form N-8A under the 1940
Act as filed with the Securities and Exchange Commission ("SEC");
(e) The Fund's registration statement including exhibits, as amended,
on Form N-1A (the "Registration Statement") under the 1933 Act and the 1940 Act,
as filed with the SEC;
(f) Copies of the Investment Advisory Agreement between the Fund and
its investment adviser (the "Advisory Agreement");
(g) Opinions of counsel and auditors' reports;
(h) The Fund's prospectus(es) and statement(s) of additional
information relating to all funds, series, portfolios and classes, as
applicable, and all amendments and supplements thereto (such Prospectus(es) and
Statement(s) of Additional Information and supplements thereto, as presently in
effect and as from time to time hereafter amended and supplemented, herein
called the "Prospectuses"); and
(i) Such other agreements as the Fund may enter into from time to
time including securities lending agreements, futures and commodities account
agreements, brokerage agreements and options agreements.
4. SERVICES PROVIDED.
(a) Chase will provide the following services subject to the control,
direction and supervision of the Board and in compliance with the objectives,
policies and limitations set forth in the Fund's Registration Statement, Charter
Document and By-Laws; applicable U.S. laws and regulations; and all resolutions
and policies implemented by the Board, of which Chase has been notified by the
Fund:
(i) Fund Administration,
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(ii) Fund Accounting, and
(iii) Transfer Agency.
A detailed description of each of the above services is contained in Schedules
B, C and D, respectively, to this Agreement.
(b) Chase will also:
(i) provide office facilities with respect to the provision of the
services contemplated herein (which may be in the offices of Chase or a
corporate affiliate of Chase);
(ii) provide the services of individuals to serve as officers of
the Fund who will be designated by Chase and elected by the Board subject to
reasonable Board approval;
(iii) provide or otherwise obtain personnel sufficient for
provision of the services contemplated herein;
(iv) furnish equipment and other materials, which are necessary or
desirable for provision of the services contemplated herein; and
(v) keep records relating to the services provided hereunder in
such form and manner as Chase may deem appropriate or advisable. To the extent
required by Section 31 of the 1940 Act and the rules thereunder, Chase agrees
that all such records prepared or maintained by Chase relating to the services
provided hereunder are the property of the Fund and will be preserved for the
periods prescribed under Rule 31a-2 under the 1940 Act, maintained at the Fund's
expense, and made available in accordance with such Section and rules.
5. FEES AND EXPENSES.
(a) As compensation for the services rendered to the Fund pursuant to
this Agreement the Fund shall pay Chase monthly fees determined as set forth in
Schedule A to this Agreement. Such fees are to be billed monthly and shall be
due and payable upon receipt of the invoice. Upon any termination of the
provision of services under this Agreement before the end of any month, the fee
for the part of the month before such termination shall be prorated according to
the proportion which such part bears to the full monthly period and shall be
payable upon the date of such termination.
(b) For the purpose of determining fees calculated as a function of the
Fund's assets, the value of the Fund's assets and net assets shall be computed
as required by its currently effective Prospectus, generally accepted accounting
principles, and resolutions of the Board.
4
<PAGE>
(c) The Fund may request additional services, additional processing, or
special reports, with such specifications and requirements documentation as may
be reasonably required by Chase. In addition, significant regulatory and legal
changes and changes in the Fund's status may necessitate additional services,
processing or reports. In either instance, if Chase elects to provide such
services or arrange for their provision, it shall be entitled to additional fees
and expenses at its customary rates and charges.
(d) Chase will bear its own expenses in connection with the performance
of the services under this Agreement except as provided herein or as agreed to
by the parties. The Fund agrees to promptly reimburse Chase for any services,
equipment or supplies ordered by or for the Fund through Chase and for any other
expenses that Chase may incur on the Fund's behalf at the Fund's request or as
consented to by the Fund. Such other expenses to be incurred in the operation of
the Fund and to be borne by the Fund, include, but are not limited to: taxes;
interest; brokerage fees and commissions; salaries and fees of officers and
directors [trustees] who are not officers, directors, shareholders or employees
of Chase, or the Fund's investment adviser or distributor; SEC and state Blue
Sky registration and qualification fees, levies, fines and other charges; EDGAR
filing fees', processing services and related fees; postage and mailing costs;
costs of share certificates; advisory and administration fees; charges and
expenses of pricing and data services, independent public accountants and
custodians; insurance premiums including fidelity bond premiums; legal expenses;
consulting fees; customary bank charges and fees; costs of maintenance of
corporate [or trust] existence; expenses of typesetting and printing of
Prospectuses for regulatory purposes and for distribution to current
shareholders of the Fund (the Fund's distributor to bear the expense of all
other printing, production, and distribution of Prospectuses, and marketing
materials); expenses of printing and production costs of shareholders' reports
and proxy statements and materials; expenses of proxy solicitation, proxy
tabulation and annual meetings; costs and expenses of Fund stationery and forms;
costs and expenses of special telephone and data lines and devices; costs
associated with corporate [or trust], shareholder, and Board meetings; trade
association dues and expenses; reprocessing costs to Chase caused by third party
errors; and any extraordinary expenses and other customary Fund expenses. In
addition, Chase may utilize one or more independent pricing services to obtain
securities prices and to act as backup to the primary pricing services, in
connection with determining the net asset values of
5
<PAGE>
the Fund. The Fund will reimburse Chase for the Fund's share of the cost of such
services based upon the actual usage, or a pro-rata estimate of the use, of the
services for the benefit of the Fund.
(e) All fees, out-of-pocket expenses, or additional charges of Chase
shall be billed on a monthly basis and shall be due and payable upon receipt of
the invoice.
(f) Chase will render, after the close of each month in which services
have been furnished, a statement reflecting all of the charges for such month.
Charges remaining unpaid after thirty (30) days shall bear interest in finance
charges equivalent to, in the aggregate, the Prime Rate (as determined by Chase)
plus two percent per year and all costs and expenses of effecting collection of
any such sums, including reasonable attorney's fees, shall be paid by the Fund
to Chase.
(g) In the event that the Fund is more than sixty (60) days delinquent
in its payments of monthly billings in connection with this Agreement (with the
exception of specific amounts which may be contested in good faith by the Fund),
this Agreement may be terminated upon thirty (30) days' written notice to the
Fund by Chase. The Fund must notify Chase in writing of any contested amounts
within thirty (30) days of receipt of a billing for such amounts. Disputed
amounts are not due and payable while they are being investigated.
6. LIMITATION OF LIABILITY AND INDEMNIFICATION.
(a) Chase shall not be liable for any error of judgment or mistake of
law or for any loss or expense suffered by the Fund or third parties, in
connection with the matters to which this Agreement relates, except for a loss
or expense solely caused by or resulting from Chase's gross negligence or
willful misconduct.
(b) Chase shall not be responsible for, and the Fund shall indemnify
and hold Chase and its directors, officers, agents and employees (collectively
the "Indemnitees") harmless from and against any and all claims, liabilities,
losses, damages, fines, penalties and expenses, including out-of-pocket and
incidental expenses and legal fees ("Losses") that may be imposed on, incurred
by, or asserted against, the Indemnitees or any of them in the performance of
its/their duties hereunder, including but not limited to those arising out of or
attributable to:
(i) any and all actions of the Indemnitees required to be taken
pursuant to this Agreement;
6
<PAGE>
(ii) the reliance on or use by the Indemnitees of information,
records, or documents which are received by the Indemnitees and furnished to it
or them by or on behalf of the Fund, and which have been prepared or maintained
by the Fund or any third party on behalf of the Fund;
(iii) the Fund's refusal or failure to comply with the terms of
this Agreement or the Fund's lack of good faith, or its actions, or lack
thereof, involving negligence or willful misfeasance;
(iv) the breach of any representation or warranty of the Fund
hereunder;
(v) the taping or other form of recording of telephone
conversations or other forms of electronic communications with investors and
shareholders, or reliance by the Indemnitees on telephone or other electronic
instructions of any person acting on behalf of a shareholder or shareholder
account for which telephone or other electronic services have been authorized;
(vi) following any instructions or other directions reasonably
believed to be requests of the Fund or otherwise duly authorized, and upon which
Chase is authorized to rely pursuant to the terms of this Agreement;
(vii) the recognition and processing by Chase of any share
certificates which are reasonably believed to bear the proper signatures of the
officers of the Fund and the proper countersignature of any transfer agent or
registrar of the Fund;
(viii) any delays, inaccuracies, errors in or omissions from
information or data provided to Chase by the Fund, its investment advisers
and/or sub-advisers, and providers of other services such as data services,
corporate action services, pricing services or securities brokerage;
(ix) the offer or sale of shares by the Fund in violation of any
requirement under the Federal securities laws or regulations or the securities
laws or regulations of any state, or in violation of any stop order or other
determination or ruling by any Federal agency or any state agency with respect
to the offer or sale of such shares in such state (1) resulting from activities,
actions, or omissions by the Fund or its other service providers and agents, or
(2) existing or arising out of activities, actions or omissions by or on behalf
of the Fund prior to the effective date of this Agreement;
7
<PAGE>
(x) any failure of the Fund's registration statement to comply with
the 1933 Act and the 1940 Act (including the rules and regulations thereunder)
and any other applicable laws, or any untrue statement of a material fact or
omission of a material fact necessary to make any statement therein not
misleading in a Fund's prospectus;
(xi) the actions taken by the Fund, its investment adviser and/or
sub-advisers, and its distributor in compliance with applicable securities, tax,
commodities and other laws, rules and regulations, or the failure to so comply;
and
(xii) all actions, inactions, omissions, or errors caused by third
parties to whom the Fund or the Indemnitees have assigned any rights and/or
delegated any duties under this Agreement at the request of or as required by
the Fund, its investment advisers, distributor, administrator or sponsor.
(c) In addition to and not in limitation of paragraph (b) immediately
above, the Fund also agrees to indemnify and hold the Indemnitees and each of
them harmless from and against any and all Losses that may be imposed on,
incurred by, or asserted against, the Indemnitees or any of them in connection
with or arising out of Chase's performance under this Agreement, provided the
Indemnitees have not acted with gross negligence or engaged in willful
misconduct.
(d) In performing its services hereunder, Chase shall be entitled to
rely on any oral or written instructions, notices or other communications,
including electronic transmissions, from the Fund and its custodians, officers
and directors, investment advisers and sub-advisers, investors, agents and other
service providers which Chase reasonably believes to be genuine, valid and
authorized. Chase shall also be entitled to consult with and rely on the advice
and opinions of outside legal counsel and public accountants retained by the
Fund, as necessary or appropriate.
(e) Anything in this agreement to the contrary notwithstanding, in no
event shall Chase be liable for any indirect, incidental, special or
consequential losses or damages of any kind whatsoever (including but not
limited to lost profits), even if Chase has been advised of the likelihood of
such loss or damage and regardless of the form of action in which any such loss
or damage may be claimed. This provision shall survive the termination of this
Agreement.
7. TERM. This Agreement shall become effective on the date first
hereinabove written and may be modified or amended from time to time by mutual
agreement between the parties
8
<PAGE>
hereto. The Agreement shall continue in effect unless terminated by either party
on 180 days' prior written notice. Upon termination of this Agreement, the Fund
shall pay to Chase such compensation and any out-of-pocket or other reimbursable
expenses which may become due or payable under the terms hereof as of the date
of termination or after the date that the provision of services ceases,
whichever is later. In the event of late payment or non-payment, Chase shall
have the right to retain the records of the Fund until all fees and monies due
Chase are paid.
8. NOTICES. Any notice required or permitted hereunder shall be in writing
and shall be deemed effective on the date of personal delivery (by private
messenger, courier service or otherwise) or upon confirmed receipt of telex or
facsimile, whichever occurs first, or upon receipt if by mail to the parties at
the following address (or such other address as a party may specify by notice to
the other):
If to the Fund:
Cohen & Steers Institutional Realty Shares, Inc.
757 3rd Avenue
New York, NY 10017
Attention:
Fax:
If to Chase:
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108
Attention:
Fax:
9. WAIVER. The failure of a party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver nor
shall it deprive such party of the right thereafter to insist upon strict
adherence to that term or any term of this Agreement. Any waiver must be in
writing signed by the waiving party.
10. FORCE MAJEURE. Chase shall not be responsible or liable for any harm,
loss or damage suffered by the Fund, its investors, or other third parties or
for any failure or delay in performance of Chase's obligations under this
Agreement arising out of or caused, directly or indirectly, by circumstances
beyond Chase's control. In the event of a force majeure, any
9
<PAGE>
resulting harm, loss, damage, failure or delay by Chase will not give the Fund
the right to terminate this Agreement.
11. AMENDMENTS. This Agreement may be modified or amended from time to
time by mutual written agreement between the parties. No provision of this
Agreement may be changed, discharged, or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, discharge or termination is sought.
12. SEVERABILITY. If any provision of this Agreement is invalid or
unenforceable, the balance of the Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance it shall nevertheless
remain applicable to all other persons and circumstances.
13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE SUBSTANTIVE
LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first written above.
COHEN & STEERS INSTITUTIONAL
REALTY SHARES, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
CHASE GLOBAL FUNDS
SERVICES COMPANY
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
10
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE A
FEES AND EXPENSES
FUND ACCOUNTING AND ACCOUNTING FEES
A. For the services rendered under this Agreement, the Fund shall pay
to the Administrator an annual fee based on the following schedule:
_______ of 1% on the first $ _______ million in total assets, plus
_______ of 1% on the first $ _______ million in total assets, plus
_______ of 1% of the total assets in excess of $1 billion.
B. The foregoing calculation is based on the average daily net assets
of the Fund. The fees will be computed, billed and payable monthly.
The minimum charge per year for the Fund will not be less than _____
of 1% of average daily net assets.
C. Out-of-pocket expenses will be computed, billed and payable monthly.
TRANSFER AGENCY FEES
A. $ __________ per account.
B. Out-of-pocket expenses and customary bank charges and offsets and
customized systems and technology charges, which will be computed,
billed and payable monthly
A-1
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE B
GENERAL DESCRIPTION OF FUND ADMINISTRATION
AND COMPLIANCE SERVICES
Chase's Fund Administration and Compliance Services are designed and intended to
address the Fund's routine financial and tax reporting, portfolio compliance and
general administration needs. Chase will work closely with the Fund's experts,
such as its public accountants and legal counsel, with respect to these
services.
I. ROUTINE FINANCIAL REPORTING SERVICES
A. Semi-annual and annual reports. Prepare for review and approval by
Fund's officers, financial information for the Fund's semi-annual
reports, annual reports and financial statements for routine
prospectus updates.
B. Regular N-SAR filings. Prepare for review and approval by Fund's
officers, Form N-SAR. Upon approval of the N-SAR by the Fund's
adviser and officers, Chase will file Form N-SAR with the SEC.
C. 24f-2 Notices. Prepare and file with the SEC the annual Rule 24f-2
Notice, upon approval by Fund officers.
D. EDGAR filings. Prepare for review and approval by Fund's officers,
the electronic filing copies (via the SEC's electronic filing system
("EDGAR")) of the Fund's semi-annual and annual reports, financial
data schedules, and Form N-SAR. The Fund will bear the costs of
filing and of formatting ("EDGARizing") all financial statements and
documents for filing.
II. ROUTINE TAX SERVICES
A. Tax filings. Working with the Fund's independent public accountants
or other professionals, assist with the preparation and filing of
(1) the Fund's Federal tax returns on Form 1120 RIC and Form 8613
and (2) such state and local returns as directed by the Fund.
B. 1099-MISC. Provide Form 1099-MISC to persons other than corporations
(i.e., Trustees) to whom the Fund paid more than $600 during the
year.
C. Supplementary tax information. Prepare for review by the Fund's
officers, supplementary information for shareholders' tax purposes
as directed by the Fund.
III. ROUTINE COMPLIANCE
B-1
<PAGE>
Chase will provide assistance to the Fund and its investment adviser with
respect to compliance with federal tax and securities laws. Responsibility for
such compliance services are subject to the development of a more precise
allocation of duties and responsibilities between Chase, the adviser and other
relevant service providers. In addition, Chase's provision of compliance
services is designed to assist the Fund and its adviser but is not intended as
an assumption by Chase of the adviser's fiduciary duties and legal
responsibilities to the Fund.
A. Portfolio compliance. Monitor and periodically test the Fund's
compliance with such investment restrictions and other
regulatory requirements, as may be agreed to between the
adviser, Chase and the Fund (e.g., issuer or industry
diversification, etc.).
B. Tax compliance. Monitor and periodically test, including on
required quarterly testing dates, the Fund's compliance with
the requirements of Section 851 of the Internal Revenue Code
and applicable Treasury Regulations for qualification as a
regulated investment company.
C. Policies and procedures compliance. Assist the investment
adviser with monitoring its compliance with Fund Board
directives, such as "Approved Issuers Listings for Repurchase
Agreements", Rule 17a-7, Rule 17e-1 and Rule 12d3-1
procedures.
IV. REGULATORY AFFAIRS AND CORPORATE GOVERNANCE
A. Prospectus/SAI updates. Prepare and file post-effective
amendments to the Fund's registration statement for annual
prospectus update purposes; prepare and file prospectus
stickers or supplements with respect to routine items for
existing Portfolios.
B. Board materials. Prepare agenda, minutes of prior Fund Board
meetings, collect background information and prepare all
routine Board materials for regular quarterly Board meetings
and distribute such materials to all necessary parties.
C. Corporate calendar. Maintain general corporate calendar of
Board meetings and routine SEC filings.
V. GENERAL ADMINISTRATION
A. Board materials. Prepare or compile performance and expense
information, financial reports, and compliance data and
information for inclusion in the Fund's regular quarterly
Board meeting materials.
B-2
<PAGE>
B. Dividend distributions. Calculate dividend distributions in
accordance with distribution policies detailed in the Fund's
prospectuses or Board resolutions. Assist Fund management in
making final determinations of distribution amounts.
C. Expense accruals. Prepare Fund, portfolio or class expense
projections, establish accruals and review on a periodic
basis, including expenses based on a percentage of average
daily net assets (e.g., management, advisory and
administrative fees) and expenses based on actual charges
annualized and accrued daily (audit fees, registration fees,
directors' fees, etc.).
D. Expense payments. Arrange, if directed by the appropriate Fund
officers, for the payment of the Fund's and each Portfolio's
or class' expenses.
E. Reports to statistical service providers. Report Fund
performance to outside statistical service providers as
directed by Fund management.
F. SEC examinations. Provide support and coordinate
communications and data collection, of records and documents
held by Chase on the Fund's behalf, with respect to routine
SEC regulatory examinations of the Fund.
G. Non-executive officers. Furnish appropriate non-executive
officers for the Fund, such as assistant treasurers and
secretaries.
B-3
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE C
DESCRIPTION OF FUND ACCOUNTING SERVICES
Chase shall provide the following accounting services to the Fund:
A. Maintenance of the books and records for the Fund's assets,
including records of all securities transactions.
B. Calculation of each funds', portfolios' or classes' Net Asset
Value in accordance with the Prospectus, and after the fund,
portfolio or class meets eligibility requirements, transmission to
NASDAQ and to such other entities as directed by the Fund.
C. Accounting for dividends and interest received and distributions
made by the Fund.
D. Coordinate with the Fund's independent auditors with respect to
the annual audit, and as otherwise requested by the Fund.
E. As mutually agreed upon, Chase will provide domestic and/or
international reports.
F. Calculation of "SEC Yield" (See Appendix 1).
C-1
<PAGE>
MUTUAL FUNDS SERVICE AGREEMENT
SCHEDULE D
DESCRIPTION OF TRANSFER AGENCY SERVICES
The following is a general description of the transfer agency services Chase
will provide to the Fund.
A. SHAREHOLDER RECORDKEEPING. Maintain records showing for each Fund
shareholder the following: (i) name, address, appropriate tax
certification and tax identifying number; (ii) number of shares of
each fund, portfolio or class; (iii) historical information
including, but not limited to, dividends paid, date and price of
all transactions including individual purchases and redemptions,
based upon appropriate supporting documents; and (iv) any dividend
reinvestment order, application, specific address, payment and
processing instructions and correspondence relating to the current
maintenance of the account.
B. SHAREHOLDER ISSUANCE. Record the issuance of shares of each fund,
portfolio or class. Except as specifically agreed in writing between
Chase and the Fund, Chase shall have no obligation when
countersigning and issuing and/or crediting shares to take
cognizance of any other laws relating to the issue and sale of such
shares except insofar as policies and procedures of the Stock
Transfer Association recognize such laws.
C. TRANSFER, PURCHASE AND REDEMPTION ORDERS. Process all orders for the
transfer, purchase and redemption of shares of the Fund in
accordance with the Fund's current prospectus and customary transfer
agency policies and procedures, including electronic transmissions
which the Fund acknowledges it has authorized, or in accordance with
any instructions of the Fund or its agents which Chase reasonably
believes to be authorized.
D. SHAREHOLDER COMMUNICATIONS. Transmit all communications by the Fund
to its shareholders promptly following the delivery by the Fund of
the material to be transmitted by mail, telephone, courier service
or electronically.
E. PROXY MATERIALS. Assist with the mailing or transmission of proxy
materials, tabulating votes, and compiling and certifying voting
results.
F. SHARE CERTIFICATES. If permitted by Fund policies, and if a
shareholder of the Fund requests a certificate representing shares,
Chase as Transfer Agent, will countersign and mail a share
certificate to the investor at his/her address as it appears on the
Fund's shareholder records.
G. RETURNED CHECKS. In the event that any check or other negotiable
instrument for the payment of shares is returned unpaid for any
reason, Chase will take such steps, as
D-1
<PAGE>
Chase may, in its discretion, deem appropriate and notify the Fund
of such action. However, the Fund remains ultimately liable for any
returned checks or negotiable instruments of its shareholders.
H. SHAREHOLDER CORRESPONDENCE. Acknowledge all correspondence from
shareholders relating to their share accounts and undertake such
other shareholder correspondence as may from time to time be
mutually agreed upon.
I. TAX REPORTING. Chase shall issue appropriate shareholder tax forms
as required.
J. DIVIDEND DISBURSING. Chase will prepare and mail checks, place wire
transfers or credit income and capital gain payments to
shareholders. The Fund will advise Chase of the declaration of any
dividend or distribution and the record and payable date thereof at
least five (5) days prior to the record date. Chase will, on or
before the payment date of any such dividend or distribution, notify
the Fund's Custodian of the estimated amount required to pay any
portion of such dividend or distribution payable in cash, and on or
before the payment date of such distribution, the Fund will instruct
its Custodian to make available to Chase sufficient funds for the
cash amount to be paid out. If a shareholder is entitled to receive
additional shares by virtue of any such distribution or dividend,
appropriate credits will be made to each shareholder's account.
K. ESCHEATMENT. Chase shall provide escheatment services only with
respect to the escheatment laws of the Commonwealth of
Massachusetts, including those which relate to reciprocal agreements
with other states.
L. TELEPHONE SERVICES. Chase will provide staff coverage, training and
supervision in connection with the Fund's telephone line for
shareholder inquiries, and will respond to inquiries concerning
shareholder records, transactions processed by Chase, procedures to
effect the shareholder records and inquiries of a general nature
relative to shareholder services. All other telephone calls will be
referred to the Fund, as appropriate.
D-2
<PAGE>
Appendix 1
SEC YIELD COMPUTATION [MAY ALSO BE USED FOR ANY COMPLEX OR UNUSUAL
ITEM REQUESTED BY CLIENTS]
L. (1) Chase shall compute the yield, or tax equivalent yield, for the
Fund for the periods of time as agreed to by the parties;
(2) Chase shall have no responsibility to review, confirm or
otherwise assume any duty with respect to the accuracy or
correctness of any data, including but not limited to security
attributes, pricing data, and tax equivalent data, supplied to it by
the Fund, any of the Fund's agents including the investment adviser,
or by third party providers. Chase is entitled to rely on
information or data provided to it by the Fund's agents or
investment advisers, or by third party providers and will not be
liable for any loss or expense suffered by the Fund caused by such
reliance;
(3) The Fund shall provide, from time to time as may be appropriate,
and Chase shall be entitled to rely on, the written standards and
guidelines to be followed by Chase in interpreting and applying the
computation methods set forth in the SEC Releases, industry
standards and regulatory guidelines regarding yield as they
specifically apply to the Fund, as well as information relating to
any and all of the Fund's assets. The Fund shall keep Chase informed
of all publicly available information and of any non-public advice
or information obtained by the Fund from its accountants, its
personnel or its investment adviser related to industry standards,
or regulatory guidelines regarding the computations to be undertaken
by Chase pursuant to this Agreement and Chase shall not be charged
with knowledge of such information unless it has been furnished to
Chase in writing; and
[use only if executed independently of main contract]
(4) The Fund shall indemnify Chase for any expenses, assessments,
claims or liabilities which it may incur in connection with this
Amendment, except as may arise from Chase's gross negligence, bad
faith or willful misconduct. In no event shall Chase be liable for
any indirect, incidental, special or consequential loss or damage of
any kind whatsoever (including but not limited to lost profits),
even if Chase has been advised of the likelihood of such loss or
damage and regardless of the form of action.
CHASE GLOBAL FUNDS SERVICES COHEN & STEERS INSTITUTIONAL
COMPANY REALTY SHARES, INC.
By: By:
-------------------------- ----------------------------------
<PAGE>
APPENDIX 2
AUTHORIZED PERSONNEL
The following personnel are authorized to give written or oral
instructions to Chase, subject to the provisions of Section 6(b)(vi):
1.
2.
3.
4.
5.
It is the sole responsibility of the Fund to notify Chase of any
changes to this list in writing.
CHASE GLOBAL FUNDS SERVICES COHEN & STEERS INSTITUTIONAL
COMPANY REALTY SHARES, INC.
By: By:
---------------------------- -----------------------------
<PAGE>
[SIMPSON THACHER & BARTLETT LETTERHEAD]
January 11, 2000
Re: Cohen & Steers Institutional Realty Shares, Inc.
Registration Statement on Form N-1A
(File Nos. 333-89183;811-09631)
------------------------------
Cohen & Steers Institutional
Realty Shares, Inc.
757 Third Avenue
New York, New York 10017
Ladies and Gentlemen:
We have acted as counsel to Cohen & Steers Institutional Realty Shares,
Inc. (the "Fund") in connection with the preparation of a Registration Statement
on Form N-1A (the "Registration Statement") filed by the Fund under the
Securities Act of 1933 and the Investment Company Act of 1940, both as amended,
relating to the offer and sale of an unlimited number of shares of Common Stock
of the Fund, par value $.001 per share (the "Shares").
We have examined the Prospectus included in the Registration Statement
(the "Prospectus"), the Registration Statement and such corporate records,
documents and other instruments and such certificates of officers of the Fund,
and have made such other and further investigations as we have deemed relevant
and necessary as a basis for the opinion hereinafter set forth.
COLUMBUS LOS ANGELES PALO ALTO
LONDON HONG KONG TOKYO SINGAPORE
<PAGE>
SIMPSON THACHER & BARTLETT
Cohen & Steers Institutional
Realty Shares, Inc. -2- January 11, 2000
In such examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such latter documents.
Based on the foregoing, and subject to the qualifications and
limitations stated herein, we are of the opinion that:
1. The Fund is duly organized and validly existing as a corporation and
in good standing under the laws of the State of Maryland.
2. The Shares to be offered for sale pursuant to the Prospectus are, to
the extent of the number of Shares authorized in the Fund's Charter, duly
authorized and, when sold, issued and paid for as contemplated by the
Prospectus, will have been validly and legally issued and will be fully paid and
nonassessable.
We are members of the Bar of the State of New York and we do not express
any opinion herein concerning any law other than the law of the State of New
York and the federal law of the United States. Accordingly, in rendering the
foregoing opinion, we have relied upon the opinion of Venable, Baetjer and
Howard, LLP, a copy of which is attached hereto, with respect to matters
governed by the laws of the State of Maryland, and the foregoing opinion is
subject to the qualifications and exceptions described therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Counsel and
<PAGE>
SIMPSON THACHER & BARTLETT
Cohen & Steers Institutional
Realty Shares, Inc. -3- January 11, 2000
Independent Accountants" in the Statement of Additional Information forming a
part of the Registration Statement.
This opinion letter in rendered to you in connection with the above
described Registration Statement. This opinion letter may not be relied upon by
you for any other purpose, or relied upon by, or furnished to, any other person,
form or corporation without our prior written consent.
Very truly yours,
SIMPSON THACHER & BARTLETT
<PAGE>
January 11, 2000
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3909
Re: Cohen & Steers Institutional Realty Shares, Inc.
------------------------------------------------
Ladies and Gentlemen:
We have acted as special Maryland counsel for Cohen & Steers
Institutional Realty Shares, Inc., a Maryland corporation (the "Fund"), in
connection with the organization of the Fund and the issuance of shares of its
Common Stock, par value $.001 (the "Shares").
As special Maryland counsel for the Fund, we are familiar with its
Charter and Bylaws. We have examined the Prospectus included in its Registration
Statement on Form N-1A, File Nos. 333-89183; 811-09631 (the "Registration
Statement"), substantially in the form in which it is to become effective (the
"Prospectus"). We have further examined and relied upon a certificate of the
Maryland State Department of Assessments and Taxation to the effect that the
Fund is duly incorporated and existing under the laws of the State of Maryland
and is in good standing and duly authorized to transact business in the State of
Maryland.
We have also examined and relied upon such corporate records of the Fund
and other documents and certificates with respect to factual matters as we have
deemed necessary to render the opinion expressed herein. We have assumed,
without independent verification, the genuineness of all signatures on documents
submitted to us, the authenticity of all documents submitted to us as originals,
and the conformity with originals of all documents submitted to us as copies.
<PAGE>
Simpson Thacher & Bartlett
January 11, 2000
Page 2
Based on such examination, we are of the opinion that:
1. The Fund is duly organized and validly existing as a corporation in
good standing under the laws of the State of Maryland.
2. The Shares to be offered for sale pursuant to the Prospectus are, to
the extent of the number of Shares authorized in the Fund's Charter,
duly authorized and, when sold, issued and paid for as contemplated
by the Prospectus, will have been validly and legally issued and will
be fully paid and nonassessable under the laws of the State of
Maryland.
This letter expresses our opinion with respect to the Maryland General
Corporation Law. It does not extend to the securities or "blue sky" laws of
Maryland, to federal securities laws or to other laws.
You may rely on this opinion in rendering your opinion to the Fund that
is to be filed as an exhibit to the Registration Statement. We consent to the
filing of this opinion as an exhibit to the Registration Statement. We do not
thereby admit that we are "experts" within the meaning of the Securities Act of
1933 and the regulations thereunder. This opinion may not be relied upon by any
other person or for any other purpose without our prior written consent.
Very truly yours,
Venable, Baetjer and Howard,LLP
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form N-1A of our
report dated January 12, 2000, relating to the financial statement of Cohen &
Steers Institutional Realty Shares, Inc., which appears in such Registration
Statement. We also consent to the reference to our Firm under the caption
"Counsel and Independent Accountants" in such Registration Statement.
PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
New York, New York
January 12, 2000
<PAGE>
Cohen & Steers Institutional Realty Shares, Inc.
757 Third Avenue
New York, New York 10017
January 5, 2000
Cohen & Steers Capital Management, Inc.
757 Third Avenue
New York, New York 10017
Dear Sirs:
Cohen & Steers Institutional Realty Shares, Inc. (the "Fund") hereby
accepts your offer to purchase 4,000 shares at a price of $25.00 per share for
an aggregate purchase price of $100,000. This agreement is subject to the
understanding that you have no present intention of selling or redeeming the
shares so acquired.
Sincerely,
Cohen & Steers Institutional Realty
Shares, Inc.
By:
-------------------------------
Accepted:
Cohen & Steers Capital Management, Inc.
By:
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