As filed with the Securities and Exchange Commission on July 23, 1996
Registration Nos. 33-90762
811-9016
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No. -----
Post-Effective Amendment No. 2 X
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REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X
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Amendment No. 3
RREEF SECURITIES FUND, INC.
(Exact name of Registrant as Specified in Charter)
650 California Street, San Francisco, CA 94108
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (415) 781-3300
Arthur Don
D'Ancona & Pflaum
30 North LaSalle Street
Chicago, Illinois 60602
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b)
X on August 1, 1996 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.
The Registrant has registered an indefinite amount of shares under the
Securities Act of 1933, pursuant to Rule 24f-2 (a)(1) under the Investment
Company Act of 1940. Registrant's Rule 24f-2 Notice for the fiscal year ended
October 31, 1995 was filed on January 5, 1996.
<PAGE>
FORM N-1A
RREEF SECURITIES FUND, INC.
REGISTRATION STATEMENT NO. 33-90762 UNDER THE
SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 2
AND REGISTRATION STATEMENT NO. 811-9016 UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 3
CROSS REFERENCE SHEET
N-1A
ITEM NO. Prospectus Caption or Placement
1 Front Cover
2 Fees and Expenses
3 Financial Highlights
4 Investment Objective and Policies; The Fund
5 Management of the Fund
6 The Fund; Certain Shareholders of the Fund;
Shareholder Inquiries; Dividends,
Distributions and Taxes
7 How to Purchase Shares; Calculation of Net
Asset Value
8 How to Redeem Shares
9 (Not Applicable)
Part B Caption or Placement
10 Cover Page
11 Table of Contents
12 (Not Applicable)
13 Fundamental Investment Restrictions;
Non-Fundamental Investment Restrictions and
Other Policies; Additional Information
Concerning Certain Investment Techniques;
See also Prospectus - Portfolio Transactions
14 Management of the Fund
15 Control Persons and Principal Holders of
Securities; See also Prospectus-Certain
Shareholders of the Fund
16 Investment Advisory Services; Custodian;
Legal Counsel and Auditors
17 Portfolio Transactions
18 See Prospectus-The Fund
19 In Kind Purchases of Shares of the Fund;
Additional Information on Redemptions; See
<PAGE>
Part B Caption or Placement (Cont'd)
also Prospectus - Calculation of Net Asset
Value
20 Additional Information on Tax Issues; See
also Prospectus-Dividends, Distributions and
Taxes
21 (Not Applicable)
22 Calculation of Performance Data
23 Financial Statements
<PAGE>
RREEF
REAL ESTATE
SECURITIES FUND
PROSPECTUS AUGUST 1, 1996
RREEF
The RREEF Funds
650 California Street
San Francisco, California 94108
(800) 909-9234 (415) 781-3300
RREEF Real Estate Securities Fund (the "Fund") is a series of RREEF Securities
Fund, Inc. (the "Company") which is a non-diversified, open-end management
investment company. The Fund's primary objective is long-term capital
appreciation. Current income is a secondary objective. The Fund seeks to achieve
its objective by investing primarily in securities issued by Real Estate
Investment Trusts ("REITs").
The minimum initial investment in the Fund is $50,000. The Fund is 100% no-load.
There are no sales charges and no 12b-1 marketing fees.
The Fund's investment portfolio is managed by RREEF Real Estate Securities
Advisers L.P. (the "Adviser").
This prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. Please read this prospectus
and retain it for future reference. A Statement of Additional Information dated
August 1, 1996 has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. A copy of the Statement of Additional
Information may be obtained without charge by writing to or calling the Fund at
the above address or telephone number.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
PAGE
Fees and Expenses 3
Financial Highlights 4
Investment Objectives and Policies 5
Calculation of Net Asset Value 9
Dividends, Distributions and Taxes 10
The Fund 12
Mangement of the Fund 12
How to Purchase Shares 13
How to Redeem Shares 15
Performance Information 16
Shareholder Inquiries 17
<PAGE>
FEES AND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load None
Redemption Fee 1.00%(1)
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees(2)(3) 0.75%
12b-1 Fees None
Other Expenses (after expense reimbursement)(3) 0.25%
Total Fund Operating Expenses (after expense reimbursement)(3) 1.00%
(1) A redemption fee of 1.00% of the amount redeemed, payable to the Fund, will
be charged on all redemptions within one year of purchase, except
redemptions from individual account retirement plans (including 401(k)
plans, cash or deferred profit sharing plans, stock bonus plans, money
purchase pension plans, ESOPs investing in non-employer securities and
403(b) annuity plans) (hereinafter "Individual Account Retirement Plans").
(2) Management Fees are reduced with respect to net assets of the Fund in
excess of $100 million. See "Management of the Fund".
(3) This information is based on estimated amounts for the Fund's current
fiscal year. RREEF Real Estate Securities Advisers L.P. (the "Adviser") has
voluntarily agreed to absorb certain Fund operating expenses, or waive a
portion of its management fee, through at least the end of the fiscal year
ended October 31, 1996 to the extent the Total Fund Operating Expenses, as
a percentage of net assets, exceed 1.00%. Absent any expense reimbursement
or fee waiver, it is estimated that "Other Expenses" would be 7.31% of
average net assets and that "Total Fund Operating Expenses" would be 8.06%
of average net assets.
This table is intended to assist you in understanding the various costs and
expenses that an investor in the Fund will bear directly or indirectly. THE 5%
ANNUAL RATE OF RETURN USED IN THE EXAMPLE BELOW IS ONLY FOR ILLUSTRATION AND IS
NOT INTENDED TO BE INDICATIVE OF THE FUTURE PERFORMANCE OF THE FUND, WHICH MAY
BE MORE OR LESS THAN THE ASSUMED RATE. FUTURE EXPENSES MAY BE MORE OR LESS THAN
THOSE SHOWN. You can refer to the section "How to Purchase Shares" and
"Management of the Fund" for more information on transaction and operating
expenses of the Fund.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each period:
1 YEAR 3 YEARS
$10 $32
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial information for the six months ended April 30, 1996 is
unaudited. The financial information for the period September 21, 1995
(commencement of operations) to the Company's fiscal year ended October 31, 1995
is derived from the Company's audited financial statements included in the
Company's Annual Report. The financial statements and report of Deloitte &
Touche L.L.P., independent accountants, included in the Annual Report are
incorporated by reference into this prospectus. The following data should be
read in conjunction with such financial statements. The Annual Report is
available without charge and upon request by calling 800-909-9234 or
415-781-3300.
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Six Months Ended
April 30, 1996 Period Ended
(Unaudited) October 31, 1995 *
--------------- ------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.82 $ 10.00
-------- --------
Income from investment operations:
Net investment income 0.27 0.07
Net realized and unrealized gain/loss on investments 0.83 (0.25)
-------- --------
Total from investment operations 1.10 (0.18)
-------- --------
Less distributions to shareholders from:
Net investment income (0.13) -
Net realized gains - -
-------- --------
Total distributions to shareholders (0.13) -
-------- --------
NET ASSET VALUE, END OF PERIOD $ 10.79 $9.82
========= =========
AGGREGATE TOTAL RETURN 11.26% (1.80%)
RATIOS/SUPPLEMENTAL DATA:
Net expenses as a percentage of
average net assets 1.00% ** 1.50% **
Net investment income as a percentage of
average net assets 5.96% ** 6.66% **
Portfolio turnover rate 36% 0%
Average broker commission rate $ 0.0560 N/A
Net assets, end of period (000's) $ 4,881 $2,983
The Adviser has voluntarily agreed to waive its management fee and reimburse
certain expenses incurred by the Fund. The Custodian has offset part of its fees
for balance credits given to the Fund. Without these waivers and offset of fees
and reimbursement of expenses, the ratios of expenses and net income as a
percentage of average net assets would have been:
Net expenses as a percentage of average net assets 8.06% ** 14.83% **
Net investment income as a percentage of average net assets (1.10%) ** (6.67%)**
- -----------------------------------------------------------
* The Fund commenced operations on September 21, 1995.
** Annualized
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Fund's primary investment objective is long-term capital appreciation.
Current income is a secondary consideration. The Fund seeks to achieve its
objective by investing primarily in securities issued by Real Estate Investment
Trusts ("REITs"). In addition, the Fund may invest in the securities of
companies which are principally engaged in the real estate industry. There can
be no assurance that the Fund will achieve its objective.
Under normal conditions, the Fund will invest not less than 65% of its total
assets in equity securities of companies which are principally engaged in the
real estate industry. Equity securities include common stock, preferred stock
and securities convertible into common stock. A company will be considered to be
"principally engaged in the real estate industry" if, in the opinion of RREEF
Real Estate Securities Advisers L.P., the Fund's investment adviser (the
"Adviser"), at the time its securities are purchased by the Fund, at least 50%
of its revenues or at least 50% of the market value of its assets is
attributable to the ownership, construction, management or sale of residential,
commercial or industrial real estate. Companies principally engaged in the real
estate industry may include, among others, equity REITs and real estate master
limited partnerships, mortgage REITs, and real estate brokers and developers.
The specific risks of investing in companies principally engaged in the real
estate industry are summarized below under the heading "Investment
Considerations and Risks."
The Fund may also invest up to 35% of its total assets in other securities.
Other securities may include debt securities and equity securities of companies
not principally engaged in the real estate industry. See "Debt Securities."
Since inception, the Fund has invested in excess of 95% of its net assets in
real estate securities, exclusive of cash equivalent investments.
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 it complies with various requirements relating to
its organization, ownership, assets and income and with the requirement that it
distribute to its shareholders at least 95% of its taxable income (other than
net capital gains) for each taxable year. 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 property that has
appreciated in value. Mortgage REITs invest the majority of their assets in real
estate mortgages and derive their income primarily from interest payments.
Hybrid REITs combine the characteristics of both equity REITs and mortgage
REITs.
Debt Securities. The Fund may invest in fixed income securities for income or as
a defensive strategy when the Adviser believes adverse economic or market
conditions exist. As a temporary defensive strategy, the Adviser may invest part
or all of the Fund's assets in debt securities. The value of fixed income
securities is sensitive to interest rate changes as well as the financial
strength of the debtor. When interest rates go down, debt securities in the
portfolio tend to appreciate in value. Conversely, when interest rates go up,
such securities tend to depreciate in value. Generally, the debt securities in
which the Fund may invest are investment grade securities. These are securities
rated in the four highest grades assigned by Moody's Investors Service, Inc. or
Standard and Poor's Corporation or that are unrated but deemed to be of
comparable quality by the Adviser. The lowest of these grades has speculative
characteristics; changes in economic conditions or other circumstances are more
likely to lead to a weakened capacity to make principal and interest payments.
The Fund may invest in securities below investment grade (so called "junk
bonds") although the Fund will not
<PAGE>
purchase such bonds if such investment would cause more than 5% of its net
assets to be so invested. Such bonds are considered speculative. In the event of
a downgrade of a debt security held by the Fund to below investment grade, the
Fund is not usually required to sell the issue, but the Adviser will consider
this in determining whether to hold the security. However, if such a downgrade
would cause more than 5% of net assets to be invested in debt securities below
investment grade, sales will be made as soon as practicable to reduce the
proportion of debt below investment grade to 5% of net assets or less. When the
Adviser believes that economic or market conditions require a more defensive
strategy, the Fund's assets may be invested without limitation in cash or cash
equivalents such as obligations issued or guaranteed by the U.S. Government, its
agencies and/or instrumentalities ("U.S. Government Securities") or high quality
money market instruments such as notes, certificates of deposit or bankers'
acceptances.
Diversification. The Fund is classified as a "non-diversified" investment
company under the Investment Company Act of 1940 (the "1940 Act"), which means
the Fund is not limited by the 1940 Act in the proportion of its assets that may
be invested in the securities of a single issuer. However, the Fund intends to
conduct its operations so as to qualify as a regulated investment company for
purposes of the Internal Revenue Code, so that it will not be subject to U.S.
federal income tax on income and capital gain distributions to shareholders. See
"Dividends, Distributions and Taxes." To so qualify, among other requirements,
the Fund will limit its investments so that, at the close of each quarter of the
taxable year, (i) not more than 25% of the market value of the Fund's total
assets will be invested in the securities of a single issuer, and (ii) with
respect to 50% of the market value of its total assets, not more than 5% of the
market value of its total assets will be invested in the securities of a single
issuer and the Fund will not own more than 10% of the outstanding voting
securities of a single issuer. The Fund's investments in U.S. Government
Securities are not subject to these limitations.
Restricted and Illiquid Securities. The Fund may invest in restricted
securities, i.e., securities which, if sold, would cause the Fund to be deemed
an "underwriter" under the Securities Act of 1933 or which are subject to
contractual restrictions on resale. The Fund will not purchase or hold illiquid
securities (which may include restricted securities) if more than 15% of the
Fund's net assets would then be illiquid. If at any time more than 15% of the
Fund's net assets are illiquid, sales will be made as soon as practicable to
reduce the percentage of illiquid assets to 15% or less.
Restricted securities which the Fund may purchase include securities which have
not been registered under the Securities Act of 1933 (the "1933 Act") but are
eligible for purchase and sale pursuant to Rule 144A ("Rule 144A Securities").
This Rule permits certain qualified institutional buyers, such as the Fund, to
trade in privately placed securities even though such securities are not
registered under the 1933 Act. The Adviser, under criteria established by the
Fund's Board of Directors, will consider whether Rule 144A Securities being
purchased or held by the Fund are illiquid and thus subject to the Fund's policy
that it will not make an investment causing more than 15% of its net assets to
be invested in illiquid securities. In making this determination, the Adviser
will consider the frequency of trades and quotes, the number of dealers and
potential purchasers, dealer undertakings to make a market, and the nature of
the security and the market place trades (for example, the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
transfer). The liquidity of Rule 144A Securities held by the Fund
<PAGE>
will also be monitored by the Adviser and, if as a result of changed conditions,
it is determined that a Rule 144A Security is no longer liquid, the Fund's
holding of illiquid securities will be reviewed to determine what, if any,
action is required in light of the Fund's policy limiting investments in such
securities. Investing in Rule 144A Securities could have the effect of
increasing the amount of investments in illiquid securities if qualified
institutional buyers are unwilling to purchase such securities.
Borrowing. The Fund's investment restrictions allow the Fund to borrow money,
for any reason, in amounts up to 33 1/3% of the value of the Fund's total assets
at the time of borrowing. However, as a matter of operating policy, the Fund
will not borrow money except from banks for temporary or emergency purposes (to
facilitate orderly redemption of its shares while avoiding untimely disposition
of portfolio holdings). Further, the Fund may not (i) borrow money in excess of
10% of the value of its total assets (excluding the amount borrowed), at the
time of the borrowing or (ii) mortgage, pledge or hypothecate any assets except
to secure permitted borrowings and then only in an amount not in excess of 15%
of the value of its total assets (excluding the amount borrowed) at the time of
such borrowings. The Fund will not purchase securities while any borrowing
exceeds 5% of total assets. The Fund's operating policies with respect to
borrowing may be changed by vote of the Board of Directors without a shareholder
vote.
Repurchase Agreements. The Fund may enter into repurchase agreements, but
normally will not enter into repurchase agreements maturing in more than seven
days. A repurchase agreement involves a sale of securities to the Fund with the
concurrent agreement of the seller (a member bank of the Federal Reserve System
or securities dealer which the Adviser determines to be financially sound at the
time of the transaction) to repurchase the securities at the same price plus an
amount equal to accrued interest at an agreed-upon interest rate, within a
specified time, usually less than one week, but, on occasion, at a later time.
The repurchase obligation of the seller is, in effect, secured by the underlying
securities. In the event of a bankruptcy or other default of a seller of a
repurchase agreement, the Fund could experience both delays in liquidating the
underlying securities and losses, including possible declines in the value of
the collateral during the period while the Fund seeks to enforce its rights,
possible loss of all or a part of the income during such period and expenses of
enforcing its rights.
Portfolio Transactions. The Fund's primary investment objective is long-term
capital appreciation and the Adviser does not attempt to time the market for
quick gains. However, the Fund may sell securities recently purchased as a
result of changes in market conditions or the circumstances of a particular
issuer. Because of its long term growth emphasis, the Fund expects that total
portfolio turnover rate generally will not exceed 100% annually. The Fund's
annual rate of portfolio turnover may vary widely from year to year depending on
market conditions and prospects. High portfolio turnover in any given year
indicates a substantial amount of short-term trading, which may result in
payment by the Fund of above-average amounts of brokerage commissions and could
result in the payment by shareholders of above-average amounts of taxes on
realized investment gain. In placing portfolio transactions, the Adviser may
take into account assistance with the placement of sales for the Fund and
research services. The Adviser may use such research in servicing its other
fiduciary accounts and not all services received may be used by the Adviser in
connection with its services to the Fund. However, the Fund may also benefit
from research services received by the Adviser in connection with transactions
effected on behalf of other fiduciary accounts.
<PAGE>
Fundamental and Non-Fundamental Policies. The investment restrictions set forth
as fundamental in the Statement of Additional Information cannot be changed
without a vote of the shareholders. The investment objective and all other
restrictions and policies of the Fund are not fundamental and may be changed
without shareholder approval. In the event that the Fund's investment objective
should ever be changed, such change may result in an objective different from
the objective the shareholder considered appropriate at the time of investment
in the Fund. Any percentage restrictions (except those with respect to illiquid
securities and the Fund's fundamental restrictions with respect to borrowing)
set forth in the Prospectus or in the Statement of Additional Information apply
as of the time of investment without regard to later increases or decreases in
the values of securities or total or net assets.
INVESTMENT CONSIDERATIONS AND RISKS
The Fund may be subject to certain risks similar to those associated with the
direct ownership of real estate because of its policy of concentration in the
securities of companies which are principally engaged in the real estate
industry. The risks of direct ownership of real estate include: risks related to
general, regional and local economic conditions and fluctuations in interest
rates; overbuilding and increased competition; increases in property taxes and
operating expenses; changes in zoning laws; heavy cash flow dependency; possible
lack of availability of mortgage funds; losses due to natural disasters;
regulatory limitations on rents; variations in market rental rates; and changes
in neighborhood values. In addition, the Fund may incur losses due to
environmental problems. If there is historic contamination at a site, the
current owner is one of the parties that may be responsible for clean up costs.
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 default or payment
problems relating to underlying mortgages, the quality of credit extended and
self-liquidation provisions by which mortgages held may be paid in full and
distributions of capital returns may be made at any time. Equity and mortgage
REITs are dependent upon the skill of their individual management personnel and
generally are not diversified. In addition, equity and mortgage REITs could be
adversely affected by failure to qualify for tax-free pass-through of income
under the Internal Revenue Code, or to maintain their exemptions from
registration under the Investment Company Act of 1940, as amended. By investing
in REITs indirectly through the Fund, a shareholder will bear not only a
proportionate share of the expenses of the Fund, but also indirectly, similar
expenses of the REITs, including compensation of management.
To the extent the Fund is invested in debt securities (including asset-backed
securities) or mortgage REITs, it will be subject to credit risk and interest
rate risk. Credit risk relates to the ability of the issuer to meet interest and
principal payments when due. Interest rate risk refers to the fluctuations in
the net asset value of any portfolio of fixed income securities resulting solely
from the inverse relationship between the price and yield of fixed income
securities; that is, when interest rates rise, bond prices generally fall and,
conversely, when interest rates fall, bond prices generally rise. In general,
bonds with longer maturities are more sensitive to interest rate changes than
bonds with shorter maturities.
The Fund, as a non-diversified investment company, may invest in a smaller
number of individual issuers than a diversified investment company. Therefore,
an investment in the Fund may present greater risk and volatility to an investor
than an investment in a diversified investment company.
<PAGE>
INVESTMENT PHILOSOPHY
The Adviser believes that successful investing in real estate securities
requires in-depth knowledge of the securities market and a complete
understanding of the factors influencing the performance of real estate assets.
The Adviser strives to provide superior performance via investment in a select
group of real estate securities which are attractively valued and have strong
growth prospects.
The investment process generally begins with property type sector allocations
determined by the Adviser. The Adviser, among other things, may review, analyze
and rank REIT securities based on certain financial ratios and relative
valuation measures. The financial analysis process includes a review of the
capital structure and the on-going capital needs of the company. Finally,
particular emphasis is placed on analyzing each company's cash flow stream and
its dividend safety, predictability and prospects for growth.
The Adviser's fundamental real estate analysis depends on extensive, localized
research on property markets across the United States, direct inspection of
individual property assets and familiarity with company management, operating
styles and investment strategies. The Adviser utilizes the nationwide network of
real estate professionals employed by RREEF America L.L.C. and its affiliates to
assist in evaluating and monitoring properties held by public REITs. See
"Management of the Fund" for more information.
CALCULATION OF NET ASSET VALUE
Shares of the Fund are purchased or redeemed, on a continuing basis without a
sales charge, at their next determined net asset value per share. Net asset
value per share is determined as of 4:00 p.m., Eastern Time, Monday through
Friday, exclusive of days on which the New York Stock Exchange ("NYSE") is
closed, by dividing the aggregate net assets of the Fund by the total number of
shares of the Fund outstanding. The NYSE is ordinarily closed on New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day. In the event that the NYSE and other
financial markets close earlier, as on the eve of a holiday, the net asset value
per share will be determined earlier in the day at the close of trading on the
NYSE.
A portfolio security listed or traded on a stock exchange or quoted on NASDAQ is
valued at the last reported sale price prior to the time when assets are valued.
Lacking any sales on that day, the security is valued at the mean between the
last reported bid and ask prices. Over-the-counter portfolio securities for
which market quotations are readily available are valued at the mean between the
most recent bid and ask prices as obtained from one or more dealers that make
markets in the securities. Portfolio securities which are traded both in the
over-the-counter market and on a stock exchange are valued according to the
broadest and most representative market as determined by the Adviser. When
market quotations are not readily available, or when restricted securities or
other assets are being valued, such assets are valued at fair value as
determined in good faith by or under procedures established by the Board of
Directors.
Debt securities (other than short-term obligations) are normally valued on the
basis of valuations provided by a pricing service when such prices are believed
to reflect the fair value of such securities. Other assets and securities for
which no quotations are readily available are valued at fair value as determined
in good faith by the Fund. Short-term investments with maturities of 60 days or
less at the time of purchase are valued on the basis of the amortized cost. This
involves
<PAGE>
valuing an instrument at its cost initially and, thereafter, assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument.
DIVIDENDS, DISTRIBUTIONS AND TAXES
THIS SECTION IS NOT INTENDED TO BE A FULL DISCUSSION OF ALL THE ASPECTS OF THE
FEDERAL INCOME TAX LAW AND ITS EFFECTS ON THE FUND AND ITS SHAREHOLDERS.
SHAREHOLDERS MAY BE SUBJECT TO STATE AND LOCAL TAXES ON DISTRIBUTIONS. EACH
INVESTOR SHOULD CONSULT A TAX ADVISER REGARDING THE EFFECT OF FEDERAL, STATE AND
LOCAL TAXES ON AN INVESTMENT IN THE FUND.
All income dividends and capital gains distributions are normally reinvested,
without charge, in additional full and fractional shares of the Fund.
Alternatively, investors may choose: (i) automatic reinvestment of capital gains
distributions in Fund shares and payment of income dividends in cash; (ii)
payment of capital gains distributions in cash and automatic reinvestment of
dividends in Fund shares; or (iii) all income dividend and capital gain
distributions paid in cash. The share price of the reinvestment will be the net
asset value of the Fund shares computed at the close of business on the date the
dividend or distribution is paid. Dividend and distribution checks returned to
the Fund as being undeliverable will automatically be reinvested in shares of
the Fund at the current net asset value on the day returned or on the 181st day,
and the distribution option will be changed to full reinvestment.
At the time of purchase, the share price of the Fund may reflect undistributed
income, capital gains or unrealized appreciation of securities. Any dividend or
capital gains distribution paid to a shareholder shortly after a purchase of
shares will reduce the per share net asset value by the amount of the
distribution. Although in effect a return of capital to the shareholder, these
dividends and distributions are fully taxable.
The Fund generally pays dividends twice each year (usually in June and
December). Capital gains, if any, usually will be distributed annually in
December.
The Fund intends to continue to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code (the "Code") and, if so qualified,
will not be liable for federal income tax to the extent its earnings are
distributed. If, for any calendar year the required distribution of the Fund
exceeds the amount distributed, an excise tax equal to 4% of the excess will be
imposed on the Fund. The Company intends to make distributions during each
calendar year sufficient to prevent imposition of the excise tax. During its
initial operations, the Fund may be a personal holding company ("PHC") under the
Code due to substantial ownership of the Fund's shares by a few shareholders. In
that event, the Fund intends to distribute all its PHC income so that there is
no PHC tax imposed on the Fund.
Dividends from taxable net investment income and distributions of net short-term
capital gains paid by the Fund are taxable to shareholders as ordinary income,
whether received in cash or reinvested in additional shares of the Fund. A
portion of these dividends may qualify for the 70% dividends received deduction
available to corporations; dividends that are attributable to distributions made
by REITs to the Fund will not qualify. Distributions of net capital gains will
be taxable to shareholders as long-term capital gains, whether paid in cash or
reinvested in additional shares, and regardless of the length of time the
investor has held his shares.
A gain or loss for tax purposes may be realized on the redemption of shares. If
the shareholder realizes a loss on the sale or exchange of any shares held for
six months or less and if the shareholder received a
<PAGE>
capital gain distribution during such period, then such loss is treated as a
long-term capital loss to the extent of such capital gain distribution.
The Fund may invest in REITs that hold residual interests in real estate
mortgage investment conduits ("REMICs"). Under Treasury regulations that have
not yet been issued, but may apply retroactively, 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. (See "Additional Information on Tax Issues-Taxation of
Certain Mortgage REITs" in the Statement of Additional Information.)
The Fund is required to withhold a portion of the dividends, capital gains
distributions and proceeds of redemptions payable to any shareholder who fails
to furnish the Fund with a correct taxpayer identification number. In order to
avoid this withholding requirement, you must certify on your application, or on
a separate W-9 Form supplied by the Fund's Transfer Agent, that your taxpayer
identification number is correct and that you are not currently subject to
backup withholding or you are exempt from backup withholding. For individuals,
your taxpayer identification number is your social security number.
THE FUND
RREEF Securities Fund, Inc. (the "Company") is a non-diversified, open-end
investment management company organized in 1995 as a Maryland corporation. The
Company may issue multiple series, each of which represents an interest in a
separate investment portfolio. Currently, the Fund is the only series issued by
the Company. The Board of Directors may offer additional series in the future
and thus create additional funds within the Company.
Each share, when issued and paid for in accordance with the terms of the
offering, is fully paid and non-assessable. Shares have no preemptive or
subscription rights and are freely transferable. Each share of the Fund
represents an interest in the assets of the Fund and has identical voting,
dividend, liquidation and other rights and the same terms and conditions as any
other shares. Each fractional share has the same rights, in proration, as a full
share. Shares do not have cumulative voting rights; therefore, the holders of
more than 50% of the voting power of the Fund can elect all of the directors of
the Fund.
The Company does not hold regular annual shareholder meetings. Shareholder
meetings are held when they are required under the 1940 Act or otherwise called
for special purposes. Special meetings may be called upon the written request of
shareholders holding at least 10% of the voting power of the Company.
MANAGEMENT OF THE FUND
Subject to the direction and supervision of the Company's Board of Directors,
RREEF Real Estate Securities Advisers L.P. (the "Adviser") serves as the Fund's
investment adviser. The Adviser is a California limited partnership registered
as an investment adviser under the Federal securities laws. RREEF Real Estate
Securities Advisers, Inc. is the sole general partner of the Adviser. Donald A.
King, Jr., D. Wylie Greig and Stephen M. Steppe are the directors of the
Adviser's general partner. The Adviser is under common control with RREEF
America L.L.C., also a registered investment adviser. The Adviser's affiliates
have provided real estate investment management services to institutional
investors since 1975. Its principal office is located at 650 California Street,
San Francisco, California. The Adviser was formed in April, 1993 to manage
accounts for institutional clients on a discretionary basis. As of June 30,
1996, the Adviser had $297 million in assets under management.
<PAGE>
The Adviser manages the investment and reinvestment of the assets of the Fund
and is responsible for managing the fund's business affairs. The Adviser
furnishes continuous advice concerning the Fund's investments. In addition, the
Adviser provides office space for the Fund, pays the salaries, fees and expenses
of all Fund officers and directors who are affiliated with the Adviser and pays
all expenses of marketing the Fund's shares. For such services, the Fund pays
the Adviser a fee of 0.75% per annum on daily net assets of the Fund up to $100
million and 0.65% per annum on daily net assets of the Fund in excess of $100
million. This fee is higher than that paid by most mutual funds but is not
necessarily higher than that paid by funds with similar objectives. The Adviser
has voluntarily agreed to absorb certain Fund operating expenses through at
least the end of the fiscal year ending October 31, 1996 to the extent that the
ratio of expenses to average net assets exceed 1.00%.
Primary Portfolio Manager. Kim G. Redding is the Fund's primary portfolio
manager. Mr. Redding has served as the President of the Adviser's general
partner since inception in 1993, is currently a member of RREEF America L.L.C.
and is a Senior Vice-President of RREEF Management Company. From 1990 to 1993,
he was a principal in K.G. Redding & Associates, an investment adviser, and
prior thereto he was the President of Redding, Melchor & Company, an investment
adviser. Mr. Redding has been professionally managing portfolios of real estate
securities since 1987.
<PAGE>
ADMINISTRATOR, TRANSFER AGENT, CUSTODIAN AND
DIVIDEND PAYING AGENT
The Company has entered into Administration, Custodian and Transfer Agency and
Service Agreements with Investors Bank & Trust Company ("Investors Bank"), 89
South Street, Boston, Massachusetts 02111.
Investors Bank generally assists the Adviser in all matters relating to the
administration of the Fund, including the coordination and monitoring of any
third parties furnishing services to the Fund, the preparation and maintenance
of financial and accounting records, and the provision of the necessary office
space, equipment and personnel to perform administrative and clerical functions.
Investors Bank is not involved in the investment decisions made with respect to
the Fund.
Investors Bank also serves as the Transfer Agent of the Fund. In its capacity as
Transfer Agent, Investors Bank maintains the records of each shareholder's
account, processes purchases and redemptions of the Fund's shares, acts as
dividend and distribution disbursing agent and performs other shareholder
servicing functions.
As compensation for its services as Administrator, Custodian and Transfer Agent
of the Fund, Investors Bank receives a monthly fee at the annual rate of 0.10%
of the average daily net assets of the Fund, subject to certain minimums, plus
transaction fees and any applicable shareholder account charges.
HOW TO PURCHASE SHARES
Investors may purchase Fund shares at net asset value by wire, telephone or mail
as described below. The Fund imposes no sales charges. The minimum initial
investment in the Fund is $50,000. The minimum initial investment may be waived
for accounts beneficially owned or controlled by officers, directors and
employees of the Fund, the Adviser and any affiliated entities and for
Individual Account Retirement Plans. In addition, the Adviser may waive the
minimum initial investment for an investor when the aggregate of all Fund
accounts beneficially owned or controlled by that investor total at least
$500,000. The minimum subsequent investment is $1,000. The Fund does not issue
certificates representing ownership of its shares.
Your purchase order will be processed at the net asset value next determined
with respect to the shares being purchased after your purchase order (or your
wire, if applicable) has been received and accepted by the Fund's Transfer
Agent. See "Calculation of Net Asset Value." You are deemed to be a shareholder
as of the first business day following the day the Transfer Agent has received
payment for your order. Orders will be accepted only upon receipt by the
Transfer Agent of all documentation required to be submitted in connection with
such order.
When you purchase shares by check, the Fund reserves the right to hold payment
on redemptions until your purchase check has cleared (which can take up to 15
days from the purchase date). If you anticipate the need for more immediate
access to your investment you should purchase shares by Federal Funds wire, as
described below.
YOU MAY INVEST IN THE FOLLOWING WAYS:
BY WIRE
Investors may purchase shares through the Transfer Agent by bank wire. Bank wire
purchases will be treated as received after the Transfer Agent is notified that
the bank wire has been credited to the Fund. To open an account by wire
purchase, investors must first call the Transfer
<PAGE>
Agent at (800) 909-9234 for an account number. Then wire the money to:
Investors Bank & Trust Company
Attn.: Transfer Agent
Boston, MA 02205-1537
ABA#011001438
DDA#453211234
Include the Fund name, account name(s)
and account number(s)
The completed application should be mailed to the Transfer Agent at the address
below. Subsequent wire investments may be made by existing shareholders by
following the instructions outlined above. It is not necessary, however, for
such shareholders to call for another account number.
BY MAIL
Send the completed and signed Application enclosed with this Prospectus with a
check to the Transfer Agent. Checks should be made payable to RREEF Real Estate
Securities Fund and be drawn on a U.S. bank. Send your purchase order to:
RREEF Real Estate Securities Fund
c/o Investors Bank & Trust Company
P.O. Box 1537, MFD23
Boston, MA 02205-1537
When making subsequent investments, enclose your check with the return
remittance portion of the confirmation of your previous investment or indicate
on your check or a separate piece of paper your name, address and account number
and mail it to the address set forth above. Third party checks will not be
accepted; and the Fund reserves the right to refuse to accept second party
checks.
The Fund reserves the right to suspend the offering of shares for a period of
time. It also reserves the right to reject any specific purchase order.
HOW TO REDEEM SHARES
You may redeem all or a portion of your shares on any day on which the Fund's
net asset value is calculated. Your shares will be redeemed at the net asset
value determined after the Transfer Agent has received and accepted your
redemption request. See "Calculation of Net Asset Value." A redemption fee of
1.00% of the amount redeemed, payable to the Fund will be charged on all
redemptions within one year of purchase, except redemptions from Individual
Account Retirement Plans. Other than this fee, there are no redemption charges
or expenses.
BY TELEPHONE
You may select an optional feature on your Application which will permit you or
your authorized representatives to redeem up to your entire account by telephone
request. If you do not elect this privilege, you can redeem up to $25,000 by
telephone request if your address of record has not changed within the last 60
days. These proceeds will only be mailed to your address of record payable
exactly as registered or to a pre-designated bank account.
To redeem by telephone, call the Transfer Agent at (800) 909-9234 and specify
the number of shares or the dollar amount to be redeemed, your name and your
account number. Telephone instructions will be accepted between 9:00 a.m. and
4:00 p.m., Eastern Time, on any day the New York Stock Exchange is open. It may
be difficult to implement telephone redemptions during periods of drastic
economic or market changes, in which case, you may redeem your shares by sending
a written request to the Transfer Agent. The Fund and the Transfer Agent will
employ reasonable procedures, as described below, to attempt to confirm that
instructions communicated by telephone are genuine, and if such procedures are
not employed, the Fund may be liable for any losses due to unauthorized or
fraudulent instructions. Specifically, the
<PAGE>
person initiating the call will be asked to identify the account registration
and tax identification number of the account from which shares are to be
redeemed. In addition, all telephone calls may be recorded and written
confirmation of such transactions will be provided. The Fund and its agents will
not be liable for following instructions communicated by telephone reasonably
believed to be genuine. The Fund reserves the right to terminate, suspend or
modify telephone transaction privileges at any time without notice to
shareholders.
The Transfer Agent will normally send the redemption proceeds on the first
business day following receipt of your redemption request. If you request that
your redemption proceeds be sent by wire transfer to a preauthorized account,
the amount redeemed must be at least $1,000. If making immediate payment could
adversely affect the Fund, it may take up to seven days to pay you. The Fund
cannot suspend the right of redemption for more than seven days except when the
NYSE is closed (or when trading is restricted) for any reason other than its
customary weekend or holiday closings, or under any emergency circumstances as
determined by the Securities and Exchange Commission to merit such action.
BY MAIL
To redeem your shares by mail, send a written redemption request to the Transfer
Agent at the following address:
Investors Bank & Trust Company
P.O. Box 1537, MFD23
Boston, MA 02205-1537
Specify the Fund's name, the number of shares or the dollar amount to be
redeemed, your account number, and the requirements listed below that apply to
your particular account. You should also specify whether you wish to have the
proceeds sent to the account registration address or to your preauthorized
account if you have established this option. If you request: (i) a redemption of
more than $50,000; (ii) a redemption of any amount to be sent to an address
other than that on record with the Fund; or (iii) a redemption payable other
than as your account is registered, all owners must sign the redemption request
and all signatures must be guaranteed. For some types of accounts, additional
documentation may be required. The Transfer Agent accepts signature guarantees
from all acceptable financial institutions as described in the enclosed
Application. Those financial institutions which participate in a medallion
signature program must use the specific "Medallion Guaranteed" stamp.
If any portion of the shares to be redeemed represents an investment made by
check, the Fund reserves the right to hold payment on such redemption until the
purchase check has cleared (which could take up to 15 days from receipt of the
check). If you anticipate the need for more immediate access to your investment,
you should purchase shares by Federal Funds wire.
In order to reduce expenses of the Fund, the Fund reserves the right to redeem
all of the shares in any shareholder account if, for a period of more than three
months, the account has a net asset value lower than the initial minimum
investment requirement due to shareholder redemptions. If the Fund elects to
close such accounts, it will notify shareholders whose accounts are below the
minimum of its intention to do so, and will provide those shareholders with an
opportunity to increase their accounts by investing a sufficient amount to bring
their accounts up to the minimum amount within sixty (60) days of the notice.
<PAGE>
PERFORMANCE INFORMATION
From time to time, in advertisements or in reports to shareholders or
prospective shareholders, the Fund may compare its performance, in terms of its
total return, to that of other mutual funds with similar investment objectives
and to stock or other indices. For example, the Fund may compare its performance
to rankings prepared by Lipper Analytical Services, Inc., a widely recognized
independent service which monitors the performance of mutual funds, to
Morningstar's Mutual Fund Values and to various indices, including Lehman
Brothers REIT Index, NAREIT Equity-Less Health Care Index, Standard & Poor's 500
Composite Stock Price Index and Wilshire REIT Only Index. Performance
information and rankings as reported in the Realty Stock Review, Changing Times,
Business Week, Institutional Investor, the Wall Street Journal, Mutual Fund
Forecaster, No-Load Investor, Money Magazine, Forbes, Fortune, Investor's
Business Daily and Barrons magazine may also be used in comparing performance of
the Fund. The Fund's past performance comparisons should not be considered as
representative of the future performance of the Fund.
The Fund's average annual total return is computed by determining the average
annual compounded rate of return for a specified period that, if applied to a
hypothetical $1,000 initial investment, would produce the redeemable value of
that investment at the end of the period, assuming reinvestment of all dividends
and distributions and with recognition of all recurring charges. The Fund may
also utilize a total return for differing periods computed in the same manner
but without annualizing the total return.
SHAREHOLDER INQUIRIES
Call (800) 909-9234 from 9:00 a.m.--5:00 p.m. Eastern Time for prompt service on
any questions about your account. During unusual market conditions, the Fund may
experience difficulty in accepting telephone inquiries. In such circumstances,
you should contact the Fund directly at (415) 781-3300 weekdays from 9:00
a.m.--5:00 p.m. Pacific Time or by mail at 650 California Street, San Francisco,
CA 94108
<PAGE>
RREEF REAL ESTATE SECURITIES FUND
650 California Street
San Francisco, California 94108
INVESTMENT ADVISER
RREEF Real Estate Securities Advisers L.P.
875 N. Michigan Avenue
Chicago, Illinois 60611
DIRECTORS
Donald A. King, Jr.
Gregory L. Melchor
Willis K. Polite
Kim G. Redding
William Wilson, III
ADMINISTRATOR
CUSTODIAN
TRANSFER AGENT
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
LEGAL COUNSEL
D'Ancona & Pflaum
30 N. LaSalle Street
Chicago, Illinois 60602
INDEPENDENT ACCOUNTANTS
Deloitte & Touche L.L.P.
125 Summer Street
Boston, Massachusetts 02110
RREEF
REAL ESTATE
SECURITIES
FUND
PROSPECTUS
& APPLICATION
AUGUST 1, 1996
RREEF
The RREEF Funds
<PAGE>
RREEF
The RREEF Funds
RREEF REAL ESTATE SECURITIES FUND ACCOUNT APPLICATION
Send to: RREEF Real Estate Securities Fund
P.O. Box 1537, MFD23
Boston, MA 02205-1537
I. ACCOUNT INFORMATION
Name of Account Owner
Name of Co-Owner (if applicable)
Street or P.O. Box
City
State Zip Code
Unless otherwise indicated, Co-Owners will be registered as joint tenants with
right of survivorship.
Telephone Number
Taxpayer Identification Number
US Citizen, Resident or Entity [ ] Yes [ ] No
II. ADDRESS FOR CONFIRMATIONS/STATEMENTS
Confirmations and statements will be sent to the party listed in Section I. If
additional statements are needed, please list to whom they should be sent:
Daily Confirmations (limit of one):
Monthly Statements (additional addresses can be listed on a separate page):
III. INVESTMENT INFORMATION
RREEF Real Estate Securities Fund $
IV. DIVIDEND/DISTRIBUTIONS REMITTANCE PLANS
CHECK APPROPRIATE BOX (SEE "DIVIDENDS, DISTRIBUTIONS AND TAXES" IN THE
PROSPECTUS)
All distributions will be reinvested if no item is checked.
Dividends: [ ] Cash [ ] Reinvested
Capital Gains: [ ] Cash [ ] Reinvested
V. REDEMPTIONS
I/we authorize RREEF Securities Fund, Inc. and the Transfer Agent to honor
telephone instructions for my/our account. In an effort to confirm that
telephone requests are genuine, the Fund will employ reasonable procedures which
currently include, but are not limited to, requiring the caller to provide
certain information unique to the account. As long as the Fund's telephone
representatives comply with these procedures neither the Fund nor the Transfer
Agent will be liable for any losses due to fraudulent or unauthorized
transactions.
[ ] Permit redemption of shares via telephone
Redemptions requested via telephone will only be wired to pre-existing bank
account instructions. No bank instruction changes will be accepted via
telephone.
If you do not authorize telephone redemptions, only written transaction
instructions will be accepted. Each request must contain the signature of the
owner(s) exactly as the name(s) appear in the registration with a signature
guarantee under certain circumstances outlined in the Prospectus, by a member of
the New York Stock Exchange's Medallion Signature Program, or certain banks,
savings and loan institutions, credit unions, securities dealers, securities
exchanges, clearing agencies and registered securities associations in
accordance with a regulation of the Securities and Exchange Commission and
acceptable to the Fund and the Transfer Agent.
VI. REDEMPTION AND DIVIDEND WIRE INSTRUCTIONS
Proceeds of any redemptions and dividend disbursements (if applicable) should be
wired to my/our bank as follows:
Bank Name
ABA Number
Street Address
City State Zip Code
Account Name
Account Number
<PAGE>
VII. AUTHORIZED SIGNERS
By the execution of this RREEF Real Estate Securities Fund Application, the
undersigned represents and warrants that it has full right, power and authority
to make the investment applied for pursuant to this Application and is acting
for itself or in some fiduciary capacity in making such investment, and the
individual(s) signing on behalf of the registered owner(s) represent and warrant
that they are duly authorized to sign this Application and to purchase and
redeem shares of the Fund described in the accompanying Prospectus on behalf of
the undersigned. THE UNDERSIGNED AFFIRMS THAT IT HAS RECEIVED A CURRENT RREEF
REAL ESTATE SECURITIES FUND PROSPECTUS AND HAS REVIEWED THE SAME, AND AGREES TO
BE BOUND BY THE TERMS DETAILED THEREIN, AND AS AMENDED FROM TIME TO TIME.
Signature
Print Name and Title, if any
VIII. CERTIFICATION
TAXPAYER IDENTIFICATION NUMBER
Under penalties of perjury, the account owner named in Section I above certifies
that:
(1) The number shown on this form is the account owner's correct Taxpayer
Identification Number (or the account owner has applied or is applying for
such number), and;
(2) The account owner is not subject to backup withholding because the account
owner (a) is exempt from backup withholding, (b) has not been notified by
the Internal Revenue Service (IRS) that the account owner is subject to
backup withholding as a result of failure to report all interest or
dividends, or (c) has received notice from the IRS that backup withholding
no longer applies.
CERTIFICATION INSTRUCTIONS: Item (2) above must be crossed out if the account
owner has received IRS notice that backup withholding currently applies because
of under reporting of dividends on the account owner's return. (Also see
"Guidelines for Certification of Taxpayer Identification Number" at the bottom
of this application.)
NOTE: FAILURE TO COMPLETE THIS SECTION MAY RESULT IN BACKUP WITHHOLDING OF 31%
OF ANY PAYMENTS MADE TO THE ACCOUNT OWNER.
BY CHECKING ONLY THE APPROPRIATE BOX BELOW, THE ACCOUNT OWNER CERTIFIES UNDER
PENALTY OF PERJURY THAT:
[ ] The account owner does not have a taxpayer identification number, but has
applied for or intends to apply for one. Owner understands that the
required 31% withholding may apply before the account owner provides such
number and required certifications, which should be provided within 60
days.
[ ] The account owner is an exempt recipient.
[ ] The account owner is neither a citizen nor a resident of the United
States for the purposes of the Internal Revenue Code. Owner is a resident
of .
ALL RECIPIENTS, INCLUDING EXEMPT RECIPIENTS, MUST REPORT THEIR TAXPAYER
IDENTIFICATION NUMBERS AND PROVIDE THE CERTIFICATIONS REQUESTED TO PREVENT
WITHHOLDING.
A PARTIAL LIST OF EXEMPT RECIPIENTS FOLLOWS:
Retirement Plans
Corporations
Common Trust Funds
Financial Institutions
Colleges, Churches, Charitable Organizations
Agents, Fiduciaries, Middlemen
Registered Securities Dealers
SIGNATURE:
DATE:
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
Federal law requires that taxable distributions and proceeds of redemptions be
reported to the IRS and that 31% be withheld if you fail to provide your correct
Taxpayer Identification Number (TIN) and the certifications in Section VIII, or
you are otherwise subject to backup withholding. Amounts withheld and forwarded
to the IRS can be credited as a payment of tax when completing your Federal
income tax return. For most individual taxpayers, the TIN is your social
security number. Special rules apply for certain accounts. For example, for an
account established under the Uniform Gift to Minors Act, the TIN of the minor
should be furnished. If you do not have a TIN, you may apply for one using the
forms available at local offices of the Social Security Administration of the
IRS. Recipients exempt from backup withholding, including corporations and
certain other entities, should provide their TIN and complete the appropriate
items in Section VIII of the application to avoid possible erroneous
withholding. Non-resident aliens and foreign entities may be subject to
non-resident alien withholding of up to 30% on certain distributions received
from the Fund and must provide certain certifications on IRS Form W-8 to avoid
backup withholding with respect to other payments. For further information, see
IRC Sections 1441, 1442 and 3406, or consult your tax advisor.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
August 1, 1996
RREEF REAL ESTATE SECURITIES FUND
650 California Street
San Francisco, CA 94108
1-800-909-9234
1-415-781-3300
This Statement of Additional Information is not a prospectus but contains
information which should be read in conjunction with the prospectus of the RREEF
Real Estate Securities Fund (the "Fund") dated August 1, 1996 (the
"Prospectus"), which may be obtained free of charge by writing to or calling the
Fund at the above address or telephone number.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
FUNDAMENTAL INVESTMENT RESTRICTIONS........................................... 3
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS AND OTHER POLICIES.................... 3
ADDITIONAL INFORMATION CONCERNING CERTAIN INVESTMENT TECHNIQUES .............. 5
PORTFOLIO TRANSACTIONS........................................................ 6
MANAGEMENT OF THE FUND........................................................ 7
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES ..........................11
INVESTMENT ADVISORY SERVICES..................................................11
IN KIND PURCHASES OF SHARES OF THE FUND ......................................13
ADDITIONAL INFORMATION ON REDEMPTIONS ........................................13
CALCULATION OF PERFORMANCE DATA ..............................................14
ADDITIONAL INFORMATION ON TAX ISSUES..........................................15
CUSTODIAN.....................................................................18
LEGAL COUNSEL ................................................................18
INDEPENDENT ACCOUNTANTS ......................................................18
APPENDIX .....................................................................19
FINANCIAL STATEMENTS .........................................................20
<PAGE>
FUNDAMENTAL INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental and may not
be changed without the approval of the holders of the lesser of (i) 67% of the
eligible votes, if the holders of more than 50% of the eligible votes are
present in person or by proxy or (ii) more than 50% of the eligible votes.
THE FUND MAY NOT:
(1) Issue senior securities, except as permitted under the Investment
Company Act of 1940 (the "1940 Act").
(2) Borrow in amounts exceeding 33 1/3% of the value of the Fund's total
assets at the time of borrowing. The Fund may not pledge or hypothecate
any of its assets, except in connection with permitted borrowing.
(3) Underwrite the securities of other issuers, except to the extent that
the Fund may be deemed to act as an underwriter in certain cases when
disposing of restricted securities.
(4) Invest in real estate, except the Fund may invest in securities secured
by real estate interests therein or securities issued by companies which
invest in real estate or interests therein including real estate
investment trusts ("REITs"). (This does not prevent the Fund from owning
and liquidating real estate or real estate interests incident to a
default on portfolio securities.)
(5) Purchase or sell commodities or commodity futures contracts.
(6) Lend money, except that it may purchase and hold debt securities
publicly distributed or traded or privately placed and may enter into
repurchase agreements. The Fund will not lend securities if such a loan
would cause more than 20% of the value of its net assets to then be
subject to such loans.
(7) Invest 25% or more of its total assets in securities of companies
principally engaged in any one industry, except that the Fund may invest
without limitation in securities of companies engaged principally in the
real estate industry.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS AND OTHER POLICIES
These policies and the Fund's investment objective set forth in the
Prospectus may be changed by the Board of Directors without a shareholder vote.
THE FUND MAY NOT:
(8) Purchase any security on margin, except that it may obtain such
short-term credits as are necessary for clearance of securities
transactions.
(9) Invest more than 5% of its total assets in warrants to purchase common
stock.
(10) Invest in companies for the purpose of exercising control or management.
3
<PAGE>
(11) Purchase a security (other than obligations issued or guaranteed by the
U.S., any state or local government, or any foreign government, their
agencies or instrumentalities) if, as a result, more than 5% of the
value of the Fund's total assets would be invested in the securities of
issuers which at the time of purchase have been in operation for less
than three years (for this purpose, the period of operation of any
issuer shall include the period of operation of any predecessor or
unconditional guarantor of such issuer). The restriction does not apply
to securities of real estate investment trusts or other pooled
investment vehicles or mortgage- or asset-backed securities.
(12) Invest more than 15% of its net assets in illiquid securities (including
restricted securities which are illiquid and repurchase agreements
maturing in more than seven days).
(13) Purchase or retain the securities of any issuer if, to the Fund's
knowledge, (i) one or more officers, directors or partners of the Fund
or the Adviser individually owns or would own, directly or beneficially,
more than 1/2% of the securities of such issuer, and (ii) in the
aggregate, such persons own or would own, directly or beneficially, more
than 5% of such securities.
(14) Purchase participations or other direct interests or enter into leases
with respect to oil, gas, or other mineral exploration or development
programs.
(15) Purchase or write puts, calls, or any combination thereof.
(16) Purchase the securities of open-end or closed-end investment companies
except in compliance with the Investment Company Act of 1940.
PLEASE NOTE: All percentage restrictions, whether fundamental or
non-fundamental, except those restrictions in Fundamental Restriction #2, with
respect to borrowing, and Non-Fundamental Restriction #13, with respect to
illiquid securities, apply as of the time of an investment without regard to any
later fluctuations in the value of portfolio securities or other assets.
OPERATING POLICIES
In addition to the above investment restrictions, the Board of
Directors has approved the following operating policies which may be changed by
the Board of Directors without a shareholder vote.
(i) The Fund may not borrow money except from banks for temporary or
emergency purposes in amounts not in excess of 10% of the value of the
Fund's total assets (excluding the amount borrowed) at the time of such
borrowing.
(ii) The Fund may not pledge or hypothecate any of its assets except in
connection with permitted borrowing in amounts not exceeding 15% of the
value of its total assets (excluding the amount borrowed) at the time of
such borrowing.
(iii) The Fund will not purchase any securities at any time when
borrowings exceed 5% of the value of its total assets.
(iv) The Fund may not loan portfolio securities.
4
<PAGE>
STATE UNDERTAKINGS
The Fund has voluntarily undertaken with a state in which its shares
are registered for sale (i) not to engage in futures transactions except in
conformity with the state's regulations, and (ii) not to invest in REITs that
are not listed on the American Stock Exchange, the New York Stock Exchange or
NASDAQ NMS unless such REITs follow guidelines set forth by the National
Association of State Securities Administrators. These restrictions will be in
force for so long as the Fund's Shares are sold in that state and may be changed
at any time without approval of the shareholders.
ADDITIONAL INFORMATION CONCERNING
CERTAIN INVESTMENT TECHNIQUES
LOANS OF PORTFOLIO SECURITIES
The fundamental investment restrictions provide that the Fund may make
secured loans of portfolio securities in order to realize additional income,
provided that the Fund will not lend securities if such a loan would cause more
than 20% of the total value of its net assets to then be subject to such loans.
However, as a matter of operating policy, the Fund does not intend to make such
loans. This policy may be changed by the Board of Directors should they
determine that such loans would benefit the Fund.
If the Fund were to lend securities, the borrower would provide cash
collateral which the Fund could invest in order to receive short-term interest
income. The borrower also would pay the Fund an amount equal to the dividends or
interest which the Fund would have received if the Fund had not loaned the
securities. The cash collateral which the borrower would provide must be equal
to the market value of the securities loaned. If this market value rises, the
borrower would provide more cash on each business day. If it declines, the
borrower is entitled to be paid back some of its cash. Determinations of market
value are made at the end of each business day. If the cash collateral drops
below 100% and the required additional cash is not immediately deposited by the
borrower, the loan would immediately become due and the Fund would be entitled
to replace the securities by purchase. There can be no assurance that the
borrower would be able to deposit any required additional cash. The Fund would
exercise its right to replace the securities within such reasonable time as the
Fund deemed appropriate under the circumstances.
There are other policies which would govern the Fund's lending
securities. The borrower must agree to return the securities after notice,
within the normal settlement time of five business days. The Fund would invest
the cash collateral only in readily marketable short-term interest bearing
securities of prime quality so that the Fund could return the borrower's cash
when due. Part of the interest the Fund receives on these investments may be
paid to the borrower.
If the voting rights or rights to consent on securities loaned pass to
the borrower, the Fund would retain the right to cancel the loan and retain its
rights in time to vote upon or consent to a matter which the Fund deems
important.
The Fund would loan its portfolio securities only to brokers, dealers
and other financial institutions, and the Fund's loans would comply with
applicable regulatory requirements. The Fund may pay reasonable finder's,
administrative and custodian fees in connection with securities loans.
Some, but not all, of the Fund's policies are necessary to meet certain
requirements of the tax laws relating to the lending of securities. The Fund's
policies will not be changed unless the change is permitted under these
requirements. The Fund intends not to lend portfolio securities if, or to the
extent that, such activity would jeopardize its qualification as a regulated
investment company under the tax laws.
5
<PAGE>
FIRM COMMITMENT AGREEMENTS
The Fund may enter into firm commitment agreements ("when-issued"
purchases) for the purchase of securities at an agreed upon price on a specified
future date. The Fund will not enter into such agreements for the purpose of
investment leverage.
Liability for the purchase price and all the rights and risks of
ownership of the securities accrue to the Fund at the time it becomes obligated
to purchase the securities, although delivery and payment occur at a later date,
generally within 45 days of the date of the commitment to purchase. Accordingly,
if the market price of the security should decline, the effect of the agreement
would be to obligate the Fund to purchase the security at a price above the
current market price on the date of delivery and payment. During the time the
Fund is obligated to purchase such securities, it will maintain with the
Custodian a segregated account with U.S. Government Securities, cash or cash
equivalents of an aggregate current value sufficient to make payment for the
securities.
PORTFOLIO TRANSACTIONS
The Advisory Agreement between the Fund and the Adviser requires that
the Adviser, in executing portfolio transactions and selecting brokers or
dealers, seek the best overall terms available. In this regard, the Adviser will
seek to obtain the most favorable price and execution for the transaction given
the size and risk involved. In placing executions and paying brokerage
commissions, the Adviser considers the financial responsibility and reputation
of the broker or dealer, the range and quality of the brokerage and research
services made available to the Fund and the professional services rendered,
including execution, clearance procedures, wire service quotations, assistance
with the placement of sales for the Fund and ability to provide supplemental
performance, statistical and other research information for consideration,
analysis and evaluation by the Adviser's staff. Under the Advisory Agreement,
the Adviser is permitted, in certain circumstances, to pay a higher commission
than might otherwise be obtained in order to acquire brokerage and research
services. The Adviser must determine in good faith, however, that such
commission is reasonable in relation to the value of the brokerage and research
services provided -- viewed in terms of that particular transaction or in terms
of all the accounts over which investment discretion is exercised. In such case,
the Board of Directors will review the commissions paid by the Fund to determine
if the commissions paid over representative periods of time were reasonable in
relation to the benefits obtained. The advisory fee paid to the Adviser would
not be reduced by reason of its receipt of such brokerage and research services.
To the extent that research services of value are provided by broker/dealers
through or with whom the Fund places portfolio transactions the Adviser may be
relieved of expenses which it might otherwise bear. In addition, the Adviser may
use such research in servicing its other fiduciary accounts and not all services
received may be used by the Adviser in connection with its services to the Fund.
However, the Fund may also benefit from research services received by the
Adviser in connection with transactions effected on behalf of other fiduciary
accounts.
On occasions when the Adviser deems the purchase or sale of a security
to be in the best interests of the Fund as well as other fiduciary accounts, the
Adviser may aggregate the securities to be sold or purchased for the Fund with
those to be sold or purchased for other accounts in order to obtain the best net
price and most favorable execution. In such event, the allocation will be made
by the Adviser in the manner considered to be most equitable and consistent with
its fiduciary obligations to all such fiduciary accounts, including the Fund. In
some instances, this procedure could adversely affect the Fund but the Company
deems that any disadvantage in the procedure would be outweighed by the
increased selection available and the increased opportunity to engage in volume
transactions.
6
<PAGE>
MANAGEMENT OF THE FUND
The Directors and Officers of the Fund, their current business
addresses and principal occupations during the past five years are set forth
below. Prior to January 1995, RREEF America L.L.C. ("RREEF America") operated as
a limited partnership under the name RREEF America Partners, L.P. All references
to RREEF America include its predecessor.
<TABLE>
<CAPTION>
Age at Address and
Name Fund Position 8/1/96 Principal Occupation(s) During Past 5 Years**
- ------------------------- ------------------ --------- -----------------------------------------------------
<S> <C> <C> <C>
Kim G. Redding* Director and 41 875 N. Michigan Avenue, Chicago, IL 60611
President
Member of RREEF America since January 1995,
Senior Vice President of RREEF Management
Company and President of RREEF Real Estate
Securities Advisers, Inc. ("the Adviser's
General Partner") since May 1993; from 1990
through 1993, principal of K.G. Redding &
Associates, an investment adviser.
Donald A. King, Jr.* Director and 56 875 N. Michigan Avenue, Chicago, IL 60611
Executive
Vice President
Managing Member or RREEF America, and Senior
Vice President of RREEF Management Company for
the past five years. Director of the Adviser's
General Partner since its inception in 1993.
Member of the Pension Real Estate Association
and the Urban Land Institute. Member of the
Executive Committee of the National Realty
Committee, the Advisory Board of McIntire School
of Commerce at the University of Virginia, and
the Executive Committee of the Policy Advisory
Board of the Center for Real Estate and Urban
Economics at the University of California,
Berkeley.
- -----------
* This Director may be deemed an "interested person" of the Fund as
defined in the 1940 Act.
** RREEF America L.L.C. is a registered investment adviser that provides
investment advisory services to various group trusts, separate accounts
and real estate investment trusts. The RREEF Corporation is a registered
investment adviser that provides discretionary investment advisory
services to corporations and group trusts. RREEF Management Company
provides administrative, property management, real estate brokerage and
other services to RREEF America L.L.C., its affiliates and their
clients.
7
<PAGE>
Gregory L. Melchor Director 47 635 Emerson Street, Palo Alto, CA 94301
President of Melchor Corporation, asset
management firm since 1979.
Willis K. Polite Director 68 650 California Street, San Francisco, CA 94108
Founding General Partner of Seagate Investment
Company, Pepper Pike, Ohio and Seagate
Investment Company, San Francisco, California.
Founder and former President of Deerfield
Corporation, a family investment entity.
Currently, Director of Solarflo Corporation, a
manufacturer of combustion equipment and SEV
Corporation, a specialty automotive paint
company.
William Wilson, III Director 60 2929 Campus Dr., San Mateo, CA 94403
President since 1978 of William Wilson and
Associates, a property management and real
estate development firm.
Peter J. Broccolo Vice President 39 875 N. Michigan Avenue, Chicago, IL 60611
Member, RREEF America since 1993; Vice President
of Acquisitions since 1994; Vice President of
Client Relations since 1995. Vice President of
LaSalle Partners Limited, property acquisition
and investment management, from 1985 to 1993.
Patrick J. Callan Vice President 60 55 East 52nd Street, New York, NY 10055
Member, RREEF America and Vice President of the
RREEF Corporation for the past five years.
Paula M. Ferkull Treasurer and 45 875 N. Michigan Avenue, Chicago, IL 60611
Secretary
Treasurer of the RREEF Corporation and the
Adviser's General Partner, Comptroller of RREEF
America Partners, L.P. and Senior Vice President
of RREEF Management Company since 1979.
Comptroller and Member of RREEF America since
January 1994.
8
<PAGE>
D. Wylie Greig Vice President 51 650 California Street, San Francisco, CA 94108
Member, RREEF America since April 1991 and Vice
President of The RREEF Corporation since 1987.
Suzanne M. Hauer Vice President 48 650 California Street, San Francisco, CA 94108
Senior Vice President of the RREEF Corporation
since 1975. Member RREEF America since January
1993.
James D. King Vice President 51 875 N. Michigan Avenue, Chicago, IL 60611
Member RREEF America since March 1983 and Vice
President of RREEF Corporation since March 1983.
Karen J. Knudson Vice President 38 650 California Street, San Francisco, CA 94108
Vice President of Real Estate Securities for
RREEF America since February 1995. Senior Vice
President and CFO of Security Capital Group, an
advisor to two NYSE listed REITs, from January
1993 to January 1995. President, Director of
Real Estate Research and Portfolio Manager of
Bailard, Biehl and Kaiser Real Estate Investment
Trust, a private REIT from November 1983 to
January 1993.
Webb Sowden, Jr. Vice President 61 1201 Main Street, Dallas, TX 75202
Vice President of the Adviser's General Partner
since April, 1993; Member RREEF America and
Senior Vice President of The RREEF Corporation
since June 1990.
Stephen M. Steppe Vice President 49 650 California Street, San Francisco, CA 94108
Member, RREEF America since 1988 and Vice
President of The RREEF Corporation since 1986.
Gary L. Thompson Vice President 60 875 N. Michigan Avenue, Chicago Il 60611
Member, RREEF America since January 1993 and
Vice President of The RREEF Corporation since
January 1984.
9
<PAGE>
Michael S. Young Assistant Vice 51 650 California Street, San Francisco, CA 94108
President
Vice President, Director of Quantitative
Research, Real Estate Securities of the
Adviser's General Partner since 1991. President
of Young Information Systems, a computer
software company serving the real estate
industry from May 1982 until November 1991.
Barry H. Braitman Assistant Secretary 48 875 N. Michigan Avenue, Chicago, IL 60611
Vice President and General Counsel of RREEF
Management Company since 1990; Senior Vice
President of RREEF Management Company since
1993.
Kevin M. Connerty Assistant Treasurer 32 89 South Street, Boston, MA 02111
Account Manager, Financial Reporting &
Compliance at Investors Bank & Trust Company
since 1992; Assistant Manager of Financial
Reporting at The Boston Company from 1986 to
1992.
Susan C. Mosher Assistant Secretary 41 89 South Street, Boston, MA 02111
Director, Legal and Regulatory, Investors Bank &
Trust Company since 1995; Associate Counsel, 440
Financial Group of Worcester, Inc. from 1993 to
1995; Associate and Partner at Gallagher,
Callahan & Gartrell, P.A. from 1986 to 1992.
</TABLE>
The Fund does not pay any direct remuneration to any Director who is an
"interested person" of the Fund, or any officer employed by the Adviser or its
affiliates. Directors of the Fund who are not "interested persons" are paid an
annual retainer of $3,000, a fee of $1,000 per meeting attended and a fee of
$200 for each telephone conference meeting, plus expenses, with a maximum fee of
$10,000 per Director.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Pension or Retirement Estimated Annual
Total estimated Benefits Accrued as Benefits Upon
Name Compensation* Part of Fund Expenses Retirement
---- ------------ --------------------- ----------
<S> <C> <C> <C>
Gregory L. Melchor $7,000 0.00 0.00
Willis K. Polite $7,000 0.00 0.00
William Wilson, III $7,000 0.00 0.00
</TABLE>
*Based on four Board meetings for the first year.
10
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The following lists shareholders of record who held 5% or more of the
outstanding securities of the Fund as of July 1, 1996. Any shareholder who owns
greater than 25% of the shares of the Fund is deemed to be a controlling person
of the Fund.
SHAREHOLDER NAME AND ADDRESS PERCENTAGE HELD
---------------------------- ---------------
Arntz Builders 23.43%
A California General Partnership
19 Pamaron Way
Novato, CA 94949
Colorado Cement Masons 22.81%
Pension Trust Fund
C/O ABPA
7000 N. Broadway Bldg 3
Suite 300 A
Denver, CO 80221
Gregory L. Melchor 20.40%
635 Emerson Street
Palo Alto, CA 94301
Merrill Lynch Trust Company of CA 13.74%
FBO RREEF Management CO
P.O. Box 30532
New Brunswick, NJ 08989-0532
Arntz Builders Profit Sharing Trust 12.20%
19 Paramon Way
Novato, CA 94949
As of July 1, 1996, Directors and Officers of the Fund as a group owned
approximately 23.98% of the outstanding shares of the Fund.
INVESTMENT ADVISORY SERVICES
RREEF Real Estate Securities Advisers L.P. (the "Adviser"), a
California limited partnership, acts as the Fund's investment adviser pursuant
to an Advisory Agreement adopted in accordance with the 1940 Act (the "Advisory
Agreement").
11
<PAGE>
In addition to the services described in the Fund's prospectus, the
Adviser will compensate all personnel, Officers and Directors of the Fund if
such persons are employees of the Adviser or its affiliates. The Adviser pays
the expense of printing and mailing prospectuses and sales materials used for
promotional purposes.
The Fund pays all other expenses of its operations and activities. The
expenses borne by the Fund include its organizational expenses, the charges and
expenses of any transfer agents and dividend disbursing agents, custodian fees,
legal and auditors' expenses, bookkeeping and accounting expenses, brokerage
commissions for portfolio transactions, taxes, if any, the advisory fee,
extraordinary expenses, expenses of issuing and redeeming shares, expenses of
shareholder and trustee meetings, and of preparing, printing and mailing proxy
statements, reports and other communications to shareholders, expenses of
registering and qualifying shares for sale, fees of Directors who are not
"interested persons" of the Adviser, fidelity bond premiums, directors' and
officers insurance premiums, cost of maintaining the books and records of the
Fund, and any other charges and fees not specifically enumerated.
For the services and facilities provided to the Fund by the Adviser,
the Fund pays to the Adviser a monthly fee based upon the monthly average net
assets of such Fund for such calendar month equal to 0.75% per annum on assets
of the Fund up to $100 million and 0.65% per annum on assets of the Fund in
excess of $100 million.
The total operating expenses of the Fund, exclusive of taxes, interest,
brokerage commissions and extraordinary expenses, but inclusive of the Adviser's
fee, are subject to the most restrictive of the expense limitations imposed by
state securities commissions of the states in which the Fund's shares are
registered or qualified for sale. The current most restrictive limitation that
may apply to the Fund is 2.5% of the first $30 million of average net assets, 2%
of the next $70 million and 1.5% of any excess over $100 million. The Adviser
has voluntarily agreed to absorb certain Fund operating expenses through at
least October 31, 1996 to the extent that the ratio of expenses to average daily
net assets exceeds 1.00%.
The Board of Directors of the Fund (including a majority of the
Directors who are not "Interested" persons of the Fund) approved the Advisory
Agreement on March 17, 1995. The Advisory Agreement provides that it will
continue initially for two years, and from year to year thereafter as long as it
is approved at least annually both (i) by a vote of a majority of the
outstanding voting securities of the Fund (as defined in the Investment Company
Act) or by the Board of Directors of the Fund, and (ii) by a vote of a majority
of the Directors who are not parties to the Advisory Agreement or "interested
persons" of any party thereto, cast in person at a meeting called for the
purpose of voting on such approval. The Advisory Agreement may be terminated on
60 days' written notice by either party and will terminate automatically if it
is assigned. The Advisory Agreement provides in substance that the Adviser shall
not be liable for any action or failure to act in accordance with its duties
thereunder in the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser or of reckless disregard of its obligations
thereunder.
The Fund has adopted procedures under Rule 17a-7 of the 1940 Act to
permit purchase and sale transactions to be effected between the Fund and the
other registered investment companies for which the Adviser acts as investment
adviser or between the Fund and any advisory clients of the Adviser. The Fund
may from time to time engage in such transactions but only in accordance with
these procedures, and if they are equitable to each participant and consistent
with each participant's investment objectives. The Fund does not intend to do so
to any large extent in the near future.
12
<PAGE>
The Adviser has adopted a Code of Ethics which regulates the personal
securities transactions of the Adviser's investment personnel and other
employees and affiliates with access to information regarding securities
transactions of the Fund. The Code of Ethics requires investment personnel to
disclose personal securities holdings upon commencement of employment and all
subsequent trading activity to the Adviser's Compliance Officer. Investment
personnel are prohibited from (a) engaging in any transactions involving real
estate securities, (b) purchasing securities in a private offering and (c)
purchasing securities in an initial public offering, without the prior consent
of the Compliance Officer. Additionally, such personnel are prohibited from
trading in any securities (i) for which the Fund has a pending buy or sell
order, (ii) which the Fund is considering buying or selling, or (iii) which the
Fund purchased or sold within seven calendar days.
IN KIND PURCHASES OF SHARES OF THE FUND
Shares of the Fund are continuously offered at their net asset value
next determined after an order is accepted. The methods available for purchasing
shares of the Fund are described in the Prospectus. In addition, shares of the
Fund may be purchased using securities, so long as the securities delivered to
the Fund meet the investment objective and policies of the Fund, do not cause
the violation of any investment restrictions at the time of acceptance and are
otherwise acceptable to the Adviser, which reserves the right to reject all or
any part of the securities offered in exchange for shares of the Fund. On any
such "in kind" purchase, the following conditions will apply:
(1) the securities offered by the investor in exchange for shares of
the Fund must not be in any way restricted as to resale or
otherwise be illiquid;
(2) the securities must have a value which is readily ascertainable
(and not established only by evaluation procedures) as evidenced
by a listing on the AMEX, the NYSE, or NASDAQ; and
(3) no over-the-counter securities will be accepted unless the
principal over-the-counter market is in the United States.
The Fund believes that this ability to purchase shares of the Fund
using securities provides a means by which holders of certain securities may
obtain diversification and continuous professional management of their
investments without the expense of selling those securities in the public
market. Benefits to the Fund may include the ability to purchase desirable
securities without brokerage commissions.
An investor who wishes to make an "in kind" purchase should furnish
(either in writing or by telephone) to the Fund a list with a full and exact
description of all of the securities which he or she proposes to deliver. The
Fund will advise him or her as to those securities which it is prepared to
accept and will provide the investor with the necessary forms to be completed
and signed by the investor. The investor should then send the securities, in
proper form for transfer, with the necessary forms to the Fund and certify that
there are no legal or contractual restrictions on the free transfer and sale of
the securities. The securities will be valued as of the close of business on the
day of receipt by the Fund in the same manner as portfolio securities of the
Fund are valued. (See the section entitled "Calculation of Net Asset Value" in
the Prospectus.) The number of shares of the Fund, having a net asset value as
of the close of business on the day of receipt equal to the value of the
securities delivered by the investor, will be issued to the investor, less
applicable stock transfer taxes, if any.
The exchange of securities by the investor pursuant to this offer will
constitute a taxable transaction and may result in a gain or loss for Federal
income tax purposes. Each investor should consult his or her tax adviser to
determine the tax consequences under Federal and state law of making such an "in
kind" purchase.
13
<PAGE>
ADDITIONAL INFORMATION ON REDEMPTIONS
REDEMPTION IN KIND. The Fund reserves the right, at its sole
discretion, to redeem shares of the Fund in cash or in kind. However, the Fund
has elected to be governed by Rule 18f-1 under the 1940 Act, pursuant to which
the Fund is obligated to redeem shares of the Fund solely in cash up to the
lesser of $250,000 or one percent of the net asset value of the Fund during any
90-day period for any one shareholder. Any shareholder of the Fund receiving a
redemption in kind would then have to pay brokerage fees in order to convert his
Fund investment into cash. All redemptions in kind will be made in marketable
securities of the Fund.
SUSPENSION OF REDEMPTION PRIVILEGES. The Fund may suspend redemption
privileges or postpone the date of payment for up to seven calendar days, but
cannot do so for more than seven days after the redemption order is received
except during any period (1) when the NYSE is closed, other than customary
weekend and holiday closings, or trading on the Exchange is restricted as
determined by the SEC, (2) when an emergency exists, as defined by the SEC,
which makes it not reasonably practicable for the Fund to dispose of securities
owned by it or to fairly determine the value of its assets, or (3) as the SEC
may otherwise permit.
CALCULATION OF PERFORMANCE DATA
TOTAL RETURN
The Fund may advertise performance in terms of average annual total
return for 1-, 5- and 10-year periods, or for such lesser periods as the Fund
has been in existence. Average annual total return is computed by finding the
average annual compounded rates of return over the periods that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
1-, 5- or 10-year periods at the end of the
year or period.
The calculation assumes all charges are deducted from the initial
$1,000 payment and assumes all dividends and distributions by the Fund are
reinvested at the price stated in the prospectus on the reinvestment dates
during the period, and includes all recurring fees that are charged to all
shareholder accounts.
Average Annual Total Return
for the Periods Ended April 30, 1996
Six-Month Period (Unaudited) Since Inception* (Unaudited)
23.94% 15.72%
*The Fund commenced operations on September 21, 1995.
YIELD
The Fund may advertise performance in terms of a 30-day yield
quotation. The 30-day yield quotation is computed by dividing the net investment
income per share earned during the period by the maximum offering price per
share on the last day of the period, according to the following formula:
Yield = 2[(a-b/cd + 1)^6 - 1]
14
<PAGE>
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursement)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
AGGREGATE TOTAL RETURN
The Fund may provide the above described standard total return results
for a period which ends not earlier than the most recent calendar quarter end
and which begins either twelve months before such calendar quarter or at the
time of commencement of the Fund's operations. In addition, the Fund may provide
aggregate total return results for differing periods, such as for the most
recent six months. Such aggregate total return is computed using the following
formula:
ERV - P
Aggregate Total Return = -------
P
Where: P = a hypothetical initial payment of $1,000
DISTRIBUTION RATES
In its sales literature, the Fund may also quote its distribution rate
along with the above described standard total return and yield information. The
distribution rate is calculated by annualizing the latest distribution and
dividing the result by the offering price per share as of the end of the period
to which the distribution relates. A distribution can include gross investment
income from debt obligations purchased at a premium and in effect include a
portion of the premium paid. A distribution can also include gross short-term
capital gains without recognition of any unrealized capital losses. Further, a
distribution can include income from the sale of options by the Fund even though
such option income is not considered investment income under generally accepted
accounting principles.
Because a distribution can include such premiums, capital gains and
option income, the amount of the distribution may be susceptible to control by
the Adviser through transactions designed to increase the amount of such items.
Also, because the distribution rate is calculated in part by dividing the latest
distribution by net asset value, the distribution rate will increase as the net
asset value declines. A distribution rate can be greater than the yield rate
calculated as described above.
ADDITIONAL INFORMATION ON TAX ISSUES
THIS SECTION IS NOT INTENDED TO BE A FULL DISCUSSION OF ALL THE ASPECTS
OF THE FEDERAL INCOME TAX LAW AND ITS EFFECTS ON THE FUND AND ITS SHAREHOLDERS.
SHAREHOLDERS MAY BE SUBJECT TO STATE AND LOCAL TAXES ON DISTRIBUTIONS. EACH
INVESTOR SHOULD CONSULT A TAX ADVISOR REGARDING THE EFFECT OF FEDERAL, STATE AND
LOCAL TAXES ON AN INVESTMENT IN THE FUND.
TAXATION OF THE FUND -- IN GENERAL
As stated in its Prospectus, the Fund intends to continue to qualify as
a "regulated investment company" under Subchapter M of the Internal Revenue Code
(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, 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 (the "90% test"); (b) derive in each taxable year less
than 30% of its gross income from the sale or other disposition of stock,
securities or certain options, futures or foreign currencies held less than
three months (the "30% test"), and (c) satisfy certain diversification
requirements at the close of each quarter of the Fund's taxable year.
15
<PAGE>
If the Fund qualifies as a regulated investment company and distributes
at least 90% of its net investment income, the Fund will not be subject to
Federal income tax on the income so distributed. However, the Fund would be
subject to corporate income tax on any undistributed income other than tax-
exempt income from municipal securities.
The Code imposes a non-deductible 4% excise tax on a regulated
investment company that fails to distribute during each calendar year an amount
equal to the sum of (1) at least 98% of its ordinary income for the calendar
year, (2) at least 98% of its capital gain net income for the twelve-month
period ending on October 31 of the calendar year, and (3) any portion not
taxable to the Fund of the respective balance from the preceding calendar year.
The Fund intends to make such distributions as are necessary to avoid imposition
of this excise tax.
TAXATION OF CERTAIN MORTGAGE REITS
The Fund may invest in REITs that hold residual interests in real
estate mortgage investment conduits ("REMICs"). Under Treasury regulations that
have not yet been issued, but may apply retroactively, 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 them 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) and (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 be required to file a tax
return, to file a tax return and pay tax on such income. In addition, if at any
time during any taxable year a "disqualified organization" (as defined in the
Code) is a record holder of a share in 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.
TAXATION OF DEBT INSTRUMENTS
For Federal income tax purposes, debt securities purchased by the Fund
may be treated as having original issue discount. Original issue discount can
generally be defined as the excess of the stated redemption price at maturity of
a debt obligation over the issue price. Original issue discount is treated as
interest earned by the Fund for Federal income tax purposes, whether or not any
income is actually received, and therefore, is subject to the distribution
requirements of the Code. However, original issue discount with respect to
tax-exempt obligations generally will be excluded from the Fund's taxable
income, although it will be included in gross income for purposes of the 90%
test and the 30% test described above. Original issue discount with respect to
tax-exempt securities is accrued and added to the adjusted tax basis of such
securities for purposes of determining gain or loss upon sale or at maturity.
Generally, the amount of original issue discount for any period is determined on
the basis of a constant yield to maturity which takes into account the
compounding of accrued interest. Under section 1286 of the Code, an investment
in a stripped bond or stripped coupon will result in original issue discount.
16
<PAGE>
The Fund may purchase debt securities at a discount which exceeds the
original issue price plus previously accrued original issue discount remaining
on the securities, at the time of purchase. This additional discount represents
market discount for income tax purposes. Generally, market discount is accrued
on a daily basis, and any gain realized on disposition will be treated as
interest income for purposes of the 90% test to the extent it does not exceed
the accrued market discount on the security (unless the Fund elects to include
such accrued market discount in income in the tax year to which it is
attributable).
The Fund may purchase debt securities at a premium, i.e., at a purchase
price in excess of face amount. With respect to tax-exempt securities, the
premium must be amortized to the maturity date but no deduction is allowed for
the premium amortization. Instead, the amortized bond premium will reduce the
Fund's adjusted tax basis in the securities. For taxable securities, the premium
may be amortized if the Fund so elects. The amortized premium on taxable
securities is allowed as a deduction, and, generally for securities issued after
September 27, 1985, must be amortized under an economic accrual method.
TAXATION OF THE SHAREHOLDER
Taxable distributions generally are included in a shareholder's gross
income for the taxable year in which they are received. However, dividends
declared in October, November and December and made payable to shareholders of
record in such a month will be deemed to have been received on December 31 if
paid by the Fund during the following January.
Distributions by the Fund will result in a reduction in the fair market
value of the Fund's shares. Should a distribution reduce the fair market value
below a shareholders cost basis, such distribution nevertheless would be taxable
to the shareholder as ordinary income or long-term capital gain, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares of the Fund just prior to a distribution. The price of such shares
includes the amount of any forthcoming distribution so that those investors may
receive a return of investment upon distribution which will nevertheless be
taxable to them.
A redemption of shares is a taxable event and, accordingly, a capital
gain or loss may be recognized. If a shareholder receives a distribution taxable
as long-term capital gain and redeems or exchanges shares which he has not held
for more than six months, any loss on the redemption or exchange (not otherwise
disallowed as attributable to an exempt-interest dividend) will be treated as
long-term capital loss to the extent of the long-term capital gain previously
recognized.
FOREIGN HOLDERS
A "Foreign Holder" is a person or entity that, for U.S. Federal income
tax purposes, is a nonresident alien individual, a foreign corporation, a
foreign partnership, or a non-resident fiduciary of a foreign estate or trust.
If a distribution of the Fund's taxable income (without regard to its net
capital gain) to a Foreign Holder is not effectively connected with a U.S. trade
or business carried on by the investor, such distribution will be subject to
withholding tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. In addition, distributions from the Fund will
generally be subject to information reporting.
If at least 50% of the value of the Fund is represented by shares of
REITs that are "domestically controlled" within the meaning of Section 897(h) of
the Code, or is represented by shares of classes of REIT stock that (i)
represent not more than 5% of such classes and (ii) are "regularly traded on an
established securities market" within the meaning of Section 897(c)(3) of the
Code, a Foreign Holder
17
<PAGE>
should not be subject to withholding tax under the Foreign Investment in Real
Property Tax Act ("FIRPTA") with respect to gain arising from the sale or
redemption of Units. In addition, based upon advice of counsel as to existing
law, the Trustee does not intend to withhold under FIRPTA on distributions of
the Fund's net capital gain (designated as capital gain by the Fund). Such
income generally will not be subject to Federal income tax unless the income is
effectively connected with a trade or business of such Foreign Holder in the
United States. In the case of a Foreign Holder who is a non-resident alien
individual, however, gain arising from the sale or redemption of shares or
distributions of the Fund's net capital gain ordinarily will be subject to
Federal income tax at a rate of 30% if such individual is physically present in
the U.S. for 183 days or more during the taxable year and, in the case of the
gain arising from the sale or redemption of Units, either the gain is
attributable to an office or other fixed place of business maintained by the
Holder in the United States or the Holder has a "tax home" in the United States.
In addition, shares held by an individual who is not a citizen or resident of
the United States at the time of his death will generally be subject to United
States federal estate tax.
The tax consequences to a Foreign Holder entitled to claim the benefits
of an applicable tax treaty may be different from those described herein.
Foreign Holders should consult their own tax advisers to determine whether
investment in the Fund is appropriate.
CUSTODIAN
The Custodian of the Fund's assets is Investors Bank & Trust Company,
89 South Street, Boston, Massachusetts. The Custodian maintains all of the
instruments representing the investments of the Fund and all cash. The Custodian
delivers securities against payment upon sale and pays for securities against
delivery upon purchase. The Custodian also remits Fund assets in payment of Fund
expenses pursuant to instructions of officers and resolutions of the Board of
Directors.
LEGAL COUNSEL
D'Ancona & Pflaum, 30 N. LaSalle Street, Chicago, Illinois 60602, is
legal counsel to the Fund.
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP ("Deloitte & Touche"), 125 Summer Street, Boston,
MA 02110 provides audit and tax services to the Fund. The financial highlights
included in the Prospectus and the audited financial statements included in this
Statement of Additional Information have been included in reliance upon the
report of Deloitte & Touche, independent accountants, given on the authority of
that firm as experts in auditing and accounting.
18
<PAGE>
APPENDIX
CORPORATE BOND RATINGS
The following is a description of Moody's Investors Service, Inc.'s investment
grade bond ratings:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make long-term risks appear somewhat larger than Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e.
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
The following is a description of Standard & Poor's Corporation's investment
grade bond ratings:
AAA: Bonds rated AAA are considered highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. They move with
market interest rates, and thus provide the maximum safety on all counts.
AA: Bonds rated AA are high-grade obligations. In the majority of instances,
they differ from AAA issues only to a small degree. Prices of AA bonds also move
with the long-term money market.
A: Bonds rated A are upper medium grade obligations. They have considerable
investment strength, but are not entirely free from adverse effects of change in
economic and trade conditions. Interest and principal are regarded as safe. They
predominantly reflect money rates in their market behavior but, to some extent,
also economic conditions.
BBB: Bonds rated BBB are medium grade obligations. They are considered
borderline between definitely sound obligations and those where the speculative
element begins to predominate. These bonds have adequate asset coverage and are
normally protected by satisfactory earnings. Their susceptibility to changing
conditions, particularly to depressions, necessitates constant monitoring. These
bonds are more responsive to business and trade conditions than to interest
rates. This group is the lowest that qualifies for commercial bank investment.
19
<PAGE>
FINANCIAL STATEMENTS
RREEF REAL ESTATE SECURITIES FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET PERCENT OF
DESCRIPTION SHARES VALUE NET ASSETS
- ----------- ------ ----- ----------
REAL ESTATE INVESTMENT TRUSTS
<S> <C> <C> <C>
MULTI-FAMILY RESIDENTIAL
Avalon Properties, Inc. . . . . . . . . . . . . . . 4,000 $ 84,000
Bay Apartment Communities . . . . . . . . . . . . . 7,900 198,488
Equity Residential Properties Trust . . . . . . . . 10,000 322,500
Evans Withycombe Residential . . . . . . . . . . . . 4,900 105,963
Gables Residential Trust . . . . . . . . . . . . . . 14,100 333,113
Mid-America Apartment Communities, Inc. . . . . . . 8,000 211,000
Oasis Residential, Inc. . . . . . . . . . . . . . . 4,200 94,500
Security Capital Pacific Trust . . . . . . . . . . . 6,700 139,863
United Dominion Realty Trust . . . . . . . . . . . . 23,300 332,025
-------
1,821,452 37.3%
---------
INDUSTRIAL
Centerpoint Properties Corporation . . . . . . . . . 8,100 195,413
First Industrial Realty Trust . . . . . . . . . . . 7,200 171,900
Meridian Industrial Trust, Inc. . . . . . . . . . . 5,800 93,525
Weeks Corporation . . . . . . . . . . . . . . . . . 8,800 214,500
-------
675,338 13.8%
-------
RETAIL
REGIONAL MALLS
CBL & Associates Properties . . . . . . . . . . . . 6,400 132,000
Macerich Company . . . . . . . . . . . . . . . . . . 9,700 187,938
-------
319,938 6.6%
-------
NEIGHBORHOOD AND COMMUNITY SHOPPING CENTERS
Developers Diversified Realty Corporation . . . . . 8,100 235,913
Vornado Realty Trust . . . . . . . . . . . . . . . . 2,300 86,825
------
322,738 6.6%
------- ---
642,676 13.2%
------- ----
OFFICE
Beacon Properties Corporation . . . . . . . . . . . 5,100 130,688
Cali Realty Corporation . . . . . . . . . . . . . . 6,400 146,400
Highwood Properties, Inc. . . . . . . . . . . . . . 3,000 90,750
Spieker Properties, Inc. . . . . . . . . . . . . . . 8,900 231,400
Reckson Associates Realty Corporation . . . . . . . 7,900 235,020
-------
834,258 17.1%
-------
STORAGE
Public Storage, Inc. . . . . . . . . . . . . . . . . 11,500 235,750
Storage USA, Inc. . . . . . . . . . . . . . . . . . 5,500 182,188
-------
417,938 8.6%
-------
HOTELS
Felcor Suite Hotels, Inc. . . . . . . . . . . . . . 2,900 84,463
Patriot American Hospitality . . . . . . . . . . . . 1,700 47,388
Starwood Lodging Trust . . . . . . . . . . . . . . . 1,700 56,202
------
188,053 3.8%
-------
DIVERSIFIED
Colonial Properties Trust . . . . . . . . . . . . . 3,400 81,600 1.7%
------
TOTAL INVESTMENTS (Cost $4,464,783) * 4,661,315 95.5%
Excess of Other Assets over Liabilities 219,564 4.5%
------- ----
NET ASSETS $ 4,880,879 100.0%
=========== =====
* Aggregate Cost for Federal tax purposes.
</TABLE>
See accompanying notes to the financial statements.
5
RREEF REAL ESTATE SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at value (cost $4,464,783) $4,661,315
Cash 26,231
Receivable for investments sold 135,426
Dividends and interest receivable 12,190
Net receivable from Adviser 54,322
Unamortized organizational expenses (Note 1) 85,947
------
Total assets 4,975,431
---------
Liabilities:
Payable for investments purchased 56,202
Accrued expenses 38,350
------
Total liabilities 94,552
------
Net Assets (equivalent to $10.79 per share based on 452,422
shares outstanding, unlimited shares authorized)* $4,880,879
Net assets consist of:
Paid-in capital $4,562,988
Undistributed net investment income 90,993
Accumulated net realized gain 30,366
Net unrealized appreciation of investments 196,532
-------
Net assets $4,880,879
==========
* Shares of the Fund are sold and redeemed at net asset value.
</TABLE>
See accompanying notes to the financial statements.
7
RREEF REAL ESTATE SECURITIES FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Dividends $ 138,800
Interest 6,182
-----
Total income 144,982
-------
EXPENSES:
Management fees (Note 2) 15,630
Custodian, transfer agent and administration fees 82,208
Insurance 15,415
Audit and tax fees 12,432
Legal fees 12,432
Directors fees 10,592
Amortization of organizational expense 9,735
Miscellaneous 9,508
-----
Total expenses 167,952
Less: fees waived and expenses reimbursed by
Adviser (Note 2) (146,981)
Less: fees offset by Custodian (Note 2) (131)
----
Net expenses 20,840
------
Net investment income 124,142
-------
REALIZED AND UNREALIZED GAINS:
Net realized gain on investments 30,366
Net change in unrealized appreciation on investments 279,122
-------
Net realized and unrealized gain on investments 309,488
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 433,630
==========
</TABLE>
See accompanying notes to the financial statements.
8
RREEF REAL ESTATE SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1996 PERIOD ENDED
(UNAUDITED) OCTOBER 31, 1995*
INCREASE (DECREASE) IN NET ASSETS:
<S> <C> <C>
Operations:
Net investment income $ 124,142 $ 19,789
Net realized gain 30,366 --
Change in net unrealized depreciation on investments 279,122 (82,590)
------- -------
Net increase/(decrease) in net assets resulting
from operations 433,630 (62,801)
Distributions to shareholders from:
Net investment income (52,938) --
Net increase in net assets resulting
from Fund share transactions (Note 4) 1,517,224 2,945,754
--------- ---------
Total increase in net assets 1,897,916 2,882,953
Net assets:
Beginning of period 2,982,963 100,010
--------- -------
End of period (including undistributed net investment
income of $90,993 and $19,789 respectively) $ 4,880,879 $ 2,982,963
============ ============
* The Fund commenced operations on September 21, 1995.
</TABLE>
See accompanying notes to the financial statements.
9
RREEF REAL ESTATE SECURITIES FUND
FINANCIAL HIGHLIGHTS
(FOR A FUND SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30, 1996 PERIOD ENDED
(UNAUDITED) OCTOBER 31, 1995*
----------- ----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.82 $ 10.00
------- --------
Income from investment operations:
Net investment income 0.27 0.07
Net realized and unrealized gain (loss) on investments 0.83 (0.25)
---- -----
Total from investment operations 1.10 (0.18)
---- -----
Less distributions to shareholders from:
Net investment income (0.13) -
----- -----
Net realized gains - -
----- -----
Total distributions to shareholders (0.13) -
----- -----
Net asset value, end of period $ 10.79 $ 9.82
========= ========
Aggregate Total Return 11.26% (1.80%)
Ratios/Supplemental Data:
Net expenses as a percentage of
average net assets 1.00%** 1.50%**
Net investment income as a percentage of
average net assets 5.96%** 6.66%**
Portfolio turnover rate 36% 0%
Average broker commission rate $ 0.0560 N/A
Net assets, end of period (000's) $ 4,881 $ 2,983
The Adviser has voluntarily agreed to waive its management fee and reimburse
certain expenses incurred by the Fund. The Custodian has waived part of
its fees for balance credits given to the Fund. Without these waivers of
fees and reimbursement of expenses, the ratios of expenses and net income
as a percentage of average net assets would have been:
Net expenses as a percentage of
average net assets 8.06%** 14.83%**
Net investment income as a percentage of
average net assets (1.10%)** (6.67%)**
- -------------------------------------------------------------
* The Fund commenced operations on September 21, 1995.
** Annualized
</TABLE>
See accompanying notes to the financial statements.
10
RREEF REAL ESTATE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SIGNIFICANT Accounting policies
RREEF Real Estate Securities Fund (the "Fund") is a series of RREEF
Securities Fund, Inc. (the "Company"). The Fund is registered under the
Investment Company Act of 1940, as amended, as an open end, non-diversified
management investment company. The Company was organized in Maryland on
March 15, 1995 and commenced operations on September 21, 1995. The
following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
PORTFOLIO VALUATION
Equity securities listed or regularly traded on a securities exchange
(including NASDAQ) are valued at the last quoted sales price on the day the
valuations are made. A security which is listed or traded on more than one
exchange is valued according to the broadest and most representative market
as determined by RREEF Real Estate Securities Advisers L.P. (the
"Adviser"). Other equity securities and those listed securities that are
not traded on a particular day are valued at the mean between the latest
bid and asked prices. Debt securities are generally traded in the
over-the-counter market and are valued at a price deemed best to reflect
fair value as quoted by dealers who make markets in these securities or by
an independent pricing service. Short-term debt obligations and money
market securities maturing in sixty days or less are valued at amortized
cost which approximates value. Securities for which the above valuation
procedures are inappropriate or are deemed not to reflect fair value are
stated at fair value as determined in good faith by or under the
supervision of the officers of the Fund as authorized by the Board of
Directors.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with certain banks and
broker/dealers whereby the Fund acquires a security for cash and obtains a
simultaneous commitment from the seller to repurchase the security at an
agreed upon price and date. The Fund, through its custodian, takes
possession of securities collateralizing the repurchase agreement. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The collateral is marked to
market daily to ensure that the market value including accrued interest of
the underlying assets remains sufficient to protect the Fund in the event
of default by the seller. In connection with transactions in repurchase
agreements, if the seller defaults and the value of the collateral declines
or if the seller enters insolvency proceedings, realization of collateral
by the Fund may be delayed or limited. The Fund will enter into repurchase
agreements only with dealers or banks determined by the Adviser to present
minimal credit risks pursuant to procedures established by the Board of
Directors to evaluate creditworthiness.
11
TAXES
The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Internal Revenue Code, as amended (the "Code").
The Fund intends to distribute to shareholders all of its taxable income,
including any net realized gain on investments not offset by loss
carryovers, to shareholders within the prescribed time periods.
Accordingly, no provision for federal income or excise tax is provided.
DISTRIBUTIONS TO SHAREHOLDERS
The Fund intends to declare distributions from net investment income, if
any, semi-annually. The Fund intends to distribute capital gains, if any,
annually. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for losses deferred due to wash sales, excise tax
regulations and utilization of capital loss carryovers. Permanent
differences relating to shareholder distributions will result in
reclassifications to paid-in capital.
INVESTMENT TRANSACTIONS AND INCOME
Security transactions are accounted for on the trade date. Dividend income
and distributions to shareholders are recorded on the ex-dividend date.
Interest income is recorded on the accrual basis. In determining the net
realized gain or loss on securities sold, the cost of securities is
determined on the identified cost basis.
DEFERRED ORGANIZATION EXPENSES
Costs incurred by the Fund in connection with its organization have been
deferred In the event that any of the initial shares of the Fund are
redeemed during such amortization period, the Fund will be reimbursed for
any unamortized costs in the same proportion as the number of shares
redeemed bears to the number of initial shares outstanding at the time of
redemption.
INVESTMENT RISK
There are certain additional risks involved in investing in Real Estate
Investment Trusts ("REITs") than a more diversified portfolio of
investments. The Fund may be subject to certain risks similar to those
associated with direct ownership of real estate including: local or
regional economic conditions, changes in zoning laws, credit risk, and
interest rate risk.
12
2. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund pays the Adviser, for management and investment advisory services,
a fee at an annual rate of 0.75% of daily net assets of the Fund up to $100
million and 0.65% on daily net assets in excess of $100 million. The
Adviser has agreed, at least until October 31, 1996, to waive its fee and
additionally reimburse the Fund to the extent the Fund's annual expenses
(including management fee but excluding taxes, interest, extraordinary
expenses and brokerage commissions or transaction costs) exceed 1.00% of
average daily net assets.
Certain Officers and Directors of the Fund are also Officers or Directors
of the Adviser, or Investors Bank and Trust Company ("Investors Bank").
Officers and Directors of the Adviser and Investors Bank do not receive any
compensation from the Fund for serving as Director or Officer of the Fund.
The Fund has entered into an expense offset arrangement as part of its
Custody agreement with Investors Bank. Under this arrangement, the Fund's
custody fees are reduced when the Fund maintains cash on deposit at
Investors Bank.
3. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from the sale of securities, excluding
short-term investments, for the six months ended April 30, 1996 were
$2,883,775 and $1,399,537 respectively.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis,
are as follows:
Aggregate cost $ 4,464,783
-----------
Gross unrealized depreciation (21,059)
Gross unrealized appreciation 217,591
Net unrealized depreciation $ 196,532
===========
13
4. SHARE TRANSACTIONS
The Articles of Incorporation of the Company permits the Directors to issue
2,000,000,000 shares of capital stock (par value $.001 per share),
500,000,000 shares of which are classified as shares of the Fund.
Transactions in Fund shares during the periods indicated were as follows:
<TABLE>
<CAPTION>
Six Months Ended Period Ended
April 30, 1996 October 31, 1995
------------------------------- -------------------------------
Dollars Shares Dollars Shares
<S> <C> <C> <C> <C>
Shares sold $ 1,482,031 145,260 $ 2,945,754 293,768
Shares issued to shareholders in 38,502 3,702 -- --
reinvestment of distributions
Shares repurchased (3,309) (309) -- --
------ ------ ------ ------
Net increase $ 1,517,224 148,653 $ 2,945,754 293,768
============= ======= ============= =======
</TABLE>
5. PRINCIPAL SHAREHOLDERS
Four shareholders, each owning greater than 10% of the outstanding shares
of the Fund, cumulatively own 83% of the outstanding shares.
14
[RREEF LOGO]
RREEF Funds
875 North Michigan Avenue
Chicago, IL 60611
312-266-9300
RREEF Real Estate Securities Fund
Portfolio of Investments
October 31, 1995
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Share/Par Market Percent of
Description Amount Value Net Assets
- ----------- ------ ----- ----------
<S> <C> <C> <C>
REAL ESTATE INVESTMENT TRUSTS
Multi-Family Residential
Avalon Properties, Inc.......................... 4,500 $ 87,750
Bay Apartment Communities....................... 6,000 123,750
Equity Residential Properties Trust............. 4,800 134,400
Gables Residential Trust........................ 6,400 137,600
Mid-America Apartment Communities, Inc.......... 5,700 131,100
Oasis Residential, Inc.......................... 2,800 60,900
Security Capital Pacific Trust.................. 4,900 87,588
Summit Properties, Inc.......................... 6,400 118,400
United Dominion Realty Trust.................... 8,900 122,375
-----------
1,003,863
----------- 33.7%
Retail
Regional Malls
CBL & Associates Properties..................... 7,200 153,000
Macerich Company................................ 10,300 207,289
Simon Property Group, Inc....................... 8,600 199,950
-----------
560,239 18.8%
-----------
Neighborhood and Community Shopping Centers
Developers Diversified Realty Corporation....... 4,700 133,950
Vornado Realty Trust............................ 1,900 68,163
-----------
202,113 6.8%
-----------
762,352 25.6%
----------- ----------
Industrial
Centerpoint Properties Corporation.............. 5,800 131,225
First Industrial Realty Trust................... 7,500 152,813
Spieker Properties, Inc......................... 8,100 196,425
-----------
480,463 16.1%
-----------
Office
Beacon Properties Corporation................... 1,500 32,621
Cali Realty Corporation......................... 2,800 54,600
Highwood Properties, Inc........................ 6,300 167,738
Koger Equity, Inc.*............................. 6,900 66,413
-----------
321,372 10.8%
-----------
Storage
Sovran Self Storage, Inc........................ 2,400 59,400
Storage Equities, Inc........................... 4,700 86,363
Storage Trust Realty............................ 5,600 109,900
Storage USA, Inc................................ 1,500 43,875
-----------
299,538 10.0%
----------- ----------
TOTAL REAL ESTATE INVESTMENT TRUSTS (Cost $2,950,178) 2,867,588 96.2%
----------- ----------
SHORT-TERM INVESTMENT
Bank of Boston Cash Sweep..... 5.20% 11/01/95 $ 150,128 150,128 5.0%
----------- ----------
TOTAL SHORT-TERM INVESTMENT (at Amortized Cost) 150,128 5.0%
----------- ----------
TOTAL INVESTMENTS (Cost $3,100,306**) 3,017,716 101.2%
Excess of Other Assets over Liabilities (34,753) (1.2)%
----------- ----------
NET ASSETS $ 2,982,963 100.0%
=========== ==========
</TABLE>
Notes to the Portfolio of Investments:
*Non-Income producing security.
**Aggregate cost for Federal tax purposes.
See accompanying notes to the financial statements.
<PAGE>
RREEF Real Estate Securities Fund
Statement of Assets and Liabilities
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at value (cost $3,100,306) $ 3,017,716
Cash 90,683
Dividends and interest receivable 10,671
Unamortized organizational expenses (Note 1) 95,682
----------
Total assets 3,214,752
----------
Liabilities:
Net payable to Adviser 85,695
Payable for investments purchased 131,653
Accrued expenses 14,441
----------
Total liabilities 231,789
----------
Net Assets (equivalent to $9.82 per share based on 303,769
shares outstanding, unlimited shares authorized)* $ 2,982,963
==========
Net assets consist of:
Paid-in capital $ 3,045,764
Undistributed net investment income 19,789
Net unrealized depreciation of investments (82,590)
----------
Net assets $ 2,982,963
==========
</TABLE>
* Shares of the Fund are sold and redeemed at net asset value.
See accompanying notes to the financial statements.
<PAGE>
RREEF Real Estate Securities Fund
Statement of Operations
For the period September 21, 1995 (Commencement of Operations) to October 31,
1995
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income:
Dividends $ 23,809
Interest 435
---------
Total income 24,244
---------
Expenses:
Management fees (Note 2) 2,227
Custodian, transfer agent and administration fees 19,296
Audit and tax fees 14,159
Amortization of organizational expense 2,199
Directors fees 1,011
Miscellaneous 5,136
---------
Total expenses 44,028
Less: fees waived and expenses reimbursed by Adviser (Note 2) (37,700)
Less: fees offset by Custodian (Note 2) (1,873)
---------
Net expenses 4,455
---------
Net investment income 19,789
---------
Change in net unrealized depreciation on investments (82,590)
---------
Net decrease in net assets resulting from operations $ (62,801)
=========
</TABLE>
See accompanying notes to the financial statements.
<PAGE>
RREEF Real Estate Securities Fund
Statement of Changes in Net Assets
For the period September 21, 1995 (Commencement of Operations) to October 31,
1995
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 19,789
Change in net unrealized depreciation on investments (82,590)
----------
Net decrease in net assets resulting from operations (62,801)
Net increase in net assets resulting
from Fund share transactions (Note 4) 2,945,754
----------
Total increase in net assets 2,882,953
Net assets:
Beginning of period 100,010
----------
End of period (including undistributed net investment income of $19,789) $ 2,982,963
==========
</TABLE>
See accompanying notes to the financial statements.
<PAGE>
RREEF Real Estate Securities Fund
Financial Highlights
(For a Fund share outstanding throughout the period)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period from
September 21, 1995*
to October 31, 1995
---------------------
<S> <C>
Net asset value, beginning of period $ 10.00
------
Income from investment operations:
Net investment income 0.07
Net unrealized loss on investments (0.25)
------
Total from investment operations (0.18)
------
Net asset value, end of period $ 9.82
======
Aggregate Total Return (1.80%)
Ratios/Supplemental Data:
Net expenses as a percentage of
average net assets 1.50%**
Net investment income as a percentage of
average net assets 6.66%**
Portfolio turnover rate 0%
Net assets, end of period (000's) $ 2,983
The Adviser has voluntarily agreed to waive its management fee
and reimburse certain expenses incurred by the Fund. The
Custodian has offset part of its fees for balance credits
given to the Fund. Without the waiver and offset of fees and
reimbursement of expenses, the ratios of expenses and net
income as a percentage of average net assets would have been:
Net expenses as a percentage of
average net assets 14.83%**
Net investment income as a percentage of
average net assets (6.67%)**
- ------------------------------------------------------------------
</TABLE>
* Commencement of Operations
** Annualized
See accompanying notes to the financial statements.
<PAGE>
RREEF Real Estate Securities Fund
Notes to Financial Statements
- -------------------------------------------------------------------------------
1. Significant accounting policies
RREEF Real Estate Securities Fund (the "Fund") is a series of RREEF
Securities Fund, Inc. (the "Company"). The Fund is registered under the
Investment Company Act of 1940, as amended, as an open end, non-diversified
management investment company. The Company was organized in Maryland on
March 15, 1995 and commenced operations on September 21, 1995. The following
is a summary of significant accounting policies consistently followed by the
Fund in the preparation of its financial statements.
Portfolio valuation
Equity securities listed or regularly traded on a securities exchange
(including NASDAQ) are valued at the last quoted sales price on the day the
valuations are made. A security which is listed or traded on more than one
exchange is valued according to the broadest and most representative market
as determined by RREEF Real Estate Securities Advisers L.P. (the "Adviser").
Other equity securities and those listed securities that are not traded on a
particular day are valued at the mean between the latest bid and asked
prices. Debt securities are generally traded in the over-the-counter market
and are valued at a price deemed best to reflect fair value as quoted by
dealers who make markets in these securities or by an independent pricing
service. Short-term debt obligations and money market securities maturing in
sixty days or less are valued at amortized cost which approximates value.
Securities for which the above valuation procedures are inappropriate or are
deemed not to reflect fair value are stated at fair value as determined in
good faith by or under the supervision of the officers of the Fund as
authorized by the Board of Directors.
Repurchase agreements
The Fund may enter into repurchase agreements with certain banks and
broker/dealers whereby the Fund acquires a security for cash and obtains a
simultaneous commitment from the seller to repurchase the security at an
agreed upon price and date. The Fund, through its custodian, takes
possession of securities collateralizing the repurchase agreement. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The collateral is marked to
market daily to ensure that the market value including accrued interest of
the underlying assets remains sufficient to protect the Fund in the event of
default by the seller. In connection with transactions in repurchase
agreements, if the seller defaults and the value of the collateral declines
or if the seller enters insolvency proceedings, realization of collateral by
the Fund may be delayed or limited. The Fund may enter into repurchase
agreements only with dealers or banks determined by the Adviser to present
minimal credit risks pursuant to procedures established by the Board of
Directors to evaluate creditworthiness.
<PAGE>
RREEF Real Estate Securities Fund
Notes to Financial Statements
- -------------------------------------------------------------------------------
Taxes
The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Internal Revenue Code, as amended (the "Code").
The Fund intends to distribute to shareholders all of its taxable income,
including any net realized gain on investments not offset by loss
carryovers, to shareholders within the prescribed time periods. Accordingly,
no provision for federal income or excise tax is provided.
Distributions to shareholders
The Fund intends to declare distributions from net investment income, if
any, semi-annually. The Fund intends to distribute capital gains, if any,
annually.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
losses deferred due to wash sales, excise tax regulations and utilization of
capital loss carryovers. Permanent differences relating to shareholder
distributions will result in reclassifications to paid-in capital.
Investment transactions and income
Security transactions are accounted for on the trade date. Dividend income
and distributions to shareholders are recorded on the ex-dividend date.
Interest income is recorded on the accrual basis. In determining the net
realized gain or loss on securities sold, the cost of securities is
determined on the identified cost basis.
Deferred organization expenses
Costs incurred by the Fund in connection with its organization have been
deferred and are being amortized on a straight-line basis over a five year
period beginning on the commencement of operations. In the event that any of
the initial shares of the Fund are redeemed during such amortization period,
the Fund will be reimbursed for any unamortized costs in the same proportion
as the number of shares redeemed bears to the number of initial shares
outstanding at the time of redemption.
Investment risk
There are certain additional risks involved in investing in Real Estate
Investment Trusts ("REITs") than a more diversified portfolio of
investments. The Fund may be subject to certain risks similar to those
associated with direct ownership of real estate including: local or regional
economic conditions, changes in zoning laws, credit risk, and interest rate
risk.
<PAGE>
RREEF Real Estate Securities Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
2. Management fee and other transactions with affiliates
The Fund pays the Adviser, for management and investment advisory services,
a fee at an annual rate of 0.75% of daily net assets of the Fund up to $100
million and 0.65% on daily net assets in excess of $100 million. The Adviser
has currently agreed to waive its fee and additionally reimburse the Fund to
the extent the Fund's annual expenses (including management fee but
excluding taxes, interest, extraordinary expenses and brokerage commissions
or transaction costs) exceed 1.50% of average daily net assets.
Certain Officers and Directors of the Fund are also Officers or Directors of
the Adviser. Officers and Directors of the Adviser do not receive any
compensation from the Fund for serving as Director or Officer of the Fund.
The fund has entered into an expense offset arrangement as part of its
Custody agreement with Investors Bank & Trust Company ("Investors Bank").
Under this arrangement, the Fund's custody fees are reduced when the Fund
maintains cash on deposit at the Custodian.
3. Purchases and sales of securities
Cost of purchases of securities, excluding short-term investments, for the
period from September 21, 1995 (commencement of operations) to October 31,
1995 was $2,950,178. There were no sales of securities during the period.
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis,
are as follows:
<TABLE>
<S> <C>
Aggregate cost $3,100,306
----------
Gross unrealized depreciation (94,420)
Gross unrealized appreciation 11,830
----------
Net unrealized depreciation $ (82,590)
----------
</TABLE>
<PAGE>
RREEF Real Estate Securities Fund
Notes to Financial Statements
- -------------------------------------------------------------------------------
4. Share transactions
The Articles of Incorporation of the Company permit the Directors to issue
an unlimited number of full and fractional shares of beneficial interest
(without par value). Transactions in Fund shares during the period from
September 21, 1995 (commencement of operations) to October 31, 1995 were as
follows:
<TABLE>
<CAPTION>
Dollars Shares
---------- -------
<S> <C> <C>
Shares sold $2,945,754 293,768
Shares issued to shareholders in
reinvestment of distributions --- ---
Shares repurchased --- ---
---------- -------
Net increase $2,945,754 293,768
========== =======
</TABLE>
5. Principal shareholders
Three shareholders, each owning greater than 10% of the outstanding shares
of the Fund, cumulatively own 90% of the outstanding shares.
<PAGE>
Independent Auditors' Report
To the Directors and Shareholders of RREEF Real Estate
Securities Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of RREEF Real Estate Securities Fund (a series of
RREEF Securities Fund, Inc.) as of October 31, 1995, the related statements of
operations and changes in net assets, and the financial highlights, for the
period September 21, 1995 (commencement of operations) through October 31, 1995.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned at October 31, 1995 by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of RREEF Real Estate
Securities Fund at October 31, 1995, the results of its operations, the changes
in its net assets, and its financial highlights for the period September 21,
1995 through October 31, 1995 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 8, 1995
[LOGO OF RREEF SECURITIES FUND, INC]
RREEF Funds, Inc.
650 California Street
San Francisco, CA 95108
415-781-3300
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Statements included in the Prospectus constituting
Part A of this Registration Statement
Financial Highlights for the period September 21, 1995
(commencement of operations)to October 31, 1995(audited) and
for the six months ended April 30, 1996 (unaudited)
(2) Financial Statements included in the Statement of Additional
Information constituting Part B of this Registration Statement
(Audited)
Portfolio of Investments at October 31, 1995
Statement of Assets and Liabilities at October 31, 1995
Statement of Operations for the period September 21, 1995
(commencement of operations) to October 31, 1995
Statement of Changes in Net Assets for the period September
21, 1995 (commencement of operations) to October 31, 1995
Financial Highlights for the period September 21, 1995
(commencement of operations) to October 31, 1995
Notes to Financial Statements
Report of Deloitte & Touche LLP, Independent Auditors
(3) Financial Statements included in the Statement of Additional
Information constituting Part B of this Registration Statement
(Unaudited)
Portfolio of Investments at April 30, 1996
Statement of Assets and Liabilities at April 30, 1996
Statement of Operations for the six months ended April 30,
1996
Statement of Changes in Net Assets for the six months ended
April 30, 1996 and for the period September 31, 1995
(commencement of operations) to October 31, 1995
Financial Highlights for the six months ended April 30, 1996
and for the period September 21, 1995 (commencement of
operations) to October 31, 1995
Notes to Financial Statements
(b) Exhibits:
1. Articles of Incorporation. /1/
2. By-Laws. /1/
3. Not Applicable.
4. Not Applicable.
5. (a) Investment Advisory Agreement. /1/
(b) Administration Agreement. /1/
6. Not Applicable.
7. Not Applicable.
8. Custodian Agreement. /1/
9. Transfer Agency Contract. /1/
10. Legal opinion is incorporated by reference to
Rule 24f-2 Notice as filed with the SEC on
January 5, 1996.
11. Consent of Independent Auditors. /2/
12. Not Applicable.
13. Not Applicable.
<PAGE>
14. Not Applicable.
15. Rule 12b-1 Distribution Plan. /1/
16. Schedule for Computation of Performance Quotation. /2/
18. Not Applicable.
19. Powers of Attorney. /1/
27. Financial Data Schedule. /2/
1 Incorporated herein by reference to Post-Effective Amendment No. 1 to
Registrant's Registration Statement filed with the Securities and Exchange
Commission via EDGARLINK on January 23, 1996 (File No. 33-90762).
2 Filed herewith.
Item 25. Persons Controlled By or Under Common Control With Registrant
Not Applicable.
Item 26. Number of Holders of Securities
As of July 1, 1996 there were seven holders of record of Registrant's
shares.
Item 27. Indemnification
Registrant's Articles of Incorporation indemnify its directors,
officers and employees to the full extent permitted by Section 2-418 of the
Maryland General Corporation Law (the "Law"), subject only to the provisions of
the Investment Company Act of 1940. The indemnification provisions of the Law
permit, among other things, corporations to indemnify directors and officers
unless it is proved that the individual (1) acted in bad faith or with active
and deliberate dishonesty, (2) actually received an improper personal benefit in
money, property or services, or (3) in the case of a criminal proceeding, had
reasonable cause to believe that his or her act or omission was unlawful. The
Law also permits corporations to indemnify directors and officers for amounts
paid in settlement of stockholders' derivative suits.
In addition, the Registrant's directors and officers are covered under
a policy to indemnify them for loss
<PAGE>
(subject to certain deductibles) including costs of defense incurred by reason
of alleged errors or omissions, neglect or breach of duty. The policy has a
number of exclusions including alleged acts, errors, or omissions which are
finally adjudicated or established to be deliberate, dishonest, malicious or
fraudulent or to constitute willful misfeasance, bad faith, gross negligence or
reckless disregard of their duties in respect to any registered investment
company. This coverage is incidental to a general policy carried by the
Registrant's Adviser.
In addition to the foregoing indemnification, Registrant's Articles of
Incorporation exculpate directors and officers with respect to monetary damages
except to the extent that an individual actually received an improper benefit in
money property or services or to the extent that a final adjudication finds that
the individual acted with active and deliberate dishonesty.
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
RREEF Real Estate Securities Advisers, L.P., the Registrant's
investment adviser, renders investment advisory services to individual,
institutional and pension and profit-sharing plan accounts. The following
officers and directors of the Adviser's general partner, RREEF Real Estate
Securities Advisers, Inc. have been engaged in other professions and/or
employment capacities during the past two fiscal years, as indicated below.
Name of Company,
Name and Title Principal Business
With Adviser Address
Capacity
Kim G. Redding,
President RREEF America L.L.C.
Member
Stephen M. Steppe,
Vice President,
Secretary, Director RREEF America L.L.C.
Member
Donald A. King, Jr.,
Vice President, Director RREEF America L.L.C.
Member
D. Wylie Grieg,
Director RREEF America L.L.C.
Member
Suzanne M. Hauer,
Vice President RREEF America L.L.C.
Member
Webb Sowden, Jr.,
Vice President RREEF America L.L.C.
Member
Gary L. Thompson,
Vice President RREEF America L.L.C.
Member
<PAGE>
Paula M. Ferkull,
Treasurer RREEF America L.L.C.
Member
RREEF America L.L.C., which is under common control with the Adviser, a
registered investment adviser, is located at 650 California Street, San
Francisco, CA 94108. RREEF America L.L.C. provides investment advisory services
to various group trusts, separate accounts and real estate investment trusts.
All of the above-listed persons are also affiliated with The RREEF Corporation,
a registered investment adviser that provides discretionary investment advisory
services to corporations and group trusts. Such persons are also affiliated with
RREEF Management Company, an affiliated California corporation providing
administrative, property management, real estate brokerage and other support
services to RREEF America L.L.C., its affiliates and their clients.
<PAGE>
Item 29. Principal Underwriters
Not Applicable.
Item 30. Location of Accounts and Records.
All documents and records related to portfolio transactions are located
at RREEF Real Estate Securities Advisers, L.P., 875 North Michigan Avenue, 41st
Floor, Chicago, Illinois 60611.
All other documents and records are located at Investors Bank & Trust
Company, 89 South Street, Boston, MA 02111.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
Commencing with Registrant's annual report to shareholders for the year
ending October 31, 1995, Registrant undertakes to furnish to each person to whom
a Prospectus is delivered, a copy of the Registrant's latest Annual Report to
Shareholders, upon request and without charge.
<PAGE>
RREEF SECURITIES FUND, INC.
SIGNATURES
Registrant certifies that this Amendment meets all of the requirements
for effectiveness pursuant to Rule 485(b).
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant has caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago and State of Illinois on the 17th day of
July, 1996.
RREEF SECURITIES FUND, INC.
*By: /s/ Arthur Don
Arthur Don,
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
Kim G. Redding* Chief Executive July 17, 1996
Kim G. Redding Officer and Director
Paula M. Ferkull* Principal July 17, 1996
Paula M. Ferkull Financial and
Accounting Officer
*By: /s/ Arthur Don
Arthur Don,
Attorney-in-Fact
* Arthur Don signs this document on behalf of the Registrant and the
foregoing officers pursuant to the powers of attorney filed as Exhibit 19 to
this Registration Statement.
<PAGE>
RREEF SECURITIES FUND, INC.
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment has been signed on July 17, 1996 by the following
persons in the capacities indicated.
Signature Title
Donald A. King, Jr.* Director
Donald A. King, Jr.
Gregory Melchor* Director
Gregory Melchor
Willis K. Polite* Director
Willis K. Polite
William Wilson, III* Director
William Wilson, III
* Arthur Don signs this document on behalf of each of the foregoing
persons pursuant to the powers of attorney filed as Exhibit 19 to this
Registration Statement.
*/s/Arthur Don
Arthur Don,
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Item
Page
11 Consent of Independent Accountants.
16 Schedule for Computation of Performance Quotation.
27 Financial Data Schedule dated April 30, 1996.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from RREEF Real
Estate Securities Fund form NSAR for the period ended April 30, 1996 and is
qualified in its entirety by refernce to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 4,464,783
<INVESTMENTS-AT-VALUE> 4,661,315
<RECEIVABLES> 201,938
<ASSETS-OTHER> 85,947
<OTHER-ITEMS-ASSETS> 26,231
<TOTAL-ASSETS> 4,975,431
<PAYABLE-FOR-SECURITIES> 56,202
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 38,350
<TOTAL-LIABILITIES> 94,552
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,562,988
<SHARES-COMMON-STOCK> 452,422
<SHARES-COMMON-PRIOR> 303,769
<ACCUMULATED-NII-CURRENT> 90,993
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 30,366
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 279,122
<NET-ASSETS> 4,880,879
<DIVIDEND-INCOME> 138,800
<INTEREST-INCOME> 6,182
<OTHER-INCOME> 0
<EXPENSES-NET> 20,840
<NET-INVESTMENT-INCOME> 124,142
<REALIZED-GAINS-CURRENT> 30,366
<APPREC-INCREASE-CURRENT> 279,122
<NET-CHANGE-FROM-OPS> 433,630
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 52,938
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 145,260
<NUMBER-OF-SHARES-REDEEMED> 309
<SHARES-REINVESTED> 3,702
<NET-CHANGE-IN-ASSETS> 1,897,916
<ACCUMULATED-NII-PRIOR> 19,789
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 15,630
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 167,952
<AVERAGE-NET-ASSETS> 4,187,952
<PER-SHARE-NAV-BEGIN> 9.82
<PER-SHARE-NII> 0.27
<PER-SHARE-GAIN-APPREC> 0.83
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.13)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.79
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
EXHIBIT 11
INDEPENDENT AUDITORS' CONSENT
We consent to the inclusion in this Post-Effective Amendment No. 2 to the
Registration Statement No. 33-90762 of RREEF Securities Fund, Inc. of our report
dated December 8, 1995 on RREEF Real Estate Securities Fund and to the
references to us under the headings "Financial Highlights" in the Prospectus and
"Independent Accountants" in the Statement of Additional Information, which
are part of such Registration Statement.
/s/ Deloitte & Touche LLP
Boston Massachusetts
July 22, 1996
EXHIBIT 16
RREEF REAL ESTATE SECURITIES FUND
Computation of One Year Hypothetical Average Annual Total Return
Form N-1A Part C Item 16
<TABLE>
<CAPTION>
Initial NAV Dividend Shares Cumulative ERV Price
Investment Amount Shares
<S> <C> <C> <C> <C> <C> <C> <C>
9/21/95 1,000.00 10.00 100.000 100.000 1,000.00 0
12/29/95 10.40 13.10 1.260 101.260 1,053.10 .2705
4/30/96 10.79 101.260 1,092.59 .6066
</TABLE>
HYPOTHETICAL TOTAL RETURN CALCULATION
1
-----
1,092.59 .6066
T = (--------) - 1
1,000
T = 15.72%
