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
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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.
1
TABLE OF CONTENTS
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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 11
Management of the Fund 11
How to Purchase Shares 12
How to Redeem Shares 13
Performance Information 15
Shareholder Inquiries 15
2
FEES AND EXPENSES
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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%
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Total Fund Operating Expenses (after expense reimbursement)(3) 1.00%
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(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
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$10 $32
3
FINANCIAL HIGHLIGHTS
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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*
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<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.82 $ 10.00
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Income from investment operations:
Net investment income 0.27 0.07
Net realized and unrealized gain/loss on investments 0.83 (0.25)
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Total from investment operations 1.10 (0.18)
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Less distributions to shareholders from:
Net investment income (0.13) --
Net realized gains -- --
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Total distributions to shareholders (0.13) --
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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%)**
</TABLE>
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* The Fund commenced operations on September 21, 1995.
** Annualized.
4
INVESTMENT OBJECTIVES AND POLICIES
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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
5
invest in securities below investment grade (so called "junk bonds") although
the Fund will not 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
6
liquidity of Rule 144A Securities held by the Fund 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.
7
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.
8
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
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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
9
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
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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
10
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
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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
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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 875 N. Michigan Avenue,
Chicago, Illinois. 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.
The Adviser manages the investment and reinvestment of the assets of the Fund
and is respon-
11
sible 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.
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
$50,000. The minimum subsequent investment is $1,000. The Fund does not issue
certificates representing ownership of its shares.
12
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 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
13
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 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,
14
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.
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 con- sidered 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
15
RREEFREAL 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, MA 02110
RREEF
REAL ESTATE
SECURITIES
FUND
PROSPECTUS
& APPLICATION
AUGUST 1, 1996
RREEF
The RREEF Funds
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
- --------------------------------------------------------------------------------
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 Colleges, Churches, Charitable Organizations
Corporations Agents, Fiduciaries, Middlemen
Common Trust Funds Registered Securities Dealers
Financial Institutions
- --------------------------------------------------------------------------------
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.
