RREEF
REAL ESTATE
SECURITIES
FUND
SEMI-ANNUAL REPORT
APRIL 30, 1997(UNAUDITED)
[LOGO]
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PRESIDENT'S LETTER
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Dear Shareholder,
As you know, the RREEF Real Estate Securities Fund was recently merged with and
into the American Century Real Estate Fund. We are very enthusiastic about the
benefits of this to current shareholders, particularly with respect to the
transfer agency capabilities of American Century and the diversification
benefits of broader distribution. RREEF Real Estate Securities Advisors
continues as the investment manager through a subadvisory relationship.
The semi-annual report for the RREEF Fund is enclosed for your review. In
addition, below, I provide some commentary with respect to the market events
during the first quarter of 1997, and our outlook for the market for the
remainder of the year.
During the first quarter the REIT market continued the positive momentum
generated during 1996 with a total return for the Wilshire REIT Index of 1.0
percent. This compares to a total return in the S&P 500 of 2.7 percent during
the same period. The first quarter performance, while positive, represents a
dramatic reduction from the stellar performance during the fourth quarter of
1996 (20 percent). In fact, three sectors reported negative performance during
the quarter: self-storage, manufactured housing and factory outlet.
Over $4.2 billion in equity capital was raised during the first quarter in 45
different offerings. Two IPO's came to the market: Kilroy, an office company,
raised $330 million in January, and Golf Trust of America raised $80 million in
February. IPO activity may accelerate as several companies primarily in the
office sector have filed registrations in preparation for common share
offerings. Nevertheless, continuing the trend of the last several quarters,
secondary offerings dominated capital raising with the larger issuers including
Spieker ($345 million), TriNet ($202 million), Reckson ($195 million) and
Liberty ($184 million).
It was a relatively quiet quarter for mergers, with one significant exception:
Vornado Realty announced an agreement to purchase the Mendik Company for $654
million. Mendik, a sizable New York office company, diversifies Vornado out of
its retail emphasis and highlights the industry-wide trend of larger companies
pursuing external growth through diversification by product type or geographic
area. Management's ability to successfully execute diversification strategies
will be an important part of company analysis going forward.
2
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PRESIDENT'S LETTER (continued)
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RREEF Real Estate Securities Advisors continues to believe in the attractiveness
of select investment opportunities in the REIT market given solid real estate
fundamentals. Also, dividend payout ratios are generally in the 80 percent range
of FFO, indicating a comfort margin. Finally, reasonable estimates for internal
and external growth for well positioned companies result in 1998 earnings
estimates and associated price/earnings multiples that are comfortable within
historical ranges. For these reasons, we believe current pricing is generally
reasonable, and do not anticipate a significant correction, unless capital flows
are disrupted due to external factors.
Thank you again for your continued confidence.
Sincerely,
/s/ Kim G. Redding
Kim G. Redding
Principal
3
<TABLE>
<CAPTION>
RREEF REAL ESTATE SECURITIES FUND
PORTFOLIO OF INVESTMENTS
APRIL 30,1997 (UNAUDITED)
====================================================================================================================================
<S> <C> <C> <C>
MARKET PERCENT OF
DESCRIPTION SHARES VALUE NET ASSETS
- ----------- ------ ----- ----------
REAL ESTATE INVESTMENT TRUSTS
APARTMENTS
Apartment Investment & Management Company Cl A 14,000 $ 388,500
Security Capital Atlantic 10,100 217,150
------------
605,650 2.9%
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MULTI-FAMILY RESIDENTIAL
Avalon Properties, Inc 18,900 498,488
Bay Apartment Communities 14,516 486,286
Camden Property Trust 30,148 821,533
Equity Residential Properties Trust 23,800 1,041,250
Essex Property Trust Inc 26,800 783,900
Gables Residential Trust 16,600 410,850
United Dominion Realty Trust 58,700 807,125
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4,849,432 23.6%
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HOTELS
American General Hospitality 2,000 49,250
Felcor Suite Hotels, Inc 31,000 1,112,125
Innkeepers USA Trust 35,000 490,000
Patriot American Hospitality 10,600 227,900
Starwood Lodging Trust 31,550 1,214,675
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3,093,950 15.0%
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INDUSTRIAL
Centerpoint Properties Corporation 26,400 795,300
Duke Realty Investments 19,200 705,600
Liberty Property Trust 33,100 798,538
Weeks Corporation 11,900 373,360
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2,672,798 13.0%
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OFFICE
Cali Realty Corporation 27,500 811,250
Carramerica Reality Corporation 38,500 1,073,188
Cousins Properties Inc 17,200 440,750
Crescent Real Estate Equity Company 42,000 1,102,500
Highwood Properties, Inc 32,800 1,020,900
Kilroy Realty Corporation 16,900 397,150
Reckson Associates Realty Corporation 38,200 883,375
Spieker Properties, Inc 4,000 139,500
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5,868,613 28.5%
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</TABLE>
See accompanying notes to the financial statements.
4
<TABLE>
<CAPTION>
RREEF REAL ESTATE SECURITIES FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 (UNAUDITED)
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<S> <C> <C> <C>
MARKET PERCENT OF
DESCRIPTION SHARES VALUE NET ASSETS
- ----------- ------ ----- ----------
REGIONAL MALLS
CBL & Associates Properties 21,200 $ 500,850
General Growth Properties 22,400 714,000
Macerich Company 26,900 699,400
Mills Corporation 11,900 298,988
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2,213,238 10.8%
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STORAGE
Public Storage, Inc. 30,300 814,313 4.0%
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TOTAL REAL ESTATE INVESTMENT TRUSTS (at Amortized Cost) 20,117,994
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TOTAL INVESTMENTS (Cost $ 18,959,307*) 20,117,994 97.8%
Excess of Other Assets over Liabilities 456,305 2.2%
------------ -------------
NET ASSETS $ 20,574,299 100.0%
============ ============
* Aggregate cost for Federal tax purposes.
</TABLE>
See accompanying notes to the financial statements.
5
<TABLE>
<CAPTION>
RREEF REAL ESTATE SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997 (UNAUDITED)
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<S> <C>
ASSETS:
Investments, at value (cost $18,959,307) $ 20,117,994
Cash 957,874
Receivable for investments sold 0
Dividends and interest receivable 63,963
Net receivable from Adviser 52,448
Unamortized organizational expenses (Note 1) 66,398
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Total assets 21,258,677
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LIABILITIES:
Payable for investments purchased 651,895
Accrued expenses 32,483
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Total liabilities 684,378
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NET ASSETS (equivalent to $13.80 per share based on 1,490,611
shares outstanding, unlimited shares authorized)* $ 20,574,299
================
NET ASSETS CONSIST OF:
Paid-in capital $ 18,705,538
Undistributed net investment income 216,119
Accumulated net realized gain 493,955
Net unrealized appreciation of investments 1,158,687
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NET ASSETS $ 20,574,299
================
</TABLE>
* Shares of the Fund are sold and redeemed at net asset value.
6
See accompanying notes to the financial statements.
<TABLE>
<CAPTION>
RREEF REAL ESTATE SECURITIES FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1997 (UNAUDITED)
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<S> <C>
INVESTMENT INCOME:
Dividends $ 316,403
Interest 31,107
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Total income 347,510
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EXPENSES:
Management fees (Note 2) 45,354
Custodian, transfer agent and administration fees 88,253
Insurance 11,650
Directors fees 11,100
Legal fees 10,821
Amortization of organizational expense 9,707
Other 16,053
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Total expenses 192,938
Less: fees waived and expenses reimbursed by Adviser (Note 2) (132,467)
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Net expenses 60,471
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Net investment income 287,039
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REALIZED AND UNREALIZED GAINS:
Net realized gain on investments 489,389
Net change in unrealized appreciation on investments 415,430
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Net realized and unrealized gain on investments 904,819
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,191,858
================
</TABLE>
See accompanying notes to the financial statements. 7
RREEF REAL ESTATE SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED
APRIL 30, 1997 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1996
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INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 287,039 $ 289,352
Net realized gain 489,389 198,658
Change in net unrealized appreciation on investments 415,430 825,847
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Net increase/(decrease) in net assets resulting from operations 1,191,858 1,313,857
Distributions to shareholders from:
Net investment income (158,728) (155,292)
Realized capital gains (195,877) -
--------------------- ---------------------
Total distributions (354,605) (155,292)
Net increase in net assets resulting
from Fund share transactions (Note 4) 12,527,690 3,067,828
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Total increase in net assets 13,364,943 4,226,393
NET ASSETS:
Beginning of period 7,209,356 2,982,963
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---------------------
End of period (including undistributed net investment
income of $216,119 and $87,808 respectively)
$ 20,574,299 $ 7,209,356
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</TABLE>
8 See accompanying notes to the financial statements.
<TABLE>
<CAPTION>
RREEF REAL ESTATE SECURITIES FUND
FINANCIAL HIGHLIGHTS
(FOR A FUND SHARE OUTSTANDING THROUGHOUT THE PERIOD)
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<S> <C> <C> <C>
SIX MONTHS ENDED
APRIL 30, 1997 YEAR ENDED PERIOD ENDED
(UNAUDITED) OCTOBER 31, 1996 OCTOBER 31, 1995*
------------------- -------------------- ------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.29 $ 9.82 $ 10.00
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Income from investment operations:
Net investment income 0.34 0.55 0.07
Net realized and unrealized gain (loss) on investments 1.70 2.27 (0.25)
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Total from investment operations 2.04 2.82 (0.18)
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Less distributions to shareholders from:
Net investment income (0.24) (0.35) -
Net realized capital gains (0.29) - -
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Total distributions to shareholders (0.53) - -
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NET ASSET VALUE, END OF PERIOD $ 13.80 $ 12.29 $ 9.82
============ ============ =============
AGGREGATE TOTAL RETURN 16.80% 29.28% (1.80%)
RATIOS/SUPPLEMENTAL DATA:
Net expenses as a percentage of
average net assets 1.00% 1.00% 1.50%**
Net investment income as a percentage of
average net assets 4.75% 5.84% 6.66%**
Portfolio turnover rate 36% 86% 0%
Average broker commission rate $ 0.0525 $ 0.0545 $ ----
Net assets, end of period (000's) $ 20,574 $ 7,209 $ 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 3.19% 6.83% 14.83%**
Net investment income as a percentage of
average net assets 2.56% 0.01% (6.67%)**
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* The Fund commenced operations on September 21, 1995.
** Annualized
</TABLE>
See accompanying notes to the financial statements. 9
RREEF REAL ESTATE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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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.
10
RREEF REAL ESTATE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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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.
11
RREEF REAL ESTATE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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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 June 15, 1997, 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, 1997 were
$16,438,094 and $4,170,325 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 $ 18,959,307
----------------
Gross unrealized depreciation (76,032)
Gross unrealized appreciation 1,234,719
----------------
Net unrealized appreciation $ 1,158,687
----------------
12
RREEF REAL ESTATE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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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 Year Ended
April 30, 1997 October 31, 1996
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<S> <C> <C> <C> <C>
Dollars Shares Dollars Shares
------- ------ ------- ------
Shares sold $12,273,140 884,670 $2,954,839 272,098
Shares issued to shareholders in
reinvestment of distributions 296,750 22,722 116,612 10,855
Shares repurchased (42,200) (3,164) (3,623) (339)
NET INCREASE $12,527,690 904,228 $3,067,828 282,614
=========== ======= ========== =======
</TABLE>
5. PRINCIPAL SHAREHOLDERS
Two shareholders, each owning greater than 10% of the outstanding shares of
the Fund, cumulatively own 55% of the outstanding shares.
5. MERGER
Effective June 13, 1997, the Fund merged with and into the Investor Class
shares of the American Century Real Estate Fund (the "ACRE Fund"), a newly
created series of American Century Capital Portfolios, Inc. Each
shareholder of record as of the close of business on June 13, 1997 received
one share of the ACRE Fund for every share of the Fund that they owned. The
investment policies of the ACRE Fund are substantially similar to the
investment policies of the Fund. RREEF Real Estate Securities Advisors
L.P., as sub adviser will be responsible for the investment management of
the ACRE Fund's portfolio of investments.
13
14
15
[GRAPHIC OMITTED]
RREEF Funds
875 North Michigan Avenue, 41st floor
Chicago, IL 60611-1901
312-266-9600
<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, 1997 and is
qualified in its entirety by refernce to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 18,959,307
<INVESTMENTS-AT-VALUE> 20,117,994
<RECEIVABLES> 116,411
<ASSETS-OTHER> 66,398
<OTHER-ITEMS-ASSETS> 957,874
<TOTAL-ASSETS> 21,258,677
<PAYABLE-FOR-SECURITIES> 651,895
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 32,483
<TOTAL-LIABILITIES> 684,378
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 18,705,538
<SHARES-COMMON-STOCK> 1,490,611
<SHARES-COMMON-PRIOR> 586,383
<ACCUMULATED-NII-CURRENT> 216,119
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 493,955
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,158,687
<NET-ASSETS> 20,574,299
<DIVIDEND-INCOME> 316,403
<INTEREST-INCOME> 31,107
<OTHER-INCOME> 0
<EXPENSES-NET> 60,471
<NET-INVESTMENT-INCOME> 287,039
<REALIZED-GAINS-CURRENT> 489,389
<APPREC-INCREASE-CURRENT> 415,430
<NET-CHANGE-FROM-OPS> 1,191,858
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 158,728
<DISTRIBUTIONS-OF-GAINS> 195,877
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 884,670
<NUMBER-OF-SHARES-REDEEMED> 3,164
<SHARES-REINVESTED> 22,722
<NET-CHANGE-IN-ASSETS> 13,364,943
<ACCUMULATED-NII-PRIOR> 87,808
<ACCUMULATED-GAINS-PRIOR> 198,658
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 45,354
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 192,938
<AVERAGE-NET-ASSETS> 12,194,640
<PER-SHARE-NAV-BEGIN> 12.29
<PER-SHARE-NII> 0.34
<PER-SHARE-GAIN-APPREC> 1.70
<PER-SHARE-DIVIDEND> (0.24)
<PER-SHARE-DISTRIBUTIONS> (0.29)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.80
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
