AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2, 2001
REGISTRATION NO. 333-56510
INVESTMENT COMPANY ACT FILE NO. 811-07154
FORM N-14
[ ] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[x] PRE-EFFECTIVE AMENDMENT NO. 1
[ ] POST-EFFECTIVE AMENDMENT NO. ______
(CHECK APPROPRIATE BOX OR BOXES)
COHEN & STEERS TOTAL RETURN
REALTY FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
(212) 832-3232
(AREA CODE AND TELEPHONE NUMBER)
757 THIRD AVENUE
NEW YORK, NY 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
ROBERT H. STEERS
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
757 THIRD AVENUE
NEW YORK, NY 10017
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES TO:
LAWRENCE B. STOLLER, ESQ. SARAH E. COGAN, ESQ.
COHEN & STEERS SIMPSON THACHER & BARTLETT
CAPITAL MANAGEMENT, INC. 425 LEXINGTON AVENUE
757 THIRD AVENUE NEW YORK, NY 10017-3954
NEW YORK, NY 10017
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APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after the Registration Statement becomes effective under the Securities Act of 1933.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
PROPOSED
MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE AGGREGATE AMOUNT OF
BEING REGISTERED(1) REGISTERED(1) PER SHARE OFFERING PRICE(1) REGISTRATION FEE
Common Shares, $.001 par value. 1,841,474 12.49 23,000,000 5,750(2)
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) This amount was previously paid by the Registrant in connection with the initial filing of the Registration Statement on March 2, 2001.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
757 THIRD AVENUE
NEW YORK, NY 10017
COHEN & STEERS REALTY INCOME FUND, INC.
757 THIRD AVENUE
NEW YORK, NY 10017
April 2, 2001
To the Stockholders of
COHEN & STEERS TOTAL RETURN REALTY FUND, INC. and
COHEN & STEERS REALTY INCOME FUND, INC.:
A joint annual meeting of Stockholders of Cohen & Steers Total Return Realty Fund, Inc. ('Total Return Realty Fund') and Stockholders of Cohen & Steers Realty Income Fund, Inc. ('Realty Income Fund') will be held at the Hotel Inter-Continental New York, 111 East 48th Street, New York, NY 10017, on May 15, 2001 at 9:30 a.m. (Eastern time). Formal notices of the joint annual meeting appear on the following pages, followed by materials regarding the meeting.
At the joint annual meeting (the 'Meeting'), you will be asked to consider and vote upon a proposed combination (the 'Reorganization') of Realty Income Fund into Total Return Realty Fund (the 'Proposal') and other matters. The accompanying Combined Prospectus/Proxy Statement provides more detailed information about these matters. We are proposing the Reorganization to increase the operational and administrative efficiencies of each Fund. Management believes that Stockholders of both Funds will benefit if Realty Income Fund, the smaller of the two Funds, is combined with Total Return Realty Fund, which is a significantly larger fund. Both Funds have substantially similar investment objectives and policies. As a result of the Reorganization, Total Return Realty Fund would own all of the assets and liabilities of both Funds. Stockholders of Realty Income Fund would become Stockholders of Total Return Realty Fund and automatically receive shares of Total Return Realty Fund. Stockholders of Total Return Realty Fund would continue to own shares of that Fund. These Stockholders would not encounter any change in the ownership of their shares other than to experience the proposed benefits of the Reorganization, which we fully discuss in the enclosed Combined Prospectus/Proxy Statement.
Cohen & Steers Capital Management, Inc. ('Cohen & Steers') serves as investment adviser for each Fund. Following the Reorganization, Cohen & Steers will continue to serve as investment adviser to Total Return Realty Fund and will manage all day-to-day operations, including making investment decisions.
For detailed information regarding the Reorganization and a comparison of Total Return Realty Fund and Realty Income Fund, you should read the enclosed Combined Prospectus/Proxy Statement. The costs and expenses of the Reorganization, including the costs of soliciting proxies, will be shared equally by Cohen & Steers Total Return Realty Fund and Realty Income Fund. Please read the enclosed materials carefully.
After careful review, the Board of Directors of each Fund has approved the Proposal. The Board of Directors of each Fund identified a number of benefits that the Proposal would bring to Stockholders, including the following:
Total Return Realty Fund and Realty Income Fund are substantially similar. The Funds have similar investment objectives and policies and generally have similar investment portfolios.
The Reorganization is projected to result in economies of scale. Total Return Realty Fund had a total expense ratio, as of December 31, 2000, of 1.16%, as compared to a total expense ratio for Realty Income Fund of 1.72% as of the same date. We estimate that, after the Reorganization, Total Return Realty Fund will have a total expense ratio of approximately 1.0%, which reflects the expected change in Total Return Realty Fund's administrative service provider and the cost savings that will accompany this change. All other things being equal, a lower total expense ratio will result in better returns for Stockholders.
The Reorganization will address the issue of Realty Income Fund's size. The Reorganization will result in Realty Income Fund Stockholders becoming shareholders of a larger fund, and thus eliminate the primary disadvantage of Realty Income Fund's relatively small size -- a higher total expense ratio as compared to an equivalent, larger fund.
The Reorganization is generally expected to be a tax-free transaction to Total Return Realty Fund, Realty Income Fund and Stockholders of both Funds, except that Realty Income Fund Stockholders may be subject to current income taxation on the cash they receive in lieu of fractional shares of Total Return Realty Fund, although we expect that this amount will be relatively insignificant.
The Reorganization will provide Stockholders of Realty Income Fund the opportunity to continue to hold an investment in a closed-end investment company with a substantially similar investment profile.
THE BOARDS OF DIRECTORS OF COHEN & STEERS TOTAL RETURN REALTY
FUND, INC. AND COHEN & STEERS REALTY INCOME FUND, INC. RECOMMEND
THAT YOU VOTE 'FOR' THE REORGANIZATION.
We have enclosed a proxy card or cards for your use in the Meeting. These cards represent shares of Total Return Realty Fund or Realty Income Fund you held as of the record date, March 27, 2001. IT IS IMPORTANT THAT YOU COMPLETE, SIGN, AND RETURN YOUR PROXY CARDS IN THE ENVELOPE PROVIDED AS SOON AS POSSIBLE. This will ensure that your shares will be represented at the Meeting to be held on May 15, 2001. You may, of course, attend the Meeting in person if you wish, in which case the proxy can be revoked by you at the Meeting. We have attached to this letter a list of commonly asked questions and answers. If you have any additional questions on voting of proxies and/or agenda at the Meeting, please call us at (800) 330-REIT.
Sincerely,
MARTIN COHEN ROBERT STEERS MARTIN COHEN ROBERT STEERS President Chairman |
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
COHEN & STEERS REALTY INCOME FUND, INC.
COMMONLY ASKED QUESTIONS
WHY IS MANAGEMENT RECOMMENDING THE REORGANIZATION?
Management is proposing the Reorganization to increase the operational and administrative efficiencies of each Fund. Management believes that Stockholders of both Funds will benefit if Realty Income Fund, the smaller of the two Funds, is merged into Total Return Realty Fund, which is a significantly larger fund. Both Funds have substantially similar investment objectives and policies.
As a result of the Reorganization, there would be a single fund, Total Return Realty Fund, which would own all of the assets and liabilities of each Fund. Stockholders of Realty Income Fund would become Stockholders of Total Return Realty Fund and automatically receive shares in Total Return Realty Fund. Realty Income Fund Stockholders will receive cash in lieu of any fractional shares of Total Return Realty Fund they would have received in the Reorganization. The amount of cash any Realty Income Fund Stockholder may receive is expected to be relatively insignificant.
Stockholders of Total Return Realty Fund would continue to own shares of that Fund. These Stockholders would not experience any change in the ownership of their shares except to encounter the proposed benefits of the Reorganization, which we fully discuss in the enclosed Combined Prospectus/Proxy Statement.
The Board of Directors of each Fund identified a number of benefits that the proposed Reorganization would bring to Stockholders, including the following:
Total Return Realty Fund and Realty Income Fund are substantially similar. The Funds have similar investment objectives and policies, and generally have similar investment portfolios.
The Reorganization is projected to result in economies of scale. Total Return Realty Fund had a total expense ratio, as of December 31, 2000, of 1.16%, as compared to a total expense ratio for Realty Income Fund of 1.72% as of the same date. We estimate that, after the Reorganization, Total Return Realty Fund will have a total expense ratio of approximately 1.0%, which reflects the expected change in Total Return Realty Fund's administrative service provider and the cost savings that will accompany this change. All other things being equal, a lower total expense ratio will result in better returns for Stockholders.
The Reorganization will address the issue of Realty Income Fund's size. The Reorganization will result in Realty Income Fund Stockholders becoming shareholders of a larger fund, and thus eliminate the primary disadvantage of Realty Income Fund's relatively small size -- a higher total expense ratio as compared to an equivalent, larger fund.
The Reorganization is generally expected to be a tax-free transaction to Total Return Realty Fund, Realty Income Fund and Stockholders of both Funds, except that Realty Income Fund Stockholders may be subject to current income taxation on the cash they receive in lieu of fractional shares of Total Return Realty Fund, although we expect that this amount will be relatively insignificant.
The Reorganization will provide Stockholders of Realty Income Fund the opportunity to continue to hold an investment in a closed-end investment company with a substantially similar investment profile.
IF THE REORGANIZATION IS APPROVED, WHAT WILL HAPPEN?
If the Reorganization is approved, the result would be a single fund, Total Return Realty Fund. Stockholders of Realty Income Fund would own shares of Total Return Realty Fund rather than Realty Income Fund. Total Return Realty Fund shares trade on the New York Stock Exchange under the ticker symbol 'RFI.'
HOW WOULD THE REORGANIZATION BE ACCOMPLISHED?
Under the Reorganization, Realty Income Fund would transfer all of its assets (and liabilities) to Total Return Realty Fund in exchange for shares of Total Return Realty Fund. The shares (and cash in lieu of any fractional shares) would then be distributed to the Stockholders of Realty Income Fund. Realty Income Fund Stockholders would receive shares of Total Return Realty Fund having the equivalent aggregate net asset value of their shares of Realty Income Fund. For example, a Realty
Income Fund Stockholder owning shares of Realty Income Fund having an aggregate net asset value of $10,000 would receive, as of the closing of the Reorganization, shares of Total Return Realty Fund having an aggregate net asset value of $10,000. However, that Stockholder would own a different number of shares of Total Return Realty Fund than he owned of Realty Income Fund because of the different net asset values per share for each Fund.
After the Reorganization becomes effective, we will deregister Realty Income Fund as an investment company and delist it from the American Stock Exchange.
HOW WILL THE ADOPTION OF THIS PROPOSAL AFFECT YOUR INVESTMENT IN REALTY INCOME FUND?
If you are a Realty Income Fund Stockholder, approval and consummation of the Reorganization would not affect your economic interest. Again, you would merely own shares of Total Return Realty Fund having the same aggregate net asset value, although you will receive cash in lieu of any fractional shares of Total Return Realty Fund you would have received. Also, Total Return Realty Fund has substantially similar investment objectives, policies and restrictions as those of Realty Income Fund. The one significant change that Realty Income Fund Stockholders would see is the timing of dividends: Total Return Realty Fund pays monthly, rather than quarterly, dividends.
WILL THERE BE ANY CHANGE IN THE MANAGER OF REALTY INCOME FUND?
No. Cohen & Steers Capital Management, Inc. will manage the day-to-day investment activities of Total Return Realty Fund, just as it does now for Realty Income Fund. The portfolio managers for both Funds are Martin Cohen, Robert H. Steers and Steven R. Brown. Each Fund receives the insights and analysis of the Cohen & Steers research and trading team.
HOW WILL THE FEES AND EXPENSES ASSOCIATED WITH MY INVESTMENT BE AFFECTED?
Management believes that the Reorganization will provide a benefit to all Stockholders. For the year ended December 31, 2000, Realty Income Fund's total expense ratio was 1.72% while the total expense ratio of Total Return Realty Fund was 1.16%. Management estimates that the total expense ratio of Total Return Realty Fund following the Reorganization will be approximately 1.0%, which reflects the expected change in Total Return Realty Fund's administrative service provider and the cost savings that will accompany this change. All other things being equal, a lower total expense ratio will result in a greater total return for Stockholders.
The annual investment advisory fee for Realty Income Fund is 0.65% of the Fund's average weekly net assets, while the investment advisory fee for Total Return Realty Fund is 0.70% of that Fund's average weekly net assets. In voting to approve the Reorganization, the Board of Directors of Realty Income Fund considered the effect this higher investment advisory fee will have on Stockholders. The Directors concluded, however, that the projected savings of 0.56% in the total expense ratio of the combined Fund would more than offset for the increased investment advisory fee.
WHO WILL PAY FOR THE REORGANIZATION?
The costs and expenses associated with the Reorganization, including costs of soliciting proxies, will be shared equally by Total Return Realty Fund and Realty Income Fund.
WHAT IF I DO NOT VOTE OR I VOTE AGAINST THE REORGANIZATION, YET APPROVAL OF THE REORGANIZATION IS OBTAINED?
The Reorganization will be implemented and Stockholders of Realty Income Fund will automatically receive shares in Total Return Realty Fund.
WHAT DO I NEED TO DO?
Please sign, date and mail the proxy card(s) promptly in the enclosed return envelope as soon as possible after reviewing the enclosed Combined Prospectus/Proxy Statement. Your vote is important!
MAY I ATTEND THE MEETING IN PERSON?
Yes. Management encourages Stockholders to attend the Meeting in person. If you complete a proxy card and subsequently attend the Meeting, your proxy can be revoked. To ensure that your vote is counted, we strongly urge you to mail us your signed, dated and completed proxy card(s) even if you plan to attend the Meeting.
April 2, 2001
To the Stockholders of
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.:
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Stockholders ('Meeting') of Cohen & Steers Total Return Realty Fund, Inc. ('Total Return Realty Fund') will be held at the Hotel Inter-Continental New York, 111 East 48th Street, New York, New York 10017, on May 15, 2001 at 9:30 a.m. (Eastern time), to consider and vote on the following proposals, both of which are more fully described in the accompanying Combined Prospectus/Proxy Statement:
PROPOSAL ONE
THE REORGANIZATION
To consider and approve an Agreement and Plan of Reorganization (the
'Reorganization Plan') between Cohen & Steers Realty Income Fund, Inc. ('Realty
Income Fund') and Total Return Realty Fund, and the transactions contemplated
thereby, including (a) the transfer of all of the assets and liabilities of
Realty Income Fund to Total Return Realty Fund in exchange for shares issued by
Total Return Realty Fund (the 'RFI Shares'); (b) the distribution of the RFI
Shares and cash in lieu of any fractional RFI Shares to the Stockholders of
Realty Income Fund in connection with the liquidation of Realty Income Fund; and
(c) the subsequent dissolution of Realty Income Fund; and
PROPOSAL TWO
ELECTION OF DIRECTOR
To elect one Director of Total Return Realty Fund, to hold office for a term of three years and until his successor is duly elected and qualifies.
THE BOARD OF DIRECTORS OF COHEN & STEERS TOTAL RETURN REALTY
FUND, INC. RECOMMENDS THAT YOU VOTE IN FAVOR OF BOTH PROPOSALS.
We have described the terms and conditions of the Reorganization and related matters in the accompanying Combined Prospectus/Proxy Statement. We also have attached as Appendix A to the Combined Prospectus/Proxy Statement a copy of the Reorganization Plan.
The Directors have fixed the close of business on March 27, 2001 as the record date for the determination of Stockholders entitled to notice of and to vote at the Meeting or any adjournment(s) thereof. The enclosed proxy is being solicited on behalf of the Directors.
By order of the Board of Directors,
ROBERT H. STEERS
ROBERT H. STEERS
Secretary
New York, New York
April 2, 2001
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, SIGN AND DATE IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IN ORDER TO SAVE THE FUND ANY ADDITIONAL EXPENSE OF FURTHER SOLICITATION, PLEASE MAIL YOUR PROXY PROMPTLY.
April 2, 2001
To the Stockholders of
COHEN & STEERS REALTY INCOME FUND, INC.:
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Stockholders ('Meeting') of Cohen & Steers Realty Income Fund, Inc. ('Realty Income Fund') will be held at the Hotel Inter-Continental New York, 111 East 48th Street, New York, New York 10017, on May 15, 2001 at 9:30 a.m. (Eastern time), to consider and vote on the following proposals, both of which are more fully described in the accompanying Combined Prospectus/Proxy Statement:
PROPOSAL ONE
THE REORGANIZATION
To consider and approve an Agreement and Plan of Reorganization (the 'Reorganization Plan') between Realty Income Fund and Cohen & Steers Total Return Realty Fund, Inc. ('Total Return Realty Fund') and the transactions contemplated thereby, including (a) the transfer of all of the assets and liabilities of Realty Income Fund to Total Return Realty Fund in exchange for shares issued by Total Return Realty Fund (the 'RFI Shares'); (b) the distribution of the RFI Shares and cash in lieu of any fractional RFI Shares to the Stockholders of Realty Income Fund in connection with the liquidation of Realty Income Fund; and (c) the subsequent dissolution of Realty Income Fund; and
PROPOSAL TWO
ELECTION OF DIRECTOR
To elect one Director of Realty Income Fund, to hold office for a term of three years and until his successor is duly elected and qualifies.
THE BOARD OF DIRECTORS OF COHEN & STEERS REALTY INCOME FUND,
INC. RECOMMENDS THAT YOU VOTE IN FAVOR OF BOTH PROPOSALS.
We have described the terms and conditions of the Proposed Reorganization and related matters in the accompanying Combined Prospectus/Proxy Statement. We also have attached as Appendix A to the Combined Prospectus/Proxy Statement a copy of the Reorganization Plan.
The Directors have fixed the close of business on March 27, 2001 as the record date for the determination of Stockholders entitled to notice of and to vote at the Meeting or any adjournment(s) thereof. The enclosed proxy is being solicited on behalf of the Directors.
By order of the Board of Directors,
ROBERT H. STEERS
ROBERT H. STEERS
Secretary
New York, New York
April 2, 2001
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, SIGN AND DATE IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IN ORDER TO SAVE THE FUND ANY ADDITIONAL EXPENSE OF FURTHER SOLICITATION, PLEASE MAIL YOUR PROXY PROMPTLY.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
THE DATE OF THIS COMBINED PROSPECTUS/PROXY STATEMENT IS APRIL 2, 2001
ACQUISITION OF THE ASSETS AND LIABILITIES
OF
COHEN & STEERS REALTY INCOME FUND, INC.
757 THIRD AVENUE
NEW YORK, NY 10017
(212) 832-3232
BY AND IN EXCHANGE FOR SHARES
OF
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
757 THIRD AVENUE
NEW YORK, NY 10017
(212) 832-3232
This Combined Prospectus/Proxy Statement relates to the proposed reorganization of Cohen & Steers Realty Income Fund, Inc. ('Realty Income Fund') into Cohen & Steers Total Return Realty Fund, Inc. ('Total Return Realty Fund'). If approved by both the Stockholders of Realty Income Fund ('RIF Stockholders') and the Stockholders of Total Return Realty Fund ('RFI Stockholders'), Realty Income Fund would be combined with Total Return Realty Fund. Under this transaction, all of the assets and liabilities of Realty Income Fund would be transferred to Total Return Realty Fund in exchange for shares of Total Return Realty Fund (the 'Reorganization'). Total Return Realty Fund has substantially similar investment objectives and policies as Realty Income Fund. Following the Reorganization, Total Return Realty Fund will maintain the same investment objectives and policies of the Fund before the Reorganization.
Under the Reorganization, each RIF Stockholder would receive shares (the 'RFI Shares') in Total Return Realty Fund and cash in lieu of any fractional RFI Shares with an aggregate net asset value equal to the aggregate net asset value of the RIF Stockholder's holdings in Realty Income Fund. For example, a RIF Stockholder owning shares of Realty Income Fund having an aggregate net asset value of $10,000 would receive, as of the closing of the Reorganization, RFI Shares having an aggregate net asset value of $10,000. Each RIF Stockholder, however, would own a different number of shares of Total Return Realty Fund because of the different net asset values per share of the two Funds. As a result of the Reorganization, current RIF Stockholders will become Stockholders in Total Return Realty Fund. Realty Income Fund then will be delisted from the American Stock Exchange, dissolved under State law and deregistered under the Investment Company Act of 1940, as amended (the '1940 Act').
Both Realty Income Fund and Total Return Realty Fund are registered as non-diversified closed-end management investment companies under the 1940 Act. Cohen & Steers Capital Management, Inc. ('Cohen & Steers') serves as investment adviser to both Realty Income Fund and Total Return Realty Fund. After the Reorganization, Cohen & Steers would continue to be the investment adviser to Total Return Realty Fund. Total Return Realty Fund intends to continue to conduct investment operations in substantially the same manner as it did before the Reorganization and in a substantially similar manner as Realty Income Fund conducted its investment operations, all as described in this Combined Prospectus/Proxy Statement.
The terms and conditions of these transactions are more fully described in this Combined Prospectus/Proxy Statement and in the Agreement and Plan of Reorganization (the 'Reorganization Plan') between Realty Income Fund and Total Return Realty Fund, which we have attached to this Combined Prospectus/Proxy Statement as Appendix A.
The Board of Directors of Realty Income Fund and the Board of Directors of Total Return Realty Fund are soliciting proxies in connection with the joint annual meeting (the 'Meeting') of RIF Stockholders and RFI Stockholders to be held on May 15, 2001 at 9:30 a.m. (Eastern time) at the Hotel Inter-Continental New York, 111 East 48th Street, New York, New York 10017. At the Meeting RIF Stockholders and RFI Stockholders will be asked to consider and approve the Reorganization and the related transactions. This Combined Prospectus/Proxy Statement constitutes (i) the prospectus for RFI
Shares that have been registered with the Securities and Exchange Commission
(the 'SEC') and are to be issued in connection with the Reorganization, (ii)
the proxy statement of Realty Income Fund for the Meeting of RIF Stockholders
and (iii) the proxy statement of Total Return Realty Fund for the Meeting of
RFI Stockholders.
This Combined Prospectus/Proxy Statement, which should be retained for future reference, sets forth concisely the information about Total Return Realty Fund that a prospective investor should know before voting on the Reorganization Plan (and related transactions). The prospectus and statement of additional information for Total Return Realty Fund was filed on Form N-2 with the Securities and Exchange Commission on September 17, 1993. The prospectus and statement of additional information for Realty Income Fund, formerly Real Estate Securities Income Fund, Inc., was filed on Form N-2 with the Securities and Exchange Commission on August 23, 1988.
We expect to send this Combined Prospectus/Proxy Statement to Stockholders on or about April 9, 2001.
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 COMBINED PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROSPECTUS/PROXY STATEMENT AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY COHEN & STEERS REALTY INCOME FUND, INC. OR COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
INVESTMENTS IN COHEN & STEERS REALTY INCOME FUND, INC. AND COHEN & STEERS TOTAL RETURN REALTY FUND, INC. ARE SUBJECT TO RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
Cohen & Steers Total Return Realty Fund, Inc. is listed on the New York Stock Exchange under the ticker symbol 'RFI.' Cohen & Steers Realty Income Fund is listed on the American Stock Exchange under the ticker symbol 'RIF.' Reports, proxy material and other information concerning the Funds can be inspected at their respective exchanges.
PAGE
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Introduction................................................ 4
Proposal One -- The Reorganization.......................... 5
I. Synopsis................................................ 5
Principal Risk Factors.................................. 9
II. The Reorganization..................................... 11
Financial Highlights.................................... 15
III. Comparison of the Funds................................ 20
Investment Objectives and Policies...................... 20
Investment Restrictions................................. 21
Dividends and Distributions............................. 22
Share Repurchases; Possible Conversion to Open-End
Status................................................. 24
Investment Advisory Agreements.......................... 27
Management.............................................. 30
Description of Shares................................... 31
Certain Provisions of the Articles of Incorporation and
By-Laws................................................ 32
Determination of Net Asset Value........................ 33
Taxation................................................ 34
Legal Proceedings....................................... 38
Custodian and Transfer Agent............................ 38
Proposal Two -- Election of Director........................ 38
Cohen & Steers Realty Income Fund, Inc. ................ 38
Cohen & Steers Total Return Realty Fund, Inc. .......... 40
Compensation of Directors and Certain Officers.......... 42
Other Matters............................................... 43
Submission of Proposals for Submission at the Next Annual
Meeting................................................... 43
Legal Matters............................................... 43
Experts..................................................... 43
Additional Information...................................... 43
Financial Statements........................................ F-1
Appendix A -- Agreement and Plan of Reorganization.......... A-1
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INTRODUCTION
We are furnishing you this Combined Prospectus/Proxy Statement in connection with the solicitation of proxies on behalf of the Board of Directors of Total Return Realty Fund and Realty Income Fund, to be voted at the joint annual meeting of stockholders, to be held at the Hotel Inter-Continental New York, 111 East 48th Street, New York, New York 10017, on May 15, 2001 at 9:30 a.m., and at any adjournments thereof (the 'Meeting'). This solicitation will be by mail and the cost (including printing and mailing this Combined Prospectus/Proxy Statement, meeting notice and form of proxy, as well as any necessary supplementary solicitation) will be shared equally by the Funds pursuant to the terms of their investment advisory agreements. We are mailing the Notices of the Meeting, Combined Prospectus/Proxy Statement and Proxy to Stockholders on or about April 9, 2001.
At the Meeting, Stockholders of Realty Income Fund (the 'RIF Stockholders') and Stockholders of Total Return Realty Fund (the 'RFI Stockholders') will consider and vote upon the following two proposals:
1. To approve the proposed reorganization (the 'Reorganization') of Realty Income Fund into Total Return Realty Fund. Under the Reorganization, all of the assets and liabilities of Realty Income Fund would be transferred to Total Return Realty Fund in exchange for shares (the 'RFI Shares') issued by Total Return Realty Fund having the equivalent aggregate net asset value of the shares of Realty Income Fund, and such RFI Shares (and cash in lieu of any fractional RFI Shares) would then be distributed to RIF Stockholders in connection with the liquidation of Realty Income Fund. Therefore, RIF Stockholders would become RFI Stockholders and would receive RFI Shares equal in aggregate net asset value to their holdings in Realty Income Fund on the date of the Reorganization.
2. To elect one Director to serve as a Director of Realty Income Fund and a Director of Total Return Realty Fund, to hold office for a term of three years until his successor is duly elected and qualifies.
THE BOARD OF DIRECTORS OF COHEN & STEERS TOTAL RETURN REALTY
FUND, INC. HAS RECOMMENDED THAT RFI STOCKHOLDERS
VOTE 'FOR' BOTH PROPOSALS.
THE BOARD OF DIRECTORS OF COHEN & STEERS REALTY INCOME
FUND, INC. HAS RECOMMENDED THAT RIF STOCKHOLDERS
VOTE 'FOR' BOTH PROPOSALS.
Approval of the Reorganization requires both the affirmative vote of RIF Stockholders holding a majority of the outstanding shares in Realty Income Fund and the approval by a majority of votes cast by RFI Stockholders, provided that the total votes cast by RFI Stockholders on the proposal represent at least a majority of all votes entitled to be cast on the proposal by RFI Stockholders. If the Reorganization is not approved by Stockholders of each Fund, the Reorganization will not be implemented and each Fund's Board of Directors will consider other appropriate courses of action.
With respect to each Fund, the nominee for Director who receives the highest number of votes cast in favor of nominees for Director will be elected.
For each Fund, the presence in person or by proxy of the holders of record of a majority of the shares of the Fund entitled to vote will constitute a quorum at the Meeting. If, however, a quorum is not present or represented at the Meeting or if fewer shares voting in favor of the proposal are present in person or by proxy than is the minimum required to approve any proposal presented at the Meeting, the holders of a majority of the shares of each Fund present in person or by proxy will have the power to adjourn the Meeting from time to time, without notice other than announcement at the Meeting, until the requisite amount of shares entitled to vote at the Meeting or approve the proposals are present. At any such adjourned Meeting, if the relevant quorum is constituted, any business may be transacted that might have been transacted at the Meeting as originally called. For purposes of determining the presence of a quorum for transacting business at the Meeting, abstentions and broker 'non-votes' (that is, proxies from brokers or nominees indicating that they have not received instructions from the beneficial owner or other persons entitled to vote shares on a particular matter
with respect to which the brokers or nominees do not have discretionary power) will be treated as shares that are present but which have not been voted. For this reason, abstentions and broker non-votes (i) will have the effect of a 'no' vote for purposes of obtaining the requisite approval of proposal one by RIF Stockholders, (ii) will not count as shares voted by RFI Stockholders for purposes of determining whether the total votes cast by RFI Stockholders represent a majority of all votes entitled to be cast on the proposal by RFI Stockholders or whether a majority of votes cast by RFI Stockholders have been voted in favor of proposal one and (iii) will have no effect on the vote on proposal two.
The Boards of Directors of the Funds have fixed the close of business on March 27, 2001 as the record date for the determination of Stockholders entitled to notice of and to vote at the Meeting. The outstanding voting shares of Total Return Realty Fund as of March 27, 2001 consisted of 7,399,100 shares of common stock, each share being entitled to one vote. The outstanding voting shares of Realty Income Fund as of March 27, 2001 consisted of 3,024,603 shares of common stock, each share being entitled to one vote. All properly executed proxies received prior to the Meeting will be voted at the Meeting in accordance with the instructions marked on them or as otherwise provided. Unless instructions to the contrary are marked, proxies will be voted for the election of each Fund's Director and for proposal one. Any Stockholder may revoke his proxy at any time prior to exercise thereof by giving written notice to the Secretary of the applicable Fund at its offices at 757 Third Avenue, New York, New York 10017, or by signing another proxy of a later date or by personally casting his vote at the Meeting.
The Funds may employ Corporate Investor Communications, Inc. ('CIC') to assist in the solicitation of proxies. Representatives of CIC may contact certain Stockholders of each Fund. For its services, CIC will charge each Fund a fee of approximately $6,000, plus $5 for each Stockholder contacted and $5 for each vote taken by telephone.
We have previously mailed to Stockholders the most recent annual and
semi-annual reports of the Funds, including financial statements. If you have
not received these reports or would like to receive additional copies free of
charge, please contact us at 757 Third Avenue, New York, New York 10017,
(800) 330-REIT, and we will send you the requested material promptly by
first-class mail.
PROPOSAL ONE -- THE REORGANIZATION
I. SYNOPSIS
GENERAL
Total Return Realty Fund and Realty Income Fund are non-diversified, closed-end management investment companies. Total Return Realty Fund was incorporated in Maryland on September 4, 1992 and commenced operations on September 22, 1993. Realty Income Fund was incorporated in Maryland on June 21, 1988 and commenced operations on August 23, 1988.
Total Return Realty Fund trades on the New York Stock Exchange ('NYSE') under the ticker symbol 'RFI.' Realty Income Fund trades on the American Stock Exchange ('AMEX') under the ticker symbol 'RIF.'
PROPOSED REORGANIZATION
Pursuant to the proposed Agreement and Plan of Reorganization (the 'Reorganization Plan'), Realty Income Fund will be combined with Total Return Realty Fund. Under the Reorganization Plan, Realty Income Fund will transfer all of its assets and liabilities to Total Return Realty Fund in exchange for the RFI Shares. Realty Income Fund will then distribute the RFI Shares and cash in lieu of any fractional RFI Shares to the RIF Stockholders in exchange for all of their RIF Shares. After the Reorganization, Total Return Realty Fund will have the combined assets and liabilities that each of Realty Income Fund and Total Return Realty Fund had prior to the Reorganization.
Under the Reorganization, each RIF Stockholder will receive shares (and cash in lieu of any fractional shares) of Total Return Realty Fund with an aggregate net asset value equal on the date of the exchange to the aggregate net asset value of the Stockholder's RIF Shares. Therefore, following the Reorganization, RIF Stockholders will be Stockholders of Total Return Realty Fund. Realty Income
Fund will then be delisted from the AMEX, dissolved under state law and deregistered under the Investment Company Act of 1940, as amended (the '1940 Act').
BOARD APPROVALS
Based upon their evaluation of the information presented to them, the Board of Directors of Realty Income Fund and the Board of Directors of Total Return Realty Fund, including in each case a majority of the Directors who are not 'interested persons' within the meaning of the 1940 Act, has determined that the Reorganization is in the best interests of the RIF Stockholders and RFI Stockholders, respectively.
COMPARATIVE FEE AND EXPENSE TABLES
The table below presents the current fees and expenses, as of December 31, 2000, you pay as a holder of shares of Realty Income Fund and Total Return Realty Fund. The table also presents the projected fees and expenses you would pay for holding shares of the Total Return Realty Fund following the Reorganization, and reflects the expected change in Total Return Realty Fund's administrative service provider and the cost savings that will accompany this change.
The table below show that the total expense ratios for current RIF Stockholders and RFI Stockholders are anticipated to be lower after the Reorganization, assuming that the asset levels for Total Return Realty Fund do not substantially decrease. All other things being equal, a lower total expense ratio will result in greater performance for Stockholders.
FUND EXPENSES
PRO FORMA
TOTAL RETURN REALTY INCOME TOTAL RETURN
REALTY FUND FUND REALTY FUND
----------- ---- -----------
SHAREHOLDER FEES (fees paid directly from your
investment).................................. None None None
ANNUAL FUND OPERATING EXPENSES (expenses that
are deducted from Fund assets):
Management fee................................. 0.70% 0.65% 0.70%
Other Expenses................................. 0.46% 1.07% 0.30%
TOTAL ANNUAL FUND OPERATING EXPENSES........... 1.16% 1.72% 1.00%
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Examples. These examples are intended to help you compare the current cost of investing in Total Return Realty Fund, Realty Income Fund and the cost of investing in Total Return Realty Fund after the Reorganization. These examples assume that you invest $10,000 in each Fund for the time periods indicated and reinvestment of all dividends and distributions at net asset value. The examples also assume that your investments have a 5% return each year and that the Funds' operating expenses remain the same. YOU SHOULD NOT CONSIDER THE ASSUMED 5% ANNUAL RETURN AND ANNUAL EXPENSES TO BE REPRESENTATIONS OF THE ACTUAL OR EXPECTED PERFORMANCE OR EXPENSES OF THE FUNDS. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ------ ------- ------- --------
Total Return Realty Fund........................... $ 118 $ 368 $ 638 $1,409
Realty Income Fund................................. 175 542 933 2,030
Total Return Realty Fund
following the Reorganization..................... 102 318 552 1,225
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COMPARISON OF THE FUNDS
Investment Objectives and Policies. The investment objectives and policies of the Funds are substantially similar. The investment objective of Total Return Realty Fund is to achieve a high total return through investment in real estate securities. Total Return Realty Fund equally emphasizes current income and capital appreciation. The primary investment objective of Realty Income Fund is to
achieve high current income through investment in real estate securities. Realty Income Fund has a secondary objective of capital appreciation.
Under normal circumstances, Total Return Realty Fund invests at least 75% of
its total assets in the equity securities of real estate companies, whereas
Realty Income Fund invests at least 65% of its total assets in the equity
securities of real estate companies. In the case of each Fund, these equity
securities consist of: (i) common shares (including shares and units of
beneficial interest of real estate investment trusts, commonly referred to as
'REITs,') (ii) rights and warrants to purchase common shares, (iii) securities
convertible into common shares where the conversion feature represents, in the
investment adviser's view, a significant element of the securities' value, and
(iv) preferred shares.
The Funds may invest without limit in shares of REITs. REITs invest primarily in income producing real estate or real estate-related loans or interests and are generally required to distribute to stockholders at least 90% of their taxable income (other than net capital gain) for each year. A REIT generally is not subject to U.S. federal income tax on income distributed to Stockholders. The shares of the REITs in which the Funds typically invest are traded on stock exchanges. These REITs are subject to the requirements of the federal securities laws and the rules of any stock exchanges on which their shares are traded as to such matters as financial reporting, corporate governance and disclosure of material business developments.
Whereas Total Return Realty Fund may invest up to 25% of its total assets in debt securities issued or guaranteed by real estate companies, Realty Income Fund may invest up to 35% of its total assets in debt securities issued or guaranteed by real estate companies. Within these limitations, each Fund may invest entirely in lower-rated debt securities, or unrated debt securities. These debt securities are rated below investment grade and entail a higher degree of risk.
Following the Reorganization, the investment objectives and policies of Total Return Realty Fund will continue to be the same investment objective and policies of the Fund prior to the Reorganization. For additional information regarding the investment objectives and policies of the Funds, see 'Investment Objectives and Policies.'
Dividends and Distribution Policies. Whereas Total Return Realty Fund pays monthly dividends from investment company taxable income, Realty Income Fund pays dividends quarterly. Both Funds distribute net capital gain (defined as the excess of net long-term capital gain over net short-term capital loss), if any, to Stockholders at least annually. This net capital gain will be taxable to Stockholders as long-term capital gain if designated as a capital gain dividend.
Each Fund maintains a Dividend Reinvestment Plan (each, a 'Plan'). Total Return Realty Fund maintains an 'opt-in' Plan: dividends and other distributions from the Fund are distributed to its Stockholders in cash unless a Stockholder elects to have them reinvested in additional shares of the Fund through the Plan. In comparison, Realty Income Fund maintains an 'opt-out' Plan: dividends and other distributions from the Fund are automatically reinvested in the Plan unless a Stockholder elects to receive them in cash. Realty Income Fund's Plan also has a 'flip' feature: if the Fund's shares trade on the AMEX at a price that is at or above the net asset value of the Fund, then the Fund will make a distribution of additional shares to Plan participants. If the Fund's shares trade below the net asset value of the Fund, the Administrator of the Plan will use the distributions to purchase shares of the Fund on the open market and distribute them to Plan participants. Following the Reorganization, Stockholders of the former Realty Income Fund who wish to participate in the Dividend Reinvestment Plan of Total Return Realty Fund should call the Fund's transfer agent, EquiServe, L.P. ('Equiserve'), at 800-426-5523 to obtain a form to do so.
Following the Reorganization, Total Return Realty Fund will maintain the same dividend and distribution policies of the Fund as before the Reorganization. For additional information regarding dividend and distribution policies of the Funds, see 'Dividends and Distributions.'
Share Repurchases, Annual Tender Offers and Possible Conversion to Open-End Investment Company. Under certain circumstances, Total Return Realty Fund must conduct annual tender offers of its shares either in the open market or through private transactions. An annual tender offer will occur during the first quarter of each calendar year unless during a certain time period, the Fund's shares have traded at an average discount from net asset value of less than three percent (or at a premium). Any
proposal to amend the Fund's Articles of Incorporation to convert to an open-end investment company requires a vote of 66 2/3% of the outstanding shares of the Fund.
In comparison, Realty Income Fund is not required to conduct annual tender offers. If Realty Income Fund's shares trade on the AMEX at an average discount from net asset value of more than 10% for a certain time period, the Board of Directors of the Fund will submit to Stockholders at the next annual meeting a proposal to amend the Fund's Articles of Incorporation, which if adopted by shares of the Fund representing at least 66 2/3% of the outstanding shares of the Fund, would convert the Fund to an open-end investment company.
Following the Reorganization, Total Return Realty Fund will maintain the same policies regarding share repurchases, annual tender offers and possible conversion to open-end investment company of the Fund as before the Reorganization. For additional information relating to the Funds' policies regarding share repurchases, annual tender offers and possible conversions to open-end investment company, see 'Share Repurchases; Possible Conversion to Open-End Status.'
Investment Adviser. The investment adviser to both Realty Income Fund and Total Return Realty Fund is Cohen & Steers. Cohen & Steers manages each Fund on a day-to-day basis, including making investment decisions for the Fund. Martin Cohen, Robert H. Steers and Steven R. Brown are the portfolio managers for both Funds. Each Fund also receives the services of Cohen & Steers' research analysts and trading personnel. Following the Reorganization, Cohen & Steers will continue to serve as investment adviser to Total Return Realty Fund. For additional information regarding the investment adviser, see 'Investment Advisory Agreements.'
Stockholder's Rights. The shares of each Fund have no preemptive, conversion, exchange or redemption rights. Each share has equal voting, dividend, distribution and liquidation rights. Stockholders are entitled to one vote per share. All voting rights for the election of Directors are noncumulative. This means that holders of more than 50% of the shares can elect 100% of the Directors then nominated for election if they choose to do so. If this occurs, the holders of the remaining shares will not be able to elect any Directors. For additional information regarding Stockholder's rights, see 'Description of Shares.'
Anti-Takeover Provisions. Certain provisions of each Fund's Articles of Incorporation and By-Laws may have the effect of limiting the ability of other entities or persons to acquire control of the respective Fund or to change its structure. These provisions may also have the effect of depriving Stockholders of an opportunity to sell their shares at a premium over prevailing market prices. These include provisions for staggered terms of office for Directors, super-majority voting requirements for certain merger, consolidation and asset sale transactions, amendments to the Articles of Incorporation and conversion to open-end status. For additional information regarding the Funds' anti-takeover provisions, see 'Description of Shares' and 'Certain Provisions of the Articles of Incorporation and By-Laws.'
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
Simpson Thacher & Bartlett will issue an opinion (based on certain assumptions) dated on or before the closing of the Reorganization to the effect that the Reorganization will not give rise to the recognition of income, gain or loss for federal income tax purposes to Realty Income Fund, Total Return Realty Fund or their respective Stockholders, except with respect to cash received in lieu of fractional RFI Shares. A RIF Stockholder's holding period and tax basis of the RFI Shares received pursuant to the Reorganization (including any fractional RFI Shares with respect to which such RIF Stockholder receives cash) will be the same as the holding period and tax basis of such RIF Stockholder's RIF Shares (provided such RIF Shares were held as a capital asset on the date of the closing of the Reorganization). In addition, the holding period and tax basis of those assets owned by Realty Income Fund and transferred to Total Return Realty Fund will be identical for Total Return Realty Fund. See 'The Reorganization -- Federal Income Tax Consequences.'
PRINCIPAL RISK FACTORS
We highlight below the principal risks of an investment in Total Return Realty Fund. The investment objectives, policies and restrictions of Total Return Realty Fund and Realty Income Fund are substantially similar. Following the Reorganization, Total Return Realty Fund will maintain the same investment objective, policies and restrictions of the Fund as before the Reorganization. Therefore, unless we note otherwise, the risks of an investment in Total Return Realty Fund following the Reorganization are the same risks of investing in the Funds currently.
Some of these risks are risks typically associated with investing in a managed portfolio of equity securities, such as fluctuations in individual stock prices as well as general market volatility. Other risks are more specific risks associated with investing in non-diversified real estate funds, such as declining property values and decreasing prices of REIT stocks.
GENERAL RISKS OF SECURITIES LINKED TO THE REAL ESTATE MARKET
Total Return Realty Fund does not invest in real estate directly, but only in securities issued by real estate companies. However, because of its policy of concentrating in the securities of companies in the real estate industry, the Fund is also subject to the risks associated with the direct ownership of real estate. These risks include:
declines in the value of real estate;
risks related to general and local economic conditions;
possible lack of availability of mortgage funds;
overbuilding;
extended vacancies of properties;
increased competition;
increases in property taxes and operating expenses;
changes in zoning laws;
losses due to costs resulting from the clean-up of environmental problems;
liability to third parties for damages resulting from environmental problems;
casualty or condemnation losses;
limitations on rents;
changes in neighborhood values and the appeal of properties to tenants; and
changes in interest rates
Therefore, the value of the Fund's shares may change at different rates compared to the value of shares of a fund with investments in a mix of different industries.
In addition to these risks, REITs that invest predominantly in real property, or Equity REITs, may be affected by changes in the value of the underlying property owned by the trusts, while REITs that invest predominantly in real property, mortgage securities, or Mortgage REITs, may be affected by the quality of any credit extended. Further, Equity and Mortgage REITs are dependent upon management skills and generally may not be diversified. Equity and Mortgage REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidation. In addition, Equity and Mortgage REITs could possibly fail to qualify for tax-free pass-through of income under the Code, or to maintain their exemptions from registration under the 1940 Act. These factors may also adversely affect a borrower's or a lessee's ability to meet its obligations to the REIT. In the event of a default by a borrower or lessee, the REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting its investments.
In addition, even the larger REITs in the industry tend to be small to medium-sized companies in relation to the equity markets as a whole. There may be less trading in a smaller company's stock, which means that buy and sell transactions in that stock could have a larger impact on the stock's price than is the case with larger company stocks. Smaller companies also may have fewer lines of business so that changes in any one line of business may have a greater impact on a smaller company's stock price than is the case for a larger company. Further, smaller company stocks may perform in different cycles than
larger company stocks. Accordingly, REIT shares can be more volatile than -- and at times will perform differently from -- large company stocks such as those found in the Dow Jones Industrial Average.
RISKS OF INVESTMENT IN HIGH YIELD DEBT SECURITIES
Total Return Realty Fund may invest in investment grade or non-investment grade debt securities. Debt securities rated non-investment grade (lower than Baa by Moody's Investor Services, Inc. ('Moody's') or lower than BBB by Standard and Poor's Ratings Services (the 'S&P')), are sometimes referred to as 'high yield' or 'junk' bonds. High yield debt securities may be considered more speculative than investment grade debt securities with respect to the issuer's continuing ability to make principal and interest payments, and as a result, there is a greater risk of default by the issuer. Analysis of the creditworthiness of issuers of high yield debt securities may be more complex than for issuers of investment grade debt securities, and the ability of Total Return Realty Fund to achieve its investment objective may, to the extent invested in high yield debt securities, be more dependent upon such creditworthiness analysis than would be the case if the Fund invested in investment grade debt securities.
High yield debt securities may be more susceptible to real or perceived adverse economic and competitive industry conditions than investment grade debt securities. The prices of high yield debt securities have been found to be less sensitive to interest rate changes than investment grade debt investments, but more sensitive to adverse economic downturns or individual corporate developments. Yields on high yield securities will fluctuate. If the issuer of high yield debt securities defaults, the Fund may incur additional expenses to seek recovery.
The secondary markets in which high yield debt securities are traded may be less liquid than the market for investment grade debt securities. Less liquidity in the secondary trading markets could adversely affect the price at which the Fund could sell a particular high yield debt security when necessary to meet liquidity needs or in response to a specific economic event, such as a deterioration in the creditworthiness of the issuer, and could adversely affect and cause large fluctuations in the daily net asset value of the Fund's shares. Adverse publicity and investor perceptions may decrease the values and liquidity of high yield debt securities.
USE OF LEVERAGE
Total Return Realty Fund may borrow money for investment purposes in an amount up to 33 1/3% of its total assets. The Fund also may raise additional funds for investment purposes by the issuance of short-term debt or preferred stock. Any of these practices would result in leveraging of the Fund's portfolio. Borrowings are obligations of the Fund and are senior in preference to the Fund's common stock. Because only holders of the Fund's common stock bear the investment risk associated with investment assets purchased with borrowed amounts, adverse movements in the price of the Fund's portfolio holdings would have a more severe effect on the Fund's net asset value than if the Fund were not leveraged. For additional information regarding borrowings and leverage, see 'Investment Objective and Policies -- Borrowings and Leverage.'
Leverage creates risks for Stockholders of the Fund, including the likelihood of greater volatility of net asset value and market price of shares, and the risk that fluctuations in interest rates on borrowings or in the dividend rates on any preferred stock may affect the yield to Stockholders. If the income from the securities purchased with borrowed funds is not sufficient to cover the cost of leverage, the net income of the Fund will be less than if leverage had not been used, and therefore the amount available for distribution to Stockholders as dividends will be reduced. In such an event, the Fund may nevertheless determine to maintain its leveraged position in order to avoid capital losses on securities purchased with the leverage.
PORTFOLIO TURNOVER
Total Return Realty Fund may engage in portfolio trading when appropriate, but will not engage in short-term trading as the primary means of achieving its investment objective. Although the Fund
cannot accurately predict its annual portfolio turnover rate, it is not expected to exceed 150% under normal circumstances. However, there are no limits on the rate of portfolio turnover, and the Fund may sell investments without regard to length of time held when, in the opinion of the investment adviser, investment considerations warrant this action. The Fund may pay higher brokerage commissions and other transactional expenses as a result of a higher turnover rate. In addition, high portfolio turnover may result in the realization of net short-term capital gain by the Fund. Any net short-term capital gain distributed to Stockholders will be taxable as ordinary income. For additional information regarding portfolio turnover, see 'Taxation.'
NON-DIVERSIFIED STATUS
Total Return Realty Fund is 'non-diversified' and not limited by the 1940 Act in the proportion of its assets that may be invested in the securities of a single issuer. Following the Reorganization, Total Return Realty Fund intends to continue to conduct its operations, however, so as to qualify as a regulated investment company for purposes of the Code, which generally will relieve the Fund of any liability for federal income tax to the extent the Fund's earnings are distributed to Stockholders. To 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 (other than Government securities or securities of other regulated investment companies) of a single issuer, or of two or more issuers which the Fund controls and which are engaged in similar or related trades or businesses and (ii) at least 50% of the market value of the Fund's total assets will be invested in cash and cash items, Government securities, securities of other regulated investment companies, and other securities, with such other securities limited so that 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. Because the Fund, as a non-diversified investment company, may invest in a smaller number of individual issuers than a more diversified investment company, an investment in the Fund may present greater risk to an investor than an investment in a diversified company.
MARKET PRICE DISCOUNT FROM NET ASSET VALUE
Shares of closed-end investment companies frequently trade at a discount from their net asset value. This characteristic is a risk separate and distinct from the risk that Total Return Realty Fund's net asset value could decrease as a result of its investment activities. Whether you will realize gain or loss upon the sale of the shares will depend not upon the Fund's net asset value but entirely upon whether the market price of the shares at the time of sale is above or below your purchase price for the shares. Because the market price of the shares will be determined by factors such as relative supply of and demand for shares in the market, general market and economic conditions, and other factors beyond the control of the Fund, the Fund cannot predict whether the shares will trade at, below or above net asset value or at, below or above the initial public offering price.
II. THE REORGANIZATION
GENERAL
We have summarized below certain information relating to the Reorganization. This discussion is qualified by reference to the more complete information contained elsewhere in this Combined Prospectus/Proxy Statement and the Agreement and Plan of Reorganization, or the Reorganization Plan, attached to this Combined Prospectus/Proxy Statement as Appendix A.
REASONS FOR THE REORGANIZATION
We are proposing the Reorganization to increase the operational and administrative efficiencies of each Fund. We believe that Stockholders of both Funds will benefit if Realty Income Fund, the smaller of the two Funds, is reorganized into Total Return Realty Fund, which is a significantly larger fund. Both Funds have appreciably similar investment objectives and policies. After the Reorganization, Total Return Realty Fund would own all of the assets and liabilities of each Fund. RIF Stockholders would
become RFI Stockholders and automatically receive shares (and cash in lieu of any fractional shares) in Total Return Realty Fund. RFI Stockholders would continue to own shares of that Fund. These RFI Stockholders would not undergo any change in the ownership of their shares except to experience the proposed benefits of the Reorganization, which we fully discuss in the enclosed Combined Prospectus/Proxy Statement.
The Board of Directors of each Fund identified a number of benefits that the Proposal would bring to its respective Stockholders, including the following:
Total Return Realty Fund and Realty Income Fund are substantially similar. The Funds have similar investment objectives and policies, and generally have similar investment portfolios.
The Reorganization is projected to result in economies of scale. Total Return Realty Fund had a total expense ratio, as of December 31, 2000, of 1.16%, as compared to a total expense ratio for Realty Income Fund of 1.72% as of the same date. We estimate that, after the Reorganization, Total Return Realty Fund will have a total expense ratio of approximately 1.0%, which reflects the expected change in Total Return Realty Fund's administrative service provider and the cost savings that will accompany this change. All other things being equal, a lower total expense ratio will result in better returns for Stockholders.
The Reorganization will address the issue of Realty Income Fund's size. The Reorganization will result in Realty Income Fund Stockholders becoming shareholders of a larger fund, and thus eliminate the primary disadvantage of Realty Income Fund's relatively small size -- a higher total expense ratio as compared to an equivalent, larger fund.
The Reorganization is generally expected to be a tax-free transaction to Total Return Realty Fund, Realty Income Fund and Stockholders of both Funds, except that Realty Income Fund Stockholders may be subject to current income taxation on the cash they receive in lieu of fractional shares of Total Return Realty Fund, although we expect that this amount will be relatively insignificant.
The Reorganization will provide RIF Stockholders the opportunity to continue to hold an investment in a closed-end investment company with a substantially similar investment profile.
BOARD CONSIDERATION
At meetings held on November 20, 2000, December 5, 2000 and February 27, 2001, the Board of Directors of Realty Income Fund discussed the future of Realty Income Fund and how to best serve Stockholders' interests. The Board's focus in these discussions was Realty Income Fund's size and the effect this size has on the Fund's total expense ratio. During these meetings, the Board of Directors discussed the advantages of merging Realty Income Fund into Total Return Realty Fund, as well as other options, including liquidating the Fund or converting the Fund to an open-end investment company. After much discussion and consideration of all the issues involved, the Board concluded that it would be in the reasonable best interests of Realty Income Fund Stockholders to pursue the proposed Reorganization.
In considering Total Return Realty Fund, the Board of Directors of Realty Income Fund noted that combining Realty Income Fund into Total Return Realty Fund could offer increased administrative and operational efficiencies. The Board also considered, among other things: the terms of the Reorganization Plan; the opinion to be issued concerning the general tax-free nature of the Reorganization; a comparison of the Funds' historical and projected expense ratios and particularly, that Total Return Realty Fund's total operating expenses are lower than those of Realty Income Fund; the fact that the day-to-day portfolio management would be unchanged by the Reorganization; the management and other fees to be payable by Total Return Realty Fund; the similarities in the investment objectives and policies of the Funds; the similarities in the organizational structures of the Funds; the similarities in the Directors, investment adviser, administrator, custodian and transfer agent of the Funds; the similarities in the agreements, plans, procedures and investment restrictions of the Funds; the other effects of the reorganization on the Funds and their respective Stockholders; the recommendations of Cohen & Steers with respect to the Reorganization; and the alternatives available to the Funds.
Based upon its evaluation of the relevant information provided to it, and in light of its fiduciary duties under federal and state law, the Board, including the disinterested Directors, approved the Reorganization Plan, finding that the proposed Reorganization would be in the reasonable best interests of the Stockholders and that their interests would not be diluted as a result of the Reorganization.
THE BOARD OF DIRECTORS OF REALTY INCOME FUND RECOMMENDS THAT STOCKHOLDERS VOTE
'FOR' THE REORGANIZATION.
The Board of Directors of Realty Income Fund has not determined what action Realty Income Fund will take in the event either of the Funds' Stockholders fail to approve the Reorganization Plan or for any reason the Reorganization is not consummated. In either such event, the Directors will consider other appropriate courses of action, including continuing the operations of Realty Income Fund in its present form.
Similarly, at meetings held on November 20, 2000, December 5, 2000 and February 27, 2001, the Board of Directors of Total Return Realty Fund discussed the future of Total Return Realty Fund and how to best serve Stockholders' interests. The Board discussed the advantages of reorganizing Realty Income Fund into Total Return Realty Fund, noting particularly that the Reorganization would result in a material reduction in Total Return Realty Fund's total expense ratio. After much discussion and consideration of all the issues involved, the Board concluded that it would be in the reasonable best interests of Total Return Realty Fund Stockholders to pursue the proposed Reorganization.
The Board considered, among other things: the terms of the Reorganization Plan; the significant similarities of the Funds; and the opinion to be issued concerning the general tax-free nature of the Reorganization. Based upon its evaluation of the relevant information provided to it, and in light of its fiduciary duties under federal and state law, the Board, including the disinterested Directors, determined that the proposed Reorganization would be in the best interests of the Stockholders and that their interests would not be diluted as a result of the Reorganization and approved the Reorganization Plan.
THE BOARD OF DIRECTORS OF TOTAL RETURN REALTY FUND RECOMMENDS THAT STOCKHOLDERS
VOTE 'FOR' THE REORGANIZATION.
The Board has not determined what action Total Return Realty Fund will take in the event either of the Funds' Stockholders fail to approve the Reorganization Plan or for any reason the Reorganization is not consummated. In either such event, the Board will consider other appropriate courses of action, including continuing the operations of Total Return Realty Fund in its present form.
DESCRIPTION OF THE AGREEMENT AND PLAN OF REORGANIZATION
The Reorganization Plan provides that at the Effective Time (as defined in the Reorganization Plan) of the Reorganization, the assets and liabilities of Realty Income Fund will be transferred to and assumed by Total Return Realty Fund. In exchange for the transfer of the assets of, and the assumption of the liabilities of Realty Income Fund, Total Return Realty Fund will issue at the Effective Time of the Reorganization shares (and cash in lieu of any fractional shares) of Total Return Realty Fund having an aggregate net asset value equivalent to the aggregate net asset value of full and fractional outstanding shares of Realty Income Fund determined at the valuation time specified in the Reorganization Plan. Realty Income Fund will then distribute these shares (and cash in lieu of any fractional shares) of Total Return Realty Fund to Stockholders of Realty Income Fund. Each Stockholder of Realty Income Fund at the Effective Time of the Reorganization will receive a number of shares and cash in lieu of any fractional shares of Total Return Realty Fund having an aggregate net asset value equal to the aggregate net asset value of their shares of Realty Income Fund.
After the Reorganization, all of the issued and outstanding shares of Realty Income Fund will be canceled on the books of Realty Income Fund and the Fund's stock transfer books will be permanently closed. Realty Income Fund will then be delisted from the American Stock Exchange, deregistered as an investment company under the 1940 Act and dissolved under State law.
Following the Reorganization, Total Return Realty Fund will maintain the same investment objective and policies of the Fund as before the Reorganization.
The Reorganization is subject to a number of conditions, including without limitation, the approval of the Reorganization Plan by Stockholders of Realty Income Fund and Stockholders of Total Return Realty Fund; the effectiveness of this Combined Prospectus/Proxy Statement and any other documents filed with the SEC; and the parties' performance in all material respects of their respective agreements and undertakings in the Reorganization Plan. Assuming satisfaction of the conditions in the Reorganization Plan, the Effective Time of the Reorganization will be on May 31, 2001 or such other date as is agreed to by the parties.
The costs and expenses associated with the Reorganization, which are estimated to be $175,000 in the aggregate, will be borne equally by the Funds.
The Reorganization Plan may be abandoned at any time prior to the Effective Time of the Reorganization by either party if a material condition to the performance of such party under the Reorganization Plan or a material covenant of the other party is not fulfilled by the date specified in the Reorganization Plan or if there is a material default or material breach by the other party. In addition, either party may terminate the Reorganization Plan if its Board of Directors determines that proceeding with the Reorganization is not in the best interests of its respective Stockholders.
DESCRIPTION OF SHARES TO BE ISSUED IN THE REORGANIZATION
Common shares of Total Return Realty Fund issued in the Reorganization will, when issued, be fully paid and non-assessable by the Fund and transferable without restrictions and will have no preemptive rights. For additional information regarding the shares of the Fund, see 'Description of Shares' and 'Certain Provisions of the Articles of Incorporation and By-Laws.'
CAPITALIZATION
The following table presents as of December 31, 2000: (i) the capitalization
of Realty Income Fund; (ii) the capitalization of Total Return Realty Fund; and
(iii) the pro forma capitalization of Total Return Realty Fund, as of December
31, 2000, and as adjusted to give effect to the Reorganization. The total
capitalization of Total Return Realty Fund after the Reorganization is expected
to equal the capitalization of Realty Income Fund and Total Return Realty Fund
immediately prior to the Reorganization.
PRO FORMA
REALTY INCOME TOTAL RETURN TOTAL RETURN
FUND REALTY FUND REALTY FUND
---- ----------- -----------
Total Net Assets ($)......................... 22,743,263 91,404,861 114,148,124
Shares Outstanding........................... 3,024,603 7,399,100 9,242,677
Net Asset Value Per Share ($)................ 7.52 12.35 12.35
Closing Market Price Per Share ($)........... 6.9375 11.8750 11.8750
|
FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Reorganization is subject to the condition that the Funds receive an opinion from Simpson Thacher & Bartlett to the effect that for federal income tax purposes: (i) the transfer of all of the assets and liabilities of Realty Income Fund to Total Return Realty Fund in exchange for RFI Shares, followed by the liquidating distribution to RIF Stockholders of the RFI Shares so received, as described in the Reorganization Plan, will constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the 'Code'); (ii) no gain or loss will be recognized by Realty Income Fund as a result of the Reorganization; (iii) no gain or loss will be recognized by Total Return Realty Fund as a result of the Reorganization; (iv) no gain or loss will be recognized by the RIF Stockholders on the distribution to RIF Stockholders of RFI Shares solely in exchange for their RIF Shares, except with respect to cash received in lieu of fractional RFI Shares received in the Reorganization; (v) the aggregate basis of RFI Shares received by a RIF Stockholder (including any fractional RFI Shares with respect to which such RIF Stockholder receives cash) will be the same as the aggregate basis of such RIF Stockholder's RIF Shares immediately prior to the Reorganization; (vi) the basis of Total Return Realty Fund in the assets of Realty Income Fund received pursuant to the Reorganization will be the same as the basis of such assets in the hands of
Realty Income Fund immediately before the Reorganization; (vii) a RIF Stockholder's holding period for RFI Shares will be determined by including the period for which such RIF Stockholder held RIF Shares exchanged therefor, provided that such shareholder held such RIF Shares as a capital asset on the date of the closing of the Reorganization and (viii) Total Return Realty Fund's holding period with respect to the assets received in the Reorganization will include the period for which such assets were held by Realty Income Fund.
The Funds have not sought a tax ruling from the Internal Revenue Service ('IRS'), but are acting in reliance upon the opinion of counsel discussed in the previous paragraph. That opinion is not binding on the IRS and does not preclude the IRS from adopting a contrary position. RIF Stockholders should consult their own advisers concerning the potential tax consequences to them, including state and local income taxes.
FINANCIAL HIGHLIGHTS
The financial highlights table below is intended to help you understand each Fund's financial performance for the periods indicated. Certain information reflects financial results for a single share of a Fund. The total returns in the table represent the rate that an investor would have earned or lost on an investment in each Fund (assuming reinvestment of all dividends and distributions). This information has been audited by PricewaterhouseCoopers LLP, whose reports, along with each Fund's audited financial statements, are included in the accompanying current annual reports for the Funds.
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
FOR YEAR ENDED DECEMBER 31,
-------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 10.63 $ 12.35 $17.51 $16.87 $13.44
------- ------- ------ ------ ------
Income from investment operations:
Net investment income.................................... 0.94 1.01 1.17 1.10 1.02
Net realized and unrealized gain/(loss) on investments... 1.74 (1.74) (3.36) 2.38 3.42
------- ------- ------ ------ ------
Total from investment operations......................... 2.68 (0.73) (2.19) 3.48 4.44
------- ------- ------ ------ ------
Less dividends and distributions to shareholders from:
Net investment income.................................... (0.74) (0.83) (0.74) (0.96) (0.96)
Net realized gain on investments......................... -- -- (2.05) (1.18) (0.05)
Tax return of capital.................................... (0.22) (0.16) (0.18) -- --
------- ------- ------ ------ ------
Total dividends and distributions to shareholders.... (0.96) (0.99) (2.97) (2.84) (1.01)
------- ------- ------ ------ ------
Net asset value, end of period.............................. $ 12.35 $ 10.63 $12.35 $17.51 $16.87
------- ------- ------ ------ ------
------- ------- ------ ------ ------
Market value, end of period(1).............................. $11.875 $10.625 $12.81 $17.75 $16.50
------- ------- ------ ------ ------
------- ------- ------ ------ ------
Total market value return(1)................................ 21.53% - 10.18% - 12.20% 24.96% 32.37%
------- ------- ------ ------ ------
------- ------- ------ ------ ------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions)..................... $ 91.4 $ 78.7 $ 91.4 $129.6 $124.8
------- ------- ------ ------ ------
------- ------- ------ ------ ------
Ratio of expenses to average daily net assets (before
expense reduction)......................................... 1.16% 1.18% 1.14% 1.22% 1.20%
------- ------- ------ ------ ------
------- ------- ------ ------ ------
Ratio of expenses to average daily net assets (net of
expense reduction)......................................... 1.15% 1.12% 1.12% 1.17% 1.16%
------- ------- ------ ------ ------
------- ------- ------ ------ ------
Ratio of net investment income to average daily net assets
(before expense reduction)................................. 8.24% 8.61% 7.35% 6.12% 7.16%
------- ------- ------ ------ ------
------- ------- ------ ------ ------
Ratio of net investment income to average daily net assets
(net of expense reduction)................................. 8.25% 8.67% 7.37% 6.17% 7.21%
------- ------- ------ ------ ------
------- ------- ------ ------ ------
Portfolio turnover rate..................................... 31% 62% 76% 41% 31%
------- ------- ------ ------ ------
------- ------- ------ ------ ------
|
(1) Total market value return is computed based upon the New York Stock Exchange market price of the Funds's shares and excludes the effects or brokerage commissions. Dividends and distributions, if any, are assumed for purposes of this calculation, to be reinvested at prices obtained under the Fund's dividend reinvestment plan. Total net asset value return measures the changes in value over the period indicated, taking into account dividends as reinvested.
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
(CONTINUED)
FOR YEAR ENDED FOR PERIOD
DECEMBER 31, SEPTEMBER 17, 1993*
----------------- THROUGH DECEMBER 31,
1995 1994 1993
---- ---- ----
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 13.26 $ 13.30 $ 13.96(1)
------- ------- -------
Income from investment operations:
Net investment income.................................... 0.88 0.83 0.18
Net realized and unrealized gain/(loss) on investments... 0.26 0.01 (0.60)
------- ------- -------
Total from investment operations......................... 1.14 0.84 (0.42)
------- ------- -------
Less dividends and distributions from:
Net investment income.................................... (0.70) (0.47) (0.18)
Net realized gain on investments.........................
Tax return of capital.................................... (0.26) (0.41) (0.03)
------- ------- -------
Total dividends and distributions to shareholders..... (0.96) (0.88) (0.24)
------- ------- -------
Net asset value, end of period.............................. $ 13.44 $ 13.26 $ 13.30
------- ------- -------
------- ------- -------
Market value, end of period................................. $13.375 $12.375 $ 13.50
------- ------- -------
------- ------- -------
Total market value return(2)................................ 16.38% - 2.32% - 8.48%
9.14% 6.45% - 4.26%*
------- ------- -------
------- ------- -------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).................... $99,425 $98,136 $98,388
------- ------- -------
------- ------- -------
Ratio of expenses to average daily net assets (before
expense reduction)......................................... 1.25% 1.35% 1.22%
------- ------- -------
------- ------- -------
Ratio of expenses to average daily net assets (net of
expense reduction)......................................... 1.23% 1.31% 1.15%**
------- ------- -------
------- ------- -------
Ratio of net investment income to average daily net assets
(before expense reduction)................................. 6.78% 6.14% 5.14%**
------- ------- -------
------- ------- -------
Ratio of net investment income to average daily net assets
(net of expense reduction)................................. 6.79% 6.19% 5.21%**
------- ------- -------
------- ------- -------
Portfolio turnover rate..................................... 51% 65% 16%
------- ------- -------
------- ------- -------
|
* Commencement of operations.
** Annualized.
(1) Net of offering costs of $0.14 per share.
(2) Total market value return is computed based upon the New York Stock Exchange market price of the Funds's shares and excludes the effects or brokerage commissions. Dividends and distributions, if any, are assumed for purposes of this calculation, to be reinvested at prices obtained under the Fund's dividend reinvestment plan. Total net asset value return measures the changes in value over the period indicated, taking into account dividends as reinvested.
COHEN & STEERS REALTY INCOME FUND, INC.
FOR YEAR ENDED DECEMBER 31,
---------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 6.41 $ 7.56 $ 11.08 $10.70 $ 8.59
------ ----------- ----------- ------ --------
Income from investment operations:
Net investment income.................................... 0.55 0.60 0.69 0.69 0.68
Net realized and unrealized gain/(loss) on investments... 1.10 (1.11) (2.20) 1.65 2.26
------ ----------- ----------- ------ --------
Total from investment operations......................... 1.65 (0.51) (1.51) 2.34 2.94
------ ----------- ----------- ------ --------
Less dividends and distributions to shareholders from:
Net investment income.................................... (0.46) (0.49) (0.41) (0.68) (0.68)
Net realized gain on investments......................... -- -- (1.52) (1.28) (0.15)
Tax return of capital.................................... (0.08) (0.15) (0.08) -- --
------ ----------- ----------- ------ --------
Total dividends and distributions to shareholders.... (0.54) (0.64) (2.01) (1.96) (0.83)
Net asset value, end of period.............................. $ 7.52 $ 6.41 $ 7.56 $11.08 $ 10.70
------ ----------- ----------- ------ --------
------ ----------- ----------- ------ --------
Market value, end of period................................. $ 6.94 $ 6.50 $ 7.81 $11.56 $ 12.00
------ ----------- ----------- ------ --------
------ ----------- ----------- ------ --------
Total market value return(1)................................ 15.50% - 3.57% - 15.90% 13.20% 42.32%
------ ----------- ----------- ------ --------
------ ----------- ----------- ------ --------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions)..................... $ 22.7 $ 19.3 $ 22.2 $ 32.1 $ 30.08
------ ----------- ----------- ------ --------
------ ----------- ----------- ------ --------
Ratio of expenses to average daily net assets (before
expense reduction)......................................... 1.72% 1.66% 1.52% 1.42% 1.45%
------ ----------- ----------- ------ --------
------ ----------- ----------- ------ --------
Ratio of expenses to average daily net assets (net of
expense reduction)......................................... 1.72% 1.58% 1.51% 1.42% 1.45%
------ ----------- ----------- ------ --------
------ ----------- ----------- ------ --------
Ratio of net investment income to average daily net assets
(before expense reduction)................................. 7.90% 8.31% 6.89% 6.07% 7.34%
------ ----------- ----------- ------ --------
------ ----------- ----------- ------ --------
Ratio of net investment income to average daily net assets
(net of expense reduction)................................. 7.90% 8.39% 6.90% 6.07% 7.34%
------ ----------- ----------- ------ --------
------ ----------- ----------- ------ --------
Portfolio turnover rate..................................... 33.48% 56.88% 88.32% 53.76% 30.45%
------ ----------- ----------- ------ --------
------ ----------- ----------- ------ --------
|
(1) Total market value return is computed based upon the American Stock Exchange market price of the Fund's shares and excludes the effect of brokerage commissions. Dividends and distributions, if any, are assumed for purposes of this calculation, to be reinvested at prices obtained under the Fund's dividend reinvestment plan. Total net asset value return measures the changes in value over the period indicated taking into account reinvested dividends.
COHEN & STEERS REALTY INCOME FUND, INC.
(CONTINUED)
FOR YEAR ENDED DECEMBER 31,
-----------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 8.30 $ 8.70 $ 7.63 $ 7.35 $ 5.33
------- ------- ------- ------- -------
Income from investment operations:
Net investment income.................................... 0.64 0.65 0.65 0.65 0.64
Net realized and unrealized gain/(loss) on investments... 0.33 (0.31) 1.10 0.31 2.06
------- ------- ------- ------- -------
Total from investment operations......................... 0.97 0.34 1.75 0.96 2.70
------- ------- ------- ------- -------
Less dividends and distributions to shareholders from:
Net investment income.................................... (0.40) (0.49) (0.65) (0.65) (0.64)
Net realized gain on investments......................... 0.00 (0.09) 0.00 0.00 0.00
Tax return of capital.................................... (0.28) (0.16) 0.00 0.03 (0.04)
------- ------- ------- ------- -------
Total dividends and distributions to shareholders.... (0.68) (0.74) (0.68) (0.68) (0.68)
------- ------- ------- ------- -------
Net asset value, end of period.............................. $ 8.59 $ 8.30 $ 8.70 $ 7.63 $ 7.35
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Market value, end of period................................. $ 9.13 $ 8.50 $ 9.50 $ 8.00 $ 7.13
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total market value return(1)................................ 15.97% (2.78)% 27.77% 22.64% 68.96%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions)..................... $24.577 $23.548 $24.502 $21.323 $20.379
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratio of expenses to average daily net assets............... 1.73% 1.69% 1.64%* 1.63% 1.66%
------- ------- ------- -------- -------
------- ------- ------- -------- -------
Ratio of expenses to average daily net assets (net of
expense reduction)......................................... -- 1.51% 1.64% 1.63% --
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratio of net investment income to average daily net assets
(before expense reduction)................................. 7.67% 7.62% 7.31% 8.65% 9.26%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratio of net investment income to average daily net assets
(net of expense reduction).................................
Portfolio turnover rate..................................... 37.75% 80.68% 107.91% 79.51% 77.62%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
|
* Fees paid through directed brokerage commissions have been excluded. Had these fees been paid by the Fund, the ratio would have been 1.69%.
(1) Total market value return is computed based upon the American Stock Exchange market price of the Fund's shares and excludes the effects of brokerage commissions. Dividends and distributions, if any, are assumed for purposes of this calculation, to be reinvested at prices obtained under the Fund's dividend reinvestment plan. Total net asset value return measures the changes in value over the period indicated taking into account reinvested dividends.
The following table sets forth the high and low market price, net asset value and premium/discount to net asset value for each Fund for the periods indicated.
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
PER SHARE DATA FOR COMMON STOCK
TRADED ON THE NEW YORK STOCK EXCHANGE
PREMIUM
(DISCOUNT) TO
MARKET PRICE NET ASSET VALUE NET ASSET VALUE
------------------- ------------------ ---------------
QUARTER ENDED HIGH LOW HIGH LOW HIGH LOW
------------- ---- --- ---- --- ---- ---
(UNAUDITED)
March 31, 1999............................................ $14.125 $11.50 $12.52 $11.15 16.06% 1.59 %
June 30, 1999............................................. $14.0625 $11.375 $12.85 $11.30 13.68% (0.13)%
September 30, 1999........................................ $13.125 $11.00 $12.55 $11.19 7.67% (1.70)%
December 31, 1999......................................... $11.75 $10.0625 $11.27 $ 9.89 7.64% (2.12)%
March 31, 2000............................................ $11.3125 $10.125 $11.05 $ 9.97 6.99% (1.32)%
June 30, 2000............................................. $12.25 $10.75 $11.83 $10.51 8.83% (4.05)%
September 30, 2000........................................ $12.50 $11.6875 $12.57 $11.81 2.10% (5.03)%
December 31, 2000......................................... $12.0625 $11.1875 $12.46 $11.37 3.18% (5.94)%
March 31, 2001............................................ $13.25 $11.6875 $12.76 $12.29 5.41% (5.38)%
|
As indicated above, for the periods shown, shares of the Fund generally have traded at prices that are close to net asset value. The Fund has undertaken to reduce any tendency of the shares to trade at a discount to net asset value by agreeing under certain circumstances, to engage in annual tender offers and periodic open market purchases and allowing for conversion to open-end status by shareholder vote. For additional information regarding annual tender offers and possible conversion to open-end status, see 'Share Repurchases; Possible Conversion to Open-End Status -- Cohen & Steers Total Return Realty Fund, Inc.' Although we do not expect that the Reorganization will change the tendency
for shares of the Fund to trade at a discount, we cannot predict whether shares of the Fund will trade at a premium or discount to net asset value after the consummation of the Reorganization or to what the extent of any such premium or discount might be.
COHEN & STEERS REALTY INCOME FUND, INC.
PER SHARE DATA FOR COMMON STOCK
TRADED ON THE AMERICAN STOCK EXCHANGE
PREMIUM
(DISCOUNT) TO
MARKET PRICE NET ASSET VALUE NET ASSET VALUE
----------------- ---------------- ----------------
QUARTER ENDED HIGH LOW HIGH LOW HIGH LOW
------------- ---- --- ---- --- ---- ---
(UNAUDITED)
March 31, 1999............................................ $9.3125 $7.8750 $7.66 $6.83 25.00% 7.98%
June 30, 1999............................................. $9.2500 $7.8125 $7.89 $6.91 20.00% 9.71%
September 30, 1999........................................ $9.1250 $7.5000 $7.65 $6.79 22.89% 5.78%
December 31, 1999......................................... $7.7500 $6.0625 $6.83 $6.09 15.36% (1.88)%
March 31, 2000............................................ $7.2500 $5.8750 $6.68 $6.16 9.02% (5.85)%
June 30, 2000............................................. $7.1250 $6.3125 $7.28 $6.37 3.86% (7.86)%
September 30, 2000........................................ $7.3750 $6.6875 $7.68 $7.18 (1.41)% (7.66)%
December 31, 2000......................................... $7.1250 $6.5625 $7.58 $7.05 (1.27)% (10.23)%
March 31, 2001............................................ $7.7500 $6.8750 $7.89 $7.49 (0.77)% (10.13)%
|
As indicated above, for the periods shown, shares of the Fund generally have traded at prices that are close to net asset value. The Fund has undertaken to reduce any tendency of the shares to trade at a discount to net asset value by agreeing, under certain circumstances, to engage in annual tender offers and in periodic open market purchases of shares and allowing for conversion to open-end status by shareholder vote. For additional information regarding open-market purchases and possible conversion to open-end status, see 'Share Repurchases; Possible Conversion to Open-End Status -- Cohen & Steers Realty Income fund, Inc.'
III. COMPARISON OF THE FUNDS INVESTMENT OBJECTIVES AND POLICIES
We summarize below the investment objectives and policies of Total Return Realty Fund and Realty Income Fund. Although the investment objectives and policies of the Funds are substantially similar, there are important differences. We describe below these differences and compare the investment objectives and policies of the Funds.
Following the Reorganization, Total Return Realty Fund will maintain the same investment objective and policies as it had before the Reorganization.
OBJECTIVES
The investment objective of Total Return Realty Fund is to achieve a high total return through investment in real estate securities. The Fund seeks both current income and capital appreciation (realized and unrealized) with approximately equal emphasis. Realty Income Fund's primary investment objective is high current income through investment in publicly-traded real estate securities. Capital appreciation is a secondary objective. Both Funds have an investment policy of concentrating their respective investments in the real estate industry.
Following the Reorganization, the investment objective of Total Return Realty Fund will continue to be the same investment objective of the Fund prior to the Reorganization. There can be no assurance that the Fund will achieve its investment objective. The Fund, of course, will continue to concentrate its investments in the real estate industry.
PRINCIPAL INVESTMENT STRATEGIES
In making investment decisions on behalf of each Fund, the investment adviser relies on a fundamental analysis of each company. The investment adviser reviews each company's potential for success in light of the company's current financial condition, its industry position, and economic and market conditions. The investment adviser evaluates a number of factors, including growth potential, earnings estimates and the quality of management.
The following are the Funds' principal investment strategies, which are substantially similar. Any important differences are discussed below.
Real Estate Companies. For purposes of the Funds' investment policies, a real estate company is one that:
derives at least 50% of its revenues from the ownership, construction, financing, management or sale of commercial, industrial, or residential real estate; or
has at least 50% of its assets in such real estate.
Under normal circumstances, Total Return Realty Fund will invest at least 75% of its total assets in the equity securities of real estate companies. In comparison, Realty Income Fund will invest at least 65% of its total assets in the equity securities of real estate companies. These equity securities can consist of:
common stocks (including REIT shares);
rights or warrants to purchase common stocks;
securities convertible into common stocks where the conversion feature represents, in the investment adviser's view, a significant element of the securities' value; and
preferred stocks.
Real Estate Investment Trusts. The Funds may invest without limit in shares of real estate investment trusts ('REITs'). REITs pool investors' funds for investment primarily in income producing real estate or real estate related loans or interests. A REIT is not taxed on income distributed to Stockholders if, among other things, it distributes to its Stockholders substantially all of its taxable income (other than net capital gain) for each taxable year. As a result, REITs tend to pay relatively
higher dividends than other types of companies and the Funds intend to use these REIT dividends in an effort to meet the current income goal of its investment objective.
Types of REITs. REITs can generally be classified as Equity REITs, Mortgage REITs and Hybrid REITs. Equity REITs, which invest the majority of their assets directly in real property, derive their income primarily from rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs, which invest the majority of their assets in real estate mortgages, derive their income primarily from interest payments. Hybrid REITs combine the characteristics of both Equity REITs and Mortgage REITs.
Debt Securities. Total Return Realty Fund may invest a maximum of 35% of its total assets in investment grade and non-investment grade debt securities of companies, including real estate industry companies. In comparison, Realty Income Fund may invest a maximum of 25% of its total assets in investment grade and non-investment grade debt securities of companies, including real estate industry companies. Debt securities rated non-investment grade (lower than Baa by Moody's or lower than BBB by S&P, are sometimes referred to as 'high yield' or 'junk' bonds.
Illiquid Securities. Total Return Realty Fund will not invest more than 15% of its net assets in illiquid securities. In comparison, Realty Income Fund will not invest more than 10% of its net assets in illiquid securities. A security is illiquid if, for legal or market reasons, it cannot be promptly sold (i.e., within seven days) at a price which approximates its fair value.
Defensive Position. When the Funds' investment adviser believes that market or general economic conditions justify a temporary defensive position, either Fund may deviate from its investment objective and invest all or any portion of its assets in high-grade debt securities, without regard to whether the issuer is a real estate company. When and to the extent the Fund assumes a temporary defensive position, it may not pursue or achieve its investment objective.
INVESTMENT RESTRICTIONS
We summarize below the investment restrictions of the Funds. The investment restrictions of Total Return Realty Fund and Realty Income Fund are substantially similar.
The Funds' investment restrictions may not be changed without the approval of the holders of a majority of the applicable Fund's outstanding voting securities, as defined below. The percentage limitations described below, as well as those described elsewhere in this Combined Prospectus/Proxy Statement, apply only at the time an investment is made or other relevant action is taken by the applicable Fund.
Each Fund will not:
1. Purchase more than 10% of the voting securities of any issuer;
2. Make loans except through the purchase of debt obligations in accordance with its investment objective and policies;
3. Issue senior securities (including borrowing money for other than temporary purposes) except in conformity with the limits defined in the 1940 Act; or pledge its assets other than to secure such issuances or borrowings or in connection with permitted investment strategies; notwithstanding these limitations, the Fund may borrow up to an additional 5% of its total assets for temporary purposes;
4. Pledge, hypothecate, mortgage or otherwise encumber its assets, except to secure permitted borrowings;
5. Participate on a joint or joint and several basis in any securities trading account;
6. Invest in companies for the purpose of exercising control;
7. Make short sales of securities or maintain a short position, unless at all times when a short position is open the Fund owns an equal amount of such securities or securities convertible into or exchangeable for, without payment of any further consideration, securities of the same issue as, and equal in amount to, the securities sold short ('short sales against the box'), and unless not more than 10% of the Fund's net assets (taken at market value) is held as collateral for such sales at any
one time (it is the Fund's present intention to make such sales only for the purpose of deferring realization of gain or loss for Federal income tax purposes); or
8. (i) Purchase or sell real estate, except that the Fund may purchase
securities issued or guaranteed by real estate companies and will, as a
matter of fundamental policy, concentrate its investments in such
securities; (ii) purchase or sell commodities or commodity contracts;
(iii) invest in interests in oil, gas, or other mineral exploration or
development programs; (iv) purchase securities on margin, except for such
short-term credits as may be necessary for the clearance of transactions and
except for borrowings permitted under investment restriction number 3; or
(v) act as an underwriter of securities, except that the Fund may acquire
restricted securities under circumstances in which, if such securities were
sold, the Fund might be deemed to be an underwriter for purposes of the
Securities Act of 1933.
The restrictions described above are fundamental policies that may not be changed without the approval of a majority of the Fund's outstanding voting securities. As used in this Combined Prospectus/Proxy Statement, a majority of the Fund's outstanding voting securities means the lesser of (i) more than 50% of its outstanding voting securities or (ii) 67% or more of the voting securities present at a meeting at which more than 50% of the outstanding voting securities are present or represented by proxy. Fund policies which are not fundamental may be modified by the Board of Directors if, in the reasonable exercise of its business judgment, modification is determined to be necessary or appropriate to carry out the Fund's objectives.
DIVIDENDS AND DISTRIBUTIONS
We summarize below the dividend and distribution policies of the Funds and highlight important differences between Total Return Realty Fund and Realty Income Fund with respect to these policies.
Following the Reorganization, Total Return Realty Fund will maintain the same dividend and distribution policies of the Fund prior to the Reorganization.
COHEN & STEERS TOTAL RETURN REALTY FUND
The policy of Total Return Realty Fund is to make monthly distributions from investment company taxable income of the Fund. Net capital gain (net long-term capital gain in excess of net short-term capital loss), if any, is distributed at least annually. To the extent practicable, the Fund will attempt to pay monthly distributions to Stockholders at a constant rate, which may be adjusted from time to time by the Fund's Board of Directors, although there can be no assurance that it will be able to do so. For additional information concerning the tax treatment of the Fund's distribution policies for the Fund and its Stockholders, see 'Taxation -- Distributions.'
The Fund has a Dividend Reinvestment Plan (the 'Plan'). Each Stockholder may elect to have all distributions of dividends and capital gains automatically reinvested in additional shares by The Bank of New York, as agent for Stockholders pursuant to the Plan (the 'Plan Agent'). Otherwise, distributions are made in cash. The Plan Agent will effect purchases of shares under the Plan in the open market. Stockholders who do not participate in the Plan will receive all distributions in cash paid by check mailed directly to the Stockholder of record (or if the shares are held in street or other nominee name, then to the nominee) by the Plan Agent, as dividend disbursing agent. Stockholders whose shares are held in the name of a broker or nominee should contact the broker or nominee to determine whether and how they may participate in the Plan.
Participants in the Plan may withdraw from the Plan upon written notice to the Plan Agent. Such withdrawal will be effective immediately if received not less than ten days prior to a dividend record date; otherwise, it will be effective for all subsequent dividend record dates. When a participant withdraws from the Plan or upon termination of the Plan as provided below, certificates for whole shares credited to his or her account under the Plan will be issued and a cash payment will be made for any fraction of a share credited to such account.
The Plan Agent maintains each Stockholder's account in the Plan and furnishes monthly written confirmations of all transactions in the accounts, including information needed by the Stockholders for
personal and tax records. Shares in the account of each Plan participant will be held by the Plan Agent on behalf of the participant. Proxy material relating to Stockholders' meetings of the Fund will include those shares purchased as well as shares held pursuant to the Plan.
In the case of Stockholders, such as banks, brokers or nominees, which hold shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of shares certified from time to time by the record Stockholders as representing the total amount registered in the record Stockholder's name and held for the account of beneficial owners who are participants in the Plan.
The Plan Agent's fees for the handling of reinvestment of dividends and other distributions will be paid by the Fund. Each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of distributions. There are no other charges to participants for reinvesting dividends or capital gain distributions.
The automatic reinvestment of dividends and other distributions will not relieve participants of any income tax that may be payable or required to be withheld on such dividends or distributions.
The Fund reserves the right to amend or terminate the Plan as applied to any
distribution paid subsequent to written notice of the change sent to all
Stockholders of the Fund at least 90 days before the record date for the
dividend or distribution. The Plan also may be amended or terminated by the Plan
Agent by at least 90 days' written notice to all Stockholders of the Fund. All
correspondence concerning the Plan should be directed to the Plan Agent at State
Street Bank and Trust Company, P.O. Box 8200, Boston, MA 02266-8200
(800) 426-5523.
COHEN & STEERS REALTY INCOME FUND
The policy of Realty Income Fund is to distribute investment company taxable income quarterly. The Fund intends to distribute net capital gain, if any, at least annually although the Board of Directors may in the future determine to retain realized capital gains and not distribute them to Stockholders. For additional information concerning the tax treatment of the Fund's distribution policies for the Fund and its Stockholders, see 'Taxation -- Distributions.'
Stockholders may elect to receive all distributions of dividends and capital gains in cash paid by check mailed directly to the Stockholder by The Bank of New York (the 'Bank'), the dividend paying agent. Otherwise, distributions are reinvested in additional shares. In order for a Stockholder to receive distributions and capital gains in cash, the Stockholder must send a written notice to the Bank of his withdrawal from the Dividend Reinvestment Plan (the 'Plan') at least ten days prior to the record date for any forthcoming distribution. Pursuant to the Plan Stockholders not making such election will have all such amounts automatically reinvested by the Bank, as the Plan agent, in whole and fractional shares of the Fund's common stock.
If the Directors of the Fund declare a dividend or determine to make a capital gain distribution payable either in shares of common stock or in cash as Stockholders may have elected, then nonparticipants in the Plan will receive cash and participants in the Plan will receive the equivalent in shares valued at the lower of market price or net asset value. Whenever market price is equal to or exceeds net asset value at the time shares are valued for the purpose of determining the number of shares equivalent to the cash dividend or distribution, participants will be issued shares at a per share price equal to the higher of (i) the net asset value or (ii) 95% of the closing market price per share on the payment date. If net asset value of shares at such time exceeds the market price of shares at such time, or if the Fund should declare a dividend or other distribution payable only in cash, the Bank will, as agent for the participants, buy shares in the open market, on the American Stock Exchange or elsewhere, for the participants' account. If, before the Bank has completed its purchases, the market price exceeds the net asset value of the shares, the average per share purchase price paid by the Bank may exceed the net asset value of the shares, resulting in the acquisition of fewer shares than if the dividend or distribution had been paid in shares issued by the Fund. The Bank will apply all cash received as a dividend or distribution to purchase shares on the open market as soon as practicable after the payment date of such dividend or distribution, but in no event later than 30 days after such date, except where necessary to comply with applicable provisions of the Federal securities laws.
The Bank maintains all Stockholder accounts in the Plan and furnishes written confirmation of all transactions in the account, including information needed by Stockholders for personal and tax records. Shares in the account of each Plan participant will be held by the Bank in non-certificated form in the name of the participant, and each Stockholder's proxy will include those shares purchased pursuant to the Plan.
There is no charge to participants for reinvesting dividends or distributions. The Bank's fees for the handling of the reinvestment of dividends and distributions will be paid by the Fund. There will be no brokerage charges with respect to shares issued directly by the Fund as a result of dividends or distributions payable either in stock or in cash. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Bank's open market purchases in connection with the reinvestment of dividends or distributions.
The automatic reinvestment of dividends and distributions will not relieve participants of any income tax which may be payable on such dividends or distributions.
The Fund reserves the right to amend or terminate the Plan as applied to any dividend or distribution paid subsequent to written notice of the change sent to the participants in the Plan at least 90 days before the record date for such dividend and distribution. The Plan also may be amended or terminated by the Bank, with the Fund's prior written consent, on at least 90 days' written notice to participants in the Plan. All correspondence concerning the Plan should be directed to the Plan Agent at Church Street Station, New York, New York 10277-0702, Attention: Dividend Reinvestment Service.
SHARE REPURCHASES; POSSIBLE CONVERSION TO OPEN-END STATUS
We summarize below the share repurchase policies and procedures of the Funds and highlight important differences between Total Return Realty Fund and Realty Income Fund with respect to these policies and procedures.
Following the proposed Reorganization, Total Return Realty Fund will maintain the same share repurchase policies and procedures.
COHEN & STEERS TOTAL RETURN REALTY FUND
The Board of Directors has committed to conduct a tender offer for shares on an annual basis, subject to some limitations. A tender offer will be conducted during the first quarter of each calendar year unless, during the period of 12 calendar weeks prior to a date in the first quarter designated by the Board of Directors no later than the end of the preceding quarter, shares of the Fund have traded on the NYSE at an average discount from net asset value of less than 3%, or at an average premium, determined on the basis of the discount or premium, as the case may be, as of the last trading day in each week during such 12 week period. In addition, the Board will consider from time to time more frequent tender offers for and/or open market repurchases of Fund shares.
Subject to the Fund's investment restrictions with respect to borrowings, the Fund may incur debt to finance tender offers and/or repurchases. Interest on any borrowings will reduce the Fund's net investment income, and any such borrowings are subject to special considerations. For additional information regarding investment restrictions with respect to borrowings, see 'Risk Factors -- Use of Leverage.'
We cannot assure you that tenders and/or repurchases will result in the Fund's shares trading at a price that approximates or is equal to their net asset value. We anticipate that the market price of the Fund's shares will from time to time vary from net asset value. The market price of the Fund's shares will, among other things, be determined by the relative demand for and supply of shares in the market, the Fund's investment performance, the Fund's dividends and yield and investor perception of the Fund's overall attractiveness as an investment as compared with other investment alternatives. Nevertheless, the fact that the shares may be subject to tender offers at net asset value from time to time may reduce the spread between market price and net asset value that might otherwise exist. We believe that sellers may be less inclined to accept a significant discount if they have a reasonable expectation of being able to recover net asset value in conjunction with an annual tender offer.
Although we believe that tender offers and share repurchases generally would have a favorable effect on the market price of the Fund's shares, the repurchase of shares by the Fund will decrease the total assets of the Fund and, therefore, have the effect of increasing the Fund's expense ratio. Because of the nature of the Fund's investment objective and policies and the Fund's portfolio, we do not anticipate that tender offers and repurchases should have a materially adverse effect on the Fund's investment performance and do not anticipate any material difficulty in disposing of portfolio securities in order to consummate tender offers and share repurchases.
Although we have committed to annual tender offers under the circumstances described above, we may change this policy and not conduct tender offers or effect repurchases if (1) these transactions, if consummated, would (a) result in the delisting of the Fund's shares from the NYSE (the NYSE having advised the Fund that it would consider delisting if the aggregate market value of the Fund's outstanding shares is less than $50,000,000, the number of publicly held shares falls below 600,000 or the number of round-lot holders falls below 1,200), (b) impair the Fund's status as a regulated investment company under the Code (which would make the Fund a taxable entity, causing the Fund's income to be taxed at the Fund level in addition to the taxation of Stockholders who receive dividends from the Fund) or (c) result in a failure to comply with applicable asset coverage requirements in the event any senior securities are issued and outstanding; (2) the amount of securities tendered would require liquidation of such a substantial portion of the Fund's securities that the Fund would not be able to liquidate portfolio securities in an orderly manner in light of the existing market conditions and such liquidation would have an adverse effect on the net asset value of the Fund to the detriment of non- tendering Stockholders; (3) there is any (a) in the Board of Directors' judgment, material legal action or proceeding instituted or threatened challenging such transactions or otherwise materially adversely affecting the Fund, (b) suspension of or limitation on prices for trading securities generally on the NYSE or other national securities exchange(s), or the National Association of Securities Dealers Automated Quotation System ('NASDAQ') National Market System, (c) declaration of a banking moratorium by federal or state authorities or any suspension of payment by banks in the United States or New York State, (d) limitation affecting the Fund or the issuers of its portfolio securities imposed by federal or state authorities on the extension of credit by lending institutions, (e) commencement of war, armed hostilities or other international or national calamity directly or indirectly involving the United States, or (f) in the Board of Directors' judgment, other event or condition which would have a material adverse effect on the Fund or its Stockholders if shares were repurchased; or (4) the Board of Directors determines that effecting any such transaction would constitute a breach of their fiduciary duty owed the Fund or its Stockholders. The Directors may modify these conditions in light of experience.
If we conduct a tender offer for shares of the Fund, it will be at a price equal to the net asset value of the shares on a date subsequent to the Fund's receipt of all tenders. During the pendency of any tender offer by the Fund, we will calculate daily the net asset value of the shares and will establish procedures, which will be specified in the tender offer documents, to enable Stockholders to ascertain readily such net asset value. We will make each offer and notify Stockholders in accordance with the requirements of the Securities Exchange Act of 1934 and the 1940 Act, either by publication or mailing or both. Each offering document will contain the information prescribed by these laws and the rules and regulations promulgated under them, including information for Stockholders to consider in deciding whether to tender shares and detailed instructions on how to tender shares. When the Fund's Directors authorize a tender offer, a Stockholder wishing to accept the offer will be required to tender all (but not less than all) of the shares owned by such Stockholder (or attributed to him for federal income tax purposes under Section 318 of the Code) unless the Fund has received a ruling from the IRS (or, at the Fund's option, an opinion of counsel) that a tender of less than all of a Stockholder's stock will not cause certain adverse tax consequences with respect to non-tendering Stockholders. For additional information concerning tax matters relating to tender offers, see 'Taxation -- Offers to Purchase Shares.'
We will not specify a record date for the tender offer which will not permit a Stockholder of record on the effective date of the tender offer to tender his shares. The Fund will purchase all shares tendered in accordance with the terms of the offer unless we determine to accept none of them (based upon one of the conditions set forth above). Each person tendering shares will pay to the Fund a reasonable service charge currently anticipated to be $25.00, subject to change, to help defray certain costs,
including the processing of tender forms, effecting payment, postage and handling. The staff of the SEC has taken the position that this service charge may not be deducted from the proceeds of the purchase. The Fund's transfer agent will receive the fee as an offset to these costs. We expect that the cost to the Fund of effecting a tender offer will exceed the aggregate of all service charges received from those who tender their shares. Such excess costs associated with the tender will be charged against capital. Tendered shares that have been accepted and purchased by the Fund will be recorded and reported as an offset to Stockholders' equity and accordingly will reduce the Fund's total assets.
In the event that the Fund engages in financial leveraging, the asset coverage requirements of the 1940 Act may restrict the Fund's ability to engage in repurchases of its shares. With respect to bank borrowings or senior securities consisting of debt, these requirements provide that no purchases of shares may be made by the Fund unless, at the time of the purchase, the outstanding borrowings or senior securities consisting of debt have an asset coverage of at least 300% after deducting the amount of the purchase price. With respect to preferred stock, the applicable asset coverage percentage is 200%. For additional information concerning the Fund's policies regarding borrowing and leverage, see 'Risk Factors -- Use of Leverage.'
We may convert the Fund to an open-end investment company at any time by a vote of the outstanding shares. If we convert the Fund to an open-end investment company, the Fund's shares would no longer be listed on the NYSE. Conversion to open-end status could also require us to modify some investment restrictions and policies. Stockholders of an open-end investment company may require the Fund to redeem their shares at any time (except in certain circumstances as authorized by or permitted under the 1940 Act) at their net asset value, less such redemption charge, if any, as might be in effect at the time of redemption. In order to avoid maintaining large cash positions or liquidating favorable investments to meet redemptions, open-end investment companies typically engage in a continuous offering of their shares. Open-end investment companies are thus subject to periodic asset in-flows and out-flows that can complicate portfolio management. The Board of Directors may at any time propose conversion of the Fund to open-end status, depending upon its judgment regarding the advisability of such action in light of circumstances then prevailing.
COHEN & STEERS REALTY INCOME FUND
In comparison, Realty Income Fund is not required to conduct annual tender offers. Because the Fund is a closed-end investment company, Stockholders of the Fund do not have the right to redeem their shares. We may repurchase shares from time to time in open market or private transactions, however, when we can do so at prices below the current net asset value per share. Subject to its investment restrictions, the Fund may borrow temporarily to finance the repurchase of shares.
Shares of the Fund trade in the open market at a price that is a function of several factors, including the yield and net asset value of the shares and the extent of market activity. Shares of closed-end investment companies frequently trade at a discount from net asset value, but in some cases trade at a premium. When the Fund repurchases its shares at a price below their net asset value, the net asset value of those shares that remain outstanding will be increased, but this does not necessarily mean that the market price of those outstanding shares will be affected either positively or negatively. Further, if the Fund borrows temporarily to finance the share repurchase transactions, interest on such borrowings will reduce the Fund's net income. These repurchases will decrease the net assets of the Fund and as a result possibly increase the Fund's expense ratio because the Fund's fixed expenses will be spread over a smaller asset base.
If shares of the Fund trade on the principal securities exchange where it is listed at an average discount from net asset value of more than 10%, determined on the basis of the discount as of the end of the close of trading on the last trading date in each week during the period of 12 calendar weeks preceding December 31 in such year, the Board of Directors is to submit to Stockholders at the next succeeding annual meeting of Stockholders a proposal, to the extent consistent with the 1940 Act, to amend the Fund's Articles of Incorporation. Such amendment would provide that, upon its adoption by the holders of two-thirds of the Fund's outstanding shares of common stock, the Fund will convert from a closed-end to an open-end investment company. The two-thirds vote requirement is higher than the minimum vote required under the 1940 Act. The Board of Directors determined that the two-thirds
vote requirement is in the best interests of the Fund and its Stockholders. The proxy statement for any annual meeting at which such a proposal is submitted is to contain, among other things, the Board of Director's recommendation either to vote in favor of the proposition or against it. The Board of Directors is not required to recommend that the Stockholders vote in favor of such a proposition.
If the Fund is converted to an open-end investment company, each share of the Fund's common stock could be presented to the Fund at the option of the holder thereof for redemption at its net asset value per share. In such event, the Fund may be required to liquidate portfolio securities to meet requests for redemption. After conversion to an open-end investment company, the Fund's shares of common stock would no longer be listed on the AMEX.
To the extent that any such repurchase decreased the discount from net asset value to below 10% during the measurement period described above, the Fund would not be required to submit to Stockholders a proposal to convert the Fund to an open-end investment company at the next annual meeting of Stockholders.
INVESTMENT ADVISORY AGREEMENTS
We summarize below the investment advisory agreements of Total Return Realty Fund and Realty Income Fund. Although these investment advisory agreements are substantially similar, there are important differences between the Funds. We describe below these differences.
Following the Reorganization, Total Return Realty Fund will continue to maintain the same investment advisory agreement of the Fund prior to the Reorganization.
ADVISORY AGREEMENTS
Pursuant to investment advisory agreements (the 'Investment Advisory Agreements') with each of the Funds, the Adviser furnishes a continuous investment program for each Fund's portfolio, makes the day-to-day investment decisions for the Fund, executes the purchase and sale orders for the portfolio transactions of the Fund and generally manages the Fund's investments in accordance with the stated policies of the Fund, subject to the general supervision of the Board of Directors of the Fund. Robert H. Steers, Director, Chairman and Secretary of each Fund and Chairman of the Adviser, and Martin Cohen, Director, President and Treasurer of each Fund and President of the Adviser, are responsible for the day-to-day management of each Fund's portfolio. It is the policy of the Adviser to allocate advisory recommendations and the placing of orders in a manner that is deemed equitable by the Adviser to the accounts involved, including the Fund. When two or more of the clients of the Adviser (including the Fund) are purchasing or selling the same security on a given day through the same broker-dealer, such transactions may be averaged as to price.
The Adviser provides persons satisfactory to the Directors of each Fund to serve as officers of the applicable Fund. These officers, as well as certain other employees and Directors of the Funds, may be directors, officers, or employees of the Adviser. Messrs. Martin Cohen and Robert H. Steers may be deemed 'controlling persons' of the Adviser on the basis of their ownership of the Adviser's stock.
Under its Investment Advisory Agreement, Total Return Realty Fund pays the Adviser a monthly management fee at the annual rate of 0.70% of the average weekly net assets of the Fund during the month. For purposes of the calculation of the fee payable to the Adviser, average weekly net assets are determined on the basis of the average net assets of the Fund for each weekly period (ending on Thursdays) ending during the month. The net assets for each weekly period are determined by averaging the net assets on Thursday of such weekly period with the net assets on Thursday of the immediately preceding weekly period. When a Thursday is not a Fund business day, then the calculation will be based on the net assets of the Fund on the Fund business day immediately preceding such Thursday.
In comparison, under its Investment Advisory Agreement, Realty Income Fund pays the Adviser a monthly management fee at the annual rate of 0.65% of the average weekly net assets of the Fund during the month. For purposes of the calculation of the fee payable to the Adviser, average weekly net assets are determined on the basis of the average net assets of the Fund for each weekly period (ending
on Fridays) ending during the month. The net assets for each weekly period are determined by averaging the net assets on Friday of such weekly period with the net assets on Friday of the immediately preceding weekly period. When a Friday is not a Fund business day, then the calculation will be based on the net assets of the Fund on the Fund business day immediately preceding such Friday.
The Adviser provides Total Return Realty Fund with such personnel as the Fund may from time to time request for the performance of clerical, accounting and other office services, such as coordinating matters with the Administrator, the transfer agent and the custodian, which the Adviser is not required to furnish under the Investment Advisory Agreement with the Fund. The personnel rendering these services, who may act as officers of the Fund, may be employees of the Adviser or its affiliates. The cost to the Fund of these services must be agreed to by the Fund and is intended to be no higher than the actual cost to the Adviser or its affiliates of providing the services. The Fund does not pay for services performed by officers of the Adviser or its affiliates. In comparison, the Adviser does not provide Realty Income Fund with personnel for the performance of clerical, accounting and other office services that it is not required to furnish under the Investment Advisory Agreement with Realty Income Fund.
Each Fund may from time to time hire its own employees or contract to have services performed by third parties, and the management of each Fund intends to do so whenever it appears advantageous to the applicable Fund.
In addition to the payments to the Adviser under the Investment Advisory
Agreements described above, each Fund pays other costs of its operations
including (i) brokerage and commission expenses, (ii) federal, state and local
taxes, including issue and transfer taxes, incurred by or levied on the Fund,
(iii) interest charges on borrowings, (iv) the organizational and offering
expenses of the Fund, whether or not advanced by the Adviser, (v) fees and
expenses of registering the shares of the Fund under the appropriate federal
securities laws and of qualifying shares of the Fund under applicable state
securities law, (vi) fees and expenses of listing and maintaining the listing of
the Fund's shares on any national securities exchange, (vii) expenses of
printing and distributing reports to Stockholders, (viii) costs of proxy
solicitation, (ix) charges and expenses of the Fund's Administrator, custodian,
transfer agent, dividend disbursing agent and registrar, (x) compensation of the
Fund's officers, Directors and employees who do not devote any part of their
time to the affairs of the Adviser or the Administrator or any of their
affiliates other than investment companies, (xi) legal and auditing expenses,
(xii) the cost of certificates representing the Fund's shares, and (xiii) costs
of stationery and supplies. Total Return Realty Fund also pays the Adviser all
costs of personnel for the performance of clerical, accounting and other office
services, such as coordinating matters with the Administrator, the transfer
agent and the custodian, which the Adviser is not required to furnish under the
Investment Advisory Agreement with the Fund.
The Investment Advisory Agreements will remain in effect until January 1, 2002 and for successive twelve-month periods (computed from each January 1) thereafter, provided that their continuance is specifically approved annually by the Directors of the applicable Fund or by vote of the Fund's Stockholders, and in either case by a majority of the Directors who are not parties to the Investment Advisory Agreements or interested persons of any such party, by vote cast in person at a meeting called for the purpose of voting on such approval.
The Investment Advisory Agreements are terminable without penalty by each Fund on 60 days' written notice when authorized either by a majority vote of the applicable Fund's outstanding voting securities or by a vote of a majority of its Directors, or by the Adviser on 60 days' written notice, and will automatically terminate in the event of its assignment. The Investment Advisory Agreements provide that in the absence of willful misfeasance, bad faith or gross negligence on the part of the Adviser, or of reckless disregard of its obligations under the Agreements, the Adviser will not be liable for any action or failure to act in accordance with its duties under the Agreements.
ADMINISTRATOR
Under the terms of an administration agreement between Princeton Administrators, L.P. (the 'RFI Administrator') and Total Return Realty Fund, the RFI Administrator performs or arranges for the
performance of the administrative services (i.e., services other than investment advice and related portfolio activities) necessary for the operation of the Fund, including maintaining certain of the books and records of the Fund, preparing certain reports and other documents required by the U.S. federal securities laws and regulations and providing the Fund with administrative office facilities. For the services rendered to the Fund and the facilities furnished, the Fund pays the Administrator a monthly fee at the annual rate of 0.15% of the average weekly net assets of the Fund subject to a minimum monthly fee of $12,500.
Under the terms of an administration agreement between The Chase Manhattan Bank, through its affiliate Chase Global Funds Services Company (the 'RIF Administrator') and Realty Income Fund, the RIF Administrator performs or arranges for the performance of the administrative services (i.e., services other than investment advice and related portfolio activities) necessary for the operation of the Fund, including maintaining certain of the books and records of the Fund, preparing certain reports and other documents required by the U.S. federal securities laws and regulations and providing the Fund with administrative office facilities. For the services rendered to the Fund and the facilities furnished, the Fund pays the Administrator a monthly fee at the annual rate of 0.08% of the average daily net assets of the Fund (and the Cohen & Steers mutual funds) on the first $500 million of these funds' average daily net assets, 0.05% on the next $500 million of the funds' average daily net assets and 0.03% on the funds' average daily net assets in excess of $1 billion. The RIF Administrator's fee is allocated to each of these funds on the basis of relative net assets, subject to a minimum fee of $50,000 for the Fund.
CODE OF ETHICS
Each Fund and the Adviser has adopted codes of ethics that are designed to ensure that the interests of the Funds' Stockholders come before the interests of those involved in managing the Funds. The codes of ethics, among other things, prohibit management personnel from investing in REITs and real estate securities, prohibit purchases in an initial public offering and require pre-approval for investments in private placements. Each Fund's Independent Directors are prohibited from purchasing or selling any security if they knew or reasonably should have known at the time of the transaction that, within the most recent 15 days, the security is being or has been considered for purchase or sale by a Fund, or is being purchased or sold by a Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Subject to the supervision of the Directors, decisions to buy and sell securities for each Fund and negotiation of its brokerage commission rates are made by the Adviser. Transactions on stock exchanges involve the payment by the Fund of negotiated brokerage commissions. There is generally no stated commission in the case of securities traded in the over-the-counter market but the price paid by the Fund usually includes an undisclosed dealer commission or mark-up. In certain instances, the Fund may make purchases of underwritten issues at prices which include underwriting fees.
In selecting a broker to execute each particular transaction, the Adviser will take the following into consideration: the best net price available; the reliability, integrity and financial condition of the broker; the size and difficulty in executing the order; and the value of the expected contribution of the broker to the investment performance of the Fund on a continuing basis. Accordingly, the cost of the brokerage commissions to the Fund in any transaction may be greater than that available from other brokers if the difference is reasonably justified by other aspects of the portfolio execution services offered. Subject to such policies and procedures as the Directors may determine, the Adviser shall not be deemed to have acted unlawfully or to have breached any duty solely by reason of its having caused the Fund to pay a broker that provides research services to the Adviser an amount of commission for effecting a portfolio investment transaction in excess of the amount of commission another broker would have charged for effecting that transaction, if the Adviser determines in good faith that such amount of commission was reasonable in relation to the value of the research service provided by such broker viewed in terms of either that particular transaction or the Adviser's ongoing responsibilities with respect to the Fund. Research and investment information is provided by these and other brokers at no cost to the Adviser and is available for the benefit of other accounts advised by the Adviser and its affiliates, and not all of the information will be used in connection with the Fund. While this information may be useful in
varying degrees and may tend to reduce the Adviser's expenses, it is not possible to estimate its value and in the opinion of the Adviser it does not reduce the Adviser's expenses in a determinable amount. The extent to which the Adviser makes use of statistical, research and other services furnished by brokers is considered by the Adviser in the allocation of brokerage business but there is no formula by which such business is allocated. The Adviser does so in accordance with its judgment of the best interests of the Fund and its Stockholders. The Adviser may also take into account payments made by brokers effecting transactions for the Fund to other persons on behalf of the Fund for services provided to it for which it would be obligated to pay (such as custodial and professional fees).
Each Fund anticipates that its annual portfolio turnover rate will not exceed 150%, but the turnover rate will not be a limiting factor when the Adviser deems portfolio changes appropriate. The turnover rate may vary from year to year. An annual turnover rate of 150% occurs, for example, when all of the securities held by the Fund are replaced one and one-half times in a period of one year. The Fund may pay higher brokerage commissions and other transactional expenses as a result of a higher turnover rate. Furthermore, high portfolio turnover may result in the realization of net short-term capital gain by the Fund. Any distributions of net short-term capital gain to Stockholders will be taxable as ordinary income. For additional information concerning taxation of net short-term capital gain, see 'Taxation -- Distributions.'
MANAGEMENT
The overall management of the business and affairs of each Fund is vested with its Board of Directors. The management of each Fund's day-to-day operations is delegated to its officers, the Adviser and the Administrator, subject to the investment objectives and policies of the Fund and to general supervision by the Board of Directors.
The directors and officers of Total Return Realty Fund occupy the same positions as Realty Income Fund. For more information regarding the directors and officers of the Funds, see 'Proposal Two-Election of Director.'
THE INVESTMENT ADVISER
Cohen & Steers Capital Management, Inc., or Cohen & Steers, with offices located at 757 Third Avenue, New York, New York 10017, has been retained to provide investment advice, and, in general, to conduct the management and investment program of each Fund under the overall supervision and control of the Fund's Board of Directors. Cohen & Steers, a registered investment adviser, was formed in 1986 and is a leading U.S. manager of portfolios dedicated to investments in REITs. In addition to the Funds, its current clients include pension plans, endowment funds and mutual funds, including Cohen & Steers Realty Shares, Inc., Cohen & Steers Special Equity Fund, Inc. and Cohen & Steers Institutional Realty Shares, Inc, all of which are open-end management investment companies. All of Cohen & Steers' client accounts are invested principally in real estate securities.
Under its Investment Advisory Agreement with each Fund, the investment adviser furnishes a continuous investment program for the Fund's portfolio, makes the day-to-day investment decisions for the Fund, and generally manages the Fund's investments in accordance with the stated policies of the Fund, subject to the general supervision of the Board of Directors of the Fund. The investment adviser performs certain administrative services for the Fund and provides persons satisfactory to the Directors of the Fund to serve as officers of the Fund. Such officers, as well as certain other employees and Directors of the Fund, may be directors, officers, or employees of the investment adviser. Under the Investment Advisory Agreement, the investment adviser pays all employee costs and other ordinary operating costs of the Fund. Excluded from ordinary operating costs are interest charges, taxes, brokerage fees, extraordinary legal and accounting fees and expenses and other extraordinary expenses.
The investment adviser also selects brokers and dealers to execute each Fund's portfolio transactions. Consistent with the Conduct Rules of the National Association of Securities Dealers, Inc., and subject to seeking best price and execution, the investment adviser may consider sales of shares of the Fund as a factor in the selection of brokers and dealers to execute portfolio transactions on behalf of the Fund.
Total Return Realty Fund pays the investment adviser a monthly management fee at the annual rate of 0.70% of the average daily net asset value of the Fund for its services under the Investment Advisory Agreement and for paying the ordinary operating expenses of the Fund. In comparison, Realty Income Fund pays the investment adviser a monthly management fee at the annual rate of 0.65% of the average daily net asset value of the Fund.
PORTFOLIO MANAGERS
The Funds' portfolio managers, who have managed the Funds since their inceptions, are:
Martin Cohen -- Mr. Cohen is a Director, President and Treasurer of each Fund. He is, and has been since its inception, President of Cohen & Steers Capital Management, Inc., the Fund's investment adviser.
Robert H. Steers -- Mr. Steers is a Director, Chairman and Secretary of each Fund. He is, and has been since its inception, Chairman of Cohen & Steers Capital Management, Inc., the Fund's investment adviser.
Steven R. Brown -- Mr. Brown joined Cohen & Steers in 1992 and currently serves as a Senior Vice President in investment research. He is a member of NAREIT and ICSC and currently serves on the ICSC Research Advisory Task Force.
Martin Cohen and Robert H. Steers may be deemed to be 'controlling persons,' of Cohen & Steers on the basis of their ownership of more than 10% of Cohen & Steers common stock. Their address is 757 Third Avenue, New York, New York 10017.
OFFICERS OF THE FUNDS
We describe below the principal officers of each Fund and their principal occupations during the past five years. The address of each of the following persons is 757 Third Avenue, New York, New York 10017.
Robert H. Steers, Chairman and Secretary (see 'Proposal Two -- Election of Director' for biographical information).
Martin Cohen, President and Treasurer (see 'Proposal Two -- Election of Director' for biographical information).
Elizabeth O. Reagan, Vice President, age 38, joined Cohen & Steers in 1987, and has been Senior Vice President since 1996 and prior to that a Vice President since 1990.
Adam M. Derechin, Senior Vice President and Assistant Treasurer, age 36, joined Cohen & Steers in 1993 and has been a Senior Vice President since 1998 and prior to that was a Vice President since 1995.
Lawrence B. Stoller, Assistant Secretary, age 37, joined Cohen & Steers in 1999 as Senior Vice President and General Counsel. For the five years prior to that time, he was Associate General Counsel at Neuberger Berman Management Inc. (1998-1999) and Assistant General Counsel of The Dreyfus Corporation (1995-1998).
DESCRIPTION OF SHARES
We describe below the material provisions of the Funds' common stock. The common stock of the Funds are substantially similar. This description is not complete, however, and is qualified in its entirety by reference to the Articles of Incorporation and By-laws of each Fund.
Total Return Realty Fund is authorized to issue 100,000,000 shares of common stock, $.001 par value, of which 7,399,100 shares were issued and outstanding, as of March 27, 2001. Realty Income Fund is authorized to issue 50,000,000 shares of common stock, $.01 par value, of which 3,024,603 shares were issued and outstanding, as of March 27, 2001. The shares of both Funds have no preemptive, conversion, exchange or redemption rights. Each Share has equal voting, dividend, distribution and liquidation rights. The shares outstanding and those issued in the Reorganization are, when issued, fully paid and
nonassessable. Stockholders are entitled to one vote per share. All voting rights for the election of Directors are noncumulative, which means that the holders of more than 50% of the shares of each Fund can elect 100% of the Directors of that Fund then nominated for election if they choose to do so and, in such event, the holders of the remaining shares will not be able to elect any Directors. Under the rules of the NYSE and the AMEX, as the case may be, applicable to listed companies, each Fund will be required to hold an annual meeting of Stockholders in each year.
We do not intend currently to offer any additional shares of Total Return Realty Fund following the Reorganization. Any additional offerings of the Fund's shares will require approval of the Board of Directors. Further, any additional offering will be subject to the requirement of the 1940 Act that shares may not be sold at a price below the then current net asset value, exclusive of sales loads, except in connection with an offering to existing Stockholders or with consent of the holders of a majority of the Fund's outstanding voting securities.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND BY-LAWS
We describe below the material provisions of the Articles of Incorporation and By-laws of the Funds. The Articles of Incorporation and By-laws of the Funds are substantially similar.
Each Fund presently has provisions in its Articles of Incorporation and
By-laws (together, the 'Charter Documents') that are intended to have the effect
of limiting (i) the ability of other entities or persons to acquire control of
the Fund, (ii) the Fund's freedom to engage in certain transactions or
(iii) the ability of the Fund's Directors or Stockholders to amend the Charter
Documents or effect changes in the Fund's management. These provisions of the
Charter Documents may be regarded as 'anti-takeover' provisions. Each Fund's
Board of Directors have been divided into three classes, each with a term of
three years. Upon the expiration of the term of office of each class, the
Directors in each class will be elected for a term of three years to succeed the
Directors whose terms of office expire. Accordingly, only those Directors in one
class may be changed in any one year, and it would require two years to change a
majority of the Board of Directors (although under Maryland law procedures are
available for the removal of Directors even if they are not then standing for
re-election, and under SEC regulations, procedures are available for including
Stockholder proposals in management's annual proxy statement). This system of
electing Directors may have the effect of maintaining the continuity of
management and, thus, make it more difficult for the Fund's Stockholders to
change the majority of Directors. The Articles of Incorporation of Total Return
Realty Fund provide that a Director may be removed from office only by a vote of
at least 75% of the outstanding shares entitled to vote for the election of
Directors. In comparison, under the Articles of Incorporation of Realty Income
Fund, a vote of 66 2/3% of the outstanding shares entitled to vote is required
to remove a Director from office. Under Maryland law and each Fund's Articles of
Incorporation, except as described below, the affirmative vote of the holders of
a majority of the votes entitled to be cast is required for the consolidation of
the Fund with another corporation, a merger of the Fund with or into another
corporation (except for certain mergers in which the Fund is the successor), a
statutory share exchange in which the Fund is not the successor, a sale or
transfer of all or substantially all of the Fund's assets, the dissolution of
the Fund and any amendment to the Fund's Articles of Incorporation. Under the
Articles of Incorporation of Total Return Realty Fund, the affirmative vote of
75% (which is higher than that required under Maryland law or the 1940 Act) of
the outstanding shares is required to authorize the liquidation or dissolution
of the Fund in the absence of approval of the liquidation or dissolution by a
majority of the Continuing Directors of the Fund (defined for this purpose as
those Directors who were either members of the Board of Directors on the date of
closing of the initial public offering of the shares or subsequently become
Directors and whose election is approved by a majority of the Continuing
Directors then on the Board). In addition, with respect to each Fund, the
affirmative vote of 75% (which is higher than that required under Maryland law
or the 1940 Act) of the outstanding shares is required generally to authorize
any of the following transactions involving a corporation, person or entity that
is directly, or indirectly through affiliates, the beneficial owner of more than
5% of the outstanding shares ('Principal Stockholder'), or to amend the
provisions of the Articles of Incorporation relating to such transactions:
merger, consolidation or statutory share exchange of the Fund with or into any Principal Stockholder;
issuance of any securities of the Fund to any Principal Stockholder for cash;
sale, lease or exchange of all or any substantial part of the assets of the Fund to any Principal Stockholder (except assets having an aggregate fair market value of less than $1,000,000); or
sale, lease or exchange to the Fund, in exchange for securities of the Fund, of any assets of any Principal Stockholder (except assets having an aggregate fair market value of less than $1,000,000).
However, such vote would not be required when, under certain conditions, the Continuing Directors of the Fund approve the transaction, although in certain cases involving merger, consolidation or statutory share exchange or sale of all or substantially all of the Fund's assets, the affirmative vote of a majority of the outstanding shares of the Fund would nevertheless be required. The affirmative vote of 66 2/3% (which is higher than that required Maryland law or the 1940 Act) of the outstanding shares is required to convert the Fund to an open-end investment company and to amend the Fund's Articles of Incorporation to effect any such conversion.
The provisions of the Charter Documents described above could have the effect of depriving the owners of shares of the Funds opportunities to sell their shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of the Funds in a tender offer or similar transaction. The overall effect of these provisions is to render more difficult the accomplishment of a merger or the assumption of control by a principal Stockholder. The Board of Directors of each Fund has considered the foregoing anti-takeover provisions and concluded that they are in the best interests of the applicable Fund and its Stockholders.
DETERMINATION OF NET ASSET VALUE
We summarize below the procedures used in determining the net asset value of Total Return Realty Fund and Realty Income Fund. Although these procedures are substantially similar, there are important differences. We discuss these differences below. Following the Reorganization, Total Return Realty Fund will continue to use the same procedure to determine the net asset value of Total Return Realty Fund prior to the Reorganization.
Total Return Realty Fund determines the net asset value of its shares at least once each week, generally on Thursday, as of the close of trading on the NYSE (currently 4:00 p.m. New York time). Realty Income Fund determines the net asset value of its shares at least once each week, generally on Friday, as of the close of trading on the AMEX (currently 4:00 p.m. New York time). Net asset value for each Fund is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
For purposes of determining each Fund's net asset value per Share, readily marketable portfolio securities listed on the NYSE or AMEX, as the case may be, are valued, except as indicated below, at the last sale price reflected on the consolidated tape at the close of the NYSE or AMEX, as the case may be, on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. If no bid or asked prices are quoted on such day, then the security is valued by such method as the applicable Fund's Directors shall determine in good faith to reflect its fair market value. Readily marketable securities not listed on the NYSE or AMEX but listed on other national securities exchanges or admitted to trading on the NASDAQ National List are valued in like manner. Portfolio securities traded on more than one national securities exchange are valued at the last sale price on the business day as of which such value is being determined as reflected on the tape at the close of the exchange representing the principal market for such securities.
Readily marketable securities traded in the over-the-counter market, including listed securities whose primary market is believed by the Adviser to be over-the-counter, but excluding securities admitted to trading on the NASDAQ National List, are valued at the mean of the current bid and asked prices as reported by NASDAQ or, in the case of securities not quoted by NASDAQ, the National Quotation Bureau or such other comparable sources as the applicable Fund's Directors deem appropriate to reflect their fair market value. However, certain fixed-income securities may be valued
on the basis of prices provided by a pricing service when such prices are believed by the Adviser to reflect the fair market value of such securities. The prices provided by a pricing service take into account institutional size trading in similar groups of securities and any developments related to specific securities. Notwithstanding the above, short-term debt securities with maturities of 60 days or less are valued at amortized cost, if their term to maturity from the date of purchase was less than 60 days, or by amortizing their value on the 61st day prior to maturity, if their term to maturity from date of purchase when acquired by the applicable Fund was more than 60 days, unless the Board of Directors determines that this does not represent fair value. Where securities are traded on more than one exchange and also over-the-counter, the securities will generally be valued using the quotations the Board of Directors believes reflect most closely the value of such securities.
TAXATION
We discuss below the material U.S. federal income tax issues concerning the Funds and the purchase, ownership and disposition of shares of each Fund. This discussion does not purport to be complete or to deal with all aspects of federal income taxation that may be relevant to Stockholders in light of their particular circumstances. This discussion is based upon present provisions of the Code, the regulations promulgated under them, and judicial and administrative ruling authorities, all of which are subject to change, which change may be retroactive. Stockholders should consult their own tax advisers with regard to the federal tax consequences of the purchase, ownership, or disposition of Fund shares, as well as the tax consequences arising under the laws of any state, foreign country, or other taxing jurisdiction.
TAXATION OF THE FUNDS
Each Fund intends to qualify annually and to elect to be treated as a regulated investment company under the Code.
To qualify as a regulated investment company, a Fund must, among other things, (a) derive in each taxable year at least 90% of its gross income from dividends, interest, payments with respect to securities loans and gains from the sale or other disposition of stock, securities or foreign currencies or other income derived with respect to its business of investing in such stock, securities or currencies; (b) diversify its holdings so that, at end of each quarter of the taxable year, (i) at least 50% of the market value of the Fund's assets is represented by cash and cash items (including receivables), U.S. government securities, the securities of other regulated investment companies and other securities, with such other securities of any one issuer limited for the purposes of this calculation to an amount not greater than 5% of the value of the Fund's total assets and not greater than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its total assets is invested in the securities of any one issuer (other than U.S. government securities or the securities of other regulated investment companies); and (c) distribute at least 90% of its investment company taxable income (which includes, among other items, dividends, interest and net short-term capital gain in excess of net long-term capital loss) each taxable year.
As a regulated investment company, each Fund generally will not be subject to U.S. federal income tax on its investment company taxable income and net capital gain (the excess of net long-term capital gain over net short-term capital loss), if any, that it distributes to Stockholders. Each Fund intends to distribute to its Stockholders, at least annually, substantially all of its investment company taxable income and net capital gain. Amounts not distributed on a timely basis in accordance with a calendar year distribution requirement are subject to a nondeductible 4% excise tax. To prevent imposition of the excise tax, the Fund must distribute during each calendar year an amount equal to the sum of (1) at least 98% of its ordinary income (not taking into account any capital gain or loss for the calendar year, (2) at least 98% of its capital gain in excess of its capital loss (adjusted for certain ordinary losses) for the one-year period ending on October 31 of the calendar year, and (3) any ordinary income and capital gain for previous years that was not distributed during those years. A distribution will be treated as paid December 31 of the current calendar year if it is declared by the Fund in October, November or December with a record date in such a month and paid by the Fund during January of the following calendar year. Such distributions will be taxable to Stockholders in the calendar year in which the
distributions are declared, rather than the calendar year in which the distributions are received. To prevent application of the excise tax, the Funds intend to make their respective distributions in accordance with the calendar year distribution requirement.
DISTRIBUTIONS
Dividends paid out of each Fund's investment company taxable income will be taxable to a U.S. Stockholder as ordinary income. If a portion of the Fund's income consists of dividends paid by U.S. corporations, a portion of the dividends paid by the Fund may be eligible for the corporate dividends received deduction. Distributions of net capital gain, if any, designated as capital gain dividends are taxable to a Stockholder as long-term capital gain regardless of how long the Stockholder has held Fund shares. Stockholders receiving distributions in the form of additional shares, rather than cash, generally will have a cost basis in each such share equal to the net asset value of a share of the Fund on the reinvestment date. A distribution of an amount in excess of the Fund's current and accumulated earnings and profits will be treated by a Stockholder as a return of capital which is applied against and reduces the Stockholder's basis in his or her shares. To the extent that the amount of any such distribution exceeds the Stockholder's basis in his or her shares, the excess will be treated by the Stockholder as gain from a sale or exchange of the shares.
Stockholders will be notified annually as to the U.S. federal tax status of distributions, and Stockholders receiving distributions in the form of additional shares will receive a report as to the net asset value of those shares.
SALE OR EXCHANGE OF FUND SHARES
Upon the sale or other disposition of shares of either Fund, a Stockholder may realize a capital gain or loss which will be long-term or short-term, depending upon the Stockholder's holding period for the shares. Any loss realized on a sale or exchange will be disallowed to the extent the shares disposed of are replaced (including through reinvestment of dividends) within a period of 61 days beginning 30 days before and ending 30 days after disposition of the shares. In such a case, the basis of the shares acquired will be adjusted to reflect the disallowed loss. Any loss realized by a Stockholder on a disposition of Fund shares held by the Stockholder for six months or less will be treated as a long-term capital loss to the extent of any capital gain dividends received or deemed to have been received by the Stockholder with respect to such shares.
OFFERS TO PURCHASE SHARES
A Stockholder who, pursuant to a tender offer, tenders all shares of a Fund owned or considered owned by him or her will realize a taxable gain or loss depending upon his or her basis in such shares. Such gain or loss will be treated as capital gain or loss if the shares are capital assets in the shareholder's hands and will be long-term or short-term depending upon the shareholder's holding period for the shares. If a tendering Stockholder tenders less than all shares owned by and attributed to such shareholder, and if the distribution to such shareholder does not otherwise qualify as an exchange, the proceeds received will be treated as a dividend, return of capital or capital gain depending on the Fund's earnings and profits and the shareholder's basis in the tendered shares. There is a risk that shareholders may be considered to have received a deemed distribution as a result of the purchase by the Fund of tendered shares and that such distribution may be taxable as a dividend in whole or in part. A shareholder of Total Return Realty Fund wishing to tender shares pursuant to a tender offer will be required to tender all (but not less than all) of the shares of Total Return Realty Fund owned by and attributed to such shareholder unless Total Return Realty Fund has received a ruling from the IRS (or, at the Fund's option, an opinion of counsel) that a tender of less than all of a shareholder's shares will not cause adverse tax consequences with respect to shares not tendered. See 'Comparison of the Funds -- Share Repurchases; Possible Conversion to Open-End Status.'
ORIGINAL ISSUE DISCOUNT SECURITIES
Investments by either Fund in zero coupon or other discount securities will result in income to the Fund equal to a portion of the excess of the face value of the securities over their issue price (the
'original issue discount') each year that the securities are held, even though the Fund receives no cash interest payments. This income is included in determining the amount of income which the Fund must distribute to maintain its status as a regulated investment company and to avoid the payment of federal income tax and the 4% excise tax. In addition, if the Fund invests in certain high yield original issue discount securities issued by corporations, a portion of the original issue discount accruing on any such obligation may be eligible for the deduction for dividends received by corporations. In such event, dividends of investment company taxable income received from the Fund by its corporate Stockholders, to the extent attributable to such portion of accrued original issue discount, may be eligible for this deduction for dividends received by corporations if so designated by the Fund in a written notice to Stockholders.
MARKET DISCOUNT BONDS
Gain derived by either Fund from the disposition of any market discount bonds (i.e., bonds purchased other than at original issue, where the face value of the bonds exceeds their purchase price) held by the Fund will be taxed as ordinary income to the extent of the accrued market discount of the bonds, unless the Fund elects to include the market discount in income as it accrues.
INVESTMENT IN REAL ESTATE INVESTMENT TRUSTS
Each Fund may invest in REITs that hold residual interests in real estate mortgage investment conduits ('REMICs'). Under current Treasury regulations, 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 Stockholders of the regulated investment company in proportion to the dividends received by such Stockholders, with the same consequences as if the Stockholders held the related REMIC residual interest directly. In general, excess inclusion income allocated to Stockholders (i) cannot be offset by net operating losses (subject to a limited exception for certain thrift institutions), (ii) will constitute unrelated business taxable income to entities (including a qualified pension plan, an individual retirement account, a 401(k) plan, a Keogh plan or other tax-exempt entity) subject to tax on unrelated business income, thereby potentially requiring such an entity that is allocated excess inclusion income, and otherwise might not be required to file a tax return, to file a tax return and pay tax on such income, and (iii) in the case of a foreign Stockholder, will not qualify for any reduction in U.S. federal withholding tax. In addition, if at any time during any taxable year a 'disqualified organization' (as defined in the Code) is a record holder of a share in a regulated investment company, then the regulated investment company will be subject to a tax equal to that portion of its excess inclusion income for the taxable year that is allocable to the disqualified organization, multiplied by the highest federal income tax rate imposed on corporations. The Adviser does not intend on behalf of the Funds to invest in REITs, a substantial portion of the assets of which consists of residual interests in REMICs.
BACKUP WITHHOLDING
Each Fund may be required to withhold U.S. federal income tax at the rate of 31% of all taxable distributions payable to Stockholders who fail to provide the Fund with their correct taxpayer identification number or to make required certifications, or who have been notified by the Internal Revenue Service that they are subject to backup withholding. Corporate Stockholders and certain other Stockholders specified in the Code generally are exempt from such backup withholding. Backup withholding is not an additional tax. Any amounts withheld may be credited against the Stockholder's U.S. federal income tax liability.
FOREIGN STOCKHOLDERS
U.S. taxation of a Stockholder who, as to the United States, is a nonresident alien individual, a foreign trust or estate, a foreign corporation or foreign partnership ('foreign Stockholder') depends on
whether the income of the Fund is 'effectively connected' with a U.S. trade or business carried on by the Stockholder.
INCOME NOT EFFECTIVELY CONNECTED
If the income from the Fund is not 'effectively connected' with a U.S. trade or business carried on by the foreign Stockholder, distributions of investment company taxable income will be subject to a U.S. federal tax of 30% (or lower treaty rate, except in the case of any excess inclusion income allocated to the Stockholder (see 'Taxation -- Investments in Real Estate Investment Trusts' above)), which tax is generally withheld from such distributions.
Distributions of capital gain dividends and any amounts retained by the Fund which are designated as undistributed capital gain will not be subject to U.S. tax at the rate of 30% (or lower treaty rate) unless the foreign Stockholder is a nonresident alien individual and is physically present in the United States for more than 182 days during the taxable year and meets certain other requirements. However, this 30% tax on capital gain of nonresident alien individuals who are physically present in the United States for more than the 182 day period only applies in exceptional cases because any individual present in the United States for more than 182 days during the taxable year is generally treated as a resident for U.S. federal income tax purposes; in that case, he or she would be subject to U.S. federal income tax on his or her worldwide income at the graduated rates applicable to U.S. citizens, rather than the 30% U.S. tax. In the case of a foreign Stockholder who is a nonresident alien individual, the Fund may be required to withhold U.S. income tax at a rate of 31% of distributions of net capital gain unless the foreign Stockholder certifies his or her non-U.S. status under penalties of perjury or otherwise establishes an exemption. See 'Taxation -- Backup Withholding,' above. If a foreign Stockholder is a nonresident alien individual, any gain such Stockholder realizes upon the sale or exchange of such Stockholder's shares of the Fund in the United States will ordinarily be exempt from U.S. federal tax unless (i) the gain is U.S. source income and such Stockholder is physically present in the United States for more than 182 days during the taxable year and meets certain other requirements, or is otherwise considered to be a resident alien of the United States, or (ii) at any time during the shorter of the period during which the foreign Stockholder held shares of the Fund and the five year period ending on the date of the disposition of those shares, the Fund was a 'U.S. real property holding corporation' and the foreign Stockholder held more than 5% of the shares of the Fund, in which event the gain would be taxed in the same manner as for a U.S. Stockholder as discussed above and a 10% U.S. federal withholding tax would be imposed on the amount realized on the disposition of such shares to be credited against the foreign Stockholder's U.S. federal income tax liability on such disposition. A corporation is a 'U.S. real property holding corporation' if the fair market value of its U.S. real property interests equals or exceeds 50% of the fair market value of such interests plus its interests in real property located outside the United States plus any other assets used or held for use in a business. In the case of the Fund, U.S. real property interests include interests in stock in U.S. real property holding corporations (other than stock of a REIT controlled by U.S. persons and holdings of 5% or less in the stock of publicly traded U.S. real property holding corporations) and certain participating debt securities.
INCOME EFFECTIVELY CONNECTED
If the income from the Fund is 'effectively connected' with a U.S. trade or business carried on by a foreign Stockholder, then distributions of investment company taxable income and capital gain dividends, any amounts retained by the Fund which are designated as undistributed capital gains and any gains realized upon the sale or exchange of shares of the Fund will be subject to U.S. federal income tax at the graduated rates applicable to U.S. citizens, residents and domestic corporations. Foreign corporate Stockholders may also be subject to the branch profits tax imposed by the Code.
The tax consequences to a foreign Stockholder entitled to claim the benefits of an applicable tax treaty may differ from those described herein. Foreign Stockholders are advised to consult their own tax advisers with respect to the particular tax consequences to them of an investment in the Fund.
OTHER TAXATION
Each Fund's Stockholders may be subject to state, local and foreign taxes on their respective Fund's distributions. Stockholders are advised to consult their own tax advisers with respect to the particular tax consequences to them of an investment in the Fund.
LEGAL PROCEEDINGS
The Funds are not involved in any litigation which would have any material adverse effect upon the Funds.
CUSTODIAN AND TRANSFER AGENT
The Chase Manhattan Bank serves as custodian and transfer agent for Realty Income Fund. State Street Bank and Trust Company serves as custodian for Total Return Realty Fund and EquiServe serves as transfer agent. Following the Reorganization, State Street Bank will continue to act as custodian and EquiServe will continue to act as transfer agent for Total Return Realty Fund on substantially similar terms and conditions.
PROPOSAL TWO -- ELECTION OF DIRECTOR
COHEN & STEERS REALTY INCOME FUND, INC.
At the Meeting, one Director will be elected, to serve for a term of three years and until his successor is duly elected and qualified. The nominee is Martin Cohen. If elected, Mr. Cohen will serve for a term to expire in 2004. It is the intention of the persons named in the enclosed proxy to nominate and vote in favor of the nominee. Jeffrey H. Lynford, who was formerly a Director of the Fund and whose term was scheduled to expire in 2001, resigned from the Board of Directors effective February 26, 2001. At a meeting of the Board of Directors held on February 27, 2001, the Board approved the reduction of the number of Directors from six to five.
At the Annual Meeting of Stockholders held on May 23, 1989, the Fund's Stockholders elected the Board of Directors to staggered terms. Accordingly, the term of office of only a single class of Directors will expire in 2001. As a result of this system, only those Directors in any one class may be changed in any one year, and it would require two years or more to change a majority of the Board of Directors. This system of electing Directors, which may be regarded as an 'anti-takeover' provision, may have the effect of maintaining the continuity of management and, thus, make it more difficult for the Fund's Stockholders to change the majority of Directors. For additional information regarding anti-takeover provisions, see 'Certain Provisions of the Articles of Incorporation and By-laws.'
The nominee has consented to serve as a Director. The Board of Directors knows of no reason why the nominee would be unable to serve, but in the event of such unavailability, the proxies received will be voted for such substitute nominee as the Board of Directors may recommend. Approval of the election of the nominee as a Director requires the affirmative vote of a plurality of the votes cast by holders of shares of the Fund represented at the Meeting and entitled to vote.
The following table presents information concerning Mr. Cohen and the other members of the Board of Directors:
APPROXIMATE
NUMBER OF SHARES
NAME, POSITIONS AND OFFICES WITH THE BENEFICIALLY OWNED
FUND, AGE, PRINCIPAL OCCUPATIONS YEAR FIRST YEAR TERM DIRECTLY OR
DURING THE PAST FIVE YEARS AND BECAME A AS DIRECTOR INDIRECTLY AS OF
OTHER DIRECTORSHIPS DIRECTOR WILL EXPIRE DECEMBER 31, 2000
------------------- -------- ----------- -----------------
Gregory Clark* ........................................ 1988 2002 1,000
Director, 54. Director, Cohen & Steers Total Return
Realty Fund, Inc. ('RFI'), Cohen & Steers Realty
Shares, Inc. ('CSR'), Cohen & Steers Institutional
Realty Shares, Inc. ('CSIR'), Cohen & Steers Special
Equity Fund, Inc. ('CSS') and Cohen & Steers Equity
Income Fund, Inc. ('CSI'). Private Investor.
Previously, President of Wellspring Management Group,
Inc. Mr. Clark's address is 376 Mountain Laurel
Drive, Aspen, Colorado.
Martin Cohen** ........................................ 1988 2004'D' 78,349'D'D'
Director, President and Treasurer, 52. Director, RFI,
CSR, CSIR, CSS and CSI. President of Cohen & Steers
Capital Management, Inc., the Fund's Investment
Adviser, since 1986. Mr. Cohen's address is 757 Third
Avenue, New York, New York.
Jeffrey H. Lynford*** ................................. 1988 2001 1,500
Director, 53. Director, RFI, CSR, CSIR, CSS and CSI.
Chairman of Wellsford Real Properties, Inc. since
1997, and Chairman of Wellsford Residential Property
Trust from 1992 to May 1997. Mr. Lynford is also a
Trustee of Equity Residential Trust and an Emeritus
Trustee of the National Trust for Historic
Preservation. Mr. Lynford's address is 535 Madison
Avenue, New York, New York.
George Grossman* ...................................... 1988 2003 1,000
Director, 47. Director, RFI, CSR, CSIR, CSS and CSI.
Attorney at law. Mr. Grossman's address is 17 Elm
Place, Rye, New York.
Willard H. Smith, Jr.* ................................ 1996 2002 500
Director, 64. Director, RFI, CSR, CSIR, CSS and CSI.
Board member of Essex Property Trust, Inc., Highwoods
Properties, Inc., Realty Income Corporation, Willis
Lease Finance Corporation and Crest Net Lease Inc.
Managing director at Merrill Lynch & Co., Equity
Capital Markets Division from 1983 to 1995.
Mr. Smith's address is 5208 Renaissence Avenue, San
Diego, CA.
Robert H. Steers** .................................... 1988 2003 30,419'D'D'
Director, Chairman and Secretary, 48. Director, RFI,
CSR, CSIR, CSS and CSI, Chairman of Cohen & Steers
Capital Management, Inc., the Fund's Investment
Adviser, since 1986. Mr. Steers' address is 757 Third
Avenue, New York, New York.
|
* Member of the Audit Committee.
** 'Interested person,' as defined in the 1940 Act, of the Fund because of the affiliation with Cohen & Steers Capital Management, Inc., the Fund's investment adviser.
*** Resigned from the Board of Directors, effective February 26, 2001.
'D' If elected at the Meeting.
'D'D' Includes 30,049 shares owned beneficially and of record by Cohen & Steers Capital Management, Inc., the Fund's investment adviser.
During the Fund's fiscal year ended December 31, 2000, the Board of Directors met five times. All of the Directors attended all of the meetings of the Board of Directors, with the exception of Mr. Lynford, who attended four meetings. The Fund maintains an Audit Committee of the Board of Directors, which is composed of all the Directors who are not 'interested persons' of the Fund within the meaning of the 1940 Act. The Audit Committee met twice during the fiscal year ended December 31, 2000 for the purposes of selecting the Fund's independent auditors. Directors of the Fund who are not interested persons of the Fund are paid an annual retainer of $5,500 and a fee of $500 for each meeting attended and are reimbursed for the expenses of attendance at these meetings and, for the fiscal year ended December 31, 2000, these fees and expenses paid by the Fund totaled $41,842.
As of December 31, 2000, the Directors and officers of the Fund as a group owned less than 1% of the shares of the Fund.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE ELECTION OF THE NOMINEE TO SERVE AS A DIRECTOR OF THE FUND.
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
At the Meeting, one Director will be elected to serve for a term of three years and until his successor is duly elected and qualified. The nominee is Martin Cohen. If elected, Mr. Cohen will serve for a term to expire in 2004. It is the intention of the persons named in the enclosed proxy to nominate and vote in favor of the nominee. Jeffrey H. Lynford, who was formerly a Director of the Fund and whose term was scheduled to expire in 2001, resigned from the Board of Directors effective February 26, 2001. At a meeting of the Board of Directors held on February 27, 2001, the Board approved the reduction of the number of Directors from six to five.
At the Annual Meeting of Stockholders held on April 27, 1994, a the Fund's Stockholders elected the Board of Directors to staggered terms. Accordingly, the term of office of only a single class of Directors will expire in 2001. As a result of this system, only those Directors in any one class may be changed in any one year, and it would require two years or more to change a majority of the Board of Directors. This system of electing Directors, which may be regarded as an 'anti-takeover' provision, may have the effect of maintaining the continuity of management and, thus, make it more difficult for the Fund's Stockholders to change the majority of Directors. For additional information regarding anti- takeover provisions, see 'Certain Provisions of the Articles of Incorporation and By-laws.'
The nominee has consented to serve as a Director. The Board of Directors knows of no reason why the nominee would be unable to serve, but in the event of such unavailability, the proxies received will be voted for such substitute nominee as the Board of Directors may recommend. Approval of the election of the nominee as a Director requires the affirmative vote of a plurality of the votes cast by holders of shares of the Fund represented at the Meeting and entitled to vote.
The following table presents certain information concerning Mr. Cohen and the other members of the Board of Directors:
APPROXIMATE
NUMBER OF SHARES
NAME, POSITIONS AND OFFICES WITH THE BENEFICIALLY OWNED
FUND, AGE, PRINCIPAL OCCUPATIONS YEAR FIRST YEAR TERM DIRECTLY OF
DURING THE PAST FIVE YEAR AND BECAME A AS DIRECTOR INDIRECTLY AS OF
OTHER DIRECTORSHIPS DIRECTOR WILL EXPIRE DECEMBER 31, 2000
------------------- -------- ----------- -----------------
Gregory Clark*......................................... 1993 2002 3,000
Director, 54. Director, Cohen & Steers Realty Income
Fund, Inc. ('RIF'), Cohen & Steers Realty Shares, Inc.
('CSR'), Cohen & Steers Institutional Realty Shares,
Inc. ('CSIR'), Cohen & Steers Special Equity Fund, Inc.
('CSS') and Cohen & Steers Equity Income Fund, Inc.
('CSI'). Private Investor. Previously, President of
Wellspring Management Group, Inc. Mr. Clark's address
is 376 Mountain Laurel Drive, Aspen, Colorado.
Martin Cohen** ........................................ 1993 2004'D' 38,578'D'D'
Director, President and Treasurer, 52. Director, RIF,
CSR, CSIR, CSS and CSI. President of Cohen & Steers
Capital Management, Inc., the Fund's Investment
Adviser, since 1986. Mr. Cohen's address is 757 Third
Avenue, New York, New York.
Jeffrey H. Lynford*** ................................. 1993 2001 1,000
Director, 53. Director, RIF, CSR, CSIR, CSS and CSI.
Chairman of Wellsford Real Properties, Inc. since
1997, and Chairman of Wellsford Residential Property
Trust from 1992 to May 1997. Mr. Lynford is also a
Trustee of Equity Residential Trust and an Emeritus
Trustee of the National Trust for Historic
Preservation. Mr. Lynford's address is 535 Madison
Avenue, New York, New York.
George Grossman* ...................................... 1993 2003 1,000
Director, 47. Director, RIF, CSR, CSIR, CSS and CSI.
Attorney at law. Mr. Grossman's address is 17 Elm
Place, Rye, New York.
Willard H. Smith, Jr.* ................................ 1996 2002 500
Director, 64. Director, RIF, CSR, CSIR, CSS and CSI.
Board member of Essex Property Trust, Inc., Highwoods
Properties, Inc., Realty Income Corporation, Willis
Lease Finance Corporation and Crest Net Lease Inc.
Managing director at Merrill Lynch & Co., Equity
Capital Markets Division from 1983 to 1995.
Mr. Smith's address is 5208 Renaissence Avenue, San
Diego, CA.
Robert H. Steers** .................................... 1993 2003 18,458'D'D'
Director, Chairman and Secretary, 48. Director, RIF,
CSR, CSIR, CSS and CSI, Chairman of Cohen & Steers
Capital Management, Inc., the Fund's Investment
Adviser, since 1986. Mr. Steers' address is 757 Third
Avenue, New York, New York.
|
** 'Interested person,' as defined in the 1940 Act, of the Fund because of the affiliation with Cohen & Steers Capital Management, Inc., the Fund's investment adviser.
*** Resigned from the Board of Directors, effective February 26, 2001.
'D' If elected at the Meeting.
'D'D' Includes 13,578 shares owned beneficially and of record by Cohen & Steers Capital Management, Inc., the Fund's investment adviser.
During the Fund's fiscal year ended December 31, 2000, the Board of Directors met six times. All of the Directors attended all of the meetings of the Board of Directors, with the exception of Mr. Lynford, who attended five meetings. The Fund maintains an Audit Committee of the Board of Directors which is composed of all the Directors who are not 'interested persons' of the Fund within the meaning of the 1940 Act. The Audit Committee met twice during the fiscal year ended December 31, 2000 for the purposes of selecting the Fund's independent auditors. Directors of the Fund who are not interested persons of the Fund are paid an annual retainer of $5,500 and a fee of $500 for each meeting attended and are reimbursed for the expenses of attendance at such meetings and, for the fiscal year ended December 31, 2000, such fees and expenses paid by the Fund totaled $41,842.
As of December 31, 2000, the Directors and officers of the Fund as a group owned less than 1% of the shares of the Fund.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF THE NOMINEE TO SERVE AS A DIRECTOR OF THE FUND.
COMPENSATION OF DIRECTORS AND CERTAIN OFFICERS
The following table presents information regarding compensation of Directors by each Fund and by the fund complex of which the Funds are a part for the fiscal year ended December 31, 2000. Officers of the Funds and Directors who are interested persons of the Funds do not receive any compensation from the Funds or any other fund in the fund complex that is a U.S. registered investment company. In the column headed 'Total Compensation Paid to Directors by Fund Complex,' the compensation paid to each Director represents the five funds that each director served in the fund complex during 2000. The Directors do not receive any pension or retirement benefits from the fund complex.
COMPENSATION TABLE
FISCAL YEAR ENDED DECEMBER 31, 2000
TOTAL
AGGREGATE AGGREGATE COMPENSATION
COMPENSATION COMPENSATION TO BE PAID TO
FROM REALTY FROM TOTAL RETURN DIRECTOR BY
NAME OF PERSON AND POSITION INCOME FUND REALTY FUND FUND COMPLEX
--------------------------- ----------- ----------- ------------
Gregory C. Clark*, Director....................... $8,000 $8,000 $48,000
Martin Cohen**, Director and President............ $ 0 $ 0 $ 0
George Grossman*, Director........................ $8,000 $8,000 $48,000
Jeffrey H. Lynford***, Director................... $7,500 $7,500 $45,000
Willard H. Smith, Jr.*, Director.................. $8,000 $8,000 $48,000
Robert H. Steers**, Director and Chairman......... $ 0 $ 0 $ 0
|
* Member of the Audit Committee.
** 'Interested person,' as defined in the 1940 Act, of the Fund because of the affiliation with Cohen & Steers Capital Management, Inc., the Fund's investment adviser.
*** Resigned from the Board of Directors, effective February 26, 2001.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act and Section 30(h) of the 1940 Act, as applied to the Funds, require each Fund's officers, Directors and investment adviser, affiliates of the investment adviser, and persons who beneficially own more than 10% of a registered class of the Fund's outstanding securities to file reports of ownership of the Fund's securities and changes in such ownership with the SEC and the NYSE or AMEX, as the case may be. Such persons are required by SEC regulations to furnish the Fund with copies of all such filings.
Based solely upon our review of the copies of such forms received by us and written representations from certain Reporting Persons that no year-end reports were required for those persons, we believe that during the fiscal year ended December 31, 2000, all filing requirements applicable to its Reporting Persons were met with.
OTHER MATTERS
We do not know of any other matters to be presented at the Meeting other than those mentioned in this Combined Prospectus/Proxy Statement. However, if any other matters properly come before the Meeting, the shares represented by proxies will be voted with respect to these matters in accordance with the best judgment of the person or persons voting the proxies.
SUBMISSION OF PROPOSALS FOR SUBMISSION AT THE NEXT ANNUAL MEETING
Proposals of Stockholders intended to be presented at the next annual meeting of stockholders must be received by Total Return Realty Fund by November 17, 2001 for inclusion in the Fund's Proxy Statement and form of proxy relating to that meeting.
LEGAL MATTERS
Certain legal matters concerning the issuance of RFI Shares will be passed upon by Simpson Thacher & Bartlett, New York, New York. Simpson Thacher & Bartlett may rely on Venable, Baetjer and Howard, LLP as to certain matters of Maryland law.
EXPERTS
The audited financial statements and related notes and financial highlights of the Funds for the fiscal year ended December 31, 2000 included elsewhere in this Combined Prospectus/Proxy Statement are from the annual reports for the Funds in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on their authority as experts in auditing and accounting.
AUDIT FEES
The aggregate fees paid to PricewaterhouseCoopers LLP in connection with the annual audits of the Funds and the review of the Funds' financial statements for the fiscal year ended December 31, 2000 was $61,500.
OTHER FEES
The aggregate fees billed for all other non-audit services, including fees for tax-related and other attest services, rendered by PricewaterhouseCoopers LLP to the Funds and their investment adviser for the fiscal year ended December 31, 2000 was $59,786. The Audit Committee of each Fund has determined that the provision of these services is compatible with maintaining the independence of PricewaterhouseCoopers LLP.
ADDITIONAL INFORMATION
The Funds are subject to the informational requirements of the 1940 Act and in accordance with such requirements, file reports and other information with the SEC. If you would like additional information about the Funds, annual and semi-annual reports are available to you without any charge, upon request. In these reports, you will find a discussion of the market conditions and investment strategies that significantly affected each Fund's performance during its most recent fiscal year.
To request a free copy of any of the materials described above, or to make any other inquiries, please contact us:
By telephone: (800) 437-9912
By mail: Cohen & Steers Total Return Realty Fund, Inc.
c/o Boston Financial Data Services
P.O. Box 8123
Boston, Massachusetts 02266-8123
By e-mail: marketing@csreit.com
On the Internet: http://www.cohenandsteers.com
|
The prospectuses of the Funds may also be available from your broker or financial adviser. Reports and other information about the Funds may also be obtained from the SEC:
By going to the SEC's Public Reference Room in Washington, D.C. where you can review and copy the information. Information on the operation of the Public Reference Room may be obtained by calling the SEC at (202) 942-8090.
By accessing the SEC's Internet site at http://www.sec.gov where you can view, download and print the information.
By electronic request at the following e-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the SEC, Washington, D.C. 20549-0102. Upon payment of a duplicating fee, copies of the information will be sent to you.
SEC File No. 811-07154
You may also inspect reports, proxy statements and other information concerning the Funds at the exchanges on which shares of the Funds are listed. Total Return Realty Fund is listed on the New York Stock Exchange and Realty Income Fund is listed on the American Stock Exchange.
FINANCIAL STATEMENTS
PAGE
----
Pro Forma Portfolio of Investments -- As of December 31,
2000...................................................... F-2
Pro Forma Statement of Assets and Liabilities for the Year
Ended December 31, 2000................................... F-4
Pro Forma Statement of Operations for the Year Ended
December 31, 2000......................................... F-5
Notes to Pro Forma Financial Statements for the Year Ended
December 31, 2000......................................... F-6
|
PRO FORMA PORTFOLIO OF INVESTMENTS
PRO FORMA COMBINED
AS OF DECEMBER 31, 2000
(UNAUDITED)
TOTAL RETURN REALTY
TOTAL RETURN REALTY REALTY FUND FUND INCOME COMBINED FUND
REALTY FUND INCOME FUND ADJUSTMENT COMBINED FUND VALUE VALUE ADJUSTMENT VALUE
----------- ----------- ---------- ------------- ----- ----- ---------- -----
(SHARES) (SHARES) (SHARES)
EQUITIES
COMMON STOCK
APARTMENT/RESIDENTIAL
Apartment
Investment &
Management
Co. -- Class A.... 44,800 8,700 -- 53,500 $ 2,237,200 $ 434,456 $ -- $ 2,671,656
Camden Property
Trust........... 51,200 12,900 -- 64,100 1,715,200 432,150 -- 2,147,350
Gables
Residential
Trust........... 59,900 14,800 -- 74,700 1,677,200 414,400 -- 2,091,600
Home Properties
of New York..... 31,400 7,900 -- 39,300 877,238 220,706 -- 1,097,944
Summit
Properties...... 87,500 21,900 -- 109,400 2,275,000 569,400 -- 2,844,400
United Dominion
Realty Trust.... 264,600 63,400 -- 328,000 2,860,987 685,513 -- 3,546,500
----------- ----------- -------- ------------
11,642,825 2,756,625 -- 14,399,450
----------- ----------- -------- ------------
DIVERSIFIED
Colonial
Properties
Trust........... 64,100 13,000 -- 77,100 1,670,606 338,812 -- 2,009,418
----------- ----------- -------- ------------
HEALTH CARE
Health Care
Property
Investors....... 133,800 33,600 -- 167,400 3,997,275 1,003,800 -- 5,001,075
Healthcare Realty
Trust........... 154,300 38,900 -- 193,200 3,278,875 826,625 -- 4,105,500
Nationwide Health
Properties...... 232,700 52,900 -- 285,600 2,996,012 681,088 -- 3,677,100
Ventas........... 225,000 56,700 -- 281,700 1,265,625 318,938 -- 1,584,563
----------- ----------- -------- ------------
11,537,787 2,830,451 -- 14,368,238
----------- ----------- -------- ------------
HOTEL
FelCor Lodging
Trust........... 91,500 22,800 -- 114,300 2,190,281 545,775 -- 2,736,056
Host Marriott
Corp. .......... 143,800 36,100 -- 179,900 1,860,413 467,044 -- 2,327,457
MeriStar
Hospitality
Corp. .......... 174,200 42,900 -- 217,100 3,429,562 844,594 -- 4,274,156
----------- ----------- -------- ------------
7,480,256 1,857,413 -- 9,337,669
----------- ----------- -------- ------------
INDUSTRIAL
First Industrial
Realty Trust.... 86,400 23,800 -- 110,200 2,937,600 809,200 -- 3,746,800
----------- ----------- -------- ------------
MANUFACTURED HOME
Chateau
Communities..... 6,500 200 -- 6,700 197,844 6,087 -- 203,931
----------- ----------- -------- ------------
OFFICE
Arden Realty
Group........... 131,400 29,200 -- 160,600 3,301,425 733,650 -- 4,035,075
Brandywine Realty
Trust........... 196,100 49,200 -- 245,300 4,056,819 1,017,825 -- 5,074,644
Crescent Real
Estate Equities
Co. ............ 167,200 41,700 -- 208,900 3,720,200 927,825 -- 4,648,025
Highwoods
Properties...... 148,200 37,900 -- 186,100 3,686,475 942,762 -- 4,629,237
Mack-Cali Realty
Corp. .......... 133,400 33,400 -- 166,800 3,810,237 953,987 -- 4,764,224
----------- ----------- -------- ------------
18,575,156 4,576,049 -- 23,151,205
----------- ----------- -------- ------------
OFFICE/INDUSTRIAL
Kilroy Realty
Corp............ 29,000 5,500 -- 34,500 828,313 157,094 -- 985,407
Liberty Property
Trust........... 139,400 34,800 -- 174,200 3,981,612 993,975 -- 4,975,587
Prentiss
Properties
Trust........... 17,000 4,000 -- 21,000 457,938 107,750 -- 565,688
Prime Group
Realty Trust.... 60,200 15,300 -- 75,500 865,375 219,938 -- 1,085,313
Reckson
Associates
Realty
Corp. -- Class B.... 77,900 19,600 -- 97,500 2,117,906 532,875 -- 2,650,781
----------- ----------- -------- ------------
8,251,144 2,011,632 -- 10,262,776
----------- ----------- -------- ------------
SELF STORAGE
Storage USA...... 10,400 3,600 -- 14,000 330,200 114,300 -- 444,500
----------- ----------- -------- ------------
SHOPPING CENTER
COMMUNITY CENTER
Kimco Realty
Corp. .......... 22,900 8,000 -- 30,900 1,011,894 353,500 -- 1,365,394
Pan Pacific
Retail
Properties...... 79,300 17,600 -- 96,900 1,769,381 392,700 -- 2,162,081
Philips
International
Realty Corp. ... 133,600 31,200 -- 164,800 542,750 126,750 -- 669,500
----------- ----------- -------- ------------
3,324,025 872,950 -- 4,196,975
----------- ----------- -------- ------------
|
PRO FORMA PORTFOLIO OF INVESTMENTS -- (CONTINUED)
PRO FORMA COMBINED
AS OF DECEMBER 31, 2000
(UNAUDITED)
TOTAL RETURN REALTY
TOTAL RETURN REALTY REALTY FUND FUND INCOME COMBINED FUND
REALTY FUND INCOME FUND ADJUSTMENT COMBINED FUND VALUE VALUE ADJUSTMENT VALUE
----------- ----------- ---------- ------------- ----- ----- ---------- -----
(SHARES) (SHARES) (SHARES)
REGIONAL MALL
CBL & Associates
Properties...... 95,800 16,500 -- 112,300 2,424,938 417,656 -- 2,842,594
JP Realty........ 111,400 27,800 -- 139,200 1,754,550 437,850 -- 2,192,400
Macerich Co. .... 116,500 21,200 -- 137,700 2,235,344 406,775 -- 2,642,119
Simon Property
Group........... 81,300 20,400 -- 101,700 1,951,200 489,600 -- 2,440,800
Taubman
Centers......... 154,300 38,900 -- 193,200 1,687,656 425,469 -- 2,113,125
----------- ----------- -------- ------------
10,053,688 2,177,350 -- 12,231,038
----------- ----------- -------- ------------
TOTAL SHOPPING CENTER................................................. $13,377,713 $3,050,300 -- 16,428,013
TOTAL COMMON STOCK.................................................... $76,001,131 $18,350,869 -- 94,352,000
PREFERRED STOCK
Apartment
Investment &
Management Co.,
9.00%,
Series C........ 8,000 31,500 -- 39,500 $ 158,000 $ 622,125 $ -- $ 780,125
Apartment
Investment &
Management Co.,
8.75%,
Series D........ 10,000 0 -- 10,000 188,750 -- -- 188,750
Apartment
Investment &
Management Co.,
9.375%,
Series G........ 130,100 37,600 -- 167,700 2,650,787 766,100 -- 3,416,887
Camden Property
Trust, $2.25,
Series A
(Convertible)... 90,100 18,600 -- 108,700 2,342,600 483,600 -- 2,826,200
CarrAmerica
Realty Corp.,
8.57%,
Series B........ 41,000 10,000 -- 51,000 843,063 205,625 -- 1,048,688
Colonial
Properties
Trust, 8.75%,
Series A........ 69,500 17,500 -- 87,000 1,442,125 363,125 -- 1,805,250
Crescent Real
Estate Equities
Co., 6.75%,
Series A
(Convertible)... 0 4,300 -- 4,300 -- 68,262 -- 68,262
Crown American
Realty Trust,
11.00%,
Series A........ 44,300 11,100 -- 55,400 1,672,325 419,025 -- 2,091,350
Health Care
Property
Investors,
8.70%,
Series B........ 0 3,200 -- 3,200 -- 58,800 -- 58,800
Health Care
Property
Investors,
8.60%,
Series C........ 0 6,300 -- 6,300 -- 116,550 -- 116,550
SPG Properties
Inc., 7.89%,
Series C........ 5,500 0 -- 5,500 209,000 -- -- 209,000
Taubman Centers
Inc., 8.30%,
Series A........ 111,200 28,300 -- 139,500 1,862,600 474,025 -- 2,336,625
United Dominion
Realty Trust.... 0 9,600 -- 9,600 -- 213,600 -- 213,600
----------- ----------- -------- ------------
TOTAL PREFERRED STOCK................................................. 11,369,250 3,790,837 -- 15,160,087
----------- ----------- -------- ------------
TOTAL RETURN
REALTY FUND REALTY
VALUE INCOME FUND ADJUSTMENT COMBINED FUND
----- ----------- ---------- -------------
CORPORATE BOND
Macerich Co.
144A,
Convertible,
7.25%
12/15/02........ $945,000 $235,000 -- $1,180,000 $857,588 $213,263 -- $1,070,851
(Identified
cost -- $770,175
and $206,769 for
Total Return
Realty Fund and
Realty Income
Fund,
respectively)
COMMERCIAL PAPER
State Street
Bank, 6.20%,
due 1/2/01...... 2,454,000 0 -- $2,454,000 2,454,000 -- -- 2,454,000
(Identified
cost -- $2,453,577)
Campbell Soup
Co., 6.25% due
1/02/01......... 0 674,000 -- $674,000 -- 673,883 -- 673,883
(Identified
cost -- $673,883)
----------- ----------- -------- ------------
Total Commercial Paper................................................... 2,454,000 673,883 -- 3,127,883
----------- ----------- -------- ------------
TOTAL INVESTMENTS (Identified cost -- $88,427,030 and $22,581,645 for
Total Return Realty Fund and Realty Income Fund, respectively).......... 90,681,969 23,028,852 -- 113,710,821
OTHER ASSETS IN EXCESS OF LIABILITIES.................................... 722,892 (285,589) -- 437,303
----------- ----------- -------- ------------
NET ASSETS............................................................... $91,404,861 $22,743,263 $ -- $114,148,124
----------- ----------- -------- ------------
----------- ----------- -------- ------------
|
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 2000
(UNAUDITED)
TOTAL RETURN REALTY INCOME COMBINED
REALTY FUND FUND ADJUSTMENT FUND
----------- ---- ---------- ----
ASSETS:
Investments in securities, at value
(Note B)............................ $90,681,969 $23,028,852 $ -- $113,710,821
(Identified cost -$88,427,030 and
$22,581,645 for Total Return Realty
Fund & Realty Income Fund,
respectively)
Cash.................................. 425 952 -- 1,377
Dividends and interest receivable..... 858,080 231,751 -- 1,089,831
Receivable for investment securities
sold................................ 43,157 9,497 -- 52,654
Other assets.......................... 2,674 1,078 (1,069) 2,683
----------- ----------- ------- ------------
Total assets...................... 91,586,305 23,272,130 (1,069) 114,857,366
----------- ----------- ------- ------------
LIABILITIES:
Payable for dividends declared........ 55,823 453,691 -- 509,514
Payable to investment advisor......... 51,601 10,712 -- 62,313
Payable to administrator.............. 12,500 16,583 -- 29,083
Other liabilities..................... 61,520 47,881 -- 109,401
----------- ----------- ------- ------------
Total liabilities................. 181,444 528,867 -- 710,311
----------- ----------- ------- ------------
NET ASSETS applicable to shares of $0.001
par value common stock outstanding...... $91,404,861 $22,743,263 $(1,069) $114,147,055
----------- ----------- ------- ------------
----------- ----------- ------- ------------
NET ASSET VALUE PER SHARE:
($7,399,100 shares of Total Return
Realty Fund, 3,024,603 shares of
Realty Income Fund and 9,242,677
shares of Combined Fund issued and
outstanding......................... $ 12.35 $ 7.52 -- $ 12.35
----------- ----------- ------- ------------
MARKET PRICE PER SHARE.................... $ 11.8750 $ 6.9375 -- $ 11.8750
----------- ----------- ------- ------------
MARKET PRICE DISCOUNT TO NET ASSET VALUE
PER SHARE............................... - 3.85% - 7.75% - 3.85%
----------- ----------- ------- ------------
----------- ----------- ------- ------------
NET ASSETS consist of:
Paid-in capital....................... 93,301,028 23,867,376 (1,069) 117,167,335
Distributions in excess of net
investment income................... -- (453,691) -- (453,691)
Accumulated net realized loss on
investments sold.................... (4,151,106) (1,117,629) -- (5,268,735)
Net unrealized appreciation on
investments......................... 2,254,939 447,207 -- 2,702,146
----------- ----------- ------- ------------
91,404,861 22,743,263 (1,069) 114,147,055
----------- ----------- ------- ------------
----------- ----------- ------- ------------
|
See accompanying notes to financial statements.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(UNAUDITED)
TOTAL RETURN REALTY INCOME COMBINED
REALTY FUND FUND ADJUSTMENT FUND
----------- ---- ---------- ----
INVESTMENT INCOME (NOTE B):
Dividend income........................ $ 7,758,952 $1,981,301 $ -- $ 9,740,253
Interest income........................ 178,089 53,791 -- 231,880
----------- ---------- -------- -----------
Total income....................... 7,937,041 2,035,092 -- 9,972,133
----------- ---------- -------- -----------
EXPENSES:
Investment advisory fees (Note C)...... 591,214 133,807 10,293 735,314
Administration fees & transfer agent
fees (Note C)........................ 171,057 64,094 (132,651) 102,500
Professional fees...................... 59,617 54,920 (50,000) 64,537
Custodian fees and expenses............ 59,573 13,690 (7,000) 66,263
Reports to shareholders................ 39,097 52,957 (42,000) 50,054
Directors' fees and expenses........... 29,970 31,220 (30,000) 31,190
Registration fees and filing fees...... 16,170 7,521 -- 23,691
Miscellaneous (Note A)................. 13,795 5,148 47,000 65,943
----------- ---------- -------- -----------
Total expenses..................... 980,493 363,357 (204,358) 1,139,492
----------- ---------- -------- -----------
Reduction of expenses.................. (8,507) -- -- (8,507)
----------- ---------- -------- -----------
Net expenses....................... 971,986 363,357 (204,358) 1,130,985
----------- ---------- -------- -----------
Net investment income...................... $ 6,965,055 $1,671,735 $204,358 $ 8,841,148
----------- ---------- -------- -----------
----------- ---------- -------- -----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS:
Net realized loss on investments....... (4,508,075) (992,398) -- (5,500,473)
Net change in unrealized
appreciation/(depreciation) on
investments.......................... 17,392,538 4,312,879 -- 21,705,417
----------- ---------- -------- -----------
Net realized and unrealized gain on
investments.......................... 12,884,463 3,320,481 -- 16,204,944
----------- ---------- -------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................... $19,849,518 $4,992,216 $204,358 $25,046,092
----------- ---------- -------- -----------
----------- ---------- -------- -----------
|
See accompanying notes to financial statements.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -- GENERAL
The unaudited pro-forma financial statements give effect to the proposed acquisition of the assets of Cohen & Steers Realty Income Fund, Inc. ('Realty Income Fund') by Cohen & Steers Total Return Realty Fund, Inc. ('Total Return Realty Fund') pursuant to an agreement and plan of reorganization, dated as of March 30, 2001. The acquisitions would be accomplished by a tax-free exchange of the assets of Cohen & Steers Realty Income Fund for shares of Total Return Realty Fund.
The unaudited pro-forma Statements of Investments, of Assets and Liabilities and of Operations have been prepared as though the acquisitions had been effective as of and for the year ended December 31, 2000 and should be read in conjunction with the historical financial statements and schedules of investments of the Portfolio. The pro-forma Statement of Operations has been prepared under the assumption that certain expenses would be lower for the combined entity as a result of the acquisitions. The expense of the acquisitions, including the cost of proxy solicitation, will be borne equally by Realty Income Fund and Total Return Realty Fund. The cost of the acquisition and proxy solicitation is estimated at $175,000 and has been reflected on the pro-forma Statement of Operations.
NOTE B -- SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
1. Portfolio Valuation
Investments in securities that are listed on the New York Stock Exchange are valued, except as indicated below, at the last sale price reflected at the close of the New York Stock Exchange on the business day as of which such value is being determined. If there are has been no sale on such day, the securities are valued at the mean of the closing bid and ask prices for the day. Securities not listed on the New York Stock Exchange but listed on other domestic or foreign securities exchanges or admitted to trading on the National Association of Securities Dealers Automated Quotations, Inc. ('NASDAQ') National Market System are valued in a similar manner. Securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined as reflected on the tape at the close of the exchange representing the principal market for such securities. Readily marketable securities traded in the over-the-counter market, including listed securities whose primary market is believed by Cohen & Steers Capital Management, Inc. (the 'Adviser') to be over-the-counter, but excluding securities admitted to trading on the NASDAQ National List, are valued at the mean of the current bid and asked prices as reported by NASDAQ, the National Quotations Bureau or such other comparable sources as the Board of Directors believes reflect most closely the value of such securities. Short-term debt securities, which have a maturity of 60 days or less, are valued at amortized cost which approximates value.
2. Taxes
It is Total Return Realty Fund policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required.
3. Security Transactions and Investment Income
Security transactions are recorded on trade date. Realized gain and losses on investments sold are recorded on the basis of identified cost for accounting and tax purposes. Dividend income is recorded on the ex-dividend date. Interest income is recognized on the accrual basis. Discounts and premiums of securities purchased are amortized using the effective yield basis over their respective lives.
NOTES TO PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
4. Dividends and Distributions to Shareholders
Dividends and distributions to shareholders are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with accounting principles generally accepted in the United States. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification.
NOTE C
1. Advisory Fee
Cohen & Steers Capital Management, Inc. (the 'Adviser') serves as the investment adviser to the Fund, pursuant to an Investment Advisory Agreement (the 'Advisory Agreement'). The Adviser is responsible for the actual management of Total Return Realty Fund's portfolio. The responsibility for making decisions to buy, sell or hold a particular investment rests with the Adviser, subject to review by the Board of Directors and the applicable provisions of the Act. For the services provided pursuant to the Advisory Agreement, the Adviser is entitled to receive a fee, computed weekly and payable monthly at an annual rate of 0.70% of Total Return Realty Fund's average weekly net assets.
2. Administration Fee
State Street Bank and Trust Company has been appointed as the new administrator for Total Return Realty. Prior to this, Princeton Administrators, L.P. served as the administrator. The Adviser believes that, with the appointment of the new administrator, Total Return Realty will benefit from an estimated cost savings of 0.10% of the Fund's average net assets. The effect of this cost savings has been reflected in the Fund's projected expense ratio. This change will take effect during the second quarter of 2001.
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the 'Plan') made this 30th day of March, 2001 by Cohen & Steers Realty Income Fund, Inc. (the 'Transferor'), a Maryland corporation, and Cohen & Steers Total Return Realty Fund, Inc. (the 'Acquiror'), a Maryland corporation.
WHEREAS, the Board of Directors of the Transferor has determined that the transfer of all of the assets and liabilities of the Transferor to the Acquiror in exchange for full shares and cash in lieu of any fractional shares of the Acquiror is in the best interests of shareholders of the Transferor and that the interests of the existing shareholders of the Transferor would not be diluted as a result of this transaction;
WHEREAS, the Board of Directors of the Acquiror has determined that the acquisition of all of the assets and liabilities of the Transferor by the Acquiror in exchange for full shares and cash in lieu of any fractional shares of the Acquiror is in the best interests of the shareholders of the Acquiror and that the interests of existing shareholders would not be diluted as a result of this transaction;
WHEREAS, the Transferor and the Acquiror intend to provide for the
reorganization of the Transferor (the 'Reorganization') through the acquisition
by the Acquiror of all of the assets, subject to all of the liabilities, of the
Transferor in exchange for full shares of common stock, par value $.001 per
share, of the Acquiror (the 'Acquiror Shares') and cash in lieu of any
fractional shares of the Acquiror, the liquidation of the Transferor and the
distribution to the Transferor's shareholders of such Acquiror Shares, all in
such a manner as to qualify as a reorganization within the meaning of
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the 'Code');
NOW, THEREFORE, in consideration of the mutual promises herein contained, the Transferor and the Acquiror hereto agree as follows:
1. TRANSFER OF ASSETS OF THE TRANSFEROR IN EXCHANGE FOR THE ACQUIROR SHARES AND LIQUIDATION OF THE TRANSFEROR
(a) Plan of Reorganization.
(i) The Transferor will convey, transfer and deliver to the Acquiror all of the then existing assets of the Transferor (consisting, without limitation, of portfolio securities and instruments, dividend and interest receivables, cash and other assets). In consideration thereof, the Acquiror will (A) assume and pay, to the extent that they exist on or after the Effective Time of the Reorganization (as defined in Section 1(b)(i) hereof), all of the obligations and liabilities of the Transferor and (B) issue and deliver to the Transferor shares of common stock of the Acquiror equal to that number of Acquiror Shares as determined in Section 1(c) hereof. The Acquiror will not issue fractional Acquiror Shares to Transferor Shareholders. In lieu thereof, State Street Bank and Trust Company (the 'Custodian') will aggregate all fractional Acquiror Shares and sell the resulting full Acquiror Shares on the New York Stock Exchange at the then current market price for such Shares for the account of each Transferor Shareholder entitled to receive such fractional Acquiror Shares. Such transactions shall take place on the date provided for in Section 1(b) hereof (the 'Exchange Date'). All computations for the Transferor and the Acquiror shall be performed by the Custodian. The determination of the Custodian shall be conclusive and binding on all parties in interest.
(ii) As of the Effective Time of the Reorganization, the Transferor will liquidate and distribute pro rata to its shareholders of record ('Transferor Shareholders') the Acquiror Shares and cash in lieu of fractional Acquiror Shares received by such Transferor pursuant to Section 1(a)(i) in actual or constructive exchange for the shares of the Transferor held by the Transferor Shareholders and the shares of the Transferor shall be cancelled. Such liquidation and distribution will be accomplished by the transfer of the Acquiror Shares and cash in lieu of fractional Acquiror Shares then credited to the account of the Transferor on the books of the Acquiror, to open accounts on the share records of the Acquiror in the names of the Transferor Shareholders and representing the respective pro rata number of the Acquiror Shares and cash in lieu of fractional Acquiror Shares due such Shareholders. The Acquiror Shares which are distributed to each Transferor Shareholder
will be of the same share class as the shares of capital stock, par value $.01 per share, of the Transferor ('Transferor Shares') owned by such Transferor Shareholder. The Acquiror will issue separate certificates, each registered in the name of Transferor, representing the Acquiror Shares in connection with such exchange. The Transferor will then distribute the Acquiror Shares and cash in lieu of fractional Acquiror Shares to the Transferor Shareholders by redelivering the certificates evidencing ownership of Acquiror Shares to State Street Bank as the transfer agent and registrar for the Acquiror Shares for distribution to the Transferor Shareholders on the basis of each holder's proportionate interest in the aggregate net asset value of the Common Stock of Transferor.
(iii) As soon as practicable after the Exchange Date, the Transferor shall take all the necessary steps under Maryland law, the Transferor's Articles of Incorporation and By-laws and any other applicable law to effect a complete dissolution of the Transferor, including the filing of Articles of Dissolution with the Maryland State Department of Assessment and Taxation.
(b) Exchange Date and Effective Time of the Reorganization.
(i) Subject to the satisfaction of the conditions to the Reorganization specified in this Plan, the Reorganization shall be effective as of the close of regularly scheduled trading on the New York Stock Exchange (the 'Effective Time of the Reorganization') on May 31, 2001, and shall be implemented at the Effective Time of the Reorganization or on such later date as may be agreed upon by the parties (the 'Exchange Date').
(ii) All acts taking place on the Exchange Date shall be deemed to take place simultaneously as of the Effective Time of the Reorganization unless otherwise provided.
(iii) In the event that on the proposed Exchange Date (A) the New York Stock Exchange shall be closed to trading or trading thereon shall be restricted, (B) the American Stock Exchange shall be closed to trading or trading thereon shall be restricted or (C) trading or the reporting of trading on the New York Stock Exchange or American Stock Exchange or elsewhere shall be disrupted so that accurate valuation of the net assets of the Acquiror or the Transferor is impracticable, the Exchange Date shall be postponed until the first business day after the day when trading shall have been fully resumed and reporting shall have been restored.
(iv) On the Exchange Date, portfolio securities of the Transferor shall be transferred by the Custodian to the accounts of the Acquiror duly endorsed in proper form for transfer, in such condition as to constitute good delivery thereof in accordance with the custom of brokers, and shall be accompanied by all necessary federal and state stock transfer stamps or a check for the appropriate purchase price thereof.
(c) Valuation.
(i) The net asset value of the shares of the Acquiror and the net value of the assets of the Transferor to be transferred in exchange therefore shall be determined as of the Effective Time of the Reorganization. The net asset value of the Acquiror Shares shall be computed by the Custodian in the manner set forth in the Acquiror's Articles of Incorporation or By-laws and then current prospectus and statement of additional information and shall be computed to not less than two decimal places. The net value of the assets of the Transferor to be transferred shall be computed by the Custodian by calculating the value of the assets transferred by the Transferor and by subtracting therefrom the amount of the liabilities assigned and transferred to the Acquiror, said assets and liabilities to be valued in the manner set forth in the Transferor's Articles of Incorporation or By-laws and then current prospectus and statement of additional information.
(ii) The number of Acquiror Shares to be issued by the Acquiror in exchange for the Transferor's assets shall be determined by an exchange ratio computed by dividing the net value of the Transferor's assets by the net asset value per share of the Acquiror, both as determined in accordance with Section 1(c)(i).
(iii) All computations of value shall be made by the Custodian in accordance with its regular practice as pricing agent for the Acquiror.
2. REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
The Acquiror represents and warrants as follows:
(a) Organization, Existence, etc. The Acquiror is a corporation that is duly organized, validly existing and in good standing under the laws of State of Maryland and has the power to carry on its business as it is now being conducted. The Acquiror Shares are validly authorized and issued under the laws of State of Maryland. The Acquiror has all necessary federal, state and local authorization to own all of its properties and assets and to carry on its business as now being conducted.
(b) Registration as Investment Company. The Acquiror is registered under the Investment Company Act of 1940, as amended (the 'Act') as a non-diversified closed-end management investment company; such registration has not been revoked or rescinded and is in full force and effect.
(c) Current Offering Documents. The current prospectus and statement of additional information of the Acquiror, dated September 17, 1993, included in the Acquiror's registration statement on Form N-2 filed with the Commission, comply in all material respects with the requirements of the Securities Act of 1933, as amended (the 'Securities Act') and the Act and do not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(d) Capitalization. The Acquiror is authorized to issue 100,000,000 shares of Common Stock, par value $.001 per share, of which 7,399,100 shares were outstanding, as of March 27, 2001. All of the outstanding shares of the Acquiror have been duly authorized and are validly issued, fully paid and nonassessable and have full voting rights. All such shares will, at the Exchange Date, be held by the shareholders of record of the Acquiror as set forth on the books and records of the Acquiror in the amounts set forth therein, and as set forth in any list of shareholders of record provided to the Transferor for purposes of the Reorganization, and no such shareholders of record will have any preemptive rights to purchase any Acquiror shares, and the Acquiror does not have outstanding any options, warrants or other rights to subscribe for or purchase any Acquiror shares (other than as set forth in this Plan), nor are there outstanding any securities convertible into any shares of the Acquiror (except pursuant to any existing conversion and exchange privileges described in the current prospectus and statement of additional information of the Acquiror). All of the issued and outstanding shares of the Acquiror have been offered and sold in compliance in all material respects with applicable registration requirements of the Securities Act and applicable state securities laws.
(e) Shares to be Issued Upon Reorganization. The Acquiror Shares to be issued in connection with the Reorganization will be duly authorized and upon consummation of the Reorganization will be validly issued, fully paid and nonassessable and have full voting rights.
(f) Authority Relative to this Plan. The Acquiror has the power to enter into this Plan and to carry out its obligations hereunder. The execution and delivery of this Plan and the consummation of the transactions contemplated hereby have been duly authorized by the Acquiror's Board of Directors and no other proceedings by the Acquiror other than those contemplated under this Plan are necessary to authorize its officers to effectuate this Plan and the transactions contemplated hereby. The Acquiror is not a party to or obligated under any provision of its Articles of Incorporation or By-laws, or under any indenture or contract provision or any other commitment or obligation, or subject to any order or decree, which would be violated by or which would prevent its execution and performance of this Plan in accordance with its terms.
(g) Liabilities. There are no liabilities of the Acquiror, whether actual or contingent and whether or not determined or determinable.
(h) Litigation. There are no claims, actions, suits or proceedings pending or, to the knowledge of the Acquiror, threatened which would materially adversely affect the Acquiror or the Acquiror's assets or business or which would prevent or hinder consummation of the transactions contemplated hereby, and, to the knowledge of the Acquiror, there are no regulatory investigations of the Acquiror, pending or threatened, other than routine inspections and audits.
(i) Contracts. No default exists under any material contract or other commitment to which the Acquiror is subject.
(j) No Approvals Required. Except for the approval of the Acquiror
Shareholders referred to in Section 4(a) hereof, the Registration Statement
(as defined in Section 4(b) hereof), an amendment to the Registration
Statement of the Acquiror on Form N-14, certain 'blue sky' securities law
filings and the approval of the Transferor's shareholders (referred to in
Section 6(a) hereof), no consents, approvals, authorizations, registrations
or exemptions under federal or state laws are necessary for the consummation
by the Acquiror of the Reorganization, except such as have been obtained as
of the date hereof and except for the acceptance of the Articles of Transfer
for record by the Maryland State Department of Assessments and Taxation.
(k) Regulated Investment Company. The Acquiror currently is, and will continue to be prior to, at and after the Exchange Date, qualified as a regulated investment company within the meaning of Section 851 of the Code.
3. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR
The Transferor represents and warrants as follows:
(a) Organization, Existence, etc. The Transferor is a corporation that is duly organized, validly existing and in good standing under the laws of the State of Maryland and has the power to carry on its business as it is now being conducted. The Transferor Shares are validly authorized and issued under the laws of State of Maryland. The Transferor has all necessary federal, state and local authorization to own all of its properties and assets and to carry on its business as now being conducted.
(b) Registration as Investment Company. The Transferor is registered under the 1940 Act as a non-diversified management investment company; such registration has not been revoked or rescinded and is in full force and effect.
(c) Current Offering Documents. The current prospectus and statement of additional information of the Transferor, dated August 26, 1988, included in the Transferor's registration statement filed on Form N-2 with the Commission, comply in all material respects with the requirements of the Securities Act and the 1940 Act and do not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(d) Capitalization. The Transferor is authorized to issue 50,000,000 shares of Common Stock, par value $.01 per share, of which 3,024,603 shares were outstanding as of March 27, 2001. All of the outstanding shares of the Transferor have been duly authorized and are validly issued, fully paid and nonassessable and have full voting rights. All such shares will, at the Exchange Date, be held by the shareholders of record of the Transferor as set forth on the books and records of the Transferor in the amounts set forth therein, and as set forth in any list of shareholders of record provided to the Acquiror for purposes of the Reorganization, and no such shareholders of record will have any preemptive rights to purchase any Transferor shares, and the Transferor does not have outstanding any options, warrants or other rights to subscribe for or purchase any Transferor shares (other than as set forth in this Plan), nor are there outstanding any securities convertible into any shares of the Transferor (except pursuant to any existing conversion and exchange privileges described in the current prospectus and statement of additional information of the Transferor). All of the Transferor's issued and outstanding shares have been offered and sold in compliance in all material respects with applicable registration requirements of the Securities Act and applicable state securities laws.
(e) Financial Statements. The financial statements for the Transferor with respect to the Transferor for the fiscal year ended December 31, 2000, which have been audited by PricewaterhouseCoopers LLP, fairly present the financial position of the Transferor as of the dates thereof and the respective results of operations and changes in net assets for each of the periods indicated in accordance with GAAP.
(f) Authority Relative to this Plan. The Transferor has the power to enter into this Plan and to carry out its obligations hereunder. The execution and delivery of this Plan and the consummation of the transactions contemplated hereby have been duly authorized by the Transferor's Board of Directors and no other proceedings by the Transferor other than those contemplated under this Plan are necessary to authorize its officers to effectuate this Plan and the transactions contemplated hereby. The Transferor is not a party to or obligated under any provision of its Articles of Incorporation or By-laws, or under any indenture or contract provision or any other commitment or obligation, or subject to any order or decree, which would be violated by or which would prevent its execution and performance of this Plan in accordance with its terms.
(g) Liabilities. There are no liabilities of the Transferor, whether actual or contingent and whether or not determined or determinable, other than liabilities disclosed or provided for in the Transferor's financial statements with respect to the Transferor and liabilities incurred in the ordinary course of business subsequent to March 30, 2001 or otherwise previously disclosed to the Transferor.
(h) No Material Adverse Change. Since March 30, 2001, there has been no material adverse change in the financial condition, results of operations, business, properties or assets of the Transferor, other than those occurring in the ordinary course of business (for these purposes, a decline in net asset value does not constitute a material adverse change).
(i) Litigation. There are no claims, actions, suits or proceedings pending or, to the knowledge of the Transferor, threatened which would materially adversely affect the Transferor or the Transferor's assets or business or which would prevent or hinder consummation of the transactions contemplated hereby, and, to the knowledge of the Transferor, there are no regulatory investigations of the Transferor, pending or threatened, other than routine inspections and audits.
(j) Contracts. The Transferor is not subject to any contracts or other commitments (other than this Plan) which will not be terminated without liability to the Transferor as of or prior to the Effective Time of the Reorganization.
(k) Taxes. The federal income tax returns of the Transferor and all other income tax returns required to be filed by the Transferor have been filed, and all taxes payable pursuant to such returns have been paid. To the knowledge of the Transferor, no such return is under audit and no assessment has been asserted in respect of any such return. All federal and other taxes owed by the Transferor have been paid so far as due.
(l) No Approvals Required. Except for the Registration Statement (as defined in Section 4(b) hereof), the approval of the Acquiror Shareholders referred to in Section 4(a) hereof and the approval of the Transferor Shareholders referred to in Section 6(a) hereof, no consents, approvals, authorizations, registrations or exemptions under federal or state laws are necessary for the consummation by the Transferor of the Reorganization, except such as have been obtained as of the date hereof, the acceptance of the Articles of Transfer for record by the Maryland Department of Assessments and Taxation and such as may be required for the dissolution of the Transferor.
(m) Regulated Investment Company. The Transferor currently is, and will continue to be prior to and at the Exchange Date, qualified as a regulated investment company within the meaning of Section 851 of the Code.
4. COVENANTS OF THE ACQUIROR
The Acquiror covenants to the following:
(a) Meeting of the Acquiror Shareholders. The Acquiror shall call and hold a meeting of the shareholders of the Acquiror for the purpose of acting upon this Plan and the transactions contemplated herein.
(b) Registration Statement. The Acquiror shall file or has filed with the Commission a Registration Statement on Form N-14 (the 'Registration Statement') under the Securities Act relating to the Acquiror Shares issuable hereunder and the proxy statement of the Transferor relating to the meeting of the Transferor Shareholders referred to in Section 5(a) herein. At the
time the Registration Statement becomes effective, the Registration Statement (i) will comply in all material respects with the provisions of the Securities Act and the rules and regulations of the Commission thereunder (the 'Regulations') and (ii) will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and at the time the Registration Statement becomes effective, at the time of the Transferor Shareholders' meeting referred to in Section 5(a) hereof, and at the Effective Time of the Reorganization, the combined prospectus/proxy statement (the 'Prospectus') and statement of additional information (the 'Statement of Additional Information') included therein, as amended or supplemented by any amendments or supplements filed by the Acquiror, will not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(c) Cooperation in Effecting Reorganization. The Acquiror agrees to use all reasonable efforts to effectuate the Reorganization, to continue in operation thereafter, and to obtain any necessary regulatory approvals for the Reorganization. The Acquiror shall furnish such data and information relating to the Acquiror as shall be reasonably requested for inclusion in the information to be furnished to the Transferor Shareholders in connection with the meeting of the Transferor Shareholders for the purpose of acting upon this Plan and the transactions contemplated herein.
5. COVENANTS OF THE TRANSFEROR
The Transferor covenants to the following:
(a) Meeting of the Transferor's Shareholders. The Transferor shall call and hold a meeting of the shareholders of the Transferor for the purpose of acting upon this Plan and the transactions contemplated herein.
(b) Registration Statement. In connection with the preparation of the Registration Statement, the Transferor will cooperate with the Acquiror and will furnish to the Acquiror the information relating to the Transferor required by the Securities Act and the Regulations to be set forth in the Registration Statement (including the Prospectus and Statement of Additional Information). At the time the Registration Statement becomes effective, the Registration Statement, insofar as it relates to the Transferor, (i) will comply in all material respects with the provisions of the Securities Act and the Regulations and (ii) will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and at the time the Registration Statement becomes effective, at the time of the Transferor's shareholders' meeting referred to in Section 5(a) and at the Effective Time of the Reorganization, the Prospectus and Statement of Additional Information, as amended or supplemented by any amendments or supplements filed by the Acquiror, insofar as they relate to the Transferor, will not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the representations and warranties in this subsection shall apply only to statements in or omissions from the Registration Statement, Prospectus or Statement of Additional Information made in reliance upon and in conformity with information furnished by the Transferor for use in the Registration Statement, Prospectus or Statement of Additional Information as provided in this Section 5(c).
(c) Cooperation in Effecting Reorganization. The Transferor agrees to use all reasonable efforts to effectuate the Reorganization and to obtain any necessary regulatory approvals for the Reorganization.
(d) Operations in the Ordinary Course. Except as otherwise contemplated by this Plan, the Transferor shall conduct its business in the ordinary course until the consummation of the Reorganization, it being understood that such ordinary course of business will include the declaration and payment of customary dividends and distributions.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRANSFEROR
The obligations of the Transferor with respect to the consummation of the Reorganization are subject to the satisfaction of the following conditions:
(a) Approval by Transferor Shareholders. This Plan and the transactions contemplated by the Reorganization shall have been approved by the requisite vote of the shares of the Transferor entitled to vote on the matter ('Transferor Shareholder Approval').
(b) Approval by Acquiror Shareholders. This Plan and the transactions contemplated by the Reorganization shall have been approved by the requisite vote of the shares of the Acquiror entitled to vote on the matter ('Acquiror Shareholder Approval').
(c) Covenants, Warranties and Representations. The Acquiror shall have complied with each of its covenants contained herein and each of the representations and warranties contained herein shall be true in all material respects as of the Effective Time of the Reorganization (except as otherwise contemplated herein).
(d) Regulatory Approval. The Registration Statement shall have been declared effective by the Commission and no stop orders under the Securities Act pertaining thereto shall have been issued, and all other approvals, registrations, and exemptions under federal and state laws considered to be necessary shall have been obtained (collectively, the 'Regulatory Approvals').
(e) Tax Opinion. The Transferor shall have received the opinion of
Simpson Thacher & Bartlett, dated on or before the Exchange Date, addressed
to and in form and substance satisfactory to the Transferor, as to certain
of the federal income tax consequences under the Code of the Reorganization,
insofar as they relate to the Transferor and the Acquiror, and to
shareholders of the Transferor (the 'Tax Opinion'). For purposes of
rendering the Tax Opinion, Simpson Thacher & Bartlett may rely exclusively
and without independent verification, as to factual matters, upon the
statements made in this Plan, the Prospectus and Statement of Additional
Information, and upon such other written representations as the President or
Treasurer of each of the Transferor and the Acquiror will have verified as
of the Effective Time of the Reorganization. The Tax Opinion will be to the
effect that, based on the facts and assumptions stated therein, for federal
income tax purposes: (i) the Reorganization will generally constitute a
reorganization within the meaning of section 368(a)(1) of the Code with
respect to the Transferor and the Acquiror; (ii) no gain or loss will be
recognized by the Transferor or the Acquiror upon the transfer of all the
assets and liabilities, if any, of the Transferor to the Acquiror in
exchange for shares of the Acquiror or upon the distribution of the shares
of the Acquiror to the holders of the shares of the Transferor in exchange
for all of the shares of the Transferor; (iii) no gain or loss will be
recognized by shareholders of the Transferor upon the exchange of shares of
such Transferor for shares of the Acquiror; (iv) the holding period and tax
basis of the shares of the Acquiror received by each holder of shares of the
Transferor pursuant to the Reorganization will be the same as the holding
period and tax basis of shares of the Transferor held by the shareholder
(provided the shares of the Transferor were held as a capital asset on the
Exchange Date) immediately prior to the Reorganization; (v) the holding
period and tax basis of the assets of the Transferor acquired by the
Acquiror will be the same as the holding period and tax basis of those
assets to the Transferor immediately prior to the Reorganization; and
(vi) the payment of cash to the Transferor Shareholders in lieu of
fractional Acquiror Shares will be treated as though such fractional shares
were distributed as part of the Reorganization and redeemed by the Acquiror
with the result that the Transferor Shareholder will generally have capital
gain or loss to the extent the cash distribution differs from such
Transferor Shareholder's basis allocable to the fractional Acquiror Shares.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIROR
The obligations of the Acquiror with respect to the consummation of the Reorganization are subject to the satisfaction of the following conditions:
(a) Approval by the Acquiror Shareholders. The Acquiror Shareholder Approval shall have been obtained.
(b) Approval by the Transferor's Shareholders. The Transferor Shareholder Approval shall have been obtained.
(c) Covenants, Warranties and Representations. The Transferor shall have complied with each of its covenants contained herein, each of the representations and warranties contained herein shall be true in all material respects as of the Effective Time of the Reorganization (except as otherwise contemplated herein).
(d) Regulatory Approval. The Regulatory Approvals shall have been obtained.
(e) Tax Opinion. The Acquiror shall have received the Tax Opinion addressed to and in form and substance satisfactory to the Acquiror.
8. AMENDMENTS; TERMINATIONS; NO SURVIVAL OF COVENANTS, WARRANTIES AND REPRESENTATIONS
(a) Amendments. The parties hereto may, by agreement in writing authorized by the Board of Directors of each of the Acquiror and the Transferor amend this Plan at any time before or after approval hereof by the shareholders of the Acquiror or the shareholders of the Transferor, but after such approval, no amendment shall be made which substantially changes the terms hereof.
(b) Waivers. At any time prior to the Effective Time of the Reorganization,
either the Transferor or the Acquiror may by written instrument signed by it
(i) waive any inaccuracies in the representations and warranties made to it
contained herein and (ii) waive compliance with any of the covenants or
conditions made for its benefit contained herein, except that conditions set
forth in Sections 6(d) and 7(d) may not be waived.
(c) Termination by the Transferor. The Transferor may terminate this Plan with respect to the Transferor at any time prior to the Effective Time of the Reorganization by notice to the Acquiror and State Street if (i) a material condition to the performance of the Transferor hereunder or a material covenant of the Acquiror contained herein shall not be fulfilled on or before the date specified for the fulfillment thereof or (ii) a material default or material breach of this Plan shall be made by the Acquiror.
(d) Termination by the Acquiror. The Acquiror may terminate this Plan with respect to the Acquiror at any time prior to the Effective Time of the Reorganization by notice to the Transferor and State Street if (i) a material condition to the performance of the Acquiror hereunder or a material covenant of the Transferor contained herein shall not be fulfilled on or before the date specified for the fulfillment thereof or (ii) a material default or material breach of this Plan shall be made by the Transferor.
(e) Survival. No representations, warranties or covenants in or pursuant to this Plan, except for the provisions of Section 9 of this Plan, shall survive the Reorganization.
9. EXPENSES
The expenses of the Reorganization will be borne equally by the Acquiror and
the Transferor. Such expenses include, without limitation, (i) expenses incurred
in connection with the entering into and the carrying out of the provisions of
this Plan; (ii) expenses associated with the preparation and filing of the
Registration Statement; (iii) fees and expenses of preparing and filing such
forms as are necessary under any applicable state securities laws in connection
with the Reorganization; (iv) postage; (v) printing; (vi) accounting fees;
(vii) legal fees; (viii) solicitation costs relating to the Reorganization;
(ix) any insurance coverage provided for the Directors of the Transferor;
(x) any payments to any service providers to the Transferor in connection with
the termination of the relationship with such service provider; and (xi) any
out-of-pocket post-closing costs incurred by the Transferor in connection with
its dissolution or otherwise in connection with the Plan.
10. NOTICES
Any notice, report, statement or demand required or permitted by any provision of this Plan shall be in writing and shall be given by hand, certified mail or by facsimile transmission, shall be deemed
given when received and shall be addressed to the parties hereto at their respective addresses listed below or to such other persons or addresses as the relevant party shall designate as to itself from time to time in writing delivered in like manner:
if to the Acquiror or Transferor:
Cohen & Steers Capital Management, Inc.
757 Third Avenue
New York, New York 10017
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Sarah E. Cogan, Esq.
11. RELIANCE
All covenants and agreements made under this Plan shall be deemed to have been material and relied upon by the Transferor and the Acquiror, notwithstanding any investigation made by either such party.
12. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
(a) The section and paragraph headings contained in this Plan are for reference purposes only and shall not affect in any way the meaning or interpretation of this Plan.
(b) This Plan may be executed in any number of counterparts, each of which shall be deemed an original.
(c) This Plan shall be governed by and construed in accordance with the laws of the State of New York.
(d) This Plan shall bind and inure to the benefit of the Transferor and the Acquiror and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Plan.
IN WITNESS WHEREOF, the undersigned have executed this Plan as of the date first above written.
COHEN & STEERS REALTY INCOME FUND, INC.
on behalf of the Transferor
By: /s/ Robert H. Steers
..................................
Name: Robert H. Steers
Title: Chairman
|
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
on behalf of the Acquiror
By: /s/ Martin Cohen
..................................
Name: Martin Cohen
Title: President
|
Appendix 1
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
757 Third Avenue
New York, New York 10017
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Revoking any such prior appointments, the undersigned appoints Martin Cohen and Robert H. Steers (or, if only one shall act, then that one) proxies with the power of substitution to vote all the common stock of Cohen & Steers Total Return Realty Fund, Inc. (the 'Fund') registered in the name of the undersigned at the Annual Meeting of Stockholders to be held at the Hotel Inter-Continental New York, 111 East 48th Street, New York, New York 10017 on May 15, 2001 at 9:30 a.m., and at any adjournments thereof.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS? ---------------------------------- ---------------------------------------- ---------------------------------- ---------------------------------------- ---------------------------------- ---------------------------------------- |
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
Mark box at right if an address change [ ] or comment has been noted on the reverse side of this card.
1. To consider and approve an Agreement and Plan of Reorganization between Cohen & Steers Realty Income Fund, Inc. ("Realty Income Fund") and Cohen & Steers Total Return Realty Fund, Inc. (the "Fund"), and the transactions contemplated thereby, including (a) the transfer of all of the assets and liabilities of Realty Income Fund to the Fund in exchange for shares of the Fund (the "RFI Shares"); (b) the distribution of the RFI Shares to the Stockholders of Realty Income Fund in connection with the liquidation of Realty Income Fund; and (c) the subsequent dissolution of Realty Income Fund.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. Election of Director. For the With-
Nominee hold
Martin Cohen
[ ] [ ]
|
3. To transact such other business as may properly come before the meeting.
The shares of common stock represented by the Proxy will be voted in accordance with the specifications made above. With respect to proposal one, if no specifications are made, such shares will be treated as shares that are present but which have not been voted. For this reason, such shares will have the effect of a "no" vote for purposes of obtaining the requisite approval of proposal one. With respect to proposal two, if no specifications are made, such shares will be voted FOR the election of the nominee for Director.
Appendix 2
COHEN & STEERS REALTY INCOME FUND, INC.
757 Third Avenue
New York, New York 10017
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Revoking any such prior appointments, the undersigned appoints Martin Cohen and Robert H. Steers (or, if only one shall act, then that one) proxies with the power of substitution to vote all the common stock of Cohen & Steers Realty Income Fund, Inc. (the 'Fund') registered in the name of the undersigned at the Annual Meeting of Stockholders to be held at the Hotel Inter-Continental New York, 111 East 48th Street, New York, New York 10017 on May 15, 2001 at 9:30 a.m., and at any adjournments thereof.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS? ---------------------------------- ---------------------------------------- ---------------------------------- ---------------------------------------- ---------------------------------- ---------------------------------------- |
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
Mark box at right if an address change [ ] or comment has been noted on the reverse side of this card.
1. To consider and approve an Agreement and Plan of Reorganization between Cohen & Steers Realty Income Fund, Inc. (the "Fund") and Cohen & Steers Total Return Realty Fund, Inc. ("Total Return Realty Fund"), and the transactions contemplated thereby, including (a) the transfer of all of the assets and liabilities of the Fund to "Total Return Realty Fund" in exchange for shares of "Total Return Realty Fund" (the "RFI Shares"); (b) the distribution of the RFI Shares to the Stockholders of the Fund in connection with the liquidation of the Fund; and (c) the subsequent dissolution of the Fund.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. Election of Director. For the With-
Nominee hold
Martin Cohen
[ ] [ ]
|
3. To transact such other business as may properly come before the meeting.
The shares of common stock represented by the Proxy will be voted in accordance with the specifications made above. If no specifications are made, such shares will be voted FOR proposal one and FOR the election of the nominee for Director.
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION.
It is the Registrant's policy to indemnify its directors, officers, employees and other agents to the maximum extent permitted by Section 2-418 of the General Corporation Law of the State of Maryland as set forth in Article EIGHTH of Registrant's Articles of Incorporation, and Article VIII, Section 1, of the Registrant's By-Laws. The liability of the Registrant's directors and officers is dealt with in Article EIGHTH of Registrant's Articles of Incorporation. The liability of Cohen & Steers Capital Management, Inc., the Registrant's Investment Adviser (the 'Adviser'), for any loss suffered by the Registrant or its Stockholders is set forth in Section 5 of the Investment Advisory Agreement.
ITEM 16. EXHIBITS.
(1) Articles of Incorporation*
(2) By-Laws*
(3) [Not applicable]
(4) Agreement and Plan of Reorganization, dated March 30, 2001 between Cohen & Steers Realty Income Fund, Inc. and Cohen & Steers Total Return Realty Fund, Inc.*
(5) The rights of security holders are defined in the Registrant's Articles of Incorporation (Article FIFTH and Article SEVENTH, Sections (b) and (c)) and the Registrant's By-Laws (Article II and Article VI).
(6)(a) Investment Advisory Agreement, dated September 15, 1993, between Cohen & Steers Capital Management, Inc. and Cohen & Steers Total Return Realty Fund, Inc. (filed herewith)
(b) Form of Administration Agreement, dated April , 2001 between State
Street Bank and Trust Company and Cohen & Steers Total Return Realty Fund.
(filed herewith)
(7) [Not applicable]
(8) [Not applicable]
(9) Custodian Agreement and Transfer Agency Services Agreement (filed herewith)
(10) [Not applicable]
(11) (a) Opinion of Simpson Thacher & Bartlett (filed herewith)
(b) Opinion of Venable, Baetjer and Howard, LLP (filed herewith)
(12) [Not applicable]
(13) [Not applicable]
(14) Consent of PricewaterhouseCoopers LLP (filed herewith)
(15) [Not applicable]
(16) Powers of Attorney (filed herewith)
* Filed previously.
ITEM 17. UNDERTAKINGS.
(1) The undersigned Registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is part of this registration statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, as amended (the '1933 Act'), the reoffering prospectus will contain the information called for by the applicable registration form for reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed under paragraph (1), above, will be filed as part of an amendment to the registration statement and will not be used until the amendment is effective, and that, in determining any liability under the 1933 Act, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them.
II-1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York and State of New York on the 2nd day of April, 2001.
COHEN & STEERS TOTAL RETURN REALTY FUND,
INC.
Registrant
By: /S/ ROBERT H. STEERS
....................................
ROBERT H. STEERS
CHAIRMAN & SECRETARY
|
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ MARTIN COHEN* President, Treasurer and Director April 2, 2001
.........................................
(MARTIN COHEN)
/s/ ROBERT H. STEERS* Director, Chairman and Secretary April 2, 2001
.........................................
(ROBERT H. STEERS)
/s/ GREGORY C. CLARK* Director April 2, 2001
.........................................
(GREGORY C. CLARK)
/s/ GEORGE GROSSMAN* Director April 2, 2001
.........................................
(GEORGE GROSSMAN)
/s/ WILLARD H. SMITH JR.* Director April 2, 2001
.........................................
(WILLARD H. SMITH JR.)
*By: Power-of-Attorney
/s/ LAWRENCE B. STOLLER Attorney-in-Fact April 2, 2001
.........................................
(LAWRENCE B. STOLLER)
|
II-2
STATEMENT OF DIFFERENCES
The registered trademark symbol shall be expressed as............... 'r' The service mark symbol shall be expressed as....................... 'sm' The dagger symbol shall be expressed as............................. 'D' |
INVESTMENT ADVISORY AGREEMENT
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
757 Third Avenue
New York, New York 10017
September , 1993
Cohen & Steers Capital
Management, Inc.
757 Third Avenue
New York, New York 10017
Dear Sirs:
We, the undersigned Cohen & Steers Total Return Realty Fund, Inc., herewith confirm our agreement with you as follows:
1. We are a closed-end, non-diversified management investment company registered under the Investment Company Act of 1940 (the "Act"). We propose to engage in the business of investing and reinvesting our assets in securities of the type and in accordance with the limitations specified in our Articles of Incorporation, By-Laws, Registration Statement filed with the Securities and Exchange Commission under the Securities Act of 1933 and the Act, including any representations made in our prospectus, all in such manner and to such extent as may from time to time be authorized by our Board of Directors. We enclose copies of the documents listed above and will from time to time furnish you with any amendments thereof.
2. We hereby employ you to manage the investment and reinvestment of our assets as above specified, and, without
limiting the generality of the foregoing, to provide management and other services specified below:
(a) You will make decisions with respect to all purchases and sales of our portfolio securities. To carry out such decisions, you are hereby authorized, as our agent and attorney-in-fact, for our account and at our risk and in our name, to place orders for the investment and reinvestment of our assets. In all purchases, sales and other transactions in our portfolio securities you are authorized to exercise full discretion and act for us in the same manner and with the same force and effect as we might or could do with respect to such purchases, sales or other transactions, as well as with respect to all other things necessary or incidental to the furtherance or conduct of such purchases, sale or other transactions.
(b) You will report to our Board of Directors at each meeting thereof all changes in our portfolio since the prior report, and will also keep us in touch with important developments affecting our portfolio and on your own initiative will furnish us from time to time with such information as you may believe appropriate for this purpose or as we reasonably may request. You will also furnish us with such statistical and analytical information with respect to our portfolio securities as you may believe appropriate or as we reasonably may request. In making such purchases and sales of our portfolio securities, you will bear in mind the policies set from time to time by our
Board of Directors as well as the limitations imposed by our Articles of Incorporation and in our Registration Statement under the Act and the Securities Act of 1933, and the limitations in the Act and of the Internal Revenue Code of 1986 in respect of regulated investment companies.
(c) It is understood that you will from time to time employ or associate with yourselves such persons as you believe to be particularly fitted to assist you in the execution of your duties hereunder, the cost of performance of such duties to be borne and paid by you. No obligation may be incurred on our behalf in any such respect. During the continuance of this agreement at our request you will provide us persons satisfactory to our Board of Directors to serve as our officers. You or your affiliates will also provide persons, who may be our officers, to render such clerical, accounting and other services to us as we may from time to time request of you. Such personnel may be employees of you or your affiliates. We will pay to you or your affiliates the cost of such personnel for rendering such services to us at such rates as shall from time to time be agreed upon between us, provided that all time devoted to the investment or reinvestment of our portfolio securities shall be for your account. Nothing contained herein shall be construed to restrict our right to hire our own employees or to contract for services to be performed by third parties.
3. We propose to retain the services of an administrator, which shall be a firm acceptable to you, to administer all aspects of the Fund's operations except those which are your responsibility pursuant to this agreement. We will bear the cost of and pay the fees of the administrator. The Fund's initial administrator will be Middlesex Administrators L.P.
4. We hereby confirm that, subject to the foregoing we shall be
responsible and hereby assume the obligation for payment of all our other
expenses, including: (a) payment of the fee payable to you under paragraph
6 hereof; (b) brokerage and commission expenses; (c) Federal, state and local
taxes, including issue and transfer taxes incurred by or levied to use (d)
interest charges on borrowing; (e) our organizational and offering expenses,
whether or not advanced by you; (f) the cost of personnel providing services
to us, as provided in paragraph 2 (c) above; (g) fees and expenses of
registering our shares under the appropriate Federal securities laws and of
qualifying our shares under applicable state securities laws; (h) fees and
expenses of listing and maintaining the listing of our shares on any national
securities exchange; (i) expenses of printing and distributing reports to
stockholders; (j) costs of proxy solicitation; (k) charges and expenses of our
administrator, custodian, and registrar, transfer and dividend disbursing agent;
(l) compensation of our officers, Directors and employees who do not devote any
part of their time to your affairs or the affairs
of your affiliates other than us; (m) legal and auditing expenses; (n) the cost of stock certificates representing shares of our stock; and (o) costs of stationery and supplies.
5. We shall expect of you, and you will give us the benefit of, your best judgment and efforts in rendering these services to us, and we agree as an inducement to your undertaking these services that you shall not be liable hereunder for any mistake of judgment or in any event whatsoever, except for lack of good faith, provided that nothing herein shall be deemed to protect, or purport to protect, you against any liability to us or to our security holders to which you would otherwise be subject by reason of willful misfeasance, bad faith or grows negligence in the performance of your duties hereunder, or by reason of your reckless disregard of your obligations and duties hereunder.
6. In consideration of the foregoing we will pay you a monthly fee in an amount equal to 1/12th of 0.70% of our average weekly assets during the month. For purposes of the calculation of such fee, average weekly net assets shall be determined on the basis of our average net assets for each weekly period (ending on Thursday) ending during the month. The net assets for each weekly period are determined by averaging the net assets on the Thursday of such weekly period with the net assets on the Thursday of the immediately proceeding weekly period. When a Thursday is not a business day for us, then the calculation
will be based on our net assets on the business day immediately preceding such Thursday. Such fee shall be payable in arrears on the last day of each calendar month for services performed hereunder during such month. If our initial registration statement is declared effective by the Securities and Exchange Commission after the beginning of a month or this agreement terminates prior to the end of a month, such fee shall be prorated according to the proportion which such portion of the month bears to the full month.
7. This agreement shall become effective on the date on which our pending Registration Statement on Form N-2 relating to our shares becomes effective and shall continue in effect until December 31, 1994 and thereafter for successive twelve-month periods (computed from each January 1), provided that such continuance is specifically approved at least annually by our Board of Directors or by majority vote of the holders of our outstanding voting securities (as defined in the Act), and, in either case, by a majority of our Board of Directors who are not interested persons, as defined in the Act, of any party to this agreement (other than as Directors of our Corporation) provided further, however, that if the continuation of this agreement is not approved, you may continue to render the services described herein in the manner and to the extent permitted by the Act and the rules and regulations thereunder. Upon the effectiveness of this agreement, it shall supersede all previous agreements
between us covering the subject matter hereof. This agreement may be terminated at any time, without the payment of any penalty, by vote of a majority of our outstanding voting securities (as so defined), or by a vote of a majority of our entire Board of Directors on sixty days' written notice to you, or by you on sixty days' written notice to us.
8. This agreement may not be transferred, assigned, sold or in any manner hypothecated or pledged by you and this agreement shall terminate automatically in the event of any such transfer, assignment, sale, hypothecation or pledge by you. The terms "transfer," "assignment" and "sale" as used in this paragraph shall have the meanings ascribed hereto by governing law and any interpretation thereof contained in rules or regulations promulgated by the Securities and Exchange Commission thereunder.
9. Except to the extent necessary to perform your obligations hereunder, nothing herein shall be deemed to limit or restrict your right, or the right of any of your officers, director or employees who may also be a Director, officer or employee of ours, or persons otherwise affiliated with us within the meaning of the Act) to engage in any other business or to devote time and attention to the management or other aspects of any other business, whether of a similar or dissimilar nature, or to render services of any kind to any other trust, corporation, firm, individual or association.
If the foregoing is in accordance with your understanding, will you kindly so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
COHEN & STEERS TOTAL RETURN
REALTY FUND, INC.
By__________________________
Chairman
Accepted:
COHEN & STEERS CAPITAL
MANAGEMENT, INC.
By__________________________
President
FORM OF ADMINISTRATION AGREEMENT
Agreement dated as of ________, 2001 by and between State Street Bank and Trust Company, a Massachusetts trust company (the "Administrator"), and the Cohen & Steers Funds listed and defined in Exhibit A (the "Funds").
WHEREAS, Cohen & Steers Realty Shares, Inc., Cohen & Steers Equity Income Fund, Inc., Cohen & Steers Special Equity Fund, Inc., and Cohen & Steers Institutional Realty Shares, Inc. are registered as open-end management investment companies under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, Cohen & Steers Realty Income Fund, Inc. and the Cohen & Steers Total Return Realty Fund Inc. are registered as closed end management investment companies under the 1940 Act; and
WHEREAS, the Funds desire to retain the Administrator to furnish certain administrative services to the Funds, and the Administrator is willing to furnish such services, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto agree as follows:
1. APPOINTMENT OF ADMINISTRATOR
The Funds hereby appoint the Administrator to act as administrator with respect to the Funds for purposes of providing certain administrative services for the period and on the terms set forth in this Agreement. The Administrator accepts such appointment and agrees to render the services stated herein.
In the event that the Funds wish to retain the Administrator to act as administrator hereunder with respect to additional portfolios or funds ("Additional Funds") hereinafter established by the Funds or by other management investment companies that are advised by Cohen & Steers Capital Management Inc., the Administrator shall be notified in writing by the Additional Fund. Upon written acceptance by the Administrator, such Additional Fund shall become subject to the provisions of this Agreement to the same extent as the existing Funds, except to the extent that such provisions (including those relating to the compensation and expenses payable by the Funds) may be modified with respect to each Additional Fund in writing by the Additional Fund and the Administrator at the time of the addition of the Additional Fund.
2. DELIVERY OF DOCUMENTS
Each Fund will promptly deliver to the Administrator copies of each of the following documents and all future amendments and supplements, if any:
a. The Fund's Articles of Incorporation and by-laws;
b. The Fund's currently effective registration statement under the Securities Act of 1933, as amended (the "1933 Act"), and the 1940 Act and the Fund's Prospectus(es) and Statement(s) of Additional Information relating to all portfolios and all amendments and supplements thereto as in effect from time to time;
c. Certified copies of the resolutions of the Board of Directors of the Fund (the "Board") authorizing (1) the Fund to enter into this Agreement and (2) certain individuals on behalf of the Fund to (a) give instructions to the Administrator pursuant to this Agreement and (b) sign checks and pay expenses;
d. A copy of the investment advisory agreement between the Fund and its investment adviser; and
e. Such other certificates, documents or opinions which the Administrator may, in its reasonable discretion, deem necessary or appropriate in the proper performance of its duties.
3. REPRESENTATIONS AND WARRANTIES OF THE ADMINISTRATOR
The Administrator represents and warrants to each Fund that:
a. It is a Massachusetts trust company, duly organized and existing under the laws of The Commonwealth of Massachusetts;
b. It has the corporate power and authority to carry on its business in The Commonwealth of Massachusetts;
c. All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement;
d. No legal or administrative proceedings have been instituted or threatened which would impair the Administrator's ability to perform its duties and obligations under this Agreement; and
e. Its entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of the Administrator or any law or regulation applicable to it.
4. REPRESENTATIONS AND WARRANTIES OF EACH FUND
Each Fund severally represents and warrants to the Administrator that:
a. It is a corporation, duly organized, existing and in good standing under the laws of the State of Maryland;
b. It has the corporate power and authority under applicable laws and by its charter and by-laws to enter into and perform this Agreement;
c. All requisite proceedings have been taken to authorize it to enter into and perform this Agreement;
d. It is an investment company properly registered under the 1940 Act;
e. A registration statement under the 1933 Act and the 1940 Act has been filed and will be effective and remain effective during the term of this Agreement. Each Fund also warrants to the Administrator that as of the effective date of this Agreement, all necessary filings under the securities laws of the states in which the Fund offers or sells its shares have been made;
f. No legal or administrative proceedings have been instituted or threatened which would impair the Fund's ability to perform its duties and obligations under this Agreement;
g. Its entrance into this Agreement will not cause a material breach or be in material conflict with any other agreement or obligation of the Fund or any law or regulation applicable to it; and
h. As of the close of business on the date of this Agreement, the Fund is authorized to issue shares of capital stock, and it will initially offer shares, in the authorized amounts as set forth in Schedule A to this Agreement.
5. ADMINISTRATION SERVICES
The Administrator shall provide the following services, in each case, subject to the control, supervision and direction of the respective Funds and the review and comment by such Fund's auditors and legal counsel and in accordance with procedures which may be established from time to time between the Funds and the Administrator:
a. Oversee the determination and publication of the Fund's net asset value in accordance with the Fund's policy as adopted from time to time by the Board;
b. Oversee the maintenance by the Fund's custodian of certain books and records of the Fund as required under Rule 31a-1(b) of the 1940 Act;
c. Review calculation, submit for approval by officers of the Fund and arrange for payment of the Fund's expenses;
d. Prepare for review and approval by officers of the Fund financial information for the Fund's semi-annual and annual reports, proxy statements and other communications required or otherwise to be sent to Fund shareholders, and arrange for the printing and dissemination of such reports and communications to shareholders;
e. Prepare for review by an officer of and legal counsel for the Fund the Fund's periodic financial reports required to be filed with the Securities and Exchange Commission ("SEC") on Form N-SAR and financial information required by Form N-1A or Form N-2 and such other reports, forms or filings as may be mutually agreed upon;
f. Prepare reports relating to the business and affairs of the Fund as may be mutually agreed upon and not otherwise prepared by the Fund's investment adviser, custodian, legal counsel or independent accountants;
g. Make such reports and recommendations to the Board concerning the performance of the independent accountants as the Board may reasonably request;
h. Make such reports and recommendations to the Board concerning the performance and fees of the Fund's custodian and transfer and dividend disbursing agent ("Transfer Agent") as the Board may reasonably request or deems appropriate;
i. Oversee and review calculations of fees paid to the Fund's investment adviser, custodian and Transfer Agent;
j. Consult with the Fund's officers, independent accountants, legal counsel, custodian and Transfer Agent in establishing the accounting policies of the Fund;
k. Respond to, or refer to the Fund's officers or Transfer Agent, shareholder inquiries relating to the Fund;
l. Provide periodic testing of portfolios to assist the Fund's investment adviser in complying with Internal Revenue Code mandatory qualification requirements, the requirements of the 1940 Act and Fund prospectus limitations as may be mutually agreed upon;
m. Review and provide assistance on shareholder communications;
n. Maintain copies of the Fund's charter and by-laws;
o. File annual and semi-annual shareholder reports with the appropriate regulatory agencies; review text of "President's letters" to shareholders and "Management's Discussion of Fund Performance" (which shall also be subject to review by the Fund's legal counsel);
p. Maintain continuing awareness of significant emerging regulatory and legislative developments which may affect the Fund, update the Board and the investment adviser on those developments and provide related planning assistance where requested or appropriate;
q. Develop or assist in developing guidelines and procedures to improve overall compliance by the Fund and its various agents;
r. Counsel and assist the Fund in the handling of routine regulatory examinations and work closely with the Fund's legal counsel in response to any non-routine regulatory matters;
s. Prepare and file with the SEC Rule 24f-2 notices; and
t. Perform Blue Sky services pursuant to the specific instructions of the Fund and as detailed in Schedule B to this Agreement.
The Administrator shall provide the office facilities and the personnel required by it to perform the services contemplated herein.
6. FEES; EXPENSES; EXPENSE REIMBURSEMENT
The Administrator shall receive from the Funds such compensation for the Administrator's services provided pursuant to this Agreement as may be agreed to from time to time in a written fee schedule approved by the parties and initially set forth in the Fee Schedule to this Agreement. The fees are accrued daily and billed monthly and shall be due and payable upon receipt of the invoice. Upon the termination of this Agreement
before the end of any month, the fee for the part of the month before such termination shall be prorated according to the proportion which such part bears to the full monthly period and shall be payable upon the date of termination of this Agreement. In addition, the Funds shall reimburse the Administrator for its out-of-pocket costs incurred in connection with this Agreement.
The Funds agree promptly to reimburse the Administrator for any equipment and supplies specially ordered by or for the Funds through the Administrator and for any other expenses not contemplated by this Agreement that the Administrator may incur on the Funds' behalf at the Funds' request or with the Funds' consent.
Each Fund will bear all expenses that are incurred in its operation and not specifically assumed by the Administrator. Expenses to be borne by the Funds, include, but are not limited to: organizational expenses; cost of services of independent accountants and outside legal and tax counsel (including such counsel's review of a Fund's registration statement, proxy materials, federal and state tax qualification as a regulated investment company and other reports and materials prepared by the Administrator under this Agreement); cost of any services contracted for by the Funds directly from parties other than the Administrator; cost of trading operations and brokerage fees, commissions and transfer taxes in connection with the purchase and sale of securities for the Funds; investment advisory fees; taxes, insurance premiums and other fees and expenses applicable to its operation; costs incidental to any meetings of shareholders including, but not limited to, legal and accounting fees, proxy filing fees and the costs of preparation, printing and mailing of any proxy materials; costs incidental to Board meetings, including fees and expenses of Board members; the salary and expenses of any officer, director\trustee or employee of the Funds; costs incidental to the preparation, printing and distribution of the Funds' registration statements and any amendments thereto and shareholder reports; cost of typesetting and printing of prospectuses; cost of preparation and filing of the Funds' tax returns, Form N-1A or N-2 and Form N-SAR, and all notices, registrations and amendments associated with applicable federal and state tax and securities laws; all applicable registration fees and filing fees required under federal and state securities laws; fidelity bond and directors' and officers' liability insurance; and cost of independent pricing services used in computing each Fund's net asset value.
The Administrator is authorized to and may employ or associate with such person or persons as the Administrator may deem desirable to assist it in performing its duties under this Agreement; provided, however, that the compensation of such person or persons shall be paid by the Administrator and that the Administrator shall be as fully responsible to the Funds for the acts and omissions of any such person or persons as it is for its own acts and omissions.
7. INSTRUCTIONS AND ADVICE
At any time, the Administrator may apply to any officer of the respective Fund for instructions and may consult with its own legal counsel or outside counsel for the Fund or the independent accountants for the Fund at the expense of the Fund, with respect to any matter arising in connection with the services to be performed by the Administrator under this Agreement. The Administrator shall not be liable, and shall be indemnified by the Funds, for any action taken or omitted by it in good faith in reliance upon any such instructions or advice or upon any paper or document believed by it to be genuine and to have been signed by the proper person or persons. The Administrator shall not be held to have notice of any change of authority of any person until receipt of written notice thereof from the Funds. Nothing in this paragraph shall be construed as imposing upon the Administrator any obligation to seek such instructions or advice, or to act in accordance with such advice when received.
8. LIMITATION OF LIABILITY AND INDEMNIFICATION
The Administrator shall be responsible for the performance of only such duties as are set forth in this Agreement and, except as otherwise provided under Section 6, shall have no responsibility for the actions or activities of any other party, including other service providers. The Administrator shall have no liability for any error of judgment or mistake of law or for any loss or damage resulting from the performance or nonperformance of its duties hereunder unless solely caused by or resulting from the gross negligence or willful misconduct of the Administrator, its officers or employees. The Administrator shall not be liable for any special, indirect, incidental, or consequential damages of any kind whatsoever (including, without limitation, attorneys' fees) under any provision of this Agreement or for any such damages arising out of any act or failure to act hereunder. In any event, the Administrator's cumulative liability for each calendar year (a "Liability Period") with respect to the Funds under this Agreement regardless of the form of action or legal theory shall be limited to its total annual compensation earned with respect to the Funds and fees payable hereunder during the preceding Compensation Period, as defined herein, for any liability or loss suffered by any Fund including, but not limited to, any liability relating to qualification of any Fund as a regulated investment company or any liability relating to a Fund's compliance with any federal or state tax or securities statute, regulation or ruling during such Liability Period. "Compensation Period" shall mean the calendar year ending immediately prior to each Liability Period in which the event(s) giving rise to the Administrator's liability for that period have occurred. Notwithstanding the foregoing, the Compensation Period for purposes of calculating the annual cumulative liability of the Administrator for the Liability Period commencing on the date of Agreement and terminating on December 31, 2001 shall be the date of this Agreement through December 31, 2001.
The Administrator shall not be responsible or liable for any failure or delay in performance of its obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its control, including without limitation, work
stoppage, power or other mechanical failure, computer virus, natural disaster, governmental action or communication disruption.
Each Fund shall indemnify and hold the Administrator harmless from all loss, cost, damage and expense, including reasonable fees and expenses for counsel, incurred by the Administrator resulting from any claim, demand, action or suit in connection with the Administrator's acceptance of this Agreement, any action or omission by it in the performance of its duties hereunder, or as a result of acting upon any instructions reasonably believed by it to have been duly authorized by the respective Fund, provided that this indemnification shall not apply to actions or omissions of the Administrator, its officers or employees in cases of its or their own gross negligence or willful misconduct.
The indemnification contained herein shall survive the termination of this Agreement.
9. CONFIDENTIALITY
The Administrator agrees that, except as otherwise required by law or in connection with any required disclosure to a banking or other regulatory authority, it will keep confidential all records and information in its possession relating to the Funds or their shareholders or shareholder accounts and will not disclose the same to any person except at the request or with the written consent of the respective Fund.
10. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS; RECORDS
The Funds assume full responsibility for complying with all securities, tax, commodities and other laws, rules and regulations applicable to it.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Administrator agrees that all records which it maintains for the Funds shall at all times remain the property of the respective Funds, shall be readily accessible during normal business hours, and shall be promptly surrendered upon the termination of the Agreement or otherwise on written request. The Administrator further agrees that all records which it maintains for the Funds pursuant to Rule 31a-1 under the 1940 Act will be preserved for the periods prescribed by Rule 31a-2 under the 1940 Act unless any such records are earlier surrendered as provided above. Records shall be surrendered in usable machine-readable form.
11. SERVICES NOT EXCLUSIVE
The services of the Administrator to the Funds are not to be deemed exclusive, and the Administrator shall be free to render similar services to others. The Administrator shall be deemed to be an independent contractor and shall, unless otherwise
expressly provided herein or authorized by the Funds from time to time, have no authority to act or represent the Funds in any way or otherwise be deemed an agent of the Funds.
12. TERM, TERMINATION AND AMENDMENT
(a) This Agreement shall become effective on the date of its execution and shall remain in full force and effect for a period of two years from the effective date and shall automatically continue in full force and effect after such initial term unless either party terminates this Agreement by written notice to the other party at least sixty (60) days prior to the expiration of the initial term.
(b) Either party may terminate this Agreement at any time after the initial term upon at least sixty (60) days' prior written notice to the other party. Termination of this Agreement with respect to any given Fund shall in no way affect the continued validity of this Agreement with respect to any other Fund.
(c) Upon termination of this Agreement, the Funds shall pay to the Administrator such compensation and any reimbursable expenses as may be due under the terms hereof as of the date of such termination, including reasonable out-of-pocket expenses associated with such termination.
(d) This Agreement may be modified or amended from time to time by mutual written agreement of the parties hereto.
13. NOTICES
Any notice or other communication authorized or required by
this Agreement to be given to either party shall be in writing and deemed to
have been given when delivered in person or by confirmed facsimile, or posted by
certified mail, return receipt requested, to the following address (or such
other address as a party may specify by written notice to the other): if to the
Funds: c/o Cohen & Steers Capital Management Inc., Attn: Adam Derechin, Senior
Vice President, fax: (212) 750-0713; if to the Administrator: State Street Bank
and Trust Company, 2 Avenue de Lafayette, Boston, Massachusetts 02111, Attn:
Fund Administration Legal Department, fax: 617-662-3805.
14. NON-ASSIGNABILITY
This Agreement shall not be assigned by any party hereto without the prior consent in writing of the other party, except that the Administrator may assign this Agreement to a successor of all or a substantial portion of its business, or to a party controlling, controlled by or under common control with the Administrator.
15. SUCCESSORS
This Agreement shall be binding on and shall inure to the benefit of the Funds and the Administrator and their respective successors and permitted assigns.
16. ENTIRE AGREEMENT
This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof and supersedes all previous representations, warranties or commitments regarding the services to be performed hereunder whether oral or in writing.
17. WAIVER
The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver nor shall it deprive such party of the right thereafter to insist upon strict adherence to that term or any term of this Agreement. Any waiver must be in writing signed by the waiving party.
18. SEVERABILITY
If any provision of this Agreement is invalid or unenforceable, the balance of the Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance it shall nevertheless remain applicable to all other persons and circumstances.
19. GOVERNING LAW
This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of The Commonwealth of Massachusetts.
20. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, exhibits, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below as of the date first written above.
Cohen & Steers Realty Income Fund, Inc. Cohen & Steers Realty Shares, Inc. Cohen & Steers Equity Income Fund, Inc. Cohen & Steers Special Equity Fund, Inc. Cohen & Steers Institutional Realty Shares, Inc. Cohen & Steers Total Return Realty Fund Inc.
STATE STREET BANK AND TRUST COMPANY
ADMINISTRATION AGREEMENT
SCHEDULE A
Listing of Investment Funds and Authorized Shares
Fund Authorized Shares
---- -----------------
Cohen & Steers Realty Shares, Inc.
Cohen & Steers Equity Income Fund, Inc.
Cohen & Steers Special Equity Fund, Inc.
Cohen & Steers Institutional Realty Shares, Inc.
Cohen & Steers Realty Income Fund, Inc.
Cohen & Steers Total Return Realty Fund Inc.
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ADMINISTRATION AGREEMENT
SCHEDULE B
Notice Filing with
State Securities Administrators
At the specific direction of the Funds, the Administrator will prepare required documentation and make Notice Filings in accordance with the securities laws of each jurisdiction in which Funds shares are to be offered or sold pursuant to instructions given to the Administrator by the Funds.
The Funds shall be solely responsible for the determination (i) of those jurisdictions in which Notice Filings are to be submitted and (ii) the number of Fund shares to be permitted to be sold in each such jurisdiction. In the event that the Administrator becomes aware of (a) the sale of Fund shares in a jurisdiction in which no Notice Filing has been made or (b) the sale of Fund shares in excess of the number of Fund shares permitted to be sold in such jurisdiction, the Administrator shall report such information to the Funds, and it shall be the Fund's responsibility to determine appropriate corrective action and instruct the Administrator with respect thereto.
The Blue Sky services shall consist of the following:
1. Filing of Fund's Initial Notice Filings, as directed by each Fund;
2. Filing of Fund's renewals and amendments as required;
3. Filing of amendments to the Fund's registration statement where required;
4. Filing Fund sales reports where required;
5. Payment at the expense of the Fund of all Fund Notice Filing fees;
6. Filing the Prospectuses and Statements of Additional Information and any amendments or supplements thereto where required;
7. Filing of annual reports and proxy statements where required; and
8. The performance of such additional services as the Administrator and the Funds may agree upon in writing.
Unless otherwise specified in writing by the Administrator, Blue Sky services by the Administrator shall not include determining the availability of exemptions under a jurisdiction's blue sky law. Any such determination shall be made by a Fund or its legal counsel. In connection with the services described herein, each Fund shall issue in favor of the Administrator a power of attorney to submit Notice Filings on behalf of such Fund, which power of attorney shall be substantially in the form of Exhibit I attached hereto.
EXHIBIT I
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, as of October __, 2000, that Cohen & Steers Equity Income Fund, Inc., Cohen & Steers Special Equity Fund, Inc., Cohen & Steers Institutional Realty Shares, Inc., Cohen & Steers Realty Income Fund, Inc. Cohen & Steers Realty Shares, Inc. and Cohen & Steers Total Return Realty Fund Inc. (each, a "Fund") with principal offices at 757 Third Avenue, New York, NY 10017-2013, makes, constitutes, and appoints STATE STREET BANK AND TRUST COMPANY (the "Administrator") with principal offices at 225 Franklin Street, Boston, Massachusetts its lawful attorney-in-fact for it to do as if it were itself acting, the following:
1. NOTICE FILINGS FOR FUND SHARES. The Power to submit notice filings for the Funds in each jurisdiction in which the Funds' shares are offered or sold and in connection therewith the power to prepare, execute, and deliver and file any and all the Funds' applications including without limitation, applications to provide notice for the Funds' shares, consents, including consents to service of process, reports, including without limitation, all periodic reports, or other documents and instruments now or hereafter required or appropriate in the judgment of the Bank in connection with the notice filings of the Funds' shares.
2. CHECKS. The power to draw, endorse, and deposit checks in the name of the Funds in connection with the notice filings of the Funds' shares with state securities administrators.
3. AUTHORIZED SIGNERS. Pursuant to this Limited Power of Attorney, individuals holding the titles of Officer or Blue Sky Manager at the Bank shall have authority to act on behalf of the Funds with respect to items 1 and 2 above.
The execution of this limited power of attorney shall be deemed coupled with an interest and shall be revocable only upon receipt by Bank of such termination of authority. Nothing herein shall be construed to constitute the appointment of the Bank as or otherwise authorize the Bank to act as an officer, director or employee of the Funds.
IN WITNESS WHEREOF, each of the undersigned Funds severally have caused this agreement to be executed in its name and on its behalf by and through its duly authorized officer, as of the date first written above.
Cohen & Steers Equity Income Fund, Inc.
Cohen & Steers Special Equity Fund, Inc.
Cohen & Steers Institutional Realty Shares, Inc.
Cohen & Steers Realty Income Fund, Inc.
Cohen & Steers Realty Shares, Inc.
Cohen & Steers Total Return Realty Fund Inc.
Subscribed and sworn to before me
this ____ day of ________, 2001
Notary Public
EXHIBIT A
The above registered investment companies are each referred to herein as a "Fund" and are collectively referred to herein as the "Funds."
Approved as of , 2001
EXHIBIT 99.9
Master Custodian Agreement
This Agreement is made as of March 9, 2001 by and among each investment company identified on Appendix A hereto (each such investment company and each investment company made subject to this Agreement in accordance with Section 18.5 below, shall hereinafter be referred to as (the "Fund"), and State Street Bank and Trust Company, a Massachusetts trust company (the "Custodian"),
Witnesseth:
Whereas, each Fund may or may not be authorized to issue shares of beneficial interest in separate series ("Shares"), with each such series representing interests in a separate portfolio of securities and other assets;
Whereas, each Fund so authorized intends that this Agreement be applicable to each of its series set forth on Appendix A hereto (such series together with all other series subsequently established by the Fund and made subject to this Agreement in accordance with Section 18.6 below, shall hereinafter be referred to as the "Portfolio(s)").
Whereas, each Fund not so authorized intends that this Agreement be applicable to it and all references hereinafter to one or more "Portfolio(s)" shall be deemed to refer to such Fund(s); and
Now, Therefore, in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows:
Section 1. Employment of Custodian and Property to be Held by It
Each Fund hereby employs the Custodian as a custodian of assets of the Portfolios, including securities which the Fund, on behalf of the applicable Portfolio, desires to be held in places within the United States ("domestic securities") and securities it desires to be held outside the United States ("foreign securities"). The Custodian shall not be responsible for any property of a Portfolio which is not received by it or which is delivered out in accordance with Proper Instructions including, without limitation, Portfolio property (i) held by brokers, private bankers or other entities on behalf of the Portfolio (each a "Local Agent"), (ii) held by Special Sub-Custodians (as such term is defined in Section 5 hereof), (iii) held by entities which have advanced monies to or on behalf of the Portfolio and which have received Portfolio property as security for such advance(s) (each a "Pledgee"), or (iv) delivered or otherwise removed from the custody of the Custodian pursuant to Special Instructions (as such term is defined in Section 7 hereof). With respect to uncertificated shares (the "Underlying Shares") of registered "investment companies" (as defined in Section 3(a)(1) of the Investment Company Act of 1940, as amended (the "1940 Act")), whether in the same "group of investment companies" (as defined in Section 12(d)(1)(G)(ii) of the 1940 Act) or otherwise, including pursuant to Section 12(d)(1)(F) of the 1940 Act (hereinafter sometimes referred to as the "Underlying Portfolios") the holding of confirmation statements that identify the shares as being recorded in the Custodian's name on behalf of the Portfolios will be deemed custody for purposes hereof.
Upon receipt of Proper Instructions, the Custodian shall on behalf of the applicable Portfolio(s) from time to time employ one or more sub-custodians located in the United States, but only in accordance with an applicable vote by the Board of Trustees or the Board of Directors of the Fund (as appropriate, and in each case, the "Board") on behalf of the applicable Portfolio(s), and provided that the Custodian shall have no more or less responsibility or liability to any Fund on account of any actions or omissions of any sub-custodian so employed than any such sub-custodian has to the Custodian. The Custodian may employ as sub-custodian for each Fund's foreign securities on behalf of the applicable Portfolio(s) the foreign banking institutions and foreign securities depositories designated in Schedules A and B hereto, but only in accordance with the applicable provisions of Sections 3 and 4 hereof.
Section 2. Duties of the Custodian with Respect to Property of the Portfolios to be Held in the United States
Section 2.1 Holding Securities. The Custodian shall hold and physically segregate for the account of each Portfolio all non-cash property, to be held by it in the United States, including all domestic securities owned by such Portfolio other than (a) securities which are maintained pursuant to Section 2.8 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the U.S. Department of the Treasury (each, a "U.S. Securities System") and (b) Underlying Shares owned by each Fund which are maintained pursuant to Section 2.10 hereof in an account with State Street Bank and Trust Company or such other entity which may from time to time act as a transfer agent for the Underlying Portfolios and with respect to which the Custodian is provided with Proper Instructions (the "Underlying Transfer Agent").
Section 2.2 Delivery of Securities. The Custodian shall release and deliver domestic securities owned by a Portfolio held by the Custodian, in a U.S. Securities System account of the Custodian or in an account at the Underlying Transfer Agent, only upon receipt of Proper Instructions on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a U.S. Securities System, in accordance with the provisions of Section 2.8 hereof;
4) To the depository agent in connection with tender or other similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of the Portfolio or into the name of any nominee or nominees of the Custodian or into the name or nominee name of any agent appointed pursuant to Section 2.7 or into the name or nominee name of any sub-custodian appointed pursuant to Section 1; or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; provided that, in any such case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Portfolio, to the broker or its clearing agent, against a receipt, for examination in accordance with "street delivery" custom; provided that in any such case, the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Custodian's own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by the Portfolio (a) against receipt of collateral as agreed from time to time by the Fund on behalf of the Portfolio, except that in connection with any loans for which collateral is to be credited to the Custodian's account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or responsible for the delivery of securities owned by the Portfolio prior to the receipt of such collateral or (b) to the lending agent, or the lending agent's custodian, in accordance with written Proper Instructions (which may not provide for the receipt by the Custodian of collateral therefor) agreed upon from time to time by the Custodian and the Fund;
11) For delivery as security in connection with any borrowing by a Fund on behalf of a Portfolio requiring a pledge of assets by the Fund on behalf of such Portfolio;
12) For delivery in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-dealer registered under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The National Association of Securities Dealers, Inc. (the "NASD"), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund on behalf of a Portfolio;
13) For delivery in accordance with the provisions of any agreement among a Fund on behalf of the Portfolio, the Custodian, and a futures commission merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission (the "CFTC") and/or any contract market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Fund on behalf of a Portfolio;
14) Upon the sale or other delivery of such investments (including,
without limitation, to a Special Sub-Custodian), and prior to
receipt of payment therefor, as set forth in written Proper
Instructions (such delivery in advance of payment, along with
payment in advance of delivery made in accordance with Section
2.6(7), as applicable, shall each be referred to herein as a "Free
Trade"), provided that such Proper Instructions shall set forth
(a) the securities of the Portfolio to be delivered and (b) the
person or persons to whom delivery of such securities shall be
made;
15) Upon receipt of instructions from the Fund's transfer agent (the "Transfer Agent") for delivery to such Transfer Agent or to the holders of Shares in connection with distributions in kind, as may be described from time to time in the currently effective prospectus and statement of additional information of the Fund related to the Portfolio (the "Prospectus"), in satisfaction of requests by holders of Shares for repurchase or redemption;
16) In the case of a sale processed through the Underlying Transfer Agent or Underlying Shares, in accordance with Section 2.10 hereof; and
17) For any other purpose, but only upon receipt of Proper
Instructions from the Fund on behalf of the applicable Portfolio
specifying (a) the securities of the Portfolio to be delivered and
(b) the person or persons to whom delivery of such securities
shall be made.
Section 2.3 Registration of Securities. Domestic securities held by the Custodian (other than bearer securities) shall be registered in the name of the Portfolio or in the name of any nominee of a Fund on behalf of the Portfolio or of any nominee of the Custodian which nominee shall be assigned exclusively to the Portfolio, unless the Fund has authorized in writing the appointment of a nominee to be used in common with other registered investment companies having
the same investment advisor as the Portfolio, or in the name or nominee name of any agent appointed pursuant to Section 2.7 or in the name or nominee name of any sub-custodian appointed pursuant to Section 1. All securities accepted by the Custodian on behalf of the Portfolio under the terms of this Agreement shall be in "street name" or other good delivery form. If, however, a Fund directs the Custodian to maintain securities in "street name", the Custodian shall utilize its best efforts only to timely collect income due the Fund on such securities and to notify the Fund on a best efforts basis only of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers.
Section 2.4 Bank Accounts. The Custodian shall open and maintain a separate bank account or accounts in the United States in the name of each Portfolio of each Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Agreement, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Portfolio, other than cash maintained by the Portfolio in a bank account established and used in accordance with Rule 17f-3 under the 1940 Act. Funds held by the Custodian for a Portfolio may be deposited by it to its credit as Custodian in the banking department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; provided, however, that every such bank or trust company shall be qualified to act as a custodian under the 1940 Act and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall on behalf of each applicable Portfolio be approved by vote of a majority of the Board. Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity.
Section 2.5 Collection of Income. Except with respect to Portfolio property released and delivered pursuant to Section 2.2(14) or purchased pursuant to Section 2.6(7), and subject to the provisions of Section 2.3, the Custodian shall collect on a timely basis all income and other payments with respect to registered domestic securities held hereunder to which each Portfolio shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer domestic securities if, on the date of payment by the issuer, such securities are held by the Custodian or its agent thereof and shall credit such income, as collected, to such Portfolio's custodian account. Without limiting the generality of the foregoing, the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. Income due each Portfolio on securities loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of the applicable Fund. The Custodian will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Portfolio is properly entitled.
Section 2.6 Payment of Fund Monies. Upon receipt of Proper Instructions on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts or options on futures contracts for the account of the Portfolio but only (a) against the delivery of such securities or evidence of title to such options, futures contracts or options on futures contracts to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is qualified under the 1940 Act to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Portfolio or in the name of a nominee of the Custodian referred to in Section 2.3 hereof or in proper form for transfer; (b) in the case of a purchase effected through a U.S. Securities System, in accordance with the conditions set forth in Section 2.8 hereof; (c) in the case of a purchase of Underlying Shares, in accordance with the conditions set forth in Section 2.10 hereof; (d) in the case of repurchase agreements entered into between the applicable Fund on behalf of a Portfolio and the Custodian, or another bank, or a broker-dealer which is a member of NASD, (i) against delivery of the securities either in certificate form or through an entry crediting the Custodian's account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the Portfolio of securities owned by the Custodian along with written evidence of the agreement by the Custodian to repurchase such securities from the Portfolio; or (e) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Fund as defined herein;
2) In connection with conversion, exchange or surrender of securities owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued as set forth in
Section 6 hereof;
4) For the payment of any expense or liability incurred by the Portfolio, including but not limited to the following payments for the account of the Portfolio: interest, taxes, management, accounting, transfer agent and legal fees, and operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares declared pursuant to the Fund's articles of incorporation or organization and by-laws or agreement or declaration trust, as applicable, and Prospectus (collectively, "Governing Documents");
6) For payment of the amount of dividends received in respect of securities sold short;
7) Upon the purchase of domestic investments and prior to receipt of such investments, as set forth in written Proper Instructions (such payment in advance of delivery, along with delivery in advance of payment made in accordance with Section 2.2(14), as applicable, shall each be referred to herein as a "Free Trade"), provided that such
Proper Instructions shall also set forth (a) the amount of such payment and (b) the person(s) to whom such payment is made; and
8) For any other purpose, but only upon receipt of Proper
Instructions from the Fund on behalf of the Portfolio specifying
(a) the amount of such payment and (b) the person or persons to
whom such payment is to be made.
Section 2.7 Appointment of Agents. The Custodian may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company which is itself qualified under the 1940 Act to act as a custodian, as its agent to carry out such of the provisions of this Section 2 as the Custodian may from time to time direct; provided, however, that the appointment of any agent shall not relieve the Custodian of its responsibilities or liabilities hereunder. The Underlying Transfer Agent shall not be deemed an agent or subcustodian of the Custodian for purposes of this Section 2.7 or any other provision of this Agreement.
Section 2.8 Deposit of Fund Assets in U.S. Securities Systems. The Custodian may deposit and/or maintain securities owned by a Portfolio in a U.S. Securities System subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S. Securities System provided that such securities are represented in an account of the Custodian in the U.S. Securities System (the "U.S. Securities System Account") which account shall not include any assets of the Custodian other than assets held as a fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the Portfolio which are maintained in a U.S. Securities System shall identify by book-entry those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of the Portfolio upon (a) receipt of advice from the U.S. Securities System that such securities have been transferred to the U.S. Securities System Account and (b) the making of an entry on the records of the Custodian to reflect such payment and transfer for the account of the Portfolio. The Custodian shall transfer securities sold for the account of the Portfolio upon (i) receipt of advice from the U.S. Securities System that payment for such securities has been transferred to the U.S. Securities System Account and (ii) the making of an entry on the records of the Custodian to reflect such transfer and payment for the account of the Portfolio. Copies of all advices from the U.S. Securities System of transfers of securities for the account of the Portfolio shall identify the Portfolio, be maintained for the Portfolio by the Custodian and be provided to the Fund at its request. Upon request, the Custodian shall furnish the Fund confirmation of each transfer to or from the account of the Portfolio in the form of a written advice or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the U.S. Securities System for the account of the Portfolio;
4) The Custodian shall provide the Fund with any report obtained by the Custodian on the U.S. Securities System's accounting system, internal accounting control and procedures for safeguarding securities deposited in the U.S. Securities System; and
5) Anything to the contrary in this Agreement notwithstanding, the Custodian shall be liable to the Fund for the benefit of the Portfolio for any loss or damage to the Portfolio resulting from use of the U.S. Securities System by reason of any negligence, misfeasance or misconduct of the Custodian or any of its agents or of any of its or their employees or from failure of the Custodian or any such agent to enforce effectively such rights as it may have against the U.S. Securities System; at the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claim against the U.S. Securities System or any other person which the Custodian may have as a consequence of any such loss or damage if and to the extent that the Portfolio has not been made whole for any such loss or damage.
Section 2.9 Segregated Account. The Custodian shall upon receipt of
Proper Instructions on behalf of each applicable Portfolio, establish and
maintain a segregated account or accounts for and on behalf of each such
Portfolio, into which account or accounts may be transferred cash and/or
securities, including securities maintained in an account by the Custodian
pursuant to Section 2.8 hereof, (a) in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing Corporation and of
any registered national securities exchange (or the CFTC or any registered
contract market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the Portfolio,
(b) for purposes of segregating cash or government securities in connection with
options purchased, sold or written by the Portfolio or commodity futures
contracts or options thereon purchased or sold by the Portfolio, (c) for the
purposes of compliance by the Portfolio with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release of the U.S.
Securities and Exchange Commission (the "SEC"), or interpretative opinion of the
staff of the SEC, relating to the maintenance of segregated accounts by
registered investment companies, and (d) for any other purpose in accordance
with Proper Instructions.
Section 2.10 Deposit of Fund Assets with the Underlying Transfer Agent. Underlying Shares shall be deposited and/or maintained in an account or accounts maintained with the Underlying Transfer Agent. The Underlying Transfer Agent shall be deemed to be acting as if it is a "securities depository" for purposes of Rule 17f-4 under the 1940 Act. Each Fund hereby directs the Custodian to deposit and/or maintain such securities with the Underlying Transfer Agent, subject to the following provisions:
1) The Custodian shall keep Underlying Shares owned by a Portfolio with the Underlying Transfer Agent provided that such securities are maintained in an account or accounts on the books and records of the Underlying Transfer Agent in the name of the Custodian as custodian for the Portfolio.
2) The records of the Custodian with respect to Underlying Shares which are maintained with the Underlying Transfer Agent shall identify by book-entry those Underlying Shares belonging to each Portfolio;
3) The Custodian shall pay for Underlying Shares purchased for the account of a Portfolio upon (a) receipt of advice from the Portfolio's investment adviser that such Underlying Shares have been purchased and will be transferred to the account of the Custodian, on behalf of the Portfolio, on the books and records of the Underlying Transfer Agent and (b) the making of an entry on the records of the Custodian to reflect such payment and transfer for the account of the Portfolio. The Custodian shall receive confirmation from the Underlying Transfer Agent of the purchase of such securities and the transfer of such securities to the Custodian's account with the Underlying Transfer Agent only after such payment is made. The Custodian shall transfer Underlying Shares redeemed for the account of a Portfolio (i) upon receipt of an advice from the Portfolio's investment adviser that such securities have been redeemed and that payment for such securities will be transferred to the Custodian and (ii) the making of an entry on the records of the Custodian to reflect such transfer and payment for the account of the Portfolio. The Custodian will receive confirmation from the Underlying Transfer Agent of the redemption of such securities and payment therefor only after such securities are redeemed. Copies of all advices from the Portfolio's investment adviser of purchases and sales of Underlying Shares for the account of the Portfolio shall identify the Portfolio, be maintained for the Portfolio by the Custodian, and be provided to the Portfolio's investment adviser at its request; and
4) The Custodian shall be not be liable to any Fund or any Portfolio for any loss or damage to the Fund or any Portfolio resulting from maintenance of Underlying Shares with Underlying Transfer Agent except for losses resulting directly from the negligence, misfeasance or misconduct of the Custodian or any of its agents or of any of its or their employees.
Section 2.11 Ownership Certificates for Tax Purposes. The Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to domestic securities of each Portfolio held by it and in connection with transfers of securities.
Section 2.12 Proxies. Except with respect to Portfolio property
released and delivered pursuant to Section 2.2(14), or purchased pursuant to
Section 2.6(7), the Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered otherwise than in the name of the Portfolio or a nominee of the Portfolio, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Fund such proxies, all proxy soliciting materials and all notices relating to such securities.
Section 2.13 Communications Relating to Portfolio Securities. Except with respect to Portfolio property released and delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7), and subject to the provisions of Section 2.3, the Custodian shall transmit promptly to the applicable Fund for each Portfolio all written information (including, without limitation, pendency of calls and maturities of domestic securities and expirations of rights in connection therewith and notices of exercise of call and put options written by the Fund on behalf of the Portfolio and the maturity of futures contracts purchased or sold by the Fund on behalf of the Portfolio) received by the Custodian from issuers of the securities being held for the Portfolio. With respect to tender or exchange offers, the Custodian shall transmit promptly to the applicable Fund all written information received by the Custodian from issuers of the securities whose tender or exchange is sought and from the party (or its agents) making the tender or exchange offer. If a Fund desires to take action with respect to any tender offer, exchange offer or any other similar transaction, the Fund shall notify the Custodian at least three business days prior to the date on which the Custodian is to take such action.
Section 3. Provisions Relating to Rules 17f-5 and 17f-7
Section 3.1. Definitions. As used throughout this Agreement, the capitalized terms set forth below shall have the indicated meanings:
"Country Risk" means all factors reasonably related to the systemic risk of holding Foreign Assets in a particular country including, but not limited to, such country's political environment, economic and financial infrastructure (including any Eligible Securities Depository operating in the country), prevailing or developing custody and settlement practices, and laws and regulations applicable to the safekeeping and recovery of Foreign Assets held in custody in that country.
"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule 17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as defined in Rule 17f-5), a bank holding company meeting the requirements of an Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate action of the SEC, or a foreign branch of a Bank (as defined in Section 2(a)(5) of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of the 1940 Act; the term does not include any Eligible Securities Depository.
"Eligible Securities Depository" has the meaning set forth in section (b)(1) of Rule 17f-7.
"Foreign Assets" means any of the Portfolios' investments (including foreign currencies) for which the primary market is outside the United States and such cash and cash equivalents as are reasonably necessary to effect the Portfolios' transactions in such investments.
"Foreign Custody Manager" has the meaning set forth in section (a)(3) of Rule 17f-5.
"Rule 17f-5" means Rule 17f-5 promulgated under the 1940 Act.
"Rule 17f-7" means Rule 17f-7 promulgated under the 1940 Act.
Section 3.2. The Custodian as Foreign Custody Manager.
3.2.1 Delegation to the Custodian as Foreign Custody Manager. Each Fund, by resolution adopted by its Board, hereby delegates to the Custodian, subject to Section (b) of Rule 17f-5, the responsibilities set forth in this Section 3.2 with respect to Foreign Assets of the Portfolios held outside the United States, and the Custodian hereby accepts such delegation as Foreign Custody Manager with respect to the Portfolios.
3.2.2 Countries Covered. The Foreign Custody Manager shall be
responsible for performing the delegated responsibilities defined below only
with respect to the countries and custody arrangements for each such country
listed on Schedule A to this Agreement, which list of countries may be amended
from time to time by any Fund with the agreement of the Foreign Custody Manager.
The Foreign Custody Manager shall list on Schedule A the Eligible Foreign
Custodians selected by the Foreign Custody Manager to maintain the assets of the
Portfolios, which list of Eligible Foreign Custodians may be amended from time
to time in the sole discretion of the Foreign Custody Manager. The Foreign
Custody Manager will provide amended versions of Schedule A in accordance with
Section 3.2.5 hereof.
Upon the receipt by the Foreign Custody Manager of Proper Instructions to open an account or to place or maintain Foreign Assets in a country listed on Schedule A, and the fulfillment by each Fund, on behalf of the applicable Portfolio(s), of the applicable account opening requirements for such country, the Foreign Custody Manager shall be deemed to have been delegated by such Fund's Board on behalf of such Portfolio(s) responsibility as Foreign Custody Manager with respect to that country and to have accepted such delegation. Execution of this Agreement by each Fund shall be deemed to be a Proper Instruction to open an account, or to place or maintain Foreign Assets, in each country listed on Schedule A. Following the receipt of Proper Instructions directing the Foreign Custody Manager to close the account of a Portfolio with the Eligible Foreign Custodian selected by the Foreign Custody Manager in a designated country, the delegation by the Board on behalf of such Portfolio to the Custodian as Foreign Custody Manager for that country shall be deemed to have been withdrawn and the Custodian shall immediately cease to be the Foreign Custody Manager with respect to such Portfolio with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated responsibilities with respect to a designated country upon written notice to the Fund. Thirty days (or such longer period to which the parties agree in writing) after receipt of any such notice by the Fund, the Custodian shall have no further responsibility in its capacity as Foreign Custody Manager to the Fund with respect to the country as to which the Custodian's acceptance of delegation is withdrawn.
3.2.3 Scope of Delegated Responsibilities:
(a) Selection of Eligible Foreign Custodians. Subject to the provisions of this Section 3.2, the Foreign Custody Manager may place and maintain the Foreign Assets in the care of the Eligible Foreign Custodian selected by the Foreign Custody Manager in each country listed on Schedule A, as amended from time to time. In performing its delegated responsibilities as Foreign Custody Manager to place or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign Assets will be subject to reasonable care, based on the standards applicable to custodians in the country in which the Foreign Assets will be held by that Eligible Foreign Custodian, after considering all factors relevant to the safekeeping of such assets, including, without limitation the factors specified in Rule 17f-5(c)(1).
(b) Contracts With Eligible Foreign Custodians. The Foreign Custody Manager shall determine that the contract governing the foreign custody arrangements with each Eligible Foreign Custodian selected by the Foreign Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).
(c) Monitoring. In each case in which the Foreign Custody Manager maintains Foreign Assets with an Eligible Foreign Custodian selected by the Foreign Custody Manager, the Foreign Custody Manager shall establish a system to monitor (i) the appropriateness of maintaining the Foreign Assets with such Eligible Foreign Custodian and (ii) the contract governing the custody arrangements established by the Foreign Custody Manager with the Eligible Foreign Custodian. In the event the Foreign Custody Manager determines that the custody arrangements with an Eligible Foreign Custodian it has selected are no longer appropriate, the Foreign Custody Manager shall notify the Board in accordance with Section 3.2.5 hereunder.
3.2.4 Guidelines for the Exercise of Delegated Authority. For purposes of this Section 3.2, the Board shall be deemed to have considered and determined to accept such Country Risk as is incurred by placing and maintaining the Foreign Assets in each country for which the Custodian is serving as Foreign Custody Manager of the Portfolios.
3.2.5 Reporting Requirements. The Foreign Custody Manager shall report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian and the placement of such Foreign Assets with another Eligible Foreign Custodian by providing to the Board an amended Schedule A at the end of the calendar quarter in which an amendment to such Schedule has occurred. The Foreign Custody Manager shall make written reports notifying the Board of any other material change in the foreign custody arrangements of the Portfolios described in this Section 3.2 after the occurrence of the material change.
3.2.6 Standard of Care as Foreign Custody Manager of a Portfolio. In performing the responsibilities delegated to it, the Foreign Custody Manager agrees to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of assets of management investment companies registered under the 1940 Act would exercise.
3.2.7 Representations with Respect to Rule 17f-5. The Foreign Custody Manager represents to each Fund that it is a U.S. Bank as defined in section (a)(7) of Rule 17f-5. Each Fund represents to the Custodian that its Board has determined that it is reasonable for such Board to rely on the Custodian to perform the responsibilities delegated pursuant to this Agreement to the Custodian as the Foreign Custody Manager of the Portfolios.
3.2.8 Effective Date and Termination of the Custodian as Foreign Custody Manager. Each Board's delegation to the Custodian as Foreign Custody Manager of the Portfolios shall be effective as of the date hereof and shall remain in effect until terminated at any time, without penalty, by written notice from the terminating party to the non-terminating party. Termination will become effective thirty (30) days after receipt by the non-terminating party of such notice. The provisions of Section 3.2.2 hereof shall govern the delegation to and termination of the Custodian as Foreign Custody Manager of the Portfolios with respect to designated countries.
Section 3.3 Eligible Securities Depositories.
3.3.1 Analysis and Monitoring. The Custodian shall (a) provide the Fund (or its duly-authorized investment manager or investment advisor) with an analysis of the custody risks associated with maintaining assets with the Eligible Securities Depositories set forth on Schedule B hereto in accordance with section (a)(1)(i)(A) of Rule 17f-7, and (b) monitor such risks on a continuing basis, and promptly notify the Fund (or its duly-authorized investment manager or investment advisor) of any material change in such risks, in accordance with section (a)(1)(i)(B) of Rule 17f-7.
3.3.2 Standard of Care. The Custodian agrees to exercise
reasonable care, prudence and diligence in performing the duties set forth in
Section 3.3.1.
Section 4. Duties of the Custodian with Respect to Property of the Portfolios to be Held Outside the United States
Section 4.1 Definitions. As used throughout this Agreement, the capitalized terms set forth below shall have the indicated meanings:
"Foreign Securities System" means an Eligible Securities Depository listed on Schedule B hereto.
"Foreign Sub-Custodian" means a foreign banking institution serving as an Eligible Foreign Custodian.
Section 4.2. Holding Securities. The Custodian shall identify on its books as belonging to the Portfolios the foreign securities held by each Foreign Sub-Custodian or Foreign Securities System. The Custodian may hold foreign securities for all of its customers, including the Portfolios, with any Foreign Sub-Custodian in an account that is identified as belonging to the Custodian for the benefit of its customers, provided however, that (i) the records of the Custodian with respect to foreign securities of the Portfolios which are maintained in such account shall identify those securities as belonging to the Portfolios and (ii), to the extent permitted and customary in the market in which the account is maintained, the Custodian shall require that securities so held by the Foreign Sub-Custodian be held separately from any assets of such Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.
Section 4.3. Foreign Securities Systems. Foreign securities shall be maintained in a Foreign Securities System in a designated country through arrangements implemented by the Custodian or a Foreign Sub-Custodian, as applicable, in such country.
Section 4.4. Transactions in Foreign Custody Account.
4.4.1. Delivery of Foreign Assets. The Custodian or a Foreign Sub-Custodian shall release and deliver foreign securities of the Portfolios held by the Custodian or such Foreign Sub-Custodian, or in a Foreign Securities System account, only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:
(i) Upon the sale of such foreign securities for the Portfolio in accordance with commercially reasonable market practice in the country where such foreign securities are held or traded, including, without limitation: (A) delivery against expectation of receiving later payment; or (B) in the case of a sale effected through a Foreign Securities System, in accordance with the rules governing the operation of the Foreign Securities System;
(ii) In connection with any repurchase agreement related to foreign securities;
(iii) To the depository agent in connection with tender or other similar offers for foreign securities of the Portfolios;
(iv) To the issuer thereof or its agent when such foreign securities are called, redeemed, retired or otherwise become payable;
(v) To the issuer thereof, or its agent, for transfer into the name of the Custodian (or the name of the respective Foreign Sub-Custodian or of any nominee of the Custodian or such Foreign Sub-Custodian) or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units;
(vi) To brokers, clearing banks or other clearing agents for examination or trade execution in accordance with market custom; provided that in any such case, the Foreign Sub-Custodian shall have no responsibility or liability for any loss arising from the delivery of such foreign securities prior to receiving payment for such foreign securities except as may arise from the Foreign Sub-Custodian's own negligence or willful misconduct;
(vii) For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement;
(viii) In the case of warrants, rights or similar foreign securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities;
(ix) For delivery as security in connection with any borrowing by a Fund on behalf of a Portfolio requiring a pledge of assets by the Fund on behalf of such Portfolio;
(x) In connection with trading in options and futures contracts, including delivery as original margin and variation margin;
(xi) Upon the sale or other delivery of such foreign securities (including, without limitation, to a Special Sub-Custodian) as a Free Trade, provided that applicable Proper Instructions shall set forth (A) the foreign securities to be delivered and (B) the person or persons to whom delivery shall be made;
(xii) In connection with the lending of foreign securities; and
(xiii) For any other purpose, but only upon receipt of Proper Instructions specifying (A) the foreign securities to be delivered and (B) the person or persons to whom delivery of such securities shall be made.
4.4.2. Payment of Portfolio Monies. Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the respective Foreign Securities System to pay out, monies of a Portfolio in the following cases only:
(i) Upon the purchase of foreign securities for the Portfolio, unless otherwise directed by Proper Instructions, by (A) delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer) against expectation of receiving later delivery of such foreign securities; or (B) in the case of a purchase effected through a Foreign Securities System, in accordance with the rules governing the operation of such Foreign Securities System;
(ii) In connection with the conversion, exchange or surrender of foreign securities of the Portfolio;
(iii) For the payment of any expense or liability of the Portfolio, including but not limited to the following payments: interest, taxes, investment advisory fees, transfer agency fees, fees under this Agreement, legal fees, accounting fees, and other operating expenses;
(iv) For the purchase or sale of foreign exchange or foreign exchange contracts for the Portfolio, including transactions executed with or through the Custodian or its Foreign Sub-Custodians;
(v) In connection with trading in options and futures contracts, including delivery as original margin and variation margin;
(vi) Upon the purchase of foreign securities as a Free Trade, provided that applicable Proper Instructions shall set forth (A) the amount of such payment and (B) the person or persons to whom payment shall be made;
(vii) For payment of part or all of the dividends received in respect of securities sold short;
(viii) In connection with the borrowing or lending of foreign securities; and
(ix) For any other purpose, but only upon receipt of Proper Instructions specifying (A) the amount of such payment and (B) the person or persons to whom such payment is to be made.
4.4.3. Market Conditions. Notwithstanding any provision of this Agreement to the contrary, settlement and payment for Foreign Assets received for the account of the Portfolios and delivery of Foreign Assets maintained for the account of the Portfolios may be effected in accordance with the customary established securities trading or processing practices and procedures in the country or market in which the transaction occurs, including, without limitation, delivering Foreign Assets to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) with the expectation of receiving later payment for such Foreign Assets from such purchaser or dealer.
The Custodian shall provide to each Board the information with respect to custody and settlement practices in countries in which the Custodian employs a Foreign Sub-Custodian described on Schedule C hereto at the time or times set forth on such Schedule. The Custodian may revise Schedule C from time to time, provided that no such revision shall result in a Board being provided with substantively less information than had been previously provided hereunder.
Section 4.5. Registration of Foreign Securities. The foreign securities maintained in the custody of a Foreign Sub-Custodian (other than bearer securities) shall be registered in the name of the applicable Portfolio or in the name of the Custodian or in the name of any Foreign Sub-Custodian or in the name of any nominee of the foregoing, and the applicable Fund on behalf of such Portfolio agrees to hold any such nominee harmless from any liability as a holder of record of such foreign securities. The Custodian or a Foreign Sub-Custodian shall not be obligated to accept securities on behalf of a Portfolio under the terms of this Agreement unless the form of such securities and the manner in which they are delivered are in accordance with reasonable market practice.
Section 4.6 Bank Accounts. The Custodian shall identify on its books as belonging to the applicable Fund cash (including cash denominated in foreign currencies) deposited with the Custodian. Where the Custodian is unable to maintain, or market practice does not facilitate the maintenance of, cash on the books of the Custodian, a bank account or bank accounts shall be opened and maintained outside the United States on behalf of a Portfolio with a Foreign Sub-Custodian. All accounts referred to in this Section shall be subject only to draft or order by the Custodian (or, if applicable, such Foreign Sub-Custodian) acting pursuant to the terms of this Agreement to hold cash received by or from or for the account of the Portfolio. Cash maintained on the books of the Custodian (including its branches, subsidiaries and affiliates), regardless of currency denomination, is maintained in bank accounts established under, and subject to the laws of, The Commonwealth of Massachusetts.
Section 4.7. Collection of Income. The Custodian shall use reasonable commercial efforts to collect all income and other payments with respect to the Foreign Assets held hereunder to which the Portfolios shall be entitled and shall credit such income, as collected, to the applicable Portfolio. In the event that extraordinary measures are required to collect such income, the Fund and the Custodian shall consult as to such measures and as to the compensation and expenses of the Custodian relating to such measures.
Section 4.8 Shareholder Rights. With respect to the foreign securities held pursuant to this Section 4, the Custodian shall use reasonable commercial efforts to facilitate the exercise of voting and other shareholder rights, subject always to the laws, regulations and practical constraints that may exist in the country where such securities are issued. Each Fund acknowledges that local conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors may have the effect of severely limiting the ability of such Fund to exercise shareholder rights.
Section 4.9. Communications Relating to Foreign Securities. The Custodian shall transmit promptly to the applicable Fund written information with respect to materials received by the Custodian via the Foreign Sub-Custodians from issuers of the foreign securities being held for the account of the Portfolios (including, without limitation, pendency of calls and maturities of foreign securities and expirations of rights in connection therewith). With respect to tender or exchange offers, the Custodian shall transmit promptly to the applicable Fund written information with respect to materials so received by the Custodian from issuers of the foreign securities whose
tender or exchange is sought or from the party (or its agents) making the tender
or exchange offer. The Custodian shall not be liable for any untimely exercise
of any tender, exchange or other right or power in connection with foreign
securities or other property of the Portfolios at any time held by it unless (i)
the Custodian or the respective Foreign Sub-Custodian is in actual possession of
such foreign securities or property and (ii) the Custodian receives Proper
Instructions with regard to the exercise of any such right or power, and both
(i) and (ii) occur at least three business days prior to the date on which the
Custodian is to take action to exercise such right or power.
Section 4.10. Liability of Foreign Sub-Custodians. Each agreement pursuant to which the Custodian employs a Foreign Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian to exercise reasonable care in the performance of its duties, and to indemnify, and hold harmless, the Custodian from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the Foreign Sub-Custodian's performance of such obligations. At a Fund's election, the Portfolios shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a Foreign Sub-Custodian as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Portfolios have not been made whole for any such loss, damage, cost, expense, liability or claim.
Section 4.11 Tax Law. The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on any Fund, the Portfolios or the Custodian as custodian of the Portfolios by the tax law of the United States or of any state or political subdivision thereof. It shall be the responsibility of each Fund to notify the Custodian of the obligations imposed on such Fund with respect to the Portfolios or the Custodian as custodian of the Portfolios by the tax law of countries other than those mentioned in the above sentence, including responsibility for withholding and other taxes, assessments or other governmental charges, certifications and governmental reporting. The sole responsibility of the Custodian with regard to such tax law shall be to use reasonable efforts to assist the Fund with respect to any claim for exemption or refund under the tax law of countries for which such Fund has provided such information.
Section 4.12. Liability of Custodian. The Custodian shall be liable for the acts or omissions of a Foreign Sub-Custodian to the same extent as set forth with respect to sub-custodians generally in this Agreement and, regardless of whether assets are maintained in the custody of a Foreign Sub-Custodian or a Foreign Securities System, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism, or any other loss where the Sub-Custodian has otherwise acted with reasonable care.
Section 5. Special Sub-Custodians
Upon receipt of Special Instructions (as such term is defined in Section 7 hereof), the Custodian shall, on behalf of one or more Portfolios, appoint one or more banks, trust companies or other entities designated in such Special Instructions to act as a sub-custodian for purposes of: (a) effecting third-party repurchase transactions with banks, brokers, dealers or other entities through the use of a
common custodian or sub-custodian; (b) establishing a joint trading account for the applicable Portfolio(s) and other registered open-end management investment companies for which Cohen & Steers Capital Management, Inc. serves as investment adviser, through which such Portfolios and such other investment companies shall collectively participate in certain repurchase transactions; and (c) effecting any other transactions designated by a Fund in Special Instructions. Each such designated sub-custodian is referred to herein as a "Special Sub-Custodian." Each such duly-appointed Special Sub-Custodian shall be listed on Schedule D hereto, as it may be amended from time to time by a Fund, with the acknowledgment of the Custodian. In connection with the appointment of any Special Sub-Custodian, and in accordance with Special Instructions, the Custodian shall enter into a subcustodian agreement with the Fund and the Special Sub-Custodian in form and substance approved by such Fund, provided that such agreement shall in all events comply with the provisions of the 1940 Act and the rules and regulations thereunder and the terms and provisions of this Agreement.
Section 6. Payments for Sales or Repurchases or Redemptions of Shares
The Custodian shall receive from the distributor of the Shares or from the Transfer Agent and deposit into the account of the appropriate Portfolio such payments as are received for Shares thereof issued or sold from time to time by the applicable Fund. The Custodian will provide timely notification to such Fund on behalf of each such Portfolio and the Transfer Agent of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose, the Custodian shall, upon receipt of instructions from the Transfer Agent, make funds available for payment to holders of Shares who have delivered to the Transfer Agent a request for redemption or repurchase of their Shares. In connection with the redemption or repurchase of Shares, the Custodian is authorized upon receipt of instructions from the Transfer Agent to wire funds to or through a commercial bank designated by the redeeming shareholders. In connection with the redemption or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian by a holder of Shares, which checks have been furnished by a Fund to the holder of Shares, when presented to the Custodian in accordance with such procedures and controls as are mutually agreed upon from time to time between such Fund and the Custodian.
Section 7. Proper Instructions and Special Instructions
"Proper Instructions," as such term is used throughout this Agreement, means a writing signed or initialed by one or more person or persons as the applicable Board shall have from time to time authorized. Each such writing shall set forth the specific transaction or type of transaction involved. Oral instructions will be considered Proper Instructions if the Custodian reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved; each Fund shall cause all oral instructions to be confirmed in writing. Proper Instructions may include communications effected directly between electro-mechanical or electronic devices
provided that the applicable Fund and the Custodian agree to security procedures including, but not limited to, the security procedures selected by such Fund via the form of Funds Transfer Addendum hereto. For purposes of this Section, Proper Instructions shall include instructions received by the Custodian pursuant to any three-party agreement which requires a segregated asset account in accordance with Section 2.9 hereof.
"Special Instructions," as such term is used throughout this Agreement, means Proper Instructions countersigned or confirmed in writing by the Treasurer or any Assistant Treasurer of the applicable Fund or any other person designated in writing by the Treasurer of such Fund, which countersignature or confirmation shall be (a) included on the same instrument containing the Proper Instructions or on a separate instrument clearly relating thereto and (b) delivered by hand, by facsimile transmission, or in such other manner as the Fund and the Custodian agree in writing.
Concurrently with the execution of this Agreement, and from time to time thereafter, as appropriate, each Fund shall deliver to the Custodian, duly certified by such Fund's Treasurer or Assistant Treasurer, a certificate setting forth: (i) the names, titles, signatures and scope of authority of all persons authorized to give Proper Instructions or any other notice, request, direction, instruction, certificate or instrument on behalf of the Fund and (ii) the names, titles and signatures of those persons authorized to give Special Instructions. Such certificate may be accepted and relied upon by the Custodian as conclusive evidence of the facts set forth therein and shall be considered to be in full force and effect until receipt by the Custodian of a similar certificate to the contrary.
Section 8. Evidence of Authority
The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper believed by it to be genuine and to have been properly executed by or on behalf of the applicable Fund. The Custodian may receive and accept a copy of a resolution certified by the Secretary or an Assistant Secretary of any Fund as conclusive evidence (a) of the authority of any person to act in accordance with such resolution or (b) of any determination or of any action by the applicable Board as described in such resolution, and such resolution may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary.
Section 9. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from the applicable Fund on behalf of each applicable Portfolio:
1) Make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Agreement; provided that all such payments shall be accounted for to the Fund on behalf of the Portfolio;
2) Surrender securities in temporary form for securities in definitive form;
3) Endorse for collection, in the name of the Portfolio, checks, drafts and other negotiable instruments; and
4) In general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Portfolio except as otherwise directed by the applicable Board.
Section 10. Duties of Custodian with Respect to the Books of Account and Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the applicable Board to keep the books of
account of each Portfolio and/or compute the net asset value per Share of the
outstanding Shares or, if directed in writing to do so by a Fund on behalf of a
Portfolio, shall itself keep such books of account and/or compute such net asset
value per Share. If so directed, the Custodian shall also calculate daily the
net income of the Portfolio as described in the Prospectus and shall advise the
Fund and the Transfer Agent daily of the total amounts of such net income and,
if instructed in writing by an officer of the Fund to do so, shall advise the
Transfer Agent periodically of the division of such net income among its various
components. Each Fund acknowledges and agrees that, with respect to investments
maintained with the Underlying Transfer Agent, the Underlying Transfer Agent is
the sole source of information on the number of shares of a fund held by it on
behalf of a Portfolio and that the Custodian has the right to rely on holdings
information furnished by the Underlying Transfer Agent to the Custodian in
performing its duties under this Agreement, including without limitation, the
duties set forth in this Section 10 and in Section 11 hereof; provided, however,
that the Custodian shall be obligated to reconcile information as to purchases
and sales of Underlying Shares contained in trade instructions and confirmations
received by the Custodian and to report promptly any discrepancies to the
Underlying Transfer Agent. The calculations of the net asset value per Share and
the daily income of each Portfolio shall be made at the time or times described
from time to time in the Prospectus. Each Fund acknowledges that, in keeping the
books of account of the Portfolio and/or making the calculations described
herein with respect to Portfolio property released and delivered pursuant to
Section 2.2(14), or purchased pursuant to Section 2.6(7) hereof, the Custodian
is authorized and instructed to rely upon information provided to it by the
Fund, the Fund's counterparty(ies), or the agents of either of them.
Section 11. Records
The Custodian shall with respect to each Portfolio create and maintain all records relating to its activities and obligations under this Agreement in such manner as will meet the obligations of each Fund under the 1940 Act, with particular attention to section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers,
employees or agents of such Fund and employees and agents of the SEC. The Custodian shall, at a Fund's request, supply the Fund with a tabulation of securities owned by each Portfolio and held by the Custodian and shall, when requested to do so by the Fund and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations. Each Fund acknowledges that, in creating and maintaining the records as set forth herein with respect to Portfolio property released and delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7) hereof, the Custodian is authorized and instructed to rely upon information provided to it by the Fund, the Fund's counterparty(ies), or the agents of either of them.
Section 12. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as a Fund with respect to a Portfolio may from time to time request, to obtain from year to year favorable opinions from the Fund's independent accountants with respect to its activities hereunder in connection with the preparation of the Fund's Form N-1A or Form N-2, as applicable, and Form N-SAR or other annual reports to the SEC and with respect to any other requirements thereof.
Section 13. Reports to Fund by Independent Public Accountants
The Custodian shall provide the applicable Fund, on behalf of each of the Portfolios at such times as such Fund may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, futures contracts and options on futures contracts, including securities deposited and/or maintained in a U.S. Securities System or a Foreign Securities System, relating to the services provided by the Custodian under this Agreement; such reports, shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state.
Section 14. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian, as agreed upon from time to time between each Fund on behalf of each applicable Portfolio and the Custodian.
Section 15. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant to this Agreement and shall be held harmless in acting upon any
notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. The Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Agreement, but shall be kept indemnified by and shall be without liability to any Fund for any action taken or omitted by it in good faith without negligence, including, without limitation, acting in accordance with any Proper Instruction. It shall be entitled to rely on and may act upon advice of counsel (who may be counsel for the Fund) on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. The Custodian shall be without liability to any Fund or Portfolio for any loss, liability, claim or expense resulting from or caused by anything which is part of Country Risk (as defined in Section 3 hereof), including without limitation nationalization, expropriation, currency restrictions, or acts of war, revolution, riots or terrorism.
Except as may arise from the Custodian's own negligence or willful misconduct or the negligence or willful misconduct of a sub-custodian or agent, the Custodian shall be without liability to any Fund for any loss, liability, claim or expense resulting from or caused by; (i) events or circumstances beyond the reasonable control of the Custodian or any sub-custodian or Securities System or any agent or nominee of any of the foregoing, including, without limitation, the interruption, suspension or restriction of trading on or the closure of any securities market, power or other mechanical or technological failures or interruptions, computer viruses or communications disruptions, work stoppages, natural disasters, or other similar events or acts; (ii) errors by any Fund or its duly authorized investment manager or investment advisor in their instructions to the Custodian provided such instructions have been in accordance with this Agreement; (iii) the insolvency of or acts or omissions by a Securities System; (iv) any act or omission of a Special Sub-Custodian including, without limitation, reliance on reports prepared by a Special Sub-Custodian; (v) any delay or failure of any broker, agent or intermediary, central bank or other commercially prevalent payment or clearing system to deliver to the Custodian's sub-custodian or agent securities purchased or in the remittance or payment made in connection with securities sold; (vi) any delay or failure of any company, corporation, or other body in charge of registering or transferring securities in the name of the Custodian, any Fund, the Custodian's sub-custodians, nominees or agents or any consequential losses arising out of such delay or failure to transfer such securities including non-receipt of bonus, dividends and rights and other accretions or benefits; (vii) delays or inability to perform its duties due to any disorder in market infrastructure with respect to any particular security or Securities System; and (viii) any provision of any present or future law or regulation or order of the United States of America, or any state thereof, or any other country, or political subdivision thereof or of any court of competent jurisdiction.
The Custodian shall be liable for the acts or omissions of a Foreign Sub-Custodian (as such term is defined in Section 4 hereof) to the same extent as set forth with respect to sub-custodians generally in this Agreement.
If a Fund on behalf of a Portfolio requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund or the Portfolio being liable for the
payment of money or incurring liability of some other form, such Fund on behalf of the Portfolio, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an amount and form satisfactory to it.
If a Fund requires the Custodian, its affiliates, subsidiaries or agents, to advance cash or securities for any purpose (including but not limited to securities settlements, foreign exchange contracts and assumed settlement) or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Agreement, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the applicable Portfolio shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to dispose of such Portfolio's assets to the extent necessary to obtain reimbursement.
Except as may arise from the Custodian's own negligence or willful misconduct,
each Fund shall indemnify and hold the Custodian harmless from and against any
and all costs, expenses, losses, damages, charges, counsel fees, payments and
liabilities which may be asserted against the Custodian (a) acting in accordance
with any Proper Instruction or Special Instruction including, without
limitation, any Proper Instruction with respect to Free Trades including, but
not limited to, cost, expense, loss, damage, liability, tax, charge, assessment
or claim resulting from (i) the failure of the applicable Fund to receive income
with respect to purchased investments, (ii) the failure of the applicable to
recover amounts invested on maturity of purchased investments, (iii) the failure
of the Custodian to respond to or be aware of notices or other corporate
communications with respect to purchased investments, or (iv) the Custodian's
reliance upon information provided by the applicable Fund, such Fund's
counterparty(ies) or the agents of either of them with respect to Fund property
released, delivered or purchased pursuant to either of Section 2.2(14) or
Section 2.6(7) hereof; (b) for the acts or omissions of any Special
Sub-Custodian; or (c) for the acts or omissions of any Local Agent or Pledgee.
In no event shall the Custodian be liable for indirect, special or consequential damages.
Section 16. Effective Period, Termination and Amendment
This Agreement shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than sixty (60) days after the date of such delivery or mailing; provided, however, that no Fund shall amend or terminate this Agreement in contravention of any applicable federal or state regulations, or any provision of such Fund's Governing Documents, and further provided, that any Fund on behalf of one or more of the Portfolios may at any time by action of its Board (i) substitute another bank or trust company for the Custodian by giving notice as described above to the Custodian, or (ii) immediately terminate this Agreement in the event of the appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction.
Termination of this Agreement with respect to any one particular Fund or Portfolio shall in no way affect the rights and duties under this Agreement with respect to any other Fund or Portfolio.
Upon termination of the Agreement, the applicable Fund on behalf of each applicable Portfolio shall pay to the Custodian such compensation as may be due as of the date of such termination and shall likewise reimburse the Custodian for its costs, expenses and disbursements.
Section 17. Successor Custodian
If a successor custodian for one or more Portfolios shall be appointed by the applicable Board, the Custodian shall, upon termination and receipt of Proper Instructions, deliver to such successor custodian at the office of the Custodian, duly endorsed and in the form for transfer, all securities of each applicable Portfolio then held by it hereunder and shall transfer to an account of the successor custodian all of the securities of each such Portfolio held in a Securities System or at the Underlying Transfer Agent.
If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of Proper Instructions, deliver at the office of the Custodian and transfer such securities, funds and other properties in accordance with such resolution.
In the event that no Proper Instructions designating a successor custodian or alternative arrangements shall have been delivered to the Custodian on or before the date when such termination shall become effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a "bank" as defined in the 1940 Act, doing business in Boston, Massachusetts or New York, New York, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian on behalf of each applicable Portfolio and all instruments held by the Custodian relative thereto and all other property held by it under this Agreement on behalf of each applicable Portfolio, and to transfer to an account of such successor custodian all of the securities of each such Portfolio held in any Securities System or at the Underlying Transfer Agent. Thereafter, such bank or trust company shall be the successor of the Custodian under this Agreement.
In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of any Fund to provide Proper Instructions as aforesaid, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Agreement relating to the duties and obligations of the Custodian shall remain in full force and effect.
Section 18. General
Section 18.1 Massachusetts Law to Apply. This Agreement shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts.
Section 18.2 Prior Agreements. This Agreement supersedes and terminates, as of the date hereof, all prior Agreements between each Fund on behalf of each of the Portfolios and the Custodian relating to the custody of such Fund's assets.
Section 18.3 Assignment. This Agreement may not be assigned by (a) any Fund without the written consent of the Custodian or (b) by the Custodian without the written consent of each applicable Fund.
Section 18.4 Interpretive and Additional Provisions. In connection with the operation of this Agreement, the Custodian and each Fund on behalf of each of the Portfolios, may from time to time agree on such provisions interpretive of or in addition to the provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. Any such interpretive or additional provisions shall be in a writing signed by all parties and shall be annexed hereto, provided that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of a Fund's Governing Documents. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Agreement.
Section 18.5 Additional Funds. In the event that any investment company in addition to those listed on Appendix A hereto desires to have the Custodian render services as custodian under the terms hereof, it shall so notify the Custodian in writing, and if the Custodian agrees in writing to provide such services, such investment company shall become a Fund hereunder and be bound by all terms and conditions and provisions hereof including, without limitation, the representations and warranties set forth in Section 18.7 below.
Section 18.6 Additional Portfolios. In the event that any Fund establishes one or more series of Shares in addition to those set forth on Appendix A hereto with respect to which it desires to have the Custodian render services as custodian under the terms hereof, it shall so notify the Custodian in writing, and if the Custodian agrees in writing to provide such services, such series of Shares shall become a Portfolio hereunder.
Section 18.7 The Parties. All references herein to the "Fund" are to each of the investment companies listed on Appendix A hereto, and each investment company made subject to this Agreement in accordance with Section 18.5 above, individually, as if this Agreement were between such individual Fund and the Custodian. In the case of a series corporation, trust or other entity, all references herein to the "Portfolio" are to the individual series or portfolio of such corporation, trust or other entity, or to such corporation, trust or other entity on behalf of the individual series or portfolio, as appropriate. Any reference in this Agreement to "the parties" shall
mean the Custodian and such other individual Fund as to which the matter pertains. Each Fund hereby represents and warrants that (a) it is duly incorporated or organized and is validly existing in good standing in its jurisdiction of incorporation or organization; (b) it has the requisite power and authority under applicable law and its Governing Documents to enter into and perform this Agreement; (c) all requisite proceedings have been taken to authorize it to enter into and perform this Agreement; (d) this Agreement constitutes its legal, valid, binding and enforceable agreement; and (e) its entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of the Fund or any law or regulation applicable to it.
Section 18.8 Remote Access Services Addendum. The Custodian and each Fund agree to be bound by the terms of the Remote Access Services Addendum hereto.
Section 18.9 Notices. Any notice, instruction or other instrument required to be given hereunder may be delivered in person to the offices of the parties as set forth herein during normal business hours or delivered prepaid registered mail or by telex, cable or telecopy to the parties at the following addresses or such other addresses as may be notified by any party from time to time.
To any Fund: c/o Cohen & Steers Capital Management, Inc.
757 Third Avenue
New York, New York 10017
Attention: Adam M. Derechin, Senior Vice President
Telephone: 212-832-3232
Telecopy: 212-750-0713
To the Custodian: State Street Bank and Trust Company
1776 Heritage Drive, AFB3
Quincy, MA 02171
Attention: Michael E. Prendergast, Vice President
Telephone: 617-985-0387
Telecopy: 617-537-2498
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Such notice, instruction or other instrument shall be deemed to have been served in the case of a registered letter at the expiration of five business days after posting, in the case of cable twenty-four hours after dispatch and, in the case of telex, immediately on dispatch and if delivered outside normal business hours it shall be deemed to have been received at the next time after delivery when normal business hours commence and in the case of cable, telex or telecopy on the business day after the receipt thereof. Evidence that the notice was properly addressed, stamped and put into the post shall be conclusive evidence of posting.
Section 18.10 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all such counterparts taken together shall constitute one and the same Agreement.
Section 18.11 Reproduction of Documents. This Agreement and all schedules, addenda, exhibits, appendices, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.
Section 18.12 Shareholder Communications Election. SEC Rule 14b-2 requires banks which hold securities for the account of customers to respond to requests by issuers of securities for the names, addresses and holdings of beneficial owners of securities of that issuer held by the bank unless the beneficial owner has expressly objected to disclosure of this information. In order to comply with the rule, the Custodian needs each Fund to indicate whether it authorizes the Custodian to provide such Fund's name, address, and share position to requesting companies whose securities the Fund owns. If a Fund tells the Custodian "no," the Custodian will not provide this information to requesting companies. If a Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the Custodian is required by the rule to treat the Fund as consenting to disclosure of this information for all securities owned by the Fund or any funds or accounts established by the Fund. For a Fund's protection, the Rule prohibits the requesting company from using the Fund's name and address for any purpose other than corporate communications. Please indicate below whether the Fund consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name, address, and share positions.
NO [X] The Custodian is not authorized to release the Fund's name, address, and share positions.
Signature Page
In Witness Whereof, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative and its seal to be hereunder affixed as of the date first above-written.
Fund Signature Attested to By: EACH OF THE ENTITIES SET FORTH ON
APPENDIX A HERETO
By:_______________________ By:____________________________
Name:____________________ Name:__________________________
Title:*[Secretary/Ass't Secretary] Title:___________________________
Signature Attested to By: State Street Bank and Trust Company
By:____________________ By:________________________________
Stephanie L. Poster Ronald E. Logue
Vice President Vice Chairman and Chief
Operating Officer
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APPENDIX A
to
Master Custodian Agreement
Investment Companies and Portfolios, If Any
Cohen & Steers Equity Income Fund, Inc.
Cohen & Steers Institutional Realty Shares, Inc.
Cohen & Steers Realty Income Fund, Inc.
Cohen & Steers Realty Shares, Inc.
Cohen & Steers Special Equity Fund, Inc.
Cohen & Steers Total Return Realty Fund, Inc.
SCHEDULE D
to
Master Custodian Agreement
Special Sub-Custodians
None
REMOTE ACCESS SERVICES ADDENDUM TO MASTER CUSTODIAN AGREEMENT
ADDENDUM to that certain Master Custodian Agreement dated as of March 9, 2001 (the "Custodian Agreement") by and among each investment company identified on Appendix A thereto and made subject thereto pursuant to Section 18.5 thereof (each, a "Customer") and State Street Bank and Trust Company.
State Street Bank and Trust Company, its subsidiaries and affiliates (collectively, "State Street") has developed and utilized proprietary accounting and other systems in conjunction with the custodian services which State Street provides to the Customer. In this regard, State Street maintains certain information in databases under its control and ownership which it makes available to its customers (the "Remote Access Services").
The Services
State Street agrees to provide the Customer, and its designated investment advisors, consultants or other third parties authorized by State Street and who the Customer hereby represents have agreed to abide by the terms of this Addendum ("Authorized Designees") with access to In-Sight'sm' as described in Exhibit A or such other systems as may be offered from time to time (the "System") on a remote basis.
Security Procedures
The Customer agrees to comply, and to cause its Authorized Designees to comply, with remote access operating standards and procedures and with user identification or other password control requirements and other security procedures as may be issued from time to time by State Street for use of the System and access to the Remote Access Services. The Customer agrees to advise State Street immediately in the event that it learns or has reason to believe that any person to whom it has given access to the System or the Remote Access Services has violated or intends to violate the terms of this Addendum and the Customer will cooperate with State Street in seeking injunctive or other equitable relief. The Customer agrees to discontinue use of the System and Remote Access Services, if requested, for any security reasons cited by State Street.
Fees
Fees and charges for the use of the System and the Remote Access Services and related payment terms shall be as set forth in the custody fee schedule in effect from time to time between the parties (the "Fee Schedule"). The Customer shall be responsible for any tariffs, duties or taxes imposed or levied by any government or governmental agency by reason of the transactions contemplated by this Addendum, including, without limitation, federal, state and local taxes, use, value added and personal property taxes (other than income, franchise or similar taxes which may be imposed or assessed against State Street). Any claimed exemption from such tariffs, duties or taxes shall be supported by proper documentary evidence delivered to State Street.
Proprietary Information/Injunctive Relief
The System and Remote Access Services described herein and the databases, computer programs, screen formats, report formats, interactive design techniques, formulae, processes, systems, software, knowhow, algorithms, programs, training aids, printed materials, methods, books, records, files, documentation and other information made available to the Customer by State Street as part of the Remote Access Services and through the use of the System and all copyrights, patents, trade secrets and other proprietary rights of State Street related thereto are the exclusive, valuable and confidential property of State Street and
its relevant licensors (the "Proprietary Information"). The Customer agrees on behalf of itself and its Authorized Designees to keep the Proprietary Information confidential and to limit access to its employees and Authorized Designees (under a similar duty of confidentiality) who require access to the System for the purposes intended. The foregoing shall not apply to Proprietary Information in the public domain or required by law to be made public.
The Customer agrees to use the Remote Access Services only in connection with the proper purposes of this Addendum. The Customer will not, and will cause its employees and Authorized Designees not to, (i) permit any third party to use the System or the Remote Access Services, (ii) sell, rent, license or otherwise use the System or the Remote Access Services in the operation of a service bureau or for any purpose other than as expressly authorized under this Addendum, (iii) use the System or the Remote Access Services for any fund, trust or other investment vehicle without the prior written consent of State Street, or (iv) allow or cause any information transmitted from State Street's databases, including data from third party sources, available through use of the System or the Remote Access Services, to be redistributed or retransmitted for other than use for or on behalf of the Customer, as State Street's customer.
The Customer agrees that neither it nor its Authorized Designees will modify the System in any way, enhance or otherwise create derivative works based upon the System, nor will the Customer or its Authorized Designees reverse engineer, decompile or otherwise attempt to secure the source code for all or any part of the System.
The Customer acknowledges that the disclosure of any Proprietary Information, or of any information which at law or equity ought to remain confidential, will immediately give rise to continuing irreparable injury to State Street inadequately compensable in damages at law and that State Street shall be entitled to obtain immediate injunctive relief against the breach or threatened breach of any of the foregoing undertakings, in addition to any other legal remedies which may be available.
Limited Warranties
State Street represents and warrants that it is the owner of and has the right to grant access to the System and to provide the Remote Access Services contemplated herein. Because of the nature of computer information technology and the necessity of relying upon third party sources, and data and pricing information obtained from third parties, the System and Remote Access Services are provided "AS IS", and the Customer and its Authorized Designees shall be solely responsible for the investment decisions, regulatory reports and statements produced using the Remote Access Services. State Street and its relevant licensors will not be liable to the Customer or its Authorized Designees for any direct or indirect, special, incidental, punitive or consequential damages arising out of or in any way connected with the System or the Remote Access Services, nor shall either party be responsible for delays or nonperformance under this Addendum arising out of any cause or event beyond such party's control.
State Street will take reasonable steps to ensure that its products (and those of its third-party suppliers) reflect the available state of the art technology to offer products that are Year 2000 compliant, including, but not limited to, century recognition of dates, calculations that correctly compute same century and multi century formulas and date values, and interface values that reflect the date issues arising between now and the next one-hundred years, and if any changes are required, State Street will make the changes to its products at no cost to you and in a commercially reasonable time frame and will require third-party suppliers to do likewise. The Customer will do likewise for its systems.
EXCEPT AS EXPRESSLY SET FORTH IN THIS ADDENDUM, STATE STREET FOR ITSELF AND ITS RELEVANT LICENSORS EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES CONCERNING THE SYSTEM AND THE SERVICES TO BE RENDERED HEREUNDER,
WHETHER EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTIBILITY OR FITNESS FOR A PARTICULAR PURPOSE.
Infringement
State Street will defend or, at our option, settle any claim or action brought against the Customer to the extent that it is based upon an assertion that access to the System or use of the Remote Access Services by the Customer under this Addendum constitutes direct infringement of any United States patent or copyright or misappropriation of a trade secret, provided that the Customer notifies State Street promptly in writing of any such claim or proceeding and cooperates with State Street in the defense of such claim or proceeding. Should the System or the Remote Access Services or any part thereof become, or in State Street's opinion be likely to become, the subject of a claim of infringement or the like under the patent or copyright or trade secret laws of the United States, State Street shall have the right, at State Street's sole option, to (i) procure for the Customer the right to continue using the System or the Remote Access Services, (ii) replace or modify the System or the Remote Access Services so that the System or the Remote Access Services becomes noninfringing, or (iii) terminate this Addendum without further obligation.
Termination
Either party to the Custodian Agreement may terminate this Addendum (i) for any reason by giving the other party at least one-hundred and eighty (180) days' prior written notice in the case of notice of termination by State Street to the Customer or thirty (30) days' notice in the case of notice from the Customer to State Street of termination, or (ii) immediately for failure of the other party to comply with any material term and condition of the Addendum by giving the other party written notice of termination. This Addendum shall in any event terminate within ninety (90) days after the termination of the Custodian Agreement. In the event of termination, the Customer will return to State Street all copies of documentation and other confidential information in its possession or in the possession of its Authorized Designees. The foregoing provisions with respect to confidentiality and infringement will survive termination for a period of three (3) years.
Miscellaneous
This Addendum and the exhibit hereto constitutes the entire understanding of the parties to the Custodian Agreement with respect to access to the System and the Remote Access Services. This Addendum cannot be modified or altered except in a writing duly executed by each of State Street and the Customer and shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts.
By its execution of the Custodian Agreement, the Customer, for itself and its Authorized Designees, accepts the terms of this Addendum
EXHIBIT A
to
REMOTE ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
IN-SIGHT'sm'
System Product Description
In-Sight'sm' provides information delivery and on-line access to State Street. In-Sight'sm' allows users a single point of entry into the many views of data created by the diverse systems and applications. Reports and data from systems such as Investment Policy Monitor'sm', Multicurrency Horizon'sm', Securities Lending, Performance & Analytics can be accessed through In-Sight'sm'. This Internet-enabled application is designed to run from a Web browser and perform across low-speed data line or corporate high-speed backbones. In-Sight'sm' also offers users a flexible toolset, including an ad-hoc query function, a custom graphics package, a report designer, and a scheduling capability. Data and reports offered through In-Sight'sm' will continue to increase in direct proportion with the customer roll out, as it is viewed as the information delivery system will grow with State Street's customers.
FUNDS TRANSFER ADDENDUM
[STATE STREET LOGO]
OPERATING GUIDELINES
1. Obligation of the Sender: State Street is authorized to promptly debit Client's (as named below) account(s) upon the receipt of a payment order in compliance with the selected Security Procedure chosen for funds transfer and in the amount of money that State Street has been instructed to transfer. State Street shall execute payment orders in compliance with the Security Procedure and with the Client's instructions on the execution date provided that such payment order is received by the customary deadline for processing such a request, unless the payment order specifies a later time. All payment orders and communications received after this time will be deemed to have been received on the next business day.
2. Security Procedure: The Client acknowledges that the Security Procedure it has designated on the Selection Form was selected by the Client from Security Procedures offered by State Street. The Client shall restrict access to confidential information relating to the Security Procedure to authorized persons as communicated in writing to State Street. The Client must notify State Street immediately if it has reason to believe unauthorized persons may have obtained access to such information or of any change in the Client's authorized personnel. State Street shall verify the authenticity of all instructions according to the Security Procedure.
3. Account Numbers: State Street shall process all payment orders on the basis of the account number contained in the payment order. In the event of a discrepancy between any name indicated on the payment order and the account number, the account number shall take precedence and govern.
4. Rejection: State Street reserves the right to decline to process or delay the processing of a payment order which (a) is in excess of the collected balance in the account to be charged at the time of State Street's receipt of such payment order; (b) if initiating such payment order would cause State Street, in State Street's sole judgment, to exceed any volume, aggregate dollar, network, time, credit or similar limits upon wire transfers which are applicable to State Street; or (c) if State Street, in good faith, is unable to satisfy itself that the transaction has been properly authorized.
5. Cancellation or Amendment: State Street shall use reasonable efforts to act on all authorized requests to cancel or amend payment orders received in compliance with the Security Procedure provided that such requests are received in a timely manner affording State Street reasonable opportunity to act. However, State Street assumes no liability if the request for amendment or cancellation cannot be satisfied.
6. Errors: State Street shall assume no responsibility for failure to detect any erroneous payment order provided that State Street complies with the payment order instructions as received and State Street complies with the Security Procedure. The Security Procedure is established for the purpose of authenticating payment orders only and not for the detection of errors in payment orders.
7. Interest and Liability Limits: State Street shall assume no responsibility for lost interest with respect to the refundable amount of any unauthorized payment order, unless State Street is notified of the unauthorized payment order within thirty (30) days of notification by State Street of the acceptance of such payment order. In no event shall State Street be liable for special, indirect or consequential damages, even if advised of the possibility of such damages and even for failure to execute a payment order.
8. Automated Clearing House ("ACH") Credit Entries/Provisional Payments: When a Client initiates or receives ACH credit and debit entries pursuant to these Guidelines and the rules of the National Automated Clearing House Association and the New England Clearing House Association, State Street will act as an Originating Depository Financial Institution and/or Receiving Depository Institution, as the case may be, with respect to such entries. Credits given by State Street with respect to an ACH credit entry are provisional until State Street receives final settlement for such entry from the Federal Reserve Bank. If State Street does not receive such final settlement, the Client agrees that State Street shall receive a refund of the amount credited to the Client in connection with such entry, and the party making payment to the Client via such entry shall not be deemed to have paid the amount of the entry.
9. Confirmation Statements: Confirmation of State Street's execution of payment orders shall ordinarily be provided within 24 hours notice which may be delivered through State Street's proprietary information systems, such as, but not limited to Horizon and GlobalQuest'r', or by facsimile or callback. The lient must report any objections to the execution of a payment order within 30 days.
FUNDS TRANSFER ADDENDUM
[STATE STREET LOGO]
Security Procedure(s) Selection Form
Please select one or more of the funds transfer security procedures indicated below.
[ ] SWIFT
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a
cooperative society owned and operated by member financial institutions that
provides telecommunication services for its membership. Participation is limited
to securities brokers and dealers, clearing and depository institutions,
recognized exchanges for securities, and investment management institutions.
SWIFT provides a number of security features through encryption and
authentication to protect against unauthorized access, loss or wrong delivery of
messages, transmission errors, loss of confidentiality and fraudulent changes to
messages. SWIFT is considered to be one of the most secure and efficient
networks for the delivery of funds transfer instructions.
Selection of this security procedure would be most appropriate for existing SWIFT members.
[ ] Standing Instructions
Standing Instructions may be used where funds are transferred to a broker on the
Client's established list of brokers with which it engages in foreign exchange
transactions. Only the date, the currency and the currency amount are variable.
In order to establish this procedure, State Street will send to the Client a
list of the brokers that State Street has determined are used by the Client. The
Client will confirm the list in writing, and State Street will verify the
written confirmation by telephone. Standing Instructions will be subject to a
mutually agreed upon limit. If the payment order exceeds the established limit,
the Standing Instruction will be confirmed by telephone prior to execution.
[ ] Remote Batch Transmission
Wire transfer instructions are delivered via Computer-to-Computer (CPU-CPU) data
communications between the Client and State Street. Security procedures include
encryption and or the use of a test key by those individuals authorized as
Automated Batch Verifiers.
Clients selecting this option should have an existing facility for completing CPU-CPU transmissions. This delivery mechanism is typically used for high-volume business.
[ ] Global Horizon Interchange'sm' Funds Transfer Service Global Horizon Interchange Funds Transfer Service (FTS) is a State Street proprietary microcomputer-based wire initiation system. FTS enables Clients to electronically transmit authenticated Fedwire, CHIPS or internal book transfer instructions to State Street.
This delivery mechanism is most appropriate for Clients with a low-to-medium number of transactions (5-75 per day), allowing Clients to enter, batch, and review wire transfer instructions on their PC prior to release to State Street.
[ ] Telephone Confirmation (Callback)
Telephone confirmation will be used to verify all non-repetitive funds transfer
instructions received via untested facsimile or phone. This procedure requires
Clients to designate individuals as authorized initiators and authorized
verifiers. State Street will verify that the instruction contains the signature
of an authorized person and prior to execution, will contact someone other than
the originator at the Client's location to authenticate the instruction.
Selection of this alternative is appropriate for Clients who do not have the
capability to use other security procedures.
[ ] Repetitive Wires
For situations where funds are transferred periodically (minimum of one
instruction per calendar quarter) from an existing authorized account to the
same payee (destination bank and account number) and only the date and currency
amount are variable, a repetitive wire may be implemented. Repetitive wires will
be subject to a mutually agreed upon limit. If the payment order exceeds the
established limit, the instruction will be confirmed by telephone prior to
execution. Telephone confirmation is used to establish this process. Repetitive
wire instructions must be reconfirmed annually.
This alternative is recommended whenever funds are frequently transferred between the same two accounts.
[ ] Transfers Initiated by Facsimile
The Client faxes wire transfer instructions directly to State Street Mutual Fund
Services. Standard security procedure requires the use of a random number test
key for all transfers. Every six months the Client receives test key logs from
State Street. The test key contains alpha-numeric characters, which the Client
puts on each document faxed to State Street. This procedure ensures all wire
instructions received via fax are authorized by the Client.
We provide this option for Clients who wish to batch wire instructions and transmit these as a group to State Street Mutual Fund Services once or several times a day.
FUNDS TRANSFER ADDENDUM
[STATE STREET LOGO]
[ ] Automated Clearing House (ACH)
State Street receives an automated transmission or a magnetic tape from a Client
for the initiation of payment (credit) or collection (debit) transactions
through the ACH network. The transactions contained on each transmission or tape
must be authenticated by the Client. Clients using ACH must select one or more
of the following delivery options:
[ ] Global Horizon Interchange Automated Clearing House Service Transactions are created on a microcomputer, assembled into batches and delivered to State Street via fully authenticated electronic transmissions in standard NACHA formats.
[ ] Transmission from Client PC to State Street Mainframe with Telephone Callback
[ ] Transmission from Client Mainframe to State Street Mainframe with Telephone Callback
[ ] Transmission from DST Systems to State Street Mainframe with Encryption
[ ] Magnetic Tape Delivered to State Street with Telephone Callback
State Street is hereby instructed to accept funds transfer instructions only via the delivery methods and security procedures indicated. The selected delivery methods and security procedure(s) will be effective for payment orders initiated by our organization.
Key Contact Information
Whom shall we contact to implement your selection(s)?
Client operations contact Alternate Contact
----------------------------------------- -----------------------------------------
Name Name
----------------------------------------- -----------------------------------------
Address Address
----------------------------------------- -----------------------------------------
City/State/Zip Code City/State/Zip Code
----------------------------------------- -----------------------------------------
Telephone Number Telephone Number
----------------------------------------- -----------------------------------------
Facsimile Number Facsimile Number
-----------------------------------------
SWIFT Number
-----------------------------------------
Telex Number
|
FUNDS TRANSFER ADDENDUM
[STATE STREET LOGO]
INSTRUCTION(S)
TELEPHONE CONFIRMATION
Fund________________________________________
Investment Adviser__________________________
Authorized Initiators
Please Type or Print
Please provide a listing of Fund officers or other individuals are currently authorized to initiate wire transfer instructions to State Street:
NAME TITLE (Specify whether position SPECIMEN SIGNATURE
is with Fund or Investment
Adviser)
------------------------- ------------------------------ ---------------------------
------------------------- ------------------------------ ---------------------------
------------------------- ------------------------------ ---------------------------
------------------------- ------------------------------ ---------------------------
------------------------- ------------------------------ ---------------------------
Authorized Verifiers
Please Type or Print
Please provide a listing of Fund officers of other individuals who will be
CALLED BACK to verify the initiation of repetitive wires of $10 million or more
and all non repetitive wire instructions:
|
NAME CALLBACK PHONE NUMBER DOLLAR LIMITATION (IF ANY) ------------------------- ------------------------------ --------------------------- ------------------------- ------------------------------ --------------------------- ------------------------- ------------------------------ --------------------------- ------------------------- ------------------------------ --------------------------- ------------------------- ------------------------------ --------------------------- |
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS
Country Subcustodian
Argentina Citibank, N.A.
Australia Westpac Banking Corporation
Austria Erste Bank der Osterreichischen
Sparkassen AG
Bahrain HSBC Bank Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Bangladesh Standard Chartered Bank
Belgium Fortis Bank nv-sa
Bermuda The Bank of Bermuda Limited
Bolivia Citibank, N. A.
Botswana Barclays Bank of Botswana Limited
Brazil Citibank, N.A.
Bulgaria ING Bank N.V.
Canada State Street Trust Company Canada
Chile BankBoston, N.A.
People's Republic The Hongkong and Shanghai
of China Banking Corporation Limited,
Shanghai and Shenzhen branches
Colombia Cititrust Colombia S.A. Sociedad Fiduciaria
|
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS
Country Subcustodian
Costa Rica Banco BCT S.A.
Croatia Privredna Banka Zagreb d.d
Cyprus The Cyprus Popular Bank Ltd.
Czech Republic Ceskoslovenska Obchodni
Banka, A.S.
Denmark Danske Bank A/S
Ecuador Citibank, N.A.
Egypt Egyptian British Bank S.A.E.
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Estonia Hansabank
Finland Merita Bank Plc.
France BNP Paribas, S.A.
Germany Dresdner Bank AG
Ghana Barclays Bank of Ghana Limited
Greece National Bank of Greece S.A.
Hong Kong Standard Chartered Bank
Hungary Citibank Rt.
Iceland Icebank Ltd.
|
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS
Country Subcustodian
India Deutsche Bank AG
The Hongkong and Shanghai
Banking Corporation Limited
Indonesia Standard Chartered Bank
Ireland Bank of Ireland
Israel Bank Hapoalim B.M.
Italy BNP Paribas, Italian Branch
Ivory Coast Societe Generale de Banques
en Cote d'Ivoire
Jamaica Scotiabank Jamaica Trust and Merchant
Bank Ltd.
Japan The Fuji Bank, Limited
The Sumitomo Bank, Limited
Jordan HSBC Bank Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Kazakhstan HSBC Bank Kazakhstan
Kenya Barclays Bank of Kenya Limited
Republic of Korea The Hongkong and Shanghai Banking
Corporation Limited
Latvia A/s Hansabanka
|
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS
Country Subcustodian
Lebanon HSBC Bank Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Lithuania Vilniaus Bankas AB
Malaysia Standard Chartered Bank Malaysia Berhad
Mauritius The Hongkong and Shanghai
Banking Corporation Limited
Mexico Citibank Mexico, S.A.
Morocco Banque Commerciale du Maroc
Namibia Standard Bank Namibia Limited-
Netherlands Fortis Bank (Nederland) N.V.
New Zealand ANZ Banking Group (New Zealand) Limited
Nigeria Stanbic Merchant Bank Nigeria Limited
Norway Christiania Bank og Kreditkasse ASA
Oman HSBC Bank Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Pakistan Deutsche Bank AG
Palestine HSBC Bank Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Panama BankBoston, N.A.
|
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS
Country Subcustodian
Peru Citibank, N.A.
Philippines Standard Chartered Bank
Poland Citibank (Poland) S.A.
Portugal Banco Comercial Portugues
Qatar HSBC Bank Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Romania ING Bank N.V.
Russia Credit Suisse First Boston AO - Moscow
(as delegate of Credit Suisse
First Boston - Zurich)
Singapore The Development Bank of Singapore Limited
Slovak Republic Ceskoslovenska Obchodni Banka, A.S.
Slovenia Bank Austria Creditanstalt d.d. - Ljubljana
South Africa Standard Bank of South Africa Limited
Spain Banco Santander Central Hispano S.A.
Sri Lanka The Hongkong and Shanghai
Banking Corporation Limited
Swaziland Standard Bank Swaziland Limited
Sweden Skandinaviska Enskilda Banken
|
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS
Country Subcustodian
Switzerland UBS AG
Taiwan - R.O.C. Central Trust of China
Thailand Standard Chartered Bank
Trinidad & Tobago Republic Bank Limited
Tunisia Banque Internationale Arabe de Tunisie
Turkey Citibank, N.A.
Ukraine ING Bank Ukraine
United Kingdom State Street Bank and Trust Company,
London Branch
Uruguay BankBoston, N.A.
Venezuela Citibank, N.A.
Vietnam The Hongkong and Shanghai
Banking Corporation Limited
Zambia Barclays Bank of Zambia Limited
Zimbabwe Barclays Bank of Zimbabwe Limited
|
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS
Country Depositories
Argentina Caja de Valores S.A.
Australia Austraclear Limited
Reserve Bank Information and
Transfer System
Austria Oesterreichische Kontrollbank AG
(Wertpapiersammelbank Division)
Belgium Caisse Interprofessionnelle de Depots et
de Virements de Titres, S.A.
Banque Nationale de Belgique
Brazil Companhia Brasileira de Liquidacao e Custodia
Sistema Especial de Liquidacao e de Custodia (SELIC)
Central de Custodia e de Liquidacao Financeira de
Titulos Privados (CETIP)
Bulgaria Central Depository AD
Bulgarian National Bank
Canada Canadian Depository for Securities Limited
Chile Deposito Central de Valores S.A.
People's Republic Shanghai Securities Central Clearing &
of China Registration Corporation
Shenzhen Securities Central Clearing Co., Ltd.
Colombia Deposito Centralizado de Valores
Costa Rica Central de Valores S.A.
|
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS
Country Depositories
Croatia Ministry of Finance
National Bank of Croatia
Sredisnja Depozitarna Agencija d.d.
Czech Republic Stredisko cennych papiru
Czech National Bank
Denmark Vaerdipapircentralen (Danish Securities Center)
Egypt Misr for Clearing, Settlement, and Depository
Estonia Eesti Vaartpaberite Keskdepositoorium
Finland Finnish Central Securities Depository
France Societe Interprofessionnelle pour la Compensation
des Valeurs Mobilieres
Germany Clearstream Banking AG, Frankfurt
Greece Bank of Greece,
System for Monitoring Transactions in
Securities in Book-Entry Form
Apothetirion Titlon AE - Central Securities
Depository
Hong Kong Central Clearing and Settlement System
Central Moneymarkets Unit
Hungary Kozponti Elszamolohaz es Ertektar
(Budapest) Rt. (KELER)
|
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS
Country Depositories
India National Securities Depository Limited
Central Depository Services India Limited
Reserve Bank of India
Indonesia Bank Indonesia
PT Kustodian Sentral Efek Indonesia
Israel Tel Aviv Stock Exchange Clearing
House Ltd. (TASE Clearinghouse)
Italy Monte Titoli S.p.A.
Ivory Coast Depositaire Central - Banque de Reglement
Jamaica Jamaica Central Securities Depository
Japan Japan Securities Depository Center (JASDEC)
Bank of Japan Net System
Kazakhstan Central Depository of Securities
Kenya Central Bank of Kenya
Republic of Korea Korea Securities Depository
Latvia Latvian Central Depository
|
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS
Country Depositories
Lebanon Custodian and Clearing Center of
Financial Instruments for Lebanon
and the Middle East (Midclear) S.A.L.
Banque du Liban
Lithuania Central Securities Depository of Lithuania
Malaysia Malaysian Central Depository Sdn. Bhd.
Bank Negara Malaysia,
Scripless Securities Trading and Safekeeping
System
Mauritius Central Depository and Settlement Co. Ltd.
Bank of Mauritius
Mexico S.D. INDEVAL
(Instituto para el Deposito de Valores)
Morocco Maroclear
Netherlands Nederlands Centraal Instituut voor
Giraal Effectenverkeer B.V. (NECIGEF)
New Zealand New Zealand Central Securities
Depository Limited
Nigeria Central Securities Clearing System Limited
Norway Verdipapirsentralen (Norwegian Central
Securities Depository)
Oman Muscat Depository & Securities
Registration Company, SAOC
|
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS
Country Depositories
Pakistan Central Depository Company of Pakistan Limited
State Bank of Pakistan
Palestine Clearing Depository and Settlement, a department
of the Palestine Stock Exchange
Peru Caja de Valores y Liquidaciones, Institucion de
Compensacion y Liquidacion de Valores S.A
Philippines Philippine Central Depository, Inc.
Registry of Scripless Securities
(ROSS) of the Bureau of Treasury
Poland National Depository of Securities
(Krajowy Depozyt Papierow Wartosciowych SA)
Central Treasury Bills Registrar
Portugal Central de Valores Mobiliarios
Qatar Central Clearing and Registration (CCR), a
department of the Doha Securities Market
Romania National Securities Clearing, Settlement and
Depository Company
Bucharest Stock Exchange Registry Division
National Bank of Romania
Singapore Central Depository (Pte) Limited
Monetary Authority of Singapore
|
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS
Country Depositories
Slovak Republic Stredisko cennych papierov
National Bank of Slovakia
Slovenia Klirinsko Depotna Druzba d.d.
South Africa Central Depository Limited
Share Transactions Totally Electronic
(STRATE) Ltd.
Spain Servicio de Compensacion y
Liquidacion de Valores, S.A.
Banco de Espana, Central de Anotaciones en Cuenta
Sri Lanka Central Depository System (Pvt) Limited
Sweden Vardepapperscentralen VPC AB
(Swedish Central Securities Depository)
Switzerland SegaIntersettle AG (SIS)
Taiwan - R.O.C. Taiwan Securities Central Depository Co., Ltd.
Thailand Thailand Securities Depository Company Limited
Tunisia Societe Tunisienne Interprofessionelle pour la
Compensation et de Depots des Valeurs Mobilieres
Turkey Takas ve Saklama Bankasi A.S. (TAKASBANK)
Central Bank of Turkey
Ukraine National Bank of Ukraine
|
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS
Country Depositories
United Kingdom Central Gilts Office and
Central Moneymarkets Office
Venezuela Banco Central de Venezuela
Zambia LuSE Central Shares Depository Limited
Bank of Zambia
|
TRANSNATIONAL
Euroclear
Clearstream Banking AG
SCHEDULE C
MARKET INFORMATION
Publication/Type of Information Brief Description
------------------------------- -----------------
(Frequency)
The Guide to Custody in World Markets An overview of safekeeping and settlement practices and
(annually) procedures in each market in which State Street Bank and Trust
Company offers custodial services.
Global Custody Network Review Information relating to the operating history and structure of
(annually) depositories and subcustodians located in the markets in which State
Street Bank and Trust Company offers custodial services, including
transnational depositories.
Global Legal Survey With respect to each market in which State Street Bank and
(annually) Trust Company offers custodial services, opinions relating to whether
local law restricts (i) access of a fund's independent public
accountants to books and records of a Foreign Sub-Custodian or
Foreign Securities System, (ii) the Fund's ability to recover in the
event of bankruptcy or insolvency of a Foreign Sub-Custodian or
Foreign Securities System, (iii) the Fund's ability to recover in the
event of a loss by a Foreign Sub-Custodian or Foreign Securities
System, and (iv) the ability of a foreign investor to convert cash
and cash equivalents to U.S. dollars.
Subcustodian Agreements Copies of the subcustodian contracts State Street Bank and
(annually) Trust Company has entered into with each subcustodian in the markets
in which State Street Bank and Trust Company offers subcustody
services to its US mutual fund clients.
Network Bulletins (weekly): Developments of interest to investors in the markets in which State
Street Bank and Trust Company offers custodial services.
Foreign Custody Advisories (as
necessary): With respect to markets in which State Street Bank and Trust Company
offers custodial services which exhibit special custody risks,
developments which may impact State Street's ability to deliver
expected levels of service.
|
[LOGO OF EQUISERVE]
FEE AND SERVICE SCHEDULE
For
STOCK TRANSFER SERVICES
between
COHEN & STEERS TOTAL
RETURN REALTY FUND, INC.
and
STATE STREET BANK
AND TRUST COMPANY
between
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
TERM
This Fee and Service Schedule sets forth the terms and conditions under which State Street Bank and Trust Company ("State Street Bank and Trust Company") will serve as Sole Transfer Agent and Registrar for the Common Stock of Cohen & Steers Total Return Realty Fund, Inc., (hereinafter referred to as "the Company").
The term of this Fee and Service Schedule shall be for a period of three (3) years, commencing from, June 1, 2000, the effective date of this Fee and Service Schedule (the "Initial Term").
FEES and SERVICES
Transfer Agent and Registrar Fee
$ 8.00* Per Account, Per Annum
$ 1.00 For each Dividend Reinvestment per Participant
$ 1.00 For each Optional Cash Infusion
$250.00 DTC Charge per Dividend Reinvestment Period
$ 10.00 Per Redemption (shareholder paid)
* Minimum Monthly Administrative Fee of $1,350.00
Includes the standard Transfer Agent and Registrar services as
stated in the following sections
|
Administrative Services
Annual administrative services as Transfer Agent and Registrar for the Common Stock of the Company
Assignment of Account Administrator
Account Maintenance
Maintaining shareholder accounts, to include the following services:
Processing of new shareholder accounts
Posting and acknowledging address changes
Processing other routine file maintenance adjustments
Posting all transactions, including debit and credit certificates to the stockholder file
Responding to requests for audit confirmations
Research and respond to all shareholder inquiries
Routine Certificate Issuance
Minimum monthly includes the issuance, cancellation and registration of up to 1,500 certificates per year (excess to be billed at $1.50 each) to include the following services:
Production and mailing of daily transfer reports
Processing of all legal transfers including New York window and mail items
Combining certificates into large and/or smaller denominations
Replacing lost certificates
Placing, maintaining and removing stop-transfer notations
Special Certificate Issuance
The processing of up to 50 stock option issuances to include DWAC processing where required, per annum, additional to be billed at $7.50 per stock option issuance
The processing of up to 50 restricted transfers per annum, additional to be billed at $7.50 per restricted transfer
Annual Meeting Services
Preparing a full stockholder list as of the Annual Meeting Record Date
Addressing proxy cards for all registered shareholders
Enclosing and mailing proxy card, proxy statement, return envelope and Annual Report to all registered shareholders
Receiving, opening and examining retained proxies
Writing in connection with unsigned or improperly executed proxies
Tabulating returned proxies
Attending Annual Meeting as Inspector of Election (Travel expenses billed as incurred)
Preparing a final Annual Meeting List reflecting how each account has voted on each proposal
Mailing, Reporting and Miscellaneous Services
Addressing, enclosing and mailing to registered shareholders company-provided materials three (3) times per annum
Addressing and mailing dividend reinvestment brochures to new shareholders on a monthly basis, or as agreed
Providing one (1) set of labels
Providing and Annual Meeting Record Date list
Providing an Annual Meeting Final Voted List
One complete Statistical report per annum
Coding "multiple" accounts at a single household to suppress duplicate mailings of reports
Dividend Reinvestment Services
As Administrator of your original issue Dividend Reinvestment and Stock Purchase Plan ("DRP"), State Street Bank and Trust Company will perform the following DRP related services:
Processing optional cash investments and acknowledging same
The reinvestment of dividend proceeds for participants
Participant withdrawal or sell requests
Preparation, mailing and filing of Federal Tax Form 1099B for sales
Preparation and mailing of monthly reinvestment statements
Dividend Disbursement Services
Generate and mail annual dividend checks with one (1) enclosure
Replace lost dividend checks
Processing of backup withholding and remittance
Processing of non-resident alien withholding and remittance
Preparation and filing of Federal Tax Forms 1099 and 1042
Preparation and filing of State Tax information as directed
ITEMS NOT COVERED
Additional Services
Items not included in the fees and services set forth in this Agreement including, but not limited to, services associated with the payment of a stock dividend, stock split, corporate reorganization, or any services associated with a special project are to be billed separately, on an appraisal basis.
Services required by legislation or regulatory fiat which become effective after the date of acceptance of this Agreement shall not be a part of the Standard Services and shall be billed by appraisal. All additional services not specifically covered under this Agreement will be billed by appraisal, as applicable.
Out Of Pocket Expenses
All direct out-of-pocket expenses will be billed as incurred. A list of applicable out-of-pocket expenses is attached as Exhibit A.
Payment of Services
It is agreed that all invoices are due and payable upon receipt on a monthly basis. Each billing period will, therefore, be of one (1) month duration. The failure by the Company to pay an invoice within 90 days after receipt of such invoice or the failure by the Company to consecutive invoices shall constitute a material breach. The Bank may terminate this Agreement for such material breach and shall not be obligated to provide the Company with 90 days written notice as stated in tine Termination of Agreement.
Billing Definition of Number of Accounts
For billing purposes, the number of accounts will be based on open accounts on file at the beginning of each billing period, plus any new accounts added during that period.
ACCEPTANCE
In witness whereof, the parties hereto have caused this Fee and Service Schedule to be executed by their respective officers, hereunto duly agreed and authorized, as of the effective date of this Fee and Service Schedule.
STATE STREET BANK AND TRUST COMPANY COHEN & STEERS TOTAL RETURN
REALTY FUND, INC.
By: /s/ Charles V. Rossi By: /s/ Adam Derechin
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Charles V. Rossi
Title: Vice President Title: Vice President
----------------------------- ------------------------
Date: 4/3/00 Date: 6/2/00
----------------------------- -------------------------
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Exhibit A
Out of Pocket Expenses
Out of pocket expenses associated with, but not limited to, the following are not included in the fees quoted in this Fee and Service Schedule and are billable as incurred.
Postage (Outgoing and Business Reply)
Envelopes
Labels
Forms, Stationery and Proxy Cards
Fulfillment
Proxy Proof Set-up
Record Retention
Insurance Premiums (Mailing certificates)
Delivery and Freight charges (including overnight delivery; Airborne Express,
FedEx, etc.)
Typesetting (proxy cards, due diligence mailings, etc.)
Destruction of excess/obsolete material
DTC trade transactions expenses (Treasury buybacks, etc.)
Custody Settlement charges
Telephone usage and line expenses
Lost Shareholder Program database search
Please Note:
Other out of pocket expenses could be incurred depending on the services utilized.
Good funds to cover postage expenses in excess of $5,000 for shareholder mailings must be received in full by 12:00 p.m. Eastern Time on the scheduled mailing date. Postage expenses less than $5,000 will be billed as incurred.
SKU numbers are required on all material received for mailing. A special handling fee of $10.00 per box will be assessed for all material not marked with a SKU number. Such material includes, but is not limited to: proxy statements, annual and quarterly reports, and news releases. Overtime charges will be assessed in the event of late delivery of material for mailings to shareholders unless the mail date is rescheduled.
Simpson Thacher & Bartlett
April 2, 2001
Cohen & Steers Total Return Realty Fund, Inc.
757 Third Avenue
New York, New York 10017
Ladies and Gentlemen:
We have acted as counsel to Cohen & Steers Total Return Realty
Fund, Inc., a Maryland corporation (the "Company"), in connection with an
Agreement and Plan of Reorganization (the "Agreement"), dated as of March 30,
2001, between the Company and Cohen & Steers Realty Income Fund, Inc. ("Realty
Income Fund"), a Maryland corporation, pursuant to which the Company will
acquire all of the assets and liabilities of Realty Income Fund in exchange for
shares of common stock, $.001 par value, of the Company (the "Shares") and cash
in lieu of any fractional Shares, which will then be distributed to the holders
of common stock, $.01 par value, of Realty Income Fund
We have examined the combined prospectus/proxy statement contained in the Company's Registration Statement on Form N-14, with respect to the Agreement (the "Registration Statement"), filed by the Company with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), substantially in the form in which it is to become effective. We also have examined the originals, or duplicates or certified or conformed copies, of such records, agreements, instruments and other documents and have made such other and further investigations as we have deemed relevant and necessary in connection with the opinions expressed herein. As to questions of fact material to this opinion, we have relied upon certificates of public officials and of officers and representatives of the Company.
In such examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as duplicates or certified or conformed copies, and the authenticity of the originals of such latter documents.
Based upon the foregoing, and subject to the qualifications and limitations stated herein, we are of the opinion that when (i) the Agreement has been duly approved by the stockholders of the Company in accordance with the listing rules of the New York Stock Exchange, (ii) appropriate Articles of Transfer with respect to the reorganization contemplated in the Agreement have been accepted for record by the Maryland State Department of Assessments and Taxation, and (iii) the Shares have been issued pursuant to the Agreement and the Articles of Transfer and in the manner described in the Registration Statement, the Shares will be validly issued shares, fully paid and nonassessable, under the laws of the State of Maryland.
Insofar as the opinion expressed herein relates to or is dependent upon matters governed by the laws of the State of Maryland, we have relied upon the opinion of Venable, Baetjer and Howard, LLP, dated the date hereof.
We are members of the Bar of the State of New York and we do not express any opinion herein concerning any law other than the law of the State of New York and, to the extent set forth herein, the law of the State of Maryland.
We hereby consent to the filing of this opinion letter as Exhibit 5 to the Registration Statement and to the use of our name under the caption "Legal Matters" in the Prospectus included in the Registration Statement.
Very truly yours,
SIMPSON THACHER & BARTLETT
April 2, 2001
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3909
Re: Cohen & Steers Total Return Realty Fund, Inc.
Ladies and Gentlemen:
We have acted as special Maryland counsel to Cohen & Steers Total Return Realty Fund, Inc., a Maryland corporation ("RFI"), in connection with an Agreement and Plan of Reorganization (the "Agreement"), dated as of March 30, 2001, between RFI and Cohen & Steers Realty Income Fund, Inc. ("RIF"), a Maryland corporation, pursuant to which RFI will acquire all of the assets and liabilities of RIF in exchange for shares of common stock, $.001 par value, of RFI (the "RFI Shares"), and cash in lieu of any fractional RFI Shares, which will then be distributed to the holder of RIF common stock, $.01 par value.
We have examined the combined prospectus/proxy statement contained in RFI's Registration Statement on Form N-14, Securities Act File No. 333-56510, with respect to the Agreement (the "Registration Statement"), substantially in the form in which it is to become effective, RFI's Charter and Bylaws, and the Agreement. We have also examined and relied on a certificate of the Maryland State Department of Assessments and Taxation ("SDAT") to the effect that RFI is duly incorporated and existing under the laws of the State of Maryland and is in good standing and duly authorized to transact business in the State of Maryland.
We have also examined and relied on such other corporate records of RFI, including a certificate of an appropriate officer of RFI with respect to RFI Board actions and certain other matters, and such other documents as we have deemed necessary to render the opinion expressed herein. We have assumed, without independent verification, the genuineness of all signatures on documents that we have reviewed, the authenticity of all documents submitted to us as originals, and the conformity with originals of all documents submitted to us as copies.
We have also assumed that the terms of the Agreement are fair and reasonable to RFI.
Simpson & Thacher
April 2, 2001
Based on the foregoing and subject to the qualifications set forth below we are of the opinion that:
1. RFI is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland.
2. When (i) the Agreement has been duly approved by the stockholders of RFI in accordance with the listing rules of the New York Stock Exchange, (ii) appropriate Articles of Transfer with respect to the reorganization contemplated in the Agreement have been accepted for record by SDAT, and (iii) the RFI Shares have been issued pursuant to the Agreement and the Articles of Transfer and in the manner described in the Registration Statement, the RFI Shares will be validly issued shares, fully paid and nonassessable, under the laws of the State of Maryland.
This letter expresses our opinion with respect to the Maryland General Corporation Law governing matters such as the authorization and issuance of stock, and does not extend to the securities or 'blue sky' laws of Maryland, to federal securities laws or to other laws.
You may rely on our foregoing opinion in rendering your opinion to RFI that is to be filed as an exhibit to the Registration Statement. We consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to us under 'Legal Matters' in the Registration Statement. We do not thereby admit that we are 'experts' as that term is used in the Securities Act of 1933, as amended, and the regulations thereunder. This opinion may not be relied on by any other person or for any other purpose without our prior written consent.
Very truly yours,
/s/ Venable, Baetjer and Howard, LLP |
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration Statement on Form N-14 of our reports dated February 7, 2001, relating to the financial statements and financial highlights of Cohen & Steers Realty Income Fund, Inc. and Cohen & Steers Total Return Realty Fund, Inc. which appear in the December 31, 2000 Annual Reports to Shareholders, which are also incorporated by reference into the Registration Statement. We also consent to the references to us under the headings "Financial Highlights", "Experts" and "Financial Statements" in such Registration Statement.
PricewaterhouseCoopers LLP
New York, New York
April 2, 2001
Exhibit 16
Cohen & Steers Total Return Realty Fund, Inc.
POWER OF ATTORNEY
Robert H. Steers, whose signature appears below, hereby constitutes and appoints Martin Cohen and Lawrence B. Stoller, and each of them, his true and lawful attorneys and agents, with full power and authority of substitution and resubstitution, to do any and all acts and things and to execute any and all instruments which said attorneys and agents, or any of them, may deem necessary or advisable or which may be required to enable Cohen & Steers Total Return Realty Fund, Inc. (the "Company") to comply with the Investment Company Act of 1940, as amended, and the Securities Act of 1933, as amended (collectively, the "Acts"), and any rules, regulations or requirements of the Securities and Exchange Commission in respect thereof, in connection with the filing and effectiveness of any and all amendments (including post-effective amendments) to the Company's Registration Statement on Form N-14 and any other registration statements pursuant to said Acts, including specifically, but without limiting the generality of the foregoing, the power and authority to sign in the name and on behalf of the undersigned as a director of the Company any and all such amendments and registration statements filed with the Securities and Exchange Commission under said Acts, and any other instruments or documents related thereto, and the undersigned does hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof.
/s/ Robert H. Steers
-----------------------
Robert H. Steers
Date: March 6, 2001
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Exhibit 16
Cohen & Steers Total Return Realty Fund, Inc.
POWER OF ATTORNEY
Martin Cohen, whose signature appears below, hereby constitutes and appoints Robert H. Steers and Lawrence B. Stoller, and each of them, his true and lawful attorneys and agents, with full power and authority of substitution and resubstitution, to do any and all acts and things and to execute any and all instruments which said attorneys and agents, or any of them, may deem necessary or advisable or which may be required to enable Cohen & Steers Total Return Realty Fund, Inc. (the "Company") to comply with the Investment Company Act of 1940, as amended, and the Securities Act of 1933, as amended (collectively, the "Acts"), and any rules, regulations or requirements of the Securities and Exchange Commission in respect thereof, in connection with the filing and effectiveness of any and all amendments (including post-effective amendments) to the Company's Registration Statement on Form N-14 and any other registration statements pursuant to said Acts, including specifically, but without limiting the generality of the foregoing, the power and authority to sign in the name and on behalf of the undersigned as a director of the Company any and all such amendments and registration statements filed with the Securities and Exchange Commission under said Acts, and any other instruments or documents related thereto, and the undersigned does hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof.
/s/ Martin Cohen
-------------------
Martin Cohen
Date: March 6, 2001
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Exhibit 16
Cohen & Steers Total Return Realty Fund, Inc.
POWER OF ATTORNEY
Gregory Clark, whose signature appears below, hereby
constitutes and appoints Martin Cohen, Robert H. Steers and Lawrence B. Stoller,
and each of them, his true and lawful attorneys and agents, with full power and
authority of substitution and resubstitution, to do any and all acts and things
and to execute any and all instruments which said attorneys and agents, or any
of them, may deem necessary or advisable or which may be required to enable
Cohen & Steers Total Return Realty Fund, Inc (the "Company") to comply with the
Investment Company Act of 1940, as amended, and the Securities Act of 1933, as
amended (collectively, the "Acts"), and any rules, regulations or requirements
of the Securities and Exchange Commission in respect thereof, in connection with
the filing and effectiveness of any and all amendments (including post-effective
amendments) to the Company's Registration Statement on Form N-14 and any other
registration statements pursuant to said Acts, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Company
any and all such amendments and registration statements filed with the
Securities and Exchange Commission under said Acts, and any other instruments or
documents related thereto, and the undersigned does hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to be done
by virtue hereof.
/s/ Gregory Clark
----------------------
Gregory Clark
Date: March 6, 2001
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Exhibit 16
Cohen & Steers Total Return Realty Fund, Inc.
POWER OF ATTORNEY
George Grossman, whose signature appears below, hereby
constitutes and appoints Martin Cohen, Robert H. Steers and Lawrence B. Stoller,
and each of them, his true and lawful attorneys and agents, with full power and
authority of substitution and resubstitution, to do any and all acts and things
and to execute any and all instruments which said attorneys and agents, or any
of them, may deem necessary or advisable or which may be required to enable
Cohen & Steers Total Return Realty Fund, Inc. (the "Company") to comply with the
Investment Company Act of 1940, as amended, and the Securities Act of 1933, as
amended (collectively, the "Acts"), and any rules, regulations or requirements
of the Securities and Exchange Commission in respect thereof, in connection with
the filing and effectiveness of any and all amendments (including post-effective
amendments) to the Company's Registration Statement on Form N-14 and any other
registration statements pursuant to said Acts, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a director of the Company
any and all such amendments and registration statements filed with the
Securities and Exchange Commission under said Acts, and any other instruments or
documents related thereto, and the undersigned does hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to be done
by virtue hereof.
/s/ George Grossman
--------------------
George Grossman
Date: March 6, 2001
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Exhibit 16
Cohen & Steers Total Return Realty Fund, Inc.
POWER OF ATTORNEY
Willard H. Smith, Jr., whose signature appears below, hereby constitutes and appoints Martin Cohen, Robert H. Steers and Lawrence B. Stoller, and each of them, his true and lawful attorneys and agents, with full power and authority of substitution and resubstitution, to do any and all acts and things and to execute any and all instruments which said attorneys and agents, or any of them, may deem necessary or advisable or which may be required to enable Cohen & Steers Total Return Realty Fund, Inc. (the "Company") to comply with the Investment Company Act of 1940, as amended, and the Securities Act of 1933, as amended (collectively, the "Acts"), and any rules, regulations or requirements of the Securities and Exchange Commission in respect thereof, in connection with the filing and effectiveness of any and all amendments (including post-effective amendments) to the Company's Registration Statement on Form N-14 and any other registration statements pursuant to said Acts, including specifically, but without limiting the generality of the foregoing, the power and authority to sign in the name and on behalf of the undersigned as a director of the Company any and all such amendments and registration statements filed with the Securities and Exchange Commission under said Acts, and any other instruments or documents related thereto, and the undersigned does hereby ratify and confirm all that said attorneys and agents, or any of them, shall do or cause to be done by virtue hereof.
/s/ Willard H. Smith, Jr.
------------------------
Willard H. Smith, Jr.
Date: March 6, 2001
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