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DWS RREEF Real Estate Fund, Inc.
(Name of Registrants as Specified in Its Charter)
SUSAN L. CICIORA TRUST
c/o Stephen C. Miller, Esq.
and Joel L. Terwilliger, Esq.
2344 Spruce Street, Suite A
Boulder, CO 80302
(303)442-2156
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Investor Presentation to
Shareholders of
DWS RREEF Real Estate Fund
>> Liquidating SRQ does not make economic sense, either in the short or long
term.
>> We believe defeating the liquidation proposal will be beneficial to
shareholders.
Business Judgment, or Lack Thereof
o The current board of directors' business judgment has earned SRQ the
distinction of:
- The worst overall Morningstar(TM) rating [1 of 5 stars] relative to
the fund's peers
- Anti-shareholder measures (poison pills, etc.) implemented by
management without shareholder input
- A liquidation plan that will result in a distribution of assets
significantly less than their per share net asset value (NAV)
- Rash investment decisions that have propelled the sinking ship ever
faster to the bottom
The Board of Directors' Reasons for Liquidating SRQ
o They say that stockholders can "exit the Fund at net asset value".
- They don't tell you that stockholders will pay for the costs of
liquidation: legal fees, brokerage commission fees they incur for
liquidating SRQ's assets, proxy and proxy solicitation fees, potential
corporate tax penalties, and so on. Contrary to their statement, if
the liquidation occurs net asset value per share will be diluted.
- SRQ contains many illiquid or thinly traded holdings. SRQ's biggest
holding is 71,600 shares of Urstadt-Biddle Preferred "C", valued at
about $6mm. To call it "thinly traded" is an understatement--a total
of 700 shares of UBP-PC changed hands in the last year. SRQ carries it
at $83/sh. Last 12-month high was $85.15 and the low was $43.70.
- A big holding was $5.2 mm of Sunstone Hotels (SHO-Pa) -- a REIT that
recently tendered for its Senior notes at 60 cents on the dollar.
Second was $3.8mm of Associated Estates (AEC-B) depositary preferred.
The issue is thinly traded -- 2,475 shares change hands on an average
day -- so it may be hard to find a bid for all the shares still in the
portfolio.
- The Fund's 3/31/09 schedule of investments has a new holding -- "DWS
Real Estate Fund II, Inc." -- with 100 shares at an assigned value of
$1,814,401. It appears that SRQ's management decided to drop the
Canyon Ranch membership interests down into a new subsidiary
corporation so as to cordon off the toxic effect of those interests on
the Fund's tax status as a RIC. This means that the fund is stuck with
the problem of finding a buyer for an unmarketable minority LLC
interest that amounts to about 9% of the fund's stated net asset
value.
o They say that we will realize the value of any trading discount.
- They don't tell you that you will pay the costs for liquidation. This
erodes the final value per share you may receive before taxes, if any.
See above points.
o They say that we can reinvest the proceeds in an investment of our own
choosing.
- They don't tell you that the proceeds from liquidation will be greatly
diminished. Shareholders don't want to call it quits and receive
pennies on the dollar. They want results.
o They say that you will realize a "substantial tax benefit if you purchased
your shares prior to Fall 2008."
- But, they said their plan was in the interests of all stockholders.
Now, are they saying that only certain stockholders get tax benefits?
How is nearly wiping out all of the value of SRQ a "substantial tax
benefit"? This is blatantly unfair to all the stockholders.
The Board's Response Doesn't Give Shareholders the Complete Story
o "Mr. Horejsi has a history of taking over closed-end funds, increasing
management fees and changing [their] investment objectives and policies[.]"
- True for 3 of 4 funds, and all changes have received shareholder
approval (even after removing Mr. Horejsi's percentage of share
ownership); one fund retained its investment adviser (Wellington
Management)
- Mr. Horejsi puts his money where his mouth is
- Positive things have resulted!
o Lipper awards, more flexible investment guidelines, etc.
o In short, these changes that SRQ's current board decries
benefited the shareholders of these closed-end funds
o It appears SRQ's management is resistant to change, even if they
are driving straight off the cliff with the shareholders' money
Change - from consensus or management adoption?
o Funds associated with Mr. Horejsi and his family trusts have implemented
change because of shareholder approval
o SRQ's board considers its changes as "in the best interests of all
shareholders" yet never offered to let the shareholders vote on their
changes
o Liquidation proposal is mandated - it's the only time shareholders have had
a chance to give SRQ management their feedback
Claims vs. Reality
o Tax losses issue
o Anti-shareholder issues implemented by SRQ management without shareholder
approval
o Arbitrary selling if liquidation proceeds; SRQ has large holdings of
illiquid and thinly traded securities. This isn't an auction, it's a garage
sale by the fund at the expense of the shareholders
o The costs of liquidation is a big dent in what shareholders ultimately
receive
The proposal to liquidate SRQ is not reasonable and prudent management
o The Susan L. Ciciora Trust (the "Trust") is the single largest shareholder
of SRQ, owning 16.5% of the fund. As discussed in this presentation, it has
the experience and knowledge to determine whether management for a
closed-end fund is performing adequately on behalf of the stockholders
because it is an educated and experienced stockholder on these very issues.
o We believe shareholders should question whether or not the Board:
- Considered all of the alternatives available
- Considered whether the Board and Managers have a record of good
judgment
o There is no doubt - this situation with SRQ is unique and the decision to
liquidate the fund has no rational economic or other basis other than to
"bury their mistakes."
Background on the Principal Shareholder
o The Trust is the largest shareholder of SRQ (owning 16.5% of the
outstanding shares), and is affiliated with three Lipper award winning
closed end funds:
- The Denali Fund (NYSE: DNY) which won:
o Lipper's 2008 #1 Ranking for 1 year performance for Closed End
Real Estate Funds and
o Lipper's 2008 #1 Ranking for 5 year performance for Closed End
Real Estate Funds*
- The Boulder Growth & Income Fund, Inc. (NYSE: BIF) which won:
o Lipper's 2008 #1 Ranking for 1 year performance for Closed End
Real Estate Funds, and
o Lipper's 2008 #1 Ranking for 5 year performance for Closed End
Core Equity Funds.
- The Boulder Total Return Fund (NYSE BTF) which won:
o Lipper's 2000 #1 Ranking for the 1 year performance for Closed
End Growth & Income Funds
o The Trust's investment manager is Stewart R. Horejsi, the same portfolio
manager for DNY, BIF, and BTF. Mr. Horejsi has an extensive background and
knowledge on investment matters generally, and closed-end funds in
particular.
o Mr. Horejsi is a private investor and is the portfolio manager for two
registered investment advisers, Boulder Investment Advisers, LLC ("BIA")
and Stewart West Indies Trading Company, Ltd., doing business as Stewart
Investment Advisers ("SIA"). BIA and SIA are co-investment advisers to BIF,
DNY, and BTF.
o Because the Trust is a large shareholder of SRQ, it has a direct stake in
the best possible outcome for all of SRQ's shareholders.
o The current board of directors for SRQ has little, if any, economic stake
in the outcome of SRQ - the rationale underlying their decisions regarding
SRQ should be viewed with skepticism.
o Other shareholders of SRQ have contacted the Trust's representatives and
voiced their SUPPORT of the Trust's proposals and are angry that SRQ's
board is not taking their economic interests at heart.
o The board for SRQ wants to "rid itself" of a badly performing fund, and its
proposal to liquidate SRQ creates even more harm to the stockholders
* The Trust took over management of DNY in October 2007.
In light of their poor track record, can shareholders
afford to follow their recommendation to liquidate?
- - The investment managers have done a poor job of managing the fund, losing
82% of the fund's value for the calendar year 2008 and losing 91.5% of the
fund's sister-fund, SRO
- - SRQ's performance is so dismal it has been forced to partially redeem its
leverage to maintain compliance with SEC rules on debt-equity ratios
- - The board for SRQ consistently reviewed and approved an investment advisory
contract for SRQ even while the fund was a perennial loser among other
similarly situated closed-end funds
- - SRQ may have incurred a corporate tax penalty for tax-year 2008, a major
oversight that almost never occurs for any other type of registered
investment company, open or closed-end
Performance that speaks for itself
o Losses have been cataclysmic, surpassing all other similarly situated funds
and "earning" Morningstar's(TM) "worst of" rating, 1 of 5 stars for its
overall, 3-, and 5-year performance.
o SRQ's board attempted to "explain away" these losses by pointing to
"unprecedented and intense volatility" of the market while ignoring the
fact that other similar funds during this time frame have fared much better
(including DNY).
o Liquidation means irreparable economic harm to shareholders as it would
cause SRQ to lose the biggest thing of value it has left, its tax-loss
carry forwards. This asset (estimated at $178 million) could be used to
accumulate future capital gains inside SRQ without any taxable impact on
shareholders.
o The fact that SRQ may have failed to maintain its favorable tax status
under Subchapter M of the Tax Code, along with the board's decision to
"throw away" SRQ's substantial tax loss carry forwards, means that they
lack a fundamental understanding of how to manage a closed-end fund for the
longer term.
What SRQ's Board Proposes
o Liquidating the fund
- Throwing away substantial and valuable tax loss carry-forwards
- Undergoing a "fire sale" of assets that are already pressure from the
cumulative effect of poor management decisions
- Incurring substantial liquidation and wind-up costs, i.e., proxy
solicitations, filing fees, brokerage commissions on asset sales,
legal fees, possible (and punitive) corporate tax rates imposed on
shareholders, etc. The net effect - reduction in the potential
proceeds from the liquidation of SRQ
- Ignoring potential investment opportunities which would be "enhanced"
by SRQ's tax loss carry forwards
Does the SRQ board have a stake in their decisions?
>> As of March 27, 2009, the Fund's directors and officers together owned less
than 1% of the outstanding capital stock of SRQ.*
>> If the board of SRQ has little or no personal economic stake in SRQ, its
decision-making process must be flawed.
DIRECTOR SHARES OWNED
=============================== ==========================
John Ballantine 0
Henry Becton 900
Dawn-Marie Driscoll 200
Keith Fox 0
Paul Freeman 0
Kenneth Froewiss 500
Richard Herring 900
William McClayton 0
Rebecca Rimel 0
Alex Schwarzer 0
William Searcy 0
Jean Stromberg 0
Robert Wadsworth 0
* According to SRQ's proxy materials filed with the SEC on April 6, 2009.
Does the SRQ board have a stake in their decisions?
o The Trust has a substantial (16.5%) economic stake in SRQ and views the
liquidation proposal as a DISASTER for all shareholders
The Trust's Previous Proposals Were Ignored
o In letters to the Board, the Trust proposed to SRQ's board of directors:
- To terminate the investment management agreement between SRQ and
Deutsche Asset Management, Inc. ("DAM")
- To terminate the investment advisory agreement between DAM and RREEF
America, L.L.C..
- To nominate for election directors who have specific experience
dealing with closed-end funds and "re-creating" stockholder value.
- To adopt certain corporate governance standards that are viewed in the
industry as generally "stockholder friendly". Examples include:
o Repealing SRQ's opt-in to the Maryland Unsolicited Takeovers Act
which should result in maximizing board and management
accountability to stockholders
o Reducing the large and unwieldy number of board members from 12
to 5
o Other industry-approved corporate governance proposals
o SRQ ignored these proposals:
- Instead, on April 9, 2009, SRQ issued a press release disclosing that
the board had "opted into" a MD statute which purportedly limits the
voting rights of certain stockholders, adopted a "poison pill" which
is designed to reduce certain stockholder voting rights, and adopted
by-law provisions which, among other things, requires an 80% vote of
the independent Board members to approve an advisory agreement for any
investment adviser affiliated with any "5% stockholder".
- The measures are clearly in response to the Trust's attempts to
effectuate positive changes for all of SRQ's stockholders.
- If the board of SRQ, as stated in their press release, "approved
certain measures to enhance its ability to protect the interests of
stockholders pending stockholder consideration of proposed plans of
liquidation" then why are they are making it even more difficult for
the stockholders to effect positive change?
- Where was the Board when the Fund was losing very nearly all of its
stockholder value and "earning" Morningstar's(TM) rating of 1 of 5
stars for its overall, 3- and 5-year performance history - as compared
with other similarly situated specialty real estate closed-end funds?
- Why is the Board spending stockholder's money on legal fees and other
costs on these restrictive measures when their time could be better
spent addressing the abysmal performance of the Fund and more
efficient ways of fixing the problem?
SRQ's board decision-making process presents a conundrum
o Why are the managers for SRQ fighting so hard, and willing to spend SRQ
stockholders' money, to keep control of SRQ only to obliterate it?
o Bury the dead, and move on?...
o Who mourns the loss? SRQ's stockholders who lose nearly everything based on
the bad decisions of SRQ's board - the SAME board that now wants to
liquidate SRQ!
o The current board's decisions have led to catastrophe; why should their
opinion on liquidation matter now?
What stockholders need to know about SRQ's board decisions
o Liquidating SRQ means substantial hidden assets - the realized and
unrealized tax losses - are lost, instead of being put to good use in
offsetting future gains if SRQ stays in operation.
o The liquidation plan calls for potential corporate tax payments on
liquidation proceeds, meaning that stockholders may not receive full
payment for the liquidated value of their shares because SRQ's management
may have failed to qualify SRQ as a regulated investment company. This is
the result of yet another costly (but entirely foreseeable and avoidable)
mistake by management which significantly and adversely impacts stockholder
value.
o The frictional costs associated with liquidating, winding down and
dissolving SRQ are apt to be high and will be borne directly by
stockholders.
o Liquidation would require redeeming all of SRQ's leverage. Leverage is an
important asset of SRQ, especially today with auction market rates at
historic lows and the market close to the bottom - potentially a perfect
opportunity for leveraged investing.
o Liquidation necessarily forces arbitrary selling at a very low point in the
market. Buying the good deals in this low market seems much more
appropriate. Good buys benefit long-term stockholders for many years
because there are no taxable consequences on gains inside SRQ.
o By what we believe is their inept oversight of the Fund, the incumbent
Board members have made it abundantly clear that their interests are not
aligned with stockholders'. Thus, any recommendation by this Board should
be scrutinized. Not one member of the Board has a significant stake in the
Fund, so no Board member took the financial hit that many stockholders
took.
Other industry insiders think SRQ's board are "burying its mistakes"
o In a well-research commentary on seekingalpha.com published April 21, 2009,
a researcher noted that "Investment managers at Deutsche Bank's DWS mutual
fund complex are trying desperately to bury their mistakes."
- Article can be located at http://seekingalpha.com/article/131943-
the-curious-case-of-dws-investments; it is attached to this
presentation
o The commentary also noted that, "At DWS, however, a single consolidated
board of directors is responsible for overseeing all of the closed-end and
open-end funds in the DWS complex, so each Director of SRO and SRQ sits
simultaneously on the Board of 131 or so other funds. A three hour board
meeting, not counting coffee breaks, would allow about 81 seconds for
discussing the affairs of any particular fund. And considering that each
"independent" director collected upwards of $189,000 a year for their
services to the DWS fund complex, it could be that the watchdogs didn't
bark because they were too busy chewing."
o 81 seconds. 81 seconds.
We recommend shareholders vote AGAINST liquidation of the Fund
o Liquidating SRQ is the final bad decision by SRQ's management in a long
line of decisions.
o Liquidation is a drastic and "irretrievable act" - once it's done, the
stockholders have no recourse to recoup their lost investments
o Fortunately, stockholders have the final say-so and can vote AGAINST this
proposal
Only your last vote counts! Even if you have already voted "for" their plan of
liquidation, you can still change your vote to "AGAINST" by voting again using
the proxy you received earlier, or:
To vote by telephone, call toll-free 1-800-454-8683
To vote by internet, go to www.proxyvote.com
Whether you vote by telephone or internet, use your 12 digit Control Number as
shown on the right side of your proxy card. If you cannot locate your proxy
card, call 1-800-662-5200.
The Susan L. Ciciora Trust (the "Trust") has filed a proxy statement in
connection with the 2009 special meeting of DWS RREEF Real Estate Fund
stockholders. Stockholders are strongly advised to read the Trust's proxy
statement and the accompanying GREEN proxy card, as they contain important
information, including information relating to the participants in such proxy
solicitation. Stockholders can obtain this proxy statement, any amendments or
supplements to the proxy statement and other documents filed by the Trust with
the Securities and Exchange Commission (SEC) for free at the internet website
maintained by the SEC at www.sec.gov. Certain statements contained in this
presentation are based on publicly available information, including information
filed by SRQ with the SEC and other third-party sources. The Trust makes no
claims or representations as to the veracity of information provided by
third-party sources, including SRQ, and stockholders are advised to conduct
their own due diligence with respect to their holdings in SRQ, SEC filings, and
other publicly available information. Forward looking statements: Information
contained in this presentation may contain forward-looking statements that are
based on expectations, estimates, projections and assumptions. Words such as
"expects," "anticipates," "plans," "believes," "scheduled," "estimates" and
variations of these words and similar expressions are intended to identify
forward-looking statements. Forward-looking statements are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995,
as amended. These statements are not guarantees of future performance and
involve certain risks and uncertainties, which are difficult to predict. This
presentation contains information regarding the past performance of certain
funds or securities; past performance is no guarantee of future results.