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Fund
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NYSE MKT
Symbol+
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Number of
Common
Shares
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Number of
Preferred Shares
(Series M, T, W,
Th and F)
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RMR Real Estate Income Fund
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RIF
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7,651,507
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667
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-
+
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The
common shares of the Fund are listed for trading on the NYSE MKT LLC (the "NYSE MKT"). The preferred shares of the Fund are not listed for trading
on any national securities exchange.
The
principal executive office of the Fund is located at Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458.
A
quorum of shareholders is required to take action at the Annual Meeting. A majority of the shares of the Fund entitled to vote on a particular matter at the Annual Meeting, represented
in person or by proxy, will constitute a quorum for voting on that particular matter or transaction of business. Common
shares and preferred shares of the Fund represented by valid proxies or in person will count for the purpose of determining the presence of a quorum for the Annual Meeting. Votes cast by proxy or in
person at the Annual Meeting will be tabulated by the inspector of election appointed for the Annual Meeting.
Broker
non-votes are shares held in street name for which instructions on a particular proposal have not been received from the beneficial owners or other persons entitled to
vote and for which the broker does not have discretionary voting authority. Shares represented by proxies that are marked "ABSTAIN" will be counted as shares present for purposes of determining
whether a quorum is present at the Annual Meeting. Broker non-votes and abstentions will have no effect on the outcome of the vote on Proposal 1 or Proposal 2.
Failure
of a quorum to be present at the Annual Meeting with respect to any particular matter may cause an adjournment of the Annual Meeting with respect to that particular matter and
will subject the Fund to additional proxy solicitation expenses. The Fund's bylaws expressly authorize the chairperson of the Annual Meeting, subject to the review of the Independent Trustees (as
defined below), to adjourn the Annual Meeting for any reason deemed necessary by the chairperson, including if (a) no quorum is present for the transaction of business, (b) the Board or
the chairperson of the Annual Meeting determines that adjournment is necessary or appropriate to enable the shareholders to consider fully information that the Board or the chairperson of the Annual
Meeting determines has not been made sufficiently or timely available to shareholders, or (c) the Board or the chairperson of the Annual Meeting determines that adjournment is otherwise in the
best interests of the Fund. If the Annual Meeting is adjourned, the time and place of the adjourned meeting will be announced at the Annual Meeting.
The
holders of the outstanding common and preferred shares of the Fund are entitled to one vote per share with respect to proposals of the Fund upon which such holders are entitled to
vote.
Approval
of Proposal 1 and Proposal 2 requires the affirmative vote of a majority of all the votes cast on Proposal 1 and Proposal 2, as applicable, at the Annual Meeting.
The
individuals named as proxies on the proxy cards will vote in accordance with your directions with respect to the Fund as indicated thereon if your proxy is received properly
executed. If you properly execute your proxy card and give no voting instructions, your shares will be voted "FOR"
2
Proposal
1 and Proposal 2 to the extent that your shares are entitled to be voted on those proposals. If other matters properly come before the Annual Meeting or any adjournments, postponements or
delays thereof, and if discretionary authority to vote with respect thereto has been conferred by the applicable proxy card, the persons named in the proxy card will vote the proxy in accordance with
their discretion on those matters.
Any
proxies may be revoked at any time before they are voted at the Annual Meeting by timely filing with the Fund a written notice of revocation, by timely delivering to the Fund a duly
executed proxy bearing a later date, by voting over the Internet or by telephone at a later time in the manner provided on the website indicated in the Notice of Internet Availability or by attending
the Annual Meeting and voting in person. Votes provided over the Internet, by telephone or by mail must be received by 11:59 p.m. Eastern time on April 10, 2013. If you hold shares in
the name of a brokerage firm, bank, nominee or other institution, you must provide a legal proxy from that institution in order to vote your shares at the Annual Meeting.
IMPORTANT: If your shares are held in "street name" through a brokerage firm, bank, nominee or other institution, please contact the person responsible for your
account and give instructions on how to vote your shares.
The
proposals for shareholder votes and the recommendations of the Board with respect to Proposal 1 and Proposal 2 are set forth below.
INFORMATION
RELATING TO TRUSTEES
The
Fund's Board is divided into three classes of trustees (each trustee, a "Trustee" and, collectively, the "Trustees"). There is one Trustee (Mr. John
L. Harrington) in Class I whose current term expires in 2014, there are two Trustees in Class II (Messrs. Adam D. Portnoy and Jeffrey P. Somers) whose current terms expire in 2015
and there are two Trustees in Class III (Messrs. Barry M. Portnoy and Arthur G. Koumantzelis) whose current terms expire in 2013. Messrs. Barry M. Portnoy and Arthur G.
Koumantzelis are each being proposed for reelection as a Class III Trustee at the Annual Meeting. Trustees in each class are elected and hold office for a term expiring at the Fund's annual
meeting held in the third year following the year of their election, with each Trustee holding office until the expiration of the term of the relevant class and the election and qualification of his
or her successor, or until he or she sooner dies, resigns, retires, or is disqualified or removed from office. Pursuant to the requirements of the Investment Company Act of 1940, as amended (the "1940
Act"), and the organizational documents of the Fund, holders of preferred shares of the Fund, voting as a separate class, are entitled to elect two Trustees to the Fund's Board (Messrs. Barry
M. Portnoy and Adam D. Portnoy presently represent the holders of the Fund's
preferred shares), and the remaining Trustees of the Fund are elected by the holders of the common shares and preferred shares of the Fund, voting together as a single class.
A
majority of the Trustees are not "interested persons" of the Fund within the meaning of the 1940 Act. Messrs. Harrington, Somers and Koumantzelis are not "interested persons" of
the Fund within the meaning of the 1940 Act, and are sometimes referred to herein as "Independent Trustees."
The
Board has determined that a majority of the Trustees are Independent Trustees pursuant to the corporate governance standards for companies listed on the NYSE MKT. In determining
independence pursuant to NYSE MKT standards each year, the Fund's Board affirmatively determines whether the Independent Trustees have a direct or indirect material relationship with the Fund or its
affiliates other than by reason of their service as an Independent Trustee. When assessing a Trustee's relationship with the Fund or its affiliates, the Board considers all relevant facts and
circumstances, not merely from the Trustee's standpoint but also from that of the persons or organizations with which the Trustee has an affiliation. Material relationships can include commercial,
banking, consulting, legal, accounting, charitable and familial relationships. The Board has determined that Messrs. Harrington,
3
Somers
and Koumantzelis currently qualify as independent under the NYSE MKT rules. Additional information regarding the nominees and Trustees is included in this proxy statement under the heading
"Information Regarding Nominees and Trustees of the Fund."
Proposal 1: Election of Mr. Barry M. Portnoy as a Class III Trustee by the holders of preferred shares, voting as a separate
class.
ELECTION
OF TRUSTEE
In
Proposal 1, holders of preferred shares, voting as a separate class, are being asked to elect Mr. Barry M. Portnoy as a Class III Trustee of the Fund. On
December 13, 2012, the Fund's Board, upon the recommendation of the Nominating Committee of the Fund, nominated Mr. Barry M. Portnoy as a Class III Trustee to stand for reelection
at the Annual Meeting.
The
Board, in making its nomination, and the Nominating Committee of the Fund, in making its recommendation, considered Mr. Barry M. Portnoy's qualifications for service on the
Board. The Board and the Nominating Committee considered the quality of his past services as a Trustee of the Fund, his business and personal experience and reputation for integrity, intelligence,
sound judgment and ability to understand complex financial issues and to make meaningful inquiries; his willingness and ability to devote sufficient time to Board business; his familiarity with the
responsibilities of service on the board of a publicly owned company; and other matters that the Board and the Nominating Committee deemed appropriate. Mr. Barry M. Portnoy is the nominee of
the Board for election by its preferred shareholders, voting as a separate class, at the Annual Meeting to serve until the Fund's 2016 annual meeting, and to hold office until the expiration of the
term of the Class III Trustees and the election and qualification of his successor, or until he sooner dies, resigns, retires, or is disqualified or removed from office.
It
is the intention of the persons named in the proxy cards to vote the shares represented thereby "FOR" the election of Mr. Barry M. Portnoy, unless a proxy card is marked
otherwise. Mr. Barry M. Portnoy has agreed to serve as Trustee of the Fund if elected. However, if Mr. Barry M. Portnoy becomes unable or unwilling to accept nomination for election to
the Board, the proxies will be voted for a substitute nominee designated by the Fund's Board. The Board has no reason to believe that Mr. Barry M. Portnoy will be unable or unwilling to serve.
THE BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE ELECTION OF MR. BARRY M. PORTNOY.
Proposal 2: Election of Mr. Arthur G. Koumantzelis as a Class III Trustee by the holders of
common shares and preferred shares, voting together as a single class.
ELECTION
OF TRUSTEE
In
Proposal 2, holders of common shares and preferred shares, voting together as a single class, are being asked to elect Mr. Arthur G. Koumantzelis as a Class III Trustee
of the Fund. On December 13, 2012, the Nominating Committee of the Fund nominated Mr. Arthur G. Koumantzelis as a Class III Trustee to stand for reelection at the Annual Meeting.
4
In
making its nomination, the Nominating Committee of the Fund considered Mr. Arthur G. Koumantzelis' qualifications for service on the Board. The Nominating Committee considered
the quality of his past services as a Trustee of the Fund, his business and personal experience and reputation for integrity, intelligence, sound judgment and ability to understand complex financial
issues and to make meaningful inquiries; his willingness and ability to devote sufficient time to Board business; his familiarity with the responsibilities of service on the Board of a publicly owned
company; his ability to qualify as an Independent Trustee; and other matters that the Nominating Committee deemed appropriate. Mr. Arthur G. Koumantzelis is the nominee of the Nominating
Committee of the Fund for election by its common shareholders and preferred shareholders, voting together as a single class, at the Annual Meeting to serve until the Fund's 2016 annual meeting, and to
hold office until the expiration of the term of the Class III Trustees and the election and qualification of his successor, or until he sooner dies, resigns, retires, or is disqualified or
removed from office.
It
is the intention of the persons named in the proxy cards to vote the shares represented thereby "FOR" the election of Mr. Arthur G. Koumantzelis, unless a proxy card is marked
otherwise. Mr. Arthur G. Koumantzelis has agreed to serve as Trustee of the Fund if elected. However, if Mr. Arthur G. Koumantzelis becomes unable or unwilling to accept nomination for
election to the Board, the proxies will be voted for a substitute nominee designated by the Fund's Nominating Committee. The Board has no reason to believe that Mr. Arthur G. Koumantzelis will
be unable or unwilling to serve.
THE BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE ELECTION OF MR. ARTHUR G. KOUMANTZELIS.
SOLICITATION OF PROXIES
The Fund will bear the cost of the solicitation of proxies, including the preparation, printing and mailing of proxy materials. In
addition to the solicitation of proxies by Internet, email, telephone and mail, the Fund's Trustees, officers and other employees, and the directors of RMR Advisors, Inc. (the "Advisor"), as
well as the Advisor's officers and other employees, may solicit proxies by personal interview, telephone, facsimile, email or otherwise. They will not be paid any additional compensation for such
solicitation. The Fund will request banks, brokers and other custodians, nominees and fiduciaries to forward proxy materials to the beneficial owners of the shares of the Fund and obtain their voting
instructions. The Fund will reimburse those firms for their expenses.
INFORMATION REGARDING NOMINEES AND TRUSTEES OF THE FUND
Certain information concerning the nominees and Trustees of the Fund is set forth below. Messrs. Barry M. Portnoy and Arthur G.
Koumantzelis, nominees for the Fund, are currently Trustees of the Fund. The Fund is a registered closed end management investment company advised by the Advisor. The "interested persons" of the Fund
(as defined by Section 2(a)(19) of the 1940 Act) who are Trustees of the Fund are noted as "Interested Trustees." The business address of the nominees and Trustees of the Fund, and of the
Advisor, is Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458.
During
2012, the Board of the Fund held seven meetings. No Trustee attended less than 75% of the meetings of the Board or Board committees on which he served. All members of the Board
are encouraged, but not required, to attend the Annual Meeting. All members of the Board attended the annual meeting of shareholders held in 2012.
Biographical
and other information relating to the nominees standing for election at the Annual Meeting is set forth below. Mr. Barry M. Portnoy is an Interested Trustee as a
result of his ownership of, and current positions with, the Advisor and/or the Fund. Mr. Arthur G. Koumantzelis is an
5
Independent
Trustee, and is a member of the Fund's Audit, Compensation and Nominating Committees.
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Name and Year of Birth
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Position held with the
Fund, current
term and length of time
served†
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Principal occupation(s) or employment in
past 5 years and other public company directorships
held by Trustee in past 5 years
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Number of
portfolios in fund
complex
overseen by
nominee
for Trustee
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Interested Trustee Nominee
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Barry M. Portnoy††
(1945)
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Class III Trustee to serve until 2013; Portfolio Manager of the Fund; since 2003
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Director, an owner and Vice President of the Advisor since 2002; Founder, an owner and Director of Reit Management &
Research LLC ("Reit Management") since 1986 and Chairman since 1998; Managing Trustee of CommonWealth REIT since 1986; Managing Trustee of Hospitality Properties Trust since 1995; Managing Trustee of Senior Housing Properties Trust since 1999;
Managing Director of Five Star Quality Care, Inc. since 2001; Managing Director of TravelCenters of America LLC since 2006; Managing Trustee of Government Properties Income Trust since 2009; and Managing Trustee of Select Income REIT since
2011.
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1
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Independent Trustee Nominee
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Arthur G. Koumantzelis
(1930)
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Class III Trustee to serve until 2013; since 2003
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Director of TravelCenters of America LLC since 2007; Director of Five Star Quality Care, Inc. from 2001 to 2010;
Trustee of Hospitality Properties Trust from 1995 to 2007; and President and Chief Executive Officer of Gainesborough Investments LLC from 1998 to 2007.
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1
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Biographical and other information relating to the Trustees who are not standing for election or reelection at the Annual Meeting is set forth
below. Mr. Adam D. Portnoy is an Interested Trustee as a result of his ownership of, and current positions with, the Advisor and/or the Fund. Messrs. Harrington
6
and
Somers are Independent Trustees, and are members of the Fund's Audit, Compensation and Nominating Committees.
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Name and Year of Birth
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Position held with the
Fund, current
term and length of time
served†
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Principal occupation(s) or employment in
past 5 years and other public company directorships
held by Trustee in past 5 years
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Number of
portfolios in fund
complex
overseen by
Trustee
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Interested Trustee
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Adam D. Portnoy††
(1970)
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Class II Trustee to serve until 2015; President and Chief Executive Officer (serves at the discretion of the Board);
Portfolio Manager of the Fund; since 2007 (Class II Trustee since 2009)
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President, an owner and Director of the Advisor since 2007 (Executive Vice President from 2003 to 2007); President, an owner,
Chief Executive Officer and Director of Reit Management since 2006 (Vice President from 2003 to 2006); Managing Trustee of CommonWealth REIT since 2006 (Executive Vice President from 2003 to 2006, President since 2011); Managing Trustee of
Hospitality Properties Trust since 2007; Managing Trustee of Senior Housing Properties Trust since 2007; Managing Trustee of Government Properties Income Trust since 2009 (President from 2009 to 2011); and Managing Trustee of Select Income REIT since
2011.
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1
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Independent Trustees
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John L. Harrington
(1936)
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Class I Trustee to serve until 2014; since 2003
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Trustee of the Yawkey Foundation (a charitable trust) since 1982 (Chairman of the Board from 2002 to 2003 and since 2007) and
Executive Director of the Yawkey Foundation from 1982 to 2006; Trustee of the JRY Trust (a charitable trust) from 1982 to 2009; President of Boston Trust Management Corp. from 1981 to 2006; Chief Executive Officer and General Partner of the Boston
Red Sox Baseball Club from 1986 to 2002 and Vice President and Chief Financial Officer prior to that time; Trustee of Hospitality Properties Trust since 1995; Trustee of Senior Housing Properties Trust since 1999; Principal of Bingham McCutchen
Sports Consulting LLC from 2007 to 2008; and Trustee of Government Properties Income Trust since 2009.
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1
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Jeffrey P. Somers
(1943)
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Class II Trustee to serve until 2015; since 2009
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Of Counsel, Morse, Barnes-Brown & Pendleton, PC (law firm) since 2010 (Equity Member from 1995 to 2009 and Director);
Director of Cantella Management Corp. (holding company for Cantella & Co., Inc., a SEC registered broker dealer) since 2002; Trustee of Senior Housing Properties Trust since 2009; Trustee of Government Properties Income Trust since
2009; Trustee of Select Income REIT since 2012; and Trustee of Pictet Funds (1995-2001).
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1
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-
†
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Includes
length of time served as a Trustee of the Fund's predecessor funds.
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††
-
Adam
D. Portnoy is the son of Barry M. Portnoy.
7
The Board believes that, collectively, the Trustees have balanced and diverse experiences, skills, attributes and qualifications, which allows the
Board to operate effectively in governing the Fund and protecting the interests of shareholders. Among the attributes common to all Trustees is their ability to review critically, evaluate, question
and discuss information provided to them, to interact effectively with the Advisor, other service providers, counsel and independent auditors, and to exercise effective business judgment in the
performance of their duties as Trustees. Each Trustee's ability to perform his duties effectively is evidenced by his educational background or professional training; business, consulting, or public
or charitable service; experience from service as a Trustee of the Fund and its predecessor funds, other investment funds, public companies, real estate investment trusts or
not-for-profit entities or other organizations; ongoing commitment and participation in Board and committee meetings; or other relevant life experiences.
The
table below discusses some of the experiences, qualifications and skills of each of the Trustees that support the conclusion that they should serve (or continue to serve) on the
Board.
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Trustee
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Experience, Qualifications and Skills
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Interested Trustee Nominee:
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Barry M. Portnoy
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The Board concluded that Mr. Portnoy should serve as one of the Fund's Trustees based upon, among other things, his many
years of leadership experience in real estate, administration and financial services operations and the law and his experience in and knowledge of the commercial real estate industry and REITs. Mr. Portnoy's extensive public company director
service, his professional skills and expertise in, among other things, legal and regulatory matters and his experience as chairman of a national law firm have provided him with legal expertise and executive skills valuable to the Board in dealing
with and resolving complex and difficult issues. Mr. Portnoy's experience as Chairman of Reit Management, and Managing Trustee of various real estate investment trusts, provides the Board with insight into the operational, financial and
investment practices of other real estate investment vehicles. The Board also benefits from Mr. Portnoy's experience as Director and Vice President of the Advisor in light of his business leadership and experience. Mr. Portnoy's
long-standing service on the Board also provides him with a specific understanding of the Fund, its operations, and the business and regulatory issues facing the Fund.
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Independent Trustee Nominee:
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Arthur G. Koumantzelis
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The Board concluded that Mr. Koumantzelis should serve as one of the Fund's Independent Trustees because, among other things,
he brings to the Board a wealth of practical business knowledge and leadership as an experienced president, chief financial officer and director/trustee of various public and private companies and accounting and financial reporting knowledge as a
former partner in an international firm of independent public accountants. In particular, because of Mr. Koumantzelis' extensive service as the president of a private investment company, as a trustee of various real estate investment trusts and
as a director of a real estate based operating company, he is able to provide the Board with insight regarding the management of pools of real estate related assets. Moreover, Mr. Koumantzelis has served as the chief financial officer of a
company required to file periodic reports with the SEC and this, among other qualifications, qualifies Mr. Koumantzelis as the Fund's audit committee financial expert. Mr. Koumantzelis' long-standing service on the Board also provides him
with a specific understanding of the Fund, its operations, and the business and regulatory issues facing the Fund. Mr. Koumantzelis' independence from the Fund and the Advisor also qualifies him to be a member of the Audit, Compensation and
Nominating Committees.
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8
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Trustee
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Experience, Qualifications and Skills
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Interested Trustee:
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Adam D. Portnoy
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The Board concluded that Mr. Portnoy should serve as one of the Fund's Trustees based upon, among other things, his
extensive experience in and knowledge of the commercial real estate industry and REITs, his leadership position with Reit Management and the Advisor, his public company director service, his demonstrated management ability, his experience in
investment banking and private equity, his government organization service, his institutional knowledge earned through service on the Board and in key leadership positions with the Advisor. The Board benefits from Mr. Portnoy's experience as
President and Chief Executive Officer of Reit Management and the Advisor in light of his business leadership and experience. Mr. Portnoy's experiences as the Managing Trustee of various real estate investment trusts provide the Board with
practical business knowledge and leadership in the real estate investment management industry. Mr. Portnoy's long-standing service on the Board also provides him with a specific understanding of the Fund, its operations, and the business and
regulatory issues facing the Fund.
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Independent Trustees:
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John L. Harrington
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The Board concluded that Mr. Harrington should serve as one of the Fund's Independent Trustees based upon, among other
things, his many years of experience as a president, chief executive officer and director/trustee of various public and private companies and charitable trusts. Mr. Harrington's experience as president of Boston Trust Management Corp., an
investment management company, as a former director of Fleet Bank, N.A. and as trustee of a various real estate investment trusts provides the Board with the benefit of his experience with the management practices of other financial companies and
expertise with respect to real estate investment trusts. Through his many executive and finance related positions, including but not limited to responsibilities he undertook during his long tenure in management of professional baseball,
Mr. Harrington developed professional skills and expertise in management, accounting, finance and risk management. Mr. Harrington is also licensed as a Certified Public Accountant and was a former professor of accounting at Boston College.
Mr. Harrington's long-standing service on the Board also provides him with a specific understanding of the Fund, its operations, and the business and regulatory issues facing the Fund. Mr. Harrington's independence from the Fund and the
Advisor also qualifies him to serve as a member of the Audit, Compensation and Nominating Committees.
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Jeffrey P. Somers
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The Board concluded that Mr. Somers should serve as one of the Fund's Independent Trustees because, among other things, he
brings to the Board broad and diverse knowledge of the legal and compliance matters pertaining to investment companies as a result of his prior experience serving on the boards of registered investment companies, his work as an SEC staff attorney and
more than 30 years of business law experience, including in general corporate governance and securities matters and securities laws compliance for investment advisers and broker-dealers. Mr. Somers's experience as a trustee of two real
estate investment trusts allows him to provide the Board with added insight into the management practices of other real estate focused investment vehicles and expertise with respect to real estate investment trusts. Mr. Somers's leadership roles
as a managing member of two law firms provided him with management and executive experience valuable to the Board in fulfilling their oversight responsibilities. Mr. Somers's past service on the Board also provides him with a specific
understanding of the Fund, its operations, and the business and regulatory issues facing the Fund. Mr. Somers's independence from the Fund and the Advisor also qualifies him for service as a member of the Audit, Compensation and Nominating
Committees.
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9
COMPENSATION OF TRUSTEES
Interested Trustees of the Fund, as defined in the 1940 Act, receive no compensation for services as a Trustee from the Fund. The
following table sets forth the compensation of the Independent Trustees from the Fund for service to the Fund for the fiscal year ended December 31, 2012.
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RIF
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John L. Harrington
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$
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12,000
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Arthur G. Koumantzelis
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$
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11,000
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Jeffrey P. Somers
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$
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11,500
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-
*
-
As
of December 31, 2012, the Fund is the only fund in the fund complex.
Until
changed by a vote of the Compensation Committee of the Board, the compensation payable to each Independent Trustee is as follows.
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Timing and Description
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Amount
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•
At the first
meeting of the Board following the Annual Meeting of shareholders, an annual retainer.
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$
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5,000
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•
At the first
meeting of the Board following the Annual Meeting of shareholders, an annual retainer paid to the Audit Committee Chair.
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$
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1,000
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•
For each
meeting of the Board or a Board committee which is attended, an attendance fee, per meeting, up to a maximum of $1,000 per meeting day.
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$
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500
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In
addition to the compensation paid to Independent Trustees, the Fund reimburses all Trustees for expenses incurred in connection with their duties as Trustees, including for approved
attendance at continuing education programs.
COMMUNICATIONS WITH TRUSTEES
Any shareholder of the Fund or other interested party of the Fund who desires to communicate with the Fund's Trustees, individually or
as a group, may do so by visiting the Fund's website at
www.rmrfunds.com
, by calling the Fund's toll free confidential message system at
(866) 511-5038, or by writing to the party for whom the communication is intended, in care of the Chief Compliance Officer and Director of Internal Audit, RMR Funds, Two Newton
Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458. The Chief Compliance Officer and Director of Internal Audit will deliver communications to the appropriate persons.
BOARD LEADERSHIP STRUCTURE AND COMMITTEES
The Fund's Board is comprised of both Independent Trustees and Managing Trustees (as defined below), with a majority being Independent
Trustees. The Independent Trustees are not involved in the day to day activities of the Fund, are not employees of the Advisor and are persons who qualify as independent under the Fund's declaration
of trust, bylaws, applicable rules of the NYSE MKT and applicable laws and regulations relating to registered investment companies. The "Managing Trustees" have been employees, officers or directors
of the Advisor or involved in the day to day activities of the Fund for at least one year. The Fund's Board of Trustees is composed of three Independent Trustees and two Managing Trustees. The Fund's
President is a member of the Board of Trustees. The Fund's Treasurer is not a member of the Board of Trustees, but he regularly attends Board meetings, as does the Fund's Chief Compliance Officer and
Director of Internal Audit. Other officers of the Advisor also sometimes attend Board meetings at the invitation of the Board.
10
The
Audit, Compensation and Nominating Committees are comprised solely of Independent Trustees and an Independent Trustee serves as Chair of each such committee. These three standing
committees have responsibilities related to leadership and governance, including among other things: (i) the Fund's Audit Committee reviews financial reports, oversees accounting and financial
reporting processes, selects independent accountants, determines the compensation paid to independent accountants and assists the Fund's Board with its oversight of the internal audit function and
compliance with legal and regulatory requirements; (ii) the Fund's Compensation Committee annually evaluates the performance of the Fund's Chief Compliance Officer and Director of Internal
Audit and approves the compensation the Fund pays to him and recommends to the Board compensation to be paid to the Fund's Independent Trustees; and (iii) the Fund's Nominating Committee
considers nominees to serve on the
Fund's Board and selects, or recommends that the Board select, nominees for election to the Board. The Chairs of the Audit, Compensation and Nominating Committees set the agenda for their respective
committee meetings, but committee members, the Managing Trustees or members of the management may suggest agenda items to be considered by these committees.
The
Fund does not have a Chairman of the Board or a lead Independent Trustee. The President, any Managing Trustee or any two Trustees then in office may call a special meeting of the
Trustees. The Managing Trustees (of whom the President is one), in consultation with the Treasurer, set the agenda for the Board meetings, and any Independent Trustee may place an item on an agenda by
providing notice to a Managing Trustee, or the Treasurer. Discussions at Board meetings are led by the Managing Trustee or Independent Trustee who is most knowledgeable on a subject. The Fund's Board
is small, which facilitates informal discussions and communication from management to the Board and among Trustees. The Independent Trustees meet to consider the business of the Fund without the
attendance of the Fund's Managing Trustees or officers, and they meet separately with the Fund's officers, with its Chief Compliance Officer and Director of Internal Audit and with the Fund's outside
accountants. In such meetings of the Independent Trustees, the Chair of the Audit Committee presides unless the Independent Trustees determine otherwise.
The
Board of the Fund seeks to combine appropriate leadership with the ability to conduct business efficiently and with appropriate care and attention given the specific characteristics
and circumstances of the Fund. In particular, the Board of the Fund is small—comprised of only five members—and the Board believes that this structure facilitates informal
discussions and communication from management to the Board and among Trustees. Additionally, the Fund is relatively small in terms of assets under management, and the Board believes that this
structure allows it to provide oversight of and be involved in the critical aspects of the Fund's management on an ongoing and cost efficient basis.
The
Fund's Board oversees risk as part of its general oversight of the Fund, and oversight of risk is addressed as part of various Board and Board committee activities and through
regular and special Board and Board committee meetings. The actual day to day business of the Fund is conducted by the Advisor, and the Advisor implements risk management in its activities. In
discharging their oversight responsibilities, the Fund's Board and Board committees regularly review a wide range of reports provided to them by the Advisor and other service providers, including
reports on market and industry conditions, operating and compliance reports, financial reports, reports on risk management activities, regulatory and legislative updates that may impact the Fund,
legal proceedings updates and reports on other business related matters, and discusses such matters among themselves and with representatives of the Advisor, counsel and its independent accountants.
The Fund's Audit Committee performs a lead role in helping the Board fulfill its responsibilities for oversight of the financial reporting, internal audit function, risk management and the compliance
with legal and regulatory requirements. The Fund's Board and Audit Committee review periodic reports from an independent registered public accounting firm regarding potential risks, including risks
related to its internal controls. The Fund's Audit Committee also annually reviews, approves and oversees an internal audit plan developed by the Fund's Chief Compliance Officer and Director of
Internal Audit with the goal of helping the Fund
11
systematically
evaluate the effectiveness of its risk management, control and governance processes, and periodically meets with the Chief Compliance Officer and Director of Internal Audit to review
the results of its internal audits, and directs or recommends to the Board actions or changes it determines appropriate to enhance or improve the effectiveness of its risk management. The Fund's
Compensation Committee also evaluates the performance of the Chief Compliance Officer and Director of Internal Audit.
While
a number of risk management functions are performed, it is not possible to identify all of the risks that may affect the Fund or to develop processes and controls to eliminate all
risks and their possible effects, and processes and controls employed to address risks may be limited in their effectiveness. Moreover, it is necessary for the Fund to bear certain risks to achieve
its objectives. As a result of the foregoing and other factors, the Fund's ability to manage risk is subject to substantial limitations.
As
discussed above, the Fund has an Audit Committee, a Compensation Committee and a Nominating Committee. The Board has adopted charters for each of these committees. Copies of the
respective charters of the Audit Committee, Compensation Committee and Nominating Committee are available on the Fund's website at
www.rmrfunds.com
.
Each of these Board committees is composed of Messrs. Harrington, Koumantzelis and Somers, the Independent Trustees, who are independent under applicable NYSE MKT listing standards.
The
primary function of the Audit Committee is to assist the Board's oversight of matters relating to: the integrity of financial statements; legal and regulatory compliance; the
qualifications, independence, performance and fees of independent accountants; accounting, financial reporting and internal control processes; and the appointment, duties and compensation of internal
audit personnel. Messrs. Harrington and Somers each serve simultaneously on the audit committees of more than three public companies; however, the Board has determined that such simultaneous
service does not impair the ability of Messrs. Harrington and Somers to effectively serve on the Fund's Audit Committee. The Audit Committee is directly responsible for the selection of independent
accountants. The Board has determined that Mr. Koumantzelis is "independent" as defined by applicable laws and regulations governing registered investment companies and the rules of the NYSE
MKT, and based upon his education and experience, possesses the requisite qualifications for designation, and has so designated him as the Fund's audit committee financial expert. During 2012, the
Audit Committee of the Fund held four meetings.
The
primary function of the Compensation Committee is to determine and review the fees paid by the Fund to Independent Trustees and to recommend to the Fund's Board the compensation
payable to the Chief Compliance Officer and Director of Internal Audit of the Fund. During 2012, the Compensation Committee of the Fund held two meetings.
The
primary function of the Fund's Nominating Committee is to (i) identify individuals qualified to become Independent Trustees and to select Independent Trustee nominees for each
annual meeting of the Fund's shareholders or when vacancies occur and (ii) consider recommendations by the Fund's shareholders of nominees for election to the Board. The Fund's Nominating
Committee may also generally consider the qualifications of Managing Trustee nominees for each annual meeting of the Fund's shareholders and recommend to the Board whether the Board should nominate
such persons for election by the Fund's shareholders. During 2012, the Nominating Committee of the Fund held two meetings.