As filed with the Securities and Exchange Commission on April 29, 2011
File Nos. 333-120705
811-21677
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
COHEN & STEERS INTERNATIONAL REALTY FUND, INC.
(Exact Name of Registrant as Specified in Charter)
280 Park Avenue, New York, NY 10017
(Address of Principal Executive Office) (Zip Code)
Registrants Telephone Number, including Area Code: (212) 832-3232
Copy To:
Tina M. Payne | Stuart H. Coleman, Esq. | |
Cohen & Steers International Realty Fund, Inc. | Stroock & Stroock & Lavan LLP | |
280 Park Avenue New York, NY 10017 |
180 Maiden Lane New York, NY 10038 |
|
(Name and Address of Agent of Service of Process) |
Approximate date of proposed public offering: as soon as practicable after the effective date of this registration statement.
It is proposed that this filing will become effective (check appropriate box):
¨ | immediately upon filing pursuant to paragraph (b) |
x | on April 29, 2011 pursuant to paragraph (b) |
¨ | 60 days after filing pursuant to paragraph (a)(1) |
¨ | on (date) pursuant to paragraph (a)(1) |
¨ | 75 days after filing pursuant to paragraph (a)(2) |
¨ | on (date) pursuant to paragraph (a)(2) of Rule 485 |
If appropriate, check the following box:
¨ | this post-effective amendment designates a new effective date for a previously filed post-effective amendment. |
280 PARK AVENUE
NEW YORK, NEW YORK 10017
CLASS A (IRFAX) AND CLASS C (IRFCX) SHARES
PROSPECTUS
Advisor
Cohen & Steers Capital Management, Inc.
280 Park Avenue
New York, New York 10017
Telephone: (212) 832-3232
Transfer Agent
Boston Financial Data Services
P.O. Box 8123
Boston, Massachusetts 02266-8123
Telephone: (800) 437-9912
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF THE FUNDS SHARES OR DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANYONE WHO INDICATES OTHERWISE IS COMMITTING A CRIME.
MAY 1, 2011
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Payments to Broker-Dealers and Other Financial Intermediaries |
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INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS |
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COHEN & STEERS INTERNATIONAL REALTY FUND, INC.
The investment objective of Cohen & Steers International Realty Fund, Inc. (the Fund) is total return.
This table describes the fees and expenses that you could pay if you buy and hold shares of the Fund. You may qualify for sales charge discounts on Class A shares if you and your family invest, or agree to invest in the future, at least $100,000 in Cohen & Steers funds. More information about these and other discounts is available from your financial intermediary and in How to Purchase, Exchange and Sell Fund SharesPurchasing the Class of Fund Shares that is Best for You on page 18 of the Funds prospectus (the Prospectus) and Reducing the Initial Sales Load on Class A Shares on page 68 of the Funds statement of additional information (the SAI).
Class A |
Class C |
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Shareholder Fees (fees paid directly from your investment): |
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Maximum sales charge (load) imposed on purchases (as a percentage of offering price) |
4.50% | None | ||
Maximum deferred sales charge (load) (as a percentage of original purchase price or redemption proceeds, whichever is lower) |
None | 1% (1) | ||
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment): |
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Class A |
Class C |
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Management Fee |
0.95% | 0.95% | ||
Distribution (12b-1) Fees |
0.25% | 0.75% | ||
Other Expenses |
0.31% | 0.31% | ||
Service Fee |
0.10% | 0.25% | ||
Total Annual Fund Operating Expenses |
1.61% | 2.26% | ||
(1) | For Class C shares, the maximum deferred sales charge does not apply after one year. |
E XAMPLE
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Funds operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 Year |
3 Years |
5 Years |
10 Years |
|||||||||||||
Class A shares |
$ | 606 | $ | 935 | $ | 1,287 | $ | 2,275 | ||||||||
Class C shares |
||||||||||||||||
Assuming redemption at the end of the period |
$ | 329 | $ | 706 | $ | 1,210 | $ | 2,595 | ||||||||
Assuming no redemption at the end of the period |
$ | 229 | $ | 706 | $ | 1,210 | $ | 2,595 |
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P ORTFOLIO T URNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the Funds portfolio turnover rate was 84% of the average value of its portfolio.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests at least 80% of its total assets in a portfolio of non-U.S. real estate equity securities. Real estate equity securities include common stocks, preferred stocks and other equity securities issued by real estate companies, including real estate investment trusts (REITs) and similar REIT-like entities. A real estate company is one that (i) derives at least 50% of its revenue from the ownership, construction, financing, management or sale of commercial, industrial or residential real estate; or (ii) has at least 50% of its assets in such real estate. REITs are companies that own interests in real estate or in real estate related loans or other interests, and their revenue primarily consists of rent derived from owned, income producing real estate properties and capital gains from the sale of such properties. A REIT in the U.S. is generally not taxed on income distributed to shareholders so long as it meets certain tax related requirements, including the requirement that it distribute substantially all of its taxable income to its shareholders. REIT-like entities are organized outside of the U.S. and have operations and receive tax treatment similar to that of U.S. REITs. While the Fund is not limited to investing in REIT-like entities, it is expected that the Fund will invest a significant percentage of its portfolio in these types of entities.
Under normal market conditions, the Fund expects to have investments across different countries and regions. The Fund may, however, invest up to 20% of its total assets in the equity securities of U.S. REITs and other U.S. real estate companies. In addition, the Fund may invest up to 15% of its total assets in real estate equity securities of companies domiciled in emerging market countries.
The Fund may also invest in securities of foreign companies in the form of American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and European Depositary Receipts (EDRs).
The Fund may engage in foreign currency transactions, including foreign currency forward contracts, futures contracts, options, swaps and other similar strategic transactions in connection with its investments in securities of non-U.S. companies.
Investment Risk. An investment in the Fund is subject to investment risk, including the possible loss of the entire principal amount that you invest.
Market Risk. Your investment in Fund shares represents an indirect investment in the REIT shares and other real estate securities owned by the Fund. The value of these equity securities, like other investments, may move up or down, sometimes rapidly and unpredictably. Your Fund shares at any point in time may be worth less than what you invested, even after taking into account the reinvestment of Fund dividends and distributions.
Common Stock Risk. While common stock has historically generated higher average returns than fixed-income securities, common stock has also experienced significantly more volatility in those returns. An adverse event, such as an unfavorable earnings report, may depress the value of common stock held by
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the Fund. Also, the price of common stock is sensitive to general movements in the stock market. A drop in the stock market may depress the price of common stock held by the Fund.
Real Estate Market Risk. Since the Fund concentrates its assets in the real estate industry, your investment in the Fund will be closely linked to the performance of the real estate markets. Property values may fall due to increasing vacancies or declining rents resulting from unanticipated economic, legal, cultural or technological developments. Real estate company prices also may drop because of the failure of borrowers to pay their loans and poor management.
REIT Risk. REITs are dependent upon management skills and generally may not be diversified. REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidation. In addition, REITs could possibly fail to qualify for pass-through of income under applicable tax law. Various factors may also adversely affect a borrowers or a lessees 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.
Foreign (Non-U.S.) and Emerging Market Securities Risk. Risks of investing in foreign securities include currency risks, future political and economic developments and possible imposition of foreign withholding taxes on income payable on the securities. In addition, there may be less publicly available information about a foreign issuer than about a domestic issuer, and foreign issuers may not be subject to the same accounting, auditing and financial recordkeeping standards and requirements as domestic issuers.
Securities of companies in emerging markets may be more volatile than those of companies in more developed markets. Investing in securities of companies in emerging markets may entail special risks relating to potential economic, political or social instability and the risks of expropriation, nationalization, confiscation or the imposition of restrictions on foreign investment, the lack of hedging instruments, and repatriation of capital invested. The securities and real estate markets of some emerging market countries have in the past sometimes experienced substantial market disruptions and may do so in the future.
Smaller Companies Risk. Real estate companies 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 companys stock, which means that buy and sell transactions in that stock could have a larger impact on the stocks 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 companys stock price than is the case for a larger company. Further, smaller company stocks may perform in different cycles than larger company stocks. Accordingly, real estate company shares can be more volatile thanand at times will perform differently fromlarge company stocks.
Foreign Currency and Currency Hedging Risk. Although the Fund will report its net asset value (NAV) and pay dividends in U.S. dollars, foreign securities often are purchased with and make any dividend and interest payments in foreign currencies. Therefore, the Funds investments in foreign securities will be subject to foreign currency risk, which means that the Funds NAV could decline solely as a result of changes in the exchange rates between foreign currencies and the U.S. dollar. Certain foreign countries may impose restrictions on the ability of issuers of foreign securities to make payment of principal, dividends and interest to investors located outside the country, due to blockage of foreign currency exchanges or otherwise.
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The Fund may, but is not required to, engage in various investments that are designed to hedge the Funds foreign currency risks, including foreign currency forward contracts, foreign currency futures contracts, put and call options on foreign currencies and foreign currency swaps. Such transactions may reduce returns or increase volatility, perhaps substantially.
Preferred Securities Risk . There are various risks associated with investing in preferred securities, including credit risk, interest rate risk, deferral and omission of distributions, subordination to bonds and other debt securities in a companys capital structure, call, reinvestment and income risk, limited liquidity, limited voting rights and special redemption rights.
Non-Diversification Risk. As a non-diversified investment company, the Fund may invest in fewer individual companies than a diversified investment company. Because a non-diversified portfolio is more likely to experience large market price fluctuations, the Fund may be subject to a greater risk of loss than a fund that has a diversified portfolio.
Your investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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The following bar chart and table provide some indication of the risks of investing in the Fund. The bar chart shows changes in the Funds performance from year to year for the Class A shares. The table shows how the Funds average annual returns compare with the performance of selected broad market indexes over various time periods. Past performance (both before and after taxes) is not, however, an indication as to how the Fund may perform in the future. Updated performance is available at cohenandsteers.com or by calling (800) 330-7348.
The bar chart does not reflect the deduction of sales charges imposed on Class A shares; if these amounts were reflected, returns would be less than those shown.
C LASS A S HARES
A NNUAL T OTAL R ETURNS *
Highest quarterly return during this period: 36.40% (quarter ended June 30, 2009)
Lowest quarterly return during this period: -26.29% (quarter ended December 31, 2008)
* | The annual total returns for the Class C shares of the Fund are substantially similar to the annual returns of the Class A shares, because the assets of both classes are invested in the same portfolio of securities. The annual total returns differ only to the extent that the classes do not have the same expenses. |
Average Annual Total Returns
(for periods ended December 31, 2010)
1 Year |
5 Years |
Since
Inception
|
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Class A Shares |
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Return Before Taxes |
8.37% | 1.15% | 3.78% | |||||||||
Return After Taxes on Distributions |
6.32% | -0.25% | 2.49% | |||||||||
Return After Taxes on Distributions and Sale of Fund Shares |
5.85% | 0.43% | 2.74% | |||||||||
Class C Shares |
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Return Before Taxes |
11.72% | 1.43% | 3.94% | |||||||||
FTSE EPRA/NAREIT Developed Ex-U.S. Real Estate Index (reflects no deduction for fees, expenses or taxes) |
15.63% | 2.89% | 6.05% | |||||||||
S&P 500 ® Index (reflects no deduction for fees, expenses or taxes) (1) |
15.06% | 2.29% | 3.23% |
(1) | The S&P 500 Index is an unmanaged index of common stocks that is frequently used as a general measure of stock market performance. |
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After-tax returns are shown for Class A shares only. After-tax returns for Class C shares will vary. After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investors tax situation and may differ from those shown, and the after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
Advisor
Cohen & Steers Capital Management, Inc. (the Advisor)
Subadvisors
Cohen & Steers Europe S.A. (CNS Europe)
Cohen & Steers Asia Limited (CNS Asia)
Cohen & Steers UK Limited (CNS UK)
Portfolio Managers
The Funds portfolio managers are:
· |
Martin Cohen Director and Co-Chairman of the Fund. Mr. Cohen has been a portfolio manager of the Fund since inception. |
· |
Robert H. Steers Director and Co-Chairman of the Fund. Mr. Steers has been a portfolio manager of the Fund since inception. |
· |
Joseph M. Harvey Vice President of the Fund. Mr. Harvey has been a portfolio manager of the Fund since inception. |
· |
Scott Crowe Vice President of the Fund. Mr. Crowe has been a portfolio manager of the Fund since 2008. |
· |
Gerios J.M. Rovers Mr. Rovers has been a portfolio manager of the Fund since inception. |
· |
Luke Sullivan Mr. Sullivan has been a portfolio manager of the Fund since 2008. |
PURCHASE AND SALE OF FUND SHARES
You may open an account with the Fund with a minimum investment of $1,000. Additional investments must be at least $250.
You may purchase, redeem or exchange shares of the Fund on any business day, which is any day the New York Stock Exchange (NYSE) is open for business, by written request, wire transfer (call (800) 437-9912 for instructions) or telephone. You may purchase, redeem or exchange shares of the Fund either through a financial intermediary or directly through Cohen & Steers Securities, LLC, the Funds distributor (the Distributor). For accounts opened directly through the Distributor, a completed and signed Subscription Agreement is required for the initial account opened with the Fund.
Please mail the signed Subscription Agreement to:
Boston Financial Data Services
Cohen & Steers Funds
P.O. Box 8123
Boston, Massachusetts 02266-8123
Phone: (800) 437-9912
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The Funds distributions are taxable as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and/or its Advisor or Distributor may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your individual financial adviser to recommend the Fund over another investment. Ask your individual financial adviser or visit your financial intermediarys Web site for more information.
The Fund may be suitable for you if you are seeking:
· |
to add exposure to non-U.S. real estate equity securities to your portfolio; |
· |
a fund that may perform differently than other types of stock or bond funds because of the Funds focus on equity securities of non-U.S. real estate companies; and |
· |
a fund offering the potential for both current income and long-term capital appreciation. |
The Fund is designed for long-term investors. You should not invest in the Fund unless your investment horizon is at least two months. The Fund will take reasonable steps to identify and reject orders from market timers.
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
The investment objective of the Fund is total return. In pursuing total return, the Fund seeks both capital appreciation and current income with approximately equal emphasis. There can be no assurance that the Fund will achieve its investment objective. The Fund may change its investment objective without shareholder approval, although it has no current intention to do so. Shareholders will be provided with at least 60 days prior written notice of any change to the Funds investment objective. The Fund will concentrate its investments in the real estate industry.
PRINCIPAL INVESTMENT STRATEGIES
In managing the Funds portfolio, the Advisor and CNS Asia, CNS UK and CNS Europe, the Funds sub-investment advisors (the Subadvisors) adhere to an integrated, bottom-up, relative value investment process. A proprietary valuation model ranks international real estate securities on price-to-NAV, which the Advisor and Subadvisors believe is the primary determinant of real estate security valuation, and guides a bottom-up portfolio construction process. Analysts incorporate both
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quantitative and qualitative analysis in their NAV estimates. The company research process includes an evaluation of management, strategy, property quality, financial strength and corporate structure. In addition to the NAV model, portfolio managers may use secondary valuation tools including cash flow multiple/growth or discounted cash flow models. Judgments with respect to risk control, diversification, liquidity and other factors overlay the models output and drive the portfolio managers investment decisions.
The following are the Funds principal investment strategies.
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 market conditions, the Fund will invest at least 80% of its total assets in a portfolio of equity securities issued by non-U.S. real estate companies (including REITs and REIT-like entities).
These equity securities in which the Fund invests can consist of:
· |
common stocks; |
· |
rights or warrants to purchase common stocks; |
· |
securities convertible into common stocks where the conversion feature represents, in the view of the Advisor or a Subadvisor, a significant element of the securities value; and |
· |
preferred stocks. |
Under normal market conditions, the Fund expects to have investments in real estate equity securities of companies across different countries and regions. In addition, the Fund will normally invest in real estate equity securities primarily in developed countries, but may invest up to 15% of its total assets in real estate equity securities of companies domiciled in emerging market countries.
Foreign (Non-U.S.) Real Estate Companies and Depositary Receipts
The Fund will invest at least 80% of its assets in real estate companies outside the U.S. These companies may have characteristics that are similar to a REIT. REITs are companies that own interests in real estate or in real estate related loans or other interests, and their revenue primarily consists of rent derived from owned, income producing real estate properties and capital gains from the sale of such properties. A REIT in the U.S. is generally not taxed on income distributed to shareholders so long as it meets certain tax related requirements, including the requirement that it distribute substantially all of its taxable income to its shareholders. A number of countries around the world have adopted, or are considering adopting, similar REIT-like structures pursuant to which these companies are not subject to corporate income tax in their home countries provided they distribute a significant percentage of their net income each year to shareholders and meet certain other requirements. While the Fund is not limited to investing in foreign-domiciled REIT-like entities, it is expected that the Fund will invest a significant percentage of its portfolio in these types of entities.
The Fund may also invest in securities of foreign companies in the form of ADRs, GDRs and EDRs. Generally, ADRs in registered form are dollar denominated securities designed for use in the U.S. securities markets, which represent and may be converted into an underlying foreign security. GDRs, in bearer form, are designed for use outside the United States. EDRs, in bearer form, are designed for use in the European securities markets.
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Real Estate Investment Trusts (REITs)
The Fund may invest up to 20% of its total assets in U.S. real estate equity securities, including U.S. REITs. REITs are companies that own interests in real estate or in real estate related loans or other interests, and REITs revenue primarily consists of rent derived from owned, income producing real estate properties and capital gains from the sale of such properties. A REIT is generally not taxed on income distributed to shareholders so long as it meets certain tax related requirements, including the requirement that it distribute substantially all of its taxable income to such shareholders (other than net capital gains for each taxable year). As a result, REITs tend to pay relatively higher dividends than other types of companies, and the Fund intends to use these REIT dividends in an effort to meet the current income goal of its investment objective. Dividends paid by REITs will not be eligible for the dividends received deduction under Section 243 of the Internal Revenue Code of 1986, as amended (the Code), and are generally not considered qualified dividend income eligible for reduced rates of taxation. The dividends received deduction generally allows corporations to deduct 70% of the income they receive from dividends that are paid out of earnings and profits of the issuer. Individuals will generally be taxed at long-term capital gain rates on qualified dividend income for taxable years beginning on or before December 31, 2012.
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. The Fund invests primarily in equity REITs or REIT-like entities.
Currency Hedging Transactions
In order to hedge against foreign currency exchange rate risks from adverse changes in the relationship between the U.S. dollar and foreign currencies (including to hedge against anticipated future changes which otherwise might adversely affect the prices of securities that the Fund intends to purchase at a later date), the Fund may enter into foreign currency forward contracts, foreign currency futures contracts and foreign currency swaps, as well as purchase put or call options on foreign currencies, as described below and engage in other similar strategic transactions. The Fund may also conduct its foreign currency exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market.
A foreign currency forward contract is an obligation to purchase or sell a specific currency for an agreed price on a future date which is individually negotiated and privately traded by currency traders and their customers. A foreign currency futures contract is an exchange-traded contract for the purchase or sale of a specified foreign currency at a specified price at a future date. A foreign currency swap is an agreement between two parties to exchange principal and interest payments on a loan made in one currency for principal and interest payments of a loan of equal value in another currency. The Fund may enter into a foreign currency forward contract, foreign currency futures contract or foreign currency swap, or purchase a currency option, for example, when it enters into a contract for the purchase or sale of a security denominated in a foreign currency or expects to receive a dividend or interest payment on a portfolio holding, in order to lock in the U.S. dollar value of the security or payment. In addition, the Fund may enter into a foreign currency forward contract, futures contract or swap or purchase a currency option in respect of a currency which acts as a proxy for a currency in which the Funds portfolio holdings or anticipated holdings are denominated. This second investment practice is generally referred to as cross-hedging. To the extent forward contracts, swaps or options would be deemed to be illiquid, they will be included in the maximum limitation of 15% of net assets invested in illiquid securities.
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Investment Risk
An investment in the Fund is subject to investment risk, including the possible loss of the entire principal amount that you invest.
Market Risk
Your investment in Fund shares represents an indirect investment in the REIT shares and other real estate securities owned by the Fund. The value of these equity securities, like other investments, may move up or down, sometimes rapidly and unpredictably. Your Fund shares at any point in time may be worth less than what you invested, even after taking into account the reinvestment of Fund dividends and distributions.
Common Stock Risk
While common stock has historically generated higher average returns than fixed-income securities, common stock has also experienced significantly more volatility in those returns. An adverse event, such as an unfavorable earnings report, may depress the value of common stock held by the Fund. Also, the price of common stock is sensitive to general movements in the stock market. A drop in the stock market may depress the price of common stock held by the Fund.
General Risks of Securities Linked to the Real Estate Industry
The Fund will not invest in real estate directly, but only in securities issued by real estate companies. However, because of its policy of concentration 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. |
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Thus, the value of the Funds shares may change at different rates compared to the value of shares of a
Risks of Investing in REITs
In addition to the risks of securities linked to the real estate industry, REITs are subject to certain other risks related to their structure and focus. REITs are dependent upon management skills and generally may not be diversified. REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidation. In addition, REITs could possibly fail to qualify for pass-through of income under applicable tax law, or to maintain their exemptions from registration under the Investment Company Act of 1940, as amended (1940 Act). The above factors may also adversely affect a borrowers or a lessees 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.
General Risks of Foreign (Non-U.S.) and Emerging Market Securities
Although it is not the Funds current intent, the Fund may invest up to 100% of its total assets in foreign (non-U.S.) securities. Under normal market conditions, the Fund intends to invest at least 80% of its total assets in non-U.S. real estate equity securities. In addition, the Fund may invest up to 15% of its total assets in foreign securities of companies in so-called emerging markets (or lesser developed countries). Investments in such securities are particularly speculative. Investing in foreign securities involves certain risks not involved in domestic investments, including, but not limited to:
· |
future foreign economic, financial, political and social developments; |
· |
different legal systems; |
· |
the possible imposition of exchange controls or other foreign governmental laws or restrictions; |
· |
less governmental supervision; |
· |
regulation changes; |
· |
changes in currency exchange rates; |
· |
less publicly available information about companies due to less rigorous disclosure or accounting standards or regulatory practices; |
· |
high and volatile rates of inflation; |
· |
fluctuating interest rates; |
· |
different accounting, auditing and financial record-keeping standards and requirements; and |
· |
dividend income the Fund receives from foreign securities may not be eligible for the special tax treatment applicable to qualified income. |
Investments in foreign securities, especially in emerging market countries, will expose the Fund to the direct or indirect consequences of political, social or economic changes in the countries that issue the securities or in which the issuers are located. Certain countries in which the Fund may invest, especially emerging market countries, have historically experienced, and may continue to experience, high rates of inflation, high interest rates, exchange rate fluctuations, large amounts of external debt, balance of payments and trade difficulties and extreme poverty and unemployment. Many of these countries are also characterized by political uncertainty and instability. The cost of servicing external debt will generally be adversely affected by rising international interest rates because many external debt
11
obligations bear interest at rates that are adjusted based upon international interest rates. In addition, with respect to certain foreign countries, there is a risk of:
· |
the possibility of expropriation of assets; |
· |
confiscatory taxation; |
· |
difficulty in obtaining or enforcing a court judgment; |
· |
economic, political or social instability; and |
· |
diplomatic developments that could affect investments in those countries. |
In addition, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as:
· |
growth of gross domestic product; |
· |
rates of inflation; |
· |
capital reinvestment; |
· |
resources; |
· |
self-sufficiency; and |
· |
balance of payments position. |
To the extent the Funds investments are concentrated in a geographic region or country, the Fund will be subject, to a greater extent than if the Funds assets were less concentrated, to the risks of adverse changes in that region or country. In addition, certain investments in foreign securities also may be subject to foreign withholding taxes.
Securities of companies in emerging markets may be more volatile than those of companies in more developed markets. Emerging market countries generally have less developed markets and economies and, in some countries, less mature governments and governmental institutions. Investing in securities of companies in emerging markets may entail special risks relating to potential economic, political or social instability and the risks of expropriation, nationalization, confiscation or the imposition of restrictions on foreign investment, the lack of hedging instruments, and repatriation of capital invested. The securities and real estate markets of some emerging market countries have in the past sometimes experienced substantial market disruptions and may do so in the future. The economies of many emerging market countries may be heavily dependent on international trade and, accordingly, have been and may continue to be adversely affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they wish to trade.
As a result of these potential risks, the Advisor or Subadvisors may determine that, notwithstanding otherwise favorable investment criteria, it may not be practicable or appropriate to invest in a particular country. The Fund may invest in countries in which foreign investors, including the Advisor or Subadvisors, have had no or limited prior experience.
Smaller Companies Risk
Real estate companies 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 companys stock, which means that buy and sell transactions in that stock could have a larger impact on the stocks price than is the case
12
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 companys stock price than is the case for a larger company. Further, smaller company stocks may perform in different cycles than larger company stocks. Accordingly, real estate company shares can be more volatile thanand at times will perform differently fromlarge company stocks.
Preferred Securities Risk
Preferred securities are subject to credit risk, which is the risk that a security will decline in price, or the issuer of the security will fail to make dividend, interest or principal payments when due, because the issuer experiences a decline in its financial status. Preferred securities are also subject to interest rate risk and may decline in value because of changes in market interest rates. In addition, an issuer may be permitted to defer or omit distributions. Preferred securities are also generally subordinated to bonds and other debt instruments in a companys capital structure. During periods of declining interest rates, an issuer may be able to exercise an option to redeem (call) its issue at par earlier than scheduled, and the Fund may be forced to reinvest in lower yielding securities. Certain preferred securities may be substantially less liquid than many other securities, such as common stocks. Generally, preferred security holders have no voting rights with respect to the issuing company unless certain events occur. Certain preferred securities may give the issuers special redemption rights allowing the securities to be redeemed prior to a specified date if certain events occur, such as changes to tax or securities laws.
Foreign Currency and Currency Hedging Risk
Although the Fund will report its NAV and pay dividends in U.S. dollars, foreign securities often are purchased with and make any dividend and interest payments in foreign currencies. Therefore, when the Fund invests in foreign securities, it will be subject to foreign currency risk, which means that the Funds NAV could decline as a result of changes in the exchange rates between foreign currencies and the U.S. dollar. Certain foreign countries may impose restrictions on the ability of issuers of foreign securities to make payment of principal, dividends and interest to investors located outside the country, due to blockage of foreign currency exchanges or otherwise.
The Fund may, but is not required to, engage in various investments that are designed to hedge the Funds foreign currency risks, including foreign currency forward contracts, foreign currency futures contracts, put and call options on foreign currencies and foreign currency swaps. Such transactions may reduce returns or increase volatility, perhaps substantially. Foreign currency forward contracts, foreign currency futures contracts, over-the-counter options on foreign currencies and foreign currency swaps are subject to the risk of default by the counterparty and can be illiquid. These currency hedging transactions, as well as the futures contracts and exchange-listed options in which the Fund may invest, are subject to many of the risks of, and can be highly sensitive to changes in the value of, the related currency or other reference asset. As such, a small investment could have a potentially large impact on the Funds performance. Whether or not the Fund engages in currency hedging transactions, the Fund may experience a decline in the value of its portfolio securities, in U.S. dollar terms, due solely to fluctuations in currency exchange rates. Use of currency hedging transactions may cause the Fund to experience losses greater than if the Fund had not engaged in such transactions.
Non-Diversification Risk
As a non-diversified investment company, the Fund can invest in fewer individual companies than a diversified investment company. Because a non-diversified portfolio is more likely to experience large market price fluctuations, the Fund may be subject to a greater risk of loss than a fund that has a diversified portfolio.
13
ADDITIONAL INVESTMENT INFORMATION
In addition to the principal investment strategies described above, the Fund has other investment practices that are described here and in the SAI.
Illiquid Securities
The Fund will not invest more than 15% of its net assets in illiquid securities. Restricted securities, which are securities that may be resold to the public without an effective registration statement under the Securities Act of 1933, as amended, or, if they are unregistered, may be sold only in a privately negotiated transaction or pursuant to an exemption from registration, may be illiquid. Illiquid securities involve the risk that the securities will not be sold promptly ( i.e. , within seven days) at the time desired by the Fund or at prices approximating the value at which the Fund is carrying the securities on its books and records.
Defensive Position
When the Advisor or Subadvisors believe that market or general economic conditions justify a temporary defensive position, the Fund may deviate from its investment objective and invest all or any portion of its assets in short-term debt instruments, government securities, cash or cash equivalents. When and to the extent the Fund assumes a temporary defensive position, it may not pursue or achieve its investment objective.
Portfolio Holdings
A description of the Funds policies and procedures with respect to the disclosure of the Funds portfolio securities is available in the Funds SAI. The Fund also files its complete schedule of portfolio holdings with the Securities and Exchange Commission (the SEC) on Form N-Q as of the end of its first and third fiscal quarters. The Funds full portfolio holdings are published semi-annually in reports sent to shareholders and filed with the SEC on Form N-CSR and such reports are made available at cohenandsteers.com in the Our Products section, generally within 70 days after the end of each semi-annual period. The Fund also posts an uncertified list of portfolio holdings on the Web site, no earlier than 15 days after the end of each calendar quarter. The holdings information remains available until the Fund files a report on Form N-Q or Form N-CSR for the period that includes the date as of which the information is current. In addition to information on portfolio holdings, other Fund statistical information may be found on the Cohen & Steers Funds Web site or by calling (800) 330-7348.
The Advisor, a registered investment advisor located at 280 Park Avenue, New York, New York 10017, was formed in 1986 and its clients include pension plans, endowment funds and investment companies, including each of the open-end and closed-end Cohen & Steers funds. As of March 31, 2011, the Advisor managed approximately $38 billion in assets. The Advisor is a wholly owned subsidiary of Cohen & Steers, Inc. (CNS), a publicly traded company whose common stock is listed on the NYSE under the symbol CNS.
The Advisor is responsible for the overall management of the Funds portfolio and for the supervision and ongoing monitoring of the Subadvisors.
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CNS Asia, with offices located at 12/F Citibank Tower, Citibank Plaza, No. 3 Garden Road, Central Hong Kong, is a wholly owned subsidiary of CNS and serves as a Subadvisor pursuant to an agreement with the Advisor (a Subadvisory Agreement). CNS Asia provides investment research and advisory services with respect to Asia Pacific real estate securities and provides trade order execution services for the Fund. CNS Asia is a registered investment advisor and was formed in 2005.
CNS Europe, with offices located at 166 Chausee de la Hulpe, Brussels, Belgium, is a wholly owned subsidiary of CNS and serves as a Subadvisor pursuant to a Subadvisory Agreement. CNS Europe provides investment research and advisory services with respect to European real estate securities and provides trade order execution services for the Fund. CNS Europe is a registered investment advisor and was formed in February 2000.
CNS UK, with offices located at 21 Sackville Street, 4 th Floor, London, W1S 3DN, U.K., is a wholly owned subsidiary of CNS and serves as a Subadvisor pursuant to a Subadvisory Agreement. CNS UK provides investment research and advisory services to the Advisor and CNS Europe in connection with managing the Funds investments in Europe. CNS UK is a registered investment advisor and was formed in 2006.
The fees of the Subadvisors are paid by the Advisor (and not the Fund) out of its investment advisory fee received from the Fund.
References in this Prospectus to activities and responsibilities of the Advisor may be performed by one or more of the Subadvisors.
Under its investment advisory agreement (the Investment Advisory Agreement) with the Fund, the Advisor furnishes a continuous investment program for the Funds portfolio, makes the day-to-day investment decisions for the Fund, and generally manages the Funds investments in accordance with the stated policies of the Fund, subject to the general supervision of the Board of Directors of the Fund. The Advisor also performs certain administrative services for the Fund and provides persons satisfactory to the Board of Directors of the Fund to serve as officers of the Fund. Such officers, as well as certain Directors of the Fund, may also be directors, officers, or employees of the Advisor. The Advisor and Subadvisors also select brokers and dealers to execute the Funds portfolio transactions.
For its services under the Investment Advisory Agreement, the Fund pays the Advisor a monthly investment advisory fee at the annual rate of 0.95% of the average daily NAV of the Fund for the first $1.5 billion and 0.85% of the average daily NAV in excess of $1.5 billion. This fee is allocated among the separate classes based on the classes proportionate shares of such average daily NAV. The Funds effective investment advisory fee during 2010 was 0.95% of average daily net assets.
In addition to this investment advisory fee, the Fund pays other operating expenses, which may include but are not limited to, administrative, transfer agency, custodial, legal and accounting fees. The Fund pays the Advisor a monthly fee at the annual rate of 0.06% for administration services.
A discussion regarding the Board of Directors basis for approving the Investment Advisory and Subadvisory Agreements is available in the Funds semi-annual report to shareholders for the period ended June 30, 2010.
The Funds portfolio managers are:
· |
Martin CohenMr. Cohen is a director and co-chairman of the Fund. He is co-chairman and co-chief executive officer of the Advisor and CNS, and vice president of the Distributor. |
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· |
Robert H. SteersMr. Steers is a director and co-chairman of the Fund. He is co-chairman and co-chief executive officer of the Advisor and CNS, and vice president of the Distributor. |
· |
Joseph M. HarveyMr. Harvey is a vice president of the Fund. He joined the Advisor in 1992 and currently serves as president and chief investment officer of the Advisor and president of CNS. |
· |
Scott CroweMr. Crowe is a vice president of the Fund. He joined the Advisor in 2007 and currently serves as senior vice president and global research strategist. Prior to that, Mr. Crowe was an executive director at UBS and served as head of U.S. REITs and as a global strategist. He also worked at UBS Warburg as a real estate analyst. |
· |
Gerios J.M. RoversMr. Rovers has been a managing director and chief investment officer of CNS Europe since 2000. Prior to that, he was a vice president at Security Capital Group in Brussels, Belgium. |
· |
Luke SullivanMr. Sullivan has been with CNS Asia since 2006 and currently serves as senior vice president. Prior to joining CNS Asia, Mr. Sullivan was a vice president and research analyst at Citigroup Investment Research where he covered Australian real estate companies. Prior to that, he was a research assistant at Credit Suisse First Boston. |
The Advisor and Subadvisors utilize a team-based approach in managing the Fund. Messrs. Cohen, Steers and Harvey are the leaders of this team. Messrs. Rovers, Crowe and Sullivan direct and supervise the execution of the Funds investment strategy, and lead and guide other members of the investment team.
The SAI contains additional information about the portfolio managers compensation, other accounts they manage and their ownership of securities in the Fund.
The price at which you can purchase and redeem each class of the Funds shares is the NAV of that class of shares next determined after we receive your order in proper form, less any applicable sales charge. Proper form means that your request includes the Fund name and account number, states the amount of the transaction (in dollars or shares), includes the signatures of all owners exactly as registered on the account, signature guarantees (if necessary), any supporting legal documentation that may be required and any outstanding certificates representing shares to be redeemed.
The Fund calculates its NAV per share as of the close of regular trading on the NYSE, generally 4:00 p.m. eastern time, on each day the NYSE is open for trading. Thus, purchase and redemption orders must be received in proper form by the close of trading on the NYSE in order to receive that days NAV; orders received after the close of regular trading on the NYSE will receive the NAV next determined. The Fund has authorized one or more brokers to accept on its behalf purchase (and redemption) orders, and these brokers are authorized to designate other intermediaries on the Funds behalf. The Fund will be deemed to have received a purchase (or redemption) order when an authorized broker, or that brokers designee, accepts the order, and that order will be priced at the next computed NAV after this acceptance. The Fund determines NAV per share for each class by dividing that classs share of the net assets of the Fund ( i.e. , its assets less liabilities) by the total number of outstanding shares of that class.
Investments in securities that are listed on the NYSE are valued, except as indicated below, at the last sale price reflected at the close of the NYSE on the business day as of which such value is being determined. If
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there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices for the day or, if no asked price is available, at the bid price.
Securities not listed on the NYSE but listed on other domestic or foreign securities exchanges 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. If after the close of a foreign market, but prior to the close of business on the day the securities are being valued, market conditions change significantly, certain foreign securities may be fair valued pursuant to procedures established by the Board of Directors.
Readily marketable securities traded in the over-the-counter market, including listed securities whose primary market is believed by the Advisor to be over-the-counter, are valued at the official closing prices as reported by sources as the Board of Directors deem appropriate to reflect their fair market value. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices for the day, or if no asked price is available, at the bid price. 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 Board of Directors to reflect the fair market value of such securities.
Securities for which market prices are unavailable, or securities for which the Advisor determines that bid and/or asked price or a counterparty valuation does not reflect market value, will be valued at fair value pursuant to procedures approved by the Funds Board of Directors. Circumstances in which market prices may be unavailable include, but are not limited to, when trading in a security is suspended, the exchange on which the security is traded is subject to an unscheduled close or disruption or material events occur after the close of the exchange on which the security is principally traded. In these circumstances, the Fund determines fair value in a manner that fairly reflects the market value of the security on the valuation date based on consideration of any information or factors it deems appropriate. These may include recent transactions in comparable securities, information relating to the specific security and developments in the markets.
The Funds use of fair value pricing may cause the NAV of Fund shares to differ from the NAV that would be calculated using market quotations. Fair value pricing involves subjective judgments and it is possible that the fair value determined for a security may be materially different than the value that could be realized upon the sale of that security.
Short-term debt securities, which have a maturity date of 60 days or less, are valued at amortized cost, which approximates value. Investments in open-end mutual funds are valued at their closing NAV.
Because the Fund may hold securities that are primarily listed on foreign exchanges that trade on weekends or days when the Fund does not price its shares, the value of securities held in the Fund may change on days when you will not be able to purchase or redeem Fund shares.
HOW TO PURCHASE, EXCHANGE AND SELL FUND SHARES
You may open an account with the Fund with a minimum investment of $1,000. Additional investments must be at least $250. The Fund reserves the right to waive or change its minimum investment requirements.
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PURCHASING THE CLASS OF FUND SHARES THAT IS BEST FOR YOU
Mutual funds typically incur costs for the distribution and servicing of their shares. Many funds pay for these costs by charging a variety of fees to their shareholders. Some of the most common fees include:
· Initial Sales Loads |
A percentage fee deducted from your initial investment. | |
· Contingent Deferred Sales Charges |
A percentage fee deducted from your sales proceeds based on the length of time you own your shares. | |
· Distribution (12b-1) Fees |
An annual percentage fee used to pay for distribution expenses. | |
· Service Fees |
An annual percentage fee used to pay for the cost of servicing shareholder accounts. |
This Prospectus offers two separate classes of shares to give you flexibility in choosing a fee structure that is most beneficial to you. Each class represents an investment in the same portfolio of securities, but as described below, the classes utilize a combination of the above fees and other features to suit your investment needs. Because each investors financial considerations are different, you should speak with your financial advisor to help you decide which share class is best for you.
The Fund reserves the right to reject or cancel any purchase order and to withdraw or suspend the offering of shares at any time. The Fund may also request additional information from you in order to verify your identity. If you do not provide this information or if such information cannot be verified, we reserve the right to close your account to the extent required or permitted by applicable law or regulations, including those relating to the prevention of money laundering.
· |
Initial Sales Loads The following initial sales loads apply to Class A shares: |
SALES CHARGE AS
|
||||||||
INVESTMENT AMOUNT |
OFFERING
|
NET AMOUNT
|
||||||
Less than $100,000 |
4.50 | % | 4.71 | % | ||||
$100,000 but less than $250,000 |
3.75 | % | 3.90 | % | ||||
$250,000 but less than $500,000 |
2.75 | % | 2.83 | % | ||||
$500,000 but less than $1 million |
2.25 | % | 2.30 | % | ||||
$1 million or more |
None | None |
* | Offering Price is the amount you actually pay for Fund shares; it includes the initial sales charge. |
· |
Contingent Deferred Sales Charge (CDSC) None, but if you invest $1,000,000 or more in Class A shares and sell those shares on or before the one year anniversary date of their purchase, you may pay a charge equal to 1% of the lesser of the current NAV or the original cost of the shares that you sell. |
· |
Distribution (12b-1) Fees 0.25% of average daily net assets annually. |
· |
Service Fees 0.10% of average daily net assets annually. |
You may want to purchase Class A shares if:
· |
you prefer to pay an initial sales load and have the benefit of lower continuing fees; |
· |
you expect to maintain your investment for an extended period of time; and |
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· |
you qualify for a reduced initial sales load due to the size of your investment. |
Reducing Your Initial Sales Load. As demonstrated in the table above, the size of your investment in Class A shares will affect the initial sales load that you pay. The Fund offers certain methods, which are described below, that you can use to reduce the initial sales load.
Aggregating Accounts. The size of the total investment applies to the total amount being invested by any person, which includes:
· |
you, your spouse and children under the age of 21; |
· |
a trustee or other fiduciary purchasing for a single trust, estate or single fiduciary account although more than one beneficiary is involved; and |
· |
any U.S. bank or investment advisor purchasing shares for its investment advisory clients. |
Rights of Accumulation. A person (defined above) may take into account not only the amount being invested, but also the current NAV of the shares of the Fund and shares of other Cohen & Steers open-end funds that impose sales charges (eligible funds) already held by such person in order to reduce the sales charge on the new purchase.
To be entitled to a reduced sales charge pursuant to the Rights of Accumulation, you must notify the Fund, your dealer or other financial intermediary at the time of purchase, and give information related to the other account(s).
Letter of Intention. You may reduce your Class A sales charge by establishing a letter of intention. A letter of intention allows a person (defined above) to aggregate purchases of shares of the Fund and other eligible funds during a 12-month period in order to reduce the sales charge. All shares of the Fund and other eligible funds currently owned will be credited as purchases toward completion of the letter at the greater of their NAV on the date the letter is executed or their cost. You should retain any records necessary to substantiate cost basis because the Fund, Boston Financial Data Services, Inc., the Funds transfer agent (the Transfer Agent), or your dealer or financial intermediary may not maintain this information for periods prior to January 1, 2012. See Additional InformationTax Considerations. Capital appreciation and reinvested dividends and capital gains distributions do not count toward the required purchase amount during this 12-month period.
The letter is not a binding obligation. However, 5% of the amount specified in the letter will be held in escrow, and if your purchases are less than the amount specified, the Fund will request that you remit the amount equal to the difference between the sales charge paid and the sales charge applicable to the aggregate purchases actually made. If this amount is not remitted within 20 days after written request, an appropriate number of escrowed shares will be redeemed in order to realize the difference. However, the sales charge applicable to the investment will in no event be higher than if you had not submitted a letter. Please note that no retroactive adjustment will be made if purchases exceed the amount indicated in the letter.
At the time of your purchase, you must inform the Fund, your dealer or other financial intermediary of any other investment in the Fund or in other eligible funds that would count toward reducing your sales load. This includes, for example, investments held in a retirement account, an employee benefit plan, or at a dealer or other financial intermediary other than the one handling your current purchase. In addition, you may be asked to provide supporting account statements or other information to allow us to verify your eligibility for a discount. If you do not let the Fund, your dealer or other financial intermediary know that you are eligible for a discount, you may not receive the discount to which you are otherwise entitled.
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You may obtain more information about sales charge reductions and waivers from cohenandsteers.com, the SAI or your dealer or financial intermediary.
Sales at Net Asset Value. Class A shares of the Fund may be sold at NAV (i.e., without a sales charge) to certain investors without regard to investment amount, including investment advisors and financial planners who place trades for their own accounts or the accounts of their clients and who charge a management, consulting or other fee for their services (NAV Purchases).
Dealer Commission. The Distributor may pay dealers a commission of up to 1% on investments of $1 million or more in Class A shares.
Higher Dividends. The net income attributable to, and dividends payable on, the shares of each class is reduced by the amount of annual distribution and other expenses of each class. Because Class A shares bear lower annual distribution and other expenses, they will tend to pay higher dividends than Class C shares.
Reinstatement Privilege. If you redeem your Class A shares and then decide to reinvest in Class A shares of the Fund or another eligible fund, you have a one-time option to, within 120 calendar days of the date of your redemption, use all or any part of the proceeds of the redemption to reinstate, free of an initial sales load, all or any part of your investment in Class A shares of the Fund. If you redeem your Class A shares and your redemption was subject to a CDSC, you may reinstate all or any part of your investment in Class A shares within 120 calendar days of the date of your redemption and receive a credit for the applicable CDSC that you paid. Your investment will be reinstated at the NAV per share next determined after we receive your request. The Transfer Agent must be informed that your new purchase represents a reinstated investment. Reinstated shares must be registered exactly and be of the same class as the shares previously redeemed, and the Funds minimum initial investment amount must be met at the time of reinstatement. For the purposes of the CDSC schedule, the holding period will continue as if the Class A shares had not been redeemed. The ability of a shareholder to utilize the reinstatement privilege is subject to the Funds right to reject any purchase or exchange order if it believes such shareholder is engaged in or has engaged in, market timing or other abusive trading practices.
C LASS C S HARES
· |
Initial Sales Loads None. |
· |
CDSC You may pay a charge equal to 1% of the lesser of the current NAV of your shares or their original cost if you sell your shares on or before the one year anniversary date of their purchase. |
· |
Distribution (12b-1) Fees 0.75% of average daily net assets annually. |
· |
Service Fees 0.25% of average daily net assets annually. |
You may want to purchase Class C shares if:
· |
you prefer to have all of your assets invested initially; and |
· |
you are uncertain as to the length of time you intend to hold your shares of the Fund. |
The following is additional information about Class C shares:
Dealer Commission. The Distributor may pay a commission of up to 1% of the amount invested to dealers who sell Class C shares.
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Potentially Higher Costs. Your investment in Class C shares will be subject to higher distribution and shareholder services fees for an indefinite period of time, potentially costing you more than owning Class A shares.
Lower Dividends. The net income attributable to, and dividends payable on, the shares of each class is reduced by the amount of annual distribution and other expenses of each class. Because Class C shares bear higher annual distribution and other expenses than Class A shares, they will tend to pay lower dividends than Class A shares.
Each class has advantages and disadvantages for different investors. You should choose the class that best suits your circumstances and objectives.
F ORM OF P AYMENT
We will accept payment for shares in two forms:
1. A check drawn on any bank or domestic savings institution. Checks must be payable in U.S. dollars and will be accepted subject to collection at full face value.
2. A bank wire or federal reserve wire of federal funds.
P URCHASES OF F UND S HARES
Initial Purchase By Wire
1. Telephone toll free from any continental U.S. state: (800) 437-9912. When you contact the Transfer Agent, you will need the following information:
· |
name of the Fund; |
· |
class of shares; |
· |
name(s) in which shares are to be registered; |
· |
address; |
· |
social security or tax identification number (where applicable); |
· |
dividend payment election; |
· |
amount to be wired; |
· |
name of the wiring bank; and |
· |
name and telephone number of the person to be contacted in connection with the order. |
The Transfer Agent will assign you an account number.
2. Instruct the wiring bank to transmit at least the required minimum amount (see Purchase Minimums above) to the custodian:
State Street Bank and Trust Company
One Lincoln Street
Boston, Massachusetts 02111
ABA # 011000028
Account: DDA #99055287
Attn: Cohen & Steers International Realty Fund, Inc.
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For further credit to: (Account Name)
Account Number: (provided by the Transfer Agent)
3. Complete the Subscription Agreement attached to this Prospectus and mail the Subscription Agreement to the Transfer Agent:
Boston Financial Data Services
Attn: Cohen & Steers Funds
P.O. Box 8123
Boston, Massachusetts 02266-8123
Additional Purchases By Wire
1. Telephone toll free from any U.S. continental state: (800) 437-9912. When you contact the Transfer Agent, you will need the following information:
· |
name of the Fund; |
· |
class of shares; |
· |
account number; |
· |
amount to be wired; |
· |
name of the wiring bank; and |
· |
name and telephone number of the person to be contacted in connection with the order. |
2. Instruct the wiring bank to transmit at least the required minimum amount (see Purchase Minimums above) to the custodian:
State Street Bank and Trust Company
One Lincoln Street
Boston, Massachusetts 02111
ABA # 011000028
Account: DDA #99055287
Attn: Cohen & Steers International Realty Fund, Inc.
For further credit to: (Account Name)
Account Number: (provided by the Transfer Agent)
Initial Purchase By Mail
1. Complete the Subscription Agreement attached to this Prospectus.
2. Mail the Subscription Agreement and a check in at least the required minimum amount per class purchased (see Purchase Minimums above), payable to the Fund, to the Transfer Agent at the above address.
Additional Purchases By Mail
1. Make a check payable to the Fund in at least the required minimum amount (see Purchase Minimums above). Write your Fund account number and the class of shares to be purchased on the check.
2. Mail the check and the detachable stub from your account statement (or a letter providing your account number) to the Transfer Agent at the address set forth above.
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P URCHASES T HROUGH D EALERS AND I NTERMEDIARIES
You may purchase the Funds shares through authorized dealers and other financial intermediaries.
Financial service firms that do not have a sales agreement with the Distributor also may place orders for purchases of the Funds shares, but may charge you a transaction fee in addition to any applicable initial sales charge.
Dealers and financial service firms are responsible for promptly transmitting purchase orders to the Distributor. These dealers and financial service firms may also impose charges for handling transactions placed through them that are in addition to the sales charges or any other charges described in this Prospectus. Such charges may include processing or service fees, which are typically fixed dollar amounts. You should contact your dealer or financial service firm for more information about any additional charges that may apply.
ADDITIONAL INFORMATION ON PURCHASE OF FUND SHARES
D EALER COMPENSATION
Dealers will be paid a commission when you buy shares and may also be compensated through the distribution and service fees paid by the Fund. In addition, dealers may charge fees for administrative and other services that such dealers provide to Fund shareholders. These fees may be paid by the Advisor out of its own resources and/or by the Fund pursuant to a networking or sub-transfer agency arrangement. See Additional InformationNetworking and Sub-Transfer Agency Fees.
A N OTE O N C ONTINGENT D EFERRED S ALES C HARGES
For purposes of determining the CDSC, if you sell only some of your shares, shares that are not subject to any CDSC will be sold first ( e.g. , shares acquired through reinvestment of distributions and shares held longer than the required holding period), followed by shares that you have owned the longest. All CDSCs will be waived on redemptions of shares following the death or disability of a shareholder or to meet the requirements of certain qualified retirement plans. See the SAI for more information.
A UTOMATIC I NVESTMENT P LAN AND P URCHASES BY ACH
The Funds automatic investment plan (the Plan) provides a convenient way to invest in the Fund. Under the Plan, you can have money transferred automatically from your checking account to the Fund each month to buy additional shares. If you are interested in this Plan, please refer to the automatic investment plan section of the Subscription Agreement attached to this Prospectus or contact your dealer. The market value of the Funds shares may fluctuate, and a systematic investment plan such as this will not assure a profit or protect against a loss. You may discontinue the Plan at any time by notifying the Fund by mail or telephone at the address or number on the back cover of this Prospectus.
You may purchase additional shares of the Fund by automated clearing house (ACH). To elect the Auto-Buy option, select it on your Subscription Agreement or call the Transfer Agent and request an optional shareholder services form. ACH is similar to the Plan, except that you may choose the date on which you want to make the purchase. We will need a voided check or deposit slip before you may purchase by ACH. If you are interested in this option, please call (800) 437-9912.
23
C LASS I S HARES
The Fund also offers Class I shares, which are described in a separate Prospectus and are available for purchase only by certain investors. The Class I shares do not have a front-end sales load or a CDSC, and are not subject to distribution plan expenses. To obtain the Prospectus that describes the Funds Class I shares, contact the Fund or the Distributor by writing to the address or by calling the telephone number listed on the back cover of this Prospectus.
You may exchange some or all of your Fund shares for shares of other Cohen & Steers open-end funds provided that you meet applicable investment minimums. If you exchange Fund shares for shares of another Cohen & Steers open-end fund that imposes sales charges, you must exchange into shares of the same class of such other fund. In computing the holding period for purposes of the CDSC, the length of time you have owned your shares will be measured from the date of original purchase and will not be affected by the permitted exchange, assuming you exchange into shares of the same class. If you exchange Fund shares for shares of another Cohen & Steers fund that does not impose any sales charges or for shares of SSgA Money Market Fund (described below), then that exchange will be subject to any applicable CDSCs. Similarly, if you exchange shares of another Cohen & Steers fund that does not impose any sales charges or exchange shares of SSgA Money Market Fund for shares of the Fund, then that exchange will be subject to applicable initial sales charges.
You may, under certain circumstances, exchange Fund shares for a different class of shares of the same Fund, and move shares held in certain types of accounts to a different type of account or to a new account maintained by a financial intermediary. To qualify for a potential exchange, you must be eligible to purchase the class of shares you wish to exchange into (including satisfying any applicable investment minimum) and, if you invest in the Fund through an intermediary, your intermediary must have an arrangement with the Distributor to offer such class. No sales charges or other charges will apply to any such exchange. For federal income tax purposes, a same-fund share class exchange is not expected to result in the realization by the investor of a capital gain or loss; however, shareholders are advised to consult with their own tax advisors with respect to the particular tax consequences to them of an investment in the Fund. Please speak with your financial intermediary or tax advisor if you have any questions.
The Fund also makes available for exchange shares of SSgA Money Market Fund, which is advised by SSgA Funds Management, Inc. You may request a prospectus and application for the SSgA Money Market Fund by calling (800) 437-9912. Please read the prospectus carefully before you invest.
An exchange of shares may result in your realizing a taxable gain or loss for income tax purposes. See Additional InformationTax Considerations. The exchange privilege is available to shareholders residing in any state in which the shares being acquired may be legally sold. Before you exercise the exchange privilege, you should read the prospectus of the fund whose shares you are acquiring. Certain dealers and other financial intermediaries may limit or prohibit your right to use the exchange privilege and may charge you a fee for exchange transactions placed through them.
We have adopted reasonable procedures that are designed to ensure that any telephonic exchange instructions are genuine. Neither the Fund nor its agents will be liable for any loss or expenses if we act in accordance with these procedures. We may modify or revoke the exchange privilege for all shareholders upon 60 days prior written notice, and this privilege may be revoked immediately with respect to any shareholder if the Fund believes that the shareholder is engaged in, or has engaged in,
24
market timing or other abusive trading practices. For additional information concerning exchanges, or to make an exchange, please call the Transfer Agent at (800) 437-9912.
You may sell or redeem your shares through authorized dealers, other financial intermediaries or through the Transfer Agent. If your shares are held by your dealer or intermediary in street name, you must redeem your shares through that dealer or intermediary.
Redemptions Through Dealers and Other Intermediaries
If you have an account with an authorized dealer or other intermediary, you may submit a redemption request to such dealer or intermediary. They are responsible for promptly transmitting redemption requests to the Distributor. Dealers and intermediaries may impose charges for handling redemption transactions placed through them that are in addition to the sales charges or any other charges described in this Prospectus. Such charges may include processing or service fees, which are typically fixed dollar amounts. You should contact your dealer or intermediary for more information about additional charges that may apply.
Redemption By Telephone
To redeem shares by telephone, call the Funds Transfer Agent at (800) 437-9912. In order to be honored at that days price, we must receive any telephone redemption requests by the close of regular trading on the NYSE that day, generally 4:00 p.m., eastern time. Orders received after the close of regular trading on the NYSE will receive the NAV next determined.
If you would like to change your telephone redemption instructions, you must send the Transfer Agent written notification signed by all of the accounts registered owners, accompanied by signature guarantee(s), as described below.
We may modify or suspend telephone redemption and exchange privileges without notice during periods of drastic economic or market changes. We have adopted reasonable procedures that are designed to ensure that any telephonic redemption instructions are genuine. Neither the Fund nor its agents will be liable for any loss or expenses if we act in accordance with these procedures. We may modify or terminate the telephone redemption privilege at any time on 30 days notice to shareholders.
Redemption By Mail
You can redeem Fund shares by sending a written request for redemption to the Transfer Agent:
Boston Financial Data Services
P.O. Box 8123
Boston, Massachusetts 02266-8123
Attn: Cohen & Steers International Realty Fund, Inc.
A written redemption request must:
· |
state the number of shares or dollar amount to be redeemed; |
· |
identify your account number and tax identification number; and |
· |
be signed by each registered owner exactly as the shares are registered. |
25
If the shares to be redeemed were issued in certificate form, the certificate must be endorsed for transfer (or be accompanied by a duly executed stock power) and must be submitted to the Transfer Agent together with a redemption request.
For redemptions made by corporations, executors, administrators or guardians, the Transfer Agent may require additional supporting documents evidencing the authority of the person making the redemption (including evidence of appointment or incumbency). For additional information regarding the specific documentation required, contact the Transfer Agent at (800) 437-9912.
The Transfer Agent will not consider your redemption request to be properly made until it receives all required documentation in proper form.
O THER R EDEMPTION I NFORMATION
Payment of Redemption Proceeds
The Fund will send you redemption proceeds by check. However, if you made an election on the Subscription Agreement to receive redemption proceeds by wire, the Fund will send the proceeds by wire to your designated bank account. When proceeds of a redemption are to be paid to someone other than the shareholder, either by wire or check, you must send a letter of instruction and the signature(s) on the letter of instruction must be guaranteed, as described below, regardless of the amount of the redemption. The Transfer Agent will normally mail checks for redemption proceeds within five business days. Redemptions by wire will normally be sent within two business days. The Fund will delay the payment of redemption proceeds, however, if your check used to pay for the shares to be redeemed has not cleared, which may take up to 15 days or more. The Fund may suspend the right of redemption or postpone the date of payment if trading is halted or restricted on the NYSE or under other emergency conditions as permitted by the 1940 Act.
The Fund will pay redemption proceeds in cash, by check or wire, unless the Board of Directors believes that economic conditions exist which make redeeming in cash detrimental to the best interests of the Fund. In the event that this were to occur, all or a portion of your redemption proceeds would consist of readily marketable portfolio securities of the Fund transferred into your name. You would then incur brokerage costs in converting the securities to cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act, as a result of which the Fund is obligated to redeem shares, with respect to any one shareholder during any 90-day period, solely in cash up to the lesser of $250,000 or 1% of the Fund's NAV at the beginning of the period.
Signature Guarante e
You may need to have your signature guaranteed (STAMP 2000 Medallion) in certain situations, such as:
· |
written requests to wire redemption proceeds (if not previously authorized on the Subscription Agreement); |
· |
sending redemption proceeds to any person, address or bank account not on record; and |
· |
transferring redemption proceeds to a Cohen & Steers fund account with a different registration (name/ownership) from yours. |
A signature guarantee stamp may be obtained from eligible members of the Medallion Signature Guarantee Program. Eligible guarantor institutions generally include banks, broker-dealers, credit unions, members of national securities exchanges, registered securities associations, clearing agencies and savings associations. You should verify with the institution that they are an eligible guarantor institution prior to signing. A notary public cannot provide a medallion guarantee stamp.
26
Redemption of Small Accounts
If your Fund account has a value of $1,000 or less as the result of any voluntary redemption, we may redeem your remaining shares. We will, however, give you 30 days notice of our intention to do so. During this 30-day notice period, you may make additional investments to increase your account value to $1,000 (the minimum purchase amount) or more and avoid having the Fund automatically liquidate your account.
FREQUENT PURCHASES AND REDEMPTIONS OF FUND SHARES
The Fund is designed for long-term investors with investment horizons of at least two months. Excessive trading, short-term market timing or other abusive trading practices may disrupt portfolio management strategies and harm portfolio performance. For example, in order to handle large flows of cash into and out of the Fund, a portfolio manager may need to allocate more assets to cash or other short-term investments or sell securities. Transaction costs, such as brokerage commissions and market spreads, can detract from the Funds performance. Additionally, excessive trading is a concern for the Fund because the Funds portfolio will have foreign securities and therefore could be subject to time-zone arbitrage.
Because of potential harm to the Fund and its long-term investors, the Board of Directors of the Fund has adopted policies and procedures to discourage and prevent excessive trading and short-term market timing. As part of these policies and procedures, the Advisor monitors purchase, exchange and redemption activity in Fund shares. The intent is not to inhibit legitimate strategies such as asset allocation, dollar cost averaging or similar activities that may nonetheless result in frequent trading of the Funds shares. Under these procedures, the Fund generally prohibits more than two purchases and sales or exchanges of its shares within a 60 day calendar year period.
The following transactions are excluded when determining whether trading activity is excessive: (i) transfers associated with systematic purchases or redemptions; (ii) transactions through firm-sponsored, discretionary asset allocation or wrap programs and (iii) transactions subject to the trading policy of an intermediary that the Fund deems materially similar to the Funds policy.
If, based upon these procedures, the Advisor determines that a shareholder is engaged in, or has engaged in, market timing or excessive trading, we may place a temporary or permanent block on all further purchases or exchanges of Fund shares.
Multiple accounts under common ownership or control may be considered one account for the purpose of determining a pattern of excessive trading, short-term market timing or other abusive trading practices.
The Fund will also utilize fair value pricing in an effort to reduce arbitrage opportunities available to short-term traders.
Due to the complexity involved in identifying excessive trading and market timing activity, there can be no guarantee that the Fund will be able to identify and restrict such activity in all cases. Additionally, it is more difficult for the Fund to monitor the trading activity of beneficial owners of Fund shares who hold those shares through third-party 401(k) and other group retirement plans and other omnibus arrangements maintained by broker/dealers and other intermediaries. Omnibus account arrangements permit multiple investors to aggregate their respective share ownership positions and purchase, redeem and exchange Fund shares in a single account.
27
In certain circumstances the Fund may accept frequent trading restrictions of intermediaries that differ from the Funds policies. Since such intermediaries execute or administer transactions with many fund families, it may be impractical for them to enforce a particular funds frequent trading or exchange policy. These alternate trading restrictions would be authorized only if the Fund believes that the alternate restrictions would provide reasonable protection to the Fund and its shareholders.
The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act (a Distribution Plan) which allows the Fund to pay distribution fees for the sale and distribution of its shares. Under the Distribution Plan, the Fund may pay the Distributor a quarterly distribution fee at an annual rate of up to 0.25% of average daily value of the Funds net assets attributable to the Class A shares and 0.75% of the average daily value of the Funds net assets attributable to the Class C shares. Because these fees are paid out of the Funds assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.
The Distributor is obligated to use the amounts received under the Distribution Plan for payments to qualifying dealers for their assistance in the distribution of the Funds shares and for other expenses such as advertising costs and the payment for the printing and distribution of Prospectuses to prospective investors. Payments received under the Distribution Plan with respect to Class A and Class C shares will not be used to pay any interest expenses, carrying charges or other financing costs or allocation of overhead of the Distributor. The Distributor bears distribution expenses to the extent they are not covered by payments under the Distribution Plan. Any distribution expenses incurred by the Distributor in any fiscal year of the Fund, which are not reimbursed from payments under the Distribution Plan accrued in such fiscal year, will not be carried over for payment under the Distribution Plan in any subsequent year.
The Fund has adopted a shareholder services plan, pursuant to which the Fund pays the Distributor a fee at an annual rate of up to 0.10% of the average daily NAV of the Fund's Class A shares and up to 0.25% of the average daily NAV of the Fund's Class C shares for shareholder account service and maintenance. Under this plan, the Fund or the Distributor may enter into agreements with qualified financial institutions to provide these shareholder services, and the Distributor is responsible for payment to the financial institutions. Services provided may vary based on the services offered by your financial institution and the class of shares in which you invest. You should contact your financial institution about services offered and which share class is best for you.
NETWORKING AND SUB-TRANSFER AGENCY FEES
The Fund may also enter into agreements with financial intermediaries pursuant to which the Fund will pay financial intermediaries for services such as networking or sub-transfer agency. Payments made pursuant to such agreements are generally based on either (1) a percentage of the average daily net assets of Fund shareholders serviced by such financial intermediaries, or (2) the number of Fund shareholders serviced by such financial intermediaries. Any payments made pursuant to such an agreement are in addition to, rather than in lieu of, distribution or shareholder services fees the
28
financial intermediary may also be receiving pursuant to agreements with the Distributor. From time to time, the Advisor may pay a portion of the fees for networking or sub-transfer agency services at its own expense and out of its own profits.
The Advisor and the Distributor may make payments from their own resources to dealers and other financial intermediaries for distribution, administrative or other services. Please contact your dealer or intermediary for details about payments it may receive.
The Fund intends to declare and pay dividends from its investment income semi-annually. The Fund intends to distribute net realized capital gains, if any, at least once each year, normally in December. The Transfer Agent will automatically reinvest your dividends and distributions in additional shares of the Fund unless you elected on your Subscription Agreement to have them paid to you in cash.
The following tax discussion assumes you are a U.S. shareholder. This discussion offers only a brief outline of the federal income tax consequences of investing in the Fund and is based on the federal tax laws in effect on the date hereof. Such tax laws are subject to change by legislative, judicial or administrative action, possibly with retroactive effect. In the SAI, we have provided more detailed information regarding the tax consequences of investing in the Fund.
Dividends paid to you out of the Funds investment company taxable income as that term is defined in the Code, determined without regard to the deduction for dividends paid, will be taxable to you as ordinary income. If a portion of the Funds income consists of dividends paid by U.S. corporations (other than REITs), a portion of the dividends paid by the Fund may be eligible for the corporate dividends received deduction (DRD). In addition, for taxable years beginning on or before December 31, 2012, distributions of investment company taxable income designated by the Fund as derived from qualified dividend income (QDI) will be taxed in the hands of individuals at the rates applicable to long-term capital gains, provided the holding period and other requirements are met by both you and the Fund. Dividend income that the Fund receives from REITs, if any, will generally not be treated as QDI. There can be no assurance that favorable tax treatment of QDI will continue following December 31, 2012. A foreign corporation is a qualified foreign corporation if it is (1) incorporated in a possession of the United States or is eligible for benefits of a comprehensive income tax treaty with the United States that the United States Treasury Department determines is satisfactory for this purpose and that includes an exchange of information program or (2) any other foreign corporation with respect to any dividend paid by such corporation if the stock with respect to which such dividend is paid is readily tradable on an established securities market in the United States. A qualified foreign corporation does not include any foreign corporation, which for the taxable year of the corporation in which the dividend was paid, or the preceding taxable year, is a passive foreign investment company. Because of the fact-specific nature of the inquiry, the Fund cannot predict at this time what portion, if any, of the dividends it will receive from foreign corporations will be eligible for the reduced rates of taxation applicable to QDI. Distributions of net capital gain (the excess of net long-term capital gain over net short-term capital loss), if any, designated as capital gain dividends are taxable to you as long-term capital gains, regardless of how long you have held your Fund shares. A
29
distribution of an amount in excess of the Funds current and accumulated earnings and profits is treated as a non-taxable return of capital that reduces your tax basis in your Fund shares; any such distributions in excess of your tax basis are treated as gain from a sale of your shares. The tax treatment of your dividends and distributions will be the same regardless of whether they were paid to you in cash or reinvested in additional Fund shares. If you buy shares of the Fund when the Fund has realized but not yet distributed income or capital gains, you will be buying a dividend by paying the full price for the shares and then receiving a portion back in the form of a taxable distribution.
A distribution will be treated as paid to you on 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 during January of the following year.
Each year, we will notify you of the tax status of dividends and other distributions.
If you sell or redeem your Fund shares, or exchange them for shares of another Cohen & Steers open-end fund, you may realize a capital gain or loss (provided the shares are held as a capital asset) which will be long-term or short-term, depending generally on your holding period for the shares.
Under the Energy Improvement and Extension Act of 2008, the Funds Transfer Agent will be required to provide you with cost basis information on the sale of any of your shares in the Fund, subject to certain exceptions. This cost basis reporting requirement is effective for shares purchased in the Fund on or after January 1, 2012.
For taxable years beginning after December 31, 2012, recently enacted legislation will generally impose a tax on the net investment income of certain individuals and on the undistributed net investment income of certain estates and trusts. For these purposes, net investment income will generally include interest, dividends (including dividends paid with respect to Fund shares), annuities, royalties, rent, net gain attributable to the disposition of property not held in a trade or business (including net gain from the sale, exchange or other taxable disposition of Fund shares) and certain other income, but will be reduced by any deductions properly allocable to such income or net gain. Shareholders are advised to consult their own tax advisors regarding additional taxation of net investment income.
We may be required to withhold U.S. federal income tax on all taxable distributions and redemption proceeds payable if you:
· |
fail to provide us with your correct taxpayer identification number; |
· |
fail to make required certifications; or |
· |
have been notified by the Internal Revenue Service that you are subject to backup withholding. |
Backup withholding is not an additional tax. Any amounts withheld may be credited against your U.S. federal income tax liability.
Certain dividends and other distributions received from sources outside the United States may be subject to withholding taxes imposed by other countries. In the event that more than 50 percent of the value of the total assets of the Fund at the close of the taxable year consists of stock or securities of foreign corporations, the Fund may make an election to pass through to its shareholders the amount of foreign taxes paid by it.
The Fund has elected to be treated as, and intends to qualify each year as, a regulated investment company under U.S. federal income tax law. If the Fund so qualifies and distributes each year to its shareholders at least 90% of the sum of its investment company taxable income (as that term is defined in the Code, but without regard to the deduction for dividends paid) and net tax-exempt interest, the
30
Fund will not be required to pay U.S. federal income taxes on any income it distributes to shareholders. Additionally, if the Fund distributes less than an amount equal to the sum of 98% of its ordinary income for the calendar year and 98.2% of its capital gain net income for the one-year period ending on October 31 of such calendar year (unless the Fund elects to use a calendar year), plus any ordinary income and capital gain net income from previous years that were not distributed, then the Fund will be subject to a nondeductible 4% excise tax on the undistributed amounts. The Fund intends to make sufficient distributions of its income to satisfy the distribution requirement and prevent application of the excise tax.
Fund distributions also may be subject to state and local taxes. You should consult with your own tax advisor regarding the particular consequences of investing in the Fund.
A non-resident alien individual, a foreign trust or estate, a foreign corporation or foreign partnership (foreign shareholders) are advised to consult with their own tax advisors with respect to the particular tax consequences to them of an investment in the Fund.
31
The financial highlights tables are intended to help you understand the financial performance of the Funds Class A shares and Class C shares for the past five years. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). These financial highlights have been derived from financial statements audited by PricewaterhouseCoopers LLP, whose report, along with the Funds audited financial statements, is included in the Funds current annual report, which is available free of charge upon request or by visiting cohenandsteers.com.
The following tables include selected data for a share outstanding throughout each period and other performance information derived from the financial statements. They should be read in conjunction with the financial statements and notes thereto.
Class A | ||||||||||||||||||||
For the Year Ended December 31, | ||||||||||||||||||||
Per Share Operating Performance: |
2010 |
2009 |
2008 |
2007 |
2006 |
|||||||||||||||
Net asset value, beginning of period |
$ | 10.48 | $ | 8.41 | $ | 16.17 | $ | 18.48 | $ | 13.28 | ||||||||||
Income from investment operations: |
||||||||||||||||||||
Net investment income (a ) |
0.22 | (b) | 0.18 | 0.25 | 0.25 | 0.20 | (c ) | |||||||||||||
Net realized and unrealized gain (loss) |
1.13 | 2.77 | (7.87 | ) | (1.09 | ) | 5.59 | |||||||||||||
Total from investment operations |
1.35 | 2.95 | (7.62 | ) | (0.84 | ) | 5.79 | |||||||||||||
Less dividends and distributions to shareholders from: |
||||||||||||||||||||
Net investment income |
(0.75 | ) | (0.88 | ) | | (0.95 | ) | (0.50 | ) | |||||||||||
Net realized gain |
| | | (0.53 | ) | (0.09 | ) | |||||||||||||
Tax return of capital |
| | (0.14 | ) | | | ||||||||||||||
Total dividends and distributions to shareholders |
(0.75 | ) | (0.88 | ) | (0.14 | ) | (1.48 | ) | (0.59 | ) | ||||||||||
Redemption fees retained by the Fund |
0.00 | (d) | 0.00 | (d ) | 0.00 | (d ) | 0.01 | 0.00 | (d ) | |||||||||||
Net increase (decrease) in net asset value |
0.60 | 2.07 | (7.76 | ) | (2.31 | ) | 5.20 | |||||||||||||
Net asset value, end of period |
$ | 11.08 | $ | 10.48 | $ | 8.41 | $ | 16.17 | $ | 18.48 | ||||||||||
Total investment return (e) |
13.48 | % | 35.48 | % | 47.43 | % | 4.64 | % | 43.88 | % | ||||||||||
Ratios/Supplemental Data: |
||||||||||||||||||||
Net assets, end of period (in millions) |
$ | 330.3 | $ | 423.1 | $ | 372.5 | $ | 1,475.2 | $ | 921.0 | ||||||||||
Ratio of expenses to average daily net assets |
1.61 | % (f) | 1.66 | % (f ) | 1.54 | % | 1.46 | % | 1.61 | % | ||||||||||
Ratio of net investment income to average daily net assets |
2.10 | % (f) | 1.92 | % | 1.87 | % | 1.31 | % | 1.26 | % | ||||||||||
Portfolio turnover rate |
84 | % | 190 | % | 88 | % | 67 | % | 30 | % | ||||||||||
(a) | Calculation based on average shares outstanding. |
(b) | 25.2% of gross income was attributable to dividends paid by Unibail-Rodamco. |
(c) | 18.1% of gross income was attributable to a special dividend paid by Great Eagle Holdings Ltd. |
(d) | Amount is less than $0.005. |
(e) | Does not reflect sales charges, which would reduce return. |
(f) | Reflects Fund level ratio for non-class specific expenses plus class specific expenses. |
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FINANCIAL HIGHLIGHTS(C ONTINUED )
Class C | ||||||||||||||||||||
For the Year Ended December 31, | ||||||||||||||||||||
Per Share Operating Performance: |
2010 |
2009 |
2008 |
2007 |
2006 |
|||||||||||||||
Net asset value, beginning of period |
$ | 10.42 | $ | 8.36 | $ | 16.13 | $ | 18.44 | $ | 13.26 | ||||||||||
Income from investment operations: |
||||||||||||||||||||
Net investment income (a ) |
0.14 | (b) | 0.12 | 0.16 | 0.12 | 0.10 | (c ) | |||||||||||||
Net realized and unrealized gain (loss) |
1.13 | 2.75 | (7.84 | ) | (1.07 | ) | 5.58 | |||||||||||||
Total from investment operations |
1.27 | 2.87 | (7.68 | ) | (0.95 | ) | 5.68 | |||||||||||||
Less dividends and distributions to shareholders from: |
||||||||||||||||||||
Net investment income |
(0.72 | ) | (0.81 | ) | | (0.84 | ) | (0.41 | ) | |||||||||||
Net realized gain |
| | | (0.53 | ) | (0.09 | ) | |||||||||||||
Tax return of capital |
| | (0.09 | ) | | | ||||||||||||||
Total dividends and distributions to shareholders |
(0.72 | ) | (0.81 | ) | (0.09 | ) | (1.37 | ) | (0.50 | ) | ||||||||||
Redemption fees retained by the Fund |
0.00 | (d) | 0.00 | (d ) | 0.00 | (d ) | 0.01 | 0.00 | (d ) | |||||||||||
Net increase (decrease) in net asset value |
0.55 | 2.06 | (7.77 | ) | (2.31 | ) | 5.18 | |||||||||||||
Net asset value, end of period |
$ | 10.97 | $ | 10.42 | $ | 8.36 | $ | 16.13 | $ | 18.44 | ||||||||||
Total investment return (e ) |
12.72 | % | 34.69 | % | 47.83 | % | 5.23 | % | 42.99 | % | ||||||||||
Ratios/Supplemental Data: |
||||||||||||||||||||
Net assets, end of period (in millions) |
$ | 220.5 | $ | 254.6 | $ | 281.0 | $ | 1,074.9 | $ | 688.1 | ||||||||||
Ratio of expenses to average daily net assets |
2.26 | % (f) | 2.31 | % (f ) | 2.19 | % | 2.12 | % | 2.26 | % | ||||||||||
Ratio of net investment income to average daily net assets |
1.40 | % (f) | 1.29 | % | 1.23 | % | 0.63 | % | 0.63 | % | ||||||||||
Portfolio turnover rate |
84 | % | 190 | % | 88 | % | 67 | % | 30 | % | ||||||||||
(a) | Calculation based on average shares outstanding. |
(b) | 25.2% of gross income was attributable to dividends paid by Unibail-Rodamco. |
(c) | 18.1% of gross income was attributable to a special dividend paid by Great Eagle Holdings Ltd. |
(d) | Amount is less than $0.005. |
(e) | Does not reflect sales charges, which would reduce return. |
(f) | Reflects Fund level ratio for non-class specific expenses plus class specific expenses. |
33
C OHEN & S TEERS I NTERNATIONAL R EALTY F UND , I NC . C LASS A AND C LASS C S HARES
THE USA PATRIOT ACT
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account.
What this means for you: when you open an account, we will ask you for your name, address, date of birth and other information that will allow us to identify you. This information will be verified to
SUBSCRIPTION AGREEMENT
1 |
Account Type (Please print; indicate only one registration type) | |||||
¨ |
A. Individual or Joint Account* |
- | - | |||||||||||||||||||||||||
Name | Social Security Number** | Date of Birth |
- | - | |||||||||||||||||||||||||
Name of Joint Owner, if any | Social Security Number** | Date of Birth | ||||||||||||||||||||||||
Citizenship: ¨ U.S. Citizen ¨ Resident Alien ¨ Nonresident Alien***: |
Country of Citizenship |
¨ |
B. Uniform Gifts/Transfers to Minors (UGMA/UTMA) |
- | - | |||||||||||||||||||||||||
Custodians name (only one permitted) | Social Security Number** | Date of Birth | ||||||||||||||||||||||||
- | - | |||||||||||||||||||||||||
Minors name (only one permitted) | Social Security Number** | Date of Birth | ||||||||||||||||||||||||
under the Uniform Gifts/Transfers to Minors Act | ||||||||||||||||||||||||||
(state residence of minor) |
¨ |
C. Trust, Corporation or Other Entity |
Name of Trust, Corporation or Other Entity | Tax Identification Number** | Date of Trust Agreement |
Check the box that describes the entity establishing the account:
¨ | U.S. Financial Institution governed by a federal regulator. |
¨ | Bank governed by a U.S. state bank regulator. |
¨ | Corporation. If Corporation, provide the tax classification: (C=C Corporation, S=S Corporation). Attach a copy of the certified articles of incorporation or business license unless the corporation is publicly traded on the New York Stock Exchange or NASDAQ. If so, please provide ticker symbol: |
¨ | Retirement plan governed by ERISA. |
¨ | Trust. Attach a copy of the Trust Agreement. |
¨ | Partnership. Attach a copy of Partnership Agreement. |
¨ | Limited Liability Company (LLC). If LLC, provide the tax classification: (C= C Corporation, S=S Corporation, P=Partnership). |
¨ | U.S. Government Agency or Instrumentality. |
¨ | Foreign correspondent account, foreign broker dealer or foreign private banking account. |
¨ | Other. Attach copy of document that formed entity or by laws or similar document. |
Call (800) 437-9912 to see if additional information is required.
* | All joint registrations will be registered as joint tenants with rights of survivorship unless otherwise specified. |
** | If applied for, include a copy of application for social security or tax identification number. |
*** | Nonresident aliens must include a copy of a government-issued photo ID with this application. |
| If no classification is provided, per IRS regulations, your account will default to an S Corporation. |
IRFAXSAGAC-0511
2 |
Authorized Persons | |||||
If you are establishing an account under 1C above as a (i) Corporation (non-publicly traded), (ii) Partnership, (iii) Trust or (iv) Other, information on each of the individuals authorized to effect transactions must be provided below: |
- | - | |||||||||||||||||||||||||
Authorized Individual/Trustee | Social Security Number* | Date of Birth |
- | - | |||||||||||||||||||||||||
Authorized Individual/Trustee | Social Security Number* | Date of Birth | ||||||||||||||||||||||||
Citizenship: ¨ U.S. Citizen ¨ Resident Alien ¨ Nonresident Alien**: |
Country of Citizenship |
(If there are more than two authorized persons, provide the information, in the same format, on a separate sheet for each such additional person.)
* | If applied for, include a copy of application for social security number. |
** | Nonresident aliens must include a copy of a government-issued photo ID with this application. |
3 |
Address | |||||
(If mailing address is a post office box, a street address is also required. APO and FPO addresses will be accepted)
Registrant Street Address |
( ) |
||||
Street | Home Telephone Number | |||
( ) |
||||
City and State Zip Code | Business Telephone Number |
Mailing Address | City | State | Zip |
Joint Registrant Street Address (required if different than Registrant Address above)
Address | City | State | Zip |
4 |
Investment Information |
Class of shares (please check one) : ¨ A ¨ C
(Class A purchased if no box checked)
$ Amount to invest ($1,000 minimum investment). Do not send cash. Investment will be paid for by
(please check one):
¨ | Check or draft made payable to Cohen & Steers International Realty Fund, Inc. |
¨ | Wire through the Federal Reserve System.* |
* | Call (800) 437-9912 to notify the Fund of investments by wire and to obtain an account number. See the Purchase of Fund Shares section of the Prospectus for wire instructions. |
5 |
Automatic Investment Plan |
A. | The automatic investment plan makes possible regularly scheduled monthly purchases of Fund shares. The Funds Transfer Agent can arrange for an amount of money selected by you ($100 minimum) to be deducted from your checking account and used to purchase shares of the Fund. |
Please debit $ from my checking account beginning on *.
(Month)
Please debit my account on (check one) : ¨ 1st of Month ¨ 15th of Month
B. | ¨ Please establish the Auto-Buy option, which allows you to make additional investments on dates you choose by having an amount of money selected by you ($100 minimum) deducted from your checking account.* |
* | To initiate the automatic investment plan or the Auto-Buy option, Section 10 of this Subscription Agreement must be completed. |
Please continue application on reverse side.
6 |
Reduced Sales Charge (Class A Only) |
Aggregating Accounts or Rights of Accumulation
¨ | I apply for Aggregating Accounts reduced sales charges based on the following accounts: |
¨ | I apply for Rights of Accumulation reduced sales charges based on the following accounts: |
Account Name |
Social Security Number |
|||||||||||||||||||||||||||
1. |
- | - | ||||||||||||||||||||||||||
2. |
- | - | ||||||||||||||||||||||||||
3. |
- | - |
Letter of Intention
¨ | I am already investing under an existing Letter of Intention. |
¨ | I agree to the Letter of Intention provisions in the Funds current Prospectus. During a 12 month period, I plan to invest a dollar amount of at least: ¨ $100,000 ¨ $250,000 ¨ $500,000 ¨ $1,000,000 |
Net Asset Value Purchase
¨ | I certify that I qualify for an exemption from the sales charge by meeting the conditions set forth in the Prospectus. |
7 |
Exchange Privileges |
Exchange privileges will be automatically granted unless you check the box below. Shareholders wishing to exchange into other Cohen & Steers Funds or the SSgA Money Market Fund should consult the Exchange Privilege section of the Prospectus. (Note: If shares are being purchased through a dealer, please contact your dealer for availability of this service.)
¨ | I decline the exchange privilege. |
8 |
Redemption Privileges |
Shareholders may select the following redemption privileges by checking the box(es) below. See How to Sell Fund Shares section of the Prospectus for further details. Redemption privileges will be automatically declined for boxes not checked.
¨ | I authorize the Transfer Agent to redeem shares in my account(s) by telephone, in accordance with the procedures and conditions set forth in the Funds current Prospectus. |
¨ | I wish to have redemption proceeds paid by wire (please complete Section 10). |
9 |
Distribution Options |
Dividends and capital gains may be reinvested or paid by check. If no options are selected below, both dividends and capital gains will be reinvested in additional Fund shares.
Dividends | ¨ Reinvest. | ¨ Pay in cash. | ||||
Capital Gains | ¨ Reinvest. | ¨ Pay in cash. |
¨ | I wish to have my distributions paid by wire (please complete Section 10). |
10 |
Bank of Record (for Wire Instructions and/or Automatic Investment Plan) |
Please attach a voided check from your bank account.
Bank Name | Bank ABA Number | |||
Street or P.O. Box | Bank Account Number | |||
City and State Zip Code | Account Name |
11 | Signature and Certifications |
(a) | By signing this agreement, I represent and warrant that: |
(1) | I have the full right, power, capacity and authority to invest in the Fund; |
(2) | I am of legal age in my state of residence or am an emancipated minor; |
(3) | All of the information on this agreement is true and correct; and |
(4) | I will notify the Fund immediately if there is any change in this information. |
(b) | I have read the current Prospectus of the Fund and this agreement and agree to all their terms. I also agree that any shares purchased now or later are and will be subject to the terms of the Funds Prospectus as in effect from time to time. Further, I agree that the Fund, its administrators and service providers and any of their directors, trustees, employees and agents will not be liable for any claims, losses or expenses (including legal fees) for acting on any instructions believed to be genuine, provided that reasonable security procedures have been followed. If an account has multiple owners, the Fund may rely on the instructions of any one account owner unless all owners specifically instruct the Fund otherwise. |
(c) | I am aware that under the laws of certain states, the assets in my account may be transferred (escheated) to the state if no activity occurs in my account within a specified period of time. |
(d) | If I am a U.S. citizen, resident alien, or a representative of a U.S. entity, I certify, under penalty of perjury, that: |
(1) | The taxpayer identification number and tax status shown on this form are correct. |
(2) | I am not subject to backup withholding because: |
|
I am exempt from backup withholding, or |
|
I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or |
|
The IRS has notified me that I am no longer subject to backup withholding. |
NOTE: If you have been notified by the IRS that you are currently subject to backup withholding because of under-reporting interest or dividends on your tax return, you must cross out this Item 2.
(3) | I am a U.S. person (including resident alien). |
(e) | If I am a nonresident alien, I understand that I am required to complete and attach the appropriate Form W-8 to certify my foreign status. |
(1) | Indicate country of residence for tax purposes |
Under penalty of perjury, I certify that I am not a U.S. citizen or resident alien and I am an exempt foreign person as defined by the IRS. |
(f) | Additional Certification: |
(1) | Neither I (we), nor any person having a direct or indirect beneficial interest in the shares to be acquired, appears on any U.S. Government published list of persons who are known or suspected to engage in money laundering activities, such as the Specially Designated Nationals and Blocked Persons List of the Office of Foreign Assets Control of the United States Department of the Treasury. I (we) do not know or have any reason to suspect that (i) the monies used to fund my (our) investment have been or will be derived from or related to any illegal activities and (ii) the proceeds from my (our) investment will be used to finance any illegal activities. |
(2) | I agree to provide such information and execute and deliver such documents as the Fund may reasonably request from time to time to verify the accuracy of the information provided in connection with the opening of an account or to comply with any law, rule or regulation to which the Fund may be subject, including compliance with anti-money laundering laws. |
The IRS does not require your consent to any provision of this document other than the certifications required to avoid backup withholding. |
x | x | |||||
Signature* (Owner, Trustee, Etc.) |
Date | Signature* (Joint Owner, Co-Trustee) | Date |
Name and Title |
* | If shares are to be registered in (1) joint names, both persons should sign, (2) a custodians name, the custodian should sign, (3) a trust, the trustee(s) should sign, or (4) a corporation or other entity, an officer or other authorized person should sign and print name and title above. Persons signing as representatives or fiduciaries of corporations, partnerships, trusts or other organizations are required to furnish corporate resolutions or similar documents providing evidence that they are authorized to effect securities transactions on behalf of the investor (alternatively, the secretary or another designated officer of the entity may certify the authority of the persons signing on the space provided above). |
Mail to: Boston Financial Data Services, P.O. Box 8123, Boston, MA 02266-8123
TO OBTAIN ADDITIONAL INFORMATION ABOUT THE FUND
If you would like additional information about Cohen & Steers International Realty Fund, Inc., the following documents are available to you without any charge either upon request or at cohenandsteers.com:
|
Annual/Semi-Annual Reports Additional information about the Funds investments is available in the Funds annual and semi-annual reports to shareholders. In these reports, you will find a discussion of the market conditions and investment strategies that significantly affected the Funds performance during its most recent fiscal year. |
|
Statement of Additional Information Additional information about the Funds investments, structure and operations can be found in the SAI. The information presented in the SAI is incorporated by reference into this Prospectus and is legally considered to be part of the Prospectus. |
To request a free copy of any of the materials described above as well as other information, or to make any other inquiries, please contact us:
By telephone | (800) 437-9912 | |
By mail | Cohen & Steers International Realty Fund, Inc. | |
c/o Boston Financial Data Services | ||
P.O. Box 8123 | ||
Boston, Massachusetts 02266-8123 | ||
By e-mail | marketing@cohenandsteers.com | |
On the Internet | cohenandsteers.com |
This information may also be available from your broker or financial intermediary. In addition, other information about the Fund (including the Funds SAI) may also be obtained from the SEC:
|
By going to the SECs 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) 551-8090. |
|
By accessing the SECs 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. 20549-1520. Upon payment of a duplicating fee, copies of the information will be sent to you. |
280 PARK AVENUE, NEW YORK, NEW YORK 10017
SEC File No. 811-21677
IRFAXPROAC-0511
280 PARK AVENUE
NEW YORK, NEW YORK 10017
CLASS I (IRFIX) SHARES
PROSPECTUS
Advisor
Cohen & Steers Capital Management, Inc.
280 Park Avenue
New York, New York 10017
Telephone: (212) 832-3232
Transfer Agent
Boston Financial Data Services
P.O. Box 8123
Boston, Massachusetts 02266-8123
Telephone: (800) 437-9912
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF THE FUNDS SHARES OR DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANYONE WHO INDICATES OTHERWISE IS COMMITTING A CRIME.
MAY 1, 2011
TABLE OF CONTENTS
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Payments to Broker-Dealers and Other Financial Intermediaries |
6 | |||
6 | ||||
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS |
6 | |||
6 | ||||
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9 | ||||
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27 |
COHEN & STEERS INTERNATIONAL REALTY FUND, INC.
The investment objective of Cohen & Steers International Realty Fund, Inc. (the Fund) is total return.
This table describes the fees and expenses that you could pay if you buy and hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment): |
None | |
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment): |
||
Management Fee |
0.95% | |
Other Expenses |
0.31% | |
Total Annual Fund Operating Expenses |
1.26% | |
E XAMPLE
The example below is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then either redeem or do not redeem your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Funds operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be :
1 Year |
3 Years |
5 Years |
10 Years |
|||||||||||||
Class I shares |
$ | 128 | $ | 400 | $ | 692 | $ | 1,523 |
P ORTFOLIO T URNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Funds performance. During the most recent fiscal year, the Funds portfolio turnover rate was 84% of the average value of its portfolio.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests at least 80% of its total assets in a portfolio of non-U.S. real estate equity securities. Real estate equity securities include common stocks, preferred stocks and other equity securities issued by real estate companies, including real estate investment trusts (REITs) and similar REIT-like entities. A real estate company is one that (i) derives at least 50% of its revenue from the ownership, construction, financing, management or sale of commercial, industrial or residential real estate; or (ii) has at least 50% of its assets in such real estate. REITs are companies that own interests in real estate or in real estate related loans or other interests, and their revenue primarily consists of rent derived from owned, income producing real estate properties and capital gains from the sale of such properties. A REIT in the U.S. is generally not taxed on income distributed to shareholders
1
so long as it meets certain tax related requirements, including the requirement that it distribute substantially all of its taxable income to its shareholders. REIT-like entities are organized outside of the U.S. and have operations and receive tax treatment similar to that of U.S. REITs. While the Fund is not limited to investing in REIT-like entities, it is expected that the Fund will invest a significant percentage of its portfolio in these types of entities.
Under normal market conditions, the Fund expects to have investments across different countries and regions. The Fund may, however, invest up to 20% of its total assets in the equity securities of U.S. REITs and other U.S. real estate companies. In addition, the Fund may invest up to 15% of its total assets in real estate equity securities of companies domiciled in emerging market countries.
The Fund may also invest in securities of foreign companies in the form of American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and European Depositary Receipts (EDRs).
The Fund may engage in foreign currency transactions, including foreign currency forward contracts, futures contracts, options, swaps and other similar strategic transactions in connection with its investments in securities of non-U.S. companies.
Investment Risk. An investment in the Fund is subject to investment risk, including the possible loss of the entire principal amount that you invest.
Market Risk. Your investment in Fund shares represents an indirect investment in the REIT shares and other real estate securities owned by the Fund. The value of these equity securities, like other investments, may move up or down, sometimes rapidly and unpredictably. Your Fund shares at any point in time may be worth less than what you invested, even after taking into account the reinvestment of Fund dividends and distributions.
Common Stock Risk. While common stock has historically generated higher average returns than fixed-income securities, common stock has also experienced significantly more volatility in those returns. An adverse event, such as an unfavorable earnings report, may depress the value of common stock held by the Fund. Also, the price of common stock is sensitive to general movements in the stock market. A drop in the stock market may depress the price of common stock held by the Fund.
Real Estate Market Risk. Since the Fund concentrates its assets in the real estate industry, your investment in the Fund will be closely linked to the performance of the real estate markets. Property values may fall due to increasing vacancies or declining rents resulting from unanticipated economic, legal, cultural or technological developments. Real estate company prices also may drop because of the failure of borrowers to pay their loans and poor management.
REIT Risk. REITs are dependent upon management skills and generally may not be diversified. REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidation. In addition, REITs could possibly fail to qualify for pass-through of income under applicable tax law. Various factors may also adversely affect a borrowers or a lessees 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.
Foreign (Non-U.S.) and Emerging Market Securities Risk. Risks of investing in foreign securities include currency risks, future political and economic developments and possible imposition of foreign withholding taxes on income payable on the securities. In addition, there may be less publicly available
2
information about a foreign issuer than about a domestic issuer, and foreign issuers may not be subject to the same accounting, auditing and financial recordkeeping standards and requirements as domestic issuers.
Securities of companies in emerging markets may be more volatile than those of companies in more developed markets. Investing in securities of companies in emerging markets may entail special risks relating to potential economic, political or social instability and the risks of expropriation, nationalization, confiscation or the imposition of restrictions on foreign investment, the lack of hedging instruments, and repatriation of capital invested. The securities and real estate markets of some emerging market countries have in the past sometimes experienced substantial market disruptions and may do so in the future.
Smaller Companies Risk. Real estate companies 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 companys stock, which means that buy and sell transactions in that stock could have a larger impact on the stocks 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 companys stock price than is the case for a larger company. Further, smaller company stocks may perform in different cycles than larger company stocks. Accordingly, real estate company shares can be more volatile thanand at times will perform differently fromlarge company stocks.
Foreign Currency and Currency Hedging Risk. Although the Fund will report its net asset value (NAV) and pay dividends in U.S. dollars, foreign securities often are purchased with and make any dividend and interest payments in foreign currencies. Therefore, the Funds investments in foreign securities will be subject to foreign currency risk, which means that the Funds NAV could decline solely as a result of changes in the exchange rates between foreign currencies and the U.S. dollar. Certain foreign countries may impose restrictions on the ability of issuers of foreign securities to make payment of principal, dividends and and interest to investors located outside the country, due to blockage of foreign currency exchanges or otherwise.
The Fund may, but is not required to, engage in various investments that are designed to hedge the Funds foreign currency risks, including foreign currency forward contracts, foreign currency futures contracts, put and call options on foreign currencies and foreign currency swaps. Such transactions may reduce returns or increase volatility, perhaps substantially.
Preferred Securities Risk. There are various risks associated with investing in preferred securities, including credit risk, interest rate risk, deferral and omission of distributions, subordination to bonds and other debt securities in a companys capital structure, call, reinvestment and income risk, limited liquidity, limited voting rights and special redemption rights.
Non-Diversification Risk. As a non-diversified investment company, the Fund may invest in fewer individual companies than a diversified investment company. Because a non-diversified portfolio is more likely to experience large market price fluctuations, the Fund may be subject to a greater risk of loss than a fund that has a diversified portfolio.
Your investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
3
The following bar chart and table provide some indication of the risks of investing in the Fund. The bar chart shows changes in the Funds performance from year to year for the Class I shares. The table shows how the Funds average annual returns compare with the performance of selected broad market indexes over various time periods. Past performance (both before and after taxes) is not, however, an indication as to how the Fund may perform in the future. Updated performance is available at cohenandsteers.com or by calling (800) 330-7348.
C LASS I S HARES
A NNUAL T OTAL R ETURNS
Highest quarterly return during this period: 36.66% (quarter ended June 30, 2009)
Lowest quarterly return during this period: -26.25% (quarter ended December 31, 2008)
Average Annual Total Returns
(for periods ended December 31, 2010)
1 Year |
5 Years |
Since Inception (March 31, 2005) |
||||||||||
Return Before Taxes |
13.95 | % | 2.46 | % | 4.98 | % | ||||||
Return After Taxes on Distributions |
11.70 | % | 0.99 | % | 3.62 | % | ||||||
Return After Taxes on Distributions and Sale of Fund Shares |
9.48 | % | 1.52 | % | 3.75 | % | ||||||
FTSE EPRA/NAREIT Developed Ex-U.S. Real Estate Index (reflects no deduction for fees, expenses or taxes) |
15.63 | % | 2.89 | % | 6.05 | % | ||||||
S&P 500 ® Index (reflects no deduction for fees, expenses or taxes) (1) |
15.06 | % | 2.29 | % | 3.23 | % |
(1) | The S&P 500 Index is an unmanaged index of common stocks that is frequently used as a general measure of stock market performance. |
After-tax returns are calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investors tax situation and may differ from those shown, and the after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.
4
Advisor
Cohen & Steers Capital Management, Inc. (the Advisor)
Subadvisors
Cohen & Steers Europe S.A. (CNS Europe)
Cohen & Steers Asia Limited (CNS Asia)
Cohen & Steers UK Limited (CNS UK)
Portfolio Managers
The Funds portfolio managers are:
· |
Martin Cohen Director and Co-Chairman of the Fund. Mr. Cohen has been a portfolio manager of the Fund since inception. |
· |
Robert H. Steers Director and Co-Chairman of the Fund. Mr. Steers has been a portfolio manager of the Fund since inception. |
· |
Joseph M. Harvey Vice President of the Fund. Mr. Harvey has been a portfolio manager of the Fund since inception. |
· |
Scott Crowe Vice President of the Fund. Mr. Crowe has been a portfolio manager of the Fund since 2008. |
· |
Gerios J.M. Rovers Mr. Rovers has been a portfolio manager of the Fund since inception. |
· |
Luke Sullivan Mr. Sullivan has been a portfolio manager of the Fund since 2008. |
PURCHASE AND SALE OF FUND SHARES
You may open an account with the Fund with a minimum investment of $100,000. If you are a registered advisor, you may open a Class I account with the Fund with an aggregate minimum investment of $100,000.
You may purchase, redeem or exchange shares of the Fund on any business day, which is any day the New York Stock Exchange (NYSE) is open for business, by written request, wire transfer (call (800) 437-9912 for instructions) or telephone. You may purchase, redeem or exchange shares of the Fund either through a financial intermediary or directly through Cohen & Steers Securities, LLC, the Funds distributor (the Distributor). For accounts opened directly through the Distributor, a completed and signed Subscription Agreement is required for the initial account opened with the Fund.
Please mail the signed Subscription Agreement to:
Boston Financial Data Services
Cohen & Steers Funds
P.O. Box 8123
Boston, MA 02266-8123
Phone: (800) 437-9912
The Funds distributions are taxable as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account.
5
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and/or its Advisor or Distributor may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your individual financial adviser to recommend the Fund over another investment. Ask your individual financial adviser or visit your financial intermediarys Web site for more information.
The Fund may be suitable for you if you are seeking:
· |
to add exposure to non-U.S. real estate equity securities to your portfolio; |
· |
a fund that may perform differently than other types of stock or bond funds because of the Funds focus on equity securities of non-U.S. real estate companies; and |
· |
a fund offering the potential for both current income and long-term capital appreciation. |
The Fund is designed for long-term investors. You should not invest in the Fund unless your investment horizon is at least two months. The Fund will take reasonable steps to identify and reject orders from market timers.
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
The investment objective of the Fund is total return. In pursuing total return, the Fund seeks both capital appreciation and current income with approximately equal emphasis. There can be no assurance that the Fund will achieve its investment objective. The Fund may change its investment objective without shareholder approval, although it has no current intention to do so. Shareholders will be provided with at least 60 days prior written notice of any change to the Funds investment objective. The Fund will concentrate its investments in the real estate industry.
PRINCIPAL INVESTMENT STRATEGIES
In managing the Funds portfolio, the Advisor and CNS Asia, CNS UK and CNS Europe, the Funds sub-investment advisors (the Subadvisors) adhere to an integrated, bottom-up, relative value investment process. A proprietary valuation model ranks international real estate securities on price-to-NAV, which the Advisor and Subadvisors believe is the primary determinant of real estate security valuation, and guides a bottom-up portfolio construction process. Analysts incorporate both quantitative and qualitative analysis in their NAV estimates. The company research process includes an evaluation of management, strategy, property quality, financial strength and corporate structure. In addition to the NAV model, portfolio managers may use secondary valuation tools including cash flow multiple/growth or discounted cash flow models. Judgments with respect to risk control, diversification, liquidity and other factors overlay the models output and drive the portfolio managers investment decisions.
6
The following are the Funds principal investment strategies.
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 market conditions, the Fund will invest substantially all of its total assets in a portfolio of equity securities issued by non-U.S. real estate companies (including REITs and REIT-like entities).
These equity securities in which the Fund invests can consist of:
· |
common stocks; |
· |
rights or warrants to purchase common stocks; |
· |
securities convertible into common stocks where the conversion feature represents, in the view of the Advisor or a Subadvisor, a significant element of the securities value; and |
· |
preferred stocks. |
Under normal market conditions, the Fund expects to have investments in real estate equity securities of companies across different countries and regions. In addition, the Fund will normally invest in real estate equity securities primarily in developed countries, but may invest up to 15% of its total assets in real estate equity securities of companies domiciled in emerging market countries.
Foreign (Non-U.S.) Real Estate Companies and Depositary Receipts
The Fund will invest at least 80% of its assets in real estate companies outside the U.S. These companies may have characteristics that are similar to a REIT entity. REITs are companies that own interests in real estate or in real estate related loans or other interests, and their revenue primarily consists of rent derived from owned, income producing real estate properties and capital gains from the sale of such properties. A REIT in the U.S. is generally not taxed on income distributed to shareholders so long as it meets certain tax related requirements, including the requirement that it distribute substantially all of its taxable income to its shareholders. A number of countries around the world have adopted, or are considering adopting, similar REIT-like structures pursuant to which these companies are not subject to corporate income tax in their home countries provided they distribute a significant percentage of their net income each year to shareholders and meet certain other requirements. While the Fund is not limited to investing in foreign-domiciled REIT-like entities, it is expected that the Fund will invest a significant percentage of its portfolio in these types of entities.
The Fund may also invest in securities of foreign companies in the form of ADRs, GDRs and EDRs. Generally, ADRs in registered form are dollar denominated securities designed for use in the U.S. securities markets, which represent and may be converted into an underlying foreign security. GDRs, in bearer form, are designed for use outside the United States. EDRs, in bearer form, are designed for use in the European securities markets.
Real Estate Investment Trusts (REITs)
The Fund may invest up to 20% of its total assets in U.S. real estate equity securities, including U.S. REITs. REITs are companies that own interests in real estate or in real estate related loans or other interests, and REITs revenue primarily consists of rent derived from owned, income producing real
7
estate properties and capital gains from the sale of such properties. A REIT is generally not taxed on income distributed to shareholders so long as it meets certain tax related requirements, including the requirement that it distribute substantially all of its taxable income to such shareholders (other than net capital gains for each taxable year). As a result, REITs tend to pay relatively higher dividends than other types of companies and the Fund intends to use these REIT dividends in an effort to meet the current income goal of its investment objective. Dividends paid by REITs will not be eligible for the dividends received deduction under Section 243 of the Internal Revenue Code of 1986, as amended (the Code), and are generally not considered qualified dividend income eligible for reduced rates of taxation. The dividends received deduction generally allows corporations to deduct 70% of the income they receive from dividends that are paid out of earnings and profits of the issuer. Individuals will generally be taxed at long-term capital gain rates on qualified dividend income for taxable years beginning on or before December 31, 2012.
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. The Fund invests primarily in equity REITs or REIT-like entities.
Currency Hedging Transactions
In order to hedge against foreign currency exchange rate risks from adverse changes in the relationship between the U.S. dollar and foreign currencies (including to hedge against anticipated future changes which otherwise might adversely affect the prices of securities that the Fund intends to purchase at a later date), the Fund may enter into foreign currency forward contracts, foreign currency futures contracts and foreign currency swaps, as well as purchase put or call options on foreign currencies, as described below and engage in other similar strategic transactions. The Fund may also conduct its foreign currency exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market.
A foreign currency forward contract is an obligation to purchase or sell a specific currency for an agreed price on a future date which is individually negotiated and privately traded by currency traders and their customers. A foreign currency futures contract is an exchange-traded contract for the purchase or sale of a specified foreign currency at a specified price at a future date. A foreign currency swap is an agreement between two parties to exchange principal and interest payments on a loan made in one currency for principal and interest payments of a loan of equal value in another currency. The Fund may enter into a foreign currency forward contract, foreign currency futures contract or foreign currency swap, or purchase a currency option, for example, when it enters into a contract for the purchase or sale of a security denominated in a foreign currency or expects to receive a dividend or interest payment on a portfolio holding, in order to lock in the U.S. dollar value of the security or payment. In addition, the Fund may enter into a foreign currency forward contract, futures contract or swap or purchase a currency option in respect of a currency which acts as a proxy for a currency in which the Funds portfolio holdings or anticipated holdings are denominated. This second investment practice is generally referred to as cross-hedging. To the extent forward contracts, swaps or options would be deemed to be illiquid, they will be included in the maximum limitation of 15% of net assets invested in illiquid securities.
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Investment Risk
An investment in the Fund is subject to investment risk, including the possible loss of the entire principal amount that you invest.
Market Risk
Your investment in Fund shares represents an indirect investment in the REIT shares and other real estate securities owned by the Fund. The value of these equity securities, like other investments, may move up or down, sometimes rapidly and unpredictably. Your Fund shares at any point in time may be worth less than what you invested, even after taking into account the reinvestment of Fund dividends and distributions.
Common Stock Risk
While common stock has historically generated higher average returns than fixed-income securities, common stock has also experienced significantly more volatility in those returns. An adverse event, such as an unfavorable earnings report, may depress the value of common stock held by the Fund. Also, the price of common stock is sensitive to general movements in the stock market. A drop in the stock market may depress the price of common stock held by the Fund.
General Risks of Securities Linked to the Real Estate Industry
The Fund will not invest in real estate directly, but only in securities issued by real estate companies. However, because of its policy of concentration 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. |
Thus, the value of the Funds shares may change at different rates compared to the value of shares of a mutual fund with investments in a mix of different industries.
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Risks of Investing in REITs
In addition to the risks of securities linked to the real estate industry, REITs are subject to certain other risks related to their structure and focus. REITs are dependent upon management skills and generally may not be diversified. REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidation. In addition, REITs could possibly fail to qualify for pass-through of income under applicable tax law, or to maintain their exemptions from registration under the Investment Company Act of 1940, as amended (1940 Act). The above factors may also adversely affect a borrowers or a lessees 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.
General Risks of Foreign (Non-U.S.) and Emerging Market Securities
Although it is not the Funds current intent, the Fund may invest up to 100% of its total assets in foreign (non-U.S.) securities. Under normal market conditions, the Fund intends to invest at least 80% of its total assets in non-U.S. real estate equity securities. In addition, the Fund may invest up to 15% of its total assets in foreign securities of companies in so-called emerging markets (or lesser developed countries). Investments in such securities are particularly speculative. Investing in foreign securities involves certain risks not involved in domestic investments, including, but not limited to:
· |
future foreign economic, financial, political and social developments; |
· |
different legal systems; |
· |
the possible imposition of exchange controls or other foreign governmental laws or restrictions; |
· |
less governmental supervision; |
· |
regulation changes; |
· |
changes in currency exchange rates; |
· |
less publicly available information about companies due to less rigorous disclosure or accounting standards or regulatory practices; |
· |
high and volatile rates of inflation; |
· |
fluctuating interest rates; |
· |
different accounting, auditing and financial record-keeping standards and requirements; and |
· |
dividend income the Fund receives from foreign securities may not be eligible for the special tax treatment applicable to qualified income. |
Investments in foreign securities, especially in emerging market countries, will expose the Fund to the direct or indirect consequences of political, social or economic changes in the countries that issue the securities or in which the issuers are located. Certain countries in which the Fund may invest, especially emerging market countries, have historically experienced, and may continue to experience, high rates of inflation, high interest rates, exchange rate fluctuations, large amounts of external debt, balance of payments and trade difficulties and extreme poverty and unemployment. Many of these countries are also characterized by political uncertainty and instability. The cost of servicing external debt will generally be adversely affected by rising international interest rates because many external debt obligations bear interest at rates that are adjusted based upon international interest rates. In addition, with respect to certain foreign countries, there is a risk of:
· |
the possibility of expropriation of assets; |
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· |
confiscatory taxation; |
· |
difficulty in obtaining or enforcing a court judgment; |
· |
economic, political or social instability; and |
· |
diplomatic developments that could affect investments in those countries. |
In addition, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as:
· |
growth of gross domestic product; |
· |
rates of inflation; |
· |
capital reinvestment; |
· |
resources; |
· |
self-sufficiency; and |
· |
balance of payments position. |
To the extent the Funds investments are concentrated in a geographic region or country, the Fund will be subject, to a greater extent than if the Funds assets were less concentrated, to the risks of adverse changes in that region or country. In addition, certain investments in foreign securities also may be subject to foreign withholding taxes.
Securities of companies in emerging markets may be more volatile than those of companies in more developed markets. Emerging market countries generally have less developed markets and economies and, in some countries, less mature governments and governmental institutions. Investing in securities of companies in emerging markets may entail special risks relating to potential economic, political or social instability and the risks of expropriation, nationalization, confiscation or the imposition of restrictions on foreign investment, the lack of hedging instruments, and repatriation of capital invested. The securities and real estate markets of some emerging market countries have in the past sometimes experienced substantial market disruptions and may do so in the future. The economies of many emerging market countries may be heavily dependent on international trade and, accordingly, have been and may continue to be adversely affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they wish to trade.
As a result of these potential risks, the Advisor or Subadvisors may determine that, notwithstanding otherwise favorable investment criteria, it may not be practicable or appropriate to invest in a particular country. The Fund may invest in countries in which foreign investors, including the Advisor or Subadvisors, have had no or limited prior experience.
Smaller Companies Risk
Real estate companies 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 companys stock, which means that buy and sell transactions in that stock could have a larger impact on the stocks 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 companys stock price than is the case for a larger company. Further, smaller company stocks may perform in different cycles than larger company stocks. Accordingly, real estate company shares can be more volatile thanand at times will perform differently fromlarge company stocks.
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Preferred Securities Risk
Preferred securities are subject to credit risk, which is the risk that a security will decline in price, or the issuer of the security will fail to make dividend, interest or principal payments when due, because the issuer experiences a decline in its financial status. Preferred securities are also subject to interest rate risk and may decline in value because of changes in market interest rates. In addition, an issuer may be permitted to defer or omit distributions. Preferred securities are also generally subordinated to bonds and other debt instruments in a companys capital structure. During periods of declining interest rates, an issuer may be able to exercise an option to redeem (call) its issue at par earlier than scheduled, and the Fund may be forced to reinvest in lower yielding securities. Certain preferred securities may be substantially less liquid than many other securities, such as common stocks. Generally, preferred security holders have no voting rights with respect to the issuing company unless certain events occur. Certain preferred securities may give the issuers special redemption rights allowing the securities to be redeemed prior to a specified date if certain events occur, such as changes to tax or securities laws.
Foreign Currency and Currency Hedging Risk
Although the Fund will report its NAV and pay dividends in U.S. dollars, foreign securities often are purchased with and make any dividend and interest payments in foreign currencies. Therefore, when the Fund invests in foreign securities, it will be subject to foreign currency risk, which means that the Funds NAV could decline as a result of changes in the exchange rates between foreign currencies and the U.S. dollar. Certain foreign countries may impose restrictions on the ability of issuers of foreign securities to make payment of principal, dividends and interest to investors located outside the country, due to blockage of foreign currency exchanges or otherwise.
The Fund may, but is not required to, engage in various investments that are designed to hedge the Funds foreign currency risks, including foreign currency forward contracts, foreign currency futures contracts, put and call options on foreign currencies and foreign currency swaps. Such transactions may reduce returns or increase volatility, perhaps substantially. Foreign currency forward contracts, foreign currency futures contracts, over-the-counter options on foreign currencies and foreign currency swaps are subject to the risk of default by the counterparty and can be illiquid. These currency hedging transactions, as well as the futures contracts and exchange-listed options in which the Fund may invest, are subject to many of the risks of, and can be highly sensitive to changes in the value of, the related currency or other reference asset. As such, a small investment could have a potentially large impact on the Funds performance. Whether or not the Fund engages in currency hedging transactions, the Fund may experience a decline in the value of its portfolio securities, in U.S. dollar terms, due solely to fluctuations in currency exchange rates. Use of currency hedging transactions may cause the Fund to experience losses greater than if the Fund had not engaged in such transactions.
Non-Diversification Risk
As a non-diversified investment company, the Fund can invest in fewer individual companies than a diversified investment company. Because a non-diversified portfolio is more likely to experience large market price fluctuations, the Fund may be subject to a greater risk of loss than a fund that has a diversified portfolio.
ADDITIONAL INVESTMENT INFORMATION
In addition to the principal investment strategies described above, the Fund has other investment practices that are described here and in the Statement of Additional Information (SAI).
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Illiquid Securities
The Fund will not invest more than 15% of its net assets in illiquid securities. Restricted securities, which are securities that may be resold to the public without an effective registration statement under the Securities Act of 1933, as amended, or, if they are unregistered, may be sold only in a privately negotiated transaction or pursuant to an exemption from registration, may be illiquid. Illiquid securities involve the risk that the securities will not be sold promptly ( i.e. , within seven days) at the time desired by the Fund or at prices approximating the value at which the Fund is carrying the securities on its books and records.
Defensive Position
When the Advisor or Subadvisors believe that market or general economic conditions justify a temporary defensive position, the Fund may deviate from its investment objective and invest all or any portion of its assets in short-term debt instruments, government securities, cash or cash equivalents. When and to the extent the Fund assumes a temporary defensive position, it may not pursue or achieve its investment objective.
Portfolio Holdings
A description of the Funds policies and procedures with respect to the disclosure of the Funds portfolio securities is available in the Funds SAI. The Fund also files its complete schedule of portfolio holdings with the Securities and Exchange Commission (the SEC) on Form N-Q as of the end of its first and third fiscal quarters. The Funds full portfolio holdings are published semi-annually in reports sent to shareholders and filed with the SEC on Form N-CSR and such reports are made available at cohenandsteers.com in the Our Products section, generally within 70 days after the end of each semi-annual period. The Fund also posts an uncertified list of portfolio holdings on the Web site, no earlier than 15 days after the end of each calendar quarter. The holdings information remains available until the Fund files a report on Form N-Q or Form N-CSR for the period that includes the date as of which the information is current. In addition to information on portfolio holdings, other Fund statistical information may be found on the Cohen & Steers Funds Web site or by calling (800) 330-7348.
The Advisor, a registered investment advisor located at 280 Park Avenue, New York, New York 10017, was formed in 1986 and its clients include pension plans, endowment funds and investment companies, including each of the open-end and closed-end Cohen & Steers funds. As of March 31, 2011, the Advisor managed approximately $38 billion in assets. The Advisor is a wholly owned subsidiary of Cohen & Steers, Inc. (CNS), a publicly traded company whose common stock is listed on the NYSE under the symbol CNS.
The Advisor is responsible for the overall management of the Funds portfolio and for the supervision and ongoing monitoring of the Subadvisors.
CNS Asia, with offices located at 12/F Citibank Tower, Citibank Plaza, No. 3 Garden Road, Central Hong Kong, is a wholly owned subsidiary of CNS and serves as a Subadvisor pursuant to an agreement with the Advisor (a Subadvisory Agreement). CNS Asia provides investment research and advisory services with respect to Asia Pacific real estate securities and provides trade order execution services for the Fund. CNS Asia is a registered investment advisor and was formed in 2005.
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CNS Europe, with offices located at 166 Chausee de la Hulpe, Brussels, Belgium, is a wholly owned subsidiary of CNS and serves as a Subadvisor pursuant to a Subadvisory Agreement. CNS Europe provides investment research and advisory services with respect to European real estate securities and provides trade order execution services for the Fund. CNS Europe is a registered investment advisor and was formed in February 2000.
CNS UK, with offices located at 21 Sackville Street, 4th Floor, London, W1S 3DN, U.K., is a wholly owned subsidiary of CNS and serves as a Subadvisor pursuant to a Subadvisory Agreement. CNS UK provides investment research and advisory services to the Advisor and CNS Europe in connection with managing the Funds investments in Europe. CNS UK is a registered investment advisor and was formed in 2006.
The fees of the Subadvisors are paid by the Advisor (and not the Fund) out of its investment advisory fee received from the Fund.
References in this Prospectus to activities and responsibilities of the Advisor may be performed by one or more of the Subadvisors.
Under its investment advisory agreement (the Investment Advisory Agreement) with the Fund, the Advisor furnishes a continuous investment program for the Funds portfolio, makes the day-to-day investment decisions for the Fund, and generally manages the Funds investments in accordance with the stated policies of the Fund, subject to the general supervision of the Board of Directors of the Fund. The Advisor also performs certain administrative services for the Fund and provides persons satisfactory to the Board of Directors of the Fund to serve as officers of the Fund. Such officers, as well as certain Directors of the Fund, may also be directors, officers, or employees of the Advisor. The Advisor and Subadvisor also select brokers and dealers to execute the Funds portfolio transactions.
For its services under the Investment Advisory Agreement, the Fund pays the Advisor a monthly investment advisory fee at the annual rate of 0.95% of the average daily NAV of the Fund for the first $1.5 billion and 0.85% of the average daily NAV in excess of $1.5 billion. This fee is allocated to the Class I shares based on the Class I shares proportionate share of such average daily NAV. The Funds effective investment advisory fee during 2010 was 0.95% of average daily net assets.
In addition to this investment advisory fee, the Fund pays other operating expenses, which may include but are not limited to, administrative, transfer agency, custodial, legal and accounting fees. The Fund pays the Advisor a monthly fee at the annual rate of 0.06% for administration services.
A discussion regarding the Board of Directors basis for approving the Investment Advisory Agreement and the Subadvisory Agreements are included in the Funds semi-annual reports to shareholders for the period ended June 30, 2010.
The Funds portfolio managers are:
· |
Martin CohenMr. Cohen is a director and co-chairman of the Fund. He is co-chairman and co-chief executive officer of the Advisor and CNS, and vice president of the Distributor. |
· |
Robert H. SteersMr. Steers is a director and co-chairman of the Fund. He is co-chairman and co-chief executive officer of the Advisor and CNS, and vice president of the Distributor. |
· |
Joseph M. HarveyMr. Harvey is a vice president of the Fund. He joined the Advisor in 1992 and currently serves as president and chief investment officer of the Advisor and president of CNS. |
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· |
Scott CroweMr. Crowe is a vice president of the Fund. He joined the Advisor in 2007 and currently serves as senior vice president and global research strategist. Prior to that, Mr. Crowe was an executive director at UBS and served as head of U.S. REITs and as a global strategist. He also worked at UBS Warburg as a real estate analyst. |
· |
Gerios J.M. RoversMr. Rovers has been a managing director and chief investment officer of CNS Europe since 2000. Prior to that, he was a vice president at Security Capital Group in Brussels, Belgium. |
· |
Luke SullivanMr. Sullivan has been with CNS Asia since 2006 and currently serves as senior vice president. Prior to joining CNS Asia, Mr. Sullivan was a vice president and research analyst at Citigroup Investment Research where he covered Australian real estate companies. Prior to that, he was a research assistant at Credit Suisse First Boston. |
The Advisor and Subadvisors utilize a team-based approach in managing the Fund. Messrs. Cohen, Steers and Harvey are the leaders of this team. Messrs. Rovers, Crowe and Sullivan direct and supervise the execution of the Funds investment strategy, and lead and guide other members of the investment team.
The SAI contains additional information about the portfolio managers compensation, other accounts they manage and their ownership of securities in the Fund.
The price at which you can purchase and redeem the Funds Class I shares is the NAV of the shares next determined after we receive your order in proper form. Proper form means that your request includes the Fund name and account number, states the amount of the transaction (in dollars or shares), includes the signatures of all owners exactly as registered on the account, signature guarantees (if necessary), any supporting legal documentation that may be required and any outstanding certificates representing shares to be redeemed.
The Fund calculates its NAV per share as of the close of regular trading on the NYSE, generally 4:00 p.m. eastern time, on each day the NYSE is open for trading. Thus, purchase and redemption orders must be received in proper form by the close of trading on the NYSE in order to receive that days NAV; orders received after the close of regular trading on the NYSE will receive the NAV next determined. The Fund has authorized one or more brokers to accept on its behalf purchase (and redemption) orders, and these brokers are authorized to designate other intermediaries on the Funds behalf. The Fund will be deemed to have received a purchase (or redemption) order when an authorized broker, or that brokers designee, accepts the order, and that order will be priced at the next computed NAV after this acceptance. The Fund determines NAV per share for the Class I shares by dividing that classs share of the net assets of the Fund ( i.e. , its assets less liabilities) by the total number of Class I shares then outstanding.
Investments in securities that are listed on the NYSE are valued, except as indicated below, at the last sale price reflected at the close of the NYSE 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 for the day or, if no asked price is available, at the bid price.
Securities not listed on the NYSE but listed on other domestic or foreign securities exchanges are valued in a similar manner. Securities traded on more than one securities exchange are valued at the last sale
15
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. If after the close of the foreign markets, but prior to the close of business on the day the securities are being valued, market conditions change significantly, certain foreign securities may be fair valued pursuant to procedures established by the Board of Directors.
Readily marketable securities traded in the over-the-counter market, including listed securities whose primary market is believed by the Advisor to be over-the-counter, are valued at the official closing prices as reported by sources as the Board of Directors deem appropriate to reflect their fair market value. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices for the day, or if no asked price is available, at the bid price. 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 Board of Directors to reflect the fair market value of such securities.
Securities for which market prices are unavailable, or securities for which the Advisor determines that bid and/or asked price or a counterparty valuation does not reflect market value, will be valued at fair value pursuant to procedures approved by the Funds Board of Directors. Circumstances in which market prices may be unavailable include, but are not limited to, when trading in a security is suspended, the exchange on which the security is traded is subject to an unscheduled close or disruption or material events occur after the close of the exchange on which the security is principally traded. In these circumstances, the Fund determines fair value in a manner that fairly reflects the market value of the security on the valuation date based on consideration of any information or factors it deems appropriate. These may include recent transactions in comparable securities, information relating to the specific security and developments in the markets.
The Funds use of fair value pricing may cause the NAV of Fund shares to differ from the NAV that would be calculated using market quotations. Fair value pricing involves subjective judgments and it is possible that the fair value determined for a security may be materially different than the value that could be realized upon the sale of that security.
Short-term debt securities, which have a maturity date of 60 days or less, are valued at amortized cost, which approximates value. Investments in open-end mutual funds are valued at their closing NAV.
Because the Fund may hold securities that are primarily listed on foreign exchanges that trade on weekends or days when the Fund does not price its shares, the value of the securities held in the Fund may change on days when you will not be able to purchase or redeem Fund shares.
HOW TO PURCHASE, EXCHANGE AND SELL FUND SHARES
TYPES OF SHAREHOLDERS QUALIFIED TO PURCHASE CLASS I SHARES
Class I shares are available for purchase only by:
· |
retirement plans introduced by persons not associated with brokers or dealers that are primarily engaged in the retail securities business and rollover individual retirement accounts (IRA) from such plans; |
· |
tax-exempt employee benefit plans of the Advisor or its affiliates and securities dealer firms with a selling agreement with the Distributor; |
· |
institutional advisory accounts of the Advisor or its affiliates and related employee benefit plans and rollover IRAs from such institutional advisory accounts; |
16
· |
a bank, trust company or similar financial institution investing for its own account or for the account of its trust customers for whom such financial institution is exercising investment discretion in purchasing Class I shares, except where the investment is part of a program that requires payment to the financial institution of a Rule 12b-1 plan fee; |
· |
registered investment advisors investing on behalf of clients that consist of institutions and/or individuals; |
· |
clients (including individuals, corporations, endowments, foundations and qualified plans) of approved financial intermediaries who charge such clients an ongoing fee for advisory, investment, consulting or similar services, or who have entered into an agreement with the Distributor to offer Class I shares through an omnibus account, no-load network or platform; |
· |
investors who purchase through certain wrap programs, fee based advisory programs, asset allocation programs and similar programs with approved financial intermediaries; |
· |
current officers, directors and employees (and their immediate families) of the Fund, the Advisor, the Subadvisors, CNS, the Distributor, and to any trust, pension, profit-sharing or other benefit plan for only such persons; and |
· |
investors having a direct relationship with the Advisor or its affiliates. |
You may open an account with the Fund with a minimum investment of $100,000. If you are a registered advisor, you may open a Class I account with the Fund with an aggregate minimum investment of $100,000. The Fund reserves the right to waive or change its minimum investment requirements.
HOW TO PURCHASE FUND SHARES
We will accept payment for shares in two forms:
1. A check drawn on any bank or domestic savings institution. Checks must be payable in U.S. dollars and will be accepted subject to collection at full face value.
2. A bank wire or federal reserve wire of federal funds.
Initial Purchase By Wire
1. Telephone toll free from any continental U.S. state: (800) 437-9912. When you contact the Transfer Agent, you will need the following information:
· |
name of the Fund; |
· |
class of shares; |
· |
name(s) in which shares are to be registered; |
· |
address; |
· |
social security or tax identification number (where applicable); |
· |
dividend payment election; |
17
· |
amount to be wired; |
· |
name of the wiring bank; and |
· |
name and telephone number of the person to be contacted in connection with the order. |
The Transfer Agent will assign you an account number.
2. Instruct the wiring bank to transmit at least the required minimum amount (see Purchase Minimums above) to the custodian:
State Street Bank and Trust Company
One Lincoln Street
Boston, Massachusetts 02111
ABA # 011000028
Account: DDA #99055287
Attn: Cohen & Steers International Realty Fund, Inc.
For further credit to: (Account Name)
Account Number: (provided by the Transfer Agent)
3. Complete the Subscription Agreement attached to this Prospectus and mail the Subscription Agreement to the Transfer Agent:
Boston Financial Data Services
Attn: Cohen & Steers Funds
P.O. Box 8123
Boston, Massachusetts 02266-8123
Additional Purchases By Wire
1. Telephone toll free from any U.S. continental state: (800) 437-9912. When you contact the Transfer Agent, you will need the following information:
· |
name of the Fund; |
· |
class of shares; |
· |
account number; |
· |
amount to be wired; |
· |
name of the wiring bank; and |
· |
name and telephone number of the person to be contacted in connection with the order. |
2. Instruct the wiring bank to transmit at least the required minimum amount (see Purchase Minimums above) to the custodian:
State Street Bank and Trust Company
One Lincoln Street
Boston, Massachusetts 02111
ABA # 011000028
Account: DDA #99055287
Attn: Cohen & Steers International Realty Fund, Inc.
For further credit to: (Account Name)
Account Number: (provided by the Transfer Agent)
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Initial Purchase By Mail
1. Complete the Subscription Agreement attached to this Prospectus.
2. Mail the Subscription Agreement and a check in at least the required minimum amount (see Purchase Minimums above), payable to the Fund, to the Transfer Agent at the above address.
Additional Purchases By Mail
1. Make a check payable to the Fund in at least the required minimum amount (see Purchase Minimums above). Write your Fund account number and the class of shares to be purchased on the check.
2. Mail the check and the detachable stub from your account statement (or a letter providing your account number) to the Transfer Agent at the address set forth above.
P URCHASES T HROUGH D EALERS A ND I NTERMEDIARIES
You may purchase the Funds shares through authorized dealers and other financial intermediaries.
Financial service firms that do not have a sales agreement with the Distributor also may place orders for purchases of the Funds shares, but may charge you a transaction fee.
Dealers and financial service firms are responsible for promptly transmitting purchase orders to the Distributor. These dealers and financial service firms may also impose charges for handling transactions placed through them. Such charges may include processing or service fees, which are typically fixed dollar amounts. You should contact your dealer or financial service firm for more information about any additional charges that may apply.
ADDITIONAL INFORMATION ON PURCHASE OF FUND SHARES
In addition to offering Class I shares, the Fund also offers Class A and Class C shares, which are described in a separate Prospectus. To obtain a Prospectus for these classes, contact Boston Financial Data Services, Inc. (the Transfer Agent) by writing to the address or by calling the telephone number listed on the back cover of this Prospectus.
A UTOMATIC I NVESTMENT P LAN AND P URCHASES BY ACH
The Funds automatic investment plan (the Plan) provides a convenient way to invest in the Fund. Under the Plan, you can have money transferred automatically from your checking account to the Fund each month to buy additional shares. If you are interested in this Plan, please refer to the automatic investment plan section of the Subscription Agreement attached to this Prospectus or contact your dealer. The market value of the Funds shares may fluctuate, and a systematic investment plan such as this will not assure a profit or protect against a loss. You may discontinue the Plan at any time by notifying the Fund by mail or telephone at the address or number on the back cover of this Prospectus.
You may purchase additional shares of the Fund by automated clearing house (ACH). To elect the Auto-Buy option, select it on your Subscription Agreement or call the Transfer Agent and request an optional shareholder services form. ACH is similar to the Plan, except that you may choose the date on which you want to make the purchase. We will need a voided check or deposit slip before you may purchase by ACH. If you are interested in this option, please call (800) 437-9912.
19
The Fund reserves the right to reject or cancel any purchase order and to withdraw or suspend the offering of shares at any time. The Fund may also request additional information from you in order to verify your identity. If you do not provide this information or if such information cannot be verified, we reserve the right to close your account to the extent required or permitted by applicable law or regulations, including those relating to the prevention of money laundering.
You may exchange some or all of your Fund shares for shares of other Cohen & Steers open-end funds, provided that you meet applicable investment minimums. If you exchange Fund shares for shares of another Cohen & Steers open-end fund that imposes sales charges, you must exchange into shares of the same class of such other fund.
You may, under certain circumstances, exchange Fund shares for a different class of shares of the same Fund, and move shares held in certain types of accounts to a different type of account or to a new account maintained by a financial intermediary. To qualify for a potential exchange, you must be eligible to purchase the class of shares you wish to exchange into (including satisfying any applicable investment minimum) and, if you invest in the Fund through an intermediary, your intermediary must have an arrangement with the Distributor to offer such class. No sales charges or other charges will apply to any such exchange. For federal income tax purposes, a same-fund share class exchange is not expected to result in the realization by the investor of a capital gain or loss; however, shareholders are advised to consult with their own tax advisors with respect to the particular tax consequences to them of an investment in the Fund. Please speak with your financial intermediary or tax advisor if you have any questions.
The Fund also makes available for exchange shares of SSgA Money Market Fund, which is advised by SSgA Funds Management, Inc. You may request a prospectus and application for the SSgA Money Market Fund by calling (800) 437-9912. Please read the prospectus carefully before you invest.
An exchange of shares may result in your realizing a taxable gain or loss for income tax purposes. See Additional InformationTax Considerations. The exchange privilege is available to shareholders residing in any state in which the shares being acquired may be legally sold. Before you exercise the exchange privilege, you should read the prospectus of the Fund whose shares you are acquiring. Certain dealers and other financial intermediaries may limit or prohibit your right to use the exchange privilege and may charge you a fee for exchange transactions placed through them.
We have adopted reasonable procedures that are designed to ensure that any telephonic exchange instructions are genuine. Neither the Fund nor its agents will be liable for any loss or expenses if we act in accordance with these procedures. We may modify or revoke the exchange privilege for all shareholders upon 60 days prior written notice and this privilege may be revoked immediately with respect to any shareholder if the Fund believes that the shareholder is engaged in, or has engaged in, market timing or other abusive trading practices. For additional information concerning exchanges, or to make an exchange, please call the Transfer Agent at (800) 437-9912.
You may sell or redeem your shares through authorized dealers, other financial intermediaries or through the Transfer Agent. If your shares are held by your dealer or intermediary in street name, you must redeem your shares through that dealer or intermediary.
20
Redemptions Through Dealers and Other Intermediaries
If you have an account with an authorized dealer or other intermediary, you may submit a redemption request to such dealer or intermediary. They are responsible for promptly transmitting redemption requests to the Distributor. Dealers and intermediaries may impose charges for handling redemption transactions placed through them. Such charges may include processing or service fees, which are typically fixed dollar amounts. You should contact your dealer or intermediary for more information about additional charges that may apply.
Redemption By Telephone
To redeem shares by telephone, call the Funds Transfer Agent at (800) 437-9912. In order to be honored at that days price, we must receive any telephone redemption requests by the close of regular trading on the NYSE that day, generally 4:00 p.m., eastern time. Orders received after the close of regular trading on the NYSE will receive the NAV next determined.
If you would like to change your telephone redemption instructions, you must send the Transfer Agent written notification signed by all of the accounts registered owners, accompanied by signature guarantee(s), as described below.
We may modify or suspend telephone redemption and exchange privileges without notice during periods of drastic economic or market changes. We have adopted reasonable procedures that are designed to ensure that any telephonic redemption instructions are genuine. Neither the Fund nor its agents will be liable for any loss or expenses if we act in accordance with these procedures. We may modify or terminate the telephone redemption privilege at any time on 30 days notice to shareholders.
Redemption By Mail
You can redeem Fund shares by sending a written request for redemption to the Transfer Agent:
Boston Financial Data Services
P.O. Box 8123 Boston,
Massachusetts 02266-8123
Attn: Cohen & Steers International Realty Fund, Inc.
A written redemption request must:
· |
state the number of shares or dollar amount to be redeemed; |
· |
identify your account number and tax identification number; and |
· |
be signed by each registered owner exactly as the shares are registered. |
If the shares to be redeemed were issued in certificate form, the certificate must be endorsed for transfer (or be accompanied by a duly executed stock power) and must be submitted to the Transfer Agent together with a redemption request.
For redemptions made by corporations, executors, administrators or guardians, the Transfer Agent may require additional supporting documents evidencing the authority of the person making the redemption (including evidence of appointment or incumbency). For additional information regarding the specific documentation required, contact the Transfer Agent at (800) 437-9912.
The Transfer Agent will not consider your redemption request to be properly made until it receives all required documentation in proper form.
21
O THER R EDEMPTION I NFORMATION
Payment of Redemption Proceeds
The Fund will send you redemption proceeds by check. However, if you made an election on the Subscription Agreement to receive redemption proceeds by wire, the Fund will send the proceeds by wire to your designated bank account. When proceeds of a redemption are to be paid to someone other than the shareholder, either by wire or check, you must send a letter of instruction and the signature(s) on the letter of instruction must be guaranteed, as described below, regardless of the amount of the redemption. The Transfer Agent will normally mail checks for redemption proceeds within five business days. Redemptions by wire will normally be sent within two business days. The Fund will delay the payment of redemption proceeds, however, if your check used to pay for the shares to be redeemed has not cleared, which may take up to 15 days or more. The Fund may suspend the right of redemption or postpone the date of payment if trading is halted or restricted on the NYSE or under other emergency conditions as permitted by the 1940 Act.
The Fund will pay redemption proceeds in cash, by check or wire, unless the Board of Directors believes that economic conditions exist which make redeeming in cash detrimental to the best interests of the Fund. In the event that this were to occur, all or a portion of your redemption proceeds would consist of readily marketable portfolio securities of the Fund transferred into your name. You would then incur brokerage costs in converting the securities to cash. The Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act, as a result of which the Fund is obligated to redeem shares, with respect to any one shareholder during any 90-day period, solely in cash up to the lesser of $250,000 or 1% of the Fund's NAV at the beginning of the period.
Signature Guarantee
You may need to have your signature guaranteed (STAMP 2000 Medallion) in certain situations, such as:
· |
written requests to wire redemption proceeds (if not previously authorized on the Subscription Agreement); |
· |
sending redemption proceeds to any person, address or bank account not on record; and |
· |
transferring redemption proceeds to a Cohen & Steers fund account with a different registration (name/ownership) from yours. |
A signature guarantee stamp may be obtained from eligible members of the Medallion Signature Guarantee Program. Eligible guarantor institutions generally include banks, broker-dealers, credit unions, members of national securities exchanges, registered securities associations, clearing agencies and savings associations. You should verify with the institution that they are an eligible guarantor institution prior to signing. A notary public cannot provide a medallion guarantee stamp.
Redemption of Small Accounts
If your Fund account has a value of $100,000 or less as the result of any voluntary redemption, we may redeem your remaining shares. We will, however, give you 30 days notice of our intention to do so. During this 30-day notice period, you may make additional investments to increase your account value to $100,000 (the minimum purchase amount) or more and avoid having the Fund automatically liquidate your account.
FREQUENT PURCHASES AND REDEMPTIONS OF FUND SHARES
The Fund is designed for long-term investors with investment horizons of at least two months. Excessive trading, short-term market timing or other abusive trading practices may disrupt portfolio management strategies and harm portfolio performance. For example, in order to handle large flows of
22
cash into and out of the Fund, a portfolio manager may need to allocate more assets to cash or other short-term investments or sell securities. Transaction costs, such as brokerage commissions and market spreads, can detract from the Funds performance. Additionally, excessive trading is a concern for the Fund because the Funds portfolio will have foreign securities and therefore could be subject to time-zone arbitrage.
Because of potential harm to the Fund and its long-term investors, the Board of Directors of the Fund has adopted policies and procedures to discourage and prevent excessive trading and short-term market timing. As part of these policies and procedures, the Advisor monitors purchase, exchange and redemption activity in Fund shares. The intent is not to inhibit legitimate strategies such as asset allocation, dollar cost averaging or similar activities that may nonetheless result in frequent trading of the Funds shares. Under these procedures, the Fund generally prohibits more than two purchases and sales or exchanges of its shares within a 60 day calendar year period.
The following transactions are excluded when determining whether trading activity is excessive: (i) transfers associated with systematic purchases or redemptions; (ii) transactions through firm-sponsored, discretionary asset allocation or wrap programs and (iii) transactions subject to the trading policy of an intermediary that the Fund deems materially similar to the Funds policy.
If, based on these procedures, the Advisor determines that a shareholder is engaged in, or has engaged in, market timing or excessive trading, we may place a temporary or permanent block on all further purchases or exchanges of Fund shares.
Multiple accounts under common ownership or control may be considered one account for the purpose of determining a pattern of excessive trading, short-term market timing or other abusive trading practices.
The Fund will also utilize fair value pricing in an effort to reduce arbitrage opportunities available to short-term traders.
Due to the complexity involved in identifying excessive trading and market timing activity, there can be no guarantee that the Fund will be able to identify and restrict such activity in all cases. Additionally, it is more difficult for the Fund to monitor the trading activity of beneficial owners of Fund shares who hold those shares through third-party 401(k) and other group retirement plans and other omnibus arrangements maintained by broker/dealers and other intermediaries. Omnibus account arrangements permit multiple investors to aggregate their respective share ownership positions and purchase, redeem and exchange Fund shares in a single account.
In certain circumstances the Fund may accept frequent trading restrictions of intermediaries that differ from the Funds policies. Since such intermediaries execute or administer transactions with many fund families, it may be impractical for them to enforce a particular funds frequent trading or exchange policy. These alternate trading restrictions would be authorized only if the Fund believes that the alternate restrictions would provide reasonable protection to the Fund and its shareholders.
NETWORKING AND SUB-TRANSFER AGENCY FEES
The Fund may also enter into agreements with financial intermediaries pursuant to which the Fund will pay financial intermediaries for services such as networking or sub-transfer agency. Payments made pursuant to such agreements are generally based on either (1) a percentage of the average daily net assets of Fund shareholders serviced by such financial intermediaries, or (2) the number of Fund
23
shareholders serviced by such financial intermediaries. From time to time, the Advisor may pay a portion of the fees for networking or sub-transfer agency services at its own expense and out of its own profits.
The Advisor and the Distributor may make payments from their own resources to dealers and other financial intermediaries for distribution, administrative or other services. Please contact your dealer or intermediary for details about payments it may receive.
The Fund intends to declare and pay dividends from its investment income semi-annually. The Fund intends to distribute net realized capital gains, if any, at least once each year, normally in December. The Transfer Agent will automatically reinvest your dividends and distributions in additional shares of the Fund unless you elected on your Subscription Agreement to have them paid to you in cash.
The following tax discussion assumes you are a U.S. shareholder. This discussion offers only a brief outline of the federal income tax consequences of investing in the Fund and is based on the federal tax laws in effect on the date hereof. Such tax laws are subject to change by legislative, judicial or administrative action, possibly with retroactive effect. In the SAI, we have provided more detailed information regarding the tax consequences of investing in the Fund.
Dividends paid to you out of the Funds investment company taxable income as that term is defined in the Code, determined without regard to the deduction for dividends paid, will be taxable to you as ordinary income. If a portion of the Funds income consists of dividends paid by U.S. corporations (other than REITs), a portion of the dividends paid by the Fund may be eligible for the corporate dividends received deduction (DRD). In addition for taxable years beginning on or before December 31, 2012, distributions of investment company taxable income designated by the Fund as derived from qualified dividend income (QDI) will be taxed in the hands of individuals at the rates applicable to long-term capital gains, provided the holding period and other requirements are met by both you and the Fund. Dividend income that the Fund receives from REITs, if any, will generally not be treated as QDI. There can be no assurance that favorable tax treatment of QDI will continue following December 31, 2012. A foreign corporation is a qualified foreign corporation if it is (1) incorporated in a possession of the United States or is eligible for benefits of a comprehensive income tax treaty with the United States that the United States Treasury Department determines is satisfactory for this purpose and that includes an exchange of information program or (2) any other foreign corporation with respect to any dividend paid by such corporation if the stock with respect to which such dividend is paid is readily tradable on an established securities market in the United States. A qualified foreign corporation does not include any foreign corporation, which for the taxable year of the corporation in which the dividend was paid, or the preceding taxable year, is a passive foreign investment company. Because of the fact-specific nature of the inquiry, the Fund cannot predict at this time what portion, if any, of the dividends it will receive from foreign corporations will be eligible for the reduced rates of taxation applicable to QDI. Distributions of net capital gain (the excess of net long-term capital gain over net short-term capital loss), if any, designated as capital gain dividends are taxable to you as long-term capital gains, regardless of how long you have held your Fund shares. A distribution of an amount in excess of the Funds current and accumulated earnings and profits is treated as a non-taxable return of capital that reduces your tax basis in your Fund shares; any such
24
distributions in excess of your tax basis are treated as gain from a sale of your shares. The tax treatment of your dividends and distributions will be the same regardless of whether they were paid to you in cash or reinvested in additional Fund shares. If you buy shares of the Fund when the Fund has realized but not yet distributed income or capital gains, you will be buying a dividend by paying the full price for the shares and then receiving a portion back in the form of a taxable distribution.
A distribution will be treated as paid to you on 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 during January of the following year.
Each year, we will notify you of the tax status of dividends and other distributions.
If you sell or redeem your Fund shares, or exchange them for shares of another Cohen & Steers open-end fund, you may realize a capital gain or loss (provided the shares are held as a capital asset) which will be long-term or short-term, depending on your holding period for the shares.
Under the Energy Improvement and Extension Act of 2008, the Funds Transfer Agent will be required to provide you with cost basis information on the sale of any of your shares in the Fund, subject to certain exceptions. This cost basis reporting requirement is effective for shares purchased in the Fund on or after January 1, 2012.
For taxable years beginning after December 31, 2012, recently enacted legislation will generally impose a tax on the net investment income of certain individuals and on the undistributed net investment income of certain estates and trusts. For these purposes, net investment income will generally include interest, dividends (including dividends paid with respect to Fund shares), annuities, royalties, rent, net gain attributable to the disposition of property not held in a trade or business (including net gain from the sale, exchange or other taxable disposition of Fund shares) and certain other income, but will be reduced by any deductions properly allocable to such income or net gain. Shareholders are advised to consult their own tax advisors regarding additional taxation of net investment income.
We may be required to withhold U.S. federal income tax on all taxable distributions and redemption proceeds payable if you:
· |
fail to provide us with your correct taxpayer identification number; |
· |
fail to make required certifications; or |
· |
have been notified by the Internal Revenue Service that you are subject to backup withholding. |
Backup withholding is not an additional tax. Any amounts withheld may be credited against your U.S. federal income tax liability.
Certain dividends and other distributions received from sources outside the United States may be subject to withholding taxes imposed by other countries. In the event that more than 50% of the value of the total assets of the Fund at the close of the taxable year consists of stock or securities of foreign corporations, the Fund may make an election to pass through to its shareholders the amount of foreign taxes paid by it.
The Fund has elected to be treated as, and intends to qualify each year as, a regulated investment company under U.S. federal income tax law. If the Fund so qualifies and distributes each year to its shareholders at least 90% of the sum of its investment company taxable income (as that term is defined in the Code, but without regard to the deduction for dividends paid) and net tax-exempt interest, the Fund will not be required to pay U.S. federal income taxes on any income it distributes to shareholders. Additionally, if the Fund distributes less than an amount equal to the sum of 98% of its ordinary income
25
for the calendar year and 98.2% of its capital gain net income for the one-year period ending on October 31 (unless the Fund elects to use a calendar year), plus any ordinary income and capital gain net income from previous years that were not distributed, then the Fund will be subject to a nondeductible 4% excise tax on the undistributed amounts. The Fund intends to make sufficient distributions of its income to satisfy the distribution requirement and prevent application of the excise tax.
Fund distributions also may be subject to state and local taxes. You should consult with your own tax advisor regarding the particular consequences of investing in the Fund.
A non-resident alien individual, a foreign trust or estate, a foreign corporation or foreign partnership (foreign shareholders) are advised to consult with their own tax advisors with respect to the particular tax consequences to them of an investment in the Fund.
26
The financial highlights table is intended to help you understand the financial performance of the Funds Class I shares for the past five years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). The financial highlights have been derived from financial statements audited by PricewaterhouseCoopers LLP, whose report, along with the Funds audited financial statements, is included in the Funds current annual report, which is available free of charge upon request or by visiting cohenandsteers.com.
The following table includes selected data for a share outstanding throughout each period and other performance information derived from the financial statements. It should be read in conjunction with the financial statements and notes thereto.
Class I | ||||||||||||||||||||
For the Year Ended December 31, | ||||||||||||||||||||
Per Share Operating Performance: |
2010 |
2009 |
2008 |
2007 |
2006 |
|||||||||||||||
Net asset value, beginning of period |
$ | 10.51 | $ | 8.43 | $ | 16.19 | $ | 18.50 | $ | 13.28 | ||||||||||
Income from investment operations: |
||||||||||||||||||||
Net investment income (a) |
0.25 | (b) | 0.21 | 0.31 | 0.30 | 0.26 | (c) | |||||||||||||
Net realized and unrealized gain (loss) |
1.15 | 2.78 | (7.90 | ) | (1.08 | ) | 5.59 | |||||||||||||
Total from investment operations |
1.40 | 2.99 | (7.59 | ) | (0.78 | ) | 5.85 | |||||||||||||
Less dividends and distributions to shareholders from: |
||||||||||||||||||||
Net investment income |
(0.77 | ) | (0.91 | ) | | (1.01 | ) | (0.54 | ) | |||||||||||
Net realized gain |
| | | (0.53 | ) | (0.09 | ) | |||||||||||||
Tax return of capital |
| | (0.17 | ) | | | ||||||||||||||
Total dividends and distributions to shareholders |
(0.77 | ) | (0.91 | ) | (0.17 | ) | (1.54 | ) | (0.63 | ) | ||||||||||
Redemption fees retained by the Fund |
0.00 | (d) | 0.00 | (d) | 0.00 | (d) | 0.01 | 0.00 | (d) | |||||||||||
Net increase (decrease) in net asset value |
0.63 | 2.08 | (7.76 | ) | (2.31 | ) | 5.22 | |||||||||||||
Net asset value, end of period |
$ | 11.14 | $ | 10.51 | $ | 8.43 | $ | 16.19 | $ | 18.50 | ||||||||||
Total investment return |
13.95 | % | 35.96 | % | 47.26 | % | 4.32 | % | 44.45 | % | ||||||||||
Ratios/Supplemental Data: |
||||||||||||||||||||
Net assets, end of period (in millions) |
$ | 826.5 | $ | 686.9 | $ | 528.0 | $ | 1,136.0 | $ | 711.5 | ||||||||||
Ratio of expenses to average daily net assets |
1.26 | % (e) | 1.31 | % (e) | 1.19 | % | 1.12 | % | 1.25 | % | ||||||||||
Ratio of net investment income to average daily net assets |
2.41 | % (e) | 2.23 | % | 2.36 | % | 1.61 | % | 1.60 | % | ||||||||||
Portfolio turnover rate |
84 | % | 190 | % | 88 | % | 67 | % | 30 | % | ||||||||||
(a) | Calculation based on average shares outstanding. |
(b) | 25.2% of gross income was attributable to dividends paid by Unibail-Rodamco. |
(c) | 18.1% of gross income was attributable to a special dividend paid by Great Eagle Holdings Ltd. |
(d) | Amount is less than $0.005. |
(e) | Reflects Fund level ratio for non-class specific expenses. |
27
C OHEN & S TEERS I NTERNATIONAL R EALTY F UND , I NC . C LASS I S HARES O NLY
THE USA PATRIOT ACT
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account.
What this means for you: when you open an account, we will ask you for your name, address, date of birth and other information that will allow us to identify you. This information will be verified to
SUBSCRIPTION AGREEMENT
1 |
Account Type (Please print; indicate only one registration type) | |||||
¨ |
A. Individual or Joint Account* |
- | - | |||||||||||||||||||||||||
Name | Social Security Number** | Date of Birth |
- | - | |||||||||||||||||||||||||
Name of Joint Owner, if any | Social Security Number** | Date of Birth | ||||||||||||||||||||||||
Citizenship: ¨ U.S. Citizen ¨ Resident*** Alien*** ¨ Nonresident Alien: |
Country of Citizenship |
¨ |
B. Uniform Gifts/Transfers to Minors (UGMA/UTMA) |
- | - | |||||||||||||||||||||||||
Custodians name (only one permitted) | Social Security Number** | Date of Birth | ||||||||||||||||||||||||
- | - | |||||||||||||||||||||||||
Minors name (only one permitted) | Social Security Number** | Date of Birth | ||||||||||||||||||||||||
under the Uniform Gifts/Transfers to Minors Act | ||||||||||||||||||||||||||
(state residence of minor) |
¨ |
C. Trust, Corporation or Other Entity |
Name of Trust, Corporation or Other Entity | Tax Identification Number** | Date of Trust Agreement |
Check the box that describes the entity establishing the account:
¨ | U.S. Financial Institution governed by a federal regulator. |
¨ | Bank governed by a U.S. state bank regulator. |
¨ | Corporation. If Corporation, provide the tax classification: (C=C Corporation, S=S Corporation). Attach a copy of the certified articles of incorporation or business license unless the corporation is publicly traded on the New York Stock Exchange or NASDAQ. If so, please provide ticker symbol: |
¨ | Retirement plan governed by ERISA. |
¨ | Trust. Attach a copy of the Trust Agreement. |
¨ | Partnership. Attach a copy of Partnership Agreement. |
¨ | Limited Liability Company (LLC). If LLC, provide the tax classification: (C= C Corporation, S=S Corporation, P=Partnership). |
¨ | U.S. Government Agency or Instrumentality. |
¨ | Foreign correspondent account, foreign broker dealer or foreign private banking account. |
¨ | Other. Attach copy of document that formed entity or by laws or similar document. |
Call (800) 437-9912 to see if additional information is required.
* | All joint registrations will be registered as joint tenants with rights of survivorship unless otherwise specified. |
** | If applied for, include a copy of application for social security or tax identification number. |
*** | Nonresident aliens must include a copy of a government-issued photo ID with this application. |
| If no classification is provided, per IRS regulations, your account will default to an S Corporation. |
IRFAXSAGI-0511
2 |
Authorized Persons | |||||
If you are establishing an account under 1C above as a (i) Corporation (non-publicly traded), (ii) Partnership, (iii) Trust or (iv) Other, information on each of the individuals authorized to effect transactions must be provided below: |
- | - | |||||||||||||||||||||||||
Authorized Individual/Trustee | Social Security Number* | Date of Birth |
- | - | |||||||||||||||||||||||||
Authorized Individual/Trustee | Social Security Number* | Date of Birth | ||||||||||||||||||||||||
Citizenship: ¨ U.S. Citizen ¨ Resident Alien ¨ Nonresident Alien**: |
Country of Citizenship |
(If there are more than two authorized persons, provide the information, in the same format, on a separate sheet for each such additional person.)
* | If applied for, include a copy of application for social security number. |
** | Nonresident aliens must include a copy of a government-issued photo ID with this application. |
3 |
Address | |||||
(If mailing address is a post office box, a street address is also required. APO and FPO addresses will be accepted)
Registrant Street Address |
( ) |
||||
Street | Home Telephone Number | |||
( ) |
||||
City and State Zip Code | Business Telephone Number |
Mailing Address | City | State | Zip |
Joint Registrant Street Address (required if different than Registrant Address above)
Address | City | State | Zip |
4 |
Investment Information |
$ Amount to invest ($1,000,000 minimum investment). Do not send cash. Investment will be paid for by
(please check one):
¨ | Check or draft made payable to Cohen & Steers International Realty Fund, Inc. |
¨ | Wire through the Federal Reserve System.* |
* | Call (800) 437-9912 to notify the Fund of investments by wire and to obtain an Account Number. See the Purchase of Fund Shares section of the Prospectus for wire instructions. |
5 |
Automatic Investment Plan |
A. | The Automatic Investment Plan makes possible regularly scheduled monthly purchases of Fund shares. The Funds Transfer Agent can arrange for an amount of money selected by you ($500 minimum) to be deducted from your checking account and used to purchase shares of the Fund. |
Please debit $ from my checking account beginning on *.
(Month)
Please debit my account on (check one) : ¨ 1st of Month ¨ 15th of Month
B. | ¨ Please establish the Auto-Buy option, which allows you to make additional investments on dates you choose by having an amount of money selected by you ($500 minimum) deducted from your checking account.* |
* | To initiate the Automatic Investment Plan or the Auto-Buy option, Section 9 of this Subscription Agreement must be completed. |
6 |
Exchange Privileges |
Exchange privileges will be automatically granted unless you check the box below. Shareholders wishing to exchange into other Cohen & Steers Funds or the SSgA Money Market Fund should consult the Exchange Privilege section of the Prospectus. (Note: If shares are being purchased through a dealer, please contact your dealer for availability of this service.)
¨ | I decline the exchange privilege. |
7 |
Redemption Privileges |
Shareholders may select the following redemption privileges by checking the box(es) below. See How to Sell Fund Shares section of the Prospectus for further details. Redemption privileges will be automatically declined for boxes not checked.
¨ | I authorize the Transfer Agent to redeem shares in my account(s) by telephone, in accordance with the procedures and conditions set forth in the Funds current Prospectus. |
¨ | I wish to have redemption proceeds paid by wire (please complete Section 9). |
8 |
Distribution Options |
Dividends and capital gains may be reinvested or paid by check. If no options are selected below, both dividends and capital gains will be reinvested in additional Fund shares.
Dividends | ¨ Reinvest. | ¨ Pay in cash. | ||||
Capital Gains | ¨ Reinvest. | ¨ Pay in cash. |
¨ | I wish to have my distributions paid by wire (please complete Section 9). |
9 |
Bank of Record (for Wire Instructions and/or Automatic Investment Plan) |
Please attach a voided check from your bank account.
Bank Name | Bank ABA Number | |||
Street or P.O. Box | Bank Account Number | |||
City and State Zip Code | Account Name |
10 |
Signature and Certifications |
(a) | By signing this agreement, I represent and warrant that: |
(1) | I have the full right, power, capacity and authority to invest in the Fund; |
(2) | I am of legal age in my state of residence or am an emancipated minor; |
(3) | All of the information on this agreement is true and correct; and |
(4) | I will notify the Fund immediately if there is any change in this information. |
(b) | I have read the current Prospectus of the Fund and this agreement and agree to all their terms. I also agree that any shares purchased now or later are and will be subject to the terms of the Funds Prospectus as in effect from time to time. Further, I agree that the Fund, its administrators and service providers and any of their directors, trustees, employees and agents will not be liable for any claims, losses or expenses (including legal fees) for acting on any instructions believed to be genuine, provided that reasonable security procedures have been followed. If an account has multiple owners, the Fund may rely on the instructions of any one account owner unless all owners specifically instruct the Fund otherwise. |
(c) | I am aware that under the laws of certain states, the assets in my account may be transferred (escheated) to the state if no activity occurs in my account within a specified period of time. |
(d) | If I am a U.S. citizen, resident alien, or a representative of a U.S. entity, I certify, under penalty of perjury, that: |
(1) | The taxpayer identification number and tax status shown on this form are correct. |
(2) | I am not subject to backup withholding because: |
|
I am exempt from backup withholding, OR |
|
I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, OR |
|
The IRS has notified me that I am no longer subject to backup withholding. |
NOTE: If you have been notified by the IRS that you are currently subject to backup withholding because of under-reporting interest or dividends on your tax return, you must cross out this Item 2.
(3) | I am a U.S. person (including resident alien). |
(e) | If I am a nonresident alien, I understand that I am required to complete and attach the appropriate Form W-8 to certify my foreign status. |
(1) | Indicate country of residence for tax purposes Under penalty of perjury, I certify that I am not a U.S. citizen or resident alien and I am an exempt foreign person as defined by the IRS. |
(f) | Additional Certification: |
(1) | Neither I (we), nor any person having a direct or indirect beneficial interest in the shares to be acquired, appears on any U.S. Government published list of persons who are known or suspected to engage in money laundering activities, such as the Specially Designated Nationals and Blocked Persons List of the Office of Foreign Assets Control of the United States Department of the Treasury. I (we) do not know or have any reason to suspect that (i) the monies used to fund my (our) investment have been or will be derived from or related to any illegal activities and (ii) the proceeds from my (our) investment will be used to finance any illegal activities. |
(2) | I agree to provide such information and execute and deliver such documents as the Fund may reasonably request from time to time to verify the accuracy of the information provided in connection with the opening of an account or to comply with any law, rule or regulation to which the Fund may be subject, including compliance with anti-money laundering laws. |
The IRS does not require your consent to any provision of this document other than the certifications required to avoid backup withholding. |
x | x | |||||
Signature* (Owner, Trustee, Etc.) |
Date | Signature* (Joint Owner, Co-Trustee) | Date |
Name and Title |
* | If shares are to be registered in (1) joint names, both persons should sign, (2) a custodians name, the custodian should sign, (3) a trust, the trustee(s) should sign, or (4) a corporation or other entity, an officer or other authorized person should sign and print name and title above. Persons signing as representatives or fiduciaries of corporations, partnerships, trusts or other organizations are required to furnish corporate resolutions or similar documents providing evidence that they are authorized to effect securities transactions on behalf of the investor (alternatively, the secretary or another designated officer of the entity may certify the authority of the persons signing on the space provided above). |
Mail to: Boston Financial Data Services, P.O. Box 8123, Boston, MA 02266-8123
TO OBTAIN ADDITIONAL INFORMATION ABOUT THE FUND
If you would like additional information about Cohen & Steers International Realty Fund, Inc., the following documents are available to you without any charge either upon request or at cohenandsteers.com:
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Annual/Semi-Annual Reports Additional information about the Funds investments is available in the Funds annual and semi-annual reports to shareholders. In these reports, you will find a discussion of the market conditions and investment strategies that significantly affected the Funds performance during its most recent fiscal year. |
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Statement of Additional Information Additional information about the Funds investments, structure and operations can be found in the SAI. The information presented in the SAI is incorporated by reference into this Prospectus and is legally considered to be part of the Prospectus. |
To request a free copy of any of the materials described above as well as other information, or to make any other inquiries, please contact us:
By telephone | (800) 437-9912 | |
By mail | Cohen & Steers International Realty Fund, Inc. | |
c/o Boston Financial Data Services | ||
P.O. Box 8123 | ||
Boston, Massachusetts 02266-8123 | ||
By e-mail | marketing@cohenandsteers.com | |
On the Internet | cohenandsteers.com |
This information may also be available from your broker or financial intermediary. In addition, other information about the Fund (including the Funds SAI) may also be obtained from the SEC:
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By going to the SECs 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) 551-8090. |
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By accessing the SECs Internet site at http://www.sec.gov where you can view, download and print the information. |
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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. 20549-1520. Upon payment of a duplicating fee, copies of the information will be sent to you. |
280 PARK AVENUE, NEW YORK, NEW YORK 10017
SEC File No. 811-21677
IRFAXPROI-0511
280 P ARK A VENUE
N EW Y ORK , N EW Y ORK 10017
(800) 437-9912
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2011
This Statement of Additional Information (SAI) is not a prospectus, but supplements and should be should be read in conjunction with the current Prospectus of each fund listed below (each, a Fund and collectively, the Funds), as such Prospectuses may be supplemented from time to time:
Fund |
Abbreviation |
Share Class/Ticker |
Fiscal Year End |
Prospectus
|
||||
Cohen & Steers Global Infrastructure Fund, Inc. | Global Infrastructure Fund |
Class A/CSUAX Class B/CSUBX Class C/CSUCX Class I/CSUIX |
December 31 | May 1 | ||||
Cohen & Steers Global Realty Shares, Inc. | Global Realty Shares |
Class A/CSFAX Class B/CSFBX Class C/CSFCX Class I/CSSPX |
December 31 | May 1 | ||||
Cohen & Steers Institutional Global Realty Shares, Inc. |
Institutional Global Realty Shares |
GRSIX | December 31 | May 1 | ||||
Cohen & Steers Institutional Realty Shares, Inc. | Institutional Realty Shares | CSRIX | December 31 | May 1 | ||||
Cohen & Steers International Realty Fund, Inc. | International Realty Fund | Class A/IRFAX Class C/IRFCX Class I /IRFIX | December 31 | May 1 | ||||
Cohen & Steers Preferred Securities and Income Fund, Inc. |
Preferred Securities and Income Fund |
Class A/CPXAX Class C/CPXCX Class I/CPXIX | December 31 | May 1 | ||||
Cohen & Steers Realty Income Fund, Inc. | Realty Income Fund | Class A/CSEIX Class B/CSBIX Class C/CSCIX Class I/CSDIX | December 31 | May 1 | ||||
Cohen & Steers Realty Shares, Inc. | Realty Shares | CSRSX | December 31 | May 1 |
Class B shares are no longer being offered except through dividend reinvestment and permitted exchanges by existing Class B shareholders. This SAI is incorporated by reference in its entirety into each Prospectus. Copies of the SAI, the Prospectuses and each Funds Annual and Semi-Annual Reports may be obtained free of charge by writing to the address or calling the phone number shown above or by visiting cohenandsteers.com.
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31 | ||||
35 | ||||
45 | ||||
46 | ||||
51 | ||||
62 | ||||
65 | ||||
66 | ||||
66 | ||||
67 | ||||
68 | ||||
69 | ||||
72 | ||||
73 | ||||
84 | ||||
84 | ||||
A-1 | ||||
B-1 |
2
STATEMENT OF ADDITIONAL INFORMATION
Each Fund is an open-end management investment company organized as a Maryland corporation on the following respective dates:
Fund |
Date of Incorporation |
|
Global Infrastructure Fund |
January 13, 2004 | |
Global Realty Shares |
February 14, 1997 | |
Institutional Global Realty Shares |
May 11, 2006 | |
Institutional Realty Shares |
October 13, 1999 | |
International Realty Fund |
November 23, 2004 | |
Preferred Securities and Income Fund |
February 22, 2010 | |
Realty Income Fund |
July 3, 1997 | |
Realty Shares |
April 26, 1991 |
Global Infrastructure Fund, Global Realty Shares and Institutional Global Realty Shares are classified as diversified funds. Each other Fund is classified as a non-diversified fund.
Realty Shares, Institutional Global Realty Shares and Institutional Realty Shares are no-load Funds.
Much of the information contained in this SAI expands on subjects discussed in each Funds Prospectus. No investment in the shares of a Fund should be made without first reading the Prospectus.
INVESTMENT STRATEGIES AND POLICIES
The following chart, which supplements the information in each Funds Prospectus, indicates some of the specific investments and investment techniques applicable to each Fund. Additional policies and restrictions (including total or net asset limitations) are described in the Prospectus and below in this SAI. See the applicable Funds Prospectus and Additional Information Regarding Fund Investments in this SAI for more information, including important risk disclosure, about the investments and investment techniques applicable to your Fund.
Types of Investments |
Global Infrastructure Fund |
Global Realty Shares |
Institutional Global Realty Shares |
Institutional Realty Shares |
International Realty Fund |
Preferred Securities and Income Fund |
Realty Income Fund |
Realty Shares |
||||||||||||||||||||||||
Below Investment Grade Securities |
ü | ü | ü | |||||||||||||||||||||||||||||
Borrowing for Investment Purposes |
ü | |||||||||||||||||||||||||||||||
Canadian Royalty Trusts |
ü | |||||||||||||||||||||||||||||||
Companies in the Financials Sector |
ü | |||||||||||||||||||||||||||||||
Convertible Securities |
ü | ü | ü | ü | ü | ü | ü | ü | ||||||||||||||||||||||||
Credit Derivatives |
ü | |||||||||||||||||||||||||||||||
Debt Securities |
ü | ü | ü | |||||||||||||||||||||||||||||
Emerging Market Securities |
ü | ü | ü | ü | ü | |||||||||||||||||||||||||||
Energy Companies |
ü | ü |
3
Types of Investments |
Global Infrastructure Fund |
Global Realty Shares |
Institutional Global Realty Shares |
Institutional Realty Shares |
International Realty Fund |
Preferred Securities and Income Fund |
Realty Income Fund |
Realty Shares |
||||||||||||||||||||||||
Foreign Currency and Currency Hedging Transactions |
ü | ü | ü | ü | ü | ü | ü | ü | ||||||||||||||||||||||||
Futures Contracts and Options on Futures Contracts |
ü | ü | ü | ü | ü | ü | ü | ü | ||||||||||||||||||||||||
Foreign Securities |
ü | ü | ü | ü | ü | ü | ü | ü | ||||||||||||||||||||||||
Healthcare Companies |
ü | |||||||||||||||||||||||||||||||
Illiquid Securities |
ü | ü | ü | ü | ü | ü | ü | ü | ||||||||||||||||||||||||
Industrial Companies |
ü | ü | ||||||||||||||||||||||||||||||
Interest Rate Swaps and Credit Default Swaps |
ü | |||||||||||||||||||||||||||||||
Master Limited Partnerships |
ü | |||||||||||||||||||||||||||||||
Mortgage-Backed and Asset-Backed Securities |
ü | |||||||||||||||||||||||||||||||
Municipal Securities |
ü | |||||||||||||||||||||||||||||||
Options on Securities and Stock Indexes |
ü | ü | ü | ü | ü | ü | ü | ü | ||||||||||||||||||||||||
Preferred Securities |
ü | ü | ü | ü | ü | ü | ü | ü | ||||||||||||||||||||||||
Real Estate Companies and Real Estate Investment Trusts |
ü | ü | ü | ü | ü | ü | ü | |||||||||||||||||||||||||
Repurchase Agreements |
ü | ü | ü | ü | ü | ü | ü | ü | ||||||||||||||||||||||||
Securities Lending |
ü | ü | ü | ü | ü | ü | ü | ü | ||||||||||||||||||||||||
Securities of Other Investment Companies |
ü | ü | ü | ü | ü | ü | ü | ü | ||||||||||||||||||||||||
Short Sales |
ü | ü | ü | ü | ü | |||||||||||||||||||||||||||
Structured Notes |
ü | |||||||||||||||||||||||||||||||
Telecommunications and Media Companies |
ü | ü | ||||||||||||||||||||||||||||||
Utility Companies |
ü | |||||||||||||||||||||||||||||||
Warrants and Rights |
ü | ü | ü | ü | ü | ü | ü |
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ADDITIONAL INFORMATION REGARDING FUND INVESTMENTS
The following descriptions supplement the information set forth in the Prospectuses and in the table above relating to each Funds investments and risks. Except as otherwise provided in the Prospectuses or as discussed below, each Funds investment objective, strategies and investment policies are not fundamental and may be changed by the Board of Directors of the Fund without the approval of the shareholders; however, the Fund will not change its investment objective or policies without written notice to shareholders. In addition, shareholders will be provided with at least 60 days prior written notice of any change to a Funds 80% investment policy as described in that Funds Prospectus (e.g., Realty Income Funds policy of investing at least 80% of its total assets in income-producing common stocks and other equity securities issued by real estate companies, such as real estate investment trusts).
BELOW INVESTMENT GRADE SECURITIES
For Global Realty Shares, Preferred Securities and Income Fund and Realty Income Fund : The Fund will, although it is not required to do so, seek to maintain a minimum weighted average senior debt rating of companies in which it invests of BBB/BB+. Credit risk is the risk that a security in the Funds portfolio will decline in price or the issuer of the security will fail to make dividend, interest or principal payments when due because the issuer experiences a decline in its financial status. Preferred securities are subordinated to senior debt instruments in a companys capital structure, in terms of priority to corporate income and claim to corporate assets, and therefore will be subject to greater credit risk than debt instruments.
The Fund may invest in securities that are rated below investment grade. Securities rated below investment grade are regarded as having predominately speculative characteristics with respect to the issuers capacity to pay interest and repay principal, and these bonds are commonly referred to as high yield or junk securities. These securities are subject to a greater risk of default. The prices of these lower-grade securities are more sensitive to negative developments, such as a decline in the issuers revenues or a general economic downturn, than are the prices of higher-grade securities. Lower-grade securities tend to be less liquid than investment grade securities. The market values of lower-grade securities tend to be more volatile than investment grade securities. A security will be considered to be investment grade if it is rated as such by one nationally recognized statistical rating organization (NRSRO) (for example, below Baa3 or BBB- by Moodys Investors Services, Inc. (Moodys) or Standard & Poors Ratings Services (S&P)) or, if unrated, are judged to be below investment grade by Cohen & Steers Capital Management, Inc. (the Advisor). Although a companys senior debt rating may be, for example, BBB, an underlying security issued by such company in which the Fund invests may have a lower rating. See Appendix B for a description of certain ratings.
Lower-rated securities, or equivalent unrated securities, may be considered speculative with respect to the issuers continuing ability to make principal and interest payments. Analysis of the creditworthiness of issuers of lower-rated securities may be more complex than for issuers of higher-quality debt securities, and a Funds ability to achieve its investment objective may, to the extent the Fund is invested in lower-rated securities, be more dependent upon such creditworthiness analysis than would be the case if the Fund were investing in higher quality securities. An issuer of these securities has a currently identifiable vulnerability to default and the issuer may be in default or there may be present elements of danger with respect to principal or interest.
The secondary markets in which lower-rated securities are traded may be less liquid than the market for higher grade securities. Less liquidity in the secondary trading markets could adversely affect the price at which the Fund could sell a particular lower-rated security when necessary to meet liquidity needs or
5
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 net asset value of a Funds shares. Adverse publicity and investor perceptions may decrease the values and liquidity of high yield securities.
It is reasonable to expect that any adverse economic conditions could disrupt the market for lower-rated securities, have an adverse impact on the value of those securities and adversely affect the ability of the issuers of those securities to repay principal or interest on those securities. New laws and proposed new laws may adversely impact the market for lower-rated securities.
BORROWING FOR INVESTMENT PURPOSES
For Global Realty Shares : The Fund may borrow up to 30% of the value of its total assets to increase its holdings of portfolio securities. The Fund is required to maintain continuous asset coverage of 300% with respect to such borrowings and to sell (within three days) sufficient portfolio holdings to restore such coverage if it should decline to less than 300% due to market fluctuations or otherwise, even if such liquidations of the Funds portfolio are disadvantageous from an investment standpoint. Leveraging by means of borrowing, which is deemed to be a speculative technique, may exaggerate the effect of any increase or decrease in the value of the portfolio securities or the Funds net asset value (NAV). Money borrowed also will be subject to interest and other costs (which may include commitment fees and/or the cost of maintaining minimum average balances) which may or may not exceed the income received from the securities purchased with borrowed funds.
CANADIAN ROYALTY TRUSTS
For Global Infrastructure Fund : The Fund may invest in Canadian royalty trusts. A Canadian royalty trust is a trust whose securities are listed on a Canadian stock exchange and which controls an underlying company whose business is the acquisition, exploitation, production and sale of oil and natural gas. These trusts generally pay out to unitholders the majority of the cash flow that they receive from the production and sale of underlying oil and natural gas reserves. The amount of distributions paid on a Canadian royalty trusts units will vary from time to time based on production levels, commodity prices, royalty rates and certain expenses, deductions and costs, as well as on the distribution payout ratio policy adopted. As a result of distributing the bulk of their cash flow to unitholders, the ability of a Canadian royalty trust to finance internal growth through exploration is limited. Therefore, Canadian royalty trusts typically grow through acquisition of additional oil and gas properties or producing companies with proven reserves of oil and gas, funded through the issuance of additional equity or, where the trust is able, additional debt.
CASH RESERVES
For each Fund : Each Funds cash reserves, in each case held to provide sufficient flexibility to take advantage of new opportunities for investments and for other cash needs, will be invested in money market instruments and generally will not exceed 15% of a Funds total assets. If the Advisor has difficulty finding an adequate number of undervalued equity securities, all or any portion of a Funds assets may also be invested temporarily in money market instruments. Cash reserves in excess of 20% of a Funds total assets will be maintained for defensive purposes only.
Money market instruments in which a Fund may invest its cash reserves may consist of obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities and such obligations which are subject to repurchase agreements (see Debt Securities U.S. Government Obligations below regarding U.S. Government obligations and Repurchase Agreements below regarding
6
repurchase agreements); commercial paper rated by any NSRO, such as Moodys Investors Moodys or S&P; certificates of deposit; bankers acceptances issued by domestic banks having total assets in excess of one billion dollars, and money market mutual funds (see Securities of Other Investment Companies). A certificate of deposit is a negotiable interest-bearing instrument with a specific maturity. Certificates of deposit are issued by banks and savings and loan institutions in exchange for the deposit of funds, and normally can be traded in the secondary market prior to maturity. A bankers acceptance is a bill of exchange or time draft drawn on and accepted by a commercial bank.
COMPANIES IN THE FINANCIALS SECTOR
For Preferred Securities and Income Fund : Preferred securities in which the Fund invests also may include preferred securities of financial services companies. Companies in the financial services sector include commercial banks, industrial banks, insurance companies, savings institutions, finance companies, diversified financial services companies, investment banking firms, securities brokerage houses, investment advisory companies, leasing companies and companies providing similar services.
Events that affect the financial services industries will have a greater effect on these Funds than they would on a fund that is more widely diversified among a number of unrelated industries. For example, financial services companies can be significantly affected by availability and cost of capital and changes in interest rates, insurance claims activity and general economic conditions. Financial services companies are subject to extensive government regulations, which can limit the types and amounts of loans and other commitments they make and the interest rates and fees they charge and can have a significant impact on profitability. Losses resulting from financial difficulties of borrowers and declines in the value of assets can negatively impact the financial services industries.
The financial services industries are also subject to relatively rapid changes as a result of industry consolidation trends which may result in distinctions between different financial service segments (for example, banking, insurance and brokerage businesses) becoming less clear. In the recent past, the financial services industries have experienced considerable financial distress, which has led to the implementation of government programs designed to ease that distress.
CONVERTIBLE SECURITIES
For each Fund : Each Fund may invest in convertible securities. Convertible securities are preferred stocks or debt obligations that are convertible into common stock. They generally offer lower interest or dividend yields than non-convertible securities of similar quality. Convertible securities have both equity and fixed-income risk characteristics. Like all fixed-income securities, the value of convertible securities is susceptible to the risk of market losses attributable to changes in interest rates. Generally, the market value of convertible securities tends to decline as interest rates increase and, conversely, to increase as interest rates decline. However, when the market price of the common stock underlying a convertible security approaches or exceeds the conversion price of the convertible security, the convertible security tends to reflect the market price of the underlying common stock. As the market price of the underlying common stock declines, the convertible security, like a fixed-income security, tends to trade increasingly on a yield basis, and thus, may not decline in price to the same extent as the underlying common stock. The markets for convertible securities may be less liquid than markets for common stocks or bonds.
7
DEBT SECURITIES
For Global Infrastructure Fund, Preferred Securities and Income Fund and Realty Income Fund : Each Fund may invest in debt securities as described in its Prospectus.
Debt securities may pay fixed or variable rates of interest. Bonds and other debt securities generally are issued by corporations and other issuers to borrow money from investors. The value of debt securities may fluctuate based on changes in interest rates and the issuers financial condition. When interest rates rise or the issuers financial condition worsens or is perceived by the market to be at greater risk, the value of debt securities tends to decline.
Corporate Debt Obligations . The Funds may invest in investment grade or below investment grade U.S. dollar-denominated debt obligations issued or guaranteed by U.S. corporations or U.S. commercial banks, U.S. dollar-denominated obligations of foreign issuers and debt obligations of foreign issuers denominated in foreign currencies. Such debt obligations include, among others, bonds, notes, debentures and variable rate demand notes. In choosing corporate debt securities on behalf of a Fund, its portfolio managers may consider (i) general economic and financial conditions; (ii) the specific issuers (a) business and management, (b) cash flow, (c) earnings coverage of interest and dividends, (d) ability to operate under adverse economic conditions, (e) fair market value of assets, and (f) in the case of foreign issuers, unique political, economic or social conditions applicable to such issuers country; and, (iii) other considerations deemed appropriate.
U.S. Government Obligations . The Funds may invest in U.S. Government obligations. Obligations issued or guaranteed by the U.S. Government, its agencies and instrumentalities include bills, notes and bonds issued by the U.S. Treasury, as well as stripped or zero coupon U.S. Treasury obligations representing future interest or principal payments on U.S. Treasury notes or bonds. Stripped securities are sold at a discount to their face value, and may exhibit greater price volatility than interest-bearing securities because investors receive no payment until maturity.
Obligations of certain agencies and instrumentalities of the U.S. Government, while others are supported by the right of the issuer to borrow from the U.S. Treasury. Other obligations of certain agencies and instrumentalities of the U.S. Government are supported only by the credit of the instrumentality. The U.S. Government may choose not to provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not legally obligated to do so, in which case, if the issuer were to default, the Fund might not be able to recover their investment from the U.S. Government.
Mortgage-backed and Asset-backed Securities . The Preferred Securities and Income Fund may also invest in mortgage and asset-backed securities. Mortgage-backed securities are mortgage-related securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities, or issued by non-government entities. Mortgage-related securities represent pools of mortgage loans assembled for sale to investors by various government agencies, as well as by non-government issuers such as commercial banks, savings and loan institutions, mortgage bankers and private mortgage insurance companies. Although certain mortgage-related securities are guaranteed by a third party or otherwise similarly secured, the market value of the security, which may fluctuate, is not guaranteed.
Other asset-backed securities are structured like mortgage-backed securities, but instead of mortgage loans or interests in mortgage loans, the underlying assets may include such items as motor vehicle installment sales or installment loan contracts, leases of various types of real and personal property, and receivables from credit card agreements and from sales of personal property. Regular payments received in respect of such securities include both interest and principal. Asset-backed securities
8
typically have no U.S. Government backing. Additionally, the ability of an issuer of asset-backed securities to enforce its security interest in the underlying assets may be limited.
If the Preferred Securities and Income Fund purchases a mortgage-backed or other asset-backed security at a premium, that portion may be lost if there is a decline in the market value of the security whether resulting from changes in interest rates or prepayments in the underlying collateral. As with other interest-bearing securities, the prices of such securities are inversely affected by changes in interest rates. Although the value of a mortgage-backed or other asset-backed security may decline when interest rates rise, the converse is not necessarily true, since in periods of declining interest rates the mortgages and loans underlying the securities are prone to prepayment, thereby shortening the average life of the security and shortening the period of time over which income at the higher rate is received.
When interest rates are rising, the rate of prepayment tends to decrease, thereby lengthening the period of time over which income at the lower rate is received. For these and other reasons, a mortgage-backed or other asset-backed securitys average maturity may be shortened or lengthened as a result of interest rate fluctuations and, therefore, it is not possible to predict accurately the securitys return.
Collateralized Mortgage Obligations (CMOs) . The Preferred Securities and Income Fund may invest in CMOs. A CMO is a hybrid between a mortgage-backed bond and a mortgage pass-through security. A CMO is a type of mortgage-backed security that creates separate classes with varying maturities and interest rates, called tranches. Similar to a bond, interest and prepaid principal is paid, in most cases, semi-annually.
CMOs may be collateralized by whole mortgage loans, but are more typically collateralized by portfolios of mortgage pass-through securities guaranteed by the U.S. Government, and their income streams. CMOs are structured into multiple classes, each bearing a different stated maturity. Actual maturity and average life will depend upon the prepayment experience of the collateral. CMOs provide for a modified form of call protection through a de facto breakdown of the underlying pool of mortgages according to how quickly the loans are repaid. Monthly payment of principal received from the pool of underlying mortgages, including prepayments, is first returned to investors holding the shortest maturity class. Investors holding the longer maturity classes receive principal only after the first class has been retired. An investor is partially guarded against a sooner than desired return of principal because of the sequential payments.
In a typical CMO transaction, an issuer issues multiple series ( e.g. , Series A, B, C and Z) of CMO bonds (Bonds). Proceeds of the Bond offering are used to purchase mortgages or mortgage pass-through certificates (Collateral). The Collateral is pledged to a third party trustee as security for the Bonds. Principal and interest payments from the Collateral are used to pay principal on the Bonds in the following order: Series A, B, C and Z. The Series A, B, and C Bonds all bear current interest. Interest on a Series Z Bond is accrued and added to principal and a like amount is paid as principal on the Series A, B, or C Bond currently being paid off. Only after the Series A, B, and C Bonds are paid in full does the Series Z Bond begin to receive payment. With some CMOs, the issuer serves as a conduit to allow loan originators (primarily builders or savings and loan associations) to borrow against their loan portfolios.
Municipal Securities . The Preferred Securities and Income Fund may invest in Municipal Securities, which includes debt obligations of states, territories or possessions of the United States and the District of Columbia and their political subdivisions, agencies and instrumentalities. Municipal Securities are issued to obtain funds for various public purposes, including the construction of a wide range of public facilities such as airports, bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works.
9
Other public purposes for which Municipal Securities may be issued include the refunding of outstanding obligations, obtaining funds for general operating expenses and lending such funds to other public institutions and facilities. In addition, certain types of industrial development bonds are issued by or on behalf of public authorities to obtain funds to provide for the construction, equipment, repair or improvement of privately operated housing facilities, airport, mass transit, industrial, port or parking facilities, air or water pollution control facilities and certain local facilities for water supply, gas, electricity or sewage or solid waste disposal. The principal and interest payments for industrial development bonds or pollution control bonds are often the sole responsibility of the industrial user and therefore may not be backed by the taxing power of the issuing municipality. The interest paid on such bonds may be exempt from federal income tax, although current federal tax laws place substantial limitations on the purposes and size of such issues. Such obligations are considered to be Municipal Securities provided that the interest paid thereon, in the opinion of bond counsel, qualifies as exempt from federal income tax. However, interest on Municipal Securities may give rise to a federal alternative minimum tax (AMT) liability and may have other collateral federal income tax consequences.
The two major classifications of Municipal Securities are bonds and notes. Bonds may be further classified as general obligation or revenue issues. General obligation bonds are secured by the issuers pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue bonds are payable from the revenues derived from a particular facility or class of facilities, and in some cases, from the proceeds of a special excise or other specific revenue source, but not from the general taxing power. Tax exempt industrial development bonds are in most cases revenue bonds and do not generally carry the pledge of the credit of the issuing municipality. Notes are short term instruments which usually mature in less than two years. Most notes are general obligations of the issuing municipalities or agencies and are sold in anticipation of a bond sale, collection of taxes or receipt of other revenues. There are, of course, variations in the risks associated with Municipal Securities, both within a particular classification and between classifications. The Fund does not anticipate meeting the requirements under the Code to pass through income from municipal securities as tax free to the Fund shareholders.
Senior Secured Floating Rate Loans . The Preferred Securities and Income Fund may invest in senior secured floating rate loans (Senior Loans). Senior Loans generally are made to corporations, partnerships and other business entities (Borrowers) which operate in various industries and geographical regions. Senior Loans, which typically hold the most senior position in a Borrowers capital structure, pay interest at rates that are re-determined periodically on the basis of a floating base lending rate, such as the London Inter-bank Offered Rate (LIBOR), plus a premium. This floating rate feature should help to minimize changes in the principal value of the Senior Loans resulting from interest rate changes. The Fund may invest in Senior Loans that are below investment grade quality and are speculative investments that are subject to credit risk.
Senior Loans in which the Preferred Securities and Income Fund may invest may not be rated by a rating agency, will not be registered with the Securities and Exchange Commission or any state securities commission and generally will not be listed on any national securities exchange. Therefore, the amount of public information available about Senior Loans will be limited, and the performance of the Funds investments in Senior Loans will be more dependent on the analytical abilities of the Advisor than would be the case for investments in more widely rated, registered or exchange-listed securities. In evaluating the creditworthiness of Borrowers, the Advisor may consider, and may rely in part, on analyses performed by others. Moreover, certain Senior Loans will be subject to contractual restrictions on resale and, therefore, will be illiquid.
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Bank Instruments . The Preferred Securities and Income Fund may invest in certificates of deposits, time deposits, and bankers acceptances from U.S. or foreign banks, including certificates of deposit (Eurodollar CDs) and time deposits (Eurodollar time deposits) of foreign branches of domestic banks. A time deposit is a non-negotiable receipt issued by a bank in exchange for the deposit of funds. Like a certificate of deposit, it earns a specified rate of interest over a definite period of time; however, it cannot be traded in the secondary market.
DERIVATIVES TRANSACTIONS
Futures Contracts
For each Fund : Each Fund may purchase and sell financial futures contracts and options on such contracts. A financial futures contract is an agreement to buy or sell a specific security or financial instrument at a particular price on a stipulated future date. Although some financial futures contracts call for making or taking delivery of the underlying securities or instruments, in most cases these obligations are closed out before the settlement date. The closing of a contractual obligation may be accomplished by purchasing or selling an identical offsetting futures contract. Other financial futures contracts by their terms call for cash settlements.
Each Fund may also buy and sell index futures contracts with respect to any stock or bond index traded on a recognized stock exchange or board of trade. An index futures contract is a contract to buy or sell units of an index on a specified future date at a price agreed upon when the contract is made. The stock index futures contract specifies that no delivery of the actual stocks making up the index will take place. Instead, settlement in cash must occur upon the termination of the contract, with the settlement being the difference between the contract price and the actual level of the stock index at the expiration of the contract. In addition, a Fund may enter into foreign currency futures contracts as described below under Foreign Currency and Currency Hedging Transactions.
At the time a Fund purchases a futures contract, an amount of cash or liquid portfolio securities generally equal to the settlement price less any margin deposit will be designated as segregated at that Funds custodian. When writing a futures contract, a Fund will maintain with its custodian similar liquid assets that, when added to the amounts deposited with a futures commission merchant or broker as margin, are equal to the market value of the instruments underlying the contract. Alternatively, a Fund may cover its position by owning the instruments underlying the contract (or, in the case of an index futures contract, a portfolio with a volatility substantially similar to that of the index on which the futures contract is based), or holding a call option permitting a Fund to purchase the same futures contract at a price no higher than the price of the contract written by a Fund (or at a higher price if the difference is maintained in liquid assets with the Funds custodian).
Each Fund will be authorized to use financial futures contracts and related options for hedging and non-hedging purposes, for example to enhance total return or provide market exposure pending the investment of cash balances. A Fund may lose the expected benefit of transactions in financial contracts if currency exchange rates or securities prices change in an unanticipated manner. Such unanticipated changes in currency exchange rates or securities prices may also result in poorer overall performance than if a
Options on Securities and Stock Indexes
For each Fund : Each Fund may write covered call and put options and purchase call and put options on securities or stock indices that are traded on U.S. exchanges. Preferred Securities and Income Fund may
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also enter into over-the-counter put and call options on securities and baskets of securities, indexes and other financial instruments.
An option on a security is a contract that gives the purchaser of the option, in return for the premium paid, the right to buy a specified security (in the case of a call option) or to sell a specified security (in the case of a put option) from or to the writer of the option at a designated price during the term of the option. An option on a securities index gives the purchaser of the option, in return for the premium paid, the right to receive from the seller cash equal to the difference between the closing price of the index and the exercise price of the option.
A Fund, other than Preferred Securities and Income Fund, which is not required to cover written call options as discussed herein, may write a call or put option only if the option is covered. A call option on a security written by a Fund is covered if that Fund owns the underlying security covered by the call or has an absolute and immediate right to acquire that security without additional cash consideration (or for additional cash consideration held in a segregated account by its custodian) upon conversion or exchange of other securities held in its portfolio. A call option on a security is also covered if a Fund owns a call option on the same security and in the same principal amount as the call option written where the exercise price of the call option held (a) is equal to or less than the exercise price of the call option written or (b) is greater than the exercise price of the call option written if the difference is maintained by that Fund in cash or liquid portfolio securities in a segregated account with its custodian. A put option on a security written by a Fund is covered if that Fund maintains similar liquid assets with a value equal to the exercise price designated as segregated at its custodian, or else owns a put option on the same security and in the same principal amount as the put option written where the exercise price of the put option held is equal to or greater than the exercise price of the put option written. The value of the underlying securities on which options may be written at any one time will not exceed 25% of the total assets of a Fund, and a Fund will not purchase put or call options if the aggregate premium paid for such options would exceed 5% of its total assets at the time of purchase. Preferred Securities and Income Fund is not subject to these limitations.
A Fund, other than Preferred Securities and Income Fund, will cover call options on stock indices by owning securities whose price changes, in the opinion of the Advisor, are expected to be similar to those of the index, or in such other manner as may be in accordance with the rules of the exchange on which the option is traded and applicable laws and regulations. Nevertheless, where a Fund covers a call option on a stock index through ownership of securities, such securities may not match the composition of the index. In that event, that Fund will not be fully covered and could be subject to risk of loss in the event of adverse changes in the value of the index. A Fund will cover put options on stock indices by segregating assets equal to the options exercise price, or in such other manner as may be in accordance with the rules of the exchange on which the option is traded and applicable laws and regulations.
A Fund will receive a premium for writing a put or call option, which will increase the Funds gross income in the event the option expires unexercised or is closed out at a profit. If the value of a security or an index on which a Fund has written a call option falls or remains the same, that Fund will realize a profit in the form of the premium received (less transaction costs) that could offset all or a portion of any decline in the value of any portfolio securities underlying the option. A rise in the value of the security or index underlying a call option written by a Fund, exposes that Fund to possible loss or loss of opportunity to realize appreciation in the value of any portfolio securities underlying or otherwise related to the call option. By writing a put option, a Fund assumes the risk of a decline in the underlying security or index. To the extent that the price changes of any portfolio securities being
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hedged correlate with changes in the value of the underlying security or index, writing put options on securities or indices will increase a Funds losses in the event of a market decline, although such losses will be offset in part by the premium received for writing the option.
A Fund may also purchase put options to hedge its investments against a decline in value. By purchasing a put option, a Fund will seek to offset a decline in the value of the portfolio securities being hedged through appreciation of the put option. If the value of a Funds investments does not decline as anticipated, that Funds loss will be limited to the premium paid for the option plus related transaction costs. The success of this strategy will depend, in part, on the accuracy of the correlation between the changes in value of the underlying security or index and the changes in value of that Funds security holdings being hedged.
A Fund may purchase call options on individual securities to hedge against an increase in the price of securities that the Fund anticipates purchasing in the future. Similarly, a Fund may purchase call options to attempt to reduce the risk of missing a broad market advance, or an advance in an industry or market segment, at a time when that Fund holds uninvested cash or short-term debt securities awaiting investment. When purchasing call options, a Fund will bear the risk of losing all or a portion of the premium paid if the value of the underlying security or index does not rise.
There can be no assurance that a liquid market will exist when a Fund seeks to close out an option position, and for certain options not on an exchange no market usually exists. Trading could be interrupted, for example, because of supply and demand imbalances arising from a lack of either buyers or sellers, or the options exchange could suspend trading after the price has risen or fallen more than the maximum specified by the exchange. Although a Fund may be able to offset to some extent any adverse effects of being unable to liquidate an option position, that Fund may experience losses in some cases as a result of such inability.
Foreign Currency Transactions and Currency Hedging Transactions
For each Fund : In order to hedge against foreign currency exchange rate risks from adverse changes in the relationship between the U.S. dollar and foreign currencies (including to hedge against anticipated future changes which otherwise might adversely affect the prices of securities that the Fund intends to purchase at a later date), each Fund may enter into forward foreign currency exchange contracts (forward contracts), foreign currency futures contracts (foreign currency futures) and foreign currency swap agreements (foreign currency swaps), as well as purchase put or call options on foreign currencies, as described below. Preferred Securities and Income Fund also may enter into options on currency futures contracts and is not limited to entering into currency transactions for hedging purposes. Each Fund may also conduct its foreign currency exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market.
A forward contract is an obligation to purchase or sell a specific currency for an agreed price on a future date which is individually negotiated and privately traded by currency traders and their customers. A foreign currency future is an exchange-traded contract for the purchase or sale of a specified foreign currency at a specified price at a future date. A foreign currency swap is an agreement between two parties to exchange principal and interest payments on a loan made in one currency for principal and interest payments of a loan of equal value in another currency. The Fund may enter into a foreign currency forward contract, foreign currency futures contract or foreign currency swap, or purchase a currency option, for example, when it enters into a contract for the purchase or sale of a security denominated in a foreign currency or expects to receive a dividend or interest payment on a portfolio holding, in order to lock in the U.S. dollar value of the security or payment. In addition, the
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Fund may enter into a foreign currency forward contract, futures contract or swap or purchase a currency option in respect of a currency which acts as a proxy for a currency in which the Funds portfolio holdings or anticipated holdings are denominated. This second investment practice is generally referred to as cross-hedging. Because in connection with a Funds foreign currency transactions an amount of that Funds assets equal to the amount of that Funds current commitment will be segregated to be used to pay for the commitment, the Fund will always have cash or other liquid assets available that are sufficient to cover any commitments under these transactions. The segregated assets will be marked-to-market on a daily basis.
A Fund may enter into a forward contract to attempt to minimize the risk to that Fund from adverse changes in the relationship between the U.S. dollar and foreign currencies. A Fund, other than Preferred Securities and Income Fund, will not enter into such forward contracts if, as a result, that Fund will have more than 15% of the value of its total assets committed to such contracts. Forward contracts may limit potential gain from a positive change in the relationship between the U.S. dollar and foreign currencies. Unanticipated changes in currency prices may result in poorer overall performance for a Fund than if it had not engaged in such contracts.
A Fund may enter into exchange-traded foreign currency futures for the purchase or sale for future delivery of foreign currencies. U.S. exchange-traded futures are regulated by the Commodity Futures Trading Commission. This investment technique will be used only to hedge against anticipated future changes in exchange rates which otherwise might adversely affect the value of a Funds portfolio securities or adversely affect the prices of securities that a Fund intends to purchase at a later date.
A Fund may enter into foreign currency swaps to shift its currency exposure from one currency to another currency. See Additional Derivatives Transactions Swap Agreements below regarding swap agreements.
A Fund may purchase and write put and call options on foreign currencies for the purpose of protecting against declines in the dollar value of foreign portfolio securities and against increases in the U.S. dollar cost of foreign securities to be acquired. As is the case with other kinds of options, however, the writing of an option on foreign currency will constitute only a partial hedge, up to the amount of the premium received, and that Fund could be required to purchase or sell foreign currencies at disadvantageous exchange rates, thereby incurring losses. The purchase of an option on foreign currency may constitute an effective hedge against fluctuation in exchange rates although, in the event of rate movements adverse to that Funds position, the Fund may forfeit the entire amount of the premium plus related transaction costs.
The successful use of foreign currency transactions will usually depend on the Advisors ability to forecast currency exchange rate movements correctly. Should exchange rates move in an unexpected manner, a Fund may not achieve the anticipated benefits of forward contracts, foreign currency futures or may realize losses.
Additional Derivatives Transactions
For Preferred Securities and Income Fund : The Fund may, but is not required to, use, without limit, various Derivatives Transactions (defined below) described in this SAI and in the Prospectus to seek to generate return, facilitate portfolio management and mitigate risks. Although the Advisor may seek to use these kinds of transactions to further the Funds investment objective, no assurance can be given that they will achieve this result.
Swap Transactions . Swap agreements are two party over-the-counter contracts entered into primarily by institutional investors that agree to exchange the returns (or differentials in rates of return) earned
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or realized on particular predetermined investments or instruments. The gross returns to be exchanged or swapped between the parties are generally calculated with respect to a notional amount, i.e ., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency, or in a basket of credit default swaps or securities representing a particular index. The notional amount of the swap agreement is only used as a basis upon which to calculate the obligations that the parties to a swap agreement have agreed to exchange.
Swap agreements will tend to shift investment exposure from one type of investment to another. For example, if the Fund agreed to exchange payments in U.S. dollars for payments in a foreign currency, the swap agreement would tend to decrease the Funds exposure to U.S. interest rates and increase its exposure to foreign currency and interest rates. Depending on how they are used, swap agreements may increase or decrease the overall volatility of the Funds investments and its share price and yield. Caps and floors have an effect similar to buying or writing options.
Most swap agreements entered into are cash settled and calculate the obligations of the parties to the agreement on a net basis. Thus, the Funds current obligations (or rights) under a swap agreement generally will be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the net amount). The Funds current obligations under a swap agreement will be accrued daily (offset against any amounts owed to the Fund) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by the segregation of permissible liquid assets of the Fund.
Specific swap agreements include foreign currency swaps (discussed above under Foreign Currency Transactions and Currency Hedging Transactions); index swaps; interest rate swaps (including interest rate locks, caps, floors and collars); credit default swaps; and total return swaps (including equity swaps).
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Interest Rate Swap Transactions . An interest rate swap agreement involves the exchange of cash flows based on interest rate specifications and a specified principal amount, often a fixed payment for a floating payment that is linked to an interest rate. In an interest rate cap one party receives payments at the end of each period in which a specified interest rate on a specified principal amount exceeds an agreed rate; conversely, in an interest rate floor one party may receive payments if a specified interest rate on a specified principal amount falls below an agreed rate. Interest rate collars involve selling a cap and purchasing a floor, or vice versa, to protect the Fund against interest rate movements exceeding given minimum or maximum levels. |
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Credit Default Swap Transactions . Credit default swap agreements and similar agreements may have as reference obligations debt securities that are or are not currently held by the Fund. The protection buyer in a credit default contract may be obligated to pay the protection seller an up front payment or a periodic stream of payments over the term of the contract provided generally that no credit event on a reference obligation has occurred. If a credit event occurs, the seller generally must pay the buyer the par value (full notional value) of the swap in exchange for an equal face amount of deliverable obligations of the reference entity described in the swap, or the seller may be required to deliver the related net cash amount, if the swap is cash settled. |
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Total Return Swap Transactions . In a total return or equity swap agreement one party makes payments based on a set rate, either fixed or variable, while the other party makes payments based on the return of an underlying asset, which includes both the income it generates and any capital gains. The underlying reference asset of a total return swap may include an equity index, loans or bonds. |
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Credit Derivatives . Credit derivative transactions include those involving default price risk derivatives and market spread derivatives. Default price risk derivatives are linked to the price of reference securities or loans after a default by the issuer or borrower, respectively. Market spread derivatives are based on the risk that changes in market factors, such as credit spreads, can cause a decline in the value of a security, loan or index. There are three basic transactional forms for credit derivatives: swaps, options and structured instruments. The use of credit derivatives is a highly specialized activity which involves strategies and risks different from those associated with ordinary portfolio security transactions. The risk of loss in a credit derivative transaction varies with the form of the transaction. For example, if the Fund purchases a default option on a security, and if no default occurs with respect to the security, the Funds loss is limited to the premium it paid for the default option. In contrast, if there is a default by the grantor of a default option, the Funds loss will include both the premium it paid for the option and the decline in value of the underlying security that the default option hedged. If the Fund is a buyer in a credit default swap agreement and no credit event occurs, the Fund recovers nothing if the swap is held through its termination date. However, if a credit event occurs, the Fund may elect to receive the full notional value of the swap in exchange for an equal face amount of deliverable obligations of the reference entity that may have little or no value. As a seller, the Fund generally receives an up front payment or a fixed rate of income throughout the term of the swap, which typically is between six months and three years, provided that there is no credit event. If a credit event occurs, generally the seller must pay the buyer the full notional value of the swap in exchange for an equal face amount of deliverable obligations of the reference entity that may have little or no value.
Structured Notes . Structured notes are privately negotiated debt obligations where the principal and/or interest is determined by reference to the performance of a benchmark asset, market or interest rate (an embedded index), such as selected securities, an index of securities or specified interest rates, or the differential performance of two assets or markets. When the Fund purchases a structured note, it will make a payment of principal to the counterparty. Some structured notes have a guaranteed repayment of principal while others place a portion (or all) of the principal at risk. The possibility of default by the counterparty or its credit provider may be greater for structured notes than for other types of money market instruments. The terms of such structured instruments normally provide that their principal and/or interest payments are to be adjusted upwards or downwards (but not ordinarily below zero) to reflect changes in the embedded index while the structured instruments are outstanding. As a result, the interest and/or principal payments that may be made on a structured product may vary widely, depending upon a variety of factors, including the volatility of the embedded index and the effect of changes in the embedded index on principal and/or interest payments. The rate of return on structured notes may be determined by applying a multiplier to the performance or differential performance of the referenced index or indexes or other assets. Application of a multiplier involves leverage that will serve to magnify the potential for gain and the risk of loss. Structured notes may not have an active trading market.
Risks of Derivatives Transactions
For each Fund : Derivatives Transactions as discussed in this SAI include options; futures contracts and options thereon; interest rate transactions, such as swaps, caps, floors or collars; credit transactions; swaps; forward contracts; and structured investments. For Preferred Securities and Income Fund, Derivatives Transactions include transactions that combine features of the Derivatives Transactions described in this SAI and other types of derivatives, structured and similar instruments which are not currently available but which may be developed in the future. Derivatives Transactions can be highly volatile and involve various types and degrees of risk, depending upon the characteristics of the particular derivative, including the imperfect correlation between the value of such instruments and the
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underlying assets, the possible default of the other party to the transaction and illiquidity of the derivative instruments. Derivatives Transactions may entail investment exposures that are greater than their cost would suggest, meaning that a small investment in derivatives could have a large potential impact on the Funds performance, effecting a form of investment leverage on the Funds portfolio. In certain types of Derivatives Transactions the Fund could lose the entire amount of its investment; in other types of Derivatives Transactions the potential loss is theoretically unlimited.
The market for many derivatives is, or suddenly can become, illiquid. Changes in liquidity may result in significant, rapid and unpredictable changes in the prices for Derivatives Transactions. A Fund could experience severe losses if it were unable to liquidate its position because of an illiquid secondary market. Successful use of Derivatives Transactions also is subject to the ability of the Advisor or, if applicable, the Subadvisors (as defined below) to predict correctly movements in the direction of the relevant market and, to the extent the transaction is entered into for hedging purposes, to ascertain the appropriate correlation between the transaction being hedged and the price movements of the securities, currency, interest rate or other reference asset underlying the Derivatives Transactions. Derivatives Transactions entered into to seek to manage the risks of a Funds portfolio of securities may have the effect of limiting gains from otherwise favorable market movements. For example, the use of currency instruments for hedging purposes may limit gains from a change in the relationship between the U.S. dollar and foreign currencies. The use of Derivatives Transactions may result in losses greater than if they had not been used (and a loss on a Derivatives Transaction position may be larger than the gain in a portfolio position being hedged), may require a Fund to sell or purchase portfolio securities at inopportune times or for prices other than current market values, may limit the amount of appreciation a Fund can realize on an investment, or may cause a Fund to hold a security that it might otherwise sell. Amounts paid by a Fund as premiums and cash or other assets held as collateral with respect to Derivatives Transactions may not otherwise be available to the Fund for investment purposes. To the extent Derivatives Transactions would be deemed to be illiquid, they will be included in the maximum limitation of 15% of net assets invested in restricted or illiquid securities.
The use of currency transactions can result in a Fund incurring losses as a result of the imposition of exchange controls, political developments, government intervention or failure to intervene, suspension of settlements or the inability of the Fund to deliver or receive a specified currency.
Structured notes and other related instruments carry risks similar to those of more traditional derivatives such as futures, forward and option contracts. However, structured instruments may entail a greater degree of market risk and volatility than other types of debt obligations.
A Fund will be subject to credit risk with respect to the counterparties to certain Derivatives Transactions entered into by the Fund. Derivatives may be purchased on established exchanges or, as described herein, through privately negotiated transactions referred to as over-the-counter (OTC) derivatives. Exchange-traded derivatives generally are guaranteed by the clearing agency which is the issuer or counterparty to such derivatives. However, many futures exchanges and boards of trade limit the amount of fluctuation permitted in futures contract prices during a single trading day and once the daily limit has been reached in a particular contract no trades may be made that day at a price beyond that limit or trading may be suspended. There also is no assurance that sufficient trading interest to create a liquid secondary market on an exchange will exist at any particular time and no such secondary market may exist or may cease to exist. Each party to an OTC derivative bears the risk that the counterparty will default. OTC derivatives are less liquid than exchange-traded derivatives because the other party to the transaction may be the only investor with sufficient understanding of the derivative to be interested in bidding for it. If a counterparty becomes bankrupt or otherwise fails to perform its
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obligations under a derivative contract due to financial difficulties, the Fund may experience significant delays in obtaining any recovery under the derivative contract in bankruptcy or other reorganization proceeding. The Fund may obtain only a limited recovery or may obtain no recovery in such circumstances.
There is no limit on the amount of a Funds assets that can be put at risk through the use of futures contracts and the value of a Funds futures contracts and options thereon may equal or exceed 100% of that Funds total assets. No Fund has a current intention of entering into futures transactions other than for traditional hedging purposes.
A Fund will not be a commodity pool (i.e., a pooled investment vehicle which trades in commodity futures contracts and options thereon and the operator of which is registered with the Commodity Futures Trading Commission). In addition, the Fund has claimed an exclusion from the definition of commodity pool operator and, therefore, is not subject to registration or regulation as a pool operator under the Commodity Exchange Act.
ENERGY COMPANIES
For Global Infrastructure Fund and Preferred Securities and Income Fund : Energy companies in which the Funds may invest include companies in the discovery, development, production or distribution of energy or other natural resources, the development of technologies for the production or efficient use of energy and other natural resources, or the furnishing of related supplies or services. The energy industries can be significantly affected by fluctuations in energy prices and supply and demand of energy fuels, energy conservation, exploration and production spending, the success of exploration projects, tax and other government regulations, weather or meteorological events, world events and economic conditions. The energy industries also may be affected by fluctuations in energy prices, energy conservation, exploration and production spending, government regulations, weather, world events and economic conditions.
FOREIGN (NON-U.S.) SECURITIES
For each Fund : Each Fund may invest in foreign (non-U.S.) securities as described in its prospectus. Investing in securities issued by foreign companies involves considerations and possible risks not typically associated with investing in securities issued by domestic corporations. The values of foreign investments are affected by changes in currency rates or exchange control regulations, application of foreign tax laws, including withholding taxes, changes in governmental administration or economic or monetary policy (in the United States or abroad) or changed circumstances in dealings between nations. Costs are incurred in connection with conversions between various currencies. In addition, foreign brokerage commissions are generally higher than in the United States, and foreign securities markets may be less liquid, more volatile and less subject to governmental supervision than in the United States. Investments in foreign countries could be affected by other factors not present in the United States, including expropriation, confiscatory taxation, lack of uniform accounting and auditing standards and potential difficulties in enforcing contractual obligations which could extend settlement periods. Dividend income a Fund receives from foreign securities may not be eligible for the special tax treatment reserved for qualified dividend income. See Taxation.
Investments in foreign securities, especially in emerging market countries, will expose the Fund to the direct or indirect consequences of political, social or economic changes in the countries that issue the securities or in which the issuers are located. Certain countries in which the Fund may invest, especially
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emerging market countries, have historically experienced, and may continue to experience, high rates of inflation, high interest rates, exchange rate fluctuations, large amounts of external debt, balance of payments and trade difficulties, and extreme poverty and unemployment. Many of these countries are also characterized by political uncertainty and instability. The cost of servicing external debt will generally be adversely affected by rising international interest rates because many external debt obligations bear interest at rates that are adjusted based upon international interest rates. In addition, with respect to certain foreign countries, there is a risk of:
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the possibility of expropriation of assets; |
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confiscatory taxation; |
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difficulty in obtaining or enforcing a court judgment; |
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economic, political or social instability; and |
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diplomatic developments that could affect investments in those countries. |
Each Fund may invest in sponsored and unsponsored American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and similar depositary receipts. ADRs, typically issued by a financial institution (a depositary), evidence ownership interests in a security or a pool of securities issued by a foreign company and deposited with the depositary. Prices of ADRs are quoted in U.S. dollars, and ADRs are traded in the United States. GDRs are receipts issued outside the United States, typically by non-United States banks and trust companies, that evidence ownership of either foreign or domestic securities. Generally, GDRs, in bearer form, are designated for use outside the United States. Ownership of ADRs and GDRs entails similar investment risks to direct ownership of foreign securities traded outside the U.S., including increased market liquidity, currency, political, information and other risks.
HEALTHCARE COMPANIES
For Preferred Securities and Income Fund : Healthcare companies in which the Fund may invest encompass two main groups. The first group includes companies that manufacture health care supplies or provide health care-related services, including distributors of products, providers of basic health care services and owners and operators of care facilities and organizations. The second group includes companies in the research, development, production and marketing of pharmaceuticals and biotechnology products. Events affecting the health care industries include technological advances that make existing products and services obsolete, and changes in regulatory policies concerning approvals of new drugs, medical devices or procedures. In addition, changes in governmental payment systems and private payment systems, such as increased use of managed care arrangements, are risks in investing in the health care industries.
ILLIQUID SECURITIES
For each Fund : Each Fund may invest in illiquid securities. A Fund will not invest in illiquid securities if immediately after such investment more than 15% of that Funds net assets (taken at market value) would be invested in such securities. For this purpose, illiquid securities include, among others, securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not deemed illiquid for purposes of this limitation.
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the
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Securities Act), and securities which are otherwise not readily marketable. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. The Funds do not typically hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities, and a Fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A Fund might also have to register such restricted securities in order to dispose of them, resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed for certain securities that are not registered under the Securities Act, including repurchase agreements, commercial paper, foreign securities, municipal securities and corporate bonds and notes. Institutional investors depend on an efficient institutional market in which the unregistered security can be readily resold or on an issuers ability to honor a demand for repayment. The fact that there are contractual or legal restrictions on resale to the general public or to certain institutions may not be indicative of the liquidity of such investments.
Rule 144A under the Securities Act allows a broader institutional trading market for securities otherwise subject to restriction on resale to the general public. Rule 144A establishes a safe harbor from the registration requirements of the Securities Act of resales of certain securities to qualified institutional buyers, which generally creates a more liquid market for securities eligible for resale under Rule 144A than other types of restricted securities.
The Advisor will monitor the liquidity of restricted securities in a Funds portfolio, under the supervision of the Board of Directors. In reaching liquidity decisions, the Advisor will consider, among other things, the following factors: (1) the frequency of trades and quotes for the security; (2) the number of dealers wishing to purchase or sell the security and the number of other potential purchasers; (3) dealer undertakings to make a market in the security; and (4) the nature of the security and the nature of the marketplace trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of the transfer).
INDUSTRIAL COMPANIES
For Global Infrastructure Fund and Preferred Securities and Income Fund : Industrial companies that the Funds may invest in include companies involved in the research, development, manufacture, distribution, supply or sale of industrial products, services or equipment. These companies may include manufacturers of civil or military aerospace and defense equipment, building components and home improvement products and equipment, civil engineering firms and large-scale contractors, companies producing electrical components or equipment, manufacturers of industrial machinery and industrial components and products, providers of commercial printing services, and companies providing transportation services. A company is in industrial products, services or equipment industries if at the time of investment it is determine that at least 50% of the companys assets, revenues or profits are derived from these industries.
The industrial products, services and equipment industries can be significantly affected by general economic trends, changes in consumer sentiment and spending, commodity prices, technological obsolescence, labor relations, legislation, government regulations and spending, import controls, and
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worldwide competition, and can be subject to liability for environmental damage, depletion of resources, and mandated expenditures for safety and pollution control.
MASTER LIMITED PARTNERSHIPS
For Global Infrastructure Fund : The Fund may invest in equity securities of master limited partnerships (MLPs), and their affiliates. An MLP generally has two classes of partners, the general partner and the limited partners. The general partner normally controls the MLP through an equity interest plus units that are subordinated to the common (publicly traded) units for an initial period and then only converting to common if certain financial tests are met. As a motivation for the general partner to successfully manage the MLP and increase cash flows, the terms of most MLPs typically provide that the general partner receives a larger portion of the net income as distributions reach higher target levels. As cash flow grows, the general partner receives a greater interest in the incremental income compared to the interest of limited partners. The general partners incentive compensation typically increases to up to 50% of incremental income. Nevertheless, the aggregate amount distributed to limited partners will increase as MLP distributions reach higher target levels. Given this incentive structure, the general partner has an incentive to streamline operations and undertake acquisitions and growth projects in order to increase distributions to all partners.
MLP common units represent an equity ownership interest in a partnership, providing limited voting rights and entitling the holder to a share of the companys success through distributions and/or capital appreciation. Unlike shareholders of a corporation, common unit holders do not elect directors annually and generally have the right to vote only on certain significant events, such as mergers, a sale of substantially all of the assets, removal of the general partner or material amendments to the partnership agreement. MLPs are required by their partnership agreements to distribute a large percentage of their current operating earnings. Common unit holders generally have first right to a minimum quarterly distribution prior to distributions to the convertible subordinated unit holders or the general partner (including incentive distributions). Common unit holders typically have arrearage rights if the minimum quarterly distribution is not met. In the event of liquidation, MLP common unit holders have first right to the partnerships remaining assets after bondholders, other debt holders, and preferred unit holders have been paid in full. MLP common units trade on a national securities exchange or over-the-counter. Some limited liability companies (LLCs) may be treated as MLPs for federal income tax purposes. Similar to MLPs, LLCs typically do not pay federal income tax at the entity level and are required by their operating agreements to distribute a large percentage of their current operating earnings. In contrast to MLPs, LLCs have no general partner and there are no incentives that entitle management or other unit holders to increased percentages of cash distributions as distributions reach higher target levels. In addition, LLC common unit holders typically have voting rights with respect to the LLC, whereas MLP common units have limited voting rights. MLP common units and other equity securities can be affected by macro economic and other factors affecting the stock market in general, expectations of interest rates, investor sentiment towards MLPs or a MLPs business sector, changes in a particular issuers financial condition, or unfavorable or unanticipated poor performance of a particular issuer (in the case of MLPs, generally measured in terms of distributable cash flow). Prices of common units of individual MLPs and other equity securities can also be affected by fundamentals unique to the partnership or company, including earnings power and coverage ratios.
MLP convertible subordinated units are typically issued by MLPs to founders, corporate general partners of MLPs, entities that sell assets to the MLP, and institutional investors, and may be purchased
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in direct placements from such persons. The purpose of the convertible subordinated units is to increase the likelihood that during the subordination period there will be available cash to be distributed to common unit holders. Convertible subordinated units generally are not entitled to distributions until holders of common units have received specified minimum quarterly distributions, plus any arrearages, and may receive less in distributions upon liquidation. Convertible subordinated unit holders generally are entitled to a minimum quarterly distribution prior to the payment of incentive distributions to the general partner, but are not entitled to arrearage rights. Therefore, they generally entail greater risk than MLP common units. They are generally convertible automatically into the senior common units of the same issuer at a one-to-one ratio upon the passage of time or the satisfaction of certain financial tests. These units do not trade on a national exchange or over-the-counter, and there is no active market for convertible subordinated units. The value of a convertible security is a function of its worth if converted into the underlying common units. Convertible subordinated units generally have similar voting rights to MLP common units. Because convertible subordinated units generally convert to common units on a one-to-one ratio, the price that the Fund could be expected to pay upon purchase or to realize upon resale is generally tied to the common unit price less a discount. The size of the discount varies depending on a variety of factors including the likelihood of conversion, and the length of time remaining to conversion, and the size of the block purchased.
MLP I-Shares represent an indirect investment in MLP I-units. I-units are equity securities issued to affiliates of MLPs, typically a limited liability company, that own an interest in and manage the MLP. The issuer has management rights but is not entitled to incentive distributions. The I-Share issuers assets consist exclusively of MLP I-units. Distributions by MLPs to I-unit holders are made in the form of additional I-units, generally equal in amount to the cash received by common unit holders of MLPs. Distributions to I-Share holders are made in the form of additional I-Shares, generally equal in amount to the I-units received by the I-Share issuer. The issuer of the I-Share is taxed as a corporation for federal income tax purposes; however, the MLP does not allocate income or loss to the I-Share issuer. Accordingly, investors receive a Form 1099, are not allocated their proportionate share of income of the MLPs and are not subject to state income tax filing obligations. The price of I-Shares and their volatility tend to be correlated to the price of common units, although the price correlation is not precise.
PREFERRED SECURITIES
For each Fund : There are two basic types of preferred securities, traditional and hybrid-preferred securities. Traditional preferred securities consist of preferred stock issued by an entity taxable as a corporation. Preferred stocks, which may offer fixed or floating rate dividends, are perpetual instruments and considered equity securities. Preferred securities are subordinated to senior debt instruments in a companys capital structure, in terms of priority to corporate income and claim to corporate assets, and therefore will be subject to greater credit risk than debt instruments. Alternatively, hybrid-preferred securities may be issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics, or by an affiliated trust or partnership of the corporation, generally in the form of preferred interests in subordinated debentures or similarly structured securities. The hybrid-preferred securities market consists of both fixed and adjustable coupon rate securities that are either perpetual in nature or have stated maturity dates. Hybrid-preferred securities are considered debt securities. Due to their similar attributes, the Advisor also considers senior debt perpetual issues, certain securities with convertible features as well as exchange-listed senior debt issues that trade with attributes of exchange-listed perpetual and hybrid-preferred securities to be part of the broader preferred securities market.
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Traditional Preferred Securities . Traditional preferred securities pay fixed or floating dividends to investors and have preference over common stock in the payment of dividends and the liquidation of a companys assets. This means that a company must pay dividends on preferred stock before paying any dividends on its common stock. In order to be payable, distributions on such preferred securities must be declared by the issuers board of directors. Income payments on preferred securities may be cumulative, causing dividends and distributions to accumulate even if not declared by the board of directors or otherwise made payable. In such a case, all accumulated dividends must be paid before any dividend on the common stock can be paid. However, many traditional preferred stocks are non-cumulative, in which case dividends do not accumulate and need not ever be paid. The Fund may invest in non-cumulative preferred securities, whereby the issuer does not have an obligation to make up any missed payments to its stockholders. There is no assurance that dividends or distributions on the traditional preferred securities in which the Fund invests will be declared or otherwise made payable. Preferred securities may also contain provisions under which payments must be stopped (i.e., stoppage is compulsory, not discretionary). The conditions under which this occurs may relate to, for instance, capitalization levels. Hence, if a company incurs significant losses that deplete retained earnings automatic payment stoppage could occur. In some cases the terms of the preferred securities provide that the issuer would be obligated to attempt to issue common shares to raise funds for the purpose of making the preferred payments. However, there is no guarantee that the issuer would be successful in placing common shares.
Preferred stockholders usually have no right to vote for corporate directors or on other matters. Shares of traditional preferred securities have a liquidation preference that generally equals the original purchase price at the date of issuance. The market value of preferred securities may be affected by, among other factors, favorable and unfavorable changes impacting the issuer or industries in which they operate, movements in interest rates and inflation, and the broader economic and credit environments, and by actual and anticipated changes in tax laws, such as changes in corporate and individual income tax rates. Because the claim on an issuers earnings represented by traditional preferred securities may become onerous when interest rates fall below the rate payable on such securities, the issuer may redeem the securities. Thus, in declining interest rate environments in particular, the Funds holdings of higher rate-paying fixed rate preferred securities may be reduced, and the Fund may be unable to acquire securities of comparable credit quality paying comparable rates with the redemption proceeds.
Pursuant to the dividends received deduction (the DRD), corporations may generally deduct 70% of the income they receive from dividends on traditional preferred securities issued by domestic corporations that are paid out of earnings and profits of the issuer. However, not all traditional preferred securities pay dividends that are eligible for the DRD, including preferred securities issued by real estate investment trusts (REITs). Under current law, individuals will generally be taxed at long-term capital gain rates on qualified dividend income (QDI) for taxable years beginning before January 1, 2013. There can be no assurance that favorable tax treatment of QDI will continue following December 31, 2012. However, not all traditional preferred securities will provide significant benefits under the rules relating to QDI, including preferred securities issued by REITs.
Hybrid-preferred Securities . Hybrid-preferred securities are typically junior and fully subordinated liabilities of an issuer or the beneficiary of a guarantee that is junior and fully subordinated to the other liabilities of the guarantor. In addition, hybrid-preferred securities typically permit an issuer to defer the payment of income for eighteen months or more without triggering an event of default. Generally, the maximum deferral period is five years. Because of their subordinated position in the capital structure of an issuer, the ability to defer payments for extended periods of time without default
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consequences to the issuer, and certain other features (such as restrictions on common dividend payments by the issuer or ultimate guarantor when full cumulative payments on the hybrid preferred securities have not been made), these hybrid-preferred securities are often treated as close substitutes for traditional preferred securities, both by issuers and investors. Hybrid-preferred securities have many of the key characteristics of equity due to their subordinated position in an issuers capital structure and because their quality and value are heavily dependent on the profitability of the issuer rather than on any legal claims to specific assets or cash flows. Hybrid-preferred securities include, but are not limited to, trust preferred securities (TRUPS ® ); enhanced trust preferred securities (Enhanced TRUPS ® ); trust-originated preferred securities (TOPrS ® ); monthly-income preferred securities (MIPS ® ); quarterly-income bond securities (QUIBS ® ); quarterly-income debt securities (QUIDS ® ); quarterly-income preferred securities (QUIPSSM); corporate trust securities (CorTS ® ); public income notes (PINES ® ); and other hybrid-preferred securities. (1)
Hybrid-preferred securities are typically issued with a final maturity date. In certain instances, a final maturity date may be extended and/or the final payment of principal may be deferred at the issuers option for a specified time without default. No redemption can typically take place unless all cumulative payment obligations have been met, although issuers may be able to engage in open-market repurchases without regard to whether all payments have been paid.
Many hybrid-preferred securities are issued by trusts or other special purpose entities established by operating companies and are not a direct obligation of an operating company. At the time the trust or special purpose entity sells such preferred securities to investors, it purchases debt of the operating company (with terms comparable to those of the trust or special purpose entity securities), which enables the operating company to deduct for tax purposes the interest paid on the debt held by the trust or special purpose entity. The trust or special purpose entity is generally required to be treated as transparent for U.S. federal income tax purposes such that the holders of the trust preferred securities are treated as owning beneficial interests in the underlying debt of the operating company. Accordingly, payments on the hybrid-preferred securities are generally treated as interest rather than dividends for U.S. federal income tax purposes and, as such, are not eligible for the DRD or the reduced rates of tax that apply to qualified dividend income. The trust or special purpose entity in turn would be a holder of the operating companys debt and would have priority with respect to the operating companys earnings and profits over the operating companys common stockholders, but would typically be subordinated to other classes of the operating companys debt. Typically a preferred security has a credit rating that is lower than that of its corresponding operating companys senior debt securities.
Within the category of hybrid-preferred securities are senior debt instruments that trade in the broader preferred securities market. These debt instruments, which are sources of long-term capital for the issuers, have structural features similar to other preferred securities such as maturities ranging from 30 years to perpetuity, call features, quarterly payments, exchange listings and the inclusion of accrued interest in the trading price.
In some cases traditional and hybrid securities may include loss absorption provisions that make the securities more equity like. This is particularly true in the financials sector, the largest preferred issuer segment. Events in global financial markets in recent periods have caused regulators to review the
(1) | TOPrS is a registered service mark of Merrill Lynch & Co., Inc. MIPS and QUIDS are registered services marks, and QUIPS is a service mark, owned by Goldman, Sachs & Co. QUIBS is a registered service mark owned by Morgan Stanley & Co. Incorporated. CorTS and PINES are registered service marks owned by Citigroup Global Markets Inc. |
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function and structure of preferred securities more closely. While loss absorption language is relatively rare in the preferred market today, it may become much more prevalent.
In one version of a preferred security with loss absorption characteristics, the liquidation value of the security may be adjusted downward to below the original par value under certain circumstances. This may occur, for instance, in the event that business losses have eroded capital to a substantial extent. The write down of the par value would occur automatically and would not entitle the holders to seek bankruptcy of the company. Such securities may provide for circumstances under which the liquidation value may be adjusted back up to par, such as an improvement in capitalization and/or earnings.
Another preferred structure with loss absorption characteristics is the contingent capital security (sometimes referred to as CoCos). These securities provide for mandatory conversion into common shares of the issuer under certain circumstances. The mandatory conversion might relate, for instance, to maintenance of a capital minimum, whereby falling below the minimum would trigger automatic conversion. Since the common stock of the issuer may not pay a dividend, investors in these instruments could experience a reduced income rate, potentially to zero; and conversion would deepen the subordination of the investor, hence worsening standing in a bankruptcy. In addition, some such instruments have a set stock conversion rate that would cause an automatic write-down of capital if the price of the stock is below the conversion price on the conversion date.
Preferred securities may be subject to changes in regulations and there can be no assurance that the current regulatory treatment of preferred securities will continue.
Convertible Preferred Securities . Some preferred securities, generally known as convertible preferred securities, provide for an investor option to convert their holdings into common shares of the issuer. These securities may have lower rates of income than other preferred securities, and the conversion option may cause them to trade more like equities than typical fixed income instruments.
Floating Rate Securities . The Funds may invest, and Preferred Securities and Income Fund may invest up to 100% of its total assets, in floating rate preferred securities, which provide for a periodic adjustment in the interest rate paid on the securities. The terms of such securities provide that interest rates are adjusted periodically based upon an interest rate adjustment index. The adjustment intervals may be regular, and range from daily up to annually, or may be event-based, such as a change in the prime rate. Because of the interest rate reset feature, floating rate securities provide the Fund with a certain degree of protection against rises in interest rates, although the interest rates of floating rate securities will participate in any declines in interest rates as well.
REAL ESTATE COMPANIES AND REAL ESTATE INVESTMENT TRUSTS
Each Fund (other than Global Infrastructure Fund) : Each Fund may invest significantly in the securities of real estate companies and may be susceptible to adverse economic or regulatory occurrences affecting that sector. Real property investments are subject to varying degrees of risk. The yields available from investments in real estate depend on the amount of income and capital appreciation generated by the related properties. Income and real estate values may also be adversely affected by such factors as applicable laws (e.g., Americans with Disabilities Act and tax laws), interest rate levels and the availability of financing. If the properties do not generate sufficient income to meet operating expenses, including, where applicable, debt service, ground lease payments, tenant improvements, third-party leasing commissions and other capital expenditures, the income and ability of the real estate company to make payments of any interest and principal on its debt securities will be adversely affected. In addition, real property may be subject to the quality of credit extended and defaults by borrowers and
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tenants. The performance of the economy in each of the regions and countries in which the real estate owned by a portfolio company is located affects occupancy, market rental rates and expenses and, consequently, has an impact on the income from such properties and their underlying values. The financial results of major local employers also may have an impact on the cash flow and value of certain properties. In addition, real estate investments are relatively illiquid and, therefore, the ability of real estate companies to vary their portfolios promptly in response to changes in economic or other conditions is limited. A real estate company also may have joint venture investments in certain of its properties and, consequently, its ability to control decisions relating to these properties may be limited.
Real property investments are also subject to risks which are specific to the investment sector or type of property in which the real estate companies are investing.
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Retail Properties. Retail properties are affected by the overall health of the applicable economy and may be adversely affected by the growth of alternative forms of retailing, bankruptcy, departure or cessation of operations of a tenant, a shift in consumer demand due to demographic changes, spending patterns and lease terminations. |
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Office Properties. Office properties are affected by the overall health of the economy and other factors such as a downturn in the businesses operated by their tenants, obsolescence and non-competitiveness. |
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Hotel Properties. The risks of hotel properties include, among other things, the necessity of a high level of continuing capital expenditures, competition, increases in operating costs which may not be offset by increases in revenues, dependence on business and commercial travelers and tourism, increases in fuel costs and other expenses of travel and adverse effects of general and local economic conditions. |
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Healthcare Properties. Healthcare properties and healthcare providers are affected by several significant factors, including Federal, state and local laws governing licenses, certification, adequacy of care, pharmaceutical distribution, medical rates, equipment, personnel and other factors regarding operations; continued availability of revenue from government reimbursement programs (primarily Medicaid and Medicare); and competition on a local and regional basis. |
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Multifamily Properties. The value and successful operation of a multifamily property may be affected by a number of factors such as the location of the property, the ability of the management team, the level of mortgage rates, presence of competing properties, adverse economic conditions in the locale, oversupply and rent control laws or other laws affecting such properties. |
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Insurance Issues. Certain real estate companies may carry comprehensive liability, fire, flood, earthquake extended coverage and rental loss insurance with various policy specifications, limits and deductibles. |
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Credit Risk. REITs may be highly leveraged, and financial covenants may affect the ability of REITs to operate effectively. |
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Environmental Issues. In connection with the ownership (direct or indirect), operation, management and development of real properties that may contain hazardous or toxic substances, a portfolio company may be considered an owner, operator or responsible party of such properties and, therefore, may be potentially liable for removal or remediation costs, as well as certain other costs, including governmental fines and liabilities for injuries to persons and property. |
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Smaller Companies. Even the larger REITs in the industry tend to be small- to medium-sized companies in relation to the equity markets as a whole. REIT shares, therefore, can be more volatile than, and perform differently from, larger company stocks. |
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REIT Tax Issues. REITs are subject to a highly technical and complex set of provisions in the Internal Revenue Code of 1986, as amended (the Code). It is possible that the Fund may invest in a real estate company which purports to be a REIT and that the company could fail to qualify as a REIT. In the event of any such unexpected failure to qualify as a REIT, the company would be subject to corporate level taxation, significantly reducing the return to the Fund on its investment in such company. |
For each Fund (other than Global Infrastructure Fund) : Each Fund may invest in real estate investment trusts (REITs). REITs are sometimes informally characterized as equity REITs, mortgage REITs and hybrid REITs. An equity REIT invests primarily in the fee ownership or leasehold ownership of land and buildings and derives its income primarily from rental income. An equity REIT may also realize capital gains (or losses) by selling real estate properties in its portfolio that have appreciated (or depreciated) in value. A mortgage REIT invests primarily in mortgages on real estate, which may secure construction, development or long-term loans. A mortgage REIT generally derives its income primarily from interest payments on the credit it has extended. A hybrid REIT combines the characteristics of equity REITs and mortgage REITs, generally by holding both ownership interests and mortgage interests in real estate. It is anticipated, although not required, that under normal circumstances a majority of a Funds investments in REITs will consist of securities issued by equity REITs.
In addition to the risks of securities linked to the real estate industry, equity REITs may be affected by changes in the value of the underlying property owned by the trusts, while mortgage REITs may be affected by the quality of any credit extended. Further, REITs are dependent upon management skills and generally may not be diversified. REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidation. In addition, U.S. REITs could possibly fail to qualify for pass-through of income under the Code, or to maintain their exemptions from registration under the Investment Company Act of 1940, as amended (the 1940 Act). The above factors may also adversely affect a borrowers or a lessees 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.
REPURCHASE AGREEMENTS
For each Fund : Each Fund may enter into repurchase agreements. A repurchase agreement is an instrument under which an investor, such as a Fund, purchases a U.S. Government security from a vendor, with an agreement by the vendor to repurchase the security at the same price, plus interest at a specified rate. In such a case, the security is held by that Fund, in effect, as collateral for the repurchase obligation. Repurchase agreements may be entered into with member banks of the Federal Reserve System or primary dealers (as designated by the Federal Reserve Bank of New York) in U.S. Government securities. Repurchase agreements usually have a short duration, often less than one week. In entering into the repurchase agreement for a Fund, the Advisor will evaluate and monitor the creditworthiness of the vendor. In the event that a vendor should default on its repurchase obligation, a Fund might suffer a loss to the extent that the proceeds from the sale of the collateral were less than the repurchase price. If the vendor becomes bankrupt, a Fund might be delayed, or may incur costs or possible losses of principal and income, in selling the collateral.
SECURITIES LENDING
For each Fund : Each Fund may lend portfolio securities to broker/dealers or other institutions. The borrower must maintain with the Fund cash or equivalent collateral equal to at least 100% of the market value of the securities loaned. During the time portfolio securities are on loan, the borrower
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pays the lending Fund any dividends or interest paid on the securities. The Fund may invest the collateral and earn additional income or receive an agreed upon amount of interest income from the borrower. Loans are subject to termination at the option of the Fund or the borrower. The Fund may pay reasonable administrative and custodial fees in connection with a loan. The Fund does not have the right to vote securities on loan, but would terminate the loan and regain the right to vote if that were considered important with respect to the investment. The Fund may lose money if a borrower defaults on its obligation to return securities and the value of the collateral held by the Fund is insufficient to replace the loaned securities. In addition, the Fund is responsible for any loss that might result from its investment of the borrowers collateral.
SHORT SALES
For Global Infrastructure Fund, Global Realty Shares, International Realty Fund, Preferred Securities and Income Fund and Realty Income Fund : Each Fund may enter into short sales, provided the dollar amount of short sales at any one time would not exceed 25% of the net assets of that Fund, and the value of securities of any one issuer in which a Fund is short would not exceed the lesser of 2% of the value of a Funds net assets or 2% of the securities of any class of any issuer. A Fund must designate collateral consisting of cash or liquid portfolio securities with a value equal to the current market value of the shorted securities, which is marked-to-market daily. If a 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 issuer as, and equal in amount to, the securities sold short (which sales are commonly referred to as short sales against the box), the above requirements are not applicable.
TELECOMMUNICATIONS AND MEDIA COMPANIES
For Global Infrastructure Fund and Preferred Securities and Income Fund : The Funds may invest in telecommunications companies, which are companies principally engaged in the development, manufacture, or sale of communications services or communications equipment or provision of communications services, including cable television, satellite, microwave, radio, telephone and other communications media. Preferred Securities and Income Fund may also invest in media companies, which are companies that invest in, create, own, and distribute various forms of printed, visual, audio, and interactive content, as well as information databases that they sell or lease to others. Examples include the Internet, newspaper, magazine, and book publishers, movie and television studios, advertising agencies, radio and television broadcasters, as well as cable television and direct satellite broadcast system operators. Risks of investing in the telecommunications and media sector includes many of the risks of investing in the utilities sector, including government regulation of rates of return and services that may be offered. Telecommunications products and services also may be subject to rapid obsolescence resulting from changes in consumer tastes, intense competition and strong market reactions to technological development.
UTILITY COMPANIES
For Global Infrastructure Fund and Preferred Securities and Income Fund : Utility companies in which the Funds may invest generally are involved in the generation, transmission, sale or distribution of electric energy; distribution, purification and treatment of water; or production, transmission or distribution of oil or natural gas. Global Infrastructure Fund will, and Preferred Securities and Income Fund may,
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invest significantly in securities of utility companies and may be susceptible to adverse economic or regulatory occurrences affecting that sector. Investing in the utility sector includes the following risks:
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high interest costs in connection with capital construction and improvement programs; |
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difficulty in raising capital in adequate amounts on reasonable terms in periods of high inflation and unsettled capital markets; |
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governmental regulation of rates charged to customers; |
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costs associated with compliance with and changes in environmental and other regulations; |
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effects of economic slowdowns and surplus capacity; |
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increased competition from other providers of utility services; |
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inexperience with and potential losses resulting from a developing deregulatory environment; |
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costs associated with reduced availability of certain types of fuel, occasionally reduced availability and high costs of natural gas for resale and the effects of energy conservation policies, and the potential that costs incurred by the utility, such as the cost of fuel, change more rapidly than the rate the utility is permitted to charge its customers; |
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effects of a national energy policy and lengthy delays and greatly increased costs and other problems associated with the design, construction, licensing, regulation and operation of nuclear facilities for electric generation, including, among other considerations, the problems associated with the use of radioactive materials and the disposal of radioactive wastes; |
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technological innovations that may render existing plants, equipment or products obsolete; and |
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potential impact of terrorist activities on utility companies and their customers and the impact of natural or man-made disasters, including events such as the blackout that affected electric utility companies in many Mid-Atlantic and Midwest states in 2003. |
Issuers in the utility sector may be subject to regulation by various governmental authorities and may be affected by the imposition of special tariffs and changes in tax laws, regulatory policies and accounting standards. In addition, there are substantial differences between the regulatory practices and policies of various jurisdictions, and any given regulatory agency may make major shifts in policy from time to time. There is no assurance that regulatory authorities will, in the future, grant rate increases or that such increases will be adequate to permit the payment of dividends on preferred or common stocks. Prolonged changes in climatic conditions can also have a significant impact on both the revenues of an electric or gas utility as well as its expenses.
WARRANTS AND RIGHTS
For each Fund : Warrants are options to buy a stated number of shares of common stock at a specified price at any time during the life of the warrant. Rights represent a privilege offered to holders of record of issued securities to subscribe (usually on a pro rata basis) for additional securities of the same class, of a different class or of a different issuer. The holders of warrants and rights have no voting rights, receive no dividends and have no rights with respect to the assets of the issuer. The value of a warrant or right may not necessarily change with the value of the underlying securities. Warrants and rights cease to have value if they are not exercised prior to their expiration date. Investments in warrants and rights are thus speculative and may result in a total loss of any money invested in their acquisition.
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DISCLOSURE OF PORTFOLIO HOLDINGS
Each Fund has adopted policies and procedures with respect to the disclosure of the Funds portfolio holdings and ongoing arrangements to make available such information to the general public and to certain persons on a selective basis. Except as noted below, the Funds do not provide portfolio holdings to any third party until they are made available on the Cohen & Steers website at cohenandsteers.com or through some other means of public dissemination. Each Funds full portfolio holdings are published semi-annually in reports sent to shareholders and such reports are made available on the Cohen & Steers website, within 60 days after the end of each semi-annual period. These semi-annual holdings are also filed with the Securities and Exchange Commission (the SEC) within 70 days of the end of each semi-annual period, as part of Form N-CSR. Quarterly holdings reports are filed with the SEC within 60 days at the end of the first and third quarters, as part of Form N-Q. In addition, each Fund posts an uncertified list of portfolio holdings on the website, no earlier than 15 days after the end of each calendar quarter. One day after the full holdings have been published, employees of the Advisor or a Subadvisor may freely distribute them to third parties. This information remains available until a Fund files a report on Form N-Q or Form N-CSR for the period that includes the date as of which the information is current. In addition to information on portfolio holdings, other Fund statistical information may be found on the Cohen & Steers Funds website or by calling 800-330-7348.
The following are exceptions to the general rule that holdings are not disclosed to third parties until posted to the website:
1. Each Funds portfolio holdings may be disclosed prior to public release to certain third parties ( e.g. , rating and ranking organizations, financial printers, pricing information vendors and other research firms) for legitimate business purposes. Disclosure is conditioned on receipt of a written confidentiality agreement, including an agreement not to trade on the basis of the information disclosed. The portfolio holdings may be disclosed to such third parties on an as-needed basis and such disclosure must be authorized by an officer of the Fund. Under these circumstances, the Funds portfolio holdings may be disclosed to the following third parties: Broadridge, Inc., Charles River Systems, Inc., RR Donnelley Financial, Merrill Corporation, Interactive Data Corporation, Princeton Financial Systems, Inc., RiskMetrics Group, Moodys and S&P.
2. Each Funds portfolio holdings may also be disclosed between and among each Funds Advisor, Subadvisors (if applicable), Distributor (as defined below), administrator, co-administrator, custodian, independent registered public accounting firm and outside legal counsel for legitimate business purposes within the scope of their official duties and responsibilities, subject to their continuing duty of confidentiality and duty not to trade on the basis of any material nonpublic information, as such duties are imposed under the Code of Ethics and the Inside Information Policies and Procedures applicable to the Advisor, Distributor and administrator, and as imposed on the other parties by agreement or under applicable laws, rules and regulations.
3. Each Funds Advisor, Subadvisors (if applicable), administrator, co-administrator or custodian may, for legitimate business purposes within the scope of their official duties and responsibilities, disclose portfolio holdings to one or more broker-dealers during the course of, or in connection with, normal day-to-day securities transactions with such broker-dealers, subject to the broker-dealers legal obligation not to use or disclose material nonpublic information concerning a Funds portfolio holdings.
4. Each Fund may provide certain information (other than complete portfolio holdings) related to its portfolio holdings or derived from its portfolio holdings to the media so long as the Funds chief
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compliance officer, or his or her designated representative, determines that the Fund has a legitimate business purpose for disclosing the information and the dissemination cannot be reasonably seen to give the recipient of such information an advantage in trading Fund shares or in any other way harm the Fund or its shareholders. Such information may include a small number of portfolio holdings (including information that the Fund no longer holds a particular security) or general information about the Funds portfolio holdings that cannot be used to determine the Funds portfolio holdings or any portion thereof. Information about a security may not be released if it could reasonably be seen to interfere with the current or future purchase or sale activities of the Fund or is contrary to applicable law.
5. Fund portfolio holdings may also be disclosed to any person as required by applicable laws, rules and regulations. Examples of such required disclosure include, but are not limited to, disclosure (1) in a filing or submission with the SEC or another regulatory body, (2) in connection with a lawsuit or (3) as required by court order.
Each Fund may from time to time post portfolio holdings on the Cohen & Steers website on a more timely basis than 15 days after calendar quarter-end if warranted by market conditions or other circumstances.
The investment objective and the principal investment strategies and investment techniques of each Fund are described in each Funds Prospectus. Each Fund has also adopted certain investment restrictions limiting the following activities, except as specifically authorized.
FUNDAMENTAL POLICIES
The following restrictions have been adopted as fundamental policies by the Funds, as specified below. Under the Investment Company Act of 1940, as amended (the 1940 Act), a fundamental policy may not be changed without the vote of a majority of the outstanding voting securities of a Fund, as defined under the 1940 Act, to mean the lesser of (1) 67% or more of the shares present at a meeting of shareholders of a Fund, if the holders of more than 50% of the outstanding shares of that Fund are present or represented by proxy, or (2) more than 50% of the outstanding shares of a Fund.
Borrowing
For each Fund (other than Global Realty Shares) : the Fund may not borrow money, or pledge its assets, except that the Fund may borrow money from banks for temporary or emergency purposes, including the meeting of redemption requests which might require the untimely disposition of securities.
Borrowing in the aggregate may not exceed 15%, and borrowing for purposes other than meeting redemptions may not exceed 5%, of the value of the Funds total assets (including the amount borrowed) less liabilities (not including the amount borrowed) at the time the borrowing is made. Outstanding borrowings in excess of 5% of the value of the Funds total assets will be repaid before any subsequent investments are made.
For Global Realty Shares : the Fund may not borrow money, except that it may borrow from banks to increase its holdings of portfolio securities in an amount not to exceed 30% of the value of its total assets and may borrow for temporary or emergency purposes from banks and entities other than banks in an amount not to exceed 5% of the value of its total assets; provided that aggregate borrowing at any time may not exceed 30% of the Funds total assets.
31
Senior Securities
For each Fund (other than Realty Shares) : the Fund may not issue any senior securities, except that collateral arrangements with respect to transactions such as forward contracts, futures contracts, short sales or options, including deposits of initial and variation margin, shall not be considered to be the issuance of a senior security for purposes of this restriction.
For Realty Shares : the Fund may not issue any senior securities, except to the extent permitted by the 1940 Act.
Underwriting
For each Fund (other than Realty Shares) : the Fund may not act as an underwriter of securities issued by other persons, except insofar as the Fund may be deemed an underwriter in connection with the disposition of securities.
For Realty Shares : the Fund may not 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.
Real Estate
For Global Realty Shares and Realty Income Fund : the Fund may not purchase or sell real estate, except that the Fund may invest in securities of companies that deal in real estate or are engaged in the real estate business, including real estate investment trusts, and securities secured by real estate or interests therein and the Fund may hold and sell real estate acquired through default, liquidation, or other distributions of an interest in real estate as a result of the Funds ownership of such securities.
For Global Infrastructure Fund, Institutional Global Realty Shares, Institutional Realty Shares, International Realty Fund and Preferred Securities and Income Fund : the Fund may not purchase or sell real estate or mortgages on real estate, except that the Fund may invest in securities of companies that deal in real estate or are engaged in the real estate business, including real estate investment trusts, and securities secured by real estate or interests therein and the Fund may hold and sell real estate or mortgages acquired on real estate acquired through default, liquidation, or other distributions of an interest in real estate as a result of the Funds ownership of such securities.
For Realty Shares : the Fund may not purchase or sell real estate, except that the Fund may purchase securities issued by companies in the real estate industry and will, as a matter of fundamental policy, concentrate its investments in such securities.
Commodities and Commodity Futures Contracts:
For each Fund (other than Realty Shares) : the Fund may not purchase or sell commodities or commodity futures contracts, except that the Fund may invest in financial futures contracts, options thereon and similar instruments.
Lending
For each Fund (other than Realty Shares) : the Fund may not make loans to other persons except through the lending of securities held by it (but not to exceed a value of one-third of total assets), through the use of repurchase agreements, and by the purchase of debt securities, all in accordance with its investment policies.
For Realty Shares : the Fund may not make loans except through the purchase of debt obligations in accordance with its investment objective and policies.
32
Concentration
For Global Infrastructure Fund : the Fund may not invest 25% or more of its net assets in securities of issuers in any particular industry, except that the Fund will invest at least 25% of the value of its net assets in securities of companies engaged in the utilities industry and provided that this limitation shall exclude securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities.
For International Realty Fund : the Fund may not invest 25% or more of its net assets in securities of issuers in any particular industry, except that the Fund will invest at least 25% of the value of its net assets in securities of companies engaged in the real estate industry and provided that this limitation shall exclude securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities.
For Institutional Global Realty Shares and Institutional Realty Shares : the Fund may not, with the exception of the real estate industry, invest more than 25% of its total assets in any one industry or group of industries.
For Preferred Securities and Income Fund : the Fund may not invest 25% or more of its net assets in securities of issuers in any particular industry, except that the Fund will invest at least 25% of the value of its net assets in securities of companies engaged in the financials sector and provided that this limitation shall exclude securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities.
A DDITIONAL F UNDAMENTAL P OLICIES
For Realty Shares only : In addition to the fundamental policies noted above, Realty Shares has adopted the following investment restrictions as fundamental policies. Realty Shares may not:
1. Invest in illiquid securities if immediately after such investment more than 15% of the Funds net assets (taken at market value) would be invested in such securities.
2. Purchase a security if, as a result (unless the security is acquired pursuant to a plan of reorganization or an offer of exchange), the Fund would own any securities of an open-end investment company or more than 3% of the value of the Funds total assets would be invested in securities of any closed-end investment company or more than 10% of such value in closed-end investment companies in general.
3. 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 (which sales are commonly referred to as short sales against the box), and unless not more than 10% of the Funds net assets (taken at market value) is held as collateral for such sales at any one time.
4. Invest in interests in oil, gas, or other mineral exploration or development programs.
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. Pledge, hypothecate, mortgage or otherwise encumber its assets, except to secure permitted borrowings.
8. Purchase securities on margin, except for such short-term credits as may be necessary for the clearance of transactions and except for borrowings in an amount not exceeding 10% of the value of the Funds total assets.
33
NON-FUNDAMENTAL POLICIES
The following investment restrictions have been adopted as non-fundamental policies by the Funds (other than Realty Shares), as specified below. They may be changed at any time by vote of a majority of the Board of Directors of an applicable Fund. Realty Shares has not adopted any non-fundamental policies.
Restricted or Illiquid Securities
For each Fund (other than Realty Shares) : the Fund may not purchase restricted or illiquid securities, including repurchase agreements maturing in more than seven days, if as a result, more than 15% of the Funds net assets would then be invested in such securities (excluding securities which are eligible for resale pursuant to Rule 144A under the Securities Act and, for Global Infrastructure Fund, Global Realty Shares, Preferred Securities and Income Fund and Realty Income Fund, determined to be liquid).
Other Investment Companies
For each Fund (other than Realty Shares): the Fund may not acquire or retain securities of any investment company, except that the Fund may (a) acquire securities of investment companies up to the limits permitted by Section 12(d)(1) of the 1940 Act, and (b) acquire securities of any investment company as part of a merger, consolidation or similar transaction.
Short Sales
For each Fund (other than Realty Shares and Preferred Securities and Income Fund) : the Fund may not make short sales whereby the dollar amount of short sales at any one time would exceed 25% of the net assets of the Fund; provided that the Fund maintains collateral in a segregated account consisting of cash or liquid portfolio securities with a value equal to the current market value of the shorted securities, which is marked to market daily. If 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 issuer as, and equal in amount to, the securities sold short (which sales are commonly referred to as short sales against the box), such restrictions shall not apply.
Options
For each Fund (other than Realty Shares and Preferred Securities and Income Fund) : the Fund may not invest in puts, calls, straddles, spreads or any combination thereof, except that the Fund may (a) purchase put and call options on securities and securities indexes, and (b) write covered put and call options on securities and securities indexes, provided that (i) the securities underlying such options are within the investment policies of the Fund; (ii) at the time of such investment, the value of the aggregate premiums paid for such securities does not exceed 5% of the Funds total assets; and (iii) the value of the underlying securities on which options may be written at any one time does not exceed 25% of total assets.
Oil, Gas and Minerals
For each Fund (other than Institutional Realty Shares, Institutional Global Realty Shares and Realty Shares): The Fund may not invest in oil, gas or other mineral exploration programs, development programs or leases, except that the Fund may purchase securities of companies engaging in whole or in part in such activities.
Pledging, Mortgaging or Hypothecation of Assets
For each Fund (other than Realty Shares and Preferred Securities and Income Fund) : the Fund may not pledge, mortgage or hypothecate its assets except in connection with permitted borrowings.
34
Purchasing Securities on Margin
For each Fund (other than Realty Shares and Preferred Securities and Income Fund) : The Fund may not purchase securities on margin, except short-term credits as are necessary for the purchase and sale of securities, provided that the deposit or payment of initial or variation margin in connection with futures contracts or related options will not be deemed to be a purchase on margin.
The business and affairs of each Fund are managed under the direction of its Board of Directors. Each Board of Directors approves all significant agreements between the Fund and persons or companies furnishing services to it, including the Funds agreements with its Advisor, subadvisors, administrator, co-administrator, custodian and Boston Financial Data Services, Inc. (the Transfer Agent). The Boards of Directors of Global Infrastructure Fund, Global Realty Shares, Institutional Global Realty Shares and International Realty Fund also approve agreements with Cohen & Steers Europe, S.A. (CNS Europe), Cohen & Steers Asia Limited (CNS Asia), and Cohen & Steers UK Limited (CNS UK), investment sub-advisors for those Funds (the Subadvisors). The management of each Funds day-to-day operations is delegated to its officers, the Advisor, the Subadvisors (if applicable), the administrator and sub-administrator, and Transfer Agent, subject always to the investment objective and policies of the Fund and to the general supervision of the Board of Directors.
The Directors and officers of each Fund and their principal occupations during at least the past five years are set forth below. Each such Director and officer is also a Director or officer of some or all of the other seventeen funds in the Cohen & Steers Fund Complex.
Name, Address (1) and Age |
Position(s) Held
|
Term of Office (2) |
Principal Occupation During
|
Number of Funds Within
Fund Complex
|
Length of
|
|||||
Interested Directors (4) |
||||||||||
Robert H. Steers Age: 57 |
Director and Co-Chairman | Until Next Election of Directors | Co-Chairman and Co-Chief Executive Officer of the Advisor since 2003 and its parent, Cohen & Steers, Inc. (CNS), since 2004. Prior to that, Chairman of the Advisor; Vice President of Cohen & Steers Securities, LLC, the Funds distributor (the Distributor). | 18 |
Since
1991 |
|||||
Martin Cohen (4) (5) Age: 62 |
Director and Co-Chairman | Until Next Election of Directors | Co-Chairman and Co-Chief Executive Officer of the Advisor since 2003 and CNS since 2004. Prior to that, President of the Advisor; Vice President of the Distributor. | 18 |
Since
1991 |
35
(table continued from previous page)
Name, Address (1) and Age |
Position(s) Held
|
Term of Office (2) |
Principal Occupation During
|
Number of Funds Within
Fund Complex
|
Length of
|
|||||
Independent Directors |
||||||||||
Bonnie Cohen (5) Age: 68 |
Director | Until Next Election of Directors |
Consultant. Board member, United States Department of Defense Business Board since 2010; Board member, Global Heritage Fund since 2002; Advisory Board member, Posse Foundation since
2004; Trustee, H. Rubenstein Foundation since 1996; Trustee, District of Columbia Public Libraries since 2004; Board member, Woods Hole Research Center since 2011; Board member, Telluride Mountain Film Festival since 2010; Board member, Washington
National Opera since 2007; Former Director, Reis, Inc. (real estate analytics firm) from 2003 to 2009; Former member of the Investment Committee, The Moriah Fund from 2002 to 2008; Former Board member, Foundation for Arts and Preservations in
Embassies from 2001 to 2009; Former Under Secretary of State for Management, United States Department of State,
1996-2000. |
18 |
Since
2001 |
|||||
George Grossman Age: 57 |
Director | Until Next Election of Directors | Attorney-at-law. | 18 |
Since
1993 |
36
(table continued from previous page)
Name, Address (1) and Age |
Position(s) Held
|
Term of Office (2) |
Principal Occupation During
|
Number of Funds Within
Fund Complex
|
Length of
|
|||||
Richard E. Kroon Age: 68 |
Director | Until Next Election of Directors | Member of Investment Committee, Monmouth University since 2004; Former Director, Retired Chairman and Managing Partner of Sprout Group venture capital funds, then an affiliate of Donaldson, Lufkin and Jenrette Securities Corporation from 1981 to 2001. Former chairman of the National Venture Capital Association for the year 2000. | 18 |
Since
2004 |
|||||
Richard J. Norman Age: 67 |
Director | Until Next Election of Directors | Private Investor. Member, District of Columbia Department of Corrections Chaplains Corps from 2008 to February 2010; Member, Montgomery County, Maryland Department of Corrections Chaplains Corps since February 2010; Special Representative, Salvation Army World Service Organization (SAWSO) since 2010; Advisory Board Member, The Salvation Army since 1985; Financial Education Fund Chair, The Foundation Board of Maryland Public Television since 2009; Former President, Executive Committee, Chair of Investment Committee, The Foundation Board of Maryland Public Television from 1997 to 2008. Prior thereto, Investment Representative of Morgan Stanley Dean Witter from 1966 to 2000. | 18 |
Since
2001 |
37
(table continued from previous page)
Name, Address (1) and Age |
Position(s) Held
|
Term of Office (2) |
Principal Occupation During
|
Number of Funds Within
Fund Complex
|
Length of
|
|||||
Frank K. Ross Age: 67 |
Director | Until Next Election of Directors | Visiting Professor of Accounting, Howard University School of Business since 2004; Board member and Audit Committee Chair and Human Resources and Compensation Committee Member, Pepco Holdings, Inc. (electric utility) since 2004; Former Board Member of NCRIC Inc. from 2004 to 2005; Formerly, Midatlantic Area Managing Partner for Assurance Services at KPMG LLP and Managing Partner of its Washington DC offices from 1977 to 2003. | 18 |
Since
2004 |
|||||
Willard H. Smith Jr. Age: 74 |
Director | Until Next Election of Directors | Board member, Essex Property Trust, Inc. since 1996; Former Board member, Realty Income Corporation from 1996 to 2009; Former Board member, Highwoods Property Trust from 1996 to 2005; Former Board member, Crest Net Lease, Inc. from 1999 to 2009; Formerly, Managing Director at Merrill Lynch & Co., Equity Capital Markets Division, from 1983 to 1995. | 18 |
Since
1996 |
|||||
C. Edward Ward, Jr. Age: 64 |
Director | Until Next Election of Directors | Member of The Board of Trustees of Manhattan College, Riverdale, New York since 2004; Formerly Director of closed-end fund management for the New York Stock Exchange (the NYSE) where he worked from 1979 to 2004. | 18 |
Since
2004 |
(1) | The address for each Director is 280 Park Avenue, New York, NY 10017. |
(2) |
On March 12, 2008, the Board of Directors adopted a mandatory retirement policy stating a Director must retire from the Board on December 31st of the year in which he or she turns 75 years of age. |
38
(3) | The length of time served represents the year in which the Director was first elected or appointed to any fund in the Cohen & Steers Fund Complex. |
(4) | Interested persons, as defined in the 1940 Act, on the basis of their affiliation with the Advisor (Interested Directors). |
(5) | Martin Cohen and Bonnie Cohen are unrelated. |
Each Director has been a Director of the funds in the Cohen & Steers Fund Complex for at least five years. Additional information about each Independent Director (as defined below) follows (supplementing the information provided in the table above) that describes some of the specific experiences, qualifications, attributes or skills that each Director possesses which the Board believes has prepared them to be effective Directors.
· |
Bonnie Cohen In addition to her tenure as a Director of various Cohen & Steers funds, Ms. Cohen served as the Funds lead Independent Director for one year. She has also served in high ranking positions within the federal government for the past 15 years. In addition, Ms. Cohen has served on the boards of several not-for-profit companies and charitable foundations and founded her own consulting firm. She also served on the board of a firm that analyzes the trends of commercial real estate. |
· |
George Grossman In addition to his tenure as a Director of various Cohen & Steers funds, Mr. Grossman has practiced commercial and residential real estate law, real estate development, zoning and complex financing for over 30 years, managing his own law firm. Mr. Grossman also serves as the Chairman of the Boards Contract Review Committee (since 2004), coordinating the information presented to the Boards in connection with the renewal of each Funds management contracts as well as interacting with the independent third party service provider. |
· |
Richard E. Kroon In addition to his tenure as a Director of various Cohen & Steers funds, Mr. Kroon has served as the complexs lead Independent Director since 2006, acting as liaison between the Boards and the Independent Directors. Mr. Kroon has over 30 years of investment and management experience. In addition, he has served on the boards of several public and private companies, and charitable foundations. |
· |
Richard J. Norman In addition to his tenure as a Director of various Cohen & Steers funds, Mr. Norman has served as the Chairman of the Boards Governance Committee since 2004, acting as liaison between the Boards and the Investment Company Institute. Mr. Norman has over 34 years of business experience. He served as the Investment Chair of Maryland Public Television for over 10 years, administering various investment opportunities. He serves on various boards of several charitable foundations, including the Salvation Army, where he coordinates and oversees numerous fundraising efforts. |
· |
Frank K. Ross In addition to his tenure as a Director of various Cohen & Steers funds, Mr. Ross has served as the Chairman of the Boards Audit Committee since 2004, acting as liaison between the Boards and the Funds independent registered public accountants. Mr. Ross has over 35 years of public accounting and auditing experience. In addition, he is a visiting professor, teaching accounting auditing and ethics courses at a private university, and serves as the audit committee chairman and a member of the Human Resources and Compensation Committees of a public utility company. He was on the Board of NCRIC, Inc. from 2004 to 2006, at which point the company was sold. While on NCRICs Board, he served on the audit and governance committees. |
· |
Willard H. Smith Jr. In addition to his tenure as a Director of various Cohen & Steers funds, Mr. Smith has over 45 years of business experience. He currently serves as a board member of a publicly traded real estate investment trust. |
39
· |
C. Edward Ward Jr. In addition to his tenure as a Director of various Cohen & Steers funds, Mr. Ward has over 31 years of industry experience with closed-end investment companies, previously serving as Director of Closed-End Fund Management at the NYSE. He also earned a master of business administration degree from Harvard University and currently serves as a trustee of a private university. |
The Boards believe that the significance of each Directors experience, qualifications, attributes or skills is an individual matter (meaning that experience that is important for one Director may not have the same value for another) and that these factors are best evaluated at the board level, with no single Director, or particular factor, being indicative of board effectiveness. However, the Boards believe that
Directors need to have the ability to critically review, evaluate, question and discuss information provided to them, and to interact effectively with Fund management, service providers and counsel, in order to exercise effective business judgment in the performance of their duties; the Boards believe that their members satisfy this standard. Experience relevant to having this ability may be achieved through a Directors educational background; business, professional training or practice ( e.g ., accounting or law), public service or academic positions; experience from service as a board member (including the Boards of the Funds) or as an executive of investment funds, public companies or significant private or not-for-profit entities or other organizations; and/or other life experiences. The charter for the Boards Nominating Committee contains certain other specific requirements and factors considered by the Committee in identifying and selecting Director candidates.
To assist them in evaluating matters under federal and state law, the Directors are counseled by their own independent legal counsel, who participates in Board meetings and interacts with the Advisor, and also may benefit from information provided by the Funds and the Advisors counsel; both Board and Fund counsel have significant experience advising funds and fund board members. Each Board and its committees have the ability to engage other experts as appropriate. Each Board evaluates its performance on an annual basis.
Board Composition and Leadership Structure . The 1940 Act requires that at least 40% of a Funds directors not be interested persons (as defined in the 1940 Act) of the Fund and as such are not affiliated with the Advisor (Independent Directors). To rely on certain exemptive rules under the 1940 Act, a majority of a Funds Directors must be Independent Directors, and for certain important matters, such as the approval of investment advisory agreements or transactions with affiliates, the 1940 Act or the rules thereunder require the approval of a majority of the Independent Directors. Currently, over 75% of the Funds Directors are Independent Directors. The Chairmen of the Boards are interested persons of the Funds, and the Independent Directors have designated a lead Independent Director who chairs meetings or executive sessions of the Independent Directors, reviews and comments on Board meeting agendas, represents the views of the Independent Directors to management and facilitates communication among the Independent Directors and their counsel. Each Board has determined that its leadership structure, in which the Independent Directors have designated a lead Independent Director to function as described above is appropriate in light of the services that the Advisor and its affiliates provide to the Funds and potential conflicts of interest that could arise from these relationships.
40
Officers of the Funds . The officers of the Funds (other than Messrs. Cohen and Steers, whose biographies are provided above) their addresses, their ages, and their principal occupations for at least the past five years are set forth below.
A LL F UNDS
Name, Address (1) and Age |
Position(s) Held with the Funds (2) |
Principal Occupation During at Least the Past Five Years |
Length of
|
|||
Adam M. Derechin Age: 46 |
President and Chief Executive Officer | Chief Operating Officer of the Advisor since 2003 and prior to that, Senior Vice President of the Advisor. | 2005 | |||
Joseph M. Harvey Age: 47 |
Vice President | President and Chief Investment Officer of the Advisor (since 2003) and President of CNS (since 2004). Prior to that, Senior Vice President and Director of Investment Research of the Advisor. | 2004 | |||
Francis C. Poli Age: 48 |
Secretary | Executive Vice President, Secretary and General Counsel of the Advisor since March 2007. Prior to that, General Counsel of Allianz Global Investors of America LP. | 2007 | |||
Tina M. Payne Age: 36 |
Assistant Secretary | Senior Vice President and Associate General Counsel of the Advisor since 2010 and prior to that Vice President and Associate General Counsel since July 2007. Prior thereto, Vice President and Counsel at PFPC Inc. (financial services company) from 2003 to 2007. Associate at Stradley, Ronon, Stevens & Young, LLP (law firm) from 2001 to 2003. | 2007 | |||
James Giallanza Age: 44 |
Treasurer and Chief Financial Officer | Senior Vice President of the Advisor since 2006. Prior thereto, Deputy Head of US Funds Administration and Treasurer and CFO of various mutual funds within Legg Mason Partners (formerly Citigroup Asset Management) fund complex from August 2004 to September 2006; Director/Controller of the US wholesale business at UBS Global Asset Management (U.S.) from September 2001 to July 2004. | 2006 | |||
Lisa Phelan Age: 42 |
Chief Compliance Officer | Senior Vice President and Director of Compliance of the Advisor since 2007 and prior to that Vice President since 2006. Prior to joining the Advisor in 2004, she was Chief Compliance Officer of Avatar Associates and Overture Asset Managers from 2003 to 2004. | 2006 | |||
Lester Lay Age: 48 |
Assistant Treasurer | Vice President of the Advisor since 2005. Prior thereto, Vice President of Morgan Stanley Investment Advisors Inc. | 2005 | |||
Neil Bloom Age 40 |
Assistant Treasurer | Vice President of the Advisor since August 2008. Prior thereto, Senior Tax Manager at KPMG, LLP (accounting firm) from 2004 to 2008. | 2009 |
41
G LOBAL I NFRASTRUCTURE F UND
Name, Address (1) and Age |
Position(s) Held
|
Principal Occupation During Past Five Years |
Length of
|
|||
Robert Becker Age: 42 |
Vice President | Senior Vice President of the Advisor since December 2003. Prior thereto, co-portfolio manager of the Franklin Utilities Fund at Franklin Templeton Investments. He has previously held positions in equity research for the utility sector at Salomon Smith Barney and Scudder, Stevens and Clark. | 2004 |
G LOBAL R EALTY S HARES , I NSTITUTIONAL G LOBAL R EALTY S HARES , AND I NTERNATIONAL R EALTY F UND
Name, Address (1) and Age |
Position(s) Held
|
Principal Occupation During Past Five Years |
Length of
|
|||
Scott Crowe Age: 33 |
Vice President | Senior Vice President and Global Research Strategist of the Advisor since 2007. Prior thereto, Executive Director at UBS and head of U.S. REITs and global strategist. He also worked at UBS Warburg as a real estate analyst. | 2007 |
P REFERRED S ECURITIES AND I NCOME F UND
Name, Address (1) and Age |
Position(s) Held with Fund (2) |
Principal Occupation During Past Five Years |
Length of
|
|||
William F. Scapell Age: 43 |
Vice President | Senior Vice President of CSCM since 2003. Prior to that, chief strategist for preferred securities at Merrill Lynch & Co., Inc. | 2010 |
R EALTY S HARES AND I NSTITUTIONAL R EALTY S HARES
Name, Address (1) and Age |
Position(s) Held with Fund (2) |
Principal Occupation During Past Five Years |
Length of
|
|||
Jon Cheigh Age: 38 |
Vice President | Senior Vice President of the Advisor since 2005. Prior to joining the Advisor, Mr. Cheigh was a vice president and senior research analyst for Security Capital. | 2007 |
R EALTY I NCOME F UND
Name, Address (1) and Age |
Position(s) Held with Fund (2) |
Principal Occupation During Past Five Years |
Length of
|
|||
Thomas Bohjalian Age: 45 |
Vice President | Senior Vice President of the Advisor since 2006. Prior to that, Vice President of Advisor from 2003 to 2005. Prior thereto, Vice President at AEW Capital Management. | 2006 | |||
Yigal Jhirad Age: 46 |
Vice President | Senior Vice President of the Advisor since 2007. Prior to that, executive director at Morgan Stanley and head of prime brokerage equity product marketing responsible for developing and marketing quantitative and derivatives product to hedge funds. |
Since
2010 |
(1) | The address for all officers is 280 Park Avenue, New York, NY 10017. |
(2) | Each appointed by the Board of Directors and serves at the pleasure of the Board of Directors. |
42
(3) | The length of time served represents the year in which the officer was first appointed to any Fund in the Cohen & Steers Fund Complex. |
All of the officers of a Fund are officers or employees of the Advisor and its affiliates. Their affiliations with the Funds and with the Advisor are provided under their principal business occupations.
The following table provides information concerning the dollar range of each Funds equity securities owned by each Director and the aggregate dollar range of securities owned in the Cohen & Steers Fund Complex, each as of December 31, 2010.*
ANone
B$1-$10,000
C$10,001-$50,000
D$50,001-$100,000
EOver $100,000
Preferred
|
Global
|
Global
|
Institutional
|
Institutional
|
International
Fund |
Realty
|
Realty
|
Aggregate
|
||||||||||
Robert H. Steers |
A | E | E | A | A | E | A | E | E | |||||||||
Martin Cohen |
A | A | A | A | A | A | A | A | E | |||||||||
Bonnie Cohen |
B | D | E | A | A | C | C | C | E | |||||||||
George Grossman |
A | A | A | A | A | A | A | A | E | |||||||||
Richard E. Kroon |
A | A | A | A | A | A | A | A | E | |||||||||
Richard J. Norman |
A | A | A | A | A | A | A | A | E | |||||||||
Frank K. Ross |
A | A | C | A | D | B | A | B | E | |||||||||
Willard H. Smith Jr. |
A | A | C | A | A | A | C | C | E | |||||||||
C. Edward Ward, Jr. |
A | B | B | A | A | B | B | B | C |
* | Valued as of April 1, 2011. |
Conflicts of Interest . No Independent Director and none of their immediate family members, own any securities issued by the Advisor, or any person or entity (other than a Fund and other funds in the Cohen & Steers Fund Complex) directly or indirectly controlling, controlled by, or under common control with the Advisor.
BOARDS ROLE IN FUND GOVERNANCE
Committees. Each Funds Board of Directors has four standing committees, the Audit Committee, the Nominating Committee, the Contract Review Committee and the Governance Committee. Each Committee is composed solely of Independent Directors. All of the Independent Directors are members of the Nominating and Contract Review Committees. The members of the Governance Committees are Messrs. Norman, Ward and Smith. The members of the Audit Committees are Ms. Cohen and Messrs. Ross, Kroon and Grossman.
For each Fund, the Audit, Nominating, Contract Review and Governance Committees met three, one, one and seven times, respectively during the fiscal year ended December 31, 2010.
The function of each Audit Committee is to assist the Board of Directors in its oversight of the Funds financial reporting process. The functions of each Nominating Committee are to identify individuals qualified to become members of the Board of Directors in the event that a position is vacated or
43
created, to select the Director nominees for any future meeting of shareholders and to set any necessary standards or qualifications for service on the Board of Directors. Each Nominating Committee will consider nominees properly recommended by the Funds shareholders. Shareholders who wish to recommend a nominee should send nominations that include, among other things, biographical data and the qualifications of the proposed nominee to their Funds Secretary. The main functions of the Contract Review Committee are to make recommendations to the Board of Directors after reviewing advisory and other contracts that the Fund has with the Advisor and Subadvisors (if applicable) and to select third parties to provide evaluative reports and other information regarding the services provided by the Advisor to the Board. The main function of each Governance Committee is to assist the Board in the oversight of appropriate and effective governance of the Fund. Each Governance Committee will oversee, among other things, the structure and composition of the Board committees, the size of the Board and the compensation of Independent Directors for service on the Board and any Board committee.
Boards Oversight Role in Management. Each Boards role in management of its Fund is oversight. As is the case with virtually all investment companies (as distinguished from operating companies), service providers to the Funds, primarily the Advisor and its affiliates, have responsibility for the day-to-day management of the Funds, which includes responsibility for risk management (including management of investment performance and investment risk, valuation risk, issuer and counterparty credit risk, compliance risk and operational risk). As part of its oversight, each Board, acting at its scheduled meetings, or the lead Independent Director, acting between Board meetings, regularly interacts with and receives reports from senior personnel of service providers, including the Funds and the Advisors Chief Compliance Officer and portfolio management personnel. Each Boards Audit Committee meets during its scheduled meetings, and between meetings the audit committee chair maintains contact, with the Funds independent registered public accounting firm and the Funds Treasurer and Chief Financial Officer. Each Board also receives periodic presentations from senior personnel of the Advisor or its affiliates regarding risk management generally, as well as periodic presentations regarding specific operational, compliance or investment areas such as business continuity, anti-money laundering, personal trading, valuation, credit, investment research and securities lending. Each Board has adopted policies and procedures designed to address certain risks to the Fund. In addition, the Advisor and certain service providers to the Funds have adopted a variety of policies, procedures and controls designed to address particular risks to the Funds. However, it is not possible to eliminate all of the risks to the Funds. Each Board also receives reports from counsel to the Funds and the Advisor and the Boards own independent legal counsel regarding regulatory compliance and governance matters. Each Boards oversight role does not make the Board a guarantor of the Funds investments or activities.
44
COMPENSATION OF DIRECTORS AND CERTAIN OFFICERS
The following table sets forth information regarding compensation of the Directors by the Funds for the fiscal year ended December 31, 2010 and by the Cohen & Steers Fund Complex for the calendar year ended December 31, 2010. Officers of the Funds and Interested Directors do not receive any compensation from any Fund or any other fund in the Cohen & Steers Fund Complex, except for the Chief Compliance Officer, who receives less than $60,000 from any one Fund. The Independent Directors are paid an annual base retainer of $95,000, paid quarterly, and a $10,000 per meeting fee per quarter ($40,000 annually), and such fees are allocated over the Cohen & Steers Fund Complex based on average net assets of each fund. Prior to January 1, 2011, the Audit Committee Chairman was paid $15,000 per year in the aggregate for his service as Chairman of the Audit Committees of the Cohen & Steers Fund Complex, and the Contract Review and Governance Committee Chairmen were paid $10,000 per year in the aggregate for their work in connection with the Cohen & Steers Fund Complex. Beginning January 1, 2011, the Audit Committee Chairman is paid $25,000 per year in the aggregate for his service as Chairman of the Audit Committees of the Cohen & Steers Fund Complex, and the Contract Review and Governance Committee Chairmen are paid $20,000 per year in the aggregate for their work in connection with the Cohen & Steers Fund Complex. The lead Independent Director is paid $50,000 per year in the aggregate for his service as lead Independent Director of the Cohen & Steers Fund Complex. Directors also may be paid additional compensation for services related to the Board or its committees, as approved by the Board. In the column headed Total Compensation Paid to Directors by Fund Complex, the compensation paid by the eighteen funds that each Director served in the Fund Complex during the year ended December 31, 2010. The Directors do not receive any pension or retirement benefits from the Cohen & Steers Fund Complex.
Name of Person, Position |
Global
|
Global
|
Institutional
|
Institutional
|
International
Fund |
Preferred
|
Realty
|
Realty
|
Total
|
|||||||||||||||||||||||||||
Bonnie Cohen, Director |
$ | 1,163 | $ | 3,815 | $ | 5,178 | $ | 10,782 | $ | 16,008 | $ | 589 | $ | 5,869 | $ | 33,464 | $ | 135,000 | ||||||||||||||||||
Martin Cohen (1) , Director and Co-Chairman |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||||
George Grossman, Director and Contract Review Committee Chairman |
$ | 1,249 | $ | 4,098 | $ | 5,561 | $ | 11,580 | $ | 17,194 | $ | 632 | $ | 6,303 | $ | 35,943 | $ | 145,000 | ||||||||||||||||||
Richard E. Kroon (2) , Director and Lead Independent Director |
$ | 1,594 | $ | 5,228 | $ | 7,095 | $ | 14,775 | $ | 21,937 | $ | 807 | $ | 8,042 | $ | 45,859 | $ | 251,000 | ||||||||||||||||||
Richard J. Norman, Director and Governance Committee Chairman |
$ | 1,249 | $ | 4,098 | $ | 5,561 | $ | 11,580 | $ | 17,194 | $ | 632 | $ | 6,303 | $ | 35,943 | $ | 145,000 | ||||||||||||||||||
Frank K. Ross, Director and Audit Committee Chairman |
$ | 1,292 | $ | 4,239 | $ | 5,753 | $ | 11,980 | $ | 17,787 | $ | 654 | $ | 6,521 | $ | 37,183 | $ | 212,813 | ||||||||||||||||||
William H. Smith, Jr., Director |
$ | 1,163 | $ | 3,815 | $ | 5,178 | $ | 10,782 | $ | 16,008 | $ | 589 | $ | 5,869 | $ | 33,464 | $ | 135,000 | ||||||||||||||||||
Robert H. Steers (1) , Director and Co-Chairman |
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||||
C. Edward Ward, Jr., Director |
$ | 1,163 | $ | 3,815 | $ | 5,178 | $ | 10,782 | $ | 16,008 | $ | 589 | $ | 5,869 | $ | 33,464 | $ | 135,000 |
(1) | Interested Director |
(2) | Lead Independent Director |
45
PRINCIPAL HOLDERS
A principal shareholder is any person who owns (either of record or beneficially) 5% or more of any class of outstanding shares of a Fund. A control person is one who owns, either directly or indirectly, more than 25% of the voting securities of a Fund or acknowledges the existence of such control. A control person could control the outcome of any proposal submitted to the shareholders for approval, including changes to a Funds fundamental policies or terms of the investment advisory agreement with the Advisor.
As of
Global Infrastructure Fund
Name and Address |
Fund Classes |
Percentage of
|
||||||
Pershing LLC 1 |
A | 8.57 | % | |||||
Pershing Plaza |
B | 9.66 | % | |||||
Jersey City, NJ 07399-0002 |
||||||||
Charles Schwab & Co., Inc. |
A | 13.35 | % | |||||
Reinvest Account |
I | 21.60 | % | |||||
Attn: Mutual Funds |
||||||||
101 Montgomery Street |
||||||||
San Francisco, CA 94101-4151 |
||||||||
Merrill Lynch |
A | 13.71 | % | |||||
for Exclusive Benefit of Our Customers |
B | 44.20 | % | |||||
FDSAttn: Michael Ceglio |
C | 43.74 | % | |||||
4800 Deer Lake Drive East |
I | 46.15 | % | |||||
2nd Floor |
||||||||
Jacksonville, FL 32246-6484 |
||||||||
CitiGroup Global Markets |
C | 14.47 | % | |||||
House Account |
I | 8.62 | % | |||||
700 Red Brook Blvd. |
||||||||
Owings Mills, MD 21117-5184 |
||||||||
Prudential Investment Management |
I | 7.81 | % | |||||
Services for the Benefit of Mutual Fund Clients |
||||||||
Attn: PruChoice Unit |
||||||||
100 Mulberry Street |
||||||||
Gateway Center 3-11th Floor |
||||||||
Newark, NJ 07102-4056 |
||||||||
Morgan Stanley Smith Barney |
A | 5.94 | % | |||||
Harborside Financial Center |
B | 5.63 | % | |||||
Plaza 2, 3rd Floor |
C | 5.46 | % | |||||
Jersey City, NJ 07311 |
46
Global Realty Shares
Name and Address |
Fund Classes |
Percentage of
|
||||||
Charles Schwab & Co., Inc. |
A | 26.59 | % | |||||
Reinvest Account |
I | 13.22 | % | |||||
Attn: Mutual Funds |
||||||||
101 Montgomery Street |
||||||||
San Francisco, CA 94101-4151 |
||||||||
Merrill Lynch |
A | 7.18 | % | |||||
for Exclusive Benefit of Our Customers |
B | 24.08 | % | |||||
FDSAttn: Michael Ceglio |
C | 36.85 | % | |||||
4800 Deer Lake Drive East |
I | 28.69 | % | |||||
2nd Floor |
||||||||
Jacksonville, FL 32246-6484 |
||||||||
CitiGroup Global Markets |
C | 17.81 | % | |||||
House Account |
I | 16.72 | % | |||||
700 Red Brook Blvd. |
||||||||
Owings Mills, MD 21117-5184 |
||||||||
Pershing LLC |
B | 16.89 | % | |||||
1 Pershing Plaza |
||||||||
Jersey City, NJ 07399-0002 |
||||||||
Morgan Stanley Smith Barney |
A | 13.69 | % | |||||
Harborside Financial Center |
C | 11.88 | % | |||||
Plaza 2, 3rd Floor |
||||||||
Jersey City, NJ 07311 |
||||||||
Prudential Investment Management |
I | 12.37 | % | |||||
Services for the Benefit of Mutual Fund Clients |
||||||||
Attn: PruChoice Unit |
||||||||
100 Mulberry Street |
||||||||
Gateway Center 3-11th Floor |
||||||||
Newark, NJ 07102-4056 |
Institutional Global Realty Shares
Name and Address |
Fund Classes |
Percentage of
|
||||||
SEI Private Trust Company |
N/A | 6.11 | % | |||||
Attn: Mutual Funds |
||||||||
c/o M&T Bank ID 337 |
||||||||
One Freedom Valley Drive |
||||||||
Oaks, PA 19456-9989 |
||||||||
Charles Schwab & Co., Inc. |
N/A | 26.20 | % | |||||
Reinvest Account |
||||||||
Attn: Mutual Funds |
||||||||
101 Montgomery Street |
||||||||
San Francisco, CA 94101-4151 |
47
Institutional Realty Shares
Name and Address |
Fund Classes |
Percentage of
|
||||||
NFS LLC FEBO |
N/A | 8.07 | % | |||||
FIIOC as agent for Qualified Employee Benefit Plans (401K) |
||||||||
FINOPS-IC Funds |
||||||||
100 Magellan Way KW1C |
||||||||
Covington, KY 41015-1987 |
||||||||
Charles Schwab & Co., Inc. |
N/A | 32.36 | % | |||||
Reinvest Account |
||||||||
Attn: Mutual Funds |
||||||||
101 Montgomery Street |
||||||||
San Francisco, CA 94101-4151 |
||||||||
Pershing LLC |
N/A | 7.87 | % | |||||
1 Pershing Plaza |
||||||||
Jersey City, NJ 07399-0002 |
International Realty Fund
Name and Address |
Fund Classes |
Percentage of
|
||||||
CitiGroup Global Markets |
A | 7.39 | % | |||||
House Account |
C | 20.59 | % | |||||
700 Red Brook Blvd. |
||||||||
Owings Mills, MD 21117-5184 |
||||||||
Merrill Lynch |
A | 10.45 | % | |||||
for Exclusive Benefit of Our Customers |
C | 35.56 | % | |||||
FDSAttn: Michael Ceglio |
I | 11.44 | % | |||||
4800 Deer Lake Drive East |
||||||||
2nd Floor |
||||||||
Jacksonville, FL 32246-6484 |
||||||||
Charles Schwab & Co., Inc. |
A | 11.87 | % | |||||
Reinvest Account |
I | 42.78 | % | |||||
Attn: Mutual Funds |
||||||||
101 Montgomery Street |
||||||||
San Francisco, CA 94101-4151 |
||||||||
Pershing LLC |
A | 7.48 | % | |||||
1 Pershing Plaza |
||||||||
Jersey City, NJ 07399-0002 |
||||||||
Morgan Stanley Smith Barney |
A | 10.88 | % | |||||
Harborside Financial Center |
C | 8.48 | % | |||||
Plaza 2, 3rd Floor |
||||||||
Jersey City, NJ 07311 |
||||||||
Prudential Investment Management |
I | 5.40 | % | |||||
Services for the Benefit of Mutual Fund Clients |
||||||||
Attn: PruChoice Unit |
||||||||
100 Mulberry Street |
||||||||
Gateway Center 3-11th Floor |
||||||||
Newark, NJ 07102-4056 |
48
Name and Address |
Fund Classes |
Percentage of
|
||||||
Charles Atwood Company |
A | 5.22 | % | |||||
136 E. Michigan Ave., Suite 1201 |
||||||||
Kalamazoo, MI 49007-3918 |
Preferred Securities and Income Fund
Name and Address |
Fund Classes |
Percentage of
|
||||||
Merrill Lynch |
A | 30.22 | % | |||||
for Exclusive Benefit of Our Customers |
C | 66.18 | % | |||||
FDSAttn: Michael Ceglio |
I | 62.57 | % | |||||
4800 Deer Lake Drive East |
||||||||
2nd Floor |
||||||||
Jacksonville, FL 32246-6484 |
||||||||
CitiGroup Global Markets |
A | 5.83 | % | |||||
House Account |
C | 9.56 | % | |||||
700 Red Brook Blvd. |
I | 5.42 | % | |||||
Owings Mills, MD 21117-5184 |
||||||||
Charles Schwab & Co., Inc. |
A | 12.94 | % | |||||
Reinvest Account |
I | 9.71 | % | |||||
Attn: Mutual Funds |
||||||||
101 Montgomery Street |
||||||||
San Francisco, CA 94101-4151 |
||||||||
Wells Fargo Bank NA |
I | 5.01 | % | |||||
FBO Chattanooga F&P Funds |
||||||||
PO Box 1533 |
||||||||
Minneapolis, MN 55480-1533 |
Realty Income Fund
Name and Address |
Fund Classes |
Percentage of
|
||||||
Pershing LLC |
A | 11.83 | % | |||||
1 Pershing Plaza |
B | 7.26 | % | |||||
Jersey City, NJ 07399-0002 |
||||||||
Merrill Lynch |
A | 12.11 | % | |||||
for Exclusive Benefit of Our Customers |
B | 25.11 | % | |||||
FDSAttn: Michael Ceglio |
C | 45.55 | % | |||||
4800 Deer Lake Drive East |
I | 21.47 | % | |||||
2nd Floor |
||||||||
Jacksonville, FL 32246-6484 |
||||||||
CitiGroup Global Markets |
B | 9.35 | % | |||||
House Account |
C | 12.40 | % | |||||
700 Red Brook Blvd. |
I | 16.04 | % | |||||
Owings Mills, MD 21117-5184 |
||||||||
Morgan Stanley Smith Barney |
A | 8.23 | % | |||||
Harborside Financial Center |
B | 6.02 | % | |||||
Plaza 2, 3rd Floor |
C | 7.95 | % | |||||
Jersey City, NJ 07311 |
49
Name and Address |
Fund Classes |
Percentage of
|
||||||
Prudential Investment Management |
I | 5.25 | % | |||||
Services for the Benefit of Mutual Fund Clients |
||||||||
Attn: PruChoice Unit |
||||||||
100 Mulberry Street |
||||||||
Gateway Center 3-11th Floor |
||||||||
Newark, NJ 07102-4056 |
||||||||
PRIAC As Trustee Custodian |
I | 32.21 | % | |||||
FBO Various Retirement Plans |
||||||||
280 Trumbull Street |
||||||||
One Commercial Plaza |
||||||||
Hartford, CT 06103-3509 |
Realty Shares
Name and Address |
Fund Classes |
Percentage of
|
||||||
Prudential Investment Management |
N/A | 10.70 | % | |||||
Services for the Benefit of Mutual Fund Clients |
||||||||
Attn: PruChoice Unit |
||||||||
100 Mulberry Street |
||||||||
Gateway Center 3-11th Floor |
||||||||
Newark, NJ 07102-4056 |
||||||||
Charles Schwab & Co., Inc. |
N/A | 35.75 | % | |||||
Reinvest Account |
||||||||
Attn: Mutual Funds |
||||||||
101 Montgomery Street |
||||||||
San Francisco, CA 94101-4151 |
||||||||
NFS LLC FEBO |
N/A
|
5.22 |
%
|
|||||
FIIOC as agent for Qualified Employee Benefit Plans (401K) |
||||||||
FINOPS-IC Funds |
||||||||
100 Magellan Way KW1C |
||||||||
Covington, KY 41015-1987 |
As of March 31, 2011, the following principal holders owned 25% or more of the total outstanding
International Realty Fund
Name and Address |
Percentage of
|
|||||||
Charles Schwab & Co., Inc. |
27 | % | ||||||
Reinvest Account |
||||||||
Attn: Mutual Funds |
||||||||
101 Montgomery Street |
||||||||
San Francisco, CA 94101-4151 |
50
Preferred Securities and Income Fund
Name and Address |
Percentage of
|
|||||||
Merrill Lynch |
27 | % | ||||||
for Exclusive Benefit of Our Customers |
||||||||
FDSAttn: Michael Ceglio |
||||||||
4800 Deer Lake Drive East |
||||||||
2nd Floor |
||||||||
Jacksonville, FL 32246-6484 |
MANAGEMENT OWNERSHIP
As of March 31, 2011, Directors and officers of each Fund as a group owned less than 1% of their respective Funds outstanding shares.
INVESTMENT ADVISORY AND OTHER SERVICES
THE ADVISOR
Cohen & Steers Capital Management, Inc., a registered investment advisor, located at 280 Park Avenue, New York, New York 10017, is the investment advisor to the Funds. The Advisor is a wholly-owned subsidiary of CNS, a publicly traded company whose shares are listed on the NYSE under the symbol CNS. As of March 31, 2011, the Advisor managed $38 billion in assets.
The Advisor was formed in 1986 and its current clients include pension plans of leading corporations, endowment funds and investment companies, including each of the open-end and closed-end Cohen & Steers funds. Messrs. Cohen and Steers are deemed controlling persons of the Advisor on the basis of their ownership of stock in CNS.
Pursuant to investment advisory agreements (each, an Investment Advisory Agreement) with each of Global Infrastructure Fund, Global Realty Shares, International Realty Fund, Preferred Securities and Income Fund, Realty Income Fund and Realty Shares, and investment management agreements (each, an Investment Management Agreement) with Institutional Global Realty Shares and Institutional Realty Shares, the Advisor furnishes a continuous investment program for each Funds portfolio, and has overall responsibility for directing the investments of each Fund in accordance with each Funds investment objective, policies and limitations, subject to the general supervision of the Board of Directors of each Fund. With respect to Global Infrastructure Fund, Global Realty Shares, Institutional Global Realty Shares and International Realty Fund, the Advisor is also responsible for supervising the Subadvisors.
51
Under each Investment Advisory Agreement or Investment Management Agreement, as applicable, the Fund pays the Advisor a monthly advisory or management fee equal to an annual percentage of the average daily net asset value (NAV) of the Fund. The fee that each Fund pays pursuant to its Investment Management Agreement or Investment Advisory Agreement, as applicable, is set forth in the table below. In addition, the Advisor has made contractual commitments to certain of the Funds to waive its fee and/or reimburse such Funds for expenses to the extent necessary to maintain those Funds total annual operating expenses at or below certain levels. Such waiver/reimbursement arrangements are also set forth in the table below.
Fund |
Advisory/Management Fee |
Waiver/ Reimbursement Arrangement |
||
Global Infrastructure Fund* |
0.75% for assets up to and including $1.5 billion; 0.65% for assets above $1.5 billion | Through April 30, 2012, the Advisor has agreed to waive its fee and/or reimburse the Fund for expenses incurred to the extent necessary to maintain the Funds total annual operating expenses at 1.50% for the Class A shares, 2.15% for Class B shares and Class C shares and 1.15% for Class I shares. | ||
Global Realty Shares* |
0.90% | N/A | ||
Institutional Global Realty Shares** |
1.00% | The Advisor has agreed to waive its fee and/or reimburse the Fund so that its total annual operating expenses never exceed 1.00% of average daily net assets. This commitment will remain in place for the life of the Fund. | ||
Institutional Realty Shares** |
0.75% | The Advisory has agreed to waive its fee and/or reimburse the Fund so that its total annual operating expenses never exceed 0.75% of average daily net assets. This commitment will remain in place for the life of the Fund. | ||
International Realty Fund* |
0.95% for assets up to and including $1.5 billion; 0.85% for assets above $1.5 billion | N/A | ||
Preferred Securities and Income Fund* |
0.70% | Through April 30, 2012, the Advisor has contractually agreed to waive its fee and/or reimburse the Fund for expenses incurred to the extent necessary to maintain the Funds total annual operating expenses at 1.10% for Class A Shares, 1.75% for Class C Shares and 0.75% for Class I Shares. | ||
Realty Income Fund* |
0.75% for assets up to and including $1.5 billion; 0.65% for assets above $1.5 billion | N/A | ||
Realty Shares |
0.85% for assets up to and including $1.5 billion; 0.75% for assets above $1.5 billion | N/A |
* | The fee for this Fund is allocated among the separate classes based on the classes proportionate shares of such average daily NAV. |
52
** | The Advisor pays all expenses of the Fund except for brokerage fees, taxes, interest, fees and expenses of the Independent Directors (including fees and expenses of independent counsel and other independent consultants to the Independent Directors), trade organization membership dues, federal and state registration fees and extraordinary expenses. |
For the fiscal years ended December 31, 2010, 2009 and 2008, the Advisor received advisory or management fees from each Fund in the following amounts:
Fiscal Year Ended |
Global
Infrastructure Fund |
Global
Realty Shares |
Institutional
Global Realty Shares |
Institutional
Realty Shares |
International
Realty Fund |
Preferred
Securities and Income Fund |
Realty
Income Fund |
Realty Shares | ||||||||||||||||||||||||
December 31, 2010 |
$ | 706,168 | $ | 2,773,578 | $ | 4,189,495 | $ | 8,859,539 | $ | 12,338,181 | $ | 315,539 | $ | 3,563,689 | $ | 21,832,329 | ||||||||||||||||
December 31, 2009 |
$ | 556,265 | $ | 1,371,400 | $ | 2,666,582 | $ | 5,065,381 | $ | 11.163.551 | N/A | $ | 2,424,007 | $ | 13,061,882 | |||||||||||||||||
December 31, 2008 |
$ | 667,016 | $ | 1,639,617 | $ | 2,900,830 | $ | 6,581,509 | $ | 23,598,933 | N/A | $ | 4,628,556 | $ | 17,142,986 |
For the fiscal years ended December 31, 2010, 2009 and 2008, the Advisor waived and/or reimbursed each of Global Infrastructure Fund, Global Realty Shares*, Institutional Global Realty Shares, Institutional Realty Shares and Preferred Securities and Income Fund the respective amounts set forth in the table below, pursuant to contractual agreements by the Advisor to limit expenses that were substantially the same as those described above:
Fiscal Year End |
Global Infrastructure
Fund |
Global Realty
Shares* |
Institutional
Global Realty Shares |
Institutional Realty
Shares |
Preferred Securities
and Income Fund |
|||||||||||||||
December 31, 2010 |
$ | 224,454 | $ | 0 | $ | 104,842 | $ | 199,969 | $ | 315,539 | ||||||||||
December 31, 2009 |
$ | 295,953 | $ | 318,041 | $ | 112,155 | $ | 156,473 | N/A | |||||||||||
December 31, 2008 |
$ | 298,516 | $ | 179,043 | $ | 106,205 | $ | 138,773 | N/A |
* | For the this fiscal years ended December 31, 2010, 2009 and 2008, and through April 30, 2011, the Advisor had agreed to waive its fee and/or reimburse the Fund for expenses incurred to the extent necessary to maintain the Funds total annual operating expenses at 1.65% for Class A shares, 2.30% for Class B shares and Class C shares and 1.30% for Class I shares. |
Therefore, for the fiscal years ended December 31, 2010, 2009 and 2008, the net management or advisory fees paid by Global Infrastructure Fund, Global Realty Shares, Institutional Global Realty Shares, Institutional Realty Shares and Preferred Securities and Income Fund were as follows:
Fiscal Year End |
Global Infrastructure
Fund |
Global Realty
Shares* |
Institutional
Global Realty Shares |
Institutional Realty
Shares |
Preferred Securities
and Income Fund |
|||||||||||||||
December 31, 2010 |
$ | 481,714 | $ | 2,773,578 | $ | 4,084,653 | $ | 8,659,570 | $ | 0 | ||||||||||
December 31, 2009 |
$ | 260,312 | $ | 1,053,359 | $ | 2,554,427 | $ | 4,908,908 | N/A | |||||||||||
December 31, 2008 |
$ | 368,500 | $ | 1,460,574 | $ | 2,794,625 | $ | 6,442,736 | N/A |
The Advisor also provides the Funds with such personnel as the Funds may from time to time request for the performance of clerical, accounting and other office services, such as coordinating matters with the co-administrator, the Transfer Agent and the custodian, which the Advisor is not required to furnish under the Investment Advisory Agreements. The personnel rendering these services, who may act as officers of a Fund, may be employees of the Advisor or its affiliates. The cost to a Fund for these services must be agreed to by a Fund and is intended to be no higher than the actual cost to the Advisor or its affiliates of providing the services. Institutional Global Realty Shares, Institutional Realty Shares and Realty Shares do not pay for these services performed by officers of the Advisor or its affiliates. A
53
Fund may from time to time hire its own employees or contract to have services performed by third parties, and the management of the Funds intends to do so whenever it appears advantageous to a Fund.
THE SUBADVISORS
With respect to Global Infrastructure Fund, Global Realty Shares, Institutional Global Realty Shares and International Realty Fund (each, a Subadvised Fund and collectively, the Subadvised Funds), the Advisor has entered into subadvisory agreements (each, a Subadvisory Agreement and collectively the Subadvisory Agreements) with each of the Subadvisors which are each a wholly-owned subsidiary of CNS. References in this SAI to activities and responsibilities of the Advisor with respect to a Sub-Advised Fund may be performed by one or more of the Subadvisors pursuant to the Subadvisory Agreements with the Advisor.
Each of the Subadvisors provides investment advisory and research services in connection with managing the investments of the Subadvised Funds. CNS Europe is located at 166 Chaussee de la Hulpe, 1170 Brussels, Belgium, CNS UK is located at 21 Sackville Street, 4th floor, London, U.K., and CNS Asia is located at 1202, Citibank Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong. As of March 31, 2011, CNS Europe, CNS Asia and CNS UK managed approximately $ billion, $ billion and $ billion in assets, respectively.
Effective October 1, 2009, the Advisor allocates 50% of the advisory fee received from each Fund among itself and each Subadvisor based on the portion of each Funds average assets managed by the Advisor and each Subadvisor. The Advisor retains the remaining 50% of the advisory fee received from each Fund. Prior to October 1, 2009, the Advisor paid CNS Asia, CNS UK and CNS Europe 16.3%, 6.3% and 6.3%, respectively, of the advisory fee received by the Advisor from each Fund. For the fiscal year ended December 31, 2010, the Advisor paid CNS Europe, CNS Asia and CNS UK the following subadvisory fees with respect to each Subadvised Fund.
CNS Europe
Fiscal Year Ended
|
Global Infrastructure
Fund |
Global Realty
Shares |
Institutional
Global Realty Shares |
International
Realty Fund |
||||||||||||||
2010 | $ | 60,248 | $ | 92,259 | $ | 116,786 | $ | 668,313 | ||||||||||
2009 | $ | 41,054 | $ | 74,223 | $ | 124,646 | $ | 978,119 | ||||||||||
2008 | $ | 30,604 | $ | 103,295 | $ | 155,339 | $ | 2,359,893 |
CNS Asia
Fiscal Year Ended
|
Global Infrastructure
Fund |
Global Realty
Shares |
Institutional
Global Realty Shares |
International
Realty Fund |
||||||||||||||
2010 | $ | 94,980 | $ | 575,639 | $ | 743,169 | $ | 4,182,973 | ||||||||||
2009 | $ | 82,901 | $ | 257,676 | $ | 420,721 | $ | 3,317,357 | ||||||||||
2008 | $ | 79,182 | $ | 267,258 | $ | 401,910 | $ | 6,489,707 |
CNS UK
Fiscal Year Ended
|
Global Infrastructure
Fund |
Global Realty
Shares |
Institutional
Global Realty Shares |
International
Realty Fund |
||||||||||||||
2010 | $ | 60,428 | $ | 92,259 | $ | 116,786 | $ | 668,313 | ||||||||||
2009 | $ | 41,054 | $ | 74,223 | $ | 124,646 | $ | 978,119 | ||||||||||
2008 | $ | 30,604 | $ | 103,295 | $ | 155,339 | $ | 2,359,893 |
54
PORTFOLIO MANAGERS
Accounts Managed. The portfolio managers (each referred to as a portfolio manager) for each Fund are listed below. Each portfolio manager also manages other registered investment companies and/or other pooled investment vehicles and other accounts in addition to the Fund or Funds that they manage. The following tables show, as of December 31, 2010, the number of accounts each portfolio manager managed in each of the listed categories and the total assets in the accounts managed within each category.
Number of Other Accounts Managed and Assets ($mm) by Account Type |
||||||||||||||||||||||
Registered Investment
|
Other Pooled Vehicles |
Other Accounts |
||||||||||||||||||||
Number of Accounts |
Total Assets |
Number of Accounts |
Total Assets |
Number of Accounts |
Total
|
|||||||||||||||||
Global Infrastructure Fund | ||||||||||||||||||||||
Robert Becker |
2 | $ | 2,521 | 4 | $ | 334 | 0 | $ | 0 | |||||||||||||
Ben Morton |
3 | $ | 2,875 | 4 | $ | 334 | 0 | $ | 0 | |||||||||||||
Global Realty Shares | ||||||||||||||||||||||
Martin Cohen |
16 | $ | 14,127 | 36 | $ | 11,540 | 42 | $ | 4,237 | (1) | ||||||||||||
Robert H. Steers |
16 | $ | 14,127 | 36 | $ | 11,540 | 42 | $ | 4,237 | (1) | ||||||||||||
Joseph M. Harvey |
16 | $ | 14,127 | 36 | $ | 11,540 | 42 | $ | 4,237 | (1) | ||||||||||||
Gerios M. Rovers |
3 | $ | 2,300 | 33 | $ | 10,985 | 23 | $ | 2,106 | |||||||||||||
Scott Crowe |
5 | $ | 2,709 | 29 | $ | 10,847 | 17 | $ | 1,527 | |||||||||||||
Luke Sullivan |
4 | $ | 2,355 | 30 | $ | 10,856 | 17 | $ | 1,527 | |||||||||||||
Charles McKinley |
2 | $ | 922 | 27 | $ | 10,004 | 11 | $ | 1,382 | |||||||||||||
Institutional Global Realty Shares | ||||||||||||||||||||||
Martin Cohen |
16 | $ | 14,127 | 36 | $ | 11,540 | 42 | $ | 4,237 | (1) | ||||||||||||
Robert H. Steers |
16 | $ | 14,127 | 36 | $ | 11,540 | 42 | $ | 4,237 | (1) | ||||||||||||
Joseph M. Harvey |
16 | $ | 14,127 | 36 | $ | 11,540 | 42 | $ | 4,237 | (1) | ||||||||||||
Gerios M. Rovers |
3 | $ | 2,300 | 33 | $ | 10,985 | 23 | $ | 2,106 | |||||||||||||
Scott Crowe |
5 | $ | 2,709 | 29 | $ | 10,847 | 17 | $ | 1,527 | |||||||||||||
Luke Sullivan |
4 | $ | 2,355 | 30 | $ | 10,856 | 17 | $ | 1,527 | |||||||||||||
Charles McKinley |
2 | $ | 922 | 27 | $ | 10,004 | 11 | $ | 1,382 | |||||||||||||
Institutional Realty Shares | ||||||||||||||||||||||
Martin Cohen |
16 | $ | 14,127 | 36 | $ | 11,540 | 42 | $ | 4,237 | (1) | ||||||||||||
Robert H. Steers |
16 | $ | 14,127 | 36 | $ | 11,540 | 42 | $ | 4,237 | (1) | ||||||||||||
Joseph M. Harvey |
16 | $ | 14,127 | 36 | $ | 11,540 | 42 | $ | 4,237 | (1) | ||||||||||||
Jon Cheigh |
4 | $ | 5,297 | 0 | $ | 0 | 16 | $ | 1,731 | |||||||||||||
International Realty Fund | ||||||||||||||||||||||
Martin Cohen |
16 | $ | 14,127 | 36 | $ | 11,540 | 42 | $ | 4,237 | (1) | ||||||||||||
Robert H. Steers |
16 | $ | 14,127 | 36 | $ | 11,540 | 42 | $ | 4,237 | (1) | ||||||||||||
Joseph M. Harvey |
16 | $ | 14,127 | 36 | $ | 11,540 | 42 | $ | 4,237 | (1) | ||||||||||||
Gerios M. Rovers |
3 | $ | 2,300 | 33 | $ | 10,985 | 23 | $ | 2,106 | |||||||||||||
Scott Crowe |
5 | $ | 2,709 | 29 | $ | 10,847 | 17 | $ | 1,527 | |||||||||||||
Luke Sullivan |
4 | $ | 2,355 | 30 | $ | 10,856 | 17 | $ | 1,527 |
55
Number of Other Accounts Managed and Assets ($mm) by Account Type |
||||||||||||||||||||||
Registered Investment
|
Other Pooled Vehicles |
Other Accounts |
||||||||||||||||||||
Number of Accounts |
Total Assets |
Number of Accounts |
Total Assets |
Number of Accounts |
Total
|
|||||||||||||||||
Preferred Securities and Income Fund | ||||||||||||||||||||||
Martin Cohen |
16 | $ | 14,127 | 36 | $ | 11,540 | 42 | $ | 4,237 | (1) | ||||||||||||
Robert H. Steers |
16 | $ | 14,127 | 36 | $ | 11,540 | 42 | $ | 4,237 | (1) | ||||||||||||
Joseph M. Harvey |
16 | $ | 14,127 | 36 | $ | 11,540 | 42 | $ | 4,237 | (1) | ||||||||||||
William F. Scapell |
7 | $ | 5,952 | 2 | $ | 546 | 5 | $ | 522 | |||||||||||||
Realty Income Fund | ||||||||||||||||||||||
Martin Cohen |
16 | $ | 14,127 | 36 | $ | 11,540 | 42 | $ | 4,237 | (1) | ||||||||||||
Robert H. Steers |
16 | $ | 14,127 | 36 | $ | 11,540 | 42 | $ | 4,237 | (1) | ||||||||||||
Joseph M. Harvey |
16 | $ | 14,127 | 36 | $ | 11,540 | 42 | $ | 4,237 | (1) | ||||||||||||
Thomas Bohjalian |
4 | $ | 3,252 | 2 | $ | 546 | 2 | $ | 221 | |||||||||||||
William F. Scapell |
7 | $ | 5,952 | 2 | $ | 546 | 5 | $ | 522 | |||||||||||||
Realty Shares | ||||||||||||||||||||||
Martin Cohen |
16 | $ | 14,127 | 36 | $ | 11,540 | 42 | $ | 4,237 | (1) | ||||||||||||
Robert H. Steers |
16 | $ | 14,127 | 36 | $ | 11,540 | 42 | $ | 4,237 | (1) | ||||||||||||
Joseph M. Harvey |
16 | $ | 14,127 | 36 | $ | 11,540 | 42 | $ | 4,237 | (1) | ||||||||||||
Jon Cheigh |
4 | $ | 5,297 | 0 | $ | 0 | 16 | $ | 1,731 |
(1) | Two Other Accounts, with total assets of $105 million, are subject to performance based fees. |
Share Ownership.
The following table indicates the dollar range of securities of each Fund owned by each Funds portfolio managers as of
ANone
B$1-$10,000
C$10,001-$50,000
D$50,001-$100,000
E$100,001-$500,000
F$500,001-$1,000,000
Gover $1,000,000
N/ANot applicable (not a portfolio manager of the Fund)
Portfolio Manager |
Global
|
Global
|
Institutional
|
Institutional
|
International
|
Preferred
|
Realty
|
Realty
|
||||||||
Martin Cohen |
N/A | A | A | A | A | A | A | A | ||||||||
Robert H. Steers |
N/A | G | A | A | G | A | A | E | ||||||||
Joseph M. Harvey |
N/A | A | A | A | E | A | A | D | ||||||||
William F. Scapell |
N/A | N/A | N/A | N/A | N/A | E | N/A | N/A | ||||||||
Robert Becker |
B | N/A | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||
Ben Morton |
C | N/A | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||
Gerios M. Rovers |
N/A | A | A | N/A | A | N/A | N/A | N/A |
56
Portfolio Manager |
Global
|
Global
|
Institutional
|
Institutional
|
International
|
Preferred
|
Realty
|
Realty
|
||||||||
Luke Sullivan |
N/A | A | A | N/A | A | N/A | N/A | N/A | ||||||||
Scott Crowe |
N/A | A | A | N/A | A | N/A | N/A | N/A | ||||||||
Charles McKinley |
N/A | A | A | N/A | N/A | N/A | N/A | N/A | ||||||||
Thomas Bohjalian |
N/A | N/A | N/A | N/A | N/A | N/A | A | N/A | ||||||||
Jon Cheigh |
N/A | N/A | N/A | A | N/A | N/A | N/A | A |
Conflicts of Interest. Although the potential for conflicts of interest exist when an investment adviser and portfolio managers manage other accounts that invest in securities in which a Fund may invest or that may pursue a strategy similar to one of the Funds strategies, the Advisor and Subadvisors have procedures in place that are designed to ensure that all accounts are treated fairly and that the Funds are not disadvantaged.
For example, a portfolio manager may have conflicts of interest in allocating management time, resources and investment opportunities among a Fund and the other accounts or vehicles he advises. In addition, due to differences in the investment strategies or restrictions among a Fund and the other accounts, a portfolio manager may take action with respect to another account that differs from the action taken with respect to a Fund. In some cases, another account managed by a portfolio manager may provide more revenue to the Advisor or Subadvisors, as applicable. While this may appear to create additional conflicts of interest for the portfolio manager in the allocation of management time, resources and investment opportunities, the Advisor and Subadvisors strive to ensure that portfolio managers endeavor to exercise their discretion in a manner that is equitable to all interested persons. In this regard, in the absence of specific account-related limitations (such as client-imposed restrictions or lack of available cash), it is the general policy of the Advisor and Subadvisors to allocate investment ideas pro rata to all accounts with the same primary investment strategy, except where an allocation would not produce a meaningful position size. In addition, each Fund, as a registered investment company, is subject to different regulations than certain of the other accounts, and, consequently, may not be permitted to engage in all the investment techniques or transactions, or to engage in such techniques or transactions to the same degree, as the other accounts.
Certain of the portfolio managers may from time to time manage one or more accounts on behalf of the Advisor or Subadvisors, as applicable, and its affiliated companies (the CNS Accounts). Certain securities held and traded in the CNS Accounts also may be held and traded in one or more client accounts. It is the policy of the Advisor and Subadvisors, however, not to put the interests of the CNS Accounts ahead of the interests of client accounts. The Advisor and Subadvisors may aggregate orders of client accounts with those of the CNS Accounts; however, under no circumstances will preferential treatment be given to the CNS Accounts. For all orders involving the CNS Accounts, purchases or sales will be allocated prior to trade placement, and orders that are only partially filled will be allocated across all accounts in proportion to the shares each account, including the CNS Accounts, was designated to receive prior to trading, except as noted below. As a result, it is expected that the CNS Accounts will receive the same average price as other accounts included in the aggregated order. Shares will not normally be allocated or re-allocated to the CNS Accounts after trade execution or after the average price is known. However, in the event so few shares of an order are executed that a pro-rata allocation is not practical, a rotational system of allocation may be used; however, the CNS Accounts will never be part of that rotation or receive shares of a partially filled order other than on a pro-rata basis.
57
Because certain CNS Accounts are managed with a cash management objective, it is possible that a security will be sold out of the CNS Accounts but continue to be held for one or more client accounts. In situations when this occurs, such security will remain in a client account only if the Advisor and the Subadvisors, acting in their reasonable judgment and consistent with its fiduciary duties, believes this is appropriate for, and consistent with the objectives and profile of, the client account.
Certain accounts managed by the Advisor may compensate the Advisor using performance based fees. Orders for these accounts will be aggregated, to the extent possible, with any other account managed by the Advisor, regardless of the method of compensation. In the event such orders are aggregated, allocation of partially-filled orders will be made on a pro-rata basis in accordance with pre-trade indications. An accounts fee structure is not considered when making allocation decisions.
Finally, the structure of a portfolio managers compensation may give rise to potential conflicts of interest. A portfolio managers base pay and bonus tend to increase with additional and more complex responsibilities that include increased assets under management. As such, there may be an indirect relationship between a portfolio managers marketing or sales efforts and his or her bonus.
The Advisor and Subadvisors, and the Funds, have adopted certain compliance procedures that are designed to address the above conflicts as well as other types of conflicts of interests. However, there is no guarantee that such procedures will detect each and every situation where a conflict arises.
Compensation of Investment Professionals. Compensation of portfolio managers and other investment professionals has three primary components: (1) a base salary, (2) an annual cash bonus and (3) long-term stock-based compensation consisting generally of restricted stock units of the Advisor and
Subadvisors parent, CNS. All investment professionals, including the portfolio managers, also receive certain retirement, insurance and other benefits that are broadly available to all of its employees. Compensation of investment professionals is reviewed primarily on an annual basis. Cash bonuses, stock-based compensation awards, and adjustments in base salary are typically paid or put into effect in the January following the fiscal year-end of CNS.
The Advisor and Subadvisors compensate their portfolio managers based primarily on the scale and complexity of their portfolio responsibilities and the total return performance of funds and accounts managed by the portfolio manager compared with appropriate peer groups or benchmarks. The Advisor and Subadvisors use a variety of benchmarks to evaluate the portfolio managers performance for compensation purposes, as set forth in following table:
Global Infrastructure Fund | Benchmark | |
Messrs. Becker and Morton |
UBS Global 50/50 Infrastructure & Utilities Index | |
Global Realty Shares | ||
Messrs. Cohen, Steers, Harvey, Crowe, Rovers, Sullivan and McKinley |
FTSE EPRA/NAREIT Developed Real Estate Index | |
Institutional Global Realty Shares | ||
Messrs. Cohen, Steers, Harvey, Crowe, Rovers, Sullivan and McKinely |
FTSE EPRA/NAREIT Developed Real Estate Index | |
Institutional Realty Shares | ||
Messrs. Cohen, Steers, Harvey and Cheigh |
FTSE NAREIT Equity REIT Index |
58
International Realty Fund | ||
Messrs. Cohen, Steers, Harvey, Crowe, Rovers and Sullivan |
FTSE EPRA/NAREIT Developed Ex-U.S. Real Estate Index | |
Preferred Securities and Income Fund | ||
Messrs. Cohen, Steers, Harvey and Scappell |
BofA Merrill Lynch Capital Securities Index; BofA Merrill Lynch Fixed Rate Preferred Securities Index |
|
Realty Income Fund | ||
Messrs. Cohen, Steers, Harvey and Bohjalian |
FTSE NAREIT Equity REIT Index | |
William F. Scapell |
BofA Merrill Lynch Capital Securities Index; BofA Merrill Lynch Fixed Rate Preferred Securities Index |
|
Realty Shares | ||
Messrs. Cohen, Steers, Harvey and Cheigh |
FTSE NAREIT Equity REIT Index |
In evaluating the performance of a portfolio manager, primary emphasis is normally placed on one- and three-year performance. Performance is evaluated on a pre-tax and pre-expense basis. In addition to rankings within peer groups of funds on the basis of absolute performance, consideration may also be given to risk-adjusted performance. For funds and accounts with a primary investment objective of high current income, consideration will also be given to the funds and accounts success in achieving this objective. For managers responsible for multiple funds and accounts, investment performance is evaluated on an aggregate basis. Portfolio managers are also evaluated on the basis of their success in managing their dedicated team of analysts. Base compensation for portfolio managers of the Advisor and the Subadvisors varies in line with the portfolio managers seniority and position with the firm.
Salaries, bonuses and stock-based compensation are also influenced by the operating performance of the Advisor and CNS. While the annual salaries of the Advisors and the Subadvisors portfolio managers are fixed, cash bonuses and stock based compensation may fluctuate significantly from year-to-year, based on changes in manager performance and other factors.
Note that the Advisor has two accounts with performance-based advisory fees; however, these accounts do not impact the compensation of Messrs. Cohen, Steers or Harvey.
ADMINISTRATIVE SERVICES
The Advisor performs certain administrative functions for each Fund, including (i) providing office space, telephone, office equipment and supplies for each Fund; (ii) paying the compensation of each Funds officers for services rendered as such; (iii) authorizing expenditures and approving bills for payment on behalf of each Fund; (iv) supervising preparation of the periodic updating of each Funds registration statement, including the Prospectuses and SAI, for the purpose of filings with the SEC and state securities administrators and monitoring and maintaining the effectiveness of such filings, as appropriate; (v) supervising preparation of quarterly reports to each Funds shareholders, notices of dividends, capital gains distributions and tax credits, and attending to routine correspondence and other communications with individual shareholders; (vi) supervising the daily pricing of each Funds investment portfolio and the publication of the NAV of each Funds shares, earnings reports and other
59
financial data; (vii) monitoring relationships with organizations providing services to each Fund, including the custodian, Transfer Agent and printers; (viii) providing trading desk facilities for each Fund; (ix) supervising compliance by each Fund with recordkeeping requirements under the 1940 Act and regulations thereunder, maintaining books and records for each Fund (other than those maintained by the custodian and Transfer Agent) and preparing and filing of tax reports other than each Funds income tax returns; and (x) providing executive, clerical and secretarial help needed to carry out these responsibilities.
The Advisor provides these administrative services to Global Infrastructure Fund, Global Realty Shares, International Realty Fund, Preferred Securities and Income Fund, Realty Income Fund and Realty Shares pursuant to an administration agreement with each of these Funds (the Administration Agreement). For its services under the Administration Agreement, the Advisor receives a monthly fee from each of the foregoing Funds at the annual rate of 0.06% in the case of International Realty Fund, 0.05% in the case of Preferred Securities and Income Fund and 0.02% in the case of all other Funds. The Advisor provides these administrative services to Institutional Global Realty Shares and Institutional Realty Shares pursuant to each Funds Investment Management Agreement, at no additional fee to these Funds other than the fees paid under each Investment Management Agreement.
In accordance with the terms of the Administration Agreement or Investment Management Agreements, as applicable, and with the approval of each Funds Board of Directors, the Advisor has caused each Fund to retain State Street Bank and Trust Company (State Street) under a fund accounting and administration agreement (the Co-Administration Agreement) with each Fund. Under the Co-Administration Agreement, State Street has assumed responsibility for performing certain of the foregoing administrative functions, including (i) determining each Funds NAV and preparing these figures for publication; (ii) maintaining certain of each Funds books and records that are not maintained by the Advisor, custodian or Transfer Agent; (iii) preparing financial information for each Funds income tax returns, proxy statements, shareholders reports, and SEC filings and (iv) responding to shareholder inquiries.
Under the terms of the Co-Administration Agreement, Global Infrastructure Fund, Global Realty Shares, International Realty Fund, Preferred Securities and Income Fund, Realty Income Fund and Realty Shares each pay State Street a monthly administration fee computed on the basis of the aggregate net assets of all the funds in the Cohen & Steers Fund Complex at an annual rate equal to 0.03% of the first $2.2 billion in assets, 0.02% of the next $2.2 billion, and 0.01% of assets in excess of $4.4 billion, with a minimum fee per fund of $120,000. The aggregate fee paid by each Fund and the other funds in the Cohen & Steers Fund Complex to State Street is computed by calculating the effective rate for all the funds and multiplying the monthly average net assets of each respective fund in the complex by that effective rate. Each of Global Infrastructure Fund, Global Realty Shares, International Realty Fund, Preferred Securities and Income Fund, Realty Income Fund and Realty Shares is then responsible for its pro rata amount of the aggregate administration fee. In the case of Institutional Global Realty Shares and Institutional Realty Shares, the Advisor pays for the cost of State Streets services without any additional charge to those Funds.
State Street also serves as each Funds custodian. See Custodian and Transfer and Dividend Disbursing Agent, below. The Transfer Agent, an affiliate of State Street, has been retained by each Fund to provide transfer agency services.
60
For the fiscal years ended December 31, 2010, 2009 and 2008, the Advisor received administration fees from each Fund in the following amounts:
Fiscal Year Ended |
Global
|
Global
|
Institutional
|
Institutional
|
International
|
Preferred
|
Realty
|
Realty Shares |
||||||||||||||||||||||||
December 31, 2010 |
$ | 18,831 | $ | 61,635 | None | None | $ | 779,254 | $ | 22,539 | $ | 95,032 | $ | 542,195 | ||||||||||||||||||
December 31, 2009 |
$ | 14,834 | $ | 30,475 | None | None | $ | 705,077 | N/A | $ | 64,640 | $ | 312,636 | |||||||||||||||||||
December 31, 2008 |
$ | 17,787 | $ | 36,436 | None | None | $ | 1,563,230 | N/A | $ | 123,428 | $ | 418,512 |
DISTRIBUTOR
Cohen & Steers Securities, LLC located at 280 Park Avenue, New York, NY 10017 (the Distributor), serves as the Distributor of shares of each Fund.
For Class A and Class C shares of Global Infrastructure Fund, Global Realty Shares, International Realty Fund, Preferred Securities and Income Fund and Realty Income Fund, and for Class B shares of Global Infrastructure Fund, Global Realty Shares and Realty Income Fund, the Distributor receives compensation as described below under each Funds Distribution Plan.
With respect to Institutional Global Realty Shares, Institutional Realty Shares and Realty Shares, which each offer only one class of shares and do not have a Distribution Plan, the Distributor serves without compensation.
The Distributor is not obligated to sell any specific amount of shares of any Fund and will sell shares, as agent for each Fund, on a continuous basis only against orders to purchase shares.
The Distributor is an affiliated person of the Advisor, which is itself an affiliated person of each Fund. The Distributor is a wholly-owned subsidiary of CNS. Those individuals identified above under Management of the Fund as Directors or officers of both the Funds and the Distributor are affiliated persons of both entities.
For the last three fiscal years, the Distributor received the following combined commissions on sales of Class A and Class C shares of Global Infrastructure Fund, Global Realty Shares, International Realty Fund, Preferred Securities and Income Fund and Realty Income Fund:
Fiscal Year End |
Global
|
Global
|
International
|
Preferred
|
Realty
|
|||||||||||||||
December 31, 2010 |
$ | 20,522 | $ | 49,323 | $ | 55,338 | $ | 119,709 | $ | 100,546 | ||||||||||
December 31, 2009 |
$ | 57,019 | $ | 39,969 | $ | 72,725 | N/A | $ | 101,364 | |||||||||||
December 31, 2008 |
$ | 100,412 | $ | 58,697 | $ | 547,809 | N/A | $ | 288,939 |
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
State Street, which has its principal business at One Lincoln Street, Boston, Massachusetts 02111, has been retained to act as custodian of each Funds investments. The Transfer Agent, which has its principal business at P.O. Box 8123, Boston, Massachusetts 02266-8123 provides transfer and dividend disbursing agency services to each Fund.
Neither State Street nor the Transfer Agent has any part in deciding a Funds investment policies or which securities are to be purchased or sold for a Funds portfolio.
61
PROXY VOTING
The Funds Boards of Directors have delegated to the Advisor and, as applicable, the Subadvisors the responsibility for voting proxies on behalf of each Fund, and have determined that the Advisor and, as applicable, the Subadvisors will vote proxies with respect to those portfolio securities for which they have investment responsibility. A summary of the Advisors and Subadvisors Proxy Voting Policies and Procedures is set forth in Appendix A.
Each Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. Each Funds Form N-PX filings are available (i) without charge, upon request, by calling toll-free at (800) 437-9912 and (ii) on the SECs website (http://www.sec.gov).
CODE OF ETHICS
The Funds, the Advisor, the Subadvisors and the Distributor have adopted codes of ethics pursuant to Rule 17j-1 under the 1940 Act and with respect to the Advisor and Subadvisors, Rule 204A-1 under the Investment Advisers Acts of 1940, as amended, that are designed to ensure that the interests of Fund shareholders come before the interests of those involved in managing the Funds. Each code of ethics, among other things, prohibits personnel of the Advisor, the Subadvisors and the Distributor from investing in REITs and real estate securities, and initial public offerings; requires pre-approval for transactions in private placements and most other securities transactions (including transactions in Cohen & Steers closed-end funds); and requires a holding period of 30 days for Cohen & Steers open-end funds. The Funds Independent Directors are prohibited from purchasing or selling any security if they know or reasonably should know at the time of the transaction that the security is being considered for purchase or sale by a Fund or is being purchased or sold by a Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the supervision of the Board of Directors, decisions to buy and sell securities for a Fund and negotiation of its brokerage commission rates are made by the Advisor and, as applicable, the Subadvisors. Transactions on U.S. and, as applicable, non-U.S. stock exchanges involve the payment by a Fund of negotiated brokerage commissions. Generally, commissions relating to securities traded on foreign exchanges will be higher than commissions relating to securities traded on U.S. exchanges. The Advisor purchases and sells fixed-income securities (including certain preferred securities) through principal transactions, meaning the Advisor normally purchases securities on a net basis directly from the issuer or a primary market-maker acting as principal for the securities. The Funds generally do not pay a stated brokerage commission on these transactions, although the purchase price for such securities usually includes an undisclosed compensation. Purchases of securities from underwriters typically include a commission or concession paid by the issuer to the underwriter, and purchases from dealers serving as market-makers typically include a dealers mark-up (i.e., a spread between the bid and asked prices). There is generally no stated commission in the case of equity securities traded in the over-the-counter market but the price paid by a Fund usually includes an undisclosed dealer commission or mark-up. In certain instances, a Fund may make purchases of underwritten or agency placed issues at prices that reflect underwriting or placement fees. The Advisor and, as applicable, the Subadvisors will only cause a Fund to engage in these transactions if the Advisor and Subadvisors deem
62
such participation to be in the best interests of the Fund. In certain circumstances, regulatory restrictions may prevent a Fund from purchasing securities in an offering in which an affiliate serves as placement agent of the issuer, and that Funds inability to participate could be deemed to be to the detriment of the Fund.
The Advisor and, as applicable, the Subadvisors have the responsibility of selecting brokers and dealers to execute portfolio transactions. In selecting a broker to execute each particular transaction, the Advisor and, as applicable, the Subadvisors generally will take the following into consideration (if and as relevant to the transaction): 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 a 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 and other services offered.
In transactions to buy and sell fixed-income securities, the selection of the broker-dealer is determined by the availability of the desired security and its offering price, as well as the broker-dealers general execution and operational and financial capabilities in the type of transaction involved. The Advisor will seek to obtain prompt execution of orders at the most favorable prices or yields and may consider other factors as appropriate.
In addition, the Advisor and each Subadvisor may receive research services from a broker in connection with initiating portfolio transactions for a Fund. Research services include pricing and market data services. The Advisor and each Subadvisor shall not be deemed to have acted unlawfully or to have breached any duty solely by reason of its having caused a Fund to pay a broker an amount of commission for effecting a portfolio investment transaction in excess of the amount of commission another broker would have charged solely for execution services for that transaction if the Advisor or a Subadvisor, as the case may be, determines in good faith that the commission was reasonable in relation to the value of the research service provided.
Research and investment information may be provided by brokers at no cost to the Advisor and Subadvisors and available for the benefit of other accounts advised by the Advisor, Subadvisors and their affiliates, and not all of the information will be used in connection with a Fund. While this information may be useful in varying degrees and may tend to reduce the Advisors or Subadvisors expenses, it is not possible to estimate its value, and in the opinion of the Advisor and Subadvisors it does not reduce the Advisors or Subadvisors expenses in a determinable amount.
The extent to which the Advisor or Subadvisors make use of statistical, research and other services furnished by brokers is considered by the Advisor or Subadvisors in the allocation of brokerage business but there is no formula by which such business is allocated. The Advisor and Subadvisors do so in accordance with their judgment of the best interests of a Fund. The Advisor and Subadvisors may also take into account payments made by brokers effecting transactions for a Fund to other persons on behalf of a Fund for services provided to it for which it would be obligated to pay (such as custodial and professional fees).
Pursuant to its internal procedures, the Advisor regularly evaluates the brokerage and research services provided by each broker-dealer that it uses.
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For the fiscal years ended December 31, 2010, 2009 and 2008, each Fund paid total brokerage commissions in the following amounts:
Fiscal Year Ended |
Global
|
Global
|
Institutional
|
Institutional
|
International
|
Preferred
|
Realty
|
Realty Shares |
||||||||||||||||||||||||
December 31, 2010 |
$ | 173,231 | $ | 1,013,223 | $ | 1,349,218 | $ | 2,805,609 | $ | 3,518,014 | $ | 42,499 | $ | 1,076,958 | $ | 6,402,147 | ||||||||||||||||
December 31, 2009 |
$ | 213,066 | $ | 878,621 | $ | 1,532,907 | $ | 2,262,270 | $ | 7,249,527 | N/A | $ | 1,013,138 | $ | 5,334,268 | |||||||||||||||||
December 31, 2008 |
$ | 478,198 | $ | 678,824 | $ | 1,042,311 | $ | 1,763,587 | $ | 8,838,155 | N/A | $ | 1,535,840 | $ | 3,989,391 |
(1) | The difference in brokerage commissions paid in 2009 and 2010 was primarily the result of purchases and sales of securities by the Fund in 2009 in order to take advantage of market opportunities. |
Of the amounts listed above, brokerage commission paid to brokers or dealers who provide research and investment information were as follows:
Fiscal Year Ended |
Global
|
Global
|
Institutional
|
Institutional
|
International
|
Preferred
|
Realty
|
Realty Shares |
||||||||||||||||||||||||
December 31, 2010 |
$ | 86,795 | $ | 434,877 | $ | 573,166 | $ | 1,282,326 | $ | 1,273,967 | $ | 42,118 | $ | 521,104 | $ | 2,897,007 | ||||||||||||||||
December 31, 2009 |
$ | 110,129 | $ | 424,525 | $ | 752,978 | $ | 1,269,764 | $ | 3,106,958 | N/A | $ | 606,957 | $ | 2,975,588 | |||||||||||||||||
December 31, 2008 |
$ | 164,323 | $ | 210,985 | $ | 335,667 | $ | 921,693 | $ | 2,062,071 | N/A | $ | 685,339 | $ | 2,076,750 |
Each Funds portfolio turnover rate for the fiscal years ended December 31, 2010 and 2009 were as follows:
Fiscal Year Ended |
Global
|
Global
|
Institutional
|
Institutional
|
International
|
Preferred
|
Realty
|
Realty Shares |
||||||||||||||||||||||||
December 31, 2010 |
79 | % | 110 | % | 111 | % | 104 | % | 84 | % | 31 | % | 102 | % | 106 | % | ||||||||||||||||
December 31, 2009 |
98 | % | 170 | % | 186 | % | 119 | % | 190 | % | N/A | 119 | % | 119 | % |
(1) | The difference in the Funds portfolio turnover rate between 2009 and 2010 was primarily the result of purchases and sales of securities by the Fund in 2009 in order to take advantage of market opportunities. |
During the Funds fiscal year ended December 31, 2010, the Funds did not acquire securities of any of their regular brokers or dealers (as defined in Rule 10b-1 under the 1940 Act) or of their parents, with the exception of Preferred Securities and Income Fund. As of December 31, 2010, Preferred Securities and Income Fund held securities of its regular brokers or dealers or of their parents as follows:
Dollar Value of
Securities Owned |
||||
Goldman, Sachs & Co. |
$ | 955,659 | ||
J.P. Morgan Chase & Co. |
$ | 9,072,900 | ||
Deutsche Bank |
$ | 1,921,592 |
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ORGANIZATION AND DESCRIPTION OF CAPITAL STOCK
Each Fund is a Maryland corporation that is authorized to issue shares of Common Stock, $.001 par value per share, in the following respective amounts:
Fund |
Authorized Shares |
|||
Global Infrastructure Fund |
200,000,000 shares | |||
Global Realty Shares |
50,000,000 shares | |||
Institutional Global Realty Shares |
100,000,000 shares | |||
Institutional Realty Shares |
100,000,000 shares | |||
International Realty Shares |
800,000,000 shares | |||
Preferred Securities and Income Fund |
600,000,000 shares | |||
Realty Income Fund |
200,000,000 shares | |||
Realty Shares |
200,000,000 shares |
The authorized shares of Global Infrastructure Fund, Global Realty Shares, International Realty Fund and Realty Income Fund are currently divided into four classes designated Class A Common Stock, Class B Common Stock, Class C Common Stock and Class I Common Stock and Preferred Securities and Income Fund is currently divided into three classes designated Class A Common Stock, Class C Common Stock and Class I Common Stock (each of the foregoing Funds is a Multiclass Fund and collectively, are the Multiclass Funds). Class B Common Stock of International Realty Fund has not been offered for sale, and Class B shares of Global Infrastructure Fund, Global Realty Shares and Realty Income Fund are no longer being offered for sale except through dividend reinvestment and permitted exchanges by existing Class B shareholders.
Institutional Global Realty Shares, Institutional Realty Shares and Realty Shares each presently have one class of shares.
Each Fund shall, to the extent permitted by applicable law, have the right, at its option, at any time to redeem shares owned by any shareholder if its Board of Directors has determined that it is in the best interest of the Fund to redeem its shares. The Funds shares have no preemptive or conversion rights. With respect to the Multiclass Funds, each class of shares represents an interest in the same assets of the Fund and is identical in all respects except that (i) each class is subject to different sales charges and distributions and service fees, which may affect performance, and (ii) each class has exclusive voting rights on any matter submitted to shareholders that affects only that class, including any matter that relates to that class Distribution Plan and has separate voting rights on any matter submitted to shareholders in which the interests of one class differ from the interests of any other class. With the exceptions noted above for Multiclass Funds, all shares of a Fund have equal voting, dividend, distribution and liquidation rights. All shares of the Funds, when duly issued, will be fully paid and nonassessable. Shareholders 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 outstanding can elect 100% of the Directors 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. The foregoing description is subject to the provisions contained in each Funds Articles of Incorporation and By-Laws as amended and supplemented from time-to-time.
The Board of Directors is authorized to reclassify and issue any unissued shares of a Fund without shareholder approval. Accordingly, in the future, the Board of Directors may create additional series of shares with different investment objectives, policies or restrictions. Any issuance of shares of another class would be governed by the 1940 Act and Maryland law.
65
( GLOBAL I NFRASTRUCTURE F UND , G LOBAL R EALTY S HARES , I NTERNATIONAL R EALTY F UND , P REFERRED S ECURITIES AND I NCOME F UND AND R EALTY I NCOME F UND O NLY )
With respect to the Multiclass Funds, dealers and financial advisors receive a percentage of the initial sales charge on sales of Class A shares, as set forth below:
Investment Amount |
Sales Charge
|
Sales Charge
|
Regular Dealer
|
|||||||||
Less than $100,000 |
4.50 | % | 4.71 | % | 4.00 | % | ||||||
$100,000 but less than $250,000 |
3.75 | % | 3.90 | % | 3.25 | % | ||||||
$250,000 but less than $500,000 |
2.75 | % | 2.83 | % | 2.25 | % | ||||||
$500,000 but less than $1 million |
2.25 | % | 2.30 | % | 1.75 | % | ||||||
$1 million or more |
None | None | None | |
(1) | Offering Price is the amount that you actually pay for Fund shares; it includes the initial sales charge. |
| See Other Share Information. |
( GLOBAL I NFRASTRUCTURE F UND , G LOBAL R EALTY S HARES , I NTERNATIONAL R EALTY F UND , P REFERRED S ECURITIES AND I NCOME F UND AND R EALTY I NCOME F UND O NLY )
Each Multiclass Fund has adopted a Distribution Plan and related agreements (the Distribution Plan) pursuant to Rule 12b-1 under the 1940 Act, which provides that investment companies may pay distribution expenses, directly or indirectly, pursuant to a distribution plan adopted by the investment companys Board of Directors. Under the Distribution Plan, each Fund will pay to the Distributor, as compensation for acting as principal underwriter of a Funds shares and as reimbursement of the distribution expenses incurred therewith, a fee at annual rates not to exceed 0.25%, 0.75% and 0.75% of the average net assets of each Fund attributable to Class A shares, Class B shares and Class C shares, respectively (there are no Class B shares of International Realty Fund or Preferred Securities and Income Fund). The Distributor may use such amounts to pay various distribution-related expenses, including (i) to make payments to brokers, financial institutions and other financial intermediaries (payee(s)) who have rendered distribution assistance, (ii) to pay interest and other financing costs in the case of Class B shares, as applicable and (iii) for other expenses such as advertising costs and the payment for printing and distribution of Prospectuses to prospective investors. The Class I shares do not participate in the Distribution Plan. In addition to the amounts required by the Distribution Plan, the Distributor may, in its discretion, pay additional amounts from its own resources. The Board of Directors has determined that there is a reasonable likelihood the Distribution Plan will benefit each Fund and its Class A and Class C shareholders. The expected benefits include greater sales (for Class A and Class C shares) and lower redemptions of each class of shares, which should allow each class to maintain a consistent cash flow.
66
For the fiscal year ended December 31, 2010, with respect to the Class A, Class B and Class C shares, each Multiclass Fund paid distribution services fees for expenditures under the Distribution Plan in the following aggregate amounts.
Class of Shares |
Global
|
Global
|
International
|
Preferred
|
Realty
|
|||||||||||||||
Class A Shares |
$ | 130,621 | $ | 394,369 | $ | 945,218 | $ | 40,051 | $ | 496,806 | ||||||||||
Class B Shares |
$ | 27,385 | $ | 12,656 | N/A | N/A | $ | 207,484 | ||||||||||||
Class C Shares |
$ | 174,796 | $ | 423,437 | $ | 1,686,247 | $ | 88,340 | $ | 1,405,430 |
Under the Distribution Plan, the Treasurer for each Multiclass Fund reports quarterly the amounts and purposes of assistance payments. During the continuance of the Distribution Plan the selection and nomination of the Independent Directors are at the discretion of the Independent Directors currently in office.
The Distribution Plan may be terminated at any time by a vote of the shareholders or by vote of the Independent Directors. The Distribution Plan and related agreements may be renewed from year to year if approved by a vote of the majority of the Board of Directors, and by the vote of the Independent Directors cast in person at a meeting called for the purpose of voting on such renewal. The Distribution Plan may not be amended to increase materially the amount to be spent for distribution without shareholder approval. All material amendments to the Distribution Plan must be approved by a vote of the Board of Directors and of the Independent Directors, cast in person at a meeting called for the purpose of such vote.
Pursuant to the rules of the Financial Industry Regulatory Authority (FINRA), the Distributor is required to limit aggregate initial sales charges, deferred sales charges and asset-based sales charges to 6.25% of total gross sales of each class of shares. Interest charges on unreimbursed distribution expenses equal to the prime rate plus one percent per annum may be added to the 6.25% limitation. Sales from the reinvestment of dividends and distributions are not included in the calculation of the 6.25% limitation. The annual asset-based sales charge on shares of a Fund may not exceed 0.75 of 1% per class. The 6.25% limitation applies to each class of a Multiclass Fund rather than on a per shareholder basis. If aggregate sales charges were to exceed 6.25% of total gross sales of any class, all sales charges on shares of that class would be suspended.
Each of Global Infrastructure Fund, Global Realty Shares, International Realty Fund, Preferred Securities and Income Fund and Realty Income Fund have adopted a shareholder services plan, pursuant to which each Fund pays the Distributor a fee at an annual rate of up to 0.10% of the average daily NAV of each Funds Class A, up to 0.25% of the average daily NAV of each Funds Class B shares, where applicable, and up to 0.25% of the average daily NAV of each Funds Class C shares for shareholder account service and maintenance. Under this plan, each Fund or the Distributor may enter into agreements with qualified financial institutions to provide these shareholder services, and the Distributor is responsible for payment to the financial institutions. Services provided may vary based on the services offered by your financial institution and the class of shares in which you invest.
67
For the fiscal years ended December 31, 2010, each Fund paid fees for expenditures under the shareholder services plan, in the aggregate amount as follows:
Global
Infrastructure Fund |
Global
Realty Shares |
International
Realty Fund |
Preferred
Securities and Income Fund |
Realty
Income Fund |
||||||||||||||||
Class A Shares |
$ | 52,249 | $ | 157,747 | $ | 378,087 | $ | 16,020 | $ | 198,722 | ||||||||||
Class B Shares |
$ | 9,128 | $ | 4,219 | N/A | N/A | $ | 69,161 | ||||||||||||
Class C Shares |
$ | 58,265 | $ | 141,146 | $ | 562,082 | $ | 29,447 | $ | 468,477 |
Under the shareholder service plan, each Funds Treasurer reports quarterly the amounts of the payments. During the continuance of the shareholder services plan the selection and nomination of the Independent Directors are at the discretion of the Independent Directors currently in office.
REDUCING THE INITIAL SALES LOAD ON CLASS A SHARES
( GLOBAL I NFRASTRUCTURE F UND , G LOBAL R EALTY S HARES , I NTERNATIONAL R EALTY F UND , P REFERRED S ECURITIES AND I NCOME F UND AND R EALTY I NCOME F UND O NLY )
As discussed in each Prospectus for Class A shares, the size of the total investment in the Class A shares of a Multiclass Fund will affect your sales load.
Described below are several methods to reduce the applicable sales load. In order to obtain a reduction in the sales load, an investor must notify, at the time of purchase, his or her dealer, the Transfer Agent or the Distributor of the applicability of one of the following:
Rights of Aggregation. The size of the total investment applies to the total amount being invested by any person, which term includes an individual, his or her spouse and children under the age of 21, a trustee or other fiduciary purchasing for a single trust, estate or single fiduciary account (including a pension, profit-sharing or other employee benefit trust created pursuant to a plan qualified under the Code) although more than one beneficiary is involved, or any U.S. bank or investment advisor purchasing shares for its investment advisory clients or customers. Any such person purchasing for several accounts at the same time may combine these investments into a single transaction in order to reduce the applicable sales charge.
Rights of Accumulation. The Class A shares may be purchased at a reduced sales charge by a person (as defined above) who is already a shareholder of a Fund and/or a shareholder of other Cohen & Steers open-end funds that impose sales charges (Eligible Funds) by taking into account not only the amount then being invested, but also the current NAV of the shares of that Fund and other Eligible Funds already held by such person. If the current NAV of the qualifying shares already held plus the NAV of the current purchase exceeds a point in the schedule of sales charges at which the charge is reduced to a lower percentage, the entire current purchase is eligible for the reduced charge. To be entitled to a reduced sales charge pursuant to the Rights of Accumulation, the investor must notify his or her dealer, the Transfer Agent or the Distributor at the time of purchase that he or she wishes to take advantage of such entitlement, and give the numbers of his or her account, and those accounts held in the name of his or her spouse or for a minor child, and the specific relationship of each such other person to the investor.
Letter of Intention. An investor may also qualify for a reduced sales charge by completing a Letter of Intention (the Letter) set forth in the Subscription Agreement attached to the Prospectus or on a separate form for this purpose which is available from the Funds. This enables the investor to aggregate
68
purchases of shares of a Fund and other Eligible Funds during a 12-month period for purposes of calculating the applicable sales charge. All shares of a Fund and other Eligible Funds currently owned by the investor will be credited as purchases toward the completion of the Letter at the greater of their NAV on the date the Letter is executed or their cost. No retroactive adjustment will be made if purchases exceed the amount indicated in the Letter. For each investment made, the investor must notify his or her dealer, the Transfer Agent or the Distributor that a Letter is on file along with all account numbers associated with the Letter.
The Letter is not a binding obligation on the investor. However, 5% of the amount specified in the Letter will be held in escrow, and if the investors purchases are less than the amount specified, the investor will be requested to remit to the Fund an amount equal to the difference between the sales charge paid and the sales charge applicable to the aggregate purchases actually made. If not remitted within 20 days after written request, an appropriate number of escrowed shares will be redeemed in order to realize the difference. However, the sales charge applicable to the investment will in no event be higher than if the shareholder had not submitted a Letter.
Sales at Net Asset Value. Class A shares of a Fund may be sold at NAV ( i.e., without a sales charge) (i) to registered representatives or employees (and their immediate families) of authorized dealers, or to any trust, pension, profit-sharing or other benefit plan for only such persons, (ii) to banks or trust companies or their affiliates when the bank, trust company, or affiliate is authorized to make investment decisions on behalf of a client, (iii) to investment advisors and financial planners who place trades for their own accounts or the accounts of their clients and who charge a management, consulting or other fee for their services, (iv) to clients of such investment advisors and financial planners who place trades for their own accounts if the accounts are linked to the master account of such investment advisor or financial planner on the books and records of the broker, agent, investment advisor or financial institution, and (v) to retirement and deferred compensation plans including, but not limited to those defined in Section 401(a), 403(b) or 457 of the Code and rabbi trusts. Investors may be charged a fee if they effect transactions in Fund shares through a broker or agent. Class A shares of the Fund may also be sold at NAV to current officers, directors and employees (and their immediate families) of a Fund, the Advisor and its affiliates, Distributor, employees (and their immediate families) of certain firms providing services to a Fund (such as the custodian and Transfer Agent), and to any trust, pension, profit-sharing or other benefit plan for only such persons.
CONTINGENT DEFERRED SALES CHARGES
( GLOBAL I NFRASTRUCTURE F UND , G LOBAL R EALTY S HARES , I NTERNATIONAL R EALTY F UND , P REFERRED S ECURITIES AND I NCOME F UND AND R EALTY I NCOME F UND O NLY )
CLASS A SHARES
With respect to purchases of $1,000,000 or more, Class A shares of a Multiclass Fund redeemed on or before the one year anniversary date of their purchase will be subject to a contingent deferred sales charge equal to 1% of the lesser of the cost of the shares being redeemed or their NAV at the time of redemption. Accordingly, no sales charge will be imposed on increases in NAV above the initial purchase price. The contingent deferred sales charge on Class A shares will be waived on certain redemptions, as described below under Contingent Deferred Sales ChargesClass C Shares. In addition, no charge will be assessed on shares derived from reinvestment of dividends or capital gains distributions. In determining the contingent deferred sales charge applicable to a redemption of Class A shares, it will be assumed that the redemption is, first, of any shares that are not subject to a contingent
69
deferred sales charge (for example, because an initial sales charge was paid with respect to the shares, or they have been held beyond the period during which the charge applies or were acquired upon the reinvestment of dividends and distributions) and, second, of shares held longest during the time they are subject to the sales charge.
Proceeds from the contingent deferred sales charge on Class A shares are paid to the Distributor and are used by the Distributor to defray expenses of the Distributor related to providing distribution-related services to a Fund in connection with the sales of Class A shares, such as the payment of compensation to selected dealers or financial intermediaries for selling Class A shares.
CLASS B SHARES
Class B shares of a Multiclass Fund that are redeemed on or before the sixth anniversary date of their of purchase will be subject to a contingent deferred sales charge at the rates set forth in a Funds Prospectus charged as a percentage of the dollar amount subject thereto. The charge will be assessed on an amount equal to the lesser of the cost of the shares being redeemed or their NAV at the time of redemption. Accordingly, no sales charge will be imposed on increases in NAV above the initial purchase price. In addition, no charge will be assessed on shares derived from reinvestment of dividends or capital gains distributions.
Proceeds from the contingent deferred sales charge on Class B shares are paid to the Distributor and are used by the Distributor to defray its expenses related to providing distribution-related services to a Fund in connection with past sales of Class B shares, including payments to dealers and other financial intermediaries for sales of Class B shares and interest and other financing costs associated with Class B shares.
In determining the contingent deferred sales charge applicable to a redemption of Class B shares, it will be assumed that the redemption is, first, of any shares that were acquired upon the reinvestment of dividends or distributions and, second, of any shares held longest during the time they are subject to the sales charge. When shares acquired in an exchange are redeemed, the applicable contingent deferred sales charge and conversion schedules will be the schedules that applied at the time of the purchase of shares of the corresponding class of a Fund originally purchased by the shareholder.
The contingent deferred sales charge on Class B shares will be waived on certain redemptions, as described below under Contingent Deferred Sales ChargesClass C Shares.
Conversion Feature. At the end of the month which precedes the eighth anniversary of the purchase date of a shareholders Class B shares, such Class B shares will automatically convert to Class A shares and will no longer be subject to higher distribution and service fees. Such conversion will occur on the basis of the relative NAVs of the two classes, without the imposition of any sales load, fee or other charge. The purpose of the conversion feature is to reduce the distribution and service fees paid by holders of Class B shares that have been outstanding long enough for the Distributor to have been compensated for distribution expenses incurred in the sale of such shares.
For purposes of conversion to Class A, Class B shares purchased through the reinvestment of dividends and distributions paid in respect of Class B shares in a shareholders account will be considered to be held in a separate sub-account. Each time any Class B shares in the shareholders account (other than those in the sub-account) convert to Class A, an equal pro-rata portion of the Class B shares in the sub-account will also convert to Class A.
70
CLASS C SHARES
Class C shares that are redeemed on or before the one year anniversary date of their of purchase will be subject to a contingent deferred sales charge of 1%, charged as a percentage of the dollar amount subject thereto. The charge will be assessed on an amount equal to the lesser of the cost of the shares being redeemed or their NAV at the time of redemption. Accordingly, no sales charge will be imposed on increases in NAV above the initial purchase price. In addition, no charge will be assessed on shares derived from reinvestment of dividends or capital gains distributions. The contingent deferred sales charge is waived on redemptions of shares (i) following the death or disability, as defined in the Code, of a shareholder, (ii) to the extent that the redemption represents a minimum required distribution from an individual retirement account or other retirement plan to a shareholder who has attained the age of 70 1 / 2 , or (iii) that had been purchased by present or former Directors of a Fund, by the relative of any such person, by any trust, individual retirement account or retirement plan account for the benefit of any such person or relative, or by the estate of any such person or relative.
In determining the contingent deferred sales charge applicable to a redemption of Class C shares, it will be assumed that the redemption is, first, of any shares that are not subject to a contingent deferred sales charge (for example, because the shares have been held beyond the period during which the charge applies or were acquired upon the reinvestment of dividends or distributions) and, second, of any shares held longest during the time they are subject to the sales charge.
Proceeds from the contingent deferred sales charge are paid to the Distributor and are used by the Distributor to defray the expenses of the Distributor related to providing distribution-related services to a Fund in connection with the sale of the Class C shares, such as the payment of compensation to dealers and financial intermediaries for selling Class C shares.
CLASS I SHARES
Class I shares are not subject to a contingent deferred sales charge. Please see a Funds Class I Prospectus for a further discussion of Class I shares.
FUND REORGANIZATIONS
Shares of a Fund (Class A for Multiclass Funds) may be issued without an initial sales charge in connection with the acquisition of cash and securities owned by other investment companies. Any contingent deferred sales charge or redemption fee will be waived in connection with the redemption of shares of a Fund if that Fund is combined with another Cohen & Steers mutual fund, or in connection with a similar reorganization transaction.
SIGNATURE GUARANTEES
In addition to the circumstances listed in that Funds Prospectus, a Multiclass Fund requires signature guarantees for the following:
1. When shares are transferred to a new owner.
2. When certificated (issued) shares are redeemed, exchanged or transferred.
3. To establish any ACH service or to amend banking information on an existing ACH service.*
4. When the authority of a representative of a corporation, partnership, trust, or other entity has not been satisfactorily established prior to the transaction request.
71
5. When an address is updated on an account which has been coded Do Not Mail because mail has been returned as undeliverable. A mailing address and residential address must be provided.*
6. For any other instance whereby a Fund or its transfer agent deems it necessary as a matter of prudence.
Each Fund reserves the right to require that instructions for any other transactions be in writing, signed by all owners, and signature guaranteed.
A Fund will accept a signature guarantee from its principal underwriter, or any eligible guarantor institution (including any bank, savings association, credit union, exchange, or broker firm) that is a member of the STAMP, the New York Exchange Medallion Signature Program (MSP), or the Stock Exchanges Medallion Program (SEMP). The surety bond coverage amount of the guarantee must equal or exceed the amount of the transaction or transactions that are being authorized. If more than one signature is required, each signature must be signature guaranteed. A Fund will not accept a signature guarantee that has been amended or limited in any way. Please note that a notary public stamp or seal is not an acceptable substitute for a signature guarantee.
The signature guarantee requirements do not apply to transactions or instructions that are communicated to a Fund through NSCC Fund/SERV or Networking by broker-dealers or other financial institutions that have entered into a Fund/SERV or Networking Agreement with a Fund or a Funds agent. Broker-dealers and other institutions that process transactions through Fund/SERV or Networking are responsible for obtaining the permission of their clients to process such transactions and for ensuring that such transactions are processed properly. A Fund does not have any responsibility for obtaining any documentation from such financial institutions to demonstrate that their clients have authorized the transactions or instructions.
The signature guarantee policies of the Funds may be amended at any time without prior notice.
The Advisor and the Distributor may make payments from their own resources to dealers and other financial intermediaries as compensation for distribution, administrative or other services (Additional Payments). In the case of Multiclass Funds, these Additional Payments are in addition to the compensation these intermediaries receive from sales commissions, distribution fees and shareholder service fees, as described in the Prospectuses of the Multiclass Funds. With respect to all Funds, these Additional Payments may take the form of, among other things, due diligence payments for an intermediarys examination of a Fund and payments for providing extra employee training and information relating to a Fund; listing fees for the placement of a Fund on an intermediarys list of mutual funds available for purchase by its customers; marketing support fees for providing assistance in promoting the sale of a Funds shares; payments for the sale of shares and/or the maintenance of share balances; and fees for subaccounting, administrative and/or shareholder processing services that are in addition to the shareholder servicing fees and networking and sub-transfer agency fees paid by a
* | For items 3 and 5, a Signature Validation Program stamp (SVP) will be accepted from any member of the Securities Transfer Agent Medallion Signature Program (STAMP) in lieu of a medallion signature guarantee. When using SVP to change banking instructions, a shareholder must wait 30 days from the date of the change before redeeming shares to the newly updated bank file; however, using a STAMP 2000 Medallion signature guarantee will not cause such a delay. |
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Fund. The Additional Payments may be a fixed dollar amount, may be based on the number of customer accounts maintained by a dealer, or may be based on a percentage of the value of shares sold to, or held by, customers of the intermediary.
The Advisor and Distributor may from time to time pay additional cash or non-cash incentives to intermediaries in connection with the sale of shares of a Fund, subject to applicable FINRA rules. Such additional amounts may be utilized, in whole or in part, in some cases together with other revenues of such dealers, to provide additional compensation to registered representatives who sell shares of a Fund. On some occasions, such cash or non-cash incentives may be offered only to certain dealers who have sold or may sell significant amounts of shares. Such incentives may include payment for attendance at seminars or payment for occasional meals, sporting events, theater performances or comparable entertainment. Such dealers may elect to receive cash incentives of equivalent amount in lieu of such payments.
Set forth below is a discussion of certain U.S. federal income tax issues concerning each Fund and the purchase, ownership and disposition of Fund shares. This discussion does not purport to be complete or to deal with all aspects of federal income taxation that may be relevant to shareholders in light of their particular circumstances. This discussion is based upon present provisions of the Code, the regulations promulgated thereunder, and judicial and administrative ruling authorities, all of which are subject to change, which change may be retroactive. Prospective investors should consult their own tax advisors 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 FUND
Each Fund has elected to be treated as, and intends to qualify annually as, a regulated investment company under the Code.
To qualify for the favorable U.S. federal income tax treatment generally accorded to a regulated investment company, a Fund must, among other things, (i) derive in each taxable year (the gross income test) at least 90% of its gross income from: (a) dividends, interest, payments with respect to certain securities loans, and gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including but not limited to gains from options, futures and forward contracts) derived with respect to its business of investing in such stock, securities or foreign currencies; and (b) net income derived from interests in certain publicly traded partnerships that are treated as partnerships for U.S. federal income tax purposes and that derive less than 90% of their gross income from the items described in (a) above (each a Qualified Publicly Traded Partnership); and (ii) diversify its holdings (the asset diversification test) so that, at the end of each quarter of each taxable year; (a) at least 50% of the value of the Funds total assets is represented by (I) cash and cash items, U.S. government securities, the securities of other regulated investment companies and (II) other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than 5% of the value of the Funds total assets and not more than 10% of the outstanding voting securities of such issuer and (b) not more than 25% of the value of the Funds total assets is invested in the securities (other than U.S. government securities and the securities of other regulated investment companies) of (I) any one issuer, (II) any two or more issuers that
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the Fund controls and that are determined to be engaged in the same or similar trades or businesses or related trades or businesses or (III) any one or more Qualified Publicly Traded Partnerships.
Pursuant to the recently enacted Regulated Investment Company Modernization Act of 2010 (the Modernization Act), a Fund that fails the gross income test for a taxable year shall nevertheless be considered to have satisfied the test for such year if (i) the Fund satisfies certain procedural requirements, and (ii) the Funds failure to satisfy the gross income test is due to reasonable cause and not due to willful neglect. However, in such case, a tax is imposed on the Fund for the taxable year in which, absent the application of the above cure provision, it would have failed the gross income test equal to the amount by which (x) the Funds non-qualifying gross income exceeds (y) one-ninth of the Funds qualifying gross income, each as determined for purposes of applying the gross income test for such year.
Also pursuant to the Modernization Act, a Fund that fails the asset diversification test as of the end of a quarter shall nevertheless be considered to have satisfied the test as of the end of such quarter in the following circumstances. If the Funds failure to satisfy the asset diversification test at the end of the quarter is due to the ownership of assets the total value of which does not exceed the lesser of (i) one percent of the total value of the Funds assets at the end of such quarter and (ii) $10,000,000 (a de minimis failure), the Fund shall be considered to have satisfied the asset diversification test as of the end of such quarter if, within six months of the last day of the quarter in which the Fund identifies that it failed the asset diversification test (or such other prescribed time period), the Fund either disposes of assets in order to satisfy the asset diversification test, or otherwise satisfies the asset diversification test.
In the case of a failure to satisfy the asset diversification test at the end of a quarter under circumstances that do not constitute a de minimis failure, a Fund shall nevertheless be considered to have satisfied the asset diversification test as of the end of such quarter if (i) the Fund satisfies certain procedural requirements; (ii) the Funds failure to satisfy the asset diversification test is due to reasonable cause and not due to willful neglect; and (iii) within six months of the last day of the quarter in which the Fund identifies that it failed the asset diversification test (or such other prescribed time period), the Fund either disposes of the assets that caused the asset diversification failure, or otherwise satisfies the asset diversification test. However, in such case, a tax is imposed on the Fund, at the current rate of 35 percent, on the net income generated by the assets that caused the Fund to fail the asset diversification test during the period for which the asset diversification test was not met. In all events, however, such tax will not be less than $50,000.
As a regulated investment company, each Fund generally will not be subject to U.S. federal income tax on its investment company taxable income (which includes among other items, dividends, interest and net short-term capital gains in excess of net long-term capital losses, but determined without regard to the deduction for dividend paid) and net capital gains (the excess of net long-term capital gains over net short-term capital losses), if any, that it distributes to shareholders, provided that it distributes at least 90% of its investment company taxable income for such taxable year. Each Fund intends to distribute to its shareholders, at least annually, substantially all of its investment company taxable income and net capital gains. Amounts not distributed on a timely basis in accordance with a calendar year distribution requirement, described below, are subject to a nondeductible 4% excise tax. To prevent imposition of the excise tax, each Fund must distribute during each calendar year an amount at least equal to the sum of (1) 98% of its ordinary income (not taking into account any capital gains or losses) for the calendar year, (2) 98.2% of its capital gains in excess of its capital losses (adjusted for certain ordinary losses) for the one-year period ending on October 31, for Institutional Global Realty Shares, International Realty Fund and Preferred Securities and Income Fund and December 31, as
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elected by Global Infrastructure Fund, Global Realty Shares, Institutional Realty Shares, Realty Income Fund and Realty Shares, and (3) any ordinary income and capital gain net income for previous years that was not distributed during those years.
DISTRIBUTIONS
Dividends paid out of a Funds current and accumulated earnings and profits will, except in the case of distributions of qualified dividend income and capital gain dividends described below, be taxable to a U.S. shareholder as ordinary income to the extent of that Funds earnings and profits. For taxable years beginning on or before December 31, 2012 qualified dividend income received by individual shareholders is taxed at rates equivalent to long-term capital gain tax rates, which reach a maximum of 15%. Qualified dividend income generally includes dividends from domestic corporations and dividends from qualified foreign corporations. Dividends paid by U.S. REITs will not generally be eligible to qualify as qualified dividend income. A foreign corporation is a qualified foreign corporation if it is (1) incorporated in a possession of the United States or is eligible for benefits of a comprehensive income tax treaty with the United States that the United States Treasury Department determines is satisfactory for this purpose and that includes an exchange of information program or (2) any other foreign corporation with respect to any dividend paid by such corporation if the stock with respect to which such dividend is paid is readily tradable on an established securities market in the United States. A qualified foreign corporation does not include any foreign corporation, which for the taxable year of the corporation in which the dividend was paid, or the preceding taxable year, is a passive foreign investment company. A Fund generally can pass the tax treatment of qualified dividend income it receives through to Fund shareholders. For a Fund to receive qualified dividend income, that Fund must meet certain holding period requirements for the stock on which the otherwise qualified dividend is paid. In addition, the Fund cannot be obligated to make payments (pursuant to a short sale or otherwise) with respect to substantially similar or related property. The same provisions, including the holding period requirements, apply to each shareholders investment in that Fund. The provisions of the Code applicable to qualified dividend income and the 15% maximum individual tax rate on long-term capital gains are currently effective through 2012. Thereafter, qualified dividend income will no longer be taxed at the rates applicable to long-term capital gains, and the maximum individual tax rate on long-term capital gains will increase to 20%, unless Congress enacts legislation providing otherwise. Because of the fact-specific nature of the inquiry, a Fund cannot predict at this time what portion, if any, of the dividends it will receive from foreign corporations will be eligible for the reduced rates of taxation applicable to qualified dividend income, nor can there be any assurance as to what portion, if any, of that Funds distributions will be entitled to the lower tax rates that apply to qualified dividend income.
Distributions of net capital gain, if any, designated as capital gain dividends are taxable to a shareholder as long-term capital gains, regardless of how long the shareholder has held Fund shares. Long-term capital gain rates for individuals have been temporarily reduced to 15% (with lower rates for individuals in the 10% and 15% rate brackets) for taxable years beginning on or before December 31, 2012.
A distribution will be treated as paid on December 31 of the current calendar year if it is declared by a Fund in October, November or December with a record date in such a month and paid by that Fund during January of the following calendar year. Such distributions will be taxable to shareholders 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 distributions in accordance with the calendar year distribution requirement.
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A distribution of an amount in excess of a Funds current and accumulated earnings and profits will be treated by a shareholder as a return of capital which is applied against and reduces the shareholders basis in his or her shares. To the extent that the amount of any such distribution exceeds the shareholders basis in his or her shares, the excess will be treated by the shareholder as gain from a sale or exchange of the shares.
Dividends designated by a Fund and received by corporate shareholders of that Fund will qualify for the dividends received deduction (the DRD) to the extent of the amount of qualifying dividends received by that Fund from domestic corporations (other than REITs) for the taxable year. A dividend received by a Fund will not be treated as a qualifying dividend (i) if the stock on which the dividend is paid is considered to be debt-financed (generally, acquired with borrowed funds), (ii) if the Fund fails to meet certain holding period requirements for the stock on which the dividend is paid or (iii) to the extent that the Fund is under an obligation (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. Moreover, the DRD may be disallowed or reduced if the corporate shareholder fails to satisfy the foregoing requirements with respect to its shares of the Fund or by application of the Code.
Distributions will be treated in the manner described above regardless of whether such distributions are paid in cash or invested in additional shares of a Fund.
A Fund may elect to retain its net capital gain or a portion thereof for investment and be taxed at corporate rates on the amount retained. In such case, it may designate the retained amount as undistributed capital gains in a notice to its shareholders who will be treated as if each received a distribution of his or her pro rata share of such gain, with the result that each shareholder will (i) be required to report his or her pro rata share of such gain on his or her tax return as long-term capital gain, (ii) receive a refundable tax credit for his or her pro rata share of tax paid by that Fund on the gain and (iii) increase the tax basis for his or her shares by an amount equal to the deemed distribution less the tax credit.
Shareholders will be notified annually as to the U.S. federal tax status of distributions.
SALE OR EXCHANGE OF FUND SHARES
Upon the sale or other disposition of shares of a Fund which a shareholder holds as a capital asset, including an exchange of shares in a Fund for shares of another Fund or another Cohen & Steers fund, such shareholder may realize a capital gain or loss which will be long-term or short-term, depending upon the shareholders holding period for the shares. A shareholder who exchanges shares in a Fund for shares of another Fund or another Cohen & Steers fund will have a tax basis in the newly- acquired fund shares equal to the amount invested and will begin a new holding period for federal income tax purposes.
If a shareholder exchanges shares in a Fund held for 90 days or less for shares in another Fund or another Cohen & Steers fund pursuant to a reinvestment right, the sales charge incurred in the purchase of the Fund shares exchanged may not be added to the tax basis in determining gain or loss for federal income tax purposes to the extent an otherwise applicable sales charge on the purchase of the newly-acquired shares is reduced pursuant to the reinvestment right. Instead, the sales charge for the exchanged fund shares shall be added to the cost basis of the newly-acquired shares for purposes of determining gain or loss on the disposition of such newly-acquired fund shares, if such newly-acquired fund shares are not disposed of in a similar exchange transaction within 90 days. Any loss realized on a sale or exchange will be disallowed to the extent the shares disposed of are replaced (including through
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reinvestment of dividends) with substantially similar shares 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 shareholder on a disposition of Fund shares held by the shareholder for six months or less will be treated as a long-term capital loss to the extent of any distributions of net capital gains received by the shareholder with respect to such shares.
If a shareholder recognizes a loss with respect to shares of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder, the shareholder must file with the Internal Revenue Service (IRS) a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a regulated investment company are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all regulated investment companies. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayers treatment of the loss is proper. Shareholders should consult their tax advisors to determine the applicability of these regulations in light of their individual circumstances.
MEDICARE TAX ON NET INVESTMENT INCOME
For taxable years beginning after December 31, 2012, recently enacted legislation will generally impose a tax on the net investment income of certain individuals and on the undistributed net investment income of certain estates and trusts. For these purposes, net investment income will generally include interest, dividends (including dividends paid with respect to Fund shares), annuities, royalties, rent, net gain attributable to the disposition of property not held in a trade or business (including net gain from the sale, exchange or other taxable disposition of Fund shares) and certain other income, but will be reduced by any deductions properly allocable to such income or net gain. Shareholders are advised to consult their own tax advisors regarding additional taxation of net investment income.
NATURE OF FUNDS INVESTMENTS
Certain of the Funds investment practices are subject to special and complex federal income tax provisions that may, among other things, (i) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (ii) convert lower taxed long-term capital gain into higher taxed short-term capital gain or ordinary income, (iii) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited), (iv) cause a Fund to recognize income or gain without a corresponding receipt of cash, (v) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur, (vi) adversely alter the characterization of certain complex financial transactions and (vii) produce income that will not qualify as good income under the 90% annual gross income test described above. Each Fund will monitor its transactions and may make certain tax elections in order to mitigate the effect of these provisions.
ORIGINAL ISSUE DISCOUNT SECURITIES
Investments by a Fund in zero coupon or other discount securities will result in income to that 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 a Fund must distribute
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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 a 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 that Fund by its corporate shareholders, 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 shareholders. Because such income may not be matched by a corresponding cash distribution to that Fund, the Fund may be required to borrow money or dispose of other securities to be able to make distributions to its shareholders.
MARKET DISCOUNT BONDS
Gains derived by a 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 that 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.
OPTIONS AND HEDGING TRANSACTIONS
The taxation of equity options and over-the- counter options on debt securities is governed by Section 1234 of the Code. Pursuant to Section 1234 of the Code, the premium received by a Fund for selling a put or call option is not included in income at the time of receipt. If the option expires, the premium is short-term capital gain to that Fund. If a Fund enters into a closing transaction, the difference between the premium received and the amount paid to close out its position is short-term capital gain or loss. If a call option written by a Fund is exercised, thereby requiring that Fund to sell the underlying security, the premium will increase the amount realized upon the sale of such security, and any resulting gain or loss will be capital gain or loss and will be long-term or short-term depending upon the holding period of the security. With respect to a put or call option that is purchased by a Fund, if the option is sold, any resulting gain or loss will be a capital gain or loss, and will be long-term or short-term, depending upon the holding period of the option. If the option expires, the resulting loss is a capital loss and is long- term or short-term depending upon the holding period of the option. If the option is exercised, the cost of the option, in the case of a call option, is added to the basis of the purchased security and, in the case of a put option, reduces the amount realized on the underlying security in determining gain or loss.
Certain options, futures contracts and forward contracts in which a Fund may invest are Section 1256 contracts governed by Section 1256 of the Code. Gains or losses on Section 1256 contracts generally are considered 60% long-term and 40% short-term capital gains or losses; however, foreign currency gains or losses (as discussed below) arising from certain Section 1256 contracts may be treated as ordinary income or loss. Also, Section 1256 contracts held by a Fund at the end of each taxable year (and, generally, for purposes of the 4% excise tax, on October 31, for Institutional Global Realty Shares, International Realty Fund and Preferred Income and Securities Fund and December 31, as elected by Global Infrastructure Fund, Global Realty Shares, Institutional Realty Shares, Realty Income Fund and Realty Shares) are marked-to-market (that is, treated as sold at fair market value), resulting in unrealized gains or losses being treated as though they were realized.
Generally, the hedging transactions undertaken by a Fund may result in straddles for U.S. federal income tax purposes. The straddle rules may affect the character of gains (or losses) realized by a Fund.
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In addition, losses realized by a Fund on positions that are part of a straddle may be deferred under the straddle rules, rather than being taken into account in calculating the taxable income for the taxable year in which the losses are realized. Because only a few regulations implementing the straddle rules have been promulgated, the tax consequences to a Fund of engaging in hedging transactions are not entirely clear. Hedging transactions may increase the amount of short-term capital gain realized by a Fund which is taxed as ordinary income when distributed to shareholders.
A Fund may make one or more of the elections available under the Code which are applicable to straddles. If a Fund makes any of the elections, the amount, character and timing of the recognition of gains or losses from the affected straddle positions will be determined under rules that vary according to the election(s) made. The rules applicable under certain of the elections may operate to accelerate the recognition of gains or losses from the affected straddle positions.
Because the straddle rules may affect the character of gains or losses, defer losses and/or accelerate the recognition of gains or losses from the affected straddle positions, the amount which may be distributed to shareholders, and which will be taxed to them as ordinary income or long-term capital gain, may be increased or decreased as compared to a fund that did not engage in such hedging transactions.
Notwithstanding any of the foregoing, a Fund may recognize gain (but not loss) from a constructive sale of certain appreciated financial positions if that Fund enters into a short sale, offsetting notional principal contract, or futures or forward contract transaction with respect to the appreciated position or substantially identical property. Appreciated financial positions subject to this constructive sale treatment are interests (including options, futures and forward contracts and short sales) in stock, partnership interests, certain actively traded trust instruments and certain debt instruments. Constructive sale treatment does not apply to certain transactions closed prior to the end of the 30th day after the close of the taxable year, if certain conditions are met.
INVESTMENTS IN SECURITIES OF UNCERTAIN TAX CHARACTER
Each Fund may invest in preferred securities or other securities the U.S. federal income tax treatment of which may not be clear or may be subject to recharacterization by the IRS. To the extent the tax treatment of such securities or the income from such securities differs from the tax treatment expected by a Fund, it could affect the timing or character of income recognized by that Fund, requiring the Fund to purchase or sell securities, or otherwise change its portfolio, in order to comply with the tax rules applicable to regulated investment companies under the Code.
INVESTMENT IN NON-U.S. SECURITIES
Investment income that may be received by a Fund from sources within foreign countries may be subject to foreign taxes withheld at the source. The United States has entered into tax treaties with many foreign countries, which entitle a Fund to a reduced rate of, or exemption from, taxes on such income. If more than 50% of the value of a Funds total assets at the close of the taxable year consists of stock or securities of foreign corporations, that Fund may elect to pass through to its shareholders the amount of foreign taxes paid by that Fund. If the Fund so elects, each shareholder would be required to include in gross income, even though not actually received, his or her pro rata share of the foreign taxes paid by the Fund, but would be treated as having paid his or her pro rata share of such foreign taxes and would therefore be allowed to either deduct such amount in computing taxable income or use such amount (subject to various Code limitations) as a foreign tax credit against federal income tax (but not
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both). For purposes of the foreign tax credit limitation rules of the Code, each shareholder would treat as foreign source income his or her pro rata share of such foreign taxes plus the portion of dividends received from the Fund representing income derived from foreign sources. No deduction for foreign taxes could be claimed by an individual shareholder who does not itemize deductions. In certain circumstances, a shareholder that (i) has held shares of the Fund for less than a specified minimum period during which it is not protected from risk of loss or (ii) is obligated to make payments related to the dividends will not be allowed a foreign tax credit for foreign taxes deemed imposed on dividends paid on such shares. Additionally, the Fund must also meet this holding period requirement with respect to its foreign stocks and securities in order for creditable taxes to flow-through. Each shareholder should consult his or her own tax adviser regarding the potential application of foreign tax credits.
FOREIGN CURRENCY TRANSACTIONS
Under Section 988 of the Code, gains or losses attributable to fluctuations in exchange rates between the time a Fund accrues income or receivables or expenses or other liabilities denominated in a foreign currency and the time that Fund actually collects such income or receivables or pays such liabilities are generally treated as ordinary income or loss. Similarly, gains or losses on foreign currency forward contracts and the disposition of debt securities denominated in a foreign currency, to the extent attributable to fluctuations in exchange rates between the acquisition and disposition dates, are also treated as ordinary income or loss.
INVESTMENTS IN REAL ESTATE INVESTMENT TRUSTS
A Fund may invest in U.S. REITs that hold residual interests in real estate mortgage investment conduits (REMICs) or which are, or have certain wholly-owned subsidiaries that are taxable mortgage pools. Under a Notice issued by the IRS, the Code and Treasury regulations to be issued, a portion of a Funds income from a U.S. REIT that is attributable to the REITs residual interest in a REMIC or, possibly, equity interests in a taxable mortgage pool (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 a Fund, will be allocated to shareholders of the regulated investment company in proportion to the dividends received by such shareholders, with the same consequences as if the shareholders held the related REMIC residual interest or, if applicable, taxable mortgage pool directly. In general, excess inclusion income allocated to shareholders (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 shareholder, 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 Notice imposes certain reporting requirements upon regulated investment companies that have excess inclusion income. The Advisor does not intend to invest a substantial portion of any Funds assets in U.S. REITs which generate excess inclusion income.
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PASSIVE FOREIGN INVESTMENT COMPANIES
A Fund may invest in shares of foreign corporations that may be classified under the Code as passive foreign investment companies (PFICs). In general, a foreign corporation is classified as a PFIC if at least one-half of the average value of its assets held during the taxable year constitute investment-type assets, or 75% or more of its gross income is investment-type income. If a Fund receives a so-called excess distribution with respect to PFIC stock, that Fund itself may be subject to a tax on a portion of the excess distribution, whether or not the corresponding income is distributed by the Fund to shareholders. In general, under the PFIC rules, an excess distribution is treated as having been realized ratably over the period during which a Fund held the PFIC shares. A Fund will itself be subject to tax on the portion, if any, of an excess distribution that is so allocated to prior Fund taxable years and an interest factor will be added to the tax, as if the tax had been payable in such prior taxable years. Certain distributions from a PFIC as well as gain from the sale of PFIC shares are treated as excess distributions. Excess distributions are characterized as ordinary income even though, absent application of the PFIC rules, certain excess distributions might have been classified as capital gain.
A Fund may be eligible to elect alternative tax treatment with respect to PFIC shares. Under an election that currently is available in some circumstances, a Fund would be required to include in its gross income its share of the earnings of a PFIC on a current basis, regardless of whether distributions were received from the PFIC in a given year. If this election were made, the special rules, discussed above, relating to the taxation of excess distributions, would not apply. In addition, another election would involve marking to market a Funds PFIC shares at the end of each taxable year, with the result that unrealized gains would be treated as though they were realized and reported as ordinary income. Any marked-to-market losses and any loss from an actual disposition of PFIC shares would be deductible as ordinary losses to the extent of any net marked-to-market gains included in income in prior years.
Under either election, a Fund might be required to recognize in a year income in excess of its distributions from PFICs and its proceeds from dispositions of PFIC stock during that year, and such income would nevertheless be 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.
Dividends from a PFIC and certain other foreign corporations are not eligible for treatment as qualified dividend income. See Distributions above for a discussion regarding the taxation of qualified dividend income.
Certain other anti-deferral rules could apply to the extent a Fund owes 10% or more of the voting powers of the voting stock of a controlled foreign corporation.
BACKUP WITHHOLDING
A Fund may be required to withhold U.S. federal income tax on all taxable distributions payable to shareholders who fail to provide that Fund with their correct taxpayer identification number or to make required certifications, or who have been notified by the IRS that they are subject to backup withholding. Corporate shareholders and certain other shareholders 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 shareholders U.S. federal income tax liability.
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FOREIGN SHAREHOLDERS
U.S. taxation of income from a Fund to a shareholder who, as to the United States, is a nonresident alien individual, a foreign trust or estate, a foreign corporation or foreign partnership (foreign shareholder) depends on whether the income of that Fund is effectively connected with a U.S. trade or business carried on by the shareholder.
Income Not Effectively Connected . If the income from a Fund is not effectively connected with a U.S. trade or business carried on by the foreign shareholder, distributions of investment company taxable income will generally be subject to a U.S. tax of 30% (or lower treaty rate, except in the case of any excess inclusion income allocated to the shareholder (see TaxationInvestments in Real Estate Investment Trusts, above)), which tax is generally withheld from such distributions. Capital gain dividends and any amounts retained by a Fund which are designated as undistributed capital gains will not be subject to U.S. tax at the rate of 30% (or lower treaty rate) unless the foreign shareholder 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 gains 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. income tax purposes; in that case, he or she would be subject to U.S. income tax on his or her worldwide income at the graduated rates applicable to U.S. citizens, rather than the 30% U.S. withholding tax. In the case of a foreign shareholder who is a nonresident alien individual, a Fund may be required to withhold U.S. income tax on distributions of net capital gains unless the foreign shareholder certifies his or her non-U.S. status under penalties of perjury or otherwise establishes an exemption (generally by providing an Internal Revenue Service Form W-8BEN).
If a Fund is a U.S. real property holding corporation, or would be but for the operation of certain exclusions, distributions by the Fund that are both attributable to gains from U.S. real property interests and realized on account of certain capital gain dividends from REITs, will generally cause the foreign shareholder to be treated as recognizing such gain as income effectively connected to a trade or business within the United States (subject to the rules described below for effectively connected income). Generally, a Fund is required to withhold at a 35% rate on a distribution to a foreign shareholder attributable to such gains, and such a distribution may subject a foreign shareholder to a U.S. tax filing obligation and may create a branch profits tax liability for foreign corporate shareholders. Under a de minimis exception to the rule described above, if a foreign shareholder has not held more than 5% of a Funds shares at any time during the one-year period ending on the date of the distribution, the foreign shareholder is not treated as receiving a distribution attributable to gains from U.S. real property interests derived through REITs, but is, instead, treated as receiving an ordinary distribution subject to U.S. tax at the rate of 30% (or lower treaty rate).
Any gain that a foreign shareholder realizes upon the sale or exchange of such shareholders shares of a Fund will ordinarily be exempt from U.S. tax unless (i) in the case of a shareholder that is a nonresident alien individual, the gain is U.S. source income and such shareholder is physically present in the United States for more than 182 days during the taxable year and meets certain other requirements, or (ii) at any time during the shorter of the period during which the foreign shareholder 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 shareholder actually or constructively held more than 5% of the shares of the Fund. In the latter event the gain would be taxed in the same manner as for a U.S. shareholder, as discussed above. 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
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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 a 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.
Foreign shareholders that engage in certain wash sale and/or substitute dividend payment transactions the effect of which is to avoid the receipt of distributions from the Fund that would be treated as gain effectively connected with a United States trade or business will be treated as having received such distributions. All shareholders of a Fund should consult their tax advisors regarding the application of the foregoing rule.
Income Effectively Connected . If the income from a Fund is effectively connected with a U.S. trade or business carried on by a foreign shareholder, 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. income tax at the graduated rates applicable to U.S. citizens, residents and domestic corporations. Foreign corporate shareholders may also be subject to the branch profits tax imposed by the Code.
The tax consequences to a foreign shareholder entitled to claim the benefits of an applicable tax treaty may differ from those described herein.
Foreign shareholders are advised to consult their own tax advisors with respect to the particular tax consequences to them of an investment in a Fund.
The Hiring Incentives to Restore Employment Act. Under recently enacted legislation that is generally effective in respect of payments made after December 31, 2012, certain payments of U.S. source interest, dividends, and other fixed or determinable annual or periodical gains, profits and income, as well as gross proceeds from the sale or disposition of property of a type that can produce U.S. source dividends and interest (all such payments, withholdable payments), which are made to a foreign financial institution, which term may include certain foreign shareholders, may be subject to a 30% withholding tax, if the foreign financial institution does not, among other things, comply with prescribed due diligence requirements necessary to determine which of its accounts (including equity interests in the foreign financial institution) are held by specified United States persons or United States owned foreign entities (such accounts, United States accounts), and prescribed reporting requirements in respect of its United States accounts. Further, a 30% withholding tax may apply in respect of payments by a foreign financial institution to certain account holders that do not comply with reasonable information requests aimed at enabling the foreign financial institution to identify its United States accounts and meet applicable reporting obligations. The legislation further imposes a 30% withholding tax on certain payments to non-financial foreign entities. The scope of this new legislation is not entirely clear and no assurance can be given that some or all of the income of the Fund and certain of its shareholders will not be subject to any of the new withholding taxes or that information will not be required to be reported to the IRS in respect of a shareholders interest in the Fund. To comply with the requirements of the new legislation, the Fund may, in appropriate circumstances, require shareholders to provide information and tax documentation regarding their direct and indirect owners. The new legislation also imposes information reporting requirements on individuals (and, to the extent provided in future regulations, certain domestic entities) that hold any interest in a specified foreign financial asset if the aggregate value of all such assets held by such individual exceed $50,000.
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Significant penalties can apply upon a failure to make the required disclosure and in respect of understatements of tax attributable to undisclosed foreign financial assets. This information reporting requirement is generally applicable for taxable years beginning after March 18, 2010. The scope of this reporting requirement is not entirely clear and all shareholders should consult their own tax advisers as to whether reporting may be required in respect of their indirect interests in the investments of the Fund.
INVESTMENT BY TAX-EXEMPT INVESTORS
Employee benefit plans and most other organizations exempt from United States federal income tax, including individual retirement accounts and other retirement plans, are subject to United States federal income tax on UBTI. Because the Fund is a corporation for United States federal income tax purposes, an owner of Fund shares will not report on its federal income tax return any of the Funds items of income, gain, loss and deduction. Therefore, a tax-exempt investor generally will not have UBTI attributable to its ownership or sale of Fund shares unless its ownership of Fund shares is debt-financed. In general, Fund shares would be debt-financed if the tax-exempt owner of Fund Shares incurs debt to acquire Fund shares or otherwise incurs or maintains a debt that would not have been incurred or maintained if that Fund shares had not been acquired.
OTHER TAXATION
Fund shareholders may be subject to state, local and foreign taxes on their Fund distributions. Shareholders are advised to consult their own tax advisors with respect to the particular tax consequences to them of an investment in a Fund.
COUNSEL AND INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stroock & Stroock & Lavan LLP, located at 180 Maiden Lane, New York, New York 10038-4982, serves as counsel to each Fund.
PricewaterhouseCoopers LLP, located at 300 Madison Avenue, New York, New York 10017, has been appointed as the independent registered public accounting firm for each Fund.
Each Funds audited financial statements for the fiscal year ended December 31, 2010, including notes thereto, are incorporated by reference to this SAI from each Funds Annual Report dated December 31, 2010.
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PROXY VOTING POLICIES AND PROCEDURES
A. Responsibility . The Advisor and the Subadvisors shall seek to ensure that there is an effective means in place to hold companies accountable for their actions. While management must be accountable to its board, the board must be accountable to a companys shareholders. Although accountability can be promoted in a variety of ways, protecting shareholder voting rights may be among our most important tools.
B. Rationalizing Management and Shareholder Concerns . The Advisor and the Subadvisors seek to ensure that the interests of a companys management and board are aligned with those of the companys shareholders. In this respect, compensation must be structured to reward the creation of shareholder value.
C. Shareholder Communication . Since companies are owned by their shareholders, the Advisor and the Subadvisors seek to ensure that management effectively communicates with its owners about the companys business operations and financial performance. It is only with effective communication that shareholders will be able to assess the performance of management and to make informed decisions on when to buy, sell or hold a companys securities.
In exercising voting rights, the Advisor and the Subadvisors follow the general principles set forth below.
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The ability to exercise a voting right with respect to a security is a valuable right and, therefore, must be viewed as part of the asset itself. |
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In exercising voting rights, the Advisor and the Subadvisors shall engage in a careful evaluation of issues that may materially affect the rights of shareholders and the value of the security. |
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Consistent with general fiduciary principles, the exercise of voting rights shall always be conducted with reasonable care, prudence and diligence. |
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In exercising voting rights on behalf of clients, the Advisor and the Subadvisors shall conduct itself in the same manner as if the Advisor and the Subadvisors were the constructive owners of the securities. |
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To the extent reasonably possible, the Advisor and the Subadvisors shall participate in each shareholder voting opportunity. |
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Voting rights shall not automatically be exercised in favor of management-supported proposals. |
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The Advisor and the Subadvisors, and their respective officers and employees, shall never accept any item of value in consideration of a favorable proxy voting decision. |
Set forth below are general guidelines followed by the Advisor and the Subadvisors in exercising proxy voting rights:
Prudence . In making a proxy voting decision, the Advisor and the Subadvisors shall give appropriate consideration to all relevant facts and circumstances, including the value of the securities to be voted and the likely effect any vote may have on that value. Since voting rights must be exercised on the basis of an informed judgment, investigation shall be a critical initial step.
Third Party Views . While the Advisor and the Subadvisors may consider the views of third parties, the Advisor and the Subadvisors shall never base a proxy voting decision solely on the opinion of a third
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party. Rather, decisions shall be based on a reasonable and good faith determination as to how best to maximize shareholder value.
Shareholder Value. Just as the decision whether to purchase or sell a security is a matter of judgment, determining whether a specific proxy resolution will increase the market value of a security is a matter of judgment as to which informed parties may differ. In determining how a proxy vote may affect the economic value of a security, the Advisor and the Subadvisors shall consider both short-term and long-term views about a companys business and prospects, especially in light of its projected holding period on the stock (e.g., the Advisor may discount long-term views on a short-term holding).
Set forth below are guidelines as to how specific proxy voting issues shall be analyzed and assessed by the Advisor and the Subadvisors. While these guidelines will provide a framework for the Advisors and the Subadvisors decision making process, the mechanical application of these guidelines can never address all proxy voting decisions. When new issues arise or old issues present nuances not encountered before, the Advisor and the Subadvisors must be guided by their reasonable judgment to vote in a manner that the Advisor and the Subadvisors deem to be in the best interests of a Fund and its shareholders. In addition, because the regulatory framework and the business cultures and practices vary from region to region, the below general guidelines may be inconsistent in certain circumstances for proxies of issuers of securities in Europe and Asia.
U NCONTESTED D IRECTOR E LECTIONS
Votes on director nominees should be made on a case-by-case basis using a mosaic approach, where all factors are considered in director elections and where no single issue is deemed to be determinative. For example, a nominees experience and business judgment may be critical to the long-term success of the portfolio company, notwithstanding the fact that he or she may serve on the board of more than four public companies. In evaluating nominees, Advisor and the Subadvisors consider the following factors:
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Whether the nominee attended less than 75 percent of the board and committee meetings without a valid excuse for the absences; |
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Whether the nominee is an inside or affiliated outside director and sits on the audit, compensation, or nominating committees; |
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Whether the board ignored a significant shareholder proposal that was approved by a (i) majority of the shares outstanding or (ii) majority of the votes cast for two consecutive years; |
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Whether the board, without shareholder approval, to the Advisors and Subadvisors knowledge instituted a new poison pill plan, extended an existing plan, or adopted a new plan upon the expiration of an existing plan during the past year; |
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Whether the nominee is an inside or affiliated outside director and the full board serves as the audit, compensation, or nominating committee or the company does not have one of these committees; |
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Whether the nominee is an insider or affiliated outsider on boards that are not at least majority independent; |
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Whether the nominee is the CEO of a publicly-traded company who serves on more than two public boards; |
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Whether the nominee is the chairperson of more than one publicly-traded company; |
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Whether the nominee serves on more than four public company boards; |
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Whether the nominee serves on the audit committee where there is evidence (such as audit reports or reports mandated under the Sarbanes-Oxley Act) that there exists material weaknesses in the companys internal controls; |
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Whether the nominee serves on the compensation committee if that director was present at the time of the grant of backdated options or options the pricing or the timing of which Advisor and the Subadvisors believe may have been manipulated to provide additional benefits to executives; |
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Whether the nominee has a material related party transaction or is believed by the Advisor and the Subadvisors to have a material conflict of interest with the portfolio company; and |
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Whether the nominee (or the overall board) in the Advisors and Subadvisors view has a record of making poor corporate or strategic decisions or has demonstrated an overall lack of good business judgment, including, among other things, whether the companys total shareholder return is in the bottom 25% of its peer group over the prior five years. |
The Advisor and the Subadvisors vote on a case-by-case basis for shareholder proposals requesting companies to amend their bylaws in order to create access to the proxy so as to nominate candidates for directors. The Advisor and the Subadvisors recognize the importance of shareholder access to the ballot process as a means to ensure that boards do not become self-perpetuating and self-serving. However, the Advisor and the Subadvisors are also aware that some proposals may promote certain interest groups and could be disruptive to the nomination process. Special attention will be paid to companies that display a chronic lack of shareholder accountability.
P ROXY C ONTESTS
Director Nominees in a Contested Election . By definition, this type of board candidate or slate runs for the purpose of seeking a significant change in corporate policy or control. Therefore, the economic impact of the vote in favor of or in opposition to that director or slate must be analyzed using a higher standard such as is normally applied to changes in control. Criteria for evaluating director nominees as a group or individually should also include: the underlying reason why the new slate (or individual director) is being proposed; performance; compensation; corporate governance provisions and takeover activity; criminal activity; attendance at meetings; investment in the company; interlocking directorships; inside, outside and independent directors; number of other board seats; and other experience. It is impossible to have a general policy regarding director nominees in a contested election.
Reimbursement of Proxy Solicitation Expenses. Decisions to provide full reimbursement for dissidents waging a proxy contest should be made on a case-by-case basis.
R ATIFICATION OF A UDITORS
The Advisor and the Subadvisors vote for proposals to ratify auditors, unless an auditor has a financial interest in or association with the company, and are therefore not independent; or there is reason to believe that the independent auditor has rendered an opinion that is neither accurate nor indicative of the companys financial position. Generally, the Advisor and the Subadvisors vote against auditor ratification and withhold votes from audit committee members if non-audit fees exceed audit fees. The Advisor and the Subadvisors vote on a case-by-case basis on auditor rotation proposals. Criteria for evaluating the rotation proposal include, but are not limited to: tenure of the audit firm; establishment and disclosure of a renewal process whereby the auditor is regularly evaluated for both audit quality and competitive price; length of the rotation period advocated in the proposal; and any significant audit related issues. Generally, the Advisor and the Subadvisors vote against auditor indemnification and limitation of liability; however the Advisor and the Subadvisors recognize there may be situations where indemnification and limitations on liability may be appropriate.
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T AKEOVER D EFENSES
While the Advisor and the Subadvisors recognize that a takeover attempt can be a significant distraction for the board and management to deal with, the simple fact is that the possibility of a corporate takeover keeps management focused on maximizing shareholder value. As a result, the Advisor and the Subadvisors oppose measures that are designed to prevent or obstruct corporate takeovers because they can entrench current management. The following are our guidelines on change of control issues:
Shareholder Rights Plans . The Advisor and the Subadvisors acknowledge that there are arguments for and against shareholder rights plans, also known as poison pills. Companies should put their case for rights plans to shareholders. The Advisor and the Subadvisors review on a case-by-case basis management proposals to ratify a poison pill. The Advisor and the Subadvisors generally look for shareholder friendly features including a two- to three-year sunset provision, a permitted bid provision and a 20 percent or higher flip-in provision.
Greenmail . The Advisor and the Subadvisors vote for proposals to adopt anti-greenmail charter or bylaw amendments or otherwise restricts a companys ability to make greenmail payments.
Unequal Voting Rights . Generally, the Advisor and the Subadvisors vote against dual-class recapitalizations as they offer an effective way for a firm to thwart hostile takeovers by concentrating voting power in the hands of management or other insiders.
Classified Boards . The Advisor and the Subadvisors generally vote in favor of shareholder proposals to declassify a board of directors, although the Advisor and the Subadvisors acknowledge that a classified board may be in the long-term best interests of a company in certain situations, such as continuity of a strong board and management team. In voting on shareholder proposals to declassify a board of directors, the Advisor and the Subadvisors evaluate all facts and circumstances surrounding such proposal, including whether the shareholder proposing the de-classification has an agenda in making such proposal that may be at odds with the long-term best interests of the company or whether it would be in the best interests of the company to thwart a shareholders attempt to control the board of directors.
Cumulative Voting . Having the ability to cumulate votes for the election of directorsthat is, cast more than one vote for a director about whom they feel stronglygenerally increases shareholders rights to effect change in the management of a corporation. The Advisor and the Subadvisors generally support, therefore, proposals to adopt cumulative voting.
Shareholder Ability to Call Special Meeting . The Advisor and the Subadvisors vote on a case-by-case basis for shareholder proposals requesting companies to amend their governance documents (bylaws and/or charter) in order to allow shareholders to call special meetings. The Advisor and the Subadvisors recognize the importance of shareholder ability to call a special meeting, however, the Advisor and the Subadvisors are also aware that some proposals are put forth in order to promote the agenda(s) of certain special interest groups and could be disruptive to the management of the company.
Shareholder Ability to Act by Written Consent . The Advisor and the Subadvisors generally vote against proposals to allow or facilitate shareholder action by written consent. The requirement that all shareholders be given notice of a shareholders meeting and matters to be discussed therein seems to provide a reasonable protection of minority shareholder rights.
Shareholder Ability to Alter the Size of the Board . The Advisor and the Subadvisors generally vote for proposals that seek to fix the size of the board and vote against proposals that give management the
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ability to alter the size of the board without shareholder approval. While the Advisor and the Subadvisors recognize the importance of such proposals, the Advisor and the Subadvisors are, however, also aware that these proposals are sometimes put forth in order to promote the agenda(s) of certain special interest groups and could be disruptive to the management of the company.
M ISCELLANEOUS B OARD P ROVISIONS
Board Committees . Boards should delegate key oversight functions, such as responsibility for audit, nominating and compensation issues, to independent committees. The chairman and members of any committee should be clearly identified in the annual report. Any committee should have the authority to engage independent advisors where appropriate at the companys expense.
Audit, nominating and compensation committees should consist solely of non-employee directors, who are independent of management.
Separate Chairman and CEO Positions . The Advisor will generally vote for proposals looking to separate the CEO and Chairman roles. The Advisor and the Subadvisors do acknowledge, however, that under certain circumstances, it may be reasonable for the CEO and Chairman roles to be held by a single person.
Lead Directors and Executive Sessions . In cases where the CEO and Chairman roles are combined, the Advisor and the Subadvisors will vote for the appointment of a lead (non-insider) director and for regular executive sessions (board meetings taking place without the CEO/Chairman present).
Majority of Independent Directors . The Advisor and the Subadvisors vote for proposals that call for the board to be composed of a majority of independent directors. The Advisor and the Subadvisors believe that a majority of independent directors can be an important factor in facilitating objective decision making and enhancing accountability to shareholders.
Independent Committees . The Advisor and the Subadvisors vote for shareholder proposals requesting that the boards audit, compensation, and nominating committees consist exclusively of independent directors.
Stock Ownership Requirements . The Advisor and the Subadvisors support measures requiring senior executives to hold a minimum amount of stock in a company (often expressed as a percentage of annual compensation), which may include restricted stock or restricted stock units.
Term of Office . The Advisor and the Subadvisors vote against shareholder proposals to limit the tenure of outside directors. Term limits pose artificial and arbitrary impositions on the board and could harm shareholder interests by forcing experienced and knowledgeable directors off the board.
Director and Officer Indemnification and Liability Protection . Proposals concerning director and officer indemnification and liability protection should be evaluated on a case-by-case basis.
Board Size. The Advisor and the Subadvisors generally vote for proposals to limit the size of the board to 15 members or less.
Majority Vote Standard. The Advisor and the Subadvisors generally vote for proposals asking for the board to initiate the appropriate process to amend the companys governance documents (charter or bylaws) to provide that director nominees shall be elected by the affirmative vote of the majority of votes cast at an annual meeting of shareholders. The Advisor and the Subadvisors would generally review on a case-by-case basis proposals that address alternative approaches to a majority vote requirement.
Confidential Voting. The Advisor and the Subadvisors vote for shareholder proposals requesting that companies adopt confidential voting, use independent tabulators, and use independent inspectors of
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election as long as the proposals include clauses for proxy contests as follows: in the case of a contested election, management should be permitted to request that the dissident group honor its confidential voting policy. If the dissidents agree, the policy remains in place. If the dissidents do not agree, the confidential voting policy is waived.
The Advisor and the Subadvisors also vote for management proposals to adopt confidential voting.
Bundled Proposals. The Advisor and the Subadvisors review on a case-by-case basis bundled or conditioned proxy proposals. In the case of items that are conditioned upon each other, the Advisor and the Subadvisors examine the benefits and costs of the packaged items. In instances where the joint effect of the conditioned items is not in shareholders best interests, the Advisor and the Subadvisors vote against the proposals. If the combined effect is positive, the Advisor and the Subadvisors support such proposals. In the case of bundled director proposals, we will vote for the entire slate only if we would have otherwise voted for each director on an individual basis.
Date/Location of Meeting. The Advisor and the Subadvisors vote against shareholder proposals to change the date or location of the shareholders meeting. No one site will meet the needs of all shareholders.
Adjourn Meeting if Votes are Insufficient. Open-ended requests for adjournment of a shareholder meeting generally will not be supported. However, where management specifically states the reason for requesting an adjournment and the requested adjournment is necessary to permit a proposal that would otherwise be supported under this policy to be carried out; the adjournment request will be supported.
Disclosure of Shareholder Proponents. The Advisor and the Subadvisors vote for shareholder proposals requesting that companies disclose the names of shareholder proponents. Shareholders may wish to contact the proponents of a shareholder proposal for additional information.
C APITAL S TRUCTURE
Increase Additional Common Stock. The Advisor and the Subadvisors generally vote for increases in authorized shares, provided that the increase is not greater than three times the number of shares outstanding and reserved for issuance (including shares reserved for stock-related plans and securities convertible into common stock, but not shares reserved for any poison pill plan). Votes generally are cast in favor of proposals to authorize additional shares of stock except where the proposal:
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creates a blank check preferred stock; or |
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establishes classes of stock with superior voting rights. |
Blank Check Preferred Stock. Votes generally are cast in opposition to management proposals authorizing the creation of new classes of preferred stock with unspecific voting, conversion, distribution and other rights, and management proposals to increase the number of authorized blank check preferred shares. The Advisor and the Subadvisors may vote in favor of this type of proposal when they receive assurances to its reasonable satisfaction that (i) the preferred stock was authorized by the board for the use of legitimate capital formation purposes and not for anti-takeover purposes, and (ii) no preferred stock will be issued with voting power that is disproportionate to the economic interests of the preferred stock. These representations should be made either in the proxy statement or in a separate letter from the company to the Advisor and, as applicable, the Subadvisors.
Pre-emptive Rights. We believe that the governance and regulation of public equity markets allow for adequate shareholder protection against dilution. Further, we believe that companies should have more
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flexibility to issue shares without costly and time constraining rights offerings. As such, we do not believe that pre-emptive rights are necessary and as such, we generally vote for the issuance of equity shares without pre-emptive rights. On a limited basis, we will vote for shareholder pre-emptive rights where such pre-emptive rights are necessary, taking into account the best interests of the companys shareholders.
We acknowledge that international local practices typically call for shareholder pre-emptive rights when a company seeks authority to issue shares (e.g., UK authority for the issuance of only up to 5% of outstanding shares without pre-emptive rights). While we would prefer that companies be permitted to issue shares without pre-emptive rights, in deference to international local practices, in markets outside the US we will approve issuance requests without pre-emptive rights for up to 100% of a companys outstanding capital.
Dual Class Capitalizations. Because classes of common stock with unequal voting rights limit the rights of certain shareholders, the Advisor and the Subadvisors vote against adoption of a dual or multiple class capitalization structure.
Restructurings/Recapitalizations . The Advisor and the Subadvisors review proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan on a case-by-case basis. In voting, the Advisor and the Subadvisors consider the following issues:
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dilutionhow much will ownership interest of existing shareholders be reduced, and how extreme will dilution to any future earnings be? |
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change in controlwill the transaction result in a change in control of the company? |
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bankruptcygenerally, approve proposals that facilitate debt restructurings unless there are clear signs of self-dealing or other abuses. |
Share Repurchase Programs . Boards may institute share repurchase or stock buy-back programs for a number of reasons. The Advisor and the Subadvisors will generally vote in favor of such programs where the repurchase would be in the long-term best interests of shareholders, and where the company is not thought to be able to use the cash in a more useful way.
The Advisor and the Subadvisors will vote against such programs when shareholders interests could be better served by deployment of the cash for alternative uses, or where the repurchase is a defensive maneuver or an attempt to entrench management.
Targeted Share Placements . These shareholder proposals ask companies to seek shareholder approval before placing 10% or more of their voting stock with a single investor. The proposals are typically in reaction to the placement by various companies of a large block of their voting stock in an ESOP, parent capital fund or with a single friendly investor, with the aim of protecting themselves against a hostile tender offer. These proposals are voted on a case-by-case basis after reviewing the individual situation of the company receiving the proposal.
E XECUTIVE AND D IRECTOR C OMPENSATION
Executive Compensation (Say on Pay). Votes regarding shareholder say on pay are determined on a case-by-case basis. Generally, we believe that executive compensation should be tied to the long-term performance of the executive and the company as well as relevant market conditions. We therefore monitor the compensation practices of those companies that compensate their executives in the top 10% tier to determine whether compensation to these executives is commensurate to the companys long-term performance (i.e., we expect companies that pay their executives in the top 10% pay range to also be performing commensurately well).
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Further, pay elements that are not directly based on performance are generally evaluated on a case-by-case basis considering the context of a companys overall pay program and demonstrated pay-for-performance philosophy. The following list highlights certain negative pay practices that carry significant weight in this overall consideration and may result in adverse vote recommendations:
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Repricing or replacing of underwater stock options/SARS without prior shareholder approval (including cash buyouts and voluntary surrender of underwater options); |
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Excessive perquisites or tax gross-ups; |
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New or extended agreements that provide for: |
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CIC payments exceeding 3 times base salary and bonus; |
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CIC severance payments without involuntary job loss or substantial diminution of duties (single or modified single triggers); |
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CIC payments with excise tax gross-ups (including modified gross-ups). |
Also, we generally vote for shareholder proposals that seek additional disclosure of executive and director pay information.
Frequency of Advisory Vote on Executive Compensation (Say When on Pay). We generally vote for annual advisory votes on compensation as we note that executive compensation is also evaluated on an annual basis by the companys compensation committee.
Stock-based Incentive Plans . Votes with respect to compensation plans should be determined on a case-by-case basis. The analysis of compensation plans focuses primarily on the transfer of shareholder wealth (the dollar cost of pay plans to shareholders). Other matters included in our analysis are the amount of the companys outstanding stock to be reserved for the award of stock options or restricted stock, whether the exercise price of an option is less than the stocks fair market value at the date of the grant of the options, and whether the plan provides for the exchange of outstanding options for new ones at lower exercise prices. Every award type is valued. An estimated dollar cost for the proposed plan and all continuing plans is derived. This cost, dilution to shareholders equity, will also be expressed as a percentage figure for the transfer of shareholder wealth and will be considered along with dilution to voting power. Once the cost of the plan is estimated, it is compared to an allowable industry-specific and market cap-based dilution cap.
If the proposed plan cost is above the allowable cap, an against vote is indicated. If the proposed cost is below the allowable cap, a vote for the plan is indicated unless the plan violates the repricing guidelines. If the company has a history of repricing options or has the express ability to reprice underwater stock options without first securing shareholder approval under the proposed plan, the plan receives an against voteeven in cases where the plan cost is considered acceptable based on the quantitative analysis.
The Advisor and the Subadvisors vote against equity plans that have high average three year burn rates, unless the company has publicly committed to reduce the burn rate to a rate that is comparable to its peer group (as determined by the Advisor).
Approval of Cash or Cash-and-Stock Bonus Plans . The Advisor and the Subadvisors vote for cash or cash-and-stock bonus plans to exempt the compensation from limits on deductibility under the provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code).
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Reload/Evergreen Features . The Advisor and the Subadvisors will generally vote against plans that enable the issuance of reload options and that provide an automatic share replenishment (evergreen) feature.
Golden Parachutes. In general, the guidelines call for voting against golden parachute plans because they impede potential takeovers that shareholders should be free to consider. In particular, the Advisor and the Subadvisors oppose the use of employment contracts that result in cash grants of greater than three times annual compensation (salary and bonus) and generally withhold their votes at the next shareholder meeting for directors whom to its knowledge approved golden parachutes.
Voting on Golden Parachutes in an Acquisition, Merger, Consolidation, or Proposed Sale. We vote on a case-by-case basis on proposals to approve the company's golden parachute compensation. Features that may lead to a vote against include:
· |
Potentially excessive severance payments (cash grants of greater than three times annual compensation (salary and bonus)); |
· |
Recently adopted or materially amended agreements that include excessive excise tax gross-up provisions (since prior annual meeting); |
· |
Recently adopted or materially amended agreements that include modified single triggers (since prior annual meeting); |
· |
Single trigger payments that will happen immediately upon a change in control, including cash payment and such items as the acceleration of performance-based equity despite the failure to achieve performance measures; |
· |
Single-trigger vesting of equity based on a definition of change in control that requires only shareholder approval of the transaction (rather than consummation); |
· |
Recent amendments or other changes that may make packages so attractive as to influence merger agreements that may not be in the best interests of shareholders; |
· |
In the case of a substantial gross-up from pre-existing/grandfathered contract: the element that triggered the gross-up (i.e., option mega-grants at low point in stock price, unusual or outsized payments in cash or equity made or negotiated prior to the merger); or |
· |
The companys assertion that a proposed transaction is conditioned on shareholder approval of the golden parachute advisory vote. |
401(k) Employee Benefit Plans . The Advisor and the Subadvisors vote for proposals to implement a 401(k) savings plan for employees.
Employee Stock Purchase Plans . The Advisor and the Subadvisors support employee stock purchase plans, although the Advisor and the Subadvisors generally believe the discounted purchase price should be at least 85% of the current market price.
Option Expensing . The Advisor and the Subadvisors vote for shareholder proposals to expense fixed-price options.
Vesting . The Advisor and the Subadvisors believe that restricted stock awards normally should vest over at least a two-year period.
Option Repricing . The Advisor and the Subadvisors believe that stock options generally should not be re-priced, and never should be re-priced without shareholder approval. In addition, companies should
A-9
not issue new options, with a lower strike price, to make up for previously issued options that are substantially underwater. The Advisor and the Subadvisors will vote against the election of any slate of directors that, to its knowledge, has authorized a company to re-price or replace underwater options during the most recent year without shareholder approval.
Stock Holding Periods . The Advisor and the Subadvisors generally vote against all proposals requiring executives to hold the stock received upon option exercise for a specific period of time.
Transferable Stock Options . The Advisor and the Subadvisors review on a case-by-case basis proposals to grant transferable stock options or otherwise permit the transfer of outstanding stock options, including cost of proposal and alignment with shareholder interests.
Recoup Bonuses . The Advisor and the Subadvisors vote on a case-by-case on shareholder proposals to recoup unearned incentive bonuses or other incentive payments made to senior executives if it is later determined that fraud, misconduct, or negligence significantly contributed to a restatement of financial results that led to the awarding of unearned incentive compensation.
I NCORPORATION
Reincorporation Outside of the United States . Generally, the Advisor and the Subadvisors will vote against companies looking to reincorporate outside of the U.S.
Voting on State Takeover Statutes . The Advisor and the Subadvisors review on a case-by-case basis proposals to opt in or out of state takeover statutes (including control share acquisition statutes, control share cash-out statutes, freeze out provisions, fair price provisions, stakeholder laws, poison pill endorsements, severance pay and labor contract provisions, anti greenmail provisions, and disgorgement provisions). In voting on these shareholder proposals, The Advisor and the Subadvisors evaluate all facts and circumstances surrounding such proposal, including whether the shareholder proposing such measure has an agenda in making such proposal that may be at odds with the long-term best interests of the company or whether it would be in the best interests of the company to thwart a shareholders attempt to control the board of directors.
Voting on Reincorporation Proposals . Proposals to change a companys state of incorporation are examined on a case-by-case basis. In making its decision, the Advisor and the Subadvisors review managements rationale for the proposal, changes to the charter/bylaws, and differences in the state laws governing the companies.
M ERGERS AND C ORPORATE R ESTRUCTURINGS
Mergers and Acquisitions . Votes on mergers and acquisitions should be considered on a case-by-case basis, taking into account factors including the following: anticipated financial and operating benefits; offer price (cost vs. premium); prospects of the combined companies; how the deal was negotiated; and changes in corporate governance and their impact on shareholder rights.
The Advisor and the Subadvisors vote against proposals that require a super-majority of shareholders to approve a merger or other significant business combination. The Advisor and the Subadvisors support proposals that seek to lower super-majority voting requirements.
Nonfinancial Effects of a Merger or Acquisition . Some companies have proposed a charter provision which specifies that the board of directors may examine the nonfinancial effect of a merger or acquisition on the company. This provision would allow the board to evaluate the impact a proposed change in control would have on employees, host communities, suppliers and/or others. The Advisor and the Subadvisors generally vote against proposals to adopt such charter provisions. The Advisor and the Subadvisors feel it is the directors fiduciary duty to base decisions solely on the financial interests of the shareholders.
A-10
Corporate Restructuring . Votes on corporate restructuring proposals, including minority squeeze outs, leveraged buyouts, going private proposals, spin-offs, liquidations, and asset sales, should be considered on a case-by-case basis.
Spin-offs . Votes on spin-offs should be considered on a case-by-case basis depending on the tax and regulatory advantages, planned use of sale proceeds, market focus, and managerial incentives.
Asset Sales . Votes on asset sales should be made on a case-by-case basis after considering the impact on the balance sheet/working capital, value received for the asset, and potential elimination of diseconomies.
Liquidations . Votes on liquidations should be made on a case-by-case basis after reviewing managements efforts to pursue other alternatives, appraisal value of assets, and the compensation plan for executives managing the liquidation.
Appraisal Rights . The Advisor and the Subadvisors vote for proposals to restore, or provide shareholders with, rights of appraisal. Rights of appraisal provide shareholders who are not satisfied with the terms of certain corporate transactions the right to demand a judicial review in order to determine a fair value for their shares.
Changing Corporate Name . The Advisor and the Subadvisors vote for changing the corporate name.
S HAREHOLDER R IGHTS .
Our position on the rights of shareholders is as follows:
· |
Shareholders should be given the opportunity to exercise their rights. Notification of opportunities for the exercise of voting rights should be given in good time. |
· |
Shareholders are entitled to submit questions to company management. |
· |
Minority shareholders should be protected as far as possible from the exercise of voting rights by majority shareholders. |
· |
Shareholders are entitled to hold company management as well as the legal person or legal entity accountable for any action caused by the company or company management for which the company, company management or legal entity should bear responsibility. |
S OCIAL I SSUES
The Advisor and the Subadvisors believe that it is the responsibility of the board and management to run a company on a daily basis. With this in mind, in the absence of unusual circumstances, the Advisor and the Subadvisors do not believe that shareholders should be involved in determining how a company should address broad social and policy issues. As a result, the Advisor generally votes against these types of proposals, which are generally initiated by shareholders, unless the Advisor and the Subadvisors believes the proposal has significant economic implications.
A-11
RATING CATEGORIES
The following is a description of certain ratings assigned by S&P, Moodys and Fitch Ratings (Fitch).
S&P
An S&P issue credit rating is a forward-looking opinion about the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The opinion reflects S&Ps view of the obligors capacity and willingness to meet its financial commitments as they come due, and may assess terms, such as collateral security and subordination, which could affect ultimate payment in the event of default.
Issue credit ratings can be either long-term or short-term. Short-term ratings are generally assigned to those obligations considered short-term in the relevant market. In the U.S., for example, that means obligations with an original maturity of no more than 365 days, including commercial paper. Short-term ratings also are used to indicate the creditworthiness of an obligor with respect to put features on long-term obligations. The result is a dual rating, in which the short-term rating addresses the put feature, in addition to the usual long-term rating. Medium-term notes are assigned long-term ratings.
Long-Term Issue Credit Ratings
Issue credit ratings are based, in varying degrees, on S&Ps analysis of the following considerations:
· |
likelihood of payment; |
· |
capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation; |
· |
nature of and provisions of the obligation; and |
· |
protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization or other arrangement under the laws of bankruptcy and other laws affecting creditors rights. |
Issue ratings are an assessment of default risk, but may incorporate an assessment of relative seniority or ultimate recovery in the event of default. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above. (Such differentiation may apply when an entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.)
An obligation rated AAA has the highest rating assigned by S&P. The obligors capacity to meet its financial commitment on the obligation is extremely strong.
An obligation rated AA differs from the highest-rated obligations only to a small degree. The obligors capacity to meet its financial commitment on the obligation is very strong.
An obligation rated A is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligors capacity to meet its financial commitment on the obligation is still strong.
B-1
An obligation rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
Obligations rated BB , B , CCC , CC and C are regarded as having significant speculative characteristics. BB indicates the least degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
An obligation rated BB is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which could lead to the obligors inadequate capacity to meet its financial commitment on the obligation.
An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial or economic conditions will likely impair the obligors capacity or willingness to meet its financial commitment on the obligation.
An obligation rated CCC is currently vulnerable to nonpayment, and is dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
An obligation rated CC is currently highly vulnerable to nonpayment.
A C rating is assigned to obligations that are currently highly vulnerable to nonpayment, obligations that have payment arrearages allowed by the terms of the documents or obligations of an issuer that is the subject of a bankruptcy petition or similar action which have not experienced a payment default. Among others, the C rating may be assigned to subordinated debt, preferred stock or other obligations on which cash payments have been suspended in accordance with the instruments terms or when preferred stock is the subject of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.
An obligation rated D is in payment default. The D rating category is used when payments on an obligation, including a regulatory capital instrument, are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition or the taking of similar action if payments on an obligation are jeopardized. An obligations rating is lowered to D upon completion of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.
Note: The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.
An NR indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular obligation as a matter of policy.
Short-Term Issue Credit Ratings
A short-term obligation rated A-1 is rated in the highest category by S&P. The obligors capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are
B-2
designated with a plus sign (+). This indicates that the obligors capacity to meet its financial commitment on these obligations is extremely strong.
A short-term obligation rated A-2 is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligors capacity to meet its financial commitment on the obligation is satisfactory.
A short-term obligation rated A-3 exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
A short-term obligation rated B is regarded as having significant speculative characteristics. Ratings of B-1, B-2, and B-3 may be assigned to indicate finer distinctions within the B category. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligors inadequate capacity to meet its financial commitment on the obligation.
A short-term obligation rated B-1 is regarded as having significant speculative characteristics, but the obligor has a relatively stronger capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors.
A short-term obligation rated B-2 is regarded as having significant speculative characteristics, and the obligor has an average speculative-grade capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors.
A short-term obligation rated B-3 is regarded as having significant speculative characteristics, and the obligor has a relatively weaker capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors.
A short-term obligation rated C is currently vulnerable to nonpayment and is dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation.
A short-term obligation rated D is in payment default. The D rating category is used when payments on an obligation, including a regulatory capital instrument, are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.
Municipal Short-Term Note Ratings Definitions
An S&P U.S. municipal note rating reflects S&Ps opinion about the liquidity factors and market access risks unique to the notes. Notes due in three years or less will likely receive a note rating. Notes with an original maturity of more than three years will most likely receive a long-term debt rating. In determining which type of rating, if any, to assign, S&P analysis will review the following considerations:
· |
amortization schedule the larger the final maturity relative to other maturities, the more likely it will be treated as a note; and |
· |
source of payment the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note. |
B-3
Note rating symbols are as follows:
SP-1 | Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation. |
SP-2 | Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes. |
SP-3 | Speculative capacity to pay principal and interest. |
Moodys
Long-Term Obligation Ratings and Definitions
Moodys long-term obligation ratings are opinions of the relative credit risk of fixed income obligations with an original maturity of one year or more. They address the possibility that a financial obligation will not be honored as promised. Such ratings reflect both the likelihood of default and any financial loss suffered in the event of default.
Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk.
Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.
Obligations rated A are considered upper-medium grade and are subject to low credit risk.
Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics.
Obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk.
Obligations rated B are considered speculative and are subject to high credit risk.
Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk.
Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
Obligations rated C are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.
Note: Moodys appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking and the modifier 3 indicates a ranking in the lower end of that generic rating category.
Short-Term Ratings
Moodys short-term ratings are opinions of the ability of issuers to honor short-term financial obligations. Ratings may be assigned to issuers, short-term programs or to individual short-term debt instruments. Such obligations generally have an original maturity not exceeding thirteen months, unless explicitly noted.
Moodys employs the following designations to indicate the relative repayment ability of rated issuers:
P-1 | Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations. |
P-2 | Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations. |
B-4
P-3 | Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term debt obligations. |
NP | Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories. |
Fitch
Corporate Finance ObligationsLong-Term Rating Scales
Ratings of individual securities or financial obligations of a corporate issuer address relative vulnerability to default on an ordinal scale. In addition, for financial obligations in corporate finance, a measure of recovery given default on that liability also is included in the rating assessment. This notably applies to covered bond ratings, which incorporate both an indication of the probability of default and of the recovery given a default of this debt instrument.
The relationship between issuer scale and obligation scale assumes an historical average recovery of between 30%50% on the senior, unsecured obligations of an issuer. As a result, individual obligations of entities, such as corporations, are assigned ratings higher, lower or the same as that entitys issuer rating.
Highest credit quality: AAA ratings denote the lowest expectation of credit risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.
Very high credit quality: AA ratings denote expectations of very low credit risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.
High credit quality: A ratings denote expectations of low credit risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.
Good credit quality: BBB ratings indicate that expectations of credit risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.
Speculative: BB ratings indicate an elevated vulnerability to credit risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial alternatives may be available to allow financial commitments to be met.
Highly speculative: B ratings indicate that material credit risk is present.
Substantial credit risk: CCC ratings indicate that substantial credit risk is present.
Very high levels of credit risk: CC ratings indicate very high levels of credit risk.
Exceptionally high levels of credit risk: C indicates exceptionally high levels of credit risk.
Defaulted obligations typically are not assigned D ratings, but are instead rated in the B to C rating categories, depending upon their recovery prospects and other relevant characteristics. This approach better aligns obligations that have comparable overall expected loss but varying vulnerability to default and loss.
B-5
Note: The modifiers + or - may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the AAA obligation rating category, or to corporate finance obligation ratings in the categories below B.
Structured, Project & Public Finance ObligationsLong-Term Rating Scales
Ratings of structured finance, project finance and public finance obligations on the long-term scale, including the financial obligations of sovereigns, consider the obligations relative vulnerability to default. These ratings are typically assigned to an individual security or tranche in a transaction and not to an issuer.
Highest credit quality: AAA ratings denote the lowest expectation of default risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.
Very high credit quality: AA ratings denote expectations of very low default risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.
High credit quality: A ratings denote expectations of low default risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.
Good credit quality: BBB ratings indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.
Speculative: BB ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time.
Highly speculative: B ratings indicate that material default risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment.
Substantial credit risk: CCC indicates that default is a real possibility.
Very high levels of credit risk: CC indicates that default of some kind appears probable.
Exceptionally high levels of credit risk: C indicates that default appears imminent or inevitable.
Default: D indicates a default. Default generally is defined as one of the following:
· |
failure to make payment of principal and/or interest under the contractual terms of the rated obligation; |
· |
the bankruptcy filings, administration, receivership, liquidation or other winding-up or cessation of the business of an issuer/obligor; or |
· |
the coercive exchange of an obligation, where creditors were offered securities with diminished structural or economic terms compared with the existing obligation. |
Short-Term Ratings Assigned to Obligations in Corporate, Public and Structured Finance
A short-term issuer or obligation rating is based in all cases on the short-term vulnerability to default of the rated entity or security stream and relates to the capacity to meet financial obligations in accordance with the documentation governing the relevant obligation. Short-term ratings are assigned
B-6
to obligations whose initial maturity is viewed as short-term based on market convention. Typically, this means up to 13 months for corporate, sovereign and structured obligations, and up to 36 months for obligations in U.S. public finance markets.
Highest short-term credit quality: F1 indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added + to denote any exceptionally strong credit feature.
Good short-term credit quality: F2 indicates good intrinsic capacity for timely payment of financial commitments.
Fair short-term credit quality: F3 indicates that the intrinsic capacity for timely payment of financial commitments is adequate.
Speculative short-term credit quality: B indicates minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions.
High short-term default risk: C indicates that default is a real possibility.
Restricted default: RD indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations. Applicable to entity ratings only.
Default: D indicates a broad-based default event for an entity, or the default of a specific short-term obligation.
B-7
PART C
OTHER INFORMATION
(1) | Incorporated by reference from Registrants Initial Registration Statement on Form N-1A filed with the Securities and Exchange Commission (Commission) on November 23, 2004 (Accession Number 0000950117-04-004124. |
(2) | Incorporated by reference from Registrants Pre-Effective Amendment No. 1 to its Registration Statement on Form N-1A filed with the Commission on March 4, 2005 (Accession Number 0000950117-05-000838. |
(3) | Incorporated by reference from Registrants Post-Effective Amendment No.4 to its Registration Statement on Form N-1A filed with the Commission on April 30, 2009 (Accession Number 0001193125-09-093623). |
(4) | Incorporated by reference from Registrants Post-Effective Amendment No.6 to its Registration Statement on Form N-1A filed with the Commission on April 30, 2010 (Accession Number 0001193125-10-043060). |
* | Filed herewith. |
C-1
ITEM 29. | PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT |
Not Applicable.
ITEM 30. | INDEMNIFICATION |
It is the Registrants policy to indemnify its Directors and officers 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 Registrants Articles of Incorporation, filed as Exhibit (a) to the Registrants Registration Statement filed on November 23, 2004, and Article VIII, of the Registrants By-Laws, filed as Exhibit (b) to this Post-Effective Amendment. The liability of the Registrants Directors and officers is dealt with in Article EIGHTH of Registrants Articles of Incorporation. The liability of Cohen & Steers Capital Management, Inc. (the Advisor), for any loss suffered by the Registrant or its shareholders is set forth in Section 4 of the Investment Advisory Agreement, filed as Exhibit (d)(i) to Pre-Effective Amendment No. 1 to the Registration Statement filed on March 4, 2005. The liability of Cohen & Steers Capital Management, Inc., the Registrants administrator, for any loss suffered by the Registrant or its shareholders is set forth in Section 6 of the Administration Agreement, filed as Exhibit (h)(i) to Post-Effective Amendment No. 4 to the Registration Statement filed on April 30, 2009. The liability of Cohen & Steers Securities, LLC, the Registrants distributor, for any loss suffered by the Registrant or its shareholders is set forth in Section 8 of each of the Underwriter Agreement and Distribution Agreement filed as Exhibits (e)(i) and (e)(ii), respectively, to Pre-Effective Amendment No. 1 to the Registration Statement filed on March 4, 2005.
Insofar as indemnification for liabilities under the Securities Act of 1933, as amended (the Securities Act), may be permitted to the directors and officers, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in such Act and is therefore unenforceable. If a claim for indemnification against such liabilities under the Securities Act (other than for expenses incurred in a successful defense) is asserted against the Registrant by the directors or officers in connection with the shares, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
ITEM 31. | BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISORS |
This information is set forth under the caption Management of the Fund in the Prospectus and in the Statement of Additional Information constituting Parts A and B, respectively, of this Registration Statement.
(a) The following is a list of the directors and officers of the Advisor. Unless otherwise indicated, none of the persons listed below has had other business connections of a substantial nature during the past two fiscal years other than as stated in the Prospectus forming Part A of this Registration Statement or in response to Item 32(b) below.
Name |
Title |
Other Business/Position Held/Dates |
||
Robert H. Steers |
Co-Chairman and Co-Chief Executive Officer, Director | * | ||
Martin Cohen |
Co-Chairman and Co-Chief Executive Officer, Director | * | ||
Joseph M. Harvey |
President | * | ||
Adam M. Derechin |
Executive Vice President and Chief Operating Officer | * | ||
Matthew S. Sadler |
Executive Vice President and Chief Financial Officer | * | ||
Frank Poli |
Executive Vice President, General Counsel | Quantum Sphere, Inc., Board of Directors, 2006 - present | ||
Douglas R. Bond |
Executive Vice President | * | ||
William J. Frischling |
Executive Vice President | * |
C-2
Name |
Title |
Other Business/Position Held/Dates |
||
Stephen Dunn |
Executive Vice President | * | ||
William F. Scapell |
Senior Vice President, Director of Fixed Income Investments | * | ||
Robert Becker |
Senior Vice President | * | ||
Thomas Bohjalian |
Senior Vice President | * | ||
Yigal Jhirad |
Senior Vice President | * | ||
James Giallanza |
Senior Vice President | * | ||
Bernard Doucette |
Senior Vice President and Chief Accounting Officer | * | ||
Richard E. Helm |
Senior Vice President | * | ||
Norbert Berrios |
Senior Vice President | * | ||
Salvatore Rappa |
Senior Vice President and Associate General Counsel | * | ||
Lisa Phelan |
Senior Vice President and Director of Compliance | * | ||
Michele Nolty |
Senior Vice President | * | ||
Terrance R. Ober |
Senior Vice President | * | ||
Robert Tisler |
Senior Vice President | * | ||
Frank Zukowski |
Senior Vice President | * | ||
Steven Buckridge |
Senior Vice President | * | ||
Stephen Coyle |
Senior Vice President | * | ||
Scott Crowe |
Senior Vice President | * | ||
Brooks Hamblett |
Senior Vice President | * | ||
Christopher Henderson |
Senior Vice President | * | ||
James McAdams |
Senior Vice President | * | ||
Charles McKinley |
Senior Vice President | * | ||
Nancy Norton |
Senior Vice President | * | ||
Matthew Pace |
Senior Vice President | Pace Metals, Inc., Vice President, 1996 present; Pace-Glass, Inc., Vice President, 1996 - present |
C-3
Name |
Title |
Other Business/Position Held/Dates |
||
Edward Rieger |
Senior Vice President | * | ||
Shui Seto |
Senior Vice President | * | ||
Todd Voigt |
Senior Vice President | * | ||
Tina M. Payne |
Senior Vice President and Associate General Counsel | * | ||
John Cheigh |
Senior Vice President | * | ||
David Edlin |
Senior Vice President | * | ||
Anthony Ialeggio |
Senior Vice President | Alliance Bernstein Investments, Managing Director, 2000-2010 | ||
James MacPherson |
Senior Vice President | Financial Products Group, Inc., Founder/Consultant, 2009-2010 | ||
Martha Shapiro |
Senior Vice President |
Morgan Stanley Investment Management, Executive Director, 2004-2010 |
||
Adam Johnson |
Senior Vice President and Associate General Counsel | * | ||
Ben Morton |
Senior Vice President | * | ||
Matthew Karcic |
Senior Vice President | * | ||
Neil Bloom |
Vice President | * | ||
Anatoliy Cheravach |
Vice President | * | ||
Austin Fagen |
Vice President | * | ||
Mary Gordon |
Vice President | * | ||
Stephen Joslin |
Vice President | * | ||
Joanna Kennedy |
Vice President | * | ||
Lester Lay |
Vice President | * | ||
Jamelah Leddy |
Vice President | * | ||
Michael Loftus |
Vice President | * | ||
Kevin Lotti |
Vice President | * | ||
Mark Miness |
Vice President | * | ||
Ronald Pucillo |
Vice President | * |
C-4
Name |
Title |
Other Business/Position Held/Dates |
||
Kim Spellman |
Vice President | * | ||
Dev Subhash |
Vice President | * | ||
Stephen Tone |
Vice President | * | ||
Thomas Watkins |
Vice President | * | ||
Pascal van Garderen |
Vice President | * | ||
Elaine Zaharis-Nikas |
Vice President | * | ||
Luis Polit |
Vice President | * | ||
Ted Valenti |
Vice President | * | ||
Michael DeGroff |
Vice President | * | ||
Scott Dwyer |
Vice President | * | ||
Jonathan Geurkink |
Vice President | * | ||
Deborah Krisbergh |
Vice President | * | ||
Jiang Xin |
Vice President | * | ||
Jason Yablon |
Vice President | * | ||
Christopher Barrett |
Vice President | * | ||
Jamie Zimmerman |
Vice President | * | ||
Julia Chin |
Vice President | * | ||
Robert Cipriano |
Vice President | Natixis North America Inc., Director, 1997 - 2010 | ||
Colleen Dean |
Vice President | * | ||
Judy Diaz |
Vice President | Truesoft, Inc., President, 2006 - present | ||
Mark Dickinson |
Vice President |
Legg Mason, Inc., Vice President, 2001 - 2009 |
||
Patrick Evans |
Vice President |
BlackRock, Inc., Vice President, 2006 - 2009 |
||
William Formosa |
Vice President | * |
C-5
Name |
Title |
Other Business/Position Held/Dates |
||
Andrew Humble |
Vice President | * | ||
Heather Kaden |
Vice President | * | ||
Rochan Kalyanpur |
Vice President | Swiss Reinsurance Company, Assistant Vice President, 2007 - 2010 | ||
Matthew Kirschner |
Vice President | * | ||
Laura Kling |
Vice President | * | ||
Stephen Lavine |
Vice President | Credit Suisse, Consultant, 2009 - 2010 | ||
Matthew McAvoy |
Vice President | Forum Securities LLC, Vice President, 2009; Citi Property Investors, a Division of Citi Alternative Investments, Vice President, 2005 2009. | ||
Michael Miller |
Vice President |
Legg Mason, Inc., Vice President, 2008 2009. |
||
Antonia Montanari |
Vice President | * | ||
Damien Porras |
Vice President |
AllianceBernstein, Vice President, 2004 2010. |
||
Saho Tada |
Vice President |
ING Real Estate Investment Management, Vice President, January 2010 to April 2010, Assistant
Vice President, December 2006 December 2009. |
||
Jason Williams |
Vice President | WisdomTree Asset Management, Inc., Regional Director, 2007 2010. | ||
Joseph Williams |
Vice President |
Evergreen Investments, Regional Vice President,
2008 2009. |
||
Yue Zhang |
Vice President | * | ||
William Cheng |
Vice President | * | ||
Michael Kaufman |
Vice President | * | ||
John Murphy |
Vice President | * | ||
Stephen Fiacco |
Vice President | * | ||
Andrew Schaffler |
Vice President | * | ||
Evan Serton |
Vice President | * | ||
Parke Miller Johnson |
Vice President | * |
C-6
(b) The Registrant is fulfilling the requirement of this Item 31(b) to provide a list of the officers and directors of Cohen & Steers Europe S.A. (CNS Europe), Cohen & Steers UK Limited (CNS UK) and Cohen & Steers Asia Limited (CNS Asia), the sub-investment advisors of the Registrant, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by CNS Europe, CNS UK or CNS Asia, or those of their officers and directors during the past two years, by incorporating by reference the information contained in the Form ADVs filed with the Securities and Exchange Commission pursuant to the Investment Advisers Act of 1940, as amended by CNS Europe (SEC File No. 801-57710), CNS UK (SEC File
ITEM 32. PRINCIPAL UNDERWRITERS
(a) Cohen & Steers Securities, LLC is the principal underwriter for the Registrant. The names of each investment company (in addition to the Registrant) for which Cohen & Steers Securities, LLC acts as principal underwriter are:
Cohen & Steers Emerging Markets Real Estate Fund, Inc.
Cohen & Steers Dividend Value Fund, Inc.
Cohen & Steers Institutional Global Realty Shares, Inc.
Cohen & Steers Institutional Realty Shares, Inc.
Cohen & Steers Global Realty Shares, Inc.
Cohen & Steers Realty Income Fund, Inc.
Cohen & Steers Realty Shares, Inc.
Cohen & Steers Global Infrastructure Fund, Inc.
Cohen & Steers Preferred Securities and Income Fund, Inc.
(b) The following are directors and officers of Cohen & Steers Securities, LLC. The principal address of these persons is 280 Park Avenue, New York, New York 10017.
Name |
Position and Offices with Distributor |
Position and Offices with Registrant |
||
Francis C. Poli |
President and Chief Legal Officer | Secretary and Chief Legal Officer | ||
Robert H. Steers |
Vice President | Co-Chairman and Director | ||
Martin Cohen |
Vice President | Co-Chairman and Director | ||
Adam M. Derechin |
Vice President | President and Chief Executive Officer | ||
Douglas Bond |
Vice President | None | ||
Stephen Dunn |
Vice President | None | ||
David Edlin |
Vice President | None | ||
Matthew Stadler |
Chief Financial Officer and Treasurer | None | ||
Lisa D. Phelan |
Vice President and Chief Compliance Officer | Chief Compliance Officer | ||
Tina M. Payne |
Secretary | Assistant Secretary | ||
Salvatore Rappa |
Assistant Secretary | None |
(c) Not Applicable.
ITEM 33. LOCATION OF ACCOUNTS AND RECORDS
The majority of the accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940, as amended (the 1940 Act), and the rules thereunder will be maintained as follows: journals, ledgers, securities records and other original records will be maintained principally at the offices of the Registrants Sub-Administrator and Custodian, State Street Bank and Trust Company, One Lincoln Street, Boston, Massachusetts 02111. All other records so required to be maintained will be maintained at the offices of Cohen & Steers Capital Management, Inc., 280 Park Avenue, New York, New York 10017.
ITEM 34. MANAGEMENT SERVICES
Not applicable.
ITEM 35. UNDERTAKINGS
Not applicable.
C-7
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the Registrant certifies that it meets all the requirements for effectiveness of this Post-Effective Amendment pursuant to Rule 485(b) under the Securities Act of 1933, as amended, and has duly caused this Post-Effective Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York and the State of New York, on the 29th day of April 2011.
COHEN & STEERS INTERNATIONAL REALTY FUND, INC.
|
||
By: |
/s/ A DAM D ERECHIN |
|
Name: |
Adam Derechin | |
Title: |
President |
Pursuant to the requirements of the Securities Act of 1933, as amended, this Post-Effective Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the date indicated.
SIGNATURE |
TITLE |
DATE |
||||
By: |
/s/ ADAM DERECHIN |
President and Chief Executive Officer (Principal Executive Officer) |
April 29, 2011 | |||
(ADAM DERECHIN) |
||||||
By: |
/s/ JAMES GIALLANZA |
Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) |
April 29, 2011 | |||
(JAMES GIALLANZA) |
||||||
By: |
/s/ MARTIN COHEN |
Co-Chairman and Director | April 29, 2011 | |||
(MARTIN COHEN) |
||||||
By: |
/s/ ROBERT H. STEERS |
Co-Chairman and Director | April 29, 2011 | |||
(ROBERT H. STEERS) |
||||||
By: |
* |
Director | April 29, 2011 | |||
(BONNIE COHEN) |
||||||
By: |
* |
Director | April 29, 2011 | |||
(GEORGE GROSSMAN) |
||||||
By: |
* |
Director | April 29, 2011 | |||
(RICHARD E. KROON) |
||||||
By: |
* |
Director | April 29, 2011 | |||
(RICHARD J. NORMAN) |
||||||
By: |
* |
Director | April 29, 2011 | |||
(FRANK K. ROSS) |
||||||
By: |
* |
Director | April 29, 2011 | |||
(WILLARD H. SMITH JR.) |
||||||
By: |
* |
Director | April 29, 2011 | |||
(C. EDWARD WARD, JR.) |
||||||
By: |
/s/ ROBERT H. STEERS |
April 29, 2011 | ||||
* ROBERT H. STEERS AS ATTORNEY-IN-FACT |
Exhibit (a)(iii)
ARTICLES SUPPLEMENTARY
COHEN & STEERS INTERNATIONAL REALTY FUND, INC., a Maryland corporation having its principal office in Baltimore, Maryland (hereinafter called the Corporation), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: The aggregate number of shares of Common Stock that the Corporation has authority to issue is increased by six hundred million (600,000,000) shares of Common Stock, $.001 par value per share, with an aggregate par value of six hundred thousand dollars ($600,000), of which two hundred million (200,000,000) of such shares shall be classified as Class A Common Stock of the Corporation, two hundred million (200,000,000) of such shares shall be classified as Class C Common Stock of the Corporation, and two hundred million (200,000,000) of such shares shall be classified as Class I Common Stock of the Corporation.
SECOND: The shares of Class A Common Stock, Class C Common Stock and Class I Common Stock of the Corporation shall have the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption as set forth in Article FIFTH of the Corporations Charter and shall be subject to all provisions of the Corporations Charter relating to stock of the Corporation generally.
THIRD: Immediately before the increase and classification of shares as set forth in Article FIRST hereof, the Corporation was authorized to issue two hundred million (200,000,000) shares of stock, all of which were shares of Common Stock, having a par value of one tenth of one cent ($.001) each, and an aggregate par value of two hundred thousand dollars ($200,000), classified as follows:
Class |
Shares Authorized | |||
Class A Shares |
50,000,000 | |||
Class B Shares |
50,000,000 | |||
Class C Shares |
50,000,000 | |||
Class I Shares |
50,000,000 | |||
Total |
200,000,000 |
FOURTH: As hereby increased and classified, the total number of shares of stock which the Corporation has authority to issue is eight hundred million (800,000,000) shares, all of which are shares of Common Stock, with a par value of one tenth of one cent ($.001) per share, having an aggregate par value of eight hundred thousand dollars ($800,000), classified as follows:
Class |
Shares Authorized | |||
Class A Shares |
250,000,000 | |||
Class B Shares |
50,000,000 | |||
Class C Shares |
250,000,000 | |||
Class I Shares |
250,000,000 | |||
Total |
800,000,000 |
FIFTH: The Board of Directors of the Corporation increased the total number of shares of capital stock that the Corporation has authority to issue pursuant to Section 2-105(c) of the Maryland General Corporation Law and classified the increased shares pursuant to authority provided in the Corporations Charter.
IN WITNESS WHEREOF , Cohen & Steers International Realty Fund, Inc. has caused these Articles Supplementary to be signed in its name and on its behalf by its Vice President who acknowledges that these Articles Supplementary are the act of the Corporation, that to the best of his knowledge, information and belief all matters and facts set forth herein relating to the authorization and approval of these Articles Supplementary are true in all material respects, and that this statement is made under the penalties of perjury.
COHEN & STEERS INTERNATIONAL
|
||
By: | s/Joseph M. Harvey | |
Name: Joseph M. Harvey | ||
Title: Vice President |
WITNESS: | ||
s/John E. McLean | ||
Name: John E. McLean | ||
Title: Secretary |
Dated: February 5, 2007
-2-
Exhibit (b)
BY-LAWS
OF
COHEN & STEERS INTERNATIONAL REALTY FUND, INC.
(As amended June 23, 2010)
ARTICLE I
Offices
Section 1. Principal Office in Maryland . The Corporation shall have a principal office in the City of Baltimore, State of Maryland.
Section 2. Other Offices . The Corporation may have offices also at such other places within and without the State of Maryland as the Board of Directors may from time to time determine or as the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
Section 1. Place of Meeting . Meetings of stockholders shall be held at such places within or outside the United States as shall be fixed from time to time by the Board of Directors.
Section 2. Annual Meetings . The Corporation shall not be required to hold an annual meeting of stockholders in any year in which the election of directors is not required to be acted on by stockholders under the Investment Company Act of 1940. If the Corporation is required to hold a meeting of stockholders to elect directors, the meeting shall be designated as the annual meeting of stockholders for that year and shall be held no later than 120 days after the occurrence of the event requiring the meeting. Any business may be considered at an annual meeting of stockholders without the purpose of the meeting having been specified in the notice.
Section 3. Notice of Annual Meeting . Written or printed notice of the annual meeting, stating the place, date and hour thereof, shall be given to each stockholder entitled to vote
thereat and each other shareholder entitled to notice thereof not less than ten nor more than ninety days before the date of the meeting.
Section 4. Special Meetings . Special meetings of stockholders may be called by the chairman, the president or by the Board of Directors and shall be called by the secretary upon the written request of holders of shares entitled to cast not less than twenty-five percent of all the votes entitled to be cast at such meeting. Such request shall state the purpose or purposes of such meeting and the matters proposed to be acted on thereat. In the case of such request for a special meeting, upon payment by such stockholders to the Corporation of the estimated reasonable cost of preparing and mailing a notice of such meeting, the secretary shall give the notice of such meeting. The secretary shall not be required to call a special meeting to consider any matter which is substantially the same as a matter acted upon at any special meeting of stockholders held within the preceding twelve months unless requested to do so by holders of shares entitled to cast not less than a majority of all votes entitled to be cast at such meeting. Notwithstanding the foregoing, to the extent required by the Investment Company Act of 1940, special meetings of stockholders for the purpose of voting upon the question of removal of any director or directors of the Corporation shall be called by the secretary upon the written request of holders of shares entitled to cast not less than ten percent of all the votes entitled to be cast at such meeting.
Section 5. Notice of Special Meeting . Written or printed notice of a special meeting of stockholders, stating the place, date, hour and purpose thereof, shall be given by the secretary to each stockholder entitled to vote thereat and each other shareholder entitled to notice thereof not less than ten nor more than ninety days before the date fixed for the meeting.
Section 6. Business of Special Meetings . Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice thereof.
Section 7. Quorum . The holders of shares entitled to cast one-third of the votes entitled to be cast thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business, except with respect to any matter which, under applicable statutes or regulatory requirements or the Corporations charter, requires approval by a separate vote of one or more classes of stock, in which case the presence in person or by proxy of the holders of shares entitled to cast one-third of the votes entitled to be cast separately on the matter shall constitute a quorum with respect to those classes of stock. A meeting of stockholders convened on the date for which it is called may be
2
adjourned from time to time without further notice to a date not more than 120 days after the record date.
Section 8. Adjournment . Any meeting of the stockholders convened on the date for which it was called may be adjourned from time to time, without notice other than by announcement at the meeting at which the adjournment was taken. In the absence of a quorum, the stockholders present in person or by proxy, by majority vote of those present and without notice other than by announcement at the meeting, may adjourn the meeting from time to time as provided for in this Section 8 of Article II. At any adjourned meeting at which a quorum shall be present, any action may be taken that could have been taken at the meeting originally called. A meeting of the stockholders may not be adjourned without further notice to a date more than 120 days after the original record date determined pursuant to Section 11 of this Article II.
Section 9. Voting . When a quorum is present at any meeting, the affirmative vote of a majority of the votes cast by stockholders entitled to vote on the matter shall decide any question brought before such meeting (except that directors may be elected by the affirmative vote of a plurality of the votes cast), unless the question is one upon which by express provision of the Investment Company Act of 1940, as from time to time in effect, or other statutes, or rules or orders of the Securities and Exchange Commission or any successor thereto or of the Charter a different vote is required, in which case such express provision shall govern and control the decision of such question.
Section 10. Proxies . Each stockholder shall at every meeting of stockholders be entitled to vote in person or by proxy appointed in such manner as may be permitted by Maryland law. No proxy shall be voted after eleven months from its date, unless otherwise provided in the proxy.
Section 11. Record Date . In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date which shall be not more than ninety days and, in the case of a meeting of stockholders, not less than ten days prior to the date on which the particular action requiring such determination of stockholders is to be taken. In lieu of fixing a record date, the Board of Directors may provide that the stock transfer books shall be
3
closed for a stated period, but not to exceed, in any case, twenty days. If the stock transfer books are closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least ten days immediately preceding such meeting. If no record date is fixed and the stock transfer books are not closed for the determination of stockholders: (1) The record date for the determination of stockholders entitled to notice of, or to vote at, a meeting of stockholders shall be at the close of business on the day on which notice of the meeting of stockholders is mailed or the day thirty days before the meeting, whichever is the closer date to the meeting; and (2) The record date for the determination of stockholders entitled to receive payment of a dividend or an allotment of any rights shall be at the close of business on the day on which the resolution of the Board of Directors declaring the dividend or allotment of rights is adopted, provided that the payment or allotment date shall not be more than sixty days after the date of the adoption of such resolution. If a record date has been fixed for the determination of stockholders entitled to vote at a meeting, only the stockholders of record on the record date shall be entitled to vote at the meeting and such stockholders shall be entitled to vote at the meeting notwithstanding the subsequent transfer or redemption of the shares owned of record on such date.
Section 12. Inspectors of Election . The directors, in advance of any meeting, may, but need not, appoint one or more inspectors to act at the meeting or any adjournment thereof. If an inspector or inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his duties, may be required to take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum and the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting or any stockholder, the inspector or inspectors, if any, shall
4
make a report in writing of any challenge, question or matter determined by him or them and execute a certificate of any fact found by him or them.
Section 13. Informal Action by Stockholders . Except to the extent prohibited by the Investment Company Act of 1940, as from time to time in effect, or rules or orders of the Securities and Exchange Commission or any successor thereto, any action required or permitted to be taken at any meeting of stockholders may be taken without a meeting if a consent in writing, setting forth such action, is signed by all the stockholders entitled to vote on the subject matter thereof, and such consent is filed with the records of the Corporation.
ARTICLE III
Board of Directors
Section 1. Number of Directors . The number of directors constituting the entire Board of Directors (which initially was fixed at two in the Corporations Articles of Incorporation) may be increased or decreased from time to time by the vote of a majority of the entire Board of Directors within the limits permitted by law but at no time may be more than twenty, but the tenure of office of a director in office at the time of any decrease in the number of directors shall not be affected as a result thereof. The directors shall be elected to hold offices at the annual meeting of stockholders and each director shall hold office until the next annual meeting of stockholders or until his successor is elected and qualifies. Any director may resign at any time upon written notice to the Corporation. Any director may be removed, either with or without cause, at any meeting of stockholders duly called and at which a quorum is present by the affirmative vote of the majority of the votes entitled to be cast thereon, and the vacancy in the Board of Directors caused by such removal may be filled by the stockholders at the time of such removal. Directors need not be stockholders.
Section 2. Vacancies and Newly-Created Directorships . Any vacancy occurring in the Board of Directors for any cause other than by reason of an increase in the number of directors may be filled by a majority of the remaining members of the Board of Directors although such majority is less than a quorum. Any vacancy occurring by reason of an increase in the number of directors may be filled by a majority of the entire Board of Directors. A director elected by the Board of Directors to fill a vacancy shall be elected to hold office until the next annual meeting of stockholders or until his successor is elected and qualifies.
5
Section 3. Powers . The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Charter or by these By-Laws conferred upon or reserved to the stockholders.
Section 4. Meetings . The Board of Directors of the Corporation or any committee thereof may hold meetings, both regular and special, either within or without the State of Maryland. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors. Special meetings of the Board of Directors may be called by the chairman, the president or by two or more directors. Notice of special meetings of the Board of Directors shall be given by the secretary to each director at least three days before the meeting if by mail or at least 24 hours before the meeting if given in person or by telephone or by telegraph. The notice need not specify the business to be transacted.
Section 5. Quorum and Voting . During such times when the Board of Directors shall consist of more than one director, a quorum for the transaction of business at meetings of the Board of Directors shall consist of one-third of the entire Board of Directors, but in no event less than two directors. The action of a majority of the directors present at a meeting at which a quorum is present shall be the action of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.
Section 6. Chairman of the Board of Directors . The Board of Directors may appoint a chairman, or co-chairmen, of the Board of Directors, who shall preside at all meetings of the stockholders and of the Board of Directors. The chairman shall be ex officio a member of all committees designated by the Board of Directors except as otherwise determined by the Board of Directors. The chairman shall have authority to execute instruments and contracts on behalf of the Corporation except where required by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some officer or agent of the Corporation.
Section 7. Committees . The Board of Directors may appoint from among its members an executive committee and other committees of the Board of Directors, each committee to be composed of one or more of the directors of the Corporation. The Board of Directors may
6
delegate to such committees any of the powers of the Board of Directors except those which may not by law be delegated to a committee. Such committee or committees shall have the name or names as may be determined from time to time by resolution adopted by the Board of Directors. Unless the Board of Directors designates one or more directors as alternate members of any committee, who may replace an absent or disqualified member at any meeting of the committee, the members of any such committee present at any meeting and not disqualified from voting may, whether or not they constitute a quorum, appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member of such committee. At meetings of any such committee, a majority of the members or alternate members of such committee shall constitute a quorum for the transaction of business and the act of a majority of the members or alternate members present at any meeting at which a quorum is present shall be the act of the committee.
Section 8. Minutes of Committee Meetings . The committees shall keep regular minutes of their proceedings.
Section 9. Informal Action by Board of Directors and Committees . Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all members of the Board of Directors or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board of Directors or committee, provided, however, that such written consent shall not constitute approval of any matter which pursuant to the Investment Company Act of 1940 and the rules thereunder requires the approval of directors by vote cast in person at a meeting.
Section 10. Meeting by Conference Telephone . The members of the Board of Directors or any committee thereof may participate in a meeting of the Board of Directors or committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time and such participation shall constitute presence in person at such meeting, provided, however, that such participation shall not constitute presence in person with respect to matters which pursuant to the Investment Company Act of 1940 and the rules thereunder require the approval of directors by vote cast in person at a meeting.
Section 11. Fees and Expenses . The directors may be paid their expenses of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each
7
meeting of the Board of Directors, a stated salary as director or such other compensation as the Board of Directors may approve. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like reimbursement and compensation for attending committee meetings.
ARTICLE IV
Notices
Section 1. General . Notices to directors and stockholders mailed to them at their post office addresses appearing on the books of the Corporation shall be deemed to be given at the time when deposited in the United States mail.
Section 2. Waiver of Notice . Whenever any notice is required to be given under the provisions of the statutes, of the Charter or of these By-Laws, each person entitled to said notice waives notice if, before or after the meeting he signs a written waiver of notice and such waiver is filed with the records of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
ARTICLE V
Officers
Section 1. General . The officers of the Corporation shall be chosen by the Board of Directors and shall include a president, a secretary and a treasurer. The Board of Directors may choose also such vice presidents, assistant secretaries, assistant treasurers and other officers and agents as it may deem desirable and who shall have such authority and perform such duties as the Directors may determine. Any number of offices may be held by the same person, except that no person may serve concurrently as both president and vice president. No officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument is required by law to be executed, acknowledged or verified by two or more officers.
Section 2. Tenure of Officers . The officers of the Corporation shall hold office at the pleasure of the Board of Directors. Each officer shall hold his office until his successor is
8
elected and qualifies or until his earlier resignation or removal. Any officer may resign at any time upon written notice to the Corporation. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors when, in its judgment, the best interests of the Corporation will be served thereby. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise shall be filled by the Board of Directors.
Section 3. President . In the absence or disability of the chairman, the president shall perform the duties and exercise the powers of the chairman. The president shall be the chief executive officer and shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. The president shall perform such other duties and have such other powers as the chairman or the Board of Directors may from time to time prescribe. He shall have authority to execute instruments and contracts on behalf of the Corporation except where required by law to be otherwise signed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation.
Section 4. Vice Presidents . The vice presidents shall act under the direction of the chairman and the president and in the absence or disability of the president shall perform the duties and exercise the powers of the president. They shall perform such other duties and have such other powers as the chairman, the president or the Board of Directors may from time to time prescribe. The Board of Directors may designate one or more executive vice presidents or may otherwise specify the order of seniority of the vice presidents and, in that event, the duties and powers of the president shall descend to the vice presidents in the specified order of seniority.
Section 5. Secretary . The secretary shall act under the direction of the chairman and the president. Subject to the direction of the chairman and the president, he shall attend all meetings of the Board of Directors and all meetings of stockholders and record the proceedings in a book to be kept for that purpose and shall perform like duties for the committees designated by the Board of Directors when required. He shall give, or cause to be given, notice of all meetings of stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the chairman, the president or the Board of Directors. He shall keep in safe custody the seal of the Corporation and shall affix the seal or cause it to be affixed to any instrument requiring it.
9
Section 6. Assistant Secretaries . The assistant secretaries in the order of their seniority, unless otherwise determined by the chairman, the president, or the Board of Directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary. They shall perform such other duties and have such other powers as the chairman, the president or the Board of Directors may from time to time prescribe.
Section 7. Treasurer . The treasurer shall act under the direction of the chairman and the president. Subject to the direction of the chairman and the president he shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the chairman, the president or the Board of Directors, taking proper vouchers for such disbursements, and shall render to the chairman, the president and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as treasurer and of the financial condition of the Corporation.
Section 8. Assistant Treasurers . The assistant treasurers in the order of their seniority, unless otherwise determined by the chairman, the president or the Board of Directors, shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer. They shall perform such other duties and have such other powers as the chairman, the president or the Board of Directors may from time to time prescribe.
ARTICLE VI
Certificates of Stock
Section 1. General . Every holder of stock of the Corporation who has made full payment of the consideration for such stock shall be entitled upon request to have a certificate, signed by, or in the name of the Corporation by, the chairman, the president or a vice president and countersigned by the treasurer or an assistant treasurer or the secretary or an assistant secretary of the Corporation, certifying the number of whole shares of each class of stock owned by him in the Corporation.
Section 2. Fractional Share Interests . The Corporation may issue fractions of a share of stock. Fractional shares of stock shall have proportionately to the respective fractions represented thereby all the rights of whole shares, including the right to vote, the right to
10
receive dividends and distributions and the right to participate upon liquidation of the Corporation, excluding, however, the right to receive a stock certificate representing such fractional shares.
Section 3. Signatures on Certificates . Any of or all the signatures on a certificate may be a facsimile. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall cease to be such officer before such certificate is issued, it may be issued with the same effect as if he were such officer at the date of issue. The seal of the Corporation or a facsimile thereof may, but need not, be affixed to certificates of stock.
Section 4. Lost. Stolen or Destroyed Certificates . The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of any affidavit of that fact by the person claiming the certificate or certificates to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate or certificates alleged to have been lost, stolen or destroyed.
Section 5. Transfer of Shares . Upon request by the registered owner of shares, and if a certificate has been issued to represent such shares upon surrender to the Corporation or a transfer agent of the Corporation of a certificate for shares of stock duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation, if it is satisfied that all provisions of the Charter, of the By-Laws and of the law regarding the transfer of shares have been duly complied with, to record the transaction upon its books, issue a new certificate to the person entitled thereto upon request for such certificate, and cancel the old certificate, if any.
Section 6. Registered Owners . The Corporation shall be entitled to recognize the person registered on its books as the owner of shares to be the exclusive owner for all purposes including voting and dividends, and the Corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Maryland.
11
ARTICLE VII
Miscellaneous
Section 1. Reserves . There may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for such other purpose as the Board of Directors shall think conducive to the interest of the Corporation, and the Board of Directors may modify or abolish any such reserve.
Section 2. Dividends . Dividends upon the stock of the Corporation may, subject to the provisions of the Charter and of applicable law, be declared by the Board of Directors at any time. Dividends may be paid in cash, in property or in shares of the Corporations stock, subject to the provisions of the Charter and of applicable law.
Section 3. Capital Gains Distributions . The amount and number of capital gains distributions paid to the stockholders during each fiscal year shall be determined by the Board of Directors. Each such payment shall be accompanied by a statement as to the source of such payment, to the extent required by law.
Section 4. Checks . All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.
Section 5. Fiscal Year . The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.
Section 6. Seal . The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words Corporate Seal, Maryland. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in another manner reproduced or by placing the word (seal) adjacent to the signature of the person authorized to sign the document on behalf of the Corporation.
ARTICLE VIII
Indemnification
Section 1. Indemnification of Directors and Officers . The Corporation shall indemnify its directors to the fullest extent that indemnification of directors is permitted by the Maryland General Corporation Law. The Corporation shall indemnify its officers to the same extent as its directors and to such further extent as is consistent with law. The
12
Corporation shall indemnify its directors and officers who while serving as directors or officers also serve at the request of the Corporation as a director, officer, partner, trustee, employee, agent or fiduciary of another corporation, partnership, joint venture, trust, other enterprise or employee benefit plan to the fullest extent consistent with law. The indemnification and other rights provided by this Article shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. This Article shall not protect any such person against any liability to the Corporation or any stockholder thereof to which such person would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office (disabling conduct).
Section 2. Advances . Any current or former director or officer of the Corporation seeking indemnification within the scope of this Article shall be entitled to advances from the Corporation for payment of the reasonable expenses incurred by him in connection with the matter as to which he is seeking indemnification without requiring a preliminary determination of ultimate entitlement to indemnification except as provided below, to the fullest extent permissible under the Maryland General Corporation Law. The person seeking indemnification shall provide to the Corporation a written affirmation of his good faith belief that the standard of conduct necessary for indemnification by the Corporation has been met and a written undertaking to repay any such advance if it should ultimately be determined that the standard of conduct has not been met. In addition, at least one of the following additional conditions shall be met: (a) the person seeking indemnification shall provide a security in form and amount acceptable to the Corporation for his undertaking; (b) the Corporation is insured against losses arising by reason of the advance; or (c) a majority of a quorum of directors of the Corporation who are neither interested persons as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, nor parties to the proceeding (disinterested non-party directors), or independent legal counsel, in a written opinion, shall have determined, based on a review of facts readily available to the Corporation at the time the advance is proposed to be made, that there is reason to believe that the person seeking indemnification will ultimately be found to be entitled to indemnification.
Section 3. Procedure . At the request of any person claiming indemnification under this Article, the Board of Directors shall determine, or cause to be determined, in a manner consistent with the Maryland General Corporation Law, whether the standards required by this Article have
13
been met. Indemnification shall be made only following: (a) a final decision on the merits by a court or other body before whom the proceeding was brought that the person to be indemnified was not liable by reason of disabling conduct, (b) dismissal of the proceeding against the person to be indemnified for insufficiency of evidence of any disabling conduct, or (b) in the absence of such a decision or dismissal, a reasonable determination, based upon a review of the facts, that the person to be indemnified was not liable by reason of disabling conduct by (i) the vote of a majority of a quorum of disinterested non-party directors or (ii) an independent legal counsel in a written opinion. Any determination pursuant to this Section 3 shall not prevent recovery from any person of any amount paid to be in accordance with this By-Law as indemnification if such person is subsequently adjudicated by a court of competent jurisdiction to be liable by reason of disabling conduct.
Section 4. Indemnification of Employees and Agents . Employees and agents who are not officers or directors of the Corporation may be indemnified, and reasonable expenses may be advanced to such employees or agents, as may be provided by action of the Board of Directors or by contract, subject to any limitations imposed by the Investment Company Act of 1940.
Section 5. Other Rights . The Board of Directors may make further provision consistent with law for indemnification and advance of expenses to directors, officers, employees and agents by resolution, agreement or otherwise. The indemnification provided by this Article shall not be deemed exclusive of any other right, with respect to indemnification or otherwise, to which those seeking indemnification may be entitled under any insurance or other agreement or resolution of stockholders or disinterested directors or otherwise. The Corporation shall not be liable for any payment under this By-Law in connection with a claim made by a director, officer, employee or agent to the extent such director, officer, employee or agent has otherwise actually received payment under an insurance policy, agreement, resolution or otherwise. The rights provided to any person by this Article shall be enforceable against the Corporation by such person who shall be presumed to have relied upon it in serving or continuing to serve as a director, officer, employee, or agent as provided above.
Section 6. Amendments . References in this Article are to the Maryland General Corporation Law and to the Investment Company Act of 1940 as from time to time amended. No amendment of these By-laws shall effect any right of any person under this Article based on any event, omission or proceeding prior to the amendment.
14
ARTICLE IX
Amendments
The Board of Directors shall have the power to make, alter and repeal by-laws of the Corporation.
15
Exhibit (d)(ii)
SUBADVISORY AGREEMENT
COHEN & STEERS CAPITAL MANAGEMENT, INC.
280 Park Avenue
New York, New York 10017
October 1, 2009
COHEN & STEERS EUROPE S.A.
Chaussee de la Hulpe 166
1170 Brussels, Belgium
Dear Sirs:
We, the undersigned, Cohen & Steers Capital Management, Inc. herewith confirm our agreement with you as follows:
1. | We have been retained by Cohen & Steers International Realty Fund, Inc. (the Fund), an open-end, non-diversified management investment company registered under the Investment Company Act of 1940 (the Act), to serve as the Funds investment manager. In our capacity as investment manager, we have been authorized to invest the Funds assets in accordance with the Funds investment objectives, policies and restrictions, all as more fully described in the Registration Statement filed by the Fund under the Securities Act of 1933, as amended, and the Act. We hereby provide you with a copy of the Registration Statement and agree to promptly provide you with any amendment thereto. We hereby also provide you with the Articles of Incorporation and By-Laws of the Fund. We have been authorized in our capacity as investment manager to manage the Funds overall portfolio. We also have been authorized to retain you as a subadvisor with respect to that portion of the Funds assets, as from time to time allocated to you by us (the Subadvisor Assets). |
2. |
(a) We hereby employ you to manage the investment and reinvestment of the |
Subadvisor Assets as above specified and, without limiting the generality of the foregoing, to provide investment recommendations, management, trading and other services specified below. |
(b) Subject to the supervision by the Board of Directors and us, you will make decisions with respect to purchases and sales of Subadvisor Assets. To carry out such decisions, you are hereby authorized, as the Funds agent and attorney-in-fact, for the Funds account and at the Funds risk and in the Funds name, to place orders for the investment and reinvestment of Subadvisor Assets. In all purchases, sales and other transactions in Subadvisor Assets you are authorized to exercise full discretion and act for the Fund in the same manner and with the same force and effect as we might 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.
(c) You will make your officers and employees available to us from time to time at reasonable times to review the investment policies of the Fund and to consult with us regarding the investment affairs of the Fund. You will report to us and to the Board of Directors of the Fund at each meeting thereof all changes in the Funds portfolio with respect to Subadvisor Assets since the prior report, and will also keep us and the Board of Directors of the Fund in touch with important developments affecting the Subadvisor Assets and on your own initiative will furnish us and the Board of Directors of the Fund from time to time with such information as you may believe appropriate for this purpose, whether concerning the individual issuers whose securities are included in the Subadvisor Assets, the industries in which they engage,
2
or the conditions prevailing in the economy generally. You will also furnish us and the Funds Board of Directors with such statistical and analytical information with respect to the Subadvisor Assets as you may believe appropriate or as we or the Fund reasonably may request. In making such purchases and sales of the Subadvisor Assets, you will bear in mind the policies set from time to time by the Funds Board of Directors as well as the limitations imposed by the Funds Articles of Incorporation and in the Funds Registration Statement under the Act and of the Internal Revenue Code of 1986, as amended, in respect of regulated investment companies.
(d) It is understood that you will conform to all applicable rules and regulations of the Securities and Exchange Commission in all material respects and in addition will conduct your activities under this Agreement in accordance with any applicable regulations.
(e) 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.
3. |
We shall expect of you, and you will give us and the Fund the benefit of, your best judgment and efforts in rendering these services to us and the Fund, and we and the Fund 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 the Fund or to our security holders to |
3
which you would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of your duties hereunder, or by reason of your reckless disregard of your obligations and duties hereunder. |
4. | By signing this Agreement, you hereby represent to us that you are a registered investment advisor under the Investment Advisers Act of 1940, as amended (Advisers Act) and will continue to be so registered for so long as this Agreement remains in effect; you are not prohibited by the Act or the Advisers Act from performing investment advisory services to the Fund; and will immediately notify us of the occurrence of any event that would disqualify you from serving as the subadvisor for the Fund or as an investment advisor of any investment company pursuant to Section 9(a) of the Act. |
5. | In consideration of the foregoing, we will pay you a monthly fee equal on an annual basis to 50% of the management fees received by Cohen & Steers Capital Management, Inc. with respect to the Subadvisor Assets. Such fee shall be payable in arrears on the last day of each calendar month for services performed hereunder during such month. Such fee shall be prorated proportionately to the extent this agreement is not in effect for a full month. |
6. |
This agreement shall become effective on October 1, 2009 and shall remain in effect for two years and may be continued for successive twelve-month periods provided that such continuance is specifically approved at least annually by the Board of Directors of the Fund or by majority vote of the holders of the outstanding voting securities of the Fund (as defined in the Act), and, in either case, by a majority of the Funds Board of Directors who are not interested persons as defined in the Act, of any |
4
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 to the extent permitted by the Act and the rules and regulations thereunder. This agreement may be terminated at any time, without the payment of any penalty, by us, by a vote of a majority of the outstanding voting securities (as so defined) of the Fund or by a vote of a majority of the Board of Directors of the Fund, each on 60 days written notice to you, or by you on 60 days written notice to us and to the Fund. |
7. | 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 thereto by governing law and any interpretation thereof contained in rules or regulations promulgated by the Securities and Exchange Commission thereunder. |
8. | 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, directors or employees, 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. |
5
9. | This agreement shall be construed in accordance with the laws of the State of New York, provided, however, that nothing herein shall be construed as being inconsistent with the Act. |
[ Remainder of Page Intentionally Left Blank ]
6
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 CAPITAL MANAGEMENT, INC. |
||
By: | s/Adam M. Derechin | |
Adam M. Derechin Chief Operating Officer |
Agreed to and accepted
COHEN & STEERS EUROPE S.A. |
||
By: | s/Joseph Houlihan | |
Joseph Houlihan Managing Director |
Agreed to and accepted
COHEN & STEERS INTERNATIONAL REALTY FUND, INC. |
||
By: | s/Tina M. Payne | |
Tina M. Payne Assistant Secretary |
7
Exhibit (d)(iii)
SUBADVISORY AGREEMENT
COHEN & STEERS CAPITAL MANAGEMENT, INC.
280 Park Avenue
New York, New York 10017
October 1, 2009
COHEN & STEERS UK LIMITED
21 Sackville Street
Fourth Floor
London W1 S 3DN
United Kingdom
Dear Sirs:
We, the undersigned, Cohen & Steers Capital Management, Inc. herewith confirm our agreement with you as follows:
1. | We have been retained by Cohen & Steers International Realty Fund, Inc. (the Fund), an open-end, non-diversified management investment company registered under the Investment Company Act of 1940 (the Act), to serve as the Funds investment manager. In our capacity as investment manager, we have been authorized to invest the Funds assets in accordance with the Funds investment objectives, policies and restrictions, all as more fully described in the Registration Statement filed by the Fund under the Securities Act of 1933, as amended, and the Act. We hereby provide you with a copy of the Registration Statement and agree to promptly provide you with any amendment thereto. We hereby also provide you with the Articles of Incorporation and By-Laws of the Fund. We have been authorized in our capacity as investment manager to manage the Funds overall portfolio. We also have been authorized to retain you as a subadvisor with respect to that portion of the Funds assets, as from time to time allocated to you by us (the Subadvisor Assets). |
2. | (a) We hereby employ you to manage the investment and reinvestment of the Subadvisor Assets as above specified and, without limiting the generality of the foregoing, to provide investment recommendations, management and other services specified below. |
(b) Subject to the supervision by the Board of Directors and us, you will make decisions with respect to purchases and sales of Subadvisor Assets. To carry out such decisions, you are hereby authorized, as the Funds agent and attorney-in-fact, for the Funds account and at the Funds risk and in the Funds name, to place orders for the investment and reinvestment of Subadvisor Assets. In all purchases, sales and other transactions in Subadvisor Assets you are authorized to exercise full discretion and act for the Fund in the same manner and with the same force and effect as we might 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.
(c) You will make your officers and employees available to us from time to time at reasonable times to review the investment policies of the Fund and to consult with us regarding the investment affairs of the Fund. You will report to us and to the Board of Directors of the Fund at each meeting thereof all changes in the Funds portfolio with respect to Subadvisor Assets since the prior report, and will also keep us and the Board of Directors of the Fund in touch with important developments affecting the Subadvisor Assets and on your own initiative will furnish us and the Board of Directors of the Fund from time to time with such information as you may believe appropriate for this purpose, whether concerning the individual issuers whose
2
securities are included in the Subadvisor Assets, the industries in which they engage, or the conditions prevailing in the economy generally. You will also furnish us and the Funds Board of Directors with such statistical and analytical information with respect to the Subadvisor Assets as you may believe appropriate or as we or the Fund reasonably may request. In making such purchases and sales of the Subadvisor Assets, you will bear in mind the policies set from time to time by the Funds Board of Directors as well as the limitations imposed by the Funds Articles of Incorporation and in the Funds Registration Statement under the Act and of the Internal Revenue Code of 1986, as amended, in respect of regulated investment companies.
(d) It is understood that you will conform to all applicable rules and regulations of the Securities and Exchange Commission in all material respects and in addition will conduct your activities under this Agreement in accordance with any applicable regulations.
(e) 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.
3. |
We shall expect of you, and you will give us and the Fund the benefit of, your best judgment and efforts in rendering these services to us and the Fund, and we and the Fund 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 |
3
to protect, you against any liability to us or the Fund or to our security holders to which you would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of your duties hereunder, or by reason of your reckless disregard of your obligations and duties hereunder. |
4. | By signing this Agreement, you hereby represent to us that you are a registered investment advisor under the Investment Advisers Act of 1940, as amended (Advisers Act) and will continue to be so registered for so long as this Agreement remains in effect; you are not prohibited by the Act or the Advisers Act from performing investment advisory services to the Fund; and will immediately notify us of the occurrence of any event that would disqualify you from serving as the subadvisor for the Fund or as an investment advisor of any investment company pursuant to Section 9(a) of the Act. |
5. | In consideration of the foregoing, we will pay you a monthly fee equal on an annual basis to 50% of the management fees received by Cohen & Steers Capital Management, Inc. with respect to the Subadvisor Assets. Such fee shall be payable in arrears on the last day of each calendar month for services performed hereunder during such month. Such fee shall be prorated proportionately to the extent this agreement is not in effect for a full month. |
6. |
This agreement shall become effective on October 1, 2009 and shall remain in effect for two years and may be continued for successive twelve-month periods provided that such continuance is specifically approved at least annually by the Board of Directors of the Fund or by majority vote of the holders of the outstanding voting securities of the Fund (as defined in the Act), and, in either case, by a majority of the |
4
Funds 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 to the extent permitted by the Act and the rules and regulations thereunder. This agreement may be terminated at any time, without the payment of any penalty, by us, by a vote of a majority of the outstanding voting securities (as so defined) of the Fund or by a vote of a majority of the Board of Directors of the Fund, each on 60 days written notice to you, or by you on 60 days written notice to us and to the Fund. |
7. | 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 thereto by governing law and any interpretation thereof contained in rules or regulations promulgated by the Securities and Exchange Commission thereunder. |
8. | 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, directors or employees, 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. |
5
9. | This agreement shall be construed in accordance with the laws of the State of New York, provided, however, that nothing herein shall be construed as being inconsistent with the Act. |
[ Remainder of Page Intentionally Left Blank ]
6
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 CAPITAL MANAGEMENT, INC. |
||
By: | s/Adam M. Derechin | |
Adam M. Derechin | ||
Chief Operating Officer |
Agreed to and accepted
as of the date first set forth above
COHEN & STEERS UK LIMITED | ||
By: | s/Joseph Houlihan | |
Joseph Houlihan | ||
President |
Agreed to and accepted
as of the date first set forth above
COHEN & STEERS INTERNATIONAL REALTY FUND, INC. | ||
By: | s/Tina M. Payne | |
Tina M. Payne | ||
Assistant Secretary |
7
Exhibit (d)(iv)
SUBADVISORY AGREEMENT
COHEN & STEERS CAPITAL MANAGEMENT, INC.
280 Park Avenue
New York, New York 10017
October 1, 2009
COHEN & STEERS ASIA LIMITED
1202 Citibank Tower
Citibank Plaza
No. 3 Garden Road
Central, Hong Kong
Dear Sirs:
We, the undersigned, Cohen & Steers Capital Management, Inc. herewith confirm our agreement with you as follows:
1. | We have been retained by Cohen & Steers International Realty Fund, Inc. (the Fund), an open-end, non-diversified management investment company registered under the Investment Company Act of 1940 (the Act), to serve as the Funds investment manager. In our capacity as investment manager, we have been authorized to invest the Funds assets in accordance with the Funds investment objectives, policies and restrictions, all as more fully described in the Registration Statement filed by the Fund under the Securities Act of 1933, as amended, and the Act. We hereby provide you with a copy of the Registration Statement and agree to promptly provide you with any amendment thereto. We hereby also provide you with the Articles of Incorporation and By-Laws of the Fund. We have been authorized in our capacity as investment manager to manage the Funds overall portfolio. We also have been authorized to retain you as a subadvisor with respect to that portion of the Funds assets, as from time to time allocated to you by us (the Subadvisor Assets). |
2. | (a) We hereby employ you to manage the investment and reinvestment of the Subadvisor Assets as above specified and, without limiting the generality of the foregoing, to provide investment recommendations, management, trading and other services specified below. |
(b) Subject to the supervision by the Board of Directors and us, you will make decisions with respect to purchases and sales of Subadvisor Assets. To carry out such decisions, you are hereby authorized, as the Funds agent and attorney-in-fact, for the Funds account and at the Funds risk and in the Funds name, to place orders for the investment and reinvestment of Subadvisor Assets. In all purchases, sales and other transactions in Subadvisor Assets you are authorized to exercise full discretion and act for the Fund in the same manner and with the same force and effect as we might 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.
(c) You will make your officers and employees available to us from time to time at reasonable times to review the investment policies of the Fund and to consult with us regarding the investment affairs of the Fund. You will report to us and to the Board of Directors of the Fund at each meeting thereof all changes in the Funds portfolio with respect to Subadvisor Assets since the prior report, and will also keep us and the Board of Directors of the Fund in touch with important developments affecting the Subadvisor Assets and on your own initiative will furnish us and the Board of Directors of the Fund from time to time with such information as you may believe appropriate for this purpose, whether concerning the individual issuers whose
2
securities are included in the Subadvisor Assets, the industries in which they engage, or the conditions prevailing in the economy generally. You will also furnish us and the Funds Board of Directors with such statistical and analytical information with respect to the Subadvisor Assets as you may believe appropriate or as we or the Fund reasonably may request. In making such purchases and sales of the Subadvisor Assets, you will bear in mind the policies set from time to time by the Funds Board of Directors as well as the limitations imposed by the Funds Articles of Incorporation and in the Funds Registration Statement under the Act and of the Internal Revenue Code of 1986, as amended, in respect of regulated investment companies.
(d) It is understood that you will conform to all applicable rules and regulations of the Securities and Exchange Commission in all material respects and in addition will conduct your activities under this Agreement in accordance with any applicable regulations.
(e) 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.
3. |
We shall expect of you, and you will give us and the Fund the benefit of, your best judgment and efforts in rendering these services to us and the Fund, and we and the Fund 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 |
3
to protect, you against any liability to us or the Fund or to our security holders to which you would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of your duties hereunder, or by reason of your reckless disregard of your obligations and duties hereunder. |
4. | By signing this Agreement, you hereby represent to us that you are a registered investment advisor under the Investment Advisers Act of 1940, as amended (Advisers Act) and will continue to be so registered for so long as this Agreement remains in effect; you are not prohibited by the Act or the Advisers Act from performing investment advisory services to the Fund; and will immediately notify us of the occurrence of any event that would disqualify you from serving as the subadvisor for the Fund or as an investment advisor of any investment company pursuant to Section 9(a) of the Act. |
5. | In consideration of the foregoing, we will pay you a monthly fee equal on an annual basis to 50% of the management fees received by Cohen & Steers Capital Management, Inc. with respect to the Subadvisor Assets. Such fee shall be payable in arrears on the last day of each calendar month for services performed hereunder during such month. Such fee shall be prorated proportionately to the extent this agreement is not in effect for a full month. |
6. |
This agreement shall become effective on October 1, 2009 and shall remain in effect for two years and may be continued for successive twelve-month periods provided that such continuance is specifically approved at least annually by the Board of Directors of the Fund or by majority vote of the holders of the outstanding voting securities of the Fund (as defined in the Act), and, in either case, by a majority of the |
4
Funds 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 to the extent permitted by the Act and the rules and regulations thereunder. This agreement may be terminated at any time, without the payment of any penalty, by us, by a vote of a majority of the outstanding voting securities (as so defined) of the Fund or by a vote of a majority of the Board of Directors of the Fund, each on 60 days written notice to you, or by you on 60 days written notice to us and to the Fund. |
7. | 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 thereto by governing law and any interpretation thereof contained in rules or regulations promulgated by the Securities and Exchange Commission thereunder. |
8. | 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, directors or employees, 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. |
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9. | This agreement shall be construed in accordance with the laws of the State of New York, provided, however, that nothing herein shall be construed as being inconsistent with the Act. |
[ Remainder of Page Intentionally Left Blank ]
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If the foregoing is in accordance with your understanding, will you kindly so indicate by signing and returning to us the enclosed copy hereof.
V ERY TRULY YOURS , COHEN & STEERS CAPITAL MANAGEMENT, INC. |
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By: | s/Adam M. Derechin | |
Adam M. Derechin Chief Operating Officer |
Agreed to and accepted
as of the date first set forth above
COHEN & STEERS ASIA LIMITED
|
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By: | s/Stephen Kenneally | |
Stephen Kenneally Executive Director |
Agreed to and accepted
as of the date first set forth above
COHEN & STEERS INTERNATIONAL REALTY FUND, INC. | ||
By: | s/Tina M. Payne | |
Tina M. Payne Assistant Secretary |
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Exhibit (j)
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in this Registration Statement on Form N-1A for Cohen & Steers International Realty Fund, Inc. of our report dated February 16, 2011 relating to the financial statements and financial highlights which appear in the December 31, 2010 Annual Report to Shareholders of Cohen & Steers International Realty Fund, Inc. which are also incorporated by reference into the Registration Statement. We also consent to the references to us under the headings Financial Highlights and Counsel and Independent Registered Public Accounting Firm in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
New York, New York
April 29, 2011
Exhibit (n)
MULTI-CLASS PLAN
PURSUANT TO RULE 18f-3 FOR
COHEN & STEERS INTERNATIONAL REALTY FUND, INC.
WHEREAS, Cohen & Steers International Realty Fund, Inc. (the Fund) is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the 1940 Act);
WHEREAS, the Fund desires to adopt a Multi-Class Plan pursuant to Rule 18f-3 under the 1940 Act (the Plan) with respect to the Fund; and
WHEREAS, the Fund employs Cohen & Steers Securities, LLC (the Distributor) as principal underwriter of the securities of which it is the issuer;
NOW, THEREFORE, the Fund hereby adopts the Plan, in accordance with Rule 18f-3 under the 1940 Act, on the following terms and conditions:
1. Features of the Classes . The Fund issues its shares of common stock in classes: Class A Shares, Class C Shares and Class I Shares. Shares of each class of the Fund shall represent an equal pro rata interest in the Fund and, generally, shall have identical voting, dividend, distribution, liquidation, and other rights, preferences, powers, restrictions, limitations, qualifications, and terms and conditions, except that: (a) each class shall have a different designation; (b) each class of shares shall bear any Class Expenses, as defined in Section 4 below; and (c) each class shall have exclusive voting rights on any matter submitted to shareholders that relates solely to its shareholder servicing or distribution arrangements and each class shall have separate voting rights on any matter submitted to shareholders in which the interests of one class differ from the interests of any other class. In addition, Class A, Class C and Class I shares of the Fund shall have the features described in Sections 2-6 below.
2. Shareholder Services Plan . The Fund has adopted a Shareholder Services Plan with respect to the Class A and Class C shares of the Fund, which provides that the Fund pays fees for shareholder account service and maintenance at an annual rate of up to 0.10% of the average daily net asset value of the Class A shares and up to 0.25% of the average daily net asset value of the Class C shares. The Class I shares do not participate in the Shareholder Services Plan. The fees under the Shareholder Services Plan are intended to be a service fee as defined under the Financial Industry Regulatory Authority rules.
3. Distribution Plan . The Fund has adopted a Distribution Plan with respect to the Class A and Class C shares of the Fund pursuant to Rule 12b-1 promulgated under the 1940 Act. The Distribution Plan provides that the Fund pays the Distributor at an annual rate not to exceed 0.25% of the average net asset value of the Class A shares. With respect to the Class C shares, the Distribution Plan provides that the Fund pays the Distributor at an annual rate not to exceed 0.75% of the average net asset value attributable to the Class C shares. The Distribution Plan provides that the Distributor may use amounts received (a) to make payments to brokers or other financial intermediaries who have rendered assistance and (b) for other expenses such as advertising costs and payment for the printing and distribution of prospectuses to prospective investors.
4. Allocation of Income and Expenses . (a) The gross income of the Fund shall, generally, be allocated to each class on the basis of net assets. To the extent practicable, certain expenses (other
than Class Expenses (as defined below), which shall be allocated more specifically) shall be subtracted from the gross income on the basis of the net assets of each class of the Fund. These expenses include those incurred by the Fund not attributable to any particular class of the Funds shares (for example, advisory fees, custodial fees, or other expenses relating to the management of the Funds assets) (Fund Level Expenses).
(b) Expenses attributable to a particular class (Class Expenses) shall be limited to: (i) payments made pursuant to the Shareholder Services Plan or the Distribution Plan; (ii) transfer agent fees attributable to a specific class; (iii) printing and postage expenses related to preparing and distributing materials such as shareholder reports, prospectuses and proxy statements to current shareholders of a specific class; (iv) Blue Sky registration fees incurred by a class; (v) Securities and Exchange Commission registration fees incurred by a class; (vi) litigation or other legal expenses relating solely to one class; and (vii) directors fees incurred as a result of issues relating to a specific class.
Therefore, expenses of the Fund shall be apportioned to each class of shares depending on the nature of the expense item. Fund Level Expenses will be allocated among the classes of shares based on their relative net asset values. Class Expenses shall be allocated to the particular class(es) to which they are attributable. In addition, certain expenses may be allocated differently if their method of imposition changes. Thus, if a Class Expense can no longer be attributed to a class, it shall be charged to the Fund for allocation among classes as a Fund Level Expense. Any additional Class Expenses not specifically identified above which are subsequently identified and determined to be properly allocated to one class of shares shall not be so allocated until approved by the Board in light of the requirements of the 1940 Act and the Internal Revenue Code of 1986, as amended.
5. Exchange Privileges . The Class A, Class C and Class I shares of the Fund may be exchanged for shares of other Cohen & Steers funds or, under certain circumstances described in the Funds prospectus, for shares of another class of the Fund. For share exchanges between the Fund and another Cohen & Steers fund, any applicable sales charge, contingent deferred sales charge or redemption fee will apply as described in the Funds prospectus. The exchange privilege may be modified or revoked at any time upon 60 days notice to shareholders.
6. Conversion Features . There shall be no conversion features associated with the Class A, Class C or Class I shares of the Fund.
7. Modification of the Plan . The Plan shall not be materially amended except by vote of a majority of both (a) the Directors of the Fund and (b) those Directors of the Fund who are not interested persons (as defined in the 1940 Act) of the Fund after finding that modification of the Plan, including the expense allocation, is in the best interests of each class individually and the Fund as a whole.
As revised: June 22, 2010
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Exhibit (p)
Code of Ethics
Amended and Restated:
October 1, 2009
Last Updated: March 2011
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C-1 |
The Cohen & Steers Code of Ethics (the Code) applies to Cohen & Steers, Inc. as well as any of its current or future subsidiaries and affiliates (collectively, Cohen & Steers) and the Cohen & Steers U.S. registered investment companies and the provisions of this Code apply to all Cohen & Steers employees, wherever located. In certain non-U.S. countries, local laws or customs may impose requirements in addition to the Code. This Code does not apply to directors of Cohen & Steers who are not also Cohen & Steers employees but sections of this Code do apply to the independent directors of the Cohen & Steers U.S. registered investment companies.
The Code is structured as follows:
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Section I contains a statement of general fiduciary principles |
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Section II defines certain terms used in the Code |
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Section III describes the preclearance requirements for personal securities transactions, among other things |
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Section IV details the limitations and restrictions imposed by the Code |
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Section V describes the reporting requirements under the Code |
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Section VI details the administration and procedural requirements of the Code |
I. | Statement of General Fiduciary Principles |
The following general fiduciary principles shall govern personal investment activities and the interpretation and administration of this Code:
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The interests of clients must be placed first at all times; |
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All personal securities transactions must be conducted in a manner that is consistent with the Code and in a way to avoid any actual or potential conflict of interest or any abuse of an individuals position of trust and responsibility; |
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Individuals must not take advantage of their own positions at Cohen & Steers to misappropriate investment opportunities from clients; and |
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Individuals must comply with the applicable federal securities laws. 1 |
When making personal investment decisions, all employees must exercise extreme care to avoid violating the prohibitions of this Code. Furthermore, employees should conduct
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For purposes of this Code, applicable federal securities laws is defined as the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, the Investment Company Act of 1940 (the Investment Company Act), the Investment Advisers Act of 1940, Title V of the Gramm-Leach-Bliley Act of 1999, any rules adopted by the Securities and Exchange Commission (the SEC) under any of these statutes, the Bank Secrecy Act of 1970 as it applies to funds and investment advisors, any rules adopted thereunder by the SEC or the Department of the Treasury, and any applicable local legislation, including the rules and regulations of the Belgian Banking, Finance and Insurance Commission, the rules and regulations of the United Kingdom Financial Services Authority and the rules and regulations of the Hong Kong Securities and Futures Commission. |
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their personal investing in such a manner that will minimize the employees time and attention that are devoted to personal investments at the expense of time and attention that should be devoted to duties at Cohen & Steers.
It is not possible for this policy to address every situation involving Cohen & Steers employees personal trading. The Chief Compliance Officer in consultation with the Cohen & Steers Executive Committee is charged with oversight and interpretation of this Code in a manner considered fair and equitable, with a view in all cases of placing Cohen & Steers clients interests first. Technical compliance with the Code will not insulate an employee from scrutiny of, or sanctions for, employee abuses of his or her position, fiduciary duty or securities transactions which may potentially conflict with any client of Cohen & Steers.
II. | Definitions |
A. | Access Person means any employee director, officer, general partner of Cohen & Steers Capital Management, Inc. or its affiliated investment advisors. All employees are considered Access Persons. |
B. | Automatic Investment Plan means a program in which regular periodic purchases (or withdrawals) are automatically made in (or from) investment accounts in accordance with a predetermined schedule and allocation. An Automatic Investment Plan includes a dividend reinvestment plan. |
C. | Beneficial Ownership shall be interpreted in the same manner as it would be under Rule 16a-1(a)(2) under the Securities Exchange Act of 1934 in determining whether a person is the beneficial owner of a security for the purposes of Section 16 of the Securities Exchange Act of 1934 and the rules thereunder. |
D. | Board of Directors shall mean the directors of the Funds. |
E. | Chief Compliance Officer shall mean the Chief Compliance Officer (CCO) of Cohen & Steers Capital Management, Inc. and the Cohen & Steers Funds. |
F. | Code shall mean this Code of Ethics. |
G. | Control shall have the same meaning as that set forth in Section 2(a)(9) of the Investment Company Act. |
H. |
Covered Security shall have the meaning set forth in Section 2(a)(36) of the Investment Company Act. This definition includes, but is not limited to, any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or |
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subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security (including a certificate of deposit) or on any group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a security, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. |
Covered Security shall not include the following:
1. | Direct obligations of the government of the United States or any other sovereign country or supra-national agency; and |
2. |
Bankers acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments 2 , including repurchase agreements; and |
3. | Shares issued by an open-end registered investment company, including Cohen & Steers open-end investment companies, other than shares of Exchange Traded Funds. |
I. | Exchange Traded Fund or ETF is a security that tracks an index and represents a basket of stocks or bonds like an index fund, but trades like a stock on an exchange. This definition also includes Exchange Traded Notes or ETNs. |
J. | Fund or Funds mean the U.S. registered Cohen & Steers open and closed-end investment companies. |
K. | Independent Director means a director of the Funds who is not an interested person of the Fund within the meaning of Section 2(a)(19) of the Investment Company Act, and who would be required to make a report under Section V of this Code solely by reason of being a director of the Funds. |
L. | Initial Public Offering means an offering of securities registered under the Securities Act of 1933 the issuer of which, immediately before the registration, was not subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934. |
M. | Investment Personnel refers to any employee who, in connection with his or her regular functions or duties, makes or participates in making |
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High quality short-term debt instrument means any instrument that has a maturity at issuance of less than 366 days and that is rated in one of the two highest rating categories by a Nationally Recognized Statistical Rating Organization. |
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recommendations regarding the purchase or sale of securities on behalf of client accounts. Investment Personnel include portfolio managers and analyst but does not include traders. |
N. | Personal Trading System or PTA means the automated personal trading system used by Cohen & Steers for administration of this Code. All employees receive a username and password at the start of their employment with the firm. |
O. | Private Placement means a security offering that is exempt from registration under certain provisions of the U.S. securities laws and/or similar laws of non-U.S. jurisdictions (if you are unsure whether the securities are issued in a private placement you must consult with the Legal & Compliance Department). |
P. | Purchase or sale of a Covered Security includes, among other things, the writing of an option to purchase or sell a Covered Security. |
Q. | Real Estate Security means any security of a company 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. |
R. | Reportable Fund means any open-end fund for which Cohen & Steers acts as investment advisor or subadvisor or principal underwriter. See Appendix A for a list of Reportable Funds. |
S. | Reportable Security means any Covered Security and Reportable Fund. |
III. Personal Securities Transactions
A. | Preclearance Requests |
Except as specifically exempted in this section, all Access Persons must obtain preclearance approval before effecting a personal transaction in any Covered Security including closed-end funds and ETFs. For U.S. employees, clearance for personal securities transactions will be in effect only for the day of approval. For non-U.S. employees clearance for personal securities transactions will be in effect for the day of approval plus the following business day.
In order to obtain preclearance, an Access Person must complete a preclearance request using PTA whenever possible on the day they intend to trade. Preclearance may be denied for any reason. An Access Person is not entitled to receive an explanation or reason if their preclearance request is denied.
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B. | Transactions Exempt from Preclearance |
Preclearance approval is not required for the below list of transactions:
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Purchases or sales of a security that is not a Covered Security. |
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Purchases or sales that are not volitional. |
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Purchases or sales which are part of an Automatic Investment Plan that has been disclosed to the Compliance Department in advance. |
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Trades in an account where investment discretion is delegated to an independent third party (see Managed Accounts below). |
Transactions in personal accounts for which an Access Person does not have direct or indirect influence or control (e.g. a professionally managed account over which the Access Person has authorized complete discretion) are not subject to the preclearance requirements of the Code. If an Access Person has beneficial interest in an account but does not have direct or indirect influence or control, the Access Person must provide compliance with written confirmation of the Access Persons lack of direct or indirect influence or control over the account. Upon approval from the CCO, transactions in such account will not require preclearance and need not be reported under Section V below
IV. | Restrictions |
Preclearance requests will be denied under the circumstances described below. Please note that the following restrictions are equally applied to the Covered Security and to instruments related to the Covered Security. A related instrument is any security or instrument issued by the same entity as the issuer of the Covered Security, including options, rights, warrants, preferred stock, bonds and other obligations of that issuer, instruments otherwise convertible into securities of that issuer or any other instrument derived from a Covered security (e.g. OTC options) regardless of issuer.
A. | Blackout Periods |
1. | Real Estate Securities |
No Access Person shall purchase or sell any Real Estate Security (as defined in Section II ) except that an Access Person may invest in shares of open-end funds, closed-end funds and ETFs that invest in Real Estate Securities, subject to the applicable preclearance and reporting requirements of this Code.
2 . | Non-Real Estate Securities |
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a. | No Access Person shall execute any securities transaction on a day during which any client has a pending buy or sell order in that same security unless clearance was granted prior to the initiation of the order or until that order is executed or withdrawn. |
b. | Investment Personnel are prohibited from trading a security in a personal account for three days before and one day after a transaction in the same or equivalent security in a client portfolio they manage. |
B. | Holding Period |
All Access Persons are prohibited from profiting from the purchase and sale or the sale and purchase of the same security (or equivalent) within thirty (30) calendar days. Any profits realized from the purchase and sale or the sale and purchase of the same security (or equivalent) within thirty day restriction periods shall be disgorged. Transactions that would result in a loss are not subject to the 30-day holding period.
The holding period is calculated using FIFO (first-in-first out) and therefore the holding period rule is violated if there is a profit when:
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The first purchase(s) during the timeframe are followed by a sale at a higher price, or |
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The first sale(s) during the timeframe are followed by a purchase at a lower price |
The price is calculated by looking at the price of the earliest opposite-side transactions during the thirty day period.
FIFO Example:
If an employee purchased 100 shares of XYZ on March 1 and 100 more on March 15, on April 1 the employee would be permitted to sell at a profit only 100 shares. She/he would have to wait until April 15 to sell the additional 100 shares at a profit.
Certain limited exceptions to this holding period are available on a case-by-case basis and must be approved by the Chief Compliance Officer or a designee prior to execution. Exceptions to this policy include, but are not limited to, hardships and extended disability. Non-volitional trades such as automatic investment and withdrawal programs and automatic rebalancing are permitted transactions under this policy.
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The 30-day holding period also applies to transactions in Cohen & Steers Open-End Funds even though such transactions do not require preclearance. However, the holding period does not apply to shares acquired through an Automatic Investment Plan.
Officers and directors of the Cohen & Steers closed-end funds are subject to additional holding periods as set forth in Section IV.B.F below and the Cohen & Steers Inside Information Policy.
C. | Excessive Trading |
Excessive or inappropriate trading is prohibited. The Compliance Department monitors all employees trading and provides periodic reports to department heads and supervisors regarding the volume and nature of employee transactions. A pattern of excessive trading may lead to disciplinary action under the Code up to and including termination.
D. | Initial Public Offerings |
All Access Persons are prohibited from purchasing equity securities in an initial public offering.
E. | Private Placements |
Access Persons must obtain prior approval from the CCO before directly or indirectly acquiring Beneficial Ownership in a Private Placement. The CCO will consult a member of the executive committee and other appropriate parties in evaluating the request. To request prior approval, Access Persons must provide the CCO with a completed Private Placement Approval Request ( Appendix B) and sufficient supporting documentation.
If the request is approved, the Access Person must report the trade on the Quarterly Transaction Report and report the investment on the Annual Holdings report (see Section V). Subsequent investments in same Private Placement must also be preapproved and reported.
F. | Cohen & Steers Closed-End Funds |
Additional restrictions regarding the closed-end funds managed by Cohen & Steers, in order to ensure no improper trading takes place, include:
1. |
Holding Period: Directors and officers of the Cohen & Steers closed-end Funds are prohibited by the federal securities laws from selling shares of these Funds within six months of purchasing them, or purchasing shares of these Funds within six months of selling them, and must file forms promptly with the SEC regarding their transactions in shares of these |
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Funds. Any violation of this six-month holding period will require disgorgement of any profits. 3 |
2. | Blackout Periods: Independent Directors and Access Persons may not purchase or sell shares of the Cohen & Steers closed-end Funds on certain days prior to board meetings and dividend declarations. |
a. | For Independent Directors, the blackout period is from the date of the receipt of quarterly board materials through the close of business on the second day of the quarterly meeting and the issuance of a press release declaring quarterly dividends. |
b. | For Access Persons, the blackout period begins two (2) weeks prior to the quarterly board meeting through the second day of that meeting. |
c. | The CCO or General Counsel may impose additional blackout periods for trading in the closed-end funds as necessary. |
G. | Cohen & Steers Open-End Funds |
All Access Persons are subject to the same frequent trading policies that apply to the shareholders of the Cohen & Steers open-end Funds. As such, no Access Person or Independent Director may make more than two (2) round trips in a sixty (60) calendar day period. A round trip is defined by a purchase and sale/exchange of shares of the same fund.
H. | Prohibition on Accepting Gifts |
No Access Person shall give or receive any gift in violation of the Cohen & Steers Gifts and Entertainment Policy and Procedures, which permit gifts valued cumulatively at $100 or less per person per calendar year.
I. | Investment Clubs |
Employee participation in Investment Clubs is permitted but all Investment Club transactions are subject to the restrictions and reporting requirements in this Code.
J. | Outside Directorships |
No Access Person shall serve on the board of directors of a publicly traded company unless approved in advance by a Co-Chairman and Co-Chief Executive Officer of Cohen & Steers, Inc. This authorization will be provided only if a Co-Chairman and Co-Chief Executive Officer concludes that service on the board would not be inconsistent with the interests of Cohen & Steers clients. Access
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Pursuant to Section 16 of the Securities Exchange Act of 1934, the holding period for the closed-end funds is calculated using LIFO (last in-first out) whereas the holding period in Section IV.B above is calculated using FIFO. |
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Persons who have received this approval shall not trade for a client or their own account in the securities of the company while in possession of material, non-public information. Outside business activities, other than service on a board of a publicly traded company, are addressed in the Cohen & Steers Conflicts of Interest Policy.
V. | Reporting |
A. | Initial Holdings Reports |
Within 10 days of the commencement of employment with Cohen & Steers, each Access Person must provide the Compliance Department with a statement of all Reportable Securities and brokerage accounts as set forth in Appendix C . More specifically, each Access Person must provide the following information:
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The title and type of security, and as applicable the exchange ticker symbol or CUSIP number, number of shares, and principal amount of each reportable security in which the Access Person has any direct or indirect beneficial ownership; |
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The name of any broker, dealer or bank with which the Access Person maintains an account in which any securities are held for the Access Person's direct or indirect benefit; and |
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The date the Access Person submits the report. |
B. | Quarterly Transaction Reports |
Within 30 days after the end of a calendar quarter, all Access Persons must report the following information:
1. | With respect to transactions during the quarter in any Reportable Security in which such Access Person has, or by reason of such transaction acquires, any direct or indirect beneficial ownership in the Reportable Security: |
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The date of the transaction, the title, and as applicable the exchange ticker symbol or CUSIP number, interest rate and maturity date, number of shares, and principal amount of each reportable security involved; |
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The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition); |
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The price of the security at which the transaction was effected; |
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The name of the broker, dealer or bank with or through which the transaction was effected; and |
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The date the Access Person submits the report. |
2. | With respect to any account established by the Access Person in which any securities were held during the quarter for the direct or indirect benefit of the Access Person: |
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the name of the broker, dealer or bank with whom the Access Person established the account; |
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The date the account was established; and |
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The date the Access Persons submits the report. |
Quarterly transactions are uploaded into the PTA system throughout the quarter. At the end of the quarter, all Access Persons must review their transactions in PTA and complete a certification on PTA or through comparable means.
C. | Annual Holdings Reports |
Annually, all Access Persons must report the following information (which must be current as of a date no more than 45 days before the report is submitted):
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The title and type of security, and as applicable the exchange ticker symbol or CUSIP number, number of shares, and principal amount of each reportable security in which the Access Person has any direct or indirect beneficial ownership; |
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The name of any broker, dealer or bank with which the Access Person maintains an account in which any securities are held for the Access Persons direct or indirect benefit; and |
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The date the Access Person submits the report. |
Each Access Person shall submit an Annual Holdings Report through the PTA reporting system or an equivalent format within 45 days after the beginning of each calendar year.
D. | Compliance Review |
The CCO or a designee shall be responsible for reviewing the reports made pursuant to this section.
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E. | Exception |
An Access Person need not make a report under this section with respect to securities held in any account over which that person had no direct or indirect influence or control.
F. | Annual Certification |
Each Access Person must certify annually within sixty (60) days of year-end that he or she has read and understands the Code and recognizes that he or she is subject to the Code. In addition, each Access Person must certify annually that he or she has complied with all the requirements of the Code and that he or she has disclosed or reported all personal securities transactions required to be disclosed or reported pursuant to the requirements of the Code.
G. | Independent Directors |
An Independent Director shall report transactions in Reportable Securities only if the director knew or, in the ordinary course of fulfilling his or her official duties as a director should have known, that during the 15-day period immediately preceding or following the date of the transaction (or such period prescribed by applicable law), such security was purchased or sold, or was being considered for purchase or sale, by any Cohen & Steers client.
The should have known standard implies no duty of inquiry, does not presume there should have been any deduction or extrapolation from discussions or memoranda dealing with tactics to be employed meeting any Funds investment objectives, or that any knowledge is to be imputed because of prior knowledge of any Funds portfolio holdings, market considerations, or any Funds investment policies, objectives and restrictions.
Independent Directors need not provide an Initial or Annual Holdings Report and they are not subject to the restrictions in Section IV other than F and G.
H. | Confidentiality |
All reports of securities transactions and any other information filed with the Compliance Department pursuant to this Code shall be treated as confidential. In this regard, no Access Person shall reveal to any other person (except in the normal course of his or her duties on behalf of Cohen & Steers) any information regarding securities transactions made or being considered by or on behalf of any client account.
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I. | Disclaimer |
Any such report may contain a statement that the report shall not be construed as an admission by the person making such report that he has any direct or indirect beneficial ownership in the Reportable Security to which the report relates.
VI. | Administration of the Code of Ethics |
A. | Use of Preferred Brokers |
All Access Persons are strongly encouraged to maintain their personal trading accounts at, and execute all transactions in Covered Securities through, one or more brokers that provide automated feeds to the PTA system. Accounts with brokers who provide account information to PTA electronically may be more accurate and require less reconciliation for the Access Person at certification time. The Compliance Department maintains the list of such brokers.
B. | Duplicate Confirmation |
All Access Persons must require their brokers to supply to Compliance on a timely basis duplicate confirmations of all personal securities transactions. When possible, the duplicate confirmation requirement will be satisfied by electronic feed directly from the brokers to PTA.
If under local market practice, brokers are restricted by law from delivering duplicate confirmations to the Compliance Department, it is the Access Persons responsibility to provide promptly to the Compliance Department with a duplicate confirmation (either a photocopy, fax or PDF) for each trade. If a broker is unwilling to deliver duplicate confirmations for any other reason, the employee will not be permitted to maintain an account with that broker.
C. | Exemptions from the Code |
In cases of hardship, the CCO, the General Counsel or their respective designees can grant exemptions from the personal trading restrictions in this Code. The decision will be based on a determination that a hardship exists and the transaction for which an exemption is requested would not result in a conflict with Cohen & Steers clients interests. Other factors that may be considered include: the size and holding period of the Access Persons position in the security, the market capitalization of the issuer, the liquidity of the security, the amount and timing of client trading in the same or a related security and other relevant factors.
Any Access Persons seeking an exemption should submit a written request setting forth the nature of the hardship along with any pertinent facts and reasons why the Access Person believes the exemption should be granted. Access Persons are
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cautioned that exemptions are exceptions and repetitive requests for exemptions by an Access Person are not likely to be granted.
Records of the approval of exemptions and the reasons for granting the exemptions will be maintained by the Compliance Department.
D. | Fund Board of Directors Reporting and Approval |
The Board of Directors of each Fund, as applicable, including a majority of the Independent Directors, must approve this Code and any material changes to it. This approval shall be based on a determination that this Code contains provisions reasonably necessary to prevent Access Persons from engaging in any conduct prohibited by Rule 17j-1 under the Investment Company Act or any other applicable rules and regulations,. In connection with this approval, Cohen & Steers shall provide a certification to the Board that Cohen & Steers and the Funds have adopted procedures reasonably necessary to prevent Access Persons from violating this Code.
No less frequently than annually, Cohen & Steers shall furnish to the Board of Directors, and the Board of Directors must consider, a written report that:
(1) | Describes any issues arising under the Code or procedures since the last report to the Board of Directors, including, but not limited to, information about material violations of the Code or procedures or sanctions imposed in response to the material violations; and |
(2) | Certifies that the Funds and Cohen & Steers have adopted procedures reasonably necessary to prevent Access Persons from violating the Code. |
E. | Violations and Sanctions |
Access Persons must report any violations or potential violations of this Code promptly to the CCO or another member of the Legal & Compliance Department.
Upon discovering a violation of this Code, Cohen & Steers may impose such sanctions as it deems appropriate, including, among other things, disgorgement of profits, a letter of censure, suspension or termination of the employment of the violator.
F. | Acknowledgments |
Each Access Person must be provided with a copy of this Code and any amendments. In addition, each Access Person must provide the Compliance Department with a written (or electronic) acknowledgment of their receipt of the Code and any amendments.
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G. | Records |
The Compliance Department shall maintain records 4 in the manner and to the extent set forth below, which may be maintained on microfilm or by such other means permissible under the conditions described in Rule 31a-2 of the Investment Company Act and Rule 204-2 the Investment Advisers Act of 1940, or under no-action letters or interpretations under these rules, and shall be available for examination by the SEC or any representatives of the SEC.
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A copy of this Code of Ethics shall be preserved in an easily accessible place (including for five (5) years after this Code of Ethics is no longer in effect). |
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A record of any violation of this Code of Ethics and of any action taken as a result of such violation shall be preserved in an easily accessible place for a period of not less than five (5) years following the end of the fiscal year in which the violation occurs. |
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A copy of each report, including annual reports to the Fund Board of Directors, and any information provided in lieu of a report, made by an Access Person pursuant to this Code of Ethics shall be preserved for a period of not less than five (5) years from the end of the fiscal year in which it is made or the information is provided, the first two years in an easily accessible place. |
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A record of any decision, and the reasons supporting the decision, to approve the acquisition of an IPO (if an exception is made) or Private Placement shall be preserved in an easily accessible place for a period of not less than five (5) years after the end of the fiscal year in which the approval is granted. |
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A list of all Access Persons who are, or within the past five (5) years have been, required to make reports or are responsible for reviewing these reports, pursuant to this Code of Ethics shall be maintained in an easily accessible place. |
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A record of all written acknowledgments for each Access Person who is currently, or within the past five years was, an Access Person of the investment advisor. |
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For Funds, records shall be maintained at the Funds principal place of business. For advisors, records shall be maintained at an appropriate office of the investment advisor. |
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Appendix A
As of March 1, 2011*
Cohen & Steers Open-End Funds
Cohen & Steers Realty Shares
Cohen & Steers Realty Income Fund
Cohen & Steers Global Infrastructure Fund
Cohen & Steers Global Realty Shares
Cohen & Steers International Realty Fund
Cohen & Steers Emerging Markets Real Estate Fund
Cohen & Steers Institutional Global Realty Shares
Cohen & Steers Dividend Value Fund
Cohen & Steers Institutional Realty Shares
Cohen & Steers Preferred Securities and Income Fund
Cohen & Steers Subadvised Funds
LVIP Cohen & Steers Global Real Estate Fund
Harbor Large Cap Value Fund
Fidelity Strategic Advisors Value Fund
AST Cohen & Steers Realty Fund
Northern Multi-Manager Global Real Estate Fund
Russell Investment Company Real Estate Securities Fund
Russell Investment Company Global Infrastructure Fund
Russell Investment Funds
* | In addition to the list above, Reportable Funds include any future open-end investment companies advised or subadvised by Cohen & Steers. |
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Appendix B
Private Placement Approval Request
Employee Name:
Employee Position:
Cohen & Steers Phone Extension:
Name of Company:
Dollar amount of private placement:
Dollar amount of your intended investment:
Does this company have publicly traded securities? ¨ Yes ¨ No
How were you offered the opportunity to invest in this private placement?
What is the nature of your relationship with the individual or entity?
Was the opportunity because of your position with Cohen & Steers? ¨ Yes ¨ No
Would it appear to the SEC or other parties that you are being offered the opportunity to participate in an exclusive, very limited offering as a way to curry favor with you or your colleagues at Cohen & Steers?
If you are Cohen & Steers Investment Personnel, are you inclined to invest in the private placement on behalf of the funds/accounts you manage? ¨ Yes ¨ No
Would any other Cohen & Steers Funds/accounts want to invest in this private placement?
¨ Yes ¨ No
Date you require an answer:
Attachments: ¨ business summary ¨ prospectus ¨ offering memorandum
Compliance Use Only: ¨ Approved ¨ Denied
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Chief Compliance Officer Signature | Date |
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Appendix C
Employee Name: |
Employment Start Date: |
Social Security Number: |
5 Information in the Report Dated as of: |
Copies of recent brokerage statements will be accepted in place of completing this report if such statements are attached to this signed report and provided that the statements contain all of the information required to be reported herein.
Securities Accounts
Name of Broker, Dealer or Bank |
Account
Number |
Owner(s) of
Record |
Relationship to
Me (if not under my name) |
Trading
Discretion (y/n) |
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If you have no securities accounts to report, please check here:
Securities Holdings
Title/Description of Security (include ticker symbol or CUSIP number, as applicable) |
Number
of
Shares (if applicable) |
Principal Amount,
Maturity Date and Interest Rate (if applicable) |
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If you have no securities holdings to report, please check here:
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Information in this report must be current as of a date 45 days prior to your becoming an Access Person. |
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Please include all securities holdings which include accounts that:
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Involve securities (except government securities, non-CNS open-end mutual funds and money market instruments) in which you have direct or indirect beneficial ownership. |
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Are held in accounts over which you have direct or indirect influence or control. |
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Include shares of any open-end investment company which CNS provides investment advisory services including mutual funds subadvised by Cohen & Steers. |
This report will not be construed as an admission that the employee has any direct or indirect beneficial ownership in the securities listed.
v | PLEASE NOTE : PTA Connect is a personal trade management and administration system that automates and manages the approval and reporting processes required by the firm's Code of Ethics. The system is web-based and will allow all employees to log on and submit automated pre-clearance requests and fulfill their regular reporting requirements. Employee account data will also be housed on the password-protected secure site. We utilize your social security number only in the interface with your broker to verify we receive all account information for you and your family members. We keep this information confidential and do not share it with anyone within or outside of Cohen & Steers unless it is required for a business purpose. |
Signature: |
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Date: |
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