C&s Performance

Cohen & Steers U.S. Real Estate Securities Strategy MARCH 31, 2009*

INVESTMENT COMMENTARY

We would like to share with you our review and outlook for the U.S. real estate securities market as of March 31, 2009. For the month, the FTSE NAREIT Equity REIT Index had a total return of +4.1%. For the quarter, the index had a total return of –31.9%. Investment Review Stocks declined in the first quarter amid a weak economy and mostly sluggish capital markets, factors that took a disproportionately higher toll on real estate securities for much of the period. Following a negative January, equities fell in February as investors reacted unfavorably to the new administration’s proposed fiscal budget and were also disappointed with a lack of specifics on how the government would address the banking crisis. At the end of the month, General Electric announced that it would cut its dividend and the government revealed that it would exchange preferred stock for a $25 billion stake in Citigroup’s common stock; these events added to the uncertainty, and markets hit multi-year lows in early March. More clarity on policy lifted REITs in March Although volatility remained high, conditions improved after the Federal Reserve stated that it would make substantial purchases of long-term Treasury and mortgage-backed bonds. Equities received another boost when Treasury Secretary Geithner unveiled the details of his Public Private Investment Program (PPIP) rescue plan, which involves working with private investors to purchase assets from banks. The program allows for the purchase of “legacy” securities backed by commercial real estate mortgages (and the purchase of mortgages themselves). Yield spreads on commercial mortgage-backed securities—a traditional means of real estate financing—narrowed, and REITs had a strong rally in response to the news. Recapitalization comes to the United States In the wake of successful recapitalization by select commercial real estate companies in the United Kingdom and Australia, U.S. REITs have begun to raise new capital. Their goals are similar: to strengthen their balance sheets, meet debt maturities and have enough liquidity to take advantage of buying opportunities. In March, Simon Property Group, the largest owner of U.S. malls, raised $1.2 billion through a concurrent debt and equity offering. The company received $650 million from the sale of

unsecured bonds, above the $500 million originally planned, along with $550 million from a secondary stock offering. AMB Property, which owns and operates industrial warehouses, raised more than $500 million. In April, Kimco Realty, the largest owner of U.S. shopping centers, raised more than $600 million, and ProLogis, the world’s largest warehouse manager and developer, raised $1 billion. Cohen & Steers was instrumental in these capital raisings, and was a cornerstone investor in the offerings. We believe these transactions have demonstrated to the market that high-quality REITs have access to capital and can reduce their leverage, as needed. In our view, these companies, along with others that have strong balance sheets, will weather this recession and credit cycle and remain industry leaders.

FTSE NAREIT PERFORMANCE Period

FTSE NAREIT Equity REIT Index

Q109 1 Year 3 Years 5 Years 10 Years

-31.9% -58.2% -25.1% -8.6% 3.9%

Total returns of the FTSE NAREIT Equity REIT Index, an unmanaged capitalization-weighted index of all equity real estate investment trusts. Periods greater than one year are annualized. Past performance does not guarantee future results. This information is not representative of any Cohen & Steers account and no such account will seek to replicate an index. You cannot invest directly in an index.

FTSE NAREIT CHARACTERISTICS Discount to Net Asset Value Dividend Yield Price/Cash Flow (est. ‘09) Price/Cash Flow Growth (est. ‘9 vs. ‘08) Price/Cash Flow Growth (est. ‘10 vs. ‘09) Weighted Average Market Cap. Total Market Capitalization Number of Securities



-5.7% 9.9% 8.8x -8.8% -7.8% $3.2B $119.1B 98

Source: Cohen & Steers Characteristics are market capitalization-weighted averages of estimates for companies in the FTSE NAREIT Equity REIT Index.

1 280 Park Avenue • New York NY 10017 • 212.832.3232 • cohenandsteers.com

Cohen & Steers U.S. Real Estate Securities Strategy MARCH 31, 2009*

INVESTMENT COMMENTARY

In other news, industrial REIT ProLogis received $845 million in cash from the previously announced sale of its operations in China and its property fund interests in Japan. The company was also reported to be close to selling some of its U.S. properties, part of a goal to deleverage its balance sheet by $2 billion in 2009. REITs’ credit was upgraded J.P. Morgan upgraded its U.S. REIT credit recommendation in March, to overweight from neutral, citing the positive implications of the bank rescue plans. The upgrade was also based on capital raising and balance sheet news. In addition to Simon, AMB and ProLogis, the report noted Liberty Property’s placing of $320 million in mortgage bonds and BRE Property’s tendering to buy back and retire $380 million in unsecured bonds. Portfolio performance Our portfolios declined in the quarter and performed in line with their benchmarks. Factors that contributed to relative return included our stock selection and underweight in the shopping center sector (which had a total return of –41.6% within the index). This reflected our underweight in Kimco Realty, which underperformed on concerns over its capital needs. Our overweight position in the manufactured home sector (–2.4%) aided returns, as it benefited from stable cash flows. Our stock selection and underweight in the apartment sector (–30.6%) detracted from relative return. Specifically, Apartment Investment & Management struggled. While the company has higher leverage, we believe it will continue to obtain financing on favorable terms. Our overweight in the regional mall sector (–36.9%) and stock selection in the office sector (-33.1%) also hindered performance. investment outlook Although it is too soon to know if the worst of the financial crisis is behind us, the various monetary and fiscal policies now in place give some grounds for optimism. The major initiative outlined in March, PPIP, includes the use of private capital to purchase troubled assets clogging the credit markets, using investment structures that match those assets. Considering recent developments, we expect economic conditions to improve in late 2009 or early 2010 (healthier banks are a precondition for growth), followed by a strengthening in real estate fundamentals.

We are encouraged that the capital markets for real estate companies showed signs of unlocking in the quarter. Over the rest of the year we expect more real estate companies to raise capital in anticipation of debt coming due in the next several years. Some companies have more immediate needs than others; even for those with currently strong balance sheets, we think that additional capital will help remove uncertainty. Although capital raisings can be dilutive, we believe that investors will welcome efforts to strengthen balance sheets. As REITs raise and preserve cash to meet debt maturities— including through the use of dividend reductions, dividend payments in stocks and asset sales—they will also be better positioned to make distressed property acquisitions when opportunities arise.

FTSE NAREIT PROPERTY SECTOR TOTAL RETURNS Manufactured Home Specialty Free Standing Industrial/Office Health Care Apartment Self Storage Office Regional Mall Hotel Shopping Center Diversified Industrial Equity REIT Index

Q109 -2.4% -11.0% -12.6% -26.0% -27.8% -30.6% -32.2% -33.1% -36.9% -38.2% -41.6% -41.7% -41.9% -31.9%

Total returns of the FTSE NAREIT Equity REIT Index, an unmanaged capitalization-weighted index of all equity real estate investment trusts. Periods greater than one year are annualized. Past performance does not guarantee future results. This information is not representative of any Cohen & Steers account and no such account will seek to replicate an index. You cannot invest directly in an index.

IR86 Q109

2

280 Park Avenue • New York NY 10017 • 212.832.3232 • cohenandsteers.com

Cohen & Steers U.S. Real Estate Securities Strategy MARCH 31, 2009*

INVESTMENT COMMENTARY

Update: General Growth Properties General Growth Properties (GGP), the second-largest mall owner and operator in the United States, filed for Chapter 11 bankruptcy protection on April 16. This did not come as a surprise to us or to the market, considering that last November GGP started trading at or below a dollar, indicating a high probability of bankruptcy. Cohen & Steers does not have a position in the company. We do not expect this to have a material impact on the valuations of mall stocks, nor do we anticipate similar actions by other REITs. GGP’s bankruptcy is a company-specific event that was triggered by excessive leverage and its use of short-term debt to execute an aggressive acquisition program. When the credit crisis hit, the company was unable to refinance its debt due to lenders’ more stringent underwriting standards. This development stands in contrast to the increasing number of REITs that have demonstrated access to capital as highlighted above. The views and opinions in the preceding commentary are as of the date of publication and are subject to change. This material represents an assessment of the market environment at a specific point in time, should not be relied upon as investment advice and is not intended to predict or depict performance of any investment.

* The information presented above is as of April 20, 2009, for informational purposes only and does not constitute a recommendation to buy or sell a security or other investment.

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