Overview
Founded in 1986, we are a leading global investment manager focused on global real estate securities, global listed infrastructure, real assets, large cap value stocks and preferred securities. We also manage alternative investment strategies for qualified investors such as hedged real estate securities portfolios and private real estate strategies. We serve institutional and individual investors around the world.

Assets Under Management
We manage three types of accounts: institutional accounts, open-end mutual funds
and closed-end mutual funds.
The following table sets forth information regarding the net flows and
appreciation/(depreciation) of assets under management for the periods presented
(in millions):
                                            Three Months Ended             Nine Months Ended
                                              September 30,                  September 30,
                                           2012            2011           2012           2011
Institutional Accounts
Assets under management, beginning of
period                                 $    25,599     $   27,292     $   25,380     $   19,625
Inflows                                        362          2,817          1,728          9,343
Outflows                                    (2,044 )       (1,453 )       (6,262 )       (2,204 )
Net (outflows) inflows                      (1,682 )        1,364         (4,534 )        7,139
Market appreciation (depreciation)             727         (4,630 )        3,798         (2,738 )
Total (decrease) increase                     (955 )       (3,266 )         (736 )        4,401
Assets under management, end of period $    24,644     $   24,026     $   24,644     $   24,026
Average assets under management for
period                                 $    25,393     $   26,804     $   25,591     $   23,923

Open-End Mutual Funds
Assets under management, beginning of
period                                 $    12,114     $   10,213     $    9,619     $    8,484
Inflows                                      1,225          1,048          3,984          3,370
Outflows                                    (1,061 )         (892 )       (2,589 )       (2,174 )
Net inflows                                    164            156          1,395          1,196
Market appreciation (depreciation)             250         (1,757 )        1,514         (1,068 )
Total increase (decrease)                      414         (1,601 )        2,909            128
Assets under management, end of period $    12,528     $    8,612     $   12,528     $    8,612
Average assets under management for
period                                 $    12,490     $    9,574     $   11,533     $    9,399

Closed-End Mutual Funds
Assets under management, beginning of
period                                 $     6,678     $    6,809     $    6,285     $    6,353
Inflows                                        889              -            889            153
Outflows                                         -              -              -              -
Net inflows                                    889              -            889            153
Market appreciation (depreciation)             206           (830 )          599           (527 )
Total increase (decrease)                    1,095           (830 )        1,488           (374 )
Assets under management, end of period $     7,773     $    5,979     $    7,773     $    5,979
Average assets under management for
period                                 $     7,312     $    6,474     $    6,826     $    6,635

Total
Assets under management, beginning of
period                                 $    44,391     $   44,314     $   41,284     $   34,462
Inflows                                      2,476          3,865          6,601         12,866
Outflows                                    (3,105 )       (2,345 )       (8,851 )       (4,378 )
Net (outflows) inflows                        (629 )        1,520         (2,250 )        8,488
Market appreciation (depreciation)           1,183         (7,217 )        5,911         (4,333 )
Total increase (decrease)                      554         (5,697 )        3,661          4,155
Assets under management, end of period $    44,945     $   38,617     $   44,945     $   38,617
Average assets under management for
period                                 $    45,195     $   42,852     $   43,950     $   39,957

Assets under management were $44.9 billion at September 30, 2012, compared with $38.6 billion at September 30, 2011. The increase was due to market appreciation of $9.6 billion, partially offset by net outflows of $3.3 billion during the prior twelve month period.
Average assets under management were $45.2 billion in the three months ended September 30, 2012, an increase of 5% from $42.9 billion in the three months ended September 30, 2011. Average assets under management were $44.0 billion in the nine months ended September 30, 2012, an increase of 10% from $40.0 billion in the nine months ended September 30, 2011. Institutional accounts
Institutional accounts assets under management were $24.6 billion at September 30, 2012, an increase of 3% from $24.0 billion at September 30, 2011. The increase in assets under management was due to market appreciation of $6.3 billion, largely offset by net outflows of $5.6 billion, primarily from global/international real estate strategies associated with subadvisory relationships, during the prior twelve month period.
Average assets under management for institutional accounts were $25.4 billion in the three months ended September 30, 2012, a decrease of 5% from $26.8 billion in the three months ended September 30, 2011. Average assets under management for institutional accounts were $25.6 billion in the nine months ended September 30, 2012, an increase of 7% from $23.9 billion in the nine months ended September 30, 2011.
Net outflows for institutional accounts were $1.7 billion in the three months ended September 30, 2012, compared with net inflows of $1.4 billion in the three months ended September 30, 2011. Gross inflows were $362 million in the three months ended September 30, 2012, compared with $2.8 billion in the three months ended September 30, 2011. Gross outflows totaled $2.0 billion in the three months ended September 30, 2012, compared with $1.5 billion in the three months ended September 30, 2011. Market appreciation was $727 million in the three months ended September 30, 2012, compared with market depreciation of $4.6 billion in the three months ended September 30, 2011.
Net outflows for institutional accounts were $4.5 billion in the nine months ended September 30, 2012, compared with net inflows of $7.1 billion in the nine months ended September 30, 2011. Gross inflows were $1.7 billion in the nine months ended September 30, 2012, compared with $9.3 billion in the nine months ended September 30, 2011. Gross outflows totaled $6.3 billion in the nine months ended September 30, 2012, compared with $2.2 billion in the nine months ended September 30, 2011. Market appreciation was $3.8 billion in the nine months ended September 30, 2012, compared with market depreciation of $2.7 billion in the nine months ended September 30, 2011. Open-end mutual funds
Open-end mutual fund assets under management were $12.5 billion at September 30, 2012, an increase of 45% from $8.6 billion at September 30, 2011. The increase in assets under management was due to market appreciation of $2.4 billion and net inflows of $1.5 billion during the prior twelve month period.
Average assets under management for open-end mutual funds were $12.5 billion in the three months ended September 30, 2012, an increase of 30% from $9.6 billion in the three months ended September 30, 2011. Average assets under management for open-end mutual funds were $11.5 billion in the nine months ended September 30, 2012, an increase of 23% from $9.4 billion in the nine months ended September 30, 2011.
Net inflows for open-end mutual funds were $164 million in the three months ended September 30, 2012, compared with $156 million in the three months ended September 30, 2011. Gross inflows were $1.2 billion in the three months ended September 30, 2012, compared with $1.0 billion in the three months ended September 30, 2011. Gross outflows totaled $1.1 billion in the three months ended September 30, 2012, compared with $892 million in the three months ended September 30, 2011. Market appreciation was $250 million in the three months ended September 30, 2012, compared with market depreciation of $1.8 billion in the three months ended September 30, 2011.
Net inflows for open-end mutual funds were $1.4 billion in the nine months ended September 30, 2012, compared with $1.2 billion in the nine months ended September 30, 2011. Gross inflows were $4.0 billion in the nine months ended September 30, 2012, compared with $3.4 billion in the nine months ended September 30, 2011. Gross outflows totaled $2.6 billion in the nine months ended September 30, 2012, compared with $2.2 billion in the nine months ended September 30, 2011. Market appreciation was $1.5 billion in the nine months ended September 30, 2012, compared with market depreciation of $1.1 billion in the nine months ended September 30, 2011.

Closed-end mutual funds
Closed-end mutual funds assets under management were $7.8 billion at September 30, 2012, an increase of 30% from $6.0 billion at September 30, 2011. The increase in assets under management was due to market appreciation of $964 million and net inflows of $830 million during the prior twelve month period, primarily from the launch of Cohen & Steers Limited Duration Preferred and Income Fund, Inc. ("LDP") during the three months ended September 30, 2012. Average assets under management for closed-end mutual funds were $7.3 billion in the three months ended September 30, 2012, an increase of 13% from $6.5 billion in the three months ended September 30, 2011. Average assets under management for closed-end mutual funds were $6.8 billion in the nine months ended September 30, 2012, an increase of 3% from $6.6 billion in the nine months ended September 30, 2011.
Closed-end mutual funds had inflows of $889 million in the three months ended September 30, 2012 from the launch of LDP. Market appreciation was $206 million in the three months ended September 30, 2012, compared with market depreciation of $830 million in the three months ended September 30, 2011.
Closed-end mutual funds had inflows of $889 million in the nine months ended September 30, 2012 from the launch of LDP, compared with $153 million in the nine months ended September 30, 2011 through an increase in the use of the funds' credit facilities. Market appreciation was $599 million in the nine months ended September 30, 2012, compared with market depreciation of $527 million in the nine months ended September 30, 2011.

Results of Operations
Three Months Ended September 30, 2012 compared with Three Months Ended
September 30, 2011

                                            Three Months Ended
                                              September 30,
(in thousands)                              2012          2011
Results of operations
Total revenue                            $  71,296     $ 61,616
Total expenses                             (59,057 )    (39,219 )
Total non-operating income (loss)            5,315       (4,833 )
Income before provision for income taxes $  17,554     $ 17,564

Revenue
Total revenue increased 16% to $71.3 million in the three months ended September 30, 2012 from $61.6 million in the three months ended September 30, 2011. This increase was primarily attributable to higher investment advisory and administration fees resulting from higher average assets under management and higher portfolio consulting and other revenue attributable to higher average assets under advisement from model-based strategies. Average assets under management in the three months ended September 30, 2012 were $45.2 billion compared with $42.9 billion in the three months ended September 30, 2011. In the three months ended September 30, 2012, total investment advisory and administration revenue from institutional accounts decreased 8% to $22.2 million from $24.2 million in the three months ended September 30, 2011. The decrease in institutional account revenue was attributable to lower average assets under management. Average assets under management for institutional accounts in the three months ended September 30, 2012 were $25.4 billion compared with $26.8 billion in the three months ended September 30, 2011.

In the three months ended September 30, 2012, total investment advisory and administration revenue from open-end mutual funds increased 26% to $25.5 million from $20.3 million in the three months ended September 30, 2011. The increase in open-end mutual fund revenue was attributable to higher average assets under management. Average assets under management for open-end mutual funds in the three months ended September 30, 2012 were $12.5 billion compared with $9.6 billion in the three months ended September 30, 2011.
In the three months ended September 30, 2012, total investment advisory and administration revenue from closed-end mutual funds increased 14% to $15.5 million from $13.5 million in the three months ended September 30, 2011. The increase

in closed-end mutual fund revenue was attributable to higher average assets under management. Average assets under management for closed-end mutual funds in the three months ended September 30, 2012 were $7.3 billion compared with $6.5 billion in the three months ended September 30, 2011.
In the three months ended September 30, 2012, total portfolio consulting and other revenue increased to $5.2 million from $1.1 million in the three months ended September 30, 2011. The increase was attributable to higher average assets under advisement from model-based strategies. Expenses
Total operating expenses increased 51% to $59.1 million in the three months ended September 30, 2012 from $39.2 million in the three months ended September 30, 2011, primarily due to increases in employee compensation and benefits, distribution and service fees and general and administrative expenses. Employee compensation and benefits increased 15% to $25.1 million in the three months ended September 30, 2012 from $21.9 million in the three months ended September 30, 2011, primarily due to higher incentive bonus and production compensation, net of deferrals, of approximately $2.6 million.
Distribution and service fee expenses increased to $21.4 million in the three months ended September 30, 2012 from $6.2 million in the three months ended September 30, 2011. The three months ended September 30, 2012 results included approximately $14.4 million of distribution costs associated with the launch of LDP. After adjusting for these costs, distribution and service fee expenses would have been $7.0 million. The increase was primarily due to higher average assets under management in certain of our open-end no-load mutual funds. General and administrative expenses increased 13% to $10.6 million in the three months ended September 30, 2012 from $9.4 million in the three months ended September 30, 2011. The increase was primarily due to higher rent of approximately $632,000 resulting from the extension of the lease for our corporate headquarters in New York City, higher professional fees of approximately $318,000 and higher marketing and printing costs of approximately $188,000.
Non-operating Income
Non-operating income was $5.3 million in the three months ended September 30, 2012, compared with non-operating loss of $4.8 million in the three months ended September 30, 2011. The increase was primarily attributable to income from our seed investments.
Income Taxes
We recorded an income tax expense of $5.0 million in the three months ended September 30, 2012, compared with $8.0 million in the three months ended September 30, 2011. The provision for income taxes in the three months ended September 30, 2012 included U.S. federal, state, local and foreign taxes at an approximate effective tax rate of 33%, which included discrete items, the most significant of which was attributable to the offering costs for LDP. Excluding the discrete items, the effective tax rate for the three months ended September 30, 2012 was approximately 36%. The effective tax rate for the three months ended September 30, 2011 was approximately 46%, which reflected the cumulative effect of the projected tax rate increase from 35% to 38% for the full year 2011. The change in estimate was attributable to the establishment of a valuation allowance on projected losses from our seed investments in our sponsored onshore and offshore global real estate long-short funds. We expect our tax rate for the full year 2012 to approximate 35.5%, excluding discrete items.

Nine Months Ended September 30, 2012 compared with Nine Months Ended

September 30, 2011

                                             Nine Months Ended
                                               September 30,
(in thousands)                              2012          2011
Results of operations
Total revenue                            $ 202,458     $ 177,830
Total expenses                            (138,759 )    (113,625 )
Total non-operating income (loss)            6,340        (2,552 )
Income before provision for income taxes $  70,039     $  61,653

Revenue
Total revenue increased 14% to $202.5 million in the nine months ended September 30, 2012 from $177.8 million in the nine months ended September 30, 2011. This increase was primarily attributable to higher investment advisory and administration fees resulting from higher average assets under management and higher portfolio consulting and other revenue attributable to higher average assets under advisement from model-based strategies. Average assets under management in the nine months ended September 30, 2012 were $44.0 billion compared with $40.0 billion in the nine months ended September 30, 2011. In the nine months ended September 30, 2012, total investment advisory and administration revenue from institutional accounts increased 1% to $67.2 million from $66.5 million in the nine months ended September 30, 2011. The increase in institutional account revenue was attributable to higher levels of average assets under management. Average assets under management for institutional accounts in the nine months ended September 30, 2012 were $25.6 billion compared with $23.9 billion in the nine months ended September 30, 2011.

In the nine months ended September 30, 2012, total investment advisory and administration revenue from open-end mutual funds increased 19% to $70.8 million from $59.3 million in the nine months ended September 30, 2011. The increase in open-end mutual fund revenue was attributable to higher levels of average assets under management. Average assets under management for open-end mutual funds in the nine months ended September 30, 2012 were $11.5 billion compared with $9.4 billion in the nine months ended September 30, 2011.
In the nine months ended September 30, 2012, total investment advisory and administration revenue from closed-end mutual funds increased 5% to $43.0 million from $40.9 million in the nine months ended September 30, 2011. The increase in closed-end mutual fund revenue was attributable to higher levels of average assets under management. Average assets under management for closed-end mutual funds in the nine months ended September 30, 2012 were $6.8 billion compared with $6.6 billion in the nine months ended September 30, 2011. In the nine months ended September 30, 2012, total portfolio consulting and other revenue increased 249% to $13.3 million from $3.8 million in the nine months ended September 30, 2011. The increase was attributable to higher average assets under advisement from model-based strategies. Expenses
Total operating expenses increased 22% to $138.8 million in the nine months ended September 30, 2012 from $113.6 million in the nine months ended September 30, 2011, primarily due to increases in employee compensation and benefits, distribution and service fees and general and administrative expenses. Employee compensation and benefits increased 9% to $69.7 million in the nine months ended September 30, 2012 from $63.7 million in the nine months ended September 30, 2011. The increase was primarily due to higher incentive bonus and production compensation, net of deferrals, of approximately $3.6 million, higher salaries of approximately $601,000 and higher payroll taxes of approximately $273,000 associated with the delivery of restricted stock units.
Distribution and service fee expenses increased 89% to $34.1 million in the nine months ended September 30, 2012 from $18.1 million in the nine months ended September 30, 2011. The nine months ended September 30, 2012 results included approximately $14.4 million of distribution costs associated with the launch of LDP. After adjusting for these costs, dist

ribution and service fee expenses would have been $19.8 million. The increase was primarily due to higher average assets under management in certain of our open-end no-load mutual funds.
General and administrative expenses increased 8% to $29.1 million in the nine months ended September 30, 2012 from $26.8 million in the nine months ended September 30, 2011. The increase was primarily due to higher professional fees of approximately $927,000, higher rent of approximately $736,000 resulting from the extension of the lease for our corporate headquarters in New York City and higher marketing and printing costs of approximately $369,000. Non-operating Income
Non-operating income was $6.3 million in the nine months ended September 30, 2012, compared with non-operating loss of $2.6 million in the nine months ended September 30, 2011. The increase was primarily attributable to earnings in our seed investments, partially offset by foreign currency revaluations. Income Taxes
We recorded an income tax expense of $24.2 million in the nine months ended September 30, 2012, compared with $23.5 million in the nine months ended September 30, 2011. The provision for income taxes in the nine months ended September 30, 2012 included U.S. federal, state, local and foreign taxes at an approximate effective tax rate of 35%, which included discrete items, the most significant of which was attributable to the offering costs for LDP. Excluding the discrete items, the effective tax rate for the nine months ended September 30, 2012 was approximately 36%. The effective tax rate for the nine months ended September 30, 2011 was approximately 38%. We expect our tax rate for the full year 2012 to approximate 35.5%, excluding discrete items.

Liquidity and Capital Resources
Our investment advisory business does not require us to maintain significant capital balances. Our current financial condition is highly liquid, with a significant amount of our assets comprised of cash and cash equivalents, equity investments, investments, available-for-sale and accounts receivable. Our cash flows generally result from the operating activities of our business, with investment advisory and administrative fees being the most significant contributor. Cash and cash equivalents, equity investments, investments, available-for-sale and accounts receivable were 58% and 69% of total assets as of September 30, 2012 and December 31, 2011, respectively, excluding investments classified as level 3 in accordance with the Accounting Standard Codification (the "Codification") Topic 820, Fair Value Measurements and Disclosures ("Topic 820").
Cash and cash equivalents decreased by $6.5 million, excluding the effect of foreign exchange rate changes, in the nine months ended September 30, 2012. Net cash used in operating activities was $21.7 million in the nine months ended September 30, 2012. Net cash of $3.6 million was provided by investing activities, primarily from proceeds from sales of investments, available-for-sale in the amount of $23.7 million, partially offset by purchases of $18.5 million of investments, available-for-sale and purchases of $2.4 million of property and equipment. Net cash of $11.6 million was provided by financing activities, primarily from contributions from redeemable noncontrolling interest of $44.1 million and excess tax benefits associated with the delivery of restricted stock units of $2.8 million, partially offset by dividends paid to stockholders of $23.6 million, repurchases of common stock of $8.5 million to satisfy employee withholding tax obligations on the delivery of restricted stock units, and redemptions of redeemable noncontrolling interest of $3.6 million.
Cash and cash equivalents decreased by $41.7 million, excluding the effect of foreign exchange rate changes, in the nine months ended September 30, 2011. Net cash provided by operating activities was $43.8 million in the nine months ended September 30, 2011. Net cash of $14.3 million was used in investing activities, primarily for purchases of $32.9 million of investments, available-for-sale and purchases of $2.2 million of property and equipment, partially offset by proceeds from sales of investments, available-for-sale in the amount of $20.8 million. Net cash of $71.1 million was used in financing activities, primarily for dividends paid to stockholders of $62.6 million, which included a special dividend of approximately $43.2 million paid on September 28, 2011, repurchases of common stock of $6.6 million to satisfy employee withholding tax obligations on the delivery of restricted stock units, and redemptions of redeemable noncontrolling interest of $3.7 million, partially offset by excess tax benefits associated with the delivery of restricted stock units of $1.5 million. It is our policy to continuously monitor and evaluate the adequacy of our capital. We have consistently maintained net capital in excess of the regulatory requirements for our broker/dealer, as prescribed by the Securities and Exchange Commission ("SEC"). At September 30, 2012, we exceeded our minimum regulatory capital requirements by approximately $669,000. The SEC's Uniform Net Capital Rule 15c3-1 imposes certain requirements that may have the effect of prohibiting

a broker/dealer from distributing or withdrawing capital and requiring prior notice to the SEC for certain withdrawals of capital. Our non-U.S. subsidiaries are regulated outside the U.S. by the Hong Kong Securities and Future Commission, the United Kingdom Financial Securities Authority, and the Belgium Financial Services and Markets Authority. At September 30, 2012, our non-U.S. subsidiaries exceeded their aggregate minimum regulatory requirements by approximately $64.8 million. We believe that our cash flows from operations will be more than adequate to meet our anticipated capital requirements and other obligations as they become due. . . .