avatar Cohen & Steers Quality Income Realty Fund, Inc. Finance, Insurance, And Real Estate

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    2018 A N N UA L REP ORT Asia P Asia P


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    Leadership Investment Focus Financial continuity DNA strength The Cohen & Steers Platform A diverse High insider Integrity client base ownership Our Strategies Real Estate Securities Listed Infrastructure & MLPs Preferred Securities Global Real Estate Securities Global Listed Infrastructure Preferred Securities Global Realty Focus Global Listed Infrastructure Focus Low-Duration Preferred Securities Global Rental Securities Midstream Energy and MLPs REIT Preferred Securities International Real Estate Securities Midstream Energy and MLP Focus Contingent Capital Securities Real Estate Opportunities Digital Infrastructure Multi-Strategy Solutions U.S. Realty Total Return Global Logistics Multi-Strategy Real Assets U.S. Realty Focus Small Cap Infrastructure Multi-Strategy Balanced Real Assets European Real Estate Securities Natural Resource Equities Real Estate Equity/Debt Asia Pacific Real Estate Securities Commodities Real Assets Debt Asia Pacific Rental Securities Active Commodities Closed-End Fund Opportunities Systematic Commodities


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    Cohen & Steers by the numbers 328 in 4 cities across 3 continents Founded in employees 1986 as the first U.S. investment manager 15 years on the NYSE (ticker: CNS) dedicated to REITs $54.8 billion in assets under management By Strategy By Vehicle By Client Domicile U.S. Real Estate Open-End Funds North America Preferred Securities Advisory Japan Global/International Real Estate Closed-End Funds EMEA Global Listed Infrastructure Japan Subadvisory Asia Pacific ex Japan Other Subadvisory ex Japan Senior investment professionals: 54% insider ownership $0 debt 23 average experience 12 average tenure years years At December 31, 2018.


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    Our purpose Delivering results for our clients and our stockholders requires a daily commitment to excellence. It means obsessing over the factors that drive performance—conducting on-the- ground research and engaging company management teams, data providers and other industry professionals to identify mispriced investment opportunities. Analyzing macro trends and risks to put context around portfolio decisions. Challenging each other’s assumptions to see where we might be wrong. Using our global trading platform to ensure efficient execution. And knowing when to invest in our platform and when to control costs. It also means forging lasting relationships with investors and those who advise them by listening to their needs and responding quickly when markets change. Helping clients build better portfolios through education, asset allocation research and timely market insights. Setting the highest standards for compliance and professional integrity. Most importantly, it means each of us showing up every day to do our part in service of our mission: helping our clients achieve more. Because even a little advantage, compounded again and again, can add up to a big difference. To us, that’s a legacy worth building. The Cohen & Steers team


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    Table of Contents Letter to Our Shareholders 2 Financial Review 6 Form 10-K 7 Assets Under Management $ billions as of December 31 $70 Cohen & Steers helps investors diversify their portfolios 62.1 $60 57.2 by providing access to specialized asset classes that 53.1 52.6 54.8 $50 have the potential to enhance risk-adjusted returns. 45.8 45.9 41.3 Founded in 1986 and public since 2004, we are a global $40 34.5 leader in listed real assets and alternative income, $30 24.8 serving institutional and individual investors worldwide $20 through offices in New York, London, Hong Kong and $10 Tokyo. Adding value for investors through fundamental $0 investment research and active portfolio management is 09 10 11 12 13 14 15 16 17 18 the foundation of our business. Revenue $ millions for the years ended December 31 In 2018, Cohen & Steers achieved its ninth consecutive year of revenue growth, with revenues increasing 1% $400 378.7 381.1 351.5 to $381 million, from $379 million in 2017. Net income 328.7 $300 297.7 313.9 attributable to common stockholders was $2.40 per 273.6 237.2 diluted share ($2.40 as adjusted(1)), compared with $1.96 $200 183.7 ($2.07 as adjusted(1)) in the prior year. Our operating margin decreased to 38.6% (39.1% as adjusted(1)) from 123.6 $100 40.9% (40.9% as adjusted(1)) in 2017. Assets under management (AUM) totaled $54.8 billion at year end, $0 compared with $62.1 billion a year earlier. 09 10 11 12 13 14 15 16 17 18 (1) The term "as adjusted" used to identify non-GAAP financial information. See pages 29–30 of the 10-K, "Non-GAAP Reconciliations."


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    COHEN & STEERS 2018 ANNUAL REPORT To Our Shareholders Performance, Platform, Positioning A Strategy for Growth Active asset managers faced increasing headwinds in 2018, driven by the appetite for passive investments, the pressure to deliver better performance at a lower cost, and fewer avenues for growth as gatekeepers and consultants shrink the number of managers on their focus lists. But until recently, rising equity markets had kept many firms from feeling the full brunt of these secular forces. That changed in late 2018 as stocks retreated amid Fed tightening and signs of a peak in the economic cycle, leading to record outflows from mutual funds in December. Though markets have since rebounded, most economies are still slowing, fiscal stimulus is declining and profit margins are coming under pressure. With central banks becoming more supportive, the global economy should be able to sustain positive growth. However, we believe markets are headed toward the later phases of the cycle, typically a challenging period characterized by lower returns, higher volatility and a reduced appetite for risk. In the past, such conditions might have been just a normal part of the business cycle for asset management companies to navigate. But with the cumulative effects of organic decay, margin deterioration and poor investment performance tightening their grip, we believe the coming years could present an existential tipping point for some managers. These forces are manifesting in a wave of mergers, layoffs and leadership changes as companies struggle to overhaul their business strategies and redefine their value proposition to investors. However, unless they can address the root cause of the decay— investment underperformance—we suspect any benefits from these efforts are likely to be short lived, consumed by the receding tide of the economy, a lower-return environment and the relentless rationalization of overcapacity. 2


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    COHEN & STEERS 2018 ANNUAL REPORT So what does success look like in this environment? For us, it comes down to a simple formula: 1 2 3 Sustainable Investment A strong, In-demand organic alpha independent strategies growth platform 1. Investment alpha 2. A strong, independent platform In 2018, 9 of our 10 core strategies outperformed their We believe our track record of investment performance flows respective benchmarks in a year when the majority of directly from the strength of our platform: active managers continued to lag. Based on assets under Leadership continuity. Cohen & Steers has enjoyed management (AUM), 93% of our portfolios outperformed exceptional stability in both our management and investment on a 1-year basis, and 98% outperformed over both 5 and teams, born of a culture of disciplined decision-making, 10 years. In addition, 83% of our open-end fund assets were developing talent and promoting from within. rated 4 or 5 stars by Morningstar—a critical threshold for inclusion on distributor platforms. Investment DNA. From the very beginning, investment excellence has been our top priority, guiding every strategic Our performance success has allowed us to grow our decision—from how we allocate resources to which relationships with institutional clients and has elevated our strategies and products we develop for clients. profile with wealth management intermediaries, resulting in 7 of our funds being added to 23 recommended lists across Focus. To create an investment advantage, we concentrate 11 distribution partners in 2018. Together, this activity has led on listed real assets and alternative income, where active to market share gains in virtually every core strategy managers have historically had greater success in adding we manage. value. And as an independent manager, we have no other business interests to distract us from generating alpha. To build on this success, we are going deeper in our efforts to deliver sustainable, superior alpha by isolating and Financial strength. A debt-free, cash-rich balance sheet systematically mining new sources of return potential across has allowed us to weather even the most challenging market our asset classes. This includes initiatives to complement environments without downsizing, while providing capital to our fundamental research process with other techniques, develop new strategies and investment vehicles. such as enhanced data mining and the use of quantitative A diverse client base. Because demand can ebb and flow strategies and portfolio optimization tools. across different regions and markets, we reach a wide range of investors through our global distribution network, focusing on markets that appreciate what we do and where allocations to our asset classes are rising. 3


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    COHEN & STEERS 2018 ANNUAL REPORT High insider ownership. Cohen & Steers is a publicly traded • Preferred securities are coming off their first year of company in which employees own a large equity stake, negative returns in a decade despite strong overall credit promoting retention and aligning individual interests with fundamentals. Preferreds offer attractive relative values, investment performance and other goals of the firm. high tax-advantaged income and a differentiated risk profile relative to high yield and other alternative-income Integrity. We put clients first in every aspect of our business, strategies. such as enforcing the highest compliance standards, carefully managing the capacity of our strategies, being • Multi-strategy solutions allow investors to put it all thoughtful about product development, and advocating on together in a diversified listed real assets allocation, often behalf of investors through proxy voting, environmental, through custom portfolios targeting specific return/risk social and governance (ESG) initiatives and industry objectives. involvement. Success across these factors creates alignment with 3. In-demand strategies each of our constituents: Institutional allocations to real assets have been rising steadily For our clients, a reliable partner in the pursuit of better over the past decade, and while listed strategies have seen investment outcomes inflows, many investors have focused predominantly on the At a time of structural change for the asset management private market. However, faced with rich asset pricing and industry, our clients know what to expect from us, because low expected returns in the private market, more investors it’s what we have been doing for 32 years: focusing on are finding the listed market to be a competitive option— delivering performance, sticking to our strengths and offering particularly with nearly $500 billion of dry powder sitting on relevant solutions that address client objectives. the sidelines in private real estate and infrastructure funds. The strength of our brand in listed real assets and alternative Some of these mandates are coming from institutions that are income has allowed us to forge longstanding relationships allocating to listed real assets for the first time. with clients—something we expect will become even more The prospect of slower economic growth and stable interest important as industry overcapacity is rationalized and rates has also renewed interest in several of our strategies investors look to trusted managers for results. from individual investors looking to protect their portfolios For example, some institutional investors are looking for with defensive, diversifying strategies that pay attractive strategic partners to consolidate their various allocations dividends. to listed real assets. We are deepening our engagement With both secular and cyclical investment trends potentially with these clients, partnering with them to understand working in our favor, we believe most of our asset classes are their evolving needs and delivering custom multi-strategy positioned to see increasing demand: solutions that provide efficiencies, risk management and asset-allocation overlays. • Real estate companies are seeing generally healthy demand from tenants, yet certain sectors and countries We are expanding our efforts to address the needs of currently trade at discounts to their underlying asset investors who have shown interest in specialized products values, adding to the appeal of predictable cash flows and and services around our core strategies. In particular, we high dividend yields in a lower-return environment. are developing customized portfolios and vehicles suited to the unique demands of endowments, foundations, multi- • Listed infrastructure has historically demonstrated family offices and the outsourced chief investment officer resilience in volatile markets and stands to benefit (OCIO) market. These investors have historically focused on from significant private-market investment demand for private equity and hedged strategies; however, we believe infrastructure assets. there is an opening for highly concentrated, limited-capacity • Midstream energy offers compelling upside, driven by strategies targeting unique, thematic opportunities in listed a recovery in pipeline fundamentals, better corporate real assets and alternative income. governance, stronger balance sheets and a shift to more self-funding business models. 4


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    COHEN & STEERS 2018 ANNUAL REPORT For our stockholders, a history of superior total returns Our opportunity set is growing Despite a challenging year for both the markets and our stock As investors adjust asset allocations as the cycle progresses, price in 2018, Cohen & Steers remains the top-performing and increasingly seek to replace underperforming managers, asset manager since the bottom of the financial crisis in a lot of money is being put into motion. While periods of March 2009 and has outperformed nearly all others since our market volatility may create challenges in the short run, we initial public offering (IPO) in 2004. The stock has consistently believe we have exactly what the market is demanding in received a price-to-earnings multiple above the industry an advisor: average—a recognition of the strength and depth of our • A track record of superior investment performance, driven platform and the organic growth we have achieved as a result by a commitment to fundamental research and a culture of of our market position and leading investment performance. continuous improvement For our employees, an attractive environment for • A unique global platform designed around continuity, career growth specialization and putting clients first—backed by the The downsizing taking place across the industry in financial strength to support it response to overcapacity is creating career risk for asset • A focus on strategies that provide distinct value to management professionals, including fewer jobs, more- investors, creating opportunities to gain share from shifting limited career-path options and pressure on compensation. allocations and the appetite for innovative and increasingly In our 32-year history—including during the financial crisis— complex solutions Cohen & Steers has not used layoffs as a lever to cut costs, an ability afforded to us by our debt-free balance sheet and We are excited to place Cohen & Steers in a position to employee ownership. In fact, in prior downturns, we have achieve success in these areas, supporting our ultimate gone on offense by hiring to pursue growth strategies. goal of generating long-term positive organic growth. If we continue to deliver, that would put us in rare territory in a We believe in developing talent and providing opportunities for maturing industry. advancement based on merit. Compensation is aligned for all employees—and especially for the investment department— with key performance metrics for the firm and for each department and discipline. And we have clear succession plans in place to smooth transitions in the event of departures, while creating career paths for emerging talent. Taken together, these advantages put us in a strong position to recruit and retain top talent. Martin Cohen Robert H. Steers Joseph M. Harvey Chairman Chief Executive Officer President 5


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    COHEN & STEERS 2018 ANNUAL REPORT Financial Review Despite strong relative performance in nearly all of our inflows of $306 million were offset by market depreciation core investment strategies, Cohen & Steers was not of $359 million and distributions of $199 million, resulting immune to the volatility in financial markets during the in a 2% decrease in global real estate AUM for the year. fourth quarter. Net flows were essentially flat through the Our U.S. real estate strategies also outperformed the broad first three quarters of the year, before a market downturn REIT market, but market depreciation of $959 million, in the final months sparked retail investor redemptions, together with net outflows of $670 million and distributions resulting in net outflows excluding distributions of $1.2 of $2.6 billion, resulted in a 16% decline in AUM. billion in 2018 and 2% organic AUM decay. For the 15th consecutive year, our flagship preferred Against this challenging backdrop, Cohen & Steers had securities strategy outperformed its benchmark. However, record revenues of $381 million in 2018, a modest increase the preferred securities market experienced its first year of from $379 million in 2017. Our operating margin was negative returns in a decade, as widening credit spreads 38.6% in 2018, compared with 40.9% in 2017. Net income offset the positive effect from a decline in Treasury yields. attributable to common stockholders was $2.40 per Net outflows of $220 million, market depreciation of $586 diluted share ($2.40 as adjusted (1)), compared with $1.96 million and distributions of $560 million resulted in a 9% in 2017 ($2.07 as adjusted(1)). The increase in net income decline in preferred securities AUM. was largely a result of benefits relating to the Tax Cuts Global listed infrastructure outperformed the global and Jobs Act, which contributed to the reduction in our equity market in 2018, consistent with its more defensive effective tax rate to 23.12% (25.25% as adjusted(1)) in 2018, characteristics. Net inflows of $153 million were countered compared with 42.50% (37.75% as adjusted(1)) for 2017. by market depreciation of $403 million and distributions AUM declined 12% to $54.8 billion at year-end 2018, of $199 million, resulting in a 6% decline in global listed from $62.1 billion a year ago. Average AUM for the year infrastructure AUM. was $59.0 billion, compared with $60.3 billion for 2017. For the tenth consecutive year, we increased our regular The decrease in total AUM reflected a combination of quarterly dividend, from $0.28 to $0.33 per share in March net outflows excluding distributions of $1.2 billion, 2018. In December, we paid a special dividend of $2.50 market depreciation of $2.5 billion and distributions of per share—our ninth such dividend in nine years, bringing $3.6 billion. aggregate special dividends since our IPO to $11.00 per Our global and international real estate strategies share. Subsequent to year end, we increased our quarterly continued to benefit from increased market share, dividend by 9% to $0.36 per share in March 2019. We ended investor demand for global real estate and favorable the year with a strong balance sheet, with no debt and $213 relative returns, supported by significant outperformance million in cash, cash equivalents, U.S. Treasuries and seed in our European real estate portfolios. However, net investments, compared with $257 million at the end of 2017. (1) The term “as adjusted” is used to identify non-GAAP financial information. See pages 29–30 of the 10-K, “Non-GAAP Reconciliations.” 6


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    COHEN & STEERS 2018 ANNUAL REPORT FORM 10-K Table of Contents PART I Page Item 1. Business 1 Item 1A. Risk Factors 6 Item 1B. Unresolved Staff Comments 13 Item 2. Properties 13 Item 3. Legal Proceedings 13 Item 4. Mine Safety Disclosures 13 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 14 Item 6. Selected Financial Data 15 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 16 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 36 Item 8. Financial Statements and Supplementary Data 37 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 37 Item 9A. Controls and Procedures 37 Item 9B. Other Information 37 PART III Item 10. Directors, Executive Officers and Corporate Governance 38 Item 11. Executive Compensation 38 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 38 Item 13. Certain Relationships and Related Transactions, and Director Independence 38 Item 14. Principal Accountant Fees and Services 38 PART IV Item 15. Exhibits and Financial Statement Schedules 39 Item 16. Form 10-K Summary 41 7 7


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    UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2018 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO . Commission File No. 001-32236 COHEN & STEERS, INC. (Exact name of registrant as specified in its charter) Delaware 14-1904657 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) 280 Park Avenue, New York, New York 10017 (Address of Principal Executive Offices) (Zip Code) Registrant’s telephone number, including area code: (212) 832-3232 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, $.01 par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Smaller reporting company Non-accelerated filer Emerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes No The aggregate market value of the voting common stock held by non-affiliates of the Registrant as of June 30, 2018 was approximately $922 million. There is no non-voting common stock of the Registrant outstanding. As of February 19, 2019, there were 47,221,640 shares of the Registrant’s common stock outstanding. Documents Incorporated by Reference Portions of the definitive Proxy Statement of Cohen & Steers, Inc. (the Proxy Statement) to be filed pursuant to Regulation 14A of the general rules and regulations of the Securities Exchange Act of 1934, as amended, for the 2019 annual meeting of stockholders scheduled to be held on May 1, 2019 are incorporated by reference into Part III of this Form 10-K.


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    PART I Item 1. Business Overview Cohen & Steers, Inc. (CNS), a Delaware corporation formed on March 17, 2004, is a global investment manager specializing in liquid real assets, including real estate securities, listed infrastructure, commodities and natural resource equities, as well as preferred securities and other income solutions. Headquartered in New York City, with offices in London, Hong Kong, and Tokyo, we serve institutional and individual investors around the world. CNS is the holding company for its direct and indirect subsidiaries, including Cohen & Steers Capital Management, Inc. (CSCM), Cohen & Steers Securities, LLC (CSS), Cohen & Steers Asia Limited (CSAL), Cohen & Steers UK Limited (CSUK) and Cohen & Steers Japan, LLC (CSJL). CNS and its subsidiaries are collectively referred to as the Company, we, us or our. Our revenue is derived from fees received from our clients, including fees for managing or subadvising client accounts; investment advisory, administration, distribution and service fees received from Company-sponsored open-end and closed-end funds; and fees for portfolio consulting and other services. Our fees are paid in arrears, based on contractually specified percentages of the value of the assets we manage and, in certain cases, investment performance. Our revenue fluctuates with changes in the total value of our assets under management, which may occur as a result of investment performance, addition or termination of client accounts, inflows or outflows from client accounts, market conditions, or foreign currency fluctuations and is recognized over the period that the assets are managed. At December 31, 2018, we managed $54.8 billion in assets—$25.7 billion in institutional accounts, $20.7 billion in open-end funds, and $8.4 billion in closed-end funds. Our assets under management decreased 11.7% from $62.1 billion at December 31, 2017 as a result of net outflows of $1.2 billion, market depreciation of $2.5 billion and distributions of $3.6 billion. At January 31, 2019, our assets under management increased 9.5% from December 31, 2018 to $60.0 billion as a result of net inflows of $427 million and market appreciation of $5.0 billion, partially offset by distributions of $200 million. Investment Vehicles We manage three types of investment vehicles: institutional accounts, open-end funds and closed-end funds. Institutional Accounts Institutional accounts for which we serve as investment adviser represent portfolios of securities we manage for institutional clients. We manage the assets in each institutional account in accordance with the investment requirements of that client as set forth in such client’s investment management agreement and investment guidelines. The investment management agreements with our institutional account clients are generally terminable at any time. For the years ended December 31, 2018, 2017 and 2016, investment advisory fees from our institutional accounts totaled approximately $100.3 million, $100.2 million and $92.2 million, respectively, and accounted for 29.4%, 29.8% and 29.6%, respectively, of our investment advisory and administration fee revenue. Advisory assets, which represent accounts for which we have been appointed as the investment manager, are included in our institutional account assets. As investment adviser, we are responsible to oversee the daily operations and manage the assets in the account while adhering to the specified investment objectives. As of December 31, 2018, approximately $12.1 billion of our institutional account assets were in advisory accounts. Subadvisory assets, which generally represent collective investment vehicles for which we have been appointed as a subadvisor by the investment manager of that investment vehicle, are included in our institutional account assets. As subadvisor, we are responsible for managing all or a portion of the vehicle's investments, while the investment adviser oversees our performance as subadvisor; the vehicle sponsor is responsible for decisions regarding the amount, timing and whether to pay distributions of income from the investment vehicle to its beneficial owners. As of December 31, 2018, approximately $13.6 billion of our institutional account assets were in subadvisory accounts. 1


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    Open-end Funds The open-end funds for which we serve as investment adviser offer and issue new shares continuously as assets are invested and redeem shares when assets are withdrawn. The share price for purchases and redemptions of shares of each of the open-end funds is determined by each fund’s net asset value, which is calculated at the end of each business day. The net asset value per share is the current value of a fund’s assets less liabilities, divided by the fund’s total shares outstanding. The investment advisory fees that we receive from the open-end funds for which we serve as investment adviser vary based on each fund’s investment strategy, fees charged by other comparable funds and the market in which the fund is offered. In addition, we receive a separate fee for providing administrative services to certain open-end funds at a rate that is designed to reimburse us for the cost of providing these services. The open-end funds pay us a monthly investment advisory fee and an administration fee, if applicable, based on a contractual fee rate applied to the fund’s average assets under management. For the years ended December 31, 2018, 2017 and 2016, investment advisory and administration fees from open-end funds totaled approximately $163.6 million, $157.9 million and $143.5 million, respectively, and accounted for 48%, 47% and 46%, respectively, of our investment advisory and administration fee revenue. Our investment advisory and administration agreements with the U.S. registered open-end funds for which we serve as investment adviser are generally terminable upon a vote of a majority of the fund’s board of directors on 60 days’ notice, and each investment advisory agreement, including the fees payable thereunder, is subject to annual approval by a majority of the directors of the fund’s board who are not "interested persons," as defined by the Investment Company Act of 1940 (the Investment Company Act), following the initial two-year term. Closed-end Funds The closed-end funds for which we serve as investment adviser are registered investment companies that have issued a fixed number of shares through public offerings. These shares are listed on the New York Stock Exchange and cannot be redeemed by the fund’s shareholders. The trading price of the shares is determined by supply and demand in the marketplace, and, as a result, the shares may trade at a premium or discount to the net asset value of the fund. The investment advisory fees that we receive from the closed-end funds for which we serve as investment adviser vary based on each fund’s investment strategy, fees charged by other comparable funds and prevailing market conditions at the time each closed-end fund initially offered its shares to the public. In addition, we receive a separate fee for providing administration services to eight of the nine closed-end funds at a rate that is designed to reimburse us for the cost of providing these services. The closed-end funds pay us a monthly investment advisory fee and an administration fee, if applicable, based on a contractual fee rate applied to the fund’s average assets under management. For the years ended December 31, 2018, 2017 and 2016, investment advisory and administration fees from closed-end funds totaled approximately $77.3 million, $78.7 million and $76.1 million, respectively, and accounted for 22.6%, 23.4% and 24.4%, respectively, of our investment advisory and administration fee revenue. Our investment advisory agreements with each U.S. closed-end fund for which we serve as investment adviser are generally terminable upon a vote of a majority of the fund’s board of directors on 60 days’ notice and are subject to annual approval by a majority of the directors of the fund’s board who are not "interested persons," as defined by the Investment Company Act, following the initial two-year term. Portfolio Consulting and Other Services We maintain two proprietary indexes, Cohen & Steers Realty Majors Index (RMP) and Cohen & Steers Global Realty Majors Index (GRM). RMP is the basis for the iShares Cohen & Steers REIT ETF sponsored by BlackRock Institutional Trust Company, N.A. GRM is the basis for Cohen & Steers Global Realty Majors ETF sponsored by ALPS Fund Services, Inc. and iShares Global Real Estate Index ETF sponsored by BlackRock Asset Management Canada Limited. We earn a licensing fee based on a percentage of the funds’ assets for the use of our indexes, which were approximately $2.0 billion as of December 31, 2018. While we receive a fee on these assets, they are not included in our reported assets under management. We also provide services in connection with model-based strategies accounts. We provide model portfolios of securities that fulfill the investment objective of a specified strategy on a regular basis. As of December 31, 2018, we provided such services to accounts with aggregate assets of $3.0 billion. While we receive a fee on these assets, they are not included in our reported assets under management. 2


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    In addition, we provide several services in connection with assets held by unit investment trusts (UITs). A UIT is a registered investment company that holds a portfolio of securities that generally does not change during the life of the UIT (generally two to five years) except that the sponsor of the UIT may sell portfolio securities under certain narrowly defined circumstances. As a portfolio consultant to a number of UITs, we construct a portfolio of securities that we believe is well suited to satisfy the investment objective of the UIT. We also provide ongoing portfolio monitoring services and provide a license to certain firms to use our name in connection with certain of their investment products. At December 31, 2018, we provided such portfolio consulting services to UITs with aggregate assets of approximately $615 million. While we receive a fee on these assets, they are not included in our reported assets under management. Our fee schedules for these services vary based on the type of services. Our Investment Strategies Each of our investment strategies is overseen by a specialist team, each of which is led by a portfolio manager, or a team of portfolio managers, supported by dedicated analysts. These personnel are located in our New York, London and Hong Kong offices. Each team executes fundamentally driven, actively managed investment strategies and each has a unique and well- defined process that includes top-down macroeconomic and bottom-up fundamental research and portfolio management elements. These teams are subject to multiple levels of oversight and support from our President and Chief Investment Officer, our Chief Administrative Officer-Investments, our Investment Risk Committee, our Investment Operating Committee and our Legal and Compliance Department. Some of our strategies may involve multiple asset classes and are overseen by investment committees led by senior portfolio managers of our specialist teams. Below is a summary of our core investment strategies: Real Assets Multi-Strategy invests in a diversified multi-strategy portfolio of listed companies and securities that generally own or are backed by tangible real assets, including real estate securities, global listed infrastructure, commodities and natural resource equities, with the objective of achieving attractive total returns over the long term, while providing diversification and maximizing the potential for real returns in periods of rising inflation and rising interest rates. U.S. and Global Real Estate Securities invests in a portfolio of common stocks and other securities issued by U.S. and non- U.S. real estate companies, including real estate investment trusts (REITs) and similar REIT-like entities. This strategy draws on the expertise of our integrated global real estate securities investment team. The investment objective is total return with a balance of capital appreciation and income. Global Listed Infrastructure invests in a diversified portfolio of U.S. and non-U.S. securities issued by infrastructure companies such as utilities, pipelines, toll roads, airports, railroads, marine ports and communications companies located in developed markets with opportunistic allocations to emerging markets. The investment objective is total return with a balance of capital appreciation and income. MLPs and Midstream Energy invests in a diversified portfolio of energy-related master limited partnerships (MLPs) and securities of companies that derive at least 50% of their revenues or operating income from the exploration, production, gathering, transportation, processing, storage, refining, distribution or marketing of natural gas, natural gas liquids (including propane), crude oil, refined petroleum products, coal or and other energy resources. The investment objective is total return with a balance of capital appreciation and income. Global Natural Resource Equities invests in companies involved in the production, extraction, or processing of commodities and natural resources. Specifically, the strategy invests in energy producers, metals and mining companies and agriculture- based businesses. The investment objective is total return. Commodities invests in a diversified portfolio of exchange-traded commodity futures contracts and other commodity-related financial derivative instruments. We take a fundamental, research-driven approach to commodities management, while seeking alpha through active trade implementation. The investment objective is total return. Preferred Securities invests in a diversified portfolio of preferred and debt securities issued by U.S. and non-U.S. companies. The preferred securities are issued by banks, insurance companies, REITs and other diversified financial institutions as well as utility, energy, pipeline and telecommunications companies. We employ a unified investment process that underlies our traditional total return preferred securities strategy as well as the lower duration capital preservation strategies. 3


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    In addition, we offer variations on these strategies that may combine multiple strategies in a single portfolio. Individual portfolios may be customized to comply with client-specific guidelines, benchmarks or risk profiles. Certain portfolios may employ leverage. Our Distribution Network Our distribution network encompasses the major channels in the asset management industry, including large brokerage firms, registered investment advisers, institutional investors and retirement recordkeepers. The U.S. registered open-end funds for which we serve as investment adviser are available for purchase with and without commissions through full service and discount broker-dealers as well as the significant networks serving financial advisers. Our institutional account clients include corporate and public defined benefit and defined contribution pension plans, endowment funds and foundations, insurance companies and other financial institutions that access our investment management services directly, through consultants or through other intermediaries. Competition We compete with a large number of global and U.S. investment managers, commercial banks, broker-dealers, insurance companies and other financial institutions. Many competing firms are parts of larger financial services companies and attract business through numerous channels, including retail banking, investment banking and underwriting contacts, insurance agencies and broker-dealers. Our direct competitors in wealth management are other fund and exchange-traded-fund (ETF) sponsors, including large nationally recognized investment management firms that have more diverse product offerings and smaller boutique firms that specialize in particular asset classes. We also compete against managers that manage separate-account portfolios for high net worth clients. In the institutional channel, we compete against a number of investment managers offering similar products and services, from boutique establishments to major commercial and investment banks. Performance, price and brand are our principal sources of competition. Prospective clients will typically base their decisions to invest, or continue to invest, with us on our ability to generate returns in excess of a benchmark and the cost of doing so. We are evaluated based on our performance and our fees relative to our competitors. In addition, individual fund shareholders may also base their decision on the ability to access the funds we manage through a particular distribution channel. As interest in real assets increases, we may face increased competition from other managers that are competing for the same client base that we target and serve. Financial intermediaries that offer our products to their clients may also offer competing products. Many of our competitors have greater brand name recognition and more extensive client bases than we do, which could be to our disadvantage. In addition, our larger competitors have more resources and may have more capacity to expand their product offerings and distribution channels and capture market share through ongoing business relationships and extensive marketing efforts. However, compared to our larger competitors, we may be able to grow our business at a faster rate from a relatively smaller asset base and shift resources in response to changing market conditions more quickly. Regulation We are subject to regulation under U.S. federal and state laws, as well as applicable laws in the other jurisdictions in which we do business or offer our products and services. Violation of applicable laws or regulations could result in fines, temporary or permanent prohibition of engagement in certain activities, reputational harm and loss of clients, suspension of personnel or revocation of their regulatory licenses, suspension or termination of investment adviser and/or broker-dealer registrations, or other sanctions and penalties. CSCM is a registered investment adviser with the U.S. Securities and Exchange Commission (the SEC) and is an approved investment manager with the Luxembourg Commission de Surveillance du Secteur Financier (the CSSF), the Irish Financial Services Regulatory Authority (the IFSRA) and the Korean Financial Services Commission. CSCM has also obtained exemptions from registration that allow it to provide investment management services to institutions in Australia and Canada. CSCM is a registered commodity trading adviser and a registered commodity pool operator with the Commodities Futures Trading Commission (the CFTC) and is a member of the National Futures Association (the NFA), a futures industry self-regulatory organization. The CFTC and NFA regulate futures contracts, swaps, and various other financial instruments in which certain of the Company’s clients may invest. 4


  • Page 19

    CSUK, our UK-based subsidiary, is a registered investment adviser with the SEC and the United Kingdom Financial Conduct Authority and is an approved investment manager with the CSSF. CSUK provides investment management services in several European Union member states pursuant to the Directive on Markets in Financial Instruments repealing Directive 2004/39/EC (MiFID II) and the Regulation on Markets in Financial Instruments (MiFIR). CSUK is subject to the Financial Services and Markets Act 2000, which regulates, among other things, certain liquidity and capital resources requirements. Such requirements may limit our ability to withdraw capital from CSUK. CSUK is also subject to certain pan-European regulations, including MiFID II, the Capital Requirements Directive and the Alternative Investment Fund Managers Directive (AIFMD). MiFID II and MiFIR regulate the provision of investment services throughout the European Economic Area and the Capital Requirements Directive regulates capital requirements. AIFMD regulates the management, administration and marketing of alternative investment funds domiciled in or marketed within the European Union and establishes a regime for the cross-border marketing of those funds. CSAL, our Hong Kong-based subsidiary, is a registered investment adviser with the SEC and the Hong Kong Securities and Futures Commission (the SFC) and is an approved investment manager with the CSSF and the IFSRA. CSAL is subject to the Securities and Futures Ordinance (the SFO), which regulates, among other things, offers of investments to the public and the licensing of intermediaries. CSAL and its employees conducting any of the regulated activities specified in the SFO are required to be licensed with the SFC and are subject to the rules, codes and guidelines issued by the SFC. In their capacity as U.S. registered investment advisers, CSCM, CSUK and CSAL are subject to the rules and regulations of the Investment Advisers Act of 1940 (the Advisers Act). The Advisers Act imposes numerous obligations on registered investment advisers, including recordkeeping, operational and marketing requirements, disclosure obligations and prohibitions on fraudulent activities. In addition, our subsidiaries that serve as investment adviser or subadvisor to U.S. registered funds are subject to the Investment Company Act, which imposes additional governance, compliance, reporting and fiduciary obligations. CSJL, a Delaware limited liability company and subsidiary that conducts its operations from a branch office located in Tokyo, is a financial instruments operator (investment advisory and agency business) registered with the Financial Services Agency of Japan and the Kanto Local Finance Bureau and is subject to the Financial Instruments and Exchange Act. CSJL supports the marketing, client service and business development activities of the Company. CSS is a registered broker-dealer regulated by the SEC, the Financial Industry Regulatory Authority and other federal and state agencies. CSS is subject to regulations governing, among other things, sales practices, capital structure and recordkeeping. CSS is also subject to the SEC’s net capital rule, which specifies minimum net capital levels for registered broker-dealers and is designed to enforce minimum standards for the general financial condition and liquidity of broker- dealers. Under certain circumstances, this rule may limit our ability to withdraw capital and receive dividends from CSS. Because of the global and integrated nature of our business, regulation applicable to an affiliate in one jurisdiction may affect the operation of affiliates in others or require compliance at a group level. Employees As of December 31, 2018, we had 328 full-time employees. Available Information We file annual, quarterly and current reports, proxy statements and all amendments to these reports and other information with the SEC. We make available free of charge on or through our website at www.cohenandsteers.com our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. 5


  • Page 20

    Item 1A. Risk Factors Risks Related to our Business A significant portion of our revenue for 2018 was derived from a single institutional client. As of December 31, 2018, our largest institutional client, Daiwa Asset Management, which holds most of its assets in U.S. REITs in both subadvisory and model-based accounts, represented approximately 8.8% of our total revenue for 2018. Approximately 31.2% of the institutional account assets we managed and approximately 14.6% of our total assets under management as well as approximately 20.3% of our assets under advisement were derived from this client. Investor demand for the products we subadvise for this client can be affected by, among other things, changes in the distributions paid by those products, the strength of the Japanese yen compared to the currencies in which the assets held in those products are denominated, and the market and regulatory environment in the Japanese mutual fund market. Reductions in the distribution rates by those products during 2018 contributed to decreased investor demand for these products, and the resulting outflows of assets negatively impacted our revenue for 2018. Any further loss of assets from any of these accounts would reduce our revenue and adversely affect our financial condition. A decline in the absolute or relative performance of real estate securities would have an adverse effect on the assets we manage and our revenue. As of December 31, 2018, approximately 62.0% of the assets we managed were concentrated in real estate securities. Real estate securities and real property investments owned by the issuers of real estate securities are subject to varying degrees of risk that could affect investment performance. Returns on investments in real estate securities depend on the amount of income and capital appreciation or loss realized by the underlying real property. Income and real estate values may be adversely affected by, among other things, unfavorable changes to tax laws and other laws and regulations applicable to real estate securities, the cost of compliance with applicable laws and regulations, interest rates, the availability of financing, the creditworthiness of tenants, and the limited ability of issuers of real estate securities to vary their portfolios promptly in response to changes in market conditions. If the underlying properties do not generate sufficient income to pay for ongoing operating expenses, the income and the ability of an issuer of real estate securities to pay interest and principal on debt securities or any dividends on common or preferred stocks will be adversely affected. A decline in the performance of real estate securities would have an adverse effect on the assets we manage and reduce the fees we earn and our revenue. Our growth and the execution of our real estate investment strategy may be constrained by the size and number of real estate securities issuers, as well as REIT ownership restrictions. Investments in real estate securities continue to play an important role in our overall business strategy. Our ability to fully utilize our overall investment capacity and continue to increase our ownership of real estate securities depends, in part, on growth in the size and number of issuers in the real estate securities market, particularly in the U.S. Limited growth, or any consolidation activity in the real estate sector, could limit or reduce the number of investment alternatives otherwise available to us. In addition, increased competition for investment opportunities due to large amounts of available capital dedicated to real estate strategies, or a real or perceived trend towards merger and acquisition activity in the sector, could affect real estate valuations and prices. A limited number of investment targets could adversely impact our ability to make new investments based on fundamental valuations or at all, impair the full utilization of our overall investment capacity, and otherwise negatively affect our investment strategy. Our ability to increase our ownership, or maintain existing levels of ownership, may also be constrained by REIT ownership limits, which limit the percentage ownership of a REIT’s outstanding capital stock, common stock, and/or preferred stock. REIT charters generally grant a REIT the right to unilaterally reduce any ownership amount that it deems to be in violation of its ownership limits. Such charters do not typically provide for the elimination of such right even in the event that a REIT has previously provided waivers from such limits or acknowledgements that ownership levels do not violate such limits. To the extent these ownership constraints might prevent us from acquiring new or additional real estate securities, or force us to reduce existing ownership amounts, our revenue and our ability to invest available assets and increase the assets we manage could be negatively affected. Seed investments made to support the launch of new strategies and products may expose us to potential losses on invested capital. Our success is partially dependent on our ability to develop, launch, market and manage new investment strategies and products. New investment strategies and products require an initial cash investment, time and sufficient resources as well as ongoing marketing and other support, including potential subsidies of operating costs. 6


  • Page 21

    From time to time, we support the launch of new investment strategies and products by making seed investments in those strategies and products. Numerous risks and uncertainties are associated with all stages of the seed investment product life cycle, including investment performance, market risks, shifting client or market preferences, the introduction of competing products and compliance with regulatory requirements. Seed investments in new strategies and products utilize capital that would otherwise be available for other corporate purposes and expose us to potential capital losses, against which we may not hedge. To the extent we incur losses on our seed investments, our earnings and financial condition may be adversely impacted. Regulations restricting the use of commission credits to pay for research have increased, and may continue to increase, our operating expenses. On behalf of our clients, we make decisions to buy and sell securities, select broker-dealers to execute trades and negotiate brokerage commission rates. In connection with these transactions and subject to best execution, we receive commission credits to pay for eligible research and services from broker-dealers and other eligible service providers. As a result of regulations in the European Union, we previously determined to eliminate the use of commission credits to pay for research and eligible services for accounts within the scope of MiFID II. Our operating expenses increased due to the decision to pay for research and eligible services. Several U.S.-based investment managers recently announced their intention to adopt a uniform approach to pay for research costs and expenses globally, subject to applicable SEC regulations. Depending on the evolution of industry practices and regulatory developments, we may elect to pay for research to conform to market practices, which would further increase our operating expenses. We face substantial competition in all aspects of our business. The investment management industry is highly competitive, and investors are increasingly fee sensitive. We compete against a large number of investment products offered by other investment management companies, investment dealers, banks and insurance companies, and many institutions we compete with have greater financial resources than us. We compete with these firms on the basis of investment performance, diversity of products, distribution capability, scope and quality of services, reputation and the ability to develop new investment strategies and products to meet the changing needs of investors. Our actively managed investment strategies compete not only against other active strategies but also against similarly positioned passive strategies. The continuing shift in market demand toward index funds and other passive strategies reduces opportunities for active managers and may accelerate fee compression. In the event that competitors charge lower fees for substantially similar products, we may be forced to compete on the basis of price in order to attract and retain clients. In order to maintain our current fee structure in a competitive environment, we must be able to provide clients with investment returns and service that will encourage them to pay our fees. To the extent that current or potential clients decide to invest in products sponsored by our competitors, the sales of our products as well as our market share, revenue and net income could decline. The inability to access clients through third-party intermediaries could have a material adverse effect on our business. In recent years, a significant portion of the growth in the assets we manage has been from assets attributable to the distribution of our products through third-party intermediaries. Our ability to distribute our products is highly dependent on access to the client bases and product platforms of international, national and regional securities firms, investment advisory firms, banks, insurance companies, defined contribution plan administrators and other intermediaries, which generally offer competing investment products that could limit the distribution of our products. In addition, our separate account business and subadvisory and model delivery services depend in part on recommendations by consultants, financial planners and other professional advisors, as well as our existing clients. The structure and terms of the distribution arrangements with intermediaries, including fees or rebates paid by us or our funds to intermediaries to assist with distribution efforts, and the ability of our funds to participate in these intermediary platforms are subject to changes driven by market competition and regulatory developments. Our existing relationships with third-party intermediaries and access to new intermediaries could be adversely affected by continued consolidation within the financial services industry. Consolidation may result in increased distribution costs, a reduction in the number of third parties distributing our investment products or increased competition to access third-party distribution channels. There can be no assurance that we will be able to retain access to these channels. Loss of any of these third-party distribution channels, or changes to their structure and terms, or any reduction in our ability to access clients and investors through existing and new distribution channels, could adversely affect our business. 7


  • Page 22

    The growth of our business could be adversely affected if we are unable to manage the costs associated with the expansion of our business. Our growth strategy continues to involve diversifying our investment management business to include products and services outside of investments in real estate securities. As part of the implementation of our strategy, we have emphasized the development of broader real assets strategies, including global listed infrastructure and midstream energy, and have expanded our geographical presence, capabilities as well as product and service offerings outside the U.S. As a result, our fixed costs and other expenses have increased to support the development of new strategies and products, to expand the availability and marketability of our existing strategies and products, to grow our potential client base, and to enhance our infrastructure, including additional office space, technology and personnel. The success of our business strategy and future growth is contingent upon our ability to continue to support the development of new strategies and products, to expand the availability of our existing strategies and products, and our ability to successfully manage multiple offices and navigate legal and regulatory systems both domestically and internationally. The cost of adequately supporting such growth and initiatives would have an effect on our operating margin and other financial results. Our clients may withdraw or reduce the amount of assets we manage or otherwise change the terms of our relationship, which could have an adverse impact on our revenue. Our institutional clients, and firms with which we have strategic alliances, may terminate their relationship with us, reduce the amount of assets we manage, shift their assets to other types of accounts with different fee structures, or renegotiate the fees we charge them for any number of reasons, including investment performance, redemptions by beneficial owners of funds we manage or subadvise, actual or perceived competition between the accounts we subadvise and our proprietary investment products, changes in the key members of an investment team, changes in prevailing interest rates and financial market performance. Certain investors in the funds that we manage hold their shares indirectly through platforms sponsored by financial institutions that have the authority to make investment and asset allocation decisions on behalf of such investors. Decisions by investors to redeem assets may require selling investments at a disadvantageous time or price, which could negatively affect the amount of our assets under management or our ability to continue to pursue certain investment strategies. In a declining market or in conditions of poor relative or absolute performance, the pace of redemptions and withdrawals and the loss of institutional and individual separate account clients could accelerate. The occurrence of any of these events could have a material adverse effect on our revenue. Limitations on our ability to utilize leverage in the closed-end funds we sponsor could reduce our assets under management and revenue. Certain of the closed-end funds sponsored by us utilize leverage in the form of bank financing, which in the aggregate amounted to approximately $2.3 billion as of December 31, 2018. To the extent any closed-end fund sponsored by us elects or is required by regulation or the terms of its bank financing to reduce leverage, such fund may need to liquidate its investments. Reducing leverage or liquidating investments during adverse market conditions would reduce the Company’s assets under management and revenue. We could incur financial losses, reputational harm, and regulatory penalties if we fail to implement effective information security policies and procedures. Our business is dependent on the effectiveness of our information security policies and procedures to protect our network and telecommunications systems and the data that reside in or are transmitted through such systems. As part of our normal operations, we maintain and transmit confidential information about our employees and clients’ portfolios as well as proprietary information relating to our business operations. We maintain a system of internal controls designed to provide reasonable assurance that fraudulent activity, including misappropriation of our assets, fraudulent financial reporting, and unauthorized access to sensitive or confidential information is either prevented or timely detected and remediated. However, our technology systems may still be vulnerable to unauthorized access or may be corrupted by cyber attacks, computer viruses or other malicious software code, or authorized persons could inadvertently or intentionally release confidential or proprietary information. The nature of these threats is constantly evolving and becoming increasingly sophisticated. Although we take precautions to password protect and encrypt our employees’ mobile electronic devices, if such devices are stolen, misplaced or left unattended, they may become vulnerable to hacking or other unauthorized use, creating a possible security risk. 8


  • Page 23

    Breach or other failure of our technology systems, including those of third parties with whom we do business, could result in the loss of valuable information, liability for stolen assets or information, remediation costs to repair damage caused by the incident, additional security costs to mitigate against future incidents, regulatory penalties and litigation costs resulting from the incident. Moreover, loss of confidential client information could harm our reputation, result in the termination of contracts by our existing clients and subject us to liability under laws that protect confidential personal data, resulting in increased costs or loss of revenues. We maintain a cyber insurance policy to help mitigate against any potential losses relating to information security breaches. However, such insurance may only partially reimburse us for our losses, if at all, and if a claim is successful and exceeds or is not covered by our insurance policy, we may be required to pay a substantial amount in respect of such successful claim. Failure to maintain adequate business continuity plans could have a material adverse effect on the Company and its products. Significant portions of our business operations and those of our critical third-party service providers are concentrated in a few geographic areas, including New York and New Jersey. Critical operations that are geographically concentrated in New York include portfolio management, trading operations, information technology, investment administration, and portfolio accounting services for our products as well as corporate accounting systems. Should we, or any of our critical service providers, experience a significant local or regional disaster or other significant business disruption, our ability to remain operational will depend in part on the safety and availability of our personnel, our office facilities, and the proper functioning of our network, telecommunication and other related systems and operations. We have backup systems and contingency plans, but we cannot ensure that they will be adequate under all circumstances or that material interruptions and disruptions will not occur. In addition, we rely to varying degrees on outside vendors for disaster recovery support, and we cannot guarantee that these vendors will be able to perform in an adequate and timely manner. Failure by us, or any of our critical service providers, to maintain up-to-date business continuity plans, including system backup facilities, would impede our ability to operate in the event of a significant business disruption, which could result in financial losses to the Company and our clients and investors. We could experience loss of client relationships if our reputation is harmed. Our reputation is important to the success of our business. We believe that the Cohen & Steers brand has been, and continues to be, well received globally both in our industry and with our clients, reflecting the fact that our brand, like our business, is based in part on trust and confidence. Our reputation may be harmed by a number of factors, including, but not limited to, poor investment performance, operational failures, the dissemination by current or former clients of unfavorable opinions about our services, changes in key members of an investment team or changes in our senior management and the imposition of legal or regulatory sanctions or penalties in connection with our business activities. If our reputation is harmed, existing clients and investors may reduce amounts held in, or withdraw entirely from, funds or accounts that we manage, or funds or accounts may terminate their relationship with us. In addition, reputational harm may cause us to lose current employees and we may be unable to attract new ones with similar qualifications or skills, which could negatively affect our operations. If we fail to address, or appear to fail to address, successfully and promptly, the underlying causes of any reputational harm, we may be unsuccessful in repairing any damage to our reputation and our future business prospects would likely be affected, and the loss of client relationships could reduce our assets under management, revenue and earnings. The failure of a key vendor to fulfill its obligations to the Company could have a material adverse effect on the Company and its products. We depend on a number of key vendors for various fund administration, fund and corporate accounting, custody and transfer agent services, information technology services, market data, and other operational needs. The failure or inability of the Company to establish backup for key services or the failure of any key vendor to fulfill its obligations could lead to operational issues for the Company and certain of its products, which could result in financial losses for the Company and its clients. 9


  • Page 24

    Risks Related to our Common Stock A significant portion of our common stock is owned or controlled by our Chairman and our Chief Executive Officer and their respective family members, which may limit the ability of other stockholders to influence the affairs of the Company. Our Chairman and a member of his family beneficially owned or controlled approximately 23.1% of our common stock as of December 31, 2018. In addition, our Chief Executive Officer and members of his family beneficially owned or controlled approximately 25.5% of our common stock as of December 31, 2018. Such levels of ownership or control create the ability to meaningfully influence, among other things: the election of members of our board of directors, thereby indirectly influencing the management and affairs of the Company; the outcome of matters submitted to a vote of our stockholders; and any unsolicited acquisition of us and, consequently, potentially adversely affect the market price of our common stock or prevent our stockholders from realizing a premium on their shares. The interests of one or more of such persons may differ from those of other stockholders in instances where, for example, management compensation is being determined or where an unsolicited acquisition of us could result in a change in our management. The concentration of beneficial ownership in such persons may limit the ability of our other stockholders to influence the affairs of the Company. A sale of a substantial number of shares of our common stock may adversely affect the market price of our common stock, and the issuance of additional shares will dilute your percentage ownership in the Company. A sale of a substantial number of shares of our common stock in the public market, or the perception that such sale may occur, could adversely affect the market price of our common stock. Our Chairman and our Chief Executive Officer, together with certain of their respective family members, beneficially owned or controlled 10,814,801 shares and 11,910,308 shares, respectively, of our common stock as of December 31, 2018. Any of such persons may sell shares of our common stock in the open market, subject to any restrictions imposed by U.S. federal securities laws on sales by affiliates. In connection with our initial public offering in 2004, we entered into a Registration Rights Agreement with our Chairman and our Chief Executive Officer and certain trust entities controlled by certain of their respective family members that requires us to register under the Securities Act of 1933, as amended, shares of our common stock (and other securities convertible into or exchangeable or exercisable for shares of common stock) held by them under certain circumstances. In May 2018, we filed a Registration Statement on Form S-3 covering (i) the resale of up to an aggregate of 22,911,757 shares owned or controlled by our Chairman and our Chief Executive Officer and certain other persons and (ii) the offer and sale of an indeterminate number of shares by us to the public. The sale of a substantial number of shares of our common stock may adversely affect the market price of our common stock, and any additional shares that we issue will dilute your percentage ownership in the Company. Anti-takeover provisions in our charter documents and Delaware law may delay or prevent a change in control of us, which could decrease the trading price of our common stock. Our certificate of incorporation and bylaws and Delaware law contain certain anti-takeover provisions that could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of the Company without negotiating with our board of directors. Such provisions could limit the price that certain investors might be willing to pay in the future for the Company’s common stock. Certain of these provisions allow the Company to issue preferred stock with rights more senior to those of our common stock, impose various procedural and other requirements that could make it more difficult for stockholders to effect certain corporate actions, and set forth rules about how stockholders may present proposals or nominate directors for election at annual meetings. We believe these provisions protect our stockholders from coercive or other unfair takeover tactics by requiring potential acquirers to negotiate with our board of directors and by providing our board of directors with more time to assess acquisition proposals. However, these provisions apply even if an acquisition proposal may be considered beneficial by some stockholders and could have the effect of delaying or preventing an acquisition. In the event that our board of directors determines that a potential business combination transaction would be beneficial to the Company and its stockholders, such stockholders may elect to sell their shares in the Company and the trading price of our common stock could decrease. 10


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    Legal and Regulatory Risks We may be adversely impacted by legal and regulatory changes in the U.S. and internationally. We operate in a highly regulated industry and are subject to new regulations and revisions to, and evolving interpretations of, existing regulations in the U.S. and internationally. In recent years, regulators in the U.S. and abroad have increased oversight of the financial industry, which may result in regulation that increases the Company’s cost of conducting its business and maintaining its global compliance standards or limit or change the Company’s current or prospective business. U.S. regulatory agencies have proposed and adopted multiple regulations that could impact the mutual fund industry. The SEC’s final rules and amendments that modernize reporting and disclosure and implement a liquidity risk management program, along with other potential new regulations, could restrict the funds we manage from engaging in certain transactions and impact flows and increase expenses. In Europe, rules and regulations under MiFID II and MiFIR became effective on January 3, 2018. These have had, and will continue to have, direct and indirect effects on our operations in Europe, including increased costs for investment research and increased compliance, disclosure, reporting, and other obligations. In May 2018, the European Union’s General Data Protection Regulation (GDPR) became effective. The primary objectives of GDPR are to give citizens control of their personal data and to simplify the regulatory environment for international business by unifying data protection regulation in the European Union. This has required us to extensively review our global data processing systems to comply with the stringent rules under GDPR. Compliance under GDPR has resulted in higher costs for increased disclosure and other obligations. Failure to comply with GDPR could result in fines up to the higher of 20 million euros or 4% of annual global revenues. The U.K.’s decision to exit the European Union following the June 2016 vote on the matter (referred to as Brexit) may disrupt our business operations and impact our reported financial results as well as the liquidity and value of our investments. Brexit has caused significant geo-political and legal uncertainty and market volatility in the U.K. and elsewhere, which has continued during the Brexit negotiation process. Depending on the outcome of the Brexit negotiations, CSUK’s ability to market and provide its services or serve as a distributor of financial products within the European Union could be restricted temporarily or in the long term. Our contingency plans for certain Brexit scenarios require the cooperation of counterparties or a regulator of financial services to make timely arrangements. While we believe it is in the best interests of counterparties and regulators to cooperate, we cannot guarantee that counterparties or regulators will cooperate or the timeliness of their cooperation. Our operating expenses may increase as we implement our plan to continue to market and provide our services and distribute our products in the short and/or long term. Although the full extent of the foregoing regulatory changes is still unclear, they may affect our business operations and increase our operating expenses. Our involvement in legal proceedings could adversely affect our results of operations and financial condition. Many aspects of our business involve risks of legal liability. Claims against us may arise in the ordinary course of business, including employment-related claims, and from time to time, we may receive subpoenas or other requests for information from various U.S. and non-U.S. governmental or regulatory authorities and third parties in connection with certain industry-wide, company-specific or other investigations or proceedings. In addition, certain funds we manage may become subject to lawsuits, any of which could potentially impact the investment returns of the applicable fund. We carry insurance in amounts and under terms that we believe are appropriate to cover potential liabilities related to litigation. However, we cannot guarantee that our insurance will cover all liabilities and losses to which we may be exposed, or that our insurance policies will continue to be available at acceptable terms and fees. As our insurance policies are due for renewal, we may need to assume higher deductibles or pay higher premiums, which would increase our expenses and reduce our net income. 11


  • Page 26

    The tax treatment of certain of our funds involves the interpretation of complex provisions of U.S. federal income tax law for which no precedent may be available and may be subject to potential legislative, judicial or administrative change and differing interpretations, possibly on a retroactive basis. The U.S. federal income tax treatment of certain of our funds depends in some instances on determinations of fact and interpretations of complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. U.S. federal income tax rules are constantly under review by the IRS and the U.S. Department of the Treasury, frequently resulting in revised interpretations of established concepts, statutory changes, revisions to regulations and other modifications and interpretations. Recent and ongoing changes to U.S. federal income tax laws and interpretations thereof could cause us to change our investments and commitments, affect the tax considerations of an investment in us and change the character or treatment of portions of our income. In addition, the Company may be required to make certain assumptions when electing a particular tax treatment. It is possible that the IRS could assert successfully that the assumptions made by us do not satisfy the technical requirements of the Internal Revenue Code and/or Treasury Regulations and could require items of income, gain, deduction, loss or credit, including interest deductions, be adjusted, reallocated or disallowed in a manner that adversely affects us and our clients. 12


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    Item 1B. Unresolved Staff Comments The Company has no unresolved SEC staff comments. Item 2. Properties Our principal executive office is located in leased office space at 280 Park Avenue, New York, New York. In addition, we have leased office space in London, Hong Kong and Tokyo. Item 3. Legal Proceedings From time to time, we may become involved in legal matters relating to claims arising in the ordinary course of our business. There are currently no such matters pending that we believe could have a material effect on our consolidated results of operations, cash flows or financial condition. In addition, from time to time, we may receive subpoenas or other requests for information from various U.S. federal and state governmental authorities, domestic and international regulatory authorities and third parties in connection with certain industry-wide inquiries or other investigations or legal proceedings. It is our policy to cooperate fully with such requests. Item 4. Mine Safety Disclosures Not applicable. 13


  • Page 28

    PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the New York Stock Exchange (NYSE) and is traded under the symbol “CNS”. As of February 19, 2019, there were 20 holders of record of our common stock. Holders of record include institutional and omnibus accounts that hold common stock on behalf of numerous underlying beneficial owners. Payment of any dividends to our common stockholders is subject to the approval of our Board of Directors. When determining whether to pay a dividend, we take into account general economic and business conditions, our strategic plans, our financial results and condition, contractual, legal and regulatory restrictions on the payment of dividends by us and our subsidiaries and such other factors deemed relevant. On February 21, 2019, we declared a quarterly cash dividend on our common stock in the amount of $0.36 per share. Issuer Purchases of Equity Securities During the three months ended December 31, 2018, we did not make any purchases of our equity securities that are registered pursuant to Section 12(b) of the Securities Exchange Act of 1934. Recent Sales of Unregistered Securities None. 14


  • Page 29

    Item 6. Selected Financial Data The selected consolidated financial data, together with other information presented below, should be read in conjunction with our consolidated financial statements and the notes to those statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Annual Report on Form 10-K. Selected Consolidated Financial and Other Data (in thousands, except per share data) As of and For the Year Ended December 31, 2018 2017 2016 2015 2014 Consolidated Statements of Operations Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 381,111 $ 378,696 (1) $ 351,497 (1) $ 328,655 $ 313,934 Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 234,073 223,950 (1) 215,986 (1) 201,106 191,993 Operating income . . . . . . . . . . . . . . . . . . . . . . . . 147,038 154,746 135,511 127,549 121,941 Total non-operating income (loss). . . . . . . . . . . (3,259) 5,654 7,892 (14,805) (3) 73 Income before provision for income taxes . . . . . . 143,779 160,400 143,403 112,744 122,014 Provision for income taxes . . . . . . . . . . . . . . . . . . 34,257 (2) 67,914 50,593 48,407 46,280 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,522 92,486 92,810 64,337 75,734 Less: Net (income) loss attributable to redeemable noncontrolling interests . . . . . . . . . 4,374 (547) 126 214 (224) Net income attributable to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . $ 113,896 $ 91,939 $ 92,936 $ 64,551 $ 75,510 Earnings per share attributable to common stockholders Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.43 $ 1.98 $ 2.02 $ 1.42 $ 1.69 Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.40 $ 1.96 $ 2.00 $ 1.41 $ 1.65 Cash dividends declared per share Quarterly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.32 $ 1.12 $ 1.04 $ 1.00 $ 0.88 Special . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.50 $ 1.00 $ 0.50 $ 0.50 $ 1.00 Consolidated Statements of Financial Condition Cash and cash equivalents . . . . . . . . . . . . . . . . . $ 92,733 $ 193,452 $ 183,234 $ 142,728 $ 124,938 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224,932 108,106 54,544 71,334 59,328 Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 432,551 410,125 333,728 305,322 280,721 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . 95,713 86,794 67,061 62,212 52,133 Redeemable noncontrolling interests. . . . . . . 114,192 47,795 853 11,334 607 Total stockholders’ equity . . . . . . . . . . . . . . . 222,646 275,536 265,814 231,776 227,981 Other Data (in millions) Assets under management (AUM) by investment vehicle: Institutional accounts. . . . . . . . . . . . . . . . . . . . . $ 25,712 $ 29,396 $ 28,659 $ 26,105 $ 26,201 Open-end funds . . . . . . . . . . . . . . . . . . . . . . . . . 20,699 23,304 19,576 17,460 17,131 Closed-end funds . . . . . . . . . . . . . . . . . . . . . . . . 8,410 9,406 8,963 9,029 9,805 Total AUM . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,821 $ 62,106 $ 57,198 $ 52,594 $ 53,137 _________________________ (1) Amounts have been recast to reflect the Company’s adoption of the new revenue recognition accounting standard on January 1, 2018. See Notes 2 and 3 of the consolidated financial statements for further discussion of the Company's recently adopted accounting pronouncements and revenue, respectively. (2) Amount reflects the lower U.S. federal statutory tax rate of 21% due to the Tax Cuts and Jobs Act. (3) Includes $8.2 million of unrealized losses related to the reclassification of one of the Company’s seed investment from available-for- sale to equity method and a $2.8 million other-than-temporary impairment. 15


  • Page 30

    Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations This Annual Report on Form 10-K and other documents filed by us contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect management’s current views with respect to, among other things, our operations and financial performance. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “may,” “should,” “seeks,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative versions of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these forward-looking statements. We believe that these factors include, but are not limited to, the risks described in Item 1A. Risk Factors of this Annual Report on Form 10-K. These factors are not exhaustive and should be read in conjunction with the other cautionary statements that are included in this Annual Report on Form 10-K. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. Cohen & Steers, Inc. (CNS), a Delaware corporation formed in 2004, and its subsidiaries are collectively referred to as the Company, we, us or our. Executive Overview We are a global investment manager specializing in liquid real assets, including real estate securities, listed infrastructure, commodities and natural resource equities, as well as preferred securities and other income solutions. Founded in 1986, we are headquartered in New York City, with offices in London, Hong Kong and Tokyo. Our primary investment strategies include U.S. real estate securities, global/international real estate securities, global listed infrastructure, midstream energy, commodities, real assets multi-strategy, preferred securities and global natural resource equities. Our strategies seek to achieve a variety of investment objectives for different risk profiles and are actively managed by specialist teams of investment professionals who employ fundamental-driven research and portfolio management processes. We offer our strategies through a variety of investment vehicles, including U.S. registered funds and other commingled vehicles as well as separate accounts, including subadvised portfolios for financial institutions and individuals around the world. Our products and services are marketed through multiple distribution channels. We distribute our U.S. registered funds principally through financial intermediaries, including broker-dealers, registered investment advisers, banks and fund supermarkets. Our funds domiciled in Europe are marketed globally to individual and institutional investors through financial intermediaries, as well as privately to institutional investors. Our institutional clients include corporate and public defined benefit and defined contribution pension plans, endowment funds and foundations, insurance companies and other financial institutions that access our investment management services directly, through consultants or through other intermediaries. Our revenue is derived from fees received from our clients, including fees for managing or subadvising client accounts; investment advisory, administration, distribution and service fees received from Company-sponsored open-end and closed- end funds as well as fees for portfolio consulting and other services. Our fees are paid in arrears, based on contractually specified rates applied to the value of the assets we manage and, to a lesser degree, investment performance. Our revenue fluctuates with changes in the total value of our assets under management, which may occur as a result of market appreciation and depreciation, addition or termination of client accounts, contributions or withdrawals from client accounts, market conditions, foreign currency fluctuations, distributions as well as investor subscriptions or redemptions, and is recognized over the period that the assets are managed. A majority of our revenue, approximately 89.5%, 88.9% and 88.7% for the years ended December 31, 2018, 2017 and 2016, respectively, was derived from investment advisory and administration fees for providing asset management services to institutional accounts as well as open-end funds and closed-end funds sponsored by the Company. 16


  • Page 31

    Assets Under Management By Investment Vehicle Year Ended December 31, 2018 2017 2016 Institutional Accounts Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 29,396 $ 28,659 $ 26,105 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,814 3,963 6,374 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,558) (3,267) (2,414) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (744) 696 3,960 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,010) 2,867 1,627 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,962) (3,018) (3,033) Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 192 — Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,684) 737 2,554 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,712 $ 29,396 $ 28,659 Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,408 $ 29,346 $ 28,085 Open-end Funds Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 23,304 $ 19,576 $ 17,460 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,963 9,702 9,630 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,411) (6,541) (6,831) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (448) 3,161 2,799 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,014) 1,947 917 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,111) (1,188) (1,600) Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (32) (192) — Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,605) 3,728 2,116 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,699 $ 23,304 $ 19,576 Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,548 $ 21,623 $ 19,176 Closed-end Funds Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 9,406 $ 8,963 $ 9,029 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 — — Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (88) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 — (88) Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (496) 949 554 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (512) (506) (532) Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (996) 443 (66) Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,410 $ 9,406 $ 8,963 Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,012 $ 9,343 $ 9,108 Total Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 62,106 $ 57,198 $ 52,594 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,789 13,665 16,004 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,969) (9,808) (9,333) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,180) 3,857 6,671 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,520) 5,763 3,098 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,585) (4,712) (5,165) Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,285) 4,908 4,604 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,821 $ 62,106 $ 57,198 Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,968 $ 60,312 $ 56,369 17


  • Page 32

    Assets Under Management By Institutional Account Type Year Ended December 31, 2018 2017 2016 Advisory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 11,341 $ 9,068 $ 7,565 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,101 1,822 2,039 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (925) (868) (992) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,176 954 1,047 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (484) 1,127 456 Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 192 — Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 724 2,273 1,503 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,065 $ 11,341 $ 9,068 Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,804 $ 10,280 $ 8,517 Japan Subadvisory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 11,458 $ 13,699 $ 13,112 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 1,411 3,305 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,250) (1,545) (503) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,106) (134) 2,802 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (255) 911 818 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,962) (3,018) (3,033) Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,323) (2,241) 587 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,135 $ 11,458 $ 13,699 Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,408 $ 12,793 $ 13,607 Subadvisory Excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 6,597 $ 5,892 $ 5,428 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 569 730 1,030 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,383) (854) (919) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (814) (124) 111 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (271) 829 353 Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,085) 705 464 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,512 $ 6,597 $ 5,892 Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,196 $ 6,273 $ 5,961 Total Institutional Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 29,396 $ 28,659 $ 26,105 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,814 3,963 6,374 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,558) (3,267) (2,414) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (744) 696 3,960 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,010) 2,867 1,627 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,962) (3,018) (3,033) Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 192 — Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,684) 737 2,554 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,712 $ 29,396 $ 28,659 Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,408 $ 29,346 $ 28,085 18


  • Page 33

    Assets Under Management By Investment Strategy Year Ended December 31, 2018 2017 2016 U.S. Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 27,580 $ 28,927 $ 27,814 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,488 5,703 7,821 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,158) (5,241) (4,091) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (670) 462 3,730 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (959) 1,895 1,674 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,561) (3,694) (4,164) Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (232) (10) (127) Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,422) (1,347) 1,113 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,158 $ 27,580 $ 28,927 Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,052 $ 28,622 $ 29,224 Preferred Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 13,018 $ 9,880 $ 7,705 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,503 5,168 4,857 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,723) (2,635) (2,592) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (220) 2,533 2,265 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (586) 1,145 365 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (560) (540) (455) Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216 — — Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,150) 3,138 2,175 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,868 $ 13,018 $ 9,880 Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,939 $ 11,644 $ 9,145 Global/International Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 11,108 $ 9,403 $ 9,476 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,975 1,520 1,596 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,669) (1,071) (1,867) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306 449 (271) Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (359) 1,458 336 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (199) (212) (265) Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 10 127 Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (252) 1,705 (73) Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,856 $ 11,108 $ 9,403 Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,180 $ 10,258 $ 9,734 Global Listed Infrastructure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 6,932 $ 5,697 $ 5,147 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601 872 732 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (448) (376) (402) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 496 330 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (403) 935 428 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (199) (196) (208) Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (449) 1,235 550 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,483 $ 6,932 $ 5,697 Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,882 $ 6,473 $ 5,488 19


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    Assets Under Management By Investment Strategy - continued Year Ended December 31, 2018 2017 2016 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 3,468 $ 3,291 $ 2,452 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 402 998 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (971) (485) (381) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (749) (83) 617 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (213) 330 295 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (66) (70) (73) Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 — — Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,012) 177 839 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,456 $ 3,468 $ 3,291 Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,915 $ 3,315 $ 2,778 Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 62,106 $ 57,198 $ 52,594 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,789 13,665 16,004 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,969) (9,808) (9,333) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,180) 3,857 6,671 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,520) 5,763 3,098 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,585) (4,712) (5,165) Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,285) 4,908 4,604 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,821 $ 62,106 $ 57,198 Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,968 $ 60,312 $ 56,369 20


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    Investment Performance as of December 31, 2018 _________________________ (1) Past performance is no guarantee of future results. Outperformance is determined by annualized investment performance of all accounts in each investment strategy measured gross of fees and net of withholding taxes in comparison to the performance of each account's reference benchmark measured net of withholding taxes, where applicable. This is not investment advice and may not be construed as sales or marketing material for any financial product or service sponsored or provided by Cohen & Steers. (2) © 2019 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Morningstar calculates its ratings based on a risk-adjusted return measure that accounts for variation in a fund's monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive five stars, the next 22.5% receive four stars, the next 35% receive three stars, the next 22.5% receive two stars and the bottom 10% receive one star. Past performance is no guarantee of future results. Based on independent rating by Morningstar, Inc. of investment performance of each Cohen & Steers-sponsored open-end U.S.-registered mutual fund for all share classes for the overall period at December 31, 2018. Overall Morningstar rating is a weighted average based on the 3-year, 5-year and 10-year Morningstar rating. Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages. This is not investment advice and may not be construed as sales or marketing material for any financial product or service sponsored or provided by Cohen & Steers. Overview Assets under management at December 31, 2018 decreased 11.7% to $54.8 billion from $62.1 billion at December 31, 2017 and decreased 4.2% from $57.2 billion at December 31, 2016. The decrease during 2018 was due to net outflows of $1.2 billion, market depreciation of $2.5 billion and distributions of $3.6 billion. Net outflows included $670 million from U.S. real estate and $607 million from commodities (which is included in “Other” in the table on pages 19-20). Market depreciation included $959 million from U.S. real estate, $586 million from preferred securities and $403 million from global listed infrastructure. Distributions included $2.6 billion from U.S. real estate and $560 million from preferred securities. At January 31, 2019, our assets under management increased 9.5% from December 31, 2018 to $60.0 billion as a result of net inflows of $427 million and market appreciation of $5.0 billion, partially offset by distributions of $200 million. 21


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    The increase in assets under management during 2017 was due to net inflows of $3.9 billion and market appreciation of $5.8 billion, partially offset by distributions of $4.7 billion. Net inflows included $2.5 billion into preferred securities, $496 million into global listed infrastructure and $462 million into U.S. real estate. Market appreciation included $1.9 billion from U.S. real estate, $1.5 billion from global/international real estate, $1.1 billion from preferred securities and $935 million from global listed infrastructure. Distributions included $3.7 billion from U.S. real estate and $540 million from preferred securities. Average assets under management for the year ended December 31, 2018 decreased 2.2% to $59.0 billion from $60.3 billion for the year ended December 31, 2017 and increased 4.6% from $56.4 billion for the year ended December 31, 2016. Institutional accounts Assets under management in institutional accounts at December 31, 2018, which represented 46.9% of total assets under management, were $25.7 billion, compared with $29.4 billion at December 31, 2017 and $28.7 billion at December 31, 2016. The decrease during 2018 was due to net outflows of $744 million, market depreciation of $1.0 billion and distributions of $2.0 billion. Net outflows included $944 million from U.S. real estate and $546 million from commodities (which is included in “Other” in the table on pages 19-20), partially offset by net inflows of $550 million into preferred securities and $202 million into global/international real estate. Market depreciation included $314 million from U.S. real estate, $270 million from global/international real estate and $188 million from global listed infrastructure. Distributions included $1.8 billion from U.S. real estate. The increase in assets under management in institutional accounts during 2017 was due to market appreciation of $2.9 billion and net inflows of $696 million, partially offset by distributions of $3.0 billion. Net inflows included $558 million into preferred securities and $448 million into global listed infrastructure, partially offset by net outflows of $379 million from U.S. real estate. Market appreciation included $1.2 billion from global/international real estate, $863 million from U.S. real estate and $467 million from global listed infrastructure. Distributions included $2.8 billion from U.S. real estate. Average assets under management for institutional accounts for the year ended December 31, 2018 decreased 6.6% to $27.4 billion from $29.3 billion for the year ended December 31, 2017 and decreased 2.4% from $28.1 billion for the year ended December 31, 2016. Assets under management in institutional advised accounts at December 31, 2018, which represented 46.9% of institutional assets under management, were $12.1 billion, compared with $11.3 billion at December 31, 2017 and $9.1 billion at December 31, 2016. The increase during 2018 was primarily due to net inflows of $1.2 billion, partially offset by market depreciation of $484 million. Net inflows included $631 million into preferred securities and $209 million into global/ international real estate. Market depreciation included $119 million from U.S. real estate, $104 million from global listed infrastructure and $89 million from real assets multi-strategy (which is included in “Other” in the table on pages 19-20). The increase in assets under management in institutional advised accounts during 2017 was primarily due to market appreciation of $1.1 billion and net inflows of $1.0 billion. Net inflows included $565 million into global listed infrastructure and $559 million into preferred securities, partially offset by net outflows of $281 million from U.S. real estate. Market appreciation included $485 million from global/international real estate, $241 million from global listed infrastructure and $204 million from U.S. real estate. Average assets under management for institutional advised accounts for the year ended December 31, 2018 increased 14.8% to $11.8 billion from $10.3 billion for the year ended December 31, 2017 and increased 38.6% from $8.5 billion for the year ended December 31, 2016. Assets under management in Japan subadvised accounts at December 31, 2018, which represented 31.6% of institutional assets under management, were $8.1 billion, compared with $11.5 billion at December 31, 2017 and $13.7 billion at December 31, 2016. The decrease during 2018 was due to net outflows of $1.1 billion, market depreciation of $255 million and distributions of $2.0 billion. Net outflows included $966 million from U.S. real estate. Market depreciation included $166 million from U.S. real estate and $56 million from global/international real estate. Distributions included $1.8 billion from U.S. real estate. The decrease in assets under management in Japan subadvised accounts during 2017 was due to net outflows of $134 million and distributions of $3.0 billion, partially offset by market appreciation of $911 million. Net outflows included $63 million from global/international real estate and $27 million from preferred securities. Market appreciation included $594 22


  • Page 37

    million from U.S. real estate and $254 million from global/international real estate. Distributions included $2.8 billion from U.S. real estate. Average assets under management for Japan subadvised accounts for the year ended December 31, 2018 decreased 26.5% to $9.4 billion from $12.8 billion and decreased 30.9% from $13.6 billion for the year ended December 31, 2016. Assets under management in institutional subadvised accounts excluding Japan at December 31, 2018, which represented 21.4% of institutional assets under management, were $5.5 billion, compared with $6.6 billion at December 31, 2017 and $5.9 billion at December 31, 2016. The decrease during 2018 was due to net outflows of $814 million and market depreciation of $271 million. Net outflows included $546 million from commodities (which is included in “Other” in the table on pages 19-20) and $145 million from U.S. real estate. Market depreciation included $129 million from global/ international real estate and $82 million from global listed infrastructure. The increase in assets under management in institutional subadvised accounts excluding Japan during 2017 was due to market appreciation of $829 million, partially offset by net outflows of $124 million. Net outflows included $227 million from large cap value (which is included in “Other” in the table on pages 19-20), partially offset by net inflows of $178 million into global/international real estate. Market appreciation included $434 million from global/international real estate and $221 million from global listed infrastructure. Average assets under management for institutional subadvised accounts excluding Japan for the year ended December 31, 2018 decreased 1.2% to $6.2 billion from $6.3 billion for the year ended December 31, 2017 and increased 3.9% from $6.0 billion for the year ended December 31, 2016. Open-end funds Assets under management in open-end funds at December 31, 2018, which represented 37.8% of total assets under management, were $20.7 billion, compared with $23.3 billion at December 31, 2017 and $19.6 billion at December 31, 2016. The decrease during 2018 was primarily due to net outflows of $448 million, market depreciation of $1.0 billion and distributions of $1.1 billion. Net outflows included $771 million from preferred securities, partially offset by net inflows of $276 million into U.S. real estate and $118 million into global listed infrastructure. Market depreciation included $501 million from U.S. real estate and $368 million from preferred securities. Distributions included $566 million from U.S. real estate and $439 million from preferred securities. The increase in assets under management in open-end funds during 2017 was primarily due to net inflows of $3.2 billion and market appreciation of $1.9 billion, partially offset by distributions of $1.2 billion. Net inflows included $2.0 billion into preferred securities and $842 million into U.S. real estate. Market appreciation included $816 million from U.S. real estate and $769 million from preferred securities. Distributions included $679 million from U.S. real estate and $416 million from preferred securities. Average assets under management for open-end funds for the year ended December 31, 2018 increased 4.3% to $22.5 billion from $21.6 billion for the year ended December 31, 2017 and increased 17.6% from $19.2 billion for the year ended December 31, 2016. Closed-end funds Assets under management in closed-end funds at December 31, 2018, which represented 15.3% of total assets under management, were $8.4 billion, compared with $9.4 billion at December 31, 2017 and $9.0 billion at December 31, 2016. The decrease during 2018 was primarily due to market depreciation of $496 million and distributions of $512 million. The increase in assets under management in closed-end funds during 2017 was primarily due to market appreciation of $949 million, partially offset by distributions of $506 million. Average assets under management for closed-end funds for the year ended December 31, 2018 decreased 3.5% to $9.0 billion from $9.3 billion for the year ended December 31, 2017 and decreased 1.1% from $9.1 billion for the year ended December 31, 2016. 23


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    Results of Operations (in thousands, except per share data and percentages) Year Ended December 31, 2018 2017 2016 U.S. GAAP Revenue (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 381,111 $ 378,696 $ 351,497 Expenses (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 234,073 $ 223,950 $ 215,986 Operating income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 147,038 $ 154,746 $ 135,511 Non-operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,259) $ 5,654 $ 7,892 Net income attributable to common stockholders (2) . . . . . . . . . . . . . . . . . . . . . $ 113,896 $ 91,939 $ 92,936 Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.40 $ 1.96 $ 2.00 Operating margin (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38.6% 40.9% 38.6% As Adjusted (3) Net income attributable to common stockholders (2) . . . . . . . . . . . . . . . . . . . . . $ 113,849 $ 97,037 $ 86,109 Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.40 $ 2.07 $ 1.85 Operating margin (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.1% 40.9% 39.2% _________________________ (1) The presentation for the years ended December 31, 2017 and 2016 has been recast to reflect the Company's adoption of the new revenue recognition accounting standard on January 1, 2018. (2) Net income for the year ended December 31, 2018 reflected the lower U.S. federal statutory tax rate of 21% due to the Tax Cuts and Jobs Act. (3) The “As Adjusted” amounts represent non-GAAP financial measures. Refer to pages 29-30 for reconciliations to the most directly comparable U.S. GAAP financial measures. U.S. GAAP 2018 Compared with 2017 Revenue Revenue for the year ended December 31, 2018 increased 0.6% to $381.1 million from $378.7 million for the year ended December 31, 2017. This increase was primarily attributable to higher investment advisory and administration fees of $4.5 million, primarily due to a favorable change in the fee mix. For the year ended December 31, 2018: Total investment advisory revenue from institutional accounts increased 0.1% to $100.3 million from $100.2 million for the year ended December 31, 2017. Total investment advisory revenue compared with average assets under management in institutional accounts implied an annual effective fee rate of 36.6 bps and 34.1 bps for the year ended December 31, 2018 and 2017, respectively. The increase in the annual effective fee rate reflected net outflows from lower fee paying accounts. Total investment advisory and administration revenue from open-end funds increased 3.7% to $163.6 million from $157.9 million for the year ended December 31, 2017. Total investment advisory and administration revenue compared with average assets under management in open-end funds implied an annual effective fee rate of 72.6 bps and 73.0 bps for the year ended December 31, 2018 and 2017, respectively. Total investment advisory and administration revenue from closed-end funds decreased 1.8% to $77.3 million from $78.7 million for the year ended December 31, 2017. Total investment advisory and administration revenue compared with average assets under management in closed-end funds implied an annual effective fee rate of 85.7 bps and 84.2 bps for the year ended December 31, 2018 and 2017, respectively. The net increase in the annual effective fee rate reflected the full-year effect of the realignment of administration fee rates across our mutual fund complex, which was approved by the mutual fund Board of Directors in June 2017 and became effective on October 1, 2017. 24


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    Expenses Expenses for the year ended December 31, 2018 increased 4.5% to $234.1 million from $224.0 million for the year ended December 31, 2017, primarily due to higher employee compensation and benefits of $7.2 million and general and administrative expenses of $6.0 million, partially offset by lower distribution and service fees expense of $3.3 million. Employee compensation and benefits for the year ended December 31, 2018 increased 5.8% to $131.3 million from $124.1 million for the year ended December 31, 2017, primarily due to higher salaries of $3.3 million, higher amortization of restricted stock units of $2.1 million and incentive compensation of $1.9 million, partially offset by lower production compensation of $1.1 million. Distribution and service fees expense for the year ended December 31, 2018 decreased 6.2% to $50.0 million from $53.3 million for the year ended December 31, 2017, primarily due to a continued shift in the composition of assets under management into lower cost share classes. General and administrative expenses for the year ended December 31, 2018 increased 14.3% to $48.3 million from $42.2 million for the year ended December 31, 2017, primarily due to higher research and market data expenses of approximately $1.2 million, higher recruiting fees of approximately $791,000, expenses of approximately $511,000 associated with the evaluation of a potential business transaction that we did not pursue. In addition, the year ended December 31, 2017 included refunds of foreign withholding taxes related to prior years of approximately $1.3 million. Operating Margin Operating margin for the year ended December 31, 2018 decreased to 38.6% from 40.9% for the year ended December 31, 2017. Non-operating Income (Loss) Non-operating loss for the year ended December 31, 2018 was $3.3 million, which included net loss attributable to redeemable noncontrolling interests of $4.4 million, compared with non-operating income of $5.7 million for the year ended December 31, 2017, which included net income attributable to redeemable noncontrolling interests of $547,000. Non- operating income (loss) was comprised of the following: Interest and dividend income of $10.4 million for the year ended December 31, 2018, which included interest on corporate cash of $3.7 million, interest and dividend income of $5.8 million attributable to consolidated funds and dividend income of $936,000 from other seed investments. Interest and dividend income of $4.3 million for the year ended December 31, 2017, which included $1.5 million of interest on corporate cash and interest and dividend income of $1.9 million from consolidated funds and dividend income of $1.0 million from other seed investments; Net loss from investments of $14.3 million for the year ended December 31, 2018, which included net losses of $11.2 million attributable to consolidated funds, of which $1.6 million was realized, and net losses of $3.1 million from other seed investments, of which $328,000 was realized. Net gain from investments of $2.0 million for the year ended December 31, 2017, which included net realized and unrealized gains from consolidated funds of $1.9 million and net realized and unrealized gains of $105,000 from other seed investments; and Foreign currency gains of $579,000 for the year ended December 31, 2018, which included net gains of $2.3 million attributable to U.S. dollar-denominated assets and liabilities held by certain foreign subsidiaries, partially offset by net losses of $1.7 million attributable to consolidated funds. Foreign currency losses of $699,000 for the year ended December 31, 2017, which included $515,000 of net losses attributable to consolidated funds. Income Taxes Income tax expense for the year ended December 31, 2018 was $34.3 million, compared with $67.9 million for the year ended December 31, 2017. The effective tax rate for the year ended December 31, 2018, which reflected the lower U.S. federal statutory rate of 21% due to the enactment of the Tax Cuts and Jobs Act, was 23.12%, compared with 42.50% for the year ended December 31, 2017. 25


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    The effective tax rate for the year ended December 31, 2018 differed from the U.S. federal statutory rate of 21% primarily due to state, local and foreign taxes, partially offset by the reversal of certain liabilities associated with unrecognized tax benefits and the tax effects related to the delivery of restricted stock units. The effective tax rate for the year ended December 31, 2017 differed from the U.S. federal statutory rate of 35% primarily due to tax charges of approximately $8.4 million, associated with the enactment of the Tax Cuts and Jobs Act on December 22, 2017 and remeasurement of deferred and other tax balances aggregating to $4.3 million, partially offset by the reversal of certain liabilities associated with unrecognized tax benefits. 2017 Compared with 2016 Certain amounts for the years ended December 31, 2017 and 2016 have been recast to reflect the Company's adoption of the new revenue recognition accounting standard on January 1, 2018. See Notes 2 and 3 of the consolidated financial statements for further discussion of the Company's recently adopted accounting pronouncements and revenue, respectively. Revenue Revenue for the year ended December 31, 2017 increased 7.7% to $378.7 million from $351.5 million for the year ended December 31, 2016. This increase was primarily attributable to higher investment advisory and administration fees of $24.9 million due to higher average assets under management in all three investment vehicles. For the year ended December 31, 2017: Total investment advisory revenue from institutional accounts increased 8.7% to $100.2 million from $92.2 million for the year ended December 31, 2016. Total investment advisory revenue compared with average assets under management in institutional accounts implied an annual effective fee rate of 34.1 bps and 32.8 bps for the year ended December 31, 2017 and 2016, respectively. Total investment advisory and administration revenue from open-end funds increased 10.0% to $157.9 million from $143.5 million for the year ended December 31, 2016. Total investment advisory and administration revenue compared with average assets under management in open-end funds implied an annual effective fee rate of 73.0 bps and 74.9 bps for the year ended December 31, 2017 and 2016, respectively. Total investment advisory and administration revenue from closed-end funds increased 3.4% to $78.7 million from $76.1 million for the year ended December 31, 2016. Total investment advisory and administration revenue compared with average assets under management in closed-end funds implied an annual effective fee rate of 84.2 bps and 83.6 bps for the year ended December 31, 2017 and 2016, respectively. Expenses Expenses for the year ended December 31, 2017 increased 3.7% to $224.0 million from $216.0 million for the year ended December 31, 2016, primarily due to an increase of $8.5 million in employee compensation and benefits. Employee compensation and benefits for the year ended December 31, 2017 increased 7.3% to $124.1 million from $115.6 million for the year ended December 31, 2016. This increase was primarily due to higher incentive compensation of approximately $4.7 million and salaries of approximately $3.2 million. Operating Margin Operating margin for the year ended December 31, 2017 increased to 40.9% from 38.6% for the year ended December 31, 2016. Non-operating Income (Loss) Non-operating income for the year ended December 31, 2017 was $5.7 million, compared with $7.9 million for the year ended December 31, 2016. The change was primarily due to lower net realized and unrealized gains on our seed investments of approximately $3.0 million and net losses associated with forward currency contracts used to hedge certain non-U.S. dollar investment advisory fees receivable of $973,000, partially offset by an increase in interest and dividend income from our seed investments and corporate cash of approximately $2.2 million. Non-operating income for the year ended December 31, 2017 included net income attributable to redeemable noncontrolling interests of $547,000, compared with net loss attributable to redeemable noncontrolling interests of $126,000 for the year ended December 31, 2016. 26


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    Income Taxes On December 22, 2017, the Tax Cuts and Jobs Act (the Tax Act) was enacted. The Tax Act, among other things, imposed a one-time tax on deemed repatriated accumulated earnings and profits of our foreign subsidiaries, moved from the current system of worldwide taxation to a territorial system and reduced the statutory corporate tax rate to 21%. As a result of these changes, in the fourth quarter of 2017, the Company recorded a transition tax attributable to the shift in tax regimes and also remeasured its deferred and other tax balances using enacted tax rates that will be in effect when such items are expected to reverse. Income tax expense was $67.9 million for the year ended December 31, 2017, compared with $50.6 million for the year ended December 31, 2016. The effective tax rate for the year ended December 31, 2017 was 42.5%, which differed from the U.S. federal statutory rate primarily due to tax charges of approximately $8.4 million related to a transition tax on the deemed repatriation of foreign earnings and profits and approximately $4.3 million related to the remeasurement of deferred and other tax balances, partially offset by the release of certain liabilities associated with unrecognized tax benefits and other tax- related items aggregating to approximately $4.6 million. As Adjusted The term “As Adjusted” is used to identify non-GAAP financial information in the discussion below. Refer to pages 29-30 for reconciliations to the most directly comparable U.S. GAAP financial measures. 2018 Compared with 2017 Revenue Revenue, as adjusted, for the year ended December 31, 2018 increased 0.6% to $380.4 million from $378.3 million for the year ended December 31, 2017. Revenue, as adjusted, excluded investment advisory and administration fees attributable to the consolidation of certain of the Company's seed investments for both years presented. Expenses Expenses, as adjusted, for the year ended December 31, 2018 increased 3.6% to $231.8 million from $223.7 million for the year ended December 31, 2017. Expenses, as adjusted, excluded the following: Amounts attributable to the consolidation of certain of the Company's seed investments for both years presented; Amounts related to the accelerated vesting of certain restricted stock units due to a retirement for the year ended December 31, 2017; Expenses incurred associated with the evaluation of a potential business transaction that the Company did not pursue for the year ended December 31, 2018; and Refunds of foreign withholding taxes recorded for the year ended December 31, 2017. Operating Margin Operating margin, as adjusted, for the year ended December 31, 2018 was 39.1%, compared with 40.9% for the year ended December 31, 2017. Non-operating Income Non-operating income, as adjusted, for the year ended December 31, 2018 was $3.7 million, compared with $1.2 million for the year ended December 31, 2017. Non-operating income, as adjusted, excluded the following: Amounts attributable to the consolidation of certain of the Company's seed investments for both years presented; Results from the Company's seed investments for both years presented; and Net foreign currency exchange gains associated with U.S. dollar-denominated assets and liabilities held by certain foreign subsidiaries for the year ended December 31, 2018. 27


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    Income Taxes The effective tax rate, as adjusted, for the year ended December 31, 2018 was 25.25%, compared with 37.75% for the year ended December 31, 2017. The effective tax rate, as adjusted, excluded the following for both years presented: Tax effects related to the Tax Cuts and Jobs Act; Reversal of certain liabilities associated with unrecognized tax benefits; Tax effects related to the delivery of restricted stock units; Tax effects of non-GAAP adjustments; and Other tax-related items. 2017 Compared with 2016 Revenue Revenue, as adjusted, for the year ended December 31, 2017 increased 7.7% to $378.3 million from $351.2 million for the year ended December 31, 2016. Revenue, as adjusted, excluded investment advisory and administration fees attributable to the consolidation of certain of the Company's seed investments for both years presented. Expenses Expenses, as adjusted, for the year ended December 31, 2017 increased 4.8% to $223.7 million from $213.4 million for the year ended December 31, 2016. Expenses, as adjusted, excluded general and administrative expenses attributable to the consolidation of the Company's seed investments, employee compensation and benefits related to the accelerated vesting of certain restricted stock units due to retirements for both years presented and refunds of foreign withholding taxes for prior years recorded in 2017. Operating Margin Operating margin, as adjusted, for the year ended December 31, 2017 was 40.9%, compared with 39.2% for the year ended December 31, 2016. Non-operating Income Non-operating income, as adjusted, for both the years ended December 31, 2017 and 2016 was $1.2 million. Non- operating income (loss), as adjusted, excluded amounts attributable to the consolidation of the Company's seed investments and the results from the Company's equity method and available-for-sale seed investments. Income Taxes The effective tax rate, as adjusted, for the year ended December 31, 2017 was 37.75%, compared with 38.00% for the year ended December 31, 2016. The effective tax rate, as adjusted, excluded amounts attributable to the Tax Act, the release of certain liabilities associated with unrecognized tax benefits, other tax-related items and the tax effects of non-GAAP adjustments. 28


  • Page 43

    Non-GAAP Reconciliations Management believes that use of these non-GAAP financial measures enhances the evaluation of our results, as they provide greater transparency into our operating performance. In addition, these non-GAAP financial measures are used to prepare our internal management reports and are used by management in evaluating our business. While we believe that this non-GAAP financial information is useful in evaluating our results and operating performance, this information should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with U.S. GAAP. Reconciliation of U.S. GAAP Net Income Attributable to Common Stockholders and U.S. GAAP Earnings per Share to Net Income Attributable to Common Stockholders, As Adjusted and Earnings per Share, As Adjusted (in thousands, except per share data) Year Ended December 31, 2018 2017 2016 Net income attributable to common stockholders, U.S. GAAP . . . . . . . . . . . . . $ 113,896 $ 91,939 $ 92,936 Deconsolidation (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,392 (2,350) (654) Results from seed investments (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,160 (1,124) (5,934) Accelerated vesting of restricted stock units (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 522 1,945 General and administrative (4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 871 (1,018) — Foreign currency exchange gain (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,270) — — Tax adjustments (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,200) 9,068 (2,184) Net income attributable to common stockholders, as adjusted . . . . . . . . . . . . . . . . $ 113,849 $ 97,037 $ 86,109 Diluted weighted average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,381 46,979 46,432 Diluted earnings per share, U.S. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.40 $ 1.96 $ 2.00 Deconsolidation (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.07 (0.05) (0.01) Results from seed investments (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.05 (0.02) (0.13) Accelerated vesting of restricted stock units (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.01 0.04 General and administrative (4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.02 (0.02) — Foreign currency exchange gain (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.05) — — Tax adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.09) 0.19 (0.05) Diluted earnings per share, as adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.40 $ 2.07 $ 1.85 _________________________ (1) Represents amounts related to the deconsolidation of seed investments in Company-sponsored funds. (2) Represents (i) interest and dividend income and realized and unrealized (gains) losses on seed investments in Company-sponsored funds, (ii) the Company's proportionate share of the results of operations of seed investments classified as equity method investments, including realized and unrealized (gains) losses, and (iii) realized and unrealized (gains) losses on unconsolidated seed investments. (3) Represents amounts related to the accelerated vesting of certain restricted stock units due to retirements. (4) Represents expenses associated with the evaluation of a potential business transaction that the Company did not pursue in 2018 and refunds of foreign withholding taxes in 2017. (5) Represents net foreign currency exchange gains associated with U.S. dollar-denominated assets and liabilities held by certain foreign subsidiaries. U.S. GAAP amounts for prior years have not been recast to conform with the current period presentation as the impact to results was not material. (6) Tax adjustments are summarized in the following table: (in thousands) Year Ended December 31, 2018 2017 2016 Transition tax liability in connection with the Tax Cuts and Jobs Act . . . . . . . . . . . $ (123) $ 8,432 $ — Remeasurement of deferred and other tax balances . . . . . . . . . . . . . . . . . . . . . . . . . — 4,300 — Reversal of certain liabilities associated with unrecognized tax benefits. . . . . . . . . (2,758) (3,772) (675) Delivery of restricted stock units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (947) 49 — Tax-effect of non-GAAP adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 888 (962) Other tax-related items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (589) (829) (547) Total tax adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (4,200) $ 9,068 $ (2,184) 29


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    Reconciliation of U.S. GAAP Operating Income and U.S. GAAP Operating Margin to Operating Income, As Adjusted and Operating Margin, As Adjusted (in thousands, except percentages) Year Ended December 31, 2018 2017 2016 (1) Revenue, U.S. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 381,111 $ 378,696 $ 351,497 Deconsolidation (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (694) (403) (342) Revenue, as adjusted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 380,417 $ 378,293 $ 351,155 (1) Expenses, U.S. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 234,073 $ 223,950 $ 215,986 Deconsolidation (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,408) (789) (595) Accelerated vesting of restricted stock units (3) . . . . . . . . . . . . . . . . . . . . . . . . — (522) (1,945) General and administrative (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (871) 1,018 — Expenses, as adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 231,794 $ 223,657 $ 213,446 Operating income, U.S. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 147,038 $ 154,746 $ 135,511 Deconsolidation (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 714 386 253 Accelerated vesting of restricted stock units (3) . . . . . . . . . . . . . . . . . . . . . . . . — 522 1,945 General and administrative (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 871 (1,018) — Operating income, as adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 148,623 $ 154,636 $ 137,709 (1) Operating margin, U.S. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38.6% 40.9% 38.6% Operating margin, as adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.1% 40.9% 39.2% _________________________ (1) The presentation for the years ended December 31, 2017 and 2016 has been recast to reflect the Company's adoption of the new revenue recognition accounting standard on January 1, 2018. (2) Represents amounts related to the deconsolidation of seed investments in Company-sponsored funds. (3) Represents amounts related to the accelerated vesting of certain restricted stock units due to retirements. (4) Represents expenses associated with the evaluation of a potential business transaction that the Company did not pursue in 2018 and refunds of foreign withholding taxes in 2017. Reconciliation of U.S. GAAP Non-operating Income (Loss) to Non-operating Income (Loss), As Adjusted (in thousands) Year Ended December 31, 2018 2017 2016 Non-operating income (loss), U.S. GAAP. . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,259) $ 5,654 $ 7,892 Deconsolidation (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,052 (3,283) (781) Results from seed investments (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,160 (1,124) (5,934) Foreign currency exchange gain (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,270) — — Non-operating income (loss), as adjusted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,683 $ 1,247 $ 1,177 _________________________ (1) Represents amounts related to the deconsolidation of seed investments in Company-sponsored funds. (2) Represents (i) interest and dividend income and realized and unrealized (gains) losses on seed investments in Company-sponsored funds, (ii) the Company's proportionate share of the results of operations of seed investments classified as equity method investments, including realized and unrealized (gains) losses, and (iii) realized and unrealized (gains) losses on unconsolidated seed investments. (3) Represents net foreign currency exchange gains associated with U.S. dollar-denominated assets and liabilities held by certain foreign subsidiaries. U.S. GAAP amounts for prior years have not been recast to conform with the current period presentation as the impact to results was not material. 30


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    Changes in Financial Condition, Liquidity and Capital Resources Our principal objectives are to maintain a capital structure that supports our business strategies and to maintain the appropriate amount of liquidity at all times. Furthermore, we believe that our cash flows generated from operations are more than adequate to fund our present and reasonably foreseeable future commitments for investing and financing activities. Net Liquid Assets Our current financial condition is highly liquid, primarily comprising cash and cash equivalents, U.S. Treasury securities, seed investments and current assets. Liquid assets are reduced by current liabilities which are generally defined as obligations due within one year (together, net liquid assets). The Company does not currently have any debt outstanding. The table below summarizes net liquid assets for the periods presented: December 31, December 31, (in thousands) 2018 2017 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 92,733 $ 193,452 U.S. Treasury securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,748 — Seed investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,757 63,416 Current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,628 55,054 Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (78,461) (69,086) Net liquid assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 187,405 $ 242,836 Cash and cash equivalents Cash and cash equivalents are on deposit with major financial institutions and consist of short-term, highly-liquid investments, which are readily convertible into cash and have original maturities of three months or less. Cash and cash equivalents reflected special cash dividends of $2.50 per share, or $117 million, and $1.00 per share, or $46 million, at December 31, 2018 and 2017, respectively. U.S. Treasury securities U.S. Treasury securities are directly issued by the U.S. government and classified as held to maturity, with original maturities ranging from 6 to 24 months. Seed investments Seed investments are primarily comprised of listed securities held for the purpose of establishing performance track records and Company-sponsored funds that are consolidated. Seed investments approximate fair value, are generally traded within active markets and can typically be liquidated within a normal settlement cycle. Current assets Current assets primarily represent investment advisory and administration fees receivable. At December 31, 2018, institutional accounts comprised 50.9% of total accounts receivable, while open-end and closed-end funds, together, comprised 43.3% of total accounts receivable. We perform a review of our receivables on an ongoing basis in order to assess collectibility and, based on our analysis at December 31, 2018, there were no past due items greater than 90 days related to institutional accounts. Current liabilities Current liabilities are generally defined as obligations due within one year, which includes accrued compensation, distribution and service fees payable, certain income taxes payable, and other liabilities and accrued expenses. Cash flows Our cash flows generally result from the operating activities of our business, with investment advisory and administration fees being the most significant contributor. 31


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    The table below summarizes cash flows for the periods presented (in thousands): Year Ended December 31, 2018 2017 2016 Cash Flow Data: Net cash provided by (used in) operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 72,598 $ 64,253 $ 114,958 Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (53,194) 5,709 2,898 Net cash provided by (used in) financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (118,110) (60,423) (74,542) Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . (98,706) 9,539 43,314 Effect of foreign exchange rate changes on cash and cash equivalents. . . . . . . . . . . . . . (2,013) 679 (2,808) Cash and cash equivalents, beginning of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193,452 183,234 142,728 Cash and cash equivalents, end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 92,733 $ 193,452 $ 183,234 We expect that cash flows provided by operating activities will continue to serve as our principal source of working capital in the near future. In 2018, cash and cash equivalents decreased by $98.7 million, excluding the effect of foreign exchange rate changes. Net cash provided by operating activities was $72.6 million. Cash flows from operating activities primarily consisted of net income adjusted for certain non-cash items and changes in assets and liabilities. Net cash used in investing activities was $53.2 million, which included $63.6 million of investment purchases, including the seeding of five new track record accounts and investment of $49.5 million into U.S. Treasury securities, partially offset by $13.8 million of proceeds from the sale of investments. Net cash used in financing activities was $118.1 million, including dividends paid to stockholders of $178.9 million, which included a special dividend of $116.9 million paid on December 3, 2018, repurchases of common stock to satisfy employee withholding tax obligations on the vesting and delivery of restricted stock units of $10.6 million, as well as distributions to redeemable noncontrolling interests of $10.9 million, partially offset by contributions from redeemable noncontrolling interests of $81.6 million. In 2017, cash and cash equivalents increased by $9.5 million, excluding the effect of foreign exchange rate changes. Net cash provided by investing activities was comprised of proceeds from sales of available-for-sale investments of $25.8 million, partially offset by purchases of available-for-sale investments of $16.9 million, including a seed investment of $10.0 million in a track record account for a new real assets multi-strategy portfolio and purchases of property and equipment of $3.2 million. Net cash used in financing activities was primarily for dividends paid to stockholders of $98.3 million, which included a special dividend of $46.3 million paid on December 13, 2017 and repurchases of common stock to satisfy employee withholding tax obligations on the vesting and delivery of restricted stock units of $9.1 million, partially offset by contributions from redeemable noncontrolling interest of $46.7 million. In 2016, cash and cash equivalents increased by $43.3 million, excluding the effect of foreign exchange rate changes. Net cash provided by investing activities was comprised of proceeds from sales of available-for-sale investments of $20.8 million, partially offset by purchases of property and equipment of $10.2 million and purchases of available-for-sale investments of $8.1 million. Net cash used in financing activities was primarily for dividends paid to stockholders of $70.8 million, which included a special dividend of approximately $22.9 million paid on December 14, 2016, and repurchases of common stock to satisfy employee withholding tax obligations on the vesting and delivery of restricted stock units of $8.0 million, partially offset by contributions from redeemable noncontrolling interests of $4.0 million. Net Capital Requirements We continually 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 December 31, 2018, we exceeded our minimum regulatory capital requirements by approximately $3.0 million. 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. CSAL is subject to regulation by the Hong Kong Securities and Futures Commission. At December 31, 2018, CSAL exceeded its minimum regulatory capital requirements by approximately $25.7 million. In August 2018, CSAL paid a dividend in the amount of $32.0 million to its parent, Cohen & Steers Capital Management, Inc. In January 2019, CSAL paid an additional dividend in the amount of $15.0 million to the parent. 32


  • Page 47

    CSUK is subject to regulation by the United Kingdom Financial Conduct Authority. At December 31, 2018, CSUK exceeded their aggregate minimum regulatory capital requirements by approximately $28.2 million. We believe that our cash and cash equivalents and cash flows from operations will be more than adequate to meet our anticipated capital requirements and other obligations as they become due. Dividends Subject to the approval of our Board of Directors, we anticipate paying dividends. When determining whether to pay a dividend, we take into account general economic and business conditions, our strategic plans, our results of operations and financial condition, contractual, legal and regulatory restrictions on the payment of dividends, if any, by us and our subsidiaries and such other factors deemed relevant. On February 21, 2019, the Company declared a quarterly dividend on its common stock in the amount of $0.36 per share. This dividend will be payable on March 14, 2019 to stockholders of record at the close of business on March 4, 2019. Investment Commitments We have committed to co-invest up to $5.1 million alongside Cohen & Steers Global Realty Partners III-TE, L.P. (GRP-TE). At December 31, 2018, we have funded approximately $3.8 million of this commitment. Our co-investment alongside GRP-TE is illiquid and is anticipated to be invested for the life of the fund. The timing of the funding of the unfunded portion of our commitment is currently unknown, as the drawdown of our commitment is contingent on the timing of drawdowns by the underlying funds in which GRP-TE invests. The unfunded portion of this commitment was not recorded on our consolidated statements of financial condition at December 31, 2018. Contractual Obligations and Contingencies The following table summarizes our contractual obligations at December 31, 2018 (in thousands): 2024 2019 2020 2021 2022 2023 and after Total Operating leases. . . . . . . . . . . . . . . . . . . $ 15,112 $ 13,570 $ 11,397 $ 10,882 $ 10,842 $ 960 $ 62,763 Other liability. . . . . . . . . . . . . . . . . . . . . 192 665 665 1,246 1,662 2,077 6,507 Total . . . . . . . . . . . . . . . . . . . . . . $ 15,304 $ 14,235 $ 12,062 $ 12,128 $ 12,504 $ 3,037 $ 69,270 Operating Leases Operating leases consist of noncancelable long-term leases for office space, information technology applications, market data and certain office equipment. In July 2018, the Company renewed its lease agreement for office space in Japan. The lease expires July 31, 2021. Other Liability Other liability consists of the remaining transition tax liability based on the cumulative undistributed earnings and profits of our foreign subsidiaries at December 31, 2017 in connection with the enactment of the Tax Cuts and Jobs Act. This tax liability, which is payable over eight years on an interest-free basis, was included as part of income tax payable on our consolidated statement of financial condition at December 31, 2018. During the year ended December 31, 2018, in connection with the filing of the Company's 2017 Federal tax return, overpayments of approximately $680,000 were used to reduce the transition tax liability. Contingencies Due to the uncertainty with respect the timing of future cash flows associated with unrecognized tax benefits at December 31, 2018, the Company is unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities. Therefore, $12.0 million of gross unrecognized tax benefits have been excluded the contractual obligations table above. See Note 14 to the consolidated financial statements for additional disclosures related to income taxes. 33


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    Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, results of operations, liquidity or capital resources. Critical Accounting Policies and Estimates A thorough understanding of our accounting policies is essential when reviewing our reported results of operations and our financial condition. The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Our significant accounting policies are disclosed in Note 2 to the consolidated financial statements and should be read in conjunction with the summarized information below. Management considers the following accounting policies critical to an informed review of our consolidated financial statements as they require management to make certain judgments about matters that may be uncertain at the time the policies were applied or the estimates determined. Consolidation of Company-sponsored Funds The Company evaluates its investments in Company-sponsored funds at inception and thereafter, if there is a reconsideration event, in order to determine whether to apply the variable interest entity (VIE) model or the voting interest entity (VOE) model. This evaluation involves the use of judgment and analysis on an entity by entity basis. In performing this analysis, we consider the legal structure of the entity, management fees earned by the Company and the nature of the ownership interest and rights of interest holders in the entity, including the Company. If we determine that the entity is a VIE, we must then assess whether the Company absorbs a majority of the VIEs expected variability in which case it is deemed to be the primary beneficiary of the VIE. The Company consolidates VIEs for which it is deemed to be the primary beneficiary. We consolidate VOEs if we own a majority of the voting interest in the entity or when the Company is the general partner of the fund and the limited partners do not have substantive kick-out or participating rights. Amounts attributable to third parties in the funds that we consolidate are recorded in redeemable noncontrolling interests on the consolidated statements of financial condition and net (income) loss attributable to redeemable noncontrolling interests on the consolidated statements of operations. Investments Our investments are classified as equity investments at fair value, trading investments, held-to-maturity investments or equity method investments at the time of purchase and re-evaluated on an ongoing basis and at the date of each consolidated statement of financial condition. Investments classified as equity investments at fair value include securities held within the affiliated funds that the Company consolidates, individual securities held directly for the purpose of establishing performance track records and seed investments in Company-sponsored open-end funds where the Company has neither control nor the ability to exercise significant influence. Investments classified as trading investments represent securities held within the Company-sponsored funds that we consolidate and individual debt securities held directly for the purpose of establishing performance track records. Held-to-maturity investments represent fixed income securities recorded at amortized cost. Equity method investments represent investments in Company-sponsored funds in which the Company’s ownership is between 20-50% of the outstanding voting interests of the entity or when the Company is able to exercise significant influence but not control over the investments. Fair Value The majority of our investments are carried at fair value or amounts that approximate fair value on our consolidated statement of financial condition with the periodic mark-to-market included directly in earnings. Fair value is the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities reported at fair value are classified and disclosed in a fair value hierarchy based on whether the inputs to the valuation techniques are observable or unobservable. The classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement: Level 1 - Unadjusted quoted prices for identical instruments in active markets. 34


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    Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable. If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability. Level 3 - Valuations derived from valuation techniques in which significant inputs or significant value drivers are unobservable. Income Taxes We operate in numerous states and countries through our subsidiaries and therefore must allocate our income, expenses, and earnings to these taxing jurisdictions taking into account the various laws and regulations in each jurisdiction. Our tax provision represents an estimate of the total liability that we have incurred in these jurisdictions as a result of our operations. Each year we file tax returns in each jurisdiction and settle our tax liabilities which may be subject to audit by the taxing authorities. The determination of our annual provision is subject to judgments and estimates and the actual results may vary from the amounts reported in our consolidated financial statements. Accordingly, we recognize additions to, or reductions of, income tax expense during reporting periods that may pertain to prior period provisions as our estimated liabilities are revised and actual tax returns and audits, if any, are settled. Such adjustments are recognized in the discrete quarterly period in which they are determined. In addition, we record deferred tax consequences of all transactions that have been recognized in the consolidated financial statements in accordance with the provisions of the enacted tax laws. Deferred tax assets are recognized for temporary differences that will result in deductible amounts in future years. Deferred tax liabilities are recognized for temporary differences that will result in taxable income in future years. We record a valuation allowance, when necessary, to reduce deferred tax assets to an amount that more likely than not will be realized. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in several jurisdictions across our global operations. In accordance with Accounting Standards Codification Topic 740, Income Taxes (ASC 740), a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. We record unrecognized tax benefits as liabilities in accordance with ASC 740 and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the unrecognized tax benefit liabilities. These differences are reflected as increases or decreases in income tax expense in the period in which new information becomes available. Recently Issued Accounting Pronouncements See discussion of Recently Issued Accounting Pronouncements in Note 2 of the consolidated financial statements. 35


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    Item 7A. Quantitative and Qualitative Disclosures About Market Risk In the normal course of our business, we are exposed to risk as a result of changes in interest and currency rates and securities market and general economic fluctuations, which may have an adverse impact on the value of our investments. At December 31, 2018, we had approximately $108.4 million of trading investments, $66.8 million of equity investments at fair value, $49.7 million of held-to-maturity investments and $26,000 of equity method investments. Trading investments included debt securities held within the affiliated funds that the Company consolidates of approximately $94.4 million and individual debt securities held directly for the purposes of establishing performance track records of approximately $14.0 million. Equity investments at fair value included securities held within the affiliated funds that the Company consolidates of approximately $47.0 million as well as individual securities held directly for the purpose of establishing performance track records and seed investments in Company-sponsored open-end funds where the Company has neither control nor the ability to exercise significant influence of approximately $19.8 million. Held-to-maturity investments included fixed income securities recorded at amortized cost of approximately $49.7 million. At December 31, 2018, the Company consolidated the Cohen & Steers Co-Investment Partnership, L.P., the Cohen & Steers SICAV Diversified Real Assets Fund, the Cohen & Steers SICAV Global Listed Infrastructure Fund, the Cohen & Steers SICAV Global Preferred Securities Fund and the Cohen & Steers Funds ICAV. The following table summarizes the effect of a ten percent increase or decrease in equity prices on our investments subject to equity price fluctuation as of December 31, 2018: Carrying Value Carrying Value Carrying Assuming a Assuming a Value 10% Increase 10% Decrease Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 108,363 $ 119,199 $ 97,527 Equity investments at fair value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,795 73,475 60,116 Held-to-maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,748 54,723 44,773 As of December 31, 2018, the Company had outstanding foreign currency forward contracts to hedge its currency exposure related to certain client receivables with an aggregate notional value of $11.0 million. The Company estimates that a ten percent adverse change in market prices would result in a decrease of approximately $20,500 in the fair value of open foreign currency forward contracts at December 31, 2018. A majority of our revenue—89.5%, 88.9% and 88.7% for the years ended December 31, 2018, 2017 and 2016, respectively—was derived from investment advisory and administration agreements with our clients. Under these agreements, the investment advisory and administration fee we receive is based on the market value of the assets we manage. Accordingly, a decline in the prices of securities generally, and real estate securities in particular, attributable to market conditions including inflation, interest rate changes and a general economic downturn, may cause our revenue and income to decline by causing the value of the assets we manage to decrease, which would result in lower investment advisory and administration fees; or by causing our clients to withdraw funds in favor of investments that they perceive as offering greater opportunity or lower risk or cost, which would also result in lower investment advisory and administration fees. The economic environment may also preclude us from increasing the assets we manage in closed-end funds. The market conditions for these offerings may not be as favorable in the future, which could adversely impact our ability to grow the assets we manage and realize higher fee revenue associated with such growth. Depending on market conditions, the closed-end funds we manage may increase or decrease their leverage in order to maintain the funds’ target leverage ratios, thereby increasing or decreasing the assets we manage. As of December 31, 2018, 62.0% and 21.6% of the assets we managed were concentrated in real estate and preferred securities, respectively. A change in interest rates or prolonged economic downturn could have a negative impact on the valuation of real estate and preferred securities in our clients’ portfolios, reduce our revenue, and impact our ability to increase assets in our open-end funds or offer new funds. 36

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