GlobInfrastructure

Cohen & Steers Global Infrastructure The$40TrillionImperative

2010

E D U C AT I O N A L S E R I E S

RAPID ECONOmIC GROWTh AND STRAINS ON ExISTING NETWORkS hAvE mAGNIFIED ThE ImPORTANCE OF GLOBAL INFRASTRUCTURE.

Developed nations need to upgrade deteriorating roads, bridges and electricity networks. Developing nations are investing heavily to support their fast-growing economies and rising standards of living. The price tag is expected to total more than $40 trillion globally by 2030.

In this report, we highlight the trends contributing to infrastructure’s compelling investment thesis, namely:

Population growth and rapid urbanization in developing nations•

Deterioration of existing infrastructure assets in developed nations•

Governments’ growing reliance on private infrastructure financing•

Listed infrastructure’s attractive return characteristics and low •

correlation with bonds and broader equity markets

This brochure must be accompanied by the most recent applicable quarterly Cohen & Steers mutual fund fact sheet(s) if used in connection with the sale of mutual fund shares to the general public.

800.330.7348 • cohenandsteers.com

Infrastructure needs vary by country.

China is the world’s largest importer of soybeans and Brazil is the largest exporter. Yet China •

can’t rely on Brazil to supply the beans it needs when it needs them because of Brazil’s subpar infrastructure. Most Brazilian soybeans are trucked hundreds of miles across dirt roads. When they finally arrive at port, there may be further delays as cargo ships await docking space. Improvements to Brazil’s logistics and transportation networks are estimated at US$4.5 billion annually.(1)

Canada exports 38% of its GDP: more than C$1.8 billion in goods crosses the U.S. border •

daily, and exports to China are growing an average of 20% a year. To relieve some of the strain on Canada’s transportation infrastructure, the country’s leaders have committed C$1 billion(2) to the Asia Pacific Gateway and Corridor, a network of rail, road and port improvements in western Canada.

Australia is the world's driest continent, and a four-year drought has exacerbated an already •

dire situation. Sheep prices fell 80% in 2007 as ranchers sent record numbers of livestock to the stockyards rather than let them die of thirst. In response, the Australian government has accelerated plans to invest US$42 billion in water infrastructure over the next few years.(1)

how a nation responds can lead to private sector solutions and investment opportunities.

(1) “Investing in Global Infrastructure 2007: An Emerging Asset Class,” Ernst & Young(2) Transport Canada, May 2007

Cohen & Steers Global Infrastructure The$40TrillionImperative


1GLOBAL LISTED INFRASTRUCTURE

WhAT IS INFRASTRUCTURE?Infrastructure assets provide the framework for economic growth and modernization. This report will focus on economic infrastructure, which includes the assets of transportation, energy, utilities and communications companies.

Infrastructure Characteristics

Infrastructure companies typically share the following characteristics:

• Long-lived assets—Electrical grids, natural gas pipelines, water treatment plants, toll roads and wireless towers are just a few infrastructure assets with long life spans and stable cash flows.

• High barriers to entry—Building infrastructure assets requires significant capital, making it prohibitive for most competitors to enter the market.

• Monopolistic structure—Many companies benefit from government regulation and minimal competition.

Inelastic demand• —Infrastructure provides essential services that tend to be resistant to economic downturns.

These factors, alone or in combination, have the potential to generate stable growth and income.

Economic Infrastructure Categories

Transportation Energy Utilities Communications

Toll Roads

Airports

Marine Ports

Storage & Transportation

Renewable Power Generation

Electric Utilities

Gas Utilities

Water

Independent Power Producers

Wireless Towers

Satellite Services

Source: Cohen & Steers

Infrastructure’s unique characteristics may

provide stability to a diversified portfolio.



2

DRIvERS: GLOBALIzATION AND URBANIzATIONEconomic liberalization over the last two decades has contributed to the growth in global demand for infrastructure investment. World gross domestic product (GDP) is projected to grow about 3% per year through 2030, with developing countries—driven primarily by Brazil, Russia, India and China (the BRIC nations)—outpacing developed nations, 4% to 2.4%.

Globalization has led to a significant population shift as millions flock to cities in search of greater economic opportunities; by 2030, six out of 10 people will reside in urban centers.(3) The result has been an unforeseen demand for power, water and transportation that current systems are not equipped to handle. Global electricity consumption, for example, is expected to double between 2003 and 2030.(4)

BRIC Nations Lead Developing Countries in Gaining Share of World GDP

Source: ISI Group. Numbers may not add to 100% due to rounding.(1) BRIC = Brazil, Russia, India and China(2) Western Europe = France, Germany, Italy and the United Kingdom, for the purpose of this report

Global Population Growth: An Urban Trend

Source: United Nations, 2006

United States

Other Developed

BRIC(1)

Other DevelopingCountriesWestern

Europe(2)

Japan

21.6%

14.5%

7.4%13.8%

17.9%

25.1%

Other Developed BRIC(1)

Other DevelopingCountries

United States

WesternEurope(2)

Japan

18.5%17.2%

11.5%15.1%

9.1%27.5%

Developing Countries

Governments that fail to upgrade and maintain key infrastructure assets may quickly lose their competitive advantage and jeopardize their countries’ long-term economic viability.

More than half of the world’s population— 3.3 billion—now live in urban areas.

0

2

4

6

8

10

Pop

ula

tio

n (b

illio

ns)

1950

2.5

1955

2.8

1960

3.0

1965

3.3

1970

3.7

1975

4.1

1980

4.5

1985

4.9

1990

5.3

1995

5.7

2000

6.1

2005

6.5

2010

6.9

2015

7.3

2020

7.7

2025

8.0

2030

8.3Urban Population

Total Population

(3) United Nations, 2006 (4) Energy Information Administration, October 2007



The $40 Trillion Infrastructure Challenge: 2005–2030Projected Infrastructure Spending (in trillions)

Sources: Booz Allen Hamilton, Global Infrastructure Partners, World Energy Outlook, Organisation for Economic Co-operation and Development (OECD), Boeing, Drewry Shipping Consultants, U.S. Department of Transportation

Water $0.23Power $0.18Road & Rail $0.31Air/Seaport $0.14

MIDDLEEAST

Total: $0.86


AFRICA

Total: $1.10


NORTH AMERICA

Total: $6.52


LATIN/SOUTH

AMERICA

Total: $7.48


EUROPE

Total: $9.15 Water $9.04Power $4.23Road & Rail $2.11Air/Seaport $0.51

ASIA/OCEANIA

Total: $15.89

Water 55%Power 22%Road & Rail 19%Air/Seaport 4%

Percentage of Infrastructure

Spending by Sector, Through 2030:

In most developing nations, the lion’s share of infrastructure spending will target new construction as governments strive to expand inadequate networks. In developed countries, the immediate need is to upgrade and maintain existing infrastructure.(1)

Global demand for infrastructure

demand is diversified by geography and

by industry.

Global Leaders Weigh in on Infrastructure

Presidents and prime ministers around the world have made infrastructure creation and upkeep a priority.

Brazil—“As a government priority we have taken on the construction of major infrastructure projects in our region. More than just a large group of paths of integration, it will be a channel for development, bringing economic progress to areas that have been left out of the benefits of modern society.”

–President Luiz Inácio Lula da Silva, 2004

Canada—“In collaboration with the private sector and other levels of government, our government is embarking on the largest infrastructure development program in half a century (C$33 billion). Not since the great national transportation mega projects of the post-war era has the federal government launched such a massive undertaking.”

–Prime Minister Stephen Harper, 2007

Australia—“Many urban water pipe systems have been laid down a century ago, leak like hell, resulting in certain cities [having] up to 30% loss in leakage. That’s why we’ve established a quarter of a billion dollar fund to partner with local authorities and state governments, where appropriate, to deal with that.”

–Prime Minister Kevin Rudd, 2008

(1) “Policy Brief: Infrastructure to 2030,” Organisation for Economic Co-operation and Development (OECD), January 2008



4

U.S. INFRASTRUCTURE REPORT CARD: “NEEDS ImPROvEmENT”Maintaining infrastructure has proved to be a difficult task, even for the world’s largest national economy. The United States earned a D from the American Society of Civil Engineers (ASCE) on its 2009 Report Card for America’s Infrastructure.

U.S. Infrastructure

Subject2009

Grade Comments

Aviation D Airports will face the challenge of accommodating increasing numbers of regional jets and new super-jumbo jets.

Bridges C It will cost $9.4 billion a year for 20 years to overhaul the nation’s 160,000 deficient bridges.

Dams D More than $10 billion is needed over the next 12 years to address all critical non-federal dams.

Drinking Water D- America faces a shortfall of $11 billion annually to replace aging facilities and comply with safe drinking water regulations.

Energy (national grid) D+ Growth in electricity demand and investment in new power plants has

not been matched by investment in new transmission facilities.

Navigable Waterways D-

A single barge traveling the nation's waterways can move the same amount of cargo as 58 semi-trucks—at one-tenth the cost. But almost 50% of the 257 locks operated by the U.S. Army Corps of Engineers are functionally obsolete. It will cost up to $125 billion to replace the present system.

Rail C-The freight railroad industry needs to spend $175–$195 billion over the next 20 years to maintain existing infrastructure and expand for freight growth.

Roads D-Poor road conditions cost U.S. motorists $54 billion a year in repairs and operating costs—$275 per motorist. Americans spend 3.5 billion hours a year stuck in traffic, at a cost of $63.2 billion annually to the economy.

Transit D

Transit use increased faster than any other mode of transportation—up 21% between 1993 and 2002—as federal investment during this period stemmed the decline of existing transit infrastructure. But reduced federal spending in real dollars since 2001 threatens this turnaround.

U.S. Infrastructure G.P.A. = D

Total Investment Needs = $2.2 Trillion(1)

A = Execeptional D = PoorB = Good F = FailingC = Medicocre

Source: American Society of Civil Engineers (ASCE), 2009(1) Estimated five-year need—does not include security investment needs.Each category was evaluated on the basis of condition and performance, capacity vs. need, and funding vs. need.

“Congested highways, overflowing sewers and corroding bridges are constant reminders of the looming crisis that jeopardizes our nation’s prosperity and quality of life.”

— The 2005 Report Card for America’s Infrastructure



FINANCING INFRASTRUCTURE— A COmPETITIvE ImPERATIvEGovernments have historically played a major role in financing infrastructure, but the budget and taxation constraints they face are forcing them to consider a capital markets solution—namely, privatization.

Privatization is not new. In Europe, public/private partnerships have developed and operated toll roads since the 1970s, and the United States is following suit. We are also beginning to see privatization of U.S. airports.

Infrastructure’s emergence as a separate investment class, however, only began to coalesce in the mid-1990s. Recently, private equity capital has become active in infrastructure finance, with more than $100 billion raised—primarily in Europe—since 2006.

PRIvATE AND PUBLIC mARkET OPPORTUNITIESThere are two primary methods for investing in infrastructure: direct/private investments and listed (publicly traded) securities. The latter has a total global market capitalization of more than $2 trillion.(1) A portfolio of listed infrastructure securities provides several benefits: daily liquidity, diversification potential, transparency and the discipline of the public markets’ corporate governance model.

Two Ways to Invest in Infrastructure

Direct/Private Investments Listed Securities

Nature of Investments Active investment in a few projects Exposure to broad market

minimum Investment High Low

Expenses Moderate to high Low to moderate

Liquidity Low: Investments are usually locked up for a certain period

high: Investments trade on an exchange and can be liquidated easily

Access Low: Funds are usually open only to qualified or institutional investors

high: Securities can be bought in the open market

DiversificationLow to moderate: Funds can diversify, but there are due diligence and time constraints

high: A portfolio may include different infrastructure sectors and countries

Source: Standard & Poor’s

(1) Macquarie Global Infrastructure Index

Governments are increasingly comfortable

with infrastructure privatization.



6

A WORLD OF OPPORTUNITYUtilities comprise by far the largest segment of the infrastructure universe on a market cap-weighted basis. But because some investors prefer a heavier weighting in non-utilities, UBS created the UBS Global 50/50 Infrastructure & Utilities Index, a managed index that is equally weighted between utilities and infrastructure and contains 100 companies in developed markets.

Universe by SectorUBS Global 50/50 Infrastructure & Utilities Index

At December 31, 2009Index characteristics subject to change.

1% Water

4% Gas Pipelines2% Ports

16%5% Airports

5% Gas Distribution

11% Railways

17%

39%

Communications Infrastructure

Toll Roads

Electric

Geographic Diversification

Region/Country% Weight in Index Region/Country

% Weight in Index

United States 28.7% Canada 2.4%

Japan 16.5% Portugal 1.7%

France 15.3% hong kong 1.5%

Germany 7.1% Netherlands 0.9%

Spain 6.8% korea 0.9%

Australia 6.1% Other Europe 0.6%

United kingdom 5.8% New zealand 0.5%

Italy 5.3%

Source: UBS Global 50/50 Infrastructure and Utilities Index at December 31, 2009Index characteristics subject to change.



hOW GLOBAL LISTED INFRASTRUCTURE SECURITIES mAY BENEFIT A PORTFOLIOOutperformance by an Alternative Investment Sector

Infrastructure company earnings are generally regulated and predictable, with rate increases often tied to inflation. They may carry a yield that is higher than U.S. Treasurys and high-grade corporate bonds, but with less volatility than the broader equity markets.

A Pure Country Play

Investing in global infrastructure is an efficient way to participate in a country’s or region’s growth. For investors seeking geographic diversification, it is as pure a play on a local economy as there is. (Please note, however, that diversification cannot ensure profit or protect against loss in a declining market.)

Global Listed Infrastructure Returns Compared With Other Asset Classes

Total Returns

1 Year 3 Year 5 Year 10 Year

10-Year Standard Deviation

Global Infrastructure(1) 19.1% -2.7% 7.5% 8.7% 15.7%

Global Stocks(2) 30.8% -5.1% 2.6% 0.2% 16.6%

Global Bonds(3) 1.9% 8.1% 4.6% 6.7% 7.5%

Source: Zephyr StyleADVISOR at December 31, 2009(1) The UBS Global 50/50 Infrastructure & Utilities Index tracks a 50% exposure to global developed market utilities sector and a 50% exposure to global developed market infrastructure sector. The utilities sector excludes the sub-sector generation utilities. The index is free-float market capitalization weighted and is reconstituted annually with quarterly rebalances. (2) The MSCI World Index is a free-float-adjusted market capitalization index that is designed to measure global developed market equity performance. (3) The JP Morgan Global Government Bond Index is the most widely used benchmark for measuring performance and quantifying risk across interna-tional fixed-income bond markets. Unlike common stocks and other equity securities, government bonds are obligations of the respective issuing country and are generally backed by the full faith and credit of that country.Past performance is no guarantee of future results. Performance of the indexes presented above is for illustrative purposes only and is not repre-sentative of any specific security. Investors cannot invest in an index.

master Limited Partnerships— A Way to Access Energy-Related Infrastructure

Master limited partnerships (MLPs) are publicly traded, tax-efficient limited partnerships whose investment activities are limited to natural resources, commodities and real estate. Over the last five years, many utility and energy companies have divested oil and gas pipelines to energy infrastructure MLPs, which, due to the stability of the underlying assets, offer attractive yields, long-term growth and predictable cash flows. MLPs also feature low commodity price sensitivity and established franchises with high barriers to entry. The strong demand for new pipeline infrastructure in North America is expected to drive future demand for MLPs, which currently have a market capitalization of $115.4 billion.(4)

(4) As measured by the Alerian MLP Index, a composite of the 50 most prominent energy master limited partnerships, as calculated by Standard & Poor’s.There can be no guarantee that the market for limited partnership trusts will continue to develop over time.

Listed infrastructure has historically

provided attractive risk-adjusted returns.



8

9Correlation of Global Infrastructure Stocks to Other Asset ClassesTen Years Ended December 31, 2009

Global Infrastructure Global Stocks Global Bonds

Global Infrastructure(1) 1.00

Global Stocks(2) 0.81 1.00

Global Bonds(3) 0.31 0.13 1.00

Source: Zephyr StyleADVISOR(1) The UBS Global 50/50 Infrastructure & Utilities Index tracks a 50% exposure to global developed market utilities sector and a 50% exposure to global developed market infrastructure sector. The utilities sector excludes the sub-sector generation utilities. The index is free-float market capitalization weighted and is reconstituted annually with quarterly rebalances.(2) The MSCI World Index is a free-float-adjusted market capitalization index that is designed to measure global developed market equity performance. (3) The JP Morgan Global Government Bond Index is the most widely used benchmark for measuring performance and quantifying risk across interna-tional fixed-income bond markets. Unlike common stocks and other equity securities, government bonds are obligations of the respective issuing country and are generally backed by the full faith and credit of that country.

Price-to-Earnings Ratios Relative to Long-Term EPS Growth Estimates

Price-to-Earnings (P/E) Ratio(4)

Projected Long-Term Earnings per Share

(EPS) Growth EstimateP/E Relative to

Long-Term EPS Growth

Airports 20.6x 9.3% 2.2x

Ports 15.1x 17.4% 0.9x

Toll Roads 15.2x 12.9% 1.2x

Utilities 13.9x 10.0% 1.4x

Sources: Cohen & Steers; Citigroup Global Markets(4) A valuation ratio of a company’s current share price compared to its per-share earnings calculated as market value per share/earnings per share (EPS); one-year forward estimate.

Low Correlation With Stocks and Bonds

Listed infrastructure securities have historically exhibited a low correlation to stocks and bonds. Correlation is a statistical measure of how two securities move in relation to each other. A correlation of +1 means the securities’ returns move perfectly in tandem; a correlation of -1 means the returns move in opposite directions. If the correlation is zero, the securities’ movements are considered to be random.

Attractive valuations Relative to Projected Growth Rates

Global infrastructure companies’ earnings growth has benefited from healthy sector fundamentals and industry reforms. For example, global utilities are expected to post annual earnings per share (EPS) growth that exceeds their historical 2% to 3% average, yet they are trading roughly in line with historical valuations.

With its steady risk-adjusted return profile, it is our belief that infrastructure should be viewed as a core holding in a diversified portfolio.



mULTIPLE INvESTmENT APPROAChESWhether it is in the form of a separate account or through a mutual fund, we advise investors interested in infrastructure securities to work with an investment manager with proven market expertise.

Risks of Investing in Global Infrastructure

Investing in any equity market presents risks. The risks of investing in infrastructure securities typically include: (i) government regulation of rates charged to customers, (ii) restrictions on operations and increased costs and delays associated with compliance with, and changes in, environmental and other regulations, (iii) increased competition from other service providers and (iv) technological innovations that may render existing plants, equipment or other products obsolete. Foreign securities also involve special risks, including currency fluctuations, lower liquidity, political and economic uncertainties and differences in accounting and disclosure standards. Some international securities may comprise small- and medium-sized companies, which can be more susceptible to price volatility and illiquidity than larger companies.

WhY COhEN & STEERSCohen & Steers is a manager of income-oriented equity portfolios specializing in U.S. and international real estate securities, large cap value stocks, listed infrastructure and utilities, and preferred securities. The company also manages alternative investment strategies such as hedged real estate securities portfolios and private real estate multimanager strategies for qualified investors. Headquartered in New York City, with offices in London, Brussels, Hong Kong and Seattle, Cohen & Steers serves individual and institutional investors through a broad range of investment vehicles.

The views and opinions in the preceding commentary are as of the date of publication and are subject to change. This material represents an assessment of the market environment at a specific point in time, should not be relied upon as investment or tax advice and is not intended to predict or depict performance of any investment. Investors should consult their own advisors with respect to their individual circumstances.Past performance is no guarantee of future results. Index performance is not representative of the performance of any Cohen & Steers account and no such account will seek to replicate an index. You cannot invest directly in an index.Copyright © 2010 Cohen & Steers, Inc. All rights reserved.

Seattle

Headquarters:New York

London

Brussels

Hong Kong

Countries with existing REIT-like structures

Countries considering REIT-like structures

For information, call us at:800.330.7348

Come visit us online at:cohenandsteers.com

ED2006 1209

Documents

GlobInfrastructure