[Federal Register Volume 73, Number 148 (Thursday, July 31, 2008)]
[Notices]
[Pages 44787-44791]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-17539]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 28341; 812-13152]


Cohen & Steers Advantage Income Realty Fund, Inc., et al.; Notice 
of Application

July 24, 2008.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application under section 6(c) of the Investment 
Company Act of 1940 (``Act'') for an exemption from section 19(b) of 
the Act and rule 19b-1 under the Act.

-----------------------------------------------------------------------

Summary of Application: Applicants request an order to permit certain 
closed-end investment companies to make periodic distributions of long-
term capital gains with respect to their outstanding common stock as 
frequently as twelve times each year, and as frequently as 
distributions are specified by or in accordance with the terms of any 
outstanding preferred stock that such investment companies may issue.

Applicants: Cohen & Steers Advantage Income Realty Fund, Inc., Cohen & 
Steers Closed-End Opportunity Fund, Inc., Cohen & Steers Dividend 
Majors Fund, Inc., Cohen & Steers Global Income Builder, Inc., Cohen & 
Steers Premium Income Realty Fund, Inc., Cohen & Steers Quality Income 
Realty Fund, Inc., Cohen & Steers REIT and Preferred Income Fund, Inc., 
Cohen & Steers REIT and Utility Income Fund, Inc., Cohen & Steers 
Select Utility Fund, Inc., Cohen & Steers Total Return Realty Fund, 
Inc. and Cohen & Steers Worldwide Realty Income Fund, Inc. (together, 
the ``Funds'') and Cohen & Steers Capital Management, Inc. (the 
``Adviser'').

Filing Dates: January 3, 2005, April 5, 2007 and July 21, 2008.

Hearing or Notification of Hearing: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's Secretary 
and serving applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on August 18, 2008, and should be accompanied by proof of service 
on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street, 
NE., Washington, DC 20549-1090; applicants, 280 Park Avenue, New York, 
NY 10017, Attention: Francis C. Poli, Esq.

FOR FURTHER INFORMATION CONTACT: Wendy Friedlander, Senior Counsel, at 
(202) 551-6837, or James M. Curtis, Branch Chief, at (202) 551-6825 
(Division of Investment Management, Office of Chief Counsel).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
Commission's Public Reference Room, 100 F Street, NE., Washington, DC 
20549-1520 (telephone (202) 551-5850).

Applicants' Representations

    1. The Funds are registered closed-end investment companies.\1\ The 
common stock issued by each Fund is listed on the New York Stock 
Exchange. Some of the Funds have issued preferred stock; such preferred 
stock is not listed on any exchange. Applicants believe that the 
stockholders of each Fund are generally conservative, dividend-
sensitive investors who desire current income periodically and may 
favor a fixed distribution policy.
---------------------------------------------------------------------------

    \1\ Applicants request that any order issued granting the relief 
requested in the application also apply to any closed-end investment 
company that in the future: (a) Is advised by the Adviser (including 
any successor in interest) or by any entity controlling, controlled 
by, or under common control (within the meaning of section 2(a)(9) 
of the Act) with the Adviser; and (b) complies with the terms and 
conditions of the requested order. A successor in interest is 
limited to entities that result from a reorganization into another 
jurisdiction or a change in the type of business organization.
---------------------------------------------------------------------------

    2. The Adviser is registered under the Investment Advisers Act of 
1940 and is

[[Page 44788]]

responsible for the overall management of each Fund. The Adviser is a 
wholly-owned subsidiary of Cohen & Steers, Inc., a publicly traded 
company whose common stock is listed on the New York Stock Exchange 
under the symbol ``CNS.''
    3. Applicants represent that in connection with a meeting on March 
7, 2007, the Boards of Directors (the ``Boards'') of each Fund, 
including a majority of the members of each of the Boards who are not 
``interested persons'' of each Fund as defined in section 2(a)(19) of 
the Act (the ``Independent Directors''), reviewed information 
regarding, among other things, the purpose and terms of a proposed 
distribution policy and the relationship between a Fund's distribution 
rate on its common stock under the policy and such Fund's total return 
on net asset value (``NAV'') per share. Applicants state that the 
Independent Directors of each Fund also considered what conflicts of 
interest the Adviser and the affiliated persons of the Adviser and each 
Fund might have with respect to the adoption or implementation of such 
policy. Applicants further state that after considering such 
information the Board, including the Independent Directors, of each 
Fund approved a distribution policy with respect to its common stock 
(the ``Plan'') and determined that such Plan is in the best interests 
of such Fund and its common stockholders.
    4. Applicants state that the purpose of each Plan is to make fixed 
periodic distributions to provide steady cash flow to Fund common 
stockholders. Applicants represent that each Fund would distribute to 
its respective common stockholders periodic, level distributions as 
frequently as monthly, based on a fixed amount per share, a fixed 
percentage of market price or a fixed percentage of the Fund's NAV per 
common share, any of which may be adjusted from time to time. 
Applicants state that the minimum annual distribution rate with respect 
to a Fund's common stock under each Plan would be independent of the 
Fund's performance during any particular period but would be expected 
to correlate with the Fund's performance over time. Applicants explain 
that each distribution on the common stock would be at the stated rate 
then in effect, except for extraordinary distributions and potential 
increases or decreases in the final dividend periods in light of the 
Fund's performance for the entire calendar year and to enable the Fund 
to comply with the distribution requirements of subchapter M of the 
Internal Revenue Code of 1986 (the ``Code'') for the calendar year.
    5. Applicants state that prior to relying on the requested order 
each Fund's Board, including a majority of its Independent Directors, 
will adopt policies and procedures under rule 38a-1 under the Act that 
(a) are reasonably designed to ensure that all notices required to be 
sent to the Fund's stockholders pursuant to section 19(a) of the Act, 
rule 19a-1 thereunder and condition IV. below (``Notices'') include the 
disclosure required by rule 19a-1 and by condition II.A below, and that 
all other written communications by the Fund or its agents described in 
condition III.A below about the distributions under the Plan include 
the disclosure required by condition III.A below and (b) require each 
Fund to keep records that demonstrate its compliance with all of the 
conditions of the requested order and that are necessary for such Fund 
to form the basis for, or demonstrate the calculation of, the amounts 
disclosed in its Notices.\2\
---------------------------------------------------------------------------

    \2\ Applicants state that a future fund that relies on the 
requested order will satisfy each of the representations in the 
application except that such representations will be made in respect 
of actions by the board of directors of such future fund and will be 
made at a future time.
---------------------------------------------------------------------------

Applicants' Legal Analysis

    1. Section 19(b) generally makes it unlawful for any registered 
investment company to make long-term capital gains distributions more 
than once each year. Rule 19b-1 limits the number of capital gains 
dividends, as defined in section 852(b)(3)(C) of the Code 
(``distributions''), that a fund may make with respect to any one 
taxable year to one, plus one additional capital gain dividend made in 
whole or in part to avoid the excise tax under section 4982 of the 
Code, plus a supplemental ``clean up'' distribution made pursuant to 
section 855 of the Code not exceeding 10% of the total amount 
distributed for the year.
    2. Section 6(c) provides that the Commission may exempt any person 
or transaction from any provision of the Act to the extent that such 
exemption is necessary or appropriate in the public interest and 
consistent with the protection of investors and the purposes fairly 
intended by the policy and provisions of the Act.
    3. Applicants state that the common stock of closed-end funds that 
invest primarily in equity securities often trade in the market at a 
discount to their NAV. Applicants believe that this discount may be 
reduced if the Funds are permitted to pay relatively frequent 
distributions on their common stock at a consistent rate, whether or 
not those distributions include an element of long-term capital gains.
    4. Applicants state that the one of the concerns underlying section 
19(b) and rule 19b-1 is that stockholders might be unable to 
distinguish between frequent distributions of capital gains and 
distributions from investment income. Applicants state, however, that 
rule 19a-1 effectively addresses this concern by requiring that a 
separate statement showing the sources of a distribution (e.g., 
estimated net income, net short-term capital gains, net long-term 
capital gains and/or return of capital) accompany any distributions (or 
the confirmation of the reinvestment of distributions) estimated to be 
sourced in part from capital gains or capital. Applicants state that 
the same information also is included in each Fund's annual reports to 
stockholders and on its IRS Form 1099-DIV, which is sent to each common 
and preferred stockholder who received distributions during the year.
    5. Applicants further state that each of the Funds will make the 
additional disclosures required by the conditions set forth below and 
will adopt compliance policies and procedures in accordance with rule 
38a-1 prior to relying on the requested order to ensure that all 
required Notices and disclosures are sent to stockholders. Applicants 
argue that rule 19a-1, the Plans and the compliance policies will 
ensure that each Fund's stockholders would be provided sufficient 
information to understand that their periodic distributions are not 
tied to the Fund's net investment income (which for this purpose is the 
Fund's taxable income other than from capital gains) and realized 
capital gains to date, and may not represent yield or investment 
return. Accordingly, applicants assert that continuing to subject the 
Funds to section 19(b) and rule 19b-1 would afford stockholders no 
extra protection.
    6. Applicants assert that the application of rule 19b-1 to a Plan 
actually could have an inappropriate influence on portfolio management 
decisions. Applicants state that, in the absence of an exemption from 
rule 19b-1, the adoption of a Plan imposes pressure on management (i) 
not to realize any net long-term capital gains until the point in the 
year that the Fund can pay all of its remaining distributions in 
accordance with rule 19b-1, and (ii) not to realize any long-term 
capital gains during any particular year in excess of the amount of the 
aggregate pay-out for the year (since as a practical matter excess 
gains must be distributed and accordingly would not be available

[[Page 44789]]

to satisfy pay-out requirements in following years), notwithstanding 
that purely investment considerations might favor realization of long-
term gains at different times or in different amounts. Applicants thus 
assert that no purpose is served by the distortion in the normal 
operation of a periodic distribution plan required in order to comply 
with rule 19b-1, and that the order requested by the applicants would 
minimize the anomalous effects of rule 19b-1 by enabling the Funds to 
realize long-term capital gains as often as investment considerations 
dictate without fear of violating rule 19b-1.
    7. Applicants note that section 19(b) and rule 19b-1 also were 
intended to prevent certain improper sales practices, including, in 
particular, the practice of urging an investor to purchase shares of a 
fund on the basis of an upcoming capital gains dividend (``selling the 
dividend''), where the dividend would result in an immediate 
corresponding reduction in NAV and would be in effect a taxable return 
of the investor's capital. Applicants assert that this concern should 
not apply to closed-end investment companies, such as the Funds, which 
do not continuously distribute shares. According to applicants, if the 
underlying concern extends to secondary market purchases of stock of 
closed-end funds that are subject to a large upcoming capital gains 
dividend, adoption of a Plan actually helps minimize the concern by 
avoiding, through periodic distributions, any buildup of large end of 
the year distributions.
    8. In addition, applicants assert that rule 19b-1 may force the 
fixed regular periodic distributions under a Plan to be funded with 
returns of capital \3\ (to the extent net investment income and 
realized short-term capital gains are insufficient to fund the 
distribution), even though realized net long-term capital gains 
otherwise could be available. To distribute all of a fund's long-term 
capital gains within the limits in rule 19b-1, a fund may be required 
to make total distributions in excess of the annual amount called for 
by its Plan, or to retain and pay taxes on the excess amount. 
Applicants believe that the application of rule 19b-1 to a fund's 
periodic distribution plan may create pressure to limit the realization 
of long-term capital gains based on considerations unrelated to 
investment goals.
---------------------------------------------------------------------------

    \3\ Return of capital as used in the application means return of 
capital for financial accounting purposes and not for tax accounting 
purposes.
---------------------------------------------------------------------------

    9. Applicants state that Revenue Ruling 89-81 under the Code 
requires that a fund that has both common stock and preferred stock 
outstanding designate the types of income, e.g., investment income and 
capital gains, in the same proportion as the total distributions 
distributed to each class for the tax year. To satisfy the 
proportionate designation requirements of Revenue Ruling 89-81, 
whenever a fund has realized a long-term capital gain with respect to a 
given tax year, the fund must designate the required proportionate 
share of such capital gain to be included in common and preferred stock 
dividends. Applicants state that although rule 19b-1 allows a fund some 
flexibility with respect to the frequency of capital gains 
distributions, a fund might use all of the exceptions available under 
the rule for a tax year and still need to distribute additional capital 
gains allocated to the preferred stock to comply with Revenue Ruling 
89-81.
    10. Applicants assert that the potential abuses addressed by 
section 19(b) and rule 19b-1 do not arise with respect to preferred 
stock issued by a closed-end fund. Applicants assert that such 
distributions are fixed or determined in periodic auctions by reference 
to short-term interest rates rather than by reference to performance of 
the issuer, and Revenue Ruling 89-81 determines the proportion of such 
distributions that are comprised of the long-term capital gains.
    11. Applicants also submit that the ``selling the dividend'' 
concern is not applicable to preferred stock, which entitles a holder 
to no more than a periodic dividend at a fixed rate or the rate 
determined by the market, and, like a debt security, is priced based 
upon its liquidation value, dividend rate, credit quality, and 
frequency of payment. Applicants state that investors buy preferred 
shares for the purpose of receiving payments at the frequency bargained 
for, and do not expect the liquidation value of their shares to change.
    12. Applicants request an order under section 6(c) granting an 
exemption from section 19(b) and rule 19b-1 to permit each Fund's 
common stock to distribute periodic capital gains dividends (as defined 
in section 852(b)(3)(C) of the Code) as often as monthly in any one 
taxable year in respect of its common stock and as often as specified 
by or determined in accordance with the terms thereof in respect of its 
preferred stock.

Applicants' Conditions

    Applicants agree that, with respect to each Fund seeking to rely on 
the order, the order will be subject to the following conditions:
    I. Compliance Review and Reporting: The Fund's chief compliance 
officer will: (a) Report to the Fund Board, no less frequently than 
once every three months or at the next regularly scheduled quarterly 
board meeting, whether (i) the Fund and the Adviser have complied with 
the conditions to the requested order, and (ii) a Material Compliance 
Matter, as defined in rule 38a-1(e)(2), has occurred with respect to 
compliance with such conditions; and (b) review the adequacy of the 
policies and procedures adopted by the Fund no less frequently than 
annually.
    II. Disclosures to Fund Stockholders:
    A. Each Notice to the holders of the Fund's common stock, in 
addition to the information required by section 19(a) and rule 19a-1:
    1. Will provide, in a tabular or graphical format:
    (a) The amount of the distribution, on a per common share basis, 
together with the amounts of such distribution amount, on a per common 
share basis and as a percentage of such distribution amount, from 
estimated: (A) Net investment income; (B) net realized short-term 
capital gains; (C) net realized long-term capital gains; and (D) return 
of capital or other capital source;
    (b) The fiscal year-to-date cumulative amount of distributions, on 
a per common share basis, together with the amounts of such cumulative 
amount, on a per common share basis and as a percentage of such 
cumulative amount of distributions, from estimated: (A) Net investment 
income; (B) net realized short-term capital gains; (C) net realized 
long-term capital gains; and (D) return of capital or other capital 
source;
    (c) The average annual total return in relation to the change in 
NAV for the 5-year period (or, if the Fund's history of operations is 
less than five years, the time period commencing immediately following 
the Fund's first public offering) ending on the last day of the month 
prior to the most recent distribution declaration date compared to the 
current fiscal period's annualized distribution rate expressed as a 
percentage of NAV as of the last day of the month prior to the most 
recent distribution declaration date; and
    (d) The cumulative total return in relation to the change in NAV 
from the last completed fiscal year to the last day of the month prior 
to the most recent distribution declaration date compared to the fiscal 
year-to-date cumulative distribution rate expressed as a percentage of 
NAV as of the last day of the month prior to the most recent 
distribution declaration date.
    Such disclosure shall be made in a type size at least as large and 
as

[[Page 44790]]

prominent as the estimate of the sources of the current distribution; 
and
    2. Will include the following disclosure:
    (a) ``You should not draw any conclusions about the Fund's 
investment performance from the amount of this distribution or from the 
terms of the Fund's Plan'';
    (b) ``The fund estimates that it has distributed more than its 
income and net realized capital gains; therefore, a portion of your 
distribution may be a return of capital. A return of capital may occur 
for example, when some or all of the money that you invested in the 
Fund is paid back to you. A return of capital distribution does not 
necessarily reflect the Fund's investment performance and should not be 
confused with `yield' or `income' ''; and
    (c) ``The amounts and sources of distributions reported in this 
Notice are only estimates and are not being provided for tax reporting 
purposes. The actual amounts and sources of the amounts for [accounting 
and] tax reporting purposes will depend upon the Fund's investment 
experience during the remainder of its fiscal year and may be subject 
to changes based on tax regulations. The Fund will send you a Form 
1099-DIV for the calendar year that will tell you how to report these 
distributions for federal income tax purposes.''
    Such disclosure shall be made in a type size at least as large as 
and as prominent as any other information in the Notice and placed on 
the same page in close proximity to the amount and the sources of the 
distribution.
    B. On the inside front cover of each report to shareholders under 
rule 30e-1 under the Act, the Fund will:
    1. Describe the terms of the Plan (including the fixed amount or 
fixed percentage of the distributions and the frequency of the 
distributions);
    2. Include the disclosure required by condition II.A.2.a above;
    3. State, if applicable, that the Plan provides that the Board may 
amend or terminate the Plan at any time without prior notice to Fund 
shareholders; and
    4. Describe any reasonably foreseeable circumstances that might 
cause the Fund to terminate the Plan and any reasonably foreseeable 
consequences of such termination.
    C. Each report provided to stockholders under rule 30e-1 and in 
each prospectus filed with the Commission on Form N-2 under the Act, 
will provide the Fund's total return in relation to changes in NAV in 
the financial highlights table and in any discussion about the Fund's 
total return.
    III. Disclosure to Stockholders, Prospective Stockholders and Third 
Parties:
    A. The Fund will include the information contained in the relevant 
Notice, including the disclosure required by condition II.A.2 above, in 
any written communication (other than a Form 1099) about the Plan or 
distributions under the Plan by the Fund, or agents that the Fund has 
authorized to make such communication on the Fund's behalf, to any Fund 
common stockholder, prospective common stockholder or third-party 
information provider;
    B. The Fund will issue, contemporaneously with the issuance of any 
Notice, a press release containing the information in the Notice and 
will file with the Commission the information contained in such Notice, 
including the disclosure required by condition II.A.2 above, as an 
exhibit to its next filed Form N-CSR; and
    C. The Fund will post prominently a statement on its (or its 
adviser's) Web site containing the information in each Notice, 
including the disclosure required by condition II.A.2 above, and will 
maintain such information on such Web site for at least 24 months.
    IV. Delivery of 19(a) Notices to Beneficial Owners: If a broker, 
dealer, bank or other person (``financial intermediary'') holds common 
stock issued by the Fund in nominee name, or otherwise, on behalf of a 
beneficial owner, the Fund: (a) Will request that the financial 
intermediary, or its agent, forward the Notice to all beneficial owners 
of the fund's stock held through such financial intermediary; (b) will 
provide, in a timely manner, to the financial intermediary, or its 
agent, enough copies of the Notice assembled in the form and at the 
place that the financial intermediary, or its agent, reasonably 
requests to facilitate the financial intermediary's sending of the 
Notice to each beneficial owner of the fund's stock; and (c) upon the 
request of any financial intermediary, or its agent, that receives 
copies of the Notice, will pay the financial intermediary, or its 
agent, the reasonable expenses of sending the Notice to such beneficial 
owners.
    V. Additional Board Determinations for Funds Whose Stock Trades at 
a Premium: If:
    A. The Fund's common stock has traded on the exchange that it 
primarily trades on at the time in question at an average premium to 
NAV equal to or greater than 10%, as determined on the basis of the 
average of the discount or premium to NAV of the Fund's common stock as 
of the close of each trading day over a 12-week rolling period (each 
such 12-week rolling period ending on the last trading day of each 
week); and
    B. The Fund's annualized distribution rate for such 12-week rolling 
period, expressed as a percentage of NAV as of the ending date of such 
12-week rolling period, is greater than the Fund's average annual total 
return in relation to the change in NAV over the 2-year period ending 
on the last day of such 12-week rolling period; then:
    1. At the earlier of the next regularly scheduled meeting or within 
four months of the last day of such 12-week rolling period, the Board 
including a majority of the Independent Directors:
    (a) Will request and evaluate, and the Adviser will furnish, such 
information as may be reasonably necessary to make an informed 
determination of whether the Plan should be continued or continued 
after amendment;
    (b) Will determine whether continuation, or continuation after 
amendment, of the Plan is consistent with the Fund's investment 
objective(s) and policies and in the best interests of the Fund and its 
stockholders, after considering the information in condition V.B.1.a 
above; including, without limitation:
    (1) Whether the Plan is accomplishing its purpose(s);
    (2) The reasonably foreseeable effects of the Plan on the Fund's 
long-term total return in relation to the market price and NAV of the 
Fund's common shares; and
    (3) The Fund's current distribution rate, as described in condition 
V.B above, compared to with the Fund's average annual total return over 
the 2-year period, as described in condition V.B, or such longer period 
as the Board deems appropriate; and
    (c) Based upon that determination, will approve or disapprove the 
continuation, or continuation after amendment, of the Plan; and
    2. The Board will record the information considered by it and the 
basis for its approval or disapproval of the continuation, or 
continuation after amendment, of the Plan in its meeting minutes, which 
must be made and preserved for a period of not less than six years from 
the date of such meeting, the first two years in an easily accessible 
place.
    VI. Public Offerings: The Fund will not make a public offering of 
the Fund's common stock other than:
    A. A rights offering below net asset value to holders of the Fund's 
common stock;
    B. An offering in connection with a dividend reinvestment plan, 
merger,

[[Page 44791]]

consolidation, acquisition, spin-off or reorganization of the Fund; or
    C. An offering other than an offering described in conditions VI.A 
and VI.B above, unless, with respect to such other offering:
    1. The Fund's average annual distribution rate for the six months 
ending on the last day of the month ended immediately prior to the most 
recent distribution declaration date \4\, expressed as a percentage of 
NAV per share as of such date, is no more than 1 percentage point 
greater than the Fund's average annual total return for the 5-year 
period ending on such date \5\; and
---------------------------------------------------------------------------

    \4\ If the Fund has been in operation fewer than two years, the 
measured period will begin immediately following the Fund's first 
public offering.
    \5\ If the Fund has been in operation fewer than five years, the 
measured period will begin immediately following the Fund's first 
public offering.
---------------------------------------------------------------------------

    2. The transmittal letter accompanying any registration statement 
filed with the Commission in connection with such offering discloses 
that the Fund has received an order under section 19(b) to permit it to 
make periodic distributions of long-term capital gains with respect to 
its common stock as frequently as twelve times each year, and as 
frequently as distributions are specified in accordance with the terms 
of any outstanding preferred stock that such Fund may issue.
    VII. Amendments to Rule 19b-1: The requested relief will expire on 
the effective date of any amendment to rule 19b-1 that provides relief 
permitting certain closed-end investment companies to make periodic 
distributions of long-term capital gains with respect to their 
outstanding common stock as frequently as twelve times each year.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-17539 Filed 7-30-08; 8:45 am]
BILLING CODE 8010-01-P