Form N-CSR Cohen & Steers Ltd Durat For: Dec 31

March 11, 2019 3:59 PM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act File Number:    811-22707                                         

Cohen & Steers Limited Duration Preferred and Income Fund, Inc.

 

(Exact name of registrant as specified in charter)

280 Park Avenue, New York, NY 10017

 

(Address of principal executive offices) (Zip code)

Dana A. DeVivo

Cohen & Steers Capital Management, Inc.

280 Park Avenue

New York, New York 10017

 

(Name and address of agent for service)

Registrant’s telephone number, including area code:    (212) 832-3232                                         

Date of fiscal year end:    December 31                                         

Date of reporting period:    December 31, 2018                                        

 

 

 


Item 1. Reports to Stockholders.

 

 

 


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

To Our Shareholders:

We would like to share with you our report for the year ended December 31, 2018. The total returns for Cohen & Steers Limited Duration Preferred and Income Fund, Inc. (the Fund) and its comparative benchmarks were:

 

     Six Months Ended
December 31, 2018
    Year Ended
December 31, 2018
 

Cohen & Steers Limited Duration Preferred and Income Fund at Net Asset Valuea

     –5.54     –7.68 %b 

Cohen & Steers Limited Duration Preferred and Income Fund at Market Valuea

     –11.24     –9.70

ICE BofAML US Capital Securities Indexc

     –0.91     –3.57

Blended Benchmark—70% ICE BofAML US IG Institutional Capital Securities Index/20% ICE BofAML 7% Constrained Adjustable Rate Preferred Securities Index/10% Bloomberg Barclays Developed Market USD Contingent Capital Indexc

     –3.54     –5.25

Bloomberg Barclays US Aggregate Bond Indexc

     1.65     0.01

The performance data quoted represent past performance. Past performance is no guarantee of future results. The investment return and the principal value of an investment will fluctuate and shares, if sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Performance results reflect the effects of leverage, resulting from borrowings under a credit agreement. Current total returns of the Fund can be obtained by visiting our website at cohenandsteers.com. The Fund’s returns assume the reinvestment of all dividends and distributions at prices obtained under the Fund’s dividend reinvestment plan. Index performance does not reflect the deduction of any fees, taxes or expenses. An investor cannot invest directly in an index. Performance figures for periods shorter than one year are not annualized.

Managed Distribution Policy

The Fund, acting in accordance with an exemptive order received from the U.S. Securities and Exchange Commission (SEC) and with approval of its Board of Directors (the Board), adopted a managed distribution policy under which the Fund intends to include long-term capital gains, where applicable, as part of the regular monthly cash distributions to its shareholders (the Plan). The Plan gives the Fund greater flexibility to realize long-term capital gains and to distribute those gains on a regular monthly basis. In accordance with the Plan, the Fund currently distributes $0.156 per share on a monthly basis.

 

 

a 

As a closed-end investment company, the price of the Fund’s exchange-traded shares will be set by market forces and can deviate from the net asset value (NAV) per share of the Fund.

b 

The returns shown are based on net asset values reported on December 31, 2018 and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.

c 

For benchmark descriptions, see page 4.

 

1


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

The Fund may pay distributions in excess of the Fund’s investment company taxable income and net realized gains. This excess would be a return of capital distributed from the Fund’s assets. Distributions of capital decrease the Fund’s total assets and, therefore, could have the effect of increasing the Fund’s expense ratio. In addition, in order to make these distributions, the Fund may have to sell portfolio securities at a less than opportune time.

Shareholders should not draw any conclusions about the Fund’s investment performance from the amount of these distributions or from the terms of the Fund’s Plan. The Fund’s total return based on net asset value is presented in the table above as well as in the Financial Highlights table.

The Plan provides that the Board may amend or terminate the Plan at any time without prior notice to Fund shareholders; however, at this time, there are no reasonably foreseeable circumstances that might cause the termination. The termination of the Plan could have the effect of creating a trading discount (if the Fund’s stock is trading at or above NAV) or widening an existing trading discount.

Market Review

Limited-duration preferred securities had a negative total return in 2018 within a difficult environment for investments in general. Following a prolonged period of steady gains, equity and credit markets encountered turbulence amid tighter financial conditions, rising global trade tensions and slowing economic growth.

Although the economy remained relatively healthy globally, momentum slowed across most regions. Europe and China particularly showed signs of deceleration. Inflation remained subdued, but indications that pressures were building, notably in the labor market, prompted the U.S. Federal Reserve (the Fed) to continue to normalize interest rates. The Fed also removed liquidity from the system by slowly unwinding its crisis-era quantitative easing program via portfolio reduction, while the European Central Bank stopped increasing the size of its portfolio.

Limited-duration preferred securities had generally modest declines heading into the fourth quarter, but conditions became more challenging in part due to technical pressures. ETFs and mutual funds with sizable allocations to preferreds saw significant outflows late in the year, which resulted in widespread and often indiscriminate selling of preferred securities.

Fund Performance

The Fund had a negative total return in the period and underperformed its blended benchmark on both a NAV and market price basis. Factors that detracted from the Fund’s relative performance included security selection in the utilities sector, in part due to not owning a security from a French electric utility that declined but outperformed the benchmark. An overweight allocation to a preferred from Southern California Edison also hindered performance, as it fell sharply on concerns about the company’s potential financial liability for damages caused by recent wildfires in the state.

Security selection in the finance sector aided the Fund’s relative performance, led by an out-of-benchmark floating-rate preferred from Ally Financial that had a solid gain. Security selection in the banking and pipeline sectors also helped performance, as did the Fund’s underweight in pipeline securities, which underperformed as a group amid a decline in crude oil prices in the period.

 

2


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

Impact of Leverage on Fund Performance

The Fund employs leverage as part of a yield-enhancement strategy. Leverage, which can increase total return in rising markets (just as it can have the opposite effect in declining markets), significantly detracted from the Fund’s performance for the 12-month period ended December 31, 2018.

Impact of Derivatives on Fund Performance

In connection with its use of leverage, the Fund pays interest on borrowings based on a floating rate under the terms of its credit agreement. To reduce the impact that an increase in interest rates could have on the performance of the Fund with respect to these borrowings, the Fund used interest rate swaps to exchange a significant portion of the floating rate for a fixed rate. The Fund’s use of swaps did not have a material effect on the Fund’s performance for the 12-month period ended December 31, 2018.

The Fund also used derivatives in the form of currency options for hedging purposes, as well as forward foreign currency exchange contracts for managing currency risk on certain Fund positions denominated in foreign currencies. The forward foreign currency exchange contracts contributed to the Fund’s total return for the 12-month period ended December 31, 2018, while the currency options did not have a material effect on the Fund’s total return for the period.

Sincerely,

 

LOGO    LOGO
WILLIAM F. SCAPELL   

ELAINE ZAHARIS-NIKAS

Portfolio Manager   

Portfolio Manager

 

3


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

Benchmark Descriptions

The ICE BofAML US Capital Securities Index tracks the performance of US dollar-denominated investment-grade corporate debt publicly issued in the US domestic market, consisting of fixed-to-floating-rate, perpetual callable and capital securities. The ICE BofAML US IG Institutional Capital Securities Index is a subset of the ICE BofAML US Corporate Index including all fixed-to-floating rate, perpetual callable and capital securities. The ICE BofAML 7% Constrained Adjustable Rate Preferred Securities Index tracks the performance of US dollar-denominated investment-grade floating-rate preferred securities publicly issued in the US domestic market, but with issuer exposure capped at 7%. The Bloomberg Barclays Developed Market USD Contingent Capital Index includes hybrid capital securities in developed markets with explicit equity conversion or write down loss absorption mechanisms that are based on an issuer’s regulatory capital ratio or other explicit solvency-based triggers. The Bloomberg Barclays US Aggregate Bond Index is a broad-market measure of the U.S. dollar-denominated investment-grade fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities, and commercial mortgage-backed securities. Benchmark returns are shown for comparative purposes only and may not be representative of the Fund’s portfolio.

The views and opinions in the preceding commentary are subject to change without notice and are as of the date of the report. There is no guarantee that any market forecast set forth in the commentary will be realized. This material represents an assessment of the market environment at a specific point in time, should not be relied upon as investment advice and is not intended to predict or depict performance of any investment.

 

Visit Cohen & Steers online at cohenandsteers.com

For more information about the Cohen & Steers family of mutual funds, visit cohenandsteers.com. Here you will find fund net asset values, fund fact sheets and portfolio highlights, as well as educational resources and timely market updates.

Our website also provides comprehensive information about Cohen & Steers, including our most recent press releases, profiles of our senior investment professionals and their investment approach to each asset class. The Cohen & Steers family of mutual funds invests in major real asset categories including real estate securities, listed infrastructure, commodities and natural resource equities, as well as preferred securities and other income solutions.

 

4


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

Our Leverage Strategy

(Unaudited)

Our current leverage strategy utilizes borrowings up to the maximum permitted by the Investment Company Act of 1940 to provide additional capital for the Fund, with an objective of increasing the net income available for shareholders. As of December 31, 2018, leverage represented 32% of the Fund’s managed assets.

It has been our philosophy to utilize interest rate swap transactions to seek to reduce the interest rate risk inherent in our utilization of leverage. Considering that the Fund’s borrowings have variable interest rate payments, we seek to lock in those rates on a significant portion of this additional capital through interest rate swap agreements (where we effectively convert our variable rate obligations to fixed-rate obligations for the term of the swap agreements). Locking in a significant portion of our leveraging costs is designed to protect the dividend-paying ability of the Fund. The use of leverage increases the volatility of the Fund’s NAV in both up and down markets. However, we believe that locking in a portion of the Fund’s leveraging costs for the term of the swap agreements partially protects the Fund’s expenses from an increase in short-term interest rates.

Leverage Factsa,b

 

Leverage (as a % of managed assets)

        32%  

% Fixed Rate

        86%  

% Variable Rate

        14%  

Weighted Average Rate on Swaps:

    

Fixed Rate (Payer)

       1.3%  

Floating Rate (Receiver)

       2.5%  

Weighted Average Term on Swaps

       3.9 years  

Current Rate on Debt

       3.3%  

The Fund seeks to enhance its dividend yield through leverage. The use of leverage is a speculative technique and there are special risks and costs associated with leverage. The NAV of the Fund’s shares may be reduced by the issuance and ongoing costs of leverage. So long as the Fund is able to invest in securities that produce an investment yield that is greater than the total cost of leverage, the leverage strategy will produce higher current net investment income for shareholders. On the other hand, to the extent that the total cost of leverage exceeds the incremental income gained from employing such leverage, shareholders would realize lower net investment income. In addition to the impact on net income, the use of leverage will have an effect of magnifying capital appreciation or depreciation for shareholders. Specifically, in an up market, leverage will typically generate greater capital appreciation than if the Fund were not employing leverage. Conversely, in down markets, the use of leverage will generally result in greater capital depreciation than if the Fund had been unlevered. To the extent that the Fund is required or elects to reduce its leverage, the Fund may need to liquidate investments, including under adverse economic conditions which may result in capital losses potentially reducing returns to shareholders. There can be no assurance that a leveraging strategy will be successful during any period in which it is employed.

 

 

a 

Data as of December 31, 2018. Information is subject to change.

b 

See Note 7 in Notes to Financial Statements.

 

5


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

December 31, 2018

Top Ten Holdingsa

(Unaudited)

 

Security

   Value        % of
Managed
Assets
 

Wells Fargo & Co., 6.558%, Series K (FRN)

   $ 29,740,550          3.1  

Mellon Capital IV, 4.00%, Series 1 (FRN)

     25,592,199          2.6  

GMAC Capital Trust I, 8.401%, due 2/15/40, Series 2 (TruPS) (FRN)

     25,486,231          2.6  

Cooperatieve Rabobank UA, 11.00%, 144A (Netherlands)

     22,046,219          2.3  

JPMorgan Chase & Co., 5.99%, Series I (FRN)

     19,812,870          2.0  

Meiji Yasuda Life Insurance Co., 5.20%, due 10/20/45, 144A (Japan)

     17,278,087          1.8  

Prudential Financial, Inc., 5.625%, due 6/15/43

     15,893,241          1.6  

Royal Bank of Scotland Group PLC, 8.625% (United Kingdom)

     15,562,500          1.6  

General Electric Co., 5.00%, Series D

     15,390,131          1.6  

BHP Billiton Finance USA Ltd., 6.75%, due 10/19/75, 144A (Australia)

     14,268,207          1.5  

 

a 

Top ten holdings are determined on the basis of the value of individual securities held. The Fund may also hold positions in other types of securities issued by the companies listed above. See the Schedule of Investments for additional details on such other positions.

Sector Breakdown

(Based on Managed Assets)

(Unaudited)

 

 

LOGO

 

6


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

SCHEDULE OF INVESTMENTS

December 31, 2018

 

 

           Shares      Value  

PREFERRED SECURITIES—$25 PAR VALUE

     14.6     

BANKS

     4.6     

Bank of America Corp., 6.50%, Series Ya

 

    40,675      $ 1,032,332  

Citigroup, Inc., 6.875% to 11/15/23, Series Ka,b

 

    3,444        90,302  

GMAC Capital Trust I, 8.401%, (3 Month US LIBOR + 5.785%), due 2/15/40, Series 2 (TruPS) (FRN)c

 

    1,005,374        25,486,231  

Regions Financial Corp., 6.375% to 9/15/24, Series Ba,b

 

    62,050        1,538,219  

Synovus Financial Corp., 6.30% to 6/21/23, Series Da,b

 

    104,000        2,500,160  
       

 

 

 
          30,647,244  
       

 

 

 

FINANCIAL—INVESTMENT BANKER/BROKER

     1.8     

Morgan Stanley, 6.875% to 1/15/24, Series Fa,b

 

    255,821        6,625,764  

Morgan Stanley, 6.375% to 10/15/24, Series Ia,b

 

    210,980        5,323,025  
       

 

 

 
          11,948,789  
       

 

 

 

INDUSTRIALS—CHEMICALS

     1.8     

CHS, Inc., 7.10% to 3/31/24, Series 2a,b

 

    290,589        7,174,643  

CHS, Inc., 6.75% to 9/30/24, Series 3a,b

 

    192,523        4,632,103  
       

 

 

 
          11,806,746  
       

 

 

 

INSURANCE

     2.6     

LIFE/HEALTH INSURANCE

     0.6     

MetLife, Inc., 4.00%, (3 Month US LIBOR + 1.000%, Floor 4.00%), Series A (FRN)a,c

 

    206,431        4,320,601  
       

 

 

 

LIFE/HEALTH INSURANCE—FOREIGN

     1.0     

Aegon NV, 4.00%, (3 Month US LIBOR + 0.875%, Floor 4.00%), Series I (FRN) (Netherlands)a,c

 

    339,074        6,388,154  
       

 

 

 

MULTI-LINE

     0.8     

Hartford Financial Services Group, Inc./The, 7.875% to 4/15/22, due 4/15/42b

 

    200,000        5,470,000  
       

 

 

 

REINSURANCE

     0.2     

Reinsurance Group of America, Inc., 5.75% to 6/15/26, due 6/15/56b

 

    65,600        1,544,880  
       

 

 

 

TOTAL INSURANCE

 

       17,723,635  
       

 

 

 

 

See accompanying notes to financial statements.

 

7


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2018

 

            Shares     Value  

PIPELINES

     2.0%       

Enbridge, Inc., 6.375% to 4/15/23, due 4/15/78, Series B (Canada)b

 

     469,350     $ 11,048,499  

Energy Transfer Operating LP, 7.375% to 5/15/23, Series Ca,b

 

     119,956       2,640,232  
       

 

 

 
          13,688,731  
       

 

 

 

REAL ESTATE—NET LEASE

     0.8%       

VEREIT, Inc., 6.70%, Series Fa

 

     227,627       5,385,655  
       

 

 

 

UTILITIES

     1.0%       

Algonquin Power & Utilities Corp., 6.875% to 10/17/23,
due 10/17/78 (Canada)b

 

     40,750       1,017,527  

NiSource, Inc., 6.50% to 3/15/24, Series Ba,b

 

     104,000       2,611,700  

SCE Trust IV, 5.375% to 9/15/25, Series Ja,b

 

     121,730       2,471,119  

SCE Trust V, 5.45% to 3/15/26, Series Ka,b

 

     14,775       308,502  
       

 

 

 
          6,408,848  
       

 

 

 

TOTAL PREFERRED SECURITIES—$25 PAR VALUE
(Identified cost—$101,809,202)

 

       97,609,648  
       

 

 

 
            Principal
Amount
       

PREFERRED SECURITIES—CAPITAL SECURITIES

     125.2%       

BANKS

     37.4%       

AgriBank FCB, 6.875% to 1/1/24a,b

 

      36,200        3,710,500  

BAC Capital Trust XIV, 4.00%, (3 Month US LIBOR + 0.400%, Floor 4.00%), Series G (FRN)a,c

 

   $ 16,930,000       12,028,765  

Bank of America Corp., 6.10% to 3/17/25, Series AAa,b

 

     3,335,000       3,289,144  

Bank of America Corp., 6.25% to 9/5/24, Series Xa,b

 

     8,410,000       8,319,592  

Bank of America Corp., 6.50% to 10/23/24, Series Za,b

 

     8,582,000       8,700,002  

Citigroup, Inc., 5.95% to 8/15/20, Series Qa,b

 

     5,250,000       5,076,094  

Citigroup, Inc., 6.125% to 11/15/20, Series Ra,b

 

     5,129,000       5,013,598  

Citigroup, Inc., 6.25% to 8/15/26, Series Ta,b

 

     3,092,000       2,965,073  

Citizens Financial Group, Inc., 6.375% to 4/6/24, Series Ca,b

 

     2,900,000       2,718,750  

CoBank ACB, 6.25% to 10/1/22, Series Fa,b

 

      117,000        11,758,500  

CoBank ACB, 6.125%, Series Ga

 

      32,250        3,241,125  

CoBank ACB, 6.25% to 10/1/26, Series Ia,b

 

     6,255,000       6,286,275  

 

See accompanying notes to financial statements.

 

8


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2018

 

            Principal
Amount
    Value  

Corestates Capital III, 3.186%, (3 Month US LIBOR + 0.57%), due 2/15/27, 144A (TruPS) (FRN)c,d

 

   $ 3,000,000     $ 2,617,500  

Farm Credit Bank of Texas, 6.75% to 9/15/23, 144Aa,b,d

 

      67,500        6,783,750  

Goldman Sachs Capital II, 4.00%, (3 Month US LIBOR + 0.768%, Floor 4.00%) (FRN)a,c

 

     1,102,000       752,115  

Goldman Sachs Group, Inc./The, 5.70% to 5/10/19, Series La,b

 

     8,450,000       8,250,157  

Goldman Sachs Group, Inc./The, 5.375% to 5/10/20, Series Ma,b

 

     7,500,000       7,256,400  

Goldman Sachs Group, Inc./The, 5.00% to 11/10/22, Series Pa,b

 

     3,100,000       2,621,438  

JPMorgan Chase & Co, 3.041%, (3 Month US LIBOR + 0.500%), to 2/7/19, due 2/1/27, Series B (FRN)c

 

     2,709,000       2,390,693  

JPMorgan Chase & Co., 5.99%, (3 Month US LIBOR + 3.47%), Series I (FRN)a,c

 

     20,013,000       19,812,870  

JPMorgan Chase & Co., 6.75% to 2/1/24, Series Sa,b

 

     12,400,000       12,827,800  

JPMorgan Chase & Co., 5.30% to 5/1/20, Series Za,b

 

     7,500,000       7,425,000  

KeyCorp Capital I, 3.537%, (3 Month US LIBOR + 0.740%), due 7/1/28, (TruPS) (FRN)c

 

     3,525,000       3,115,219  

Mellon Capital IV, 4.00%, (3 Month US LIBOR + 0.565%, Floor 4.00%), Series 1 (FRN)a,c

 

     33,635,000       25,592,199  

PNC Financial Services Group, Inc., 6.75% to 8/1/21, Series Oa,b

 

     6,965,000       7,086,887  

SunTrust Capital III, 3.438%, (3 Month US LIBOR + 0.650%), due 3/15/28 (FRN)c

 

     5,850,000       5,045,625  

US Bancorp, 3.50%, (3 Month US LIBOR + 1.020%, Floor 3.50%), Series A (FRN)a,c

 

      16,150        12,151,641  

USB Capital IX, 3.50%, (3 Month US LIBOR + 1.020%, Floor 3.50%) (FRN)a,c

 

     9,878,000       7,322,067  

Wachovia Capital Trust II, 2.936%, (3 Month US LIBOR + 0.50%), due 1/15/27 (FRN)c

 

     1,000,000       862,500  

Wells Fargo & Co., 6.558%, (3 Month US LIBOR + 3.77%), Series K (FRN)a,c

 

     29,890,000       29,740,550  

Wells Fargo & Co., 5.90% to 6/15/24, Series Sa,b

 

     1,000,000       954,000  

Wells Fargo & Co., 5.875% to 6/15/25, Series Ua,b

 

     9,000,000       8,907,300  

Wells Fargo Capital X, 5.95%, due 12/1/36, (TruPS)

 

     5,893,000       6,113,988  
       

 

 

 
          250,737,117  
       

 

 

 

 

See accompanying notes to financial statements.

 

9


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2018

 

           Principal
Amount
     Value  

BANKS—FOREIGN

     39.3     

Banco Bilbao Vizcaya Argentaria SA, 8.875% to 4/14/21 (Spain)a,b,e,f

 

  $ 4,000,000      $ 4,978,282  

Banco de Sabadell SA, 6.50% to 5/18/22 (Spain)a,b,e,f

 

    1,000,000        1,063,412  

Banco Santander SA, 6.75% to 4/25/22 (Spain)a,b,e,f

 

    2,000,000        2,335,833  

Bank of China Hong Kong Ltd., 5.90% to 9/14/23, 144A (Hong Kong)a,b,d

 

    6,400,000        6,417,581  

Bankia SA, 6.375% to 9/19/23 (Spain)a,b,e,f

 

    3,400,000        3,689,303  

Barclays PLC, 7.75% to 9/15/23 (United Kingdom)a,b,f

 

    7,000,000        6,750,940  

Barclays PLC, 7.875% to 3/15/22 (United Kingdom)a,b,e,f

 

    5,200,000        5,219,500  

BNP Paribas SA, 6.75% to 3/14/22, 144A (France)a,b,d,f

 

    2,400,000        2,346,000  

BNP Paribas SA, 7.375% to 8/19/25, 144A (France)a,b,d,f

 

    2,000,000        1,997,500  

BNP Paribas SA, 7.625% to 3/30/21, 144A (France)a,b,d,f

 

    13,100,000        13,378,375  

Cooperatieve Rabobank UA, 11.00% to 6/30/19, 144A (Netherlands)a,b,d

 

    21,275,000        22,046,219  

Credit Agricole SA, 6.625% to 9/23/19, 144A (France)a,b,d,f

 

    2,000,000        1,957,500  

Credit Agricole SA, 8.125% to 12/23/25, 144A (France)a,b,d,f

 

    12,550,000        12,942,187  

Credit Suisse Group AG, 7.125% to 7/29/22 (Switzerland)a,b,e,f

 

    9,500,000        9,393,125  

Credit Suisse Group AG, 7.50% to 12/11/23, 144A (Switzerland)a,b,d,f

 

    3,863,000        3,938,328  

Credit Suisse Group AG, 7.50% to 7/17/23, 144A (Switzerland)a,b,d,f

 

    9,600,000        9,384,000  

DNB Bank ASA, 5.75% to 3/26/20 (Norway)a,b,e,f

 

    2,500,000        2,447,500  

DNB Bank ASA, 6.50% to 3/26/22 (Norway)a,b,e,f

 

    7,800,000        7,684,950  

Dresdner Funding Trust I, 8.151%, due 6/30/31, 144A (Germany)d

 

    3,530,280        4,280,111  

HSBC Capital Funding Dollar 1 LP, 10.176% to 6/30/30, 144A (United Kingdom)a,b,d

 

    5,995,000        8,617,812  

HSBC Holdings PLC, 6.25% to 3/23/23 (United Kingdom)a,b,f

 

    5,000,000        4,693,750  

HSBC Holdings PLC, 6.375% to 9/17/24 (United Kingdom)a,b,f

 

    1,000,000        932,500  

HSBC Holdings PLC, 6.375% to 3/30/25 (United Kingdom)a,b,f

 

    9,600,000        9,240,000  

 

See accompanying notes to financial statements.

 

10


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2018

 

          Principal
Amount
     Value  

HSBC Holdings PLC, 6.875% to 6/1/21 (United Kingdom)a,b,f

   $ 11,300,000      $ 11,641,825  

ING Groep N.V., 6.875% to 4/16/22 (Netherlands)a,b,e,f

     5,400,000        5,386,500  

Lloyds Banking Group PLC, 7.50% to 6/27/24 (United Kingdom)a,b,f

     6,050,000        5,852,165  

Lloyds Banking Group PLC, 7.50% to 9/27/25 (United Kingdom)a,b,f

     5,800,000        5,612,660  

Nationwide Building Society, 10.25%, (United Kingdom)a,e

     1,630,000        2,903,443  

Royal Bank of Scotland Group PLC, 7.50% to 8/10/20 (United Kingdom)a,b,f

     1,600,000        1,588,000  

Royal Bank of Scotland Group PLC, 7.648% to 9/30/31 (United Kingdom)a,b

     6,159,000        7,614,064  

Royal Bank of Scotland Group PLC, 8.625% to 8/15/21 (United Kingdom)a,b,f

     15,000,000        15,562,500  

Skandinaviska Enskilda Banken AB, 5.75% to 5/13/20,
Series EMTN (Sweden)a,b,e,f

     2,400,000        2,344,234  

Societe Generale SA, 7.375% to 9/13/21, 144A (France)a,b,d,f

     11,200,000        10,934,000  

Societe Generale SA, 7.875% to 12/18/23, 144A (France)a,b,d,f

     4,089,000        4,053,221  

Standard Chartered PLC, 6.50% to 4/2/20, 144A (United Kingdom)a,b,d,f

     1,000,000        982,264  

Standard Chartered PLC, 7.50% to 4/2/22, 144A (United Kingdom)a,b,d,f

     6,000,000        6,030,000  

Standard Chartered PLC, 7.75% to 4/2/23, 144A (United Kingdom)a,b,d,f

     3,800,000        3,752,500  

Swedbank AB, 6.00% to 3/17/22 (Sweden)a,b,e,f

     5,200,000        4,969,614  

UBS Group Funding Switzerland AG, 6.875% to 3/22/21 (Switzerland)a,b,e,f

     6,149,000        6,170,011  

UBS Group Funding Switzerland AG, 7.00% to 2/19/25 (Switzerland)a,b,e,f

     3,400,000        3,468,000  

UBS Group Funding Switzerland AG, 7.125% to 2/19/20 (Switzerland)a,b,e,f

     6,300,000        6,339,375  

UBS Group Funding Switzerland AG, 7.125% to 8/10/21
(Switzerland)a,b,e,f

     11,000,000        11,182,864  

 

See accompanying notes to financial statements.

 

11


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2018

 

           Principal
Amount
    Value  

UniCredit SpA, 6.75% to 9/10/21, Series EMTN (Italy)a,b,e,f

 

  $ 1,200,000     $ 1,314,748  
      

 

 

 
      263,436,696  
      

 

 

 

ELECTRIC—INTEGRATED ELECTRIC

     1.6    

CenterPoint Energy, Inc., 6.125% to 9/01/23, Series Aa,b

 

    4,570,000       4,461,463  

Southern California Edison Co., 6.25% to 2/1/22, Series Ea,b

 

    6,500,000       6,207,500  
      

 

 

 
      10,668,963  
      

 

 

 

FINANCIAL

     3.3    

CREDIT CARD

     1.0    

American Express Co., 4.90% to 3/15/20, Series Ca,b

 

    7,250,000       6,950,937  
      

 

 

 

DIVERSIFIED FINANCIAL SERVICES

     0.8    

State Street Corp., 5.25% to 9/15/20, Series Fa,b

 

    5,152,000       5,068,280  
      

 

 

 

INVESTMENT BANKER/BROKER

     1.5    

Charles Schwab Corp./The, 7.00% to 2/1/22a,b

 

    9,785,000       10,164,169  
      

 

 

 

TOTAL FINANCIAL

 

      22,183,386  
      

 

 

 

FOOD

     0.8    

Dairy Farmers of America, Inc., 7.875%, 144Aa,d,g

 

     55,000        5,486,250  
      

 

 

 

INDUSTRIALS—DIVERSIFIED MANUFACTURING

     2.3    

General Electric Co., 5.00% to 1/21/21, Series Da,b

 

    20,085,000       15,390,131  
      

 

 

 

INSURANCE

     28.8    

LIFE/HEALTH INSURANCE

     8.3    

MetLife Capital Trust IV, 7.875%,
due 12/15/37, 144A (TruPS)d

 

    8,100,000       9,213,750  

MetLife, Inc., 9.25%, due 4/8/38, 144Ad

 

    10,300,000       13,029,500  

MetLife, Inc., 5.25% to 6/15/20, Series Ca,b

 

    10,715,000       10,313,187  

Prudential Financial, Inc., 5.20% to 3/15/24,
due 3/15/44b

 

    2,600,000       2,437,500  

Prudential Financial, Inc., 5.625% to 6/15/23,
due 6/15/43b

 

    16,208,000       15,893,241  

Prudential Financial, Inc., 5.875% to 9/15/22,
due 9/15/42b

 

    2,507,000       2,535,204  

Voya Financial, Inc., 6.125% to 9/15/23, Series Aa,b

 

    2,500,000       2,375,000  
      

 

 

 
         55,797,382  
      

 

 

 

 

See accompanying notes to financial statements.

 

12


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2018

 

           Principal
Amount
     Value  

LIFE/HEALTH INSURANCE—FOREIGN

     11.1     

Dai-ichi Life Insurance Co. Ltd., 7.25% to
7/25/21, 144A (Japan)a,b,d

 

  $ 4,150,000      $ 4,409,375  

Dai-ichi Life Insurance Co. Ltd./The, 5.10% to
10/28/24, 144A (Japan)a,b,d

 

    5,100,000        5,100,000  

Fukoku Mutual Life Insurance Co., 6.50% to 9/19/23 (Japan)a,b,e

 

    1,703,000        1,803,560  

Hanwha Life Insurance Co., Ltd., 4.70% to 4/23/23, due 4/23/48, 144A (South Korea)b,d

 

    6,800,000        6,505,941  

La Mondiale SAM, 7.625% to 4/23/19 (France)a,b,e

 

    12,050,000        12,173,802  

Meiji Yasuda Life Insurance Co., 5.20% to 10/20/25, due 10/20/45, 144A (Japan)b,d

 

    17,235,000        17,278,087  

Nippon Life Insurance Co., 4.70% to 1/20/26, due 1/20/46, 144A (Japan)b,d

 

    8,300,000        8,082,125  

Nippon Life Insurance Co., 5.10% to 10/16/24, due 10/16/44, 144A (Japan)b,d

 

    7,200,000        7,236,000  

Sumitomo Life Insurance Co., 6.50% to 9/20/23, due 9/20/73, 144A (Japan)b,d

 

    11,100,000        11,807,625  
       

 

 

 
          74,396,515  
       

 

 

 

MULTI-LINE

     2.0     

Hartford Financial Services Group, Inc./The, 4.741%,
(3 Month US LIBOR + 2.125%), due 2/12/47,
144A, Series ICON (FRN)c,d

 

    12,885,000        10,340,213  

Nationwide Mutual Insurance Co., 5.078%, (3 Month US LIBOR + 2.290%), due 12/15/24, 144A (FRN)c,d

 

    3,125,000        3,111,781  
       

 

 

 
          13,451,994  
       

 

 

 

MULTI-LINE—FOREIGN

     0.6  

AXA SA, 1.02%, (EUAMDB10 + 0.050%, Cap 8.00%)
(FRN) (France)a,c

 

    5,000,000        3,874,066  
       

 

 

 

PROPERTY CASUALTY

     1.8  

Liberty Mutual Group, Inc., 7.80%, due 3/15/37, 144Ad

 

    2,708,000        2,958,490  

Liberty Mutual Group, Inc., 5.693%, (3 Month US
LIBOR + 2.905%), due 3/15/37, 144A (FRN)c,d

 

    9,825,000        9,161,813  
       

 

 

 
          12,120,303  
       

 

 

 

 

See accompanying notes to financial statements.

 

13


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2018

 

           Principal
Amount
    Value  

PROPERTY CASUALTY—FOREIGN

     3.0  

Mitsui Sumitomo Insurance Co., Ltd., 7.00% to
3/15/22, due 3/15/72, 144A (Japan)b,d

 

  $ 3,000,000     $ 3,191,250  

QBE Insurance Group Ltd., 6.75% to 12/2/24,
due 12/2/44 (Australia)b,e

 

    8,005,000       8,055,031  

QBE Insurance Group Ltd., 5.875% to 6/17/26,
due 6/17/46, Series EMTN (Australia)b,e

 

    4,000,000       3,808,832  

VIVAT NV, 6.25% to 11/16/22 (Netherlands)a,b,e

 

    5,300,000       5,131,725  
      

 

 

 
         20,186,838  
      

 

 

 

REINSURANCE—FOREIGN

     2.0  

Aquarius & Investments PLC for Swiss Reinsurance
Co. Ltd., 6.375% to 9/1/19, due 9/1/24 (Switzerland)b,e,f

 

    13,055,000       13,171,829  
      

 

 

 

TOTAL INSURANCE

 

      192,998,927  
      

 

 

 

INTEGRATED TELECOMMUNICATIONS SERVICES

     1.3    

Centaur Funding Corp., 9.08%, due 4/21/20, 144A
(Cayman Islands)d

 

     4,500        4,771,134  

Vodafone Group PLC, 6.25% to 7/3/24, due 10/3/78
(United Kingdom)e

 

    4,550,000       4,238,894  
      

 

 

 
         9,010,028  
      

 

 

 

MATERIAL—METALS & MINING

     3.0    

BHP Billiton Finance USA Ltd., 6.25% to 10/19/20,
due 10/19/75, 144A (Australia)b,d

 

    6,000,000       6,141,270  

BHP Billiton Finance USA Ltd., 6.75% to 10/20/25,
due 10/19/75, 144A (Australia)b,d

 

    13,700,000       14,268,207  
      

 

 

 
         20,409,477  
      

 

 

 

PIPELINES

     1.4    

Transcanada Trust, 5.875% to 8/15/26, due 8/15/76,
Series 16-A (Canada)b

 

    10,173,000       9,594,156  
      

 

 

 

REAL ESTATE—FINANCE

     0.7  

AT Securities BV, 5.25% to 7/21/23
(Germany)a,b,e

 

    5,000,000       4,470,005  
      

 

 

 

 

See accompanying notes to financial statements.

 

14


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2018

 

           Principal
Amount
     Value  

UTILITIES

     5.3  

ELECTRIC UTILITIES

     0.9  

Southern Co./The, 5.50% to 3/15/22, due 3/15/57,
Series Bb

 

  $ 6,200,000      $ 5,975,204  
       

 

 

 

ELECTRIC UTILITIES—FOREIGN

     3.9  

Emera, Inc., 6.75% to 6/15/26, due 6/15/76,
Series 16-A (Canada)b

 

    12,270,000        12,354,908  

Enel SpA, 8.75% to 9/24/23, due 9/24/73, 144A (Italy)b,d

 

    13,192,000        13,521,800  
       

 

 

 
          25,876,708  
       

 

 

 

MULTI-UTILITIES

     0.5  

NiSource, Inc., 5.65% to 6/15/23, 144Aa,b,d

 

    3,750,000        3,492,188  
       

 

 

 

TOTAL UTILITIES

 

       35,344,100  
       

 

 

 

TOTAL PREFERRED SECURITIES—CAPITAL SECURITIES
(Identified cost—$860,627,759)

 

       839,729,236  
       

 

 

 

CORPORATE BONDS

     3.9  

FINANCIAL—DIVERSIFIED FINANCIAL SERVICES

     1.2  

GE Capital International Funding Co. Unlimited Co., 3.373%, due 11/15/25

 

    3,000,000        2,670,156  

General Motors Financial Co., Inc., 3.398%,
(3 Month US LIBOR + 0.99%), due 1/5/23 (FRN)c

 

    5,500,000        5,220,455  
       

 

 

 
          7,890,611  
       

 

 

 

INDUSTRIALS—DIVERSIFIED MANUFACTURING

     0.7     

General Electric Co., 5.875%, due 1/14/38, Series MTN

 

    4,600,000        4,414,697  
       

 

 

 

REAL ESTATE

     1.1  

FINANCE

     0.4  

iStar, Inc., 6.00%, due 4/1/22

 

    2,500,000        2,425,000  
       

 

 

 

HEALTH CARE

     0.7  

Sabra Health Care LP/Sabra Capital Corp.,
5.50%, due 2/1/21

 

    5,000,000        5,015,625  
       

 

 

 

TOTAL REAL ESTATE

 

       7,440,625  
       

 

 

 

SPECIALTY

     0.5  

Equinix, Inc., 2.875%, due 2/1/26
(United States)

 

    3,000,000        3,266,848  
       

 

 

 

 

See accompanying notes to financial statements.

 

15


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2018

 

           Principal
Amount
     Value  

TELECOMMUNICATION—COMMUNICATIONS

     0.4  

Vodafone Group PLC, 3.426%, (3 Month US LIBOR + 0.99%), due 1/16/24 (FRN)
(United Kingdom)c

 

  $ 3,000,000      $ 2,928,474  
       

 

 

 

TOTAL CORPORATE BONDS
(Identified cost—$26,798,637)

 

       25,941,255  
       

 

 

 
           Shares         

SHORT-TERM INVESTMENTS

     1.1     

MONEY MARKET FUNDS

       

State Street Institutional Treasury Money Market Fund, Premier Class, 2.24%h

 

    7,356,254        7,356,254  
       

 

 

 

TOTAL SHORT-TERM INVESTMENTS
(Identified cost—$7,356,254)

 

       7,356,254  
       

 

 

 

PURCHASED OPTION CONTRACTS
(Premiums paid—$778,598)

     0.1        492,956  

TOTAL INVESTMENTS IN SECURITIESi
(Identified cost—$997,370,450)

     144.9        971,129,349  

WRITTEN OPTION CONTRACTS

     (0.0        (224,461

LIABILITIES IN EXCESS OF OTHER ASSETS

     (44.9        (300,873,555
  

 

 

      

 

 

 

NET ASSETS (Equivalent to $23.23 per share based on 28,844,929 shares of common stock outstanding)

     100.0      $ 670,031,333  
  

 

 

      

 

 

 

Over-the-Counter Option Contracts

 

Purchased Options

 

 
               
Description   Counterparty     Exercise
Price
    Expiration
Date
    Number of
Contracts
    Notional
Amountj
    Premiums
Paid
    Value  

Put—GBP-USD

    BNP Paribas SA     $ 1.26       2/1/19       17,469     $ 22,265,983     $ 274,853     $ 143,298  

Put—GBP-USD

    BNP Paribas SA       1.26       5/1/19       8,683       11,067,350       298,336       186,259  

Put—GBP-USD

    BNP Paribas SA       1.25       5/1/19       8,614       10,979,402       205,409       163,399  
           34,766     $  44,312,735     $  778,598     $ 492,956  

 

 

 

See accompanying notes to financial statements.

 

16


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2018

 

 

Written Options

 

 
               
Description   Counterparty   Exercise
Price
    Expiration
Date
    Number of
Contracts
    Notional
Amountj
    Premiums
Received
    Value  

Put—GBP-USD

  BNP Paribas SA   $ 1.21       2/1/19       (16,842   $ (21,466,809   $ (117,237   $ (33,482

Put—GBP-USD

  BNP Paribas SA     1.21       5/1/19       (8,372     (10,670,949     (174,725     (102,021

Put—GBP-USD

  BNP Paribas SA     1.20       5/1/19       (8,303     (10,583,002     (110,568     (88,958
          (33,517   $ (42,720,760   $ (402,530   $ (224,461

 

 

 

Centrally Cleared Interest Rate Swap Contracts

 

 
                 
Notional
Amount
    Fixed
Rate
Payable
    Fixed
Payment
Frequency
  Floating
Rate
(resets
monthly)
Receivablek
    Floating
Payment
Frequency
  Maturity
Date
  Upfront
Payments
(Receipts)
    Unrealized
Appreciation
(Depreciation)
    Value  
  $60,000,000       1.117   Quarterly     2.470   Monthly   10/19/21   $     $ 2,135,371     $ 2,135,371  
  90,000,000       1.203     Quarterly     2.470     Monthly   10/19/22           3,986,258       3,986,258  
  31,000,000       1.848     Quarterly     2.470     Monthly   10/19/22           610,307       610,307  
  90,000,000       1.288     Quarterly     2.470     Monthly   10/19/23           —       4,697,672       4,697,672  
            $       —     $ 11,429,608     $ 11,429,608  

 

 

 

 

Forward Foreign Currency Exchange Contracts

 

 
         
Counterparty   

Contracts to
Deliver

    

In Exchange
For

     Settlement
Date
     Unrealized
Appreciation
(Depreciation)
 

Brown Brothers Harriman

   EUR      18,489,111      USD      20,995,125        1/3/19      $ (188,768

Brown Brothers Harriman

   GBP      2,380,858      USD      3,043,570        1/3/19        8,929  

Brown Brothers Harriman

   USD      3,032,570      GBP      2,380,858        1/3/19        2,071  

Brown Brothers Harriman

   USD      21,137,861      EUR      18,489,111        1/3/19        46,032  

Brown Brothers Harriman

   EUR      18,091,215      USD      20,735,969        2/4/19        (47,393

Brown Brothers Harriman

   GBP      2,282,056      USD      2,911,059        2/4/19        (2,259
                  $ (181,388

 

 

The total amount of all interest rate swap contracts as presented in the table above are representative of the volume of activity for this derivative type during the year ended December 31, 2018.

 

See accompanying notes to financial statements.

 

17


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2018

 

Glossary of Portfolio Abbreviations

 

 

EMTN

  Euro Medium Term Note

EUAMDB

  Euribor ICE Swap Rate

EUR

  Euro Currency

FRN

  Floating Rate Note

GBP

  Great British Pound

LIBOR

  London Interbank Offered Rate

MTN

  Medium Term Note

TruPS

  Trust Preferred Securities

USD

  United States Dollar

 

Note: Percentages indicated are based on the net assets of the Fund.

Represents shares.

a 

Perpetual security. Perpetual securities have no stated maturity date, but they may be called/redeemed by the issuer.

b 

Security converts to floating rate after the indicated fixed-rate coupon period.

c 

Variable rate. Rate shown is in effect at December 31, 2018.

d 

Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may only be resold to qualified institutional buyers. Aggregate holdings amounted to $281,565,647 which represents 42.0% of the net assets of the Fund, of which 0.8% are illiquid.

e 

Securities exempt from registration under Regulation S of the Securities Act of 1933. These securities are subject to resale restrictions. Aggregate holdings amounted to $133,744,372 which represents 20.0% of the net assets of the Fund, of which 0.0% are illiquid.

f 

Contingent Capital security (CoCo). CoCos are debt or preferred securities with loss absorption characteristics built into the terms of the security for the benefit of the issuer. Aggregate holdings amounted to $224,729,295 which represents 33.5% of the net assets of the Fund (22.8% of the managed assets of the Fund).

g 

Security value is determined based on significant unobservable inputs (Level 3).

h 

Rate quoted represents the annualized seven-day yield.

i 

Securities held by the Fund are subject to a lien, granted to the lender, to the extent of the borrowing outstanding in connection with the Fund’s revolving credit agreement.

j 

Amount represents number of contracts multiplied by notional contract size multiplied by the underlying price.

k 

Based on LIBOR. Represents rates in effect at December 31, 2018.

 

See accompanying notes to financial statements.

 

18


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2018

 

 

Country Summary

   % of Managed
Assets
 

United States

     51.0  

United Kingdom

     10.6  

France

     6.5  

Japan

     6.0  

Switzerland

     5.1  

Netherlands

     4.0  

Canada

     3.5  

Australia

     3.3  

Ireland

     1.6  

Italy

     1.5  

Spain

     1.2  

Norway

     1.0  

Germany

     0.9  

Sweden

     0.7  

South Korea

     0.7  

Hong Kong

     0.7  

Cayman Islands

     0.5  

Other

     1.2  
  

 

 

 
     100.0  
  

 

 

 

 

See accompanying notes to financial statements.

 

19


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

STATEMENT OF ASSETS AND LIABILITIES

December 31, 2018

 

ASSETS:

  

Investments in securities, at value (Identified cost—$997,370,450)

   $ 971,129,349  

Cash

     2,126,976  

Cash collateral pledged for interest rate swap contracts

     3,292,039  

Receivable for dividends and interest

     11,590,041  

Unrealized appreciation on forward foreign currency exchange contracts

     57,032  

Other assets

     13,043  
  

 

 

 

Total Assets

     988,208,480  
  

 

 

 

LIABILITIES:

  

Written option contracts, at value (Premiums received—$402,530)

     224,461  

Unrealized depreciation on forward foreign currency exchange contracts

     238,420  

Payable for:

  

Revolving credit agreement

     315,000,000  

Interest expense

     883,221  

Investment advisory fees

     591,855  

Dividends declared

     372,645  

Cash collateral received for over-the-counter options contracts

     350,000  

Variation margin on interest rate swap contracts

     333,462  

Administration fees

     50,730  

Other liabilities

     132,353  
  

 

 

 

Total Liabilities

     318,177,147  
  

 

 

 

NET ASSETS

   $ 670,031,333  
  

 

 

 

NET ASSETS consist of:

  

Paid-in capital

   $ 688,631,303  

Total distributable earnings/(accumulated loss)

     (18,599,970
  

 

 

 
   $ 670,031,333  
  

 

 

 

NET ASSET VALUE PER SHARE:

  

($670,031,333 ÷ 28,844,929 shares outstanding)

   $ 23.23  
  

 

 

 

MARKET PRICE PER SHARE

   $ 21.81  
  

 

 

 

MARKET PRICE PREMIUM (DISCOUNT) TO NET ASSET VALUE PER SHARE

     (6.11 )% 
  

 

 

 

 

See accompanying notes to financial statements.

 

20


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

STATEMENT OF OPERATIONS

For the Year Ended December 31, 2018

 

Investment Income:

  

Interest income

   $ 46,734,724  

Dividend income (net of $28,048 of foreign withholding tax)

     9,925,563  
  

 

 

 

Total Investment Income

     56,660,287  
  

 

 

 

Expenses:

  

Interest expense

     9,019,121  

Investment advisory fees

     7,408,231  

Administration fees

     751,284  

Shareholder reporting expenses

     262,840  

Professional fees

     82,702  

Directors’ fees and expenses

     44,317  

Custodian fees and expenses

     36,585  

Transfer agent fees and expenses

     22,581  

Miscellaneous

     73,770  
  

 

 

 

Total Expenses

     17,701,431  
  

 

 

 

Net Investment Income (Loss)

     38,958,856  
  

 

 

 

Net Realized and Unrealized Gain (Loss):

  

Net realized gain (loss) on:

  

Investments in securities

     4,645,349  

Written option contracts

     2,148  

Interest rate swap contracts

     1,869,321  

Forward foreign currency exchange contracts

     2,952,723  

Foreign currency transactions

     (13,869
  

 

 

 

Net realized gain (loss)

     9,455,672  
  

 

 

 

Net change in unrealized appreciation (depreciation) on:

  

Investments in securities

     (108,690,591

Written option contracts

     178,069  

Interest rate swap contracts

     822,104  

Forward foreign currency exchange contracts

     46,754  

Foreign currency translations

     (9,811
  

 

 

 

Net change in unrealized appreciation (depreciation)

     (107,653,475
  

 

 

 

Net Realized and Unrealized Gain (Loss)

     (98,197,803
  

 

 

 

Net Increase (Decrease) in Net Assets Resulting from Operations

   $ (59,238,947
  

 

 

 

 

See accompanying notes to financial statements.

 

21


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

STATEMENT OF CHANGES IN NET ASSETS

 

     For the
Year Ended
December 31, 2018
    For the
Year Ended
December 31, 2017
 

Change in Net Assets:

    

From Operations:

    

Net investment income (loss)

   $ 38,958,856     $ 42,824,990  

Net realized gain (loss)

     9,455,672       10,143,415  

Net change in unrealized appreciation (depreciation)

     (107,653,475     52,961,903  
  

 

 

   

 

 

 

Net increase (decrease) in net assets resulting from operations

     (59,238,947     105,930,308  
  

 

 

   

 

 

 

Distributions to shareholdersa

     (53,591,141     (56,853,904

Tax return of capital to shareholders

     (393,137      
  

 

 

   

 

 

 

Total distributions

     (53,984,278     (56,853,904
  

 

 

   

 

 

 

Capital Stock Transactions:

    

Increase (decrease) in net assets from Fund share transactions

     367,192        
  

 

 

   

 

 

 

Total increase (decrease) in net assets

     (112,856,033     49,076,404  

Net Assets:

    

Beginning of year

     782,887,366       733,810,962  
  

 

 

   

 

 

 

End of year

   $ 670,031,333     $ 782,887,366  
  

 

 

   

 

 

 

 

 

a 

Distributions to shareholders from net investment income and net realized gain for the year ended December 31, 2017 have been reclassified to distributions to shareholders to reflect required amendments to Regulation S-X and to conform to the current year presentation. The amounts reported within the December 31, 2017 annual report were as follows:

 

     For the
Year Ended
December 31, 2017
 

Distributions to Shareholders from:

  

Net investment income

   $ (45,586,505

Net realized gain

     (11,267,399
  

 

 

 

Total distributions to shareholders

   $ (56,853,904
  

 

 

 

 

 

See accompanying notes to financial statements.

 

22


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2018

 

Increase (Decrease) in Cash:

 

Cash Flows from Operating Activities:

 

Net increase (decrease) in net assets resulting from operations

   $ (59,238,947

Adjustments to reconcile net increase (decrease) in net assets resulting from
operations to net cash provided by operating activities:

  

Purchases of long-term investments

     (364,082,241

Proceeds from sales and maturities of long-term investments

     357,184,511  

Net purchases, sales and maturities of short-term investments

     12,374,249  

Net amortization of premium on investments in securities

     4,759,911  

Net decrease in dividends and interest receivable and other assets

     1,504,338  

Net increase in cash collateral received for over-the-counter option contracts

     350,000  

Net increase in interest expense payable, accrued expenses and other liabilities

     163,230  

Net increase in payable for variation margin on interest rate swap contracts

     84,427  

Increase in premiums received from written option contracts

     402,530  

Net change in unrealized appreciation on written option contracts

     (178,069

Net change in unrealized depreciation on investments in securities

     108,690,591  

Net change in unrealized appreciation on forward foreign currency
exchange contracts

     (46,754

Net realized gain on investments in securities

     (4,645,349
  

 

 

 

Cash provided by operating activities

     57,322,427  
  

 

 

 

Cash Flows from Financing Activities:

 

Dividends and distributions paid

     (56,494,984
  

 

 

 

Increase (decrease) in cash and restricted cash

     827,443  

Cash and restricted cash at beginning of year (including foreign currency)

     4,591,572  
  

 

 

 

Cash and restricted cash at end of year (including foreign currency)

   $ 5,419,015  
  

 

 

 

Supplemental Disclosure of Cash Flow Information and Non-Cash Activities:

During the year ended December 31, 2018, interest paid was $8,757,482.

During the year ended December 31, 2018, as part of an exchange offer from one of the Fund’s investments, the Fund received shares of a new security valued at $883,481, resulting in a realized gain of $17,772.

For the year ended December 31, 2018, reinvestment of dividends was $367,192.

 

23


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

STATEMENT OF CASH FLOWS—(Continued)

For the Year Ended December 31, 2018

 

The following table provides a reconciliation of cash and restricted cash reported within the Statement of

Assets and Liabilities that sums to the total of such amounts shown on the Statement of Cash Flows.

 

    December 31, 2018     December 31, 2017  

Cash

  $ 2,126,976     $  

Restricted cash

    3,292,039       4,150,107  

Foreign currency

          441,465  
 

 

 

   

 

 

 

Total cash and restricted cash shown on the
Statement of Cash Flows

  $ 5,419,015     $ 4,591,572  
 

 

 

   

 

 

 

Restricted cash consists of cash that has been deposited with a broker and pledged to cover the Fund’s collateral or margin obligations under derivative contracts. It is reported on the Statement of Assets and Liabilities as cash collateral pledged for interest rate swap contracts.

 

See accompanying notes to financial statements.

 

24


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

FINANCIAL HIGHLIGHTS

The following table includes selected data for a share outstanding throughout each year and other performance information derived from the financial statements. It should be read in conjunction with the financial statements and notes thereto.

 

     For the Year Ended December 31,  

Per Share Operating Performance:

   2018     2017     2016     2015     2014  

Net asset value, beginning of year

   $ 27.15     $ 25.45     $ 25.27     $ 25.70     $ 25.07  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from investment operations:

          

Net investment income (loss)a

     1.35       1.49       1.59       1.68       1.77  

Net realized and unrealized gain (loss)

     (3.40     2.18       0.47       (0.24     1.03  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total from investment operations

     (2.05     3.67       2.06       1.44       2.80  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less dividends and distributions to shareholders from:

          

Net investment income

     (1.56     (1.58     (1.45     (1.50     (1.65

Net realized gain

     (0.30     (0.39     (0.43     (0.30     (0.52

Tax return of capital

     (0.01                 (0.07      
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total dividends and distributions to shareholders

     (1.87     (1.97     (1.88     (1.87     (2.17
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in net asset value

     (3.92     1.70       0.18       (0.43     0.63  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of year

   $ 23.23     $ 27.15     $ 25.45     $ 25.27     $ 25.70  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Market value, end of year

   $ 21.81     $ 26.07     $ 24.54     $ 22.52     $ 22.66  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                                          

Total net asset value returnb

     -7.65     14.97     8.89     6.52     12.13
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total market value returnb

     -9.70     14.49     17.82     7.66     9.57
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                                          

Ratios/Supplemental Data:

          

Net assets, end of year (in millions)

   $ 670.0     $ 782.9     $ 733.8     $ 728.6     $ 740.9  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios to average daily net assets:

          

Expenses

     2.38     1.94     1.72     1.61     1.57
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses (excluding interest expense)

     1.17     1.15     1.15     1.17     1.14
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     5.24     5.53     6.29     6.53     6.72
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratio of expenses to average daily managed assetsc

     1.67     1.38     1.20     1.13     1.11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Portfolio turnover rate

     35     36     48     47     47
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

25


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

FINANCIAL HIGHLIGHTS—(Continued)

 

 

 

 

 

     For the Year Ended December 31,  

Revolving Credit Agreement

   2018     2017     2016     2015     2014  

Asset coverage ratio for revolving credit agreement

     313     349     333     331     335
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Asset coverage per $1,000 for revolving credit agreement

   $ 3,127     $ 3,485     $ 3,330     $ 3,313     $ 3,352  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

a 

Calculation based on average shares outstanding.

b 

Total net asset value return measures the change in net asset value per share over the period indicated. Total market value return is computed based upon the Fund’s market price per share and excludes the effects of brokerage commissions. Dividends and distributions are assumed, for purposes of these calculations, to be reinvested at prices obtained under the Fund’s dividend reinvestment plan.

c 

Average daily managed assets represent net assets plus the outstanding balance of the revolving credit agreement.

 

See accompanying notes to financial statements.

 

26


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

NOTES TO FINANCIAL STATEMENTS

Note 1. Organization and Significant Accounting Policies

Cohen & Steers Limited Duration Preferred and Income Fund, Inc. (the Fund) was incorporated under the laws of the State of Maryland on May 1, 2012 and is registered under the Investment Company Act of 1940 (the 1940 Act) as a diversified, closed-end management investment company. The Fund’s investment objective is high current income.

The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The Fund is an investment company and, accordingly, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 946—Investment Companies. The accounting policies of the Fund are in conformity with accounting principles generally accepted in the United States of America (GAAP). The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

Portfolio Valuation: Investments in securities that are listed on the New York Stock Exchange (NYSE) are valued, except as indicated below, at the last sale price reflected at the close of the NYSE on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the closing bid and ask prices on such day or, if no ask price is available, at the bid price. Forward foreign currency contracts are valued daily at the prevailing forward exchange rate. Centrally cleared interest rate swaps are valued at the price determined by the relevant exchange or clearinghouse. Over-the-counter (OTC) interest rate swaps are valued utilizing quotes received from a third-party pricing service. Exchange-traded options are valued at their last sale price as of the close of options trading on applicable exchanges on the valuation date. In the absence of a last sale price on such day, options are valued at the average of the quoted bid and ask prices as of the close of business. OTC options are valued based upon prices provided by a third-party pricing service or counterparty.

Securities not listed on the NYSE but listed on other domestic or foreign securities exchanges (including NASDAQ) are valued in a similar manner. Securities traded on more than one securities exchange are valued at the last sale price reflected at the close of the exchange representing the principal market for such securities on the business day as of which such value is being determined. If after the close of a foreign market, but prior to the close of business on the day the securities are being valued, market conditions change significantly, certain non-U.S. equity holdings may be fair valued pursuant to procedures established by the Board of Directors.

Readily marketable securities traded in the OTC market, including listed securities whose primary market is believed by Cohen & Steers Capital Management, Inc. (the investment advisor) to be OTC, are valued on the basis of prices provided by a third-party pricing service or third-party broker-dealers when such prices are believed by the investment advisor, pursuant to delegation by the Board of Directors, to reflect the fair value of such securities.

Fixed-income securities are valued on the basis of prices provided by a third-party pricing service or third-party broker-dealers when such prices are believed by the investment advisor, pursuant to

 

27


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

NOTES TO FINANCIAL STATEMENTS—(Continued)

 

delegation by the Board of Directors, to reflect the fair value of such securities. The pricing services or broker-dealers use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services or broker-dealers may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services or broker-dealers also utilize proprietary valuation models which may consider market transactions in comparable securities and the various relationships between securities in determining fair value and/or characteristics such as benchmark yield curves, option-adjusted spreads, credit spreads, estimated default rates, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features which are then used to calculate the fair values.

Short-term debt securities with a maturity date of 60 days or less are valued at amortized cost, which approximates fair value. Investments in open-end mutual funds are valued at net asset value (NAV).

The policies and procedures approved by the Fund’s Board of Directors delegate authority to make fair value determinations to the investment advisor, subject to the oversight of the Board of Directors. The investment advisor has established a valuation committee (Valuation Committee) to administer, implement and oversee the fair valuation process according to the policies and procedures approved annually by the Board of Directors. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.

Securities for which market prices are unavailable, or securities for which the investment advisor determines that the bid and/or ask price or a counterparty valuation does not reflect market value, will be valued at fair value, as determined in good faith by the Valuation Committee, pursuant to procedures approved by the Fund’s Board of Directors. Circumstances in which market prices may be unavailable include, but are not limited to, when trading in a security is suspended, the exchange on which the security is traded is subject to an unscheduled close or disruption or material events occur after the close of the exchange on which the security is principally traded. In these circumstances, the Fund determines fair value in a manner that fairly reflects the market value of the security on the valuation date based on consideration of any information or factors it deems appropriate. These may include, but are not limited to, recent transactions in comparable securities, information relating to the specific security and developments in the markets.

The Fund’s use of fair value pricing may cause the NAV of Fund shares to differ from the NAV that would be calculated using market quotations. Fair value pricing involves subjective judgments and it is possible that the fair value determined for a security may be materially different than the value that could be realized upon the sale of that security.

Fair value is defined as the price that the Fund would expect to receive upon the sale of an investment or expect to pay to transfer a liability in an orderly transaction with an independent buyer in the principal market or, in the absence of a principal market, the most advantageous market for the investment or liability. The hierarchy of inputs that are used in determining the fair value of the Fund’s investments is summarized below.

 

28


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

NOTES TO FINANCIAL STATEMENTS—(Continued)

 

 

   

Level 1—quoted prices in active markets for identical investments

   

Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, credit risk, etc.)

   

Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing investments may or may not be an indication of the risk associated with those investments. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy.

The following is a summary of the inputs used as of December 31, 2018 in valuing the Fund’s investments carried at value:

 

    Total     Quoted Prices
in Active
Markets for
Identical
Investments
(Level 1)
    Other
Significant
Observable
Inputs

(Level 2)
    Significant
Unobservable
Inputs

(Level 3)
 

Preferred Securities—

       

$25 Par Value:

       

Utilities

  $ 6,408,848     $ 3,797,148     $ 2,611,700     $  

Other Industries

    91,200,800       91,200,800              

Preferred Securities—

       

Capital Securities:

       

Food

    5,486,250                   5,486,250  

Other Industries

    834,242,986             834,242,986        

Corporate Bonds

    25,941,255             25,941,255        

Short-Term Investments

    7,356,254             7,356,254        

Purchased Option Contracts

    492,956             492,956        
 

 

 

   

 

 

   

 

 

   

 

 

 

Total Investments in Securitiesa

  $ 971,129,349     $ 94,997,948     $ 870,645,151     $ 5,486,250 b  
 

 

 

   

 

 

   

 

 

   

 

 

 

Interest Rate Swap Contracts

  $ 11,429,608     $     $ 11,429,608     $  

Forward Foreign Currency Exchange Contracts

    57,032             57,032        
 

 

 

   

 

 

   

 

 

   

 

 

 

Total Derivative Assetsa

  $ 11,486,640     $     $ 11,486,640     $  
 

 

 

   

 

 

   

 

 

   

 

 

 

Forward Foreign Currency Exchange Contracts

  $ (238,420   $     $ (238,420   $  

Written Option Contracts

    (224,461           (224,461  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total Derivative Liabilitiesa

  $ (462,881   $     $ (462,881   $  
 

 

 

   

 

 

   

 

 

   

 

 

 

 

a 

Portfolio holdings are disclosed individually on the Schedule of Investments.

b 

Level 3 investments are valued by a third-party pricing service. The inputs for these securities are not readily available or cannot be reasonably estimated. A change in the significant unobservable inputs could result in a significantly lower or higher value in such Level 3 investments.

 

29


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

NOTES TO FINANCIAL STATEMENTS—(Continued)

 

 

     Preferred Securities—
Capital Securities—
Food
 

Balance as of December 31, 2017

   $ 5,776,194  

Change in unrealized appreciation (depreciation)

     (289,944
  

 

 

 

Balance as of December 31, 2018

   $ 5,486,250  
  

 

 

 

The change in unrealized appreciation (depreciation) attributable to securities owned on December 31, 2018, which were valued using significant unobservable inputs (Level 3) amounted to $(289,944).

Security Transactions and Investment Income: Security transactions are recorded on trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost. Interest income, which includes the amortization of premiums and accretion of discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, except for certain dividends on foreign securities, which are recorded as soon as the Fund is informed after the ex-dividend date. Distributions from real estate investment trusts (REITs) are recorded as ordinary income, net realized capital gains or return of capital based on information reported by the REITs and management’s estimates of such amounts based on historical information. These estimates are adjusted when the actual source of distributions is disclosed by the REITs and actual amounts may differ from the estimated amounts.

Options: The Fund may purchase and write exchange-listed and OTC put or call options on securities, stock indices, currencies and other financial instruments for hedging purposes, to enhance portfolio returns and reduce overall volatility.

When the Fund writes (sells) an option, an amount equal to the premium received by the Fund is recorded on the Statement of Assets and Liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. When an option expires, the Fund realizes a gain on the option to the extent of the premium received. Premiums received from writing options which are exercised or closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. If a put option on a security is exercised, the premium reduces the cost basis of the security purchased by the Fund. If a call option is exercised, the premium is added to the proceeds of the security sold to determine the realized gain or loss. The Fund, as writer of an option, bears the market risk of an unfavorable change in the price of the underlying index, currency or security. Other risks include the possibility of an illiquid options market or the inability of the counterparties to fulfill their obligations under the contracts.

Put and call options purchased are accounted for in the same manner as portfolio securities. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying investment transaction to determine the realized gain or loss when the underlying transaction is executed. The risk associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, the Fund bears the risk of loss of the premium and change in market value should the counterparty not perform under the contract.

 

30


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

NOTES TO FINANCIAL STATEMENTS—(Continued)

 

Foreign Currency Translation: The books and records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon prevailing exchange rates on the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollars based upon prevailing exchange rates on the respective dates of such transactions. The Fund does not isolate that portion of the results of operations resulting from fluctuations in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

Net realized foreign currency transaction gains or losses arise from sales of foreign currencies (excluding gains and losses on forward foreign currency exchange contracts, which are presented separately, if any), currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency translation gains and losses arise from changes in the values of assets and liabilities, other than investments in securities, on the date of valuation, resulting from changes in exchange rates. Pursuant to U.S. federal income tax regulations, certain foreign currency gains/losses included in realized and unrealized gains/losses are included in or are a reduction of ordinary income for federal income tax purposes.

Forward Foreign Currency Exchange Contracts: The Fund enters into forward foreign currency exchange contracts to hedge the currency exposure associated with certain of its non-U.S. dollar denominated securities. A forward foreign currency exchange contract is a commitment between two parties to purchase or sell foreign currency at a set price on a future date. The market value of a forward foreign currency exchange contract fluctuates with changes in foreign currency exchange rates. These contracts are marked to market daily and the change in value is recorded by the Fund as unrealized appreciation and/or depreciation on forward foreign currency exchange contracts. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are included in net realized gain or loss on forward foreign currency exchange contracts. For federal income tax purposes, the Fund has made an election to treat gains and losses from forward foreign currency exchange contracts as capital gains and losses.

Forward foreign currency exchange contracts involve elements of market risk in excess of the amounts reflected on the Statement of Assets and Liabilities. The Fund bears the risk of an unfavorable change in the foreign exchange rate underlying the contract. Risks may also arise upon entering these contracts from the potential inability of the counterparties to meet the terms of their contracts. In connection with these contracts, securities may be identified as collateral in accordance with the terms of the respective contracts.

Centrally Cleared Interest Rate Swap Contracts: The Fund uses interest rate swaps in connection with borrowing under its revolving credit agreement. The interest rate swaps are intended to reduce interest rate risk by countering the effect that an increase in short-term interest rates could have on the performance of the Fund’s shares as a result of the floating rate structure of interest owed pursuant to the revolving credit agreement. When entering into interest rate swaps, the Fund agrees to pay the other party to the interest rate swap (which is known as the counterparty) a fixed rate payment in exchange

 

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COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

NOTES TO FINANCIAL STATEMENTS—(Continued)

 

for the counterparty’s agreement to pay the Fund a variable rate payment that was intended to approximate the Fund’s variable rate payment obligation on the revolving credit agreement. The payment obligation is based on the notional amount of the swap. Depending on the state of interest rates in general, the use of interest rate swaps could enhance or harm the overall performance of the Fund. Swaps are marked-to-market daily and changes in the value are recorded as unrealized appreciation (depreciation).

Immediately following execution of the swap agreement, the swap agreement is novated to a central counterparty (the CCP) and the Fund’s counterparty on the swap agreement becomes the CCP. The Fund is required to interface with the CCP through a broker. Upon entering into a centrally cleared swap, the Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap. Securities deposited as initial margin are designated on the Schedule of Investments and cash deposited is recorded on the Statement of Assets and Liabilities as cash collateral pledged for interest rate swap contracts. The daily change in valuation of centrally cleared swaps is recorded as a receivable or payable for variation margin in the Statement of Assets and Liabilities. Payments received from or paid to the counterparty, including at termination, are recorded as realized gain (loss) in the Statement of Operations.

Swap agreements involve, to varying degrees, elements of market and counterparty risk, and exposure to loss in excess of the related amounts reflected on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of contractual terms in the agreements and that there may be unfavorable changes in interest rates.

Dividends and Distributions to Shareholders: Dividends from net investment income and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from GAAP. Dividends from net investment income, if any, are declared quarterly and paid monthly. Net realized capital gains, unless offset by any available capital loss carryforward, are typically distributed to shareholders at least annually. Dividends and distributions to shareholders are recorded on the ex-dividend date and are automatically reinvested in full and fractional shares of the Fund in accordance with the Fund’s Reinvestment Plan, unless the shareholder has elected to have them paid in cash.

The Fund has a managed distribution policy in accordance with exemptive relief issued by the SEC. This policy gives the Fund greater flexibility to realize long-term capital gains throughout the year and to distribute those gains on a more regular basis to shareholders. Therefore, regular monthly distributions throughout the year may include a portion of estimated realized long-term capital gains, along with net investment income, short-term capital gains and return of capital, which is not taxable. In accordance with the relief, the Fund is required to adhere to certain conditions in order to distribute long-term capital gains during the year. For the year ended December 31, 2018, the Fund paid distributions from net investment income, net realized gain and tax return of capital.

 

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COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

NOTES TO FINANCIAL STATEMENTS—(Continued)

 

Income Taxes: It is the policy of the Fund to continue to qualify as a regulated investment company (RIC), if such qualification is in the best interest of the shareholders, by complying with the requirements of Subchapter M of the Internal Revenue Code applicable to RICs, and by distributing substantially all of its taxable earnings to its shareholders. Also, in order to avoid the payment of any federal excise taxes, the Fund will distribute substantially all of its net investment income and net realized gains on a calendar year basis. Accordingly, no provision for federal income or excise tax is necessary. Dividend and interest income from holdings in non-U.S. securities is recorded net of non-U.S. taxes paid. Management has analyzed the Fund’s tax positions taken on federal and applicable state income tax returns as well as its tax positions in non-U.S. jurisdictions in which it trades for all open tax years and has concluded that as of December 31, 2018, no additional provisions for income tax are required in the Fund’s financial statements. The Fund’s tax positions for the tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service, state departments of revenue and by foreign tax authorities.

Note 2. Investment Advisory Fees, Administration Fees and Other Transactions with Affiliates

Investment Advisory Fees: Cohen & Steers Capital Management, Inc. serves as the Fund’s investment advisor pursuant to an investment advisory agreement (the investment advisory agreement). Under the terms of the investment advisory agreement, the investment advisor provides the Fund with day-to-day investment decisions and generally manages the Fund’s investments in accordance with the stated policies of the Fund, subject to the supervision of the Board of Directors.

For the services provided to the Fund, the investment advisor receives a fee, accrued daily and paid monthly, at the annual rate of 0.70% of the average daily managed assets of the Fund. Managed assets are equal to the net assets plus the amount of any borrowings, used for leverage, outstanding.

Administration Fees: The Fund has entered into an administration agreement with the investment advisor under which the investment advisor performs certain administrative functions for the Fund and receives a fee, accrued daily and paid monthly, at the annual rate of 0.06% of the average daily managed assets of the Fund. For the year ended December 31, 2018, the Fund incurred $634,991 in fees under this administration agreement.

Directors’ and Officers’ Fees: Certain directors and officers of the Fund are also directors, officers and/or employees of the investment advisor. The Fund does not pay compensation to directors and officers affiliated with the investment advisor except for the Chief Compliance Officer, who received compensation from the investment advisor, which was reimbursed by the Fund, in the amount of $12,317 for the year ended December 31, 2018.

Note 3. Purchases and Sales of Securities

Purchases and sales of securities, excluding short-term investments, for the year ended December 31, 2018, totaled $355,839,262 and $357,184,170, respectively.

 

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COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

NOTES TO FINANCIAL STATEMENTS—(Continued)

 

Note 4. Derivative Investments

The following tables present the value of derivatives held at December 31, 2018 and the effect of derivatives held during the year ended December 31, 2018, along with the respective location in the financial statements.

Statement of Assets and Liabilities

 

   

Assets

   

Liabilities

 

Derivatives

 

Location

  Fair
Value
   

Location

  Fair Value  

Interest Rate Risk:

       

Interest Rate Swap Contractsa

    $     Payable for variation margin on interest rate swap contracts     $11,429,608b  

Foreign Exchange Risk:

       

Forward Foreign Currency Exchange Contractsa

  Unrealized appreciation     57,032     Unrealized depreciation     238,420  

Purchased Option Contracts—
Over-the-Counterc

  Investments in securities     492,956          

Written Option Contracts—
Over-the-Counter

          Written option contracts     224,461  

 

a 

Not subject to a master netting agreement or another similar arrangement.

b 

Amount represents the cumulative appreciation on interest rate swap contracts as reported on the Schedule of Investments. The Statement of Assets and Liabilities only reflects the current day variation margin payable to the broker.

c 

Includes purchased options at value as reported in the Schedule of Investments.

Statement of Operations

 

Derivatives

  

Location

  Realized
Gain (Loss)
    Change in
Unrealized
Appreciation
(Depreciation)
 

Interest Rate Risk:

      

Interest Rate Swap Contracts

   Net Realized and Unrealized Gain (Loss)   $ 1,869,321     $ 822,104  

Foreign Exchange Risk:

      

Forward Foreign Currency Exchange Contracts

   Net Realized and Unrealized Gain (Loss)     2,952,723       46,754  

Purchased Option Contracts—
Over-the-Countera

   Net Realized and Unrealized Gain (Loss)     32,047       (285,642

Written Option Contracts—
Over-the-Counter

   Net Realized and Unrealized Gain (Loss)     2,148       178,069  

 

a 

Purchased options are included in net realized gain (loss) and change in unrealized appreciation (depreciation) on investments in securities.

 

34


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

NOTES TO FINANCIAL STATEMENTS—(Continued)

 

At December 31, 2018, the Fund’s derivative assets and liabilities (by type), which are subject to a master netting agreement, are as follows:

 

Derivative Financial Instruments

   Assets        Liabilities  

Foreign Exchange Risk:

       

Purchased Option Contracts—
Over-the-Counter

   $ 492,956        $  

Written Option Contracts—
Over-the-Counter

              224,461  

The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under a master netting agreement and net of the related collateral pledged and/or received by the Fund, if any, as of December 31, 2018:

 

  Counterparty  

   Gross Amount
of  Assets
Presented
in the Statement
of Assets and
Liabilities
     Financial
Instruments
and  Derivatives
Available
for Offset
     Collateral
Receiveda
     Net Amount
of  Derivative

Assetsb
 

BNP Paribas SA

   $ 492,956      $ (224,461    $ (268,495    $         —  

  Counterparty  

   Gross Amount
of Liabilities
Presented
in the Statement
of Assets and
Liabilities
     Financial
Instruments
and  Derivatives
Available
for Offset
     Collateral
Pledgeda
     Net Amount
of  Derivative

Liabilitiesb
 

BNP Paribas SA

   $ 224,461      $ (224,461    $      $  

 

a 

In some instances, the actual collateral pledged and/or received may be more than amount shown.

b 

Net amount represents the net receivable/payable due from/to the counterparty in the event of default.

 

35


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

NOTES TO FINANCIAL STATEMENTS—(Continued)

 

The following summarizes the volume of the Fund’s option contracts and forward foreign currency exchange contracts activity for the year ended December 31, 2018:

 

    Purchased Option
Contractsa,b
    Written Option
Contractsa,b
    Forward Foreign
Currency Exchange
Contracts
 

Average Notional Amount

  $ 37,451,834     $ 36,107,282     $ 36,967,399  

 

a 

Notional amount is calculated using the number of contracts multiplied by notional contract size multiplied by the underlying price.

b 

Average for the period November 20, 2018 through December 31, 2018, which represents the period the Fund had option contracts outstanding.

Note 5. Income Tax Information

The tax character of dividends and distributions paid was as follows:

 

     For the Year Ended
December 31,
 
           2018            2017  

Ordinary income

   $ 44,829,442      $ 47,180,578  

Long-term capital gain

     8,761,699        9,673,326  

Tax return of capital

     393,137         
  

 

 

    

 

 

 

Total dividends and distributions

   $ 53,984,278      $ 56,853,904  
  

 

 

    

 

 

 

As of December 31, 2018, the tax-basis components of accumulated earnings, the federal tax cost and net unrealized appreciation (depreciation) in value of investments held were as follows:

 

Cost of investments in securities for federal income tax purposes

   $ 1,000,926,969  
  

 

 

 

Gross unrealized appreciation on investments

   $ 18,623,669  

Gross unrealized depreciation on investments

     (36,309,470
  

 

 

 

Net unrealized appreciation (depreciation) on investments

   $ (17,685,801
  

 

 

 

The Fund incurred short-term capital losses of $860,966 and long-term capital losses of $84,976 after October 31, 2018 that it has elected to defer to the following year.

As of December 31, 2018, the Fund had temporary book/tax differences primarily attributable to wash sales on portfolio securities and certain fixed income securities and permanent book/tax differences primarily attributable to certain fixed income securities. To reflect reclassifications arising from the permanent differences, paid-in capital was charged $7,403 and total distributable earnings/(accumulated loss) was credited $7,403. Net assets were not affected by this reclassification.

 

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COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

NOTES TO FINANCIAL STATEMENTS—(Continued)

 

Note 6. Capital Stock

The Fund is authorized to issue 250 million shares of common stock at a par value of $0.001 per share.

During the year ended December 31, 2018, the Fund issued 14,349 shares of common stock for the reinvestment of dividends and the year ended December 31, 2017, the Fund did not issue shares of common stock for the reinvestment of dividends.

The Board of Directors approved the continuation of the delegation of its authority to management to effect repurchases, pursuant to management’s discretion and subject to market conditions and investment considerations, of up to 10% of the Fund’s common shares outstanding (Share Repurchase Program) as of January 1, 2019, through the fiscal year ended December 31, 2019.

During the years ended December 31, 2018 and December 31, 2017, the Fund did not effect any repurchases.

Note 7. Borrowings

The Fund has entered into a $315,000,000 revolving credit agreement (the credit agreement) with State Street Bank and Trust Company (State Street). The Fund pays a monthly financing charge which is calculated based on the used portion of the credit agreement and a LIBOR-based rate. The Fund also pays a fee of 0.20% per annum on any unused portion of the credit agreement. The credit agreement has a 360-day evergreen provision whereby State Street may terminate this agreement upon 360 days’ notice, but the Fund may terminate on 30 days’ notice to State Street. Securities held by the Fund are subject to a lien, granted to State Street, to the extent of the borrowing outstanding in connection with the Fund’s revolving credit agreement. If the Fund fails to meet certain requirements, or maintain other financial covenants required under the credit agreement, the Fund may be required to repay immediately, in part or in full, the loan balance outstanding under the credit agreement, necessitating the sale of portfolio securities at potentially inopportune times.

As of December 31, 2018, the Fund had outstanding borrowings of $315,000,000 at a current rate of 3.3%. During the year ended December 31, 2018, the Fund borrowed an average daily balance of $315,000,000 at a weighted average borrowing cost of 2.8%.

Note 8. Other Risks

Preferred Securities Risk: Preferred securities are subject to credit risk, which is the risk that a security will decline in price, or the issuer of the security will fail to make dividend, interest or principal payments when due, because the issuer experiences a decline in its financial status. Preferred securities are also subject to interest rate risk and may decline in value because of changes in market interest rates. The Fund may be subject to a greater risk of rising interest rates than would normally be the case in an environment of low interest rates and the effect of potential government fiscal policy initiatives and resulting market reaction to those initiatives. In addition, an issuer may be permitted to defer or omit distributions. Preferred securities are also generally subordinated to bonds and other debt instruments in a company’s capital structure. During periods of declining interest rates, an issuer may

 

37


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

NOTES TO FINANCIAL STATEMENTS—(Continued)

 

be able to exercise an option to redeem (call) its issue at par earlier than scheduled, and the Fund may be forced to reinvest in lower yielding securities. Certain preferred securities may be substantially less liquid than many other securities, such as common stocks. Generally, preferred security holders have no voting rights with respect to the issuing company unless certain events occur. Certain preferred securities may give the issuers special redemption rights allowing the securities to be redeemed prior to a specified date if certain events occur, such as changes to tax or securities laws.

Contingent Capital Securities Risk: Contingent capital securities (sometimes referred to as “CoCos”) are debt or preferred securities with loss absorption characteristics built into the terms of the security, for example a mandatory conversion into common stock of the issuer under certain circumstances, such as the issuer’s capital ratio falling below a certain level. Since the common stock of the issuer may not pay a dividend, investors in these instruments could experience a reduced income rate, potentially to zero, and conversion would deepen the subordination of the investor, hence worsening the investor’s standing in a bankruptcy. Some CoCos provide for a reduction in the value or principal amount of the security under such circumstances. In addition, most CoCos are considered to be high yield or “junk” securities and are therefore subject to the risks of investing in below investment-grade securities.

Duration Risk: Duration is a mathematical calculation of the average life of a fixed-income or preferred security that serves as a measure of the security’s price risk to changes in interest rates (or yields). Securities with longer durations tend to be more sensitive to interest rate (or yield) changes than securities with shorter durations. Duration differs from maturity in that it considers potential changes to interest rates, and a security’s coupon payments, yield, price and par value and call features, in addition to the amount of time until the security matures. Various techniques may be used to shorten or lengthen the Fund’s duration. The duration of a security will be expected to change over time with changes in market factors and time to maturity.

Concentration Risk: Because the Fund invests at least 25% of its net assets in the financials sector, it will be more susceptible to adverse economic or regulatory occurrences affecting this sector, such as changes in interest rates, loan concentration and competition. In addition, the Fund will also be subject to the risks of investing in the individual industries and securities that comprise the financials sector, including the bank, diversified financials, real estate (including REITs) and insurance industries. To the extent that the Fund focuses its investments in other sectors or industries, such as (but not limited to) energy, industrials, utilities, pipelines, health care and telecommunications, the Fund will be subject to the risks associated with these particular sectors and industries. These sectors and industries may be adversely affected by, among others, changes in government regulation, world events and economic conditions.

Credit and Below-Investment-Grade Securities Risk: Preferred securities may be rated below investment grade or may be unrated. Below-investment-grade securities, or equivalent unrated securities, which are commonly known as “high-yield bonds” or “junk bonds,” generally involve greater volatility of price and risk of loss of income and principal, and may be more susceptible to real or perceived adverse economic and competitive industry conditions than higher grade securities. It is reasonable to expect that any adverse economic conditions could disrupt the market for lower-rated securities, have an adverse impact on the value of those securities and adversely affect the ability of the issuers of those securities to repay principal and interest on those securities.

 

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COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

NOTES TO FINANCIAL STATEMENTS—(Continued)

 

Liquidity Risk: Liquidity risk is the risk that particular investments of the Fund may become difficult to sell or purchase. The market for certain investments may become less liquid or illiquid due to adverse changes in the conditions of a particular issuer or due to adverse market or economic conditions. In addition, dealer inventories of certain securities, which provide an indication of the ability of dealers to engage in “market making,” are at, or near, historic lows in relation to market size, which has the potential to increase price volatility in the fixed income markets in which the Fund invests. Federal banking regulations may also cause certain dealers to reduce their inventories of certain securities, which may further decrease the Fund’s ability to buy or sell such securities. As a result of this decreased liquidity, the Fund may have to accept a lower price to sell a security, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative effect on performance. Further, transactions in less liquid or illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities.

Foreign (Non-U.S.) Securities Risk: The Fund directly purchases securities of foreign issuers. Risks of investing in foreign securities, include currency risks, future political and economic developments and possible imposition of foreign withholding taxes on income or proceeds payable on the securities. In addition, there may be less publicly available information about a foreign issuer than about a domestic issuer, and foreign issuers may not be subject to the same accounting, auditing and financial recordkeeping standards and requirements as domestic issuers. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than securities of comparable U.S. issuers.

Foreign Currency Risk: Although the Fund will report its NAV and pay dividends in U.S. dollars, foreign securities often are purchased with and make any dividend and interest payments in foreign currencies. Therefore, the Fund’s investments in foreign securities will be subject to foreign currency risk, which means that the Fund’s NAV could decline solely as a result of changes in the exchange rates between foreign currencies and the U.S. dollar. Certain foreign countries may impose restrictions on the ability of issuers of foreign securities to make payment of principal, dividends and interest to investors located outside the country, due to blockage of foreign currency exchanges or otherwise. The Fund may, but is not required to, engage in various investments that are designed to hedge the Fund’s foreign currency risks, and such investments are subject to the risks described under “Derivatives and Hedging Transactions Risk” below.

Leverage Risk: The use of leverage is a speculative technique and there are special risks and costs associated with leverage. The NAV of the Fund’s shares may be reduced by the issuance and ongoing costs of leverage. So long as the Fund is able to invest in securities that produce an investment yield that is greater than the total cost of leverage, the leverage strategy will produce higher current net investment income for the shareholders. On the other hand, to the extent that the total cost of leverage exceeds the incremental income gained from employing such leverage, shareholders would realize lower net investment income. In addition to the impact on net income, the use of leverage will have an effect of magnifying capital appreciation or depreciation for shareholders. Specifically, in an up market, leverage will typically generate greater capital appreciation than if the Fund were not employing leverage. Conversely, in down markets, the use of leverage will generally result in greater capital depreciation than if the Fund had been unlevered. To the extent that the Fund is required or elects to reduce its leverage,

 

39


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

NOTES TO FINANCIAL STATEMENTS—(Continued)

 

the Fund may need to liquidate investments, including under adverse economic conditions which may result in capital losses potentially reducing returns to shareholders. The use of leverage also results in the investment advisory fees payable to the investment advisor being higher than if the Fund did not use leverage and can increase operating costs, which may reduce total return. There can be no assurance that a leveraging strategy will be successful during any period in which it is employed.

Derivatives and Hedging Transactions Risk: The Fund’s use of derivatives, including for the purpose of hedging interest rate or foreign currency risks, presents risks different from, and possibly greater than, the risks associated with investing directly in traditional securities. Among the risks presented are counterparty risk, financial leverage risk, liquidity risk, OTC trading risk and tracking risk. The use of derivatives can lead to losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivatives.

Although the Fund may be able to offset to some extent any adverse effects of being unable to liquidate an option position, that Fund may experience losses in some cases as a result of such inability, may not be able to close its position and, in such an event would be unable to control its losses.

Options Risk: Gains on options transactions depend on the investment manager’s ability to predict correctly the direction of stock prices, indexes, interest rates, and other economic factors, and unanticipated changes may cause poorer overall performance for the Fund than if it had not engaged in such transactions. A rise in the value of the security or index underlying a call option written by the Fund exposes the Fund to possible loss or loss of opportunity to realize appreciation in the value of any portfolio securities underlying or otherwise related to the call option. By writing a put option, the Fund assumes the risk of a decline in the underlying security or index. There can be no assurance that a liquid market will exist when the Fund seeks to close out an option position, and for certain options not traded on an exchange no market usually exists. Trading could be interrupted, for example, because of supply and demand imbalances arising from a lack of either buyers or sellers, or an options exchange could suspend trading after the price has risen or fallen more than the maximum specified by the exchange.

Although the Fund may be able to offset to some extent any adverse effects of being unable to liquidate an option position, that Fund may experience losses in some cases as a result of such inability, may not be able to close its position and, in such an event would be unable to control its losses.

Geopolitical Risk: Occurrence of global events similar to those in recent years, such as war, terrorist attacks, natural or environmental disasters, country instability, infectious disease epidemics, market instability, debt crises and downgrades, embargoes, tariffs, sanctions and other trade barriers and other governmental trade or market control programs, the potential exit of a country from its respective union and related geopolitical events, may result in market volatility and may have long-lasting impacts on both the U.S. and global financial markets. Additionally, those events, as well as other changes in foreign and domestic political and economic conditions, could adversely affect individual issuers or related groups of issuers, securities markets, interest rates, secondary trading, credit ratings, inflation, investor sentiment and other factors affecting the value of the Fund’s investments. The decision of the United Kingdom (UK) to exit from the European Union following the June 2016 vote on the matter (referred to as Brexit) may cause uncertainty and thus adversely impact financial results of the Fund and the global financial markets. Growing tensions, including trade

 

40


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

NOTES TO FINANCIAL STATEMENTS—(Continued)

 

disputes, between the United States and other nations, or among foreign powers, and possible diplomatic, trade or other sanctions could adversely impact the global economy, financial markets and the Fund. The strengthening or weakening of the U.S. dollar relative to other currencies may, among other things, adversely affect the Fund’s investments denominated in non-U.S. dollar currencies. It is difficult to predict when similar events affecting the U.S. or global financial markets may occur, the effects that such events may have, and the duration of those effects.

Regulatory Risk: The U.S. government has proposed and adopted multiple regulations that could have a long-lasting impact on the Fund and on the mutual fund industry in general. The SEC’s final rules and amendments that modernize reporting and disclosure, along with other potential upcoming regulations, could, among other things, restrict and/or increase the cost of the Fund’s ability to engage in transactions and/or increase overall expenses of the Fund. In addition, the SEC, Congress, various exchanges and regulatory and self-regulatory authorities, both domestic and foreign, have undertaken reviews of the use of derivatives by registered investment companies, which could affect the nature and extent of derivatives used by the Fund. While the full extent of these regulations is still unclear, these regulations and actions may adversely affect both the Fund and the instruments in which the Fund invests as well as its ability to execute its investment strategy. Similarly, regulatory developments in other countries may have an unpredictable and adverse impact on the Fund.

LIBOR Risk: Many financial instruments use or may use a floating rate based on the London Interbank Offered Rate, or “LIBOR,” which is the offered rate for short-term Eurodollar deposits between major international banks. On July 27, 2017, the head of the UK Financial Conduct Authority announced a desire to phase out the use of LIBOR by the end of 2021. There remains uncertainty regarding the future utilization of LIBOR and the nature of any replacement rate. As such, the potential effect of a transition away from LIBOR on the Fund or the financial instruments in which the Fund invests cannot yet be determined. When LIBOR is discontinued, the LIBOR replacement rate may be lower than market expectations, which could have an adverse impact on the value of preferred and debt-securities with floating or fixed-to-floating rate coupons.

Note 9. Other

In the normal course of business, the Fund enters into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is dependent on claims that may be made against the Fund in the future and, therefore, cannot be estimated; however, based on experience, the risk of material loss from such claims is considered remote.

Note 10. New Accounting Guidance

In November 2016, the FASB issued a new ASU No. 2016-18, “Statement of Cash Flows (Topic 230), Restricted Cash, a consensus of the FASB’s Emerging Issues Task Force” (ASU 2016-18). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and

 

41


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

NOTES TO FINANCIAL STATEMENTS—(Continued)

 

end-of-period total amounts shown on the statement of cash flows. The amendments in ASU 2016-18 do not provide a definition of restricted cash or restricted cash equivalents. ASU 2016-18 is effective for interim and annual reporting periods beginning after December 15, 2017. The Fund adopted the changes required by ASU 2016-18 in the Statement of Cash Flows presented herein.

In March 2017, the FASB issued ASU No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities, held at a premium, to be amortized to the earliest call date. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. The adoption will not have a material effect on the timing of income recognized by the Fund and will have no effect on the Fund’s net assets or overall results of operations.

In August 2018, the Financial Accounting Standards Board (FASB) issued a new Accounting Standards Update (ASU) No. 2018-13, “Fair Value Measurement (Topic 820), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement”. The amendments to ASU 2018-13 are intended to improve the effectiveness of disclosures in the notes to financial statements through modifications to disclosure requirements on fair value measurements. ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Fund has adopted the amended disclosures permissible under the update. The adoption had no effect on the Fund’s net assets or results of operations.

In August 2018, the SEC adopted amendments to Regulation S-X which are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the information provided to investors. The amendments include eliminating the requirement to separately state book basis components of net assets on the Statement of Assets & Liabilities; separately state the sources of distributions paid (except tax return of capital distributions must still be separately disclosed) on the Statement of Changes in Net Assets; and state the book basis amount of undistributed net investment income on the Statement of Changes in Net Assets. The Fund adopted the amendments within the financial statements for the year ended December 31, 2018, which had no effect on the Fund’s net assets or results of operations.

Note 11. Subsequent Events

Management has evaluated events and transactions occurring after December 31, 2018 through the date that the financial statements were issued, and has determined that no additional disclosure in the financial statements is required.

 

42


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Cohen & Steers Limited Duration Preferred and Income Fund, Inc.

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Cohen & Steers Limited Duration Preferred and Income Fund, Inc. (the “Fund”) as of December 31, 2018, the related statements of operations and cash flows for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, transfer agent and brokers. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

New York, New York

February 26, 2019

We have served as the auditor of one or more investment companies in the Cohen & Steers family of mutual funds since 1991.

 

43


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

AVERAGE ANNUAL TOTAL RETURNS

(Periods ended December 31, 2018) (Unaudited)

 

Based on Net Asset Value           Based on Market Value  
One Year     5 Years     Since Inception
(7/27/12)
          One Year     5 Years     Since Inception
(7/27/12)
 
  –7.68%       6.67%       7.69%         –9.70%       7.52%       5.88%  

The performance data quoted represent past performance. Past performance is no guarantee of future results. The investment return will vary and the principal value of an investment will fluctuate and shares, if sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Performance results reflect the effect of leverage from utilization of borrowings under a revolving credit agreement. Current total returns of the Fund can be obtained by visiting our website at cohenandsteers.com. The Fund’s returns assume the reinvestment of all dividends and distributions at prices obtained under the Fund’s dividend reinvestment plan.

TAX INFORMATION—2018 (Unaudited)

For the calendar year ended December 31, 2018, for individual taxpayers, the Fund designates $43,228,100 as qualified dividend income eligible for reduced tax rates, long-term capital gain distributions of $8,761,699 taxable at the maximum 20% rate and $274,309 as qualified business income eligible for the 20% deduction. In addition, for corporate taxpayers, 41.72% of the ordinary dividends paid qualified for the dividends received deduction (DRD).

REINVESTMENT PLAN

The Fund has a dividend reinvestment plan commonly referred to as an “opt-out” plan (the Plan). Each common shareholder who participates in the Plan will have all distributions of dividends and capital gains (Dividends) automatically reinvested in additional common shares by Computershare as agent (the Plan Agent). Shareholders who elect not to participate in the Plan will receive all Dividends in cash paid by check mailed directly to the shareholder of record (or if the shares are held in street or other nominee name, then to the nominee) by the Plan Agent, as dividend disbursing agent. Shareholders whose common shares are held in the name of a broker or nominee should contact the broker or nominee to determine whether and how they may participate in the Plan.

The Plan Agent serves as agent for the shareholders in administering the Plan. After the Fund declares a Dividend, the Plan Agent will, as agent for the shareholders, either: (i) receive the cash payment and use it to buy common shares in the open market, on the NYSE or elsewhere, for the participants’ accounts or (ii) distribute newly issued common shares of the Fund on behalf of the participants.

The Plan Agent will receive cash from the Fund with which to buy common shares in the open market if, on the Dividend payment date, the NAV per share exceeds the market price per share plus estimated brokerage commissions on that date. The Plan Agent will receive the Dividend in newly issued common shares of the Fund if, on the Dividend payment date, the market price per share plus estimated brokerage commissions equals or exceeds the NAV per share of the Fund on that date. The number of shares to be issued will be computed at a per share rate equal to the greater of (i) the NAV or (ii) 95% of the closing market price per share on the payment date.

 

44


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

If the market price per share is less than the NAV on a Dividend payment date, the Plan Agent will have until the last business day before the next ex-dividend date for the common stock, but in no event more than 30 days after the Dividend payment date (as the case may be, the Purchase Period), to invest the Dividend amount in shares acquired in open market purchases. If at the close of business on any day during the Purchase Period on which NAV is calculated the NAV equals or is less than the market price per share plus estimated brokerage commissions, the Plan Agent will cease making open market purchases and the uninvested portion of such Dividends shall be filled through the issuance of new shares of common stock from the Fund at the price set forth in the immediately preceding paragraph.

Participants in the Plan may withdraw from the Plan upon notice to the Plan Agent. Such withdrawal will be effective immediately if received not less than ten days prior to a Dividend record date; otherwise, it will be effective for all subsequent Dividends. If any participant elects to have the Plan Agent sell all or part of his or her shares and remit the proceeds, the Plan Agent is authorized to deduct a $15.00 fee plus $0.10 per share brokerage commissions.

The Plan Agent’s fees for the handling of reinvestment of Dividends will be paid by the Fund. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent’s open market purchases in connection with the reinvestment of Dividends. The automatic reinvestment of Dividends will not relieve participants of any income tax that may be payable or required to be withheld on such Dividends.

The Fund reserves the right to amend or terminate the Plan. All correspondence concerning the Plan should be directed to the Plan Agent at 800-432-8224.

OTHER INFORMATION

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available (i) without charge, upon request, by calling 800-330-7348, (ii) on our website at cohenandsteers.com or (iii) on the SEC’s website at http://www.sec.gov. In addition, the Fund’s proxy voting record for the most recent 12-month period ended June 30 is available by August 31 of each year (i) without charge, upon request, by calling 800-330-7348 or (ii) on the SEC’s website at http://www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available (i) without charge, upon request, by calling 800-330-7348 or (ii) on the SEC’s website at http://www.sec.gov. In addition, the Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.

Please note that distributions paid by the Fund to shareholders are subject to recharacterization for tax purposes and are taxable up to the amount of the Fund’s investment company taxable income and net realized gains. Distributions in excess of the Fund’s net investment company taxable income and net realized gains are a return of capital distributed from the Fund’s assets. To the extent this occurs, the Fund’s shareholders of record will be notified of the estimated amount of capital returned to shareholders for each such distribution and this information will also be available at cohenandsteers.com. The final tax treatment of all distributions is reported to shareholders on their 1099-DIV forms, which are mailed after the close of each calendar year. Distributions of capital decrease the Fund’s total assets and, therefore, could

 

45


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

have the effect of increasing the Fund’s expense ratio. In addition, in order to make these distributions, the Fund may have to sell portfolio securities at a less than opportune time.

Notice is hereby given in accordance with Rule 23c-1 under the 1940 Act that the Fund may purchase, from time to time, shares of its common stock in the open market.

Benchmark Change

On September 11, 2018, the Fund’s Board of Directors approved a change to the Fund’s blended benchmark from 70% ICE BofAML US IG Institutional Capital Securities Index, 20% ICE BofAML 7% Constrained Adjustable Rate Preferred Securities Index and 10% Bloomberg Barclays Developed Market USD Contingent Capital Index to 60% ICE BofAML US IG Institutional Capital Securities Index, 20% ICE BofAML 7% Constrained Adjustable Rate Preferred Securities Index and 20% Bloomberg Barclays Developed Market USD Contingent Capital Index, effective January 1, 2019.

Investment Policy Clarification

The Fund’s investment policy of investing at least 80% of its net assets (plus any borrowings for investment purposes) in a portfolio of preferred and debt securities is being clarified to specify that CoCos are considered preferred or debt securities for purposes of this policy.

CoCos are debt or preferred securities with loss absorption characteristics built into the terms of the security, for example a mandatory conversion into common stock of the issuer under certain circumstances, such as the issuer’s capital ratio falling below a certain level. Since the common stock of the issuer may not pay a dividend, investors in these instruments could experience a reduced income rate, potentially to zero, and conversion would deepen the subordination of the investor, hence worsening the investor’s standing in a bankruptcy. Some CoCos provide for a reduction in the value or principal amount of the security under such circumstances. In addition, most CoCos are considered to be high yield or ‘junk’ securities and are therefore subject to the risks of investing in below investment-grade securities.

Change in Board of Directors

Frank K. Ross retired from the Board of Directors on December 31, 2018 pursuant to the Fund’s mandatory retirement policy.

 

46


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

MANAGEMENT OF THE FUND

The business and affairs of the Fund are managed under the direction of the Board of Directors. The Board of Directors approves all significant agreements between the Fund and persons or companies furnishing services to it, including the Fund’s agreements with its investment advisor, administrator, co-administrator, custodian and transfer agent. The management of the Fund’s day-to-day operations is delegated to its officers, the investment advisor, administrator and co-administrator, subject always to the investment objective and policies of the Fund and to the general supervision of the Board of Directors.

The Board of Directors and officers of the Fund and their principal occupations during at least the past five years are set forth below.

 

Name, Address and
Year of Birth1

  

Position(s) Held
With Fund

  

Term of
Office2

  

Principal Occupation

During At Least

The Past 5 Years
(Including Other

Directorships Held)

  

Number of
Funds Within
Fund
Complex
Overseen by
Director
(Including
the Fund)

    

Length
of Time
Served3

Interested Directors4               

Robert H. Steers

1953

   Director, Chairman    Until Next Election of Directors    Chief Executive Officer of Cohen & Steers Capital Management, Inc. (CSCM or the Advisor) and its parent, Cohen & Steers, Inc. (CNS) since 2014. Prior to that, Co-Chairman and Co-Chief Executive Officer of the Advisor since 2003 and CNS since 2004. Prior to that, Chairman of the Advisor; Vice President of Cohen & Steers Securities, LLC.      20     

Since

1991

Joseph M. Harvey

1963

   Director   

Until Next

Election of Directors

   President and Chief Investment Officer of the Advisor (since 2003) and President of CNS (since 2004). Prior to that, Senior Vice President and Director of Investment Research of CSCM.      20     

Since

2014

(table continued on next page)

 

47


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

(table continued from previous page)

 

Name, Address and
Year of Birth1

  

Position(s) Held
With Fund

  

Term of
Office2

  

Principal Occupation

During At Least

The Past 5 Years
(Including Other

Directorships Held)

  

Number of
Funds Within
Fund
Complex
Overseen by
Director
(Including
the Fund)

    

Length
of Time
Served3

Disinterested Directors            

Michael G. Clark

1965

   Director    Until Next Election of Directors    From 2006 to 2011, President and Chief Executive Officer of DWS Funds and Managing Director of Deutsche Asset Management.      20      Since 2011

George Grossman

1953

   Director    Until Next Election of Directors    Attorney-at-law.      20      Since 1993

Dean A. Junkans

1959

   Director    Until Next Election of Directors    C.F.A.; Advisor to SigFig since July, 2018; Adjunct Professor and Executive–In–Residence, Bethel University Since 2015; Chief Investment Officer at Wells Fargo Private Bank from 2004 to 2014 and Chief Investment Officer of the Wealth, Brokerage and Retirement group at Wells Fargo & Company from 2011 to 2014; Former member and Chair, Claritas Advisory Committee at the CFA Institute from 2013 to 2015; Board Member and Investment Committee member, Bethel University Foundation since 2010; formerly Corporate Executive Board Member of the National Chief Investment Officers Circle, 2010 to 2015; formerly, Member of the Board of Governors of the University of Wisconsin Foundation, River Falls, 1996 to 2004; U.S. Army Veteran, Gulf War.      20      Since 2015

(table continued on next page)

 

48


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

(table continued from previous page)

 

Name, Address and
Year of Birth1

  

Position(s) Held
With Fund

  

Term of
Office2

  

Principal Occupation

During At Least

The Past 5 Years
(Including Other

Directorships Held)

  

Number of
Funds Within
Fund
Complex
Overseen by
Director
(Including
the Fund)

  

Length
of Time
Served3

Gerald J. Maginnis

1955

   Director    Until Next Election of Directors    Philadelphia Office Managing Partner, KPMG LLP from 2006 to 2015; Partner in Charge, KPMG Pennsylvania Audit Practice from 2002 to 2008; President, Pennsylvania Institute of Certified Public Accountants (PICPA) from 2014 to 2015; member, PICPA Board of Directors from 2012 to 2016; member, Council of the American Institute of Certified Public Accountants (AICPA) from 2013 to 2017; member, Board of Trustees of AICPA Foundation since 2015.    20   

Since

2015

Jane F. Magpiong

1960

   Director    Until Next Election of Directors    President, Untap Potential since 2013; Senior Managing Director, TIAA-CREF, from 2011 to 2013; National Head of Wealth Management, TIAA-CREF, from 2008 to 2011; and prior to that, President, Bank of America Private Bank from 2005 to 2008.    20   

Since

2015

(table continued on next page)

 

49


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

(table continued from previous page)

 

Name, Address and
Year of Birth1

  

Position(s) Held
With Fund

  

Term of
Office2

  

Principal Occupation

During At Least

The Past 5 Years
(Including Other

Directorships Held)

  

Number of
Funds Within
Fund
Complex
Overseen by
Director
(Including
the Fund)

  

Length
of Time
Served3

Daphne L. Richards

1966

   Director    Until Next Election of Directors    Independent Director of Cartica Management, LLC since 2015; Member of the Investment Committee of the Berkshire Taconic Community Foundation since 2015; Member of the Advisory Board of Northeast Dutchess Fund since 2016; President and CIO of Ledge Harbor Management since 2016; Formerly, worked at Bessemer Trust Company from 1999 to 2014; Prior thereto, Ms. Richards held investment positions at Frank Russell Company from 1996 to 1999. Union Bank of Switzerland from 1993 to 1996; Credit Suisse from 1990 to 1993; and Hambros International Venture Capital Fund from 1988 to 1989.    20    Since 2017

(table continued on next page)

 

50


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

(table continued from previous page)

 

Name, Address and
Year of Birth1

  

Position(s) Held
With Fund

  

Term of
Office2

  

Principal Occupation

During At Least

The Past 5 Years
(Including Other

Directorships Held)

  

Number of
Funds Within
Fund
Complex
Overseen by
Director
(Including
the Fund)

  

Length
of Time
Served3

Frank K. Ross

1943

  

Director

   5    Visiting Professor of Accounting and Director of the Center for Accounting Education at Howard University School of Business since 2004; Board member and member of Audit Committee (Chairman from 2007 to 2012) and Human Resources and Compensation Committee Member, Pepco Holdings, Inc. (electric utility) from 2004 to 2014; Formerly, Mid-Atlantic Area Managing Partner for Assurance Services at KPMG LLP and Managing Partner of its Washington, DC offices from 1995 to 2003.    20    Since 2004

C. Edward Ward, Jr.

1946

   Director    Until Next Election of Directors    Member of The Board of Trustees of Manhattan College, Riverdale,New York from 2004 to 2014. Formerly, Director of closed-end fund management for the NYSE where he worked from 1979 to 2004.    20    Since 2004

 

 

1 

The address for each director is 280 Park Avenue, New York, NY 10017.

2 

On March 12, 2008, the Board of Directors adopted a mandatory retirement policy stating a Director must retire from the Board on December 31st of the year in which he or she turns 75 years of age.

3 

The length of time served represents the year in which the Director was first elected or appointed to any fund in the Cohen & Steers fund complex.

4 

“Interested person” as defined in the 1940 Act, of the Fund because of affiliation with CSCM (Interested Directors).

5 

Frank K. Ross retired from the Board of Directors on December 31, 2018 pursuant to the Fund’s mandatory retirement policy.

 

51


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

The officers of the Fund (other than Messrs. Steers and Harvey, whose biographies are provided above), their address, their year of birth and their principal occupations for at least the past five years are set forth below.

 

Name, Address and

Year of Birth1

  

Position(s) Held

With Fund

  

Principal Occupation During At Least the Past 5 Years

 

Length

of Time

Served2

Adam M. Derechin

1964

   President and Chief Executive Officer    Chief Operating Officer of CSCM since 2003 and CNS since 2004.   Since 2005

William F. Scapell

1968

   Vice President    Executive Vice President of CSCM since 2014. Prior to that, Senior Vice President of CSCM since 2003.   Since 2003

Elaine Zaharis-Nikas

1973

   Vice President    Senior Vice President of CSCM since 2014. Prior to that, Vice President of CSCM since 2003.   Since 2015

Dana A. DeVivo

1981

   Secretary and Chief Legal Officer    Senior Vice President of CSCM since 2019. Prior to that, Vice President of CSCM since 2013.   Since 2015

James Giallanza

1966

   Chief Financial Officer    Executive Vice President of CSCM since 2014 . Prior to that, Senior Vice President of CSCM since 2006.   Since 2006

Albert Laskaj

1977

   Treasurer    Senior Vice President of CSCM since 2019. Prior to that, Vice President of CSCM since 2015. Prior to that, Director of Legg Mason & Co. since 2013.   Since 2015

Lisa D. Phelan

1968

   Chief Compliance Officer    Executive Vice President of CSCM since 2015. Prior to that, Senior Vice President of CSCM since 2008. Chief Compliance Officer of CSCM, the Cohen & Steers funds, Cohen & Steers Asia Limited and CSSL since 2007, 2006, 2005 and 2004, respectively.   Since 2006

 

 

1 

The address of each officer is 280 Park Avenue, New York, NY 10017.

2 

Officers serve one-year terms. The length of time served represents the year in which the officer was first elected as an officer of any fund in the Cohen & Steers fund complex. All of the officers listed above are officers of one or more of the other funds in the complex.

 

52


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

Cohen & Steers Privacy Policy

 

   
Facts   What Does Cohen & Steers Do With Your Personal Information?
Why?   Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.
What?  

The types of personal information we collect and share depend on the product or service you have with us. This information can include:

 

• Social Security number and account balances

 

• Transaction history and account transactions

 

• Purchase history and wire transfer instructions

How?   All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons Cohen & Steers chooses to share; and whether you can limit this sharing.

 

Reasons we can share your personal information   

Does Cohen & Steers

share?

    

Can you limit this

sharing?

For our everyday business purposes—

such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or reports to credit bureaus

   Yes      No

For our marketing purposes—

to offer our products and services to you

   Yes      No
For joint marketing with other financial companies—    No      We don’t share

For our affiliates’ everyday business purposes—

information about your transactions and experiences

   No      We don’t share

For our affiliates’ everyday business purposes—

information about your creditworthiness

   No      We don’t share
For our affiliates to market to you—    No      We don’t share
For non-affiliates to market to you—    No      We don’t share
       
     
Questions? Call 800.330.7348            

 

53


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

Cohen & Steers Privacy Policy—(Continued)

 

   
Who we are    
Who is providing this notice?   Cohen & Steers Capital Management, Inc., Cohen & Steers Asia Limited, Cohen & Steers Japan, LLC, Cohen & Steers UK Limited, Cohen & Steers Securities, LLC, Cohen & Steers Private Funds and Cohen & Steers Open and Closed-End Funds (collectively, Cohen & Steers).
What we do    
How does Cohen & Steers protect my personal information?   To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings. We restrict access to your information to those employees who need it to perform their jobs, and also require companies that provide services on our behalf to protect your information.
How does Cohen & Steers collect my personal information?  

We collect your personal information, for example, when you:

 

• Open an account or buy securities from us

 

• Provide account information or give us your contact information

 

• Make deposits or withdrawals from your account

 

We also collect your personal information from other companies.

Why can’t I limit all sharing?  

Federal law gives you the right to limit only:

 

• sharing for affiliates’ everyday business purposes—information about your creditworthiness

 

• affiliates from using your information to market to you

 

• sharing for non-affiliates to market to you

 

State law and individual companies may give you additional rights to limit sharing.

Definitions    
Affiliates  

Companies related by common ownership or control. They can be financial and nonfinancial companies.

 

• Cohen & Steers does not share with affiliates.

Non-affiliates  

Companies not related by common ownership or control. They can be financial and nonfinancial companies.

 

• Cohen & Steers does not share with non-affiliates.

Joint marketing  

A formal agreement between non-affiliated financial companies that together market financial products or services to you.

 

• Cohen & Steers does not jointly market.

 

54


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

Cohen & Steers Investment Solutions

 

COHEN & STEERS REAL ASSETS FUND

 

  Designed for investors seeking total return and the maximization of real returns during inflationary environments by investing primarily in real assets

 

  Symbols: RAPAX, RAPCX, RAPIX, RAPRX, RAPZX

COHEN & STEERS GLOBAL REALTY SHARES

 

  Designed for investors seeking total return, investing primarily in global real estate equity securities

 

  Symbols: CSFAX, CSFCX, CSSPX, GRSRX, CSFZX

COHEN & STEERS REALTY SHARES

 

  Designed for investors seeking total return, investing primarily in U.S. real estate securities

 

  Symbol: CSRSX

COHEN & STEERS REAL ESTATE SECURITIES FUND

 

  Designed for investors seeking total return, investing primarily in U.S. real estate securities

 

  Symbols: CSEIX, CSCIX, CREFX, CSDIX, CIRRX, CSZIX

COHEN & STEERS INSTITUTIONAL REALTY SHARES

 

  Designed for institutional investors seeking total return, investing primarily in U.S. real estate securities

 

  Symbol: CSRIX

COHEN & STEERS INTERNATIONAL REALTY FUND

 

  Designed for investors seeking total return, investing primarily in international (non-U.S.) real estate securities

 

  Symbols: IRFAX, IRFCX, IRFIX, IRFRX, IRFZX

COHEN & STEERS GLOBAL INFRASTRUCTURE FUND

 

  Designed for investors seeking total return, investing primarily in global infrastructure securities

 

  Symbols: CSUAX, CSUCX, CSUIX, CSURX, CSUZX

COHEN & STEERS MLP & ENERGY OPPORTUNITY FUND

 

  Designed for investors seeking total return, investing primarily in midstream energy master limited partnership (MLP) units and related stocks

 

  Symbols: MLOAX, MLOCX, MLOIX, MLORX, MLOZX

COHEN & STEERS LOW DURATION PREFERRED AND INCOME FUND

 

  Designed for investors seeking high current income and capital preservation by investing in low-duration preferred and other income securities issued by U.S. and non-U.S. companies

 

  Symbols: LPXAX, LPXCX, LPXIX, LPXRX, LPXZX

COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND

 

  Designed for investors seeking total return (high current income and capital appreciation), investing primarily in preferred and debt securities issued by U.S. and non-U.S. companies

 

  Symbols: CPXAX, CPXCX, CPXFX, CPXIX, CPRRX, CPXZX

COHEN & STEERS DIVIDEND VALUE FUND

 

  Designed for investors seeking long-term growth of income and capital appreciation, investing primarily in dividend paying common stocks and preferred stocks

 

  Symbols: DVFAX, DVFCX, DVFIX, DVFRX, DVFZX
 

Distributed by Cohen & Steers Securities, LLC.

 

 

COHEN & STEERS GLOBAL REALTY MAJORS ETF

 

  Designed for investors who seek a relatively low-cost passive approach for investing in a portfolio of global real estate equity securities of companies in a specified index

 

  Symbol: GRI

Distributed by ALPS Portfolio Solutions Distributor, Inc.

ISHARES COHEN & STEERS REALTY MAJORS INDEX FUND

 

  Designed for investors who seek a relatively low-cost passive approach for investing in a portfolio of U.S. real estate equity securities of companies in a specified index

 

  Symbol: ICF

Distributed by BlackRock Investments, LLC

 

Please consider the investment objectives, risks, charges and expenses of any Cohen & Steers U.S. registered open-end fund carefully before investing. A summary prospectus and prospectus containing this and other information can be obtained by calling 800-330-7348 or by visiting cohenandsteers.com. Please read the summary prospectus and prospectus carefully before investing.

 

55


COHEN & STEERS LIMITED DURATION PREFERRED AND INCOME FUND, INC.

 

OFFICERS AND DIRECTORS

Robert H. Steers

Director and Chairman

Joseph M. Harvey

Director and Vice President

Michael G. Clark

Director

George Grossman

Director

Dean A. Junkans

Director

Gerald J. Maginnis

Director

Jane F. Magpiong

Director

Daphne L. Richards

Director

Frank K. Ross

Director

C. Edward Ward, Jr.

Director

Adam M. Derechin

President and Chief Executive Officer

William F. Scapell

Vice President

Elaine Zaharis-Nikas

Vice President

Dana A. DeVivo

Secretary and Chief Legal Officer

James Giallanza

Chief Financial Officer

Albert Laskaj

Treasurer

Lisa D. Phelan

Chief Compliance Officer

KEY INFORMATION

Investment Advisor

Cohen & Steers Capital Management, Inc.

280 Park Avenue

New York, NY 10017

(212) 832-3232

Co-administrator and Custodian

State Street Bank and Trust Company

One Lincoln Street

Boston, MA 02111

Transfer Agent

Computershare

480 Washington Boulevard

Jersey City, NJ 07310

(866) 227-0757

Legal Counsel

Ropes & Gray LLP

1211 Avenue of the Americas

New York, NY 10036

New York Stock Exchange Symbol:    LDP

Website: cohenandsteers.com

This report is for shareholder information. This is not a prospectus intended for use in the purchase or sale of Fund shares. Performance data quoted represent past performance. Past performance is no guarantee of future results and your investment may be worth more or less at the time you sell your shares.

 

 

56


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Cohen & Steers

Limited Duration

Preferred and

Income Fund

Annual Report December 31, 2018

Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the Fund’s annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website at www.cohenandsteers.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.

If you have already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from a Fund electronically anytime by contacting your financial intermediary or, if you are a direct investor, by signing up at www.cohenandsteers.com.

Beginning on January 1, 2019, you may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary or, if you are a direct investor, you can call (866) 227-0757 to let the Fund know you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all Funds held in your account if you invest through your financial intermediary or all Funds held within the fund complex if you invest directly with the Fund.

LDPAR

 

 

 


Item 2. Code of Ethics.

The registrant has adopted an Amended and Restated Code of Ethics that applies to its Principal Executive Officer and Principal Financial Officer. The Code of Ethics was in effect during the reporting period. The registrant amended the personal trading ‘blackout period’ in the Code of Ethics during the reporting period to reflect changes to the timeline for processing Fund distributions. The registrant has not granted any waiver, including an implicit waiver, from a provision of the Code of Ethics as described in Form N-CSR during the reporting period. A current copy of the Code of Ethics is available on the registrant’s website at https://www.cohenandsteers.com/assets/content/uploads/Code_of_Ethics_for_Principal_Executive_and_Principal_Financial_Officers_of_the_Funds.pdf. Upon request, a copy of the Code of Ethics can be made by calling 800-330-7348 or writing to the Secretary of the registrant, 280 Park Avenue, 10th floor, New York, NY 10017.

Item 3. Audit Committee Financial Expert.

The registrant’s board has determined that Gerald J. Maginnis and Frank K. Ross qualify as audit committee financial experts based on their years of experience in the public accounting profession. The registrant’s board has determined that Michael G. Clark qualifies as an audit committee financial expert based on his years of experience in the public accounting profession and the investment management and financial services industry. Until December 31, 2018, each of Messrs. Clark, Ross and Maginnis was a member of the board’s audit committee, and each was “independent” as such term is defined in Form N-CSR. Mr. Ross retired from the registrant’s board on December 31, 2018 pursuant to the Fund’s mandatory retirement policy and is no longer a member of the board’s audit committee. Effective January 1, 2019, each of Messrs. Clark and Maginnis is a member of the board’s audit committee, and each is independent as such term is defined in Form N-CSR.

Item 4. Principal Accountant Fees and Services.

(a) – (d) Aggregate fees billed to the registrant for the last two fiscal years ended December 31, 2018 and December 31, 2017 for professional services rendered by the registrant’s principal accountant were as follows:

 

     2018    2017

Audit Fees

   $40,540    $39,700

Audit-Related Fees

   $0    $0

Tax Fees

   $5,850    $5,740

All Other Fees

   $0    $0

Tax fees were billed in connection with tax compliance services, including the preparation and review of federal and state tax returns and the computation of corporate and franchise tax amounts.

(e)(1) The registrant’s audit committee is required to pre-approve audit and non-audit services performed for the registrant by the principal accountant. The audit committee also is required to

 

 

 


pre-approve non-audit services performed by the registrant’s principal accountant for the registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor) and/or to any entity controlling, controlled by or under common control with the registrant’s investment advisor that provides ongoing services to the registrant, if the engagement for services relates directly to the operations and financial reporting of the registrant.

The audit committee may delegate pre-approval authority to one or more of its members who are independent members of the board of directors of the registrant. The member or members to whom such authority is delegated shall report any pre-approval decisions to the audit committee at its next scheduled meeting. The audit committee may not delegate its responsibility to pre-approve services to be performed by the registrant’s principal accountant to the investment advisor.

(e)(2) No services included in (b) – (d) above were approved by the audit committee pursuant to paragraphs (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Not applicable.

(g) For the fiscal years ended December 31, 2018 and December 31, 2017, the aggregate fees billed by the registrant’s principal accountant for non-audit services rendered to the registrant and for non-audit services rendered to the registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor) and/or to any entity controlling, controlled by or under common control with the registrant’s investment advisor that provides ongoing services to the registrant were:

 

     2018    2017

Registrant

   $5,850    $5,740

Investment Advisor

   $0    $0

(h) The registrant’s audit committee considered whether the provision of non-audit services that were rendered to the registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor) and/or to any entity controlling, controlled by or under common control with the registrant’s investment advisor that provides ongoing services to the registrant that were not required to be pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X was compatible with maintaining the principal accountant’s independence.

Item 5. Audit Committee of Listed Registrants.

The registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. As of December 31, 2018, the members of the committee were Frank K. Ross (chairman), Michael G. Clark, George Grossman and Gerald J. Maginnis. Mr. Ross retired on December 31, 2018 pursuant to the Fund’s mandatory retirement policy, and Mr. Maginnis was elected to serve as Audit Committee Chair effective January 1, 2019. Effective January 1, 2019, the members of the committee are Messrs. Maginnis (chairman), Clark and Grossman.

 

 

 


Item 6. Schedule of Investments.

Included in Item 1 above.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

The registrant has delegated voting of proxies in respect of portfolio holdings to Cohen & Steers Capital Management, Inc. (“C&S”), in accordance with the policies and procedures set forth below.

COHEN & STEERS CAPITAL MANAGEMENT, INC.

STATEMENT OF POLICIES AND PROCEDURES REGARDING THE VOTING OF SECURITIES

This statement sets forth the policies and procedures that Cohen & Steers Capital Management, Inc. and its affiliated advisors (“Cohen & Steers”, “we” or “us”) follow in exercising voting rights with respect to securities held in its client portfolios. All proxy-voting rights that are exercised by Cohen & Steers shall be subject to this Statement of Policy and Procedures.

General Proxy Voting Guidelines

Objectives

Voting rights are an important component of corporate governance. Cohen & Steers has three overall objectives in exercising voting rights:

 

  ·  

Responsibility. Cohen & Steers shall seek to ensure that there is an effective means in place to hold companies accountable for their actions. While management must be accountable to its board, the board must be accountable to a company’s shareholders. Although accountability can be promoted in a variety of ways, protecting shareholder voting rights may be among our most important tools.

 

  ·  

Rationalizing Management and Shareholder Concerns. Cohen & Steers seeks to ensure that the interests of a company’s management and board are aligned with those of the company’s shareholders. In this respect, compensation must be structured to reward the creation of shareholder value.

 

  ·  

Shareholder Communication. Since companies are owned by their shareholders, Cohen & Steers seeks to ensure that management effectively communicates with its owners about the company’s business operations and financial performance. It is only with effective communication that shareholders will be able to assess the performance of management and to make informed decisions on when to buy, sell or hold a company’s securities.

 

 

 


General Principles

In exercising voting rights, Cohen & Steers shall conduct itself in accordance with the general principles set forth below.

 

  ·  

The ability to exercise a voting right with respect to a security is a valuable right and, therefore, must be viewed as part of the asset itself.

 

  ·  

In exercising voting rights, Cohen & Steers shall engage in a careful evaluation of issues that may materially affect the rights of shareholders and the value of the security.

 

  ·  

Consistent with general fiduciary principles, the exercise of voting rights shall always be conducted with reasonable care, prudence and diligence.

 

  ·  

In exercising voting rights on behalf of clients, Cohen & Steers shall conduct itself in the same manner as if Cohen & Steers were the constructive owner of the securities.

 

  ·  

To the extent reasonably possible, Cohen & Steers shall participate in each shareholder voting opportunity.

 

  ·  

Voting rights shall not automatically be exercised in favor of management-supported proposals.

 

  ·  

Cohen & Steers, and its officers and employees, shall never accept any item of value in consideration of a favorable proxy voting decision.

General Guidelines

Set forth below are general guidelines that Cohen & Steers shall follow in exercising proxy voting rights:

 

  ·  

Prudence. In making a proxy voting decision, Cohen & Steers shall give appropriate consideration to all relevant facts and circumstances, including the value of the securities to be voted and the likely effect any vote may have on that value. Since voting rights must be exercised on the basis of an informed judgment, investigation shall be a critical initial step.

  ·  

Third Party Views. While Cohen & Steers may consider the views of third parties, Cohen & Steers shall never base a proxy voting decision solely on the opinion of a third party. Rather, decisions shall be based on a reasonable and good faith determination as to how best to maximize shareholder value.

  ·  

Shareholder Value. Just as the decision whether to purchase or sell a security is a matter of judgment, determining whether a specific proxy resolution will increase the market value of a security is a matter of judgment as to which informed parties may differ. In determining how a proxy vote may affect the economic value of a security, Cohen & Steers shall consider both short-term and long-term views about a company’s business and prospects, especially in light of our projected holding period on the stock (e.g., Cohen & Steers may discount long-term views on a short-term holding).

 

 

 


Specific Guidelines

A. Responsibility. Cohen & Steers shall seek to ensure that there is an effective means in place to hold companies accountable for their actions. While management must be accountable to its board, the board must be accountable to a company’s shareholders. Although accountability can be promoted in a variety of ways, protecting shareholder voting rights may be among our most important tools.

B. Rationalizing Management and Shareholder Concerns. Cohen & Steers seeks to ensure that the interests of a company’s management and board are aligned with those of the company’s shareholders. In this respect, compensation must be structured to reward the creation of shareholder value.

C. Shareholder Communication. Since companies are owned by their shareholders, Cohen & Steers seeks to ensure that management effectively communicates with its owners about the company’s business operations and financial performance. It is only with effective communication that shareholders will be able to assess the performance of management and to make informed decisions on when to buy, sell or hold a company’s securities.

In exercising voting rights, Cohen & Steers follows the general principles set forth below.

 

 

The ability to exercise a voting right with respect to a security is a valuable right and, therefore, must be viewed as part of the asset itself.

 

 

In exercising voting rights, Cohen & Steers shall engage in a careful evaluation of issues that may materially affect the rights of shareholders and the value of the security.

 

 

Consistent with general fiduciary principles, the exercise of voting rights shall always be conducted with reasonable care, prudence and diligence.

 

 

In exercising voting rights on behalf of clients, Cohen & Steers shall conduct itself in the same manner as if Cohen & Steers were the beneficial owners of the securities.

 

 

To the extent reasonably possible, Cohen & Steers shall participate in each shareholder voting opportunity.

 

 

Voting rights shall not automatically be exercised in favor of management-supported proposals.

 

 

Cohen & Steers, and their respective officers and employees, shall never accept any item of value in consideration of a favorable proxy vote.

Set forth below are general guidelines followed by Cohen & Steers in exercising proxy voting rights:

Prudence. In making a proxy voting decision, Cohen & Steers shall give appropriate consideration to all relevant facts and circumstances, including the value of the securities to be voted and the likely effect any vote may have on that value. Since voting rights must be exercised on the basis of an informed judgment, investigation shall be a critical initial step.

Third Party Views. While Cohen & Steers may consider the views of third parties, Cohen & Steers shall never base a proxy voting decision solely on the opinion of a third party. Rather, decisions shall be based on a reasonable and good faith determination as to how best to maximize shareholder value.

 

 

 


Shareholder Value. Just as the decision whether to purchase or sell a security is a matter of judgment, determining whether a specific proxy resolution will increase the market value of a security is a matter of judgment as to which informed parties may differ. In determining how a proxy vote may affect the economic value of a security, Cohen & Steers shall consider both short-term and long-term views about a company’s business and prospects, especially in light of its projected holding period on the stock (e.g., Cohen & Steers Capital Management, Inc. may discount long-term views on a short-term holding).

Voting for Directors Nominees in Uncontested Elections

Votes on director nominees are made on a case-by-case basis using a “mosaic” approach, where all factors are considered and no single factor is determinative. In evaluating director nominees, Cohen & Steers considers the following factors:

 

 

Whether the nominee attended less than 75 percent of the board and committee meetings without a valid excuse for the absences;

 

 

Whether the nominee is an inside or affiliated outside director and sits on the audit, compensation, or nominating committees and/or the full board serves as the audit, compensation, or nominating committees or the company does not have one of these committees;

 

 

Whether the board ignored a significant shareholder proposal that was approved by a majority of the votes cast in the previous year;

 

 

Whether the board, without shareholder approval, to our knowledge instituted a new poison pill plan, extended an existing plan, or adopted a new plan upon the expiration of an existing plan during the past year;

 

 

Whether the nominee is the chairman or CEO of a publicly-traded company who serves on more than two (2) public company boards;

 

 

In the case of nominees other than the chairman or CEO, whether the nominee serves on more than four (4) public company boards;

 

 

If the nominee is an incumbent director, the length of tenure taking into account tenure limits recommended by local corporate governance codes1;

 

 

Whether the nominee has a material related party transaction or a material conflict of interest with the company;

 

 

Whether the nominee (or the entire board) in our view has a record of making poor corporate or strategic decisions or has demonstrated an overall lack of good business judgment;

 

 

Material failures of governance, stewardship, risk oversight2, or fiduciary responsibilities at the company; and

 

 

1 

For example, in the UK, independent directors of publicly traded companies with tenure exceeding nince (9) years are reclassified as non-independent unless the company can explain why they remain independent.

2 

Examples of failure of risk oversight include, but are not limited to: bribery; large or serial fines from regulatory bodies; significant adverse legal judgments or settlements; hedging of company stock by the employees or directors of a company; or a significant pledging of company stock in the aggregate by the officers and directors of a company.

 

 


 

Actions related to a nominee’s service on other boards that raise substantial doubt about his or her ability to effectively oversee management and serve the best interests of shareholders at any company.

Voting for Director Nominees in Contested Elections

Votes in a contested election of directors are evaluated on a case-by-case basis considering the long-term financial performance of the company relative to its industry management’s track record, the qualifications of the nominees and other relevant factors.

The Majority Vote for Directors

Cohen & Steers generally votes for proposals asking for the board to amend the company’s governance documents (charter or bylaws) to provide that director nominees will be elected by the affirmative vote of the majority of votes cast at an annual meeting of shareholders.

Separation of Chairman and CEO

Cohen & Steers generally votes for proposals to separate the CEO and chairman positions. Cohen & Steers does recognize, however, that under certain circumstances, it may be in the company’s best interest for the CEO and chairman positions to be held by one person.

The Independent Chairman

Cohen & Steers reviews on a case-by-case basis proposals requiring the chairman’s position to be filled by an independent director, taking into account the company’s current board leadership and governance structure; company performance, and any other factors that may be relevant.

Lead Independent Directors

In cases where the CEO and chairman roles are combined or the chairman is not independent, Cohen & Steers vote for the appointment of a lead independent director.

Board Independence

Cohen & Steers believes that boards should have a majority of independent directors. Therefore, Cohen & Steers vote for proposals that require the board to be comprised of a majority of independent directors.

Generally, Cohen & Steers considers a director independent if the director satisfies the independence definition set forth in local corporate governance codes and/or the applicable listing standards of the exchange on which the company’s stock is listed.

In addition, Cohen & Steers generally considers a director independent if the director has no significant financial, familial or other ties with the company that may pose a conflict, and has not been employed by the company in an executive capacity.

Board Size

Cohen & Steers generally votes for proposals to limit the size of the board to 15 members or less.

 

 

 


Classified Boards

Cohen & Steers generally votes in favor of shareholder proposals to declassify a board of directors. In voting on proposals to declassify a board of directors, Cohen & Steers evaluates all facts and circumstances, including whether: (i) the current management and board have a history of making good corporate or strategic decisions and (ii) the proposal is in the best interests of shareholders.

Independent Committees

Cohen & Steers votes for proposals requesting that a board’s audit, compensation and nominating committees consist only of independent directors.

Non-Disclosure of Board Compensation

Cohen & Steers generally votes against the election of director nominees at companies if the compensation paid to such directors is not disclosed prior to the meeting. However, Cohen & Steers recognizes that companies in certain emerging markets may have legitimate reasons for not disclosing such compensation. In such cases, if a company discloses a legitimate reason why such compensation should not be disclosed, Cohen & Steers may vote for the nominees even if compensation is not disclosed.

Director and Officer Indemnification and Liability Protection

Cohen & Steers votes in favor of proposals providing indemnification for directors and officers for acts conducted in the normal course of business that is consistent with the law of the jurisdiction of formation. Cohen & Steers alsos vote in favor of proposals that expand coverage for directors and officers where, despite an unsuccessful legal defense, the director or officer acted in good faith and in the best interests of the company. Cohen & Steers votes against proposals that would expand indemnification beyond coverage of legal expenses to coverage of acts, such as gross negligence, that are violations of fiduciary obligations.

Compensation Proposals

Votes on Executive Compensation. “Say-on-Pay” votes are determined on a case-by-case basis taking into account the reasonableness of the company’s compensation structure and the adequacy of the disclosure.

Cohen & Steers generally votes against in cases where there are an unacceptable under of problematic pay practices including:

 

 

Poor linkage between the executives’ pay and the company’s performance and profitability;

 

 

The presence of objectionable structural features in the compensation plan, such as excessive perquisites, golden parachutes, tax-gross up provisions, and automatic benchmarking of pay in the top half of the peer group;

 

 

A lack of proportionality in the plan relative to the company’s size and peer group.

Additional Disclosure on Executive and Director Pay. Cohen & Steers generally votes for shareholder proposals that seek additional disclosure of executive and director pay information.

Frequency of Shareholder Votes on Executive Compensation. Cohen & Steers generally votes for annual shareholder advisory votes to approve executive compensation.

 

 

 


Golden Parachutes. In general, Cohen & Steers votes against golden parachutes because they impede potential takeovers that shareholders should be free to consider. Cohen & Steers opposes the use of employment agreements that result in excessive cash payments and generally withhold our vote at the next shareholder meeting for directors who approved golden parachutes.

In the context of an acquisition, merger, consolidation, or proposed sale, Cohen & Steers votes on a case-by-case basis on proposals to approve golden parachute payments. Factors that may result to a vote against include:

 

 

Potentially excessive severance payments;

 

 

Agreements that include excessive excise tax gross-up provisions;

 

 

Single-trigger payments upon a Change in Control (“CIC”), including cash payments and the acceleration of performance-based equity despite the failure to achieve performance measures;

 

 

Single-trigger vesting of equity based on a definition of change in control that requires only shareholder approval of the transaction (rather than consummation);

 

 

Recent amendments or other changes that may make packages so attractive as to encourage transactions that may not be in the best interests of shareholders; or

 

 

The company’s assertion that a proposed transaction is conditioned on shareholder approval of the golden parachute advisory vote.

Equity Compensation Plans. Votes on proposals related to compensation plans are determined on a case-by-case basis taking into account plan features and equity grant practices, where positive factors may counterbalance negative factors (and vice versa), as evaluated based on three pillars:

 

 

Plan Cost: the total estimated cost of the company’s equity plans relative to industry/market cap peers measured by the company’s estimated shareholder value transfer (SVT) in relation to peers, considering:

   

SVT based on new shares requested plus shares remaining for future grants, plus outstanding unvested/unexercised grants; and

   

SVT based only on new shares requested plus shares remaining for future grants.

 

 

Plan Features:

   

Automatic single-triggered award vesting upon CIC;

   

Discretionary vesting authority;

   

Liberal share recycling on various award types; and

   

Minimum vesting period for grants made under the plan.

 

 

Grant Practices:

   

The company’s three year burn rate relative to its industry/market cap peers;

   

Vesting requirements for most recent CEO equity grants (3-year look-back);

   

The estimated duration of the plan based on the sum of shares remaining available and the new shares requested divided by the average annual shares granted in the prior three years;

   

The proportion of the CEO’s most recent equity grants/awards subject to performance conditions;

   

Whether the company maintains a claw-back policy; and

   

Whether the company has established post exercise/vesting share-holding requirements.

 

 

 


Cohen & Steers generally votes against compensation plan proposals if the combination of factors indicates that the plan is not, overall, in the shareholders’ interest, or if any of the following apply:

 

 

Awards may vest in connection with a liberal CIC;

 

 

The plan would permit re-pricing or cash buyout of underwater options without shareholder approval;

 

 

The plan is a vehicle for problematic pay practices or a pay-for-performance disconnect; or

 

 

Any other plan features that are determined to have a significant negative impact on shareholder interests.

Transferable Stock Options. Cohen & Steers evaluates on a case-by-case basis proposals to grant transferable stock options or otherwise permit the transfer of outstanding stock options, including cost of proposal and alignment with shareholder interests.

Approval of Cash or Cash-and-Stock Bonus Plans. Cohen & Steers votes to approve cash or cash-and-stock bonus plans that seek to exempt executive compensation from limits on deductibility imposed by Section 162(m) of the Internal Revenue Code.

Employee Stock Purchase Plans. Cohen & Steers votes for the approval of employee stock purchase plans, although Cohen & Steers generally believes the discounted purchase price should not exceed 15% of the current market price.

401(k) Employee Benefit Plans. Cohen & Steers votes for proposals to implement a 401(k) savings plan for employees.

Stock Ownership Requirements. Cohen & Steers supports proposals requiring senior executives and directors to hold a minimum amount of stock in a company (often expressed as a percentage of annual compensation), which may include restricted stock or restricted stock units.

Stock Holding Periods. Cohen & Steers generally votes against proposals requiring executives to hold stock received upon option exercise for a specific period of time.

Recovery of Incentive Compensation. Cohen & Steers generally votes for proposals to recover incentive bonuses or other incentive payments made to senior executives if it is later determined that fraud, misconduct, or negligence significantly contributed to a restatement of financial results that led to the award of incentive compensation.

Capital Structure Changes and Anti-Takeover Proposals

Increase to Authorized Shares. Cohen & Steers generally votes for increases in authorized shares, provided that the increase is not greater than three times the number of shares outstanding and reserved for issuance (including shares reserved for stock-related plans and securities convertible into common stock, but not shares reserved for any poison pill plan).

Blank Check Preferred Stock. Cohen & Steers generally votes against proposals authorizing the creation of new classes of preferred stock without specific voting, conversion, distribution and other rights, and proposals to increase the number of authorized blank check preferred shares. Cohen & Steers may vote in favor of these proposals if Cohen & Steers receives reasonable assurances that (i) the preferred stock was authorized by the board for legitimate capital formation purposes and not for anti-takeover purposes, and (ii) no preferred stock will be issued

 

 

 


with voting power that is disproportionate to the economic interests of the preferred stock. These representations should be made either in the proxy statement or in a separate letter from the company to us.

Pre-emptive Rights. Cohen & Steers generally votes against the issuance of equity shares with pre-emptive rights. However, Cohen & Steers may vote for shareholder pre-emptive rights where such pre-emptive rights are necessary taking in to account the best interests of the company’s shareholders. In addition, we acknowledge that international local practices may call for shareholder pre-emptive rights when a company seeks authority to issue shares (e.g., UK authority for the issuance of only up to 5% of outstanding shares without pre-emptive rights). While Cohen & Steers prefers that companies be permitted to issue shares without pre-emptive rights, in deference to international local practices, Cohen & Steers will approve issuance requests with pre-emptive rights.

Dual Class Capitalizations. Because classes of common stock with unequal voting rights limit the rights of certain shareholders, we vote against adoption of a dual or multiple class capitalization structure. Cohen & Steers supports the one-share, one-vote principle for voting.

Restructurings/Recapitalizations. Cohen & Steers reviews proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan on a case-by-case basis. In voting, Cohen & Steers considers the following issues:

 

 

Dilution: how much will the ownership interest of existing shareholders be reduced, and how extreme will dilution to any future earnings be?

 

 

Change in control: will the transaction result in a change in control of the company?

 

 

Bankruptcy: generally, approve proposals that facilitate debt restructurings unless there are clear signs of self-dealing or other abuses.

Share Repurchase Programs. Cohen & Steers generally votes in favor of such programs where the repurchase would be in the long-term best interests of shareholders and where we believe that this is a good use of the company’s cash.

Cohen & Steers will vote against such programs when shareholders’ interests could be better served by deployment of the cash for alternative uses, or where the repurchase is a defensive maneuver or an attempt to entrench management.

Targeted Share Placements. Cohen & Steers votes these proposals on a case-by-case basis. These proposals ask companies to seek shareholder approval before placing 10% or more of their voting stock with a single investor. The proposals are typically in reaction to the placement of a large block of voting stock in an employee stock option plan, parent capital fund or with a single friendly investor, with the aim of protecting the company against a hostile tender offer.

Shareholder Rights Plans. Cohen & Steers reviews on a case-by-case basis proposals to ratify shareholder rights plans taking into consideration the length of the plan.

Reincorporation Proposals. Proposals to change a company’s jurisdiction of incorporation are examined on a case-by-case basis. When evaluating such proposals, Cohen & Steers reviews management’s rationale for the proposal, changes to the charter/bylaws, and differences in the applicable laws governing the companies.

 

 

 


Voting on State Takeover Statutes. Cohen & Steers reviews on a case-by-case basis proposals to opt in or out of state takeover statutes (including control share acquisition statutes, control share cash-out statutes, freeze-out provisions, fair price provisions, stakeholder laws, poison pill endorsements, severance pay and labor contract provisions and disgorgement provisions). In voting on these shareholder proposals, Cohen & Steers takes into account whether the proposal is in the long-term best interests of the company and whether it would be in the best interests of the company to thwart a shareholder’s attempt to control the board of directors.

Mergers and Corporate Restructurings

Mergers and Acquisitions. Votes on mergers and acquisitions should be considered on a case-by-case basis, taking into account the anticipated financial and operating benefits, offer price (cost vs. premium), prospects of the combined companies, how the deal was negotiated and changes in corporate governance and their impact on shareholder rights.

Cohen & Steers votes against proposals that require a super-majority of shareholders to approve a merger or other significant business combination.

Nonfinancial Effects of a Merger or Acquisition. Some companies have proposed charter provisions that specify that the board of directors may examine the nonfinancial effects of a merger or acquisition on the company. This provision would allow the board to evaluate the impact a proposed change in control would have on employees, host communities, suppliers and/or others. Cohen & Steers generally vote against proposals to adopt such charter provisions. Directors should base their decisions solely on the financial interests of the shareholders.

Spin-offs. Cohen & Steers evaluates spin-offs on a case-by-case basis taking into account the tax and regulatory advantages, planned use of sale proceeds, market focus, and managerial incentives.

Asset Sales. Cohen & Steers evaluates asset sales on a case-by-case basis taking into account the impact on the balance sheet/working capital, value received for the asset, and potential elimination of diseconomies.

Liquidations. Cohen & Steers evaluates liquidations on a case-by-case basis taking into account management’s efforts to pursue other alternatives, appraisal value of assets and the compensation plan for executives managing the liquidation.

Ratification of Auditors

Cohen & Steers generally votes for proposals to ratify auditors, auditor remuneration and/or proposals authorizing the board to fix audit fees, unless:

 

 

an auditor has a financial interest in or association with the company, and is therefore not independent;

 

 

there is reason to believe that the independent auditor has rendered an opinion that is neither accurate nor indicative of the company’s financial position;

 

 

the name of the proposed auditor and/or fees paid to the audit firm are not disclosed by the company prior to the meeting;

 

 

the auditors are being changed without explanation; or

 

 

 


 

fees paid for non-audit related services are excessive and/or exceed fees paid for audit services or limits set in local best practice recommendations or law.

Where fees for non-audit services include fees related to significant one-time capital structure events, initial public offerings, bankruptcy emergence, and spinoffs, and the company makes public disclosure of the amount and nature of those fees, then such fees may be excluded from the non-audit fees considered in determining whether non-audit related fees are excessive.

Auditor Rotation

Cohen & Steers evaluates auditor rotation proposals on a case-by-case basis taking into account the following factors: the tenure of the audit firm; establishment and disclosure of a review process whereby the auditor is regularly evaluated for both audit quality and competitive price; length of the rotation period advocated in the proposal; and any significant audit related issues.

Auditor Indemnification

Cohen & Steers generally votes against auditor indemnification and limitation of liability. However, Cohen & Steers recognizes there may be situations where indemnification and limitations on liability may be appropriate.

Shareholder Access and Voting Proposals

Proxy Access. Cohen & Steers reviews proxy access proposals on a case-by-case basis taking into account the parameters of proxy access use in light of a company’s specific circumstances. Cohen & Steers generally supports proposals that provide shareholders with a reasonable opportunity to use the right without stipulating overly restrictive or onerous parameters for use and also provide assurances that the mechanism will not be subject to abuse by short-term investors, investors without a substantial investment in the company or investors seeking to take control of the board.

Bylaw Amendments. Cohen & Steers votes on a case-by-case basis on proposals requesting companies grant shareholders the ability to amend bylaws. Similar to proxy access, Cohen & Steers generally supports proposals that provide assurances that this right will not be subject to abuse by short-term investors or investors without a substantial investment in a company.

Reimbursement of Proxy Solicitation Expenses. In the absence of compelling reasons, the Advisor and the Subadvisors will generally not support such proposals.

Shareholder Ability to Call Special Meetings. Cohen & Steers votes on a case-by-case basis on shareholder proposals requesting companies amend their governance documents (bylaws and/or charter) in order to allow shareholders to call special meetings.

Shareholder Ability to Act by Written Consent. Cohen & Steers generally votes against proposals to allow or facilitate shareholder action by written consent to provide reasonable protection of minority shareholder rights.

Shareholder Ability to Alter the Size of the Board. Cohen & Steers generally votes for proposals that seek to fix the size of the board and vote against proposals that give the board the ability to alter the size of the board without shareholder approval. While Cohen & Steers recognizes the importance of such proposals, these proposals may be set forth in order to promote the agenda(s) of certain special interest groups and could be disruptive to the management of the company.

 

 

 


Cumulative Voting. Having the ability to cumulate votes for the election of directors (i.e., to cast more than one vote for a director) generally increases shareholders’ rights to effect change in the management of a corporation. However, Cohen & Steers acknowledges that cumulative voting promotes special candidates who may not represent the interests of all, or even a majority, of shareholders. Therefore, when voting on proposals to institute cumulative voting, Cohen & Steers evaluates all facts and circumstances surrounding such proposal and generally vote against cumulative voting where the company has good corporate governance practices in place, including majority voting for board elections and de-classified boards.

Supermajority Vote Requirements. Cohen & Steers generally supports proposals that seek to lower supermajority voting requirements.

Confidential Voting. Cohen & Steers votes for shareholder proposals requesting that companies adopt confidential voting, use independent tabulators, and use independent inspectors of election as long as such proposals permit management to request that the dissident groups honor its confidential voting policy in the case of proxy contests.

Cohen & Steers also votes for management proposals to adopt confidential voting.

Date/Location of Meeting. Cohen & Steers votes against shareholder proposals to change the date or location of the shareholders’ meeting.

Adjourn Meeting if Votes are Insufficient. Cohen & Steers generally votes against open-end requests for adjournment of a shareholder meeting. However, where management specifically states the reason for requesting an adjournment and the requested adjournment is necessary to permit a proposal that would otherwise be supported under this policy to be carried out, the adjournment request will be supported.

Disclosure of Shareholder Proponents. Cohen & Steers votes for shareholder proposals requesting that companies disclose the names of shareholder proponents. Shareholders may wish to contact the proponents of a shareholder proposal for additional information.

Environmental and Social Proposals

Cohen & Steers believes that well-managed companies should be evaluating and assessing how environmental and social matters may enhance or protect shareholder value. However, because of the diverse nature of environmental and social proposals, we evaluate these proposals on a case-by-case basis. The principles guiding the evaluation of these proposals are whether implementation of a proposal is likely to enhance or protect shareholder value and whether a proposal can be implemented at a reasonable cost.

Environmental Proposals (SP). Cohen & Steers acknowledges that environmental considerations can pose significant investment risks and opportunities. Therefore, we generally vote in favor of proposals requesting a company disclose information that will aid in the determination of shareholder value creation or destruction, taking into consideration the following factors:

 

 

Whether the issues presented have already been effectively dealt with through governmental regulation or legislation;

 

 

Whether the disclosure is available to shareholders from the company or from a publicly available source; and

 

 

 


 

Whether implementation would reveal proprietary or confidential information that could place the company at a competitive disadvantage.

Social Proposals (SP). Cohen & Steers believes board and workforce diversity are beneficial t the decision-making process and can enhance long-term profitability. Therefore, we generally vote in favor of proposals that seek to increase board and workforce diversity. We vote all other social proposals on a case-by-case basis, including, but not limited to, proposals related to political and charitable contributions, lobbying, and gender equality and the gender pay gap.

Miscellaneous Proposals

Bundled Proposals. Cohen & Steers reviews on a case-by-case basis bundled or “conditioned” proposals. For items that are conditioned upon each other, Cohen & Steers examines the benefits and costs of the bundled items. In instances where the combined effect of the conditioned items is not in shareholders’ best interests, Cohen & Steers votes against the proposals. If the combined effect is positive, Cohen & Steers supports such proposals. In the case of bundled director proposals, Cohen & Steers will vote for the entire slate only if Cohen & Steers would have otherwise voted for each director on an individual basis.

Other Business. Cohen & Steers generally votes against proposals to approve other business where Cohen & Steers cannot determine the exact nature of the proposal(s) to be voted on.

Item 8. Portfolio Managers of Closed-End Investment Companies.

Information pertaining to the portfolio managers of the registrant, as of March 11, 2019, is set forth below.

 

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William F. Scapell    Executive Vice President of CSCM since 2014. Prior to that, Senior Vice President of C&S since 2003.

·  Vice President