Closed-end Funds About 700 funds Fixed number of shares Shares sell like stock Generally hold less liquid assets A lot are country funds or bond

funds

NAV versus price Generally sell at a discount (10%)

(Price – NAV) / NAV Can sell at a premium Why?

Taxes Management fees Investor sentiment

Distinctions from Open end

Less liquid for investors – no redemption

Fewer shareholders services Leverage can increase returns Don’t have to hold cash

No inflows or outflows Can invest in less liquid securities

Raising Capital Rights offer to existing

shareholders Leverage – commonly used Sell new shares

Dividend returns NAV = $10, Price = $9 Dividend yield = $1/$9 = 11.11%,

not 10%

Closed end fund dividend yield generally higher than open end, all else the same

www.closed-endfunds.com

Real Estate (REITS) www.nareit.com www.investinreits.com

REITs 75% of assets in real estate Pass through at least 90% of income 125 traded - $300 billion in assets

10-15% of US institutional quality real estate

As of July 31, 2008 Dividends – currently about 5.8%

average

What are REITs? REITs established by legislation passed

in 1960 providing small investors access to real estate investment

Operating companies which own and manage commercial real estate

Assets consist of, and revenues primarily come from, real estate investments

Can selectively operate ancillary businesses

REIT Types Equity (91%)

Own real estate assets Revenues come principally from rents

Mortgage (7%) lend to real estate owners acquire loans or mortgage-backed

securities Hybrid (2%)

Combination of equity and mortgage REITs

What Makes a REIT Different?Asset and Revenue Test

75 percent of assets must be invested in: Equity ownership of real property Mortgages Other REIT shares

75 percent of revenue must come from Rents from real property Mortgage interest Gains from sale of real property

Taxable REIT Subsidiaries (TRSs)

Allows REITs to more effectively compete with other real estate owners

May provide services to tenants to third parties such as landscaping, cleaning and concierge

Investments in TRSs limited to 20 percent of REIT’s assets

TRSs must pay taxes at the corporate level

Private 1) Institutional investors – large

positions 2) Packaged with other services

offered by a financial professional 3) Incubator – start up hoping

eventually to go public

Shares are traded like a stock Commercial or residential property REIT mutual funds

Why REITs instead of direct investment?

Property sector and geographic diversification

Professional and experienced management

Real-time pricing Low transaction costs Liquidity

REIT advantages Stable earnings from long-term

leases Attractive dividend yield Competitive risk-adjusted returns Diversification

Stable earnings Long-term leases, typically 5 to 15

years Stable revenues – lease duration of 10

years, only 10% of leases expire in a year

Expense reimbursements – leases for commercial property structures so tenants pay increases in expenses and taxes over life of lease