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 | 811-22392 | |||||||
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Cohen & Steers Preferred Securities and Income Fund, Inc. | ||||||||
(Exact name of registrant as specified in charter) | ||||||||
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280 Park Avenue, New York, NY |
| 10017 | ||||||
(Address of principal executive offices) |
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Tina M. Payne Cohen & Steers Capital Management, Inc. 280 Park Avenue New York, New York 10017 | ||||||||
(Name and address of agent for service) | ||||||||
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Registrant’s telephone number, including area code: | (212) 832-3232 |
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Date of fiscal year end: | December 31 |
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Date of reporting period: | December 31, 2012 |
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Item 1. Reports to Stockholders.
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
To Our Shareholders:
We would like to share with you our report for the year ended December 31, 2012. The net asset values (NAV) per share at that date were $13.34, $13.29 and $13.36 for Class A, Class C and Class I shares, respectively.
The total returns, including income and change in NAV, for the Fund and its comparative benchmarks were:
Six Months Ended December 31, 2012 | Year Ended December 31, 2012 | ||||||||||
Cohen & Steers Preferred Securities and Income Fund—Class A | 10.71 | % | 22.04 | % | |||||||
Cohen & Steers Preferred Securities and Income Fund—Class C | 10.34 | % | 21.31 | % | |||||||
Cohen & Steers Preferred Securities and Income Fund—Class I | 10.98 | % | 22.52 | % | |||||||
BofA Merrill Lynch Fixed Rate Preferred Indexa | 3.99 | % | 13.60 | % | |||||||
Blended benchmark—50% BofA Merrill Lynch US Capital Securities Index/50% BofA Merrill Lynch Fixed Rate Preferred Indexa | 7.32 | % | 17.40 | % | |||||||
S&P 500 Indexa | 5.95 | % | 16.00 | % |
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 redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Current total returns of the Fund can be obtained by visiting our website at cohenandsteers.com. All share class returns assume the reinvestment of all dividends and distributions at NAV. Fund performance reflects fee waivers and/or expense reimbursements, without which the performance would have been lower. Performance quoted does not reflect the deduction of the maximum 3.75% initial sales charge on Class A shares or the 1% maximum contingent deferred sales charge on Class C shares. If such charges were included, returns would have been lower. 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.
The Fund implements fair value pricing when the daily change in a specific U.S. market index exceeds a predetermined percentage. Fair value pricing adjusts the valuation of certain non-U.S. holdings to account for such index change following the close of foreign markets. This standard practice has been adopted by a majority of the fund industry. In the event fair value pricing is implemented on the first and/or last day of a performance measurement period, the Fund's return may diverge from the relative performance of its benchmark index, which does not use fair value pricing.
a The BofA Merrill Lynch Fixed Rate Preferred Index is an unmanaged index of preferred securities. The BofA Merrill Lynch US Capital Securities Index is a subset of the BofA Merrill Lynch US Corporate Index. The BofA Merrill Lynch US Corporate Index tracks the performance of US dollar denominated investment grade corporate debt publicly issued in the US domestic market. The S&P 500 Index is an unmanaged index of common stocks that is frequently used as a general measure of stock market performance.
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COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
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 investment company taxable income and realized gains are a return of capital distributed from the Fund's assets.
Investment Review
Preferred securities performed well in 2012, both in absolute terms and compared with other fixed income categories. The group benefited from demand for above-average income in an environment of slow economic growth and historically low interest rates, as well as a general betterment in the credit fundamentals of many financial companies. Preferreds' strong performance also reflected technical price support: an already favorable supply/demand dynamic improved when the Federal Reserve released a banking supervision statement that opened the door to more significant call activity.
Political uncertainty in Europe continued to drive volatility in financial markets, including in the preferreds space. Sentiment on this front improved as European Union officials took steps to ease the strain on sovereign balance sheets. In September, an agreement was reached to permit the European Central Bank to conduct unlimited open-market purchases of sovereign debt from countries willing to agree to certain conditions, prompting a sharp downturn in bond yields in Spain and Italy. Markets also benefited from signs of economic stabilization in China, which mitigated one of the key risks to global growth.
Redemptions continued, while new issuance accelerated
In June, the Federal Reserve released a much-anticipated notice laying out new proposed capital treatment rules. This enabled U.S. banks to take advantage of a special "regulatory call" window to redeem trust preferreds destined to lose their Tier 1 regulatory status. Call activity spiked in the window, with more than $30 billion redeemed by early September.
Federal Reserve guidance also provided the first clear indication of what types of preferreds would continue to offer Tier 1 capital treatment. Accordingly, with investors continuing to show strong interest in preferreds, U.S. banks began to issue in large sizes for the first time since 2008. Issuance appeared to be opportunistic, taking advantage of low market rates. To be sure, redemptions did not dry up; in October, Bank of America announced a $5.1 billion redemption of its preferreds, an example of a company removing higher-coupon securities that happened to be callable.
New preferred supply from U.S. banks was largely concentrated in the retail exchange-traded market, where companies could generally get more-favorable terms. Issuance in the over-the-counter (OTC) institutional market was relatively light (aiding the outperformance of OTC preferreds in the year), but there were some large deals, including from foreign issuers. One noteworthy transaction was a Barclay's $3 billion contingent capital (CoCo) security, the largest single publicly offered CoCo to date. These new forms of bank capital are favored by European regulators and have write-down or conversion to equity features in the event the issuer's capitalization falls below a target level.
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COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
Performance was broadly positive by sector
In this environment, bank and insurance company issues had the largest gains for the year, despite further compression of net interest margins (banks) and lower investment incomes (insurance) related to a low and relatively flat Treasury yield curve. In addition to the positive technical of a shrinking investable market due to issuer redemptions, bank preferreds benefited from steady improvements in credit fundamentals, including higher capital mandated by regulators and better asset quality supported in part by an improving housing market. Insurance issuers, too, generally saw capital improve; however, life issuers were particularly challenged by the yield environment, which hindered their investment returns.
Real estate, utilities and telecommunications preferreds had relatively modest gains. From a regional standpoint, dollar-denominated European preferreds were subject to wide swings in performance, but ended with a strong gain for the period.
Fund performance
The Fund had a positive total return for the year and outperformed its blended benchmark by a wide margin. The primary factor affecting relative performance was our security selection in the financial sectors (banking, insurance, finance and brokerage). We were well positioned to benefit from regulatory reform trends, having previously sold many callable hybrid preferreds that we expected to be redeemed. Instead, we favored securities with relatively high coupons and substantial call protection, including many out-of-index issues. As the preferred market shrank and credit spreads collapsed, securities that could not be called generally continued to rise. In addition, we had beneficial positions in certain European issuers based on what we viewed as very attractive discounts.
Our overweight in REIT preferreds detracted from relative returns, although this was offset by positive security selection in the sector, in part due to our avoidance of preferreds issued by Public Storage, a serial issuer. Similarly, our overweight in telecommunications preferreds had a negative effect on performance that was largely offset by positive stock selection. Our out-of-index allocation to pipeline securities had a sizable absolute gain but trailed the wider preferred securities market.
Impact of Derivatives on Fund Performance
The Fund used derivatives in the form of forward foreign currency exchange contracts in order to manage currency risk on certain Fund positions denominated in foreign currencies. These contracts did not have a material effect on the Fund's total return for the period.
Investment Outlook
Given the pending implementation of Basel III regulatory rules (an official commencement date has yet to be established across many global jurisdictions) and a U.S. regulatory framework that appears largely set, while we believe banks will continue to redeem existing preferreds, we expect them to also issue many new ones that will work under the new framework. Consequently, net supply is becoming more balanced after a meaningful contraction in the preferreds market over the past year. We expect new supply to remain elevated, assuming that credit markets remain receptive, which could result in a
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COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
net increase in supply in 2013. We note that some of the new issuance will be in the form of untested structures with greater yield spreads and potential room for price appreciation.
In this context, we believe it will be important to have a strategy that is active and flexible enough to take advantage of best values wherever they exist. We are generally finding better opportunities in the over-the-counter institutional market, which offers a wider array of issuers and structures, including the new CoCo securities and preferreds with fixed-to-floating-rate structures that have both attractive yields and defensive characteristics relative to interest rate risk. We have also found good values in floating-rate issues. We have been more selective in the $25-par market, based on higher new supply and generally less attractive relative valuations. That said, we have found some very appealing new issues in both markets.
Across the broad preferred securities market, we believe yields are still attractive compared with other fixed income classes, both in absolute terms and relative to historical credit spread relationships. Yields offered by preferreds generally exceed those offered by other investment-grade asset classes by a wider margin than they have historically; the spread to Treasurys remains well-wide of the historical norm. In addition, given wide credit spreads, the catalyst of much stronger financial-services regulation and a better economic backdrop suggests that improving credit fundamentals could lead to further spread tightening and good relative performance.
As well, we continue to believe that wide spreads could have a meaningful cushioning effect on prices should Treasury yields rise. This dampening effect has been evident in several recent periods, including as Treasury yields increased in December, resulting in losses to Treasury holders even as preferred prices generally rose. While we are vigilant and prefer securities less sensitive to interest rates, we do not expect interest rates to increase meaningfully or in a sustained fashion in the first half of 2013. Rather, we believe that rising taxes associated with the "fiscal cliff," as well as uncertainty surrounding federal spending negotiations, will have a dampening effect on growth and rates.
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COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
Sincerely,
MARTIN COHEN | ROBERT H. STEERS | ||||||||||
Co-chairman | Co-chairman | ||||||||||
JOSEPH M. HARVEY | WILLIAM F. SCAPELL | ||||||||||
Portfolio Manager | Portfolio Manager |
The views and opinions in the preceding commentary are subject to change and are as of the date of publication. 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 any of our funds, visit cohenandsteers.com, where you will find daily net asset values, fund fact sheets and portfolio highlights. You can also access newsletters, education tools and market updates covering the global real estate, commodities, global natural resource equities, listed infrastructure, utilities, large cap value and preferred securities sectors.
In addition, our website contains comprehensive information about our firm, including our most recent press releases, profiles of our senior investment professionals and an overview of our investment approach.
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COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
Performance Review (Unaudited)
Class A—Growth of a $10,000 Investment
Class C—Growth of a $10,000 Investment
Class I—Growth of a $100,000 Investment
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COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
Performance Review (Unaudited)—(Continued)
Average Annual Total Returns—For Periods Ended December 31, 2012
Class A Shares | Class C Shares | Class I Shares | |||||||||||||
1 Year (with sales charge) | 17.46 | %b | 20.31 | %c | — | ||||||||||
1 Year (without sales charge) | 22.04 | % | 21.31 | % | 22.52 | % | |||||||||
Since Inceptiond (with sales charge) | 11.16 | %b | 12.02 | % | — | ||||||||||
Since Inceptiond (without sales charge) | 12.77 | % | 12.02 | % | 13.17 | % |
The performance data quoted represent past performance. Past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate and shares, if redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Performance information current to the most recent month end can be obtained by visiting our website at cohenandsteers.com. All share class returns assume the reinvestment of all dividends and distributions at NAV. The performance graphs and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. During the periods presented above, the advisor waived fees and/or reimbursed expenses. Without this arrangement, performance would have been lower.
The annualized gross and net expense ratios, respectively, for each class of shares as disclosed in the May 1, 2012 prospectuses were as follows: Class A—1.29% and 1.10%; Class C—1.94% and 1.75%; and Class I—0.95% and 0.75%. Through June 30, 2014, the advisor has contractually agreed to waive its fee and/or reimburse the Fund for expenses incurred (excluding applicable distribution and shareholder servicing fees for Class A and Class C, acquired fund fees and expenses and extraordinary expenses) to the extent necessary to maintain the Fund's total annual operating expenses as a percentage of average net assets at 1.10% for Class A shares, 1.75% for Class C shares and 0.75% for Class I shares.
a The comparative indexes are not adjusted to reflect expenses or other fees that the SEC requires to be reflected in the Fund's performance. An investor cannot invest directly in an index. The Fund's performance assumes the reinvestment of all dividends and distributions at NAV. For more information, including charges and expenses, please read the prospectus carefully before you invest.
b Reflects a 3.75% front-end sales charge.
c Reflects a contingent deferred sales charge of 1%.
d Inception date of May 3, 2010.
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COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
Expense Example
(Unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2012—December 31, 2012.
Actual Expenses
The first line of the following table provides information about actual account values and expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
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COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
Expense Example (Unaudited)—(Continued)
Beginning Account Value July 1, 2012 | Ending Account Value December 31, 2012 | Expenses Paid During Perioda July 1, 2012– December 31, 2012 | |||||||||||||
Class A | |||||||||||||||
Actual (10.71% return) | $ | 1,000.00 | $ | 1,107.10 | $ | 5.83 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,019.61 | $ | 5.58 | |||||||||
Class C | |||||||||||||||
Actual (10.34% return) | $ | 1,000.00 | $ | 1,103.40 | $ | 9.25 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,016.34 | $ | 8.87 | |||||||||
Class I | |||||||||||||||
Actual (10.98% return) | $ | 1,000.00 | $ | 1,109.80 | $ | 3.98 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,021.37 | $ | 3.81 |
a Expenses are equal to the Fund's Class A, Class C and Class I annualized expense ratios of 1.10%, 1.75% and 0.75%, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). If the Fund had borne all of its expenses that were assumed by the advisor, the annualized expense ratios would have been 1.22%, 1.87% and 0.87%, respectively.
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COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
December 31, 2012
Top Ten Long-Term Holdingsa
(Unaudited)
Security | Value | % of Net Assets | |||||||||
JP Morgan Chase & Co., 7.90%, due 4/29/49, Series I | $ | 55,261,699 | 3.1 | ||||||||
American International Group, 8.175%, due 5/15/58, (FRN) | 44,817,177 | 2.5 | |||||||||
Centaur Funding Corp., 9.08%, due 4/21/20, 144A (Cayman Islands) | 35,290,506 | 2.0 | |||||||||
Wells Fargo & Co., 7.98%, due 3/29/49, Series K | 35,289,550 | 2.0 | |||||||||
HSBC Capital Funding LP, 10.176%, due 12/29/49, 144A (Jersey) | 34,386,615 | 1.9 | |||||||||
UBS AG, 7.625%, due 8/17/22 (Switzerland) | 33,193,500 | 1.8 | |||||||||
American General Institutional Capital A, 7.57%, due 12/1/45, 144A | 32,665,500 | 1.8 | |||||||||
Wells Fargo & Co., 7.50%, Series L ($1,000 Par Value)(Convertible) | 32,193,000 | 1.8 | |||||||||
MetLife Capital Trust X, 9.25%, due 4/8/38, 144A | 30,255,325 | 1.7 | |||||||||
General Electric Capital Corp., 7.125%, due 12/15/49, Series A | 27,347,764 | 1.5 |
a Top ten holdings are determined on the basis of the value of individual securities held. All of the securities listed above are preferred stock. 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 Net Assets)
(Unaudited)
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COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
SCHEDULE OF INVESTMENTS
December 31, 2012
Number of Shares | Value | ||||||||||||||
PREFERRED SECURITIES—$25 PAR VALUE | 37.8% | ||||||||||||||
BANKS | 13.7% | ||||||||||||||
Ally Financial, 7.25%, due 2/7/33 | 379,921 | $ | 9,498,025 | ||||||||||||
Ally Financial, 7.35%, due 8/8/32 | 233,779 | 5,851,488 | |||||||||||||
Ally Financial, 7.30%, due 3/9/31, (PINES) | 562,024 | 14,044,980 | |||||||||||||
Bank of America Corp., 7.25%, Series L ($1,000 Par Value)(Convertible) | 15,775 | 17,904,625 | |||||||||||||
Bank of America Corp., 8.625%, Series VIII | 170,937 | 4,369,150 | |||||||||||||
Citigroup Capital VIII, 6.95%, due 9/15/31, (TruPS) | 738,959 | 18,614,377 | |||||||||||||
Citigroup Capital XIV, 6.875%, due 6/30/66, (TruPS) | 123,327 | 3,094,274 | |||||||||||||
Citigroup Capital XV, 6.50%, due 9/15/66, (TruPS) | 134,927 | 3,386,668 | |||||||||||||
Citigroup Capital XVI, 6.45%, due 12/31/66, Series W (TruPS) | 135,586 | 3,392,362 | |||||||||||||
CoBank ACB, 6.25%, 144A ($100 Par Value)a | 240,000 | 25,117,512 | |||||||||||||
Countrywide Capital IV, 6.75%, due 4/1/33 | 127,062 | 3,153,679 | |||||||||||||
Countrywide Capital V, 7.00%, due 11/1/36 | 810,527 | 20,417,175 | |||||||||||||
First Niagara Financial Group, 8.625%, Series B | 229,881 | 6,540,114 | |||||||||||||
First Republic Bank, 6.70%, Series A | 203,215 | 5,480,708 | |||||||||||||
First Republic Bank, 6.20%, due 12/30/49, Series B | 38,009 | 992,035 | |||||||||||||
Huntington Bancshares, 8.50%, due 12/31/49, Series A ($1,000 Par Value)(Convertible) | 17,017 | 20,930,910 | |||||||||||||
KeyCorp, 7.75%, due 12/31/49, Series A ($100 Par Value)(Convertible) | 19,207 | 2,405,677 | |||||||||||||
PNC Financial Services Group, 6.125%, Series P | 344,700 | 9,551,637 | |||||||||||||
PrivateBancorp, 7.125%, due 10/30/42 | 348,075 | 8,928,124 | |||||||||||||
US Bancorp, 6.50%, Series F | 130,399 | 3,734,627 | |||||||||||||
Wells Fargo & Co., 7.50%, Series L ($1,000 Par Value)(Convertible) | 26,280 | 32,193,000 | |||||||||||||
Zions Bancorp, 9.50%, due 12/29/49, Series C | 533,419 | 13,804,884 | |||||||||||||
Zions Bancorp, 7.90%, Series F | 462,800 | 13,846,976 | |||||||||||||
247,253,007 |
See accompanying notes to financial statements.
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COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
SCHEDULE OF INVESTMENTS—(Continued)
December 31, 2012
Number of Shares | Value | ||||||||||||||
BANKS—FOREIGN | 2.4% | ||||||||||||||
Barclays Bank PLC, 7.75%, Series IV (United Kingdom) | 316,846 | $ | 7,978,182 | ||||||||||||
Deutsche Bank Contingent Capital Trust III, 7.60% | 265,252 | 7,145,889 | |||||||||||||
National Westminster Bank PLC, 7.76%, Series C (United Kingdom) | 329,708 | 8,170,164 | |||||||||||||
Royal Bank of Scotland Group PLC, 6.40%, Series M (United Kingdom) | 242,440 | 5,476,720 | |||||||||||||
Royal Bank of Scotland Group PLC, 6.35%, Series N (United Kingdom) | 285,625 | 6,432,275 | |||||||||||||
Royal Bank of Scotland Group PLC, 6.60%, Series S (United Kingdom) | 370,000 | 8,510,000 | |||||||||||||
43,713,230 | |||||||||||||||
ELECTRIC—INTEGRATED | 1.7% | ||||||||||||||
DTE Energy Co., 6.50%, due 12/1/61 | 147,654 | 4,029,478 | |||||||||||||
Entergy Arkansas, 4.90%, due 12/1/52 | 278,700 | 6,925,695 | |||||||||||||
Entergy Louisiana LLC, 5.25%, due 7/1/52 | 203,375 | 5,332,493 | |||||||||||||
NextEra Energy Capital Holdings, 5.70%, due 3/1/72, Series G | 114,106 | 2,974,743 | |||||||||||||
NextEra Energy Capital Holdings, 5.625%, due 6/15/72, Series H | 139,701 | 3,635,020 | |||||||||||||
SCE Trust I, 5.625% | 271,600 | 7,007,280 | |||||||||||||
29,904,709 | |||||||||||||||
FINANCE | 0.8% | ||||||||||||||
INVESTMENT ADVISORY SERVICES | 0.6% | ||||||||||||||
Affiliated Managers Group, 6.375%, due 8/15/42 | 400,000 | 10,520,000 | |||||||||||||
INVESTMENT BANKER/BROKER | 0.2% | ||||||||||||||
Raymond James Financial, 6.90%, due 3/15/42 | 153,040 | 4,173,401 | |||||||||||||
TOTAL FINANCE | 14,693,401 | ||||||||||||||
INDUSTRIALS—DIVERSIFIED MANUFACTURING | 0.7% | ||||||||||||||
Stanley Black & Decker, 5.75%, due 7/25/52 | 500,000 | 12,975,000 |
See accompanying notes to financial statements.
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COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
SCHEDULE OF INVESTMENTS—(Continued)
December 31, 2012
Number of Shares | Value | ||||||||||||||
INSURANCE | 6.1% | ||||||||||||||
LIFE/HEALTH INSURANCE—FOREIGN | 0.6% | ||||||||||||||
Aegon NV, 6.875% (Netherlands) | 157,132 | $ | 3,928,300 | ||||||||||||
Aegon NV, 7.25% (Netherlands) | 146,830 | 3,681,028 | |||||||||||||
Aegon NV, 8.00%, due 2/15/42 (Netherlands) | 98,987 | 2,769,656 | |||||||||||||
10,378,984 | |||||||||||||||
MULTI-LINE | 1.3% | ||||||||||||||
American International Group, 7.70%, due 12/18/62 | 216,336 | 5,494,934 | |||||||||||||
Hartford Financial Services Group, 7.875%, due 4/15/42 | 645,000 | 18,517,950 | |||||||||||||
24,012,884 | |||||||||||||||
MULTI-LINE—FOREIGN | 1.9% | ||||||||||||||
ING Groep N.V., 6.375% (Netherlands) | 169,832 | 4,108,236 | |||||||||||||
ING Groep N.V., 7.05% (Netherlands) | 234,352 | 5,861,144 | |||||||||||||
ING Groep N.V., 7.20% (Netherlands) | 218,926 | 5,490,664 | |||||||||||||
ING Groep N.V., 7.375% (Netherlands) | 527,050 | 13,170,980 | |||||||||||||
ING Groep N.V., 8.50% (Netherlands) | 234,865 | 6,010,195 | |||||||||||||
34,641,219 | |||||||||||||||
REINSURANCE | 0.8% | ||||||||||||||
Reinsurance Group of America, 6.20%, due 9/15/42 | 550,000 | 14,910,500 | |||||||||||||
REINSURANCE—FOREIGN | 1.5% | ||||||||||||||
Arch Capital Group Ltd., 6.75% (Bermuda) | 230,900 | 6,195,047 | |||||||||||||
Aspen Insurance Holdings Ltd., 7.25% (Bermuda) | 202,107 | 5,291,161 | |||||||||||||
Axis Capital Holdings Ltd., 6.875%, Series C (Bermuda)b | 256,140 | 6,838,938 | |||||||||||||
Endurance Specialty Holdings Ltd., 7.50%, Series B (Bermuda) | 163,398 | 4,356,191 | |||||||||||||
Montpelier Re Holdings Ltd., 8.875% (Bermuda) | 140,175 | 3,781,922 | |||||||||||||
26,463,259 | |||||||||||||||
TOTAL INSURANCE | 110,406,846 |
See accompanying notes to financial statements.
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COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
SCHEDULE OF INVESTMENTS—(Continued)
December 31, 2012
Number of Shares | Value | ||||||||||||||
INTEGRATED TELECOMMUNICATIONS SERVICES | 1.8% | ||||||||||||||
Qwest Corp., 7.00%, due 4/1/52 | 320,208 | $ | 8,453,491 | ||||||||||||
Qwest Corp., 7.00%, due 7/1/52 | 189,876 | 4,934,877 | |||||||||||||
Qwest Corp., 7.375%, due 6/1/51 | 228,874 | 6,136,112 | |||||||||||||
Qwest Corp., 7.50%, due 9/15/51 | 144,215 | 3,889,479 | |||||||||||||
Telephone & Data Systems, 6.875%, due 11/15/59 | 137,957 | 3,600,678 | |||||||||||||
Telephone & Data Systems, 7.00%, due 3/15/60 | 187,146 | 4,955,626 | |||||||||||||
31,970,263 | |||||||||||||||
REAL ESTATE | 10.0% | ||||||||||||||
DIVERSIFIED | 4.0% | ||||||||||||||
Colony Financial, 8.50%, Series A | 314,736 | 8,224,052 | |||||||||||||
Coresite Realty Corp., 7.25%, due 12/12/17, Series A | 349,038 | 8,799,248 | |||||||||||||
Cousins Properties, 7.75%, Series A | 199,343 | 5,039,391 | |||||||||||||
Cousins Properties, 7.50%, Series B | 83,350 | 2,085,417 | |||||||||||||
DuPont Fabros Technology, 7.875%, Series A | 318,329 | 8,461,185 | |||||||||||||
Forest City Enterprises, 7.375%, due 2/1/34 | 445,000 | 10,840,200 | |||||||||||||
Lexington Realty Trust, 7.55%, Series D | 231,293 | 5,784,638 | |||||||||||||
Retail Properties of America, 7.00% | 327,500 | 8,072,875 | |||||||||||||
Sovereign Real Estate Investment Trust, 12.00%, 144A ($1,000 Par Value)a | 4,090 | 5,237,167 | |||||||||||||
Urstadt Biddle Properties, 7.125%, Series F | 232,000 | 6,029,680 | |||||||||||||
Winthrop Realty Trust, 7.75%, due 8/15/22 | 132,900 | 3,435,465 | |||||||||||||
72,009,318 | |||||||||||||||
HOTEL | 2.1% | ||||||||||||||
Chesapeake Lodging Trust, 7.75%, Series A | 295,000 | 7,811,600 | |||||||||||||
Hersha Hospitality Trust, 8.00%, Series B | 129,235 | 3,276,107 | |||||||||||||
Hospitality Properties Trust, 7.125%, Series D | 50,000 | 1,330,000 | |||||||||||||
LaSalle Hotel Properties, 7.50%, Series H | 99,900 | 2,572,425 | |||||||||||||
Pebblebrook Hotel Trust, 7.875%, Series A | 231,372 | 5,994,849 | |||||||||||||
Strategic Hotels & Resorts, 8.50%, Series A | 260,496 | 6,528,030 | |||||||||||||
Strategic Hotels & Resorts, 8.25%, Series B | 291,320 | 7,283,000 | |||||||||||||
Sunstone Hotel Investors, 8.00%, Series D | 171,620 | 4,378,026 | |||||||||||||
39,174,037 |
See accompanying notes to financial statements.
14
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
SCHEDULE OF INVESTMENTS—(Continued)
December 31, 2012
Number of Shares | Value | ||||||||||||||
INDUSTRIALS | 0.3% | ||||||||||||||
First Potomac Realty Trust, 7.75%, Series A | 192,001 | $ | 4,928,665 | ||||||||||||
MORTGAGE | 0.3% | ||||||||||||||
Annaly Capital Management, 7.50%, Series D | 200,000 | 4,974,000 | |||||||||||||
OFFICE | 1.2% | ||||||||||||||
BioMed Realty Trust, 7.375%, Series A | 121,483 | 3,096,602 | |||||||||||||
CommonWealth REIT, 6.50%, Series D (Convertible) | 227,859 | 5,258,986 | |||||||||||||
Corporate Office Properties Trust, 7.375%, Series L | 292,000 | 7,340,880 | |||||||||||||
Hudson Pacific Properties, 8.375%, Series B | 230,908 | 6,180,252 | |||||||||||||
21,876,720 | |||||||||||||||
RESIDENTIAL—MANUFACTURED HOME | 0.2% | ||||||||||||||
Equity Lifestyle Properties, 6.75%, Series C | 176,688 | 4,547,949 | |||||||||||||
SHOPPING CENTERS | 1.9% | ||||||||||||||
COMMUNITY CENTER | 0.9% | ||||||||||||||
Cedar Realty Trust, 7.25%, Series B | 195,000 | 4,767,750 | |||||||||||||
DDR Corp., 7.375%, Series H | 229,387 | 5,741,557 | |||||||||||||
DDR Corp., 6.50%, Series J | 100,000 | 2,446,000 | |||||||||||||
Kite Realty Group Trust, 8.25%, Series A | 103,490 | 2,654,518 | |||||||||||||
15,609,825 | |||||||||||||||
FREE STANDING | 0.1% | ||||||||||||||
Realty Income Corp., 6.625%, Series F | 91,200 | 2,418,624 | |||||||||||||
REGIONAL MALL | 0.9% | ||||||||||||||
CBL & Associates Properties, 7.375%, Series D | 204,110 | 5,112,956 | |||||||||||||
Glimcher Realty Trust, 7.50%, due 11/20/49, Series H | 189,700 | 4,816,483 | |||||||||||||
Pennsylvania REIT, 8.25%, Series A | 222,833 | 5,856,051 | |||||||||||||
15,785,490 | |||||||||||||||
TOTAL SHOPPING CENTERS | 33,813,939 | ||||||||||||||
TOTAL REAL ESTATE | 181,324,628 |
See accompanying notes to financial statements.
15
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
SCHEDULE OF INVESTMENTS—(Continued)
December 31, 2012
Number of Shares | Value | ||||||||||||||
TRANSPORT—MARINE | 0.6% | ||||||||||||||
Seaspan Corp., 9.50%, due 1/29/49, Series C | 359,575 | $ | 9,906,291 | ||||||||||||
TOTAL PREFERRED SECURITIES—$25 PAR VALUE (Identified cost—$641,723,732) | 682,147,375 | ||||||||||||||
PREFERRED SECURITIES—CAPITAL SECURITIES | 58.1% | ||||||||||||||
BANKS | 9.6% | ||||||||||||||
Bank of America Corp., 8.125%, due 12/29/49, Series M | 3,500,000 | 3,879,785 | |||||||||||||
Citigroup Capital III, 7.625%, due 12/1/36 | 3,000,000 | 3,229,887 | |||||||||||||
CoBank ACB, 11.00%, Series C, 144A ($50 Par Value)a | 45,000 | 2,318,909 | |||||||||||||
Farm Credit Bank of Texas, 10.00%, due 12/15/20, Series I | 14,200 | 17,727,812 | |||||||||||||
Goldman Sachs Capital I, 6.345%, due 2/15/34 | 22,811,000 | 23,747,095 | |||||||||||||
Goldman Sachs Capital III, 4.00%, due 12/31/49, Series F (FRN) | 5,200,000 | 4,020,536 | |||||||||||||
JP Morgan Chase & Co., 7.90%, due 4/29/49, Series I | 48,600,000 | 55,261,699 | |||||||||||||
M&T Capital Trust II, 8.277%, due 6/1/27 | 6,000,000 | 6,135,000 | |||||||||||||
PNC Financial Services Group, 6.75%, due 7/29/49 | 9,000,000 | 10,264,473 | |||||||||||||
Regions Financial Corp., 7.375%, due 12/10/37 | 10,661,000 | 11,727,100 | |||||||||||||
Wells Fargo & Co., 7.98%, due 3/29/49, Series K | 30,620,000 | 35,289,550 | |||||||||||||
173,601,846 | |||||||||||||||
BANKS—FOREIGN | 17.6% | ||||||||||||||
Abbey National Capital Trust I, 8.963%, due 12/29/49 (United Kingdom) | 11,232,000 | 12,790,440 | |||||||||||||
Banco do Brasil SA/Cayman, 9.25%, due 12/31/49, 144A (Brazil)a | 19,950,000 | 24,787,875 | |||||||||||||
Barclays Bank PLC, 6.278%, due 12/31/49 (United Kingdom) | 5,550,000 | 5,328,272 | |||||||||||||
Barclays Bank PLC, 6.86%, due 12/31/49, 144A (United Kingdom)a | 14,600,000 | 15,056,250 | |||||||||||||
Barclays Bank PLC, 7.625%, due 11/21/22 (United Kingdom) | 25,000,000 | 25,031,250 | |||||||||||||
BNP Paribas, 7.195%, due 12/31/49, 144A (France)a | 12,900,000 | 13,287,000 |
See accompanying notes to financial statements.
16
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
SCHEDULE OF INVESTMENTS—(Continued)
December 31, 2012
Number of Shares | Value | ||||||||||||||
BNP Paribas SA, 7.781%, due 6/29/49, (France) (EUR) | 2,600,000 | $ | 3,825,896 | ||||||||||||
BPCE SA, 9.00%, due 3/29/49, (France) (EUR) | 6,000,000 | 8,434,676 | |||||||||||||
Claudius Ltd. (Credit Suisse), 7.875%, due 12/12/49 (Jersey) | 9,804,000 | 10,527,045 | |||||||||||||
Credit Suisse Group Guernsey I Ltd., 7.875%, due 2/24/41 | 11,400,000 | 12,117,060 | |||||||||||||
HBOS Capital Funding LP, 6.85%, due 12/31/49 (Jersey) | 20,983,000 | 19,282,726 | |||||||||||||
HSBC Capital Funding LP, 10.176%, due 12/29/49, 144A (Jersey)a | 25,054,000 | 34,386,615 | |||||||||||||
LBG Capital No.1 PLC, 8.00%, due 12/29/49, 144A (United Kingdom)a | 10,430,000 | 10,873,275 | |||||||||||||
Lloyds TSB Bank PLC, 6.35%, due 12/31/49 (United Kingdom) (EUR) | 5,686,000 | 6,184,318 | |||||||||||||
Lloyds TSB Bank PLC, 11.875%, due 12/16/21, (FRN) (United Kingdom) (EUR) | 4,405,000 | 7,326,065 | |||||||||||||
Rabobank Nederland, 8.40%, due 12/31/49 (Netherlands) | 21,150,000 | 23,091,781 | |||||||||||||
Rabobank Nederland, 11.00%, due 6/29/49, 144A (Netherlands)a | 12,330,000 | 16,778,097 | |||||||||||||
RBS Capital Trust B, 6.80%, due 12/29/49 (United Kingdom) | 12,000,000 | 10,980,000 | |||||||||||||
RBS Capital Trust II, 6.425%, due 12/31/49, (FRN) (United Kingdom) | 5,428,000 | 4,776,640 | |||||||||||||
SMFG Preferred Capital, 9.50%, due 7/29/49, 144A (FRN) (Cayman Islands)a | 4,000,000 | 5,142,000 | |||||||||||||
Societe Generale, 6.625%, due 12/31/49 (France) | 7,000,000 | 7,013,650 | |||||||||||||
Standard Chartered PLC, 7.014%, due 7/29/49, 144A (United Kingdom)a | 6,450,000 | 6,960,930 | |||||||||||||
UBS AG, 7.625%, due 8/17/22 (Switzerland) | 30,000,000 | 33,193,500 | |||||||||||||
317,175,361 | |||||||||||||||
FINANCE | 4.6% | ||||||||||||||
CREDIT CARD | 0.3% | ||||||||||||||
American Express Co., 6.80%, due 9/1/66 | 5,455,000 | 5,877,763 |
See accompanying notes to financial statements.
17
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
SCHEDULE OF INVESTMENTS—(Continued)
December 31, 2012
Number of Shares | Value | ||||||||||||||
DIVERSIFIED FINANCIAL SERVICES | 4.1% | ||||||||||||||
Citigroup, 5.95%, due 12/31/49, (FRN) | 20,650,000 | $ | 20,933,937 | ||||||||||||
General Electric Capital Corp., 7.125%, due 12/15/49, Series A | 24,100,000 | 27,347,764 | |||||||||||||
General Electric Capital Corp., 6.25%, due 12/15/49, Series B | 23,000,000 | 25,155,123 | |||||||||||||
73,436,824 | |||||||||||||||
INVESTMENT BANKER/BROKER | 0.2% | ||||||||||||||
Charles Schwab Corp., 7.00%, due 12/31/49 | 2,700,000 | 3,096,792 | |||||||||||||
TOTAL FINANCE | 82,411,379 | ||||||||||||||
INSURANCE | 19.0% | ||||||||||||||
LIFE/HEALTH INSURANCE | 6.0% | ||||||||||||||
American General Institutional Capital A, 7.57%, due 12/1/45, 144Aa | 27,450,000 | 32,665,500 | |||||||||||||
American General Institutional Capital B, 8.125%, due 3/15/46, 144Aa | 15,450,000 | 19,428,375 | |||||||||||||
CNP Assurances, 6.875%, due 9/30/41, (FRN) (France) (EUR) | 8,500,000 | 11,601,048 | |||||||||||||
Friends Life Group PLC, 7.875%, due 12/31/49, (FRN) (United Kingdom) | 9,500,000 | 10,127,532 | |||||||||||||
Great-West Life & Annuity Insurance Co., 7.153%, due 5/16/46, 144Aa | 2,800,000 | 2,919,000 | |||||||||||||
Nippon Life Insurance Co., 5.00%, due 10/18/42, 144A (Japan)a | 8,400,000 | 8,890,006 | |||||||||||||
Prudential Financial, 5.625%, due 6/15/43, (FRN) | 22,475,000 | 23,403,217 | |||||||||||||
109,034,678 | |||||||||||||||
LIFE/HEALTH INSURANCE—FOREIGN | 1.0% | ||||||||||||||
Dai-Ichi Mutual Life, 7.25%, due 12/29/49, 144A (Japan)a | 3,500,000 | 3,996,027 | |||||||||||||
Prudential PLC, 7.75%, due 6/23/16 (United Kingdom) | 13,155,000 | 14,260,020 | |||||||||||||
18,256,047 |
See accompanying notes to financial statements.
18
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
SCHEDULE OF INVESTMENTS—(Continued)
December 31, 2012
Number of Shares | Value | ||||||||||||||
MULTI-LINE | 5.1% | ||||||||||||||
American International Group, 8.175%, due 5/15/58, (FRN) | 34,277,000 | $ | 44,817,177 | ||||||||||||
MetLife Capital Trust IV, 7.875%, due 12/15/37, 144Aa | 13,565,000 | 16,752,775 | |||||||||||||
MetLife Capital Trust X, 9.25%, due 4/8/38, 144Aa | 21,845,000 | 30,255,325 | |||||||||||||
91,825,277 | |||||||||||||||
MULTI-LINE—FOREIGN | 1.9% | ||||||||||||||
Aviva PLC, 8.25%, due 4/29/49 (United Kingdom) | 5,850,000 | 6,375,927 | |||||||||||||
AXA SA, 8.60%, due 12/15/30 (France) | 5,000,000 | 6,282,655 | |||||||||||||
AXA SA, 6.379%, due 12/31/49, 144A (France)a | 8,250,000 | 8,126,250 | |||||||||||||
AXA SA, 6.463%, due 12/31/49, 144A (France)a | 6,300,000 | 6,237,000 | |||||||||||||
Cloverie PLC, 8.25%, due 12/31/49 (Ireland) | 5,800,000 | 6,702,039 | |||||||||||||
33,723,871 | |||||||||||||||
PROPERTY CASUALTY | 1.6% | ||||||||||||||
Liberty Mutual Group, 7.00%, due 3/15/37, 144Aa | 5,505,000 | 5,498,119 | |||||||||||||
Liberty Mutual Group, 7.80%, due 3/15/37, 144Aa | 20,356,000 | 22,747,830 | |||||||||||||
28,254,949 | |||||||||||||||
PROPERTY CASUALTY—FOREIGN | 0.6% | ||||||||||||||
Mitsui Sumitomo Insurance Co., Ltd., 7.00%, due 3/15/72, 144A (Japan)a | 10,000,000 | 11,473,940 | |||||||||||||
REINSURANCE | 0.3% | ||||||||||||||
Reinsurance Group of America, 6.75%, due 12/15/65 | 5,500,000 | 5,513,750 | |||||||||||||
REINSURANCE—FOREIGN | 2.5% | ||||||||||||||
Aquarius + Investments PLC, 8.25%, due 12/31/49 (Ireland) | 9,980,000 | 10,711,255 | |||||||||||||
Catlin Insurance Co., 7.249%, due 12/31/49, 144A (Bermuda)a | 16,900,000 | 16,984,500 | |||||||||||||
QBE Capital Funding III Ltd., 7.25%, due 5/24/41, 144A (Jersey)a | 7,275,000 | 7,541,425 | |||||||||||||
Swiss Re Capital I LP, 6.854%, due 5/29/49, 144A (Jersey)a | 5,800,000 | 6,083,579 | |||||||||||||
Swiss Reinsurance Co., Ltd., Series I, 7.635%, due 12/31/49, (Australia) (AUD) | 3,000,000 | 3,087,124 | |||||||||||||
44,407,883 | |||||||||||||||
TOTAL INSURANCE | 342,481,395 |
See accompanying notes to financial statements.
19
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
SCHEDULE OF INVESTMENTS—(Continued)
December 31, 2012
Number of Shares | Value | ||||||||||||||
INTEGRATED TELECOMMUNICATIONS SERVICES | 1.9% | ||||||||||||||
Centaur Funding Corp., 9.08%, due 4/21/20, 144A (Cayman Islands)a | 28,162 | $ | 35,290,506 | ||||||||||||
OIL & GAS EXPLORATION & PRODUCTION | 0.4% | ||||||||||||||
Origin Energy Finance Ltd., 7.875%, due 6/16/71 (Australia) (EUR) | 5,000,000 | 6,962,740 | |||||||||||||
PIPELINES | 3.1% | ||||||||||||||
Enbridge Energy Partners LP, 8.05%, due 10/1/37 | 19,403,000 | 22,060,299 | |||||||||||||
Enterprise Products Operating LLC, 7.034%, due 1/15/68, Series B | 14,325,000 | 16,419,759 | |||||||||||||
Enterprise Products Operating LP, 8.375%, due 8/1/66 | 15,676,000 | 17,904,250 | |||||||||||||
56,384,308 | |||||||||||||||
UTILITIES | 1.9% | ||||||||||||||
ELECTRIC UTILITIES | 0.7% | ||||||||||||||
FPL Group Capital, 7.30%, due 9/1/67, Series D | 12,200,000 | 13,570,756 | |||||||||||||
MULTI-UTILITIES | 1.2% | ||||||||||||||
Dominion Resources, 7.50%, due 6/30/66, Series A | 7,495,000 | 8,325,888 | |||||||||||||
PPL Capital Funding, 6.70%, due 3/30/67, Series A | 12,638,000 | 13,377,007 | |||||||||||||
21,702,895 | |||||||||||||||
TOTAL UTILITIES | 35,273,651 | ||||||||||||||
TOTAL PREFERRED SECURITIES—CAPITAL SECURITIES (Identified cost—$964,144,199) | 1,049,581,186 | ||||||||||||||
Principal Amount | |||||||||||||||
CORPORATE BONDS | 1.7% | ||||||||||||||
INSURANCE—PROPERTY CASUALTY | 0.5% | ||||||||||||||
Liberty Mutual Insurance, 7.697%, due 10/15/97, 144Aa | $ | 8,400,000 | 8,671,135 |
See accompanying notes to financial statements.
20
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
SCHEDULE OF INVESTMENTS—(Continued)
December 31, 2012
Principal Amount | Value | ||||||||||||||
INTEGRATED TELECOMMUNICATIONS SERVICES | 1.2% | ||||||||||||||
CenturyLink, 7.65%, due 3/15/42 | $ | 7,850,000 | $ | 8,228,667 | |||||||||||
Citizens Communications Co., 9.00%, due 8/15/31 | 11,850,000 | 13,094,250 | |||||||||||||
21,322,917 | |||||||||||||||
TOTAL CORPORATE BONDS (Identified cost—$28,019,667) | 29,994,052 | ||||||||||||||
Number of Shares | |||||||||||||||
SHORT-TERM INVESTMENTS | 0.9% | ||||||||||||||
MONEY MARKET FUNDS | |||||||||||||||
BlackRock Liquidity Funds: FedFund, 0.01%c | 8,450,366 | 8,450,366 | |||||||||||||
Federated Government Obligations Fund, 0.01%c | 8,450,573 | 8,450,573 | |||||||||||||
TOTAL SHORT-TERM INVESTMENTS (Identified cost—$16,900,939) | 16,900,939 | ||||||||||||||
TOTAL INVESTMENTS (Identified cost—$1,650,788,537) | 98.5 | % | 1,778,623,552 | ||||||||||||
OTHER ASSETS IN EXCESS OF LIABILITIES | 1.5 | 27,940,681 | |||||||||||||
NET ASSETS | 100.0 | % | $ | 1,806,564,233 |
See accompanying notes to financial statements.
21
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
SCHEDULE OF INVESTMENTS—(Continued)
December 31, 2012
Forward foreign currency exchange contracts outstanding at December 31, 2012 were as follows:
Counterparty | Contracts to Deliver | In Exchange For | Settlement Date | Unrealized Appreciation/ (Depreciation) | |||||||||||||||
Brown Brothers, Harriman | USD | 3,638,109 | EUR | 2,812,978 | 1/3/13 | $ | 74,884 | ||||||||||||
Brown Brothers, Harriman | USD | 3,073,511 | AUD | 2,959,830 | 1/3/13 | 123 | |||||||||||||
Brown Brothers, Harriman | USD | 43,627,824 | EUR | 33,098,120 | 1/3/13 | 60,066 | |||||||||||||
Brown Brothers, Harriman | AUD | 2,959,830 | USD | 3,080,251 | 1/3/13 | 6,616 | |||||||||||||
Brown Brothers, Harriman | EUR | 35,911,098 | USD | 46,710,643 | 1/3/13 | (690,240 | ) | ||||||||||||
Brown Brothers, Harriman | AUD | 2,969,730 | USD | 3,076,765 | 2/4/13 | 156 | |||||||||||||
Brown Brothers, Harriman | EUR | 33,583,956 | USD | 44,276,617 | 2/4/13 | (64,642 | ) | ||||||||||||
$ | (613,037 | ) |
Glossary of Portfolio Abbreviations
AUD Australian Dollar
EUR Euro Currency
FRN Floating Rate Note
PINES Public Income Notes
REIT Real Estate Investment Trust
TruPS Trust Preferred Securities
USD United States Dollar
Note: Percentages indicated are based on the net assets of the Fund.
a Resale is restricted to qualified institutional investors. Aggregate holdings equal 22.3% of the net assets of the Fund, of which 0.0% are illiquid.
b A portion of the security is segregated as collateral for open forward foreign currency exchange contracts. $2,136,000 in aggregate has been segregated as collateral.
c Rate quoted represents the seven-day yield of the fund.
See accompanying notes to financial statements.
22
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2012
ASSETS: | |||||||
Investments in securities, at value (Identified cost—$1,650,788,537) | $ | 1,778,623,552 | |||||
Cash | 5,621,860 | ||||||
Receivable for: | |||||||
Dividends and interest | 16,916,666 | ||||||
Fund shares sold | 11,219,977 | ||||||
Investment securities sold | 565,926 | ||||||
Unrealized appreciation on forward foreign currency exchange contracts | 141,845 | ||||||
Other assets | 33,204 | ||||||
Total Assets | 1,813,123,030 | ||||||
LIABILITIES: | |||||||
Unrealized depreciation on forward foreign currency exchange contracts | 754,882 | ||||||
Payable for: | |||||||
Investment securities purchased | 3,357,643 | ||||||
Fund shares redeemed | 1,195,559 | ||||||
Investment management fees | 799,007 | ||||||
Administration fees | 74,471 | ||||||
Distribution fees | 44,712 | ||||||
Shareholder servicing fees | 39,438 | ||||||
Directors' fees | 1,636 | ||||||
Other liabilities | 291,449 | ||||||
Total Liabilities | 6,558,797 | ||||||
NET ASSETS | $ | 1,806,564,233 | |||||
NET ASSETS consist of: | |||||||
Paid-in capital | $ | 1,681,774,195 | |||||
Dividends in excess of net investment income | (1,549,585 | ) | |||||
Accumulated net realized loss | (907,930 | ) | |||||
Net unrealized appreciation | 127,247,553 | ||||||
$ | 1,806,564,233 |
See accompanying notes to financial statements.
23
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES—(Continued)
December 31, 2012
CLASS A SHARES: | |||||||
NET ASSETS | $ | 413,603,114 | |||||
Shares issued and outstanding ($0.001 par value common stock outstanding) | 30,998,212 | ||||||
Net asset value and redemption price per share | $ | 13.34 | |||||
Maximum offering price per share ($13.34 ÷ .9625)a | $ | 13.86 | |||||
CLASS C SHARES: | |||||||
NET ASSETS | $ | 410,543,455 | |||||
Shares issued and outstanding ($0.001 par value common stock outstanding) | 30,899,710 | ||||||
Net asset value and offering price per shareb | $ | 13.29 | |||||
CLASS I SHARES: | |||||||
NET ASSETS | $ | 982,417,664 | |||||
Shares issued and outstanding ($0.001 par value common stock outstanding) | 73,558,977 | ||||||
Net asset value, offering and redemption price per share | $ | 13.36 |
a On investments of $100,000 or more, the offering price is reduced.
b Redemption price per share is equal to the net asset value per share less any applicable contingent deferred sales charge of 1% on shares held for less than one year.
See accompanying notes to financial statements.
24
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2012
Investment Income: | |||||||
Dividend income (net of $12,488 of foreign withholding tax) | $ | 38,747,428 | |||||
Interest income (net of $1,436 of foreign withholding tax) | 43,862,860 | ||||||
Total Income | 82,610,288 | ||||||
Expenses: | |||||||
Investment management fees | 8,643,346 | ||||||
Distribution fees—Class A | 655,711 | ||||||
Distribution fees—Class C | 2,131,093 | ||||||
Shareholder servicing fees—Class A | 262,285 | ||||||
Shareholder servicing fees—Class C | 710,364 | ||||||
Shareholder servicing fees—Class I | 69,036 | ||||||
Administration fees | 850,232 | ||||||
Transfer agent fees and expenses | 500,129 | ||||||
Custodian fees and expenses | 171,792 | ||||||
Registration and filing fees | 170,780 | ||||||
Professional fees | 110,166 | ||||||
Shareholder reporting expenses | 95,690 | ||||||
Directors' fees and expenses | 85,446 | ||||||
Line of credit fees | 24,135 | ||||||
Miscellaneous | 54,101 | ||||||
Total Expenses | 14,534,306 | ||||||
Reduction of Expenses (See Note 2) | (1,513,839 | ) | |||||
Net Expenses | 13,020,467 | ||||||
Net Investment Income | 69,589,821 | ||||||
Net Realized and Unrealized Gain (Loss): | |||||||
Net realized gain (loss) on: | |||||||
Investments | 17,669,566 | ||||||
Foreign currency transactions | (683,602 | ) | |||||
Net realized gain | 16,985,964 | ||||||
Net change in unrealized appreciation (depreciation) on: | |||||||
Investments | 145,881,732 | ||||||
Foreign currency translations | (717,784 | ) | |||||
Net change in unrealized appreciation | 145,163,948 | ||||||
Net realized and unrealized gain | 162,149,912 | ||||||
Net Increase in Net Assets Resulting from Operations | $ | 231,739,733 |
See accompanying notes to financial statements.
25
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended December 31, 2012 | For the Year Ended December 31, 2011 | ||||||||||
Change in Net Assets: | |||||||||||
From Operations: | |||||||||||
Net investment income | $ | 69,589,821 | $ | 27,585,459 | |||||||
Net realized gain (loss) | 16,985,964 | (4,002,686 | ) | ||||||||
Net change in unrealized appreciation (depreciation) | 145,163,948 | (19,328,354 | ) | ||||||||
Net increase in net assets resulting from operations | 231,739,733 | 4,254,419 | |||||||||
Dividends and Distributions to Shareholders from: | |||||||||||
Net investment income: | |||||||||||
Class A | (15,316,059 | ) | (5,295,510 | ) | |||||||
Class C | (14,952,881 | ) | (5,461,040 | ) | |||||||
Class I | (42,485,526 | ) | (16,507,064 | ) | |||||||
Net realized gain: | |||||||||||
Class A | (2,663,280 | ) | — | ||||||||
Class C | (2,822,876 | ) | — | ||||||||
Class I | (6,744,681 | ) | — | ||||||||
Tax return of capital: | |||||||||||
Class A | (489,660 | ) | (757,867 | ) | |||||||
Class C | (533,211 | ) | (865,727 | ) | |||||||
Class I | (1,287,349 | ) | (2,183,495 | ) | |||||||
Total dividends and distributions to shareholders | (87,295,523 | ) | (31,070,703 | ) | |||||||
Capital Stock Transactions: | |||||||||||
Increase in net assets from Fund share transactions | 959,943,211 | 565,115,659 | |||||||||
Total increase in net assets | 1,104,387,421 | 538,299,375 | |||||||||
Net Assets: | |||||||||||
Beginning of year | 702,176,812 | 163,877,437 | |||||||||
End of yeara | $ | 1,806,564,233 | $ | 702,176,812 |
a Includes dividends in excess of net investment income and accumulated undistributed net investment income of $1,549,585 and $640,387, respectively.
See accompanying notes to financial statements.
26
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout each period and other performance information derived from the financial statements. It should be read in conjunction with the financial statements and notes thereto.
Class A | |||||||||||||||
For the Year Ended December 31, | For the Period May 3, 2010a | ||||||||||||||
though | |||||||||||||||
Per Share Operating Performance: | 2012 | 2011 | December 31, 2010 | ||||||||||||
Net asset value, beginning of period | $ | 11.69 | $ | 12.10 | $ | 11.46 | |||||||||
Income from investment operations: | |||||||||||||||
Net investment incomeb | 0.71 | 0.75 | 0.53 | ||||||||||||
Net realized and unrealized gain (loss) | 1.80 | (0.35 | ) | 0.52 | |||||||||||
Total from investment operations | 2.51 | 0.40 | 1.05 | ||||||||||||
Less dividends and distributions to shareholders from: | |||||||||||||||
Net investment income | (0.73 | ) | (0.70 | ) | (0.34 | ) | |||||||||
Net realized gain | (0.11 | ) | — | (0.04 | ) | ||||||||||
Tax return of capital | (0.02 | ) | (0.11 | ) | (0.03 | ) | |||||||||
Total dividends and distributions to shareholders | (0.86 | ) | (0.81 | ) | (0.41 | ) | |||||||||
Redemption fees retained by the Fund | — | 0.00 | c | 0.00 | c | ||||||||||
Net increase (decrease) in net asset value | 1.65 | (0.41 | ) | 0.64 | |||||||||||
Net asset value, end of period | $ | 13.34 | $ | 11.69 | $ | 12.10 | |||||||||
Total investment returnd,e | 22.04 | % | 3.32 | % | 9.22 | %f | |||||||||
Ratios/Supplemental Data: | |||||||||||||||
Net assets, end of period (in millions) | $ | 413.6 | $ | 136.4 | $ | 50.4 | |||||||||
Ratio of expenses to average daily net assets (before expense reduction)g | 1.22 | % | 1.29 | % | 1.67 | %h | |||||||||
Ratio of expenses to average daily net assets (net of expense reduction)g | 1.10 | % | 1.06 | % | 0.85 | %h | |||||||||
Ratio of net investment income to average daily net assets (before expense reduction)g | 5.45 | % | 5.95 | % | 5.71 | %h | |||||||||
Ratio of net investment income to average daily net assets (net of expense reduction)g | 5.57 | % | 6.18 | % | 6.53 | %h | |||||||||
Portfolio turnover rate | 39 | % | 44 | % | 31 | %f |
a Commencement of operations.
b Calculation based on average shares outstanding.
c Amount is less than $0.005.
d Does not reflect sales charges, which would reduce return.
e Return assumes the reinvestment of all dividends and distributions at NAV.
f Not annualized.
g Non-class specific expenses are calculated at the Fund level and class specific expenses are calculated at the class level.
h Annualized.
See accompanying notes to financial statements.
27
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
FINANCIAL HIGHLIGHTS—(Continued)
Class C | |||||||||||||||
For the Year Ended December 31, | For the Period May 3, 2010a | ||||||||||||||
though | |||||||||||||||
Per Share Operating Performance: | 2012 | 2011 | December 31, 2010 | ||||||||||||
Net asset value, beginning of period | $ | 11.65 | $ | 12.06 | $ | 11.46 | |||||||||
Income from investment operations: | |||||||||||||||
Net investment incomeb | 0.63 | 0.67 | 0.49 | ||||||||||||
Net realized and unrealized gain (loss) | 1.79 | (0.34 | ) | 0.49 | |||||||||||
Total from investment operations | 2.42 | 0.33 | 0.98 | ||||||||||||
Less dividends and distributions to shareholders from: | |||||||||||||||
Net investment income | (0.65 | ) | (0.63 | ) | (0.31 | ) | |||||||||
Net realized gain | (0.11 | ) | — | (0.04 | ) | ||||||||||
Tax return of capital | (0.02 | ) | (0.11 | ) | (0.03 | ) | |||||||||
Total dividends and distributions to shareholders | (0.78 | ) | (0.74 | ) | (0.38 | ) | |||||||||
Redemption fees retained by the Fund | — | 0.00 | c | 0.00 | c | ||||||||||
Net increase (decrease) in net asset value | 1.64 | (0.41 | ) | 0.60 | |||||||||||
Net asset value, end of period | $ | 13.29 | $ | 11.65 | $ | 12.06 | |||||||||
Total investment returnd,e | 21.31 | % | 2.69 | % | 8.62 | %f | |||||||||
Ratios/Supplemental Data: | |||||||||||||||
Net assets, end of period (in millions) | $ | 410.5 | $ | 152.1 | $ | 48.4 | |||||||||
Ratio of expenses to average daily net assets (before expense reduction)g | 1.87 | % | 1.94 | % | 2.32 | %h | |||||||||
Ratio of expenses to average daily net assets (net of expense reduction)g | 1.75 | % | 1.71 | % | 1.50 | %h | |||||||||
Ratio of net investment income to average daily net assets (before expense reduction)g | 4.82 | % | 5.36 | % | 5.22 | %h | |||||||||
Ratio of net investment income to average daily net assets (net of expense reduction)g | 4.94 | % | 5.59 | % | 6.04 | %h | |||||||||
Portfolio turnover rate | 39 | % | 44 | % | 31 | %f |
a Commencement of operations.
b Calculation based on average shares outstanding.
c Amount is less than $0.005.
d Does not reflect sales charges, which would reduce return.
e Return assumes the reinvestment of all dividends and distributions at NAV.
f Not annualized.
g Non-class specific expenses are calculated at the Fund level and class specific expenses are calculated at the class level.
h Annualized.
See accompanying notes to financial statements.
28
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
FINANCIAL HIGHLIGHTS—(Continued)
Class I | |||||||||||||||
For the Year Ended December 31, | For the Period May 3, 2010a | ||||||||||||||
though | |||||||||||||||
Per Share Operating Performance: | 2012 | 2011 | December 31, 2010 | ||||||||||||
Net asset value, beginning of period | $ | 11.70 | $ | 12.10 | $ | 11.46 | |||||||||
Income from investment operations: | |||||||||||||||
Net investment incomeb | 0.76 | 0.80 | 0.58 | ||||||||||||
Net realized and unrealized gain (loss) | 1.80 | (0.35 | ) | 0.49 | |||||||||||
Total from investment operations | 2.56 | 0.45 | 1.07 | ||||||||||||
Less dividends and distributions to shareholders from: | |||||||||||||||
Net investment income | (0.77 | ) | (0.74 | ) | (0.36 | ) | |||||||||
Net realized gain | (0.11 | ) | — | (0.04 | ) | ||||||||||
Tax return of capital | (0.02 | ) | (0.11 | ) | (0.03 | ) | |||||||||
Total dividends and distributions to shareholders | (0.90 | ) | (0.85 | ) | (0.43 | ) | |||||||||
Redemption fees retained by the Fund | — | 0.00 | c | 0.00 | c | ||||||||||
Net increase (decrease) in net asset value | 1.66 | (0.40 | ) | 0.64 | |||||||||||
Net asset value, end of period | $ | 13.36 | $ | 11.70 | $ | 12.10 | |||||||||
Total investment returnd | 22.52 | % | 3.74 | % | 9.39 | %e | |||||||||
Ratios/Supplemental Data: | |||||||||||||||
Net assets, end of period (in millions) | $ | 982.4 | $ | 413.7 | $ | 65.1 | |||||||||
Ratio of expenses to average daily net assets (before expense reduction)f | 0.87 | % | 0.94 | % | 1.32 | %g | |||||||||
Ratio of expenses to average daily net assets (net of expense reduction)f | 0.75 | % | 0.71 | % | 0.50 | %g | |||||||||
Ratio of net investment income to average daily net assets (before expense reduction)f | 5.83 | % | 6.47 | % | 6.43 | %g | |||||||||
Ratio of net investment income to average daily net assets (net of expense reduction)f | 5.95 | % | 6.70 | % | 7.25 | %g | |||||||||
Portfolio turnover rate | 39 | % | 44 | % | 31 | %e |
a Commencement of operations.
b Calculation based on average shares outstanding.
c Amount is less than $0.005.
d Return assumes the reinvestment of all dividends and distributions at NAV.
e Not annualized.
f Non-class specific expenses are calculated at the Fund level and class specific expenses are calculated at the class level.
g Annualized.
See accompanying notes to financial statements.
29
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. Significant Accounting Policies
Cohen & Steers Preferred Securities and Income Fund, Inc. (the Fund) was incorporated under the laws of the State of Maryland on February 22, 2010 and is registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The Fund's investment objective is total return. The authorized shares of the Fund are divided into three classes designated Class A, C and I shares. Each of the Fund's shares has equal dividend, liquidation and voting rights (except for matters relating to distributions and shareholder servicing of such shares).
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The policies 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 are valued, except as indicated below, at the last sale price reflected at the close of the New York Stock Exchange 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 contracts are valued at the prevailing forward exchange rate.
Securities not listed on the New York Stock Exchange but listed on other domestic or foreign securities exchanges 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 foreign securities may be fair valued pursuant to procedures established by the Board of Directors.
Readily marketable securities traded in the over-the-counter market, including listed securities whose primary market is believed by Cohen & Steers Capital Management, Inc. (the advisor) to be over-the-counter, are valued at the last sale price on the valuation date as reported by sources deemed appropriate by the Board of Directors to reflect their fair market value. 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. However, certain fixed-income securities may be valued on the basis of prices provided by a pricing service when such prices are believed by the advisor, pursuant to delegation by the Board of Directors, to reflect the fair market value of such securities.
Short-term debt securities with a maturity date of 60 days or less are valued at amortized cost, which approximates value. Investments in open-end mutual funds are valued at their closing net asset value.
The policies and procedures approved by the Fund's Board of Directors delegate authority to make fair value determinations to the advisor, subject to the oversight of the Board of Directors. The
30
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
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 advisor determines that the bid and/or ask price 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.
Foreign equity fair value pricing procedures utilized by the Fund may cause certain foreign securities to be fair valued on the basis of fair value factors provided by a pricing service to reflect any significant market movements between the time the Fund values such securities and the earlier closing of foreign markets.
The Fund's use of fair value pricing may cause the net asset value of Fund shares to differ from the net asset value 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.
• 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 securities are not necessarily an indication of the risk associated with investing in those securities.
For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfer at the end of the period in which the underlying event causing the movement occurred. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. As of December 31, 2012, there were $7,556,076 of securities transferred
31
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
between Level 1 and Level 2 which resulted from the Fund using prices provided by a pricing service to value certain securities which included other significant observable inputs.
The following is a summary of the inputs used as of December 31, 2012 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)a | ||||||||||||||||
Preferred Securities—$25 Par Value—Banks | $ | 247,253,007 | $ | 222,135,495 | $ | 25,117,512 | $ | — | |||||||||||
Preferred Securities—$25 Par Value—Real Estate— Diversified | 72,009,318 | 66,772,151 | 5,237,167 | — | |||||||||||||||
Preferred Securities—$25 Par Value—Other Industries | 362,885,050 | 362,885,050 | — | — | |||||||||||||||
Preferred Securities— Capital Securities—Banks | 173,601,846 | — | 155,874,034 | 17,727,812 | b | ||||||||||||||
Preferred Securities— Capital Securities— Other Industries | 875,979,340 | — | 875,979,340 | — | |||||||||||||||
Corporate Bonds | 29,994,052 | — | 29,994,052 | — | |||||||||||||||
Money Market Funds | 16,900,939 | — | 16,900,939 | — | |||||||||||||||
Total Investmentsc | $ | 1,778,623,552 | $ | 651,792,696 | $ | 1,109,103,044 | $ | 17,727,812 | |||||||||||
Forward foreign currency exchange contracts | 141,845 | — | 141,845 | — | |||||||||||||||
Total Appreciation in Other Financial Instrumentsc | $ | 141,845 | $ | — | $ | 141,845 | $ | — | |||||||||||
Forward foreign currency exchange contracts | (754,882 | ) | — | (754,882 | ) | — | |||||||||||||
Total Depreciation in Other Financial Instrumentsc | $ | (754,882 | ) | $ | — | $ | (754,882 | ) | $ | — |
a Certain of the Fund's investments are categorized as Level 3 and were valued utilizing third party pricing information without adjustment. Such valuations are based on significant unobservable inputs. A change in the significant unobservable inputs could result in a significantly lower or higher value in such Level 3 investments.
b Valued by a pricing service which utilized independent broker quotes.
c Portfolio holdings are disclosed individually on the Schedule of Investments.
32
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
Following is a reconciliation of investments for which significant unobservable inputs (Level 3) were used in determining fair value:
Total Investments in Securities | Preferred Securities— $25 Par Value— Bank | Preferred Securities— Capital Securities— Banks | Preferred Securities— Capital Securities— Oil & Gas Exploration & Production | ||||||||||||||||
Balance as of December 31, 2011 | $ | 5,188,161 | $ | 2,832,625 | $ | — | $ | 2,355,536 | |||||||||||
Purchases | 6,657,043 | 2,940,000 | — | 3,717,043 | |||||||||||||||
Sales | (6,100,000 | ) | (6,100,000 | ) | — | — | |||||||||||||
Amortization | (582 | ) | — | — | (582 | ) | |||||||||||||
Realized gain | 224,840 | 224,840 | — | — | |||||||||||||||
Change in unrealized appreciation | 993,278 | 102,535 | — | 890,743 | |||||||||||||||
Transfers into Level 3a | 17,727,812 | — | 17,727,812 | — | |||||||||||||||
Transfers out of Level 3b | (6,962,740 | ) | — | — | (6,962,740 | ) | |||||||||||||
Balance as of December 31, 2012 | $ | 17,727,812 | $ | — | $ | 17,727,812 | $ | — |
a As of December 31, 2011, the Fund used significant observable inputs in determining the value of certain investments. As of December 31, 2012, the Fund used significant unobservable inputs in determining the value of the same investments.
b As of December 31, 2011, the Fund used significant unobservable inputs in determining the value of certain investments. As of December 31, 2012, the Fund used significant observable inputs in determining the value on the same investments.
Security Transactions, Investment Income and Expense Allocations: Security transactions are recorded on trade date. Realized gains and losses on investments sold are recorded on the basis of identified cost. Interest income is recorded on the accrual basis. Discounts are accreted and premiums are amortized over the life of the respective securities. 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 gain 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. Income, expenses (other than expenses attributable to a specific class) and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
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
33
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
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 exchange gains or losses arise from sales of foreign currencies, including gains and losses on forward foreign currency exchange contracts, 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 exchange 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 gain/loss are included in or are a reduction of ordinary income for federal income tax purposes.
Foreign Securities: The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the ability to repatriate funds, less complete financial information about companies and possible future adverse political and economic developments. 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.
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 foreign forward 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 foreign currency translations. 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 foreign currency transactions. 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.
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 and paid monthly. Net realized capital gains, unless offset by any available capital loss carryforward, are typically distributed to shareholders at
34
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
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 based on the net asset value per share at the close of business on the payable date, unless the shareholder has elected to have them paid in cash.
Distributions paid by the Fund are subject to recharacterization for tax purposes. Based upon the results of operations for the year ended December 31, 2012, a portion of the dividends has been reclassified to return of capital and distributions of net realized capital gains.
Income Taxes: It is the policy of the Fund to continue to qualify as a regulated investment company, 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 regulated investment companies, and by distributing substantially all of its taxable earnings to its shareholders. 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 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, 2012, 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 and Administration Fees and Other Transactions with Affiliates
Investment Advisory Fees: The advisor 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 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 advisor receives a fee, accrued daily and paid monthly, at the annual rate of 0.70% of the average daily net assets of the Fund.
For the year ended December 31, 2012, and through June 30, 2014, the advisor has contractually agreed to waive its fee and/or reimburse the Fund for expenses incurred (excluding distribution and shareholder servicing fees applicable to Class A and Class C shares, acquired fund fees and expenses and extraordinary expenses) to the extent necessary to maintain the Fund's total annual operating expenses as a percentage of average net assets at 1.10% for Class A shares, 1.75% for Class C shares and 0.75% for Class I shares. This contractual agreement can be amended at any time by agreement of the Fund and the advisor. For the year ended December 31, 2012, fees waived and/or expenses reimbursed totaled $1,513,839.
Administration Fees: The Fund has entered into an administration agreement with the advisor under which the advisor performs certain administrative functions for the Fund and receives a fee, accrued daily and paid monthly, at the annual rate of 0.05% of the average daily net assets of the Fund. For the year ended December 31, 2012, the Fund paid the advisor $617,382 in fees under this administration agreement. Additionally, the Fund pays State Street Bank and Trust Company as co-administrator under a fund accounting and administration agreement.
35
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
Distribution Fees: Shares of the Fund are distributed by Cohen & Steers Securities, LLC (the distributor), an affiliated entity of the advisor. The Fund has adopted a distribution plan (the plan) pursuant to Rule 12b-1 under the Investment Company Act of 1940. The plan provides that the Fund will pay the distributor a fee, accrued daily and paid monthly, at an annual rate of up to 0.25% of the average daily net assets attributable to Class A shares and up to 0.75% of the average daily net assets attributable to Class C shares.
There is a maximum initial sales charge of 3.75% for Class A shares which commenced on June 1, 2012. Prior to June 1, 2012, the maximum initial sales charge was 4.50% for Class A shares. There is a contingent deferred sales charge ("CDSC") of 1.00% on Class C shares, which applies if redemption occurs within one year from purchase. For the year ended December 31, 2012, the Fund has been advised that the distributor received $410,731 in sales commissions from the sale of Class A shares and $46,270 and $71,213 of CDSC relating to redemptions of Class A and C shares, respectively. The distributor has advised the Fund that proceeds from the CDSC on these classes are used by the distributor to defray its expenses related to providing distribution-related services to the Fund in connection with the sale of these classes, including payments to dealers and other financial intermediaries for selling these classes.
Shareholder Servicing Fees: For shareholder services, the Fund pays the distributor a fee, accrued daily and paid monthly, at an annual rate of up to 0.10% of the average daily net assets of the Fund's Class A and Class I shares and up to 0.25% of the average daily net assets of the Fund's Class C shares. The distributor is responsible for paying qualified financial institutions for shareholder services.
Directors' and Officers' Fees: Certain directors and officers of the Fund are also directors, officers and/or employees of the advisor. The Fund does not pay compensation to directors and officers affiliated with the advisor except for the Chief Compliance Officer, who received compensation from the advisor which was reimbursed by the Fund, in the amount of $17,159 for the year ended December 31, 2012.
Note 3. Purchases and Sales of Securities
Purchases and sales of securities, excluding short-term investments, for the year ended December 31, 2012, totaled $1,410,373,992 and $475,252,183, respectively.
Note 4. Derivative Investments
The following tables present the value of derivatives held at December 31, 2012 and the effect of derivatives held during the year ended December 31, 2012, along with the respective location in the financial statements.
36
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
Statement of Assets and Liabilities | |||||||||||||||||||
Assets | Liabilities | ||||||||||||||||||
Derivatives | Location | Fair Value | Location | Fair Value | |||||||||||||||
Forward foreign currency exchange contracts | Unrealized appreciation | $ | 141,845 | Unrealized depreciation | $ | 754,882 | |||||||||||||
Statement of Operations |
Derivatives | Location | Realized Loss | Change in Unrealized Depreciation | ||||||||||||
Forward foreign currency exchange contracts | Net Realized and Unrealized Gain (Loss) | $ | (688,702 | ) | $ | (743,100 | ) |
The following summarizes the volume of the Fund's forward foreign currency exchange contracts activity during the year ended December 31, 2012:
Forward Foreign Currency Exchange Contracts | |||||||
Average Notional Amount | $ | 24,339,790 | |||||
Ending Notional Amount | $ | 47,353,382 |
Note 5. Income Tax Information
The tax character of dividends and distributions paid was as follows:
For the Year Ended December 31, | |||||||||||
2012 | 2011 | ||||||||||
Ordinary income | $ | 82,064,757 | $ | 27,263,614 | |||||||
Long-term capital gain | 2,920,546 | — | |||||||||
Tax return of capital | 2,310,220 | 3,807,089 | |||||||||
Total dividends and distributions | $ | 87,295,523 | $ | 31,070,703 |
As of December 31, 2012, the tax-basis components of accumulated earnings and the federal tax cost were as follows:
Cost for federal income tax purposes | $ | 1,654,329,725 | |||||
Gross unrealized appreciation | $ | 127,824,282 | |||||
Gross unrealized depreciation | (3,530,455 | ) | |||||
Net unrealized appreciation | $ | 124,293,827 |
37
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
The Fund incurred net ordinary capital losses of $506,132 after October 31, 2012, that it has elected to treat as arising in the following fiscal year.
During the year ended December 31, 2012, the Fund utilized net capital loss carryforwards of $2,836,903.
As of December 31, 2012, the Fund had temporary book/tax differences primarily attributable to wash sales on portfolio securities and unrealized appreciation on passive foreign investment companies and permanent book/tax differences primarily attributable to foreign currency transactions, certain fixed income securities and prior year REIT distribution adjustments. To reflect reclassifications arising from the permanent differences, paid-in capital was credited $114,817, accumulated net realized loss was charged $1,089,490 and dividends in excess of net investment income was credited $974,673. Net assets were not affected by this reclassification.
Note 6. Capital Stock
The Fund is authorized to issue 600 million shares of capital stock, at a par value of $0.001 per share. The Board of Directors of the Fund may increase or decrease the aggregate number of shares of common stock that the Fund has authority to issue. Transactions in Fund shares were as follows:
For the Year Ended December 31, 2012 | For the Year Ended December 31, 2011 | ||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||
CLASS A: | |||||||||||||||||||
Sold | 25,418,970 | $ | 325,040,045 | 11,460,890 | $ | 137,745,212 | |||||||||||||
Issued as reinvestment of dividends and distributions | 1,043,170 | 13,406,946 | 291,649 | 3,504,192 | |||||||||||||||
Redeemed | (7,128,433 | ) | (91,654,478 | ) | (4,256,635 | ) | (50,730,825 | ) | |||||||||||
Redemption fees retained by the Funda | — | — | — | 2,555 | |||||||||||||||
Net increase | 19,333,707 | $ | 246,792,513 | 7,495,904 | $ | 90,521,134 | |||||||||||||
CLASS C: | |||||||||||||||||||
Sold | 19,931,667 | $ | 252,206,078 | 9,849,875 | $ | 118,620,691 | |||||||||||||
Issued as reinvestment of dividends and distributions | 560,528 | 7,183,060 | 145,208 | 1,731,681 | |||||||||||||||
Redeemed | (2,645,525 | ) | (33,971,664 | ) | (952,704 | ) | (11,299,508 | ) | |||||||||||
Redemption fees retained by the Funda | — | — | — | 2,491 | |||||||||||||||
Net increase | 17,846,670 | $ | 225,417,474 | 9,042,379 | $ | 109,055,355 |
38
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
For the Year Ended December 31, 2012 | For the Year Ended December 31, 2011 | ||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||
CLASS I: | |||||||||||||||||||
Sold | 59,825,821 | $ | 765,409,444 | 37,537,321 | $ | 455,670,619 | |||||||||||||
Subscriptions in-kindb | 342,468 | 4,291,121 | — | — | |||||||||||||||
Issued as reinvestment of dividends and distributions | 1,201,092 | 15,472,775 | 355,156 | 4,245,465 | |||||||||||||||
Redeemed | (23,155,734 | ) | (297,440,116 | ) | (7,926,576 | ) | (94,380,245 | ) | |||||||||||
Redemption fees retained by the Funda | — | — | — | 3,331 | |||||||||||||||
Net increase | 38,213,647 | $ | 487,733,224 | 29,965,901 | $ | 365,539,170 |
a A 2% redemption fee, paid directly to the Fund, was charged on shares sold within 60 days of the time of purchase. Effective March 1, 2011, the Fund no longer charges redemption fees.
b Certain shareholders of the Fund were permitted to purchase shares in-kind.
Note 7. Borrowings
The Fund, in conjunction with other Cohen & Steers funds, is a party to a $200,000,000 syndicated credit agreement (the credit agreement) with State Street Bank and Trust Company, as administrative agent and operations agent, and the lenders identified in the credit agreement, which expires January 25, 2013. The Fund pays a commitment fee of 0.10% per annum on its proportionate share of the unused portion of the credit agreement. For the period January 1, 2012 through January 27, 2012, the commitment fee was 0.125% per annum on the Fund's proportionate share of the unused portion of the credit agreement. Effective January 25, 2013, the credit agreement was renewed under similar terms and expires January 24, 2014.
During the year ended December 31, 2012, the Fund did not borrow under the credit agreement.
Note 8. 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 9. New Accounting Pronouncement
In December 2011, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update No. 2011-11, "Balance Sheet (Topic 210)—Disclosures about Offsetting Assets and Liabilities requirements in U.S. GAAP and IFRSs" ("ASU 2011-11"). ASU 2011-11 requires additional
39
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
disclosures on financial instruments and derivative instruments that are either offset in accordance with existing accounting guidance or are subject to an enforceable master netting arrangement or similar agreement. The new requirements do not change the accounting guidance on netting, but rather enhance the disclosures to more clearly show the impact of netting arrangements on a company's financial position.
Management is currently evaluating the impact the adoption of this pronouncement will have on the Fund's financial statements. ASU 2011-11 is effective for fiscal years and interim periods beginning after January 1, 2013.
Note 10. Subsequent Events
Management has evaluated events and transactions occurring after December 31, 2012 through the date that the financial statements were issued, and has determined that no additional disclosure in the financial statements is required.
40
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Cohen & Steers Preferred Securities and Income Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Cohen & Steers Preferred Securities and Income Fund, Inc. (the "Fund") at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 20, 2013
41
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
TAX INFORMATION—2012 (Unaudited)
Pursuant to the Jobs and Growth Relief Reconciliation Act of 2003, the Fund designates qualified dividend income of $39,495,970. Additionally, 16.9% of the ordinary dividends qualified for the dividends received deduction available to corporations. Also, the Fund designates a long-term capital gain distribution of $2,558,675 at the 15% rate and $361,871 at the 25% rate or maximum allowable.
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 Securities and Exchange Commission'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. The Fund may also pay distributions in excess of the Fund's net investment company taxable income and this excess could be a tax free return of capital distributed from the Fund's assets. 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.
42
COHEN & STEERS PREFERRED SECURITIES 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 advisor, administrator, co-administrator, custodian and transfer agent. The management of the Fund's day-to-day operations is delegated to its officers, the 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. The statement of additional information (SAI) includes additional information about fund directors and is available, without charge, upon request by calling 800-330-7348.
Name, Address1 and Age | 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 Director4 | |||||||||||||||||||||||
Robert H. Steers Age: 59 | Director and Co-Chairman | Until next election of directors | Co-Chairman and Co-Chief Executive Officer of Cohen & Steers Capital Management, Inc. (the Advisor) since 2003 and its parent, Cohen & Steers, Inc. since 2004. Vice President of Cohen & Steers Securities, LLC. | 20 | 1991 to present | ||||||||||||||||||
Martin Cohen Age: 64 | Director and Co-Chairman | Until next election of directors | Co-Chairman and Co-Chief Executive Officer of the Advisor since 2003 and Cohen & Steers, Inc. since 2004. Prior to that, President of the Advisor; Vice President of Cohen & Steers Securities, LLC. | 20 | 1991 to present |
(table continued on next page)
43
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
(table continued from previous page)
Name, Address1 and Age | 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 Age: 47 | Director | Until next election of directors | From May 2006 to June 2011, President and Chief Executive Officer of DWS Funds and Managing Director of Deutsche Asset Management. | 20 | June 2011 to present | ||||||||||||||||||
Bonnie Cohen5 Age: 70 | Director | Until next election of directors | Consultant. Board Member, DC Public Library Foundation since 2012; Board Member, United States Department of Defense Business Board since 2010; Board Member, Teluride Mountain Film Festival since 2010; Advisory Board Member, Posse Foundation since 2004; Trustee, H. Rubenstein Foundation since 1996; Trustee, District of Columbia Public Libraries since 2004. | 20 | 2001 to present | ||||||||||||||||||
George Grossman Age: 59 | Director | Until next election of directors | Attorney-at-law | 20 | 1993 to present | ||||||||||||||||||
Richard E. Kroon Age: 70 | Director | Until next election of directors | Member of Investment Committee, Monmouth University since 2004; Former Director, Retired Chairman and Managing Partner of Sprout Group venture capital funds, then an affiliate of Donaldson, Lufkin and Jenrette Securities Corporation from 1981 to 2001. Former chairman of the National Venture Capital Association for the year 2000. | 20 | 2004 to present |
(table continued on next page)
44
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
(table continued from previous page)
Name, Address1 and Age | 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 | ||||||||||||||||||
Richard J. Norman Age: 69 | Director | Until next election of directors | Private Investor. Member, District of Columbia Department of Corrections Chaplains Corps from 2008 to February 2010; Member, Montgomery County, Maryland Department of Corrections Volunteer Corps since February 2010; Liaison for Business Leadership, Salvation Army World Service Organization (SAWSO) since 2010; Advisory Board Member, The Salvation Army since 1985; Financial Education Fund Chair, The Foundation Board of Maryland Public Television since 2009; Former President, Executive Committee, Chair of Investment Committee, The Foundation Board of Maryland Public Television from 1997 to 2008. Prior thereto, Investment Representative of Morgan Stanley Dean Witter from 1966 to 2000. | 20 | 2001 to present | ||||||||||||||||||
Frank K. Ross Age: 69 | Director | Until next election of directors | Visiting Professor of Accounting, Howard University School of Business since 2004; Board member and Audit Committee Chair and Human Resources and Compensation Committee Member, Pepco Holdings, Inc. (electric utility) since 2004. Formerly, Midatlantic Area Managing Partner for Assurance Services at KPMG LLP and Managing Partner of its Washington, DC offices from 1977 to 2003. | 20 | 2004 to present |
(table continued on next page)
45
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
(table continued from previous page)
Name, Address1 and Age | 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 | ||||||||||||||||||
C. Edward Ward Jr. Age: 66 | Director | Until next election of directors | Member of The Board of Trustees of Manhattan College, Riverdale, New York since 2004. Formerly Director of closed-end fund management for the New York Stock Exchange, where he worked from 1979 to 2004. | 20 | 2004 to present |
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 Martin Cohen and Bonnie Cohen are not related.
46
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
The officers of the Fund (other than Messrs. Cohen and Steers, whose biographies are provided above), their address, their ages and their principal occupations for at least the past five years are set forth below.
Name, Address and Age1 | Position(s) Held with Fund | Principal Occupation During At Least the Past 5 Years | Length of Time Served2 | ||||||||||||
Adam M. Derechin Age: 48 | President and Chief Executive Officer | Chief Operating Officer of CSCM (since 2003) and CNS (since 2004). Prior to that, Senior Vice President of CSCM and Vice President and Assistant Treasurer of the Cohen & Steers funds. | Since 2005 | ||||||||||||
Joseph M. Harvey Age: 49 | Vice President | President and Chief Investment Officer of CSCM (since 2003) and President of CNS (since 2004). Prior to that, Senior Vice President and Director of Investment Research of CSCM. | Since 2004 | ||||||||||||
William F. Scapell Age: 45 | Vice President | Senior Vice President of CSCM since 2003. Prior to that, chief strategist for preferred securities at Merrill Lynch & Co., Inc. | Since 2003 | ||||||||||||
Francis C. Poli Age: 50 | Secretary | Executive Vice President, Secretary and General Counsel of CSCM and CNS since March 2007. Prior thereto, General Counsel of Allianz Global Investors of America LP. | Since 2007 | ||||||||||||
James Giallanza Age: 46 | Treasurer and Chief Financial Officer | Senior Vice President of CSCM since September 2006. Prior thereto, Deputy Head of the US Funds Administration and Treasurer & CFO of various mutual funds within the Legg Mason (formally Citigroup Asset Management) fund complex from August 2004 to September 2006. | Since 2006 | ||||||||||||
Lisa D. Phelan Age: 44 | Chief Compliance Officer | Senior Vice President and Director of Compliance of CSCM since 2007 and prior to that, Vice President since 2006. Chief Compliance Officer of CSSL since 2004. Prior to that, Compliance Officer of CSCM since 2004. Chief Compliance Officer, Avatar Associates & Overture Asset Managers, 2003-2004. | 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 to that position in 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.
47
COHEN & STEERS PREFERRED SECURITIES 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
48
COHEN & STEERS PREFERRED SECURITIES 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 UK Limited, Cohen & Steers Europe SA, 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. |
49
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
Cohen & Steers Investment Solutions
COHEN & STEERS GLOBAL REALTY SHARES
• Designed for investors seeking total return, investing primarily in global real estate securities
• Symbols: CSFAX, CSFBX*, CSFCX, CSSPX
COHEN & STEERS INSTITUTIONAL REALTY SHARES
• Designed for institutional investors seeking total return, investing primarily in U.S. real estate securities (REITs)
• Symbol: CSRIX
COHEN & STEERS REALTY INCOME FUND
• Designed for investors seeking total return, investing primarily in U.S. real estate securities (REITs)
• Symbols: CSEIX, CSBIX*, CSCIX, CSDIX
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
COHEN & STEERS
EMERGING MARKETS REAL ESTATE FUND
• Designed for investors seeking total return, investing primarily in emerging markets real estate securities
• Symbols: APFAX, APFCX, APFIX
COHEN & STEERS REALTY SHARES
• Designed for investors seeking total return, investing primarily in U.S. real estate securities (REITs)
• Symbol: CSRSX
COHEN & STEERS
INSTITUTIONAL GLOBAL REALTY SHARES
• Designed for institutional investors seeking total return, investing primarily in global real estate securities
• Symbol: GRSIX
COHEN & STEERS GLOBAL INFRASTRUCTURE FUND
• Designed for investors seeking total return, investing primarily in global infrastructure securities
• Symbols: CSUAX, CSUBX*, CSUCX, CSUIX
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 securities
• Symbols: DVFAX, DVFCX, DVFIX
COHEN & STEERS
PREFERRED SECURITIES AND INCOME FUND
• Designed for investors seeking total return, investing primarily in preferred and debt securities
• Symbols: CPXAX, CPXCX, CPXIX
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
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 real estate equity securities of companies in a specified index
• Symbol: GRI
Distributed by ALPS Distributors, 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 real estate equity securities of companies in a specified index
• Symbol: ICF
Distributed by BlackRock Investments, LLC.
* Class B shares are no longer offered except through dividend reinvestment and permitted exchanges by existing Class B shareholders.
Please consider the investment objectives, risks, charges and expenses of the 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.
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COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
OFFICERS AND DIRECTORS
Robert H. Steers
Director and co-chairman
Martin Cohen
Director and co-chairman
Michael G. Clark
Director
Bonnie Cohen
Director
George Grossman
Director
Richard E. Kroon
Director
Richard J. Norman
Director
Frank K. Ross
Director
C. Edward Ward, Jr.
Director
Adam M. Derechin
President and chief executive officer
Joseph M. Harvey
Vice president
William F. Scapell
Vice president
Francis C. Poli
Secretary
James Giallanza
Treasurer and chief financial officer
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
Boston Financial Data Services, Inc.
30 Dan Road
Canton, MA 02021
(800) 437-9912
Legal Counsel
Ropes & Gray LLP
1211 Avenue of the Americas
New York, NY 10036
Distributor
Cohen & Steers Securities, LLC
280 Park Avenue
New York, NY 10017
Nasdaq Symbol: Class A—CPXAX
Class C—CPXCX
Class I— CPXIX
Website: cohenandsteers.com
This report is authorized for delivery only to shareholders of Cohen & Steers Preferred Securities and Income Fund, Inc. unless accompanied or preceded by the delivery of a currently effective prospectus setting forth details of the Fund. Performance data quoted represents 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.
51
COHEN & STEERS
PREFERRED SECURITIES AND INCOME FUND
280 PARK AVENUE
NEW YORK, NY 10017
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CPXAXAR
Annual Report December 31, 2012
Cohen & Steers Preferred Securities and Income Fund
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 has not amended the Code of Ethics as described in Form N-CSR during the reporting period. 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. Upon request, a copy of the Code of Ethics can be obtained free of charge 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 Michael G. Clark and Frank K. Ross, each a member of the board’s audit committee, are each an “audit committee financial expert”. Mr. Clark and Mr. Ross are each “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 for professional services rendered by the registrant’s principal accountant were as follows:
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| 2012 |
| 2011 |
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Audit Fees |
| $ | 46,350 |
| $ | 45,000 |
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Audit-Related Fees |
| $ | 0 |
| $ | 0 |
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Tax Fees |
| $ | 6,400 |
| $ | 6,250 |
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All Other Fees |
| $ | 0 |
| $ | 0 |
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Tax fees were billed in connection with the preparation of tax returns, calculation and designation of dividends and other miscellaneous tax services.
(e)(1) The 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 and any sub-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, 2012 and December 31, 2011 (the registrant commenced operations on May 3, 2010), 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:
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| 2012 |
| 2011 |
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Registrant |
| $ | 6,400 |
| $ | 6,250 |
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Investment Advisor |
| $ | 15,000 |
| $ | 20,000 |
|
(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.
Not applicable.
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.
Not applicable.
Item 8. Portfolio Managers of Closed-End Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a) The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, based upon such officers’ evaluation of these controls and procedures as of a date within 90 days of the filing date of this report.
(b) There were no changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Not Applicable.
(a) (2) Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940.
(a)(3) Not applicable
(b) Certifications of chief executive officer and chief financial officer as required by Rule 30a- 2(b) under the Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
COHEN & STEERS PREFERRED SECURITIES AND INCOME FUND, INC.
| By: | /s/ Adam M. Derechin |
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| Name: Adam M. Derechin |
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| Title: President and Chief Executive Officer |
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| Date: March 1, 2013 |
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ Adam M. Derechin |
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| Name: | Adam M. Derechin |
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| Title: | President and Chief Executive Officer |
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| By: | /s/ James Giallanza |
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| Name: | James Giallanza |
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| Title: | Treasurer and Chief Financial Officer |
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| (Principal Financial Officer) |
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| Date: March 1, 2013 |
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