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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act File Number: 811-21326
Cohen & Steers REIT and Preferred Income Fund, Inc.
(Exact name of registrant as specified in charter)
757 Third Avenue, New York, NY 10017
(Address of principal executive offices) (Zip code)
Robert H. Steers
Cohen & Steers Capital Management, Inc.
757 Third Avenue
New York, New York 10017
(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 832-3232
Date of fiscal year end: December 31
Date of reporting period: June 30, 2003
Item 1. Reports to Stockholders.
The registrant's semi-annual report to shareholders, for the period ended
June 30, 2003, is hereby included.
Item 9. Controls and Procedures.
(b) There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
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Item 10. Exhibits.
(a)(2)(i) Certification, dated as of August 19, 2003, of Robert H. Steers,
principal executive officer of the registrant.
(a)(2)(ii) Certification, dated as of August 19, 2003, of Martin Cohen,
principal financial officer of the registrant.
(b) (1) Certification, dated as of August 19, 2003, of Robert H. Steers, chief
executive officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(b) (2) Certification, dated as of August 19, 2003, of Martin Cohen, chief
financial officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
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 REIT AND PREFERRED INCOME FUND, INC.
By: /s/ Robert H. Steers, Chairman
Date: August 19, 2003
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/ Robert H. Steers, Chairman, Secretary and principal
executive officer
Date: August 19, 2003
By: /s/ Martin Cohen, President, Treasurer and principal
financial officer
Date: August 19, 2003
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
August 19, 2003
To Our Shareholders:
We are pleased to submit to your our first shareholder report for the period
ending June 30, 2003. The net asset value per common share at that date was
$23.84. Because the fund commenced operations on June 27, 2003, we are just at
the beginning of our investment program. At quarter-end, we had invested
approximately $107.3 million, or 10.5% of our initial capital. Of this amount,
approximately $90.5 million was invested in REIT common stocks and $16.8 million
was invested in preferred securities. Subsequent to quarter-end, the
underwriters' final over-allotment was exercised, increasing the fund's total
common shares outstanding to 48.2 million. The fund also declared $0.17 per
share monthly dividends payable to common shareholders of record on August 15,
2003, September 15, 2003, and October 15, 2003.
On August 18, 2003, the fund issued $620 million in Auction Market Preferred
Shares. The proceeds of this issue, which received a AAA/Aaa rating from
Standard & Poor's and Moody's, will be used to make additional investments in
REITs and preferred securities. The fund also entered into several interest rate
swap transactions. These transactions are designed to reduce the risk that an
increase in short-term interest rates could have on the fund's common shares as
a result of leverage. As we continue to execute our investment program, we
anticipate entering into additional interest rate swap agreements in order to
fix the rate on the majority of our borrowings.
INVESTMENT REVIEW
In today's market environment, many investors are finding REITs to be a very
appealing asset class. Offering the potential for high income, tangible
underlying asset value, low correlation to other assets and long-term growth,
REITs are becoming increasingly more appreciated by investors. Further, we
believe that the prudent use of leverage -- which is plentiful today at a low
cost -- by real estate owners and investors has helped real estate prices remain
firm despite weak fundamentals. REITs have been able to take advantage of the
strong demand for property by selling assets, enabling them to reposition and
upgrade the quality of their portfolios while simultaneously strengthening their
balance sheets. Moreover, low interest rates have allowed REITs to refinance
existing high cost debt and boost earnings. With signs of an economic recovery
beginning to emerge, we remain confident that real estate fundamentals are
poised to improve over the coming quarters.
Emerging economic strength has driven up Treasury yields from very low
levels in recent weeks, which we view as a correction from unsustainably low
levels. As Treasury yields have climbed, we have seen the preferred market
become more attractive, enabling us to effectively begin deploying our initial
capital in line with expectations. We have also seen a good number of new issues
come to market, further expanding our universe of investment opportunities.
Lower default rates and improving growth prospects have supported the general
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
compression of risk premiums (credit spreads) on corporate obligations,
including preferred securities. In light of our positive economic outlook, we
expect this trend to continue.
Sincerely,
MARTIN COHEN ROBERT H. STEERS
MARTIN COHEN ROBERT H. STEERS
President Chairman
GREG E. BROOKS WILLIAM F. SCAPELL
GREG E. BROOKS WILLIAM F. SCAPELL
Portfolio manager Portfolio manager
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Cohen & Steers is online at COHENANDSTEERS.COM
We have enhanced both the look and features of our Web site
to give you more information about our company, our funds
and the REIT market in general. Check out our interactive
Asset Allocation Tool, which allows you to hypothetically
add REITs to any portfolio to see how they impact expected
total returns and risk. Or try the Fund Performance
Calculator and see how our funds have performed versus the
S&P 500 Index or Nasdaq Composite. As always, you can also
get daily net asset values, fund fact sheets, portfolio
highlights, recent news articles and our overall insights on
the REIT market.
So visit us today at COHENANDSTEERS.COM
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 2003 (UNAUDITED)
<Table>
<Caption>
NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD(a)
--------- -------- --------
EQUITIES 10.53%
COMMON STOCK 8.88%
DIVERSIFIED 0.62%
Colonial Properties Trust.................. 35,600 $ 1,252,764 7.56%
iStar Financial............................ 50,000 1,825,000 7.26
Vornado Realty Trust....................... 75,100 3,274,360 6.24
------------
6,352,124
------------
HEALTH CARE 0.97%
Health Care Property Investors............. 149,200 6,318,620 7.84
Nationwide Health Properties............... 3,200 50,976 9.29
Ventas..................................... 235,000 3,560,250 7.06
------------
9,929,846
------------
INDUSTRIAL 0.23%
First Industrial Realty Trust.............. 75,000 2,370,000 8.67
------------
OFFICE 2.64%
CarrAmerica Realty Corp. .................. 155,000 4,310,550 7.19
Equity Office Properties Trust............. 172,600 4,661,926 7.40
Highwoods Properties....................... 25,500 568,650 7.62
Mack-Cali Realty Corp. .................... 110,100 4,005,438 6.93
Maguire Properties......................... 694,200 13,363,350 8.31
------------
26,909,914
------------
OFFICE/INDUSTRIAL 0.24%
Liberty Property Trust..................... 67,200 2,325,120 6.94
Mission West Properties.................... 7,400 84,138 8.44
------------
2,409,258
------------
RESIDENTIAL -- APARTMENT 2.36%
Archstone-Smith Trust...................... 669,800 16,075,200 7.13
AvalonBay Communities...................... 99,100 4,225,624 6.57
Camden Property Trust...................... 73,800 2,579,310 7.27
Gables Residential Trust................... 35,600 1,076,188 7.97
Mid-America Apartment Communities.......... 1,800 48,618 8.66
------------
24,004,940
------------
</Table>
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(a) Dividend yield is computed by dividing the security's current annual
dividend rate by the last sale price on the principal exchange, or market,
on which such security trades.
See accompanying notes to financial statements.
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 2003 (UNAUDITED)
<Table>
<Caption>
NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD
--------- -------- --------
SELF STORAGE 0.01%
Sovran Self Storage........................ 3,500 $ 110,250 7.62%
------------
SHOPPING CENTER 1.81%
COMMUNITY CENTER 0.75%
Heritage Property Investment Trust......... 47,100 1,275,468 7.75
New Plan Excel Realty Trust................ 295,300 6,304,655 7.73
Ramco-Gershenson Properties Trust.......... 800 18,640 7.21
------------
7,598,763
------------
REGIONAL MALL 1.06%
Glimcher Realty Trust...................... 81,800 1,832,320 8.57
Macerich Co. .............................. 215,200 7,559,976 6.49
Mills Corp. ............................... 43,200 1,449,360 6.74
------------
10,841,656
------------
TOTAL SHOPPING CENTER...................... 18,440,419
------------
TOTAL COMMON STOCK (Identified
cost -- $90,252,424)................ 90,526,751
------------
PREFERRED SECURITIES 1.65%
AUTO MANUFACTURING 0.03%
Ford Motor Co., 7.40% Series (CORTS)(a).... 9,400 231,522 7.51
Ford Motor Co., 8.00% Series (CORTS)(a).... 100 2,510 7.97
Ford Motor Co., 8.125% Series (SATURNS)(b). 4,000 101,040 8.04
------------
335,072
------------
CABLE/MEDIA 0.01%
AOL Time Warner, 7.625%, Series A-1
(CABCO)(c)............................... 1,900 48,640 7.46
------------
COMMERCIAL BANK -- CENTRAL U.S. 0.08%
Old Second Bancorp Capital Trust I,
7.80%.................................... 70,000 759,500 7.19
------------
DIVERSIFIED TELECOMMUNICATIONS 0.05%
Telephone & Data Systems, 7.60%,
Series A................................. 17,800 467,428 7.24
------------
FINANCE -- CREDIT CARD 0.01%
MBNA Capital, 8.125%, Series D............. 4,900 130,144 7.64
------------
</Table>
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(a) (CORTS) Corporate Trust Securities.
(b) (SATURNS) Structured Asset Trust Unit Repackagings.
(c) (CABCO) Corporate Assets Backed Corporation.
See accompanying notes to financial statements.
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 2003 (UNAUDITED)
<Table>
<Caption>
NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD
--------- -------- --------
PROPERTY/CASUALTY INSURANCE 0.78%
Ace Ltd., 7.80%, Series C.................. 300,000 $ 7,903,140 7.25%
------------
REAL ESTATE 0.50%
Health Care REIT, 7.875%, Series D......... 100,000 2,500,000 7.88
Mills Corp., 8.75%, Series E............... 100,000 2,645,000 8.28
------------
5,145,000
------------
REINSURANCE 0.19%
PartnerRe Ltd., 6.75%, Series C............ 65,000 1,688,700 6.51
RenaissanceRe Holdings Ltd., 7.30%, Series
B........................................ 11,000 292,600 6.88
------------
1,981,300
------------
TOTAL PREFERRED SECURITIES
(Identified cost -- $16,615,890).... 16,770,224
------------
TOTAL EQUITIES (Identified
cost -- $106,868,314)............... 107,296,975
------------
</Table>
See accompanying notes to financial statements.
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 2003 (UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------ --------
COMMERCIAL PAPER 70.63%
AIG Funding, 1.13%, due 7/1/03....................... $ 48,000,000 $ 48,000,000
American Express Credit Corp., 1.05%, due 7/1/03..... 48,000,000 48,000,000
American General Financial Corp., 1.13%, due
7/1/03............................................ 48,000,000 48,000,000
BNP Paribas Financial, 1.13%, due 7/1/03............. 48,000,000 48,000,000
Citigroup, 1.13%, due 7/1/03......................... 48,000,000 48,000,000
Clipper Receivables, 0.92%, due 7/3/03............... 96,000,000 95,995,093
General Electric Capital Corp., 1.13%, due 7/1/03.... 48,000,000 48,000,000
Household Finance Corp., 1.13%, due 7/1/03........... 48,000,000 48,000,000
National Australia Funding, 1.13%, due 7/1/03........ 48,000,000 48,000,000
Prudential Funding Corp., 1.00%, due 7/1/03.......... 48,000,000 48,000,000
San Paolo U.S. Finance Co., 1.13%, due 7/1/03........ 48,000,000 48,000,000
State Street Boston Corp., 1.13%, due 7/1/03......... 48,000,000 48,000,000
Total Fina Elf Capital, 1.13%, due 7/1/03............ 48,000,000 48,000,000
UBS Financial, 1.13%, due 7/1/03..................... 48,000,000 48,000,000
--------------
TOTAL COMMERCIAL PAPER (Identified
cost -- $719,995,093)......................... 719,995,093
--------------
SHORT TERM -- U.S. GOVERNMENT 25.74%
Federal Home Loan Bank, 0.70%, due 7/1/03............ 132,340,000 132,340,000
Federal National Mortgage Association, 0.70%, due
7/1/03............................................ 130,000,000 130,000,000
--------------
TOTAL SHORT TERM -- U.S. GOVERNMENT
(Identified cost -- $262,340,000)............. 262,340,000
--------------
TOTAL INVESTMENTS (Identified cost --
$1,089,203,407).................................. 106.90% 1,089,632,068
LIABILITIES IN EXCESS OF OTHER ASSETS ............ (6.90)% (70,335,552)
------ --------------
NET ASSETS (Equivalent to $23.84 per share based on
42,754,200 shares of capital stock
outstanding)..................................... 100.00% $1,019,296,516
------ --------------
------ --------------
</Table>
See accompanying notes to financial statements.
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)
<Table>
ASSETS:
Investments in securities, at value (Identified
cost -- $1,089,203,407) (Note 1)...................... $1,089,632,068
Cash.................................................... 25,081
Dividends and interest receivable....................... 234,334
--------------
Total Assets........................................ 1,089,891,483
--------------
LIABILITIES:
Payable for investment securities purchased............. 68,723,551
Payable for original fund offering costs................ 1,782,675
Payable to investment manager........................... 72,565
Other liabilities....................................... 16,176
--------------
Total Liabilities................................... 70,594,967
--------------
TOTAL NET ASSETS APPLICABLE TO COMMON SHARES................ $1,019,296,516
--------------
--------------
TOTAL NET ASSETS APPLICABLE TO COMMON SHARES consist of:
Paid-in Capital (Notes 1 and 5)......................... $1,018,619,025
Undistributed net investment income..................... 248,830
Net unrealized appreciation on investments.............. 428,661
--------------
$1,019,296,516
--------------
--------------
NET ASSET VALUE PER COMMON SHARE:
($1,019,296,516[div]42,754,200 shares outstanding)........ $ 23.84
--------------
--------------
MARKET PRICE PER COMMON SHARE............................... $ 25.05
--------------
--------------
MARKET PRICE PREMIUM TO NET ASSET VALUE PER COMMON SHARE.... 5.08%
--------------
--------------
</Table>
See accompanying notes to financial statements.
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD JUNE 27, 2003(a) THROUGH JUNE 30, 2003 (UNAUDITED)
<Table>
Investment Income (Note 1):
Dividend income......................................... $234,333
Interest income......................................... 103,238
--------
Total Income....................................... 337,571
--------
Expenses:
Investment management fees (Note 2)..................... 72,565
Administration fees (Note 2)............................ 8,572
Reports to shareholders................................. 2,553
Custodian fees and expenses............................. 2,330
Professional fees....................................... 1,713
Directors' fees and expenses (Note 2)................... 521
Transfer agent fees and expenses........................ 319
Miscellaneous........................................... 168
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Total Expenses..................................... 88,741
--------
Net Investment Income....................................... 248,830
--------
Net Unrealized Gain on Investments:
Net unrealized appreciation on investments.............. 428,661
--------
Net Increase in Net Assets Resulting from Operations........ $677,491
--------
--------
</Table>
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(a) Commencement of operations.
See accompanying notes to financial statements.
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<Table>
<Caption>
FOR THE PERIOD
JUNE 27, 2003(a)
THROUGH
JUNE 30, 2003
------------------
Change in Net Assets:
From Operations:
Net investment income.............................. $ 248,830
Net unrealized appreciation on investments......... 428,661
--------------
Net increase in net assets resulting from
operations.................................. 677,491
--------------
Capital Stock Transactions (Note 5):
Increase in net assets from fund share
transactions.................................... 1,018,518,750
--------------
Total increase in net assets.................. 1,019,196,241
Net Assets:
Beginning of period................................ 100,275
--------------
End of period...................................... $1,019,296,516
--------------
--------------
</Table>
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(a) Commencement of operations.
See accompanying notes to financial statements.
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
The following table includes selected data for a common share outstanding
throughout the period and other performance information derived from the
financial statements. It should be read in conjunction with the financial
statements and notes thereto.
<Table>
<Caption>
FOR THE PERIOD
JUNE 27, 2003(a)
THROUGH
PER SHARE OPERATING PERFORMANCE: JUNE 30, 2003
- -------------------------------- ---------------
Net asset value, beginning of period........................ $ 23.88
--------
Income from investment operations:
Net investment income................................... 0.00
Net unrealized gain on investments...................... 0.01
--------
Total income from investment operations............. 0.01
--------
Less: Offering costs charged to paid-in capital............. (0.05)
--------
Net decrease in net asset value............................. (0.04)
--------
Net asset value, end of period.............................. $ 23.84
--------
--------
Market value, end of period................................. $ 25.05
--------
--------
=========================================================================
Net asset value total return(b)............................. -0.15%(c)
--------
--------
Market value return(b)...................................... 0.20%(c)
--------
--------
=========================================================================
RATIOS/SUPPLEMENTAL DATA:
- -------------------------
Net assets, end of period (in millions)..................... $1,019.3
--------
--------
Ratio of expenses to average daily net assets............... 0.79%(d)
--------
--------
Ratio of net investment income to average daily net
assets.................................................... 2.23%(d)
--------
--------
Portfolio turnover rate..................................... 0.00%(c)
--------
--------
</Table>
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(a) Commencement of operations.
(b) Total market value return is computed based upon the New York Stock Exchange
market price of the fund's shares and excludes the effects of brokerage
commissions. Dividends and distributions, if any, are assumed for purposes
of this calculation, to be reinvested at prices obtained under the fund's
dividend reinvestment plan. Total net asset value return measures the
changes in value over the period indicated, taking into account dividends
as reinvested.
(c) Not annualized.
(d) Annualized.
See accompanying notes to financial statements.
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Cohen & Steers REIT and Preferred Income Fund, Inc. (the fund) was
incorporated under the laws of the State of Maryland on March 25, 2003 and is
registered under the Investment Company Act of 1940, as amended, as a
closed-end, nondiversified management investment company. The fund had no
operations until June 6, 2003 when it sold 4,200 shares of common stock for
$100,275 to Cohen & Steers Capital Management, Inc. (the investment manager).
Investment operations commenced on June 27, 2003.
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. The preparation of the financial statements in
accordance with generally accepted accounting principles 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 asked prices
for the day. If no bid or asked prices are quoted on such day, then the security
is valued by such method as the board of directors shall determine in good faith
to reflect its fair market value.
Securities not listed on the New York Stock Exchange but listed on other
domestic or foreign securities exchanges or admitted to trading on the National
Association of Securities Dealers Automated Quotations, Inc. (Nasdaq) national
market system are valued in a similar manner. Securities traded on more than one
securities exchange are valued at the last sale price on the business day as of
which such value is being determined as reflected on the tape at the close of
the exchange representing the principal market for such securities.
Readily marketable securities traded in the over-the-counter market,
including listed securities whose primary market is believed by the investment
manager to be over-the-counter, but excluding securities admitted to trading on
the Nasdaq national list, are valued at the official closing prices as reported
by Nasdaq, the National Quotations Bureau or such other comparable sources as
the board of directors deems appropriate to reflect their fair market value.
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 board of
directors to reflect the fair market value of such securities. Where securities
are traded on more than one exchange and also over-the-counter, the securities
will generally be valued using the quotations the board of directors believes
reflect most closely the value of such securities.
Short-term debt securities, which have a maturity of 60 days or less, are
valued at amortized cost which approximates value.
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Security Transactions and Investment Income: Security transactions are
recorded on trade date. Realized gains and losses on investments sold are
recorded on the basis of identified cost for accounting and tax purposes.
Interest income is recorded on the accrual basis. Dividend income is recorded on
the ex-dividend date. Discounts and premiums of securities purchased are
amortized using the scientific method over their respective lives.
Dividends and Distributions to Shareholders: Dividends from net investment
income are declared and paid to common shareholders monthly. Dividends to
shareholders are recorded on the ex-dividend date. A portion of the fund's
dividend may consist of amounts in excess of net investment income derived from
nontaxable components of the dividends from the fund's portfolio investments.
Net realized capital gains, unless offset by any available capital loss
carryforward, are distributed to shareholders annually.
Dividends from net investment income and capital gain distributions are
determined in accordance with U.S. federal income tax regulations which may
differ from generally accepted accounting principals.
Federal Income Taxes: It is the policy of the fund 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.
NOTE 2. INVESTMENT MANAGEMENT FEES, ADMINISTRATION FEES AND OTHER TRANSACTIONS
WITH AFFILIATES
Investment Management Fees: Cohen & Steers Capital Management, Inc. (the
investment manager) serves as the investment manager to the fund, pursuant to an
investment management agreement (the management agreement). The investment
manager furnishes a continuous investment program for the fund's portfolio,
makes the day-to-day investment decisions for the fund and generally manages the
fund's investments in accordance with the stated polices of the fund, subject to
the general supervision of the board of directors of the fund. The investment
manager also performs certain administrative services for the fund.
For the services under the management agreement, the fund pays the
investment manager a monthly management fee, computed daily and payable monthly
at an annual rate of 0.65% of the fund's average daily managed asset value.
Managed asset value is the net asset value of the common shares plus the
liquidation preference of any fund preferred shares. For the period June 27,
2003 (commencement of operations) through June 30, 2003, the fund incurred
investment management fees of $72,565.
Administration Fees: Pursuant to an administration agreement, the investment
manager also performs certain administrative and accounting functions for the
fund and receives a fee equal to, on an annual basis, 0.06% of the fund's
average daily managed assets up to $1 billion, 0.04% of the fund's average daily
managed assets in excess of $1 billion up to $1.5 billion and 0.02% of the
fund's average daily managed assets in excess of $1.5 billion. For the period
June 27, 2003 (commencement of operations) through June 30, 2003, the fund
incurred $6,657 in administration fees.
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Director's Fees: Certain directors and officers of the fund are also
directors, officers and/or employees of the investment manager. None of the
directors and officers so affiliated received compensation for their services.
For the period June 27, 2003 (commencement of operations) through June 30, 2003,
fees and related expenses accrued for nonaffiliated directors totaled $521.
NOTE 3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, excluding short-term investments, for the
period June 27, 2003 (commencement of operations) through June 30, 2003, totaled
$106,868,314 and $0, respectively.
NOTE 4. INCOME TAXES
At June 30, 2003 the cost of investments and net unrealized appreciation for
federal income tax purposes were as follows:
<Table>
Aggregate cost................................... $1,089,203,407
--------------
--------------
Gross unrealized appreciation.................... $ 612,198
Gross unrealized depreciation.................... (183,537)
--------------
Net unrealized appreciation on investments....... $ 428,661
--------------
--------------
</Table>
Net investment income and net realized gains differ for financial statement
and tax purposes primarily due to return of capital and capital gain
distributions received by the fund on portfolio securities. To the extent such
differences are permanent in nature, such amounts are reclassified within the
capital accounts. Short-term capital gains are reflected in the financial
statements as realized gains on investments but are typically reclassified as
ordinary income for tax purposes.
NOTE 5. CAPITAL STOCK
On June 27, 2003, the fund completed the initial public offering of
42,750,000 shares of common stock. Proceeds paid to the fund amounted to
$1,018,518,750 after deduction of underwriting commissions and offering expenses
of $50,231,250.
NOTE 6. SUBSEQUENT EVENTS
On July 17, 2003, the fund completed a subsequent offering of 2,500,000
shares of common stock. Proceeds paid to the fund amounted to $59,562,500 after
deduction of underwriting commissions and offering expenses of $2,937,500.
On August 4, 2003 and August 11, 2003, the fund entered into, on a forward
basis, three interest rate swap transactions with UBS AG. The notional amount of
each swap is $58,125,000. The purpose of these transactions is to lock in a
payment rate on these swaps in anticipation of the fund's projected issuance
of auction rate preferred shares. The swaps are intended to reduce or
eliminate the risk that an increase in short-term interest
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13
<Page>
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
rates could have on the performance of the fund's common shares as a result of
the leverage created by the issuance of the auction rate preferred shares.
On August 5, 2003, the fund completed a subsequent offering of 2,940,000
shares. Proceeds to the fund amounted to $70,045,500 after deduction of
underwriting commissions and offering expenses of $3,454,500.
On August 18, 2003, the fund issued 3,280 Auction Market Preferred Shares,
Series M7 (par value $0.001), 3,280 Auction Market Preferred Shares, Series T7
(par value $0.001), 3,280 Auction Market Preferred Shares, Series W7 (par value
$0.001), 3,280 Auction Market Preferred Shares, Series TH7 (par value $0.001),
3,280 Auction Market Preferred Shares, Series F7 (par value $0.001), 2,800
Auction Market Preferred Shares, Series W28A (par value $0.001), 2,800 Auction
Market Preferred Shares, Series W28B (par value $0.001), and 2,800 Auction
Market Preferred Shares, Series W28C (par value $0.001). Proceeds paid to the
fund amounted to $612,816,830 after deduction of underwriting commissions and
offering expenses of $7,183,170. This issue has received a 'AAA/Aaa' rating from
Standard & Poor's and Moody's.
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<Page>
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
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REINVESTMENT PLAN
We urge shareholders who want to take advantage of this plan and whose
shares are held in 'street name' to consult your broker as soon as possible
to determine if you must change registration into your own name to
participate
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Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the fund may purchase, from time to time, shares
of its common stock in the open market.
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PRIVACY POLICY
The fund is committed to maintaining the privacy of its shareholders and
to safeguarding their personal information. The following is provided to
help you understand what personal information the fund collects, how we
protect that information, and why in certain cases we may share this
information with others.
The fund does not receive any personal information relating to shareholders
who purchase shares through an intermediary that acts as the record owner
of the shares. In the case of shareholders who are record owners of the
fund, to conduct and process your business in an accurate and efficient
manner, we must collect and maintain certain personal information about
you. This is the information we collect on applications or other forms,
and from the transactions you make with us.
The fund does not disclose any personal information about its shareholders
or former shareholders to anyone, except as required or permitted by law
or as is necessary to service shareholder accounts. We will share
information with organizations, such as the fund's transfer agent, that
assist the fund in carrying out its daily business operations. These
organizations will use this information only for purposes of providing
the services required or as otherwise as may be required by law. These
organizations are not permitted to share or use this information for any
other purpose. In addition, the fund restricts access to personal
information about its shareholders to employees of the adviser who have
a legitimate business need for the information.
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15
<Page>
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
<Table>
MEET THE COHEN & STEERS FAMILY OF OPEN-END FUNDS:
FOR HIGH CURRENT INCOME: FOR TOTAL RETURN:
COHEN & STEERS COHEN & STEERS
EQUITY INCOME FUND REALTY SHARES
IDEAL FOR INVESTORS SEEKING A HIGH DIVIDEND IDEAL FOR INVESTORS SEEKING MAXIMUM TOTAL
YIELD AND CAPITAL APPRECIATION, INVESTING RETURN THROUGH BOTH CURRENT INCOME AND
PRIMARILY IN REITS CAPITAL APPRECIATION, INVESTING PRIMARILY
IN REITS
A, B, C AND I SHARES AVAILABLE
SYMBOL: CSRSX
SYMBOLS: CSEIX, CSBIX, CSCIX, CSDIX
FOR CAPITAL APPRECIATION: FOR TOTAL RETURN:
COHEN & STEERS COHEN & STEERS
SPECIAL EQUITY FUND INSTITUTIONAL REALTY SHARES
IDEAL FOR INVESTORS SEEKING MAXIMUM CAPITAL IDEAL FOR INVESTORS SEEKING MAXIMUM TOTAL
APPRECIATION, INVESTING IN A LIMITED NUMBER RETURN THROUGH BOTH CURRENT INCOME AND
OF REITS AND OTHER REAL ESTATE COMPANIES CAPITAL APPRECIATION, INVESTING PRIMARILY
IN REITS
CONCENTRATED, HIGHLY FOCUSED PORTFOLIO
OFFERS LOW TOTAL EXPENSE RATIO
SYMBOL: CSSPX
HIGHER MINIMUM PURCHASE REQUIRED
SYMBOL: CSRIX
FOR MORE INFORMATION ABOUT ANY COHEN & STEERS FUND
OR TO OBTAIN A PROSPECTUS PLEASE CONTACT US AT:
1-800-330-REIT, OR VISIT OUR WEB SITE AT COHENANDSTEERS.COM
THE PROSPECTUS CONTAINS MORE INFORMATION ABOUT EACH FUND INCLUDING ALL CHARGES AND EXPENSES,
AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST.
COHEN & STEERS SECURITIES, LLC, DISTRIBUTOR
</Table>
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16
<Page>
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
OFFICERS AND DIRECTORS KEY INFORMATION
Robert H. Steers INVESTMENT MANAGER
Director and chairman Cohen & Steers Capital Management, Inc.
757 Third Avenue
Martin Cohen New York, NY 10017
Director and president (212) 832-3232
Gregory C. Clark FUND SUBADMINISTRATOR AND CUSTODIAN
Director State Street Bank and Trust Company
225 Franklin Street
Bonnie Cohen Boston, MA 02110
Director
TRANSFER AGENT -- COMMON SHARES
George Grossman Equiserve Trust Company
Director 150 Royall Street
Canton, MA 02021
Richard J. Norman (800) 426-5523
Director
LEGAL COUNSEL
Willard H. Smith Jr. Simpson Thacher & Bartlett
Director 425 Lexington Avenue
New York, NY 10017
Greg E. Brooks
Vice president New York Stock Exchange Symbol: RNP
Adam Derechin Web site: cohenandsteers.com
Vice president and assistant
treasurer This report is for shareholder
information. This is not a prospectus
Lawrence B. Stoller intended for use in the purchase or sale
Assistant secretary of fund shares. Past performance is of
course no guarantee of future results
and your investment may be worth more
or less at the time you sell.
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17
<Page>
COHEN & STEERS
REIT AND PREFERRED INCOME FUND
- -------------------------------
SEMIANNUAL REPORT
JUNE 30, 2003
COHEN & STEERS
REIT AND PREFERRED INCOME FUND
757 THIRD AVENUE
NEW YORK, NY 10017
STATEMENT OF DIFFERENCES
------------------------
The section symbol shall be expressed as .................................'SS'
The division sign shall be expressed as ..................................[div]