<Page>
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: 811-21437
Cohen & Steers REIT and Utility 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: December 31, 2004
Item 1. Reports to Stockholders.
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COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
February 21, 2005
To Our Shareholders:
We are pleased to submit to you our report for Cohen & Steers REIT and
Utility Income Fund for the quarter and period ended December 31, 2004. The net
asset value at that date was $21.51 per common share. The fund's common stock is
traded on the New York Stock Exchange and its share price can differ from its
net asset value. For the quarter and period since inception ended December 31,
2004, the total return, including income, for the Cohen & Steers REIT and
Utility Income Fund and the comparative benchmarks were:
<Table>
<Caption>
TOTAL RETURN, PERIOD ENDED 12/31/04
---------------------------------------------
MARKET PRICE(a) NET ASSET VALUE(a)
-------------------- ----------------------
SINCE SINCE
QUARTER INCEPTION(b) QUARTER INCEPTION(b)
------- ---------- ------- ------------
Cohen & Steers REIT and Utility Income
Fund................................. 7.8% -0.50% 13.4% 19.5%
NAREIT Equity REIT Index(c)............ 15.2% 26.1% 15.2% 26.1%
S&P 1500 Utilities Index(d)............ 11.6% 20.9% 11.6% 20.9%
Merrill Lynch Fixed Rate Preferred
Index(e)............................. 2.2% 4.0% 2.2% 4.0%
</Table>
The fund's asset mix at December 31, 2004 was 42.5% REIT common stocks,
39.3% utility common stocks and 17.8% preferred stocks (64.8% of which consisted
of REIT preferreds and 1.1% of which consisted of utility preferreds) and other
fixed income investments.
During the quarter, three monthly dividends of $0.105 per share were paid to
common shareholders. In addition, three monthly dividends of $0.105 per share
were declared and will be paid to common shareholders on January 31, 2005,
February 28, 2005, and March 31, 2005.(f) Subsequent to year end, on January 18,
2005, the fund issued $75 million in auction market preferred shares (AMPS).
INVESTMENT REVIEW
REITs and utilities demonstrated strong performance throughout 2004.
Contrary to many pundits who suggested that the directional change in interest
rates would dominate REIT and utility stock price performance, we continued to
believe that changing interest rates have an indeterminate effect on REIT and
utility stock prices over the longer term (i.e., the correlation between
interest rate changes and REIT and utility stock performance is
- -------------------
(a) As a closed-end investment company, the price of the fund's New York Stock
Exchange-traded shares will be set by market forces and at times may deviate
from the net asset value per share of the fund.
(b) The fund commenced operations on January 30, 2004.
(c) The NAREIT Equity Index ('Equity REITs') is an unmanaged
market-capitalization-weighted index of all tax- qualified Equity REITs
listed on the NYSE, AMEX, and the Nasdaq that have 75% or more of their
gross invested book assets invested directly or indirectly in the equity
ownership of real estate.
(d) S&P 1500 Utilities Index is an unmanaged market capitalization weighted
index of 83 companies whose primary business involves the generation,
transmission and/or distribution of electricity and/or natural gas.
(e) The Merrill Lynch Preferred Index is an unmanaged index of preferred
securities.
(f) Please note that distributions paid by the fund to shareholders are subject
to recharacterization for tax purposes. The final tax treatment of these
distributions is reported to shareholders after the close of each fiscal
year.
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1
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COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
low). In our view, performance in 2004 amply demonstrated that real estate and
utility fundamentals are what matter the most.
Within the REIT sector, cash flow growth rates had been decelerating since
the last peak in REIT stock prices in early 1998. REIT earnings growth finally
bottomed in the first quarter of 2004, after falling for six years, and then
re-accelerated briskly in the second and third quarters, sparking a substantial
REIT rally. Regional mall companies continued to lead the REIT industry in
performance. Benefiting from strong sales growth, rapid consolidation of
ownership (resulting in greater negotiating leverage with retailers), strong
demand for space by retailers, and a relatively fixed supply of franchise
assets, the fund's regional mall holdings returned 32.9%. Shopping centers
benefited from some of the same trends in retailing and the fund's portfolio of
shopping center companies returned 31.7%. One of the fund's largest holdings,
Kramont Realty Trust, a shopping center REIT, announced in December that it had
entered a definitive agreement to be acquired by Centro Properties Group (an
Australian listed company) for $23.50 per share, a 17% premium to the prior
day's closing price, which contributed a significant portion of Kramont's total
return for the year (27.4%).
The industrial and apartment sectors, both cyclical in nature, benefited
from a strong economy and the fund's holdings in these areas generated 27.3% and
35.2% respectively. Archstone-Smith, a highly respected apartment company, for
example, was the best performing stock in the fund and generated a 46.4% total
return.
Office companies, on average, trailed the index by a wide margin, returning
23.4% as a group. Office fundamentals, however, varied widely across the U.S.
Although the dividend yields in this sector are generally well above average,
our overweight here was a drag on the fund's total return performance. The
fund's best performing office holding was Kilroy Realty with a 41.8% total
return, while the worst performer was Equity Office Properties with a total
returned of 5.4%. The worst performing stock in our overall portfolio was
Mission West Properties, an office/industrial company suffering from the
lingering effects of a high office vacancy rate in Silicon Valley. Mission West
returned -13.1%, one of only a small handful of REITs with a negative total
return in 2004.
Like REITs, utility shares performed well during 2004, due mainly, in our
view, to improving industry fundamentals, large dividend increases, and
expectations for strong earnings growth in 2005. After several years of focusing
on balance sheet repair and exiting un-regulated businesses, a favorable
commodity price backdrop and constructive regulation has allowed many utilities
to generate positive free cash flow for the first time in many years. Coupled
with dividend payout ratios that are low by historical standards, managements of
many utilities are now able to distribute excess cash flow to shareholders in
the form of higher dividends. While not all utilities are raising their
dividends, during the year, several utilities announced substantial dividend
increases. TXU raised its dividend 350%, while double-digit increases were
posted by Exelon (31%), Edison International (25%), PNM Resources (21%), Entergy
(20%), and FirstEnergy (10%).
Dividend increases from large cap utilities helped the integrated electric
group, which generates, transmits and distributes electricity through regulated
and unregulated companies, generate a total return of 26.2%. As a more
interest-rate-sensitive sector, electric distribution utility share prices
benefited from stable interest rates. The electric distribution sector produced
a 6.3% total return. The integrated and natural gas distribution sectors had
total returns of 26.2% and 0.7% respectively.
The fund's top performing utility stock from inception through year-end was
Exelon Corporation, which produced a total return of 36.3%. During the fourth
quarter Exelon announced a 31% dividend increase and
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2
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COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
committed to growing their dividend a further 14% upon completion of the
company's planned acquisition of Public Service Enterprise Group, which operates
in New Jersey. We believe the transaction will benefit shareholders as Exelon
applies its best in class operating skills to Public Service's underperforming
nuclear fleet. As the largest operator of low cost nuclear power plants in the
US, Exelon has benefited from attractive margins in wholesale power markets
which are becoming increasingly influenced by natural gas prices. The worst
performing utility stock in the fund was Atmos Energy Corp., which had a total
return of 0.7%.
INVESTMENT OUTLOOK
We anticipate that economic fundamentals in 2005 will be substantially
similar to 2004 and in a few ways even better. Our forecast is for U.S. GDP
growth in the 3.5% range with job growth of about 2 million, barring any large,
exogenous economic shocks, which should result in continuing improvement in the
unemployment rate and real wage gains. In short, we believe the economic
recovery should become self-sustaining and somewhat more steady.
This should provide a continued positive backdrop for real estate
fundamentals, characterized by higher occupancies, rents and cash flows for most
property types and in most regions of the country. As a result, our estimates
indicate that REIT cash flows and dividends will continue their re-acceleration
through 2005 and 2006.
We anticipate that a steadily growing economy will support demand for real
estate and that muted new construction will constrain the supply of real estate
in many markets. We expect accelerating cash flow growth and likewise
accelerating, inflation-beating dividend growth. We believe that correctly
anticipating these changing growth rates will be the key to REIT stock price
performance again in 2005. Valuations, though above historical averages, are, we
believe, partially reflecting some of these positives. However, valuations in
our view are also not at levels that would indicate a peak in stock prices. As a
result, we believe REITs may deliver attractive total returns in 2005.
We believe utility stocks should continue to perform well in 2005 due to the
combination of strong fundamentals, a favorable commodity environment and
attractive earnings and dividend growth. Utility fundamentals have improved as
utilities have refocused on their core regulated business franchises following
problems associated with the partial deregulation of the industry. We expect
that utility stocks will continue to benefit from a positive commodity
environment as power prices are more heavily influenced by a supply-constrained
natural gas market. In wholesale markets, utilities with nuclear and coal-fired
power plants should be able to achieve attractive profit margins given higher
power prices and relatively stable and low costs for these fuels. We also expect
regulators to continue to be supportive of utilities' efforts to pass along
higher commodity costs to consumers in retail markets.
The positive commodity environment and constructive regulation will lead to
attractive earnings and cash flow growth, in our opinion. The ratio of operating
cash flow to interest expense for the sector increased to 6.4x at the end of the
third quarter 2004 from 4.3x one year ago. Free cash flow increased to $2.4
billion for the trailing twelve months ending in the third quarter from -$5
billion for the same period one year earlier. These positive operating and
financial trends should continue and enable the utility sector to generate
double-digit earnings growth in 2005, currently higher than growth expectations
for any other equity sector. This should also result in dividend growth that is
above historical levels.
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3
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COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
We will continue to seek investments that allow the fund to meet its primary
income objective while offering the potential for capital appreciation. We
believe that both REITs and utilities should continue to benefit from improving
fundamentals. A growing economy should support demand for real estate amidst
constrained supply in many markets. We expect this to result in accelerating
cash flow and dividend growth for REITs. We also believe that utilities will
continue to focus on their core regulated businesses which provide the potential
for stable cash flow and dividend growth. Consequently, we believe Cohen &
Steers REIT and Utility Income Fund is well positioned to meet its goal of
delivering attractive current income and capital appreciation over time. The
REIT and utilities markets enjoyed strong performance in 2004. While we remain
very optimistic that these sectors can continue to deliver attractive returns,
investors are cautioned not to assume that returns will continue indefinitely at
the same pace.
Sincerely,
<Table>
MARTIN COHEN ROBERT H. STEERS
MARTIN COHEN ROBERT H. STEERS
President Chairman
ROBERT BECKER WILLIAM F. SCAPELL
ROBERT BECKER WILLIAM F. SCAPELL
Portfolio Manager Portfolio Manager
JOSEPH M. HARVEY
JOSEPH M. HARVEY
Portfolio Manager
</Table>
VISIT COHEN & STEERS ONLINE AT COHENANDSTEERS.COM
For more information about any of our funds, visit
cohenandsteers.com, where you'll find daily net asset
values, fund fact sheets and portfolio highlights. You can
also access newsletters, education tools and market updates
covering the REIT, utility and preferred securities sectors.
In addition, our Web site 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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4
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COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
OUR LEVERAGE STRATEGY
(UNAUDITED)
While we do not attempt to predict what future interest
rates will be, it has been our philosophy to utilize
interest rate swap transactions to seek to reduce the
interest rate risk inherent in our utilization of leverage.
Our leverage strategy involves issuing auction market
preferred shares (AMPS) to raise additional capital for the
fund, with an objective of increasing the net income
available for shareholders. As of December 31, 2004, AMPS
represented 31% of the fund's managed net assets.
Considering that AMPS have variable dividend rates, we seek
to lock in the rate on a majority of this additional capital
through interest rate swap agreements (where we effectively
convert our variable rate obligation to a fixed rate
obligation for the term of the swap agreements).
Specifically, we have fixed the rate on 65% of our
borrowings at an average interest rate of 3.5%, for an
average remaining period of 4.1 years. By locking in a large
portion of our leveraging costs, we have endeavored to
adequately protect the dividend-paying ability of the fund.
The use of leverage increases the volatility of the fund's
net asset value in both up and down markets. However, we
believe that locking in a portion of the fund's leveraging
costs for the term of the swap agreements partially protects
the fund from any impact that an increase in short-term
interest rates may have as a result of the use of leverage.
LEVERAGE FACTS(a)
<Table>
Leverage (as % of managed net assets).............. 31%
% Fixed Rate....................................... 65%
% Variable Rate.................................... 35%
Average Rate on Swaps.............................. 3.5%
Average Term on Swaps.............................. 4.1 years
Current Rate on AMPS............................... 2.6%
</Table>
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(a) Data as of December 31, 2004. Information subject to change.
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5
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COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
DECEMBER 31, 2004
TOP TEN HOLDINGS
(UNAUDITED)
<Table>
<Caption>
MARKET % OF
SECURITY VALUE MANAGED ASSETS
-------- ----------- --------------
1. Equity Office Properties Trust...................... $77,301,952 4.21%
2. Hospitality Properties Trust........................ 66,667,800 3.63
3. Southern Co. ....................................... 66,269,040 3.61
4. Ameren Corp. ....................................... 62,494,496 3.40
5. DTE Energy Co. ..................................... 62,081,322 3.38
6. Cinergy Corp. ...................................... 61,008,765 3.32
7. Progress Energy..................................... 55,486,860 3.02
8. Consolidated Edison................................. 53,676,875 2.92
9. Nationwide Health Properties........................ 50,205,125 2.73
10. Duke Energy Corp. .................................. 49,393,500 2.69
</Table>
SECURITY TYPE BREAKDOWN
(Based on Managed Assets)
(Unaudited)
[PIE CHART]
<Table>
Common Stock 81.33%
Preferred Securities--
$25 Par Value 12.57%
Preferred Securities--
Capital Trust 2.63%
Corporate Bond 2.53%
Cash and Other Assets in
Excess of Liabilities 0.94%
</Table>
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6
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COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
DIVIDEND
NUMBER VALUE YIELD
OF SHARES (NOTE 1) (UNAUDITED)(a)
---------- -------------- -------------
COMMON STOCK 117.95%(b)
DIVERSIFIED 5.72%
Capital Trust -- Class A............. 66,100 $ 2,029,931 6.51%
Colonial Properties Trust............ 78,500 3,082,695 6.82
iStar Financial...................... 1,002,700 45,382,202 6.16
Lexington Corporate Properties
Trust............................. 969,600 21,893,568 6.20
--------------
72,388,396
--------------
HEALTH CARE 7.90%
Health Care Property Investors....... 758,600 21,005,634 6.03
Health Care REIT..................... 467,500 17,835,125 6.29
Nationwide Health Properties......... 2,113,900 50,205,125 6.23
Ventas............................... 400,000 10,964,000 4.74
--------------
100,009,884
--------------
HOTEL 5.62%
Hospitality Properties Trust......... 1,449,300 66,667,800 6.26
Strategic Hotel Capital.............. 274,900 4,535,850 5.33
--------------
71,203,650
--------------
INDUSTRIAL 3.03%
First Industrial Realty Trust........ 941,400 38,343,222 6.83
--------------
MORTGAGE 2.92%
Newcastle Investment Corp. .......... 1,164,400 37,004,632 7.87
--------------
</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. The dividend yield has not been audited.
(b) Percentages indicated are based on the net assets applicable to common
shares of the fund.
See accompanying notes to financial statements.
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7
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COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
DIVIDEND
NUMBER VALUE YIELD
OF SHARES (NOTE 1) (UNAUDITED)
---------- -------------- ------------
OFFICE 18.91%
Arden Realty......................... 975,300 $ 36,788,316 5.36%
BioMed Realty Trust.................. 73,700 1,636,877 4.86
Brandywine Realty Trust.............. 356,200 10,468,718 5.99
CarrAmerica Realty Corp. ............ 150,000 4,950,000 6.06
Equity Office Properties Trust....... 2,654,600 77,301,952 6.87
HRPT Properties Trust................ 3,089,700 39,640,851 6.55
Kilroy Realty Corp. ................. 45,600 1,949,400 4.63
Mack-Cali Realty Corp. .............. 170,500 7,848,115 5.47
Prentiss Properties Trust............ 504,600 19,275,720 5.86
Reckson Associates Realty Corp. ..... 1,204,600 39,522,926 5.18
--------------
239,382,875
--------------
OFFICE/INDUSTRIAL 0.03%
Liberty Property Trust............... 9,300 401,760 5.65
--------------
RESIDENTIAL 11.29%
APARTMENT 10.47%
AMLI Residential Properties Trust.... 1,002,100 32,067,200 6.00
Apartment Investment & Management Co. 216,100 8,328,494 6.23
Archstone-Smith Trust................ 350,000 13,405,000 4.49
Gables Residential Trust............. 780,700 27,941,253 6.73
Home Properties...................... 615,400 26,462,200 5.86
Mid-America Apartment Communities.... 188,700 7,778,214 5.68
Town & Country Trust................. 600,000 16,578,000 6.23
--------------
132,560,361
--------------
MANUFACTURED HOME 0.82%
Affordable Residential Communities... 511,700 7,342,895 8.71
Sun Communities...................... 75,000 3,018,750 6.06
--------------
10,361,645
--------------
TOTAL RESIDENTIAL.................... 142,922,006
--------------
SELF STORAGE 0.52%
Sovran Self Storage.................. 154,900 6,527,486 5.74
--------------
</Table>
See accompanying notes to financial statements.
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8
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COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
DIVIDEND
NUMBER VALUE YIELD
OF SHARES (NOTE 1) (UNAUDITED)
---------- -------------- ------------
SHOPPING CENTER 5.30%
COMMUNITY CENTER 2.19%
Heritage Property Investment Trust... 250,000 $ 8,022,500 6.54%
Kramont Realty Trust................. 52,200 1,221,480 5.56
New Plan Excel Realty Trust.......... 682,500 18,482,100 6.09
--------------
27,726,080
--------------
FREE STANDING 2.44%
Commercial Net Lease Realty.......... 1,500,300 30,906,180 6.31
--------------
REGIONAL MALL 0.67%
Glimcher Realty Trust................ 305,500 8,465,405 6.93
--------------
TOTAL SHOPPING CENTER................ 67,097,665
--------------
UTILITY 56.71%
ELECTRIC -- DISTRIBUTION 7.47%
Consolidated Edison.................. 1,226,900 53,676,875 5.17
Energy East Corp. ................... 352,100 9,394,028 4.12
National Grid Transco plc (ADR)...... 105,800 5,077,342 4.44
NSTAR................................ 93,000 5,048,040 4.09
Pepco Holdings....................... 1,000,800 21,337,056 4.69
--------------
94,533,341
--------------
</Table>
See accompanying notes to financial statements.
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9
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COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
DIVIDEND
NUMBER VALUE YIELD
OF SHARES (NOTE 1) (UNAUDITED)
---------- -------------- ------------
ELECTRIC -- INTEGRATED 45.66%
Ameren Corp. ........................ 1,246,400 $ 62,494,496 5.07%
American Electric Power Co. ......... 278,100 9,549,954 4.08
Cinergy Corp. ....................... 1,465,500 61,008,765 4.52
Cleco Corp. ......................... 243,500 4,933,310 4.44
DTE Energy Co. ...................... 1,439,400 62,081,322 4.78
Dominion Resources................... 148,200 10,039,068 3.93
Duke Energy Corp. ................... 1,950,000 49,393,500 4.34
E.ON AG (ADR)........................ 209,500 19,064,500 3.09
Entergy Corp. ....................... 419,500 28,354,005 3.20
Exelon Corp. ........................ 667,400 29,412,318 3.63
FirstEnergy Corp. ................... 322,300 12,734,073 4.18
Hawaiian Electric Industries......... 495,200 14,435,080 4.25
PPL Corp. ........................... 229,500 12,227,760 3.08
Pinnacle West Capital Corp. ......... 397,500 17,652,975 4.28
Progress Energy...................... 1,226,500 55,486,860 5.22
Public Service Enterprise Group...... 952,500 49,310,925 4.25
Southern Co. ........................ 1,977,000 66,269,040 4.27
Xcel Energy.......................... 750,000 13,650,000 4.56
--------------
578,097,951
--------------
GAS -- INTEGRATED 3.58%
KeySpan Corp. ....................... 916,600 36,159,870 4.61
Puget Energy......................... 372,500 9,200,750 4.05
--------------
45,360,620
--------------
TOTAL UTILITY........................ 717,991,912
--------------
TOTAL COMMON STOCK
(Identified
cost -- $1,344,393,928)....... 1,493,273,488
--------------
PREFERRED SECURITIES -- $25 PAR VALUE 18.23%
BANK 0.13%
Colonial Capital Trust IV, 7.875%.... 56,300 1,522,634 7.28
Zions Capital Trust, 8.00%, Series B. 10,000 274,000 7.3
--------------
1,796,634
--------------
</Table>
See accompanying notes to financial statements.
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10
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COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
DIVIDEND
NUMBER VALUE YIELD
OF SHARES (NOTE 1) (UNAUDITED)
---------- -------------- ------------
BANK -- FOREIGN 0.09%
Northern Rock plc, 8.00%, Series A... 45,531 $ 1,142,373 7.97%
--------------
FINANCE 0.46%
AUTO LOAN 0.08%
Ford Motor Credit Co., 7.60%......... 38,000 995,600 7.23
--------------
CREDIT CARD 0.36%
MBNA Capital, 8.125% Series D
(TruPS)........................... 105,142 2,832,525 7.54
MBNA Capital, 8.10% Series E
(TOPrS)........................... 64,000 1,753,600 7.41
--------------
4,586,125
--------------
DIVERSIFIED FINANCIAL SERVICES 0.02%
USB Capital IV, 7.35%................ 7,200 191,592 6.91
--------------
TOTAL FINANCE........................ 5,773,317
--------------
INSURANCE 0.07%
PROPERTY/CASUALTY 0.05%
St. Paul Capital Trust I, 7.60%
(TruPS)........................... 24,300 647,352 7.13
--------------
REINSURANCE -- FOREIGN 0.02%
PartnerRE Capital Trust I, 7.90%..... 9,600 255,360 7.45
--------------
TOTAL INSURANCE...................... 902,712
--------------
MEDIA 0.69%
CABLE TELEVISION 0.50%
Shaw Communications, 8.45%, Series A
(COPrS)........................... 109,200 2,757,300 8.36
Shaw Communications, 8.50%, Series B
(COPrS)........................... 139,000 3,530,600 8.39
--------------
6,287,900
--------------
DIVERSIFIED SERVICES 0.19%
Liberty Media Corp., 8.75% (CBTCS)... 33,800 920,712 8.04
Liberty Media Corp., 8.75% (PPLUS)... 55,700 1,521,167 8.02
--------------
2,441,879
--------------
TOTAL MEDIA.......................... 8,729,779
--------------
</Table>
See accompanying notes to financial statements.
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11
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COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
DIVIDEND
NUMBER VALUE YIELD
OF SHARES (NOTE 1) (UNAUDITED)
---------- -------------- ------------
REAL ESTATE 16.51%
DIVERSIFIED 2.86%
Bedford Property Investors, 7.625%,
Series B.......................... 253,050 $ 6,475,549 7.46%
Forest City Enterprises, 7.375%,
Class A........................... 519,000 13,218,930 7.22
iStar Financial, 7.875%, Series E.... 258,000 6,769,920 7.51
iStar Financial, 7.65%, Series G..... 77,000 1,986,600 7.40
iStar Financial, 7.50%, Series I..... 250,000 6,377,500 7.37
Lexington Corporate Properties Trust,
8.05%, Series B................... 50,000 1,329,000 7.56
--------------
36,157,499
--------------
HEALTH CARE 3.07%
Health Care Property Investors,
7.25%, Series E................... 7,000 182,700 6.93
Health Care Property Investors,
7.10%, Series F................... 10,000 253,100 7.03
Health Care REIT, 7.875%,
Series D.......................... 63,536 1,651,301 7.58
Health Care REIT, 7.625%,
Series F.......................... 305,600 7,716,400 7.03
LTC Properties, 8.00%, Series F...... 600,000 15,810,000 7.59
Omega Healthcare Investors, 8.375%,
Series D.......................... 500,000 13,200,000 7.92
--------------
38,813,501
--------------
HOTEL 0.74%
Host Marriott Corp., 8.875%,
Series E.......................... 80,000 2,222,000 7.99
Innkeepers USA, 8.00%, Series C...... 222,900 5,739,675 7.77
LaSalle Hotel Properties, 10.25%,
Series A.......................... 50,000 1,370,000 9.34
--------------
9,331,675
--------------
</Table>
See accompanying notes to financial statements.
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12
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COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
DIVIDEND
NUMBER VALUE YIELD
OF SHARES (NOTE 1) (UNAUDITED)
---------- -------------- ------------
OFFICE 4.58%
Alexandria Real Estate Equities,
8.375%, Series C.................. 374,250 $ 9,906,397 7.90%
Brandywine Realty Trust, 7.375%,
Series D.......................... 27,500 691,625 7.32
Brandywine Realty Trust, 7.50%,
Series C.......................... 177,410 4,527,503 7.37
Corporate Office Properties Trust,
8.00%, Series G................... 8,400 222,600 7.55
CRT Properties, 8.50%, Series A...... 111,900 2,946,327 8.09
Equity Office Properties Trust,
7.75%, Series G................... 24,600 664,200 7.19
Highwoods Properties, 8.00%,
Series B.......................... 137,215 3,475,656 7.90
Highwoods Properties, 8.00%,
Series D.......................... 60,089 1,512,440 7.95
Kilroy Realty Corp., 7.80%,
Series E.......................... 99,500 2,606,900 7.44
Maguire Properties, 7.625%,
Series A.......................... 590,400 15,114,240 7.46
SL Green Realty Corp., 7.625%,
Series C.......................... 424,500 10,888,425 7.45
SL Green Realty Corp., 7.875%,
Series D.......................... 211,200 5,480,640 7.59
--------------
58,036,953
--------------
OFFICE/INDUSTRIAL 0.70%
PS Business Parks, 7.00%,
Series H.......................... 44,100 1,093,239 7.06
PS Business Parks, 6.875%,
Series I.......................... 246,900 6,098,430 6.96
PS Business Parks, 7.95%,
Series K.......................... 65,000 1,716,000 7.54
--------------
8,907,669
--------------
RESIDENTIAL 1.49%
APARTMENT 0.24%
Apartment Investment & Management
Co.,
8.00%, Series V................... 24,000 608,880 7.88
Colonial Properties Trust, 8.125%,
Series D.......................... 9,900 262,845 7.65
Gables Residential Trust, 7.50%,
Series D.......................... 45,400 1,171,320 7.29
Mid-America Apartment Communities,
8.30%, Series H................... 38,100 990,600 8.00
--------------
3,033,645
--------------
MANUFACTURED HOME 1.25%
Affordable Residential Communities,
8.25%, Series A................... 607,100 15,833,168 7.90
--------------
TOTAL RESIDENTIAL.................... 18,866,813
--------------
SELF STORAGE 0.02%
Public Storage, 8.00%, Series R...... 8,600 226,782 7.58
--------------
</Table>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
DIVIDEND
NUMBER VALUE YIELD
OF SHARES (NOTE 1) (UNAUDITED)
---------- -------------- ------------
SHOPPING CENTER 2.24%
COMMUNITY CENTER 1.45%
Developers Diversified Realty Corp.,
8.00%, Series G................... 26,500 $ 708,875 7.48%
Developers Diversified Realty Corp.,
7.50%, Series I................... 300,700 7,788,130 7.26
Kramont Realty Trust, 8.25%,
Series E.......................... 260,000 6,552,000 8.17
Realty Income Corp., 7.375%,
Series D.......................... 26,700 695,268 7.07
Saul Centers, 8.00%, Series A........ 96,300 2,576,025 7.48
--------------
18,320,298
--------------
REGIONAL MALL 0.79%
CBL & Associates Properties, 7.75%,
Series C.......................... 114,710 3,014,579 7.38
Cedar Shopping Centers, 8.875%,
Series A.......................... 137,500 3,627,250 8.42
Mills Corp., 9.00%, Series C......... 109,400 3,041,320 8.09
Mills Corp., 8.75%, Series E......... 12,400 351,664 7.72
--------------
10,034,813
--------------
TOTAL SHOPPING CENTER................ 28,355,111
--------------
SPECIALTY 0.81%
Capital Automotive REIT, 7.50%,
Series A.......................... 50,300 1,292,710 7.32
Capital Automotive REIT, 6.75%
Series A.......................... 150,000 3,750,000 6.76
Capital Automotive REIT, 8.00%,
Series B.......................... 200,000 5,251,000 7.62
--------------
10,293,710
--------------
TOTAL REAL ESTATE.................... 208,989,713
--------------
UTILITY 0.28%
ELECTRIC -- INTEGRATED 0.24%
Dominion Resources Capital Trust II,
8.40%, Series..................... 6,800 183,260 7.79
Energy East Capital Trust I, 8.25%... 48,200 1,293,206 7.68
Northern States Power Company, 8.00%
(PINES)........................... 9,500 258,970 7.34
PSEG Funding Trust II, 8.75%
Series............................ 8,500 236,300 7.88
Puget Sound Energy Capital Trust II,
8.40% (TOPrS)..................... 39,100 1,036,541 7.92
--------------
3,008,277
--------------
</Table>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
DIVIDEND
NUMBER VALUE YIELD
OF SHARES (NOTE 1) (UNAUDITED)
---------- -------------- ------------
GAS -- DISTRIBUTION 0.04%
AGL Capital Trust II, 8.00%.......... 9,900 $ 262,647 7.54%
Laclede Capital Trust I, 7.70%
(TOPrS)........................... 10,000 276,200 6.99
--------------
538,847
--------------
TOTAL UTILITY........................ 3,547,124
--------------
TOTAL PREFERRED SECURITIES --$25
PAR VALUE (Identified
cost -- $222,452,021)......... 230,881,652
--------------
PREFERRED SECURITIES -- CAPITAL TRUST 3.81%
BANK 0.29%
Astoria Capital Trust I, 9.75%, due
11/1/29, Series B................. 3,000,000 3,636,600 8.04
--------------
DIVERSIFIED FINANCIAL SERVICES 1.29%
Old Mutual Capital Funding, 8.00%,
due 5/29/49 (Eurobond)............ 15,450,000 16,347,939 7.56
--------------
ELECTRIC -- INTEGRATED 0.36%
DPL Capital Trust II, 8.125%, due
9/1/31............................ 4,000,000 4,551,592 7.14
--------------
FOOD -- DAIRY PRODUCTS 0.40%
Dairy Farmers of America, 7.875%,
Series 144A(a).................... 50,000 5,099,410 7.73
--------------
INSURANCE -- MULTI-LINE 0.82%
AFC Capital Trust I, 8.207%, due
2/3/27, Series B.................. 10,000,000 10,436,730 7.86
--------------
OIL COMPANY -- EXPLORATION AND
PRODUCTION 0.24%
Pemex Project Funding Master Trust,
7.75%, due 9/29/49................ 3,000,000 3,025,077 7.69
--------------
REAL ESTATE 0.41%
BF Saul Real Estate Investment Trust,
7.50%, due 3/1/14.................. 5,000,000 5,175,000 7.25
--------------
TOTAL PREFERRED
SECURITIES -- CAPITAL TRUST
(Identified
cost -- $47,001,014).......... 48,272,348
--------------
</Table>
- -------------------
(a) The fund prices this security at fair value using procedures approved by
the fund's board of directors.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
NUMBER VALUE YIELD
OF SHARES (NOTE 1) (UNAUDITED)
---------- -------------- ------------
CORPORATE BOND 3.67%
AUTOMOTIVE 0.38%
Delphi Automotive Systems Corp.,
7.125%, due 5/1/29................ 2,000,000 $ 1,885,596 7.56%
Ford Motor Co., 7.45%, due 7/16/31... 3,000,000 3,025,935
--------------
4,911,531
--------------
CABLE TELEVISION 1.14%
CSC Holdings, 7.875%, due 2/15/18.... 5,500,000 5,967,500 7.26
Cablevision Systems New York Group,
8.00%, due 4/15/12, 144A.......... 2,500,000 2,681,250 7.46
Rogers Cable, 8.75%, due 5/01/32..... 5,195,000 5,792,425 7.85
--------------
14,441,175
--------------
FINANCE -- AUTO LOAN 0.41%
General Motors Acceptance Corp.,
8.00%, due 11/1/31................ 5,000,000 5,153,810 7.76
--------------
INSURANCE 0.66%
Liberty Mutual Insurance, 7.697%, due
10/15/97, 144A.................... 6,000,000 6,303,300 7.33
Oil Casualty Insurance, 8.00%, due
9/15/34, 144A..................... 2,000,000 2,022,642 7.91
--------------
8,325,942
--------------
MEDICAL -- HOSPITAL 0.64%
Columbia/HCA, 8.36%, due 4/15/24..... 2,000,000 2,189,694 7.64
Columbia/HCA, 7.69%, due 6/15/25..... 3,450,000 3,545,141 7.48
Columbia/HCA, 7.75%, due 7/15/36..... 2,325,000 2,359,433 7.64
--------------
8,094,268
--------------
TELEPHONE -- INTEGRATED 0.44%
Citizens Communications Co., 9.00%,
due 8/15/31....................... 4,850,000 5,565,375 7.84
--------------
TOTAL CORPORATE BOND
(Identified
cost -- $44,926,618).......... 46,492,101
--------------
</Table>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- --------------
COMMERCIAL PAPER 0.48%
State Street Corp., 1.70%, due 1/03/05
(Identified cost -- $6,122,422)...... $6,123,000 $ 6,122,422
--------------
TOTAL INVESTMENTS (Identified
cost -- $1,664,896,003)............. 144.14% 1,825,042,011
OTHER ASSETS IN EXCESS OF
LIABILITIES......................... 0.88% 11,130,279
LIQUIDATION VALUE OF AUCTION MARKET
PREFERRED SHARES: SERIES M7,
SERIES T7, SERIES W7, SERIES TH7,
SERIES F7 (Equivalent to $25,000 per
share based on 3,360 shares
outstanding per class), SERIES F28,
SERIES T28 (Equivalent to $25,000
per share based on 3,000 shares
outstanding per class).............. (45.02)% (570,000,000)
------- --------------
-------
NET ASSETS -- COMMON STOCK (Equivalent
to $21.51 per share based on
58,858,135 shares of capital stock
outstanding)........................ 100.00% $1,266,172,290
------ --------------
------ --------------
</Table>
GLOSSARY OF PORTFOLIO ABBREVIATIONS
ADR American Depositary Receipt
CBTCS Corporate Backed Trust Certificates
COPrS Canadian Origin Preferred Securities
PINES Public Income Notes
PPLUS Preferred Plus Trust
TOPrS Trust Originated Preferred Securities
TruPS Trust Preferred Securities
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
<Table>
ASSETS:
Investments in securities, at value (Identified
cost -- $1,664,896,003) (Note 1)...................... $1,825,042,011
Cash.................................................... 816
Dividends and interest receivable....................... 9,689,759
Unrealized appreciation on interest rate swap
transactions (Notes 1 and 6).......................... 5,042,515
Receivable for investment securities sold............... 90,225
Other assets............................................ 51,651
--------------
Total Assets........................................ 1,839,916,977
--------------
LIABILITIES:
Payable for dividends declared on common shares......... 1,120,118
Payable to investment manager........................... 1,000,443
Payable for dividends declared on preferred shares...... 536,722
Unrealized depreciation on interest rate swap
transactions (Notes 1 and 6).......................... 473,040
Payable for common offering costs....................... 207,743
Payable for preferred offering costs.................... 73,901
Payable to administrator................................ 73,130
Payable for directors fees.............................. 4,312
Other liabilities....................................... 255,278
--------------
Total Liabilities................................... 3,744,687
--------------
LIQUIDATION VALUE OF PREFERRED SHARES:
Auction market preferred shares, Series M7, ($25,000
liquidation value, $0.001 par value, 3,360 shares
issued and outstanding) (Notes 1 and 5)............... 84,000,000
Auction market preferred shares, Series T7, ($25,000
liquidation value, $0.001 par value, 3,360 shares
issued and outstanding) (Notes 1 and 5)............... 84,000,000
Auction market preferred shares, Series W7, ($25,000
liquidation value, $0.001 par value, 3,360 shares
issued and outstanding) (Notes 1 and 5)............... 84,000,000
Auction market preferred shares, Series TH7, ($25,000
liquidation value, $0.001 par value, 3,360 shares
issued and outstanding) (Notes 1 and 5)............... 84,000,000
Auction market preferred shares, Series F7, ($25,000
liquidation value, $0.001 par value, 3,360 shares
issued and outstanding) (Notes 1 and 5)............... 84,000,000
Auction market preferred shares, Series F28, ($25,000
liquidation value, $0.001 par value, 3,000 shares
issued and outstanding) (Notes 1 and 5)............... 75,000,000
Auction market preferred shares, Series T28, ($25,000
liquidation value, $0.001 par value, 3,000 shares
issued and outstanding) (Notes 1 and 5)............... 75,000,000
--------------
570,000,000
--------------
TOTAL NET ASSETS APPLICABLE TO COMMON SHARES................ $1,266,172,290
--------------
--------------
TOTAL NET ASSETS APPLICABLE TO COMMON SHARES consist of:
Common stock ($0.001 par value, 58,858,135 shares
issued and outstanding) (Notes 1 and 5)............... $1,101,938,311
Distributions in excess of net investment income........ (457,693)
Accumulated net realized loss on investments............ (23,811)
Net unrealized appreciation on investments and interest
rate swap transactions................................ 164,715,483
--------------
$1,266,172,290
--------------
--------------
NET ASSET VALUE PER COMMON SHARE:
($1,266,172,290[div]58,858,135 shares outstanding)........ $ 21.51
--------------
--------------
MARKET PRICE PER COMMON SHARE............................... $ 18.76
--------------
--------------
MARKET PRICE PREMIUM/(DISCOUNT) TO NET ASSET VALUE PER
COMMON SHARE.............................................. (12.78)%
--------------
--------------
</Table>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 30, 2004(a) THROUGH DECEMBER 31, 2004
<Table>
Investment Income (Note 1):
Dividend income (net of $9,246 of foreign
withholding tax)..................................... $ 65,670,699
Interest income......................................... 4,998,171
------------
Total Income....................................... 70,668,870
------------
Expenses:
Investment management fees (Note 2)..................... 12,446,544
Preferred remarketing fee............................... 1,105,738
Administration fees (Note 2)............................ 972,271
Reports to shareholders................................. 228,622
Custodian fees and expenses............................. 159,702
Professional fees....................................... 126,381
Directors' fees and expenses (Note 2)................... 48,947
Transfer agent fees and expenses........................ 20,271
Miscellaneous........................................... 198,981
------------
Total Expenses..................................... 15,307,457
Reduction of Expenses (Note 2).............................. (2,928,598)
------------
Net Expenses....................................... 12,378,859
------------
Net Investment Income....................................... 58,290,011
------------
Net Realized and Unrealized Gain/(Loss) on Investments
(Note 1):
Net realized gain on investments........................ 2,353,187
Net realized loss on interest rate swap transactions.... (5,095,049)
Net change in unrealized appreciation on investments.... 160,146,008
Net change in unrealized appreciation on interest rate
swap transactions.................................... 4,569,475
------------
Net realized and unrealized gain/(loss) on
investments..................................... 161,973,621
------------
Net Increase Resulting from Operations...................... 220,263,632
Less Dividends and Distributions to Preferred Shareholders
from:
Net Investment Income and net realized gain on
investments.......................................... (7,648,356)
------------
Net Increase in Net Assets from Operations Applicable to
Common Shares............................................. $212,615,276
------------
------------
</Table>
- -------------------
(a) Commencement of Operations
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS APPLICABLE TO COMMON SHARES
<Table>
<Caption>
FOR THE PERIOD
JANUARY 30, 2004(a)
THROUGH
DECEMBER 31, 2004
-------------------
Change in Net Assets Applicable to Common Shares:
From Operations:
Net investment income.............................. $ 58,290,011
Net realized loss on investments and interest rate
swap transactions............................... (2,741,862)
Net change in unrealized appreciation on
investments and interest rate swap
transactions.................................... 164,715,483
--------------
Net increase resulting from operations........ 220,263,632
--------------
Less Dividends and Distributions to Preferred
Shareholders from:
Net investment income.............................. (7,343,713)
Net realized gain on investments................... (304,643)
--------------
Total Dividends and distributions to preferred
shareholders................................ (7,648,356)
--------------
Net increase in net assets from operations
applicable to common shares..................... 212,615,276
--------------
Less Dividends and Distributions to Common Shareholders
from:
Net investment income.............................. (46,308,778)
Net realized gain on investments................... (2,072,519)
Tax return of capital.............................. (13,412,617)
--------------
Total Dividends and distributions to common
shareholders................................ (61,793,914)
--------------
Capital Stock Transactions (Note 5):
Increase in net assets from common share
transactions.................................... 1,120,442,100
Increase in net assets from shares issued to common
shareholders for reinvestment of dividends...... 1,329,853
Decrease in net assets from underwriting
commissions and offering expenses from issuance
of preferred shares............................. (6,521,300)
--------------
Net increase in net assets from capital stock
transactions................................ 1,115,250,653
--------------
Total increase in net assets applicable to
common shares............................... 1,266,072,015
Net Assets Applicable to Common Shares:
Beginning of period................................ 100,275
--------------
End of period(b)................................... $1,266,172,290
--------------
--------------
</Table>
- -------------------
(a) Commencement of Operations
(b) Includes distributions in excess of net investment income of $457,693 at
December 31, 2004.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
20
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
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
JANUARY 30, 2004(a)
THROUGH
PER SHARE OPERATING PERFORMANCE: DECEMBER 31, 2004
- -------------------------------- ------------------
Net asset value per common share, beginning of period....... $19.10
------
Income from investment operations:
Net investment income.................................... 0.90
Net realized and unrealized gain on investments.......... 2.97
------
Total income from investment operations.............. 3.87
------
Less dividends and distributions to preferred shareholders
from:
Net investment income.................................... (0.12)
Net realized gain on investments......................... (0.01)
------
Total Dividends and distributions to preferred
shareholders....................................... (0.13)
------
Total from investment operations applicable to common
shares............................................. 3.74
------
Less Offering costs charged to paid-in capital -- common
shares..................................................... (0.04)
Offering costs charged to paid-in capital -- preferred
shares................................................. (0.12)
Dilutive effect of common share offering................. (0.12)
------
Total offering and organization costs................ (0.28)
------
Less Dividends and distributions to common shareholders
from:
Net investment income.................................... (0.79)
Net realized gain on investments......................... (0.03)
Tax return of capital.................................... (0.23)
------
Total Dividends and distributions to common
shareholders....................................... (1.05)
------
Net increase in net asset value............................. 2.41
------
Net asset value, per common share, end of period............ $21.51
------
------
Market value, per common share, end of period............... $18.76
------
------
Net asset value total return(b)............................. 19.46%(c)
------
------
Market value return(b)...................................... (0.50)%(c)
------
------
</Table>
- -------------------
(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.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
21
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<Table>
<Caption>
FOR THE PERIOD
JANUARY 30, 2004(a)
THROUGH
RATIOS/SUPPLEMENTAL DATA: DECEMBER 31, 2004
- ------------------------- ------------------
Net assets applicable to common shares, end of period
(in millions).............................................. $1,266.2
--------
--------
Ratio of expenses to average daily net assets applicable to
common shares (before expense reduction)(b)................ 1.49%(d)
--------
--------
Ratio of expenses to average daily net assets applicable to
common shares (net of expense reduction)(b)................ 1.21%(d)
--------
--------
Ratio of net investment income to average daily net assets
applicable to common shares (before expense reduction)(b).. 5.40%(d)
--------
--------
Ratio of net investment income to average daily net assets
applicable to common shares (net of expense reduction)(b).. 5.68%(d)
--------
--------
Ratio of expenses to average daily managed assets (before
expense reduction)(b),(e).................................. 1.04%(d)
--------
--------
Ratio of expenses to average daily managed assets (net of
expense reduction)(b),(e).................................. 0.84%(d)
--------
--------
Portfolio turnover rate..................................... 17.89%(c)
--------
--------
PREFERRED SHARES:
- -----------------
Liquidation value, end of period (in 000's). 570,000
--------
--------
Total shares outstanding (in 000's)......................... 23
--------
--------
Asset coverage per share.................................... $ 80,534
--------
--------
Liquidation preference per share............................ $ 25,000
--------
--------
Average market value per share(f)........................... $ 25,000
--------
--------
</Table>
- -------------------
(a) Commencement of operations.
(b) Ratios do not reflect the effect of dividend payments to preferred
shareholders.
(c) Not annualized.
(d) Annualized.
(e) Average daily managed assets represents net assets applicable to common
shares plus liquidation preference of preferred shares.
(f) Based on weekly prices.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
22
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Cohen & Steers REIT and Utility Income Fund, Inc. (the fund) was
incorporated under the laws of the State of Maryland on October 1, 2003 and is
registered under the Investment Company Act of 1940, as amended, as a
closed-end, non-diversified management investment company. The fund had no
operations until December 10, 2003 when it sold 5,250 shares of common stock for
$100,275 to Cohen & Steers Capital Management, Inc. (the investment manager).
Investment operations commenced on January 30, 2004.
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 asked prices
for the day or, if no asked price is available, at the bid price. 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 sales 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. If
there has been no sale on such day, the mean of the closing bid and asked prices
for the day or, if no asked 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 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. Any securities for which market quotations
are not readily available shall be valued in accordance with the procedures
approved by the board of directors.
Short-term debt securities, which have a maturity of 60 days or less, are
valued at amortized cost which approximates value.
- --------------------------------------------------------------------------------
23
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (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. The fund has adopted a policy of recording distributions
received in excess of income from underlying investments as a reduction of cost
of investments and/or realized gain. Such amounts are based on estimates if
actual amounts are not available, and actual amounts of income, realized gain
and return of capital may differ from the estimated amounts. The fund adjusts
the estimated amounts of the components of distributions (and consequently its
net investment income) as an increase to unrealized to unrealized
appreciation/(depreciation) and realized gain/(loss) on investments as necessary
once the issuers provide information about the actual composition of the
distributions.
Interest Rate Swaps: The fund uses interest rate swaps in connection with
the sale of taxable auction market preferred shares. The interest rate swaps are
intended to reduce or eliminate the effect that an increase in short-term
interest rates could have on the performance of the fund's common shares as a
result of the floating rate structure of preferred shares. In these interest
rate swaps, the fund agrees to pay the other party to the interest rate swap
(which is known as the counterparty) a fixed rate payment in exchange for the
counterparty agreeing to pay the fund a variable rate payment that is intended
to approximate the fund's variable rate payment obligation on the auction market
preferred shares. The payment obligation is based on the notional amount of the
swap. Depending on the state of interest rates in general, the use of interest
rate swaps could enhance or harm the overall performance of the common shares.
The market value of interest rate swaps is based on pricing models that consider
the time value of money, volatility, the current market and contractual prices
of the underlying financial instrument. Unrealized gains are reported as an
asset and unrealized losses are reported as a liability on the Statement of
Assets and Liabilities. The change in value of swaps, including the accrual of
periodic amounts of interest to be paid or received on swaps is reported as
unrealized gains or losses in the Statement of Operations. A realized gain or
loss is recorded upon payment or receipt of a periodic payment or termination of
swap agreements. Swap agreements involve, to varying degrees, elements of market
and counterparty risk, and exposure to loss in excess of the related amounts
reflected in the Statement of Assets and Liabilities.
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
distributions may consist of amounts 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 GAAP.
Series M7, Series T7, Series W7, Series TH7, and Series F7 preferred shares
pay dividends based on a variable interest rate set at auctions, normally held
every seven days. Dividends for Series M7, Series T7, Series W7, Series TH7, and
Series F7 preferred shares are accrued for the subsequent seven day period on
the auction date. In
- --------------------------------------------------------------------------------
24
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
most instances, dividends are payable every seven days, on the first business
day following the end of the dividend period.
Series T28 and Series F28 preferred shares pay dividends based on a variable
interest rate set at auctions, normally held every 28 days. Dividends for
Series T28 and Series F28 preferred shares are accrued for the subsequent 28 day
period on the auction date. In most instances, dividends are payable every 28
days, on the first business day following the end of the dividend period.
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 management fee, computed daily and paid monthly at an
annual rate of 0.85% 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 the preferred shares. For the period January 30, 2004
(commencement of operations) through December 31, 2004, the fund incurred
investment management fees prior to fee waivers of $12,446,544.
The investment manager has contractually agreed to waive its investment
management fee in the amount of 0.20% of average daily managed asset value for
the first five years of the fund's operations, 0.15% of average daily managed
asset value in year six, 0.10% of average daily managed asset value in year
seven and 0.05% of average daily managed asset value in year eight. As long as
this expense cap continues, it may lower the fund's expenses and increase its
total return. For the period ended January 30, 2004 (commencement of operations)
through December 30, 2004, the investment manager waived management fees of
$2,928,598.
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
January 30, 2004 (commencement of operations) through December 31, 2004, the
fund incurred $753,242 in administration fees.
- --------------------------------------------------------------------------------
25
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (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 January 30, 2004 (commencement of operations) through
December 31, 2004, fees and related expenses accrued for nonaffiliated directors
totaled $48,947.
Other: During the period, the fund may have purchased securities in which an
affiliate of the investment manager served as placement agent for the issuer.
NOTE 3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, excluding short-term investments, for the
period January 30, 2004 (commencement of operations) through December 31, 2004,
totaled $1,939,373,830 and $264,709,633, respectively.
NOTE 4. INCOME TAXES
The fund had a return of capital of $13,412,617 ($0.23 per common share) for
the period January 30, 2004 (commencement of operations) through December 31,
2004 which has been deducted from paid-in capital. Short-term capital gains are
reflected in the financial statements as realized gains on investments but are
typically treated as ordinary income for tax purposes.
For the period January 30, 2004 (commencement of operations) through
December 31, 2004 the dividends and distributions to shareholders are
characterized for tax purposes as follows:
<Table>
<Caption>
FOR THE PERIOD
JANUARY 30, 2004
(COMMENCEMENT OF
OPERATIONS) THROUGH
DECEMBER 31, 2004
-----------------
Preferred shareholders:
Ordinary income................................... $ 7,343,713(a)
Long-term capital gains........................... 304,643
-----------
Total dividends and distributions to
preferred shareholders.................... $ 7,648,356
-----------
-----------
Common shareholders:
Ordinary income................................... $46,308,778
Long-term capital gains........................... 2,072,519
Tax return of capital............................. 13,412,617
-----------
Total dividends and distributions to common
shareholders.............................. $61,793,914
-----------
-----------
</Table>
- -------------------
(a) Under federal income tax rules, the tax character of $536,722 will be
determined based upon 2005 earnings and profits.
- --------------------------------------------------------------------------------
26
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 2004, the cost of investments and net unrealized
appreciation for federal income tax purposes were as follows:
<Table>
Aggregate cost........................................... $1,664,919,814
--------------
--------------
Gross unrealized appreciation............................ $ 161,944,070
Gross unrealized depreciation............................ (1,821,873)
--------------
Net unrealized appreciation on investments............... 160,122,197
Net unrealized appreciation on interest rate swap
transactions........................................... 4,648,505
--------------
Net unrealized appreciation.............................. $ 164,770,702
--------------
--------------
</Table>
Differences between book and tax basis unrealized appreciation are primarily
due to wash sales on portfolio securities and differing treatment of swap
income/expense.
Net investment income and net realized gains differ for financial statement
and tax purposes primarily due to differing treatments of interest rate swap
payments and wash sales on portfolio securities. To the extent such differences
are permanent in nature, such amounts are reclassified within the capital
accounts. During the period January 30, 2004 (commencement of operations)
through December 31, 2004 the fund decreased undistributed net investment income
by $5,095,213 and increased accumulated net realized gain on investments by
$5,095,213, relating primarily to differing treatment of interest rate swap
income/expense.
For the year ended December 31, 2004, the Fund did not have any
undistributed oridinary income or capital gains.
NOTE 5. CAPITAL STOCK
The fund is authorized to issue 100 million shares of common stock at a par
value of $0.001 per share. At December 31, 2004 Cohen & Steers Capital
Management, Inc. owned approximately 5,500 shares.
On January 30, 2004, the fund completed the initial public offering of
52,500,000 shares of common stock. Proceeds paid to the fund amounted to
$1,000,650,000 after deduction of underwriting commissions and offering expenses
of $49,350,000.
On February 13, 2004, the fund completed a subsequent offering of 3,500,000
shares of common stock. Proceeds paid to the fund amounted to $66,710,000 after
deduction of underwriting commissions and offering expenses of $3,290,000.
On March 9, 2004, the fund completed a subsequent offering of 2,000,000
shares of common stock. Proceeds paid to the fund amounted to $38,120,000 after
deduction of underwriting commissions and offering expenses of $1,880,000.
- --------------------------------------------------------------------------------
27
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On March 12, 2004, the fund completed a subsequent offering of 785,000
shares of common stock. Proceeds paid to the fund amounted to $14,962,100 after
deduction of underwriting commissions and offering expenses of $737,900.
During the period January 30, 2004 (commencement of operations) through
December 31, 2004, the fund issued 67,885 shares of common stock for the
reinvestment of dividends.
On March 23, 2004, the fund issued 3,360 taxable auction market preferred
shares, Series M7 (par value $0.001), 3,360 taxable auction market preferred
shares, Series T7 (par value $0.001), 3,360 taxable auction market preferred
shares, Series W7 (par value $0.001), 3,360 taxable auction market preferred
shares, Series TH7 (par value $0.001), 3,360 taxable auction market preferred
shares, Series F7 (par value $0.001), 3,000 taxable auction market preferred
shares, Series T28 (par value $0.001), and 3,000 taxable auction market
preferred shares, Series F28 (par value $0.001)(together referred to as
preferred shares). Proceeds paid to the fund amounted to $563,478,700 after
deduction of underwriting commissions and offering expenses of $6,521,300. These
issues have received a 'AAA/Aaa' rating from Standard & Poor's and Moody's.
Preferred shares are senior to the fund's common shares and will rank on a
parity with shares of any other series of preferred shares, and with shares of
any other series of preferred stock of the fund, as to the payment of dividends
and the distribution of assets upon liquidation. If the fund does not timely
cure a failure to (1) maintain a discounted value of its portfolio equal to the
preferred shares basic maintenance amount, (2) maintain the 1940 Act preferred
shares asset coverage, or (3) file a required certificate related to asset
coverage on time, all of the forgoing as defined in the article supplementary of
the fund, the preferred shares will be subject to a mandatory redemption at the
redemption price of $25,000 per share plus an amount equal to accumulated but
unpaid dividends thereon to the date fixed for redemption. To the extent
permitted under the 1940 Act and Maryland Law, the fund at its option may
without consent of the holders of preferred shares, redeem preferred shares
having a dividend period of one year or less, in whole, or in part, on the
business day after the last day of such dividend period upon not less than 15
calendar days and not more than 40 calendar days prior to notice. The optional
redemption price is $25,000 per share plus an amount equal to accumulated but
unpaid dividends thereon to the date fixed for redemption.
The fund's common shares and preferred shares have equal voting rights of
one vote per share and vote together as a single class. In addition, the
affirmative vote of the holders a majority, as defined in the 1940 Act, of the
outstanding preferred shares shall be required to (1) approve any plan of
reorganization that would adversely affect the taxable auction market preferred
shares and (2) any matter that materially and adversely affects the rights,
preferences, or powers of that series.
- --------------------------------------------------------------------------------
28
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. INVESTMENTS IN INTEREST RATE SWAPS
The fund has entered into interest rate swap agreements with Merrill Lynch
Derivative Products AG, Royal Bank of Canada, and UBS AG. Under the agreements
the fund receives a floating rate and pays a respective fixed rate. Details of
the swaps at December 31, 2004 are as follows:
<Table>
<Caption>
UNREALIZED
NOTIONAL FLOATING RATE(a) APPRECIATION/
COUNTERPARTY AMOUNT FIXED RATE (RESET MONTHLY) TERMINATION DATE (DEPRECIATION)
- --------------------------------- ----------- ---------- --------------- ---------------- --------------
Merrill Lynch Derivative
Products AG.................... $46,000,000 3.2275% 2.4175% March 29, 2008 $ 570,602
Merrill Lynch Derivative
Products AG.................... $46,000,000 3.4150% 2.4175% March 29, 2009 713,942
Merrill Lynch Derivative
Products AG.................... $46,000,000 3.4610% 2.4175% March 29, 2010 1,123,884
Merrill Lynch Derivative
Products AG.................... $34,000,000 3.535% 2.4150% April 23, 2008 103,826
Royal Bank of Canada............. $68,000,000 2.990% 2.4175% March 26, 2009 2,196,872
UBS AG........................... $30,000,000 3.220% 2.3400% May 7, 2007 132,629
UBS AG........................... $34,000,000 3.440% 2.4100% April 19, 2008 200,760
UBS AG........................... $34,000,000 4.060% 2.4100% April 19, 2010 (151,853)
UBS AG........................... $34,000,000 4.1725% 2.4175% April 28, 2010 (321,187)
----------
$4,569,475
----------
----------
</Table>
NOTE 7. SUBSEQUENT EVENT
On January 18, 2005, the fund issued 3,000 auction market preferred shares,
Series W28 (par value $0.001). Proceeds paid to the fund amounted to $73,865,172
after deduction of underwriting commissions and offering expenses of $1,134,828.
This issue has received a 'AAA/Aaa' rating from Standard & Poor's and Moody's.
- -------------------
(a) Based on LIBOR (London Interbank Offered Rate). Represents rates in effect
at December 31, 2004.
- --------------------------------------------------------------------------------
29
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Cohen & Steers REIT and Utility 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 REIT and Utility
Income Fund, Inc. (the 'Fund') at December 31, 2004, and the results of its
operations, the changes in its net assets and the financial highlights for the
period January 30, 2004 (commencement of operations) through December 31, 2004,
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 audit. We conducted our audit 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 audit, which included confirmation of securities at
December 31, 2004 by correspondence with the custodian and brokers, provides a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 21, 2005
- --------------------------------------------------------------------------------
30
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
TOTAL RETURN(a)
(PERIOD ENDED DECEMBER 31, 2004) (UNAUDITED)
SINCE INCEPTION
(1/30/04)
---------
19.46%
The performance data quoted represent past performance. Past performance is no
guarantee of future results. The rate of return will vary and the principal
value of an investment will fluctuate and shares, if sold, may be worth more or
less than their original cost. Current performance may be lower or higher than
performance data quoted.
TAX INFORMATION -- 2004 (UNAUDITED)
Pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003, the
fund designates qualified dividend income of $27,561,433. Additionally, the fund
designates long term capital gains distributions of $2,377,162 at the 15% rate
or the maximum allowable.
Shareholders are advised to consult with their own tax advisors as to the
Federal, State, and local tax status of the income received.
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.
OTHER INFORMATION
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.
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 1-800-330-7348, (ii) on our Web site at
cohenandsteers.com, or (iii) on the Securities and Exchange Commission's (SEC)
Web site 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 (i) without charge
upon request, by calling 1-800-330-7348 or (ii) on the SEC's Web site 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
1-800-330-7348, or (ii) on the SEC's website at http://www.sec.gov. In addition,
the Forms N-Q may be reviewed
- -------------------
(a) Based on net asset value.
- --------------------------------------------------------------------------------
31
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
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
1-800-SEC-0330.
The fund may pay distributions in excess of the fund's net investment
company taxable income and this excess would be a tax-free return of capital
distributed from the fund's assets. To the extent this occurs, the fund's
shareholders of record would be notified of the approximate amount of capital
returned to shareholders for each such distribution. Distributions of capital
decrease the fund's total assets and, therefore, could have the effect of
increasing the fund's expense ratio. In addition, in order to make these
distributions, the fund may have to sell portfolio securities at a less than
opportune time.
As required, the fund has submitted to the New York Stock Exchange ('NYSE')
the annual certification of the fund's chief executive officer that he is not
aware of any violation of the NYSE's Corporate Governance listing standards. The
fund also has included the certifications of the Fund's chief executive officer
and chief financial officer required by Section 302 of the Sarbanes-Oxley Act of
2002 as exhibits to the fund's Form N-CSR for the year ended December 31, 2004
filed with the SEC.
CHANGES IN INVESTMENT POLICY
Please note that the distributions paid by the fund to shareholders are
subject to recharacterization for tax purposes. The final tax treatment of these
distributions is reported to shareholders on their 1099-DIV forms, which are
mailed to shareholders after the close of each fiscal year.
Joseph M. Harvey was appointed as a portfolio manager of the fund in August
2004. He joined Cohen & Steers Capital Management, the fund's advisor, in 1992
and currently serves as its president. Mr. Harvey also serves as president of
the advisor's parent company, Cohen & Steers, Inc. Prior to August 2003, he was
a senior vice president and director of investment research for the advisor.
The board of directors approved a change to one of the fund's investment
policies to allow up to 20% of the fund's managed assets to be invested in
foreign securities, with up to 10% of the fund's managed assets in emerging
market issuers. Foreign securities markets may have substantially less volume
than U.S. securities markets, making some foreign issuers less liquid and more
volatile than securities of comparable domestic issuers.
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.
- --------------------------------------------------------------------------------
32
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COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
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.
- --------------------------------------------------------------------------------
33
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COHEN & STEERS REIT AND UTILITY 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, custodian and transfer
agent. The management of the fund's day-to-day operations is delegated to its
officers, the advisor and the fund's administrator, subject always to the
investment objective and policies of the fund and to the general supervision of
the board of directors.
The directors and officers of the fund and their principal occupations
during 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 1-800-300-7348.
<Table>
<Caption>
PRINCIPAL OCCUPATION NUMBER OF FUNDS
DURING PAST 5 YEARS WITHIN FUND COMPLEX
POSITION(S) HELD TERM OF (INCLUDING OTHER OVERSEEN BY DIRECTOR LENGTH OF
NAME, ADDRESS AND AGE* WITH FUND OFFICE DIRECTORSHIPS HELD) (INCLUDING THE FUND) TIME SERVED
- ---------------------- --------- ------ ------------------- -------------------- -----------
Interested Directors(1)
Robert H. Steers ..... Director, chairman 2005 Co-chairman and 14 Since
Age: 51 of the board, co-chief executive inception
and secretary officer of the advisor
since 2003 and prior
to that, chairman of
the advisor. President
of Cohen & Steers
Securities, LLC, the
fund's distributor.
Martin Cohen ......... Director, 2005 Co-chairman and 14 Since
Age: 55 president and co-chief executive inception
treasurer officer of the advisor
since 2003 and prior
to that, president of
the advisor. Vice
president of Cohen &
Steers Securities,
LLC, the fund's
distributor.
Disinterested Directors
Bonnie Cohen(2) ...... Director 2005 Consultant. Prior 14 Since
Age: 61 thereto, inception
Undersecretary of
State, United States
Department of State.
Director of Wellsford
Real Properties, Inc.
George Grossman ...... Director 2005 Attorney-at-law. 14 Since
Age: 50 inception
(table continued on next page)
</Table>
- -------------------
* The address for all directors is 757 Third Avenue, New York, NY 10017.
(1) 'Interested person,' as defined in the 1940 Act, of the fund because of
affiliation with Cohen & Steers Capital Management, Inc., the fund's
advisor.
(2) Martin Cohen and Bonnie Cohen are unrelated.
- --------------------------------------------------------------------------------
34
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
(table continued from preceding page)
<Table>
<Caption>
PRINCIPAL OCCUPATION NUMBER OF FUNDS
DURING PAST 5 YEARS WITHIN FUND COMPLEX
POSITION(S) HELD TERM OF (INCLUDING OTHER OVERSEEN BY DIRECTOR LENGTH OF
NAME, ADDRESS AND AGE* WITH FUND OFFICE DIRECTORSHIPS HELD) (INCLUDING THE FUND) TIME SERVED
- ---------------------- --------- ------ ------------------- -------------------- -----------
Richard E. Kroon ..... Director 2005 Board member of Finlay 14 2004 to
Age: 62 Enterprises, Inc. present
(operator of
department store fine
jewelry leased
departments), and
several private
companies; member of
Investment
Subcommittee, Monmouth
University; retired
Chairman and Managing
Partner of Sprout
Group venture capital
funds, then an
affiliate of
Donaldson, Lufkin and
Jenrette Securities
Corporation; and
former chairman of the
National Venture
Capital Association.
Richard J. Norman .... Director 2005 Private investor. 14 Since
Age: 61 President of the Board inception
of Directors of
Maryland Public
Television and board
member of The
Salvation Army. Prior
thereto, investment
representative of
Morgan Stanley Dean
Witter.
Frank K. Ross ........ Director 2005 Board member of NCRIC 14 2004 to
Age: 61 Group, Inc. present
(insurance) and Pepco
Holdings, Inc.
(electric utility).
Formerly, midatlantic
area managing Partner
for audit and risk
advisory services at
KPMG LLP and managing
partner of its
Washington, DC office.
Willard H. Smith, Director 2005 Board member of Essex 14 Since
Jr. .................. Property Trust, Inc., inception
Age: 68 Highwoods Properties,
Inc., Realty Income
Corporation and Crest
Net Lease, Inc.
Managing director at
Merrill Lynch & Co.,
Equity Capital Markets
Division from 1983 to
1995.
(table continued on next page)
</Table>
- --------------------------------------------------------------------------------
35
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
(table continued from preceding page)
<Table>
<Caption>
PRINCIPAL OCCUPATION NUMBER OF FUNDS
DURING PAST 5 YEARS WITHIN FUND COMPLEX
POSITION(S) HELD TERM OF (INCLUDING OTHER OVERSEEN BY DIRECTOR LENGTH OF
NAME, ADDRESS AND AGE* WITH FUND OFFICE DIRECTORSHIPS HELD) (INCLUDING THE FUND) TIME SERVED
- ---------------------- --------- ------ ------------------- -------------------- -----------
C. Edward Ward, Jr. ... Director 2005 Member of the board of 14 2004 to
Age: 58 trustees of Manhattan present
College, Riverdale,
New York. Formerly
head of closed-end
fund listings for the
New York Stock
Exchange.
</Table>
The officers of the fund (other than Messrs. Cohen and Steers, whose
biographies are provided above), their addresses, their ages, and their
principal occupations for at least the past five years are set forth below.
<Table>
<Caption>
POSITION(S) HELD
NAME, ADDRESS AND AGE* WITH FUND PRINCIPAL OCCUPATION DURING PAST 5 YEARS
---------------------- --------- ----------------------------------------
Robert Becker .......... Senior vice president of the advisor since
Age: 36 2003. Prior to that, Mr. Becker was a
co-portfolio manager, Franklin Templeton
Investments; and has also held positions in
equity research for the utility sector, Salomon
Smith Barney and Scudder, Stevens and Clark.
Joseph M. Harvey ....... Vice president President of the advisor since 2003 and, prior
Age: 40 to that, senior vice president and director of
investment research of the advisor.
Adam M. Derechin ....... Vice president and Chief operating officer of the advisor since
Age: 40 assistant 2003 and prior to that, senior vice president
treasurer of the advisor.
William F. Scapell ..... Senior vice president of the advisor since
Age: 38 2003. Prior to that, director in the
fixed-income research department and chief
investment strategist for preferred securities
at Merrill Lynch & Co., Inc. Prior to working
for Merrill Lynch, Mr. Scapell was employed at
the Federal Reserve Bank of New York in both
supervision and monetary policy roles.
Lawrence B. Stoller .... Assistant Executive vice president and general counsel of
Age: 41 secretary the advisor, since 2004; Chief legal officer of
Cohen & Steers Securities, LLC. Prior to that,
Senior vice president and general counsel of
the advisor, associate general Counsel,
Neuberger Berman Management, Inc. (money
manager); and assistant general counsel, The
Dreyfus Corporation (money manager).
John E. McLean ......... Chief compliance Vice president and associate general counsel of
Age: 34 officer Cohen & Steers Capital Management since
September 2003. Prior to that, vice president,
Law & Regulation, J. & W. Seligman & Co.
Incorporated (money manager); and associate,
Battle Fowler LLP (law firm).
</Table>
- -------------------
* The address of each officer is 757 Third Avenue, New York, NY 10017.
- --------------------------------------------------------------------------------
36
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
MEET THE COHEN & STEERS FAMILY OF OPEN-END FUNDS:
<Table>
FOR HIGH CURRENT INCOME: FOR TOTAL RETURN:
COHEN & STEERS COHEN & STEERS
REALTY INCOME FUND REALTY SHARES
DESIGNED FOR INVESTORS SEEKING A HIGH DESIGNED FOR INVESTORS SEEKING MAXIMUM
DIVIDEND YIELD AND CAPITAL APPRECIATION, TOTAL RETURN THROUGH BOTH CURRENT INCOME
INVESTING PRIMARILY IN REITS AND CAPITAL APPRECIATION, INVESTING
A, B, C AND I SHARES AVAILABLE PRIMARILY IN REITS
SYMBOLS: CSEIX, CSBIX, CSCIX, CSDIX SYMBOL: CSRSX
ALSO AVAILABLE: COHEN & STEERS
INSTITUTIONAL REALTY SHARES (CSRIX)
REQUIRES A HIGHER MINIMUM PURCHASE, BUT
OFFERS A LOWER TOTAL EXPENSE RATIO
FOR TOTAL RETURN: FOR CAPITAL APPRECIATION
COHEN & STEERS COHEN & STEERS
UTILITY FUND REALTY FOCUS FUND
DESIGNED FOR INVESTORS SEEKING MAXIMUM DESIGNED FOR INVESTORS SEEKING MAXIMUM
TOTAL RETURN THROUGH BOTH CURRENT INCOME CAPITAL APPRECIATION, INVESTING IN A
AND CAPITAL APPRECIATION, INVESTING LIMITED NUMBER OF REITS AND OTHER REAL
PRIMARILY IN UTILITIES ESTATE COMPANIES
A, B, C AND I SHARES AVAILABLE CONCENTRATED, HIGHLY FOCUSED PORTFOLIO
SYMBOLS: CSUAX, CSUBX, CSUCX, A, B, C AND I SHARES AVAILABLE
CSUIX SYMBOLS: CSFAX, CSFBX, CSFCX, CSSPX
</Table>
FOR MORE INFORMATION ABOUT ANY COHEN & STEERS FUND
OR TO OBTAIN A PROSPECTUS PLEASE CONTACT US AT:
1-800-330-7348, OR VISIT OUR WEB SITE AT COHENANDSTEERS.COM
PLEASE CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE
FUND CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER
INFORMATION ABOUT THE FUND. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE
INVESTING.
COHEN & STEERS SECURITIES, LLC, DISTRIBUTOR
- --------------------------------------------------------------------------------
37
- --------------------------------------------------------------------------------
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
<Table>
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
Bonnie Cohen FUND SUBADMINISTRATOR AND CUSTODIAN
Director State Street Bank and Trust Company
225 Franklin Street
George Grossman Boston, MA 02110
Director
TRANSFER AGENT -- COMMON SHARES
Richard E. Kroon Equiserve Trust Company
Director 250 Royall Street
Canton, MA 02021
Richard J. Norman (800) 426-5523
Director
TRANSFER AGENT -- PREFERRED SHARES
Frank K. Ross The Bank of New York
Director 100 Church Street
New York, NY 10007
Willard H. Smith Jr.
Director LEGAL COUNSEL
Simpson Thacher & Bartlett LLP
C. Edward Ward, Jr. 425 Lexington Avenue
Director New York, NY 10017
Robert Becker New York Stock Exchange Symbol: UTF
Vice president Web site: cohenandsteers.com
Adam Derechin This report is for shareholder information. This is not
Vice president and assistant treasurer a prospectus intended for use in the purchase or sale
of fund shares. Past performance is of course no
Joseph M. Harvey guarantee of future results and your investment may
Vice president be worth more or less at the time you sell.
William F. Scapell
Vice president
Lawrence B. Stoller
Assistant secretary
</Table>
- --------------------------------------------------------------------------------
38
COHEN & STEERS
REIT AND UTILITY INCOME FUND
757 THIRD AVENUE
NEW YORK, NY 10017
COHEN & STEERS
REIT AND UTILITY INCOME FUND
---------------
ANNUAL REPORT
DECEMBER 31, 2004
<Page>
Item 2. Code of Ethics.
The registrant has adopted a Code of Ethics that applies to its Principal
Executive Officer and Principal Financial Officer. The registrant undertakes to
provide to any person without charge, upon request, a copy of the Code of
Ethics. Such request can be made by calling 800-330-7348 or writing to the
Secretary of the registrant, 757 Third Avenue, New York, NY 10017.
Item 3. Audit Committee Financial Expert.
The registrant's Board has determined that Frank K. Ross, a member of the
registrant's Audit Committee, is an "audit committee financial expert" and
"independent," as such terms are defined in this Item.
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:
2004 2003
-------- ----
Audit Fees $123,390 N/A
Audit-Related Fees 40,000 N/A
Tax Fees 12,600 N/A
All Other Fees -- N/A
Audit-related fees were billed in connection with the preparation and issuance
of certification reports to rating agencies relating to the registrant's
preferred shares. Tax fees were billed in connection with the preparation of tax
returns, calculation and designation of dividends and other miscellaneous tax
services.
Aggregate fees billed by the registrant's principal accountant for the last two
fiscal years for non-audit services provided to the registrant's investment
adviser (not including a sub-adviser whose role is primarily portfolio
management and is subcontracted or overseen by another investment adviser) and
any entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registered investment
company, where the engagement relates directly to the operations and financial
reporting of the registrant, were as follows:
2004 2003
------- ----
Audit-Related Fees -- N/A
Tax Fees -- N/A
All Other Fees $62,500 N/A
<Page>
These other fees were billed in connection with internal control reviews and
AIMR performance reviews.
(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 adviser and
any sub-adviser (not including any sub-adviser whose role is primarily portfolio
management and is subcontracted with or overseen by another investment adviser)
and any entity controlling, controlled by or under common control with the
registrant's investment adviser 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 for the investment
adviser.
(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, 2004 and December 31, 2003, 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 adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser) and any entity controlling, controlled by or under
common control with the registrant's investment adviser that provides ongoing
services to the registrant were $120,600 and $0, respectively.
(h) The registrant's audit committee considered whether the provision of
non-audit services that were rendered to the registrant's investment adviser
(not including any sub-adviser whose role is primarily portfolio management and
is subcontracted with or overseen by another investment adviser) and any
entity controlling, controlled by or under common control with the registrant's
investment adviser that provides ongoing services to the registrant that were
not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X
was compatible with maintaining the principal accountant's independence.
Item 5. Audit Committee of Listed Registrants.
The registrant has a standing audit committee established in accordance with
Section 3(a)(58)(A) of the Exchange Act. The members of the committee are Frank
K. Ross (chairman), Bonnie
<Page>
Cohen, George Grossman, Richard E. Kroon, Richard J. Norman, Willard H. Smith
Jr. and C. Edward Ward.
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.
COHEN & STEERS CAPITAL MANAGEMENT, INC.
STATEMENT OF POLICIES AND PROCEDURES REGARDING THE VOTING OF SECURITIES
This statement sets forth the policies and procedures that Cohen & Steers
Capital Management, Inc. ("C&S") follows in exercising voting rights with
respect to securities held in our client portfolios. All proxy-voting rights
that are exercised by C&S shall be subject to this Statement of Policy and
Procedures.
I. Objectives
Voting rights are an important component of corporate governance. C&S has three
overall objectives in exercising voting rights:
A. Responsibility. C&S shall seek to ensure that there is an effective
means in place to hold companies accountable for their actions. While management
must be accountable to its board, the board must be accountable to a company's
shareholders. Although accountability can be promoted in a variety of ways,
protecting shareholder voting rights may be among our most important tools.
B. Rationalizing Management and Shareholder Concerns. C&S seeks to ensure
that the interests of a company's management and board are aligned with those of
the company's shareholders. In this respect, compensation must be structured to
reward the creation of shareholder value.
C. Shareholder Communication. Since companies are owned by their
shareholders, C&S seeks to ensure that management effectively communicates with
its owners about the company's business operations and financial performance. It
is only with effective communication that shareholders will be able to assess
the performance of management and to make informed decisions on when to buy,
sell or hold a company's securities.
II. General Principles
In exercising voting rights, C&S shall conduct itself in accordance with the
general principles set forth below.
<Page>
1. The ability to exercise a voting right with respect to a security is a
valuable right and, therefore, must be viewed as part of the asset
itself.
2. In exercising voting rights, C&S shall engage in a careful evaluation
of issues that may materially affect the rights of shareholders and
the value of the security.
3. Consistent with general fiduciary principles, the exercise of voting
rights shall always be conducted with reasonable care, prudence and
diligence.
4. In exercising voting rights on behalf of clients, C&S shall conduct
itself in the same manner as if C&S were the constructive owner of the
securities.
5. To the extent reasonably possible, C&S shall participate in each
shareholder voting opportunity.
6. Voting rights shall not automatically be exercised in favor of
management-supported proposals.
7. C&S, and its officers and employees, shall never accept any item of
value in consideration of a favorable proxy voting decision.
III. General Guidelines
Set forth below are general guidelines that C&S shall follow in exercising proxy
voting rights:
Prudence
In making a proxy voting decision, C&S shall give appropriate consideration to
all relevant facts and circumstances, including the value of the securities to
be voted and the likely effect any vote may have on that value. Since voting
rights must be exercised on the basis of an informed judgment, investigation
shall be a critical initial step.
Third Party Views
While C&S may consider the views of third parties, C&S shall never base a proxy
voting decision solely on the opinion of a third party. Rather, decisions shall
be based on a reasonable and good faith determination as to how best to maximize
shareholder value.
Shareholder Value
Just as the decision whether to purchase or sell a security is a matter of
judgment, determining whether a specific proxy resolution will increase the
market value of a security is a matter of
<Page>
judgment as to which informed parties may differ. In determining how a proxy
vote may affect the economic value of a security, C&S shall consider both
short-term and long-term views about a company's business and prospects,
especially in light of our projected holding period on the stock (e.g., C&S may
discount long-term views on a short-term holding).
IV. Specific Issues
Set forth below are guidelines as to how specific proxy voting issues shall be
analyzed and assessed. While these guidelines will provide a framework for our
decision making process, the mechanical application of these guidelines can
never address all proxy voting decisions. When new issues arise or old issues
present nuances not encountered before, C&S must be guided by its reasonable
judgment to vote in a manner that C&S deems to be in the best interests of its
clients.
A. Stock-Based Compensation
Approval of Plans or Plan Amendments. By their nature, compensation plans must
be evaluated on a case-by-case basis. As a general matter, C&S always favors
compensation plans that align the interests of management and shareholders. C&S
generally approves compensation plans under the following conditions:
10% Rule. The dilution effect of the newly authorized shares, plus the shares
reserved for issuance in connection with all other stock related plans,
generally should not exceed 10%.
Exercise Price. The minimum exercise price of stock options should be at least
equal to the market price of the stock on the date of grant.
Plan Amendments. Compensation plans should not be materially amended without
shareholder approval.
Non-Employee Directors. Awards to non-employee directors should not be subject
to management discretion, but rather should be made under non-discretionary
grants specified by the terms of the plan.
Repricing/Replacement of Underwater Options. Stock options generally should not
be re-priced, and never should be re-priced without shareholder approval. In
addition, companies should not issue new options, with a lower strike price, to
make up for previously issued options that are substantially underwater. C&S
will vote against the election of any slate of directors that, to its knowledge,
has authorized a company to re-price or replace underwater options during the
most recent year without shareholder approval.
Reload/Evergreen Features. We will generally vote against plans that enable the
issuance of reload options and that provide an automatic share replenishment
("evergreen") feature.
<Page>
Measures to Increase Executive Long-Term Stock Ownership. We support measures to
increase the long-term stock ownership by a company's executives. These include
requiring senior executives to hold a minimum amount of stock in a company
(often expressed as a percentage of annual compensation), requiring stock
acquired through option exercise to be held for a certain minimum amount of
time, and issuing restricted stock awards instead of options. In this respect,
we support the expensing of option grants because it removes the incentive of a
company to issue options in lieu of restricted stock. We also support employee
stock purchase plans, although we generally believe the discounted purchase
price should be at least 85% of the current market price.
Vesting. Restricted stock awards normally should vest over at least a two-year
period.
Other stock awards. Stock awards other than stock options and restricted stock
awards should be granted in lieu of salary or a cash bonus, and the number of
shares awarded should be reasonable.
B. Change of Control Issues
While we recognize that a takeover attempt can be a significant distraction for
the board and management to deal with, the simple fact is that the possibility
of a corporate takeover keeps management focused on maximizing shareholder
value. As a result, C&S opposes measures that are designed to prevent or
obstruct corporate takeovers because they can entrench current management. The
following are C&S's guidelines on change of control issues:
Shareholder Rights Plans. C&S acknowledges that there are arguments for and
against shareholder rights plans, also known as "poison pills." Companies should
put their case for rights plans to shareholders. We generally vote against any
directors who, without shareholder approval, to our knowledge have instituted a
new poison pill plan, extended an existing plan, or adopted a new plan upon the
expiration of an existing plan during the past year.
Golden Parachutes. C&S opposes the use of accelerated employment contracts that
result in cash grants of greater than three times annual compensation (salary
and bonus) in the event of termination of employment following a change in
control of a company. In general, the guidelines call for voting against "golden
parachute" plans because they impede potential takeovers that shareholders
should be free to consider. We generally withhold our votes at the next
shareholder meeting for directors who to our knowledge approved golden
parachutes.
Approval of Mergers - C&S votes against proposals that require a super-majority
of shareholders to approve a merger or other significant business combination.
We support proposals that seek to lower super-majority voting requirements.
C. Routine Issues
<Page>
Director Nominees in a Non-Contested Election - C&S generally votes in favor of
management proposals on director nominees.
Director Nominees in a Contested Election - By definition, this type of board
candidate or slate runs for the purpose of seeking a significant change in
corporate policy or control. Therefore, the economic impact of the vote in favor
of or in opposition to that director or slate must be analyzed using a higher
standard normally applied to changes in control. Criteria for evaluating
director nominees as a group or individually should include: performance;
compensation, corporate governance provisions and takeover activity; criminal
activity; attendance at meetings; investment in the company; interlocking
directorships; inside, outside and independent directors; whether the chairman
and CEO titles are held by the same person; number of other board seats; and
other experience. It is impossible to have a general policy regarding director
nominees in a contested election.
Board Composition - C&S supports the election of a board that consists of at
least a majority of independent directors. We generally withhold our support for
non-independent directors who serve on a company's audit, compensation and/or
nominating committees. We also generally withhold support for director
candidates who have not attended a sufficient number of board or committee
meetings to effectively discharge their duties as directors.
Classified Boards - Because a classified board structure prevents shareholders
from electing a full slate of directors at annual meetings, C&S generally votes
against classified boards. We vote in favor of shareholder proposals to
declassify a board of directors unless a company's charter or governing
corporate law allows shareholders, by written consent, to remove a majority of
directors at any time, with or without cause.
Barriers to Shareholder Action - We vote to support proposals that lower the
barriers to shareholder action. This includes the right of shareholders to call
a meeting and the right of shareholders to act by written consent.
Cumulative Voting - Having the ability to cumulate our votes for the election of
directors - that is, cast more than one vote for a director about whom they feel
strongly - generally increases shareholders' rights to effect change in the
management of a corporation. We generally support, therefore, proposals to adopt
cumulative voting.
Ratification of Auditors - Votes generally are cast in favor of proposals to
ratify an independent auditor, unless there is a reason to believe the auditing
firm is no longer performing its required duties or there are exigent
circumstances requiring us to vote against the approval of the recommended
auditor. For example, our general policy is to vote against an independent
auditor that receives more than 50% of its total fees from a company for
non-audit services.
D. Stock Related Items
Increase Additional Common Stock - C&S's guidelines generally call for approval
of increases in authorized shares, provided that the increase is not greater
than three times the number of
<Page>
shares outstanding and reserved for issuance (including shares reserved for
stock-related plans and securities convertible into common stock, but not shares
reserved for any poison pill plan).
Votes generally are cast in favor of proposals to authorize additional shares of
stock except where the proposal:
1. creates a blank check preferred stock; or
2. establishes classes of stock with superior voting rights.
Blank Check Preferred Stock - Votes generally are cast in opposition to
management proposals authorizing the creation of new classes of preferred stock
with unspecific voting, conversion, distribution and other rights, and
management proposals to increase the number of authorized blank check preferred
shares. C&S may vote in favor of this type of proposal when it receives
assurances to its reasonable satisfaction that (i) the preferred stock was
authorized by the board for the use of legitimate capital formation purposes and
not for anti-takeover purposes, and (ii) no preferred stock will be issued with
voting power that is disproportionate to the economic interests of the preferred
stock. These representations should be made either in the proxy statement or in
a separate letter from the company to C&S.
Preemptive Rights - Votes are cast in favor of shareholder proposals restoring
limited preemptive rights.
Dual Class Capitalizations - Because classes of common stock with unequal voting
rights limit the rights of certain shareholders, C&S votes against adoption of a
dual or multiple class capitalization structure.
E. Social Issues
C&S believes that it is the responsibility of the board and management to run a
company on a daily basis. With this in mind, in the absence of unusual
circumstances, we do not believe that shareholders should be involved in
determining how a company should address broad social and policy issues. As a
result, we generally vote against these types of proposals, which are generally
initiated by shareholders, unless we believe the proposal has significant
economic implications.
F. Other Situations
No set of guidelines can anticipate all situations that may arise. Our portfolio
managers and analysts will be expected to analyze proxy proposals in an effort
to gauge the impact of a proposal on the financial prospects of a company, and
vote accordingly. These policies are intended to provide guidelines for voting.
They are not, however, hard and fast rules because corporate governance issues
are so varied.
V. Proxy Voting Procedures
<Page>
C&S shall maintain a record of all voting decisions for the period required by
applicable laws. In each case in which C&S votes contrary to the stated policies
set forth in these guidelines, the record shall indicate the reason for such a
vote.
The Investment Committee of C&S shall have responsibility for voting proxies,
under the supervision of the Director of Research. The Director of Research's
designee shall be responsible for ensuring that the Investment Committee is
aware of all upcoming proxy voting opportunities. The Designee shall ensure that
proxy votes are properly recorded and that the requisite information regarding
each proxy voting opportunity is maintained. The General Counsel of C&S shall
have overall responsibility for ensuring that C&S complies with all proxy voting
requirements and procedures.
VI. Recordkeeping
The Designee shall be responsible for recording and maintaining the following
information with respect to each proxy voted by C&S:
o Name of the company
o Ticker symbol
o CUSIP number
o Shareholder meeting date
o Brief identification of each matter voted upon
o Whether the matter was proposed by management or a shareholder
o Whether C&S voted on the matter
o If C&S voted, then how C&S voted
o Whether C&S voted with or against management
The General Counsel of C&S shall be responsible for maintaining and updating
these Policies and Procedures, and for maintaining any records of written client
requests for proxy voting information and documents that were prepared by C&S
and were deemed material to making a voting decision or that memorialized the
basis for the decision.
C&S shall rely on the SEC's EDGAR filing system with respect to the requirement
to maintain proxy materials regarding client securities.
VII. Conflicts of Interest
There may be situations in which C&S may face a conflict between its interests
and those of its clients or fund shareholders. Potential conflicts are most
likely to fall into three general categories:
o Business Relationships - This type of conflict would occur if C&S or an
affiliate has a substantial business relationship with the company or a
proponent of a proxy proposal relating to the company (such as an employee
group) such that failure to vote in favor of management (or the proponent) could
harm the relationship of C&S or its affiliate with the company or
<Page>
proponent. In the context of C&S, this could occur if Cohen & Steers Capital
Advisors, a wholly owned subsidiary of C&S ("Capital Advisors"), has a material
business relationship with a company that C&S has invested in on behalf of its
clients, and C&S is encouraged to vote in favor of management as an inducement
to acquire or maintain the Capital Advisors relationship.
o Personal Relationships - C&S or an affiliate could have a personal
relationship with other proponents of proxy proposals, participants in proxy
contests, corporate directors or director nominees.
o Familial Relationships - C&S or an affiliate could have a familial
relationship relating to a company (e.g., spouse or other relative who serves as
a director or nominee of a public company).
The next step is to identify if a conflict is material. A material matter is one
that is reasonably likely to be viewed as important by the average shareholder.
Materiality will be judged under a two-step approach:
o Financial Based Materiality - C&S presumes a conflict to be non-material
unless it involves at least $500,000.
o Non-Financial Based Materiality - Non-financial based materiality would impact
the members of the C&S Investment Committee, who are responsible for making
proxy voting decisions.
Finally, if a material conflict exists, C&S shall vote in accordance with the
advice of a proxy voting service. C&S currently uses ISS to provide advice on
proxy voting decisions.
The General Counsel of C&S shall have responsibility for supervising and
monitoring conflicts of interest in the proxy voting process according to the
following process:
1. Identifying Conflicts - The General Counsel of C&S is responsible for
monitoring the relationships of Capital Advisors for purposes of C&S's Inside
Information Policies and Procedures. The General Counsel of C&S(or his designee)
maintains a watch list and a restricted list. The Investment Committee is
unaware of the content of the watch list and therefore it is only those
companies on the restricted list, which is made known to everyone at C&S, for
which potential concerns might arise. When a company is placed on the restricted
list, the General Counsel of C&S(or his designee) shall promptly inquire of the
Designee as to whether there is a pending proxy voting opportunity with respect
to that company, and continue to inquire on a weekly basis until such time as
the company is no longer included on the restricted list. When there is a proxy
voting opportunity with respect to a company that has been placed on the
restricted list, the General Counsel of C&S shall inform the Investment
Committee that no proxy vote is to be submitted for that company until the
General Counsel completes the conflicts analysis.
For purposes of monitoring personal or familial relationships, the General
Counsel of C&S (or his designee) shall receive on at least an annual basis from
each member of the Investment
<Page>
Committee written disclosure of any personal or familial relationships with
public company directors that could raise potential conflict of interest
concerns. Investment Committee members also shall agree in writing to advise the
General Counsel of C&S if (i) there are material changes to any previously
furnished information, (ii) a person with whom a personal or familial
relationship exists is subsequently nominated as a director or (iii) a personal
or familial relationship exists with any proponent of a proxy proposal or a
participant in a proxy contest.
2. Identifying Materiality - The General Counsel of C&S (or his designee) shall
be responsible for determining whether a conflict is material. He shall evaluate
financial based materiality in terms of both actual and potential fees to be
received. Non-financial based items impacting a member of the Investment
Committee shall be presumed to be material.
3. Communication with Investment Committee; Voting of Proxy - If the General
Counsel of C&S determines that the relationship between Capital Advisors and a
company is financially material, he shall communicate that information to the
members of the Investment Committee and instruct them, and the Designee, that
C&S will vote its proxy based on the advice of ISS or other consulting firm then
engaged by C&S. Any personal or familial relationship, or any other business
relationship, that exists between a company and any member of the Investment
Committee shall be presumed to be material, in which case C&S again will vote
its proxy based on the advice of ISS or other consulting firm then engaged by
C&S. The fact that a member of the Investment Committee personally owns
securities issued by a company will not disqualify C&S from voting common stock
issued by that company, since the member's personal and professional interests
will be aligned.
In cases in which C&S will vote its proxy based on the advice of ISS or other
consulting firm then engaged by C&S, the General Counsel of C&S(or his designee)
shall be responsible for ensuring that the Designee votes proxies in this
manner. The General Counsel of C&S will maintain a written record of each
instance when a conflict arises and how the conflict is resolved (e.g., whether
the conflict is judged to be material, the basis on which the materiality is
decision is made and how the proxy is voted).
VIII. Cohen & Steers Funds
Proxies relating to portfolio securities held by any Cohen & Steers Fund shall
be voted in accordance with this Statement of Policies and Procedures. For this
purpose, the Board of Directors of the Cohen & Steers Funds has delegated to C&S
the responsibility for voting proxies on behalf of the Funds. The General
Counsel of C&S shall make an annual presentation to the Board regarding this
Statement of Policy and Procedures, including whether any revisions are
recommended, and shall report to the Board at each regular, quarterly meeting
with respect to any conflict of interest situation that arose regarding the
proxy voting process.
IV. Annual Review; Reporting
The chief compliance officer (CCO) of C&S (or his designee) shall conduct an
annual review to assess compliance with these policies and procedures. This
review will include sampling a
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limited number of proxy votes during the prior year to determine if they were
consistent with these policies and procedures. The results of this review will
be reported to the General Counsel of C&S and the CCO of the Funds.
Any violations of these policies and procedures shall be reported to the General
Counsel or CCO of C&S. If the violation relates to any Cohen & Steers Fund, the
General Counsel or CCO of C&S shall report such violation to the CCO of the
Funds.
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
sufficient 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 has materially affected, or is 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.
(b) Certifications of chief executive officer and chief financial officer as
required by Rule 30a- 2(b) under the Investment Company Act of 1940.
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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 & UTILITY INCOME FUND, INC.
By: /s/ Robert H. Steers
-------------------------------
Name: Robert H. Steers
Title: Chairman
Date: March 8, 2005
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 By: /s/ Martin Cohen
--------------------------------------- -------------------------------------------
Name: Robert H. Steers Name: Martin Cohen
Title: Chairman, Secretary and Title: President, Treasurer
and principal executive officer and principal financial officer
Date: March 8, 2005
STATEMENT OF DIFFERENCES
The section symbol shall be expressed as.............................. 'SS'
The division sign shall be expressed as............................... [div]