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: 811-21488
Cohen & Steers Utility 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 UTILITY FUND, INC.
February 21, 2005
To Our Shareholders:
We are pleased to submit to you our report for Cohen & Steers Utility Fund
for the quarter and period May 3, 2004 (commencement of operations) through
December 31, 2004. The net asset values per share on December 31, 2004 were
$13.78, $13.74, and $13.75 for Class A, B, and C shares, respectively. Class I
shares had a net asset value of $13.78 per share. For the quarter and period
since inception, the total return, including income, for Cohen & Steers Utility
Fund and the comparative benchmarks were:
<Table>
<Caption>
TOTAL RETURN, PERIOD
ENDED 12/31/04
--------------------
SINCE
QUARTER INCEPTION(b)
------- -----------
Cohen & Steers Utility Fund Class A.................. 9.8% 21.8%
Cohen & Steers Utility Fund Class B.................. 9.5% 21.1%
Cohen & Steers Utility Fund Class C.................. 9.6% 21.2%
Cohen & Steers Utility Fund Class I.................. 9.8% 22.0%
S&P 1500 Utilities Index(c).......................... 11.6% 22.0%
Merrill Lynch Fixed Rate Preferred Index)d).......... 2.2% 7.3%
</Table>
The asset mix of the fund as of December 31, 2004 consisted of 79% utility
common stocks, 16% preferred and other fixed income investments (including 4% in
fixed income securities issued by utility companies), with the remaining 5% in
cash. We have an allocation to preferred stocks to enhance the income potential
of the fund. Fund performance information does not take into account sales loads
or contingent deferred sales charges, if any (standardized performance
reflecting such sales loads is included at the end of this report).
During the quarter, quarterly distributions were declared for shareholders
of record on December 22, 2004 and paid on December 23, 2004 in the amounts per
share for Class A, B, C and I shares of $0.085, $0.065, $0.065, and $0.095,
respectively.(a)
- -------------------
(a) 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.
(b) Inception date: May 3, 2004
(c) 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.
(d) The Merrill Lynch Fixed Rate Preferred Index is an unmanaged index of
preferred securities.
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1
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COHEN & STEERS UTILITY FUND, INC.
INVESTMENT REVIEW
Utility shares performed well during the quarter and from inception through
year-end 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 favorable 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 return excess cash flow
to shareholders in the form of higher dividends. While not all utilities raised
their dividends, during the fourth quarter, 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 22.4% from inception
through year-end. As a more interest-rate sensitive sector, natural gas
distribution utility share prices benefited from stable interest rates and
expectations for only moderate future increases in interest rates. The natural
gas distribution sector produced a 15.0% total return. The integrated natural
gas sector had a 24.7% total return during the quarter. The share prices of
integrated natural gas companies fluctuated with volatile natural gas and crude
oil prices, which influences profits in the exploration and production business.
Driven by strong demand growth and concern over supply shortages, the price of
crude oil increased 53% during the year to $43.45 per barrel, while the price of
natural gas rose 10% to $6.15 per MMBtu. Electric distribution utilities, which
are primarily engaged in the state-regulated distribution of electricity, had a
12.5% total return.
The fund's best performing investments during the quarter were in the
integrated electric sector, which produced a total return of 12.7%, while the
worst performing sector for the fund was the integrated natural gas sector,
which had a 7.8% total return. The fund's top contributor to performance also
delivered the strongest dividend growth in the sector. TXU Corp., one of the
fund's largest holdings, had a total return of 40.0%, following the announcement
of a 350% increase in the company's dividend. The increase is the result of the
new CEO's restructuring program that is also leading to increased earnings,
reduced debt, and lower business risk. The fund's largest holding, Exelon
Corporation, was another top performer, contributing a total return of 21.3%.
During the fourth quarter Exelon announced a 31% dividend increase and 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. The
top performers during the fourth quarter were also the top contributors to
performance from inception through year-end. During this period TXU Corp. and
Exelon Corporation generated total returns of 92.1% and 35.2%, respectively.
Laggards included FirstEnergy, with a total return of - 2.9% and Keyspan Corp,
which had a total return of 1.8%.
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2
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COHEN & STEERS UTILITY FUND, INC.
INVESTMENT OUTLOOK
After a strong year of performance in 2004, 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.
Though we remain optimistic about utilities performance in 2005, we don't
believe that returns from utility stocks will continue indefinitely at the 2004
pace.
Utility fundamentals have improved as utilities have refocused on their core
regulated business franchises following problems associated with the partial
deregulation of the industry. Balance sheets are getting stronger after several
years of sizable equity issuance. The industry's debt to capitalization ratio
fell to 56.1% by the end of the third quarter 2004 from 60.0% a year ago, and we
expect continued improvement in 2005.
We expect that utility stocks will continue to benefit from a positive
commodity environment, as the supply/demand balance for natural gas markets
remains tight, which should support high natural gas prices. This is positive
for most utilities because, after the construction of roughly $100 billion of
natural gas-fired power plants over the last several years, power prices are
more heavily influenced by natural gas prices. In wholesale markets, utilities
with nuclear and coal-fired power plants, which represent the majority of the
power industry, 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.
As a result of the positive commodity environment and constructive
regulation, we expect earnings and cash flows to continue to improve. 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, a
measure of cash available after all capital expenditures and dividend payments
to common shareholders, 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 help the utility
sector produce 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.
We will continue to concentrate our portfolio in companies that we believe
have the potential for above-average growth in earnings and dividends. We focus
on the more highly regulated utilities that in our view have above-average
credit quality and offer the potential for greater stability of earnings and
dividends. These businesses include regulated and integrated electric and gas
utilities and natural gas pipelines. We remain focused on the U.S. markets but
we do have a small allocation to utilities in the United Kingdom and Germany,
which we believe offer strong fundamentals, high dividends, and attractive
valuations. We have a modest allocation to utilities that benefit from high
natural gas prices through exploration and production and coal and nuclear
generators that have margin expansion opportunities in wholesale power markets
where high natural gas prices are increasingly the marginal price-setting fuel.
We believe that utility stocks should continue to benefit from their
attractive dividend yields, especially with a growing awareness that utilities
are one of the highest yielding sectors in the S&P 500 that qualifies for the
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3
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COHEN & STEERS UTILITY FUND, INC.
reduced tax rate on dividends. The Jobs and Growth Tax Relief Reconciliation Act
of 2003 lowered the federal tax rate on qualified dividend income to a maximum
of 15%, down from the current top rate of 35.0%. With improving fundamentals,
favorable regulation, and attractive earnings and dividend growth, we believe
utilities will benefit from increased demand for more conservative
income-producing equity investments. Consequently, we believe Cohen & Steers
Utility Fund is well positioned to deliver potentially attractive current income
and capital appreciation over time.
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
</Table>
<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.
</Table>
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4
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COHEN & STEERS UTILITY FUND, INC.
PERFORMANCE REVIEW
The investment objective of Cohen & Steers Utility Fund, Inc. (the Fund) is
total return. In pursuing total return, the Fund seeks both capital appreciation
and current income with approximately equal emphasis. The Fund may change its
investment objective without shareholder approval, although it has no current
intention to do so.
From the fund's inception, May 3, 2004 through December 31, 2004, the fund's
total returns for A, B, C and I shares were 21.8%, 21.1%, 21.2% and 22.0%,
respectively. This compared to 22.0% for the S&P 1500 Utilities Index. The
fund's best performing sector during this period was the integrated electric
sector, while the worst performing sector for the fund was the integrated
natural gas sector. The fund's top contributor to performance also delivered the
strongest dividend growth in the sector. TXU Corp., one of the fund's largest
holdings, had a total return of 92.1%, following the announcement of a 350%
increase in the company's dividend. The fund's largest holding, Exelon
Corporation, was another top performer, contributing a total return of 35.2%.
During the fourth quarter Exelon announced a 31% dividend increase. Laggards
included FirstEnergy, with a total return of 3.93% and Keyspan Corp, which had a
total return of 11.7%.
COHEN & STEERS UTILITY FUND -- CLASS A
<Table>
<Caption>
TOTAL RETURNS
FOR PERIODS ENDED DEC. 31, 2004
SINCE INCEPTION (5/3/04)
- ------------------------------------------------------
Fund 16.32%(b)
S&P 1500 Utilities Index(a) 22%
Philadelphia Utility Index(a) 20.46%
</Table>
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
Reflects $9.550 investment made on May 3, 2004
<Table>
<Caption>
Cohen & Steers S&P 1500 Philadelphia
Utility Fund-Class A Utilities Index Utility Index
-------------------- --------------- --------------
5/3/04 9550 10000 10000
5/31/04 9858 10047 10053
6/30/04 10050 10171 10141
7/31/04 10175 10314 10307
8/31/04 10492 10687 10684
9/30/04 10596 10753 10769
10/31/04 11015 11251 11345
11/30/04 11326 11676 11716
12/31/04 11632 12200 12046
</Table>
COHEN & STEERS UTILITY FUND -- CLASS B
<Table>
<Caption>
TOTAL RETURNS
FOR PERIODS ENDED DEC. 31, 2004
SINCE INCEPTION (5/3/04)
- ------------------------------------------------------
Fund 15.03%(b)
S&P 1500 Utilities Index(a) 22%
Philadelphia Utility Index(a) 20.46%(c)
</Table>
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
<Table>
Caption>
Cohen & Steers S&P 1500 Philadelphia
Utility Fund -Class B Utilities Index Utility Index
--------------------- --------------- -------------
5/3/04 10000 10000 10000
5/31/04 10305 10047 10053
6/30/04 10497 10171 10141
7/31/04 10620 10314 10307
8/31/04 10951 10687 10684
9/30/04 11060 10753 10769
10/31/04 11490 11251 11345
11/30/04 11806 11676 11716
12/31/04 11503 12200 12046
</Table>
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5
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COHEN & STEERS UTILITY FUND, INC.
PERFORMANCE REVIEW -- (CONTINUED)
COHEN & STEERS UTILITY FUND -- CLASS C
<Table>
<Caption>
TOTAL RETURNS
FOR PERIODS ENDED DEC. 31, 2004
SINCE INCEPTION (5/3/04)
- ------------------------------------------------------
Fund 19.96%(c)
S&P 1500 Utilities Index(a) 22%
Philadelphia Utility Index(a) 20.46%
</Table>
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
<Table>
<Caption>
Cohen & Steers S&P 1500 Philadelphia
Utility Fund-Class C Utility Index Utility Index
-------------------- ------------- --------------
5/3/04 10000 10000 10000
5/31/04 10314 10047 10053
6/30/04 10506 10171 10141
7/31/04 10628 10314 10307
8/31/04 10951 10687 10684
9/30/04 11060 10753 10769
10/31/04 11490 11251 11345
11/30/04 11815 11676 11716
12/31/04 12017 12200 11996
</Table>
COHEN & STEERS UTILITY FUND -- CLASS I
<Table>
<Caption>
TOTAL RETURNS
FOR PERIODS ENDED DEC. 31, 2004
SINCE INCEPTION (5/3/04)
- ------------------------------------------------------
Fund 21.98%
S&P 1500 Utilities Index(a) 22%
Philadelphia Utility Index(a) 20.46%
</Table>
GROWTH OF A $10,000 INVESTMENT SINCE INCEPTION
<Table>
<Caption>
Cohen & Steers S&P 1500 Philadelphia
Utility Fund - Class I Utilities Index Utility Index
---------------------- --------------- -------------
5/3/04 100000 100000 100000
5/31/04 103230 100470 100530
6/30/04 105240 101710 101410
7/31/04 106540 103140 103070
8/31/04 109950 106870 106840
9/30/04 111130 107530 107690
10/31/04 115520 112510 113450
11/30/04 118780 116760 117160
12/31/04 121980 122000 120460
</Table>
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. THE INVESTMENT RETURN AND THE PRINCIPAL VALUE OF AN
INVESTMENT WILL FLUCTUATE AND SHARES, IF REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE
PERFORMANCE DATA QUOTED. MONTH-END PERFORMANCE INFORMATION MAY BE OBTAINED BY
VISITING OUR WEBSITE AT COHENANDSTEERS.COM. THE PERFORMANCE TABLE AND GRAPH
DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS ON THE REDEMPTION OF FUND SHARES. THROUGH DECEMBER 31, 2005,
THE ADVISOR HAS CONTRACTUALLY AGREED TO WAIVE ITS FEE AND/OR REIMBURSE THE
FUND FOR EXPENSES INCURRED TO THE EXTENT NECESSARY TO MAINTAIN THE FUND'S
OPERATING EXPENSES AT 1.50% FOR THE CLASS A SHARES, 2.15% FOR THE CLASS B SHARES
AND CLASS C SHARES AND 1.15% FOR THE CLASS I SHARES. WITHOUT THIS ARRANGEMENT
FUND RETURNS WOULD HAVE BEEN LOWER.
(a) The comparative indexes are not adjusted to reflect expenses or other fees
that the SEC requires to be reflected in the fund's performance. The fund's
performance assumes the reinvestment of all dividends and distributions. For
more information, including charges and expenses, please read the prospectus
carefully before you invest.
(b) Returns reflect the imposition of a front end sales load of 4.50%. Without
the sales load, the returns would have been 21.80% since inception.
(c) Returns reflected include a deferred sales charge of 5%. Without the
deferred sales charge, the total return would have been 21.08%.
(d) Returns reflected include a deferred sales charge of 1%. Without the
deferred sales charge, the total return would have been 21.17%.
- --------------------------------------------------------------------------------
6
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COHEN & STEERS UTILITY FUND, INC.
EXPENSE EXAMPLE
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, and redemption
fees; and (2) ongoing costs, including management fees; distribution and/or
service (12b-1) fees; and other fund expenses. This example is intended to help
you understand your ongoing costs (in dollars) of investing in the fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period (July 1, 2004 to December 31, 2004).
ACTUAL EXPENSES
The first line of the table below provides information about actual account
values and expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading entitled 'Expenses Paid During Period' to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing cost of
investing in the fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption fees. Therefore, the second line of the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these
transactional costs were included, your costs would have been higher.
EXPENSES AND VALUE OF A $1,000 INVESTMENT
For Period July 1 through December 31, 2004
<Table>
<Caption>
ACTUAL FUND RETURN CLASS A CLASS B CLASS C CLASS I
------------------ ------- ------- ------- -------
Beginning Account Value July 1, 2004..................... $1,000.00 $1,000.00 $1,000.00 $1,000.00
Ending Account Value December 31, 2004................... $1,157.40 $1,153.50 $1,153.30 $1,159.20
Expenses Paid per $1,000(a).............................. $ 8.13 $ 11.64 $ 11.64 $ 6.24
</Table>
<Table>
<Caption>
HYPOTHETICAL 5% FUND RETURN CLASS A CLASS B CLASS C CLASS I
--------------------------- ------- ------- ------- -------
Beginning Account Value July 1, 2004..................... $1,000.00 $1,000.00 $1,000.00 $1,000.00
Ending Account Value December 31, 2004................... $1,017.50 $1,014.19 $1,014.19 $1,019.28
Expenses Paid per $1,000(a).............................. $ 7.64 $ 10.94 $ 10.94 $ 5.86
</Table>
<Table>
<Caption>
ANNUALIZED EXPENSE RATIO CLASS A CLASS B CLASS C CLASS I
------------------------ ------- ------- ------- -------
Cohen & Steers Utility Fund.............................. 1.50% 2.15% 2.15% 1.15%
</Table>
- -------------------
(a) Expenses are equal to the fund's annualized expense ratio (net of waiver)
for each share class, multiplied by the average account value over the
period, multiplied by the number of days in the most recent six month
period, then divided by 366.
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7
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COHEN & STEERS UTILITY FUND, INC.
DECEMBER 31, 2004
TOP TEN HOLDINGS
(UNAUDITED)
<Table>
<Caption>
MARKET % OF
VALUE NET ASSETS
SECURITY ---------- ----------
1. Exelon Corp.............................................. $1,863,412 4.08%
2. TXU Corp................................................. 1,641,825 3.60
3. E.ON AG (ADR)(a)......................................... 1,626,170 3.56
4. Duke Energy Corp......................................... 1,564,735 3.43
5. FPL Group................................................ 1,541,794 3.38
6. Southern Co.............................................. 1,408,577 3.09
7. Entergy Corp............................................. 1,394,990 3.06
8. PG & E Corp.............................................. 1,382,950 3.03
9. PPL Corp................................................. 1,370,628 3.00
10. Ameren Corp.............................................. 1,253,299 2.75
</Table>
SECTOR BREAKDOWN
(Based on Net Assets)
(Unaudited)
Electric-Integrated 61.59%
Other 8.63%
Electric-Distribution 7.93%
Gas-Integrated 5.93%
Cash & Other Net Assets in
Excess of Liabilities 5.08%
Office 3.51%
Gas-Distribution 3.23%
Finance 1.47%
Insurance 1.37%
Hotel 1.26%
- -------------------
(a) (ADR) American Depositary Receipts.
- --------------------------------------------------------------------------------
8
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COHEN & STEERS UTILITY FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
DIVIDEND
NUMBER YIELD
OF SHARES VALUE (UNAUDITED)(a)
---------- ----------- --------------
COMMON STOCK 78.86%(b)
UTILITIES 78.86%
ELECTRIC -- INTEGRATED 60.59%
Ameren Corp............................ 24,996 $ 1,253,299 5.07%
American Electric Power Co............. 23,952 822,512 4.08
Cinergy Corp........................... 21,914 912,280 4.52
Cleco Corp............................. 17,878 362,208 4.44
DTE Energy Co.......................... 27,890 1,202,896 4.78
Dominion Resources..................... 17,907 1,213,020 3.93
Duke Energy Corp....................... 61,774 1,564,735 4.34
E.ON AG (ADR)c......................... 17,870 1,626,170 3.09
Edison International................... 35,995 1,152,920 3.12
Entergy Corp........................... 20,639 1,394,990 3.20
Exelon Corp............................ 42,283 1,863,412 3.63
FirstEnergy Corp....................... 22,310 881,468 4.18
FPL Group.............................. 20,626 1,541,794 3.64
Hawaiian Electric Industries........... 5,024 146,450 4.25
NiSource............................... 16,217 369,423 4.04
PG & E Corp............................ 41,555 1,382,950 3.64
PPL Corp............................... 25,725 1,370,628 3.08
Pinnacle West Capital Corp............. 11,514 511,337 4.28
Progress Energy........................ 19,393 877,339 5.22
Public Service Enterprise Group........ 21,092 1,091,933 4.25
Puget Energy........................... 18,634 460,260 4.05
SCANA Corp............................. 18,481 728,151 3.71
Scottish Power plc (ADR)............... 16,817 524,018 4.11
Southern Co............................ 42,022 1,408,577 4.27
TXU Corp............................... 25,431 1,641,825 3.49
Westar Energy.......................... 24,687 564,592 4.02
Xcel Energy............................ 43,161 785,530 4.56
-----------
27,654,717
-----------
</Table>
- -------------------
(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 net assets of the fund.
See accompanying notes to financial statements.
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9
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COHEN & STEERS UTILITY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
DIVIDEND
NUMBER YIELD
OF SHARES VALUE (UNAUDITED)
--------- ----------- ------------
ELECTRIC -- DISTRIBUTION 7.93%
Consolidated Edison..................... 23,990 $ 1,049,563 5.17%
Energy East Corp........................ 21,766 580,717 4.12
National Grid Transco plc (ADR)......... 21,482 1,030,921 4.44
NSTAR................................... 10,968 595,343 4.09
Pepco Holdings.......................... 17,003 362,504 4.69
-----------
3,619,048
-----------
GAS -- DISTRIBUTION 3.18%
AGL Resources........................... 17,463 580,470 3.49
Atmos Energy Corp....................... 5,270 144,135 4.53
New Jersey Resources Corp............... 3,761 163,002 3.14
Vectren Corp............................ 21,094 565,319 4.40
-----------
1,452,926
-----------
GAS -- INTEGRATED 5.93%
Energen Corp............................ 10,575 623,396 1.31
Equitable Resources..................... 15,749 955,334 2.51
KeySpan Corp............................ 10,640 419,748 4.61
Sempra Energy........................... 19,359 710,088 2.73
-----------
2,708,566
-----------
PIPELINES 1.23%
Questar Corp............................ 10,999 560,509 1.69
-----------
TOTAL UTILITIES......................... 35,995,766
-----------
TOTAL COMMON STOCK
(Identified cost -- $33,637,093). 35,995,766
-----------
</Table>
See accompanying notes to financial statements.
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10
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COHEN & STEERS UTILITY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
DIVIDEND
NUMBER YIELD
OF SHARES VALUE (UNAUDITED)
---------- ----------- ------------
PREFERRED SECURITIES -- $25 PAR VALUE 10.43%
AGRICULTURAL CHEMICALS 0.20%
Agrium, 8.00% (COPrS).................. 3,500 $ 89,705 7.80%
-----------
AUTOMOTIVE 0.17%
Delphi Trust I, 8.25%, due 10/15/33,
Series A............................ 3,100 77,221 8.27
-----------
FINANCE 0.08%
MBNA Capital, 8.125%, Series D
(TruPS)............................. 1,300 35,022 7.54
-----------
MEDIA 1.05%
CABLE TELEVISION 0.86%
Shaw Communications, 8.45%, Series A
(COPrS)............................. 5,297 133,749 8.36
Shaw Communications, 8.50%, Series B
(COPrS)............................. 10,200 259,080 8.39
-----------
392,829
-----------
DIVERSIFIED SERVICES 0.19%
Liberty Media Corp., 8.75% (CBTCS)..... 800 21,792 8.04
Liberty Media Corp., 8.75% (PPLUS)..... 2,350 64,178 8.02
-----------
85,970
-----------
TOTAL MEDIA............................ 478,799
-----------
REAL ESTATE 7.88%
DIVERSIFIED 0.94%
iStar Financial, 7.875%, Series E...... 1,200 31,488 7.51
iStar Financial, 7.65%, Series G....... 8,000 206,400 7.40
iStar Financial, 7.50%, Series I....... 6,200 158,162 7.37
PS Business Parks, 7.95%, Series K..... 1,300 34,320 7.54
-----------
430,370
-----------
</Table>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
11
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
DIVIDEND
NUMBER YIELD
OF SHARES VALUE (UNAUDITED)
--------- ----------- ------------
HEALTH CARE 0.41%
Health Care REIT, 7.625%, Series F...... 5,200 $ 131,300 7.56%
LTC Properties, 8.00%, Series F......... 2,200 57,970 7.59
-----------
189,270
-----------
HOTEL 1.26%
Ashford Hospitality Trust, 8.55%,
Series A............................. 8,300 214,970 8.26
Innkeepers USA Trust, 8.00%, Series C... 14,000 360,500 7.77
-----------
575,470
-----------
OFFICE 3.51%
Alexandria Real Estate Equities,
8.375%, Series C..................... 3,850 101,910 7.90
Corporate Office Properties Trust,
8.00%, Series G...................... 2,100 55,650 7.55
CRT Properties, 8.50%, Series A......... 3,900 102,687 8.09
Cousins Properties, 7.50%, Series B..... 8,000 200,960 7.48
Highwoods Properties, 8.00%, Series B... 12,300 311,559 7.90
Highwoods Properties, 8.00%, Series D... 10,553 265,619 7.95
Kilroy Realty Corp., 7.50%, Series F.... 3,600 91,116 7.43
Maguire Properties, 7.625%, Series A.... 14,450 369,920 7.46
SL Green Realty Corp., 7.875%,
Series D............................. 3,950 102,503 7.59
-----------
1,601,924
-----------
RESIDENTIAL 1.14%
APARTMENT 0.80%
Apartment Investment and Management Co.,
8.00%, Series V...................... 12,500 317,125 7.88
Apartment Investment and Management Co.,
7.875%, Series Y..................... 2,000 49,450 7.97
-----------
366,575
-----------
MANUFACTURED HOME 0.34%
Affordable Residential Communities,
8.25%, Series A...................... 5,900 153,872 7.90
-----------
TOTAL RESIDENTIAL....................... 520,447
-----------
</Table>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
12
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
DIVIDEND
NUMBER YIELD
OF SHARES VALUE (UNAUDITED)
--------- ----------- ------------
SHOPPING CENTER 0.62%
COMMUNITY CENTER 0.09%
Cedar Shopping Centers, 8.875%,
Series A............................. 1,500 $ 39,570 8.42%
-----------
REGIONAL MALL 0.53%
CBL & Associates Properties, 7.75%,
Series C............................. 900 23,652 7.38
Mills Corp., 9.00%, Series C............ 1,000 27,800 8.09
Mills Corp., 8.75%, Series E............ 300 8,508 7.72
Taubman Centers, 8.00%, Series G........ 7,000 181,650 7.71
-----------
241,610
-----------
TOTAL SHOPPING CENTER................... 281,180
-----------
TOTAL REAL ESTATE....................... 3,598,661
-----------
UTILITIES 1.05%
ELECTRIC -- INTEGRATED 1.00%
Energy East Capital Trust I, 8.25%...... 1,300 34,879 7.68
NVP Capital I, 8.20%, due 3/31/37,
Series A............................. 2,400 60,720 8.10
NVP Capital III, 7.75%, due 9/30/38,
Series B............................. 14,400 363,600 7.68
-----------
459,199
-----------
GAS -- DISTRIBUTION 0.05%
AGL Capital Trust II, 8.00% (TruPS)..... 800 21,224 7.54
-----------
TOTAL UTILITIES......................... 480,423
-----------
TOTAL PREFERRED SECURITIES --
$25 PAR VALUE
(Identified cost --$4,700,514)... 4,759,831
-----------
PREFERRED SECURITIES -- CAPITAL TRUST 2.76%
FINANCE -- DIVERSIFIED FINANCIAL
SERVICES 1.39%
Old Mutual Capital Funding, 8.00%,
due 5/29/49 (Eurobond)............... 600,000 634,871 7.56
-----------
INSURANCE -- MULTI-LINE 1.37%
AFC Capital Trust I, 8.207%, due
02/03/27, Series B................... 600,000 626,204 7.87
-----------
TOTAL PREFERRED
SECURITIES -- CAPITAL TRUST
(Identified cost --$1,244,544)... 1,261,075
-----------
</Table>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
---------- -----------
CORPORATE BOND 2.87%
CELLULAR TELECOMMUNICATIONS 1.17%
Rogers Wireless Communications,
8.00%, due 12/15/12, 144A............. $ 500,000 $ 531,250
-----------
MEDICAL -- HOSPITALS 0.82%
Columbia/HCA, 7.50%, due 11/15/95........ 400,000 375,665
-----------
TELEPHONE -- INTEGRATED 0.88%
Citizens Communications Co., 9.00%,
due 8/15/31........................... 350,000 401,625
-----------
TOTAL CORPORATE BOND
(Identified cost -- $1,268,606)....... 1,308,540
-----------
COMMERCIAL PAPER 3.35%
State Street Corp., 1.70%,
due 01/03/2005
(Identified cost -- $1,529,856)....... 1,530,000 1,529,856
-----------
TOTAL INVESTMENTS (Identified
cost -- $42,380,613).................. 98.27% 44,855,068
OTHER ASSETS IN EXCESS OF LIABILITIES... 1.73% 790,734
------ -----------
NET ASSETS APPLICABLE TO COMMON
SHARES................................ 100.00% $45,645,802
------ -----------
------ -----------
</Table>
GLOSSARY OF PORTFOLIO ABBREVIATIONS
<Table>
ADR American Depositary Receipt
CBTCS Corporate Backed Trust Certificates
COPrS Canadian Origin Preferred Securities
PPLUS Preferred Plus Trust
TruPS Trust Prerferred Securities
</Table>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
<Table>
ASSETS:
Investments in securities, at value
(Identified cost -- $42,380,613) (Note 1)............ $44,855,068
Receivable for fund shares sold......................... 606,661
Dividends and interest receivable....................... 165,124
Receivable due from advisor............................. 239,461
Other assets............................................ 57
-----------
Total Assets....................................... 45,866,371
-----------
LIABILITIES:
Payable to investment advisor........................... 65,339
Payable for reports to shareholders..................... 33,375
Payable for investment securities purchased............. 25,520
Payable for distribution fees........................... 25,027
Payable for professional fees........................... 21,331
Payable to administrator................................ 13,561
Payable for shareholder servicing fees.................. 8,881
Payable for fund shares redeemed........................ 6,601
Payable for directors fees.............................. 1,500
Payable to custodian.................................... 1,105
Other liabilities....................................... 18,329
-----------
Total Liabilities.................................. 220,569
-----------
NET ASSETS.................................................. $45,645,802
-----------
-----------
NET ASSETS consist of:
Paid-in capital (Notes 1 and 5)......................... $43,206,731
Accumulated net realized loss on investments............ (35,384)
Net unrealized appreciation on investments.............. 2,474,455
-----------
$45,645,802
-----------
-----------
</Table>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 2004
<Table>
CLASS A SHARES:
NET ASSETS.............................................. $26,906,548
Shares issued and outstanding ($0.001 par value common
stock outstanding) (Note 5).......................... 1,952,809
-----------
Net asset value and redemption price per share.......... $ 13.78
-----------
-----------
Maximum offering price per share ($13.78[div]0.955)(a).. $ 14.43
-----------
-----------
CLASS B SHARES:
NET ASSETS.............................................. $ 2,869,407
Shares issued and outstanding ($0.001 par value common
stock outstanding) (Note 5).......................... 208,781
-----------
Net asset value and offering price per share(b)......... $ 13.74
-----------
-----------
CLASS C SHARES:
NET ASSETS.............................................. $14,567,512
Shares issued and outstanding ($0.001 par value common
stock outstanding) (Note 5).......................... 1,059,251
-----------
Net asset value and offering price per share(b)......... $ 13.75
-----------
-----------
CLASS I SHARES:
NET ASSETS.............................................. $ 1,302,335
Shares issued and outstanding ($0.001 par value common
stock outstanding) (Note 5).......................... 94,509
-----------
Net asset value, offering and redemption value per
share................................................ $ 13.78
-----------
-----------
</Table>
- -------------------
(a) On investments of $100,000 or more, the offering price is reduced.
(b) Redemption price per share is equal to the net asset value per share less
any applicable deferred sales charge which varies with the length of time
shares are held.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD MAY 3, 2004(a) THROUGH DECEMBER 31, 2004
<Table>
Investment Income (Note 1):
Dividend income (net of $1,339 of foreign withholding
tax)................................................. $ 396,204
Interest income......................................... 26,466
----------
Total Income....................................... 422,670
----------
Expenses:
Professional fees....................................... 68,723
Investment advisory fees (Note 2)....................... 67,462
Administration and transfer agent fees (Note 2)......... 61,618
Shareholder reporting expenses.......................... 50,251
Custodian fees and expenses............................. 41,080
Directors' fees and expenses (Note 2)................... 36,834
Registration and filing fees............................ 14,240
Distribution fees -- Class A (Note 2)................... 11,300
Distribution fees -- Class B (Note 2)................... 5,550
Distribution fees -- Class C (Note 2)................... 22,537
Shareholder servicing fees -- Class A (Note 2).......... 4,520
Shareholder servicing fees -- Class B (Note 2).......... 1,850
Shareholder servicing fees -- Class C (Note 2).......... 7,512
Line of credit fees (Note 6)............................ 240
Miscellaneous........................................... 4,020
----------
Total Expenses..................................... 397,737
Reduction of Expenses (Note 2).......................... (241,026)
----------
Net Expenses....................................... 156,711
----------
Net Investment Income....................................... 265,959
----------
Net Realized and Unrealized Gain/(Loss) on Investments:
Net realized gain on investments........................ 1,906
Net change in unrealized appreciation on investments.... 2,474,455
----------
Net realized and unrealized gain on investments.... 2,476,361
----------
Net Increase in Net Assets Resulting from Operations........ $2,742,320
----------
----------
</Table>
- -------------------
(a) Commencement of Operations.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE PERIOD
MAY 3, 2004(a)
THROUGH
DECEMBER 31, 2004
-----------------
Change in Net Assets:
From Operations:
Net investment income.............................. $ 265,959
Net realized loss on investments................... 1,906
Net change in unrealized appreciation on
investments..................................... 2,474,455
-----------
Net increase in net assets resulting from
operations.................................. 2,742,320
-----------
Dividends and Distributions to Shareholders from (Note
1):
Net investment income:
Class A....................................... (164,473)
Class B....................................... (16,599)
Class C....................................... (72,168)
Class I....................................... (15,475)
Net realized gain on investments:
Class A....................................... (22,004)
Class B....................................... (2,322)
Class C....................................... (11,877)
Class I....................................... (1,087)
Tax return of capital:
Class A....................................... (7,584)
Class B....................................... (765)
Class C....................................... (3,328)
Class I....................................... (714)
-----------
Total dividends and distributions to
shareholders........................... (318,396)
-----------
Capital Stock Transactions (Note 5):
Increase in net assets from fund share
transactions.................................... 43,121,603
-----------
Total increase in net assets.................. 45,545,527
Net Assets:
Beginning of year.................................. 100,275
-----------
End of year........................................ $45,645,802
-----------
-----------
</Table>
- -------------------
(a) Commencement of Operations
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding
throughout each period and other performance information derived from the
financial statements. It should be read in conjunction with the financial
statements and notes thereto.
<Table>
<Caption>
CLASS A CLASS B CLASS C CLASS I
----------------- ----------------- ----------------- -----------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
MAY 3, 2004(a) MAY 3, 2004(a) MAY 3, 2004(a) MAY 3, 2004(a)
THROUGH THROUGH THROUGH THROUGH
PER SHARE OPERATING PERFORMANCE: DECEMBER 31, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004
- -------------------------------- ----------------- ----------------- ----------------- -----------------
Net asset value, beginning of period.... $11.46 $ 11.46 $ 11.46 $11.46
------ ---------- ---------- ------
Income from investment operations:
Net investment income................ 0.29(b) 0.21(b) 0.22(b) 0.27(b)
Net realized and unrealized gain on
investments........................ 2.20 2.20 2.20 2.24
------ ---------- ---------- ------
Total from investment
operations..................... 2.49 2.41 2.42 2.51
------ ---------- ---------- ------
Less dividends and distributions to
shareholders from:
Net investment income................ (0.14) (0.10) (0.10) (0.17)
Net realized gain on investments..... (0.02) (0.02) (0.02) (0.01)
Tax return of capital................ (0.01) (0.01) (0.01) (0.01)
------ ---------- ---------- ------
Total dividends and distributions to
shareholders........................... (0.17) (0.13) (0.13) (0.19)
------ ---------- ---------- ------
Net increase in net asset value...... 2.32 2.28 2.29 2.32
------ ---------- ---------- ------
Net asset value, end of period.......... $13.78 $ 13.74 $ 13.75 $13.78
------ ---------- ---------- ------
------ ---------- ---------- ------
- -----------------------------------------------------------------------------------------------------------------
Total investment return(c).............. 21.80%(d) 21.08%(d) 21.17%(d) 21.98%(d)
------ ---------- ---------- ------
------ ---------- ---------- ------
- -----------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTAL DATA:
- -------------------------
Net assets, end of year (in millions)... $26.9 $2.9 $14.6 $1.3
------ ---------- ---------- ------
------ ---------- ---------- ------
Ratio of expenses to average daily net
assets (before expense reduction)(e)... 3.55% 4.66% 4.49% 9.33%
------ ---------- ---------- ------
------ ---------- ---------- ------
Ratio of expenses to average daily net
assets (net of expense reduction)(e)... 1.50% 2.15% 2.15% 1.15%
------ ---------- ---------- ------
------ ---------- ---------- ------
Ratio of net investment income to
average daily net assets (before
expense reduction)(e).................. 1.26% -0.11% 0.15% -4.92%
------ ---------- ---------- ------
------ ---------- ---------- ------
Ratio of net investment income to
average daily net assets (net of
expense reduction)(e).................. 3.31% 2.39% 2.49% 3.26%
------ ---------- ---------- ------
------ ---------- ---------- ------
Portfolio turnover rate................. 16.03%(d) 16.03%(d) 16.03%(d) 16.03%(d)
------ ---------- ---------- ------
------ ---------- ---------- ------
</Table>
- -------------------
(a) Commencement of Operations.
(b) Calculation based on average shares outstanding.
(c) Does not reflect sales charges, which would reduce return.
(d) Not annualized.
(e) Annualized.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Cohen & Steers Utility Fund, Inc. (the fund) was incorporated under the laws
of the State of Maryland on January 13, 2004 and is registered under the
Investment Company Act of 1940, as amended, as an open-end, nondiversified
management investment company. The fund had no operations until March 19, 2004
when it sold 10 shares each of Class A, B, C, and 8,720 shares of Class I for
$100,275 to Cohen & Steers Capital Management, Inc. Investment operations
commenced on May 3, 2004. There are 200,000,000 shares of $0.01 par value common
stock authorized which are divided into four classes designated Class A, B, C,
and I shares. Each of the fund's shares has equal dividend, liquidation and
voting rights (except for matters relating to distributions and shareholder
servicing of such shares).
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
policies are in conformity with accounting principles generally accepted in the
United States of America (GAAP). The preparation of the financial statements in
accordance with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
Portfolio Valuation: Investments in securities that are listed on the New
York Stock Exchange are valued, except as indicated below, at the last sale
price reflected at the close of the New York Stock Exchange on the business day
as of which such value is being determined. If there has been no sale on such
day, the securities are valued at the mean of the closing bid and asked prices
for the day or, if no asked price is available, at the bid price.
Securities not listed on the New York Stock Exchange but listed on other
domestic or foreign securities exchanges or admitted to trading on the National
Association of Securities Dealers Automated Quotations, Inc. (Nasdaq) national
market system are valued in a similar manner. Securities traded on more than one
securities exchange are valued at the last sale price on the business day as of
which such value is being determined as reflected on the tape at the close of
the exchange representing the principal market for such securities.
Readily marketable securities traded in the over-the-counter market,
including listed securities whose primary market is believed by the Cohen &
Steers Capital Management, Inc. 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 Quotation 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 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. 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 most closely reflect
the value of such securities. Any securities for which market
- --------------------------------------------------------------------------------
20
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 value of 60 days or less,
are valued at amortized cost, which approximates value.
Security Transactions and Investment Income: Security transactions are
recorded on trade date. Realized gains and losses on investments sold are
recorded on the basis of identified cost. Interest income is recorded on the
accrual basis. Dividend income is recorded on the ex-dividend date. The fund
records 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 appreciation/(depreciation) and realized gain/(loss) on investment as
necessary once the issuers provide information about the actual composition of
the distributions. Income, expenses (other than expenses attributable to a
specific class), and realized and unrealized gains or losses on investments are
allocated to each class of shares based on its relative net assets. Class B
shares automatically convert to Class A shares at the end of the month which
precedes the eighth anniversary of the purchase date.
Dividends and Distributions to Shareholders: Dividends from net investment
income are declared and paid quarterly. Distributions to shareholders are
recorded on the ex-dividend date. Dividends are automatically reinvested in full
and fractional shares of the fund based on the net asset value per share at the
close of business on the ex-dividend date unless the shareholder has elected to
have them paid in cash.
A portion of the fund's dividend may consist of amounts in excess of net
investment income derived from nontaxable components of the dividends from the
fund's portfolio investments. Net realized capital gains, unless offset by any
available capital loss carryforward, are distributed to shareholders annually.
Dividends from net income and capital gain distributions are determined in
accordance with U.S. federal income tax regulations, which may differ from GAAP.
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 ADVISORY AND ADMINISTRATION FEES AND OTHER TRANSACTIONS WITH
AFFILIATES
Investment Advisory Fees: Cohen & Steers Capital Management, Inc. (the
advisor) serves as the fund's investment advisor pursuant to an investment
advisory agreement (the advisory agreement). Under the terms of the
- --------------------------------------------------------------------------------
21
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
advisory agreement, the advisor provides the fund with the day-to-day investment
decisions and generally manages the fund's investments in accordance with the
stated policies of the fund, subject to the supervision of the fund's board of
directors. For the services provided to the fund, the advisor receives a monthly
management fee in an amount equal to 1/12th of 0.75% of the average daily net
assets of the fund up to and including $1.5 billion and 0.65% of the average
daily net asset above $1.5 billion. For the period May 3, 2004 (commencement of
operations) through December 31, 2004, the fund incurred $67,462 in advisory
fees.
Through December 31, 2005, the advisor has contractually agreed to waive its
fee and/or reimburse the fund for expenses incurred to the extent necessary to
maintain the fund's operating expenses at 1.50% for the Class A shares, 2.15%
for the Class B shares and Class C shares and 1.15% for the Class I shares. For
the period May 3, 2004 (commencement of operations) through December 31, 2004,
expenses totaling $241,026 were reduced under this agreement.
Administration Fees: The fund has entered into an administration agreement
with the advisor under which the advisor performs certain administrative
functions for the fund and receives a fee of 0.02% of the fund's average daily
net assets. For period May 3, 2004 (commencement of operations) through
December 31, 2004, the fund paid the advisor $47,314 in fees under this
administration agreement.
Distribution Fees: Cohen & Steers Securities, LLC (the distributor), an
affiliated entity of the advisor, distributes the shares of the fund. The fund
has adopted a distribution plan (the plan) on behalf of the fund pursuant to
Rule 12b-1 under the Investment Company Act of 1940. Under the plan, the fund
may not incur distribution fees which exceed an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares and 0.75% of the
average daily net assets attributable to the Class B and Class C shares. For the
period May 3, 2004 (commencement of operations) through December 31, 2004, the
fund paid $39,387 in fees under the plan. For the period May 3, 2004
(commencement of operations) through December 31, 2004, the fund has been
advised that the distributor received $4,271 in sales commissions from the sale
of Class A shares and that the distributor also received $4,029 and $1,532 of
contingent deferred sales charges relating to redemptions of Class B and
Class C shares, respectively. The distributor has advised the fund that proceeds
from the contingent deferred sales charge on the Class B & C shares are paid to
the distributor and are used by the distributor to defray its expenses related
to providing distribution-related services to the fund in connection with the
sale of the Class B & C shares, including payments to dealers and other
financial intermediaries for selling Class B & C shares and interest and other
financing costs of associated with Class B & C shares.
Shareholder Servicing Fees: The fund has adopted a shareholder services plan
which provides that the fund may obtain the services of qualified financial
institutions to act as shareholder servicing agents for their customers. For
these services, the fund may pay the shareholder servicing agent a fee at an
annual rate of up to 0.10% of the average daily net asset value of the fund's
Class A shares and up to 0.25% of the average daily net asset value of
- --------------------------------------------------------------------------------
22
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
the fund's Class B and C shares. For the period May 3, 2004 (commencement of
operations) through December 31, 2004, the fund paid $13,882 under the
shareholder servicing plan.
Directors' Fees: Certain directors and officers of the fund are also
directors, officers, and/or employees of the advisor. None of the directors and
officers so affiliated received compensation from the fund for their services.
For the period May 3, 2004 (commencement of operations) through December 31,
2004, fees and related expenses accrued for nonaffiliated directors totaled
$36,834.
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 ended December 31, 2004 totaled $43,374,680 and $2,518,964, respectively.
NOTE 4. INCOME TAXES
The fund had a return of capital of $12,391 for the period May 3, 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.
- --------------------------------------------------------------------------------
23
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The dividends and distributions to shareholders are characterized for tax
purposes as follows:
<Table>
<Caption>
FOR THE PERIOD
MAY 3, 2004
THROUGH
DECEMBER 31, 2004
-----------------
Ordinary income:
Class A........................................... $183,441
Class B........................................... 18,600
Class C........................................... 82,406
Class I........................................... 16,412
Long term capital gain:
Class A........................................... 3,036
Class B........................................... 321
Class C........................................... 1,639
Class I........................................... 150
Tax return of capital:
Class A........................................... 7,584
Class B........................................... 765
Class C........................................... 3,328
Class I........................................... 714
--------
Total dividends and distributions to
shareholders.............................. $318,396
--------
--------
</Table>
Net investment income and net realized gains differ for financial statement
and tax purposes primarily due to 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 May 3, 2004 (commencement of
operations) through December 31, 2004, the fund decreased undistributed net
investment loss by $2,756 and decreased paid-in-capital by $2,756, related
primarily to non-deductible 12b-1 fees for tax purposes. For the year ended
December 31, 2004, the Fund did not have any undistributed ordinary income or
capital gains.
At December 31, 2004 the cost of investments and net unrealized appreciation
for federal income tax purposes were as follows:
<Table>
Aggregate cost..................................... $42,415,997
-----------
-----------
Gross unrealized appreciation...................... $ 2,472,888
Gross unrealized depreciation...................... (33,817)
-----------
Net unrealized appreciation........................ $ 2,439,071
-----------
-----------
</Table>
Differences between book and tax basis unrealized appreciation are primarily
due to wash sale losses deferred on portfolio securities.
- --------------------------------------------------------------------------------
24
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. CAPITAL STOCK
The fund is authorized to issue 200 million shares of capital stock, par
value $0.001 per share. The board of directors of the fund may increase or
decrease the aggregate number of shares of common stock that the fund has
authority to issue. Transactions in fund shares were as follows:
<Table>
<Caption>
FOR THE PERIOD
MAY 3, 2004
(COMMENCEMENT OF
OPERATIONS) THROUGH
DECEMBER 31, 2004
------------------------
SHARES AMOUNT
---------- -----------
CLASS A:
Sold.......................................... 1,975,846 $26,027,711
Issued as reinvestment of dividends........... 2,670 36,012
Redeemed...................................... (25,717) (335,483)
---------- -----------
Net increase.................................. 1,952,799 $25,728,240
---------- -----------
---------- -----------
CLASS B:
Sold.......................................... 223,491 $ 2,851,112
Issued as reinvestment of dividends........... 66 905
Redeemed...................................... (14,786) (201,544)
---------- -----------
Net increase.................................. 208,771 $ 2,650,473
---------- -----------
---------- -----------
CLASS C:
Sold.......................................... 1,082,605 $14,056,872
Issued as reinvestment of dividends........... 344 4,638
Redeemed...................................... (23,708) (312,480)
---------- -----------
Net increase.................................. 1,059,241 $13,749,030
---------- -----------
---------- -----------
CLASS I:
Sold.......................................... 84,984 $ 983,321
Issued as reinvestment of dividends........... 1,309 17,275
Redeemed...................................... (504) (6,736)
---------- -----------
Net increase.................................. 85,789 $ 993,860
---------- -----------
---------- -----------
</Table>
- --------------------------------------------------------------------------------
25
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. BORROWINGS
The fund, in conjunction with Cohen & Steers Institutional Realty Shares,
Inc., Cohen & Steers Realty Shares, Inc., Cohen & Steers Realty Focus Fund,
Inc., and Cohen & Steers Realty Income Fund, Inc. has entered into a
$150,000,000 syndicated credit agreement (the credit agreement) with State
Street Bank and Trust Company, as administrative agent and operations agent, and
the lenders identified in the credit agreement.
During the period May 3, 2004 (commencement of operations) through
December 31, 2004, the fund did not utilize the line of credit. For the period
May 3, 2004 (commencement of operations) through December 31, 2004, the fund
paid commitment fees of $240.
- --------------------------------------------------------------------------------
26
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Cohen & Steers Utility 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 Utility 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 May 3,
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
- --------------------------------------------------------------------------------
27
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
TAX INFORMATION -- 2004 (UNAUDITED)
Pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003, the
fund designates qualified dividend income of $279,160. Additionally, the fund
designates long term capital gains distributions of $2,531 at the 15% rate and
$2,615 at the 25% 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.
OTHER INFORMATION
A description of the policies and procedures that the fund uses to determine
how to vote proxies relating to portfolio securities is available (i) without
charge, upon request, by calling 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 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.
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. 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.
- --------------------------------------------------------------------------------
28
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY 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 as a group beneficially
owned, directly or indirectly, less than 1% of the outstanding shares of the
fund.
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 1-800-330-7348.
<Table>
<Caption>
NUMBER OF
FUNDS WITHIN
FUND
COMPLEX
PRINCIPAL OCCUPATION OVERSEEN BY
DURING PAST 5 YEARS DIRECTOR LENGTH
POSITION(S) HELD TERM OF (INCLUDING OTHER (INCLUDING OF TIME
NAME, ADDRESS AND AGE(a) WITH FUND OFFICE DIRECTORSHIPS HELD) THE FUND) SERVED
- ----------------------- --------- ------ ------------------- --------- ------
Interested Directors(b)
Robert H. Steers ..... Director, chairman Until next Co-chairman and co-chief 14 Since
Age: 51 of the board, and election of executive officer of the inception
secretary directors advisor since 2003 and
prior to that, chairman of
the advisor. President of
Cohen & Steers Securities,
LLC, the fund's
distributor.
Martin Cohen ......... Director, Until next Co-chairman and co-chief 14 Since
Age: 55 president and election of executive officer of the inception
treasurer directors 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(c) ...... Director Until next Consultant. Prior thereto, 14 Since
Age: 61 election of Undersecretary of State, inception
directors United States Department
of State. Director of
Wellsford Real Properties,
Inc.
</Table>
(table continued on next page)
- -----------------------
(a) The address for each director is 757 Third Avenue, New York, NY 10017.
(b) "Interested person," as defined in the 1940 Act, of the fund because of
affiliation with Cohen & Steers Capital Management, Inc., the fund's
advisor.
(c) Martin Cohen and Bonnie Cohen are unrelated.
- --------------------------------------------------------------------------------
29
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
(table continued from previous page)
<Table>
<Caption>
NUMBER OF
FUNDS WITHIN
FUND
COMPLEX
PRINCIPAL OCCUPATION OVERSEEN BY
DURING PAST 5 YEARS DIRECTOR LENGTH
POSITION(S) HELD TERM OF (INCLUDING OTHER (INCLUDING OF TIME
NAME, ADDRESS AND AGE(a) WITH FUND OFFICE DIRECTORSHIPS HELD) THE FUND) SERVED
- ----------------------- --------- ------ ------------------- --------- ------
George Grossman Director Until next Attorney-at-law. 14 Since
Age: 50 election of inception
directors
Richard E. Kroon ..... Director Until next Board member of Finlay 14 2004 to
Age: 62 election of Enterprises, Inc. present
directors (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 Until next Private investor. President of the 14 Since
Age: 61 election of Board of Directors of Maryland inception
directors Public Television and board member
of The Salvation Army. Prior thereto,
investment representative of Morgan
Stanley Dean Witter.
Frank K. Ross ........ Director Until next Board member of NCRIC Group, Inc. 14 2004 to
Age: 61 election of (insurance) and Pepco Holdings, Inc. present
directors (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, Jr. Director Until next Board member of Essex Property Trust, 14 Since
Age: 68 election of Inc., Highwoods Properties, Inc., inception
directors Realty Income Corporation and Crest
Net Lease, Inc. Managing Director at
Merrill Lynch & Co., Equity Capital
Markets Division from 1983 to 1995.
</Table>
(table continued on next page)
- -------------------
(a) The address for each director is 757 Third Avenue, New York, NY 10017.
- --------------------------------------------------------------------------------
30
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
(table continued from previous page)
<Table>
<Caption>
NUMBER OF
FUNDS WITHIN
FUND
COMPLEX
PRINCIPAL OCCUPATION OVERSEEN BY
DURING PAST 5 YEARS DIRECTOR LENGTH
POSITION(S) HELD TERM OF (INCLUDING OTHER (INCLUDING OF TIME
NAME, ADDRESS AND AGE(a) WITH FUND OFFICE DIRECTORSHIPS HELD) THE FUND) SERVED
- ----------------------- --------- ------ ------------------- --------- ------
C. Edward Ward, Jr. Director Until next Member of the board of trustees of 14 2004 to
Age: 58 election of Manhattan College, Riverdale, New present
directors 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(a) WITH FUND PRINCIPAL OCCUPATION DURING PAST 5 YEARS
----------------------- --------- ----------------------------------------
Robert Becker ........... Senior vice president of the advisor since 2003.
Age: 35 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.
Adam M. Derechin ........ Vice president and Chief operating officer of the advisor since 2003
Age: 40 assistant treasurer and prior to that, senior vice president of the
advisor.
William F. Scapell ...... Senior vice president of the advisor since 2003.
Age: 38 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 secretary Executive vice president and general counsel of
Age: 41 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>
- -------------------
(a) The address for each director is 757 Third Avenue, New York, NY 10017.
- --------------------------------------------------------------------------------
31
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY 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, CSUIX A, B, C, AND I SHARES AVAILABLE
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.
- --------------------------------------------------------------------------------
32
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
OFFICERS AND DIRECTORS KEY INFORMATION
Robert H. Steers INVESTMENT ADVISOR
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 SUBADMINISTRATOR AND CUSTODIAN
Director State Street Bank and Trust Company
225 Franklin Street
George Grossman Boston, MA 02110
Director
TRANSFER AGENT
Richard E. Kroon Boston Financial Data Services, Inc.
Director 66 Brooks Drive
Braintree, MA 02184
Richard J. Norman (800) 437-9912
Director
LEGAL COUNSEL
Willard H. Smith Jr. Simpson Thacher & Bartlett LLP
Director 425 Lexington Avenue
New York, NY 10017
C. Edward Ward, Jr.
Director DISTRIBUTOR
Cohen & Steers Securities, LLC
Robert Becker 757 Third Avenue
Vice president New York, NY 10017
Adam Derechin Nasdaq Symbol: Class A - CSUAX
Vice president and assistant treasurer Class B - CSUBX
Class C - CSUCX
William F. Scapell Class I - CSUIX
Vice president
Web site: cohenandsteers.com
Lawrence B. Stoller
Assistant secretary This report is authorized for delivery
only to shareholders of Cohen & Steers
Utility Fund, Inc. unless accompanied
or preceded by the delivery of a
currently effective prospectus
setting forth details of the fund.
Past performance is of course no
guarantee of future results and your
investment may be worth more or
less at the time you sell.
- --------------------------------------------------------------------------------
33
COHEN & STEERS
UTILITY FUND
-----------------------
ANNUAL REPORT
DECEMBER 31, 2004
COHEN & STEERS
UTILITY FUND
757 THIRD AVENUE
NEW YORK, NY 10017
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 $48,500 N/A
Audit-Related Fees -- N/A
Tax Fees 12,600 N/A
All Other Fees -- N/A
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
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 $80,600 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.
Not applicable.
Item 6. Schedule of Investments.
Included in Item 1 above.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial officer
have concluded that the registrant's disclosure controls and procedures are
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.
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 UTILITY 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 and principal
executive officer financial officer
Date: March 8, 2005
STATEMENT OF DIFFERENCES
The section symbol shall be expressed as................................ 'SS'