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)
Adam M. Derechin
Cohen & Steers Capital Management, Inc.
757 Third Avenue
New York, New York 10017
(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 832-3232
Date of fiscal year end: December 31
Date of reporting period: June 30, 2005
Item 1. Reports to Stockholders.
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COHEN & STEERS UTILITY FUND, INC.
July 28, 2005
To Our Shareholders:
We are pleased to submit to you our report for Cohen & Steers Utility Fund
for the quarter and semiannual period ended June 30, 2005. The net asset values
per share at that date were $15.16, $15.11, and $15.12 for Class A, B, and C
shares, respectively. Class I shares had a net asset value of $15.17 per share.
During the quarter, the fund delivered the following total returns (including
income) compared to its relevant benchmarks:
<Table>
<Caption>
TOTAL RETURN,
PERIOD ENDED
6/30/05
-------------------
YEAR
QUARTER TO DATE
------- -------
Cohen & Steers Utility Fund Class A..................... 8.3% 11.3%
Cohen & Steers Utility Fund Class B..................... 8.1% 11.0%
Cohen & Steers Utility Fund Class C..................... 8.1% 11.0%
Cohen & Steers Utility Fund Class I..................... 8.4% 11.5%
S&P 1500 Utilities Index(a)............................. 9.4% 14.6%
Merrill Lynch Fixed Rate Preferred Index(b)............. 2.6% 0.1%
S&P 500 Index........................................... 1.4% - 0.8%
</Table>
Fund performance information does not take into account sales load or
contingent deferred sales charges, if any.
The asset mix of the fund at quarter-end consisted of 81% utility common
stocks, 17% preferred stocks, and other fixed income investments (including 3%
in fixed income securities issued by utility companies), and 2% cash. The
preferred allocation is designed to provide diversification benefits and help
increase the income potential of the fund.(c)
During the quarter, quarterly distributions were declared for shareholders
of record of June 23, 2005 and paid on June 24, 2005 in amounts per share for
Class A, B, C, and I shares of $0.085, $0.065, $0.065, $0.095, respectively.(c)
INVESTMENT REVIEW
Utility shares performed well during the quarter, building on the sector's
strong returns in 2004. Improved fundamentals, a resurgence of merger and
acquisition activity, and a favorable regulatory and commodity price
- -------------------
(a) 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.
(b) The Merrill Lynch Fixed Rate Preferred Index is an unmanaged index of
preferred securities.
(c) 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 UTILITY FUND, INC.
environment contributed to overall performance, in our view. We believe that
utilities also continued to benefit from a strong position relative to the
equity and fixed income markets. Strong fundamentals in the utility sector have
led to attractive earnings and dividend growth over the past few years. Fearing
slower profit growth in many industries as a result of Federal Reserve
tightening and a potential economic slowdown, we believe investors continue to
favor the higher income potential of utilities relative to other sectors.
Additionally, in our view, the reduced taxation of qualified dividend income has
attracted investors to utility stocks.
Many utilities continued to raise dividends during the second quarter. In
the U.S., for example, Equitable Resources announced an 11% dividend increase.
European utilities RWE, National Grid Transco, E.ON and Scottish and Southern
also raised their dividends by 25%, 20%, 18% and 12%, respectively. For the
twelve months ended June 30, 2005, 51 domestic electric utilities increased
their dividends by an average of 15.3%. Thirty-one companies had no change in
their dividends and no companies reduced their dividends.
2005 has been marked by a surge in consolidation activity among utility
companies. Three utility mergers representing $50.8 billion in transaction value
have been announced over the past six months: Exelon's $26.9 billion purchase of
Public Service Enterprise Group at an attractive 13% premium, Duke Energy's
$14.5 billion acquisition of Cinergy at an attractive 13% premium, and Warren
Buffett's MidAmerican Energy's $9.4 billion bid for PacifiCorp, a subsidiary of
ScottishPower. Scottish Power's share price rose 6% on the day the acquisition
was announced and 10% from the day of the announcement to quarter-end. We are
pleased to report that the fund owned all of the takeover targets. The recent
merger announcements follow four years of minimal consolidation activity as
managements worked to rationalize unregulated businesses, strengthen balance
sheets, and focus on managing and bolstering core utility franchises.
A common theme in mergers and acquisitions has been for large,
well-capitalized and well-managed utilities to acquire companies facing major
operational, regulatory or financial challenges. We believe Exelon's superior
operating skills can improve PSEG's troubled nuclear plants; Duke Energy's
natural gas-fired power plants in the Midwest and strong balance sheet should
help fund Cincinnati-based Cinergy's large environmental capital expenditure
program; MidAmerican and Berkshire Hathaway's superior balance sheet and cash
flow positions should enable significant infrastructure investments at
PacifiCorp.
The fund's best performing sector was the multi utility group, which posted
a 15.5% total return during the quarter. (Because their business models do not
offer the stability and visibility of cash flows and attractive dividend income
profiles offered by traditional utilities, our fund does not generally focus on
the multi-utility group, which is comprised of independent power producers and
distressed utilities and merchant energy companies.) CMS Energy, our only
holding in this group, delivered strong stock price performance stemming from
positive regulatory decisions that has led to an improving earnings profile.
The fund's best performing investments were Teekay LNG, Equitable Resources,
and Edison International, with returns of 28.2%, 19.2%, and 17.5%, respectively.
Teekay benefited from a successful initial public offering and subsequent
positive news of growth in their development backlog. As a leading natural gas
exploration and production company in Appalachia, Equitable benefited from
attractive gas prices and the announcement of an
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2
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COHEN & STEERS UTILITY FUND, INC.
accelerated drilling program. Edison International's strong relative performance
was driven by expectations for improved earnings at the company's unregulated
power subsidiary due to rising wholesale power prices.
The integrated electric sector was the worst performing sector for the
quarter, returning 9.2%. Enel was the worst performer in this sector, with a
- 6.2% total return, due to the weakening European currency and expectations
for large equity issuance. Dominion Resources, which returned - 0.5%, also
detracted from performance following the announcement of a weaker-than-expected
earnings outlook for 2006.
During the quarter, the fund's performance relative to the utility indexes
was influenced by our allocation to preferred stocks. The fund's preferred and
fixed income positions, which are utilized with the objective of enhancing the
income potential of the fund, detracted from performance due to the better
overall performance of utility stocks. Preferred shares benefited during the
quarter from declining interest rates, but detracted from overall performance,
up only 3%, compared with utilities, which were up 10%.
INVESTMENT OUTLOOK
We have a positive outlook for the utility sector due to our expectations
for strong operating fundamentals, further industry consolidation, and favorable
macro trends. After wholesale power prices collapsed under the weight of an
oversupply of power plants, we have witnessed a dramatic turnaround in sector
fundamentals as managements on the whole have written down or sold merchant
power plants and right-sized their balance sheets through substantial amounts of
equity issuance. For our portfolio, we focus on those companies with strong
fundamentals that offer the potential for attractive dividend and earnings
growth.
We believe that utilities with low cost nuclear and coal-fired generation
will continue to benefit from higher power prices, and therefore we see these
types of companies as potentially attractive investment opportunities. In our
view, we are near the trough of the commodity price cycle in wholesale power
markets, with demand growth gradually consuming excess power plant capacity.
Furthermore, in retail power markets we think that a constructive regulatory
environment could allow many large utilities to receive a timely and potentially
attractive return on capital invested in significant infrastructure projects.
These initiatives include the installation of emissions reduction equipment for
power plants and the construction of new power lines to bolster the transmission
grid.
We view recent utility merger activity as the beginning of a long-term
consolidation trend. We believe that regulators will take a constructive stance
on mergers given the need to bolster and integrate the fragmented and aging
transmission grid. The utility industry is highly fragmented due to the Public
Utility Holding Company Act (PUHCA). While it is difficult to forecast this with
any certainty, the possible repeal of this legislation, which hinders mergers
among noncontiguous utilities, could accelerate the M&A trend. We have long
expected consolidation to return to the utility sector considering the large
number of utility companies in the U.S. compared with other developed countries
or other U.S. industries such as railroads and regional telephone services,
where just a handful of players exist. Overall, we believe that the benefits of
economies of scale to potentially achieve higher growth in a mature, moderate
growth industry should continue to drive consolidation.
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3
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COHEN & STEERS UTILITY FUND, INC.
On a pre-tax basis, utility dividend yields are consistent with historical
standards, at approximately 90% of the 10-year Treasury bond yield. Importantly,
however, the attractiveness of the after-tax yields from utilities has increased
dramatically since the implementation of the Jobs and Growth Reconciliation Act
in 2003, which lowered the tax rate on qualified dividend income to a maximum of
15.0% from a maximum rate of 38.6%. Therefore, on an after-tax basis, utility
stocks look attractively valued relative to their historical relationship with
Treasury bonds, in our view.
We believe an overall environment will remain favorable for utilities. Over
the long term, we foresee a low return environment in which the potential for
utilities to generate attractive yet predictable earnings growth and high
current income will be increasingly attractive to investors, especially as an
aging population raises demand for relatively lower risk and higher yielding
investments. By focusing our portfolio on attractively valued, traditional gas
and electric utilities that offer the potential for above average dividend and
earnings growth, we believe that Cohen & Steers Select Utility Fund is well
positioned to meet its income and capital appreciation objectives.
Sincerely,
<Table>
MARTIN COHEN ROBERT H. STEERS
MARTIN COHEN ROBERT H. STEERS
Co-chairman Co-chairman
ROBERT BECKER WILLIAM F. SCAPELL
ROBERT BECKER WILLIAM F. SCAPELL
Portfolio Manager 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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COHEN & STEERS UTILITY FUND, INC.
EXPENSE EXAMPLE
(UNAUDITED)
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments and 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 01/01/05 - 06/30/05.
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) and 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.
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5
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COHEN & STEERS UTILITY FUND, INC.
EXPENSE EXAMPLE (UNAUDITED) -- (CONTINUED)
<Table>
<Caption>
EXPENSES PAID
BEGINNING ENDING DURING PERIOD*
ACCOUNT VALUE ACCOUNT VALUE JANUARY 1, 2005 -
JANUARY 1, 2005 JUNE 30, 2005 JUNE 30, 2005
--------------- ------------- -------------
CLASS A
Actual (11.30% return)................... $1,000.00 $1,113.00 $ 7.86
Hypothetical (5% annual return before
expenses).............................. $1,000.00 $1,017.36 $ 7.50
CLASS B
Actual (10.96% return)................... $1,000.00 $1,109.60 $11.25
Hypothetical (5% annual return before
expenses).............................. $1,000.00 $1,014.13 $10.74
CLASS C
Actual (10.95% return)................... $1,000.00 $1,109.50 $11.25
Hypothetical (5% annual return before
expenses).............................. $1,000.00 $1,014.13 $10.74
CLASS I
Actual (11.53% return)................... $1,000.00 $1,115.30 $ 6.03
Hypothetical (5% annual return before
expenses).............................. $1,000.00 $1,019.09 $ 5.76
</Table>
- -------------------
* Expenses are equal to the fund's annualized expense ratio of 1.50%, 2.15%,
2.15% and 1.15% respectively, multiplied by the average account value over the
period, multiplied by 181/365 (to reflect the one-half year period). If the
fund had bourne all of its expenses that were assumed by the advisor, the
annualized expense ratios would have been 1.66%, 2.32%, 2.32% and 1.32%
respectively.
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COHEN & STEERS UTILITY FUND, INC.
JUNE 30, 2005
TOP TEN HOLDINGS
(UNAUDITED)
<Table>
<Caption>
MARKET % OF
VALUE NET ASSETS
SECURITY ---------- ----------
1. Exelon Corp.............................................. $6,464,141 4.64%
2. Duke Energy Corp......................................... 6,409,550 4.60
3. Edison International..................................... 5,723,227 4.11
4. FPL Group................................................ 5,559,743 3.99
5. PG&E Corp................................................ 5,511,135 3.95
6. TXU Corp................................................. 4,706,218 3.38
7. Southern Co.............................................. 4,553,003 3.27
8. Entergy Corp............................................. 4,552,190 3.27
9. Dominion Resources....................................... 4,531,392 3.25
10. PPL Corp................................................. 4,432,064 3.18
</Table>
SECTOR BREAKDOWN
(BASED ON NET ASSETS)
(UNAUDITED)
[PIE CHART]
<Table>
Electric-Integrated 65.60%
Miscellaneous 11.54%
Electric-Distribution 6.63%
Gas-Integrated 5.51%
Gas-Distribution 3.15%
Hotel 2.07%
Pipelines 2.00%
Office 1.81%
Other Assets in Excess of Liabilities 1.69%
</Table>
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COHEN & STEERS UTILITY FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 2005 (UNAUDITED)
<Table>
<Caption>
NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD(a)
--------- ----------- ------------
COMMON STOCK 83.72%
UTILITIES 80.62%
ELECTRIC -- INTEGRATED 63.33%
Ameren Corp............................. 76,444 $ 4,227,353 4.59%
American Electric Power Co.............. 31,808 1,172,761 3.80
CINergy Corp............................ 46,795 2,097,352 4.28
Cleco Corp.............................. 42,616 919,227 4.17
CMS Energy Corp.(b)..................... 52,400 789,144 --
Constellation Energy Group.............. 58,500 3,374,865 2.32
DPL..................................... 81,000 2,223,450 3.50
DTE Energy Co........................... 41,586 1,944,977 4.40
Dominion Resources...................... 61,744 4,531,392 3.65
Duke Energy Corp........................ 215,592 6,409,550 4.17
E.ON AG (ADR)........................... 50,574 1,497,496 3.17
Edison International.................... 141,140 5,723,227 2.47
El Paso Electric Co.(b)................. 12,400 253,580 --
Enel S.P.A., (ADR)...................... 10,600 460,146 4.98
Entergy Corp............................ 60,254 4,552,190 2.86
Exelon Corp............................. 125,933 6,464,141 3.12
FirstEnergy Corp........................ 50,555 2,432,201 3.43
FPL Group............................... 132,186 5,559,743 3.38
Hawaiian Electric Industries............ 9,304 249,440 4.63
NiSource................................ 82,681 2,044,701 3.72
PG&E Corp............................... 146,807 5,511,135 3.20
PPL Corp................................ 74,639 4,432,064 3.10
Pinnacle West Capital Corp.............. 21,950 975,678 4.27
Progress Energy......................... 20,184 913,124 5.22
Public Service Enterprise Group......... 43,443 2,642,203 3.68
Puget Energy............................ 13,865 324,164 4.28
SCANA Corp.............................. 77,839 3,324,504 3.65
Scottish Power plc (ADR)................ 7,117 253,365 3.60
Southern Co............................. 131,324 4,553,003 4.30
TXU Corp................................ 56,640 4,706,218 2.71
Westar Energy........................... 16,225 389,887 3.83
Xcel Energy............................. 170,003 3,318,459 4.41
-----------
88,270,740
-----------
</Table>
See accompanying notes to financial statements.
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COHEN & STEERS UTILITY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 2005 (UNAUDITED)
<Table>
<Caption>
NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD
--------- ----------- ------------
ELECTRIC -- DISTRIBUTION 6.63%
Consolidated Edison..................... 53,848 $ 2,522,240 4.87%
Energy East Corp........................ 71,980 2,085,980 3.80
National Grid Transco plc (ADR)......... 31,347 1,528,793 4.37
NSTAR................................... 56,387 1,738,411 3.76
Pepco Holdings.......................... 57,210 1,369,607 4.18
-----------
9,245,031
-----------
GAS -- DISTRIBUTION 3.15%
AGL Resources........................... 75,896 2,933,380 3.21
Atmos Energy Corp....................... 4,558 131,270 4.31
New Jersey Resourses Corp............... 10,027 483,803 2.82
Vectren Corp............................ 29,348 843,168 4.11
-----------
4,391,621
-----------
GAS -- INTEGRATED 5.51%
Energen Corp............................ 52,106 1,826,315 2.28
Equitable Resources..................... 50,010 3,400,680 2.47
KeySpan Corp............................ 5,237 213,146 4.47
Sempra Energy........................... 54,068 2,233,549 2.81
-----------
7,673,690
-----------
PIPELINES 1.99%
Questar Corp............................ 42,139 2,776,960 1.37
-----------
TOTAL UTILITIES......................... 112,358,042
-----------
UTILITY -- FOREIGN 1.16%
ELECTRIC -- INTEGRATED
RWE AG(c)............................... 20,918 1,343,261 2.82
Scottish and Southern Energy(c)......... 15,000 271,447 2.98
-----------
1,614,708
-----------
TELECOMMUNICATION SERVICES 0.39%
FairPoint Communications................ 34,000 549,100 9.29
-----------
TRANSPORT -- MARINE 1.55%
Teekay LNG Partners LP.................. 76,600 2,160,120 5.85
-----------
TOTAL COMMON STOCK
(Identified
cost -- $103,489,252)............ 116,681,970
-----------
</Table>
See accompanying notes to financial statements.
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COHEN & STEERS UTILITY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 2005 (UNAUDITED)
<Table>
<Caption>
NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD
--------- ----------- ------------
PREFERRED SECURITIES -- $25 PAR VALUE 9.95%
FINANCE 0.06%
MBNA Capital, 8.125%, Series D
(TruPS).............................. 3,300 $ 87,978 7.61%
-----------
MEDIA 0.27%
Liberty Media Corp., 8.75% (PPLUS)...... 2,450 64,680 8.30
Shaw Communications, 8.50%, Series B
(COPrS).............................. 12,400 312,604 8.45
-----------
377,284
-----------
REAL ESTATE 8.51%
DIVERSIFIED 1.57%
Colonial Properties Trust, 7.62%,
Series E............................. 15,700 384,650 7.80
Digital Realty Trust, 8.50%, Series A... 18,000 466,470 8.22
Entertainment Properties Trust, 7.75%,
Series B............................. 11,000 278,960 7.65
iStar Financial, 7.875%, Series E....... 4,200 108,297 7.64
iStar Financial, 7.80%, Series F........ 19,900 509,440 7.62
iStar Financial, 7.65%, Series G........ 11,300 288,150 7.49
iStar Financial, 7.50%, Series I........ 6,200 155,744 7.48
-----------
2,191,711
-----------
HEALTH CARE 0.55%
Health Care REIT, 7.875%, Series D...... 13,900 356,952 7.67
Health Care REIT, 7.625%, Series F...... 14,200 358,834 7.56
LTC Properties, 8.00%, Series F......... 2,200 56,265 7.82
-----------
772,051
-----------
HOTEL 2.07%
Ashford Hospitality Trust, 8.55%,
Series A............................. 12,200 318,725 8.19
Eagle Hospitality Properties Trust,
8.25%, Series A...................... 10,000 257,000 8.02
FelCor Lodging Trust, 8.00%, Series C... 10,900 267,377 8.15
Innkeepers USA Trust, 8.00%, Series C... 21,200 542,084 7.82
Strategic Hotel Capital, 8.50%,
Series 144A(d)....................... 28,200 729,675 8.23
Sunstone Hotel Investors, 8.00%,
Series A............................. 30,000 772,500 7.77
-----------
2,887,361
-----------
</Table>
See accompanying notes to financial statements.
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COHEN & STEERS UTILITY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 2005 (UNAUDITED)
<Table>
<Caption>
NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD
--------- ----------- ------------
OFFICE 1.81%
Alexandria Real Estate Equities, 8.375%,
Series C............................. 3,850 $ 101,602 7.92%
Corporate Office Properties Trust,
8.00%, Series G...................... 2,600 67,210 7.74
CRT Properties, 8.50%, Series A......... 2,000 49,420 8.62
Cousins Properties, 7.50%, Series B..... 6,000 152,820 7.38
Highwoods Properties, 8.00%, Series B... 17,300 435,095 7.95
Highwoods Properties, 8.00%, Series D... 25,053 630,083 7.95
Kilroy Realty Corp., 7.50%, Series F.... 5,600 142,240 7.40
Maguire Properties, 7.625%, Series A.... 15,450 390,576 7.56
SL Green Realty Corp., 7.875%,
Series D............................. 21,450 550,193 7.68
-----------
2,519,239
-----------
RESIDENTIAL 1.56%
APARTMENT 1.04%
Apartment Investment and Management Co.,
9.375%, Series G..................... 5,000 133,000 8.80
Apartment Investment and Management Co.,
8.00%, Series T...................... 13,400 339,020 7.91
Apartment Investment and Management Co.,
8.00%, Series V...................... 14,500 368,300 7.87
Apartment Investment and Management Co.,
7.875%, Series Y..................... 24,000 602,400 7.85
-----------
1,442,720
-----------
MANUFACTURED HOME 0.52%
Affordable Residential Communities,
8.25%, Series A...................... 16,500 417,450 8.14
American Land Lease, 7.75%, Series A.... 12,100 306,130 7.67
-----------
723,580
-----------
TOTAL RESIDENTIAL....................... 2,166,300
-----------
SHOPPING CENTER 0.80%
COMMUNITY CENTER 0.18%
Cedar Shopping Centers, 8.875%,
Series A............................. 9,600 256,320 8.31
-----------
</Table>
See accompanying notes to financial statements.
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COHEN & STEERS UTILITY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 2005 (UNAUDITED)
<Table>
<Caption>
NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD
--------- ----------- ------------
REGIONAL MALL 0.62%
Glimcher Realty Trust, 8.125%,
Series G............................. 10,000 $ 255,500 7.95%
Mills Corp., 7.875%, Series G........... 10,000 257,000 7.67
Taubman Centers, 8.00%, Series G........ 13,500 346,275 7.80
-----------
858,775
-----------
TOTAL SHOPPING CENTER................... 1,115,095
-----------
SPECIALTY 0.15%
Capital Automotive REIT, 8.00%,
Series B............................. 8,000 210,000 7.62
-----------
TOTAL REAL ESTATE....................... 11,861,757
-----------
UTILITIES
ELECTRIC -- INTEGRATED 1.11%
NVP Capital I, 8.20%, due 3/31/37,
Series A............................. 3,900 97,500 8.20
NVP Capital III, 7.75%, due 9/30/38,
Series B............................. 32,600 817,282 7.74
Sierra Pacific Power, 7.80% Series 1.... 25,000 630,000 7.74
-----------
1,544,782
-----------
TOTAL PREFERRED SECURITIES -- $25
PAR VALUE
(Identified
cost -- $13,769,665)............. 13,871,801
-----------
PREFERRED SECURITIES -- CAPITAL TRUST 2.75%
AFC Capital Trust I, 8.207%,
due 02/03/27, Series B............... 600,000 683,029 7.21
Columbia/HCA, 7.50%, due 11/15/95....... 1,200,000 1,171,818
Old Mutual Capital Funding, 8.00%,
due 5/29/49 (Eurobond)............... 1,300,000 1,376,883 7.55
Pemex Project Funding Master Trust,
7.75%, due 9/29/49................... 600,000 607,213 7.66
-----------
TOTAL PREFERRED
SECURITIES -- CAPITAL TRUST
(Identified cost --$3,759,215)... 3,838,943
-----------
</Table>
See accompanying notes to financial statements.
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COHEN & STEERS UTILITY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 2005 (UNAUDITED)
<Table>
<Caption>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- ------------
CORPORATE BOND 1.88%
Citizens Communications Co., 9.00%, due
8/15/31............................... $1,125,000 $ 1,158,750
Liberty Media Corp., 8.25%, due 2/1/30... 100,000 99,740
Rogers Cable, 8.75%, due 5/01/32......... 300,000 342,000
Rogers Wireless Communications, 8.00%,
due 12/15/12, 144A(d)................. 500,000 541,250
Valor Telecom Enterprise, 7.75%, due
02/15/15(c)........................... 500,000 478,938
------------
TOTAL CORPORATE BOND
(Identified cost -- $2,735,186)... 2,620,678
------------
COMMERCIAL PAPER 1.59%
San Paolo U.S. Finance Co., 2.20%, due
7/01/05 (Identified
cost -- $2,210,000)................... 2,210,000 2,210,000
------------
TOTAL INVESTMENTS (Identified
cost -- $125,963,318)................ 99.89% 139,223,392
OTHER ASSETS IN EXCESS OF LIABILITES... 0.11% 150,188
------ ------------
NET ASSETS............................. 100.00% $139,373,580
------ ------------
------ ------------
</Table>
GLOSSARY OF PORTFOLIO ABBREVIATIONS
(ADR) American Depositary Receipts.
(TruPS) Trust Preferred Securities.
(PPLUS) Preferred Plus Trust.
(COPrS) Canadian Origin Preferred Securities.
- -------------------
Note: Percentages indicated are based on the net assets of the fund.
(a) Dividend yield is computed by dividing the security's current annual
dividend rate by its value on June 30, 2005. The current dividend
rate does not reflect any potential reclassifications to capital gain
or return of capital.
(b) Non-income producing security.
(c) Fair valued security. Aggregate holdings equal 1.50% of net assets.
(d) Resale is restricted to qualified institutional investors; aggregate
holdings equal to 0.91% of net assets.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 2005
<Table>
ASSETS:
Investments in securities, at value (Identified
cost -- $125,963,318) (Note 1)....................... $139,223,392
Receivable for fund shares sold......................... 1,226,147
Dividends and interest receivable....................... 553,421
Receivable due from advisor............................. 47,397
Receivable for investments sold......................... 28,857
Other assets............................................ 1,564
------------
Total Assets....................................... 141,080,778
------------
LIABILITIES:
Payable for investment securities purchased............. 1,433,553
Payable to investment advisor........................... 82,280
Payable for fund shares redeemed........................ 45,362
Payable for distribution fees........................... 44,827
Payable for shareholder servicing fees.................. 16,124
Payable for directors fees.............................. 3,616
Payable to administrator................................ 2,195
Other liabilities....................................... 79,241
------------
Total Liabilities.................................. 1,707,198
------------
NET ASSETS.................................................. $139,373,580
------------
------------
NET ASSETS consist of:
Paid-in capital......................................... $126,324,561
Undistributed net investment income..................... 168,448
Accumulated net realized loss on investments and foreign
currency transactions................................ (379,360)
Net unrealized appreciation on investments and foreign
currency translations................................ 13,259,931
------------
$139,373,580
------------
------------
</Table>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) -- (CONTINUED)
JUNE 30, 2005
<Table>
CLASS A SHARES:
NET ASSETS.............................................. $90,397,287
Shares issued and outstanding ($0.001 par value common
stock outstanding)................................... 5,963,360
-----------
Net asset value and redemption price per share..... $ 15.16
-----------
-----------
Maximum offering price per share ($15.16 [div] 0.955)(a) $ 15.87
-----------
-----------
CLASS B SHARES:
NET ASSETS.............................................. $ 5,633,784
Shares issued and outstanding ($0.001 par value common
stock outstanding)................................... 372,767
-----------
Net asset value and offering price per share(b).... $ 15.11
-----------
-----------
CLASS C SHARES:
NET ASSETS.............................................. $41,093,849
Shares issued and outstanding ($0.001 par value common
stock outstanding)................................... 2,717,357
-----------
Net asset value and offering price per share(b).... $ 15.12
-----------
-----------
CLASS I SHARES:
NET ASSETS.............................................. $ 2,248,660
Shares issued and outstanding ($0.001 par value common
stock outstanding)................................... 148,274
-----------
Net asset value, offering and redemption price per
share........................................... $ 15.17
-----------
-----------
</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.
- --------------------------------------------------------------------------------
15
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2005 (UNAUDITED)
<Table>
Investment Income (Note 1):
Dividend income (net of $25,988 of foreign withholding
tax)................................................. $ 2,088,889
Interest income......................................... 216,339
-----------
Total Income....................................... 2,305,228
-----------
Expenses:
Investment advisory fees (Note 2)....................... 369,919
Distribution fees -- Class A (Note 2)................... 80,613
Distribution fees -- Class B (Note 2)................... 16,473
Distribution fees -- Class C (Note 2)................... 104,774
Shareholder servicing fees -- Class A (Note 2).......... 32,245
Shareholder servicing fees -- Class B (Note 2).......... 5,491
Shareholder servicing fees -- Class C (Note 2).......... 34,925
Professional fees....................................... 55,750
Registration and filing fees............................ 47,500
Administration fees (Note 2)............................ 44,254
Shareholder reporting expenses.......................... 38,915
Custodian fees and expenses............................. 30,724
Transfer agent fees..................................... 28,109
Directors' fees and expenses (Note 2)................... 25,619
Line of credit fees (Note 6)............................ 1,084
Miscellaneous........................................... 5,496
-----------
Total Expenses..................................... 921,891
Reduction of Expenses (Note 2).......................... (81,173)
-----------
Net Expenses....................................... 840,718
-----------
Net Investment Income....................................... 1,464,510
-----------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized loss on investments and foreign currency
transactions......................................... (343,976)
Net change in unrealized appreciation on investments and
foreign currency translations........................ 10,785,476
-----------
Net realized and unrealized gain on investments.... 10,441,500
-----------
Net Increase in Net Assets Resulting from Operations........ $11,906,010
-----------
-----------
</Table>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<Table>
<Caption>
FOR THE PERIOD
FOR THE MAY 3, 2004(a)
SIX MONTHS ENDED THROUGH
JUNE 30, 2005 DECEMBER 31, 2004
---------------- -----------------
Change in Net Assets:
From Operations:
Net investment income................... $ 1,464,510 $ 265,959
Net realized gain (loss) on
investments.......................... (343,976) 1,906
Net change in unrealized appreciation on
investments.......................... 10,785,476 2,474,455
------------ -----------
Net increase in net assets
resulting from operations........ 11,906,010 2,742,320
------------ -----------
Dividends and Distributions to Shareholders
from (Note 1):
Net investment income:
Class A............................ (927,331) (164,473)
Class B............................ (44,022) (16,599)
Class C............................ (298,793) (72,168)
Class I............................ (25,916) (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................ (1,296,062) (318,396)
------------ -----------
Capital Stock Transactions (Note 5):
Increase in net assets from fund share
transactions......................... 83,117,830 43,121,603
------------ -----------
Total increase in net assets....... 93,727,778 45,545,527
Net Assets:
Beginning of period..................... 45,645,802 100,275
------------ -----------
End of period(b)........................ $139,373,580 $45,645,802
------------ -----------
------------ -----------
</Table>
- -------------------
(a) Commencement of operations.
(b) Includes undistributed net investment income of $168,448 and $0,
respectively.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
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
---------------------------------
FOR THE PERIOD
FOR THE SIX MAY 3, 2004(a)
MONTHS ENDED THROUGH
PER SHARE OPERATING PERFORMANCE: JUNE 30, 2005 DECEMBER 31, 2004
- -------------------------------- ------------- -----------------
Net asset value, beginning of period........................ $ 13.78 $ 11.46
---------- ----------
Income from investment operations:
Net investment income(b)................................ 0.23 0.29
Net realized and unrealized gain on investments......... 1.32 2.20
---------- ----------
Total from investment operations.................... 1.55 2.49
---------- ----------
Less dividends and distributions to shareholders from:
Net investment income................................... (0.17) (0.14)
Net realized gain on investments........................ -- (0.02)
Tax return of capital................................... -- (0.01)
---------- ----------
Total dividends and distributions to shareholders........... (0.17) (0.17)
---------- ----------
Redemption fees retained by the fund.................... 0.00(f) --
---------- ----------
Net increase in net asset value..................... 1.38 2.32
---------- ----------
Net asset value, end of period.............................. $ 15.16 $ 13.78
---------- ----------
- -------------------------------------------------------------------------------------------
Total investment return(c,d)................................ 11.30% 21.80%
---------- ----------
---------- ----------
- -------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- -------------------------
Net assets, end of period (in millions)..................... $ 90.4 $ 26.9
---------- ----------
---------- ----------
Ratio of expenses to average daily net assets (before
expense reduction)(e)..................................... 1.66% 3.55%
---------- ----------
---------- ----------
Ratio of expenses to average daily net assets (net of
expense reduction)(e)..................................... 1.50% 1.50%
---------- ----------
---------- ----------
Ratio of net investment income to average daily net assets
(before expense reduction)(e)............................. 3.03% 1.26%
---------- ----------
---------- ----------
Ratio of net investment income to average daily net assets
(net of expense reduction)(e)............................. 3.19% 3.31%
---------- ----------
---------- ----------
Portfolio turnover rate(d).................................. 10.17% 16.03%
---------- ----------
---------- ----------
</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.
(f) Amount is less than $0.005.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
FINANCIAL HIGHLIGHTS (UNAUDITED) -- (CONTINUED)
<Table>
<Caption>
CLASS B
---------------------------------
FOR THE PERIOD
FOR THE SIX MAY 3, 2004(a)
MONTHS ENDED THROUGH
PER SHARE OPERATING PERFORMANCE: JUNE 30, 2005 DECEMBER 31, 2004
- -------------------------------- ------------- -----------------
Net asset value, beginning of period........................ $ 13.74 $ 11.46
---------- ----------
Income from investment operations:
Net investment income(b)................................ 0.17 0.21
Net realized and unrealized gain on investments......... 1.33 2.20
---------- ----------
Total from investment operations.................... 1.50 2.41
---------- ----------
Less dividends and distributions to shareholders from:
Net investment income................................... (0.13) (0.10)
Net realized gain on investments........................ -- (0.02)
Tax return of capital................................... -- (0.01)
---------- ----------
Total dividends and distributions to shareholders........... (0.13) (0.13)
---------- ----------
Redemption fees retained by the fund.................... 0.00(f) --
---------- ----------
Net increase in net asset value..................... 1.37 2.28
---------- ----------
Net asset value, end of period.............................. $ 15.11 $ 13.74
---------- ----------
---------- ----------
- -------------------------------------------------------------------------------------------
Total investment return(c,d)................................ 10.96% 21.08%
---------- ----------
---------- ----------
- -------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- -------------------------
Net assets, end of period (in millions)..................... $ 5.6 $ 2.9
---------- ----------
---------- ----------
Ratio of expenses to average daily net assets (before
expense reduction)(e)..................................... 2.32% 4.66%
---------- ----------
---------- ----------
Ratio of expenses to average daily net assets (net of
expense reduction)(e)..................................... 2.15% 2.15%
---------- ----------
---------- ----------
Ratio of net investment income to average daily net assets
(before expense reduction)(e)............................. 2.27% (0.11)%
---------- ----------
---------- ----------
Ratio of net investment income to average daily net assets
(net of expense reduction)(e)............................. 2.44% 2.39%
---------- ----------
---------- ----------
Portfolio turnover rate(d).................................. 10.17% 16.03%
---------- ----------
---------- ----------
</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.
(f) Amount is less than $0.005.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
19
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
FINANCIAL HIGHLIGHTS (UNAUDITED) -- (CONTINUED)
<Table>
<Caption>
CLASS C
---------------------------------
FOR THE PERIOD
FOR THE SIX MAY 3, 2004(a)
MONTHS ENDED THROUGH
PER SHARE OPERATING PERFORMANCE: JUNE 30, 2005 DECEMBER 31, 2004
- -------------------------------- ------------- -----------------
Net asset value, beginning of period........................ $ 13.75 $ 11.46
---------- ----------
Income from investment operations:
Net investment income(b)................................ 0.18 0.22
Net realized and unrealized gain on investments......... 1.32 2.20
---------- ----------
Total from investment operations.................... 1.50 2.42
---------- ----------
Less dividends and distributions to shareholders from:
Net investment income................................... (0.13) (0.10)
Net realized gain on investments........................ -- (0.02)
Tax return of capital................................... -- (0.01)
---------- ----------
Total dividends and distributions to shareholders........... (0.13) (0.13)
---------- ----------
Redemption fees retained by the fund.................... 0.00(f) --
---------- ----------
Net increase in net asset value..................... 1.37 2.29
---------- ----------
Net asset value, end of period.............................. $ 15.12 $ 13.75
---------- ----------
---------- ----------
- -------------------------------------------------------------------------------------------
Total investment return(c,d).................................. 10.95% 21.17%
---------- ----------
---------- ----------
- -------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- -------------------------
Net assets, end of period (in millions)..................... $ 41.1 $ 14.6
---------- ----------
---------- ----------
Ratio of expenses to average daily net assets (before
expense reduction)(e)..................................... 2.32% 4.49%
---------- ----------
---------- ----------
Ratio of expenses to average daily net assets (net of
expense reduction)(e)..................................... 2.15% 2.15%
---------- ----------
---------- ----------
Ratio of net investment income to average daily net assets
(before expense reduction)(e)............................. 2.35% 0.15%
---------- ----------
---------- ----------
Ratio of net investment income to average daily net assets
(net of expense reduction)(e)............................. 2.51% 2.49%
---------- ----------
---------- ----------
Portfolio turnover rate(d).................................... 10.17% 16.03%
---------- ----------
---------- ----------
</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.
(f) Amount is less than $0.005.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
20
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
FINANCIAL HIGHLIGHTS (UNAUDITED) -- (CONTINUED)
<Table>
<Caption>
CLASS I
---------------------------------
FOR THE PERIOD
FOR THE SIX MAY 3, 2004(a)
MONTHS ENDED THROUGH
PER SHARE OPERATING PERFORMANCE: JUNE 30, 2005 DECEMBER 31, 2004
- -------------------------------- ------------- -----------------
Net asset value, beginning of period........................ $ 13.78 $ 11.46
---------- ----------
Income from investment operations:
Net investment income(b)................................ 0.24 0.27
Net realized and unrealized gain on investments......... 1.34 2.24
---------- ----------
Total from investment operations........................ 1.58 2.51
---------- ----------
Less dividends and distributions to shareholders from:
Net investment income................................... (0.19) (0.17)
Net realized gain on investments........................ -- (0.01)
Tax return of capital................................... -- (0.01)
---------- ----------
Total dividends and distributions to shareholders........... (0.19) (0.19)
---------- ----------
Redemption fees retained by the fund.................... 0.00(e) --
---------- ----------
Net increase in net asset value..................... 1.39 2.32
---------- ----------
Net asset value, end of period.............................. $ 15.17 $ 13.78
---------- ----------
---------- ----------
- -------------------------------------------------------------------------------------------
Total investment return(c).................................. 11.53% 21.98%
---------- ----------
---------- ----------
- -------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- -------------------------
Net assets, end of period (in millions)..................... $ 2.2 $ 1.3
---------- ----------
---------- ----------
Ratio of expenses to average daily net assets (before
expense reduction)(d)..................................... 1.32% 9.33%
---------- ----------
---------- ----------
Ratio of expenses to average daily net assets (net of
expense reduction)(d)..................................... 1.15% 1.15%
---------- ----------
---------- ----------
Ratio of net investment income to average daily net assets
(before expense reduction)(d)............................. 3.26% - 4.92%
---------- ----------
---------- ----------
Ratio of net investment income to average daily net assets
(net of expense reduction)(d)............................. 3.43% 3.26%
---------- ----------
---------- ----------
Portfolio turnover rate(c).................................. 10.17% 16.03%
---------- ----------
---------- ----------
</Table>
- -------------------
(a) Commencement of operations.
(b) Calculation based on average shares outstanding.
(c) Not annualized.
(d) Annualized.
(e) Amount is less than $0.005.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
21
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 a nondiversified, open-end
management investment company. The fund's investment objective is total return.
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. The
authorized shares of the fund 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). Class B shares automatically convert to Class A
shares at the end of the month which precedes the eighth anniversary of the
purchase date.
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 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 deem 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. 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
- --------------------------------------------------------------------------------
22
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
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.
Securities for which market prices are unavailable will be valued at fair
value pursuant to procedures approved by the fund's Board of Directors.
Circumstances in which market prices may be unavailable include, but are not
limited to, when trading in a security is suspended, the exchange on which the
security is traded is subject to an unscheduled close or disruption or material
events occur after the close of the exchange on which the security is
principally traded. In these circumstances, the fund determines fair value in a
manner that fairly reflects the market value of the security on the valuation
date based on consideration of any information or factors it deems appropriate.
These may include recent transactions in comparable securities, information
relating to the specific security and developments in the markets.
The fund's use of fair value pricing may cause the net asset value of fund
shares to differ from the net asset value that would be calculated using market
quotations. Fair value pricing involves subjective judgments and it is possible
that the fair value determined for a security may be materially different than
the value that could be realized upon the sale of that security.
To the extent the fund holds securities that are primarily listed on foreign
exchanges that trade on weekends or days when the fund does not price its
shares, the value of the securities held in the fund may change on days when you
will not be able to purchase or redeem fund shares.
Short-term debt securities, which have a maturity date 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 investments
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.
Foreign Currency Translation and Forward Foreign Currency Contracts: The
books and records of the fund are maintained in U.S. dollars as follows:
(1) the foreign currency market value of investment securities, other assets and
liabilities and forward foreign currency contracts (forward contracts) are
translated at the exchange rates prevailing at the end of the period; and
(2) purchases, sales, income and expenses are translated at
- --------------------------------------------------------------------------------
23
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS UTILITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
the exchange rates prevailing on the respective dates of such transactions. The
resultant exchange gains and losses are recorded as realized and unrealized
gain/loss on foreign exchange transactions. Pursuant to U.S. federal income tax
regulations, certain foreign exchange gains/losses included in realized and
unrealized gain/loss are included in or are a reduction of ordinary income for
federal income tax purposes. The fund does not isolate that portion of the
results of operations arising as a result of changes in the foreign exchange
rates from the changes in the market prices of the securities. Forward contracts
are valued daily at the appropriate exchange rates. The resultant unrealized
exchange gains and losses are recorded as unrealized foreign currency gain or
loss. The fund records realized gains or losses on delivery of the currency or
at the time the forward contract is extinguished (compensated) by entering into
a closing transaction prior to delivery.
Foreign Securities: The fund may directly purchase securities of foreign
issuers. Investing in securities of foreign issuers involves special risks not
typically associated with investing in securities of U.S. issuers. The risks
include possible revaluation of currencies, the ability to repatriate funds,
less complete financial information about companies and possible future adverse
political and economic developments. Moreover, securities of many foreign
issuers and their markets may be less liquid and their prices more volatile than
those of securities of comparable U.S. issuers.
Dividends and Distributions to Shareholders: Dividends from net investment
income are declared and paid quarterly. Dividends and distributions to
shareholders are recorded on the ex-dividend date and are automatically
reinvested in full and fractional shares of the fund based on the net asset
value per share at the close of business on the ex-dividend date unless the
shareholder has elected to have them paid in cash.
Distributions paid by the fund are subject to recharacterization for tax
purposes. Based upon the results of operations for the six months ended
June 30, 2005, the advisor considers it likely that a portion of the dividends
will be reclassified to return of capital and distributions of net realized
capital gains upon the final determination of the fund's taxable income for the
year. 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.
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
- --------------------------------------------------------------------------------
24
<Page>
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COHEN & STEERS UTILITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (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 fee,
accrued daily and paid monthly at the annual rate 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 six months ended June 30, 2005 and 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.
Administration Fees: The fund has entered into an administration agreement
with the advisor under which the advisor performs certain administrative
functions for the fund and receives a fee, accrued daily and paid monthly at the
annual rate of 0.02% of the fund's average daily net assets. For the six months
ended June 30, 2005, the fund paid the advisor $9,865 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) 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 six months ended June 30, 2005, the fund has been advised that the
distributor received $14,532 in sales commissions from the sale of Class A
shares and that the distributor also received $4,627 and $4,309 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 and 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 and C shares, including payments to dealers and other financial
intermediaries for selling Class B and C shares and interest and other financing
costs associated with Class B and 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 the
fund's Class B and C shares.
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.
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25
<Page>
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COHEN & STEERS UTILITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE 3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, excluding short-term investments, for the
six months ended June 30, 2005 totaled $93,086,052 and $9,809,091, respectively.
NOTE 4. INCOME TAX INFORMATION
At June 30, 2005 the cost of investments and net unrealized appreciation for
federal income tax purposes were as follows:
<Table>
Aggregate cost............................................ $125,963,318
------------
------------
Gross unrealized appreciation............................. $ 13,615,493
Gross unrealized depreciation............................. $ (355,562)
------------
Net unrealized appreciation............................... $ 13,259,931
------------
------------
</Table>
NOTE 5. CAPITAL STOCK
The fund is authorized to issue 200 million shares of capital stock, at a
par value of $0.001 per share. The Board of Directors of the fund may increase
or decrease the aggregate number of shares of common stock that the fund has
authority to issue. At June 30, 2005, the advisor owned 89,747 Class I shares.
Transactions in fund shares were as follows:
<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX MAY 3, 2004*
MONTHS ENDED THROUGH
JUNE 30, 2005 DECEMBER 31, 2004
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- -----------
CLASS A:
Sold........................... 4,131,826 $58,355,818 1,975,846 $26,027,711
Issued as reinvestment of
dividends and
distributions................ 6,032 87,924 2,670 36,012
Redeemed....................... (127,307) (1,835,065) (25,717) (335,483)
Redemption fees retained by the
funda........................ -- 1,195 -- --
---------- ----------- ---------- -----------
Net increase................... 4,010,551 $56,609,872 1,952,799 $25,728,240
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</Table>
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26
<Page>
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COHEN & STEERS UTILITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX MAY 3, 2004*
MONTHS ENDED THROUGH
JUNE 30, 2005 DECEMBER 31, 2004
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- -----------
CLASS B:
Sold........................... 179,163 $ 2,512,967 223,491 $ 2,851,112
Issued as reinvestment of
dividends and
distributions................ 284 4,146 66 905
Redeemed....................... (15,461) (218,626) (14,786) (201,544)
Redemption fees retained by the
funda........................ -- 72 -- --
---------- ----------- ---------- -----------
Net increase................... 163,986 $ 2,298,559 208,771 $ 2,650,473
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
CLASS C:
Sold........................... 1,722,257 $24,364,906 1,082,605 $14,056,872
Issued as reinvestment of
dividends and
distributions................ 1,041 15,169 344 4,638
Redeemed....................... (65,192) (926,384) (23,708) (312,480)
Redemption fees retained by the
fund(a)...................... -- 479 -- --
---------- ----------- ---------- -----------
Net increase................... 1,658,106 $23,454,170 1,059,241 $13,749,030
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
CLASS I:
Sold........................... 68,313 $ 974,505 84,984 $ 983,321
Issued as reinvestment of
dividends and
distributions................ 1,777 25,916 1,309 17,275
Redeemed....................... (16,325) (245,220) (504) (6,736)
Redemption fees retained by the
funda........................ -- 28 -- --
---------- ----------- ---------- -----------
Net increase................... 53,765 $ 755,229 85,789 $ 993,860
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</Table>
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. is a party to 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 six months ended June 30, 2005, the fund did not utilize the line
of credit.
- -------------------
* Commencement of operations.
(a) The fund charges a 1% redemption fee on shares sold within six months of the
time of purchase.
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27
<Page>
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COHEN & STEERS UTILITY FUND, INC.
AVERAGE ANNUAL TOTAL RETURNS
(PERIODS ENDED JUNE 30, 2005) (UNAUDITED)
<Table>
<Caption>
ONE YEAR SINCE INCEPTION (5/03/04)
--------------------------- ---------------------------
INCLUDING EXCLUDING INCLUDING EXCLUDING
SALES CHARGE SALES CHARGE SALES CHARGE SALES CHARGE
------------ ------------ ------------ ------------
Class A................. 23.03% 28.82% 24.71% 29.72%
Class B................. 22.99% 27.99% 24.62% 28.73%
Class C................. 26.96% 27.96% 28.80% 28.80%
Class I................. -- 29.28% -- 30.11%
</Table>
The performance data quoted represents past performance. Past performance is no
guarantee of future results. The investment return and principal value of an
investment will fluctuate and shares, when redeemed, may be worth more or less
than their original cost. Current performance may be lower or higher than the
performance data quoted. Performance information current to the most recent
month-end can be obtained by visiting our website at cohenandsteers.com. The
performance table does 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 fund's advisor has contractually agreed to waive
certain fees and/or reimburse the fund for expenses. Absent such arrangements,
returns would have been lower.
Return figures for Class A shares are calculated without and with the effect
of the initial 4.50% maximum sales charge. Returns for Class B shares are
calculated without and with the effect of the maximum 5% contingent deferred
sales charge (CDSC), charged only on certain redemptions made within one year of
the date of purchase, declining to 1% in the sixth year and 0% thereafter.
Returns for Class C shares are calculated without and with the effect of the 1%
CDSC charged only on redemptions made within one year of the date of purchase.
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 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.
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28
<Page>
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COHEN & STEERS UTILITY FUND, INC.
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 will be
notified of the estimated amount of capital returned to shareholders for each
such distribution and this information will also be available at
cohenandsteers.com. 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.
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29
<Page>
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COHEN & STEERS UTILITY FUND, INC.
MEET THE COHEN & STEERS FAMILY OF OPEN-END FUNDS:
<Table>
FOR TOTAL RETURN: FOR TOTAL RETURN:
COHEN & STEERS COHEN & STEERS
REALTY SHARES INSTITUTIONAL REALTY SHARES
DESIGNED FOR INVESTORS SEEKING MAXIMUM TOTAL DESIGNED FOR INSTITUTIONAL INVESTORS SEEKING
RETURN, INVESTING PRIMARILY IN REITS MAXIMUM TOTAL RETURN, INVESTING PRIMARILY IN
SYMBOL: CSRSX REITS
SYMBOL: CSRIX
FOR HIGH CURRENT INCOME: FOR CAPITAL APPRECIATION:
COHEN & STEERS COHEN & STEERS
REALTY INCOME FUND REALTY FOCUS FUND
DESIGNED FOR INVESTORS SEEKING HIGH CURRENT DESIGNED FOR INVESTORS SEEKING MAXIMUM CAPITAL
INCOME, INVESTING PRIMARILY IN REITS APPRECIATION, INVESTING IN A LIMITED NUMBER OF
SYMBOLS: CSEIX, CSBIX, CSCIX, CSDIX REITS AND OTHER REAL ESTATE SECURITIES
SYMBOLS: CSFAX, CSFBX, CSFCX, CSSPX
FOR TOTAL RETURN: FOR TOTAL RETURN:
COHEN & STEERS COHEN & STEERS
INTERNATIONAL REALTY FUND UTILITY FUND
DESIGNED FOR INVESTORS SEEKING MAXIMUM TOTAL DESIGNED FOR INVESTORS SEEKING MAXIMUM TOTAL
RETURN, INVESTING PRIMARILY IN INTERNATIONAL RETURN, INVESTING PRIMARILY IN UTILITIES
REAL ESTATE SECURITIES SYMBOLS: CSUAX, CSUBX, CSUCX, CSUIX
SYMBOLS: IRFAX, IRFCX, IRFIX
</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
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30
<Page>
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COHEN & STEERS UTILITY FUND, INC.
OFFICERS AND DIRECTORS KEY INFORMATION
Robert H. Steers INVESTMENT ADVISOR
Director and co-chairman Cohen & Steers Capital Management, Inc.
757 Third Avenue
Martin Cohen New York, NY 10017
Director and co-chairman (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
Frank K. Ross Simpson Thacher & Bartlett LLP
Director 425 Lexington Avenue
New York, NY 10017
Willard H. Smith Jr.
Director DISTRIBUTOR
Cohen & Steers Securities, LLC
C. Edward Ward, Jr. 757 Third Avenue
Director New York, NY 10017
Adam M. Derechin Nasdaq Symbol: Class A - CSUAX
President and chief executive officer Class B - CSUBX
Class C - CSUCX
Joseph M. Harvey Class I - CSUIX
Vice president
Web site: cohenandsteers.com
Robert S. Becker
Vice president This report is authorized for delivery only to
shareholders of Cohen & Steers Utility Fund, Inc.
William F. Scapell unless accompanied or preceded by the delivery of a
Vice president currently effective prospectus setting forth details of
the fund. Past performance is of course no guarantee
Lawrence B. Stoller of future results and your investment may be worth
Secretary more or less at the time you sell.
Jay J. Chen
Treasurer
John E. McLean
Chief compliance officer and assistant secretary
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31
<Page>
COHEN & STEERS
UTILITY FUND
SEMIANNUAL REPORT
JUNE 30, 2005
COHEN & STEERS
UTILITY FUND
757 THIRD AVENUE
NEW YORK, NY 10017
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
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.
None.
Item 11. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial officer
have concluded, based upon their evaluation of the registrant's disclosure
controls and procedures as conducted
<Page>
within 90 days of the filing date of this report, that these disclosure controls
and procedures provide reasonable assurance that material information required
to be disclosed by the registrant in the report it files or submits on
Form N-CSR is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms
and that such material information is accumulated and communicated to the
registrant's management, including its principal executive officer and principal
financial officer, as appropriate, in order to allow timely decisions regarding
required disclosure.
(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.
(a)(3) Not applicable.
(b) Certifications of principal executive officer and principal 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/ Adam M. Derechin
-------------------------------
Name: Adam M. Derechin
Title: President and Chief Executive Officer
Date: August 23, 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/ Adam M. Derechin
-------------------------------
Name: Adam M. Derechin
Title: President and Chief Executive Officer
(principal executive officer)
By: /s/ Jay J. Chen
----------------------------------------
Name: Jay J. Chen
Title: Treasurer
(principal financial officer)
Date: August 23, 2005
STATEMENT OF DIFFERENCES
The division sign shall be expressed as....................................[div]
The Section symbol shall be expressed as...................................'SS'