UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED
SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number
|
811-21437
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Cohen & Steers REIT and Utility Income
Fund, Inc.
|
(Exact name of registrant as
specified in charter)
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280 Park Avenue, 10
th
Floor, New York, NY
|
|
10017
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(Address of principal executive
offices)
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(Zip code)
|
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Adam M. Derechin
Cohen & Steers Capital Management, Inc.
280 Park Avenue
New York, New York 10017
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(Name and address of agent for
service)
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Registrants telephone number, including
area code:
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(212) 832-3232
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Date of fiscal year end:
|
December 31
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|
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Date of reporting period:
|
December 31,
2009
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Item
1. Reports to Stockholders.
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
To Our Shareholders:
We would like to share with you our report for the year ended December 31, 2009. The net asset value (NAV) at that date was $12.87 per common share. The Fund's common stock is traded on the New York Stock Exchange (NYSE) and its share price can differ from its NAV; at period end, the Fund's closing price on the NYSE was $10.62. The total returns, including income, for the Fund and the comparative benchmarks were:
|
|
Six Months Ended
December 31, 2009
|
|
Year Ended
December 31, 2009
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|
Cohen & Steers REIT and Utility Income Fund at
Market Value
a
|
|
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54.05
|
%
|
|
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83.21
|
%
|
|
Cohen & Steers REIT and Utility Income Fund at
Net Asset Value
a
|
|
|
54.42
|
%
|
|
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54.16
|
%
|
|
FTSE NAREIT Equity REIT Index
b
|
|
|
45.80
|
%
|
|
|
27.99
|
%
|
|
S&P 1500 Utilities Index
b
|
|
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14.80
|
%
|
|
|
12.80
|
%
|
|
S&P 500 Index
b
|
|
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22.59
|
%
|
|
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26.46
|
%
|
|
Blended benchmark40% FTSE NAREIT Equity REIT
Index, 40% S&P 1500 Utilities Index, 20% Merrill Lynch
Fixed Rate Preferred Index
b
|
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27.13
|
%
|
|
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22.14
|
%
|
|
The performance data quoted represent past performance. Past performance is no guarantee of future results. The investment return and the principal value of an investment will fluctuate and shares, if sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Performance results reflect the effects of leverage, resulting from the issuance of preferred shares and/or borrowings under a credit agreement. Current total returns of the Fund can be obtained by visiting our Web site at cohenandsteers.com.
The Fund may pay distributions in excess of its investment company taxable income and net realized capital gains. This excess would be a "return of capital" distributed from the Fund's assets. 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.
a
As a closed-end investment company, the price of the Fund's New York Stock Exchange-traded shares will be set by market forces and at times may deviate from the net asset value per share of the Fund.
b
The FTSE NAREIT Equity REIT Index is an unmanaged, market-capitalization-weighted index of all publicly traded REITs that invest predominantly in the equity ownership of real estate. The index is designed to reflect the performance of all publicly traded equity REITs as a whole. The S&P 1500 Utilities Index is an unmanaged market-capitalization-weighted index of 71 companies whose primary business involves the generation, transmission and/or distribution of electricity and/or natural gas. The S&P 500 Index is an unmanaged index of common stocks that is frequently used as a general measure of stock market performance. The Merrill Lynch Fixed Rate Preferred Index is an unmanaged index of preferred securities.
1
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
Investment Review
REITs were a tale of two markets in 2009. The year's early months were characterized by continued fallout from the post-Lehman Brothers financial panic, a blowout in risk premiums and declining credit availability. The asset class sold off on concerns about REITs' limited access to capital amid near-frozen credit markets and limited transparency on property value estimates.
Broader financial markets, including REITs, began to stabilize and then rebound when the government provided clarity on the means and costs of backstopping the financial system. This broke the vicious negative feedback loop between the capital markets and the real economy, and paved the way for the market rally that followed.
REIT recapitalization lifted share prices
REITs began to raise significant new capital in March, which reassured investors that they could strengthen their balance sheets, meet debt maturities and take advantage of buying opportunities. In total, public real estate companies raised $20 billion of new equity during the year, and Cohen & Steers was a cornerstone investor in many of the offerings. Recapitalization revealed the pent-up investor demand in the asset class and drove significant spread tightening in the REIT unsecured bond market.
REITs surged in the third quarter as easing liquidity concerns lifted the asset class to its best-ever quarterly return. The pace of the rally slowed in the fourth quarter, however, when investors' appetite for risk abated and unease over high unemployment grew.
Hotel companies were top performers
The hotel sector (with a total return of +67.2%)
1
led all property types in 2009. Their short leases and ability to respond quickly to changing economic conditions began to be discounted amid signs of economic stabilization and likely future economic growth.
Regional malls (+63.0%) turned in a better-than-expected performance, benefiting from recapitalization and stabilization in retail sales and increased consumer confidence. Office REITs (+35.6%) were aided by less-severe job losses in New York and a V-shaped recovery that anticipated a return to profitability by the financial services industry.
Shopping centers declined
The shopping center sector (1.7%) was the only REIT property group to post a negative total return during the year. Typically considered defensive because of their consumer staples anchors (supermarkets and drug stores), shopping centers' smaller retailers proved to be highly sensitive to the economic downturn. In news, shopping center owner Developers Diversified Realty completed the first commercial mortgage-backed securities issuance in more than a year, and it was the first real estate debt offering backed by the Term Asset-Backed Securities Loan Facility.
Health care REITs (+24.6%) and self storage companies (+8.4%) trailed the benchmark, as defensive sectors lagged their more economically sensitive counterparts during 2009's rally.
1
Sector returns as measured by the FTSE NAREIT Equity REIT Index.
2
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
Utilities lagged the broader equity market
Utility stocks, as measured by the S&P 1500 Utilities Index, trailed the broader equity market during the year. Their relatively stable cash flows provided some downside protection when investors were decidedly defensive in January and February. However, the sector lagged when investors' risk appetite increased, and they bought the shares of companies that were beaten down the most in 2008's market rout.
The shares of electric companies (+10.6%) languished as their defensive characteristics grew less appealing when the worst of the financial crisis appeared to be over. Although the subsector rallied late in the year, the outlook for power supply and demand remains challenging.
The natural gas pipeline (+61.4%) and distribution (+25.4%) subsectors gained momentum in the second half of the year amid signs of economic recovery and the likely impact it would have on fundamentals.
Preferreds had positive returns
Preferred securities' strong performance was tied to financial companies, which are the predominate issuer of preferreds. The group struggled early on amid concerns about the possible nationalization of leading banks. However, government initiatives to shore up capital were well received and did not suggest nationalization. Importantly, banks reported better-than-expected first-quarter earnings, helping to revive the market.
REIT preferreds significantly outperformed preferreds issued by non-real estate companies, aided by the factors that helped real estate common shares. REITs did not issue preferreds in 2009, favoring the common stock and bond deals that contributed to the supportive investment backdrop.
Proposed merger of RTU and UTF
At a special meeting on November 24, 2009, the Fund's stockholders approved its merger into Cohen & Steers Infrastructure Fund, Inc. (UTF). The board believes merging the funds would benefit shareholders through lower expenses and greater operating efficiencies. However, as of this writing, an insufficient number of UTF shareholder votes have been submitted to approve the merger, and UTF continues to solicit votes to approve the proposal. For more information, see Note 9 in the Notes to Financial Statements.
Fund performance
The Fund employs leverage as part of a yield-enhancement strategy. Leverage, which can increase total return in rising markets (just as it can have the opposite effect in declining markets), boosted the Fund's performance for the year compared with its benchmarks, which are not leveraged.
The Fund's market price rose 83.2% in the period. This reflected not only strong investment performance (and the associated impact of leverage), but also a general narrowing in closed-end funds' discounts to their underlying NAVs. Discounts for most funds reached historically wide levels in 2008, but narrowed considerably in 2009.
In terms of security selection, the Fund's performance was aided by its allocation to preferred securities, which posted strong returns in both absolute terms and compared with the broad preferred and equity markets. The Fund's REIT preferreds had especially large gains.
3
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
The Fund's REIT equity holdings outperformed the blended benchmark (on an unleveraged basis), led by our underweight in shopping center and self storage REITs, and our stock selection and underweight in the health care and industrial (+12.2%) sectors.
Factors that detracted from REITs' relative return included our stock selection and underweight in the regional mall and office sectors, and our underweight positions in hotel companies and apartment REITs (which had a total return of +30.4% within the index). Apartment companies were hurt early in the year by declining fundamentals (increased job losses and declines in market rents), but improved in the third quarter on expectations of stabilization in fundamentals in 2010 and growth in 2011.
The Fund's allocation to utilities generated a strong absolute return but trailed the blended benchmark. However, our out-of-index allocation to energy infrastructure companies (largely master limited partnership pipeline companies) provided a significant contribution to relative performance. These companies performed well in 2009 as improving economic conditions led to a stronger demand for energy. The United States has an urgent need for new infrastructure that connects emerging oil and gas supply basins to consuming regions; in our opinion, this is providing very attractive investment opportunities.
Investment Outlook
We expect 2010 to be a year of better-than-expected economic growth and continued stabilization in fundamentals. Although there are concerns about the eventual cost of the government stimulusmonetary tightening, higher taxes and the effects of fiscal stimuluswe believe the recovery will prove self-sustaining and continue into 2011.
The new year may well be one in which REITs begin to take advantage of significant acquisition opportunities. While the environment is not so distressed as to create dysfunction, well-capitalized REITs with an operating platform will likely have attractive opportunities to create value and generate above-average cash flow growth. During the latter half of 2010 and into 2011, we expect the benefits of economic recovery and growth to translate into occupancy stabilization and selective rent increases in many commercial real estate markets.
From a portfolio standpoint, we currently favor economically sensitive sectors. On a sector-specific basis, we believe that shopping centers, hotels and self storage REITs will outperform. Office REITs should benefit from low supply and stabilization in jobs, although we believe most of this dynamic is already priced into company valuations. While we find apartment company fundamentals attractive, we remain cautious because of their less favorable valuations.
We expect to maintain our focus on REITs with healthy balance sheets but with a particular focus on entrepreneurial management teams that have the acumen to create, rather than wait for, unique opportunities.
Utilities continue to face significant headwinds, the largest being the current oversupply of power, given the prolonged weakness in industrial demand. However, we believe that after a year of meaningful sector underperformance, current valuations largely reflect these factors. We see attractive opportunities in pipeline companies (given strong fundamentals and attractive valuations), and in small- and mid-cap electric utilities with strong balance sheets and visible long-term investment opportunities.
4
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
Regarding preferred securities, we continue to find good value in the market, which remains inexpensive based on various valuation metrics. In particular, credit spreads offered by preferreds remain well wide of historical levels. We expect the economic recovery to continue to support corporate credit and cause credit spreads to contract further. We also believe that many investors should be attracted by the historically high and stable income offered by preferreds.
Sincerely,
|
|
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|
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MARTIN COHEN
|
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ROBERT H. STEERS
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|
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Co-chairman
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Co-chairman
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ROBERT S. BECKER
|
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WILLIAM F. SCAPELL
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|
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Portfolio Manager
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Portfolio Manager
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|
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JOSEPH M. HARVEY
|
|
THOMAS N. BOHJALIAN
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|
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Portfolio Manager
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Portfolio Manager
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The views and opinions in the preceding commentary are subject to change. This material represents an assessment of the market environment at a specific point in time, should not be relied upon as investment advice and is not intended to predict or depict performance of any investment.
Visit Cohen & Steers online at cohenandsteers.com
For more information about any of our funds, visit cohenandsteers.com, where you will find daily net asset values, fund fact sheets and portfolio highlights. You can also access newsletters, education tools and market updates covering the global real estate, listed infrastructure, utilities, large cap value 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.
5
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
Our Leverage Strategy
(Unaudited)
Our current leverage strategy utilizes borrowings up to the maximum permitted by the 1940 Act to provide additional capital for the Fund, with an objective of increasing the net income available for shareholders. As of December 31, 2009, leverage represented 35%
a
of the Fund's managed assets.
It has been our philosophy to utilize interest rate swap transactions to seek to reduce the interest rate risk inherent in our utilization of leverage. Considering that borrowings have variable interest rate payments, we seek to lock in those rates on a significant portion of this additional capital through interest rate swap agreements (where we effectively convert our variable rate obligation to a fixed rate obligation for the term of the swap agreements). Specifically, as of December 31, 2009, we have fixed the rate on 60% of our borrowings at an average interest rate of 3.6% for an average remaining period of 3.2 years (when we first entered into the swaps, the average term was 5.7 years). Locking in a significant portion of our leveraging costs is designed to protect the dividend-paying ability of the Fund. The use of leverage increases the volatility of the Fund's net asset value in both up and down markets. However, we believe that locking in a portion of the Fund's leveraging costs for the term of the swap agreements partially protects the Fund's expenses from an increase in short-term interest rates.
Leverage Facts
b
Leverage (as a % of managed assets)
a
|
|
35
%
|
|
%
Fixed Rate
|
|
60
%
|
|
%
Variable Rate
|
|
40
%
|
|
Weighted Average Rate on Swaps
|
|
3.6
%
|
|
Weighted Average Term on Swaps
|
|
3.2
years
|
|
Current Rate on Debt
c
|
|
1.3
%
|
|
The Fund seeks to enhance its dividend yield through leverage. The use of leverage is a speculative technique and there are special risks and costs associated with leverage. The net asset value of the Fund's common shares may be reduced by the incurrence and ongoing costs of leverage. So long as the Fund is able to invest in securities that produce a realized investment yield that is greater than the total cost of leverage, the leverage strategy will produce higher current net investment income for the common shareholders. On the other hand, to the extent that the total cost of leverage exceeds the incremental income gained from employing such leverage, the common shareholders would realize lower net investment income. In addition to the impact on net income, the use of leverage will have an effect of magnifying capital appreciation or depreciation for common shareholders. Specifically, in an up market, leverage will typically generate greater capital appreciation than if the Fund was not employing leverage. Conversely, in down markets, the use of leverage will generally result in greater capital depreciation than if the Fund had been unlevered. To the extent that the Fund is required or elects to reduce its leverage, the Fund may need to liquidate investments, including under adverse economic conditions which may result in capital losses potentially reducing returns to common shareholders. There can be no assurance that a leveraging strategy will be successful during any period in which it is employed.
a
On June 1, 2009, the Securities and Exchange Commission (SEC) issued an order (the "Order") to the Fund providing an exemption from Section 18 of the 1940 Act. The Order temporarily permits the Fund to maintain 200% asset coverage for debt used to replace auction market preferred securities (AMPS) rather than 300% asset coverage required by Section 18 for debt. The exemptive relief expires on October 31, 2010.
b
Data as of December 31, 2009. Information is subject to change.
c
See Note 6 in Notes to Financial Statements.
6
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
DECEMBER 31, 2009
Top Ten Holdings
a
(Unaudited)
Security
|
|
Value
|
|
% of
Managed
Assets
|
|
Simon Property Group
|
|
$
|
45,062,262
|
|
|
|
3.9
|
%
|
|
Southern Co.
|
|
|
26,787,447
|
|
|
|
2.3
|
|
|
ProLogis
|
|
|
26,044,896
|
|
|
|
2.2
|
|
|
Entergy Corp.
|
|
|
21,967,493
|
|
|
|
1.9
|
|
|
Duke Energy Corp.
|
|
|
21,942,475
|
|
|
|
1.9
|
|
|
FPL Group
|
|
|
20,903,937
|
|
|
|
1.8
|
|
|
PG&E Corp.
|
|
|
20,764,706
|
|
|
|
1.8
|
|
|
Public Storage
|
|
|
20,483,779
|
|
|
|
1.8
|
|
|
Equity Residential
|
|
|
20,183,246
|
|
|
|
1.7
|
|
|
Host Hotels & Resorts
|
|
|
20,160,158
|
|
|
|
1.7
|
|
|
a
Top ten holdings are determined on the basis of the value of individual securities held. The Fund may also hold positions in other types of securities issued by the companies listed above. See the Schedule of Investments for additional details on such other positions.
Sector Breakdown
(Based on Managed Assets)
(Unaudited)
7
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS
December 31, 2009
|
|
|
|
Number
of Shares
|
|
Value
|
|
COMMON STOCK
|
|
|
119.6
|
%
|
|
|
|
|
|
|
|
|
|
CONSUMER DISCRETIONARYCABLE & SATELLITE
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
Eutelsat Communications (France)
a
|
|
|
|
|
|
|
65,000
|
|
|
$
|
2,085,466
|
|
|
SES SA (Luxembourg)
a
|
|
|
|
|
|
|
131,323
|
|
|
|
2,958,351
|
|
|
|
|
|
|
|
|
|
5,043,817
|
|
|
ENERGYOIL & GAS STORAGE & TRANSPORTATION
|
|
|
7.6
|
%
|
|
|
|
|
|
|
|
|
|
DCP Midstream Partners LP
b
|
|
|
|
|
|
|
96,738
|
|
|
|
2,860,543
|
|
|
Enbridge Energy Partners LP
b
|
|
|
|
|
|
|
75,981
|
|
|
|
4,079,420
|
|
|
Energy Transfer Equity LP
b
|
|
|
|
|
|
|
32,000
|
|
|
|
978,560
|
|
|
Energy Transfer Partners LP
b
|
|
|
|
|
|
|
64,610
|
|
|
|
2,905,512
|
|
|
Enterprise GP Holdings LP
b
|
|
|
|
|
|
|
30,000
|
|
|
|
1,169,100
|
|
|
Enterprise Products Partners LP
b
|
|
|
|
|
|
|
204,200
|
|
|
|
6,413,922
|
|
|
Kinder Morgan Energy Partners LP
b,c
|
|
|
|
|
|
|
86,192
|
|
|
|
5,255,988
|
|
|
Magellan Midstream Partners LP
b,c
|
|
|
|
|
|
|
106,900
|
|
|
|
4,631,977
|
|
|
MarkWest Energy Partners LP
b
|
|
|
|
|
|
|
122,400
|
|
|
|
3,582,648
|
|
|
Spectra Energy Corp.
b
|
|
|
|
|
|
|
471,326
|
|
|
|
9,666,896
|
|
|
TransCanada Corp. (Canada)
|
|
|
|
|
|
|
91,000
|
|
|
|
3,148,912
|
|
|
Williams Cos. (The)
b
|
|
|
|
|
|
|
326,000
|
|
|
|
6,872,080
|
|
|
Williams Partners LP
b
|
|
|
|
|
|
|
196,600
|
|
|
|
6,029,722
|
|
|
|
|
|
|
|
|
|
57,595,280
|
|
|
INDUSTRIALS
|
|
|
4.8
|
%
|
|
|
|
|
|
|
|
|
|
CONSTRUCTION & ENGINEERING
|
|
|
2.8
|
%
|
|
|
|
|
|
|
|
|
|
Ferrovial SA (Spain)
a
|
|
|
|
|
|
|
678,000
|
|
|
|
8,007,413
|
|
|
Vinci SA (France)
a
|
|
|
|
|
|
|
231,000
|
|
|
|
12,998,617
|
|
|
|
|
|
|
|
|
|
21,006,030
|
|
|
HIGHWAYS & RAILTRACKS
|
|
|
1.3
|
%
|
|
|
|
|
|
|
|
|
|
Anhui Expressway Co. (Hong Kong)
a
|
|
|
|
|
|
|
3,469,200
|
|
|
|
2,408,788
|
|
|
Atlantia S.p.A. (Italy)
a
|
|
|
|
|
|
|
105,600
|
|
|
|
2,761,668
|
|
|
Cia de Concessoes Rodoviarias (Brazil)
|
|
|
|
|
|
|
223,216
|
|
|
|
5,114,352
|
|
|
|
|
|
|
|
|
|
10,284,808
|
|
|
See accompanying notes to financial statements.
8
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS(Continued)
December 31, 2009
|
|
|
|
Number
of Shares
|
|
Value
|
|
RAILROADS
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
RailAmerica
b
|
|
|
|
|
|
|
417,061
|
|
|
$
|
5,088,144
|
|
|
TOTAL INDUSTRIALS
|
|
|
|
|
|
|
|
|
|
|
36,378,982
|
|
|
REAL ESTATE
|
|
|
58.2
|
%
|
|
|
|
|
|
|
|
|
|
DIVERSIFIED
|
|
|
4.2
|
%
|
|
|
|
|
|
|
|
|
|
Cousins Properties
d
|
|
|
|
|
|
|
351,635
|
|
|
|
2,682,975
|
|
|
Dexus Property Group (Australia)
a
|
|
|
|
|
|
|
4,207,100
|
|
|
|
3,191,827
|
|
|
Forest City Enterprises
e
|
|
|
|
|
|
|
234,800
|
|
|
|
2,765,944
|
|
|
Great Eagle Holdings Ltd. (Hong Kong)
a
|
|
|
|
|
|
|
247,659
|
|
|
|
642,181
|
|
|
Lexington Realty Trust
b
|
|
|
|
|
|
|
805,843
|
|
|
|
4,899,525
|
|
|
Vornado Realty Trust
b
|
|
|
|
|
|
|
250,159
|
|
|
|
17,496,121
|
|
|
|
|
|
|
|
|
|
31,678,573
|
|
|
HEALTH CARE
|
|
|
7.3
|
%
|
|
|
|
|
|
|
|
|
|
Brookdale Senior Living
b,c,e
|
|
|
|
|
|
|
515,900
|
|
|
|
9,384,221
|
|
|
Chartwell Seniors Housing (Canada)
|
|
|
|
|
|
|
448,100
|
|
|
|
3,012,041
|
|
|
HCP
b,c
|
|
|
|
|
|
|
629,785
|
|
|
|
19,233,634
|
|
|
Nationwide Health Properties
b
|
|
|
|
|
|
|
153,806
|
|
|
|
5,410,895
|
|
|
Omega Healthcare Investors
|
|
|
|
|
|
|
238,400
|
|
|
|
4,636,880
|
|
|
Senior Housing Properties Trust
|
|
|
|
|
|
|
181,961
|
|
|
|
3,979,487
|
|
|
Ventas
b
|
|
|
|
|
|
|
213,187
|
|
|
|
9,324,799
|
|
|
|
|
|
|
|
|
|
54,981,957
|
|
|
HOTEL
|
|
|
4.6
|
%
|
|
|
|
|
|
|
|
|
|
Hospitality Properties Trust
b
|
|
|
|
|
|
|
498,459
|
|
|
|
11,818,463
|
|
|
Host Hotels & Resorts
b
|
|
|
|
|
|
|
1,727,520
|
|
|
|
20,160,158
|
|
|
Sunstone Hotel Investors
e
|
|
|
|
|
|
|
371,052
|
|
|
|
3,294,942
|
|
|
|
|
|
|
|
|
|
35,273,563
|
|
|
INDUSTRIAL
|
|
|
4.4
|
%
|
|
|
|
|
|
|
|
|
|
AMB Property Corp.
b
|
|
|
|
|
|
|
180,201
|
|
|
|
4,604,136
|
|
|
ProLogis
b,c
|
|
|
|
|
|
|
1,902,476
|
|
|
|
26,044,896
|
|
|
Segro PLC (United Kingdom)
a
|
|
|
|
|
|
|
439,200
|
|
|
|
2,436,145
|
|
|
|
|
|
|
|
|
|
33,085,177
|
|
|
See accompanying notes to financial statements.
9
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS(Continued)
December 31, 2009
|
|
|
|
Number
of Shares
|
|
Value
|
|
OFFICE
|
|
|
8.3
|
%
|
|
|
|
|
|
|
|
|
|
BioMed Realty Trust
b
|
|
|
|
|
|
|
191,460
|
|
|
$
|
3,021,239
|
|
|
Boston Properties
b,d
|
|
|
|
|
|
|
253,511
|
|
|
|
17,002,983
|
|
|
Brookfield Properties Corp. (Canada)
b
|
|
|
|
|
|
|
361,463
|
|
|
|
4,380,932
|
|
|
Douglas Emmett
b
|
|
|
|
|
|
|
14,338
|
|
|
|
204,317
|
|
|
Hongkong Land Holdings Ltd. (USD) (Hong Kong)
a
|
|
|
|
|
|
|
513,700
|
|
|
|
2,530,014
|
|
|
ING Office Fund (Australia)
a
|
|
|
|
|
|
|
6,185,400
|
|
|
|
3,515,936
|
|
|
Kilroy Realty Corp.
b
|
|
|
|
|
|
|
130,616
|
|
|
|
4,005,993
|
|
|
Liberty Property Trust
b
|
|
|
|
|
|
|
255,634
|
|
|
|
8,182,844
|
|
|
Mack-Cali Realty Corp.
b,c
|
|
|
|
|
|
|
333,964
|
|
|
|
11,545,135
|
|
|
SL Green Realty Corp.
b
|
|
|
|
|
|
|
176,056
|
|
|
|
8,845,053
|
|
|
|
|
|
|
|
|
|
63,234,446
|
|
|
OFFICE/INDUSTRIAL
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
PS Business Parks
b
|
|
|
|
|
|
|
141,511
|
|
|
|
7,082,626
|
|
|
RESIDENTIAL
|
|
|
9.9
|
%
|
|
|
|
|
|
|
|
|
|
APARTMENT
|
|
|
9.3
|
%
|
|
|
|
|
|
|
|
|
|
American Campus Communities
b
|
|
|
|
|
|
|
103,621
|
|
|
|
2,911,750
|
|
|
Apartment Investment & Management Co.
b
|
|
|
|
|
|
|
351,819
|
|
|
|
5,600,958
|
|
|
AvalonBay Communities
b
|
|
|
|
|
|
|
177,419
|
|
|
|
14,567,874
|
|
|
Camden Property Trust
|
|
|
|
|
|
|
217,892
|
|
|
|
9,232,084
|
|
|
Colonial Properties Trust
b
|
|
|
|
|
|
|
260,565
|
|
|
|
3,056,427
|
|
|
Education Realty Trust
d
|
|
|
|
|
|
|
449,090
|
|
|
|
2,173,596
|
|
|
Equity Residential
b
|
|
|
|
|
|
|
597,491
|
|
|
|
20,183,246
|
|
|
Home Properties
b
|
|
|
|
|
|
|
112,070
|
|
|
|
5,346,860
|
|
|
Post Properties
b
|
|
|
|
|
|
|
226,675
|
|
|
|
4,442,830
|
|
|
UDR
b
|
|
|
|
|
|
|
189,070
|
|
|
|
3,108,311
|
|
|
|
|
|
|
|
|
|
70,623,936
|
|
|
MANUFACTURED HOME
|
|
|
0.6
|
%
|
|
|
|
|
|
|
|
|
|
Equity Lifestyle Properties
b
|
|
|
|
|
|
|
80,346
|
|
|
|
4,055,063
|
|
|
TOTAL RESIDENTIAL
|
|
|
|
|
|
|
|
|
|
|
74,678,999
|
|
|
See accompanying notes to financial statements.
10
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS(Continued)
December 31, 2009
|
|
|
|
Number
of Shares
|
|
Value
|
|
SELF STORAGE
|
|
|
4.3
|
%
|
|
|
|
|
|
|
|
|
|
Public Storage
b
|
|
|
|
|
|
|
251,489
|
|
|
$
|
20,483,779
|
|
|
Sovran Self Storage
b
|
|
|
|
|
|
|
177,072
|
|
|
|
6,326,783
|
|
|
U-Store-It Trust
d
|
|
|
|
|
|
|
779,100
|
|
|
|
5,703,012
|
|
|
|
|
|
|
|
|
|
32,513,574
|
|
|
SHOPPING CENTER
|
|
|
13.9
|
%
|
|
|
|
|
|
|
|
|
|
COMMUNITY CENTER
|
|
|
4.5
|
%
|
|
|
|
|
|
|
|
|
|
Developers Diversified Realty Corp.
d
|
|
|
|
|
|
|
917,575
|
|
|
|
8,496,745
|
|
|
Kimco Realty Corp.
b
|
|
|
|
|
|
|
531,408
|
|
|
|
7,189,950
|
|
|
Regency Centers Corp.
|
|
|
|
|
|
|
261,138
|
|
|
|
9,155,498
|
|
|
Urstadt Biddle PropertiesClass A
b
|
|
|
|
|
|
|
154,917
|
|
|
|
2,365,583
|
|
|
Weingarten Realty Investors
b
|
|
|
|
|
|
|
328,960
|
|
|
|
6,510,118
|
|
|
|
|
|
|
|
|
|
33,717,894
|
|
|
FREE STANDING
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
Realty Income Corp.
|
|
|
|
|
|
|
274,766
|
|
|
|
7,119,187
|
|
|
REGIONAL MALL
|
|
|
8.5
|
%
|
|
|
|
|
|
|
|
|
|
Macerich Co.
b,c
|
|
|
|
|
|
|
537,962
|
|
|
|
19,339,734
|
|
|
Simon Property Group
b,c
|
|
|
|
|
|
|
564,690
|
|
|
|
45,062,262
|
|
|
|
|
|
|
|
|
|
64,401,996
|
|
|
TOTAL SHOPPING CENTER
|
|
|
|
|
|
|
|
|
|
|
105,239,077
|
|
|
SPECIALTY
|
|
|
0.4
|
%
|
|
|
|
|
|
|
|
|
|
Weyerhaeuser Co.
|
|
|
|
|
|
|
71,214
|
|
|
|
3,072,172
|
|
|
TOTAL REAL ESTATE
|
|
|
|
|
|
|
|
|
|
|
440,840,164
|
|
|
TELECOMMUNICATION SERVICES
|
|
|
1.2
|
%
|
|
|
|
|
|
|
|
|
|
INTEGRATED TELECOMMUNICATION SERVICES
|
|
|
0.5
|
%
|
|
|
|
|
|
|
|
|
|
AT&T
b
|
|
|
|
|
|
|
146,000
|
|
|
|
4,092,380
|
|
|
WIRELESS TELECOMMUNICATION SERVICES
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
American Tower Corp.
b,e
|
|
|
|
|
|
|
75,000
|
|
|
|
3,240,750
|
|
|
SBA Communications Corp.
b,e
|
|
|
|
|
|
|
53,000
|
|
|
|
1,810,480
|
|
|
|
|
|
|
|
|
|
5,051,230
|
|
|
TOTAL TELECOMMUNICATION SERVICES
|
|
|
|
|
|
|
|
|
|
|
9,143,610
|
|
|
See accompanying notes to financial statements.
11
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS(Continued)
December 31, 2009
|
|
|
|
Number
of Shares
|
|
Value
|
|
UTILITIES
|
|
|
47.1
|
%
|
|
|
|
|
|
|
|
|
|
ELECTRIC UTILITIES
|
|
|
28.9
|
%
|
|
|
|
|
|
|
|
|
|
Allegheny Energy
|
|
|
|
|
|
|
209,000
|
|
|
$
|
4,907,320
|
|
|
American Electric Power Co.
b
|
|
|
|
|
|
|
305,063
|
|
|
|
10,613,142
|
|
|
Cheung Kong Infrastructure Holdings Ltd. (Hong Kong)
a
|
|
|
|
|
|
|
649,000
|
|
|
|
2,467,946
|
|
|
Cia de Transmissao de Energia Eletrica Paulista (Brazil)
|
|
|
|
|
|
|
75,347
|
|
|
|
2,239,637
|
|
|
CPFL Energia SA (Brazil)
|
|
|
|
|
|
|
86,862
|
|
|
|
1,761,687
|
|
|
DPL
b
|
|
|
|
|
|
|
250,956
|
|
|
|
6,926,386
|
|
|
Duke Energy Corp.
b
|
|
|
|
|
|
|
1,274,984
|
|
|
|
21,942,475
|
|
|
E.ON AG (Germany)
a
|
|
|
|
|
|
|
71,600
|
|
|
|
3,005,343
|
|
|
E.ON AG (ADR) (Germany)
b
|
|
|
|
|
|
|
27,517
|
|
|
|
1,148,835
|
|
|
Electricite de France (France)
a
|
|
|
|
|
|
|
137,600
|
|
|
|
8,178,025
|
|
|
Enel S.p.A. (Italy)
a
|
|
|
|
|
|
|
571,520
|
|
|
|
3,308,751
|
|
|
Entergy Corp.
b,c
|
|
|
|
|
|
|
268,420
|
|
|
|
21,967,493
|
|
|
Exelon Corp.
b,c
|
|
|
|
|
|
|
409,578
|
|
|
|
20,016,077
|
|
|
FirstEnergy Corp.
b,c
|
|
|
|
|
|
|
266,182
|
|
|
|
12,364,154
|
|
|
Fortum Oyj (Finland)
a
|
|
|
|
|
|
|
113,000
|
|
|
|
3,065,630
|
|
|
FPL Group
b,c
|
|
|
|
|
|
|
395,758
|
|
|
|
20,903,937
|
|
|
ITC Holdings Corp.
b
|
|
|
|
|
|
|
88,064
|
|
|
|
4,587,254
|
|
|
Northeast Utilities
b
|
|
|
|
|
|
|
320,871
|
|
|
|
8,275,263
|
|
|
NV Energy
b,c
|
|
|
|
|
|
|
665,584
|
|
|
|
8,239,930
|
|
|
Pepco Holdings
b
|
|
|
|
|
|
|
234,242
|
|
|
|
3,946,978
|
|
|
PPL Corp.
b
|
|
|
|
|
|
|
269,000
|
|
|
|
8,691,390
|
|
|
Progress Energy
b
|
|
|
|
|
|
|
170,929
|
|
|
|
7,009,798
|
|
|
Scottish and Southern Energy PLC (United Kingdom)
a
|
|
|
|
|
|
|
191,328
|
|
|
|
3,581,234
|
|
|
Southern Co.
b,c
|
|
|
|
|
|
|
803,945
|
|
|
|
26,787,447
|
|
|
Terna Rete Elettrica Nazionale S.p.A. (Italy)
a
|
|
|
|
|
|
|
687,200
|
|
|
|
2,955,353
|
|
|
|
|
|
|
|
|
|
218,891,485
|
|
|
GAS UTILITIES
|
|
|
2.5
|
%
|
|
|
|
|
|
|
|
|
|
EQT Corp.
b,c
|
|
|
|
|
|
|
173,000
|
|
|
|
7,598,160
|
|
|
Questar Corp.
b
|
|
|
|
|
|
|
141,199
|
|
|
|
5,869,643
|
|
|
Snam Rete Gas S.p.A. (Italy)
a
|
|
|
|
|
|
|
1,133,500
|
|
|
|
5,629,153
|
|
|
|
|
|
|
|
|
|
19,096,956
|
|
|
See accompanying notes to financial statements.
12
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS(Continued)
December 31, 2009
|
|
|
|
Number
of Shares
|
|
Value
|
|
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS
|
|
|
0.4
|
%
|
|
|
|
|
|
|
|
|
|
China Longyuan Power Group Corp. (Hong Kong)
|
|
|
|
|
|
|
2,415,900
|
|
|
$
|
3,128,387
|
|
|
MULTI UTILITIES
|
|
|
13.7
|
%
|
|
|
|
|
|
|
|
|
|
Alliant Energy Corp.
b
|
|
|
|
|
|
|
122,752
|
|
|
|
3,714,476
|
|
|
CenterPoint Energy
b
|
|
|
|
|
|
|
208,644
|
|
|
|
3,027,424
|
|
|
CMS Energy Corp.
b,c
|
|
|
|
|
|
|
489,694
|
|
|
|
7,668,608
|
|
|
Consolidated Edison
b
|
|
|
|
|
|
|
87,302
|
|
|
|
3,966,130
|
|
|
Dominion Resources
b
|
|
|
|
|
|
|
216,400
|
|
|
|
8,422,288
|
|
|
DTE Energy Co.
b
|
|
|
|
|
|
|
24,000
|
|
|
|
1,046,160
|
|
|
GDF Suez (France)
a
|
|
|
|
|
|
|
183,758
|
|
|
|
7,960,584
|
|
|
National Grid PLC (United Kingdom)
a
|
|
|
|
|
|
|
292,174
|
|
|
|
3,189,057
|
|
|
PG&E Corp.
b,c
|
|
|
|
|
|
|
465,055
|
|
|
|
20,764,706
|
|
|
Public Service Enterprise Group
b,c
|
|
|
|
|
|
|
518,400
|
|
|
|
17,236,800
|
|
|
RWE AG (Germany)
a
|
|
|
|
|
|
|
30,700
|
|
|
|
2,979,200
|
|
|
Sempra Energy
b
|
|
|
|
|
|
|
229,500
|
|
|
|
12,847,410
|
|
|
United Utilities Group PLC (United Kingdom)
a
|
|
|
|
|
|
|
71,323
|
|
|
|
570,100
|
|
|
Wisconsin Energy Corp.
b
|
|
|
|
|
|
|
208,069
|
|
|
|
10,368,078
|
|
|
|
|
|
|
|
|
|
103,761,021
|
|
|
WATER UTILITIES
|
|
|
1.6
|
%
|
|
|
|
|
|
|
|
|
|
American Water Works Co.
b
|
|
|
|
|
|
|
274,761
|
|
|
|
6,157,394
|
|
|
Cia de Saneamento Basico do Estado de Sao Paulo (Brazil)
|
|
|
|
|
|
|
49,606
|
|
|
|
979,583
|
|
|
Cia de Saneamento de Minas Gerais (Brazil)
|
|
|
|
|
|
|
85,000
|
|
|
|
1,623,349
|
|
|
Pennon Group PLC (United Kingdom)
a
|
|
|
|
|
|
|
359,000
|
|
|
|
3,108,298
|
|
|
|
|
|
|
|
|
|
11,868,624
|
|
|
TOTAL UTILITIES
|
|
|
|
|
|
|
|
|
|
|
356,746,473
|
|
|
TOTAL COMMON STOCK (Identified cost$791,916,038)
|
|
|
|
|
|
|
|
|
|
|
905,748,326
|
|
|
PREFERRED SECURITIES$25 PAR VALUE
|
|
|
19.1
|
%
|
|
|
|
|
|
|
|
|
|
BANK
|
|
|
1.1
|
%
|
|
|
|
|
|
|
|
|
|
BB&T Capital Trust VII, 8.10%, due 11/1/64
|
|
|
|
|
|
|
138,000
|
|
|
|
3,567,300
|
|
|
Citigroup Capital VIII, 6.95%, due 9/15/31, (TruPS)
|
|
|
|
|
|
|
118,197
|
|
|
|
2,452,588
|
|
|
JPMorgan Chase Capital XXVIII, 7.20%, due 12/22/39
|
|
|
|
|
|
|
101,900
|
|
|
|
2,599,469
|
|
|
|
|
|
|
|
|
|
8,619,357
|
|
|
See accompanying notes to financial statements.
13
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS(Continued)
December 31, 2009
|
|
|
|
Number
of Shares
|
|
Value
|
|
BANKFOREIGN
|
|
|
2.9
|
%
|
|
|
|
|
|
|
|
|
|
Barclays Bank PLC, 8.125%
b
|
|
|
|
|
|
|
150,000
|
|
|
$
|
3,729,000
|
|
|
Deutsche Bank Contingent Capital Trust III, 7.60%
b
|
|
|
|
|
|
|
172,000
|
|
|
|
4,081,560
|
|
|
Deutsche Bank Contingent Capital Trust V, 8.05%
b,c
|
|
|
|
|
|
|
114,525
|
|
|
|
2,884,885
|
|
|
Santander Finance Preferred, 4.00%, Series 6 (FRN)
b
|
|
|
|
|
|
|
199,700
|
|
|
|
4,035,937
|
|
|
Santander Finance Preferred, 10.50%, Series 10
b
|
|
|
|
|
|
|
264,087
|
|
|
|
7,494,789
|
|
|
|
|
|
|
|
|
|
22,226,171
|
|
|
ELECTRICINTEGRATED
|
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|
Dominion Resources, 8.375%, Series A
b
|
|
|
|
|
|
|
200,000
|
|
|
|
5,480,000
|
|
|
SCANA Corp., 7.70%, due 1/30/65
|
|
|
|
|
|
|
90,000
|
|
|
|
2,376,000
|
|
|
|
|
|
|
|
|
|
7,856,000
|
|
|
FINANCEMORTGAGE LOAN/BROKER
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
Countrywide Capital IV, 6.75%, due 4/1/33
|
|
|
|
|
|
|
175,000
|
|
|
|
3,739,750
|
|
|
Countrywide Capital V, 7.00%, due 11/1/36
b
|
|
|
|
|
|
|
125,000
|
|
|
|
2,706,250
|
|
|
|
|
|
|
|
|
|
6,446,000
|
|
|
INSURANCE
|
|
|
3.1
|
%
|
|
|
|
|
|
|
|
|
|
MULTI-LINE
|
|
|
0.4
|
%
|
|
|
|
|
|
|
|
|
|
Aegon NV, 6.50%, due 12/15/10
|
|
|
|
|
|
|
172,816
|
|
|
|
3,100,319
|
|
|
MULTI-LINEFOREIGN
|
|
|
1.8
|
%
|
|
|
|
|
|
|
|
|
|
Allianz SE, 8.375%
b
|
|
|
|
|
|
|
207,085
|
|
|
|
5,112,411
|
|
|
ING Groep N.V., 7.05%
|
|
|
|
|
|
|
270,000
|
|
|
|
5,011,200
|
|
|
ING Groep N.V., 7.375%
b
|
|
|
|
|
|
|
168,264
|
|
|
|
3,314,801
|
|
|
|
|
|
|
|
|
|
13,438,412
|
|
|
PROPERTY CASUALTYFOREIGN
|
|
|
0.4
|
%
|
|
|
|
|
|
|
|
|
|
Arch Capital Group Ltd., 8.00%
b
|
|
|
|
|
|
|
129,000
|
|
|
|
3,227,580
|
|
|
REINSURANCEFOREIGN
|
|
|
0.5
|
%
|
|
|
|
|
|
|
|
|
|
Aspen Insurance Holdings Ltd., 7.401%, Series A
b
|
|
|
|
|
|
|
150,000
|
|
|
|
3,330,000
|
|
|
TOTAL INSURANCE
|
|
|
|
|
|
|
|
|
|
|
23,096,311
|
|
|
INTEGRATED TELECOMMUNICATIONS SERVICES
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
Telephone & Data Systems, 7.60%, due 12/1/41, Series A
b
|
|
|
|
|
|
|
263,375
|
|
|
|
6,468,490
|
|
|
See accompanying notes to financial statements.
14
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS(Continued)
December 31, 2009
|
|
|
|
Number
of Shares
|
|
Value
|
|
MEDIADIVERSIFIED SERVICES
|
|
|
0.8
|
%
|
|
|
|
|
|
|
|
|
|
Comcast Corp., 7.00%, due 9/15/55, Series B
b
|
|
|
|
|
|
|
230,000
|
|
|
$
|
5,759,200
|
|
|
REAL ESTATE
|
|
|
8.4
|
%
|
|
|
|
|
|
|
|
|
|
DIVERSIFIED
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
Duke Realty Corp., 8.375%, Series O
b
|
|
|
|
|
|
|
77,300
|
|
|
|
1,900,034
|
|
|
Forest City Enterprises, 7.375%, Class A
b
|
|
|
|
|
|
|
259,975
|
|
|
|
4,882,330
|
|
|
|
|
|
|
|
|
|
6,782,364
|
|
|
HEALTH CARE
|
|
|
2.9
|
%
|
|
|
|
|
|
|
|
|
|
Health Care REIT, 7.875%, Series D
b
|
|
|
|
|
|
|
99,813
|
|
|
|
2,479,854
|
|
|
Health Care REIT, 7.625%, Series F
b
|
|
|
|
|
|
|
185,000
|
|
|
|
4,606,500
|
|
|
LTC Properties, 8.00%, Series F
b
|
|
|
|
|
|
|
296,758
|
|
|
|
7,205,284
|
|
|
Omega Healthcare Investors, 8.375%, Series D
b
|
|
|
|
|
|
|
297,464
|
|
|
|
7,507,992
|
|
|
|
|
|
|
|
|
|
21,799,630
|
|
|
HOTEL
|
|
|
0.5
|
%
|
|
|
|
|
|
|
|
|
|
LaSalle Hotel Properties, 8.00%, Series E
b
|
|
|
|
|
|
|
170,000
|
|
|
|
3,919,350
|
|
|
OFFICE
|
|
|
2.0
|
%
|
|
|
|
|
|
|
|
|
|
Alexandria Real Estate Equities, 8.375%, Series C
b
|
|
|
|
|
|
|
158,165
|
|
|
|
3,919,329
|
|
|
Brandywine Realty Trust, 7.50%, Series C
b
|
|
|
|
|
|
|
160,010
|
|
|
|
3,608,226
|
|
|
SL Green Realty Corp., 7.625%, Series C
b
|
|
|
|
|
|
|
235,050
|
|
|
|
5,394,397
|
|
|
SL Green Realty Corp., 7.875%, Series D
b
|
|
|
|
|
|
|
94,650
|
|
|
|
2,243,205
|
|
|
|
|
|
|
|
|
|
15,165,157
|
|
|
OFFICE/INDUSTRIAL
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
PS Business Parks, 6.875%, Series I
b
|
|
|
|
|
|
|
245,000
|
|
|
|
5,235,650
|
|
|
RESIDENTIALAPARTMENT
|
|
|
0.4
|
%
|
|
|
|
|
|
|
|
|
|
Apartment Investment & Management Co., 8.00%, Series T
b
|
|
|
|
|
|
|
138,400
|
|
|
|
3,154,136
|
|
|
SHOPPING CENTER
|
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|
COMMUNITY CENTER
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
Developers Diversified Realty Corp., 7.50%, Series I
b
|
|
|
|
|
|
|
295,555
|
|
|
|
5,500,278
|
|
|
See accompanying notes to financial statements.
15
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS(Continued)
December 31, 2009
|
|
|
|
Number
of Shares
|
|
Value
|
|
REGIONAL MALL
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
CBL & Associates Properties, 7.75%, Series C
b
|
|
|
|
|
|
|
114,710
|
|
|
$
|
2,340,084
|
|
|
TOTAL SHOPPING CENTER
|
|
|
|
|
|
|
|
|
|
|
7,840,362
|
|
|
TOTAL REAL ESTATE
|
|
|
|
|
|
|
|
|
|
|
63,896,649
|
|
|
TOTAL PREFERRED SECURITIES$25 PAR VALUE
(Identified cost$150,512,795)
|
|
|
|
|
|
|
|
|
|
|
144,368,178
|
|
|
PREFERRED SECURITIESCAPITAL SECURITIES
|
|
|
12.2
|
%
|
|
|
|
|
|
|
|
|
|
BANK
|
|
|
4.4
|
%
|
|
|
|
|
|
|
|
|
|
Astoria Capital Trust I, 9.75%, due 11/1/29, Series B
b,f
|
|
|
|
|
|
|
3,000,000
|
|
|
|
3,100,383
|
|
|
Bank of America Corp., 8.125%, due 12/29/49
|
|
|
|
|
|
|
3,000,000
|
|
|
|
2,891,970
|
|
|
Citigroup Capital XXI, 8.30%, due 12/21/57
|
|
|
|
|
|
|
2,000,000
|
|
|
|
1,935,000
|
|
|
CoBank ACB, 11.00%, Series C, 144A
g
|
|
|
|
|
|
|
80,000
|
|
|
|
3,995,000
|
|
|
JPMorgan Chase & Co., 7.90%, due 12/31/49
b
|
|
|
|
|
|
|
5,070,000
|
|
|
|
5,246,608
|
|
|
PNC Preferred Funding Trust I, 8.70%, due 12/31/49, 144A
b,g
|
|
|
|
|
|
|
6,800,000
|
|
|
|
6,983,464
|
|
|
Sovereign Capital Trust VI, 7.908%, due 6/13/36
b
|
|
|
|
|
|
|
3,415,000
|
|
|
|
2,945,014
|
|
|
Wachovia Capital Trust III, 5.80%, 3/15/42
b
|
|
|
|
|
|
|
2,250,000
|
|
|
|
1,743,750
|
|
|
Wells Fargo & Co., 7.98%, due 2/28/49
b
|
|
|
|
|
|
|
4,500,000
|
|
|
|
4,533,750
|
|
|
|
|
|
|
|
|
|
33,374,939
|
|
|
BANKFOREIGN
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
Barclays Bank PLC, 6.278%, due 12/31/49
b
|
|
|
|
|
|
|
4,500,000
|
|
|
|
3,414,375
|
|
|
Credit Agricole SA, 8.375%, due 12/31/49, 144A
g
|
|
|
|
|
|
|
3,000,000
|
|
|
|
3,190,083
|
|
|
|
|
|
|
|
|
|
6,604,458
|
|
|
FINANCECREDIT CARD
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
Capital One Capital III, 7.686%, due 8/15/36
b
|
|
|
|
|
|
|
3,500,000
|
|
|
|
3,255,000
|
|
|
Capital One Capital V, 10.25%, due 8/15/39
|
|
|
|
|
|
|
1,500,000
|
|
|
|
1,748,273
|
|
|
|
|
|
|
|
|
|
5,003,273
|
|
|
FOOD
|
|
|
0.6
|
%
|
|
|
|
|
|
|
|
|
|
Dairy Farmers of America, 7.875%, 144A
b,f,g
|
|
|
|
|
|
|
25,000
|
|
|
|
1,892,188
|
|
|
HJ Heinz Finance Co, 8.00%, due 7/15/13, 144A
b,g
|
|
|
|
|
|
|
25
|
|
|
|
2,600,000
|
|
|
|
|
|
|
|
|
|
4,492,188
|
|
|
See accompanying notes to financial statements.
16
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS(Continued)
December 31, 2009
|
|
|
|
Number
of Shares
|
|
Value
|
|
INSURANCE
|
|
|
3.3
|
%
|
|
|
|
|
|
|
|
|
|
MULTI-LINE
|
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
|
AXA SA, 8.60%, due 12/15/30
b
|
|
|
|
|
|
|
2,000,000
|
|
|
$
|
2,330,184
|
|
|
Metlife Capital Trust IV, 7.875%, due 12/15/36, 144A
b,g
|
|
|
|
|
|
|
1,500,000
|
|
|
|
1,507,500
|
|
|
MetLife Capital Trust X, 9.25%, due 4/8/38, 144A
b,g
|
|
|
|
|
|
|
3,600,000
|
|
|
|
4,104,000
|
|
|
Old Mutual Capital Funding, 8.00%, due 5/29/49, (Eurobond)
d
|
|
|
|
|
|
|
3,500,000
|
|
|
|
2,975,000
|
|
|
|
|
|
|
|
|
|
10,916,684
|
|
|
PROPERTY CASUALTY
|
|
|
1.8
|
%
|
|
|
|
|
|
|
|
|
|
Catlin Insurance Co., 7.249%, due 12/1/49, 144A
b,g
|
|
|
|
|
|
|
5,000,000
|
|
|
|
3,700,000
|
|
|
Liberty Mutual Group, 7.80%, due 3/15/37, 144A
b,g
|
|
|
|
|
|
|
7,000,000
|
|
|
|
5,845,000
|
|
|
Liberty Mutual Group, 10.75%, due 6/15/58, 144A
b,g
|
|
|
|
|
|
|
4,000,000
|
|
|
|
4,280,000
|
|
|
|
|
|
|
|
|
|
13,825,000
|
|
|
TOTAL INSURANCE
|
|
|
|
|
|
|
|
|
|
|
24,741,684
|
|
|
PIPELINES
|
|
|
0.8
|
%
|
|
|
|
|
|
|
|
|
|
Enbridge Energy Partners LP, 8.05%, due 10/1/37
b
|
|
|
|
|
|
|
3,000,000
|
|
|
|
2,792,877
|
|
|
Enterprise Products Operating LP, 8.375%, due 8/1/66
b
|
|
|
|
|
|
|
3,500,000
|
|
|
|
3,416,724
|
|
|
|
|
|
|
|
|
|
6,209,601
|
|
|
UTILITIES
|
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
|
ELECTRIC UTILITIES
|
|
|
0.5
|
%
|
|
|
|
|
|
|
|
|
|
DPL Capital Trust II, 8.125%, due 9/1/31
b
|
|
|
|
|
|
|
4,000,000
|
|
|
|
4,285,176
|
|
|
GAS UTILITIES
|
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|
Southern Union Co., 7.20%, due 11/1/66
b
|
|
|
|
|
|
|
8,750,000
|
|
|
|
7,525,000
|
|
|
TOTAL UTILITIES
|
|
|
|
|
|
|
|
|
|
|
11,810,176
|
|
|
TOTAL PREFERRED SECURITIESCAPITAL SECURITIES
(Identified cost$90,912,357)
|
|
|
|
|
|
|
|
|
|
|
92,236,319
|
|
|
|
|
|
|
Principal
Amount
|
|
|
|
CORPORATE BONDS
|
|
|
2.5
|
%
|
|
|
|
|
|
|
|
|
|
INTEGRATED TELECOMMUNICATIONS SERVICES
|
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|
Citizens Communications Co., 7.875%, due 1/15/27
b
|
|
|
|
|
|
$
|
2,000,000
|
|
|
|
1,850,000
|
|
|
Citizens Communications Co., 9.00%, due 8/15/31
b
|
|
|
|
|
|
|
5,500,000
|
|
|
|
5,431,250
|
|
|
|
|
|
|
|
|
|
7,281,250
|
|
|
See accompanying notes to financial statements.
17
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS(Continued)
December 31, 2009
|
|
|
|
Principal
Amount
|
|
Value
|
|
MEDIA
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
Cablevision System Corp., 8.625%, due 9/15/17, 144A
g
|
|
|
|
|
|
$
|
2,500,000
|
|
|
$
|
2,615,625
|
|
|
Rogers Cable, 8.75%, due 5/1/32
b
|
|
|
|
|
|
|
3,430,000
|
|
|
|
4,324,317
|
|
|
|
|
|
|
|
|
|
6,939,942
|
|
|
REAL ESTATE
|
|
|
0.6
|
%
|
|
|
|
|
|
|
|
|
|
DIVERSIFIED
|
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
Forest City Enterprises, 5.00%, due 10/15/16, 144A
g
|
|
|
|
|
|
|
2,000,000
|
|
|
|
2,185,000
|
|
|
SHOPPING CENTERCOMMUNITY CENTER
|
|
|
0.4
|
%
|
|
|
|
|
|
|
|
|
|
Developers Diversified Realty Corp., 9.625%, due 3/15/16
|
|
|
|
|
|
|
2,750,000
|
|
|
|
2,874,248
|
|
|
TOTAL REAL ESTATE
|
|
|
|
|
|
|
|
|
|
|
5,059,248
|
|
|
TOTAL CORPORATE BONDS
(Identified cost$18,421,162)
|
|
|
|
|
|
|
|
|
|
|
19,280,440
|
|
|
|
|
|
|
Number
of Shares
|
|
|
|
SHORT-TERM INVESTMENTS
|
|
|
0.8
|
%
|
|
|
|
|
|
|
|
|
|
MONEY MARKET FUNDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federated Government Obligations Fund, 0.06%
h
|
|
|
|
|
|
|
3,210,000
|
|
|
|
3,210,000
|
|
|
State Street Institutional Liquid Reserves Fund, 0.16%
h
|
|
|
|
|
|
|
3,210,000
|
|
|
|
3,210,000
|
|
|
TOTAL SHORT-TERM INVESTMENTS
(Identified cost$6,420,000)
|
|
|
|
|
|
|
|
|
|
|
6,420,000
|
|
|
See accompanying notes to financial statements.
18
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS(Continued)
December 31, 2009
|
|
|
|
|
|
Value
|
|
TOTAL INVESTMENTS (Identified cost$1,058,182,352)
|
|
|
154.2
|
%
|
|
|
|
$
|
1,168,053,263
|
|
|
LIABILITIES IN EXCESS OF OTHER ASSETS
|
|
|
(54.2
|
)%
|
|
|
|
|
(410,577,375
|
)
|
|
NET ASSETS (Equivalent to $12.87 per share based on 58,858,135
shares of common stock outstanding)
|
|
|
100.0
|
%
|
|
|
|
$
|
757,475,888
|
|
|
Glossary of Portfolio Abbreviations
ADR American Depositary Receipt
FRN Floating Rate Note
REIT Real Estate Investment Trust
TruPS Trust Preferred Securities
USD United States Dollar
Note: Percentages indicated are based on the net assets of the Fund.
a
Fair valued security. This security has been valued at its fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Board of Directors. Aggregate fair value securities represent 12.3% of net assets of the Fund, all of which have been fair valued pursuant to foreign security fair value procedures approved by the Board of Directors.
b
A portion or all of the security is pledged in connection with the revolving credit agreement: $852,537,915 has been pledged as collateral.
c
A portion or all of the security has been rehypothecated in connection with the Fund's revolving credit agreement in the aggregate amount of $171,276,642.
d
A portion of the security is segregated as collateral for interest rate swap transactions: $13,168,300 has been segregated as collateral.
e
Non-income producing security.
f
Illiquid security. Aggregate holdings equal 0.7% of net assets of the Fund.
g
Resale is restricted to qualified institutional investors. Aggregate holdings equal 5.7% of net assets of the Fund.
h
Rate quoted represents the seven day yield of the fund.
See accompanying notes to financial statements.
19
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS(Continued)
December 31, 2009
Interest rate swaps outstanding at December 31, 2009 are as follows:
Counterparty
|
|
Notional
Amount
|
|
Fixed
Rate
Payable
|
|
Floating Rate
a
(reset monthly)
Receivable
|
|
Termination
Date
|
|
Unrealized
Depreciation
|
|
Merrill Lynch Derivative Products AG
|
|
$
|
31,000,000
|
|
|
|
3.461
|
%
|
|
|
0.231
|
%
|
|
March 29, 2010
|
|
$
|
(239,892
|
)
|
|
Merrill Lynch Derivative Products AG
|
|
$
|
70,000,000
|
|
|
|
3.600
|
%
|
|
|
0.231
|
%
|
|
January 29, 2014
|
|
|
(3,106,989
|
)
|
|
Royal Bank of Canada
|
|
$
|
40,000,000
|
|
|
|
3.498
|
%
|
|
|
0.232
|
%
|
|
November 22, 2012
|
|
|
(1,861,044
|
)
|
|
Royal Bank of Canada
|
|
$
|
40,000,000
|
|
|
|
3.634
|
%
|
|
|
0.231
|
%
|
|
March 31, 2014
|
|
|
(1,769,686
|
)
|
|
UBS AG
|
|
$
|
60,000,000
|
|
|
|
3.639
|
%
|
|
|
0.233
|
%
|
|
April 17, 2013
|
|
|
(3,026,751
|
)
|
|
|
|
$
|
(10,004,362
|
)
|
|
a
Based on LIBOR (London Interbank Offered Rate). Represents rates in effect at December 31, 2009.
See accompanying notes to financial statements.
20
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2009
AS
SETS:
|
|
Investments in securities, at value (Identified cost$1,058,182,352)
|
|
$
|
1,168,053,263
|
|
|
Cash (includes $3,548,000 pledged as collateral for open swap positions)
|
|
|
3,565,185
|
|
|
Foreign currency, at value (Identified cost$2,124,346)
|
|
|
2,120,853
|
|
|
Receivable for:
|
|
Investment securities sold
|
|
|
7,793,194
|
|
|
Dividends and interest
|
|
|
5,023,282
|
|
|
Other assets
|
|
|
31,010
|
|
|
Total Assets
|
|
|
1,186,586,787
|
|
|
LIABILITIES:
|
|
Unrealized depreciation on interest rate swap transactions
|
|
|
10,004,362
|
|
|
Payable for:
|
|
Revolving credit agreement
|
|
|
405,000,000
|
|
|
Investment securities purchased
|
|
|
11,572,610
|
|
|
Dividends declared on common shares
|
|
|
1,211,369
|
|
|
Investment management fees
|
|
|
681,700
|
|
|
Administration fees
|
|
|
55,941
|
|
|
Interest expense
|
|
|
28,821
|
|
|
Directors' fees
|
|
|
2,013
|
|
|
Other liabilities
|
|
|
554,083
|
|
|
Total Liabilities
|
|
|
429,110,899
|
|
|
NET ASSETS
|
|
$
|
757,475,888
|
|
|
NET ASSETS consist of:
|
|
Paid-in-capital
|
|
$
|
941,463,826
|
|
|
Accumulated undistributed net investment income
|
|
|
2,690,617
|
|
|
Accumulated net realized loss
|
|
|
(286,528,367
|
)
|
|
Net unrealized appreciation
|
|
|
99,849,812
|
|
|
|
|
$
|
757,475,888
|
|
|
NET ASSET VALUE PER COMMON SHARE:
|
|
($757,475,888 ÷ 58,858,135 shares outstanding)
|
|
$
|
12.87
|
|
|
MARKET PRICE PER COMMON SHARE
|
|
$
|
10.62
|
|
|
MARKET PRICE DISCOUNT TO NET ASSET VALUE PER COMMON SHARE
|
|
|
(17.48
|
)%
|
|
See accompanying notes to financial statements.
21
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2009
Investment Income:
|
|
Dividend income (net of $435,029 of foreign withholding tax)
|
|
$
|
42,115,046
|
|
|
Interest income
|
|
|
10,076,548
|
|
|
Rehypothecation income
|
|
|
97,499
|
|
|
Total Income
|
|
|
52,289,093
|
|
|
Expenses:
|
|
Investment management fees
|
|
|
7,768,470
|
|
|
Interest expense
|
|
|
2,974,429
|
|
|
Line of credit fees
|
|
|
2,694,898
|
|
|
Administration fees
|
|
|
823,078
|
|
|
Shareholder reporting expenses
|
|
|
457,504
|
|
|
Preferred remarketing fee
|
|
|
287,981
|
|
|
Professional fees
|
|
|
286,159
|
|
|
Custodian fees and expenses
|
|
|
199,039
|
|
|
Directors' fees and expenses
|
|
|
52,630
|
|
|
Transfer agent fees and expenses
|
|
|
24,861
|
|
|
Registration and filing fees
|
|
|
18,282
|
|
|
Miscellaneous
|
|
|
208,912
|
|
|
Total Expenses
|
|
|
15,796,243
|
|
|
Reduction of Expenses (See Note 2)
|
|
|
(1,408,083
|
)
|
|
Net Expenses
|
|
|
14,388,160
|
|
|
Net Investment Income
|
|
|
37,900,933
|
|
|
Net Realized and Unrealized Gain (Loss):
|
|
Net realized loss on:
|
|
Investments
|
|
|
(136,129,092
|
)
|
|
Options
|
|
|
(912,290
|
)
|
|
Foreign currency transactions
|
|
|
(170,882
|
)
|
|
Interest rate swap transactions
|
|
|
(8,388,686
|
)
|
|
Net realized loss
|
|
|
(145,600,950
|
)
|
|
Net change in unrealized appreciation (depreciation) on:
|
|
Investments
|
|
|
363,352,809
|
|
|
Foreign currency translations
|
|
|
(12,768
|
)
|
|
Interest rate swap transactions
|
|
|
6,049,284
|
|
|
Net change in unrealized appreciation (depreciation)
|
|
|
369,389,325
|
|
|
Net realized and unrealized gain
|
|
|
223,788,375
|
|
|
Net Increase in Net Assets Resulting from Operations
|
|
|
261,689,308
|
|
|
Less Dividends to Preferred Shareholders
|
|
|
(2,276,881
|
)
|
|
Net Increase in Net Assets from Operations Applicable to Common Shares
|
|
$
|
259,412,427
|
|
|
See accompanying notes to financial statements.
22
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
|
|
For the
Year Ended
December 31, 2009
|
|
For the
Year Ended
December 31, 2008
|
|
Change in Net Assets Applicable to Common Shares:
|
|
From Operations:
|
|
Net investment income
|
|
$
|
37,900,933
|
|
|
$
|
71,533,154
|
|
|
Net realized loss
|
|
|
(145,600,950
|
)
|
|
|
(150,888,953
|
)
|
|
Net change in unrealized appreciation (depreciation)
|
|
|
369,389,325
|
|
|
|
(550,169,851
|
)
|
|
Net increase (decrease) in net assets resulting
from operations
|
|
|
261,689,308
|
|
|
|
(629,525,650
|
)
|
|
Less dividends to preferred shareholders from net investment
income
|
|
|
(2,276,881
|
)
|
|
|
(28,036,252
|
)
|
|
Net increase (decrease) in net assets from operations
applicable to common shares
|
|
|
259,412,427
|
|
|
|
(657,561,902
|
)
|
|
Less Dividends and Distributions to Common Shareholders from:
|
|
Net investment income
|
|
|
(29,408,848
|
)
|
|
|
(35,103,984
|
)
|
|
Tax return of capital
|
|
|
(11,497,556
|
)
|
|
|
(70,840,661
|
)
|
|
Total dividends and distributions to
common shareholders
|
|
|
(40,906,404
|
)
|
|
|
(105,944,645
|
)
|
|
Capital Stock Transactions:
|
|
Decrease in net assets from preferred share offering
cost adjustment
|
|
|
|
|
|
|
(3,133
|
)
|
|
Total increase (decrease) in net assets applicable to
common shares
|
|
|
218,506,023
|
|
|
|
(763,509,680
|
)
|
|
Net Assets Applicable to Common Shares:
|
|
Beginning of year
|
|
|
538,969,865
|
|
|
|
1,302,479,545
|
|
|
End of year
a
|
|
$
|
757,475,888
|
|
|
$
|
538,969,865
|
|
|
a
Includes undistributed net investment income of $2,690,617 and $4,025,988, respectively.
See accompanying notes to financial statements.
23
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2009
Increase in Cash:
|
|
Cash Flows from Operating Activities:
|
|
Net increase in net assets resulting from operations
|
|
$
|
261,689,308
|
|
|
Adjustments to reconcile net increase in net assets from
operations to net cash used for operating activities:
|
|
Purchases of long-term investments
|
|
|
(789,771,599
|
)
|
|
Net purchases, sales and maturities of short-term investments
|
|
|
36,481,858
|
|
|
Net amortization/accretion of premium (discount)
|
|
|
9,772
|
|
|
Proceeds from sales and maturities of long-term investments
|
|
|
703,368,095
|
|
|
Net increase in dividends and interest receivable, receivable for investments sold,
and other assets
|
|
|
(208,599
|
)
|
|
Net increase in interest payable, payable for investment securities purchased,
accrued expenses, and other payables
|
|
|
11,018,084
|
|
|
Net change in unrealized appreciation on investments
|
|
|
(363,352,809
|
)
|
|
Net change in unrealized depreciation on interest rate swaps
|
|
|
(6,049,284
|
)
|
|
Net realized loss from investments
|
|
|
136,129,029
|
|
|
Cash used for operating activities
|
|
|
(10,686,145
|
)
|
|
Cash Flows from Financing Activities:
|
|
Net decrease in preferred shares outstanding
|
|
|
(325,150,000
|
)
|
|
Net increase in payable for revolving credit agreement
|
|
|
385,000,000
|
|
|
Distributions paid on preferred shares
|
|
|
(2,276,881
|
)
|
|
Distributions paid on common shares
|
|
|
(40,906,404
|
)
|
|
Decrease in payable to common shareholders
|
|
|
(6,476
|
)
|
|
Decrease in payable to preferred shareholders
|
|
|
(288,056
|
)
|
|
Cash provided by financing activities
|
|
|
16,372,183
|
|
|
Increase in cash
|
|
|
5,686,038
|
|
|
Cash at beginning of year (including foreign currency)
|
|
|
0
|
|
|
Cash at end of year (including foreign currency)
|
|
$
|
5,686,038
|
|
|
See accompanying notes to financial statements.
24
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
The following table includes selected data for a common share outstanding throughout each year and other performance information derived from the financial statements. It should be read in conjunction with the financial statements and notes thereto.
|
|
For the Year Ended December 31,
|
|
Per Share Operating Performance:
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
Net asset value per common share, beginning of year
|
|
$
|
9.16
|
|
|
$
|
22.13
|
|
|
$
|
25.22
|
|
|
$
|
21.26
|
|
|
$
|
21.51
|
|
|
Income from investment operations:
|
|
Net investment income
|
|
|
0.52
|
|
|
|
1.22
|
|
|
|
1.50
|
|
|
|
1.43
|
|
|
|
1.17
|
a
|
|
Net realized and unrealized gain (loss)
|
|
|
3.93
|
|
|
|
(11.91
|
)
|
|
|
(1.85
|
)
|
|
|
5.47
|
|
|
|
0.57
|
|
|
Total income (loss) from investment
operations
|
|
|
4.45
|
|
|
|
(10.69
|
)
|
|
|
(0.35
|
)
|
|
|
6.90
|
|
|
|
1.74
|
|
|
Less dividends and distributions to preferred
shareholders from:
|
|
Net investment income
|
|
|
(0.04
|
)
|
|
|
(0.48
|
)
|
|
|
(0.55
|
)
|
|
|
(0.32
|
)
|
|
|
(0.25
|
)
|
|
Net realized gain
|
|
|
|
|
|
|
|
|
|
|
(0.18
|
)
|
|
|
(0.26
|
)
|
|
|
(0.12
|
)
|
|
Total dividends and distributions to
preferred shareholders
|
|
|
(0.04
|
)
|
|
|
(0.48
|
)
|
|
|
(0.73
|
)
|
|
|
(0.58
|
)
|
|
|
(0.37
|
)
|
|
Total from investment operations applicable
to common shares
|
|
|
4.41
|
|
|
|
(11.17
|
)
|
|
|
(1.08
|
)
|
|
|
6.32
|
|
|
|
1.37
|
|
|
Less:
Offering costs charged to paid-in capital
preferred shares
|
|
|
|
|
|
|
|
|
|
|
(0.02
|
)
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
|
Preferred and common share offering cost
adjustment
|
|
|
|
|
|
|
(0.00
|
)
b
|
|
|
|
|
|
|
|
|
|
|
0.00
|
b
|
|
Total offering costs
|
|
|
|
|
|
|
|
|
|
|
(0.02
|
)
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
|
Less dividends and distributions to common
shareholders from:
|
|
Net investment income
|
|
|
(0.50
|
)
|
|
|
(0.60
|
)
|
|
|
(0.99
|
)
|
|
|
(1.13
|
)
|
|
|
(0.93
|
)
|
|
Net realized gain
|
|
|
|
|
|
|
|
|
|
|
(0.33
|
)
|
|
|
(0.87
|
)
|
|
|
(0.46
|
)
|
|
Tax return of capital
|
|
|
(0.20
|
)
|
|
|
(1.20
|
)
|
|
|
(0.67
|
)
|
|
|
(0.35
|
)
|
|
|
(0.21
|
)
|
|
Total dividends and distributions to common
shareholders
|
|
|
(0.70
|
)
|
|
|
(1.80
|
)
|
|
|
(1.99
|
)
|
|
|
(2.35
|
)
|
|
|
(1.60
|
)
|
|
Net increase (decrease) in net asset value per common
share
|
|
|
3.71
|
|
|
|
(12.97
|
)
|
|
|
(3.09
|
)
|
|
|
3.96
|
|
|
|
(0.25
|
)
|
|
Net asset value, per common share, end of year
|
|
$
|
12.87
|
|
|
$
|
9.16
|
|
|
$
|
22.13
|
|
|
$
|
25.22
|
|
|
$
|
21.26
|
|
|
Market value, per common share, end of year
|
|
$
|
10.62
|
|
|
$
|
6.36
|
|
|
$
|
20.11
|
|
|
$
|
22.35
|
|
|
$
|
17.66
|
|
|
Net asset value total return
c
|
|
|
54.16
|
%
|
|
|
52.23
|
%
|
|
|
3.69
|
%
|
|
|
32.65
|
%
|
|
|
7.65
|
%
|
|
Market value return
c
|
|
|
83.21
|
%
|
|
|
63.50
|
%
|
|
|
1.24
|
%
|
|
|
41.52
|
%
|
|
|
2.53
|
%
|
|
See accompanying notes to financial statements.
25
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
FINANCIAL HIGHLIGHTS(Continued)
|
|
For the Year Ended December 31,
|
|
Ratios/Supplemental Data:
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
Net assets applicable to common shares, end of year
(in millions)
|
|
$
|
757.5
|
|
|
$
|
539.0
|
|
|
$
|
1,302.5
|
|
|
$
|
1,484.3
|
|
|
$
|
1,251.4
|
|
|
Ratio of expenses to average daily net assets applicable
to common shares (before expense reduction)
d
|
|
|
2.90
|
%
|
|
|
2.11
|
%
|
|
|
1.60
|
%
|
|
|
1.57
|
%
|
|
|
1.57
|
%
|
|
Ratio of expenses to average daily net assets applicable
to common shares (net of expense reduction)
d
|
|
|
2.64
|
%
|
|
|
1.77
|
%
|
|
|
1.29
|
%
|
|
|
1.27
|
%
|
|
|
1.27
|
%
|
|
Ratio of expenses to average daily net assets applicable
to common shares (net of expense reduction and
excluding interest expense)
d
|
|
|
2.10
|
%
|
|
|
1.74
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of net investment income to average daily net assets
applicable to common shares (before expense reduction)
d
|
|
|
6.70
|
%
|
|
|
6.69
|
%
|
|
|
5.12
|
%
|
|
|
5.47
|
%
|
|
|
5.15
|
%
|
|
Ratio of net investment income to average daily net assets
applicable to common shares (net of expense reduction)
d
|
|
|
6.96
|
%
|
|
|
7.04
|
%
|
|
|
5.42
|
%
|
|
|
5.77
|
%
|
|
|
5.45
|
%
|
|
Ratio of expenses to average daily managed assets
(before expense reduction)
d,e
|
|
|
1.73
|
%
|
|
|
1.24
|
%
|
|
|
1.04
|
%
|
|
|
1.04
|
%
|
|
|
1.04
|
%
|
|
Ratio of expenses to average daily managed assets
(net of expense reduction)
d,e
|
|
|
1.57
|
%
|
|
|
1.04
|
%
|
|
|
0.84
|
%
|
|
|
0.84
|
%
|
|
|
0.84
|
%
|
|
Portfolio turnover rate
|
|
|
77
|
%
|
|
|
39
|
%
|
|
|
22
|
%
|
|
|
24
|
%
|
|
|
20
|
%
|
|
Preferred Shares/Revolving Credit Agreement:
|
|
Liquidation value, end of year (in 000's)
|
|
|
|
|
|
$
|
325,150
|
|
|
$
|
795,000
|
|
|
$
|
700,000
|
|
|
$
|
645,000
|
|
|
Total shares outstanding (in 000's)
|
|
|
|
|
|
|
13
|
|
|
|
32
|
|
|
|
28
|
|
|
|
26
|
|
|
Asset coverage ratio for revolving credit agreement
|
|
|
287
|
%
f
|
|
|
4,421
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset coverage per $1,000 for revolving credit agreement
|
|
$
|
2,870
|
|
|
$
|
44,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset coverage ratio for auction market preferred shares
g
|
|
|
|
|
|
|
256
|
%
|
|
|
264
|
%
|
|
|
312
|
%
|
|
|
294
|
%
|
|
Asset coverage per share for auction market preferred shares
g
|
|
|
|
|
|
$
|
64,000
|
|
|
$
|
65,958
|
|
|
$
|
78,011
|
|
|
$
|
73,504
|
|
|
Liquidation preference per share
|
|
|
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
Average market value per share
h
|
|
|
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
a
Calculation based on average shares outstanding.
b
Amount is less than $0.005.
c
Total market value return is computed based upon the New York Stock Exchange market price of the Fund's shares and excludes the effects of brokerage commissions. Total net asset value return measures the changes in value over the period indicated, taking into account dividends as reinvested. Dividends and distributions, if any, are assumed for purposes of these calculations, to be reinvested at prices obtained under the Fund's dividend reinvestment plan.
d
Ratios do not reflect dividend payments to preferred shareholders.
e
Average daily managed assets represent net assets applicable to common shares plus liquidation preference of preferred shares and/or the outstanding balance of the revolving credit agreement.
f
The Fund received temporary relief from the Securities and Exchange Commission permitting the Fund to maintain 200% asset coverage.
g
Includes the effect of the outstanding borrowings from the revolving credit agreement.
h
Based on weekly prices.
See accompanying notes to financial statements.
26
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. Significant Accounting Policies
Cohen & Steers REIT and Utility Income Fund, Inc. (the Fund) was incorporated under the laws of the State of Maryland on October 1, 2003 and is registered under the Investment Company Act of 1940, as amended, as a nondiversified, closed-end management investment company. The Fund's investment objective is high current income.
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. Exchange traded options are valued at their last sale price as of the close of options trading on applicable exchanges. In the absence of a last sale, options are valued at the average of the quoted bid and asked prices as of the close of business. Over-the-counter options quotations are provided by the respective counterparty.
Securities not listed on the New York Stock Exchange but listed on other domestic or foreign securities exchanges are valued in a similar manner. Securities traded on more than one securities exchange are valued at the last sale price 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. If after the close of a foreign market, but prior to the close of business on the day the securities are being valued, market conditions change significantly, certain foreign securities may be fair valued pursuant to procedures established by the Board of Directors.
Readily marketable securities traded in the over-the-counter market, including listed securities whose primary market is believed by Cohen & Steers Capital Management, Inc. (the investment manager) to be over-the-counter, are valued at the official closing prices as reported by 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. Interest rate swaps are valued utilizing quotes received from an outside pricing service.
27
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS(Continued)
Securities for which market prices are unavailable, or securities for which the investment manager determines that the bid and/or asked price does not reflect market value, 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, but are not limited to, 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.
Short-term debt securities with a maturity date of 60 days or less are valued at amortized cost, which approximates value. Investments in open-end mutual funds are valued at their closing net asset value.
Fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market the most advantageous market for the investment or liability. The hierarchy of inputs that are used in determining the fair value of the Fund's investments is summarized below.
Level 1quoted prices in active markets for identical investments
Level 2other significant observable inputs (including quoted prices for similar investments, interest rates, credit risk, etc.)
Level 3significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
28
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS(Continued)
The following is a summary of the inputs used as of December 31, 2009 in valuing the Fund's investments carried at value:
|
|
Total
|
|
Quoted Prices In
Active Market for
Identical Assets
(Level 1)
|
|
Significant
Other Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Common StockConsumer
DiscretionaryCable &
Satellite
|
|
$
|
5,043,817
|
|
|
$
|
|
|
|
$
|
5,043,817
|
|
|
$
|
|
|
|
Common StockIndustrials
Construction & Engineering
|
|
|
21,006,030
|
|
|
|
|
|
|
|
21,006,030
|
|
|
|
|
|
|
Common StockIndustrials
Highways & Railtracks
|
|
|
10,284,808
|
|
|
|
5,114,352
|
|
|
|
5,170,456
|
|
|
|
|
|
|
Common StockReal Estate
Diversified
|
|
|
31,678,573
|
|
|
|
27,844,565
|
|
|
|
3,834,008
|
|
|
|
|
|
|
Common StockReal Estate
Industrial
|
|
|
33,085,177
|
|
|
|
30,649,032
|
|
|
|
2,436,145
|
|
|
|
|
|
|
Common StockReal Estate
Office
|
|
|
63,234,446
|
|
|
|
57,188,496
|
|
|
|
6,045,950
|
|
|
|
|
|
|
Common StockUtilitiesElectric
Utilities
|
|
|
218,891,485
|
|
|
|
192,329,203
|
|
|
|
26,562,282
|
|
|
|
|
|
|
Common StockUtilitiesGas
Utilities
|
|
|
19,096,956
|
|
|
|
13,467,803
|
|
|
|
5,629,153
|
|
|
|
|
|
|
Common StockUtilitiesMulti
Utilities
|
|
|
103,761,021
|
|
|
|
89,062,080
|
|
|
|
14,698,941
|
|
|
|
|
|
|
Common StockUtilitiesWater
Utilities
|
|
|
11,868,624
|
|
|
|
8,760,326
|
|
|
|
3,108,298
|
|
|
|
|
|
|
Common StockOther Industries
|
|
|
387,797,389
|
|
|
|
387,797,389
|
|
|
|
|
|
|
|
|
|
|
29
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS(Continued)
|
|
Total
|
|
Quoted Prices In
Active Market for
Identical Assets
(Level 1)
|
|
Significant
Other Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Preferred Securities$25 Par
Value
|
|
$
|
144,368,178
|
|
|
$
|
144,368,178
|
|
|
$
|
|
|
|
$
|
|
|
|
Preferred SecuritiesCapital
SecuritiesFood
|
|
|
4,492,188
|
|
|
|
|
|
|
|
2,600,000
|
|
|
|
1,892,188
|
|
|
Preferred SecuritiesCapital
SecuritiesOther Industries
|
|
|
87,744,131
|
|
|
|
|
|
|
|
87,744,131
|
|
|
|
|
|
|
Corporate Bonds
|
|
|
19,280,440
|
|
|
|
|
|
|
|
19,280,440
|
|
|
|
|
|
|
Money Market Funds
|
|
|
6,420,000
|
|
|
|
|
|
|
|
6,420,000
|
|
|
|
|
|
|
Total Investments
|
|
$
|
1,168,053,263
|
|
|
$
|
956,581,424
|
|
|
$
|
209,579,651
|
|
|
$
|
1,892,188
|
|
|
Other Financial Instruments
*
|
|
$
|
(10,004,362
|
)
|
|
|
|
|
|
$
|
(10,004,362
|
)
|
|
|
|
|
|
*
Other financial instruments are interest rate swap contracts.
Following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
|
|
Investments
in Securities
|
|
Balance as of December 31, 2008
|
|
$
|
3,429,611
|
|
|
Accrued discounts
|
|
|
11
|
|
|
Realized loss
|
|
|
(1,392,579
|
)
|
|
Change in unrealized appreciation
|
|
|
2,267,645
|
|
|
Net sales
|
|
|
(2,412,500
|
)
|
|
Balance as of December 31, 2009
|
|
$
|
1,892,188
|
|
|
The change in unrealized appreciation attributable to securities owned on December 31, 2009 which were valued using significant unobservable inputs (Level 3) amounted to approximately $433,593.
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. Discounts are accreted and premiums are amortized over the life of the respective securities. Dividend income is recorded on the ex-dividend date except for certain dividends on foreign securities, which are recorded as soon as the Fund is informed after the ex-dividend date. 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
30
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS(Continued)
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.
Options:
The Fund may write put or covered call options on an index or a security with the intention of earning option premiums. Option premiums may increase the Fund's realized gains and therefore may help increase distributable income. When a Fund writes (sells) an option, an amount equal to the premium received by the Fund is recorded in the Statement of Assets and Liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. When an option expires, the Fund realizes a gain on the option to the extent of the premiums received. Premiums received from writing options which are exercised or closed, are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. If a put option on a security is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund, as writer of an option, bears the market risk of an unfavorable change in the price of the underlying index or security. Other risks include the possibility of an illiquid options market or the inability of the counterparties to fulfill their obligations under the contract.
Foreign Currency Translations:
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 foreign currency contracts are translated at the exchange rates prevailing at the end of the period; and (2) purchases, sales, income and expenses are translated at 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.
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.
Interest Rate Swaps:
The Fund uses interest rate swaps in connection with the sale of preferred shares and borrowing under its credit agreement. The interest rate swaps are intended to reduce the risk that an increase in short-term interest rates could have on the performance of the Fund's common shares as a result of the floating rate structure of the preferred shares and the credit agreement. In these interest rate swaps, the Fund agrees to pay the other party to the interest rate swap (which is known as the counterparty) a fixed rate payment in exchange
31
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS(Continued)
for the counterparty agreeing to pay the Fund a variable rate payment that is intended to approximate the Fund's variable rate payment obligation on the preferred shares and the credit agreement. The payment obligation is based on the notional amount of the swap. Depending on the state of interest rates in general, the use of interest rate swaps could enhance or harm the overall performance of the common shares. The market value of interest rate swaps is based on pricing models that consider the time value of money, volatility, the current market and contractual prices of the underlying financial instrument. Unrealized appreciation is reported as an asset and unrealized depreciation is reported as a liability on the Statement of Assets and Liabilities. The change in value of swaps, including the accrual of periodic amounts of interest to be paid or received on swaps, is reported as unrealized appreciation or depreciation in the Statement of Operations. A realized gain or loss is recorded upon payment or receipt of a periodic payment or termination of swap agreements. Swap agreements involve, to varying degrees, elements of market and counterparty risk, and exposure to loss in excess of the related amounts reflected in the Statement of Assets and Liabilities. The Fund's maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from the counterparty over the contract's remaining life, to the extent that such amount is positive.
For each swap counterparty, the Fund entered into an International Swap Dealers Association Inc. Master Agreement and related annexes thereto ("ISDAs") which sets forth the general terms and conditions of the Fund's swap transactions. During 2008, the Fund notified Merrill Lynch Derivative Products AG ("MLDP"), UBS AG ("UBS") and Royal Bank of Canada ("RBC") that it breached certain terms and conditions of its ISDAs. On November 21, 2008, UBS granted a conditional waiver to the Fund stating that UBS did not intend to presently exercise its rights under the ISDA. MLDP has required that the Fund post collateral in the form of cash or U.S. Treasury securities. The collateral amount is determined by the approximate unrealized depreciation of a particular swap transaction on each valuation date. As of December 31, 2009, the amount was $3,548,000 and was pledged in cash by the Fund to MLDP.
During the year ended December 31, 2009, the Fund notified MLDP, UBS, and RBC of additional breaches. On December 16, 2009, RBC waived all of its rights and remedies related to any breaches that occurred or existed prior to and including this day. At December 31, 2009, the Fund continues to operate under the existing terms of all of its various ISDAs, including those with MLDP and UBS. However, MLDP and UBS reserve any and all rights to take any future action with respect to such events, including termination of outstanding swap transactions; termination or renegotiation of the ISDAs; posting of collateral in the form of cash or U.S. Treasury securities representing the unrealized depreciation on outstanding interest rate swap transactions or continuation under the current terms of the ISDAs. Any action resulting in the early termination of an interest rate swap transaction would cause the Fund to realize any market depreciation that existed on such transaction. In addition to realizing such losses, the early termination of a swap transaction may generate additional expenses for the Fund.
Dividends and Distributions to Shareholders:
Dividends from net investment income and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from GAAP.
32
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS(Continued)
Dividends from net investment income are declared and paid quarterly. Net realized capital gains, unless offset by any available capital loss carryforward, are typically distributed to shareholders at least annually. Dividends and distributions to shareholders are recorded on the ex-dividend date and are automatically reinvested in full and fractional shares of the Fund unless the shareholder has elected to have them paid in cash.
Distributions paid by the Fund are subject to recharacterization for tax purposes. Based upon the results of operations for the year ended December 31, 2009, a portion of the dividends have been reclassified to return of capital.
Prior to redemption, Series M7, Series T7, Series T7-2, Series W7, Series TH7 and Series F7 preferred shares paid dividends based on a variable interest rate set at auctions, normally held every seven days. Dividends and distributions were declared and recorded for the subsequent seven day period on the auction date. In most instances, dividends were payable every seven days, on the first business day following the end of the dividend period.
Prior to redemption, Series M28, Series T28, Series W28 and Series F28 preferred shares paid dividends based on a variable interest rate set at auctions, normally held every 28 days. The dividends were declared and recorded for the subsequent 28 day period on the auction date. In most instances, dividends were payable every 28 days, on the first business day following the end of the dividend period.
Income Taxes:
It is the policy of the Fund to continue to qualify as a regulated investment company, if such qualification is in the best interest of the shareholders, by complying with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies, and by distributing substantially all of its taxable earnings to its shareholders. Accordingly, no provision for federal income or excise tax is necessary. Management has analyzed the Fund's tax positions taken on federal income tax returns as well as its positions in non-U.S. jurisdictions where it trades for all open tax years and has concluded that as of December 31, 2009, no provisions for income tax would be required in the Fund's financial statements. The Fund's tax positions for the tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service, state departments of revenue and by foreign tax authorities
Note 2. Investment Management Fees, Administration Fees and Other Transactions with Affiliates
Investment Management Fees:
The investment manager serves as the Fund's investment manager pursuant to an investment management agreement (the investment management agreement). Under the terms of the investment management agreement, the investment manager provides the Fund with day-to-day investment decisions and generally manages the Fund's investments in accordance with the stated policies of the Fund, subject to the supervision of the Board of Directors.
For the services under the investment management agreement, the Fund pays the investment manager an investment management fee, accrued daily and paid monthly, at an annual rate of 0.85% of the Fund's average
33
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS(Continued)
daily managed asset value. Managed asset value is the net asset value of the common shares plus the liquidation preference of the preferred shares and/or the amount of any loan outstanding.
The investment manager has contractually agreed to waive its investment management fee as follows:
For the Period
|
|
Percentage of
Average Daily
Managed Asset Value
|
|
1
/01/091/31/09
|
|
|
0.20
|
%
|
|
2
/01/091/31/10
|
|
|
0.15
|
%
|
|
2
/01/101/31/11
|
|
|
0.10
|
%
|
|
2
/01/111/31/12
|
|
|
0.05
|
%
|
|
During the year ended December 31, 2009, the investment manager waived its fee at the annual rate of 0.15%.
Administration Fees:
The Fund has entered into an administration agreement with the investment manager under which the investment manager performs certain administrative functions for the Fund and receives a fee, accrued daily and paid monthly, at the annual rate of 0.06% of the Fund's average daily managed assets up to $1 billion, 0.04% of the Fund's average daily managed assets in excess of $1 billion up to $1.5 billion and 0.02% of the Fund's average daily managed assets in excess of $1.5 billion. For the year ended December 31, 2009, the Fund incurred $541,838 in administration fees. Additionally, the Fund pays State Street Bank and Trust Company as sub-administrator under a fund accounting and administration agreement.
Directors' and Officers' Fees:
Certain directors and officers of the Fund are also directors, officers, and/or employees of the investment manager. The Fund does not pay compensation to any affiliated directors and officers except for the Chief Compliance Officer, who received $12,149 from the Fund for the year ended December 31, 2009.
Note 3. Purchases and Sales of Securities
Purchases and sales of securities, excluding short-term investments, for the year ended December 31, 2009, totaled $782,504,295 and $691,628,733, respectively.
Transactions in options written during the year ended December 31, 2009, were as follows:
|
|
Number
of Contracts
|
|
Premium
|
|
Options outstanding at December 31, 2008
|
|
|
|
|
|
$
|
|
|
|
Options written
|
|
|
3,046,041
|
|
|
|
3,423,971
|
|
|
Options expired
|
|
|
(1,780,717
|
)
|
|
|
(2,131,724
|
)
|
|
Options terminated in closing transactions
|
|
|
(1,263,316
|
)
|
|
|
(1,175,671
|
)
|
|
Options exercised
|
|
|
(2,008
|
)
|
|
|
(116,576
|
)
|
|
Options outstanding at December 31, 2009
|
|
|
|
|
|
|
|
|
|
34
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS(Continued)
Note 4. Income Tax Information
The tax character of dividends and distributions paid was as follows:
|
|
For the Year Ended
December 31,
|
|
|
|
2009
|
|
2008
|
|
Ordinary income
|
|
$
|
31,685,729
|
|
|
$
|
63,140,236
|
|
|
Tax return of capital
|
|
|
11,497,556
|
|
|
|
70,840,661
|
|
|
Total dividends and distributions
|
|
$
|
43,183,285
|
|
|
$
|
133,980,897
|
|
|
As of December 31, 2009, the tax-basis components of accumulated earnings and the federal tax cost were as follows:
Cost for federal income tax purposes
|
|
$
|
1,070,347,435
|
|
|
Gross unrealized appreciation
|
|
$
|
376,083,391
|
|
|
Gross unrealized depreciation
|
|
|
(278,377,563
|
)
|
|
Net unrealized appreciation
|
|
|
97,705,828
|
|
|
Other cost basis adjustments
|
|
|
(13,074,238
|
)
|
|
Total net unrealized appreciation
|
|
$
|
84,631,590
|
|
|
The other cost basis adjustments are primarily attributable to unrealized depreciation on interest rate swaps and book/tax adjustments on partnership investments.
As of December 31, 2009, the Fund had a net capital loss carryforward of $268,619,528, of which $125,880,979 will expire on December 31, 2016 and $142,738,549 will expire on December 31, 2017. This carryforward may be used to offset future capital gains to the extent provided by regulations.
As of December 31, 2009, the Fund had temporary book/tax differences primarily attributable to wash sales on portfolio securities and adjustments for holdings in partnerships and permanent book/tax differences primarily attributable to income redesignations and differing treatment on interest rate swaps. To reflect reclassifications arising from the permanent differences, paid-in capital was charged $677,188, accumulated net realized loss was credited $8,227,763 and accumulated net investment income was charged $7,550,575.
Note 5. Capital Stock
The Fund is authorized to issue 100 million shares of common stock at a par value of $0.001 per share.
During the years ended December 31, 2009 and December 31, 2008, the Fund issued no shares of common stock, respectively, for the reinvestment of dividends.
35
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS(Continued)
On December 17, 2008, the Board of Directors approved the continuation of the delegation of its authority to management to effect repurchases, pursuant to management's discretion and subject to market conditions and investment considerations, of up to 10% of the Fund's common shares outstanding ("Share Repurchase Program") through the fiscal year ended December 31, 2009. On December 15, 2009, the Board of Directors authorized the continuation of the Share Repurchase Program through the fiscal year ending December 31, 2010.
During the years ended December 31, 2009 and December 31, 2008, the Fund did not effect any repurchases.
During the year ended December 31, 2008, an adjustment of $3,133 was charged to paid-in-capital for differences between estimated and actual preferred offering costs.
The Fund's articles of incorporation authorize the issuance of Fund preferred shares, par value $0.001 per share, in one or more classes or series, with rights as determined by the Board of Directors, by action of the Board of Directors without the approval of the common shareholders.
Prior to redemption, each series of preferred shares were senior to the Fund's common shares and ranked on parity with shares of any other series of preferred shares, and with shares of any other series of preferred stock of the Fund, as to the payment of dividends and the distribution of assets upon liquidation. If the Fund did not timely cure a failure to (1) maintain a discounted value of its portfolio equal to the preferred shares basic maintenance amount, (2) maintain the 1940 Act preferred shares asset coverage, or (3) file a required certificate related to asset coverage on time, the preferred shares were subject to a mandatory redemption at the redemption price of $25,000 per share plus an amount equal to accumulated but unpaid dividends thereon to the date fixed for redemption. To the extent permitted under the 1940 Act and Maryland Law, the Fund at its option could without consent of the holders of preferred shares, redeem preferred shares having a dividend period of one year or less, in whole, or in part, on the business day after the last day of such dividend period upon not less than 15 calendar days and not more than 40 calendar days prior to notice. The optional redemption price was $25,000 per share plus an amount equal to accumulated but unpaid dividends thereon to the date fixed for redemption.
The Fund's common shares and preferred shares had equal voting rights of one vote per share and voted together as a single class, except in certain circumstances regarding the election of directors. In addition, the affirmative vote of the holders of a majority, as defined in the 1940 Act, of the outstanding preferred shares was required to (1) approve any plan of reorganization that would adversely affect the preferred shares and (2) approve any matter that materially and adversely affects the rights, preferences, or powers of that series.
The Articles Supplementary (the "Articles") creating each series of Auction Market Preferred Shares ("AMPS") provided for dividends to be paid at either the rate set in the current auction, or at the maximum rate as defined in the Articles if sufficient clearing bids for the AMPS were not received in the current auction. Beginning on February 13, 2008, sufficient clearing bids were not received for the auctions for the AMPS series of the Fund, and therefore, the maximum rates were declared on the respective AMPS series. Based upon the ratings of the AMPS, the maximum rate for shares of a series was the greater of 125% of LIBOR or 125 basis points plus LIBOR.
36
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS(Continued)
During the years ended December 31, 2009 and December 31, 2008, the Fund redeemed $325,150,000 and $469,850,000, respectively, of its outstanding preferred shares at a redemption price of $25,000 per share plus accrued but unpaid dividends. Any partial redemptions of the preferred shares were made on a pro rata basis across all preferred series. Redemptions were allocated among participating broker/dealers by the Depository Trust Company using a predetermined methodology and each broker/dealer allocated the redeemed shares to the underlying beneficiaries according to its own procedures. On December 10, 2009, the Fund's preferred shares were reclassified and designated as common shares with preferences, rights, voting powers, restrictions, limitations as to dividends, qualifications or terms and conditions of or rights to require redemption of common shares generally set forth in the Fund's articles of incorporation.
The redemption amount and details for the year ended December 31, 2009 are:
Series
*
|
|
Shares
Outstanding
12/31/08
|
|
Number of
Shares
Redeemed
|
|
Shares
Outstanding
12/31/09
|
|
Total Value
12/31/08
|
|
Amount
Redeemed
|
|
Total Value
12/31/09
|
|
M7
|
|
|
1,373
|
|
|
|
1,373
|
|
|
|
|
|
|
$
|
34,325,000
|
|
|
$
|
34,325,000
|
|
|
|
|
|
|
M28
|
|
|
900
|
|
|
|
900
|
|
|
|
|
|
|
|
22,500,000
|
|
|
|
22,500,000
|
|
|
|
|
|
|
T7
|
|
|
1,373
|
|
|
|
1,373
|
|
|
|
|
|
|
|
34,325,000
|
|
|
|
34,325,000
|
|
|
|
|
|
|
T7-2
|
|
|
1,557
|
|
|
|
1,557
|
|
|
|
|
|
|
|
38,925,000
|
|
|
|
38,925,000
|
|
|
|
|
|
|
T28
|
|
|
1,228
|
|
|
|
1,228
|
|
|
|
|
|
|
|
30,700,000
|
|
|
|
30,700,000
|
|
|
|
|
|
|
W7
|
|
|
1,373
|
|
|
|
1,373
|
|
|
|
|
|
|
|
34,325,000
|
|
|
|
34,325,000
|
|
|
|
|
|
|
W28
|
|
|
1,228
|
|
|
|
1,228
|
|
|
|
|
|
|
|
30,700,000
|
|
|
|
30,700,000
|
|
|
|
|
|
|
TH7
|
|
|
1,373
|
|
|
|
1,373
|
|
|
|
|
|
|
|
34,325,000
|
|
|
|
34,325,000
|
|
|
|
|
|
|
F7
|
|
|
1,373
|
|
|
|
1,373
|
|
|
|
|
|
|
|
34,325,000
|
|
|
|
34,325,000
|
|
|
|
|
|
|
F28
|
|
|
1,228
|
|
|
|
1,228
|
|
|
|
|
|
|
|
30,700,000
|
|
|
|
30,700,000
|
|
|
|
|
|
|
|
|
$
|
325,150,000
|
|
|
$
|
325,150,000
|
|
|
|
|
|
|
37
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS(Continued)
The redemption amount and details for the year ended December 31, 2008 are:
Series
*
|
|
Shares
Outstanding
12/31/07
|
|
Number of
Shares
Redeemed
|
|
Shares
Outstanding
12/31/08
|
|
Total Value
12/31/07
|
|
Amount
Redeemed
|
|
Total Value
12/31/08
|
|
M7
|
|
|
3,360
|
|
|
|
1,987
|
|
|
|
1,373
|
|
|
$
|
84,000,000
|
|
|
$
|
49,675,000
|
|
|
$
|
34,325,000
|
|
|
M28
|
|
|
2,200
|
|
|
|
1,300
|
|
|
|
900
|
|
|
|
55,000,000
|
|
|
|
32,500,000
|
|
|
|
22,500,000
|
|
|
T7
|
|
|
3,360
|
|
|
|
1,987
|
|
|
|
1,373
|
|
|
|
84,000,000
|
|
|
|
49,675,000
|
|
|
|
34,325,000
|
|
|
T7-2
|
|
|
3,800
|
|
|
|
2,243
|
|
|
|
1,557
|
|
|
|
95,000,000
|
|
|
|
56,075,000
|
|
|
|
38,925,000
|
|
|
T28
|
|
|
3,000
|
|
|
|
1,772
|
|
|
|
1,228
|
|
|
|
75,000,000
|
|
|
|
44,300,000
|
|
|
|
30,700,000
|
|
|
W7
|
|
|
3,360
|
|
|
|
1,987
|
|
|
|
1,373
|
|
|
|
84,000,000
|
|
|
|
49,675,000
|
|
|
|
34,325,000
|
|
|
W28
|
|
|
3,000
|
|
|
|
1,772
|
|
|
|
1,228
|
|
|
|
75,000,000
|
|
|
|
44,300,000
|
|
|
|
30,700,000
|
|
|
TH7
|
|
|
3,360
|
|
|
|
1,987
|
|
|
|
1,373
|
|
|
|
84,000,000
|
|
|
|
49,675,000
|
|
|
|
34,325,000
|
|
|
F7
|
|
|
3,360
|
|
|
|
1,987
|
|
|
|
1,373
|
|
|
|
84,000,000
|
|
|
|
49,675,000
|
|
|
|
34,325,000
|
|
|
F28
|
|
|
3,000
|
|
|
|
1,772
|
|
|
|
1,228
|
|
|
|
75,000,000
|
|
|
|
44,300,000
|
|
|
|
30,700,000
|
|
|
|
|
$
|
795,000,000
|
|
|
$
|
469,850,000
|
|
|
$
|
325,150,000
|
|
|
The following table reflects the preferred shares range of dividend rates paid during the year ended December 31, 2009:
Series
*
|
|
Range
|
|
M7
|
|
1.49
%-1.69%
|
|
M28
|
|
1.55
%-1.81%
|
|
T7
|
|
1.49
%-1.70%
|
|
T7-2
|
|
1.49
%-1.70%
|
|
T28
|
|
1.56
%-1.81%
|
|
W7
|
|
1.48
%-1.70%
|
|
W28
|
|
1.56
%-1.81%
|
|
TH7
|
|
1.49
%-1.71%
|
|
F7
|
|
1.49
%-1.71%
|
|
F28
|
|
1.56
%-1.77%
|
|
*
All series were Auction Market Preferred Shares with at $25,000 liquidation value and $0.001 par value.
Note 6. Borrowings
On September 23, 2008 the Fund entered into a $440,000,000 revolving credit agreement (the credit agreement) with BNP Paribas Prime Brokerage Inc. (BNPP). On July 15, 2009, the credit agreement was amended to reduce the maximum commitment to $405,000,000. The Fund pays a facility fee of 0.95% per annum on the unused portion of the credit agreement. The credit agreement has a 270-day rolling term that resets daily; however,
38
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS(Continued)
if the Fund exceeds certain net asset value triggers, the credit agreement may convert to a 60-day rolling term that resets daily. The Fund is required to segregate portfolio securities as collateral with the custodian in an amount up to two times the loan balance outstanding and has granted a security interest in the securities segregated to, and in favor of, BNPP as security for the loan balance outstanding. If the Fund fails to meet certain requirements, or maintain other financial covenants required under the credit agreement, the Fund may be required to repay immediately, in part or in full, the loan balance outstanding under the credit agreement necessitating the sale of portfolio securities at potentially inopportune times. The credit agreement also permits, subject to certain conditions, BNPP to rehypothecate portfolio securities segregated by the Fund up to the amount of the loan balance outstanding. The Fund continues to receive dividends and interest on rehypothecated securities. The Fund also has the right under the credit agreement to recall the securities from BNPP on demand. If BNPP fails to deliver the recalled security in a timely manner, the Fund will be compensated by BNPP for any fees or losses related to the failed delivery or, in the event a recalled security will not be returned by BNPP, the Fund, upon notice to BNPP, may reduce the loan balance outstanding by the amount of the recalled security failed to be returned. The Fund will receive a portion of the fees earned by BNPP in connection with the rehypothecation of portfolio securities.
As of December 31, 2009, the Fund has outstanding borrowings of $405,000,000. During the year ended December 31, 2009, the Fund borrowed an average daily balance of $237,797,507 at a weighted average borrowing cost of 1.37%. As of December 31, 2009, the aggregate value of rehypothecated securities was $171,276,642. During the year ended December 31, 2009, the Fund earned $97,499 in fees from rehypothecated securities.
On June 1, 2009, the Securities and Exchange Commission (SEC) issued an order (the "Order") to the Fund providing an exemption from Section 18 of the 1940 Act. The Order temporarily permits the Fund to maintain 200% asset coverage for debt used to replace auction market preferred securities (AMPS) rather than 300% asset coverage required by Section 18 for debt. The exemptive relief expires on October 31, 2010.
Note 7. Derivative Investments
The following table presents the value of derivatives held during the year ended December 31, 2009, along with the respective location in the financial statements. The balance of interest rate swaps at December 31, 2009 is representative of the volume outstanding throughout the year ended December 31, 2009. The volume of activity for written options for the year ended December 31, 2009 is summarized in Note 3.
Statement of Assets and Liabilities
|
|
|
|
Assets
|
|
Liabilities
|
|
Derivatives
|
|
Location
|
|
Fair Value
|
|
Location
|
|
Fair Value
|
|
Interest rate contracts
|
|
Unrealized appreciation
|
|
|
|
|
|
Unrealized depreciation
|
|
$
|
10,004,362
|
|
|
39
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS(Continued)
Statement of Operations
|
|
Derivatives
|
|
Location
|
|
Realized
Gain/(Loss)
|
|
Change in Unrealized
Appreciation/
(Depreciation)
|
|
Interest rate contracts
|
|
Net Realized and Unrealized Gain (Loss)
|
|
$
|
(8,388,686
|
)
|
|
$
|
6,049,284
|
|
|
Equity contracts
|
|
Net Realized and Unrealized Gain (Loss)
|
|
|
(912,290
|
)
|
|
|
|
|
|
|
|
$
|
(9,300,976
|
)
|
|
$
|
6,049,284
|
|
|
Note 8. Other
In the normal course of business, the Fund enters into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is dependent on claims that may be made against the Fund in the future and, therefore, cannot be estimated; however, based on experience, the risk of material loss from such claims is considered remote.
Note 9. Merger
On June 29, 2009, the Board of Directors of the Fund and Cohen & Steers Select Utility Fund, Inc. (subsequently renamed Cohen & Steers Infrastructure Fund) ("UTF") approved a proposal, subject to approval by each fund's shareholders, in which the Fund would merge with and into UTF in accordance with Maryland General Corporation Law. If each fund's shareholders approve the merger, shareholders of the Fund would become shareholders of UTF. On November 24, 2009, the Fund's shareholders approved the merger. However, UTF failed to receive a sufficient number of votes. On December 10, 2009, UTF's Board of Directors determined that the merger remained in the best interest of shareholders of each fund and set new record and shareholder meeting dates of December 17, 2009 and February 26, 2010, respectively. If the merger is approved by UTF's shareholders, all of the Fund's assets and liabilities will be combined with UTF, and each shareholder of the Fund will receive a number of shares of UTF in exchange for their shares of the Fund having an aggregate net asset value equal to the aggregate net asset value of the Fund's shares held as of the close of business of the New York Stock Exchange on the closing date of the merger. If UTF's shareholders approve the merger, the closing date of the merger is expected to be on or about March 19, 2010.
The investment manager may elect to consummate the merger prior to the closing date and will promptly notify Fund shareholders of any such change.
Merger related expenses, which will be borne by the Fund, are accrued as incurred and are estimated to be approximately $475,000.
Note 10. Subsequent Events
Events and transactions occurring after December 31, 2009 and through the date that the financial statements were issued, February 19, 2010, have been evaluated in the preparation of the financial statements.
40
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Cohen & Steers REIT and Utility Income Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations, of changes in net assets and of cash flows and the financial highlights present fairly, in all material respects, the financial position of Cohen & Steers REIT and Utility Income Fund, Inc. (the "Fund") at December 31, 2009, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2009 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 19, 2010
41
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
PROXY RESULTS (Unaudited)
The Board of Directors of the Fund initially called a special meeting of shareholders (the "Meeting") to be held on October 22, 2009. The Meeting was called in order to vote on the merger of the Fund with and into Cohen & Steers Infrastructure Fund, Inc. (f/k/a Cohen & Steers Select Utility Fund, Inc.) (the "Merger"). The Meeting was adjourned until November 24, 2009 in order to solicit additional votes. On November 24, 2009, stockholders of the Fund approved the Merger. The description of the proposal and number of shares voted are as follows:
Common Shares
|
|
Shares Voted
For
|
|
Shares Voted
Against
|
|
Authority
Withheld
|
|
To approve merger of the Fund with and into Cohen & Steers
Infrastructure Fund, Inc. (f/k/a Cohen & Steers Select
Utility Fund, Inc.) in accordance with Maryland General
Corporation Law
|
|
|
29,795,328.55
|
|
|
|
3,035,115.95
|
|
|
|
651,976.46
|
|
|
For more information regarding the Mergers, please see Note 9 to the Fund's financial statements.
42
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
AVERAGE ANNUAL TOTAL RETURNS
(periods ended December 31, 2009) (Unaudited)
Based on Net Asset Value
|
|
Based on Market Value
|
|
One Year
|
|
Five Years
|
|
Since Inception
(01/30/04)
|
|
One Year
|
|
Five Years
|
|
Since Inception
(01/30/04)
|
|
|
54.16
|
%
|
|
|
0.25
|
%
|
|
|
3.27
|
%
|
|
|
83.21
|
%
|
|
|
0.85
|
%
|
|
|
0.80
|
%
|
|
The performance data quoted represent past performance. Past performance is no guarantee of future results. The investment return will vary and the principal value of an investment will fluctuate and shares, if sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Performance results reflect the effect of leverage resulting from the issuance of preferred shares and/or borrowings under a credit agreement.
TAX INFORMATION2009 (Unaudited)
Pursuant to the Jobs and Growth Relief Reconciliation Act of 2003, the Fund designates qualified dividend income of $17,555,475. Additionally, 40% of the ordinary dividends qualified for the dividends received deduction available to corporations.
REINVESTMENT PLAN
The Fund has a dividend reinvestment plan (the "Plan") commonly referred to as an "opt-out" plan. Each common shareholder who participates in the Plan will have all distributions of dividends and capital gains ("Dividends") automatically reinvested in additional common shares by The Bank of New York Mellon as agent (the "Plan Agent"). Shareholders who elect not to participate in the Plan will receive all Dividends in cash paid by check mailed directly to the shareholder of record (or if the shares are held in street or other nominee name, then to the nominee) by the Plan Agent, as dividend disbursing agent. Shareholders whose common shares are held in the name of a broker or nominee should contact the broker or nominee to determine whether and how they may participate in the Plan.
The Plan Agent serves as agent for the shareholders in administering the Plan. After the Fund declares a Dividend, the Plan Agent will, as agent for the shareholders, either: (i) receive the cash payment and use it to buy common shares in the open market, on the NYSE or elsewhere, for the participants' accounts or (ii) distribute newly issued common shares of the Fund on behalf of the participants.
The Plan Agent will receive cash from the Fund with which to buy common shares in the open market if, on the Dividend payment date, the net asset value ("NAV") per share exceeds the market price per share plus estimated brokerage commissions on that date. The Plan Agent will receive the Dividend in newly issued common shares of
43
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
the Fund if, on the Dividend payment date, the market price per share plus estimated brokerage commissions equals or exceeds the NAV per share of the Fund on that date. The number of shares to be issued will be computed at a per share rate equal to the greater of (i) the NAV or (ii) 95% of the closing market price per share on the payment date.
If the market price per share is less than the NAV on a Dividend payment date, the Plan Agent will have until the last business day before the next ex-dividend date for the common stock, but in no event more than 30 days after the Dividend payment date (as the case may be, the "Purchase Period"), to invest the Dividend amount in shares acquired in open market purchases. If at the close of business on any day during the Purchase Period on which NAV is calculated the NAV equals or is less than the market price per share plus estimated brokerage commissions, the Plan Agent will cease making open market purchases and the uninvested portion of such Dividends shall be filled through the issuance of new shares of common stock from the Fund at the price set forth in the immediately preceding paragraph.
Participants in the Plan may withdraw from the Plan upon notice to the Plan Agent. Such withdrawal will be effective immediately if received not less than ten days prior to a Dividend record date; otherwise, it will be effective for all subsequent Dividends. When a participant withdraws from the Plan or upon termination of the Plan as provided below, certificates for whole common shares credited to his or her account under the Plan will be issued and a cash payment will be made for any fraction of a common share credited to such account. If any participant elects to have the Plan Agent sell all or part of his or her shares and remit the proceeds, the Plan Agent is authorized to deduct a $15.00 fee plus $0.10 per share brokerage commissions.
The Plan Agent's fees for the handling of reinvestment of Dividends will be paid by the Fund. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of Dividends. The automatic reinvestment of Dividends will not relieve participants of any income tax that may be payable or required to be withheld on such Dividends.
The Fund reserves the right to amend or terminate the Plan. All correspondence concerning the Plan should be directed to the Plan Agent at 800-432-8224.
OTHER INFORMATION
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available (i) without charge, upon request, by calling 800-330-7348, (ii) on our 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 800-330-7348 or (ii) on the SEC's Web site at http://www.sec.gov.
44
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available (i) without charge, upon request by calling 800-330-7348, or (ii) on the SEC's Web site at http://www.sec.gov. In addition, the Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.
Please note that the distributions paid by the Fund to shareholders are subject to recharacterization for tax purposes. The Fund may also pay distributions in excess of the Fund's net investment company taxable income and this excess 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. The final tax treatment of all distributions is reported to shareholders on their 1099-DIV forms, which are mailed after the close of each calendar year. 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.
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Fund may purchase, from time to time, shares of its common stock in the open market.
Changes to Derivatives Policies
The Board of Directors, at its June 9-10, 2009 meeting, expanded the Fund's universe of permissible derivatives transactions. The Fund may, but is not required to, use, without limit, various strategic transactions described below to seek to generate return, facilitate portfolio management and mitigate risks. Although the investment manager may seek to use these kinds of transactions to further the Fund's investment objectives, no assurance can be given that they will achieve this result. The Fund may enter into exchange-listed and over-the-counter put and call options on securities (including securities of investment companies and baskets of securities), indexes, and other financial instruments; purchase and sell financial futures contracts and options thereon; enter into various interest rate transactions, such as swaps, caps, floors or collars or credit transactions; equity index, total return and credit default swaps; forward contracts; and structured investments. In addition, the Fund may enter into various currency transactions, such as forward currency contracts, currency futures contracts, currency swaps or options on currency or currency futures. The Fund also may purchase and sell derivative instruments that combine features of these instruments. The Fund may invest in other types of derivatives, structured and similar instruments which are not currently available but which may be developed in the future. Collectively, all of the above are referred to as "Derivatives Transactions."
Derivatives Transactions can be highly volatile and involve various types and degrees of risk, depending upon the characteristics of the particular derivative, including the imperfect correlation between the value of such
45
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
instruments and the underlying assets, the possible default of the other party to the transaction and illiquidity of the derivative instruments. Derivatives Transactions may entail investment exposures that are greater than their cost would suggest, meaning that a small investment in derivatives could have a large potential impact on the Fund's performance, effecting a form of investment leverage on the Fund's portfolio. In certain types of Derivatives Transactions the Fund could lose the entire amount of its investment; in other types of Derivatives Transactions the potential loss is theoretically unlimited.
The market for many derivatives is, or suddenly can become, illiquid. Changes in liquidity may result in significant, rapid and unpredictable changes in the prices for Derivatives Transactions. The Fund could experience losses if it were unable to liquidate its position because of an illiquid secondary market. Successful use of Derivatives Transactions also is subject to the ability of the Investment Manager to predict correctly movements in the direction of the relevant market and, to the extent the transaction is entered into for hedging purposes, to ascertain the appropriate correlation between the transaction being hedged and the price movements of the derivatives. Derivatives Transactions entered into to seek to manage the risks of the Fund's portfolio of securities may have the effect of limiting gains from otherwise favorable market movements. The use of Derivatives Transactions may result in losses greater than if they had not been used (and a loss on a Derivatives Transaction position may be larger than the gain in a portfolio position being hedged), may require the Fund to sell or purchase portfolio securities at inopportune times or for prices other than current market values, may limit the amount of appreciation the Fund can realize on an investment, or may cause the Fund to hold a security that it might otherwise sell. Amounts paid by the Fund as premiums and cash or other assets held as collateral with respect to Derivatives Transactions may not otherwise be available to the Fund for investment purposes.
The use of currency transactions can result in the Fund incurring losses as a result of the imposition of exchange controls, political developments, government intervention or failure to intervene, suspension of settlements or the inability of the Fund to deliver or receive a specified currency.
Structured notes and other related instruments carry risks similar to those of more traditional derivatives such as futures, forward and option contracts. However, structured instruments may entail a greater degree of market risk and volatility than other types of debt obligations.
The Fund will be subject to credit risk with respect to the counterparties to certain Derivatives Transactions entered into by the Fund. Derivatives may be purchased on established exchanges or through privately negotiated transactions referred to as over-the-counter ("OTC") derivatives. Exchange-traded derivatives generally are guaranteed by the clearing agency which is the issuer or counterparty to such derivatives. However, many futures exchanges and boards of trade limit the amount of fluctuation permitted in futures contract prices during a single trading day and once the daily limit has been reached in a particular contract no trades may be made that day at a price beyond that limit or trading may be suspended. There also is no assurance that sufficient trading interest to create a liquid secondary market on an exchange will exist at any particular time and no such secondary market
46
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
may exist or may cease to exist. Each party to an OTC derivative bears the risk that the counterparty will default. OTC derivatives are less liquid than exchange-traded derivatives because the other party to the transaction may be the only investor with sufficient understanding of the derivative to be interested in bidding for it. If a counterparty becomes bankrupt or otherwise fails to perform its obligations under a derivative contract due to financial difficulties, the Fund may experience significant delays in obtaining any recovery under the derivative contract in bankruptcy or other reorganization proceeding. The Fund may obtain only a limited recovery or may obtain no recovery in such circumstances.
The Fund will not be a commodity pool (
i.e.
, a pooled investment vehicle which trades in commodity futures contracts and options thereon and the operator of which is registered with the Commodity Futures Trading Commission). In addition, the Fund has claimed an exclusion from the definition of commodity pool operator and, therefore, is not subject to registration or regulation as a pool operator under the Commodity Exchange Act.
PRIVACY POLICY*
In the course of doing business with Cohen & Steers, you may share personal information with us. We are committed to maintaining the privacy of this information and recognize the importance of preventing unauthorized access to it. You may provide personal information on account applications and requests for forms or other literature (such as your address and social security number) and through account transactions with us (such as purchases, sales and account balances). You may also provide us with this information through written, electronic and telephone account inquiries.
We do not sell personal information about current and former customers to anyone, and we do not disclose it unless necessary to process a transaction, service an account or as otherwise required or permitted by law. For example, we may disclose information to companies that perform administrative services for Cohen & Steers, such as transfer agents, or printers that assist us in the distribution of investor materials. These organizations will use this information only for purposes of providing the required services or as otherwise may be required by law. We may also share personal information within the Cohen & Steers family of companies to provide you with additional information about our products and services.
We maintain physical, electronic and procedural safeguards to protect your personal information. Within Cohen & Steers, we restrict access to your personal information to those employees who need it to perform their jobs, such as servicing your account or informing you of new products and services.
The accuracy of your personal information is important. If you need to correct or update your personal or account information, please call us at 800-330-7348. We will be happy to review, correct or update your personal or account information.
* This privacy policy applies to the following Cohen & Steers companies: Cohen & Steers Capital Management, Inc., Cohen & Steers Securities, LLC and the Cohen & Steers Funds.
47
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
APPROVAL OF INVESTMENT MANAGEMENT AGREEMENT
The Board of Directors of the Fund, including a majority of the directors who are not parties to the Fund's investment management agreement (the "Management Agreement"), or interested persons of any such party ("Independent Directors"), has the responsibility under the 1940 Act to approve the Fund's Management Agreement for its initial two year term and its continuation annually thereafter at a meeting of the Board of Directors called for the purpose of voting on the approval or continuation. At a meeting held in person on September 22-23, 2009, the Management Agreement was discussed and was unanimously continued for a term ending June 30, 2010 by the Fund's Board of Directors, including the Independent Directors. The Independent Directors were represented by independent counsel who assisted them in their deliberations during the meeting and executive session.
In considering whether to continue the Management Agreement, the Board of Directors reviewed materials provided by the Fund's investment manager (the "Investment Manager") and Fund counsel which included, among other things, fee, expense and performance information compared to peer funds ("Peer Funds") prepared by an independent data provider; supplemental performance and summary information prepared by the Investment Manager; and memoranda outlining the legal duties of the Board of Directors. The Board of Directors also spoke directly with representatives of the independent data provider and met with investment management personnel. In addition, the Board of Directors considered information provided from time to time by the Investment Manager throughout the year at meetings of the Board of Directors, including presentations by portfolio managers relating to the investment performance of the Fund and the investment strategies used in pursuing the Fund's objective. In particular, the Board of Directors considered the following:
(i) The nature, extent and quality of services provided by the Investment Manager:
The Board of Directors reviewed the services that the Investment Manager provides to the Fund, including, but not limited to, making the day-to-day investment decisions for the Fund, and generally managing the Fund's investments in accordance with the stated policies of the Fund. The Board of Directors also discussed with officers and portfolio managers of the Fund the amount of time the Investment Manager dedicates to the Fund and the types of transactions that were being done on behalf of the Fund. Additionally, the Board of Directors took into account the services provided by the Investment Manager to its other funds, including those that invest substantially in real estate securities and have investment objectives and strategies similar to the Fund. The Board of Directors next considered the education, background and experience of the Investment Manager's personnel, noting particularly that the favorable history and reputation of the portfolio managers for the Fund has had, and would likely continue to have, a favorable impact on the Fund. The Board of Directors further noted the Investment Manager's ability to attract quality and experienced personnel. The Board of Directors then considered the administrative services provided by the Investment Manager, including compliance and accounting services. After consideration of the above factors, among others, the Board of Directors concluded that the nature, quality and extent of services provided by the Investment Manager are adequate and appropriate.
48
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
(ii) Investment performance of the Fund and the Investment Manager:
The Board of Directors considered the investment performance of the Fund compared to Peer Funds and compared to a relevant blended benchmark. The Board of Directors noted that the Fund's dual focus on REITs and utilities securities is unique and as a result, the Peer Funds generally consisted of real-estate only or utility-only funds, making it difficult to make quantitative comparisons of the Fund's performance with the Peer Funds. The Board of Directors noted that the Fund underperformed the Peer Funds' median for the year-to-date period, performed at the Peer Funds' median for the one-year period and outperformed the Peer Funds' medians for the three- and five year periods ended June 30, 2009, ranking the Fund in the fourth, third, second and third quintiles, respectively. The Board of Directors noted that the Fund outperformed its blended benchmark for the year-to-date period and underperformed its blended benchmark for the one-, three- and five-year periods ended June 30, 2009, mainly due to leverage in a down market. The Board of Directors engaged in discussions with the Investment Manager regarding the contributors and detractors to the Fund's performance during the periods, as well as the impact of leverage on the Fund's performance. The Board of Directors also considered supplemental performance data provided by the Investment Manager, including a narrative summary of various factors affecting performance, and the Investment Manager's performance in managing other funds that invest in real estate and utilities securities. The Board of Directors determined to closely monitor the Fund's performance and requested that the Investment Manager provide updates for this purpose.
(iii) Cost of the services to be provided and profits to be realized by the Investment Manager from the relationship with the Fund:
Next, the Board of Directors considered the management fees and administrative fees payable by the Fund, as well as total expense ratios. As part of their analysis, the Board of Directors gave substantial consideration to the fee and expense analyses provided by the independent data provider. The Board of Directors considered the Fund's actual and contractual management fees, and the Fund's net expense ratios at managed and common asset levels compared to the medians of the Peer Funds, ranking the Fund in the fourth or fifth quintiles across most categories. The Board of Directors considered the impact of reduced asset levels as a result of the 2008 market decline, leverage levels and change to the capital structure by replacing AMPS with borrowings on the Fund's fees and expenses at managed and common asset levels. The Board of Directors also noted that the Investment Manager continues to waive a portion of its management fee until early 2012 and that the Fund pays an administration fee to the Investment Manager. The Board of Directors concluded that, in light of market conditions, the Fund's current expense structure is generally satisfactory, but determined to closely monitor the Fund's expenses.
The Board of Directors also reviewed information regarding the profitability to the Investment Manager of its relationship with the Fund. The Board of Directors considered the level of the Investment Manager's profits and whether the profits were reasonable for the Investment Manager. The Board of Directors took into consideration other benefits to be derived by the Investment Manager in connection with the Management Agreement, noting
49
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
particularly the research and related services, within the meaning of Section 28(e) of the Securities Exchange Act of 1934, as amended, that the Investment Manager receives by allocating the Fund's brokerage transactions. The Board of Directors also considered the fees received by the Investment Manager under the Administration Agreement, and noted the significant services received, such as operational services and furnishing office space and facilities for the Fund, and providing persons satisfactory to the Board of Directors to serve as officers of the Fund, and that these services were beneficial to the Fund. The Board of Directors concluded that the profits realized by the Investment Manager from its relationship with the Fund were reasonable and consistent with fiduciary duties.
(iv) The extent to which economies of scale would be realized as the Fund grows and whether fee levels would reflect such economies of scale:
The Board of Directors noted that as a closed-end fund, the Fund would not be expected to have inflows of capital that might produce increasing economies of scale. The Board of Directors determined that, given the Fund's closed-end structure, there were not at this time significant economies of scale that were not being shared with stockholders.
(v) Comparison of services rendered and fees paid to those under other investment management contracts, such as contracts of the same and other investment advisers or other clients:
As discussed above in (i) and (iii), the Board of Directors compared both the services rendered and the fees paid under the Management Agreement to those under other investment management contracts of other investment advisers managing Peer Funds. The Board of Directors also considered the services rendered, fees paid and profitability under the Management Agreement to the Investment Manager's other fund management agreements and advisory contracts with institutional and other clients with similar investment mandates, as well as the profitability under the Management Agreement to the Investment Manager's other advisory contracts with institutional and other clients with similar investment mandates. The Board of Directors determined that on a comparative basis the fees under the Management Agreement were reasonable in relation to the services provided.
No single factor was cited as determinative to the decision of the Board of Directors. Rather, after weighing all of the considerations and conclusions discussed above, the Board of Directors, including the Independent Directors, unanimously approved the continuation of the Management Agreement.
50
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
MANAGEMENT OF THE FUND
The business and affairs of the Fund are managed under the direction of the Board of Directors. The Board of Directors approves all significant agreements between the Fund and persons or companies furnishing services to it, including the Fund's agreements with its investment manager, administrator, sub-administrator, custodian and transfer agent. The management of the Fund's day-to-day operations is delegated to its officers, the investment manager, administrator and sub-administrator, subject always to the investment objective and policies of the Fund and to the general supervision of the Board of Directors.
The Board of Directors and officers of the Fund and their principal occupations during at least the past five years are set forth below. The statement of additional information (SAI) includes additional information about Fund directors and is available, without charge, upon request by calling 800-330-7348.
Name, Address
1
and Age
|
|
Position(s) Held
with Fund
|
|
Term of
Office
2
|
|
Principal Occupation
During At Least
The Past 5 Years
(Including Other
Directorships Held)
|
|
Number of
Funds Within
Fund
Complex
Overseen by
Director
(Including
the Fund)
|
|
Length
of Time
Served
3
|
|
Interested Directors
4
|
|
|
|
|
|
|
|
|
Robert H. Steers Age: 56
|
|
Director and
Co-Chairman
|
|
|
2012
|
|
|
Co-Chairman and Co-Chief Executive Officer of Cohen & Steers Capital Management, Inc. (the Advisor) since 2003 and its parent, Cohen & Steers, Inc. since 2004. Vice President of Cohen & Steers
Securities, LLC.
|
|
|
18
|
|
|
1991 to present
|
|
|
Martin Cohen
Age: 61
|
|
Director and
Co-Chairman
|
|
|
2010
|
|
|
Co-Chairman and Co-Chief Executive Officer of the Advisor since 2003 and Cohen & Steers, Inc. since 2004. Prior to that, President of the Advisor; Vice President of Cohen & Steers Securities, LLC.
|
|
|
18
|
|
|
1991 to present
|
|
|
(table continued on next page)
51
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
(table continued from previous page)
Name, Address
1
and Age
|
|
Position(s) Held
with Fund
|
|
Term of
Office
2
|
|
Principal Occupation
During At Least
The Past 5 Years
(Including Other
Directorships Held)
|
|
Number of
Funds Within
Fund
Complex
Overseen by
Director
(Including
the Fund)
|
|
Length
of Time
Served
3
|
|
Disinterested Directors
|
|
|
|
|
Bonnie Cohen
5
Age: 67
|
|
Director
|
|
|
2011
|
|
|
Consultant. Board Member United States Department of Defense Business Board; Vice-chair Global Heritage Fund; Chair of the Advisory Committee, The Posse Foundation, DC; Finance Chair, District of Columbia Public Libraries. Government service: former Undersecretary of State for Management, US
Department of State; previously Assistant Secretary of Interior for Policy Management and Budget, US
Department of Interior. Private employment includes Senior Vice President National Trust for Historic Preservation, Treasurer UMWA Health and Retirement Funds.
|
|
|
18
|
|
|
2001 to present
|
|
|
George Grossman Age: 56
|
|
Director
|
|
|
2012
|
|
|
Attorney-at-law
|
|
|
18
|
|
|
1993 to present
|
|
|
Richard E. Kroon Age: 67
|
|
Director
|
|
|
2011
|
|
|
Member of Investment Committee, 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.
|
|
|
18
|
|
|
2004 to present
|
|
|
(table continued on next page)
52
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
(table continued from previous page)
Name, Address
1
and Age
|
|
Position(s) Held
with Fund
|
|
Term of
Office
2
|
|
Principal Occupation
During At Least
The Past 5 Years
(Including Other
Directorships Held)
|
|
Number of
Funds Within
Fund
Complex
Overseen by
Director
(Including
the Fund)
|
|
Length
of Time
Served
3
|
|
Richard J. Norman Age: 66
|
|
Director
|
|
|
2010
|
|
|
Private Investor. Advisory Board Member of the Salvation Army, Member: DC Dept. of Corrections Chaplain's Corps. Prior thereto, Investment Representative of Morgan Stanley Dean Witter.
|
|
|
18
|
|
|
2001 to present
|
|
|
Frank K. Ross Age: 66
|
|
Director
|
|
|
2010
|
|
|
Professor of Accounting, Howard University. Board member of Pepco Holdings, Inc. (electric utility). Formerly, Midatlantic Area Managing Partner for Audit and Risk Advisory Services at KPMG LLP and Managing Partner of its Washington DC office.
|
|
|
18
|
|
|
2004 to present
|
|
|
Willard H. Smith Jr. Age: 73
|
|
Director
|
|
|
2011
|
|
|
Board member of Essex Property Trust Inc. Managing Director at Merrill Lynch & Co., Equity Capital Markets Division from 1983 to 1995.
|
|
|
18
|
|
|
1996 to present
|
|
|
C. Edward Ward Jr. Age: 63
|
|
Director
|
|
|
2012
|
|
|
Member of the Board of Trustees of Directors Manhattan College, Riverdale, New York. Formerly head of closed-end fund listings for the New York Stock Exchange.
|
|
|
18
|
|
|
2004 to present
|
|
|
1
The address for each director is 280 Park Avenue, New York, NY 10017.
2
On March 12, 2008, the Board of Directors adopted a mandatory retirement policy stating a Director must retire from the Board on December 31st of the year in which he or she turns 75 years of age.
3
The length of time served represents the year in which the director was first elected or appointed to any fund in the Cohen & Steers fund complex.
4
"Interested person", as defined in the 1940 Act, of the Fund because of affiliation with the investment manager (Interested Directors).
5
Martin Cohen and Bonnie Cohen are not related.
53
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
The officers of the Fund (other than Messrs. Cohen and Steers, whose biographies are provided above), their address, their ages and their principal occupations for at least the past five years are set forth below.
Name, Address and Age
1
|
|
Position(s) Held
with Fund
|
|
Principal Occupation During At Least The Past 5 Years
|
|
Length
of Time
Served
2
|
|
Adam M. Derechin Age: 45
|
|
President and Chief Executive Officer
|
|
Chief Operating Officer of CSCM (since 2003) and CNS (since
2004). Prior to that, Senior Vice President of CSCM and Vice President and Assistant Treasurer of the Cohen & Steers funds.
|
|
Since 2005
|
|
|
Joseph M. Harvey Age: 46
|
|
Vice President
|
|
President and Chief Investment Officer of CSCM (since 2003) and President of CNS (since 2004). Prior to that, Senior Vice President and Director of Investment Research of CSCM.
|
|
Since 2004
|
|
|
William F. Scapell Age: 42
|
|
Vice President
|
|
Senior Vice President of CSCM since 2003. Prior to that, chief strategist for preferred securities at Merrill Lynch & Co., Inc.
|
|
Since 2003
|
|
|
Robert S. Becker Age: 40
|
|
Vice President
|
|
Senior Vice President of CSCM since 2003. Prior to that, portfolio manager at Franklin Templeton Investments.
|
|
Since 2003
|
|
|
Thomas N. Bohjalian Age: 44
|
|
Vice President
|
|
Senior Vice President of CSCM since 2006. Prior to that, Vice President of CSCM from 2003 through 2005. Prior thereto, Vice President at AEW Capital Management.
|
|
Since 2006
|
|
|
Yigal Jhirad Age: 45
|
|
Vice President
|
|
Senior Vice President of CSCM since 2007. Prior to that, executive director at Morgan Stanley and head of prime brokerage equity product marketing responsible for developing and marketing quantitative and derivatives product to hedge funds.
|
|
Since 2007
|
|
|
Francis C. Poli Age: 47
|
|
Secretary
|
|
Executive Vice President, Secretary and General Counsel of CSCM and CNS since March 2007. Prior thereto, General Counsel of Allianz Global Investors of America LP.
|
|
Since 2007
|
|
|
(table continued on next page)
54
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
(table continued from previous page)
Name, Address and Age
1
|
|
Position(s) Held
with Fund
|
|
Principal Occupation During At Least The Past 5 Years
|
|
Length
of Time
Served
2
|
|
James Giallanza Age: 43
|
|
Treasurer and Chief Financial Officer
|
|
Senior Vice President of CSCM since September 2006. Prior thereto, Deputy Head of the US Funds Administration and Treasurer & CFO of various mutual funds within the Legg Mason (formally Citigroup Asset Management) fund complex from August 2004 to September 2006; Director/Controller of the US wholesale business at UBS Global Asset Management (U.S.) from September 2001 to July 2004.
|
|
Since 2006
|
|
|
Lisa D. Phelan Age: 41
|
|
Chief Compliance Officer
|
|
Senior Vice President and Director of Compliance of CSCM since 2007 and prior to that, Vice President since 2006. Chief Compliance Officer of CSSL since 2004. Prior to that, Compliance Officer of CSCM since 2004. Chief Compliance Officer, Avatar Associates & Overture Asset Managers, 2003-2004.
|
|
Since 2006
|
|
|
1
The address of each officer is 280 Park Avenue, New York, NY 10017.
2
Officers serve one-year terms. The length of time served represents the year in which the officer was first elected to that position in any fund in the Cohen & Steers fund complex. All of the officers listed above are officers of one or more of the other funds in the complex.
55
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
Meet the Cohen & Steers family of open-end funds:
C
OHEN &
S
TEERS
G
LOBAL
R
EALTY
S
HARES
Designed for investors seeking total
return, investing primarily in global real estate equity
securities
Symbols: CSFAX, CSFBX, CSFCX, CSSPX
C
OHEN &
S
TEERS
I
NSTITUTIONAL
G
LOBAL
R
EALTY
S
HARES
Designed for institutional investors seeking total
return,
investing primarily in global real estate
securities
Symbol: GRSIX
C
OHEN &
S
TEERS
R
EALTY
S
HARES
Designed for investors seeking total return, investing primarily in REITs
Symbol: CSRSX
C
OHEN &
S
TEERS
I
NSTITUTIONAL
R
EALTY
S
HARES
Designed for institutional investors seeking total return, investing primarily in REITs
Symbol: CSRIX
C
OHEN &
S
TEERS
R
EALTY
I
NCOME
F
UND
Designed for investors seeking maximum total return, investing primarily in real estate securities with an emphasis on both income and capital appreciation
Symbols: CSEIX, CSBIX, CSCIX, CSDIX
C
OHEN &
S
TEERS
I
NTERNATIONAL
R
EALTY
F
UND
Designed for investors seeking total return, investing primarily in international real estate securities
Symbols: IRFAX, IRFCX, IRFIX
C
OHEN &
S
TEERS
A
SIA
P
ACIFIC
R
EALTY
S
HARES
Designed for investors seeking total return, investing primarily in real estate securities located in the Asia Pacific region
Symbols: APFAX, APFCX, APFIX
C
OHEN &
S
TEERS
G
LOBAL
I
NFRASTRUCTURE
F
UND
Designed for investors seeking total return, investing primarily in global infrastructure securities
Symbols: CSUAX, CSUBX, CSUCX, CSUIX
C
OHEN &
S
TEERS
D
IVIDEND
V
ALUE
F
UND
Designed for investors seeking high current income and long-term growth of income and capital appreciation, investing primarily in dividend paying common stocks and preferred
stocks
Symbols: DVFAX, DVFCX, DVFIX
Please consider the investment objectives, risks, charges and expenses of the fund carefully before investing. A prospectus containing this and other information can be obtained by calling 800-330-7348 or by visiting cohenandsteers.com. Please read the prospectus carefully before
investing.
Cohen & Steers Securities, LLC, Distributor
56
COHEN & STEERS REIT AND UTILITY INCOME FUND, INC.
OFFICERS AND DIRECTORS
Robert H. Steers
Director and co-chairman
Martin Cohen
Director and co-chairman
Bonnie Cohen
Director
George Grossman
Director
Richard E. Kroon
Director
Richard J. Norman
Director
Frank K. Ross
Director
Willard H. Smith Jr.
Director
C. Edward Ward, Jr.
Director
Adam M. Derechin
President and chief executive officer
Joseph M. Harvey
Vice president
William F. Scapell
Vice president
Robert S. Becker
Vice president
Thomas N. Bohjalian
Vice president
Yigal D. Jhirad
Vice president
Francis C. Poli
Secretary
James Giallanza
Treasurer and chief financial officer
Lisa D. Phelan
Chief compliance officer
KEY INFORMATION
Investment Manager
Cohen & Steers Capital Management, Inc.
280 Park Avenue
New York, NY 10017
(212) 832-3232
Fund Subadministrator and Custodian
State Street Bank and Trust Company
One Lincoln Street
Boston, MA 02111
Transfer AgentCommon Shares
The Bank of New York Mellon
480 Washington Boulevard
Jersey City, NJ 07310
(866) 227-0757
Legal Counsel
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY 10038
New York Stock Exchange Symbol: RTU
Web site: cohenandsteers.com
This report is for shareholder information. This is not a prospectus intended for use in the purchase or sale of Fund shares. Past performance is of course no guarantee of future results and your investment may be worth more or less at the time you sell.
57
COHEN & STEERS
REIT AND UTILITY INCOME FUND
280 PARK AVENUE
NEW YORK, NY 10017
eDelivery
NOW AVAILABLE
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ANNUAL REPORT
DECEMBER 31, 2009
RTUAR
Item
2. Code of Ethics.
On
October 1, 2009, the registrant has adopted an Amended and Restated Code
of Ethics that applies to its Principal Executive Officer and Principal
Financial Officer. The material changes to the Code of Ethics that apply to the
registrants principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions were (i) a shortened preclearance window, (ii) the
implementation of a 30-day holding period to sell securities at a profit, (iii) limitations
on the frequency of trading, and (iv) a preclearance requirement for
exchange traded funds. 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, 280
Park Avenue, New York, NY 10017.
Item
3. Audit Committee Financial Expert.
The registrants board has
determined that Frank K. Ross, a member of the boards Audit Committee, is an audit
committee financial expert. Mr. Ross
is independent, as such term is defined in Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) (d) Aggregate
fees billed to the registrant for the last two fiscal years for professional
services rendered by the registrants principal accountant were as follows:
|
|
2009
|
|
2008
|
|
Audit
Fees
|
|
$
|
50,200
|
|
$
|
50,200
|
|
Audit-Related
Fees
|
|
|
|
$
|
31,200
|
|
Tax
Fees
|
|
17,450
|
|
$
|
15,800
|
|
All
Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit-related
fees were billed in connection with the preparation and issuance of
certification reports to rating agencies relating to the registrants preferred
shares. Tax fees were billed in
connection with the preparation of tax returns, calculation and designation of
dividends and other miscellaneous tax services.
Aggregate fees billed by
the registrants principal accountant for the last two fiscal years for
non-audit services provided to the registrants investment advisor (not
including any sub-advisor whose role is primarily portfolio management and is
subcontracted or overseen by another investment advisor) and any entity
controlling, controlled by, or under common control with the investment advisor
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:
|
|
2009
|
|
2008
|
|
Audit-Related
Fees
|
|
|
|
|
|
Tax
Fees
|
|
|
|
|
|
All
Other Fees
|
|
|
|
$
|
110,000
|
|
|
|
|
|
|
|
|
These other fees were
billed in connection with internal control reviews.
(e)(1)
The registrants 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 registrants principal accountant for the registrants
investment advisor (not including any sub-advisor whose role is primarily portfolio
management and is subcontracted with or overseen by another investment advisor)
and/or to any entity controlling, controlled by or under common control
with the registrants investment advisor that provides ongoing services to the
registrant, if the engagement for services relates directly to the operations
and financial reporting of the registrant.
The audit committee may
delegate pre-approval authority to one or more of its members who are
independent members of the board of directors of the registrant. The member or
members to whom such authority is delegated shall report any pre-approval
decisions to the audit committee at its next scheduled meeting. The audit committee may not delegate its
responsibility to pre-approve services to be performed by the registrants
principal accountant to the investment advisor.
(e) (2) No services included in (b) (d) above
were approved by the audit committee pursuant to paragraphs (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) For the fiscal years ended December 31,
2009 and December 31, 2008, the aggregate fees billed by the registrants
principal accountant for non-audit services rendered to the registrant and for
non-audit services rendered to the registrants investment advisor (not
including any sub-advisor whose role is primarily portfolio management and is
subcontracted with or overseen by another investment advisor)
and/or to any
entity controlling, controlled by or under common control with the registrants
investment advisor that provides ongoing services to the registrant
were $17,450 and $130,885, respectively.
(h) The registrants audit committee
considered whether the provision of non-audit services that were rendered to
the registrants investment advisor (not including any sub-advisor whose role
is primarily portfolio management and is subcontracted with or overseen by
another investment advisor)
and/or to any entity controlling, controlled
by or under common control with the registrants investment advisor that
provides ongoing services to the registrant that were not required to be
pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X
was
compatible with maintaining the principal accountants independence.
Item
5. Audit Committee of Listed Registrants.
The
registrant has a separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Securities Exchange Act of
1934. The members of the committee are
Frank K. Ross (chairman), Bonnie Cohen, George Grossman and Richard E. Kroon.
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.
The registrant has delegated voting of proxies in respect
of portfolio holdings to Cohen & Steers Capital Management, Inc.,
in accordance with the policies and procedures set forth below.
COHEN & STEERS CAPITAL MANAGEMENT, INC.
STATEMENT OF POLICIES AND PROCEDURES REGARDING THE
VOTING OF SECURITIES
This
statement sets forth the policies and procedures that Cohen & Steers
Capital Management, Inc. (C&S) follows in exercising voting rights
with respect to securities held in our client portfolios. All proxy-voting rights that are exercised by
C&S shall be subject to this Statement of Policy and Procedures.
I. Objectives
Voting rights are an
important component of corporate governance. The Advisor has three overall
objectives in exercising voting rights:
A. Responsibility. The
Advisor shall seek to ensure that there is an effective means in place to hold
companies accountable for their actions. While management must be accountable
to its board, the board must be accountable to a companys shareholders.
Although accountability can be promoted in a variety of ways, protecting
shareholder voting rights may be among our most important tools.
B. Rationalizing Management
and Shareholder Concerns. The Advisor seeks to ensure that the interests of a
companys management and board are aligned with those of the companys
shareholders. In this respect, compensation must be structured to reward the
creation of shareholder value.
C. Shareholder Communication.
Since companies are owned by their shareholders, the Advisor seeks to ensure
that management effectively communicates with its owners about the companys
business operations and financial performance. It is only with effective
communication that shareholders will be able to assess the performance of
management and to make informed decisions on when to buy, sell or hold a
companys securities.
In exercising voting rights,
the Advisor follows the general principles set forth below.
·
The ability to
exercise a voting right with respect to a security is a valuable right and,
therefore, must be viewed as part of the asset itself.
·
In exercising
voting rights, the Advisor shall engage in a careful evaluation of issues that
may materially affect the rights of shareholders and the value of the security.
·
Consistent with
general fiduciary principles, the exercise of voting rights shall always be
conducted with reasonable care, prudence and diligence.
·
In exercising
voting rights on behalf of clients, the Advisor shall conduct itself in the
same manner as if the Advisor was the constructive owner of the securities.
·
To the extent
reasonably possible, the Advisor shall participate in each shareholder voting
opportunity.
·
Voting rights
shall not automatically be exercised in favor of management-supported
proposals.
·
The Advisor,
and its officers and employees, shall never accept any item of value in
consideration of a favorable proxy voting decision.
Set forth below are general
guidelines followed in exercising proxy voting rights:
Prudence
. In making a
proxy voting decision, the Advisor shall give appropriate consideration to all
relevant facts and circumstances, including the value of the securities to be
voted and the likely effect any vote may have on that value. Since voting
rights must be exercised on the basis of an informed judgment, investigation
shall be a critical initial step.
Third
Party Views
. While the Advisor may consider the views of third
parties, the Advisor shall never base a proxy voting decision solely on the
opinion of a third party.
Rather, decisions shall be
based on a reasonable and good faith determination as to how best to maximize
shareholder value.
Shareholder
Value.
Just as the decision whether to purchase or sell a security is a matter
of judgment, determining whether a specific proxy resolution will increase the
market value of a security is a matter of judgment as to which informed parties
may differ. In determining how a proxy vote may affect the economic value of a
security, the Advisor shall consider both short-term and long-term views about
a companys business and prospects, especially in light of our projected
holding period on the stock (e.g., the Advisor may discount long-term views on
a short-term holding).
Set forth below are
guidelines as to how specific proxy voting issues shall be analyzed and
assessed.
While these guidelines will
provide a framework for the Advisor decision making process, the mechanical
application of these guidelines can never address all proxy voting decisions.
When new issues arise or old
issues present nuances not encountered before, the Advisor must be guided by
its reasonable judgment to vote in a manner that the Advisor deems to be in the
best interests of the Fund and its shareholders. In addition, because the
regulatory framework and the business cultures and practices vary from region
to region, the below general guidelines may be inconsistent in certain
circumstances.
Uncontested
Director Elections
Votes on director nominees
should be made on a case-by-case basis using a mosaic approach, where all
factors are considered in director elections and where no single issue is
deemed to be determinative.
For example, a nominees
experience and business judgment may be critical to the long-term success of
the portfolio company, notwithstanding the fact that he or she may serve on the
board of more than four public companies. In evaluating nominees, the Advisor
considers the following factors:
·
Whether the
nominee attended less than 75 percent of the board and committee meetings
without a valid excuse for the absences;
·
Whether the
nominee is an inside or affiliated outside director and sits on the audit,
compensation, or nominating committees;
·
Whether the
nominee ignored a significant shareholder proposal that was approved by a (i) majority
of the shares outstanding or (ii) majority of the votes cast for two
consecutive years;
·
Whether the
nominee, without shareholder approval, to our knowledge instituted a new poison
pill plan, extended an existing plan, or adopted a new plan upon the expiration
of an existing plan during the past year;
·
Whether the
nominee is an inside or affiliated outside director and the full board serves
as the audit, compensation, or nominating committee or the company does not
have one of these committees;
·
Whether the
nominee is an insider or affiliated outsider on boards that are not at least
majority independent;
·
Whether the
nominee is the CEO of a publicly-traded company who serves on more than two
public boards;
·
Whether the
nominee serves on more than four public company boards;
·
Whether the
nominee serves on the audit committee where there is evidence (such as audit
reports or reports mandated under the Sarbanes Oxley Act) that there exists
material weaknesses in the companys internal controls;
·
Whether the
nominee serves on the compensation committee if that director was present at
the time of the grant of backdated options or options the pricing or the timing
of which Advisor believes may have been manipulated to provide additional
benefits to executives;
·
Whether the
nominee is believed by us to have a material conflict of interest with the
portfolio company; and
·
Whether the
nominee (or the overall board) in our view has a record of making poor
corporate or strategic decisions or has demonstrated an overall lack of good
business judgment.
The Advisor votes on a
case-by-case basis for shareholder proposals requesting companies to amend their
bylaws in order to create access to the proxy so as to nominate candidates for
directors. The Advisor recognizes the importance of shareholder access to the
ballot process as a means to ensure that boards do
not become self-perpetuating
and self-serving. However, the Advisor is also aware that some proposals may
promote certain interest groups and could be disruptive to the nomination
process. Special attention will be paid to companies that display a chronic
lack of shareholder accountability.
Proxy
Contests
Director
Nominees in a Contested Election
. By definition, this type
of board candidate or slate runs for the purpose of seeking a significant
change in corporate policy or control. Therefore, the economic impact of the
vote in favor of or in opposition to that director or slate must be analyzed
using a higher standard such as is normally applied to changes in control.
Criteria for evaluating director nominees as a group or individually should
also include: the underlying reason why the new slate (or individual director)
is being proposed; performance; compensation; corporate governance provisions
and takeover activity; criminal activity; attendance at meetings; investment in
the company; interlocking directorships; inside, outside and independent
directors; number of other board seats; and other experience. It is impossible
to have a general policy regarding director nominees in a contested election.
Reimbursement
of Proxy Solicitation Expenses
. Decisions to provide full
reimbursement for dissidents waging a proxy contest should be made on a
case-by-case basis.
Ratification
of Auditors
The Advisor votes for
proposals to ratify auditors, unless an auditor has a financial interest in or
association with the company, and are therefore not independent; or there is
reason to believe that the independent auditor has rendered an opinion that is
neither accurate nor indicative of the companys financial position. Generally,
the Advisor votes against auditor ratification and withhold votes from audit
committee members if non-audit fees exceed audit fees. The Advisor votes on a
case-by-case basis on auditor rotation proposals. Criteria for evaluating the
rotation proposal include, but are not limited to: tenure of the audit firm;
establishment and disclosure of a renewal process whereby the auditor is
regularly evaluated for both audit quality and competitive price; length of the
rotation period advocated in the proposal; and any significant audit related
issues. Generally, the Advisor votes against auditor indemnification and
limitation of liability; however the Advisor recognizes there may be situations
where indemnification and limitations on liability may be appropriate.
Takeover
Defenses
While the Advisor recognizes
that a takeover attempt can be a significant distraction for the board and
management to deal with, the simple fact is that the possibility of a corporate
takeover keeps management focused on maximizing shareholder value. As a result,
the Advisor opposes measures that are designed to prevent or obstruct corporate
takeovers because they can entrench current management. The following are our
guidelines on change of control issues:
Shareholder
Rights Plans
. The Advisor acknowledges that there are arguments
for and against shareholder rights plans, also known as poison pills.
Companies should put their case for rights plans to shareholders. The Advisor
reviews on a case-by-case basis management proposals to ratify a poison pill.
The Advisor generally looks for shareholder friendly features including a two-
to three-year sunset provision, a permitted bid provision and a 20 percent or
higher flip-in provision.
Greenmail
. The Advisor
votes for proposals to adopt anti-greenmail charter or bylaw amendments or
otherwise restrict a companys ability to make greenmail payments.
Unequal
Voting Rights
. Generally, The Advisor votes against dual-class
recapitalizations as they offer an effective way for a firm to thwart hostile
takeovers by concentrating voting power in the hands of management or other insiders.
Classified
Boards
. The Advisor generally votes in favor of shareholder proposals to
declassify a board of directors, although the Advisor acknowledges that a
classified board may be in the long-term best interests of a company in certain
situations. In voting on shareholder proposals to declassify a board of
directors, the Advisor evaluates all facts and circumstances surrounding such
proposal, including whether the shareholder proposing the de-classification has
an agenda in making such proposal that may be at odds with the long-term best
interests of the company or whether it would be in the best interests of the
company to thwart a shareholders attempt to control the board of directors.
Cumulative
Voting
. Having the ability to cumulate our votes for the election of
directorsthat is, cast more than one vote for a director about whom they feel
stronglygenerally increases shareholders rights to effect change in the
management of a corporation. The Advisor generally supports, therefore, proposals
to adopt cumulative voting.
Shareholder
Ability to Call Special Meeting
. The Advisor votes on a
case-by-case basis for shareholder proposals requesting companies to amend
their governance documents (bylaws and/or charter) in order to allow
shareholders to call special meetings. The Advisor recognizes the importance on
shareholder ability to call a special meeting, however, the Advisor is also
aware that some proposals are put forth in order to promote the agenda(s) of
certain special interest groups and could be disruptive to the management of
the company.
Shareholder
Ability to Act by Written Consent
. The Advisor generally
votes against proposals to allow or facilitate shareholder action by written
consent. The requirement that all shareholders be given notice of a
shareholders meeting and matters to be discussed therein seems to provide a
reasonable protection of minority shareholder rights.
Shareholder
Ability to Alter the Size of the Board
. The Advisor generally
votes for proposals that seek to fix the size of the board and vote against
proposals that give management the ability to alter the size of the board
without shareholder approval. While the Advisor recognizes the importance of
such proposals, the Advisor is however also aware that these proposals are
sometimes put forth in order to promote the agenda(s) of certain special
interest groups and could be disruptive to the management of the company.
Miscellaneous
Board Provisions
Board
Committees
. Boards should delegate key oversight functions, such
as responsibility for audit, nominating and compensation issues, to independent
committees. The chairman and members of any committee should be clearly
identified in the annual report. Any committee should have the authority to
engage independent advisors where appropriate at the companys expense.
Audit, nominating and
compensation committees should consist solely of non-employee directors, who
are independent of management.
Separate
Chairman and CEO Positions
. The Advisor will generally
vote for proposals looking to separate the CEO and Chairman roles. The Advisor
does acknowledge, however, that under certain circumstances, it may be
reasonable for the CEO and Chairman roles to be held by a single person.
Lead
Directors and Executive Sessions
. In cases where the CEO and
Chairman roles are combined, Advisor will vote for the appointment of a lead
(non-insider) director and for regular executive sessions (board meetings
taking place without the CEO/Chairman present).
Majority
of Independent Directors
. The Advisor votes for proposals that call
for the board to be composed of a majority of independent directors. The
Advisor believes that a majority of independent directors can be an important
factor in facilitating objective decision making and enhancing accountability
to shareholders.
Independent
Committees
. The Advisor votes for shareholder proposals
requesting that the boards audit, compensation, and nominating committees
consist exclusively of independent directors.
Stock
Ownership Requirements
. The Advisor supports measures requiring
senior executives to hold a minimum amount of stock in a company (often
expressed as a percentage of annual compensation), requiring stock acquired
through option exercise to be held for a certain minimum amount of time and
issuing restricted stock awards instead of options.
Term of
Office
. The Advisor votes against shareholder proposals to limit the tenure
of outside directors. Term limits pose artificial and arbitrary impositions on
the board and could harm shareholder interests by forcing experienced and
knowledgeable directors off the board.
Director
and Officer Indemnification and Liability Protection
. Proposals
concerning director and officer indemnification and liability protection should
be evaluated on a case-by-case basis.
Board Size
. The Advisor
generally votes for proposals to limit the size of the board to 15 members or
less.
Majority
Vote Standard
. The Advisor generally votes for proposals asking
for the board to initiate the appropriate process to amend the companys
governance documents (charter or bylaws) to provide that director nominees
shall be elected by the affirmative vote of the majority of votes cast at an
annual meeting of shareholders. The Advisor would generally review on a
case-by-case basis proposals that address alternative approaches to a majority
vote requirement.
Confidential
Voting
. The Advisor votes for shareholder proposals requesting that companies
adopt confidential voting, use independent tabulators, and use independent inspectors
of election as long as the proposals include clauses for proxy contests as
follows: in the case of a contested election, management should be permitted to
request that the dissident group honor its confidential voting policy. If the
dissidents agree, the policy remains in place. If the dissidents do not agree,
the confidential voting policy is waived.
The Advisor also votes for
management proposals to adopt confidential voting.
Bundled
Proposals
. The Advisor reviews on a case-by-case basis bundled
or conditioned proxy proposals. In the case of items that are conditioned
upon each other, the Advisor examines the benefits and costs of the packaged
items. In instances where the joint effect of the conditioned items is not in
shareholders best interests, the Advisor votes against the proposals. If the
combined effect is positive, the Advisor supports such proposals.
Date/Location
of Meeting
. The Advisor votes against shareholder proposals to
change the date or location of the shareholders meeting. No one site will meet
the needs of all shareholders.
Adjourn
Meeting if Votes are Insufficient
. Open-end requests for
adjournment of a shareholder meeting generally will not be supported. However,
where management specifically states the reason for requesting an adjournment
and the requested adjournment is necessary to permit a proposal that would
otherwise be supported under this policy to be carried out; the adjournment
request will be supported.
Disclosure
of Shareholder Proponents
. The Advisor votes for shareholder proposals
requesting that companies disclose the names of shareholder proponents.
Shareholders may wish to contact the proponents of a shareholder proposal for
additional information.
Capital
Structure
Increase
Additional Common Stock
. The Advisor generally votes for increases
in authorized shares, provided that the increase is not greater than three
times the number of shares outstanding and reserved for issuance (including
shares reserved for stock-related plans and securities convertible into common
stock, but not shares reserved for any poison pill plan). Votes generally are
cast in favor of proposals to authorize additional shares of stock except where
the proposal:
·
creates a blank
check preferred stock; or
·
establishes
classes of stock with superior voting rights.
Blank
Check Preferred Stock
. Votes generally are cast in opposition to
management proposals authorizing the creation of new classes of preferred stock
with unspecific voting, conversion, distribution and other rights, and
management proposals to increase the number of authorized blank check preferred
shares. The Advisor may vote in favor of this type of proposal when it receives
assurances to its reasonable satisfaction that (i) the preferred stock was
authorized by the board for the use of legitimate capital formation purposes
and not for anti- takeover purposes, and (ii) no preferred stock will be
issued with voting power that is disproportionate to the economic interests of
the preferred stock. These representations should be made either in the proxy
statement or in a separate letter from the company to the Advisor.
Preemptive
Rights
. Votes regarding shareholder proposals seeking preemptive rights are
determined on a case-by-case basis after evaluating:
·
The size of the
company;
·
The shareholder
base; and
·
The liquidity
of the stock.
For example, it would be
difficult to support a shareholder proposal that would require an S&P 500
company with over $1 billion in equity held by thousands of shareholders (with
no single shareholder owning a significant percentage of outstanding shares) to
implement preemptive rights each time it conducted a new offering. Such a
requirement would be impractical and extremely costly. Moreover, at companies
with that large of a shareholder base and the ease with which shareholders
could preserve their relative interest through purchases of shares on the on
the open market, the cost of implementing preemptive rights does not seem
justifiable in relation to the benefits.
Dual Class Capitalizations
. Because
classes of common stock with unequal voting rights limit the rights of certain
shareholders, the Advisor votes against adoption of a dual or multiple class
capitalization structure.
Restructurings/Recapitalizations
. The Advisor
reviews proposals to increase common and/or preferred shares and to issue
shares as part of a debt restructuring plan on a case- by-case basis.
In voting, the Advisor
considers the following issues:
·
dilutionhow
much will ownership interest of existing shareholders be reduced, and how
extreme will dilution to any future earnings be?
·
change in
controlwill the transaction result in a change in control of the company?
·
bankruptcygenerally,
approve proposals that facilitate debt restructurings unless there are clear
signs of self-dealing or other abuses.
Share
Repurchase Programs
. Boards may institute share repurchase or stock
buy-back programs for a number of reasons. The Advisor will generally vote in
favor of such programs where the repurchase would be in the long-term best
interests of shareholders, and where the company is not thought to be able to
use the cash in a more useful way.
The Advisor will vote
against such programs when shareholders interests could be better served by
deployment of the cash for alternative uses, or where the repurchase is a
defensive maneuver or an attempt to entrench management.
Targeted
Share Placements
. These shareholder proposals ask companies to seek
stockholder approval before placing 10% or more of their voting stock with a
single investor. The proposals are typically in reaction to the placement by
various companies of a large block of their voting stock in an ESOP, parent
capital fund or with a single friendly investor, with the aim of protecting
themselves against a hostile tender offer. These proposals are voted on a
case-by-case basis after reviewing the individual situation of the company
receiving the proposal.
Executive
and Director Compensation
Stock-based
Incentive Plans
. Votes with respect to compensation plans should be
determined on a case-by-case basis. The analysis of compensation plans focuses
primarily on the transfer of shareholder wealth (the dollar cost of pay plans
to shareholders). Other matters included in our analysis are the amount of the
companys outstanding stock to be reserved for the award of stock options or
restricted stock, whether the exercise price of an option is less than the
stocks fair market value at the date of the grant of the options, and whether
the plan provides for the exchange of outstanding options for new ones at lower
exercise prices. Every award type is valued. An estimated dollar cost for the
proposed plan and all continuing plans is derived. This cost, dilution to
shareholders equity, will also be expressed as a percentage figure for the
transfer of shareholder wealth and will be considered along with dilution to
voting power. Once the cost of the plan is estimated, it is compared to an
allowable industry-specific and market cap-based dilution cap.
If the proposed plan cost is
above the allowable cap, an against vote is indicated. If the proposed cost is
below the allowable cap, a vote for the plan is indicated unless the plan
violates the repricing guidelines. If the company has a history of repricing
options or has the express ability to reprice underwater stock options without
first securing shareholder approval under the proposed plan, the plan receives
an against voteeven in cases where the plan cost is considered acceptable
based on the quantitative analysis.
The Advisor votes against
equity plans that have high average three year burn rates, unless the company
has publicly committed to reduce the burn rate to a rate that is comparable to
its peer group (as determined by the Advisor).
Approval
of Cash or Cash-and-Stock Bonus Plans
. The Advisor votes for cash
or cash-and-stock bonus plans to exempt the compensation from limits on
deductibility under the provisions of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the Code).
Executive
Compensation
. Executive compensation should be tied to the
performance of the executive and the company as well as relevant market
conditions. The Advisor feels that the performance criteria and specific
amounts and types of executive compensation are best decided by a companys
board of directors and/or its compensation committee and fully disclosed to
shareholders.
The Advisor will, however,
vote for shareholder proposals that call for shareholders to vote, in a
non-binding manner, on executive pay since such vote is non-binding and is
merely informative for the board of directors and/or compensation committee.
Further, the Advisor generally votes for shareholder proposals that seek
additional disclosure of executive and director pay information.
Reload/Evergreen
Features
. The Advisor will generally vote against plans that
enable the issuance of reload options and that provide an automatic share
replenishment (evergreen) feature.
Golden
Parachutes
. The Advisor opposes the use of accelerated
employment contracts that result in cash grants of greater than three times
annual compensation (salary and bonus) in the event of termination of
employment following a change in control of a company. In general, the
guidelines call for voting against golden parachute plans because they impede
potential takeovers that shareholders should be free to consider. The Advisor
generally withholds its votes at the next shareholder meeting for directors who
to our knowledge approved golden parachutes.
401(k) Employee
Benefit Plans
. The Advisor votes for proposals to implement a 401(k) savings
plan for employees.
Employee
Stock Purchase Plans
. The Advisor supports employee stock purchase
plans, although the Advisor generally believes the discounted purchase price
should be at least 85% of the current market price.
Option
Expensing
. The Advisor votes for shareholder proposals to
expense fixed-price options.
Vesting
. The Advisor
believes that restricted stock awards normally should vest over at least a
two-year period.
Option
Repricing
. Stock options generally should not be re-priced,
and never should be re-priced without shareholder approval. In addition,
companies should not issue new options, with a lower strike price, to make up
for previously issued options that are substantially underwater. The Advisor
will vote against the election of any slate of directors that, to its
knowledge, has authorized a company to re-price or replace underwater options
during the most recent year without shareholder approval.
Stock
Holding Periods
. Generally vote against all proposals requiring
executives to hold the stock received upon option exercise for a specific
period of time.
Transferable
Stock Options
. Review on a case-by-case basis proposals to grant
transferable stock options or otherwise permit the transfer of outstanding
stock options, including cost of proposal and alignment with shareholder
interests.
Recoup
Bonuses
. The Advisor votes on a case-by-case on shareholder proposals to
recoup unearned incentive bonuses or other incentive payments made to senior
executives if it is later determined that fraud, misconduct, or negligence
significantly contributed to a restatement of financial results that led to the
awarding of unearned incentive compensation.
Incorporation
Reincorporation
Outside of the United States
. Generally, the Advisor
will vote against companies looking to reincorporate outside of the U.S.
Voting on
State Takeover Statutes
. The Advisor reviews on a case-by-case basis
proposals to opt in or out of state takeover statutes (including control share
acquisition statutes, control share cash-out statutes, freeze out provisions,
fair price provisions, stakeholder laws, poison pill endorsements, severance
pay and labor contract provisions, anti greenmail provisions, and disgorgement
provisions). In voting on these shareholder proposals, the Advisor evaluates
all facts and circumstances surrounding such proposal, including whether the
shareholder proposing such measure has an agenda in making such proposal that
may be at odds with the longterm best interests of the company or whether it
would be in the best interests of the company to thwart a shareholders attempt
to control the board of directors.
Voting on
Reincorporation Proposals
. Proposals to change a companys state of incorporation
are examined on a case-by-case basis. In making our decision, the Advisor
reviews managements rationale for the proposal, changes to the charter/bylaws,
and differences in the state laws governing the companies.
Mergers and
Corporate Restructurings
Mergers
and Acquisitions
. Votes on mergers and acquisitions should be
considered on a case-by-case basis, taking into account factors including the
following: anticipated financial and operating benefits; offer price (cost vs.
premium); prospects of the combined companies; how the deal was negotiated; and
changes in corporate governance and their impact on shareholder rights.
The Advisor votes against
proposals that require a super-majority of shareholders to approve a merger or
other significant business combination. The Advisor supports proposals that
seek to lower super-majority voting requirements.
Nonfinancial
Effects of a Merger or Acquisition
. Some companies have
proposed a charter provision which specifies that the board of directors may examine
the nonfinancial effect of a merger or acquisition on the company. This
provision would allow the board to evaluate the impact a proposed change in
control would have on employees, host communities, suppliers and/or others. The
Advisor generally votes against proposals to adopt such charter provisions. The
Advisor feels it is the directors fiduciary duty to base decisions solely on
the financial interests of the shareholders.
Corporate
Restructuring
. Votes on corporate restructuring proposals, including
minority squeeze outs, leveraged buyouts, going private proposals, spin-offs,
liquidations, and asset sales, should be considered on a case-by-case basis.
Spin-offs
. Votes on
spin-offs should be considered on a case-by-case basis depending on the tax and
regulatory advantages, planned use of sale proceeds, market focus, and
managerial incentives.
Asset
Sales
. Votes on asset sales should be made on a case-by-case basis after
considering the impact on the balance sheet/working capital, value received for
the asset, and potential elimination of diseconomies.
Liquidations
. Votes on
liquidations should be made on a case-by-case basis after reviewing managements
efforts to pursue other alternatives, appraisal value of assets, and the
compensation plan for executives managing the liquidation.
Appraisal
Rights
. The Advisor votes for proposals to restore, or provide shareholders
with, rights of appraisal. Rights of appraisal provide shareholders who are not
satisfied with the terms of certain corporate transactions the right to demand
a judicial review in order to determine a fair value for their shares.
Changing
Corporate Name
. The Advisor votes for changing the corporate name.
Social
Issues.
The
Advisor believes that it is the responsibility of the board and management to
run a company on a daily basis. With this in mind, in the absence of unusual
circumstances, the Advisor does not believe that shareholders should be
involved in determining how a company should address broad social and policy
issues. As a result, the Advisor generally votes against these types of
proposals, which are generally initiated by shareholders, unless the Advisor
believes the proposal has significant economic implications.
Item 8. Portfolio Managers of Closed-End Investment
Companies.
Information pertaining to the portfolio
managers of the registrant, as of February 28, 2010, is set forth below.
Martin
Cohen
·
Director and co-chairman
·
Portfolio manager since inception
|
|
Co-founder,
co-chairman and co-chief executive officer of Cohen & Steers Capital
Management, Inc. (C&S) and its parent company, Cohen &
Steers, Inc. (CNS). Vice
president and director of Cohen & Steers Securities, LLC. Director and co-chairman of each of the
Cohen & Steers funds.
Previously, president of C&S and each of the Cohen &
Steers funds.
|
|
|
|
Robert
Steers
·
Director and co-chairman
·
Portfolio manager since inception
|
|
Co-founder,
co-chairman and co-chief executive officer of C&S and CNS. Vice President and Director of Cohen &
Steers Securities, LLC. Director and
co-chairman of each of the Cohen & Steers funds. Previously, chairman of C&S and each of
the Cohen & Steers funds.
|
|
|
|
Joseph
Harvey
|
|
President of C&S
and CNS. Previously, senior vice
president of C&S and director of research.
|
·
Vice president
·
Portfolio manager since 2004
|
|
|
|
|
|
William
F. Scapell
·
Vice President
·
Portfolio manager since inception
|
|
Senior vice president of C&S. Previously, chief
strategist for preferred securities at Merrill Lynch & Co.
|
|
|
|
Robert Becker
·
Vice President
·
Portfolio manager since inception
|
|
Senior vice president of C&S. Previously,
co-portfolio manager for the Franklin Utilities Fund at Franklin Templeton
Investments.
|
|
|
|
Thomas Bohjalian
·
Vice President
·
Portfolio manager since 2006
|
|
Senior vice president of
C&S. Previously, vice president of C&S.
|
C&S
utilizes a team-based approach in managing the registrant. Mr. Cohen and Mr. Steers
are the leaders of this team and they act in a supervisory capacity. Mr. Harvey,
Mr. Becker and Mr. Bohjalian direct and supervise the execution of
the registrants investment strategy, and lead and guide the other members of
the team. Mr. Scapell manages the
registrants preferred securities investments.
Each
portfolio manager listed above manages other investment companies and/or
investment vehicles and accounts in addition to the registrant. The following
tables show, as of December 31, 2009, the number of accounts each
portfolio manager managed in each of the listed categories and the total assets
in the accounts managed within each category. The portfolio managers do not
receive performance-based fees with respect to any of the registered investment
companies, other pooled investment vehicles or other accounts that they manage.
Martin Cohen
|
|
Number of accounts
|
|
Total assets
|
|
|
|
|
|
|
|
|
·
Registered
investment companies
|
|
15
|
|
$
|
11,284,365,000
|
|
|
|
|
|
|
|
|
·
Other
pooled investment vehicles
|
|
37
|
|
$
|
7,385,259,000
|
|
|
|
|
|
|
|
|
·
Other
accounts
|
|
45
|
|
$
|
3,057,923,000
|
|
Robert Steers
|
|
Number of accounts
|
|
Total assets
|
|
|
|
|
|
|
|
|
·
Registered
investment companies
|
|
15
|
|
$
|
11,284,365,000
|
|
|
|
|
|
|
|
|
·
Other
pooled investment vehicles
|
|
37
|
|
$
|
7,385,259,000
|
|
|
|
|
|
|
|
|
·
Other
accounts
|
|
45
|
|
$
|
3,057,923,000
|
|
Joseph Harvey
|
|
Number of accounts
|
|
Total assets
|
|
|
|
|
|
|
|
|
·
Registered
investment companies
|
|
15
|
|
$
|
11,284,365,000
|
|
|
|
|
|
|
|
|
·
Other
pooled investment vehicles
|
|
37
|
|
$
|
7,385,259,000
|
|
|
|
|
|
|
|
|
·
Other
accounts
|
|
45
|
|
$
|
3,057,923,000
|
|
William F. Scapell
|
|
Number of accounts
|
|
Total assets
|
|
|
|
|
|
|
|
|
·
Registered
investment companies
|
|
7
|
|
$
|
5,027,409,000
|
|
|
|
|
|
|
|
|
·
Other
pooled investment vehicles
|
|
2
|
|
$
|
41,187,000
|
|
|
|
|
|
|
|
|
·
Other
accounts
|
|
10
|
|
$
|
499,097,000
|
|
Robert Becker
|
|
Number of accounts
|
|
Total assets
|
|
|
|
|
|
|
|
|
·
Registered
investment companies
|
|
3
|
|
$
|
2,446,326,000
|
|
|
|
|
|
|
|
|
·
Other
pooled investment vehicles
|
|
2
|
|
$
|
125,757,000
|
|
|
|
|
|
|
|
|
·
Other
accounts
|
|
0
|
|
$
|
0
|
|
Thomas Bohjalian
|
|
Number of accounts
|
|
Total assets
|
|
|
|
|
|
|
|
|
·
Registered
investment companies
|
|
5
|
|
$
|
3,722,694,000
|
|
|
|
|
|
|
|
|
·
Other
pooled investment vehicles
|
|
2
|
|
$
|
41,187,000
|
|
|
|
|
|
|
|
|
·
Other
accounts
|
|
6
|
|
$
|
234,909,000
|
|
Share Ownership.
The following table indicates the dollar range of
securities of the registrant owned by the registrants portfolio managers as of
December 31, 2009:
|
|
Dollar Range of Securities Owned
|
|
Martin Cohen
|
|
$100,001 - $500,000
|
|
Robert Steers
|
|
$500,001 - $1,000,000
|
|
Joseph Harvey
|
|
None
|
|
William F. Scapell
|
|
None
|
|
Robert Becker
|
|
None
|
|
Thomas Bohjalian
|
|
None
|
|
Conflicts of Interest.
It
is possible that conflicts of interest may arise in connection with the
portfolio managers management of the registrants investments on the one hand
and the investments of other accounts or vehicles for which the portfolio
managers are responsible on the other. For example, a portfolio manager may
have conflicts of interest in allocating management time, resources and
investment opportunities among the registrant and the other accounts or
vehicles he advises. In addition, due to differences in the investment
strategies or restrictions among the registrant and the other accounts, a
portfolio manager may take action with respect to another account that differs
from the action taken with respect to the registrant.
In some cases, another
account managed by a portfolio manager may provide more revenue to C&S.
While this may appear to create additional conflicts of interest for the
portfolio manager in the allocation of management time, resources and
investment opportunities, C&S strives to ensure that portfolio managers
endeavor to exercise their discretion in a manner that is equitable to all
interested persons. In this regard, in the absence of specific account-related
impediments (such as client-imposed restrictions or lack of available cash), it
is the policy of C&S to allocate investment ideas pro rata to all accounts
with the same primary investment objective.
In addition, certain of
the portfolio managers may from time to time manage one or more accounts on
behalf of C&S and its affiliated companies (the CNS Accounts). Certain
securities held in the CNS Accounts also may be held in the account of the
registrant or other client accounts of C&S. C&S has adopted procedures
that are designed to ensure that the interests of the CNS Accounts are never
placed ahead of the interests of the registrant or any other client account. In
this regard, C&S will not purchase or sell a security for the CNS Accounts
until C&S has completed its purchase or sale program for the registrant and
any other client accounts.
While it is possible
that a security will be sold out of the CNS Accounts but continue to be held
for the registrant or one or more other client accounts, this will occur only
if C&S, acting in its reasonable judgment and consistent with its fiduciary
duties, believes this to be appropriate for, and consistent with the objectives
and profile of, the registrant or other client accounts.
Advisor
Compensation Structure.
Compensation of
the Advisors portfolio managers and other investment professionals has three
primary components: (1) a base salary, (2) an annual cash bonus and (3) annual
stock-based compensation consisting generally of restricted stock units of the
Advisors parent, CNS. The Advisors investment professionals, including the
portfolio managers, also receive certain retirement, insurance and other
benefits that are broadly available to all of its employees. Compensation of
the Advisors investment professionals is reviewed primarily on an annual
basis.
Method
to Determine Compensation
.
The Advisor
compensates its portfolio managers based primarily on the total return
performance of funds and accounts managed by the portfolio manager versus
appropriate peer groups or benchmarks. C&S uses a variety of benchmarks to
evaluate each portfolio managers performance for compensation purposes,
including the FTSE NAREIT Equity REIT Index, the S&P 1500 Utilities Index,
the S&P 500 Index and other broad based indexes based on the asset classes
managed by each portfolio manager. In
evaluating the performance of a portfolio manager, primary emphasis is normally
placed on one- and three-year performance, with secondary consideration of
performance over longer periods of time.
Performance is evaluated on a pre-tax and pre-expense basis. In addition
to rankings within peer groups of funds on the basis of absolute performance,
consideration may also be given to risk-adjusted performance. For funds and
accounts with a primary investment objective of high current income,
consideration will also be given to the funds and accounts success in
achieving this objective. For portfolio managers responsible for multiple funds
and accounts, investment performance is evaluated on an aggregate basis. The
Advisor does not have any funds or accounts with performance-based advisory
fees. Portfolio managers are also evaluated on the basis of their success in
managing their dedicated team of analysts. Base compensation for portfolio
managers of the Advisor varies in line with the portfolio managers seniority
and position with the firm.
Salaries,
bonuses and stock-based compensation are also influenced by the operating
performance of the Advisor and CNS. While the annual salaries of the Advisors
portfolio managers are fixed, cash bonuses and stock based compensation may
fluctuate significantly from year to year, based on changes in manager
performance and other factors.
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
registrants principal executive officer and principal financial officer have
concluded that the registrants disclosure controls and procedures are
reasonably designed to ensure that information required to be disclosed by the
registrant in this Form N-CSR was recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commissions 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 registrants internal control over financial reporting that
occurred during the second fiscal quarter of the period covered by this report
that have materially affected, or are reasonably likely to materially affect,
the registrants internal control over financial reporting.
Item
12. Exhibits.
(a)(1) Amended and Restated Code of Ethics.
(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 REIT AND UTILITY INCOME FUND, INC.
By:
|
/s/
Adam M. Derechin
|
|
|
Name: Adam M. Derechin
|
|
|
Title:
President and Chief Executive Officer
|
|
|
|
Date:
March 8, 2010
|
|
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/
James Giallanza
|
|
|
Name:
|
James
Giallanza
|
|
|
Title:
|
Treasurer
|
|
|
|
(principal
financial officer)
|
|
|
|
|
|
|
|
|
|
Date:
March 8, 2010
|
|
Grafico Azioni Cohen & Steers Reit And Utilities Income Fund (NYSE:RTU)
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Da Ago 2024 a Set 2024
Grafico Azioni Cohen & Steers Reit And Utilities Income Fund (NYSE:RTU)
Storico
Da Set 2023 a Set 2024