UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act File Number: 811-21326
Cohen & Steers REIT and Preferred Income Fund, Inc.
(Exact name of registrant as specified in charter)
757 Third Avenue, New York, NY 10017
(Address of principal executive offices) (Zip code)
Robert H. Steers
Cohen & Steers Capital Management, Inc.
757 Third Avenue
New York, New York 10017
(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 832-3232
Date of fiscal year end: December 31
Date of reporting period: December 31, 2003
Item 1. Reports to Stockholders.
The registrant's annual report to shareholders, for the period ended December
31, 2003, is hereby included.
Item 2. Code of Ethics.
On February 5, 2004, the registrant adopted a code of ethics that applies to the
registrant's principal executive and principal financial officers. A copy of the
code of ethics is attached as Exhibit 10(a)(1).
Item 3. Audit Committee Financial Expert.
The registrant's audit committee has determined that it does not currently have
an audit committee financial expert serving on its audit committee. Although no
single audit committee member possesses the attributes necessary for
qualification as an audit committee financial expert, several members have
significant experience in the management of their personal assets and the assets
of the businesses with which they are or have been associated. All members of
the audit committee are also financially literate and have the necessary
education and experience to be effective members of the audit committee. In
addition, the registrant's nominating committee intends to recommend the
appointment and election of an additional director who will qualify as an audit
committee financial expert and the registrant's board will consider this
nomination at a future meeting.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees. The aggregate audit fees billed by the registrant's principal
accountant to the registrant were $0 for the fiscal year ended December 31, 2002
and $169,546 for the fiscal year ended December 31, 2003.
(b) Audit-Related Fees. The aggregate audit-related fees billed by the
registrant's principal accountant to the registrant were $0 for the fiscal year
ended December 31, 2002 and $47,200 for the fiscal year ended December 31, 2003.
These fees were billed in connection with the preparation and issuance of
certification reports to rating agencies relating to the registrant's preferred
shares.
(c) Tax Fees. The aggregate tax fees billed by the registrant's principal
accountant to the registrant were $0 for the fiscal year ended December 31, 2002
and $3,000 for the fiscal year ended December 31, 2003. These fees were billed
in connection with the preparation of tax returns, calculation and designation
of dividends and other miscellaneous tax services.
(d) All Other Fees. There were no other fees billed by the registrant's
principal accountant to the registrant for the fiscal years ended December 31,
2002 and December 31, 2003.
For the fiscal year ended December 31, 2002, the aggregate fees billed by the
registrant's principal accountant to the registrant's investment adviser for
services provided by the principal accountant were $46,000. These fees were
billed in connection with internal control reviews and AIMR performance reviews
and were not required to be approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X since this portion of the Rule was not
effective until 2003.
For the fiscal year ended December 31, 2003, the aggregate fees billed by the
registrant's principal accountant to the registrant's investment adviser for
services provided by the principal accountant and approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X were $49,500. These fees were billed
in connection with internal control reviews and AIMR performance reviews.
(e)(1) Before the registrant's principal accountant is engaged to render audit
or non-audit services to the registrant and non-audit services to the
registrant's investment adviser and its affiliates, each engagement is approved
by the registrant's audit committee.
(e)(2) None.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrant's principal accountant
for services rendered to the registrant and the registrant's investment adviser
and its affiliates were $46,000 for the fiscal year ended December 31, 2002 and
$99,700 for the fiscal year ended December 31, 2003.
(h) This item was not applicable for the fiscal year ended December 31, 2003
since no such non-pre-approved services were rendered.
Item 5. Audit Committee of Listed Registrants.
The registrant has a standing audit committee established in accordance with
Section 3(a)(58)(A) of the Exchange Act. The members of the committee are
Gregory C. Clark, Bonnie Cohen, George Grossman, Richard J. Norman and Willard
H. Smith Jr.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
COHEN & STEERS CAPITAL MANAGEMENT, INC.
STATEMENT OF POLICIES AND PROCEDURES REGARDING THE VOTING OF
SECURITIES
This statement sets forth the policies and procedures that Cohen & Steers
Capital Management, Inc. ("C&S") follows in exercising voting rights with
respect to securities held in our client portfolios. All proxy-voting rights
that are exercised by C&S shall be subject to this Statement of Policy and
Procedures.
I. Objectives
Voting rights are an important component of corporate governance. C&S has three
overall objectives in exercising voting rights:
A. Responsibility. C&S shall seek to ensure that there is an effective
means in place to hold companies accountable for their actions. While management
must be accountable to its board, the board must be accountable to a company's
shareholders. Although accountability can be promoted in a variety of ways,
protecting shareholder voting rights may be among our most important tools.
B. Rationalizing Management and Shareholder Concerns. C&S seeks to
ensure that the interests of a company's management and board are aligned with
those of the company's shareholders. In this respect, compensation must be
structured to reward the creation of shareholder value.
C. Shareholder Communication. Since companies are owned by their
shareholders, C&S seeks to ensure that management effectively communicates with
its owners about the company's business operations and financial performance. It
is only with effective communication that shareholders will be able to assess
the performance of management and to make informed decisions on when to buy,
sell or hold a company's securities.
II. General Principles
In exercising voting rights, C&S shall conduct itself in accordance with the
general principles set forth below.
1. The ability to exercise a voting right with respect to a security
is a valuable right and, therefore, must be viewed as part of the
asset itself.
2. In exercising voting rights, C&S shall engage in a careful
evaluation of issues that may materially affect the rights of
shareholders and the value of the security.
3. Consistent with general fiduciary principles, the exercise of
voting rights shall always be conducted with reasonable care,
prudence and diligence.
4. In exercising voting rights on behalf of clients, C&S shall
conduct itself in the same manner as if C&S were the constructive
owner of the securities.
5. To the extent reasonably possible, C&S shall participate in each
shareholder voting opportunity.
6. Voting rights shall not automatically be exercised in favor of
management-supported proposals.
7. C&S, and its officers and employees, shall never accept any item
of value in consideration of a favorable proxy voting decision.
III. General Guidelines
Set forth below are general guidelines that C&S shall follow in exercising proxy
voting rights:
Prudence
In making a proxy voting decision, C&S shall give appropriate consideration to
all relevant facts and circumstances, including the value of the securities to
be voted and the likely effect any vote may have on that value. Since voting
rights must be exercised on the basis of an informed judgment, investigation
shall be a critical initial step.
Third Party Views
While C&S may consider the views of third parties, C&S shall never base a proxy
voting decision solely on the opinion of a third party. Rather, decisions shall
be based on a reasonable and good faith determination as to how best to maximize
shareholder value.
Shareholder Value
Just as the decision whether to purchase or sell a security is a matter of
judgment, determining whether a specific proxy resolution will increase the
market value of a security is a matter of judgment as to which informed parties
may differ. In determining how a proxy vote may affect the economic value of a
security, C&S shall consider both short-term and long-term views about a
company's business and prospects, especially in light of our projected holding
period on the stock (e.g., C&S may discount long-term views on a short-term
holding).
IV. Specific Issues
Set forth below are guidelines as to how specific proxy voting issues shall be
analyzed and assessed. While these guidelines will provide a framework for our
decision making process, the mechanical application of these guidelines can
never address all proxy voting decisions. When new issues arise or old issues
present nuances not encountered before, C&S must be guided by its reasonable
judgment to vote in a manner that C&S deems to be in the best interests of its
clients.
A. Stock-Based Compensation
Approval of Plans or Plan Amendments. By their nature, compensation plans must
be evaluated on a case-by-case basis. As a general matter, C&S always favors
compensation plans that align the interests of management and shareholders. C&S
generally approves compensation plans under the following conditions:
10% Rule. The dilution effect of the newly authorized shares, plus the shares
reserved for issuance in connection with all other stock related plans,
generally should not exceed 10%.
Exercise Price. The minimum exercise price of stock options should be at least
equal to the market price of the stock on the date of grant.
Plan Amendments. Compensation plans should not be materially amended without
shareholder approval.
Non-Employee Directors. Awards to non-employee directors should not be subject
to management discretion, but rather should be made under non-discretionary
grants specified by the terms of the plan.
Repricing/Replacement of Underwater Options. Stock options generally should not
be re-priced, and never should be re-priced without shareholder approval. In
addition, companies should not issue new options, with a lower strike price, to
make up for previously issued options that are substantially underwater. C&S
will vote against the election of any slate of directors that, to its knowledge,
has authorized a company to re-price or replace underwater options during the
most recent year without shareholder approval.
Reload/Evergreen Features. We will generally vote against plans that enable the
issuance of reload options and that provide an automatic share replenishment
("evergreen") feature.
Measures to Increase Executive Long-Term Stock Ownership. We support measures to
increase the long-term stock ownership by a company's executives. These include
requiring senior executives to hold a minimum amount of stock in a company
(often expressed as a percentage of annual compensation), requiring stock
acquired through option exercise to be held for a certain minimum amount of
time, and issuing restricted stock awards instead of options. In this respect,
we support the expensing of option grants because it removes the incentive of a
company to issue options in lieu of restricted stock. We also support employee
stock purchase plans, although we generally believe the discounted purchase
price should be at least 85% of the current market price.
Vesting. Restricted stock awards normally should vest over at least a two-year
period.
Other stock awards. Stock awards other than stock options and restricted stock
awards should be granted in lieu of salary or a cash bonus, and the number of
shares awarded should be reasonable.
B. Change of Control Issues
While we recognize that a takeover attempt can be a significant distraction for
the board and management to deal with, the simple fact is that the possibility
of a corporate takeover keeps management focused on maximizing shareholder
value. As a result, C&S opposes measures that are designed to prevent or
obstruct corporate takeovers because they can entrench current management. The
following are C&S's guidelines on change of control issues:
Shareholder Rights Plans. C&S acknowledges that there are arguments for and
against shareholder rights plans, also known as "poison pills." Companies should
put their case for rights plans to shareholders. We generally vote against any
directors who, without shareholder approval, to our knowledge have instituted a
new poison pill plan, extended an existing plan, or adopted a new plan upon the
expiration of an existing plan during the past year.
Golden Parachutes. C&S opposes the use of accelerated employment contracts that
result in cash grants of greater than three times annual compensation (salary
and bonus) in the event of termination of employment following a change in
control of a company. In general, the guidelines call for voting against "golden
parachute" plans because they impede potential takeovers that shareholders
should be free to consider. We generally withhold our votes at the next
shareholder meeting for directors who to our knowledge approved golden
parachutes.
Approval of Mergers. C&S votes against proposals that require a super-majority
of shareholders to approve a merger or other significant business combination.
We support proposals that seek to lower super-majority voting requirements.
C. Routine Issues
Director Nominees in a Non-Contested Election - C&S generally votes in favor of
management proposals on director nominees.
Director Nominees in a Contested Election - By definition, this type of board
candidate or slate runs for the purpose of seeking a significant change in
corporate policy or control. Therefore, the economic impact of the vote in favor
of or in opposition to that director or slate must be analyzed using a higher
standard normally applied to changes in control. Criteria for evaluating
director nominees as a group or individually should include: performance;
compensation, corporate governance provisions and takeover activity; criminal
activity; attendance at meetings; investment in the company; interlocking
directorships; inside, outside and independent directors; whether the chairman
and CEO titles are held by the same person; number of other board seats; and
other experience. It is impossible to have a general policy regarding director
nominees in a contested election.
Board Composition - C&S supports the election of a board that consists of at
least a majority of independent directors. We generally withhold our support for
non-independent directors who serve on a company's audit, compensation and/or
nominating committees. We also generally
withhold support for director candidates who have not attended a sufficient
number of board or committee meetings to effectively discharge their duties as
directors.
Classified Boards - Because a classified board structure prevents shareholders
from electing a full slate of directors at annual meetings, C&S generally votes
against classified boards. We vote in favor of shareholder proposals to
declassify a board of directors unless a company's charter or governing
corporate law allows shareholders, by written consent, to remove a majority of
directors at any time, with or without cause.
Barriers to Shareholder Action - We vote to support proposals that lower the
barriers to shareholder action. This includes the right of shareholders to call
a meeting and the right of shareholders to act by written consent.
Cumulative Voting - Having the ability to cumulate our votes for the election of
directors - that is, cast more than one vote for a director about whom they feel
strongly - generally increases shareholders' rights to effect change in the
management of a corporation. We generally support, therefore, proposals to adopt
cumulative voting.
Ratification of Auditors - Votes generally are cast in favor of proposals to
ratify an independent auditor, unless there is a reason to believe the auditing
firm is no longer performing its required duties or there are exigent
circumstances requiring us to vote against the approval of the recommended
auditor. For example, our general policy is to vote against an independent
auditor that receives more than 50% of its total fees from a company for
non-audit services.
D. Stock Related Items
Increase Additional Common Stock - C&S's guidelines generally call for approval
of increases in authorized shares, provided that the increase is not greater
than three times the number of shares outstanding and reserved for issuance
(including shares reserved for stock-related plans and securities convertible
into common stock, but not shares reserved for any poison pill plan).
Votes generally are cast in favor of proposals to authorize additional shares of
stock except where the proposal:
1. creates a blank check preferred stock; or
2. establishes classes of stock with superior voting rights.
Blank Check Preferred Stock - Votes generally are cast in opposition to
management proposals authorizing the creation of new classes of preferred stock
with unspecific voting, conversion, distribution and other rights, and
management proposals to increase the number of authorized blank check preferred
shares. C&S may vote in favor of this type of proposal when it receives
assurances to its reasonable satisfaction that (i) the preferred stock was
authorized by the board for the use of legitimate capital formation purposes and
not for anti-takeover purposes, and (ii) no preferred stock will be issued with
voting power that is disproportionate to the economic interests of the preferred
stock. These representations should be made either in the proxy statement or in
a separate letter from the company to C&S.
Preemptive Rights - Votes are cast in favor of shareholder proposals restoring
limited preemptive rights.
Dual Class Capitalizations - Because classes of common stock with unequal voting
rights limit the rights of certain shareholders, C&S votes against adoption of a
dual or multiple class capitalization structure.
E. Social Issues
C&S believes that it is the responsibility of the board and management to run a
company on a daily basis. With this in mind, in the absence of unusual
circumstances, we do not believe that shareholders should be involved in
determining how a company should address broad social and policy issues. As a
result, we generally vote against these types of proposals, which are generally
initiated by shareholders, unless we believe the proposal has significant
economic implications.
F. Other Situations
No set of guidelines can anticipate all situations that may arise. Our portfolio
managers and analysts will be expected to analyze proxy proposals in an effort
to gauge the impact of a proposal on the financial prospects of a company, and
vote accordingly. These policies are intended to provide guidelines for voting.
They are not, however, hard and fast rules because corporate governance issues
are so varied.
V. Proxy Voting Procedures
C&S shall maintain a record of all voting decisions for the period required by
applicable laws. In each case in which C&S votes contrary to the stated policies
set forth in these guidelines, the record shall indicate the reason for such a
vote.
The Investment Committee of C&S shall have responsibility for voting proxies,
under the supervision of Joseph Harvey, Senior Vice President and Director of
Research. Ed Lee shall be responsible for ensuring that the Investment Committee
is aware of all upcoming proxy voting opportunities. Mr. Lee shall ensure that
proxy votes are properly recorded and that the requisite information regarding
each proxy voting opportunity is maintained. Larry Stoller, Senior Vice
President and General Counsel of C&S, shall have overall responsibility for
ensuring that C&S complies with all proxy voting requirements and procedures.
VI. Recordkeeping
Mr. Lee shall be responsible for recording and maintaining the following
information with respect to each proxy voted by C&S:
* Name of the company
* Ticker symbol
* CUSIP number
* Shareholder meeting date
* Brief identification of each matter voted upon
* Whether the matter was proposed by management or a shareholder
* Whether C&S voted on the matter
* If C&S voted, then how C&S voted
* Whether C&S voted with or against management
Mr. Stoller shall be responsible for maintaining and updating this Policy and
Procedures, and for maintaining any records of written client requests for proxy
voting information and documents that were prepared by C&S and were deemed
material to making a voting decision or that memorialized the basis for the
decision.
C&S shall rely on the SEC's EDGAR filing system with respect to the requirement
to maintain proxy materials regarding client securities.
VII. Conflicts of Interest
There may be situations in which C&S may face a conflict between its interests
and those of its clients or fund shareholders. Potential conflicts are most
likely to fall into three general categories:
* Business Relationships - This type of conflict would occur if C&S or an
affiliate has a substantial business relationship with the company or a
proponent of a proxy proposal relating to the company (such as an employee
group) such that failure to vote in favor of management (or the proponent) could
harm the relationship of C&S or its affiliate with the company or proponent. In
the context of C&S, this could occur if Cohen & Steers Capital Advisors, a
wholly owned subsidiary of C&S ("Capital Advisors"), has a material business
relationship with a company that C&S has invested in on behalf of its clients,
and C&S is encouraged to vote in favor of management as an inducement to acquire
or maintain the Capital Advisors relationship.
* Personal Relationships - C&S or an affiliate could have a personal
relationship with other proponents of proxy proposals, participants in proxy
contests, corporate directors or director nominees.
* Familial Relationships - C&S or an affiliate could have a familial
relationship relating to a company (e.g., spouse or other relative who serves as
a director or nominee of a public company).
The next step is to identify if a conflict is material. A material matter is one
that is reasonably likely to be viewed as important by the average shareholder.
Materiality will be judged under a two-step approach:
* Financial Based Materiality - C&S presumes a conflict to be non-material
unless it involves at least $500,000.
* Non-Financial Based Materiality - Non-financial based materiality would impact
the members of the C&S Investment Committee, who are responsible for making
proxy voting decisions.
Finally, if a material conflict exists, C&S shall vote in accordance with the
advice of a proxy voting service. C&S currently uses ISS to provide advice on
proxy voting decisions.
Mr. Stoller shall have responsibility for supervising and monitoring conflicts
of interest in the proxy voting process according to the following process:
1. Identifying Conflicts - Mr. Stoller is responsible for monitoring the
relationships of Capital Advisors for purposes of C&S's Inside Information
Policy and Procedures. Mr. Stoller (or his designee) maintains a watch list and
a restricted list. The Investment Committee is unaware of the content of the
watch list and therefore it is only those companies on the restricted list,
which is made known to everyone at C&S, for which potential concerns might
arise. When a company is placed on the restricted list, Mr. Stoller (or his
designee) shall promptly inquire of Mr. Lee as to whether there is a pending
proxy voting opportunity with respect to that company, and continue to inquire
on a weekly basis until such time as the company is no longer included on the
restricted list. When there is a proxy voting opportunity with respect to a
company that has been placed on the restricted list, Mr. Stoller shall inform
the Investment Committee that no proxy vote is to be submitted for that company
until Mr. Stoller completes the conflicts analysis.
For purposes of monitoring personal or familial relationships, Mr. Stoller (or
his designee) shall receive on at least an annual basis from each member of the
Investment Committee written disclosure of any personal or familial
relationships with public company directors that could raise potential conflict
of interest concerns. Investment Committee members also shall agree in writing
to advise Mr. Stoller if (i) there are material changes to any previously
furnished information, (ii) a person with whom a personal or familial
relationship exists is subsequently nominated as a director or (iii) a personal
or familial relationship exists with any proponent of a proxy proposal or a
participant in a proxy contest.
2. Identifying Materiality - Mr. Stoller (or his designee) shall be responsible
for determining whether a conflict is material. He shall evaluate financial
based materiality in terms of both actual and potential fees to be received.
Non-financial based items impacting a member of the Investment Committee shall
be presumed to be material.
3. Communication with Investment Committee; Voting of Proxy - If Mr. Stoller
determines that the relationship between Capital Advisors and a company is
financially material, he shall communicate that information to the members of
the Investment Committee and instruct them, and Mr. Lee, that C&S will vote its
proxy based on the advice of ISS or other consulting firm then engaged by C&S.
Any personal or familial relationship, or any other business relationship, that
exists between a company and any member of the Investment Committee shall be
presumed to be material, in which case C&S again will vote its proxy based on
the advice of ISS or other consulting firm then engaged by C&S. The fact that a
member of the Investment Committee personally owns securities issued by a
company will not disqualify C&S from voting common
stock issued by that company, since the member's personal and professional
interests will be aligned.
In cases in which C&S will vote its proxy based on the advice of ISS or other
consulting firm then engaged by C&S, Mr. Stoller (or his designee) shall be
responsible for ensuring that Mr. Lee votes proxies in this manner. Mr. Stoller
will maintain a written record of each instance when a conflict arises and how
the conflict is resolved (e.g., whether the conflict is judged to be material,
the basis on which the materiality is decision is made and how the proxy is
voted).
VIII. Cohen & Steers Funds
Proxies relating to portfolio securities held by any Cohen & Steers Fund shall
be voted in accordance with this Statement of Policies and Procedures. For this
purpose, the Board of Directors of the Cohen & Steers Funds has delegated to C&S
the responsibility for voting proxies on behalf of the Funds. Mr. Stoller shall
make an annual presentation to the Board regarding this Statement of Policy and
Procedures, including whether any revisions are recommended, and shall report to
the Board at each regular, quarterly meeting with respect to any conflict of
interest situation that arose regarding the proxy voting process.
Item 8. [Reserved]
Item 9. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial officer
have concluded that the registrant's disclosure controls and procedures are
sufficient to ensure that information required to be disclosed by the registrant
in this Form N-CSR was recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms, based upon such officers' evaluation of these controls and procedures as
of a date within 90 days of the filing date of this report.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10. Exhibits.
(a)(1) Code of Ethics for Principal Executive and Principal Financial Officers
(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 PREFERRED INCOME FUND, INC.
By: /s/ Robert H. Steers
--------------------------
Name: Robert H. Steers
Title: Chairman
Date: February 27, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Robert H. Steers By: /s/ Martin Cohen
------------------------------- ---------------------------------------
Name: Robert H. Steers Name: Martin Cohen
Title: Chairman, Secretary and Title: President, Treasurer
and principal executive officer and principal financial officer
Date: February 27, 2004
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
February 17, 2004
To Our Shareholders:
We are pleased to submit to you our report for the quarter and period ended
December 31, 2003. The net asset value at that date was $26.68 per common share.
In addition, during the quarter, three $0.17 per share monthly dividends were
paid and three $0.17 per share monthly dividends were declared and will be paid
in the first quarter of 2004.
For the quarter, Cohen & Steers REIT and Preferred Income Fund had a total
return, based on income and change in net asset value, of 10.3%, bringing the
net asset value total return since inception to 15.6%. This compares to the
NAREIT Equity REIT Index's(a) return of 10.0% and 21.3% for the quarter and the
period June 27, 2003 (commencement of operations) through December 31, 2003.
During the quarter, the fund closed on the issuance of an additional $51 million
of auction market preferred shares. The proceeds were subsequently invested in
additional REIT and preferred securities at dividend yields that we believe will
generate incremental net income for the fund's common shareholders. We note,
however, that the use of leverage generally may increase the volatility of the
fund's net asset value per share.
2003 REVIEW
2003 turned out to be an excellent year for most major asset classes, with
REITs and preferred securities being no exception. Investor interest in the
fund's two most important attributes (attractive monthly income and portfolio
diversification) translated into very strong returns from the fund's inception
date through the end of the year. This was true even as we patiently invested
the proceeds from the initial offering and the subsequent issuance of the fund's
auction market preferred shares. We are pleased with the balance that we have
struck in the portfolio (55% REIT common stocks and 45% preferreds and other
fixed income instruments as of December 31, 2003), and that the portfolio is
generating a level of current income consistent with our objectives when we
established the fund.
The investment climate throughout much of 2003 provided an excellent
backdrop for us to be executing our initial investment program. Specifically, it
became increasingly apparent over the course of the year that the long-awaited
economic recovery was taking shape, albeit in fits and starts. Corporate
profitability improved dramatically, the stock market began an impressive
recovery, and by the third quarter, real GDP growth on a year-over-year basis
was 8.2%, representing strength across many sectors of our economy. Yet this
nascent recovery appeared to have little to no effect on pricing power, and with
the Fed remaining in an accommodative mode, interest rates remained at their
lowest levels in over 40 years. This scenario was very positive for the fund. As
the economy continued to improve, real estate fundamentals likewise improved,
which is at least partially responsible for the strong returns generated by
REITs in 2003. In addition, with corporate profitability generally improving
(but unaccompanied by inflation), credit fundamentals also ticked up, and
corporate spreads were driven down sharply.
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(a) The 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.
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
During 2003, REITs began to enjoy widespread acceptance as both an important
asset class and a financial instrument, and as a result this was simply the best
year for REIT investors in the modern era (since 1991). Health care was the best
performing sector in the fourth quarter, producing a total return of 17.2%.
Health care fundamentals were better than expected due to a surprise increase in
nursing home reimbursement in 2003, in spite of federal and local budget
deficits. The next best performing sectors in the quarter were the hotel sector
(total return of 14.2%) and regional malls (12.5%). As has been the case for the
past several years, underperformers for the quarter were apartment and office
building owners.
The fund's best performing investments from inception through year-end were
in the health care, diversified, self storage and hotel sectors. Lagging sectors
for the fund were industrial, mixed office/industrial and shopping center. In
terms of individual securities, our best-performing holding was Ventas Inc., a
health care REIT that produced a total return of 49% for the period from
inception through the end of the year. Other significant contributors include
regional mall owner Mills Corp., which produced a total return of 35%, and
office owner Maguire Properties, which generated a total return of 31%. The
fund's poorest performing holdings included Apartment Investment & Management
Company, which generated a total return of -9% from inception through year-end,
as well as Crescent Real Estate Equities, which generated a total return of 4%.
As was the case throughout much of 2003, fixed income markets rewarded
investors in higher income securities, and many of the fund's preferred and bond
holdings participated in the gains. We reaped strong credit-related gains over
the quarter from many holdings, particularly in the auto, insurance, media and
REIT sectors. This performance, while perhaps extreme in some cases, was largely
warranted as stronger earnings, balance sheets and capital markets continued to
improve the credit quality of many issuers. We look for credit quality to
continue to improve, but see less potential for significant credit related gains
going forward given how much spreads have already compressed.
We also captured certain event-driven gains that are worth mentioning.
Specifically, we recognized meaningful capital gains through a special tender
relating to Sears' sale of its credit card business. We also recognized a $3
million gain through our purchase of a Fortis, Inc. security that was
subsequently redeemed via a 'make whole' option in conjunction with the planned
spin-off of this unit from the Fortis Group. Our primary focus remains on
producing high, stable income, but we will continue to seek out special capital
appreciation opportunities, as these examples demonstrate.
A voracious demand for income continues to support preferred and bond
prices, in our view. Demographics (growing demand for income as Baby Boomers
age), higher investor recognition of the potentially beneficial portfolio
effects of income, and the steep slope and low nominal level of the Treasury
yield curve all contribute to this environment. We view the first two factors as
long-term pillars of support. As for bond yields, while the economic recovery
currently underway eventually may usher in somewhat higher rates, we believe
that the high productivity, low inflation environment we have enjoyed since the
1990's continues to provide a benign backdrop for the near term. We further
believe that a relative dearth of supply, as companies continue to pare debt and
use higher cash flows for current financing needs, also supports preferred
prices for the near term.
--------------------------------------------------------------------------------
2
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
INVESTMENT OUTLOOK
Not surprisingly, we believe that the key to the performance of both REITs
and preferreds in 2004 will be the course of the U.S. economy. As basic as that
sounds, it is clear REIT share prices and fixed income credit spreads have
already factored in, at least to some extent, a stronger economy. Fortunately,
we remain optimistic about the course of the economy. In light of the return of
business and consumer confidence, soaring profitability, ongoing fiscal stimulus
and still-accommodative monetary policy, we believe the economy will remain
strong. Our expectation is that in 2004 GDP will increase by at least 4%.
We also believe that for the first time since the economic recovery began,
the United States will experience strong job growth. We expect that 1.5 to 2.0
million jobs will be created this year. To the extent that this occurs, several
dynamics of the real estate markets are likely to change significantly,
primarily in the office and apartment sectors. Growth in service jobs will
directly benefit owners of office buildings, particularly in larger cities such
as New York, Boston, and Washington. We are already seeing vacancy rates begin
to decline, coincident with companies now shifting from layoffs to new hiring,
such as those in the financial service industry. Because a relatively high
percentage of new jobholders tend to rent apartments, the strong job growth we
expect should benefit owners of multi-family properties. Our apartment holdings
are concentrated in those markets that are expected to be at the forefront of
the expected job growth (particularly, in the southeast and southwest), as well
as companies that have a strong presence in the northeast and western states
where there is a higher tendency to rent apartments due to high population
density and high home prices.
Whereas REIT share prices are much higher than they were one year ago, the
health of the industry and the outlook for profit growth are far superior as
well. In our experience, bear markets rarely, if ever, commence at this stage of
economic and real estate cycles. In fact, the strengthening real estate markets
are attracting an increasing amount of investment capital -- it is our
understanding that a record amount of capital has been allocated to direct
property ownership. We expect this to help to maintain strong pricing in most
real estate markets. In our opinion, the rise in REIT prices has not changed the
investment characteristics that investors are increasingly seeking. It remains
our belief that while REITs are no longer as undervalued as they were over the
past several years, the conditions for a prolonged period of rising asset
values, earnings and dividends are firmly in place.
With respect to our preferred holdings, we see the most value in sectors
that benefit most from a stronger economy, such as industrials and energy. The
dramatic fall in the U.S. dollar is another reason we favor U.S. industrials,
while the presidential election and Olympics make media attractive. We prefer to
mix such exposure with a foundation of high quality financials, and have found
good value in certain dollar-denominated securities of foreign issuers. Utility
fundamentals are attractive as well, and we expect to see new issuance in this
sector. However, we have avoided new issues offering yields that are
significantly lower than historical norms. Instead, we continue to prefer higher
coupon issues available in the secondary market, as these provide potentially
better asset value protection versus the threat of rising rates that is
typically brought on by an accelerating economy, in our view.
--------------------------------------------------------------------------------
3
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
The portfolio's current balance between REITs and preferreds indicates our
belief that REITs are better positioned to benefit from an improving economy, as
this would likely lead to improving cash flows and potentially higher dividends.
Our current asset mix: 55% REIT common stocks, 45% preferred and other fixed
income securities, reflects this view. While a better economy would also help
credit fundamentals, eventually we would expect an increase in inflation to
occur, which would present a price risk for fixed income instruments. Rising
short-term rates would also have some effect on the fund's borrowing costs,
though we have substantially mitigated this risk by fixing the majority of the
fund's borrowing costs. In sum, the portfolio is well positioned for us to
continue to be able to generate very attractive dividends for our shareholders,
with the goal that over time there will be some growth to that income stream.
Sincerely,
MARTIN COHEN ROBERT H. STEERS
MARTIN COHEN ROBERT H. STEERS
President Chairman
GREG E. BROOKS WILLIAM F. SCAPELL
GREG E. BROOKS WILLIAM F. SCAPELL
Portfolio manager Portfolio manager
Cohen & Steers is online at COHENANDSTEERS.COM
We have enhanced both the look and features of our Web site
to give you more information about our company, our funds
and the REIT market in general. Check out our interactive
Asset Allocation Tool, which allows you to hypothetically
add REITs to any portfolio to see how they impact expected
total returns and risk. Or try the Fund Performance
Calculator and see how our funds have performed versus the
S&P 500 Index or Nasdaq Composite. As always, you can also
get daily net asset values, fund fact sheets, portfolio
highlights, recent news articles and our overall insights on
the REIT market.
So visit us today at COHENANDSTEERS.COM
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4
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD(a) (UNAUDITED)
---------- -------------- --------------------
COMMON STOCK 83.46%(b)
DIVERSIFIED 9.22%
Colonial Properties Trust.................... 300,000 $ 11,880,000 6.72%
Crescent Real Estate Equities Co. ........... 1,490,500 25,532,265 8.76
iStar Financial.............................. 990,000 38,511,000 6.81
Newcastle Investment Corp. .................. 1,024,274 27,757,825 7.38
Vornado Realty Trust......................... 274,100 15,006,975 5.19
--------------
118,688,065
--------------
HEALTH CARE 13.25%
Health Care Property Investors............... 1,450,300 73,675,240 6.54
Health Care REIT............................. 1,745,600 62,841,600 6.50
Nationwide Health Properties................. 1,362,200 26,631,010 7.57
Ventas....................................... 335,000 7,370,000 4.86
--------------
170,517,850
--------------
HOTEL 1.75%
Hospitality Properties Trust................. 545,200 22,505,856 6.98
--------------
INDUSTRIAL 3.86%
First Industrial Realty Trust................ 1,472,200 49,686,750 8.12
--------------
OFFICE 23.06%
Arden Realty................................. 1,444,200 43,817,028 6.66
Brandywine Realty Trust...................... 787,800 21,089,406 6.57
CarrAmerica Realty Corp. .................... 982,300 29,252,894 6.72
Equity Office Properties Trust............... 2,943,300 84,325,545 6.98
Highwoods Properties......................... 910,200 23,119,080 6.69
Mack-Cali Realty Corp. ...................... 1,240,000 51,608,800 6.05
Maguire Properties........................... 1,286,100 31,252,230 6.58
Prentiss Properties Trust.................... 374,900 12,367,951 6.79
--------------
296,832,934
--------------
-------------------
(a) Dividend yield is computed by dividing the security's current annual
dividend rate by the last sale price on the principal exchange, or market,
on which such security trades. The dividend yield has not been audited.
(b) Percentages indicated are based on the net assets of the fund.
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
5
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2003
NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD (UNAUDITED)
---------- -------------- -------------------
OFFICE/INDUSTRIAL 4.56%
Liberty Property Trust....................... 1,143,300 $ 44,474,370 6.22%
Mission West Properties...................... 939,500 12,166,525 7.41
Reckson Associates Realty Corp............... 87,500 2,126,250 6.99
--------------
58,767,145
--------------
RESIDENTIAL -- APARTMENT 13.50%
AMLI Residential Properties Trust............ 590,400 15,822,720 7.16
Apartment Investment & Management Co. ....... 160,000 5,520,000 6.96
Archstone-Smith Trust........................ 2,374,000 66,424,520 6.11
Camden Property Trust........................ 647,800 28,697,540 5.73
Gables Residential Trust..................... 1,186,100 41,205,114 6.94
Mid-America Apartment Communities............ 349,000 11,719,420 6.97
Town & Country Trust......................... 173,400 4,395,690 6.79
--------------
173,785,004
--------------
SELF STORAGE 0.64%
Sovran Self Storage.......................... 222,200 8,254,730 6.49
--------------
SHOPPING CENTER 13.62%
COMMUNITY CENTER 8.62%
Cedar Shopping Centers....................... 400,000 4,968,000 7.25
Heritage Property Investment Trust........... 2,002,300 56,965,435 7.38
New Plan Excel Realty Trust.................. 1,538,100 37,944,927 6.69
Ramco-Gershenson Properties Trust............ 390,000 11,037,000 5.94
--------------
110,915,362
--------------
REGIONAL MALL 5.00%
Glimcher Realty Trust........................ 2,074,000 46,416,120 8.58
Macerich Co. ................................ 215,200 9,576,400 5.48
Mills Corp. ................................. 190,200 8,368,800 5.14
--------------
64,361,320
--------------
TOTAL SHOPPING CENTER........................ 175,276,682
--------------
TOTAL COMMON STOCK (Identified
cost -- $945,249,194)................. 1,074,315,016
--------------
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
6
--------------------------------------------------------------------------------
COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2003
NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD (UNAUDITED)
---------- -------------- -------------------
PREFERRED SECURITIES -- $25 PAR VALUE 26.56%
AUTOMOTIVE 0.92%
Delphi Trust I, 8.25%, due 10/15/33,
Series A.................................. 450,000 $ 11,853,000 7.82%
--------------
AGRICULTURAL CHEMICALS 0.22%
Agrium, 8.00% (COPrS)........................ 112,400 2,825,736 7.96
--------------
AUTOMOTIVE 0.69%
DaimlerChrysler, 7.25% (CBTCS)............... 23,708 606,925 7.07
DaimlerChrysler, 7.50% (CBTCS)............... 37,300 966,443 7.26
DaimlerChrysler, 7.875% (CORTS).............. 9,600 258,240 7.32
DaimlerChrysler, 8.00% (CORTS)............... 10,000 274,000 7.30
Ford Motor Co., 7.50%, Note.................. 101,951 2,631,355 7.28
Ford Motor Co., 8.00% (CORTS)................ 125,000 3,340,000 7.49
Ford Motor Co., 8.125%, Series F (SATURNS)... 32,200 852,012 7.67
--------------
8,928,975
--------------
BANK 2.26%
ASBC Capital I, 7.625%, Series A (TOPrS)..... 75,500 2,042,275 7.06
Chittenden Capital Trust I, 8.00%, Capital
Securities................................ 21,300 579,360 7.35
Cobank ACB, 7.00%, 144(a).................... 200,000 10,024,960 6.98
Colonial Capital Trust IV, 7.875%............ 309,200 8,286,560 7.35
Countrywide Capital IV, 6.75%................ 71,100 1,832,247 6.56
Fleet Capital Trust VII, 7.20% Series........ 94,800 2,510,304 6.80
Fleet Capital Trust VIII, 7.20% Series....... 87,900 2,341,656 6.76
Old Second Bancorp Capital Trust I, 7.80%.... 90,000 981,000 7.16
Zions Capital Trust B, 8.00%................. 18,600 507,222 7.33
--------------
29,105,584
--------------
BANK -- FOREIGN 1.27%
Abbey National PLC, 7.375%, Series B......... 105,700 2,928,947 6.64
Abbey National PLC, 7.375%, Series C......... 493,264 13,441,444 6.75
--------------
16,370,391
--------------
-------------------
(a) The fund prices this security at fair value using procedures approved by the
fund's board of directors.
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
7
--------------------------------------------------------------------------------
COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2003
NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD (UNAUDITED)
---------- -------------- -------------------
ELECTRIC -- INTEGRATED 1.08%
Energy East Capital Trust I, 8.25%........... 61,000 $ 1,645,170 7.64%
Northern States Power Co., 8.00%, Notes
(PINES)................................... 41,700 1,137,993 7.33
PSEG Funding Trust II, 8.75% Series.......... 199,900 5,617,190 7.79
Puget Sound Energy Capital Trust II, 8.40%
(TOPrS)................................... 95,800 2,569,356 7.83
Southern California Edison, 7.23%, due
4/30/07, Series M......................... 12,300 1,230,000 7.23
Virginia Power Capital Trust II, 7.375%,
(TruPS)................................... 62,061 1,714,745 6.66
--------------
13,914,454
--------------
FINANCE 1.76%
AUTO LOAN 0.38%
Ford Motor Credit Co., 7.60%, Note........... 82,800 2,141,208 7.35
General Motors Acceptance Corp., 7.25%,
Notes..................................... 104,900 2,723,204 6.97
--------------
4,864,412
--------------
CREDIT CARD 0.84%
MBNA Capital, 8.125%, Series D (TruPS)....... 234,100 6,269,198 7.58
MBNA Capital, 8.10%, Series E (TOPrs)........ 166,300 4,525,023 7.46
--------------
10,794,221
--------------
DIVERSIFIED FINANCIAL SERVICES 0.10%
National Rural Utilities, 7.40% (QUICS)...... 48,300 1,292,025 6.92
--------------
INVESTMENT BANKER/BROKER 0.44%
Lehman Brothers Holdings, 6.50%, Series F.... 212,500 5,729,000 6.05
--------------
TOTAL FINANCE................................ 22,679,658
--------------
GAS -- DISTRIBUTION 3.69%
Dominion CNG Capital, 8.40%.................. 78,700 2,142,214 7.02
Laclede Capital Trust I, 7.70% (TOPrS)....... 47,900 1,302,880 7.10
Southern Union Co., 7.55%, Series C.......... 1,040,000 27,799,200 7.07
Southwest Gas Capital Trust II, 7.70%........ 600,000 16,290,000 7.11
--------------
47,534,294
--------------
INSURANCE 2.40%
LIFE/HEALTH INSURANCE 0.27%
Lincoln National Capital V, 7.65%, Series E
(TruPS)................................... 52,300 1,406,870 7.10
PLC Capital Trust III, 7.50% (TOPrS)......... 33,700 898,105 7.05
Torchmark Capital Trust I, 7.75%............. 41,000 1,111,100 7.16
--------------
3,416,075
--------------
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
8
--------------------------------------------------------------------------------
COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2003
NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD (UNAUDITED)
---------- -------------- -------------------
MULTI-LINE 0.85%
ING Groep NV, 7.05% Series................... 241,600 $ 6,467,632 6.57%
ING Groep NV, 7.20% Series................... 165,700 4,493,784 6.64
--------------
10,961,416
--------------
PROPERTY/CASUALTY 1.06%
ACE Ltd., 7.80%, Series C.................... 380,400 10,594,140 7.00
St. Paul Capital Trust I, 7.60% (TruPS)...... 114,130 3,080,369 7.04
--------------
13,674,509
--------------
REINSURANCE -- FOREIGN 0.22%
Everest Re Capital Trust, 7.85%.............. 8,800 242,000 7.13
RenaissanceRE Holdings Ltd., 8.10%, Series
A......................................... 30,900 842,025 7.45
RenaissanceRE Holdings Ltd., 7.30%, Series
B......................................... 65,900 1,759,530 6.85
--------------
2,843,555
--------------
TOTAL INSURANCE.............................. 30,895,555
--------------
MEDIA 2.03%
CABLE TELEVISION 1.21%
Shaw Communications, 8.45%, Series A
(COPrS)................................... 186,192 4,701,348 8.36
Shaw Communications, 8.50%, Series B
(COPrS)................................... 432,300 10,876,668 8.47
--------------
15,578,016
--------------
DIVERSIFIED SERVICES 0.82%
AOL Time Warner, 7.625%, Series A-1
(CABCO)................................... 103,200 2,750,280 7.17
Liberty Media Corp., 8.75% (CBTCS)........... 197,500 5,395,700 8.02
Liberty Media Corp., 8.75% (PPLUS)........... 89,545 2,442,788 8.03
--------------
10,588,768
--------------
TOTAL MEDIA.................................. 26,166,784
--------------
MEDICAL -- HMO 0.07%
Aetna, 8.50%, Senior Notes................... 32,000 878,400 7.76
--------------
OIL -- EXPLORATION 1.23%
Nexen, 7.35%, due 11/1/43, Series B.......... 606,260 15,853,699 7.04
--------------
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
9
--------------------------------------------------------------------------------
COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2003
NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD (UNAUDITED)
---------- -------------- -------------------
REAL ESTATE 7.27%
Apartment Investment and Management Co.,
8.00%, Series T........................... 93,700 $ 2,417,460 7.75%
CBL & Associates Properties, 7.75%,
Series C.................................. 200,000 5,420,000 7.16
CarrAmerica Realty Corp., 7.50%, Series E.... 172,600 4,591,160 7.07
Cousins Properties, 7.75%, Series A.......... 457,500 12,466,875 7.12
Developers Diversified Realty Corp., 8.00%,
Series G.................................. 88,700 2,393,126 7.41
Glimcher Realty Trust, 8.75%, Series F....... 280,000 7,414,400 8.27
Health Care Property Investors, 7.10%,
Series F.................................. 100,000 2,550,000 6.98
Health Care REIT, 7.875%, Series D........... 100,000 2,641,000 7.46
Innkeepers USA Trust, 8.00%, Series C........ 88,000 2,226,400 7.91
iStar Financial, 7.875%, Series E............ 400,000 10,360,000 7.61
iStar Financial, 7.80%, Series F............. 292,400 7,646,260 7.46
iStar Financial, 7.65%, Series G............. 80,000 2,020,000 7.56
Kilroy Realty Corp., 7.8%, Series E.......... 100,000 2,555,000 7.63
Mid-America Apartment Communities, 8.30%,
Series H(a)............................... 690,600 18,038,472 7.96
Mills Corp., 8.75%, Series E................. 197,600 5,354,960 8.08
Saul Centers, 8.00%, Series A................ 94,400 2,501,600 7.55
Shurgard Storage Centers, 8.75%, Series A.... 13,200 357,060 8.10
SL Green Realty Corp, 7.625%, Series C....... 100,000 2,575,000 7.42
--------------
93,528,773
--------------
TELECOMMUNICATION SERVICES 1.67%
Centaur Funding Corp., 9.08%(b).............. 13,908 16,697,080 7.56
Telephone & Data Systems, 7.60%, Series A.... 175,600 4,690,276 7.11
--------------
21,387,356
--------------
TOTAL PREFERRED SECURITIES -- $25 PAR
VALUE (Identified cost
--$328,157,447).................... 341,922,659
--------------
-------------------
(a) 200,000 shares segregated as collateral for the interest rate swap
transactions.
(b) The fund prices this security at fair value using procedures approved by the
fund's board of directors.
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
10
--------------------------------------------------------------------------------
COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2003
NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD (UNAUDITED)
---------- -------------- -------------------
PREFERRED SECURITIES -- CAPITAL TRUST 33.83%
BANK 6.99%
AgFirst Farm Credit Bank, 7.30%, due
10/14/49, 144A............................ 30,000,000 $ 30,160,500 7.26%
Astoria Capital Trust I, 9.75%, due 11/1/29,
Series B.................................. 13,500,000 16,065,000 8.19
BankBoston Capital Trust II, 7.75%, due
12/15/26.................................. 1,500,000 1,663,893 6.99
BT Preferred Capital Trust II, 7.875%, due
2/25/27................................... 5,000,000 5,607,635 7.03
First Midwest Capital Trust I, 6.95%, due
12/1/33, 144A............................. 5,000,000 5,191,895 6.69
Great Western Financial Trust II, 8.206%, due
2/1/27, Series A.......................... 5,232,000 5,993,492 7.17
ML Capital Trust I, 9.875%, due 3/1/27,
Series B.................................. 1,800,000 2,078,478 8.56
Republic New York Capital I, 7.75%, due
11/15/26 (TruPS).......................... 1,000,000 1,080,934 7.17
Roslyn Preferred Trust FRN, 4.78% due 4/1/32,
144A...................................... 10,000,000 10,375,000 4.61
Sky Financial Capital Trust I, 9.75%, due
5/1/30, Series B.......................... 3,000,000 3,397,848 8.25
Webster Capital Trust I, 9.36%, due 1/29/27,
144A...................................... 7,300,000 8,335,293 8.20
--------------
89,949,968
--------------
BANK -- FOREIGN 10.47%
BNP Paribas Capital Trust V, 7.20%........... 19,550,000 20,397,336 6.90
CA Preferred Fund Trust, 7.00%, due 1/29/49
(Eurobond)................................ 28,200,000 28,624,748 6.90
Fortis Capital Trust, 8.40%, due 5/30/27,
144A...................................... 13,000,000 17,395,859 6.28
HBOS Capital Funding LP, 6.85%............... 29,000,000 29,311,518 6.78
HSBC Capital Funding LP, 10.176%............. 9,680,000 14,227,364 6.93
RBS Capital Trust B, 6.80%................... 24,700,000 24,883,694 6.75
--------------
134,840,519
--------------
ELECTRIC -- INTEGRATED 2.02%
Dominion Resources Capital Trust III, 8.40%,
due 1/15/31............................... 21,732,000 25,999,295 7.02
--------------
FINANCE 4.28%
CREDIT CARD 0.34%
MBNA Capital, 8.278%, due 12/1/26, Series
A......................................... 4,000,000 4,359,908 7.60
--------------
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
11
--------------------------------------------------------------------------------
COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2003
NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD (UNAUDITED)
---------- -------------- -------------------
DIVERSIFIED FINANCIAL SERVICES 1.98%
Old Mutual Capital Funding, 8.00%, due
5/29/49 (Eurobond)........................ 25,000,000 $ 25,468,750 7.85%
--------------
INVESTMENT BANKER/BROKER 0.94%
Chase Capital I, 7.67%, due 12/1/06.......... 2,519,000 2,783,248 6.94
JPM Capital Trust I, 7.54%, due 1/15/27...... 1,925,000 2,112,882 6.87
JPM Capital Trust II, 7.95%, due 2/27/07..... 6,400,000 7,248,794 7.02
--------------
12,144,924
--------------
MORTGAGE LOAN/BROKER 1.02%
Countrywide Capital III, 8.05%, due 6/15/27,
Series B (SKIS)........................... 11,285,000 13,189,344 6.89
--------------
TOTAL FINANCE................................ 55,162,926
--------------
FOOD -- DAIRY PRODUCTS 0.57%
Dairy Farmers of America, 7.875%, 144A(a).... 75,000 7,311,375 8.08
--------------
INSURANCE 7.82%
BROKERS 0.30%
Aon Capital Trust A, 8.205%, due 1/1/27...... 3,500,000 3,904,250 7.36
--------------
LIFE/HEALTH 0.33%
AmerUS Capital, 8.85%, due 2/1/27,
Series A.................................. 4,000,000 4,244,560 8.34
--------------
MULTI-LINE 5.94%
AXA, 7.10%, due 5/29/49 (Eurobond)........... 28,500,000 28,980,225 6.98
GenAmerica Capital I, 8.525%, due 6/30/27.... 14,000,000 16,171,246 7.38
USF&G Capital, 8.312%, due 7/1/46............ 2,000,000 2,263,456 7.34
Zurich Capital Trust I, 8.376%, due 6/1/37... 25,212,000 29,039,408 7.28
--------------
76,454,335
--------------
PROPERTY/CASUALTY 1.25%
W.R. Berkley Capital Trust, 8.197% due
12/15/45.................................. 15,100,000 16,028,484 7.72
--------------
TOTAL INSURANCE.............................. 100,631,630
--------------
-------------------
(a) The fund prices this security at fair value using procedures approved by the
fund's board of directors.
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
12
--------------------------------------------------------------------------------
COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2003
NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD (UNAUDITED)
---------- -------------- -------------------
PIPELINES 1.68%
K N Capital Trust I, 8.56%, due 4/15/27
(TruPS)................................... 9,513,000 $ 11,019,127 7.39%
K N Capital Trust III, 7.63%, due 4/15/28
(TruPS)................................... 9,650,000 10,591,560 6.95
--------------
21,610,687
--------------
TOTAL PREFERRED SECURITIES -- CAPITAL
TRUST (Identified cost --
$424,262,389)......................... 435,506,399
--------------
PRINCIPAL
AMOUNT
-----------
CORPORATE BOND 6.17%
AUTOMOTIVE 4.79%
Ford Holdings, 9.30%, due 3/1/30........... $ 2,500,000 2,910,595
Ford Motor Co., 9.98%, due 2/15/47......... 14,400,000 17,724,571
General Motors Corp., 7.375%, due
5/23/48................................. 24,377,000 23,928,634
General Motors Corp., 8.25%, due 7/15/23... 15,000,000 17,074,785
--------------
61,638,585
--------------
ELECTRIC -- INTEGRATED 0.24%
First Energy Corp., 7.375%, due 11/15/31,
Series C................................ 3,000,000 3,079,938
--------------
MEDIA -- DIVERSIFIED SERVICES 1.14%
Liberty Media Corp., 8.25%, due 2/1/30..... 12,250,000 14,709,555
--------------
TOTAL CORPORATE BOND (Identified
cost -- $71,767,316)................ 79,428,078
--------------
COMMERCIAL PAPER 1.71%
UBS Financial, 0.75% due 1/2/04 (Identified
cost -- $21,913,543).................... 21,914,000 21,913,543
--------------
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
13
--------------------------------------------------------------------------------
COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2003
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------ --------
TOTAL INVESTMENTS (Identified
cost -- $1,791,349,890) ............... 151.73% $1,953,085,695
OTHER ASSETS IN EXCESS OF LIABILITIES ... 0.40% 5,102,126
LIQUIDATION VALUE OF TAXABLE AUCTION MARKET
PREFERRED SHARES: SERIES M7, SERIES T7,
SERIES W7, SERIES TH7, SERIES F7
(Equivalent to $25,000 per share based on 3,280
shares outstanding per class), SERIES W28A,
SERIES W28B, SERIES W28C (Equivalent to $25,000
per share based on 2,800 shares outstanding per
class), AND SERIES T28 (Equivalent to $25,000
per share based on 2,040 shares outstanding
per class) ........................... (52.13)% $ (671,000,000)
------- --------------
NET ASSETS APPLICABLE TO COMMON SHARES
(Equivalent to $26.68 per share based on
48,251,666 shares of capital stock
outstanding) .......................... 100.00% $1,287,187,821
------- --------------
------- --------------
GLOSSARY OF PORTFOLIO ABBREVIATIONS
CABCO Corporate Assets Backed Corporation.
CBTCS Corporate Backed Trust Certificates.
COPrS Canadian Origin Preferred Securities.
CORTS Corporate Backed Trust Securities.
PINES Public Income Notes.
PPLUS Preferred Plus Trust.
QUICS Quarterly Income Capital Securities.
SATURNS Structured Asset Trust Unit Repackagings.
SKIS Subordinated Capital Income Securities.
TOPrS Trust Originated Preferred Securities.
TruPS Trust Preferred Securities.
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
14
--------------------------------------------------------------------------------
COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2003
ASSETS:
Investments in securities, at value (Identified
cost -- $1,791,349,890) (Note 1)...................... $ 1,953,085,695
Cash.................................................... 1,061,462
Dividends and interest receivable....................... 15,523,452
Receivable for investment securities sold............... 416,101
Unrealized appreciation on interest rate swap
transactions (note 1 and 6)........................... 548,612
Other assets............................................ 37,956
---------------
Total Assets........................................ 1,970,673,278
---------------
LIABILITIES:
Unrealized depreciation on interest rate swap
transactions (Notes 1 and 6).......................... 5,640,465
Payable for investment securities purchased............. 3,243,611
Payable for dividends declared on common shares......... 1,251,094
Payable to investment manager........................... 1,056,549
Payable for preferred organization costs................ 542,508
Payable for dividends declared on preferred shares...... 498,710
Other liabilities....................................... 252,520
---------------
Total Liabilities................................... 12,485,457
---------------
LIQUIDATION VALUE OF PREFERRED SHARES:
Taxable auction market preferred shares, Series M7,
($25,000 liquidation value, $0.001
par value, 3,280 shares issued and outstanding)
(Notes 1 and 5)....................................... 82,000,000
Taxable auction market preferred shares, Series T7,
($25,000 liquidation value, $0.001 par value, 3,280
shares issued and outstanding) (Notes 1 and 5)........ 82,000,000
Taxable auction market preferred shares, Series W7,
($25,000 liquidation value, $0.001 par value, 3,280
shares issued and outstanding) (Notes 1 and 5)........ 82,000,000
Taxable auction market preferred shares, Series TH7,
($25,000 liquidation value, $0.001 par value, 3,280
shares issued and outstanding) (Notes 1 and 5)........ 82,000,000
Taxable auction market preferred shares, Series F7,
($25,000 liquidation value, $0.001 par value, 3,280
shares issued and outstanding) (Notes 1 and 5)........ 82,000,000
Taxable auction market preferred shares, Series W28A,
($25,000 liquidation value, $0.001 par value, 2,800
shares issued and outstanding) (Notes 1 and 5)........ 70,000,000
Taxable auction market preferred shares, Series W28B,
($25,000 liquidation value, $0.001 par value, 2,800
shares issued and outstanding) (Notes 1 and 5)........ 70,000,000
Taxable auction market preferred shares, Series W28C,
($25,000 liquidation value, $0.001 par value, 2,800
shares issued and outstanding) (Notes 1 and 5)........ 70,000,000
Auction market preferred shares, Series T28, ($25,000
liquidation value, $0.001 par value, 2,800 shares
issued and outstanding) (Notes 1 and 5)............... 51,000,000
---------------
671,000,000
---------------
TOTAL NET ASSETS APPLICABLE TO COMMON SHARES................ $ 1,287,187,821
---------------
---------------
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
15
--------------------------------------------------------------------------------
COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED)
DECEMBER 31, 2003
TOTAL NET ASSETS APPLICABLE TO COMMON SHARES consist of:
Common stock ($0.001 par value, 48,251,666 shares issued
and outstanding) (Notes 1 and 5)...................... $ 1,130,141,149
Undistributed net investment income..................... 419,127
Accumulated net realized loss on investments and
interest rate swap transactions....................... (16,407)
Net unrealized appreciation/(depreciation) on
investments and interest rate swap transactions....... 156,643,952
---------------
$ 1,287,187,821
---------------
---------------
NET ASSET VALUE PER COMMON SHARE:
($1,287,187,821[div]48,251,666 shares outstanding)........ $ 26.68
---------------
---------------
MARKET PRICE PER COMMON SHARE............................... $ 25.90
---------------
---------------
MARKET PRICE PREMIUM/(DISCOUNT) TO NET ASSET VALUE PER
COMMON SHARE.............................................. (2.92)%
---------------
---------------
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
16
--------------------------------------------------------------------------------
COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD JUNE 27, 2003(a) THROUGH DECEMBER 31, 2003
Investment Income (Note 1):
Dividend income (net of $9,756 of foreign witholding
tax)................................................. $ 27,798,333
Interest income......................................... 12,422,812
------------
Total Income....................................... 40,221,145
------------
Expenses:
Investment management fees (Note 2)..................... 5,427,314
Administration fees (Note 2)............................ 548,913
Preferred remarketing fee............................... 577,535
Reports to shareholders................................. 118,541
Custodian fees and expenses............................. 126,873
Professional fees....................................... 80,500
Directors' fees and expenses (Note 2)................... 24,500
Transfer agent fees and expenses........................ 18,125
Miscellaneous........................................... 111,344
------------
Total Expenses..................................... 7,033,645
------------
Net Investment Income....................................... 33,187,500
------------
Net Realized and Unrealized Gain/(Loss) on Investments
(Note 1):
Net realized gain on investments........................ 3,151,417
Net realized loss on interest rate swap transactions.... (3,285,666)
Net change in unrealized appreciation on investments.... 161,735,805
Net change in unrealized depreciation on interest rate
swap transactions.................................... (5,091,853)
------------
Net realized and unrealized gain/(loss) on
investments..................................... 156,509,703
------------
Net Increase Resulting from Operations...................... 189,697,203
------------
Less Dividends and Distributions to Preferred Shareholders
from:
Net Investment Income................................... (3,077,879)
------------
Net Increase in Net Assets from Operations Applicable to
Common Shares............................................. $186,619,324
------------
------------
-------------------
(a) Commencement of operations.
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
17
--------------------------------------------------------------------------------
COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS APPLICABLE TO COMMON SHARES
FOR THE PERIOD
JUNE 27, 2003(a)
THROUGH
DECEMBER 31, 2003
-----------------
Change in Net Assets Applicable to Common Shares:
From Operations:
Net investment income.............................. $ 33,187,500
Net realized loss on investments and interest rate
swap transactions............................... (134,249)
Net unrealized appreciation/(depreciation) on
investments and interest rate swap
transactions.................................... 156,643,952
--------------
Net increase resulting from operations........ 189,697,203
--------------
Less Dividends and Distributions to Preferred
Shareholders from:
Net investment income.............................. (2,787,195)
Net realized gain on investments................... (290,684)
--------------
Total dividends and distributions to preferred
shareholders................................ (3,077,879)
--------------
Net increase in net assets from operations
applicable to common shares..................... 186,619,324
--------------
Less Dividends and Distributions to Common Shareholders
from:
Net investment income.............................. (26,695,512)
Net realized gain on investments................... (2,784,165)
Tax return of capital.............................. (11,524,470)
--------------
Total dividends and distributions to common
shareholders................................ (41,004,147)
--------------
Capital Stock Transactions (Note 5):
Increase in net assets from common share
transactions.................................... 1,148,126,750
Increase in net assets from shares issued to common
shareholders for reinvestment of dividends...... 1,375,745
Decrease in net assets from underwriting
commissions and offering expenses from issuance
of preferred shares............................. (8,030,126)
--------------
Net increase in net assets from capital stock
transactions................................ 1,141,472,369
--------------
Total increase in net assets applicable to
common shares............................... 1,287,087,546
--------------
Net Assets Applicable to Common Shares:
Beginning of period................................ 100,275
--------------
End of period...................................... $1,287,187,821
--------------
--------------
-------------------
(a) Commencement of operations.
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
18
--------------------------------------------------------------------------------
COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
The following table includes selected data for a common share outstanding
throughout the period and other performance information derived from the
financial statements. It should be read in conjunction with the financial
statements and notes thereto.
FOR THE PERIOD
JUNE 27, 2003(a)
THROUGH
PER SHARE OPERATING PERFORMANCE: DECEMBER 31, 2003
-------------------------------- ------------------
Net asset value per common share, beginning of period....... $23.88
--------
Income from investment operations:
Net investment income................................... 0.74(b)
Net realized and unrealized gain on investments......... 3.23
--------
Total income from investment operations............. 3.97
--------
Less dividends and distributions to preferred shareholders
from:
Net investment income................................... (0.06)
Net realized gain on investments........................ (0.01)
--------
Total dividends and distributions to preferred
shareholders...................................... (0.07)
--------
Total from investment operations applicable to
common shares..................................... 3.90
--------
Less: Offering and organization costs charged to paid-in
capital -- common shares.................................. (0.06)
Offering and organization costs charged to paid-in
capital -- preferred shares............................... (0.18)
Dilutive effect of common share offering................. (0.01)
--------
Total offering and organization costs............... (0.25)
--------
Less: dividends and distributions to common shareholders
from:
Net investment income................................... (0.55)
Net realized gain on investments........................ (0.06)
Tax return of capital................................... (0.24)
--------
Total dividends and distributions to common
shareholders...................................... (0.85)
--------
Net increase in net asset value............................. 2.80
--------
Net asset value, per common share, end of period............ $ 26.68
--------
--------
Market value, per common share, end of period............... $ 25.90
--------
--------
Net asset value total return(c)............................. 15.56%(d)
--------
--------
Market value return(c)...................................... 7.16%(d)
--------
--------
-------------------
(a) Commencement of operations.
(b) Calculation based on average shares outstanding.
(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. Dividends and distributions, if any, are assumed for purposes
of this calculation, to be reinvested at prices obtained under the fund's
dividend reinvestment plan. Total net asset value return measures the
changes in value over the period indicated, taking into account dividends
as reinvested.
(d) Not annualized.
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
19
--------------------------------------------------------------------------------
COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
FINANCIAL HIGHLIGHTS -- (CONTINUED)
FOR THE PERIOD
JUNE 27, 2003(a)
THROUGH
RATIOS/SUPPLEMENTAL DATA: DECEMBER 31, 2003
------------------------- ------------------
Net assets applicable to common shares, end of period (in
millions)................................................. $1,287.2
--------
--------
Ratio of expenses to average daily net assets applicable to
common shares(b).......................................... 1.17%(c)
--------
--------
Ratio of net investment income to average daily net assets
applicable to common shares(b)............................ 5.51%(c)
--------
--------
Ratio of expenses to average daily managed assets(b)........ 0.84%(c)
--------
--------
Portfolio turnover rate..................................... 7.66%(d)
--------
--------
PREFERRED SHARES:
----------------
Liquidation value, end of period (in 000's)................. $671,000
--------
--------
Total shares outstanding (in 000's)......................... 28
--------
--------
Asset coverage per share.................................... $ 70,949
--------
--------
Liquidation preference per share............................ $ 25,000
--------
--------
Average market value per share.............................. $ 25,000
--------
--------
-------------------
(a) Commencement of operations.
(b) Ratios do not reflect dividend payments to preferred shareholders.
(c) Annualized.
(d) Not annualized.
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
20
--------------------------------------------------------------------------------
COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Cohen & Steers REIT and Preferred Income Fund, Inc. (the fund) was
incorporated under the laws of the State of Maryland on March 25, 2003 and is
registered under the Investment Company Act of 1940, as amended, as a
closed-end, nondiversified management investment company. The fund had no
operations until June 6, 2003 when it sold 4,200 shares of common stock for
$100,275 to Cohen & Steers Capital Management, Inc. (the investment manager).
Investment operations commenced on June 27, 2003.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
policies are in conformity with accounting principles generally accepted in the
United States of America. The preparation of the financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates.
Portfolio Valuation: Investments in securities that are listed on the New
York Stock Exchange are valued, except as indicated below, at the last sale
price reflected at the close of the New York Stock Exchange on the business day
as of which such value is being determined. If there has been no sale on such
day, the securities are valued at the mean of the closing bid and asked prices
for the day. If no bid or asked prices are quoted on such day, then the security
is valued by such method as the board of directors shall determine in good faith
to reflect its fair market value.
Securities not listed on the New York Stock Exchange but listed on other
domestic or foreign securities exchanges or admitted to trading on the National
Association of Securities Dealers Automated Quotations, Inc. (Nasdaq) national
market system are valued in a similar manner. Securities traded on more than one
securities exchange are valued at the last sale price on the business day as of
which such value is being determined as reflected on the tape at the close of
the exchange representing the principal market for such securities.
Readily marketable securities traded in the over-the-counter market,
including listed securities whose primary market is believed by the investment
manager to be over-the-counter, but excluding securities admitted to trading on
the Nasdaq national list, are valued at the official closing prices as reported
by Nasdaq, the National Quotations Bureau or such other comparable sources as
the board of directors deems appropriate to reflect their fair market value.
However, certain fixed-income securities may be valued on the basis of prices
provided by a pricing service when such prices are believed by the board of
directors to reflect the fair market value of such securities. Where securities
are traded on more than one exchange and also over-the-counter, the securities
will generally be valued using the quotations the board of directors believes
reflect most closely the value of such securities.
Short-term debt securities, which have a maturity of 60 days or less, are
valued at amortized cost which approximates value.
--------------------------------------------------------------------------------
21
--------------------------------------------------------------------------------
COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Security Transactions and Investment Income: Security transactions are
recorded on trade date. Realized gains and losses on investments sold are
recorded on the basis of identified cost. Interest income is recorded on the
accrual basis. Dividend income is recorded on the ex-dividend date. The fund
records distributions received in excess of income from underlying investments
as a reduction of cost of investments and/or realized gain. Such amounts are
based on estimates if actual amounts are not available, and actual amounts of
income, realized gain and return of capital may differ from the estimated
amounts. The fund adjusts the estimated amounts of the components of
distributions (and consequently its net investment income) as necessary once the
issuers provide information about the actual composition of the distributions.
Interest Rate Swaps: The fund uses interest rate swaps in connection with
the sale of taxable auction market preferred shares. The interest rate swaps are
intended to reduce or eliminate the 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 nature of leverage. In an interest rate swap, the fund agrees
to pay the other party to the interest rate swap (which is known as the
counterparty) a fixed rate payment in exchange for the counterparty agreeing to
pay the fund a variable rate payment that is intended to approximate the fund's
variable rate payment obligation on the taxable auction market preferred shares.
The payment obligation is based on the notional amount of the swap. Depending on
the state of interest rates in general, the use of interest rate swaps could
enhance or harm the overall performance of the common shares. The market value
of interest rate swaps is based on pricing models that consider the time value
of money, volatility, the current market and contractual prices of the
underlying financial instrument.
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 classifies the
periodic payments under interest rate swap transactions as a component of
realized and unrealized gains/(losses) to the fund.
Dividends and Distributions to Shareholders: Dividends from net investment
income are declared and paid to common shareholders monthly. Dividends to
shareholders are recorded on the ex-dividend date. A portion of the fund's
distributions may consist of amounts derived from nontaxable components of the
dividends from the fund's portfolio investments. Net realized capital gains,
unless offset by any available capital loss carryforward, are distributed to
shareholders annually.
Dividends from net investment income and capital gain distributions are
determined in accordance with U.S. federal income tax regulations which may
differ from generally accepted accounting principals.
Series M7, Series T7, Series W7, Series TH7, and Series F7 preferred shares
pay dividends based on a variable interest rate set at auctions, normally held
every seven days. Dividends for Series M7, Series T7, Series W7, Series TH7, and
Series F7 preferred shares are accrued for the subsequent seven day period on
the auction date. In most instances, dividends are payable every seven days, on
the first business day following the end of the dividend period.
--------------------------------------------------------------------------------
22
--------------------------------------------------------------------------------
COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Series T28, Series W28A, Series W28B, and Series W28C preferred shares pay
dividends based on a variable interest rate set at auctions, normally held every
28 days. Dividends for Series T28, Series W28A, Series W28B, and Series W28C
preferred shares are accrued for the subsequent 28 day period on the auction
date. In most instances, dividends are payable every 28 days, on the first
business day following the end of the dividend period.
Federal Income Taxes: It is the policy of the fund to qualify as a regulated
investment company, if such qualification is in the best interest of the
shareholders, by complying with the requirements of Subchapter M of the Internal
Revenue Code applicable to regulated investment companies, and by distributing
substantially all of its taxable earnings to its shareholders. Accordingly, no
provision for federal income or excise tax is necessary.
NOTE 2. INVESTMENT MANAGEMENT FEES, ADMINISTRATION FEES AND OTHER TRANSACTIONS
WITH AFFILIATES
Investment Management Fees: Cohen & Steers Capital Management, Inc. (the
investment manager) serves as the investment manager to the fund, pursuant to an
investment management agreement (the management agreement). The investment
manager furnishes a continuous investment program for the fund's portfolio,
makes the day-to-day investment decisions for the fund and generally manages the
fund's investments in accordance with the stated polices of the fund, subject to
the general supervision of the board of directors of the fund. The investment
manager also performs certain administrative services for the fund.
For the services under the management agreement, the fund pays the
investment manager a monthly management fee, computed daily and payable monthly
at an annual rate of 0.65% of the fund's average daily managed asset value.
Managed asset value is the net asset value of the common shares plus the
liquidation preference of the preferred shares. For the period June 27, 2003
(commencement of operations) through December 31, 2003, the fund incurred
investment management fees of $5,427,314.
Administration Fees: Pursuant to an administration agreement, the investment
manager also performs certain administrative and accounting functions for the
fund and receives a fee equal to, on an annual basis, 0.06% of the fund's
average daily managed assets up to $1 billion, 0.04% of the fund's average daily
managed assets in excess of $1 billion up to $1.5 billion and 0.02% of the
fund's average daily managed assets in excess of $1.5 billion. For the period
June 27, 2003 (commencement of operations) through December 31, 2003, the fund
incurred $414,102 in administration fees.
Director's Fees: Certain directors and officers of the fund are also
directors, officers and/or employees of the investment manager. None of the
directors and officers so affiliated received compensation for their services.
For the period June 27, 2003 (commencement of operations) through December 31,
2003, fees and related expenses accrued for nonaffiliated directors totaled
$24,500.
NOTE 3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, excluding short-term investments, for the
period June 27, 2003 (commencement of operations) through December 31, 2003,
totaled $1,885,342,601 and $103,914,252, respectively.
--------------------------------------------------------------------------------
23
--------------------------------------------------------------------------------
COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4. INCOME TAXES
The fund had a return of capital of $11,524,470 ($0.24 per common share) for
the period ended December 31, 2003. Short-term capital gains are reflected in
the financial statements as realized gains on investments but are typically
reclassified as ordinary income for tax purposes.
For the period ended December 31, 2003 the dividends and distributions to
shareholders are characterized for tax purposes as follows:
Preferred shareholders:
Ordinary income.............................. $ 2,787,195
Long-term capital gains...................... 290,684
--------------
Total dividends and distributions to
preferred shareholders............... $ 3,077,879
--------------
--------------
Common shareholders:
Ordinary income.............................. $ 26,695,512
Long-term capital gains...................... 2,784,165
Tax return of capital........................ 11,524,470
--------------
Total dividends and distributions to
common shareholders.................. $ 41,004,147
--------------
--------------
At December 31, 2003 the cost of investments and net unrealized appreciation
for federal income tax purposes were as follows:
Aggregate cost............................... $1,790,947,170
--------------
--------------
Gross unrealized appreciation................ $ 163,073,343
Gross unrealized depreciation................ (934,818)
--------------
Net unrealized appreciation on investments... 162,138,525
Net unrealized depreciation on interest rate
swap transactions......................... (5,091,853)
--------------
Net unrealized appreciation.................. $ 157,046,672
--------------
--------------
Net investment income and net realized gains differ for financial statement
and tax purposes primarily due to differing treatments of interest rate swap
payments. To the extent such differences are permanent in nature, such amounts
are reclassified within the capital accounts. During the period ended
December 31, 2003 the fund decreased undistributed net investment income by
$3,285,666 and increased accumulated net realized gain on investments by
$285,666.
The components of distributable earnings on a tax basis consist of
undistributed ordinary income of $0 and undistributed capital gains of $0.
NOTE 5. CAPITAL STOCK
On June 27, 2003, the fund completed the initial public offering of
42,750,000 shares of common stock. Proceeds paid to the fund amounted to
$1,018,518,750 after deduction of underwriting commissions and offering expenses
of $50,231,250.
--------------------------------------------------------------------------------
24
--------------------------------------------------------------------------------
COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On July 17, 2003, the fund completed a subsequent offering of 2,500,000
shares of common stock. Proceeds paid to the fund amounted to $59,562,500 after
deduction of underwriting commissions and offering expenses of $2,937,500.
On August 5, 2003, the fund completed a subsequent offering of 2,940,000
shares of common stock. Proceeds paid to the fund amounted to $70,045,500 after
deduction of underwriting commissions and offering expenses of $3,454,500.
During the period June 27, 2003 (commencement of operations) through
December 31, 2003, the fund issued 57,466 shares of common stock for the
reinvestment of dividends.
On August 18, 2003, the fund issued 3,280 taxable auction market preferred
shares, Series M7 (par value $0.001), 3,280 taxable auction market preferred
shares, Series T7 (par value $0.001), 3,280 taxable auction market preferred
shares, Series W7 (par value $0.001), 3,280 taxable auction market preferred
shares, Series TH7 (par value $0.001), 3,280 taxable auction market preferred
shares, Series F7 (par value $0.001), 2,800 taxable auction market preferred
shares, Series W28A (par value $0.001), 2,800 taxable auction market preferred
shares, Series W28B (par value $0.001), and 2,800 taxable auction market
preferred shares, Series W28C (par value $0.001) (together referred to as
preferred shares). Proceeds paid to the fund amounted to $612,815,000 after
deduction of underwriting commissions and offering expenses of $7,185,000. These
issues have received a 'AAA/Aaa' rating from Standard & Poor's and Moody's.
On December 8, 2003, the fund issued 2,040 auction market preferred shares,
Series T28 (par value $0.001). Proceeds paid to the fund amounted to $50,154,874
after deduction of underwriting commissions and offering expenses of $845,126.
This issue has recieved a 'AAA/Aaa' rating from Standard & Poor's and Moody's.
Preferred shares are senior to the fund's common shares and will rank on a
parity with shares of any other series of preferred shares, and with shares of
any other series of preferred stock of the fund, as to the payment of dividends
and the distribution of assets upon liquidation. If the fund does not timely
cure a failure to (1) maintain a discounted value of its portfolio equal to the
preferred shares basic maintenance amount, (2) maintain the 1940 Act preferred
shares asset coverage, or (3) file a required certificate related to asset
coverage on time, all of the forgoing as defined in the articles supplementary
of the fund, the preferred shares will be subject to a mandatory redemption at
the redemption price of $25,000 per share plus an amount equal to accumulated
but unpaid dividends thereon to the date fixed for redemption. To the extent
permitted under the 1940 Act and Maryland Law, the fund at its option may
without consent of the holders of preferred shares, redeem preferred shares
having a dividend period of one year or less, in whole, or in part, on the
business day after the last day of such dividend period upon not less than 15
calendar days and not more than 40 calendar days prior to notice. The optional
redemption price is $25,000 per share plus an amount equal to accumulated but
unpaid dividends thereon to the date fixed for redemption.
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25
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The fund's common shares and preferred shares have equal voting rights of
one vote per share and vote together as a single class. In addition, the
affirmative vote of a majority of the holders as defined in the 1940 Act, of the
outstanding preferred shares shall be required to (1) approve any plan of
reorganization that would adversely affect the taxable auction market preferred
shares and (2) any matter that materially and adversely affects the rights,
preferences, or powers of that series.
NOTE 6. INVESTMENTS IN INTEREST RATE SWAPS
The fund has entered into interest rate swap agreements with Merrill Lynch
Derivative Products AG, UBS AG, and Royal Bank of Canada. Under the agreements
the fund receives a floating rate and pays a respective fixed rate. Details of
the swaps at December 31, 2003 are as follows:
UNREALIZED
NOTIONAL FIXED FLOATING RATE(a) APPRECIATION/
COUNTERPARTY AMOUNT RATE (RESET MONTHLY) TERMINATION DATE (DEPRECIATION)
------------------------- ----------- ------- ---------------- ------------------ --------------
Royal Bank of Canada $43,250,000 3.4520% 1.141% August 25, 2007 $ (834,443)
Royal Bank of Canada $58,125,000 3.3980% 1.154% September 16, 2008 (71,989)
UBS AG $58,125,000 2.8325% 1.141% August 25, 2006 (495,964)
UBS AG $58,125,000 3.9900% 1.141% August 25, 2009 (739,881)
UBS AG $58,125,000 4.3975% 1.141% August 25, 2010 (1,433,732)
UBS AG $58,125,000 4.5950% 1.141% August 25, 2011 (1,658,640)
Merrill Lynch Derivative
Products AG $43,625,000 3.3200% 1.148% October 22, 2007 (405,816)
Merrill Lynch Derivative
Products AG $58,500,000 3.2075% 1.170% October 2, 2008 548,612
-----------
$(5,091,853)
-----------
-----------
-------------------
(a) Based on LIBOR (London Interbank Offered Rate). Represents rates in effect
at December 31, 2003.
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26
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of
Cohen & Steers REIT and Preferred Income Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Cohen & Steers REIT and Preferred
Income Fund, Inc. (the 'Fund') at December 31, 2003, the results of its
operations, the changes in its net assets and the financial highlights for the
period June 27, 2003 (commencement of operations) through December 31, 2003, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as 'financial statements') are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of securities at December 31, 2003 by correspondence with the
custodian and brokers, provides a reasonable basis for our opinion.
[Signature: PricewaterhouseCoopers LLP]
New York, New York
February 17, 2004
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27
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
TAX INFORMATION -- 2003 (UNAUDITED)
During the period June 27, 2003 (commencement of operations) through
December 31, 2003, the fund had Post May 5th long term capital gains
distributions of $3,074,852 and qualified dividend income distributions of
$429,323. Pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003,
this dividend is eligible for a maximum allowable capital rate of 15% for
individuals.
For the period June 27, 2003 (commencement of operations) through
December 31, 2003, the fund had long term capital gains distributions of
$3,074,852.
Shareholders are advised to consult with their own tax advisors as to the
Federal, state, and local tax status of the income received.
--------------------------------------------------------------------------------
REINVESTMENT PLAN
We urge shareholders who want to take advantage of this plan
and whose shares are held in 'street name' to consult your
broker, as soon as possible to determine if you must change
registration into your own name to participate.
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--------------------------------------------------------------------------------
Notice is hereby given in accordance with Section 23(c) of
the Investment Company Act of 1940 that the fund may
purchase, from time to time, shares of its common stock in
the open market.
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
DIVIDEND REINVESTMENT PLAN
The fund has a dividend reinvestment plan (the plan) commonly referred to as
an 'opt-out' plan. Each shareholder will have all distributions of dividends and
capital gains automatically reinvested in additional common shares by EquiServe
Trust Company, NA as agent for common shareholders pursuant to the plan (the
plan agent), unless they elect to receive cash. The plan agent will either
(i) effect purchases of common shares under the plan in the open market or
(ii) distribute newly issued common shares of the fund. Shareholders who elect
not to participate in the plan will receive all distributions 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 common shareholders in administering
the plan. After the fund declares a dividend or makes a capital gain
distribution, the plan agent will, as agent for the participants, 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 determination date, the net asset value per share exceeds
the market price per share plus estimated brokerage commissions on that date.
The plan agent will receive the dividend or distribution in newly issued common
shares of the fund if, on the determination date, the market price per share
plus estimated brokerage commissions equals or exceeds the net asset value 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 net asset value or
(ii) 95% of the closing market price per share on the payment date.
Participants in the plan may withdraw from the plan upon written notice to
the plan agent. Such withdrawal will be effective immediately if received not
less than ten days prior to a distribution record date; otherwise, it will be
effective for all subsequent dividend record dates. 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. In the alternative, upon receipt of the participant's
instructions, common shares will be sold and the proceeds sent to the
participant less brokerage commissions and any applicable taxes.
The plan agent maintains each common shareholder's account in the plan and
furnishes confirmations of all acquisitions made for the participant as soon as
practicable but no later than 60 days. Common shares in the account of each plan
participant will be held by the plan agent on behalf of the participant. Proxy
material relating to shareholders' meetings of the fund will include those
shares purchased as well as shares held pursuant to the plan.
In the case of shareholders, such as banks, brokers or nominees, which hold
common shares for others who are the beneficial owners, the plan agent will
administer the plan on the basis of the number of common shares certified from
time to time by the record shareholders as representing the total amount
registered in the record
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29
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
shareholder's name and held for the account of beneficial owners who are
participants in the plan. Common shares may be purchased through any of the
underwriters, acting as broker or, after the completion of this offering,
dealer.
The plan agent's fees for the handling of reinvestment of dividends and
other distributions will be paid by the fund. 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 distributions.
There are no other charges to participants for reinvesting dividends or capital
gain distributions. See 'Taxation.'
The automatic reinvestment of dividends and other distributions will not
relieve participants of any income tax that may be payable or required to be
withheld on such dividends or distributions.
Experience under the plan may indicate that changes are desirable.
Accordingly, the fund reserves the right to amend or terminate the plan as
applied to any distribution paid subsequent to written notice of the change sent
to all shareholders of the fund at least 90 days before the record date for the
dividend or distribution. The plan also may be amended or terminated by the plan
agent by at least 90 days' written notice to all shareholders of the fund. All
correspondence concerning the plan should be directed to the plan agent at
(telephone 800-426-5523).
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
During the period, there have been no material changes
in the fund's investment objectives or fundamental policies
that have not been approved by the shareholders. There have
been no changes in the fund's charter or by-laws that would
delay or prevent a change in control of the fund which have
not been approved by shareholders. There have been no
changes in the principal risk factors associated with the
investment in the fund.
A portion of the fund's dividends and distributions may
not be tied to the fund's investment income and capital
gains and could represent a return of the fund's capital.
Any return of capital would not represent yield or
investment on the fund's investment portfolio.
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
--------------------------------------------------------------------------------
PRIVACY POLICY
The fund is committed to maintaining the privacy of its
shareholders and to safeguarding their personal information.
The following is provided to help you understand what
personal information the fund collects, how we protect that
information, and why in certain cases we may share this
information with others.
The fund does not receive any personal information relating
to shareholders who purchase shares through an intermediary
that acts as the record owner of the shares. In the case of
shareholders who are record owners of the fund, to conduct
and process your business in an accurate and efficient
manner, we must collect and maintain certain personal
information about you. This is the information we collect on
applications or other forms, and from the transactions you
make with us.
The fund does not disclose any personal information about
its shareholders or former shareholders to anyone, except as
required or permitted by law or as is necessary to service
shareholder accounts. We will share information with
organizations, such as the fund's transfer agent, that
assist the fund in carrying out its daily business
operations. These organizations will use this information
only for purposes of providing the services required or as
otherwise as may be required by law. These organizations are
not permitted to share or use this information for any other
purpose. In addition, the fund restricts access to personal
information about its shareholders to employees of the
investment manager who have a legitimate business need for
the information.
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COHEN & STEERS REIT & PREFERRED INCOME FUND, INC.
INFORMATION ABOUT FUND DIRECTORS
NUMBER OF
PORTFOLIOS
OVERSEEN
WITHIN THE
POSITION(S) HELD TERM OF LENGTH OF PRINCIPAL OCCUPATION(S) FUND
NAME, ADDRESS AND AGE WITH FUND OFFICE TIME SERVED DURING PAST FIVE YEARS COMPLEX
------------------------- ------------------ ------- ----------- ------------------------------ ----------
Robert H. Steers ........ Director, chairman Until Since Co-chairman and co-chief 10
757 Third Avenue and secretary next inception executive officer of Cohen &
New York, New York election Steers Capital Management,
Age: 50 of Inc., the fund's investment
directors manager since 2003. Prior
thereto, chairman of Cohen &
Steers Capital Management Inc.
Martin Cohen ............ Director, Until Since Co-chairman and co-chief 10
757 Third Avenue president and next inception executive officer of Cohen &
New York, New York treasurer election Steers Capital Management,
Age: 55 of Inc., the fund's investment
directors manager. Prior thereto,
President of Cohen & Steers
Capital Management, Inc.
Gregory C. Clark ........ Director Until Since Private investor. Prior 10
99 Jane Street next inception thereto, president of
New York, New York election Wellspring Management Group
Age: 56 of (investment advisory firm).
directors
Bonnie Cohen ............ Director Until Since Consultant. Prior thereto, 10
1824 Phelps Place, N.W. next inception Undersecretary of State,
Washington, D.C. election United States department of
Age: 61 of state.
directors
George Grossman ......... Director Until Since Attorney-at-law. 10
17 Elm Place next inception
Rye, New York election
Age: 50 of
directors
Richard J. Norman ....... Director Until Since Private investor. Prior 10
7520 Hackamore Drive next inception thereto, Investment
Potomac, Maryland election Representative of Morgan
Age: 60 of Stanley Dean Witter.
directors
Willard H. Smith, Jr .... Director Until Since Director. Board member of 10
7231 Encelia Drive next inception Essex Property Trust, Inc.,
La Jolla, California election Highwoods Properties, Inc. and
Age: 67 of Realty Income Corporation.
directors Managing director at Merrill
Lynch & Co., Equity Capital
Markets Division from 1983 to
1995.
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
MEET THE COHEN & STEERS FAMILY OF OPEN-END FUNDS:
[COHEN & STEERS [COHEN & STEERS
EQUITY INCOME FUND LOGO] REALTY SHARES LOGO]
IDEAL FOR INVESTORS SEEKING A HIGH DIVIDEND IDEAL FOR INVESTORS SEEKING MAXIMUM TOTAL
YIELD AND CAPITAL APPRECIATION, INVESTING RETURN THROUGH BOTH CURRENT INCOME AND
PRIMARILY IN REITS CAPITAL APPRECIATION, INVESTING PRIMARILY IN
A, B, C AND I SHARES AVAILABLE REITS
SYMBOLS: CSEIX, CSBIX, CSCIX, CSDIX SYMBOL: CSRSX
[COHEN & STEERS [COHEN & STEERS
SPECIAL EQUITY FUND LOGO] INSTITUTIONAL REALTY SHARES LOGO]
IDEAL FOR INVESTORS SEEKING MAXIMUM CAPITAL IDEAL FOR INVESTORS SEEKING MAXIMUM TOTAL
APPRECIATION, INVESTING IN A LIMITED NUMBER RETURN THROUGH BOTH CURRENT INCOME AND
OF REITS AND OTHER REAL ESTATE COMPANIES CAPITAL APPRECIATION, INVESTING PRIMARILY IN
CONCENTRATED, HIGHLY FOCUSED PORTFOLIO REITS
SYMBOL: CSSPX OFFERS LOW TOTAL EXPENSE RATIO
HIGHER MINIMUM PURCHASE REQUIRED
SYMBOL: CSRIX
FOR MORE INFORMATION ABOUT ANY COHEN & STEERS FUND
OR TO OBTAIN A PROSPECTUS PLEASE CONTACT US AT:
1-800-330-REIT, OR VISIT OUR WEB SITE AT COHENANDSTEERS.COM
THE PROSPECTUS CONTAINS MORE INFORMATION ABOUT EACH FUND INCLUDING ALL CHARGES AND EXPENSES,
AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST.
COHEN & STEERS SECURITIES, LLC, DISTRIBUTOR
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COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.
OFFICERS AND DIRECTORS KEY INFORMATION
Robert H. Steers INVESTMENT MANAGER
Director and chairman Cohen & Steers Capital Management, Inc.
757 Third Avenue
Martin Cohen New York, NY 10017
Director and president (212) 832-3232
Gregory C. Clark FUND SUBADMINISTRATOR AND CUSTODIAN
Director State Street Bank and Trust Company
225 Franklin Street
Bonnie Cohen Boston, MA 02110
Director
TRANSFER AGENT -- COMMON SHARES
George Grossman Equiserve Trust Company
Director 150 Royall Street
Canton, MA 02021
Richard J. Norman (800) 426-5523
Director
TRANSFER AGENT -- PREFERRED SHARES
Willard H. Smith Jr. The Bank of New York
Director 100 Church Street
New York, NY 10007
Greg E. Brooks
Vice president LEGAL COUNSEL
Adam Derechin Simpson Thacher & Bartlett
Vice president and assistant 425 Lexington Avenue
treasurer New York, NY 10017
Lawrence B. Stoller
Assistant secretary New York Stock Exchange Symbol: RNP
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.
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34
COHEN & STEERS
REIT AND PREFERRED INCOME FUND
757 THIRD AVENUE
NEW YORK, NY 10017
[COHEN & STEERS
REIT AND PREFERRED INCOME FUND LOGO]
ANNUAL REPORT
DECEMBER 31, 2003
STATEMENT OF DIFFERENCES
------------------------
The division sign shall be expressed as................................. [div]
The section symbol shall be expressed as................................ 'SS'