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)

 

280 Park Avenue, New York, NY

 

10017

(Address of principal executive offices)

 

(Zip code)

 

Tina M. Payne
Cohen & Steers Capital Management, Inc.
280 Park 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, 2016

 

 



 

Item 1. Reports to Stockholders.

 



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

To Our Shareholders:

We would like to share with you our report for the year ended December 31, 2016. The net asset value (NAV) at that date was $21.75 per common share. The Fund's common stock is traded on the New York Stock Exchange (NYSE) and its share price can differ from its NAV; at year end, the Fund's closing price on the NYSE was $19.12.

The total returns for the Fund and its comparative benchmarks were:

  Six Months Ended
December 31, 2016
  Year Ended
December 31, 2016
 
Cohen & Steers REIT and Preferred
Income Fund at NAVa
   

–2.04

%

   

8.43

%

 
Cohen & Steers REIT and Preferred
Income Fund at Market Valuea
   

–3.30

%

   

11.79

%

 
FTSE NAREIT Equity REIT Indexb    

–4.29

%

   

8.52

%

 
BofA Merrill Lynch Fixed-Rate Preferred
Securities Indexb
   

–2.64

%

   

2.32

%

 
Blended Benchmark—50% FTSE NAREIT
Equity REIT Index/50% BofA Merrill Lynch
Fixed-Rate Preferred Securities Indexb
   

–3.37

%

   

5.63

%

 
S&P 500 Indexb    

7.82

%

   

11.96

%

 

The performance data quoted represent past performance. Past performance is no guarantee of future results. The investment return and the principal value of an investment will fluctuate and shares, if sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Performance results reflect the effects of leverage, resulting from borrowings under a credit agreement. Current total returns of the Fund can be obtained by visiting our website at cohenandsteers.com. The Fund's returns assume the reinvestment of all dividends and distributions at prices obtained under the Fund's dividend reinvestment plan. Index performance does not reflect the deduction of any fees, taxes or expenses. An investor cannot invest directly in an index. Performance figures for periods shorter than one year are not annualized.

The Fund makes regular distributions at a level rate (the Policy). On September 15, 2016, the Board of Directors of the Fund approved a change in the frequency of dividends distributed to shareholders from quarterly to monthly effective October 1, 2016. Distributions paid by the Fund are

a  As a closed-end investment company, the price of the Fund's NYSE-traded shares will be set by market forces and can deviate from the NAV per share of the Fund.

b  The FTSE NAREIT Equity REIT Index contains all tax-qualified REITs except timber and infrastructure REITs with more than 50% of total assets in qualifying real estate assets other than mortgages secured by real property that also meet minimum size and liquidity criteria. The BofA Merrill Lynch Fixed-Rate Preferred Securities Index tracks the performance of fixed-rate U.S. dollar-denominated preferred securities issued in the U.S. domestic market. The S&P 500 Index is an unmanaged index of 500 large-capitalization stocks that is frequently used as a general measure of U.S. stock market performance. Benchmark returns are shown for comparative purposes only and may not be representative of the Fund's portfolio. The Fund's benchmarks do not include below-investment-grade securities.


1



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

subject to recharacterization for tax purposes and are taxable up to the amount of the Fund's investment company taxable income and net realized gains. As a result of the Policy, the Fund may pay distributions in excess of the Fund's investment company taxable income and net realized gains. This excess would be a return of capital distributed from the Fund's assets. Distributions of capital decrease the Fund's total assets and, therefore, could have the effect of increasing the Fund's expense ratio. In addition, in order to make these distributions, the Fund may have to sell portfolio securities at a less than opportune time.

Market Review

The real estate securities market reached a major milestone in 2016 when, for the first time since the Global Industry Classification Standard (GICS) was created in 1999, a new sector classification was added to the major stock market indexes. The move elevated real estate to its own sector category, separate from the financials sector. The reclassification acknowledged that while property investment companies share certain similarities with other capital-intensive businesses, their cash-flow-oriented business models and ties to real estate market cycles have produced a distinctive risk-return profile. Investors had other reasons to cheer real estate as well, with the sector producing a favorable total return during the year.

The broad stock market got off to a difficult start early in the year as global growth slowed and interest rates declined to record lows on renewed deflation concerns. Real estate investment trusts (REITs) outperformed during this period as investors favored the stocks' predictable income generation and attractive yields.

Global economic fears subsided as the year progressed, however, as data generally improved. The amended growth outlook resulted in a rebound in interest rates and an increase in investors' risk appetite. REITs continued to advance as real estate market fundamentals strengthened, before surrendering some of their gains as expectations of a Federal Reserve interest rate hike grew.

Donald Trump's surprise victory in the November U.S. presidential election further lifted growth and inflation expectations, due to the anticipated impact of changes in fiscal and tax policies. The sharp rise in bond yields weighed on the returns of many higher yielding equities. During this time, the more cyclical real estate sectors—such as hotels and industrial REITs—produced favorable returns, while those considered to be more defensive—like health care and free standing landlords—generally declined.

Preferred securities delivered positive total returns in 2016 despite coming under pressure early in the year from widening credit spreads and late in the year from rising bond yields. Overall, strong income generation over the course of the year more than made up for price pressures. Preferreds were also supported by the ongoing improvements in the financial profiles of banks—the largest issuers of preferreds.


2



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

In response to a tightening U.S. labor market and signs of firming inflation, the Federal Reserve raised its target interest rate by 0.25% in December to a range of 0.50% to 0.75%—the central bank's only rate hike in 2016.

Fund Performance

The Fund had a positive total return for the year and outperformed its blended benchmark on both a NAV and market price basis. Our underweight and stock selection in the shopping center sector contributed to relative performance. The sector, with properties that are generally anchored by non-discretionary grocery stores and bargain-priced retailers, produced a positive total return but lagged the benchmark in the slow-growth environment that prevailed throughout the year.

Our underweight in health care property companies, which underperformed the broad real estate market, also aided relative performance. However, the effect was offset by relatively unfavorable stock selection in the sector. Companies with the most stable cash flows, such as owners of medical office buildings, generally performed quite well during the year, while those with skilled nursing care tenants underperformed amid concerns that regulatory issues could threaten tenants' profit margins.

Hotels rallied strongly, particularly in the second half of the year. Investors looked ahead to the end of the new supply cycle, anticipating that industry fundamentals would recover in 2017 along with the economy. However, our underweight in hotels, based on valuations, detracted from relative performance. Industrial landlords were another top-performing sector during the year, but our underweight due to generally high valuations hurt relative performance.

The Fund's allocation to preferred securities had a positive absolute return and outperformed the broad preferreds universe as measured by the BofA Merrill Lynch Fixed-Rate Preferred Securities Index. Security selection was favorable in nearly all sectors, led by issues from utilities, banks and real estate companies.

Impact of Leverage on Fund Performance

The Fund employs leverage as part of a yield-enhancement strategy. Leverage, which can increase total return in rising markets (just as it can have the opposite effect in declining markets), significantly contributed to the Fund's performance for the 12-month period ended December 31, 2016.

Impact of Derivatives on Fund Performance

The Fund used derivatives in the form of options for hedging purposes, as well as forward foreign currency exchange contracts for managing currency risk on certain Fund positions denominated in foreign currencies. These contracts did not have a material effect on the Fund's total return for the 12-month period ended December 31, 2016.


3



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

Sincerely,

       

 

 
       

WILLIAM F. SCAPELL

 

THOMAS N. BOHJALIAN

 
       

Portfolio Manager

 

Portfolio Manager

 

  

  JASON YABLON

  Portfolio Manager

The views and opinions in the preceding commentary are subject to change without notice and are as of the date of the report. There is no guarantee that any market forecast set forth in the commentary will be realized. This material represents an assessment of the market environment at a specific point in time, should not be relied upon as investment advice and is not intended to predict or depict performance of any investment.

Visit Cohen & Steers online at cohenandsteers.com

For more information about the Cohen & Steers family of mutual funds, visit cohenandsteers.com. Here you will find fund net asset values, fund fact sheets and portfolio highlights, as well as educational resources and timely market updates.

Our website also provides comprehensive information about Cohen & Steers, including our most recent press releases, profiles of our senior investment professionals and their investment approach to each asset class. The Cohen & Steers family of mutual funds invests in major real asset categories including real estate securities, listed infrastructure, commodities and natural resource equities, as well as preferred securities and other income solutions.


4



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

Our Leverage Strategy
(Unaudited)

Our current leverage strategy utilizes borrowings up to the maximum permitted by the Investment Company Act of 1940 to provide additional capital for the Fund, with an objective of increasing net income available for shareholders. As of December 31, 2016, leverage represented 25% of the Fund's managed assets.

Through a combination of variable and fixed rate financing, the Fund has locked in interest rates on a significant portion of this additional capital for periods expiring in 2017, 2018 and 2019a (where we effectively reduce our variable rate obligation and lock in our fixed rate obligation over various terms). Locking in a significant portion of our leveraging costs is designed to protect the dividend-paying ability of the Fund. The use of leverage increases the volatility of the Fund's net asset value in both up and down markets. However, we believe that locking in portions of the Fund's leveraging costs for the various terms partially protects the Fund's expenses from an increase in short-term interest rates.

Leverage Factsb,c

Leverage (as a % of managed assets)    

25

%

 
% Fixed Rate    

85

%

 
% Variable Rate    

15

%

 
Weighted Average Rate on Financing    

1.9

%a

 
Weighted Average Term on Financing     4.4 yearsa    

The Fund seeks to enhance its dividend yield through leverage. The use of leverage is a speculative technique and there are special risks and costs associated with leverage. The net asset value of the Fund's shares may be reduced by the issuance and ongoing costs of leverage. So long as the Fund is able to invest in securities that produce an investment yield that is greater than the total cost of leverage, the leverage strategy will produce higher current net investment income for shareholders. On the other hand, to the extent that the total cost of leverage exceeds the incremental income gained from employing such leverage, shareholders would realize lower net investment income. In addition to the impact on net income, the use of leverage will have an effect of magnifying capital appreciation or depreciation for shareholders. Specifically, in an up market, leverage will typically generate greater capital appreciation than if the Fund were not employing leverage. Conversely, in down markets, the use of leverage will generally result in greater capital depreciation than if the Fund had been unlevered. To the extent that the Fund is required or elects to reduce its leverage, the Fund may need to liquidate investments, including under adverse economic conditions which may result in capital losses potentially reducing returns to shareholders. There can be no assurance that a leveraging strategy will be successful during any period in which it is employed.

a  On February 24, 2015, the Fund amended its credit agreement to extend the fixed rate financing terms by three years expiring in 2020, 2021 and 2022. The weighted average rate on financing does not include the three year extension and will increase as the extended fixed-rate tranches become effective. The weighted average term on financing includes the three year extension.

b  Data as of December 31, 2016. Information is subject to change.

c  See Note 7 in Notes to Financial Statements.


5



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

December 31, 2016
Top Ten Holdingsa
(Unaudited)

Security

  Value   % of
Managed
Assets
 

Simon Property Group

 

$

52,713,623

     

3.8

   

Prologis

   

36,187,387

     

2.6

   

Vornado Realty Trust

   

27,597,828

     

2.0

   

Equinix

   

26,990,889

     

1.9

   

Extra Space Storage

   

26,106,425

     

1.9

   

UDR

   

24,555,855

     

1.8

   

Essex Property Trust

   

22,694,790

     

1.6

   

General Electric Co., 5.00%, Series D

   

19,206,030

     

1.4

   

SL Green Realty Corp.

   

19,173,906

     

1.4

   

Brixmor Property Group

   

18,007,406

     

1.3

   

a  Top ten holdings are determined on the basis of the value of individual securities held. The Fund may also hold positions in other types of securities issued by the companies listed above. See the Schedule of Investments for additional details on such other positions.

Sector Breakdown

(Based on Managed Assets)
(Unaudited)


6




COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

SCHEDULE OF INVESTMENTS

December 31, 2016

        Number
of Shares
 

Value

 

COMMON STOCK—REAL ESTATE

 

61.2%

                 

DIVERSIFIED

 

5.7%

                 

American Assets Trusta

       

214,357

   

$

9,234,500

   

Gramercy Property Trust

       

1,278,801

     

11,739,393

   

Vornado Realty Trusta,b

       

264,423

     

27,597,828

   

Washington REIT

       

318,761

     

10,420,297

   
             

58,992,018

   

HEALTH CARE

 

5.6%

                 

HCPa,b

       

577,909

     

17,175,455

   

Healthcare Trust of America, Class Aa,b

       

549,593

     

15,998,652

   

Physicians Realty Trusta,b

       

740,460

     

14,039,122

   

Quality Care Propertiesa,b,c

       

132,075

     

2,047,163

   

Ventas

       

134,004

     

8,377,930

   
             

57,638,322

   

HOTEL

 

3.0%

                 

Host Hotels & Resortsa,b

       

585,423

     

11,029,369

   

Pebblebrook Hotel Trust

       

219,895

     

6,541,876

   

Sunstone Hotel Investorsa,b

       

856,730

     

13,065,133

   
             

30,636,378

   

INDUSTRIALS

 

3.5%

                 

Prologisa,b

       

685,497

     

36,187,387

   

NET LEASE

 

3.1%

                 

Four Corners Property Trust

       

214,456

     

4,400,637

   

Gaming and Leisure Properties

       

264,452

     

8,097,520

   

Spirit Realty Capitala,b

       

1,299,599

     

14,113,645

   

STORE Capital Corp.

       

244,923

     

6,052,048

   
             

32,663,850

   

OFFICE

 

7.5%

                 

Alexandria Real Estate Equitiesa

       

140,068

     

15,565,757

   

Douglas Emmetta,b

       

308,082

     

11,263,478

   

Highwoods Properties

       

127,054

     

6,481,024

   

Hudson Pacific Properties

       

238,800

     

8,305,464

   

Kilroy Realty Corp.a,b

       

225,794

     

16,532,637

   

SL Green Realty Corp.a,b

       

178,279

     

19,173,906

   
             

77,322,266

   

See accompanying notes to financial statements.
7



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2016

        Number
of Shares
 

Value

 

RESIDENTIAL

 

13.8%

                 

APARTMENT

 

12.2%

                 

American Campus Communitiesa

       

356,572

   

$

17,746,589

   

Apartment Investment & Management Co.a,b

       

312,095

     

14,184,718

   

Colony Starwood Homesa,b

       

472,561

     

13,614,482

   

Equity Residentiala,b

       

263,580

     

16,964,009

   

Essex Property Trusta,b

       

97,612

     

22,694,790

   

Mid-America Apartment Communitiesa,b

       

167,228

     

16,374,966

   

UDRa,b

       

673,132

     

24,555,855

   
             

126,135,409

   

MANUFACTURED HOME

 

1.6%

                 

Sun Communitiesa,b

       

213,633

     

16,366,424

   

TOTAL RESIDENTIAL

           

142,501,833

   

SELF STORAGE

 

4.3%

                 

CubeSmarta

       

540,924

     

14,480,535

   

Extra Space Storagea,b

       

337,991

     

26,106,425

   

Life Storagea,b

       

43,843

     

3,738,054

   
             

44,325,014

   

SHOPPING CENTERS

 

8.9%

                 

COMMUNITY CENTER

 

2.7%

                 

Brixmor Property Groupa

       

737,404

     

18,007,406

   

Regency Centers Corp.a,b

       

141,529

     

9,758,424

   
             

27,765,830

   

REGIONAL MALL

 

6.2%

                 

General Growth Propertiesa,b

       

479,036

     

11,966,319

   

Simon Property Groupa,b

       

296,694

     

52,713,623

   
             

64,679,942

   

TOTAL SHOPPING CENTERS

           

92,445,772

   

SPECIALTY

 

5.8%

                 

CyrusOnea,b

       

163,314

     

7,305,035

   

DuPont Fabros Technologya

       

251,756

     

11,059,641

   

Equinixa,b

       

75,518

     

26,990,889

   

QTS Realty Trust, Class Aa,b

       

305,320

     

15,159,138

   
             

60,514,703

   
TOTAL COMMON STOCK
(Identified cost—$447,706,872)
           

633,227,543

   

See accompanying notes to financial statements.
8



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2016

        Number
of Shares
 

Value

 

PREFERRED SECURITIES—$25 PAR VALUE

 

24.0%

                 

BANKS

 

7.4%

                 

Bank of America Corp., 6.20%, Series CCa

       

134,575

   

$

3,389,944

   

Bank of America Corp., 6.00%, Series EE

       

200,473

     

4,991,778

   

Bank of America Corp., 6.50%, Series Ya

       

261,463

     

6,672,536

   

BB&T Corp., 5.625%

       

65,175

     

1,583,101

   

Citigroup, 6.875%, Series Ka

       

83,974

     

2,296,689

   

Citigroup, 6.30%, Series Sa

       

139,006

     

3,516,852

   

Farm Credit Bank of Texas, 6.75%, 144Aa,d

       

63,000

     

6,567,750

   

Fifth Third Bancorp, 6.625%, Series Ia

       

71,998

     

1,967,705

   

First Republic Bank, 5.50%, Series Ga

       

50,991

     

1,162,085

   
GMAC Capital Trust I, 6.691%, due 2/15/40,
Series 2 (TruPS) (FRN)a
       

324,847

     

8,251,114

   

Huntington Bancshares, 6.25%, Series Da

       

198,855

     

5,031,031

   

JPMorgan Chase & Co., 6.10%, Series AAa

       

43,750

     

1,109,500

   

JPMorgan Chase & Co., 6.15%, Series BBa

       

78,600

     

2,011,374

   

JPMorgan Chase & Co., 6.125%, Series Y

       

90,000

     

2,281,500

   

People's United Financial, 5.625%, Series A

       

170,000

     

4,394,500

   

Regions Financial Corp., 6.375%, Series B

       

209,686

     

5,562,970

   

Wells Fargo & Co., 6.00%, Series T

       

48,664

     

1,220,493

   

Wells Fargo & Co., 5.85%a

       

220,206

     

5,557,999

   

Wells Fargo & Co., 6.625%

       

46,774

     

1,267,575

   

Wells Fargo & Co., 6.00%, Series V

       

39,339

     

986,229

   

Wells Fargo & Co., 5.70%, Series W

       

117,835

     

2,785,619

   

Wells Fargo & Co., 5.50%, Series X

       

87,027

     

1,993,789

   

Zions Bancorp, 7.90%, Series Fa

       

84,067

     

2,156,739

   
             

76,758,872

   

BANKS—FOREIGN

 

1.2%

                 
Barclays Bank PLC, 8.125%, Series 5
(United Kingdom)a
       

276,655

     

7,065,769

   
National Westminster Bank PLC, 7.763%, Series C
(United Kingdom)a
       

219,392

     

5,623,017

   
             

12,688,786

   

See accompanying notes to financial statements.
9



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2016

        Number
of Shares
 

Value

 

ELECTRIC

 

1.5%

                 

INTEGRATED ELECTRIC

 

0.7%

                 

DTE Energy Co., 5.375%, due 6/1/76, Series B

       

116,388

   

$

2,623,386

   

Integrys Holdings, 6.00%, due 8/1/73

       

162,977

     

4,247,588

   
             

6,870,974

   

REGULATED ELECTRIC

 

0.8%

                 

Southern Co./The, 6.25%, due 10/15/75

       

308,505

     

8,051,980

   

TOTAL ELECTRIC

           

14,922,954

   

FINANCIAL

 

2.8%

                 

DIVERSIFIED FINANCIAL SERVICES

 

0.8%

                 

KKR & Co. LP, 6.75%, Series A

       

140,000

     

3,539,200

   

State Street Corp., 5.35%, Series G

       

146,525

     

3,666,055

   

Stifel Financial Corp., 6.25%, Series A

       

45,113

     

1,121,509

   
             

8,326,764

   

INVESTMENT ADVISORY SERVICES

 

0.3%

                 

Ares Management LP, 7.00%, Series A

       

136,000

     

3,428,560

   

INVESTMENT BANKER/BROKER

 

1.7%

                 

Charles Schwab Corp./The, 5.95%, Series D

       

122,400

     

3,058,776

   

Morgan Stanley, 6.875%a,b

       

282,674

     

7,643,505

   

Morgan Stanley, 6.375%, Series Ia

       

254,338

     

6,544,117

   
             

17,246,398

   

TOTAL FINANCIAL

           

29,001,722

   

INDUSTRIALS—CHEMICALS

 

1.0%

                 

CHS, 6.75%a

       

130,453

     

3,428,305

   

CHS, 7.50%, Series 4

       

74,495

     

2,021,794

   

CHS, 7.10%, Series IIa

       

193,453

     

5,128,439

   
             

10,578,538

   

INSURANCE

 

3.0%

                 

LIFE/HEALTH INSURANCE—FOREIGN

 

0.1%

                 

Aegon NV, 6.50% (Netherlands)

       

41,743

     

1,050,254

   

See accompanying notes to financial statements.
10



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2016

        Number
of Shares
 

Value

 

MULTI-LINE

 

1.3%

                 

American Financial Group, 6.00%, due 11/15/55

       

99,000

   

$

2,475,000

   

American Financial Group, 6.25%, due 9/30/54

       

139,041

     

3,482,977

   

Hanover Insurance Group/The, 6.35%, due 3/30/53

       

78,400

     

1,960,000

   

WR Berkley Corp., 5.75%, due 6/1/56

       

139,375

     

3,188,900

   

WR Berkley Corp., 5.90%, due 3/1/56

       

112,600

     

2,701,274

   
             

13,808,151

   

MULTI-LINE—FOREIGN

 

0.2%

                 

PartnerRe Ltd., 6.50%, Series G (Bermuda)

       

74,903

     

1,941,486

   

REINSURANCE

 

0.4%

                 
Reinsurance Group of America, 5.75%,
due 6/15/56a
       

138,000

     

3,626,640

   

REINSURANCE—FOREIGN

 

1.0%

                 
Arch Capital Group Ltd., 5.25%,
Series E (Bermuda)
       

155,700

     

3,289,941

   

Aspen Insurance Holdings Ltd., 5.95% (Bermuda)

       

106,758

     

2,702,045

   

Aspen Insurance Holdings Ltd., 7.25% (Bermuda)

       

52,801

     

1,342,201

   
Endurance Speciality Holdings Ltd., 6.35%,
Series C (Bermuda)a
       

137,701

     

3,519,638

   
             

10,853,825

   

TOTAL INSURANCE

           

31,280,356

   

INTEGRATED TELECOMMUNICATIONS SERVICES

 

0.4%

                 

Qwest Corp., 6.50%, due 9/1/56a

       

111,900

     

2,556,915

   

Qwest Corp., 7.00%, due 4/1/52

       

55,429

     

1,369,096

   
             

3,926,011

   

REAL ESTATE

 

5.0%

                 

DIVERSIFIED

 

1.7%

                 

Coresite Realty Corp., 7.25%, Series A

       

79,200

     

2,002,176

   
Lexington Realty Trust, 6.50%, Series C
($50 Par Value)a
       

76,536

     

3,819,146

   

NorthStar Realty Finance Corp., 8.50%, Series D

       

90,426

     

2,303,150

   

VEREIT, 6.70%, Series Fa

       

257,840

     

6,520,774

   
Wells Fargo Real Estate Investment Corp., 6.375%,
Series A
       

102,536

     

2,580,831

   
             

17,226,077

   

See accompanying notes to financial statements.
11



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2016

        Number
of Shares
 

Value

 

HOTEL

 

0.5%

                 

Hersha Hospitality Trust, 6.875%, Series Ca

       

134,345

   

$

3,263,240

   

Sunstone Hotel Investors, 6.95%, Series E

       

65,000

     

1,647,750

   
             

4,910,990

   

INDUSTRIALS

 

0.8%

                 

Gramercy Property Trust, 7.125%, Series A

       

151,270

     

3,978,401

   
Monmouth Real Estate Investment Corp.,
7.875%, Series B
       

87,500

     

2,242,538

   

STAG Industrial, 6.875%, Series C

       

96,000

     

2,463,360

   
             

8,684,299

   

OFFICE

 

0.4%

                 
Corporate Office Properties Trust, 7.375%,
Series La
       

100,000

     

2,520,000

   
Government Properties Income Trust, 5.875%,
due 5/1/46
       

70,000

     

1,649,900

   
             

4,169,900

   

RESIDENTIAL

 

0.4%

                 

MANUFACTURED HOME

 

0.2%

                 

Equity Lifestyle Properties, 6.75%, Series C

       

60,843

     

1,528,376

   

SINGLE FAMILY

 

0.2%

                 

American Homes 4 Rent, 5.00%, Series A

       

79,685

     

2,197,713

   

TOTAL RESIDENTIAL

           

3,726,089

   

SHOPPING CENTERS—COMMUNITY CENTER

 

0.9%

                 

Cedar Realty Trust, 7.25%, Series Ba

       

219,000

     

5,332,650

   

DDR Corp., 6.50%, Series Ja

       

60,000

     

1,470,000

   

Saul Centers, 6.875%, Series Ca

       

84,140

     

2,114,438

   
             

8,917,088

   

SPECIALTY

 

0.3%

                 

Digital Realty Trust, 6.35%, Series I

       

140,000

     

3,508,400

   

TOTAL REAL ESTATE

           

51,142,843

   

TECHNOLOGY—SOFTWARE

 

0.3%

                 

eBay, 6.00%, due 2/1/56

       

133,000

     

3,450,020

   

See accompanying notes to financial statements.
12



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2016

        Number
of Shares
 

Value

 

UTILITIES

 

1.4%

                 
Dominion Resources, 5.25%, due 7/30/76,
Series A
       

115,000

   

$

2,553,000

   

Entergy New Orleans, 5.50%, due 4/1/66

       

60,000

     

1,401,000

   
NextEra Energy Capital Holdings, 5.25%,
due 6/1/76, Series K
       

116,605

     

2,574,638

   

SCE Trust IV, 5.375%, Series J

       

125,870

     

3,106,472

   

SCE Trust V, 5.45%, Series Ka

       

188,469

     

4,760,727

   
             

14,395,837

   
TOTAL PREFERRED SECURITIES—$25 PAR VALUE
(Identified cost—$242,888,597)
           

248,145,939

   
        Principal
Amount/Shares
     

PREFERRED SECURITIES—CAPITAL SECURITIES

 

44.3%

                 

BANKS

 

11.2%

                 

Bank of America Corp., 6.30%, Series DDa

       

6,400,000

     

6,704,000

   

Bank of America Corp., 6.50%, Series Za

       

10,113,000

     

10,580,726

   
Bank of New York Mellon Corp./The, 4.625%,
Series F
       

1,704,000

     

1,567,373

   

Citigroup, 6.125%, Series R

       

4,806,000

     

4,980,218

   

Citigroup, 6.25%, Series T

       

6,925,000

     

7,134,481

   

Citigroup Capital III, 7.625%, due 12/1/36a

       

4,700,000

     

5,502,224

   

CoBank ACB, 6.25%, 144Aa,d

       

33,000

     

3,362,908

   

CoBank ACB, 6.125%, Series Ga

       

46,500

     

4,536,656

   

CoBank ACB, 6.25%, Series I

       

4,334,000

     

4,507,295

   

Farm Credit Bank of Texas, 10.00%, Series Ia

       

6,000

     

7,185,000

   

Goldman Sachs Capital I, 6.345%, due 2/15/34a

       

939,000

     

1,118,768

   

Goldman Sachs Group/The, 5.70%, Series L

       

2,520,000

     

2,585,646

   
Huntington Bancshares, 8.50%, Series A
(Convertible)a
       

3,212

     

4,657,400

   

JPMorgan Chase & Co., 7.90%, Series Ia

       

11,000,000

     

11,404,250

   

JPMorgan Chase & Co., 6.75%, Series Sa

       

8,650,000

     

9,331,187

   

JPMorgan Chase & Co., 5.30%, Series Z

       

2,500,000

     

2,557,650

   

M&T Bank Corp., 5.125%, Series F

       

1,094,000

     

1,059,813

   

PNC Financial Services Group, 6.75%

       

5,275,000

     

5,683,812

   

Wells Fargo & Co., 7.98%, Series Ka

       

11,475,000

     

12,005,719

   

See accompanying notes to financial statements.
13



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2016

        Principal
Amount/Shares
 

Value

 

Wells Fargo & Co., 5.875%, Series U

       

5,270,000

   

$

5,539,561

   

Wells Fargo Capital X, 5.95%, due 12/1/36

       

3,700,000

     

3,866,500

   
             

115,871,187

   

BANKS—FOREIGN

 

13.2%

                 
Australia & New Zealand Banking Group Ltd./
United Kingdom, 6.75%, 144A (Australia)d
       

5,100,000

     

5,398,233

   
Banco Bilbao Vizcaya Argentaria SA, 8.875%
(EUR) (Spain)
       

5,200,000

     

5,911,794

   

Banco Bilbao Vizcaya Argentaria SA, 9.00% (Spain)

       

2,600,000

     

2,717,645

   
Banco Mercantil del Norte SA, 5.75%, due 10/4/31,
144A (Mexico)d
       

4,000,000

     

3,725,000

   

Barclays PLC, 7.875% (United Kingdom)

       

3,400,000

     

3,447,090

   

Barclays PLC, 8.25% (United Kingdom)a

       

5,320,000

     

5,554,740

   

BNP Paribas, 7.195%, 144A (France)a,d

       

3,300,000

     

3,605,250

   

BNP Paribas SA, 7.625%, 144A (France)a,b,d

       

8,000,000

     

8,460,800

   

Credit Agricole SA, 8.125%, 144A (France)a,d

       

7,300,000

     

7,710,479

   

Credit Suisse Group AG, 7.50%, 144A (Switzerland)a,d

       

3,605,000

     

3,784,979

   

DNB Bank ASA, 6.50% (Norway)

       

3,800,000

     

3,883,524

   
Dresdner Funding Trust I, 8.151%, due 6/30/31,
144A (Germany)a,d
       

4,835,906

     

5,615,696

   
HSBC Capital Funding LP, 10.176%, 144A
(United Kingdom)a,d
       

8,442,000

     

12,473,055

   

HSBC Holdings PLC, 6.875% (United Kingdom)

       

4,800,000

     

5,076,000

   
Lloyds Banking Group PLC, 7.50%
(United Kingdom)a,b
       

6,166,000

     

6,366,395

   
Nationwide Building Society, 10.25% (GBP)
(United Kingdom)
       

4,790,000

     

7,767,424

   
Rabobank Nederland, 11.00%, 144A
(Netherlands)a,d
       

11,375,000

     

13,411,694

   
Royal Bank of Scotland Group PLC, 7.648%
(United Kingdom)a
       

2,241,000

     

2,571,547

   
Royal Bank of Scotland Group PLC, 8.625%
(United Kingdom)
       

6,400,000

     

6,544,000

   

Societe Generale SA, 7.375%, 144A (France)d

       

4,200,000

     

4,203,444

   
Standard Chartered PLC, 7.50%, 144A
(United Kingdom)d
       

3,800,000

     

3,800,000

   

Swedbank AB, 6.00% (Sweden)

       

3,000,000

     

3,020,250

   

UBS Group AG, 6.875% (Switzerland)

       

2,000,000

     

2,040,184

   

See accompanying notes to financial statements.
14



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2016

        Principal
Amount/Shares
 

Value

 

UBS Group AG, 7.00% (Switzerland)

       

1,600,000

   

$

1,682,800

   

UBS Group AG, 7.125% (Switzerland)

       

3,000,000

     

3,091,311

   

UBS Group AG, 7.125% (Switzerland)

       

5,000,000

     

5,172,835

   
             

137,036,169

   

ELECTRIC—REGULATED ELECTRIC

 

0.2%

                 

Southern Co./The, 5.50%, due 3/15/57, Series B

       

1,500,000

     

1,518,315

   

FINANCIAL—DIVERSIFIED FINANCIAL SERVICES

 

0.4%

                 
National Rural Utilities Cooperative
Finance Corp., 5.25%, due 4/20/46
       

1,390,000

     

1,450,647

   

State Street Corp., 5.25%, Series F

       

3,005,000

     

3,087,638

   
             

4,538,285

   

FOOD

 

1.3%

                 

Dairy Farmers of America, 7.875%, 144Ad,e

       

40,100

     

4,194,211

   
Dairy Farmers of America, 7.875%, 144A
($100 Par Value)d
       

82,000

     

8,707,375

   
             

12,901,586

   

INDUSTRIALS—DIVERSIFIED MANUFACTURING

 

1.9%

                 

General Electric Co., 5.00%, Series Da,b

       

18,486,000

     

19,206,030

   

INSURANCE

 

11.0%

                 

LIFE/HEALTH INSURANCE

 

3.0%

                 

MetLife, 5.25%, Series C

       

4,266,000

     

4,329,990

   
MetLife Capital Trust IV, 7.875%, due 12/15/37,
144Ad
       

2,000,000

     

2,421,000

   

MetLife Capital Trust X, 9.25%, due 4/8/38, 144Aa,d

       

8,065,000

     

10,988,562

   

Prudential Financial, 5.625%, due 6/15/43a

       

9,464,000

     

9,842,560

   

Voya Financial, 5.65%, due 5/15/53

       

3,300,000

     

3,254,625

   
             

30,836,737

   

LIFE/HEALTH INSURANCE—FOREIGN

 

4.3%

                 
Dai-ichi Life Insurance Co. Ltd., 4.00%, 144A
(Japan)d
       

7,600,000

     

7,087,000

   
Dai-ichi Life Insurance Co. Ltd., 5.10%, 144A
(Japan)a,d
       

3,400,000

     

3,472,250

   
Demeter BV (Swiss Re Ltd.), 5.625%, due 8/15/52
(Netherlands)
       

4,200,000

     

4,201,915

   

See accompanying notes to financial statements.
15



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2016

        Principal
Amount/Shares
 

Value

 
Demeter BV (Swiss Re Ltd.), 5.75%, due 8/15/50
(Netherlands)
       

3,200,000

   

$

3,222,560

   

La Mondiale Vie, 7.625% (France)

       

4,500,000

     

4,764,375

   
Meiji Yasuda Life Insurance Co., 5.20%,
due 10/20/45, 144A (Japan)a,b,d
       

7,350,000

     

7,615,151

   
Nippon Life Insurance Co., 4.70%, due 1/20/46,
144A (Japan)d
       

10,000,000

     

10,037,500

   
Sumitomo Life Insurance Co., 6.50%, due 9/20/73,
144A (Japan)a,d
       

3,800,000

     

4,256,000

   
             

44,656,751

   

MULTI-LINE

 

0.8%

                 
Hartford Financial Services Group/The,
8.125%, due 6/15/38
       

2,365,000

     

2,538,828

   

MetLife, 10.75%, due 8/1/69a

       

3,442,000

     

5,292,075

   
             

7,830,903

   

MULTI-LINE—FOREIGN

 

0.6%

                 

AXA SA, 6.463%, 144A (France)a,d

       

3,250,000

     

3,203,265

   

ING Groep N.V., 6.875% (Netherlands)

       

3,400,000

     

3,425,310

   
             

6,628,575

   

PROPERTY CASUALTY

 

0.8%

                 

Liberty Mutual Group, 7.80%, due 3/7/87, 144Aa,d

       

7,150,000

     

8,061,625

   

PROPERTY CASUALTY—FOREIGN

 

0.9%

                 
QBE Insurance Group Ltd., 6.75%,
due 12/2/44 (Australia)
       

6,003,000

     

6,330,164

   
QBE Insurance Group Ltd., 5.875%,
due 6/17/46, Series EMTN (Australia)
       

2,800,000

     

2,827,042

   
             

9,157,206

   

REINSURANCE—FOREIGN

 

0.6%

                 

Aquarius + Investments PLC, 8.25% (Ireland)

       

6,000,000

     

6,389,790

   

TOTAL INSURANCE

           

113,561,587

   

See accompanying notes to financial statements.
16



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2016

        Principal
Amount/Shares
 

Value

 

INTEGRATED TELECOMMUNICATIONS SERVICES

 

0.6%

                 
Centaur Funding Corp., 9.08%, due 4/21/20,
144A (Cayman Islands)a,d
       

3,254

   

$

3,807,180

   
Frontier Communications Corp., 8.875%,
due 9/15/20
       

2,200,000

     

2,351,250

   
             

6,158,430

   

MATERIAL—METALS & MINING

 

1.0%

                 
BHP Billiton Finance USA Ltd., 6.75%,
due 10/19/75, 144A (Australia)a,b,d
       

9,600,000

     

10,800,000

   

PIPELINES

 

0.7%

                 
Transcanada Trust, 5.875%, due 8/15/76,
Series 16-A (Canada)
       

7,002,000

     

7,299,585

   

REAL ESTATE—DIVERSIFIED

 

0.4%

                 
QCP SNF West/Central/East/AL REIT LLC,
8.125%, due 11/1/23, 144Ad
       

3,700,000

     

3,727,750

   

UTILITIES

 

2.4%

                 

ELECTRIC UTILITIES

 

0.1%

                 
NextEra Energy Capital Holdings, 7.30%,
due 9/1/67, Series Da,b
       

1,038,000

     

1,039,557

   

ELECTRIC UTILITIES—FOREIGN

 

2.3%

                 
Emera, 6.75%, due 6/15/76, Series 16-A
(Canada)a,b
       

13,450,000

     

14,458,750

   

Enel SpA, 8.75%, due 9/24/73, 144A (Italy)a,d

       

8,510,000

     

9,701,400

   
             

24,160,150

   

TOTAL UTILITIES

           

25,199,707

   
TOTAL PREFERRED SECURITIES—CAPITAL SECURITIES
(Identified cost—$428,375,454)
           

457,818,631

   

See accompanying notes to financial statements.
17



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2016

        Number
of Shares
 

Value

 

SHORT-TERM INVESTMENTS

   

1.4%

                   

MONEY MARKET FUNDS

                         
State Street Institutional Treasury
Money Market Fund, Premier Class, 0.40%f
       

14,800,000

   

$

14,800,000

   
TOTAL SHORT-TERM INVESTMENTS
(Identified cost—$14,800,000)
               

14,800,000

   

TOTAL INVESTMENTS (Identified cost—$1,133,770,923)

   

130.9

%

           

1,353,992,113

   

LIABILITIES IN EXCESS OF OTHER ASSETS

   

(30.9

)

           

(319,363,990

)

 
NET ASSETS (Equivalent to $21.75 per share
based on 47,566,736 shares of common
stock outstanding)
   

100.0

%

         

$

1,034,628,123

   

Note: Percentages indicated are based on the net assets of the Fund.

a  All or a portion of the security is pledged as collateral in connection with the Fund's credit agreement. $716,737,980 in aggregate has been pledged as collateral.

b  A portion of the security has been rehypothecated in connection with the Fund's credit agreement. $321,823,199 in aggregate has been rehypothecated.

c  Non-income producing security.

d  Resale is restricted to qualified institutional investors. Aggregate holdings amounting to $180,199,557 or 17.4% of the net assets of the Fund, of which 0.4% are illiquid.

e  Illiquid security. Aggregate holdings equal 0.4% of the net assets of the Fund.

f  Rate quoted represents the annualized seven-day yield of the fund.

See accompanying notes to financial statements.
18



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

SCHEDULE OF INVESTMENTS—(Continued)

December 31, 2016

Forward foreign currency exchange contracts outstanding at December 31, 2016 were as follows:

Counterparty

  Contracts to
Deliver
  In Exchange
For
  Settlement
Date
  Unrealized
Appreciation
(Depreciation)
 

Brown Brothers Harriman

 

EUR

5,437,250

   

USD

5,781,172

   

1/4/17

 

$

57,649

   

Brown Brothers Harriman

 

GBP

6,246,352

   

USD

7,811,981

   

1/4/17

   

113,978

   

Brown Brothers Harriman

 

USD

7,716,743

   

GBP

6,246,352

   

1/4/17

   

(18,740

)

 

Brown Brothers Harriman

 

USD

5,733,798

   

EUR

5,437,250

   

1/4/17

   

(10,274

)

 

Brown Brothers Harriman

 

EUR

5,616,130

   

USD

5,930,881

   

2/2/17

   

10,316

   

Brown Brothers Harriman

 

GBP

6,321,219

   

USD

7,813,899

   

2/2/17

   

17,533

   
   

$

170,462

   

The total amount of all forward foreign currency exchange contracts as presented in the table above, is representative of the volume of activity for this derivative type during the year ended December 31, 2016.

Glossary of Portfolio Abbreviations

EUR   Euro Currency

FRN   Floating Rate Note

GBP   Great British Pound

REIT   Real Estate Investment Trust

TruPS   Trust Preferred Securities

USD   United States Dollar

See accompanying notes to financial statements.
19




COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

STATEMENT OF ASSETS AND LIABILITIES

December 31, 2016

ASSETS:

 

Investments in securities, at valuea (Identified cost—$1,133,770,923)

 

$

1,353,992,113

   

Cash

   

14,973,670

   

Receivable for:

 

Dividends and interest

   

11,437,626

   

Investment securities sold

   

6,399,978

   

Unrealized appreciation on forward foreign currency exchange contracts

   

199,476

   

Other assets

   

4,621

   

Total Assets

   

1,387,007,484

   

LIABILITIES:

 

Unrealized depreciation on forward foreign currency exchange contracts

   

29,014

   

Payable for:

 

Credit agreement

   

350,000,000

   

Investment securities purchased

   

991,940

   

Investment management fees

   

752,574

   

Dividends declared

   

241,422

   

Administration fees

   

63,252

   

Interest expense

   

56,626

   

Directors' fees

   

527

   

Other liabilities

   

244,006

   

Total Liabilities

   

352,379,361

   

NET ASSETS

 

$

1,034,628,123

   

NET ASSETS consist of:

 

Paid-in capital

 

$

803,300,258

   
Accumulated undistributed net investment income    

2,634,064

   
Accumulated undistributed net realized gain    

8,304,113

   

Net unrealized appreciation

   

220,389,688

   
   

$

1,034,628,123

   

NET ASSET VALUE PER SHARE:

 

($1,034,628,123 ÷ 47,566,736 shares outstanding)

 

$

21.75

   

MARKET PRICE PER SHARE

 

$

19.12

   

MARKET PRICE DISCOUNT TO NET ASSET VALUE PER SHARE

   

(12.09

)%

 

a  Includes $321,823,199 which has been rehypothecated in connection with the Fund's credit agreement, as described in Note 7.

See accompanying notes to financial statements.
20



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

STATEMENT OF OPERATIONS

For the Year Ended December 31, 2016

Investment Income:

 

Dividend income

 

$

41,674,966

   

Interest income (net of $2,305 of foreign withholding tax)

   

24,487,978

   

Rehypothecation income

   

73,895

   
Total Investment Income    

66,236,839

   

Expenses:

 

Investment management fees

   

9,121,951

   

Interest expense

   

6,761,821

   

Administration fees

   

961,569

   

Shareholder reporting expenses

   

127,146

   

Custodian fees and expenses

   

122,081

   

Professional fees

   

93,322

   

Directors' fees and expenses

   

75,929

   

Line of credit fees

   

23,229

   

Transfer agent fees and expenses

   

22,698

   

Miscellaneous

   

76,614

   

Total Expenses

   

17,386,360

   
Net Investment Income (Loss)    

48,850,479

   

Net Realized and Unrealized Gain (Loss):

 

Net realized gain (loss) on:

 
Investments    

43,598,497

   
Written option contracts    

(310,646

)

 

Foreign currency transactions

   

2,345,820

   
Net realized gain (loss)    

45,633,671

   

Net change in unrealized appreciation (depreciation) on:

 

Investments

   

(18,417,880

)

 

Written option contracts

   

(53,261

)

 

Foreign currency translations

   

116,546

   

Net change in unrealized appreciation (depreciation)

   

(18,354,595

)

 
Net realized and unrealized gain (loss)    

27,279,076

   

Net Increase (Decrease) in Net Assets Resulting from Operations

 

$

76,129,555

   

See accompanying notes to financial statements.
21



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

STATEMENT OF CHANGES IN NET ASSETS

    For the
Year Ended
December 31, 2016
  For the
Year Ended
December 31, 2015
 

Change in Net Assets:

 

From Operations:

 

Net investment income (loss)

 

$

48,850,479

   

$

43,164,825

   
Net realized gain (loss)    

45,633,671

     

59,242,895

   
Net change in unrealized appreciation
(depreciation)
   

(18,354,595

)

   

(31,792,043

)

 
Net increase (decrease) in net assets
resulting from operations
   

76,129,555

     

70,615,677

   

Dividends and Distributions to Shareholders from:

 

Net investment income

   

(46,173,805

)

   

(70,488,885

)

 

Net realized gain

   

(24,320,098

)

   

   
Total dividends and distributions
to shareholders
   

(70,493,903

)

   

(70,488,885

)

 

Capital Stock Transactions:

 
Increase (decrease) in net assets from
Fund share transactions
   

     

(3,824,582

)

 

Total increase (decrease) in net assets

   

5,635,652

     

(3,697,790

)

 

Net Assets:

 

Beginning of year

   

1,028,992,471

     

1,032,690,261

   

End of yeara

 

$

1,034,628,123

   

$

1,028,992,471

   

a  Includes accumulated undistributed net investment income of $2,634,064 and $1,769,977, respectively.

See accompanying notes to financial statements.
22



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2016

Increase (Decrease) in Cash:

 

Cash Flows from Operating Activities:

 

Net increase (decrease) in net assets resulting from operations

 

$

76,129,555

   
Adjustments to reconcile net increase in net assets resulting from
operations to net cash provided by operating activities:
 

Purchases of long-term investments

   

(634,649,983

)

 
Proceeds from sales and maturities of long-term investments    

671,907,245

   

Net purchases, sales and maturities of short-term investments

   

(7,881,225

)

 

Net amortization of premium on investments

   

634,188

   

Net non-cash dividends received

   

(767,231

)

 

Net increase in dividends and interest receivable and other assets

   

(1,656,601

)

 
Net increase in interest expense payable, accrued expenses and
other liabilities
   

44,981

   

Decrease in premiums received from written option contracts

   

(72,629

)

 

Net change in unrealized depreciation on written option contracts

   

53,261

   
Net change in unrealized depreciation on investments    

18,417,880

   
Net change in unrealized appreciation on forward foreign currency
exchange contracts
   

(111,689

)

 

Net realized gain on investments

   

(43,598,497

)

 

Cash provided by operating activities

   

78,449,255

   

Cash Flows from Financing Activities:

 

Dividends and Distributions paid

   

(70,975,084

)

 

Increase (decrease) in cash

   

7,474,171

   

Cash at beginning of year (including foreign currency)

   

7,499,499

   

Cash at end of year

 

$

14,973,670

   

Supplemental Disclosure of Cash Flow Information and Non-Cash Activities:

During the year ended December 31, 2016, interest paid was $6,741,945.

During the year ended December 31, 2016, as part of exchange offers from two of the Fund's investments, the Fund received shares of new securities valued at $23,159,428, resulting in a realized gain of $168,950.

See accompanying notes to financial statements.
23




COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

FINANCIAL HIGHLIGHTS

The following table includes selected data for a share outstanding throughout each year and other performance information derived from the financial statements. It should be read in conjunction with the financial statements and notes thereto.

   

For the Year Ended December 31,

 

Per Share Operating Performance:

 

2016

 

2015

 

2014

 

2013

 

2012

 

Net asset value, beginning of year

 

$

21.63

   

$

21.62

   

$

17.88

   

$

18.37

   

$

15.34

   

Income (loss) from investment operations:

 

Net investment income (loss)a

   

1.03

     

0.91

     

0.96

     

0.83

     

0.95

   

Net realized and unrealized gain (loss)

   

0.57

     

0.57

     

4.07

b

   

(0.13

)c

   

3.28

   

Total from investment operations

   

1.60

     

1.48

     

5.03

     

0.70

     

4.23

   
Less dividends and distributions to
shareholders from:
 

Net investment income

   

(0.97

)

   

(1.48

)

   

(1.29

)

   

(1.20

)

   

(1.20

)

 

Net realized gain

   

(0.51

)

   

     

     

     

   
Total dividends and distributions to
shareholders
   

(1.48

)

   

(1.48

)

   

(1.29

)

   

(1.20

)

   

(1.20

)

 

Anti-dilutive effect from the repurchase of shares

   

     

0.01

     

     

0.01

     

   

Net increase (decrease) in net asset value

   

0.12

     

0.01

     

3.74

     

(0.49

)

   

3.03

   

Net asset value, end of year

 

$

21.75

   

$

21.63

   

$

21.62

   

$

17.88

   

$

18.37

   

Market value, end of year

 

$

19.12

   

$

18.44

   

$

18.99

   

$

15.70

   

$

16.99

   
Total net asset value returnd    

8.43

%

   

8.45

%

   

29.87

%

   

4.48

%

   

28.45

%

 
Total market value returnd    

11.79

%

   

5.26

%

   

29.91

%

   

–0.80

%

   

28.79

%

 

See accompanying notes to financial statements.
24



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

FINANCIAL HIGHLIGHTS—(Continued)

   

For the Year Ended December 31,

 

Ratios/Supplemental Data:

 

2016

 

2015

 

2014

 

2013

 

2012

 

Net assets, end of year (in millions)

 

$

1,034.6

   

$

1,029.0

   

$

1,032.7

   

$

854.3

   

$

883.1

   

Ratio of expenses to average daily net assets

   

1.65

%

   

1.67

%

   

1.71

%

   

1.82

%

   

1.63

%

 
Ratio of expenses to average daily net assets
(excluding interest expense)
   

1.01

%

   

1.03

%

   

1.03

%

   

1.10

%

   

1.10

%

 
Ratio of net investment income (loss) to average
daily net assets
   

4.64

%

   

4.18

%

   

4.76

%

   

4.38

%

   

5.45

%

 
Ratio of expenses to average daily managed
assetse
   

1.24

%

   

1.25

%

   

1.26

%

   

1.31

%

   

1.15

%

 
Portfolio turnover rate    

46

%

   

42

%

   

54

%

   

51

%

   

49

%

 

Credit Agreement

 

Asset coverage ratio for credit agreement

   

396

%

   

394

%

   

395

%

   

344

%

   

352

%

 

Asset coverage per $1,000 for credit agreement

 

$

3,956

   

$

3,940

   

$

3,951

   

$

3,441

   

$

3,523

   

a  Calculation based on average shares outstanding.

b  Includes gains resulting from class action litigation payments on securities owned in prior years. Without these gains, the net realized and unrealized gains (losses) on investments per share would have been $3.99 and the total return on a NAV basis would have been 29.58%.

c  Includes gains resulting from class action litigation payments on securities owned in prior years. Without these gains, the net realized and unrealized gains (losses) on investments per share would have been $(0.17) and the total return on a net asset value (NAV) basis would have been 4.33%.

d  Total net asset value return measures the change in net asset value per share over the period indicated. Total market value return is computed based upon the Fund's NYSE market price per share and excludes the effects of brokerage commissions. Dividends and distributions are assumed, for purposes of these calculations, to be reinvested at prices obtained under the Fund's dividend reinvestment plan.

e  Average daily managed assets represent net assets plus the outstanding balance of the credit agreement.

See accompanying notes to financial statements.
25




COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

NOTES TO FINANCIAL STATEMENTS

Note 1. Organization and 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 (the 1940 Act) as a diversified, closed-end management investment company. The Fund's investment objective is high current income.

The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The Fund is an investment company and, accordingly, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 946—Investment Companies. The accounting policies of the Fund are in conformity with accounting principles generally accepted in the United States of America (GAAP). The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

Portfolio Valuation: Investments in securities that are listed on the NYSE are valued, except as indicated below, at the last sale price reflected at the close of the NYSE 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 ask prices on such day or, if no ask price is available, at the bid price. Exchange-traded options are valued at their last sale price as of the close of options trading on applicable exchanges on the valuation date. In the absence of a last sale price on such day, options are valued at the average of the quoted bid and ask prices as of the close of business. Over-the-counter options are valued based upon prices provided by the respective counterparty. Forward contracts are valued daily at the prevailing forward exchange rate.

Securities not listed on the NYSE but listed on other domestic or foreign securities exchanges (including NASDAQ) are valued in a similar manner. Securities traded on more than one securities exchange are valued at the last sale price reflected at the close of the exchange representing the principal market for such securities on the business day as of which such value is being determined. If after the close of a foreign market, but prior to the close of business on the day the securities are being valued, market conditions change significantly, certain non-U.S. equity holdings may be fair valued pursuant to procedures established by the Board of Directors.

Readily marketable securities traded in the over-the-counter market, including listed securities whose primary market is believed by Cohen & Steers Capital Management, Inc. (the investment manager) to be over-the-counter, are valued on the basis of prices provided by a third-party pricing service or third-party broker-dealers when such prices are believed by the investment manager, pursuant to delegation by the Board of Directors, to reflect the fair value of such securities.

Fixed-income securities are valued on the basis of prices provided by a third-party pricing service or third-party broker-dealers when such prices are believed by the investment manager, pursuant to delegation by the Board of Directors, to reflect the fair market value of such securities. The pricing services or broker-dealers use multiple valuation techniques to determine fair value. In instances where


26



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

sufficient market activity exists, the pricing services or broker-dealers may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services or broker-dealers also utilize proprietary valuation models which may consider market transactions in comparable securities and the various relationships between securities in determining fair value and/or characteristics such as benchmark yield curves, option-adjusted spreads, credit spreads, estimated default rates, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features which are then used to calculate the fair values.

Short-term debt securities with a maturity date of 60 days or less are valued at amortized cost, which approximates fair value. Investments in open-end mutual funds are valued at their closing net asset value.

The policies and procedures approved by the Fund's Board of Directors delegate authority to make fair value determinations to the investment manager, subject to the oversight of the Board of Directors. The investment manager has established a valuation committee (Valuation Committee) to administer, implement and oversee the fair valuation process according to the policies and procedures approved annually by the Board of Directors. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.

Securities for which market prices are unavailable, or securities for which the investment manager determines that the bid and/or ask price or a counterparty valuation does not reflect market value, will be valued at fair value, as determined in good faith by the Valuation Committee, pursuant to procedures approved by the Fund's Board of Directors. Circumstances in which market prices may be unavailable include, but are not limited to, when trading in a security is suspended, the exchange on which the security is traded is subject to an unscheduled close or disruption or material events occur after the close of the exchange on which the security is principally traded. In these circumstances, the Fund determines fair value in a manner that fairly reflects the market value of the security on the valuation date based on consideration of any information or factors it deems appropriate. These may include, but are not limited to, recent transactions in comparable securities, information relating to the specific security and developments in the markets.

The Fund's use of fair value pricing may cause the net asset value of Fund shares to differ from the net asset value that would be calculated using market quotations. Fair value pricing involves subjective judgments and it is possible that the fair value determined for a security may be materially different than the value that could be realized upon the sale of that security.

Fair value is defined as the price that the Fund would expect to receive upon the sale of an investment or expect to pay to transfer a liability in an orderly transaction with an independent buyer in the principal market or, in the absence of a principal market, the most advantageous market for the


27



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

investment or liability. The hierarchy of inputs that are used in determining the fair value of the Fund's investments is summarized below.

•  Level 1—quoted prices in active markets for identical investments

•  Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, credit risk, etc.)

•  Level 3—significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities may or may not be an indication of the risk associated with investing in those securities.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfer at the end of the period in which the underlying event causing the movement occurred. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. There were no transfers between Level 1 and Level 2 as of December 31, 2016.

The following is a summary of the inputs used as of December 31, 2016 in valuing the Fund's investments carried at value:

  Total   Quoted Prices
in Active
Markets for
Identical
Investments
(Level 1)
  Other
Significant
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Common Stock

 

$

633,227,543

   

$

633,227,543

   

$

   

$

   
Preferred Securities—
$25 Par Value:
 
Banks    

76,758,872

     

70,191,122

     

6,567,750

     

   
Electric-Integrated Electric    

6,870,974

     

2,623,386

     

4,247,588

     

   
Other Industries    

164,516,093

     

164,516,093

     

     

   
Preferred Securities—
Capital Securities:
 
Banks    

115,871,187

     

4,657,400

     

111,213,787

     

   
Food    

12,901,586

     

     

8,707,375

     

4,194,211

   
Other Industries    

329,045,858

     

     

329,045,858

     

   

Short-Term Investments

   

14,800,000

     

     

14,800,000

     

   

Total Investmentsa

 

$

1,353,992,113

   

$

875,215,544

   

$

474,582,358

   

$

4,194,211

b

 


28



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

  Total   Quoted Prices
in Active
Markets for
Identical
Investments
(Level 1)
  Other
Significant
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 
Forward foreign currency
exchange contracts
 

$

199,476

   

$

   

$

199,476

   

$

   
Total Appreciation in
Other Financial
Instrumentsa
 

$

199,476

   

$

   

$

199,476

   

$

   
Forward foreign currency
exchange contracts
 

$

(29,014

)

 

$

   

$

(29,014

)

 

$

   
Total Depreciation in
Other Financial
Instrumentsa
 

$

(29,014

)

 

$

   

$

(29,014

)

 

$

   

a   Portfolio holdings are disclosed individually on the Schedule of Investments.

b   Level 3 investments are valued by a third-party pricing service. The inputs for these securities are not readily available or cannot be reasonably estimated. A change in the significant unobservable inputs could result in a significantly lower or higher value in such Level 3 investments.

The following is a reconciliation of investments for which significant unobservable inputs (Level 3) were used in determining fair value:

    Total
Investments
in Securities
  Preferred
Securities—Capital
Securities—Banks
  Preferred
Securities—Capital
Securities—Food
 

Balance as of December 31, 2015

 

$

11,380,918

   

$

4,215,518

   

$

7,165,400

   
Change in unrealized appreciation
(depreciation)
   

149,949

     

321,138

     

(171,189

)

 

Sales

   

(2,911,946

)

   

     

(2,911,946

)

 

Realized Gain (Loss)

   

111,946

     

     

111,946

   

Transfers out of Level 3a

   

(4,536,656

)

   

(4,536,656

)

   

   

Balance as of December 31, 2016

 

$

4,194,211

   

$

   

$

4,194,211

   

The change in unrealized appreciation (depreciation) attributable to securities owned on December 31, 2016 which were valued using significant unobservable inputs (Level 3) amounted to $(171,189).

a  Transfers from Level 3 to Level 2 are due to an increase in market activity (e.g. frequency of trades), which resulted in an increase in available market inputs to determine prices.


29



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. Discounts are accreted and premiums are amortized over the life of the respective securities. Dividend income is recorded on the ex-dividend date, except for certain dividends on foreign securities, which are recorded as soon as the Fund is informed after the ex-dividend date. Distributions from REITs are recorded as ordinary income, net realized capital gain or return of capital based on information reported by the REITs and management's estimates of such amounts based on historical information. These estimates are adjusted when the actual source of distributions is disclosed by the REITs and actual amounts may differ from the estimated amounts.

Options: The Fund may purchase and write exchange-listed and over-the-counter put or call options on securities, stock indices, currencies and other financial instruments for hedging purposes, to enhance portfolio returns and reduce overall volatility.

When the Fund writes (sells) an option, an amount equal to the premium received by the Fund is recorded on the Statement of Assets and Liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. When an option expires, the Fund realizes a gain on the option to the extent of the premium received. Premiums received from writing options which are exercised or closed are added to or offset against the proceeds or amount paid on the transaction to determine the realized gain or loss. If a put option on a security is exercised, the premium reduces the cost basis of the security purchased by the Fund. If a call option is exercised, the premium is added to the proceeds of the security sold to determine the realized gain or loss. The Fund, as writer of an option, bears the market risk of an unfavorable change in the price of the underlying investment. Other risks include the possibility of an illiquid options market or the inability of the counterparties to fulfill their obligations under the contracts.

Put and call options purchased are accounted for in the same manner as portfolio securities. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying investment transaction to determine the realized gain or loss when the underlying transaction is executed. The risk associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, the Fund bears the risk of loss of the premium and change in market value should the counterparty not perform under the contract.

At December 31, 2016, the Fund did not have any option contracts outstanding.

Foreign Currency Translation: The books and records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon prevailing exchange rates on the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollars based upon prevailing exchange rates on the respective dates of such transactions. The Fund does not isolate that portion of the results of operations resulting from fluctuations in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.


30



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

Net realized foreign exchange gains or losses arise from sales of foreign currencies, including gains and losses on forward foreign currency exchange contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, other than investments in securities, on the date of valuation, resulting from changes in exchange rates. Pursuant to U.S. federal income tax regulations, certain foreign currency gains/losses included in realized and unrealized gains/losses are included in or are a reduction of ordinary income for federal income tax purposes.

Forward Foreign Currency Exchange Contracts: The Fund enters into forward foreign currency exchange contracts to hedge the currency exposure associated with certain of its non-U.S. dollar denominated securities. A forward foreign currency exchange contract is a commitment between two parties to purchase or sell foreign currency at a set price on a future date. The market value of a forward foreign currency exchange contract fluctuates with changes in foreign currency exchange rates. These contracts are marked to market daily and the change in value is recorded by the Fund as unrealized appreciation and/or depreciation on foreign currency translations. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are included in net realized gain or loss on foreign currency transactions. For federal income tax purposes, the Fund has made an election to treat gains and losses from forward foreign currency exchange contracts as capital gains and losses.

Forward foreign currency exchange contracts involve elements of market risk in excess of the amounts reflected on the Statement of Assets and Liabilities. The Fund bears the risk of an unfavorable change in the foreign exchange rate underlying the contract. Risks may also arise upon entering these contracts from the potential inability of the counterparties to meet the terms of their contracts. In connection with these contracts, securities may be identified as collateral in accordance with the terms of the respective contracts.

Dividends and Distributions to Shareholders: The Fund makes regular distributions pursuant to the Level Rate Plan. On September 15, 2016, the Board of Directors of the Fund approved a change in the frequency of dividends distributed to shareholders from quarterly to monthly effective October 1, 2016. Dividends from net investment income and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from GAAP. Dividends from net investment income, if any, are declared quarterly and paid monthly. Net realized capital gains, unless offset by any available capital loss carryforward, are typically distributed to shareholders at least annually. Dividends and distributions to shareholders are recorded on the ex-dividend date and are automatically reinvested in full and fractional shares of the Fund in accordance with the Fund's Reinvestment Plan, unless the shareholder has elected to have them paid in cash.

Dividends from net investment income are subject to recharacterization for tax purposes. Based upon the results of operations for the year ended December 31, 2016, a significant portion of the dividends have been reclassified to distributions from net realized gain.


31



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

Income Taxes: It is the policy of the Fund to continue to qualify as a regulated investment company, if such qualification is in the best interest of the shareholders, by complying with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies, and by distributing substantially all of its taxable earnings to its shareholders. Also, in order to avoid the payment of any federal excise taxes, the Fund will distribute substantially all of its net investment income and net realized gains on a calendar year basis. Accordingly, no provision for federal income or excise tax is necessary. Dividend and interest income from holdings in non-U.S. securities is recorded net of non-U.S. taxes paid. Management has analyzed the Fund's tax positions taken on federal and applicable state income tax returns as well as its tax positions in non-U.S. jurisdictions in which it trades for all open tax years and has concluded that as of December 31, 2016, no additional provisions for income tax are required in the Fund's financial statements. The Fund's tax positions for the tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service, state departments of revenue and by foreign tax authorities.

Note 2. Investment Management Fees, Administration Fees and Other Transactions with Affiliates

Investment Management Fees: The investment manager serves as the Fund's investment manager pursuant to an investment management agreement (the investment management agreement). Under the terms of the investment management agreement, the investment manager provides the Fund with day-to-day investment decisions and generally manages the Fund's investments in accordance with the stated policies of the Fund, subject to the supervision of the Board of Directors.

For the services provided to the Fund, the investment manager receives a fee, accrued daily and paid monthly, at the annual rate of 0.65% of the average daily managed assets of the Fund. Managed assets are equal to the net assets plus the amount of any borrowings, used for leverage, outstanding.

Administration Fees: The Fund has entered into an administration agreement with the investment manager under which the investment manager performs certain administrative functions for the Fund and receives a fee, accrued daily and paid monthly, at the annual rate of 0.06% of the average daily managed assets of the Fund up to $1 billion, 0.04% of the average daily managed assets of the Fund in excess of $1 billion and up to $1.5 billion and 0.02% of the average daily managed assets of the Fund in excess of $1.5 billion. For the year ended December 31, 2016, the Fund incurred $761,351 in fees under this administration agreement. Additionally, the Fund pays State Street Bank and Trust Company as co-administrator under a fund accounting and administration agreement.

Directors' and Officers' Fees: Certain directors and officers of the Fund are also directors, officers and/or employees of the investment manager. The Fund does not pay compensation to directors and officers affiliated with the investment manager except for the Chief Compliance Officer, who received compensation from the investment manager, which was reimbursed by the Fund, in the amount of $16,895 for the year ended December 31, 2016.


32



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

Note 3. Purchases and Sales of Securities

Purchases and sales of securities, excluding short-term investments, for the year ended December 31, 2016, totaled $633,955,477 and $668,939,875, respectively.

Transactions in written option contracts during the year ended December 31, 2016, were as follows:

    Number
of Contracts
 

Premiums

 

Written option contracts outstanding at December 31, 2015

   

1,614

   

$

72,629

   
Option contracts written    

21

     

223,325

   

Option contracts expired

   

(1,614

)

   

(72,629

)

 
Option contracts terminated in closing transactions    

(21

)

   

(223,325

)

 

Written option contracts outstanding at December 31, 2016

   

   

$

   

Note 4. Derivative Investments

The following tables present the value of derivatives held at December 31, 2016 and the effect of derivatives held during the year ended December 31, 2016, along with the respective location in the financial statements. The volume of activity for written option contracts for the year ended December 31, 2016 is summarized in Note 3.

Statement of Assets and Liabilities

   

Assets

 

Liabilities

 

Derivatives

 

Location

 

Fair Value

 

Location

 

Fair Value

 

Foreign Exchange Risk:

 
Forward foreign
currency exchange
contractsa
 

Unrealized appreciation

 

$

199,476

   

Unrealized depreciation

 

$

29,014

   

a  Forward foreign currency exchange contracts executed with Brown Brothers Harriman are not subject to a master netting arrangement or another similar agreement.


33



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

Statement of Operations

 

Derivatives

 

Location

  Realized
Gain (Loss)
  Change in
Unrealized
Appreciation
(Depreciation)
 

Foreign Exchange Risk:

 
Forward foreign
currency exchange
contracts
 

Net Realized and Unrealized Gain (Loss)

 

$

2,364,136

   

$

111,689

   
Written option
contracts
 

Net Realized and Unrealized Gain (Loss)

   

(383,275

)

   

   

Equity Risk:

 
Written option
contracts
 

Net Realized and Unrealized Gain (Loss)

   

72,629

     

(53,261

)

 

Note 5. Income Tax Information

The tax character of dividends and distributions paid was as follows:

  For the Year Ended
December 31,
 

 

2016

 

2015

 

Ordinary income

 

$

46,173,805

   

$

70,488,885

   

Long-term capital gain

   

24,320,098

     

   

Total dividends and distributions

 

$

70,493,903

   

$

70,488,885

   

As of December 31, 2016, the tax-basis components of accumulated earnings, the federal tax cost and net unrealized appreciation (depreciation) in value of securities held were as follows:

Cost for federal income tax purposes

 

$

1,133,977,152

   

Gross unrealized appreciation

 

$

229,097,153

   
Gross unrealized depreciation    

(9,082,192

)

 

Net unrealized appreciation (depreciation)

 

$

220,014,961

   

Undistributed long-term capital gains

 

$

9,176,139

   

During the year ended December 31, 2016, the Fund utilized net capital loss carryforwards of $11,879,480.

As of December 31, 2016, the Fund had temporary book/tax differences primarily attributable to wash sales on portfolio securities and certain fixed income securities and permanent book/tax differences primarily attributable to certain fixed income securities and foreign currency transactions.


34



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

To reflect reclassifications arising from the permanent differences, paid-in capital was credited $1,165,723, accumulated undistributed net realized gain was credited $646,864 and accumulated undistributed net investment income was charged $1,812,587. Net assets were not affected by this reclassification.

Note 6. Capital Stock

The Fund is authorized to issue 100 million shares of common stock at a par value of $0.001 per share.

During the years ended December 31, 2016 and December 31, 2015, the Fund did not issue shares of common stock for the reinvestment of dividends.

On December 6, 2016, the Board of Directors approved the continuation of the delegation of its authority to management to effect repurchases, pursuant to management's discretion and subject to market conditions and investment considerations, of up to 10% of the Fund's common shares outstanding (Shares Repurchase Program) from January 1, 2017, through the fiscal year ended December 31, 2017.

During the year ended December 31, 2016, the Fund did not effect any repurchases. During the year ended December 31, 2015, the Fund repurchased 203,031 Treasury shares of its common stock at an average price of $18.84 per share (including brokerage commissions) at a weighted average discount of 13.8%. These repurchases, which had a total cost of $3,824,582, resulted in an increase of $0.01 to the Fund's net asset value per share.

Note 7. Borrowings

The Fund has entered into an amended and restated credit agreement (the credit agreement) with BNP Paribas Prime Brokerage International, Ltd. (BNPP) in which the Fund pays a monthly financing charge based on a combination of LIBOR-based variable and fixed rates. The commitment amount of the credit agreement is $350,000,000. The Fund also pays a fee of 0.55% per annum on the unused portion of the credit agreement. BNPP may not change certain terms of the credit agreement except upon 360 days' notice. Also, if the Fund violates certain conditions, the credit agreement may be terminated. The Fund is required to pledge portfolio securities as collateral in an amount up to two times the loan balance outstanding (or more depending on the terms of the credit agreement) and has granted a security interest in the securities pledged to, and in favor of, BNPP as security for the loan balance outstanding. If the Fund fails to meet certain requirements, or maintain other financial covenants required under the credit agreement, the Fund may be required to repay immediately, in part or in full, the loan balance outstanding under the credit agreement, necessitating the sale of portfolio securities at potentially inopportune times. The Fund may, upon prior written notice to BNPP, prepay all or a portion of the fixed and variable rate portions of the credit facility. The Fund may have to pay a breakage fee with respect to a prepayment of all or a portion of the fixed rate financing under the credit facility. The credit agreement also permits, subject to certain conditions, BNPP to rehypothecate portfolio securities pledged by the Fund up to the amount of the loan balance outstanding. The Fund continues to receive


35



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

dividends and interest on rehypothecated securities. The Fund also has the right under the credit agreement to recall the rehypothecated securities from BNPP on demand. If BNPP fails to deliver the recalled security in a timely manner, the Fund will be compensated by BNPP for any fees or losses related to the failed delivery or, in the event a recalled security will not be returned by BNPP, the Fund, upon notice to BNPP, may reduce the loan balance outstanding by the amount of the recalled security failed to be returned. The Fund will receive a portion of the fees earned by BNPP in connection with the rehypothecation of portfolio securities.

On February 24, 2015, the Fund entered into an amendment to the credit agreement in order to extend the term length of the 5-year, 6-year and 7-year fixed rate tranches of the credit agreement by three years to 2020, 2021 and 2022, respectively. The new rates will increase and become effective upon maturity date of the current fixed rate tranches. In connection with the extension, the Fund paid an arrangement fee based on the aggregate fixed rate financing amount.

As of December 31, 2016, the Fund had outstanding borrowings of $350,000,000 at a weighted average rate of 1.9%. During the year ended December 31, 2016, the Fund borrowed an average daily balance of $350,000,000 at a weighted average borrowing cost of 1.9%. As of December 31, 2016, the aggregate value of rehypothecated securities, which are reflected as part of investments in securities on the Statement of Assets and Liabilities, was $321,823,199. The value of the outstanding borrowings under the credit agreement exceeded the value of the rehypothecated securities at December 31, 2016. During the year ended December 31, 2016, the Fund earned $73,895 in fees from rehypothecated securities.

Note 8. Other Risks

Common Stock Risk: While common stocks have historically generated higher average returns than fixed income securities over the long-term, common stock has also experienced significantly more volatility in those returns, although under certain market conditions, fixed-income investments may have comparable or greater price volatility. An adverse event, such as an unfavorable earnings report, may depress the value of common stock held by the Fund. Also, the price of common stock is sensitive to general movements in the stock market. A drop in the stock market may depress the price of common stock held by the Fund.

Real Estate Market Risk: Since the Fund concentrates its assets in companies engaged in the real estate industry, an investment in the Fund will be closely linked to the performance of the real estate markets. Risks of investing in real estate securities include falling property values due to increasing vacancies, declining rents resulting from economic, legal, tax, political or technological developments, lack of liquidity, limited diversification, and sensitivity to certain economic factors such as interest-rate changes and market recessions. Real estate company prices also may drop because of the failure of borrowers to pay their loans and poor management, and residential developers, in particular, could be negatively impacted by falling home prices, slower mortgage origination and rising construction costs. The risks of investing in REITs are similar to those associated with direct investments in real estate securities.


36



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

REIT Risk: In addition to the risks of securities linked to the real estate industry, REITs are subject to certain other risks related to their structure and focus. REITs are dependent upon management skills and generally may not be diversified. REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidation. In addition, REITs could possibly fail to (i) qualify for pass-through of income under applicable tax law, or (ii) maintain their exemptions from registration under the 1940 Act. The above factors may also adversely affect a borrower's or a lessee's ability to meet its obligations to the REIT. In the event of a default by a borrower or lessee, the REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting its investments.

Small- and Medium-Sized Companies Risk: Real estate companies in the industry tend to be small- to medium-sized companies in relation to the equity markets as a whole. There may be less trading in a smaller company's stock, which means that buy and sell transactions in that stock could have a larger impact on the stock's price than is the case with larger company stocks. Smaller companies also may have fewer lines of business so that changes in any one line of business may have a greater impact on a smaller company's stock price than is the case for a larger company. Further, smaller company stocks may perform differently in different cycles than larger company stocks. Accordingly, real estate company shares can, and at times will, perform differently than large company stocks.

Preferred Securities Risk: Preferred securities are subject to credit risk, which is the risk that a security will decline in price, or the issuer of the security will fail to make dividend, interest or principal payments when due, because the issuer experiences a decline in its financial status. Preferred securities are also subject to interest rate risk and may decline in value because of changes in market interest rates. The Fund may be subject to a greater risk of rising interest rates than would normally be the case in an environment of low interest rates and the effect of potential government fiscal policy initiatives and resulting market reaction to those initiatives. In addition, an issuer may be permitted to defer or omit distributions. Preferred securities are also generally subordinated to bonds and other debt instruments in a company's capital structure. During periods of declining interest rates, an issuer may be able to exercise an option to redeem (call) its issue at par earlier than scheduled, and the Fund may be forced to reinvest in lower yielding securities. Certain preferred securities may be substantially less liquid than many other securities, such as common stocks. Generally, preferred security holders have no voting rights with respect to the issuing company unless certain events occur. Certain preferred securities may give the issuers special redemption rights allowing the securities to be redeemed prior to a specified date if certain events occur, such as changes to tax or securities laws.

Credit and Below-Investment-Grade Securities Risk: Preferred securities may be rated below investment grade or may be unrated. Below-investment-grade securities, or equivalent unrated securities, which are commonly known as "high-yield bonds" or "junk bonds," generally involve greater volatility of price and risk of loss of income and principal, and may be more susceptible to real or perceived adverse economic and competitive industry conditions than higher grade securities. It is reasonable to expect that any adverse economic conditions could disrupt the market for lower-rated securities, have an adverse impact on the value of those securities and adversely affect the ability of the issuers of those securities to repay principal and interest on those securities.


37



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

Liquidity Risk: Liquidity risk is the risk that particular investments of the Fund may become difficult to sell or purchase. The market for certain investments may become less liquid or illiquid due to adverse changes in the conditions of a particular issuer or due to adverse market or economic conditions. In addition, dealer inventories of certain securities, which provide an indication of the ability of dealers to engage in "market making," are at, or near, historic lows in relation to market size, which has the potential to increase price volatility in the fixed income markets in which the Fund invests. Federal banking regulations may also cause certain dealers to reduce their inventories of certain securities, which may further decrease the Fund's ability to buy or sell such securities. As a result of this decreased liquidity, the Fund may have to accept a lower price to sell a security, sell other securities to raise cash, or give up an investment opportunity, any of which could have a negative effect on performance. Further, transactions in less liquid or illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities.

Foreign (Non-U.S.) Securities Risk: Risks of investing in foreign securities, include currency risks, future political and economic developments and possible imposition of foreign withholding taxes on income or proceeds payable on the securities. In addition, there may be less publicly available information about a foreign issuer than about a domestic issuer, and foreign issuers may not be subject to the same accounting, auditing and financial recordkeeping standards and requirements as domestic issuers.

Investing in securities of companies in emerging markets may entail special risks relating to potential economic, political or social instability and the risks of expropriation, nationalization, confiscation, trade sanctions or embargoes or the imposition of restrictions on foreign investment, the lack of hedging instruments, and repatriation of capital invested. The securities and real estate markets of some emerging market countries have in the past experienced substantial market disruptions and may do so in the future.

Foreign Currency Risk: Although the Fund will report its NAV and pay dividends in U.S. dollars, foreign securities often are purchased with and make any dividend and interest payments in foreign currencies. Therefore, the Fund's investments in foreign securities will be subject to foreign currency risk, which means that the Fund's NAV could decline solely as a result of changes in the exchange rates between foreign currencies and the U.S. dollar. Certain foreign countries may impose restrictions on the ability of issuers of foreign securities to make payment of principal, dividends and interest to investors located outside the country, due to blockage of foreign currency exchanges or otherwise. The Fund may, but is not required to, engage in various investments that are designed to hedge the Fund's foreign currency risks, and such investments are subject to the risks described under "Derivatives and Hedging Transactions Risk" below.

Leverage Risk: The use of leverage is a speculative technique and there are special risks and costs associated with leverage. The net asset value of the Fund's shares may be reduced by the issuance and ongoing costs of leverage. So long as the Fund is able to invest in securities that produce an investment yield that is greater than the total cost of leverage, the leverage strategy will produce higher current net investment income for the shareholders. On the other hand, to the extent that the total cost of leverage exceeds the incremental income gained from employing such leverage, shareholders would realize lower net investment income. In addition to the impact on net income, the use of leverage will


38



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

have an effect of magnifying capital appreciation or depreciation for shareholders. Specifically, in an up market, leverage will typically generate greater capital appreciation than if the Fund were not employing leverage. Conversely, in down markets, the use of leverage will generally result in greater capital depreciation than if the Fund had been unlevered. To the extent that the Fund is required or elects to reduce its leverage, the Fund may need to liquidate investments, including under adverse economic conditions which may result in capital losses potentially reducing returns to shareholders. There can be no assurance that a leveraging strategy will be successful during any period in which it is employed.

Derivatives and Hedging Transactions Risk: The Fund's use of derivatives, including for the purpose of hedging interest rate or foreign currency risks, presents risks different from, and possibly greater than, the risks associated with investing directly in traditional securities. Among the risks presented are counterparty risk, financial leverage risk, liquidity risk, over-the-counter (OTC) trading risk and tracking risk. The use of derivatives can lead to losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivatives.

Options Risk: Gains on options transactions depend on the investment manager's ability to predict correctly the direction of stock prices, indexes, interest rates, and other economic factors, and unanticipated changes may cause poorer overall performance for the Fund than if it had not engaged in such transactions. A rise in the value of the security or index underlying a call option written by the Fund exposes the Fund to possible loss or loss of opportunity to realize appreciation in the value of any portfolio securities underlying or otherwise related to the call option. By writing a put option, the Fund assumes the risk of a decline in the underlying security or index. There can be no assurance that a liquid market will exist when the Fund seeks to close out an option position, and for certain options not traded on an exchange no market usually exists. Trading could be interrupted, for example, because of supply and demand imbalances arising from a lack of either buyers or sellers, or an options exchange could suspend trading after the price has risen or fallen more than the maximum specified by the exchange.

Although the Fund may be able to offset to some extent any adverse effects of being unable to liquidate an option position, that Fund may experience losses in some cases as a result of such inability, may not be able to close its position and, in such an event would be unable to control its losses.

Regulatory Risk: The U.S. government has proposed and adopted multiple regulations that could have a long-lasting impact on the Fund and on the mutual fund industry in general. The U.S. Securities and Exchange Commission's (SEC) proposed rules governing the use of derivatives by registered investment companies, the Department of Labor's (DOL) final rule on conflicts of interest on fiduciary investment advice, as well as the SEC's final rules and amendments to modernize the reporting and disclosure (Modernization) could, among other things, restrict and/or increase the cost of the Fund's ability to engage in transactions and/or increase overall expenses of the Fund. In addition, Congress, various exchanges and regulatory and self-regulatory authorities domestic and foreign have undertaken reviews of options and futures trading in light of market volatility. Among the actions that have been taken or proposed to be taken are new limits and reporting requirements for speculative positions, new or more stringent daily price fluctuation limits for futures and options transactions, and increased margin requirements for various types of futures transactions. While the full extent of all of these regulations is still unclear, these regulations and actions may adversely affect the instruments in which the Fund invests and its ability to execute its investment strategy.


39



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

Note 9. Other

In the normal course of business, the Fund enters into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is dependent on claims that may be made against the Fund in the future and, therefore, cannot be estimated; however, based on experience, the risk of material loss from such claims is considered remote.

Note 10. New Accounting Guidance

In August 2016, the Financial Accounting Standards Board (FASB) issued a new Accounting Standards Update No. 2016-15, "Statement of Cash Flows (Topic 230), a consensus of the FASB's Emerging Issues Task Force" (ASU 2016-15). ASU 2016-15 is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The issues addressed in ASU 2016-15 are: debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, distributions received from equity method investments, beneficial interests in securitization transactions; and, separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for interim and annual reporting periods beginning after December 15, 2017.

In November 2016, the FASB issued a new Accounting Standards Update No. 2016-18, "Statement of Cash Flows (Topic 230), Restricted Cash, a consensus of the FASB's Emerging Issues Task Force" (ASU 2016-18). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in ASU 2016-18 do not provide a definition of restricted cash or restricted cash equivalents. ASU 2016-18 is effective for interim and annual reporting periods beginning after December 15, 2017.

In October 2016, the SEC issued a new rule, Investment Company Reporting Modernization, which, among other provisions, amends Regulation S-X to require standardized, enhanced disclosures, particularly related to derivatives, in investment company financial statements. Compliance with the rule is effective for financial statements filed with the SEC on or after August 1, 2017.

Management is currently evaluating the impact the adoption of this guidance will have on the Fund's financial statements and does not expect any impact to the Fund's net assets or results of operations.

Note 11. Subsequent Events

Management has evaluated events and transactions occurring after December 31, 2016 through the date that the financial statements were issued, and has determined that no additional disclosure in the financial statements is required.


40




COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of the
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, of changes in net assets and of cash flows and the financial highlights present fairly, in all material respects, the financial position of the Cohen & Steers REIT and Preferred Income Fund, Inc. (the "Fund") as of December 31, 2016, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
New York, New York
February 27, 2017


41



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

AVERAGE ANNUAL TOTAL RETURNS

(Periods ended December 31, 2016) (Unaudited)

Based on Net Asset Value

 

Based on Market Value

 
One Year  

Five Years

 

Ten Years

  Since Inception
(6/27/03)
 

One Year

 

Five Years

 

Ten Years

  Since Inception
(6/27/03)
 
  8.43

%

   

15.43

%

   

6.16

%

   

9.85

%

   

11.79

%

   

14.32

%

   

5.14

%

   

8.44

%

 

The performance data quoted represent past performance. Past performance is no guarantee of future results. The investment return will vary and the principal value of an investment will fluctuate and shares, if sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Performance results reflect the effect of leverage from utilization of borrowings under a credit agreement and/or from the issuance of preferred shares. Current total returns of the Fund can be obtained by visiting our website at cohenandsteers.com. The Fund's returns assume the reinvestment of all dividends and distributions at prices obtained under the Fund's dividend reinvestment plan.

TAX INFORMATION—2016 (Unaudited)

Pursuant to the Jobs and Growth Relief Reconciliation Act of 2003, the Fund designates qualified dividend income of $28,811,299. Additionally, 35.39% of the ordinary dividends qualified for the dividends received deduction available to corporations. Also, the Fund designates a long-term capital gain distribution of $24,320,098 at the 20% maximum rate.

REINVESTMENT PLAN

The Fund has a dividend reinvestment plan commonly referred to as an "opt-out" plan (the Plan). Each common shareholder who participates in the Plan will have all distributions of dividends and capital gains (Dividends) automatically reinvested in additional common shares by Computershare as agent (the Plan Agent). Shareholders who elect not to participate in the Plan will receive all Dividends in cash paid by check mailed directly to the shareholder of record (or if the shares are held in street or other nominee name, then to the nominee) by the Plan Agent, as dividend disbursing agent. Shareholders whose common shares are held in the name of a broker or nominee should contact the broker or nominee to determine whether and how they may participate in the Plan.

The Plan Agent serves as agent for the shareholders in administering the Plan. After the Fund declares a Dividend, the Plan Agent will, as agent for the shareholders, either: (i) receive the cash payment and use it to buy common shares in the open market, on the NYSE or elsewhere, for the participants' accounts or (ii) distribute newly issued common shares of the Fund on behalf of the participants.

The Plan Agent will receive cash from the Fund with which to buy common shares in the open market if, on the Dividend payment date, the net asset value (NAV) per share exceeds the market price per share plus estimated brokerage commissions on that date. The Plan Agent will receive the Dividend in newly issued common shares of the Fund if, on the Dividend payment date, the market price per share plus estimated brokerage commissions equals or exceeds the NAV per share of the Fund on that date. The number of shares to be issued will be computed at a per share rate equal to the greater of (i) the NAV or (ii) 95% of the closing market price per share on the payment date.


42



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

If the market price per share is less than the NAV on a Dividend payment date, the Plan Agent will have until the last business day before the next ex-dividend date for the common stock, but in no event more than 30 days after the Dividend payment date (as the case may be, the Purchase Period), to invest the Dividend amount in shares acquired in open market purchases. If at the close of business on any day during the Purchase Period on which NAV is calculated the NAV equals or is less than the market price per share plus estimated brokerage commissions, the Plan Agent will cease making open market purchases and the uninvested portion of such Dividends shall be filled through the issuance of new shares of common stock from the Fund at the price set forth in the immediately preceding paragraph.

Participants in the Plan may withdraw from the Plan upon notice to the Plan Agent. Such withdrawal will be effective immediately if received not less than ten days prior to a Dividend record date; otherwise, it will be effective for all subsequent Dividends. If any participant elects to have the Plan Agent sell all or part of his or her shares and remit the proceeds, the Plan Agent is authorized to deduct a $15.00 fee plus $0.10 per share brokerage commissions.

The Plan Agent's fees for the handling of reinvestment of Dividends will be paid by the Fund. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of Dividends. The automatic reinvestment of Dividends will not relieve participants of any income tax that may be payable or required to be withheld on such Dividends.

The Fund reserves the right to amend or terminate the Plan. All correspondence concerning the Plan should be directed to the Plan Agent at 800-432-8224.

OTHER INFORMATION

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available (i) without charge, upon request, by calling 800-330-7348, (ii) on our website at cohenandsteers.com or (iii) on the Securities and Exchange Commission's (the SEC) website at http://www.sec.gov. In addition, the Fund's proxy voting record for the most recent 12-month period ended June 30 is available by August 31 of each year (i) without charge, upon request, by calling 800-330-7348 or (ii) on the SEC's website at http://www.sec.gov.

The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available (i) without charge, upon request, by calling 800-330-7348 or (ii) on the SEC's website at http://www.sec.gov. In addition, the Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.

Please note that distributions paid by the Fund to shareholders are subject to recharacterization for tax purposes and are taxable up to the amount of the Fund's investment company taxable income and net realized gains. Distributions in excess of the Fund's investment company taxable income and net realized gains are a return of capital distributed from the Fund's assets. To the extent this occurs, the Fund's shareholders of record will be notified of the estimated amount of capital returned to shareholders for each such distribution and this information will also be available at cohenandsteers.com. The final tax treatment of all distributions is reported to shareholders on their 1099-DIV forms, which are mailed after the close of each calendar year. Distributions of capital decrease the Fund's total assets


43



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

and, therefore, could have the effect of increasing the Fund's expense ratio. In addition, in order to make these distributions, the Fund may have to sell portfolio securities at a less than opportune time.

Notice is hereby given in accordance with Rule 23c-1 under the 1940 Act that the Fund may purchase, from time to time, shares of its common stock in the open market.


44




COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

MANAGEMENT OF THE FUND

The business and affairs of the Fund are managed under the direction of the Board of Directors. The Board of Directors approves all significant agreements between the Fund and persons or companies furnishing services to it, including the Fund's agreements with its investment manager, administrator, co-administrator, custodian and transfer agent. The management of the Fund's day-to-day operations is delegated to its officers, the investment manager, administrator and co-administrator, subject always to the investment objective and policies of the Fund and to the general supervision of the Board of Directors.

The Board of Directors and officers of the Fund and their principal occupations during at least the past five years are set forth below. The statement of additional information (SAI) includes additional information about fund directors and is available, without charge, upon request by calling 800-330-7348.

Name, Address and
Year of Birth1
  Position(s) Held
With Fund
  Term of
Office2
  Principal Occupation
During At Least
The Past 5 Years
(Including Other
Directorships Held)
  Number of
Funds Within
Fund
Complex
Overseen by
Director
(Including
the Fund)
  Length
of Time
Served3
 

Interested Directors4

                     
Robert H. Steers
1953
 

Director, Chairman

 

Until Next Election of Directors

 

Chief Executive Officer of Cohen & Steers Capital Management, Inc. (CSCM) and its parent, Cohen & Steers, Inc. (CNS) since 2014. Prior to that, Co-Chairman and Co-Chief Executive Officer of CSCM since 2003 and CNS since 2004. Prior to that, Chairman of CSCM; Vice President of Cohen & Steers Securities, LLC.

 

22

 

Since 1991

 
Joseph M. Harvey
1963
 

Director

 

Until Next Election of Directors

 

President and Chief Investment Officer of CSCM (since 2003) and President of CNS (since 2004). Prior to that, Senior Vice President and Director of Investment Research of CSCM.

 

22

 

Since 2014

 

  (table continued on next page)


45



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

(table continued from previous page)

Name, Address and
Year of Birth1
  Position(s) Held
With Fund
  Term of
Office2
  Principal Occupation
During At Least
The Past 5 Years
(Including Other
Directorships Held)
  Number of
Funds Within
Fund
Complex
Overseen by
Director
(Including
the Fund)
  Length
of Time
Served3
 

Disinterested Directors

                     
Michael G. Clark
1965
 

Director

 

Until Next Election of Directors

 

From 2006 to 2011, President and Chief Executive Officer of DWS Funds and Managing Director of Deutsche Asset Management.

 

22

 

Since 2011

 
Bonnie Cohen
1942
 

Director

 

Until Next Election of Directors

 

Consultant. Board Member, DC Public Library Foundation since 2012, President since 2014; Board member, Telluride Mountain Film Festival since 2010; Trustee, H. Rubenstein Foundation since 1996; Trustee, District of Columbia Public Libraries from 2004 to 2014.

 

22

 

Since 2001

 
George Grossman
1953
 

Director

 

Until Next Election of Directors

 

Attorney-at-law.

 

22

 

Since 1993

 

  (table continued on next page)


46



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

(table continued from previous page)

Name, Address and
Year of Birth1
  Position(s) Held
With Fund
  Term of
Office2
  Principal Occupation
During At Least
The Past 5 Years
(Including Other
Directorships Held)
  Number of
Funds Within
Fund
Complex
Overseen by
Director
(Including
the Fund)
  Length
of Time
Served3
 
Dean Junkans
1959
 

Director

 

Until Next Election of Directors

 

C.F.A.; Adjunct Professor and Executive-In-Residence, Bethel University since 2015; Chief Investment Officer at Wells Fargo Private Bank from 2004 to 2014 and Chief Investment Officer of the Wealth, Brokerage and Retirement group at Wells Fargo & Company from 2011 to 2014; Former member and Chair, Claritas Advisory Committee at the CFA Institute from 2013 to 2015; Board Member and Investment Committee member, Bethel University Foundation since 2010; Formerly, Corporate Executive Board Member of the National Chief Investment Officers Circle, 2010 to 2015; Formerly, Member of the Board of Governors of the University of Wisconsin Foundation, River Falls, 1996 to 2004; U.S. Army Veteran, Gulf War.

 

22

 

Since 2015

 
Richard E. Kroon
1942
 

Director

 

Until Next Election of Directors

 

Former member of Investment Committee, Monmouth University since 2004 to 2016; Former Director, Retired Chairman and Managing Partner of Sprout Group venture capital funds, then an affiliate of Donaldson, Lufkin and Jenrette Securities Corporation from 1981 to 2001. Formerly, Director of the National Venture Capital Association from 1997 to 2000, and Chairman for the year 2000.

 

22

 

Since 2004

 

  (table continued on next page)


47



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

(table continued from previous page)

Name, Address and
Year of Birth1
  Position(s) Held
With Fund
  Term of
Office2
  Principal Occupation
During At Least
The Past 5 Years
(Including Other
Directorships Held)
  Number of
Funds Within
Fund
Complex
Overseen by
Director
(Including
the Fund)
  Length
of Time
Served3
 
Gerald J. Maginnis
1955
 

Director

 

Until Next Election of Directors

 

Philadelphia Office Managing Partner, KPMG LLP from 2006 to 2015; Partner in Charge, KPMG Pennsylvania Audit Practice from 2002 to 2008; President, Pennsylvania Institute of Certified Public Accountants (PICPA) from 2014 to 2015; member, PICPA Board of Directors from June 2012 to June 2016; member, Council of the American Institute of Certified Public Accountants (AICPA); member, Board of Trustees of AICPA Foundation.

 

22

 

Since 2015

 
Jane F. Magpiong
1960
 

Director

 

Until Next Election of Directors

 

President, Untap Potential since 2013; Board Member, Crespi High School since 2014; Senior Managing Director, TIAA-CREF, from 2011 to 2013; National Head of Wealth Management, TIAA-CREF, from 2008 to 2011; and prior to that, President, Bank of America Private Bank from 2005 to 2008.

 

22

 

Since 2015

 
Richard J. Norman
1943
 

Director

 

Until Next Election of Directors

 

Private Investor. Member, Montgomery County, Maryland Department of Corrections Volunteer Corps. since 2010; Liaison for Business Leadership, Salvation Army World Service Organization (SAWSO) since 2010; Advisory Board Member, The Salvation Army since 1985; Prior thereto, Investment Representative of Morgan Stanley Dean Witter from 1966 to 2000.

 

22

 

Since 2001

 

  (table continued on next page)


48



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

(table continued from previous page)

Name, Address and
Year of Birth1
  Position(s) Held
With Fund
  Term of
Office2
  Principal Occupation
During At Least
The Past 5 Years
(Including Other
Directorships Held)
  Number of
Funds Within
Fund
Complex
Overseen by
Director
(Including
the Fund)
  Length
of Time
Served3
 
Frank K. Ross
1943
 

Director

 

Until Next Election of Directors

 

Visiting Professor of Accounting and Director of the Center for Accounting Education at Howard University School of Business since 2004; Board member and member of Audit Committee (Chairman from 2007 to 2012) and Human Resources and Compensation Committee Member, Pepco Holdings, Inc. (electric utility) from 2004 to 2014; Formerly, Mid-Atlantic Area Managing Partner for Assurance Services at KPMG LLP and Managing Partner of its Washington, DC offices from 1995 to 2003.

 

22

 

Since 2004

 
C. Edward Ward, Jr.
1946
 

Director

 

Until Next Election of Directors

 

Member of The Board of Trustees of Manhattan College, Riverdale, New York from 2004 to 2014. Formerly, Director of closed-end fund management for the New York Stock Exchange (the NYSE) where he worked from 1979 to 2004.

 

22

 

Since 2004

 

1  The address for each director is 280 Park Avenue, New York, NY 10017.

2  On March 12, 2008, the Board of Directors adopted a mandatory retirement policy stating a Director must retire from the Board on December 31st of the year in which he or she turns 75 years of age.

3  The length of time served represents the year in which the Director was first elected or appointed to any fund in the Cohen & Steers fund complex.

4  "Interested person", as defined in the 1940 Act, of the Fund because of affiliation with CSCM (Interested Directors).


49



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

The officers of the Fund (other than Messrs. Steers and Harvey, whose biographies are provided above), their address, their year of birth and their principal occupations for at least the past five years are set forth below.

Name, Address and
Year of Birth1
  Position(s) Held
With Fund
 

Principal Occupation During At Least the Past 5 Years

  Length
of Time
Served2
 
Adam M. Derechin
1964
 

President and Chief Executive Officer

 

Chief Operating Officer of CSCM since 2003 and CNS since 2004.

 

Since 2005

 
William F. Scapell
1968
 

Vice President

 

Executive Vice President of CSCM since 2014. Prior to that, Senior Vice President of CSCM since 2003.

 

Since 2003

 
Thomas N. Bohjalian
1965
 

Vice President

 

Executive Vice President of CSCM since 2012. Prior to that, Senior Vice President of the CSCM since 2006.

 

Since 2006

 
Yigal D. Jhirad
1964
 

Vice President

 

Senior Vice President of CSCM since 2007.

 

Since 2007

 
Tina M. Payne
1974
 

Secretary and Chief Legal Officer

 

Senior Vice President and Associate General Counsel of CSCM since 2010.

 

Since 2007

 
James Giallanza
1966
 

Chief Financial Officer

 

Executive Vice President of CSCM since 2014. Prior to that, Senior Vice President of CSCM since 2006.

 

Since 2006

 
Albert Laskaj
1977
 

Treasurer

 

Vice President of CSCM since 2015. Prior to that, Director of Legg Mason & Co. since 2013. Vice President of Legg Mason from 2008 to 2013 and Treasurer of certain mutual funds since 2010.

 

Since 2015

 
Lisa D. Phelan
1968
 

Chief Compliance Officer

 

Executive Vice President of CSCM since 2015. Prior to that, Senior Vice President of CSCM since 2008. Chief Compliance Officer of CSCM, the Cohen & Steers funds, Cohen & Steers Asia Limited and CSSL since 2007, 2006, 2005 and 2004, respectively.

 

Since 2006

 

1  The address of each officer is 280 Park Avenue, New York, NY 10017.

2  Officers serve one-year terms. The length of time served represents the year in which the officer was first elected as an officer of any fund in the Cohen & Steers fund complex. All of the officers listed above are officers of one or more of the other funds in the complex.


50




COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

Cohen & Steers Privacy Policy

Facts

 

What Does Cohen & Steers Do With Your Personal Information?

 

Why?

 

Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.

 

What?

  The types of personal information we collect and share depend on the product or service you have with us. This information can include:
• Social Security number and account balances
• Transaction history and account transactions
• Purchase history and wire transfer instructions
 

How?

 

All financial companies need to share customers' personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers' personal information; the reasons Cohen & Steers chooses to share; and whether you can limit this sharing.

 

 

Reasons we can share your personal information

  Does Cohen & Steers
share?
  Can you limit this
sharing?
 
For our everyday business purposes—
such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or reports to credit bureaus
 

Yes

 

No

 
For our marketing purposes—
to offer our products and services to you
 

Yes

 

No

 

For joint marketing with other financial companies—

 

No

 

We don't share

 
For our affiliates' everyday business purposes—
information about your transactions and experiences
 

No

 

We don't share

 
For our affiliates' everyday business purposes—
information about your creditworthiness
 

No

 

We don't share

 

For our affiliates to market to you—

 

No

 

We don't share

 

For non-affiliates to market to you—

 

No

 

We don't share

 

Questions?  Call 800.330.7348


51



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

Cohen & Steers Privacy Policy—(Continued)

Who we are

     

Who is providing this notice?

 

Cohen & Steers Capital Management, Inc., Cohen & Steers Asia Limited, Cohen & Steers Japan, LLC, Cohen & Steers UK Limited, Cohen & Steers Securities, LLC, Cohen & Steers Private Funds and Cohen & Steers Open and Closed-End Funds (collectively, Cohen & Steers).

 

What we do

     

How does Cohen & Steers protect my personal information?

 

To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings. We restrict access to your information to those employees who need it to perform their jobs, and also require companies that provide services on our behalf to protect your information.

 

How does Cohen & Steers collect my personal information?

  We collect your personal information, for example, when you:
• Open an account or buy securities from us
• Provide account information or give us your contact information
• Make deposits or withdrawals from your account
We also collect your personal information from other companies.
 

Why can't I limit all sharing?

  Federal law gives you the right to limit only:
• sharing for affiliates' everyday business purposes—information about your creditworthiness
• affiliates from using your information to market to you
• sharing for non-affiliates to market to you
State law and individual companies may give you additional rights to limit sharing.
 

Definitions

     

Affiliates

  Companies related by common ownership or control. They can be financial and nonfinancial companies.
• Cohen & Steers does not share with affiliates.
 

Non-affiliates

  Companies not related by common ownership or control. They can be financial and nonfinancial companies.
• Cohen & Steers does not share with non-affiliates.
 

Joint marketing

  A formal agreement between non-affiliated financial companies that together market financial products or services to you.
• Cohen & Steers does not jointly market.
 


52



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

Cohen & Steers Investment Solutions

COHEN & STEERS REAL ASSETS FUND

  •  Designed for investors seeking total return and the maximization of real returns during inflationary environments by investing primarily in real assets

  •  Symbols: RAPAX, RAPCX, RAPIX, RAPRX, RAPZX

COHEN & STEERS
INSTITUTIONAL GLOBAL REALTY SHARES

  •  Designed for institutional investors seeking total return, investing primarily in global real estate securities

  •  Symbol: GRSIX

COHEN & STEERS GLOBAL REALTY SHARES

  •  Designed for investors seeking total return, investing primarily in global real estate equity securities

  •  Symbols: CSFAX, CSFCX, CSSPX, GRSRX, CSFZX

COHEN & STEERS REALTY SHARES

  •  Designed for investors seeking total return, investing primarily in U.S. real estate securities

  •  Symbol: CSRSX

COHEN & STEERS REAL ESTATE SECURITIES FUND

  •  Designed for investors seeking total return, investing primarily in U.S. real estate securities

  •  Symbols: CSEIX, CSCIX, CSDIX, CIRRX, CSZIX

COHEN & STEERS INSTITUTIONAL REALTY SHARES

  •  Designed for institutional investors seeking total return, investing primarily in U.S. real estate securities

  •  Symbol: CSRIX

COHEN & STEERS INTERNATIONAL REALTY FUND

  •  Designed for investors seeking total return, investing primarily in international (non-U.S.) real estate securities

  •  Symbols: IRFAX, IRFCX, IRFIX, IRFRX, IRFZX

COHEN & STEERS
ACTIVE COMMODITIES STRATEGY FUND

  •  Designed for investors seeking total return, investing primarily in a diversified portfolio of exchange-traded commodity future contracts and other commodity-related derivative instruments

  •  Symbols: CDFAX, CDFCX, CDFIX, CDFRX, CDFZX

COHEN & STEERS GLOBAL INFRASTRUCTURE FUND

  •  Designed for investors seeking total return, investing primarily in global infrastructure securities

  •  Symbols: CSUAX, CSUCX, CSUIX, CSURX, CSUZX

COHEN & STEERS
MLP & ENERGY OPPORTUNITY FUND

  •  Designed for investors seeking total return, investing primarily in midstream energy master limited partnership (MLP) units and related stocks

  •  Symbols: MLOAX, MLOCX, MLOIX, MLORX, MLOZX

COHEN & STEERS
LOW DURATION PREFERRED AND INCOME FUND

  •  Designed for investors seeking high current income and capital preservation by investing in low-duration preferred and other income securities issued by U.S. and non-U.S. companies

  •  Symbols: LPXAX, LPXCX, LPXIX, LPXRX, LPXZX

COHEN & STEERS
PREFERRED SECURITIES AND INCOME FUND

  •  Designed for investors seeking total return (high current income and capital appreciation), investing primarily in preferred and debt securities issued by U.S. and non-U.S. companies

  •  Symbols: CPXAX, CPXCX, CPXIX, CPRRX, CPXZX

COHEN & STEERS DIVIDEND VALUE FUND

  •  Designed for investors seeking long-term growth of income and capital appreciation, investing primarily in dividend paying common stocks and preferred stocks

  •  Symbols: DVFAX, DVFCX, DVFIX, DVFRX, DVFZX

Distributed by Cohen & Steers Securities, LLC.

COHEN & STEERS GLOBAL REALTY MAJORS ETF

  •  Designed for investors who seek a relatively low-cost passive approach for investing in a portfolio of global real estate equity securities of companies in a specified index

  •  Symbol: GRI

Distributed by ALPS Distributors, Inc.

ISHARES COHEN & STEERS
REALTY MAJORS INDEX FUND

  •  Designed for investors who seek a relatively low-cost passive approach for investing in a portfolio of U.S. real estate equity securities of companies in a specified index

  •  Symbol: ICF

Distributed by SEI Investments Distribution Co.

Please consider the investment objectives, risks, charges and expenses of the fund carefully before investing. A summary prospectus and prospectus containing this and other information can be obtained by calling 800-330-7348 or by visiting cohenandsteers.com. Please read the summary prospectus and prospectus carefully before investing.


53



COHEN & STEERS REIT AND PREFERRED INCOME FUND, INC.

OFFICERS AND DIRECTORS

Robert H. Steers
Director and Chairman

Joseph M. Harvey
Director and Vice President

Michael G. Clark
Director

Bonnie Cohen
Director

George Grossman
Director

Dean Junkans
Director

Richard E. Kroon
Director

Gerald J. Maginnis
Director

Jane F. Magpiong
Director

Richard J. Norman
Director

Frank K. Ross
Director

C. Edward Ward, Jr.
Director

Adam M. Derechin
President and Chief Executive Officer

William F. Scapell
Vice President

Thomas N. Bohjalian
Vice President

Yigal D. Jhirad
Vice President

Tina M. Payne
Secretary and Chief Legal Officer

James Giallanza
Chief Financial Officer

Albert Laskaj
Treasurer

Lisa D. Phelan
Chief Compliance Officer

KEY INFORMATION

Investment Manager

Cohen & Steers Capital Management, Inc.
280 Park Avenue
New York, NY 10017
(212) 832-3232

Co-administrator and Custodian

State Street Bank and Trust Company
One Lincoln Street
Boston, MA 02111

Transfer Agent

Computershare
480 Washington Boulevard
Jersey City, NJ 07310
(866) 227-0757

Legal Counsel

Ropes & Gray LLP
1211 Avenue of the Americas
New York, NY 10036

New York Stock Exchange Symbol: RNP

Website: cohenandsteers.com

This report is for shareholder information. This is not a prospectus intended for use in the purchase or sale of Fund shares. Performance data quoted represent past performance. Past performance is no guarantee of future results and your investment may be worth more or less at the time you sell your shares.


54




COHEN & STEERS

REIT AND PREFERRED INCOME FUND

280 PARK AVENUE

NEW YORK, NY 10017

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RNPAR

Annual Report December 31, 2016

Cohen & Steers REIT and Preferred Income Fund




 

Item 2. Code of Ethics.

 

The Registrant has adopted an Amended and Restated Code of Ethics that applies to its Principal Executive Officer and Principal Financial Officer.  The Code of Ethics was in effect during the reporting period.  The Registrant amended the Code of Ethics during the reporting period to expand on how covered officers should handle conflicts of interest.  The Registrant has not granted any waiver, including an implicit waiver, from a provision of the Code of Ethics as described in Form N-CSR during the reporting period.  A current copy of the Code of Ethics is available on the Registrant’s website at https://www.cohenandsteers.com/assets/content/uploads/Code_of_Ethics_for_Principal_Executive_and_Principal_Financial_ Officers_of_the_Funds.pdf.  Upon request, a copy of the Code of Ethics can be obtained free of charge by calling 800-330-7348 or writing to the Secretary of the Registrant, 280 Park Avenue, 10th floor, New York, NY 10017.

 

Item 3. Audit Committee Financial Expert.

 

The registrant’s board has determined that Michael G. Clark, Gerald J. Maginnis and Frank K. Ross, each a member of the board’s audit committee, are each an “audit committee financial expert”.  Mr. Clark, Mr. Maginnis and Mr. Ross are each “independent,” as such term is defined in Form N-CSR.

 

Item 4. Principal Accountant Fees and Services.

 

(a) – (d) Aggregate fees billed to the registrant for the last two fiscal years for professional services rendered by the registrant’s principal accountant were as follows:

 

 

 

2016

 

2015

 

Audit Fees

 

$

54,300

 

$

54,300

 

Audit-Related Fees

 

$

0

 

$

0

 

Tax Fees

 

$

6,600

 

$

6,600

 

All Other Fees

 

$

0

 

$

0

 

 

Tax fees were billed in connection with tax compliance services, including the preparation and review of federal and state tax returns and the computation of corporate and franchise tax amounts.

 

(e)(1)      The registrant’s audit committee is required to pre-approve audit and non-audit services performed for the registrant by the principal accountant. The audit committee also is required to pre-approve non-audit services performed by the registrant’s principal accountant for the registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor) and/or to any entity controlling, controlled by or under common control with the registrant’s investment advisor that provides ongoing services to the registrant, if the engagement for services relates directly to the operations and financial reporting of the registrant.

 



 

The audit committee may delegate pre-approval authority to one or more of its members who are independent members of the board of directors of the registrant. The member or members to whom such authority is delegated shall report any pre-approval decisions to the audit committee at its next scheduled meeting.  The audit committee may not delegate its responsibility to pre-approve services to be performed by the registrant’s principal accountant to the investment advisor.

 

(e)(2)      No services included in (b) — (d) above were approved by the audit committee pursuant to paragraphs (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

 

(f)            Not applicable.

 

(g)           For the fiscal years ended December 31, 2016 and December 31, 2015, the aggregate fees billed by the registrant’s principal accountant for non-audit services rendered to the registrant and for non-audit services rendered to the registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor) and/or to any entity controlling, controlled by or under common control with the registrant’s investment advisor that provides ongoing services to the registrant were:

 

 

 

2016

 

2015

 

Registrant

 

$

6,600

 

$

6,600

 

Investment Advisor

 

$

0

 

$

0

 

 

(h)           The registrant’s audit committee considered whether the provision of non-audit services that were rendered to the registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor) and/or to any entity controlling, controlled by or under common control with the registrant’s investment advisor that provides ongoing services to the registrant that were not required to be pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X was compatible with maintaining the principal accountant’s independence.

 

Item 5. Audit Committee of Listed Registrants.

 

The registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934.  The members of the committee are Frank K. Ross (chairman), Michael G. Clark, Bonnie Cohen, George Grossman and Gerald J. Maginnis.

 

Item 6. Schedule of Investments.

 

Included in Item 1 above.

 



 

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

 

The registrant has delegated voting of proxies in respect of portfolio holdings to Cohen & Steers Capital Management, Inc., in accordance with the policies and procedures set forth below.

 

COHEN & STEERS CAPITAL MANAGEMENT, INC.

STATEMENT OF POLICIES AND PROCEDURES REGARDING THE VOTING OF SECURITIES

 

This statement sets forth the policies and procedures that Cohen & Steers, Inc. and its affiliated advisors (“Cohen & Steers”, “we” or “us”) follow in exercising voting rights with respect to securities held in its client portfolios.  All proxy-voting rights that are exercised by Cohen & Steers shall be subject to this Statement of Policy and Procedures.

 

A.                                    General Proxy Voting Guidelines

 

Objectives

 

Voting rights are an important component of corporate governance.  Cohen & Steers has three overall objectives in exercising voting rights:

 

·                  Responsibility. Cohen & Steers 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.

 

·                  Rationalizing Management and Shareholder Concerns.  Cohen & Steers 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.

 

·                  Shareholder Communication.  Since companies are owned by their shareholders, Cohen & Steers 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.

 

General Principles

 

In exercising voting rights, Cohen & Steers shall conduct itself in accordance with the general principles set forth below.

 

·                  The ability to exercise a voting right with respect to a security is a valuable right and, therefore, must be viewed as part of the asset itself.

 



 

·                  In exercising voting rights, Cohen & Steers shall engage in a careful evaluation of issues that may materially affect the rights of shareholders and the value of the security.

 

·                  Consistent with general fiduciary principles, the exercise of voting rights shall always be conducted with reasonable care, prudence and diligence.

 

·                  In exercising voting rights on behalf of clients, Cohen & Steers shall conduct itself in the same manner as if Cohen & Steers were the constructive owner of the securities.

 

·                  To the extent reasonably possible, Cohen & Steers shall participate in each shareholder voting opportunity.

 

·                  Voting rights shall not automatically be exercised in favor of management-supported proposals.

 

·                  Cohen & Steers, and its officers and employees, shall never accept any item of value in consideration of a favorable proxy voting decision.

 

General Guidelines

 

Set forth below are general guidelines that Cohen & Steers shall follow in exercising proxy voting rights:

 

·                  Prudence.  In making a proxy voting decision, Cohen & Steers 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 Cohen & Steers may consider the views of third parties, Cohen & Steers 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, Cohen & Steers 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., Cohen & Steers may discount long-term views on a short-term holding).

 

Specific Guidelines

 

Uncontested Director Elections

 

Votes on director nominees should be made on a case-by-case basis using a “mosaic” approach, where all factors are considered in director elections and where no single issue is deemed to be determinative.  For example, a nominee’s experience and business judgment may be critical to the long-term success of the portfolio company, notwithstanding the fact that he or she may serve on the board of more than four public companies. In evaluating nominees, we consider the following factors:

 



 

·                  Whether the nominee attended less than 75 percent of the board and committee meetings without a valid excuse for the absences;

 

·                  Whether the nominee is an inside or affiliated outside director and sits on the audit, compensation, or nominating committees and/or the full board serves as the audit, compensation, or nominating committee or the company does not have one of these committees;

 

·                  Whether the board ignored a significant shareholder proposal that was approved by a majority of the votes cast in the previous year;

 

·                  Whether the board, without shareholder approval, to our knowledge instituted a new poison pill plan, extended an existing plan, or adopted a new plan upon the expiration of an existing plan during the past year;

 

·                  Whether the nominee is the Chairman or CEO of a publicly-traded company who serves on more than two public boards;

 

·                  Whether the nominee serves on more than four public company boards;

 

·                  If the nominee is an incumbent director, the length of tenure taking into account tenure limits recommended in local corporate governance codes(1);

 

·                  Whether the nominee has a material related party transaction or is believed by us to have a material conflict of interest with the portfolio company;

 

·                  Whether the nominee (or the overall board) in our view has a record of making poor corporate or strategic decisions or has demonstrated an overall lack of good business judgment;

 

·                  Material failures of governance, stewardship, risk oversight(2), or fiduciary responsibilities at the company

 

·                  Whether the nominee serves on the audit committee where there is evidence (such as audit reports or reports mandated under the Sarbanes Oxley Act) that there exists material weaknesses in the company’s internal controls;

 

·                  Whether the nominee serves on the compensation committee if that director was present at the time of the grant of backdated options or options the pricing or the timing of which we believe

 


(1)  For example, in the UK, independent directors of publicly traded companies with tenure exceeding nine years are reclassified as non-independent unless the company can explain why they remain independent.

 

(2)  Examples of failure of risk oversight include, but are not limited to: bribery; large or serial fines from regulatory bodies; significant adverse legal judgments or settlements; hedging of company stock by the employees or directors of a company; or significant pledging of company stock in the aggregate by the officers and directors of a company.

 



 

may have been manipulated to provide additional benefits to executives;

 

·                  Failure to replace management as appropriate; and

 

·                  Egregious actions related to a director’s service on other boards that raise substantial doubt about his or her ability to effectively oversee management and serve the best interests of shareholders at any company.

 

Pr