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COHEN & STEERS REALTY INCOME FUND, INC.
February 6, 1996
To Our Shareholders:
We are pleased to submit to you the annual report for the Cohen & Steers
Realty Income Fund, Inc. for the year ended December 31, 1995. The net asset
value per share at that date was $8.59. In addition, a regular quarterly
dividend of $0.17 per share was declared for shareholders of record December 29,
1995 and paid on January 12, 1996.
1995 REVIEW
The year just ended can best be characterized as one in which balance
returned to nearly every aspect of the real estate and real estate securities
markets. The total investment return of REITs in 1995 was both satisfactory and
above their long-term record; for the past ten years REITs have produced average
annual total returns of 10.3%. The Fund's total return for 1995 based on income
and change in net asset value was 12.1%.
Many investors, however, have expressed disappointment over recent REIT
performance because it lagged, by a considerable margin, the unusually high
returns registered by the stock (+37.6%) and long-term bond (+34.2%) markets.
While many observers have gone to great lengths to try to explain the
performance of REITs relative to other financial market assets, we believe that
REIT returns were very much in line with what should be rationally expected.
Importantly, in our opinion, 1995 performance substantiated the low correlation
between REIT returns and interest rates and it further demonstrated the low
volatility that is characteristic of REITs. The low 'beta' of REITs in general,
and our portfolio in particular, would imply relative returns that are in line
with those achieved in 1995.
The performance of REITs in 1995 reflects the balanced supply/demand
situation which exists in today's real estate markets between both landlords and
tenants and buyers and sellers of property. Vacancy rates for most major
property types have declined and market rents have risen as the economy has
grown and new development has been held in check. This improvement in real
estate conditions has resulted in the return of liquidity to the real estate
markets, an increase in transactions and, therefore, a reversion of investment
returns to a more normal level. Naturally, investment returns were not uniform
among the various property sectors as shown in the table below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
1995 TOTAL INVESTMENT RETURNS OF MAJOR SECTORS*
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
All REITs..................................... 18.3% Office REITs.................................. 38.8%
Apartment REITs............................... 12.3 Self Storage REITs............................ 34.9
Health Care REITs............................. 24.9 Shopping Center REITs......................... 5.1
Hotel REITs................................... 30.8 S&P 500 Index................................. 37.6
Industrial REITs.............................. 15.9 Long-term Treasury............................ 34.2
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
*Source: National Association of Real Estate Investment Trusts, Inc.
Our underperformance of the NAREIT Equity REIT Index in 1995 was a direct
result of our heavier than average weighting in owners of shopping centers. At
the beginning of the year we had expected the economy to experience moderate
growth which would translate into a good year for owners of retail properties.
Although the companies in our portfolio actually did experience healthy cash
flow growth, uncertainties surrounding the retail environment, particularly
towards year end, caused the share price performance of shopping center owners
to lag that of most other property types. We were also somewhat overweighted in
the apartment sector. Again, our companies experienced strong cash flow growth
but fears of increasing development activity suppressed the share prices of many
apartment-owning REITs.
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COHEN & STEERS REALTY INCOME FUND, INC.
The better performing sectors during 1995 tended to be either somewhat less
mainstream areas or ones which have a limited number of companies available in
the public market but are enjoying extremely strong fundamentals. These include
owners of office, hotel and self-storage facilities. Of the $1.0 billion in
initial public offerings of REITs underwritten during 1995, over 80% were in the
storage and hotel sectors. Most of the balance of the $5.7 billion of common
equity raised by REITs during 1995 was in the form of secondary stock offerings,
essentially by the better-positioned companies that used the proceeds primarily
to retire debt or finance property acquisitions. Here too, on the underwriting
side, balance was restored to the REIT market as equity offerings were completed
by high-quality companies and in amounts that satisfied but did not overwhelm
demand.
In summary, 1995 represented a year of great balance with regard to real
estate fundamentals, the supply and demand for properties, and the supply and
demand for REIT shares. This, in turn, led to investment returns which were in
line with historic trends.
1996 OUTLOOK
While we have maintained that interest rates alone do not exert the most
influence on REIT share prices, we believe that as we start 1996, the single
most important element in both the real estate and REIT picture is the
prevailing level of interest rates. With long-term treasury bond rates at around
the 6% level and credit readily available, we believe the real estate industry
is faced with a financing opportunity not seen in decades. Whereas the last time
interest rates were at this level (more than two years ago) REITs began a period
of below-average performance, the financial market and valuation conditions were
considerably different than they are today, as shown in the following table.
<TABLE>
<CAPTION>
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OCTOBER 1993 DECEMBER 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
30-year Treasury Yield............................................................... 5.96% 5.96%
10-year Treasury Yield............................................................... 5.43% 5.58%
S&P 500 Dividend Yield............................................................... 2.68% 2.24%
Equity REIT Dividend Yield........................................................... 6.16% 7.37%
divided by 30-year Treasury Yield............................................... 1.04 1.24
divided by 10-year Treasury Yield............................................... 1.13 1.32
divided by S&P 500 Yield........................................................ 2.30 3.29
Equity REIT Market Capitalization.................................................... $27.6 billion $46.7 billion
Assets in Real Estate Mutual Funds................................................... $1.0 billion $2.2 billion
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The last time long-term interest rates were at today's level equity REITs
had completed almost three years of exceptional returns and were trading at
valuation levels, based on dividend yields, which were unsustainably high on an
absolute basis, albeit still attractive relative to the stock and bond markets.
In contrast, at the end of 1995 equity REIT yields were considerably higher on
an absolute basis; relative to stocks and bonds REITs were trading at an
historically low valuation level. In our opinion, one important difference is
that although interest rates were quite low in 1993, there was not a great
amount of mortgage debt available to the real estate industry. In addition,
because many REITs were newly formed, the credit markets were not yet fully open
to these companies. Currently, because of the return to health of the real
estate industry, mortgage lenders are once again actively making loans and the
commercial mortgage-backed securities market is enjoying significant growth.
Further, the maturation of the REIT industry over the past several years has
opened the credit
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COHEN & STEERS REALTY INCOME FUND, INC.
markets to many companies for a wide spectrum of corporate debt instruments. In
1995, REITs raised approximately $2.6 billion in such capital, nearly double
what was raised in 1994.
With income returns (or 'capitalization rates') on property purchases
higher today than they were in 1993 and debt financing now more readily
available, we believe that the current environment for acquisitions is the most
advantageous in a generation. We believe that a continuation of the present low
interest rate environment is likely to precipitate a great deal of acquisition
activity and eventually cause property values to rise. Low interest rates are of
particular benefit to the REIT industry today which, unlike in 1993, is much
larger, more mature, dominated by strong and proven companies and better
accepted by investors at large. While the cost of equity financing may vary
based on the way it is computed, we believe that there is no calculation which
can show that cost to be less expensive than the cost of debt capital. It is
therefore our belief that those companies which either fail to take advantage of
today's borrowing opportunity or choose to sell equity in anything but a
judicious manner will find that their stock prices suffer as a result.
In summary, in our opinion, there are three important underpinnings that
the current low interest rate environment provides to the REIT industry.
Mortgage interest rates, which are influenced by long-term bond yields, and are
well below the income returns available in the property markets, provide an
exceptional financing opportunity for acquisitions and therefore a strong
foundation for property values. Second, those companies that properly take
advantage of current financing opportunities may be expected to enjoy an
increase in their growth rates and share prices. And third, because REIT
dividend yields are currently significantly higher than other financial market
yields, this should attract investors and provide strong support for REIT share
prices.
Our investment strategy for 1996 will focus on our ability to invest in
those sectors that we believe show the strongest fundamentals along with those
companies whose valuations have declined to what we consider to be unwarranted
levels. We anticipate a continuation of moderate economic growth due to what
appears to be a bias towards monetary stimulus by the Federal Reserve and a lack
of excesses in the economy. As a result, we believe that our holdings in the
shopping center sector are likely to achieve healthy profit growth. In addition,
consolidation of the retail industry may well provide the stronger companies
with uncommon re-leasing, upgrading and acquisition opportunities. Further, with
Wall Street almost unanimously negative on the shopping center sector, we
believe that nearly all bad news may be adequately factored into share prices.
Similarly, apartments are likely to be our next highest weighting due to the
continuing improvement that we expect to see in rental rates. Although there is
some apartment construction taking place, it is at a rate which we believe
cannot meet the underlying demand for rental housing. We are increasingly
attracted to the office sector, which has been the last major property type to
stage a recovery and where high-quality acquisition opportunities may still be
plentiful. We also expect both occupancy and rent growth to accelerate in the
next five years in the office sector.
While a return to normal and stable conditions in the real estate industry
is welcomed by most, it has resulted in a market environment which is more
competitive and efficient. We nonetheless remain confident in our investment
strategy and security selection criteria. Ultimately, we expect this to result
in superior investment results.
Sincerely,
<TABLE>
<S> <C>
MARTIN COHEN ROBERT H. STEERS
MARTIN COHEN ROBERT H. STEERS
President Chairman
</TABLE>
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COHEN & STEERS REALTY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER VALUE
OF SHARES (NOTE 1)
--------- -----------
<S> <C> <C>
EQUITIES 94.23%
APARTMENT 20.75%
Amli Residential Properties.................................. 25,500 $ 510,000
Associated Estates Realty Corp. ............................. 42,900 922,350
Camden Property Trust........................................ 11,200 267,400
Colonial Properties Trust.................................... 10,400 265,200
Columbus Realty Trust........................................ 26,400 511,500
Pacific Gulf Properties...................................... 27,200 442,000
Summit Properties............................................ 47,900 952,012
Wellsford Residential Property Trust......................... 53,400 1,228,200
-----------
5,098,662
-----------
HEALTH CARE 8.33%
American Health Properties................................... 49,500 1,064,250
Omega Healthcare Investors................................... 36,900 982,462
-----------
2,046,712
-----------
HOTEL 0.71%
Patriot American Hospitality................................. 6,800 175,100
-----------
INDUSTRIAL 4.16%
Copley Properties............................................ 39,900 513,712
Liberty Property Trust....................................... 24,500 508,375
-----------
1,022,087
-----------
OFFICE 13.06%
Cali Realty Corp. ........................................... 54,200 1,185,625
Carr Realty Corp. ........................................... 15,300 372,937
East Group Properties........................................ 50,300 1,075,163
Reckson Associates Realty Corp. ............................. 19,600 575,750
-----------
3,209,475
-----------
SHOPPING CENTER 47.22%
COMMUNITY CENTE R 20.17%
Bradley Real Estate.......................................... 52,800 712,800
Mid-America Realty Investments............................... 111,200 875,700
Mid-Atlantic Realty Trust.................................... 34,100 294,113
Pennsylvania REIT............................................ 47,600 987,700
Price REIT, Series B......................................... 31,500 874,125
Regency Realty Corp. ........................................ 56,500 974,625
Sizeler Property Investors................................... 26,900 238,738
-----------
4,957,801
-----------
</TABLE>
See notes to financial statements.
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COHEN & STEERS REALTY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER VALUE
OF SHARES (NOTE 1)
--------- -----------
FACTORY OUTLET CENTER 3.19%
<S> <C> <C>
HGI Realty, Inc. ............................................ 21,500 $ 491,812
Tanger Factory Outlet Centers................................ 11,700 292,500
-----------
784,312
-----------
REGIONAL MALL 23.86%
CBL & Associates Properties.................................. 21,600 469,800
DeBartolo Realty Corp. ...................................... 90,700 1,179,100
Glimcher Realty Trust........................................ 77,100 1,329,975
J.P. Realty.................................................. 43,400 949,375
Simon Property Group......................................... 13,300 324,188
Taubman Centers.............................................. 63,400 634,000
The Mills Corp. ............................................. 20,400 346,800
Urban Shopping Centers ...................................... 29,500 630,563
-----------
5,863,801
-----------
TOTAL SHOPPING CENTER........................................ 11,605,914
-----------
TOTAL EQUITIES (Identified cost $21,896,207)........ 23,157,950
-----------
</TABLE>
<TABLE>
<CAPTION>
S&P PRINCIPAL
BOND RATING AMOUNT
- ------------------- ----------------
<S> <C> <C> <C> <C>
FIXED INCOME 5.23%
B Oriole Homes, 12.50%, sr. sub. notes 1/15/03................ $1,000,000 820,000
BB - Trizec Finance Ltd., 10.875%, sr. notes 10/15/05............ 450,000 466,313
-----------
TOTAL FIXED INCOME (Identified cost $1,419,049)........ 1,286,313
-----------
TOTAL INVESTMENTS (Identified cost $23,315,256)....................... 99.46% 24,444,263
OTHER ASSETS, LESS LIABILITIES........................................ .54% 133,130
------ -----------
NET ASSETS (Equivalent to $8.59 per share based on
2,860,916 shares of capital stock outstanding)..................... 100.00% $24,577,393
------ -----------
------ -----------
</TABLE>
See notes to financial statements.
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5
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COHEN & STEERS REALTY INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (Identified cost $23,315,256) (Note 1).................... $24,444,263
Cash.......................................................................................... 450,133
Dividends and interest receivable............................................................. 259,308
Other assets.................................................................................. 1,485
-----------
Total Assets............................................................................ 25,155,189
-----------
LIABILITIES:
Payable for dividends declared................................................................ 486,356
Payable to investment adviser................................................................. 15,021
Payable to administrator...................................................................... 11,989
Other liabilities............................................................................. 64,430
-----------
Total Liabilities....................................................................... 577,796
-----------
NET ASSETS applicable to 2,860,916 shares of $.01 par value common stock
outstanding (Note 4)............................................................................. $24,577,393
-----------
-----------
NET ASSET VALUE PER SHARE:
($24,577,393[div]2,860,916 shares outstanding)................................................... $ 8.59
-----------
-----------
MARKET PRICE PER SHARE.............................................................................. $ 9.13
-----------
-----------
MARKET PRICE PREMIUM (DISCOUNT) TO NET ASSET VALUE PER SHARE........................................ 6.29%
-----------
-----------
NET ASSETS consist of:
Paid-in capital (Note 4)...................................................................... $23,073,396
Accumulated net realized gains on investments................................................. 374,990
Net unrealized appreciation on investments.................................................... 1,129,007
-----------
$24,577,393
-----------
-----------
</TABLE>
See notes to financial statements.
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COHEN & STEERS REALTY INCOME FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Investment Income:
Dividend income................................................................................ $1,959,296
Interest income................................................................................ 287,385
----------
Total Income............................................................................. 2,246,681
----------
Expenses:
Investment advisory fees (Note 2).............................................................. 155,280
Professional fees.............................................................................. 64,859
Administrative fees (Note 2)................................................................... 50,400
Reports to shareholders........................................................................ 41,889
Directors' fees and expenses (Note 2).......................................................... 29,000
Transfer agent fees............................................................................ 26,473
Custodian fees................................................................................. 15,032
Adviser administrative fees (Note 2)........................................................... 13,369
Miscellaneous.................................................................................. 17,371
----------
Total Expenses........................................................................... 413,673
----------
Net Investment Income................................................................................ 1,833,008
----------
Realized and Unrealized Gain (Loss) on Investments:
Net realized loss on investments............................................................... (943,735)
Increase in unrealized appreciation on investments............................................. 1,887,754
----------
Net realized and unrealized gain on investments.......................................... 944,019
----------
Net increase in net assets resulting from operations................................................. $2,777,027
----------
----------
</TABLE>
See notes to financial statements.
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COHEN & STEERS REALTY INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
<S> <C> <C>
Change in Net Assets:
From Operations:
Net investment income.................................. $ 1,833,008 $ 1,905,697
Net realized gain (loss) on investments................ (943,735) 1,122,672
Increase (decrease) in unrealized appreciation
(depreciation) on investments....................... 1,887,754 (2,078,588)
----------------- -----------------
Net increase in net assets resulting from
operations.................................... 2,777,027 949,781
----------------- -----------------
Dividends and Distributions From (Note 4):
Net investment income.................................. (1,134,113) (1,390,485)
Net realized gain on investments sold.................. -- (259,971)
Tax return of capital.................................. (806,210) (444,684)
----------------- -----------------
Total distributions to shareholders.............. (1,940,323) (2,095,140)
----------------- -----------------
Capital Stock Transactions (Note 4):
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions from net
investment income................................... 192,542 191,747
----------------- -----------------
Total increase (decrease) in net assets.......... 1,029,246 (953,612)
----------------- -----------------
Net Assets:
Beginning of year...................................... 23,548,147 24,501,759
End of year............................................ $24,577,393 $23,548,147
----------------- -----------------
----------------- -----------------
</TABLE>
See notes to financial statements.
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COHEN & STEERS REALTY INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding
throughout each period and other performance information derived from the
Financial Statements. It should be read in conjunction with the Financial
Statements and notes thereto.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
PER SHARE OPERATING PERFORMANCE 1995 1994 1993 1992 1991
- ---------------------------------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.............................. $ 8.30 $ 8.70 $ 7.63 $ 7.35 $ 5.33
------- ------- ------- ------- -------
Income from investment operations:
Net investment income..................................... 0.64 0.65 0.65 0.65 0.64
Net realized and unrealized gains (losses) on
investments............................................ 0.33 (0.31) 1.10 0.31 2.06
------- ------- ------- ------- -------
Total from investment operations.................... 0.97 0.34 1.75 0.96 2.70
------- ------- ------- ------- -------
Less distributions from:
Net investment income..................................... (0.40) (0.49) (0.65) (0.65) (0.64)
In excess of net investment income........................ 0.00 0.00 (0.03) 0.00 0.00
Capital gain.............................................. 0.00 (0.09) 0.00 0.00 0.00
Tax return of capital..................................... (0.28) (0.16) 0.00 (0.03) (0.04)
------- ------- ------- ------- -------
Total distributions................................. (0.68) (0.74) (0.68) (0.68) (0.68)
------- ------- ------- ------- -------
Net asset value, end of year.................................... $ 8.59 $ 8.30 $ 8.70 $ 7.63 $ 7.35
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Per share market value, end of year............................. $ 9.13 $ 8.50 $ 9.50 $ 8.00 $ 7.13
------- ------- ------- ------- -------
------- ------- ------- ------- -------
- ----------------------------------------------------------------------------------------------------------------
Total investment return(1)...................................... 15.97% (2.78)% 27.77% 22.64% 68.96%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total net asset value return(1)................................. 12.12% 3.80% 23.04% 13.63% 51.93%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
- ----------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of year (in millions)..................... $24.577 $23.548 $24.502 $21.323 $20.379
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratios of expenses to average net assets.................. 1.73% 1.51%`D' 1.64% 1.63% 1.66%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratio of net investment income to average net assets...... 7.67% 7.62% 7.31% 8.65% 9.26%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Portfolio turnover rate................................... 37.75% 80.68% 107.91% 79.51% 77.62%
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
- ------------------------
`D' Fees paid through directed brokerage commissions have been excluded. Had
these fees been paid by the Fund, the ratio would have been 1.69%.
(1) Total investment return is computed based upon the American Stock Exchange
market price of the Fund's shares and excludes the effects of brokerage
commissions. Dividends and distributions, if any, are assumed for purposes
of this calculation, to be reinvested at prices obtained under the Fund's
dividend reinvestment plan. Total net asset value return measures the change
in value over the period indicated taking into account reinvested dividends.
See notes to financial statements.
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COHEN & STEERS REALTY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
Cohen & Steers Realty Income Fund, Inc. (the 'Fund') is a non-diversified,
closed-end management investment company. The Fund was incorporated under the
laws of the State of Maryland on June 21, 1988. The following is a summary of
significant accounting policies followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally accepted
accounting principles. The preparation of the financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount and estimates on the
financial statements. Actual results could differ from those estimates.
Portfolio Valuation: Investments in securities that are listed on the New
York Stock Exchange are valued, except as indicated below, at the last sale
price reflected at the close of the New York Stock Exchange on the business day
as of which such value is being determined. If there has been no sale on such
day, the securities are valued at the mean of the closing bid and asked prices
for the day.
Securities not listed on the New York Stock Exchange but listed on other
domestic or foreign securities exchanges or admitted to trading on the National
Association of Securities Dealers Automated Quotations, Inc. ('NASDAQ') National
Market System are valued in a similar manner. Securities traded on more than one
securities exchange are valued at the last sale price on the business day as of
which such value is being determined as reflected on the tape at the close of
the exchange representing the principal market for such securities.
Readily marketable securities traded in the over-the-counter market,
including listed securities whose primary market is believed by the Adviser to
be over-the-counter, but excluding securities admitted to trading on the NASDAQ
National List, are valued at the mean of the current bid and asked prices as
reported by NASDAQ, the National Quotations Bureau or such other comparable
sources as the Board of Directors deems appropriate to reflect their fair market
value. Where securities are traded on more than one exchange and also
over-the-counter, the securities will generally be valued using the quotations
the Board of Directors believes reflect most closely the value of such
securities.
Short-term debt securities, which have a maturity of 60 days or less, are
valued at amortized cost which approximates value.
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 for accounting and tax purposes.
Interest income is recorded on the accrual basis. Dividend income is recorded on
ex-dividend date.
Dividends and Distributions to Shareholders: Dividends from net investment
income are declared and paid quarterly. Net realized capital gains, unless
offset by any available capital loss carryforward, are distributed to
shareholders annually. Distributions to shareholders are recorded on the
ex-dividend date.
Dividends from net income and capital gain distributions are determined in
accordance with U.S. Federal Income Tax regulations which may differ from
generally accepted accounting principles. During the year ended December 31,
1995, the Fund decreased paid-in capital by $769,314, increased undistributed
net investment income by $107,315 and increased accumulated net realized gain on
investment securities sold by $661,999. These differences are due to return of
capital distributions received by the Fund on Portfolio securities.
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COHEN & STEERS REALTY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Federal Income Taxes: The Fund has qualified and intends to remain
qualified as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986. The principal tax benefits of qualifying as a regulated
investment company, as compared to an ordinary taxable corporation, are that a
regulated investment company is not itself subject to Federal income tax on
ordinary investment income and net capital gains that are currently distributed
(or deemed distributed) to its shareholders and that the tax character of
long-term capital gains recognized by a regulated investment company flows
through to its shareholders who received such distributions. At December 31,
1995, the Fund had for Federal Income Tax purposes, an unused capital loss
carryforward of $453,458 to be applied against future realized gains, if any. If
not applied, the capital loss carryforward will expire in 2003.
NOTE 2 -- INVESTMENT ADVISORY AND ADMINISTRATIVE FEES AND OTHER TRANSACTIONS
WITH AFFILIATES
Investment Advisory Fees: Cohen & Steers Capital Management, Inc. (the
'Adviser') serves as the Fund's Investment Adviser pursuant to an investment
advisory agreement (the 'Advisory Agreement'). Under the terms of the Advisory
Agreement, the Adviser provides the Fund with the day-to-day investment
decisions and generally manages the Fund's investments in accordance with the
stated policies of the Fund, subject to the supervision of the Fund's Board of
Directors. For the services provided the Fund, the Adviser receives a monthly
fee in an amount equal to 1/12th of .65% of the average daily net assets of the
Fund (approximately .65% on an annual basis). For the year ended December 31,
1995, the Fund incurred $155,280 in advisory fees.
Administrative Fees: Effective September 1, 1995, The Chase Manhattan Bank,
N.A., through its affiliate Chase Global Funds Services Company ('CGFSC') (the
Administrator), formerly Mutual Funds Service Company ('MFSC') serves as the
Fund's Administrator pursuant to an Administration Agreement (the 'Agreement').
Under the terms of the Agreement, the Administrator maintains the Fund's books
and records, prepares financial information for the Fund's tax returns, proxy
statements, quarterly and annual reports to shareholders and generally assists
in all aspects of Fund operations, other than providing investment advice,
subject to the supervision of the Fund's Board of Directors. For the services
provided the Fund, the Administrator receives a monthly fee in an amount equal
to 1/12th of .20% of the average daily net assets of the Fund (approximately
.20% on an annual basis). For the year ended December 31, 1995, the Fund
incurred $50,400 in administration fees.
The Fund incurred $13,369 in administration fees paid to the Adviser
representing administrative assistance services provided to the Fund.
Directors' Fees: Certain directors of the Fund are also directors, officers
and/or employees of the Adviser. None of the directors so affiliated received
compensation for their services as directors of the Fund with the exception of
out-of-pocket expenses relating to attendance at Board and committee meetings.
Similarly, none of the Fund's officers received compensation from the Fund. Fees
and related expenses accrued for non-affiliated directors totaled $29,000 for
the year ended December 31, 1995.
NOTE 3 -- PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, excluding short-term investments, for
the year ended December 31, 1995 aggregated $9,230,558 and $8,968,314,
respectively.
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COHEN & STEERS REALTY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1995, the cost and unrealized appreciation or depreciation
in value of the investments owned by the Fund, as computed on a federal income
tax basis, are as follows:
<TABLE>
<CAPTION>
<S> <C>
Aggregate cost.......................................................................... $22,427,341
-----------
Gross unrealized appreciation........................................................... $ 3,047,952
Gross unrealized depreciation........................................................... $(1,031,030)
-----------
Net unrealized appreciation............................................................. $ 2,016,922
-----------
-----------
</TABLE>
NOTE 4 -- CAPITAL STOCK AND DISTRIBUTION REINVESTMENT
At December 31, 1995, the Fund has one class of common stock, par value
$.01 per share, of which 6,900,000 shares are authorized and 2,860,916 shares
are outstanding.
Distributions in 1995 resulted in 22,274 shares being issued at an average
price of $8.64 through the dividend reinvestment plan.
Registered shareholders may elect to receive all distributions in cash paid
by check mailed directly to the shareholder by The Chase Manhattan Bank, N.A.
('Chase') as dividend paying agent. Pursuant to the Automatic Reinvestment Plan
(the 'Plan') shareholders not making such election will have all amounts
automatically reinvested by Chase, as the Plan agent in whole or fractional
shares of the Fund.
NOTE 5 -- SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
NET INCREASE
NET REALIZED (DECREASE)
TOTAL NET AND UNREALIZED IN NET ASSETS
INVESTMENT INVESTMENT GAIN (LOSS) RESULTING NET ASSETS AT
INCOME INCOME ON INVESTMENTS FROM OPERATIONS END OF PERIOD
----------------- ----------------- ------------------ ------------------ ------------------
QUARTERLY PER PER PER PER PER
PERIOD AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE
- ---------------------------------- ---------- ------- ---------- ----- ---------- ------ ---------- ------ ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FISCAL 1995
- ------------
March 31.......................... $ 539,726 $0.19 $ 436,860 $0.15 $ (515,916) $(0.18) $ (79,056) $(0.03) $23,044,970 $8.10
June 30........................... 513,451 0.18 405,020 0.14 948,709 0.33 1,353,729 0.47 23,958,714 8.40
September 30...................... 548,067 0.19 431,265 0.15 474,071 0.17 905,336 0.32 24,908,041 8.72
December 31....................... 645,437 0.23 559,863 0.20 37,155 0.01 597,018 0.21 24,577,393 8.59
---------- ----- ---------- ----- ---------- ------ ---------- ------
$2,246,681 $0.79 $1,833,008 $0.64 $ 944,019 $ 0.33 $2,777,027 $ 0.97
---------- ----- ---------- ----- ---------- ------ ---------- ------
---------- ----- ---------- ----- ---------- ------ ---------- ------
FISCAL 1994
- -----------
March 31.......................... $ 740,527 $0.26 $ 639,068 $0.23 $ 620,367 $ 0.21 $1,259,435 $ 0.44 $25,329,579 $8.97
June 30........................... 545,005 0.19 466,921 0.16 (84,959) (0.02) 381,962 0.14 25,279,832 8.94
September 30...................... 377,737 0.13 282,496 0.10 (463,803) (0.16) (181,307) (0.06) 25,146,129 8.80
December 31....................... 619,151 0.19 517,212 0.16 (1,027,521) (0.34) (510,309) (0.18) 23,548,147 8.30
---------- ----- ---------- ----- ---------- ------ ---------- ------
$2,282,420 $0.77 $1,905,697 $0.65 $ (955,916) $(0.31) $ 949,781 $ 0.34
---------- ----- ---------- ----- ---------- ------ ---------- ------
---------- ----- ---------- ----- ---------- ------ ---------- ------
</TABLE>
Notice is hereby given in accordance with Section 23(c) of the
Investment Company Act of 1940 that the Fund may purchase, from time to time,
shares of its common stock in the open market.
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COHEN & STEERS REALTY INCOME FUND, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
To The Shareholders and Board of Directors of
Cohen & Steers Realty Income Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Cohen & Steers Realty Income Fund,
Inc., as of December 31, 1995, and the related statement of operations for the
year then ended, the statement of changes in 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. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Cohen & Steers Realty Income Fund, Inc. as of December 31, 1995, the results of
its operations 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 generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
February 8, 1996
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13
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COHEN & STEERS REALTY INCOME FUND, INC.
DIVIDEND REINVESTMENT PLAN
Pursuant to the Dividend Reinvestment Plan (the 'Plan'), shareholders may
elect, by instructing The Chase Manhattan Bank, N.A. (the 'Plan Agent') in
writing, to receive all distributions and capital gains in cash. Shareholders
who do not make such election will have all such amounts automatically
reinvested by the Plan Agent in whole and fractional shares of the Fund's common
stock.
Dividend and capital gain distributions will be reinvested for participants
in the Plan on the reinvestment date and participants shall receive the
equivalent in shares valued at the lower of market price or net asset value. If
the market price per share equals or exceeds net asset value per share on the
reinvestment date, the Fund will issue shares to participants at a per share
price equal to the higher of the net asset value or 95% of the closing market
price per share on the payment date. If net asset value of shares at such time
exceeds the market price of shares at such time, or if the Fund should declare a
dividend or other distribution payable only in cash, the Plan Agent will buy
shares in the open market. If, before the Plan Agent has completed its purchase,
the market price exceeds the net asset value of the shares, the average price
paid by the Plan Agent may exceed the net asset value of the shares, resulting
in the acquisition of fewer shares than if the dividend or distribution had been
paid in shares issued by the Fund.
The Plan Agent's fees for the reinvestment of dividends and distributions
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 or distributions. The
automatic reinvestment of dividends and distributions will not relieve
participants of any income tax which may be payable on such dividends or
distributions. Requests for additional information or any correspondence
concerning the Plan should be directed to the Plan Agent at:
The Chase Manhattan Bank, N.A.
Dividend Reinvestment Plan
770 Broadway
New York, NY 10003
ADDITIONAL INFORMATION
During the period, there have been no material changes in the Fund's
investment objectives or fundamental policies that have not been approved by
the shareholders. There have been no changes in the Fund's charter or By-laws
that would delay or prevent a change in control of the Fund which have not
been approved by shareholders. There have been no changes in the principal
risk factors associated with investment in the Fund. There have been no
changes in the persons who are primarily responsible for the day-to-day
management of the Fund's portfolio.
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14
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COHEN & STEERS REALTY INCOME FUND, INC.
OFFICERS AND DIRECTORS
Robert H. Steers
Director and Chairman
Martin Cohen
Director and President
Gregory C. Clark
Director
George Grossman
Director
Jeffrey H. Lynford
Director
Elizabeth O. Reagan
Vice President
INVESTMENT ADVISER
Cohen & Steers Capital Management, Inc.
757 Third Avenue
New York, New York 10017
(212) 832-3232
FUND ADMINISTRATOR AND TRANSFER AGENT
Chase Global Funds Services Co.
73 Tremont Street
Boston, Massachusetts 02108
(800) 437-9912
CUSTODIAN
The Chase Manhattan Bank, N.A.
770 Broadway
New York, New York 10003
LEGAL COUNSEL
Dechert Price & Rhoads
477 Madison Avenue
New York, New York 10022
American Stock Exchange Symbol: RIF
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of Fund shares.
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15
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COHEN & STEERS
REALTY INCOME FUND
757 THIRD AVENUE
NEW YORK, N.Y. 10017
COHEN & STEERS
REALTY INCOME FUND
ANNUAL REPORT
DECEMBER 31, 1995
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as `D'
The division sign shall be expressed as [div]
