<PAGE>
<PAGE>
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COHEN & STEERS REALTY INCOME FUND, INC.
July 17, 1998
To Our Shareholders:
We are pleased to submit to you the semi-annual report for Cohen & Steers
Realty Income Fund, Inc. for the quarter and six months ended June 30, 1998.
The net asset value per share at that date was $10.24. In addition, a dividend
of $0.17 was declared for shareholders of record on June 24, 1998 and paid on
July 15, 1998.
INVESTMENT REVIEW
For the quarter ended June 30, 1998, Cohen & Steers Realty Income Fund had
a total return, based on income and change in net asset value, of -4.4%, which
compares to the NAREIT Equity REIT Index total return of -4.6%. For the six
months ended June 30, 1998, the Fund's total return was -4.6% versus -5.0% for
the NAREIT Equity REIT Index.
The decline in REIT prices accelerated in the second quarter as investor
sentiment worsened and the gap between REIT returns and those of the stock and
bond markets widened. This sentiment reflects ongoing concern about the
overabundance of capital available for real estate in the private market, the
maturity of the real estate cycle and the potential slowing of earnings growth
for many real estate companies. While these concerns are valid, we believe that
the drop in REIT share prices more than adequately reflects these issues; 1998
is on track to be the worst year of investment performance since 1990, when REIT
prices declined by 15.4%. In that year the real estate bear market began in
earnest with declining occupancies and rental rates, plummeting property prices,
a credit crunch and an economic recession. Prior to 1990, one would have to go
back to 1974 to find a worse year of REIT share price performance. Given the
strength of the economy, rising rents and occupancy levels and only modest
construction activity, we think the market has overstated the negative case for
REITs and real estate.
The performance of REITs has resulted in an absolute and relative valuation
picture that has important implications for the entire real estate industry.
REITs are now trading at price-to-funds from operations ('FFO') ratios that are
at a multi-year low and are generating returns based on share prices that are
well above what can be earned in the private market. Considering that REIT
earnings are growing at about a 15% rate this year, any further decline in
price, over time, would place valuations at a level not seen since 1990. In
addition, the shares of many companies, both large and small, are trading at or
below the net asset values ('NAV') of their real estate. As a result, it is fair
to say that real estate today is cheaper in the public market than in the
private market.
On a relative basis the comparison of REIT valuations is extraordinary.
While the valuation of REITs approaches 1990 levels, the P/E multiple of the
stock market has expanded by nearly 30% and interest rates have declined by 33%.
It seems ironic to us that investor concern about the economic cycle and a
widely anticipated slowing of earnings growth for corporate America has resulted
in record high valuations, while a more modest slowing of prospective earnings
growth for REITs has resulted in a near-record low earnings multiple.
The state of the REIT market has begun to have a material impact on the way
many public companies are operating. Most evident is that equity offerings,
after a record pace during the first quarter, have come to a near-halt, clearly
eliminating the supply pressure that existed earlier in the year. In addition,
by the end of the second quarter, and for the first time in years, the flow of
funds to real estate mutual funds turned negative. Our expectation is that,
given the poor performance and current valuation levels of REITs, neither
issuers nor investors will support continued, heavy equity issuance any time
soon because of the potentially highly dilutive impact on earnings and asset
values.
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1
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COHEN & STEERS REALTY INCOME FUND, INC.
While the equity window has been closing, the debt window has never been
open wider, and this has compounded the concerns of equity investors. Long-term,
fixed rate debt at less than a 7% interest rate has become the financing vehicle
of choice in the real estate industry. This has led to a proliferation of
commercial mortgage backed securities ('CMBS'): $43 billion in CMBS was issued
in the first half of 1998, compared to only $15 billion in the first half of
1997, and $44 billion in all of 1997. The market's concern over the abundance of
debt capital began to impact the pricing of real estate debt securities towards
the end of the quarter, as spreads widened considerably. Nonetheless, the
environment remains 'borrower friendly.' Whereas the proclivity to increase
borrowing has caused concern among equity investors that the industry could fall
prey to excessive leverage, REITs have maintained their conservative balance
sheets, with debt-to-assets ratios in the 30%-50% range.
For the first time since the real estate recovery began, many companies are
materially scaling back their acquisition plans in light of limited access to
equity and the higher rate hurdle on new investment that this imposes on them.
Also for the first time, we are beginning to see REITs sell property, often to
private opportunity funds that are willing to pay high prices and finance the
acquisition mostly with debt. Several companies have announced share buyback
programs, viewing their own stock as a more attractive investment than property.
Since the private market seems to be willing to pay a higher price for property
than the public market, many companies are accessing institutional sources of
low cost capital to fund acquisition programs via joint ventures.
Finally we have begun to see some evidence of at least a stabilization, if
not an increase, in capitalization rates being reported in transactions in many
property markets. This may be indicating that the upward spiral of property
prices is coming to an end. In short, it appears to us at this juncture that the
public market is enforcing the type of discipline that many had desired.
Further, many companies are adopting rational strategies that should enable them
to continue to produce positive results for their shareholders despite what
appear to be temporarily adverse market conditions.
INVESTMENT OUTLOOK
The absolute and relative valuations of REITs have placed them in a
position from which positive relative returns should be achievable in the second
half of the year. In the long run, real estate performance is affected by the
same variables as any other asset class, such as economic growth and fiscal and
monetary policies. Accordingly, a continued widening of the gap between REIT
valuations and other assets would not be logical. We expect that the appeal of
REIT investment attributes, such as high and secure current yield, low
volatility and good defense in uncertain market conditions, will become more
widely appreciated by the investment community.
The Fund is advantageously positioned with its emphasis on above-average
dividend yielding real estate securities. The universe of attractive investments
for the Fund continues to grow, from security issuance and from share price
declines. Preferred stock issuance was heavy in the second quarter, over $1
billion, and many of these issues were hastily distributed thereby creating
after-market investment opportunities for the Fund. The near universal decline
in REIT common stock prices has increased the number of attractive dividend
yielding securities available to the Fund: at mid-year, the dividend yield on
the NAREIT Equity REIT Index was 6.1%, up 65 basis points versus year-end 1997.
This will allow the Fund to maintain its yield discipline while most likely
increasing the growth component of the portfolio. Current holdings in the Fund
reflect this abundance of investment choices. REIT common stocks make up 85% of
the portfolio, and convertible preferred stocks and perpetual preferred stocks
comprise 9% and 6%, respectively.
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2
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COHEN & STEERS REALTY INCOME FUND, INC.
The Fund is well-positioned for the balance of the year as a result of a
number of important property sector changes during the quarter. The Office and
Regional Mall sector weightings were increased while Health Care and Community
Centers sector weightings were reduced. The Office sector had the highest
price-to-FFO multiple at the beginning of the year and was the hardest hit by
the REIT correction. Therefore, a number of strong Office companies have become
attractive on a current yield basis -- the first opportunity for attractive
yield in this high growth sector in several years. Accordingly, Highwoods
Properties and SL Green Realty were added to the portfolio. We believe both
should deliver solid earnings growth over the next two years, which should
translate to solid dividend growth and capital appreciation.
While the Retail sector was the best performing sector year to date,
several investment opportunities emerged. The Fund initiated positions in
Macerich and The Mills Corp. Macerich is a California-based regional mall
company whose shares, at one point, had declined 7% and represented an excellent
income and growth opportunity. Mills, the leading owner/developer of enclosed
value malls, has above-average current income and excellent near-term growth
prospects. The Fund also increased its position in Prime Retail, a factory
outlet center owner. Prime completed a sizable acquisition of another factory
outlet center REIT, and during the process its shares became very undervalued
with a current yield in excess of 9%.
We reduced our weighting in the Health Care sector from 25% to 19%,
capturing price appreciation in a sector which defended well in the first half
of this year. The current weighting in Health Care reflects sizable weightings
in, what we believe to be, the most attractive companies within the sector. The
reduction in the Community Center sector reflects price targets being met.
Bradley Real Estate, Mid-Atlantic Realty Trust and Western Investment Real
Estate Trust were sold during the quarter. Another company in which the fund has
a position, Mid-America Realty Investments, agreed to be acquired by another
REIT during the second quarter. We remain optimistic about additional
consolidation activity in the Retail sector.
The Fund, which was fully invested at quarter end, will continue to seek
outstanding income opportunities in the current volatile real estate securities
market. We remain confident that the Fund's focus on above-average current
income, consistent earnings growth and attractive relative valuation should
result in both solid relative and absolute investment returns. Though the first
half of this year has been difficult for real estate securities, the strength of
the economy, the health of many real estate markets and very attractive real
estate stock valuations give us optimism about improved performance through the
balance of the year.
Sincerely,
<TABLE>
<S> <C>
/s/ MARTIN COHEN /s/ ROBERT H. STEERS
MARTIN COHEN ROBERT H. STEERS
President Chairman
</TABLE>
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COHEN & STEERS IS NOW ONLINE AT WWW.COHENANDSTEERS.COM. VISIT OUR WEBSITE
FOR WEEKLY NAVS, PORTFOLIO INFORMATION, PERFORMANCE INFORMATION, RECENT
NEWS ARTICLES, LITERATURE AND INSIGHTS ON THE CURRENT REIT MARKET.
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3
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COHEN & STEERS REALTY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER VALUE
OF SHARES (NOTE 1)
--------- -----------
<S> <C> <C>
EQUITIES 95.46%
COMMON STOCK 89.36%
APARTMENT/RESIDENTIAL 8.15%
Camden Property Trust, 2.25%, Series A
(Convertible Preferred)..................................... 24,000 $ 636,000
Merry Land & Investment Co..................................... 28,000 589,750
Summit Properties.............................................. 40,700 770,756
United Dominion Realty Trust................................... 32,500 450,937
-----------
2,447,443
-----------
DIVERSIFIED 3.37%
Pacific Gulf Properties........................................ 46,800 1,012,050
-----------
HEALTH CARE 19.15%
American Health Properties..................................... 52,300 1,307,500
ElderTrust..................................................... 55,800 959,063
Health Care Property Investors................................. 17,300 623,881
Health Care REIT............................................... 35,900 915,450
Healthcare Realty Trust........................................ 5,700 155,325
Meditrust Corp................................................. 28,600 799,013
Omega Healthcare Investors..................................... 28,300 994,037
-----------
5,754,269
-----------
INDUSTRIAL 2.29%
First Industrial Realty Trust.................................. 21,600 687,150
-----------
OFFICE 7.64%
Brandywine Realty Trust........................................ 33,400 747,325
Highwoods Properties........................................... 14,300 462,069
SL Green Realty Corp., 8.00%, Series A
(Convertible Preferred)..................................... 29,300 747,150
Tower Realty Trust............................................. 15,200 340,100
-----------
2,296,644
-----------
</TABLE>
See accompanying notes to financial statements.
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4
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COHEN & STEERS REALTY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER VALUE
OF SHARES (NOTE 1)
--------- -----------
<S> <C> <C>
OFFICE/INDUSTRIAL 9.05%
Prime Group Realty Trust....................................... 33,000 $ 565,125
Reckson Associates Realty Corp., 7.625%, Series A
(Convertible Preferred)..................................... 38,600 909,513
TriNet Corporate Realty Trust.................................. 36,600 1,244,400
-----------
2,719,038
-----------
SHOPPING CENTER 37.71%
COMMUNITY CENTER 20.98%
Alexander Haagen Properties.................................... 55,400 834,462
Glimcher Realty Trust.......................................... 77,000 1,496,688
Mid-America Realty Investments................................. 111,200 1,112,000
Pan Pacific Retail Properties.................................. 34,700 672,313
Pennsylvania REIT.............................................. 55,500 1,231,406
Saul Centers................................................... 39,700 687,306
Sizeler Property Investors..................................... 26,900 270,681
-----------
6,304,856
-----------
FACTORY OUTLET CENTER 8.05%
Prime Retail................................................... 122,561 1,463,071
Prime Retail, 8.50%, Series B (Convertible Preferred).......... 23,940 490,770
Tanger Factory Outlet Centers.................................. 14,700 465,806
-----------
2,419,647
-----------
REGIONAL MALL 8.68%
CBL & Associates Properties.................................... 29,000 703,250
JP Realty...................................................... 26,300 619,694
Macerich Co.................................................... 23,400 685,912
The Mills Corp................................................. 25,000 600,000
-----------
2,608,856
-----------
TOTAL SHOPPING CENTER.......................................... 11,333,359
-----------
SPECIALTY 2.00%
Entertainment Properties Trust................................. 33,000 602,250
-----------
TOTAL COMMON STOCK (Identified cost -- $25,952,950)...... 26,852,203
-----------
</TABLE>
See accompanying notes to financial statements.
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5
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COHEN & STEERS REALTY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER VALUE
OF SHARES (NOTE 1)
--------- -----------
<S> <C> <C>
PREFERRED STOCK 6.10%
Apartment Investment & Management Co., 9.00%, Series C............... 29,000 $ 712,313
Crown American Realty Trust, 11.00%, Series A........................ 20,900 1,120,762
-----------
TOTAL PREFERRED STOCK (Identified cost -- $1,782,805).... 1,833,075
-----------
TOTAL EQUITIES (Identified cost -- $27,735,755).......... 28,685,278
-----------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C> <C>
COMMERCIAL PAPER 3.33%
International Lease Finance, 5.75%, 7/1/98 (Identified
cost -- $1,001,000)............................................... $1,001,000 1,001,000
TOTAL INVESTMENTS (Identified cost -- $28,736,755) ......... 98.79% 29,686,278
OTHER ASSETS IN EXCESS OF LIABILITIES ...................... 1.21% 362,785
------- -----------
NET ASSETS (Equivalent to $10.24 per share based on
2,933,094 shares of capital stock outstanding) .......... 100.00% $30,049,063
------- -----------
------- -----------
</TABLE>
See accompanying notes to financial statements.
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6
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COHEN & STEERS REALTY INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (Identified cost -- $28,736,755) (Note 1)................. $29,686,278
Cash.......................................................................................... 662
Receivable for investment securities sold..................................................... 670,183
Dividends receivable.......................................................................... 255,412
Other assets.................................................................................. 5,168
-----------
Total Assets............................................................................ 30,617,703
-----------
LIABILITIES:
Payable for dividends declared................................................................ 498,626
Payable to administrator...................................................................... 15,789
Payable to investment adviser................................................................. 14,008
Payable to directors.......................................................................... 2,110
Other liabilities............................................................................. 38,107
-----------
Total Liabilities....................................................................... 568,640
-----------
NET ASSETS applicable to 2,933,094 shares of $0.01 par value common stock
outstanding (Note 4).......................................................................... $30,049,063
-----------
-----------
NET ASSET VALUE PER SHARE:
($30,049,063[div]2,933,094 shares outstanding)................................................ $ 10.24
-----------
-----------
MARKET PRICE PER SHARE.............................................................................. $ 10.31
-----------
-----------
MARKET PRICE PREMIUM TO NET ASSET VALUE PER SHARE................................................... 0.71%
-----------
-----------
NET ASSETS consist of:
Paid-in capital (Notes 1 and 4)............................................................... $23,683,127
Undistributed net investment income........................................................... 9,138
Accumulated net realized gain on investments sold............................................. 5,407,275
Net unrealized appreciation on investments.................................................... 949,523
-----------
$30,049,063
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
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7
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COHEN & STEERS REALTY INCOME FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
Investment Income (Note 1):
Dividend income............................................................................... $ 1,305,220
Interest income............................................................................... 4,883
-----------
Total Income............................................................................ 1,310,103
-----------
Expenses:
Investment advisory fees (Note 2)............................................................. 100,263
Administration fees (Note 2).................................................................. 31,352
Professional fees............................................................................. 20,196
Reports to shareholders....................................................................... 18,275
Transfer agent fees........................................................................... 17,135
Directors' fees and expenses (Note 2)......................................................... 16,291
Custodian fees and expenses................................................................... 7,010
Miscellaneous................................................................................. 8,517
-----------
Total Expenses.......................................................................... 219,039
-----------
Net Investment Income............................................................................... 1,091,064
-----------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments.............................................................. 4,188,682
Net change in unrealized appreciation on investments.......................................... (6,740,705)
-----------
Net realized and unrealized gain (loss) on investments.................................. (2,552,023)
-----------
Net Decrease in Net Assets Resulting from Operations................................................ $(1,460,959)
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
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8
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COHEN & STEERS REALTY INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE
JUNE 30, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
---------------- -----------------
<S> <C> <C>
Change in Net Assets:
From Operations:
Net investment income.................................... $ 1,091,064 $ 1,999,083
Net realized gains on investments........................ 4,188,682 3,636,607
Net change in unrealized appreciation (depreciation) on
investments........................................... (6,740,705) 1,110,208
---------------- -----------------
Net increase (decrease) in net assets resulting
from operations................................. (1,460,959) 6,745,898
---------------- -----------------
Dividends and Distributions to Shareholders from (Note 1):
Net investment income.................................... (996,538) (1,966,574)
Net realized gains on investments........................ -- (3,708,567)
---------------- -----------------
Total dividends and distributions to
shareholders.................................... (996,538) (5,675,141)
---------------- -----------------
Capital Stock Transactions (Note 4):
Increase in net asset value from shares issued to
shareholders in reinvestment of dividends and
distributions from net investment income and net
realized gain on investments.......................... 401,829 211,201
---------------- -----------------
Total increase (decrease) in net assets............ (2,055,668) 1,281,958
Net Assets:
Beginning of period...................................... 32,104,731 30,822,773
---------------- -----------------
End of period (including undistributed net investment of
$9,138 and distributions in excess of net investment
income of $85,388, respectively)...................... $ 30,049,063 $32,104,731
---------------- -----------------
---------------- -----------------
</TABLE>
See accompanying notes to financial statements.
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9
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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>
FOR THE
SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, 1998 -------------------------------------------------------
PER SHARE OPERATING PERFORMANCE (UNAUDITED) 1997 1996 1995 1994 1993
- ----------------------------------------------- ---------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 11.08 $ 10.70 $ 8.59 $ 8.30 $ 8.70 $ 7.63
------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income...................... 0.37 0.69 0.68 0.64 0.65 0.65
Net realized and unrealized gain (loss) on
investments............................. (0.87) 1.65 2.26 0.33 (0.31) 1.10
------- ------- ------- ------- ------- -------
Total from investment operations...... (0.50) 2.34 2.94 0.97 0.34 1.75
------- ------- ------- ------- ------- -------
Less dividends and distributions to
shareholders from:
Net investment income...................... (0.34) (0.68) (0.68) (0.40) (0.49) (0.65)
In excess of net investment income......... -- -- -- -- -- (0.03)
Capital gains.............................. -- (1.28) (0.15) -- (0.09) --
Tax return of capital...................... -- -- -- (0.28) (0.16) --
------- ------- ------- ------- ------- -------
Total dividends and distributions to
shareholders........................ (0.34) (1.96) (0.83) (0.68) (0.74) (0.68)
------- ------- ------- ------- ------- -------
Net asset value, end of period............. $ 10.24 $ 11.08 $ 10.70 $ 8.59 $ 8.30 $ 8.70
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Market value, end of period................ $ 10.31 $ 11.56 $ 12.00 $ 9.13 $ 8.50 $ 9.50
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
- ---------------------------------------------------------------------------------------------------------------------------
Total market value return(1)................... (8.06)%(2) 13.20% 42.32% 15.97% (2.78)% 27.77%
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Total net asset value return(1)................ (4.57)%(2) 22.44% 33.32% 12.12% 3.80% 23.04%
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
- ---------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in millions).... $ 30.049 $32.105 $30.823 $24.577 $23.548 $24.502
------- ------- ------- ------- ------- -------
Ratios of expenses to average net assets... 1.40%(3) 1.42% 1.45% 1.73% 1.51%(4) 1.64%
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Ratio of net investment income to average
net assets.............................. 6.96%(3) 6.07% 7.34% 7.67% 7.62% 7.31%
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Portfolio turnover rate.................... 44.17%(2) 53.76% 30.45% 37.75% 80.68% 107.91%
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
</TABLE>
- ------------------------
(1) Total market value 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
changes in value over the period indicated taking into account dividends and
distributions are reinvested.
(2) Not annualized.
(3) Annualized.
(4) Fees paid through directed brokerage commissions have been excluded. Had
these fees been paid by the Fund, the ratio would have been 1.69%.
See accompanying notes to financial statements.
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10
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COHEN & STEERS REALTY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Cohen & Steers Realty Income Fund, Inc. (the 'Fund') was incorporated under
the laws of the State of Maryland on June 21, 1988 and is registered under the
Investment Company Act of 1940 (the 'Act'), as amended, as a closed-end
non-diversified management investment company. 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 amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates.
Portfolio Valuation: Investments in securities that are listed on the New
York Stock Exchange are valued, except as indicated below, at the last sale
price reflected at the close of the New York Stock Exchange on the business day
as of which such value is being determined. If there has been no sale on such
day, the securities are valued at the mean of the closing bid and asked prices
for the day.
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. A portion of the Fund's dividend may
consist of amounts in excess of net investment income derived from non-taxable
components of the dividends from the Fund's portfolio investments. Net realized
capital gains, unless offset by any available capital loss carryforward, are
distributed to shareholders annually. Distributions to shareholders are recorded
on the ex-dividend date.
- --------------------------------------------------------------------------------
11
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COHEN & STEERS REALTY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
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.
Federal Income Taxes: It is the policy of the Fund to qualify as a
regulated investment company, if such qualification is in the best interest of
the shareholders, by complying with the requirements of Subchapter M of the
Internal Revenue Code applicable to regulated investment companies, and by
distributing substantially all of its taxable earnings to its shareholders.
Accordingly, no provision for federal income or excise tax is necessary.
NOTE 2. INVESTMENT ADVISORY AND ADMINISTRATION FEES AND OTHER TRANSACTIONS WITH
AFFILIATES
Investment Advisory Fees: Cohen & Steers Capital Management, Inc. (the
'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 to the Fund, the Adviser receives a monthly
fee in an amount equal to 1/12th of 0.65% of the average daily net assets of the
Fund (approximately 0.65% on an annual basis). For the six months ended June 30,
1998, the Fund incurred $100,263 in advisory fees.
Administration Fees: The Chase Manhattan Bank, N.A., through its affiliate
Chase Global Funds Services Company ('CGFSC' or the 'Administrator'), 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 0.20% of the average daily net assets of the Fund
(approximately 0.20% on an annual basis). For the six months ended June 30,
1998, the Fund incurred $31,352 in administration fees.
Directors' Fees: Certain directors and officers of the Fund are also
directors, officers and/or employees of the Adviser. None of the directors and
officers so affiliated received compensation for their services as directors of
the Fund. Fees and related expenses accrued for non-affiliated directors totaled
$16,291 for the six months ended June 30, 1998.
NOTE 3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, excluding short-term investments, for
the six months ended June 30, 1998 totaled $14,050,907 and $18,176,359,
respectively.
At June 30, 1998, the cost and unrealized appreciation or depreciation in
value of the investments owned by the Fund, are as follows:
<TABLE>
<S> <C>
Aggregate cost.......................................................................... $28,736,755
-----------
Gross unrealized appreciation........................................................... $ 1,911,000
Gross unrealized depreciation........................................................... $ (961,477)
-----------
Net unrealized appreciation............................................................. $ 949,523
-----------
-----------
</TABLE>
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12
<PAGE>
<PAGE>
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COHEN & STEERS REALTY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE 4. CAPITAL STOCK AND DISTRIBUTION REINVESTMENT
At June 30, 1998, the Fund has one class of common stock, par value $0.01
per share, of which 50 million shares are authorized and 2,933,094 shares are
outstanding.
Distributions during the six months ended June 30, 1998 resulted in 35,776
shares being issued at an average price of $10.91 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,
('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 ASSETS
NET REALIZED AND (DECREASE) IN AT
TOTAL INVESTMENT NET INVESTMENT UNREALIZED GAIN NET ASSETS RESULTING END OF
QUARTERLY PERIOD INCOME INCOME (LOSS) ON INVESTMENTS FROM OPERATIONS PERIOD
- ------------------ ------------------- ------------------- --------------------- --------------------- ------------------
PER PER PER PER PER
FISCAL 1998 AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE
- ------------------ ---------- ----- ---------- ----- ----------- ------ ----------- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31.......... $ 582,989 $0.20 $ 471,313 $0.16 $ (545,469) $(0.18) $ (74,156) $(0.02) $31,888,847 $10.89
June 30........... 727,114 0.25 619,751 0.21 (2,006,554) (0.69 (1,386,803) (0.48) 30,049,063 10.24
---------- ----- ---------- ----- ----------- ------ ----------- ------
$1,310,103 $0.45 $1,091,064 $0.37 $(2,552,023) $(0.87) $(1,460,959) $(0.50)
---------- ----- ---------- ----- ----------- ------ ----------- ------
---------- ----- ---------- ----- ----------- ------ ----------- ------
<CAPTION>
PER PER PER PER PER
FISCAL 1997 AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE
- ------------------ ---------- ----- ---------- ----- ----------- ------ ----------- ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31.......... $ 587,724 $0.20 $ 477,384 $0.17 $ (52,886) $(0.02) $ 424,498 $ 0.15 $30,839,414 $10.68
June 30........... 633,590 0.22 522,672 0.18 1,494,651 0.52 2,017,323 0.70 32,408,877 11.21
September 30...... 608,021 0.21 487,940 0.16 2,784,820 0.97 3,272,760 1.13 35,234,472 12.17
December 31....... 635,870 0.22 511,087 0.18 520,230 0.18 1,031,317 0.36 32,104,731 11.08
---------- ----- ---------- ----- ----------- ------ ----------- ------
$2,465,205 $0.85 $1,999,083 $0.69 $ 4,746,815 $ 1.65 $ 6,745,898 $ 2.34
---------- ----- ---------- ----- ----------- ------ ----------- ------
---------- ----- ---------- ----- ----------- ------ ----------- ------
<CAPTION>
PER PER PER PER PER
FISCAL 1996 AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE
- ------------------ ---------- ----- ---------- ----- ----------- ------ ----------- ------ ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
September 30...... $ 509,289 $0.18 $ 413,898 $0.15 $ 1,478,090 $ 0.51 $ 1,891,988 $ 0.66 $27,854,272 $ 9.69
December 31....... 689,046 0.24 583,744 0.20 3,753,796 1.30 4,337,540 1.50 30,822,773 10.70
---------- ----- ---------- ----- ----------- ------ ----------- ------
$1,198,335 $0.42 $ 997,642 $0.35 $ 5,231,886 $ 1.81 $ 6,229,528 $ 2.16
---------- ----- ---------- ----- ----------- ------ ----------- ------
---------- ----- ---------- ----- ----------- ------ ----------- ------
</TABLE>
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act that the Fund may purchase, from time to time, shares of its common
stock in the open market.
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13
<PAGE>
<PAGE>
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COHEN & STEERS REALTY INCOME FUND, INC.
PROXY RESULTS
During the six month period ended June 30, 1998, Cohen & Steers Realty
Income Fund, Inc. shareholders voted on the following proposals at the annual
meeting held on April 23, 1998. The description of each proposal and number of
shares voted are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
SHARES VOTED SHARES VOTED
FOR AUTHORITY WITHHELD
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. To elect Directors
Martin Cohen 2,669,060 28,192
Jeffrey H. Lynford 2,665,860 31,392
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
SHARES VOTED SHARES VOTED SHARES VOTED
FOR AGAINST ABSTAIN
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. To ratify PricewaterhouseCoopers as the Fund's
certified public accountants 2,660,221 19,432 17,600
</TABLE>
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14
<PAGE>
<PAGE>
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COHEN & STEERS REALTY INCOME FUND, INC.
<TABLE>
<S> <C>
OFFICERS AND DIRECTORS
Robert H. Steers INVESTMENT ADVISER
Director and Chairman Cohen & Steers Capital Management, Inc.
757 Third Avenue
Martin Cohen New York, NY 10017
Director and President (212) 832-3232
Gregory C. Clark FUND ADMINISTRATOR AND TRANSFER AGENT
Director Chase Global Funds Services Co.
73 Tremont Street
George Grossman Boston, Massachusetts 02108
Director (800) 437-9912
Jeffrey H. Lynford CUSTODIAN
Director The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
Willard H. Smith, Jr. New York, New York 10081
Director
LEGAL COUNSEL
Elizabeth O. Reagan Dechert Price & Rhoads
Vice President 30 Rockefeller Plaza
New York, NY 10112
Adam Derechin
Vice President and American Stock Exchange Symbol: RIF
Assistant Treasurer Website: www.cohenandsteers.com
William Goodwin This report is for shareholder information. This is not a
Assistant Secretary prospectus intended for use in the purchase or sale of
Fund shares.
</TABLE>
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15
<PAGE>
<PAGE>
[LOGO]
COHEN & STEERS
REALTY INCOME FUND
SEMI-ANNUAL REPORT
JUNE 30, 1998
COHEN & STEERS
REALTY INCOME FUND
757 THIRD AVENUE
NEW YORK, NY 10017
- ----------------
First Class Mail
U.S. Postage
PAID
Boston, MA
Permit No. 56712
- ----------------
STATEMENT OF DIFFERENCES
------------------------
The division sign shall be expressed as................................ [div]
