<PAGE>
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COHEN & STEERS REALTY INCOME FUND, INC.
July 20, 1999
To Our Shareholders:
We are pleased to submit to you our semi-annual report for Cohen & Steers
Realty Income Fund for the quarter and six months ended June 30, 1999. The net
asset value per share at that date was $7.64. In addition, a regular quarterly
dividend of $0.17 per share was declared for shareholders of record June 28,
1999 and paid on on July 15, 1999.
MIDYEAR REVIEW
For the three months ended June 30, 1999, Cohen & Steers Realty Income Fund
had a total return, based on income and change in net asset value, of 11.2%.
This performance compares favorably to the NAREIT Equity REIT Index total return
of 10.1%. The Fund's total return for the six months ended June 30, 1999 was
5.6%, compared to the NAREIT Equity REIT Index return of 4.8%. We believe the
Fund is well positioned based on its emphasis on companies with above-average
current income, consistent earnings growth, and attractive relative valuation
levels.
In the second quarter of 1999, real estate securities posted their
strongest quarterly returns in nearly two years. Following what was a 15-month
bear market that produced a price decline of nearly 28%, REIT share prices
appear to have bottomed out. We believe that their recovery was brought about by
renewed strength in the U.S economy, solid real estate fundamentals and
compelling valuations. In addition, unlike the prevailing fears last year with
respect to the potential for a global economic recession accompanied by price
deflation, concern has shifted in 1999 to the potential for runaway growth in
the economy, rekindling fears of price inflation.
There were a number of other important developments during the quarter and
first half of this year, which represent a complete reversal of the trends that
prevailed in 1998. For example, last year the Treasury Department pushed for
Congress to adopt several legislative proposals which, if enacted, could have
reigned in the growth rates for REITs. Although the only element to pass was the
elimination of the 'paired share' structure that affected only a handful of
companies, this created a great deal of negative investor sentiment. In
contrast, this year's regulatory environment is extremely accommodative.
Legislation recently proposed in both houses of Congress, and which seems to
have a strong probability of passing, would significantly expand the ability of
REITs to engage in related service businesses. This would enable REITs to
exercise greater control of their operations as well as pursue new avenues of
growth. There are, in addition, a number of other proposals attached to this
legislation that, at the margin, are positive for the REIT industry.
As a result of the bear market as well as the continued rise in property
values, the property acquisition activity by REITs has declined dramatically.
For example, as reported by NAREIT, REIT property acquisitions in the first
quarter of 1999 totaled $4.0 billion, an 80% decline from last year's first
quarter, when REITs acquired $20.1 billion worth of property. In the second
quarter, REIT acquisitions of $2.4 billion represent an 82% decline from last
year's second quarter acquisition pace of $13.3 billion. We also believe that
approximately $4 billion of property sales by REITs took place in the first half
of the year, with more targeted to close in the second half of the year. This
record amount of dispositions by REITs was facilitated by the exceptionally
strong pricing and demand in the private market.
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1
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COHEN & STEERS REALTY INCOME FUND, INC.
This dramatic reduction acquisition activity has concurrently reduced
REITs' need for capital. According to NAREIT statistics, REITs issued only $2.6
billion in equity in the first half of the year, an 84% decline from the $16.1
billion raised in the first half of 1998. These statistics do not take into
account the actual retirement of stock that took place in the first half of the
year, as approximately 20 companies announced share repurchase programs
encompassing the potential purchase of $500 million of their equity. Unlike a
year ago when most REIT shares were trading at a premium to their net asset
values (NAVs), today they are trading at a discount and most REIT managements
believe that their stock is the most compelling investment opportunity available
to them. So far this year, four companies believe this so strongly that they
have proposed plans to go private.
On the debt side, borrowing by REITs also declined in the first half of the
year. Issuance of secured and unsecured debt declined 57% to $6.9 billion from
$12.2 billion in the first half of 1998. Much of this borrowing was used to
replace bank debt or to refinance maturing obligations. Issuance of CMBS
(commercial mortgage backed securities), by both public and private companies in
the first half declined by 20% to $34.8 billion from $43.4 billion a year ago.
Importantly, in both the unsecured debt and CMBS markets, issuance in the second
quarter was considerably slower than in the first quarter, the result of
drastically reduced borrowing needs, the uptick in interest rates, and less
investor demand.
Finally, the debate about the interest rate-sensitivity of REITs
intensified in the first half of the year. Whereas last year's precipitous
decline in interest rates was accompanied by a dramatic decline in REIT share
prices, this year's rise in interest rates seems to have had the opposite
effect. Although statistical evidence supports a low correlation of interest
rates to REIT share prices, many observers view this year's rise in rates to
have negative implications. We believe that the interest rate picture is
reflective of, not the cause of, current and prospective economic and
fundamental conditions. Those fundamental conditions are currently exceptionally
good for both real estate and REITs, and this should remain the strongest
influence on share prices.
INVESTMENT OUTLOOK
The prospect of a strong economy and rising inflation, while upsetting to
fixed-income and other investors, is a major plus for owners of real estate.
Particularly in light of the prevailing tight markets and low vacancy rates,
real estate seems poised to resume its role as a prime hedge against inflation.
Increasing rental income and replacement cost is further enhancing the asset
values of all property owners. To the extent that underlying asset values at all
influence REIT share prices -- and we believe that they do -- the current
investment environment is nearly ideal.
This attractive real estate investment environment is also ideal for the
equity income strategy. Several key investment themes that we are pursuing
include; 1) seeking out above average current income from companies with sound
business plans, 2) companies in property sectors that have the potential for
above average earnings from internal growth, 3) viable companies that trade at a
steep discount to their underlying asset value.
The Fund's 43 investment securities generated an annualized gross dividend
yield of 8.4% at quarter end (a portion of a REIT's dividend may represent a
return of capital for tax purposes). This is materially higher than the NAREIT
Equity REIT Index dividend yield of 7.3% for the same period. Throughout the
first half of this year we have invested in securities generating a high current
yield while increasing the expected earnings per share growth of the portfolio's
underlying equity securities. The projected rate of earnings per share growth
for the Fund's equity
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2
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COHEN & STEERS REALTY INCOME FUND, INC.
investments has increased to 10.5% from 9.5% at the beginning of the year. This
improvement is a result of the Fund identifying pricing inefficiencies and
investing opportunistically in companies throughout the year. This higher level
of earnings growth will, hopefully, translate into greater share price
appreciation and dividend increases.
The property sector with the best core fundamentals, we feel, is central
business district (CBD) office. Minimal levels of construction activity in many
cities throughout the country coupled with continued economic strength has led
to a 'landlord's market'. The office market is one of the few businesses in the
country that has pricing power. We expect internal growth, which is the ability
to grow earnings from raising raise rents and occupancy levels of existing
assets, to be well in excess of inflation in this sector. The Fund's largest
holding is Mack-Cali Realty Corporation, a New Jersey-based owner of office
buildings. We expect double-digit earnings per share growth from this company
over the next three years as it benefits from rent growth from its existing
portfolio. The Office sector is the Fund's largest sector weighting with a 20%
allocation.
The Health Care sector has the potential for outsized returns. Health care
REITs predominantly own nursing homes and other types of properties catering to
the needs of the elderly. Changes in the level of reimbursement for services
provided at these property types has had a negative impact on the profitability
of nursing home operators. This in turn has caused the health care REIT stocks
to underperform the market. We view this as a buying opportunity. Demand for
elderly housing continues to grow and the population over age 85, typical
nursing home resident age, is increasing three times as fast as younger
Americans. In addition, construction activity has slowed. We also feel that the
federal government has consistently advocated for adequate care for the elderly
and that policy actions are being considered to address the financial viability
of the industry. We have increased our weighting in the Health Care sector to
13%.
We continuously review and update the net asset value of the companies in
our investment universe. Companies trading at a steep discount to their real
estate value merit further attention. One investment we are excited about is SL
Green Realty Corp. This New York-based office REIT is trading at a sizable
discount to NAV and is in one of the strongest office markets in the country.
Brandywine Realty Trust, Prime Group Realty Trust and Philips International all
meet this criteria as well. We continue to feel that the most attractively
priced real estate is in publicly traded REITs and that there will be
consolidation, which the Fund should benefit from.
Recently proposed changes in REIT regulations, if passed, will likely
create additional investment opportunities. The proposed REIT change(s) would
allow REITs to own taxable subsidiaries to engage in real estate related
activities, which are currently very limited. This change would allow companies
to offer various real estate related services to their tenants and/or space
users, i.e. shoppers/office workers. Companies owning large portfolios, which
generate sizable through traffic would be in a good position to generate fee
income for access to their 'customer base'. It would also require minimal
additional capital. We will continue to scrutinize our investment universe for
companies best positioned to take advantage of this.
Strong economic fundamentals coupled with healthy real estate markets make
us optimistic about the future performance of the Fund. The strong performance
in the second quarter, we feel, was long overdue given fundamentals and relative
valuation. Notwithstanding this recent improvement, the group is still very
attractively valued. What REITs offer, low price-to-earnings multiples, high
current income, and pricing power at the property
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3
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COHEN & STEERS REALTY INCOME FUND, INC.
level, should continue to attract investors rotating into value. Additionally,
we are optimistic that the apparent completion of the long REIT bear market in
the first quarter of this year will serve as a signal to investors to move back
into REITs. We believe, based on current valuation levels and on the portfolio
composition, that we are positioned to deliver continued solid performance.
Sincerely,
MARTIN COHEN ROBERT H. STEERS
MARTIN COHEN ROBERT H. STEERS
President Chairman
STEVEN R. BROWN
STEVEN R. BROWN
Senior Vice President
Cohen & Steers Capital Management, Inc.
Cohen & Steers is now online at WWW.COHENANDSTEERS.COM. Visit our website for
daily NAVs, portfolio information, performance information, recent news
articles, literature and insights on the REIT market.
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4
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COHEN & STEERS REALTY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER VALUE
OF SHARES (NOTE 1)
--------- -----------
<S> <C> <C>
EQUITIES 100.19%
COMMON STOCK 78.12%
APARTMENT/RESIDENTIAL 8.27%
Apartment Investment & Management
Co. -- Class A..................... 8,400 $ 359,100
Charles E. Smith Residential Realty... 10,100 342,769
Essex Property Trust.................. 11,000 389,125
Home Properties of New York........... 500 13,812
Summit Properties..................... 40,000 790,000
-----------
1,894,806
-----------
DIVERSIFIED 2.67%
Anthracite Capital.................... 93,100 610,969
-----------
HEALTH CARE 13.34%
ElderTrust............................ 27,600 281,175
Health Care Property Investors........ 26,000 750,750
Healthcare Realty Trust............... 33,000 693,000
Nationwide Health Properties.......... 38,100 726,281
Omega Healthcare Investors............ 11,600 299,425
*Ventas................................ 56,700 304,763
-----------
3,055,394
-----------
HOTEL 1.69%
FelCor Lodging Trust.................. 18,700 388,025
-----------
INDUSTRIAL 9.08%
AMB Property Corp..................... 21,400 502,900
First Industrial Realty Trust......... 22,800 625,575
Pacific Gulf Properties............... 42,100 952,512
-----------
2,080,987
-----------
OFFICE 20.00%
Arden Realty Group.................... 24,700 608,237
Brandywine Realty Trust............... 40,200 796,463
CarrAmerica Realty Corp............... 24,700 617,500
Cornerstone Properties................ 14,300 227,013
Crescent Real Estate Equities Co...... 16,500 391,875
Highwoods Properties.................. 35,300 968,544
Mack-Cali Realty Corp................. 31,400 971,437
-----------
4,581,069
-----------
</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, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER VALUE
OF SHARES (NOTE 1)
--------- -----------
<S> <C> <C>
OFFICE/INDUSTRIAL 6.50%
Liberty Property Trust................ 29,200 $ 726,350
Prime Group Realty Trust.............. 31,500 541,406
Reckson Associates Realty
Corp. -- Class B................... 9,208 219,841
-----------
1,487,597
-----------
SHOPPING CENTER 15.14%
COMMUNITY CENTER 9.61%
Developers Diversified Realty Corp.... 13,900 231,088
Federal Realty Investment Trust....... 17,200 394,525
Pan Pacific Retail Properties......... 29,600 575,350
Phillips International Realty Corp.... 31,000 523,125
Regency Realty Corp................... 21,700 476,044
-----------
2,200,132
-----------
REGIONAL MALL 5.53%
JP Realty............................. 33,600 690,900
Simon Property Group.................. 15,900 403,462
Taubman Centers....................... 13,000 171,438
-----------
1,265,800
-----------
TOTAL SHOPPING CENTER................. 3,465,932
-----------
SPECIALTY 1.43%
Entertainment Properties Trust........ 18,600 327,825
-----------
TOTAL COMMON STOCK (Identified
cost -- $18,246,681)......... 17,892,604
-----------
PREFERRED STOCK 22.07%
Apartment Investment & Management Co.,
9.00%,
Series C........................... 29,000 694,188
Apartment Investment & Management Co.,
9.375%,
Series G........................... 37,600 914,150
Bradley Real Estate, 8.40%, Series A
(Convertible)...................... 30,634 708,411
Camden Property Trust, $2.25, Series A
(Convertible)...................... 18,700 468,669
Crown American Realty Trust, 11.00%,
Series A........................... 11,100 523,087
Prime Retail, 8.50%, Series B
(Convertible)...................... 23,940 383,040
Reckson Associates Realty Corp.,
7.625%, Series A
(Convertible)...................... 31,200 711,750
SL Green Realty Corp., 8.00%, Series A
(Convertible)...................... 28,700 651,131
-----------
TOTAL PREFERRED STOCK
(Identified
cost -- $5,160,056).......... 5,054,426
-----------
TOTAL EQUITIES (Identified
cost -- $23,406,737)......... 22,947,030
-----------
</TABLE>
See accompanying notes to financial statements.
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6
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COHEN & STEERS REALTY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
--------- -----------
<S> <C> <C>
COMMERCIAL PAPER 1.26%
Carolina Power & Light Co., 5.50%, due 7/1/99
(Identified cost -- $289,000)............ $289,000 $ 289,000
-----------
TOTAL INVESTMENTS (Identified
cost -- $23,695,737) .................. 101.45% 23,236,030
LIABILITIES IN EXCESS OF OTHER ASSETS ... (1.45)% (332,369)
------ -----------
NET ASSETS (Equivalent to $7.64 per share based on
2,998,667 shares of capital stock
outstanding) .......................... 100.00% $22,903,661
------ -----------
------ -----------
</TABLE>
- ------------------------
* Non-income producing security.
See accompanying notes to financial statements.
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7
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COHEN & STEERS REALTY INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (Identified
cost -- $23,695,737) (Notes 1)....................... $23,236,030
Cash.................................................. 107
Dividends receivable.................................. 225,812
Receivable for investment securities sold............. 4,850
-----------
Total Assets.................................... 23,466,799
-----------
LIABILITIES:
Payable for dividends declared........................ 509,773
Payable to investment adviser......................... 14,510
Payable to administrator.............................. 1,158
Other liabilities..................................... 37,697
-----------
Total Liabilities............................... 563,138
-----------
NET ASSETS applicable to 2,998,667 shares of $0.001 par
value common stock outstanding (Note 5)................ $22,903,661
-----------
-----------
NET ASSET VALUE PER SHARE:
($22,903,661[div]2,998,667 shares outstanding)........ $ 7.64
-----------
-----------
MARKET PRICE PER SHARE...................................... $ 8.75
-----------
-----------
MARKET PRICE PREMIUM TO NET ASSET VALUE..................... 14.53%
-----------
-----------
NET ASSETS consist of:
Paid-in capital (Notes 1 and 5)....................... $23,985,883
Distributions in excess of net investment income...... (141,980)
Accumulated net realized loss on investments sold..... (480,535)
Net unrealized depreciation on investments............ (459,707)
-----------
$22,903,661
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
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8
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COHEN & STEERS REALTY INCOME FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
Investment Income (Note 1):
Dividend income....................................... $ 1,025,585
Interest income....................................... 16,058
-----------
Total Income.................................... 1,041,643
-----------
Expenses:
Investment advisory fees (Note 2)..................... 71,602
Reports to shareholders............................... 26,897
Professional fees..................................... 21,867
Administration and transfer agent fees (Note 2)....... 23,126
Directors' fees and expenses (Note 2)................. 15,899
Custody fees and expenses............................. 9,678
Miscellaneous......................................... 5,861
-----------
Total Expenses.................................. 174,930
-----------
Reduction of expenses (Note 4).............................. (9,678)
-----------
Net Expenses.................................... 165,252
-----------
Net Investment Income....................................... 876,391
-----------
Net Realized and Unrealized Gain/(Loss) on Investments:
Net realized loss on investments...................... (1,020,823)
Net change in unrealized appreciation/(depreciation)
on investments....................................... 1,361,789
-----------
Net realized and unrealized gain/(loss) on
investments.................................... 340,966
-----------
Net Increase in Net Assets Resulting from Operations........ $ 1,217,357
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
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9
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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, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
---------------- -----------------
<S> <C> <C>
Change in Net Assets:
From Operations:
Net investment income............. $ 876,391 $ 2,035,900
Net realized gain / (loss) on
investments.................... (1,020,823) 3,031,673
Net change in unrealized
appreciation/(depreciation) on
investments.................... 1,361,789 (9,511,724)
----------- -----------
Net increase/(decrease) in
net assets resulting from
operations............... 1,217,357 (4,444,151)
----------- -----------
Dividends and Distributions to
Shareholders from (Note 1):
Net investment income............. (1,018,371) (1,211,110)
Net realized gain on
investments.................... -- (4,449,380)
Tax return of capital............. -- (248,852)
----------- -----------
Total dividends and
distributions to
shareholders............. (1,018,371) (5,909,342)
----------- -----------
Capital Stock Transactions (Note 5):
Increase in net asset value of
shares issued to shareholders
in reinvestment of dividends
and distributions from net
investment income and
net realized gain on
investments.................... 460,626 492,811
----------- -----------
Total increase/(decrease) in
net assets............... 659,612 (9,860,682)
Net Assets:
Beginning of period..................... 22,244,049 32,104,731
----------- -----------
End of period (Including distributions
in excess of net investment income of
$141,980 at June 30, 1999)........... $22,903,661 $22,244,049
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
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10
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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, 1999 ---------------------------------------------
PER SHARE OPERATING PERFORMANCE (UNAUDITED) 1998 1997 1996 1995 1994
- ------------------------------- ---------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $ 7.56 $11.08 $10.70 $ 8.59 $ 8.30 $ 8.70
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income.............. 0.29 0.69 0.69 0.68 0.64 0.65
Net realized and unrealized
gain/(loss) on investments...... 0.13 (2.20) 1.65 2.26 0.33 (0.31)
------ ------ ------ ------ ------ ------
Total from investment
operations.................. 0.42 (1.51) 2.34 2.94 0.97 0.34
------ ------ ------ ------ ------ ------
Less dividends and distributions to
shareholders from:
Net investment income.............. (0.34) (0.41) (0.68) (0.68) (0.40) (0.49)
Net realized gain on investments... -- (1.52) (1.28) (0.15) -- (0.09)
Tax return of capital.............. -- (0.08) -- -- (0.28) (0.16)
------ ------ ------ ------ ------ ------
Total dividends and
distributions to
shareholders................ (0.34) (2.01) (1.96) (0.83) (0.68) (0.74)
------ ------ ------ ------ ------ ------
Net asset value, end of period..... $ 7.64 $ 7.56 $11.08 $10.70 $ 8.59 $ 8.30
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Market value, end of period........ $ 8.75 $ 7.81 $11.56 $12.00 $ 9.13 $ 8.50
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
- ---------------------------------------------------------------------------------------------------------
Total market value return(1)........... 16.65%(2) (15.90)% 13.20% 42.32% 15.97% (2.78)%
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Total net asset value return(1)........ 5.59%(2) (13.77)% 22.44% 33.32% 12.12% 3.80%
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
- ---------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- ---------------------------------------
Net assets, end of period (in
millions)....................... $ 22.9 $ 22.2 $ 32.1 $ 30.8 $ 24.6 $ 23.5
------ ------ ------ ------ ------ ------
Ratios of expenses to average net
assets (before expense
reduction)...................... 1.59%(3) 1.52% 1.42% 1.45% 1.73% 1.51%
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Ratios of expenses to average net
assets (net of expense
reduction)...................... 1.50%(3) 1.51% 1.42% 1.45% 1.73% 1.42%
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Ratio of net investment income to
average net assets (before
expense reduction).............. 7.87%(3) 6.89% 6.07% 7.34% 7.67% 7.62%
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Ratio of net investment income to
average net assets (net of
expense reduction).............. 7.96%(3) 6.90% 6.07% 7.34% 7.67% 7.71%
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Portfolio turnover rate............ 32.17%(2) 88.32% 53.76% 30.45% 37.75% 80.68%
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
</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 reinvested
dividends.
(2) Not annualized.
(3) Annualized.
See accompanying notes to financial statements.
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11
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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 Cohen &
Steers Capital Management, Inc. 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 market 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.
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. These differences are primarily due to
return of capital and capital gain distributions received by the Fund on
portfolio securities.
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
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, 1999, the Fund incurred $71,602 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') with Cohen & Steers Realty Income Fund, Inc., Cohen & Steers Realty
Shares, Inc., Cohen & Steers Special Equity Fund, Inc. and Cohen & Steers Equity
Income Fund, Inc. (the 'Funds'). 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 Funds, the Administrator
receives a monthly fee at the annual rate of 0.08% on the first $500 million of
the Funds' average daily net assets and of lower rates on the Funds' average
daily net assets in excess of that amount. For the six months ended June 30,
1999, the Fund incurred $21,007 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. For the six months ended June 30, 1999, fees and related expenses
accrued for non-affiliated directors totaled $15,899.
NOTE 3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, excluding short-term investments, for
the six months ended June 30, 1999 totaled $7,275,702 and $9,198,242,
respectively.
At June 30, 1999, 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>
<S> <C>
Aggregate cost............................................. $23,695,737
-----------
Gross unrealized appreciation.............................. $ 878,781
Gross unrealized depreciation.............................. $(1,338,488)
-----------
Net unrealized depreciation................................ $ (459,707)
-----------
-----------
</TABLE>
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13
<PAGE>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE 4. DIRECTED BROKERAGE ARRANGEMENTS
The Adviser has directed certain portfolio trades to brokers who paid a
portion of the Fund's expenses. For the six months ended June 30, 1999, the
Fund's expenses were reduced by $9,678 under this arrangement.
NOTE 5. CAPITAL STOCK AND DISTRIBUTION REINVESTMENT
At June 30, 1999, the Fund has one class of common stock, par value $0.01
per share, of which 50 million shares are authorized and 2,998,667 shares are
outstanding.
Distributions during the six months ended June 30, 1999 resulted in 56,378
shares being issued at an average price of $8.17 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 6. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
NET REALIZED AND
TOTAL INVESTMENT UNREALIZED GAIN/(LOSS) ON
QUARTERLY PERIOD INCOME NET INVESTMENT INCOME INVESTMENTS
- ---------------- ------------------ ---------------------- --------------------------
PER PER PER
FISCAL 1999 AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE
- ------------------------------------------- ---------- ----- ---------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
March 31................................... $ 540,840 $0.18 $ 449,816 $0.15 $(1,593,152) $(0.52)
June 30.................................... 500,803 0.17 426,575 0.14 1,934,118 0.65
---------- ----- ---------- ----- ----------- ------
$1,041,643 $0.35 $ 876,391 $0.29 $ 340,966 $ 0.13
---------- ----- ---------- ----- ----------- ------
---------- ----- ---------- ----- ----------- ------
<CAPTION>
Net Increase/
(Decrease) in
Net Assets Resulting Net Assets at
from Operations End of Period
--------------------- --------------------
PER PER
FISCAL 1999 AMOUNT SHARE AMOUNT SHARE
- ------------------------------------------- ----------- ------ ----------- ------
<S> <C> <C> <C> <C>
March 31................................... $(1,143,336) $(0.37) $21,000,169 $ 7.02
June 30.................................... 2,360,693 0.79 22,903,661 7.64
----------- ------
$ 1,217,357 $ 0.42
----------- ------
----------- ------
<CAPTION>
NET REALIZED AND
TOTAL INVESTMENT UNREALIZED GAIN/(LOSS) ON
INCOME NET INVESTMENT INCOME INVESTMENTS
-------------------- --------------------- --------------------------
PER PER PER
FISCAL 1998 AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE
- ------------------------------------------- ---------- ------- ---------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
March 31................................... $ 582,989 $0.20 471,313 $0.16 $ (545,469) (0.18)
June 30.................................... 727,114 0.25 619,751 0.21 (2,006,554) (0.69)
September 30............................... 575,338 0.20 464,942 0.16 (2,534,416) (0.86)
December 31................................ 597,425 0.20 479,894 0.16 (1,393,612) (0.47)
---------- ----- ---------- ----- ----------- ------
$2,482,866 $0.85 $2,035,900 $0.69 $(6,480,051) $(2.20)
---------- ----- ---------- ----- ----------- ------
---------- ----- ---------- ----- ----------- ------
<CAPTION>
Net Increase/
(Decrease) in
Net Assets Resulting Net Assets at
from Operations End of Period
--------------------- ----------------------
PER PER
FISCAL 1998 AMOUNT SHARE AMOUNT SHARE
- ------------------------------------------- ----------- ------ ----------- -------
<S> <C> <C> <C> <C>
March 31................................... $ (74,156) $0.02) $31,888,847 $10.89
June 30.................................... (1,386,803) (0.48) 30,049,063 10.24
September 30............................... (2,069,474) (0.70) 27,526,085 9.37
December 31................................ (913,718) (0.31) 22,244,049 7.56
----------- ------
$(4,444,151) $(1.51)
----------- ------
----------- ------
<CAPTION>
NET REALIZED AND
TOTAL INVESTMENT UNREALIZED GAIN/(LOSS) ON
INCOME NET INVESTMENT INCOME INVESTMENTS
------------------ ---------------------- --------------------------
PER PER PER
FISCAL 1997 AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE
- ------------------------------------------- ---------- ------- ----------- ------ ---------- -------
<S> <C> <C> <C> <C> <C> <C>
September 30............................... $ 608,021 $0.21 $ 487,940 $0.16 $ 2,784,820 0.97
December 31................................ 635,870 0.22 511,087 0.18 520,230 0.18
---------- ----- ---------- ----- ----------- ------
$1,243,891 $0.43 $ 999,027 $0.34 $ 3,305,050 $ 1.15
---------- ----- ---------- ----- ----------- ------
---------- ----- ---------- ----- ----------- ------
<CAPTION>
Net Increase/
(Decrease) in
Net Assets Resulting Net Assets at
from Operations End of Period
--------------------- --------------------
PER PER
FISCAL 1997 AMOUNT SHARE AMOUNT SHARE
- ------------------------------------------- ---------- ------- ----------- -------
<S> <C> <C> <C> <C>
September 30............................... $ 3,272,760 $1.13 $35,234,472 $12.17
December 31................................ 1,031,317 0.36 32,104,731 11.08
----------- ------
$ 4,304,077 $ 1.49
----------- ------
----------- ------
</TABLE>
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14
<PAGE>
- --------------------------------------------------------------------------------
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 (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:
Chase Global Fund Services, Inc.
Attn: Cohen & Steers
P.O. Box 2798
Boston, MA 02208-2798
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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15
<PAGE>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY INCOME FUND, INC.
PROXY RESULTS
During the six month period ended June 30, 1999, Cohen & Steers Realty
Income Fund, Inc. shareholders voted on the following proposals at the annual
meeting held on April 28, 1999. The description of each proposal and number of
shares voted are as follows:
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
SHARES VOTED SHARES VOTED
FOR AUTHORITY WITHHELD
- ---------------------------------------------------------------------------------------------------------------
1. To elect Directors
Greg C. Clark 2,682,332 41,829
Willard H. Smith, Jr. 2,679,432 44,729
- ---------------------------------------------------------------------------------------------------------------
SHARES VOTED SHARES VOTED SHARES VOTED
FOR AGAINST ABSTAIN
- ---------------------------------------------------------------------------------------------------------------
2. To ratify PricewaterhouseCoopers LLP as the Fund's
certified public accountants 2,676,249 32,002 15,910
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
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16
<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 Simpson Thacher & Bartlett
Vice President 425 Lexington Avenue
New York, NY 10117
Adam Derechin
Vice President and Assistant American Stock Exchange Symbol: RIF
Treasurer Website: www.cohenandsteers.com
Lawrence B. Stoller This report is for shareholder information. This is not
Assistant Secretary a prospectus intended for use in the purchase or sale
of Fund shares. Past performance is of course no
guarantee of future results and your investment may
be worth more or less at the time you sell.
</TABLE>
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17
<PAGE>
[LOGO]
COHEN & STEERS
REALTY INCOME FUND
SEMI-ANNUAL REPORT
JUNE 30, 1999
COHEN & STEERS
REALTY INCOME FUND
757 THIRD AVENUE
NEW YORK, NY 10017
STATEMENT OF DIFFERENCES
------------------------
The division symbol shall be expressed as............................. [div]
