<PAGE>
<PAGE>
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COHEN & STEERS REALTY SHARES, INC.
July 17, 1998
To Our Shareholders:
We are pleased to submit to you the semi-annual report for Cohen & Steers
Realty Shares, Inc. for the quarter and six months ended June 30, 1998. The net
asset value per share at that date was $46.15. In addition, a regular quarterly
dividend of $0.47 per share was declared for shareholders of record on June 23,
1998 and paid on June 24, 1998.
INVESTMENT REVIEW
For the quarter ended June 30, 1998, the Fund had a total return of -4.7%,
based on income and change in net asset value, compared to the NAREIT Equity
REIT Index total return of -4.6%.
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 them 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 stock and bond 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 SHARES, 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 hurdle rate 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 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 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 that at this juncture,
the public market is enforcing the type of discipline that many have 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.
More important, however, is the arbitrage potential that now exists between
the private and public markets. The real estate recovery continues to draw large
amounts of investment capital from a multitude of sources, led by large
financial and investment institutions. With many REITs trading at or below the
net asset value of their property portfolios, this capital has naturally begun
to find its way into the public market. As a result, it is our opinion that NAV
represents a floor on the share prices of nearly all high quality REITs. This
denotes a major sea change in the real estate marketplace. There have been many
times in the past when REITs traded at substantial discounts to NAV, such as in
1990, and remained depressed for extended periods. In those periods, however,
REITs were very small and did not own what one would call high quality,
institutional-grade portfolios. Consequently, the stocks of these companies
often languished without attracting substantial investor interest. In contrast,
REITs today
- --------------------------------------------------------------------------------
2
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<PAGE>
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COHEN & STEERS REALTY SHARES, INC.
are very large companies offering professional management and liquidity.
Further, they own some of the best quality and highest profile property
portfolios that are not even available in the private market. Thus, they have
already begun to draw investor interest on a large scale as demonstrated
repeatedly by sizable buyers entering the market on any meaningful price
declines.
The NAV floor, in our opinion, is further reinforced by the recent increase
in merger and acquisition activity. It appears that the long-awaited industry
consolidation among public companies may actually have begun in earnest. In
recent weeks, there have been the announcements of the acquisition of a large,
well-established REIT (Merry Land & Investment Co.) by Equity Residential, and
the acquisition of a newly public REIT (Tower Realty) by a joint venture of
Reckson Associates Realty Corp. and Crescent Real Estate Equities. It is our
understanding that there are a record number of similar transactions on the
drawing boards of the investment banking community, with the catalyst for nearly
all being the persistence of a depressed share price.
If, in fact, REIT share prices have found some interim bottom, two
questions remain with respect to future investment performance. Clearly,
positive fundamental trends must remain in place in order for investors to
realize good returns. On this count we are very sanguine due to the favorable,
albeit mature, conditions which exist in most real estate markets, and the
strong earnings growth that we expect REITs to enjoy for the foreseeable future.
The second issue is the supply/demand situation for REIT shares. While we
perceive demand to be increasing, the historic propensity of many REITs to issue
stock quickly, and in large quantities as prices rise, could clearly attenuate
any price gains. We believe that most managements have begun to understand the
market's message and, having scaled back their acquisition plans, are likely to
be more judicious with the issuance of their shares.
Our investment strategy remains one that emphasizes those companies that
already have strong balance sheets and do not need to raise high cost capital to
take advantage of new opportunities. We are also focused on companies that have
superior earnings growth prospects irrespective of any changes in the economic
or financial market environment due to internal growth within their property
portfolios. Since the beginning of the year we have reduced our number of
holdings from 57 to 41, representing, in our opinion, only the finest companies
in the industry. Notwithstanding that, thus far, this year has been one of
disappointing returns, we are confident that we are well positioned for improved
absolute and relative investment performance in the future.
Sincerely,
<TABLE>
<S> <C>
Martin Cohen Robert H. Steers
MARTIN COHEN ROBERT H. STEERS
President Chairman
</TABLE>
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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3
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COHEN & STEERS REALTY SHARES, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER VALUE
OF SHARES (NOTE 1)
---------- --------------
<S> <C> <C>
EQUITIES 96.63%
APARTMENT/RESIDENTIAL 11.15%
Apartment Investment & Management Co. -- Class A........... 2,530,200 $ 99,942,900
Archstone Communities Trust................................ 1,779,000 40,027,500
Avalon Bay Communities..................................... 2,455,097 93,293,695
Charles E. Smith Residential Realty........................ 605,900 19,388,800
'D'Essex Property Trust.................................... 1,274,200 39,500,200
Irvine Apartment Communities............................... 585,700 16,948,694
--------------
309,101,789
--------------
DIVERSIFIED 12.81%
*Crescent Operating........................................ 371,200 6,310,400
'D'LNR Property Corp....................................... 2,322,100 59,503,813
'D'Newhall Land & Farming Company.......................... 1,772,500 50,073,125
*'D'Reckson Services Industries............................ 1,612,608 5,341,764
*Security Capital Group -- Class B Warrants (expire
9/18/98)................................................ 181,261 62,308
St. Joe Co. ............................................... 1,258,400 34,448,700
'D'Vornado Realty Trust.................................... 5,025,500 199,449,531
--------------
355,189,641
--------------
HEALTH CARE 4.58%
Health Care Property Investors............................. 23,200 836,650
Healthcare Realty Trust.................................... 609,600 16,611,600
Meditrust Corp............................................. 2,761,700 77,154,994
*Sunrise Assisted Living................................... 943,300 32,425,937
--------------
127,029,181
--------------
HOTEL 6.96%
Starwood Hotels & Resorts Trust............................ 3,996,500 193,080,906
--------------
INDUSTRIAL 7.77%
#AMB Property Corp. 144.................................... 388,366 8,753,770
'D'CenterPoint Properties Corp............................. 1,132,200 37,433,362
'D'First Industrial Realty Trust........................... 2,249,600 71,565,400
ProLogis Trust............................................. 3,907,200 97,680,000
--------------
215,432,532
--------------
</TABLE>
See accompanying notes to financial statements.
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4
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COHEN & STEERS REALTY SHARES, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER VALUE
OF SHARES (NOTE 1)
---------- --------------
OFFICE 20.20%
<S> <C> <C>
'D'Arden Realty Group...................................... 4,061,100 $ 105,080,962
'D'Brandywine Realty Trust................................. 1,625,200 36,363,850
Cousins Properties......................................... 1,210,100 36,151,737
Crescent Real Estate Equities Co. ......................... 3,710,300 124,758,838
'D'Highwoods Properties.................................... 2,727,600 88,135,575
'D'Mack-Cali Realty Corp. ................................. 4,038,200 138,813,125
'D'SL Green Realty Corp. .................................. 1,376,500 30,971,250
--------------
560,275,337
--------------
OFFICE/INDUSTRIAL 10.84%
'D'Prime Group Realty Trust................................ 2,120,200 36,308,425
PS Business Parks.......................................... 1,054,017 24,769,400
'D'Reckson Associates Realty Corp.......................... 3,359,600 79,370,550
Spieker Properties......................................... 2,430,000 94,162,500
'D'TriNet Corporate Realty Trust........................... 1,937,200 65,864,800
--------------
300,475,675
--------------
SELF STORAGE 3.56%
Public Storage............................................. 3,522,200 98,621,600
--------------
SHOPPING CENTER 18.76%
COMMUNITY CENTER 7.03%
'D'Developers Diversified Realty Corp...................... 2,324,700 91,099,181
'D'Kimco Realty Corp....................................... 2,534,600 103,918,600
--------------
195,017,781
--------------
REGIONAL MALL 11.73%
'D'General Growth Properties............................... 2,898,200 108,320,225
'D'JP Realty............................................... 1,184,400 27,907,425
'D'Macerich Co............................................. 2,113,100 61,940,244
'D'Rouse Co................................................ 4,044,900 127,161,544
--------------
325,329,438
--------------
TOTAL SHOPPING CENTER...................................... 520,347,219
--------------
TOTAL EQUITIES (Identified cost -- $2,363,954,385)... 2,679,553,880
--------------
</TABLE>
See accompanying notes to financial statements.
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5
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COHEN & STEERS REALTY SHARES, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------ --------------
<S> <C> <C>
COMMERCIAL PAPER 2.97%
American Home Products, 5.75%, 7/1/98............................ $ 36,085,000 $ 36,085,000
Boeing Co., 5.75%, 7/1/98........................................ 18,600,000 18,600,000
Preferred Finance Corp., 5.75%, 7/1/98........................... 27,722,000 27,722,000
--------------
TOTAL COMMERCIAL PAPER (Identified cost -- $82,407,000).... 82,407,000
--------------
TOTAL INVESTMENTS (Identified cost -- $2,446,361,385).......... 99.60% 2,761,960,880
OTHER ASSETS IN EXCESS OF LIABILITIES.......................... 0.40% 11,220,770
------ --------------
NET ASSETS (Equivalent to $46.15 per share based on 60,093,846
shares of capital stock outstanding)........................ 100.00% $2,773,181,650
------ --------------
------ --------------
</TABLE>
- ------------
* Non-income producing security.
'D' The Fund owns 5% or more of this company's outstanding voting securities
(Note 5).
# As of June 30, 1998, security is restricted and is subject to registration
with the Securities and Exchange Commission.
See accompanying notes to financial statements.
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6
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COHEN & STEERS REALTY SHARES, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (Identified cost -- $2,446,361,385) (Notes 1 and 5).... $2,761,960,880
Cash....................................................................................... 11
Receivable for fund shares sold............................................................ 11,803,368
Dividends receivable....................................................................... 11,139,655
Receivable for investment securities sold.................................................. 9,677,341
Other assets............................................................................... 138,188
--------------
Total Assets......................................................................... 2,794,719,443
--------------
LIABILITIES:
Payable for investment securities purchased................................................ 14,251,749
Payable for fund shares redeemed........................................................... 4,409,692
Payable to investment adviser.............................................................. 1,886,246
Payable to administrator................................................................... 700,688
Payable to directors....................................................................... 1,573
Other liabilities.......................................................................... 287,845
--------------
Total Liabilities.................................................................... 21,537,793
--------------
NET ASSETS applicable to 60,093,846 shares of $0.001 par value common stock outstanding (Note
4)........................................................................................... $2,773,181,650
--------------
--------------
NET ASSET VALUE PER SHARE:
($2,773,181,650[div]60,093,846 shares outstanding)......................................... $ 46.15
--------------
--------------
NET ASSETS consist of:
Paid-in capital (Notes 1 and 4)............................................................ $2,292,279,741
Distributions in excess of net investment income........................................... (5,757,772)
Accumulated net realized gain on investments sold.......................................... 171,060,186
Net unrealized appreciation on investments................................................. 315,599,495
--------------
$2,773,181,650
--------------
--------------
</TABLE>
See accompanying notes to financial statements.
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7
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COHEN & STEERS REALTY SHARES, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
Investment Income (Note 1):
Dividend income (includes $35,761,515 received from affiliated issuers) (Note 5)............ $ 66,209,532
Interest income............................................................................. 3,027,924
-------------
Total Income.......................................................................... 69,237,456
-------------
Expenses:
Investment advisory fees (Note 2)........................................................... 12,932,537
Administration and transfer agent fees (Note 2)............................................. 2,115,528
Custodian fees and expenses................................................................. 266,503
Registration and filing fees................................................................ 204,236
Reports to shareholders..................................................................... 198,447
Professional fees........................................................................... 54,757
Directors' fees and expenses (Note 2)....................................................... 16,751
Miscellaneous............................................................................... 222,306
-------------
Total Expenses........................................................................ 16,011,065
Reduction of expenses (Note 6).............................................................. (149,125)
-------------
Net Expenses.......................................................................... 15,861,940
-------------
Net Investment Income............................................................................. 53,375,516
-------------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments (includes net realized gain of $28,991,958 on sales of
investments in affiliated issuers) (Note 5)................................................ 133,578,747
Net change in unrealized appreciation on investments........................................ (395,321,557)
-------------
Net realized and unrealized gain (loss) on investments................................ (261,742,810)
-------------
Net Decrease in Net Assets Resulting from Operations.............................................. $(208,367,294)
-------------
-------------
</TABLE>
See accompanying notes to financial statements.
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8
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COHEN & STEERS REALTY SHARES, 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.................................... $ 53,375,516 $ 115,637,815
Net realized gain on investments......................... 133,578,747 163,378,333
Net change in unrealized appreciation on investments..... (395,321,557) 291,842,960
---------------- -----------------
Net increase (decrease) in net assets resulting
from operations................................. (208,367,294) 570,859,108
---------------- -----------------
Dividends and Distributions to Shareholders from (Note 1):
Net investment income.................................... (59,133,288) (116,292,923)
Net realized gain on investments......................... -- (149,113,688)
---------------- -----------------
Total dividends and distributions to
shareholders.................................... (59,133,288) (265,406,611)
---------------- -----------------
Capital Stock Transactions (Note 4):
Increase (decrease) in net assets from Fund share
transactions.......................................... (392,312,590) 1,091,163,740
---------------- -----------------
Total increase (decrease) in net assets............ (659,813,172) 1,396,616,237
Net Assets:
Beginning of period...................................... 3,432,994,822 2,036,378,585
---------------- -----------------
End of period (including distributions in excess of net
investment income of $5,757,772 at June 30, 1998)..... $2,773,181,650 $ 3,432,994,822
---------------- -----------------
---------------- -----------------
</TABLE>
See accompanying notes to financial statements.
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9
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COHEN & STEERS REALTY SHARES, 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........... $ 50.18 $ 45.09 $ 34.62 $ 32.90 $ 31.92 $ 29.58
-------- ---------- ---------- -------- -------- --------
Income from investment operations:
Net investment income...................... 0.84 1.87 1.86 1.86 1.66 1.29
Net realized and unrealized gain (loss) on
investments.............................. (3.93) 7.40 11.04 1.69 0.98 4.24
-------- ---------- ---------- -------- -------- --------
Total from investment operations...... (3.09) 9.27 12.90 3.55 2.64 5.53
-------- ---------- ---------- -------- -------- --------
Less dividends and distributions to
shareholders from:
Net investment income...................... (0.94) (1.88) (1.76) (1.33) (1.09) (1.27)
Realized gains on investments.............. -- (2.30) (0.55) -- -- (1.64)
In excess of net realized gains............ -- -- -- -- -- (0.04)
Tax return of capital...................... -- -- (0.12) (0.50) (0.57) (0.24)
-------- ---------- ---------- -------- -------- --------
Total dividends and distributions to
shareholders........................ (0.94) (4.18) (2.43) (1.83) (1.66) (3.19)
-------- ---------- ---------- -------- -------- --------
Net asset value, end of period................. $ 46.15 $ 50.18 $ 45.09 $ 34.62 $ 32.90 $ 31.92
-------- ---------- ---------- -------- -------- --------
-------- ---------- ---------- -------- -------- --------
- ------------------------------------------------------------------------------------------------------------------------------
Total investment return........................ (6.14)%(1) 21.16% 38.48% 11.13% 8.31% 18.76%
-------- ---------- ---------- -------- -------- --------
-------- ---------- ---------- -------- -------- --------
- ------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period (in millions).... $2,773.182 $3,432.995 $2,036.379 $793.084 $458.098 $163.478
-------- ---------- ---------- -------- -------- --------
-------- ---------- ---------- -------- -------- --------
Ratios of expenses to average daily net
assets (before expense reduction)........ 1.03%(2) 1.06% 1.10% 1.16% 1.26% 1.35%
-------- ---------- ---------- -------- -------- --------
-------- ---------- ---------- -------- -------- --------
Ratios of expenses to average daily net
assets
(net of expense reduction)............... 1.02%(2) 1.05% 1.08% 1.12% 1.14% 1.18%
-------- ---------- ---------- -------- -------- --------
-------- ---------- ---------- -------- -------- --------
Ratio of net investment income to average
daily net assets (before expense
reduction)............................... 3.41%(2) 4.02% 5.27% 6.01% 5.59% 4.40%
-------- ---------- ---------- -------- -------- --------
-------- ---------- ---------- -------- -------- --------
Ratio of net investment income to average
daily net assets (net of expense
reduction)............................... 3.42%(2) 4.04% 5.28% 6.05% 5.71% 4.57%
-------- ---------- ---------- -------- -------- --------
-------- ---------- ---------- -------- -------- --------
Portfolio turnover rate.................... 16.35%(1) 40.44% 33.23% 22.68% 39.00% 65.28%
-------- ---------- ---------- -------- -------- --------
-------- ---------- ---------- -------- -------- --------
</TABLE>
- ------------------------
(1) Not annualized.
(2) Annualized.
See accompanying notes to financial statements.
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10
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COHEN & STEERS REALTY SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Cohen & Steers Realty Shares, Inc. (the 'Fund') was incorporated under the
laws of the State of Maryland on April 26, 1991 and is registered under the
Investment Company Act of 1940, as amended, as an open-end, non-diversified
management investment company. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with 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 Quotation 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 value 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
the 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
- --------------------------------------------------------------------------------
11
<PAGE>
<PAGE>
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COHEN & STEERS REALTY SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
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 will automatically be reinvested in full and fractional shares of
the Fund based on the net asset value per share at the close of business on the
ex-dividend date unless the shareholder has elected to have them paid in cash.
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 0.85% for the first $2.5 billion and 1/12th
of 0.75% thereafter of the average daily net assets of the Fund. For the six
months ended June 30, 1998, the Fund incurred $12,932,537 in advisory fees.
Administration Fees: The Fund has entered into an administration agreement
with the Adviser under which the Adviser performs certain administrative
functions for the Fund and receives a fee of 0.02% of the Fund's average daily
net assets. For the six months ended June 30, 1998, the Fund paid the Adviser
$312,407 in fees under this administration agreement.
In addition, the Fund has entered into a fund accounting and
sub-administration agreement with The Chase Manhattan Bank ('Chase') for
performing administration functions for the Fund. Chase receives a monthly sub-
administration fee at the annual rate of 0.08% on the first $500 million of the
Fund's average daily net assets and at lower rates on the Fund's average daily
net assets in excess of that amount.
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
$16,751 for the six months ended June 30, 1998.
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12
<PAGE>
<PAGE>
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COHEN & STEERS REALTY SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
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 $497,237,819 and $904,043,562,
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....................................................................... $2,446,361,385
--------------
Gross unrealized appreciation........................................................ $ 376,766,244
Gross unrealized depreciation........................................................ $ (61,166,749)
--------------
Net unrealized appreciation.......................................................... $ 315,599,495
--------------
--------------
</TABLE>
NOTE 4. CAPITAL STOCK
The Fund is authorized to issue 200 million shares of capital stock, par
value $0.001 per share. The Board of Directors of the Fund may increase or
decrease the aggregate number of shares of common stock that the Fund has
authority to issue. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Sold.................................. 10,793,636 $ 520,783,637 42,163,082 $1,966,764,076
Issued as reinvestment of dividends... 1,077,447 49,577,337 4,893,086 236,192,855
Redeemed.............................. (20,192,257) (962,673,564) (23,803,456) (1,111,793,191)
----------- -------------- ----------- --------------
Net increase (decrease)............... (8,321,174) $ (392,312,590) 23,252,712 $1,091,163,740
----------- -------------- ----------- --------------
----------- -------------- ----------- --------------
</TABLE>
NOTE 5. INVESTMENTS IN AFFILIATES
The market value of investments in affiliates (as defined in the Investment
Company Act of 1940, 'Affiliated Companies' are those in which the Fund holds 5%
or more of the outstanding voting securities) at June 30, 1998 totaled
$1,564,122,951.
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13
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<PAGE>
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COHEN & STEERS REALTY SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Affiliates, their investment income, and gain/(loss) from sales of
affiliates are as follows (in thousands):
<TABLE>
<CAPTION>
BEGINNING PURCHASE SALE ENDING PURCHASE SALES GAIN/(LOSS) DIVIDEND
EQUITIES SHARES SHARES SHARES SHARES COST COST ON SALES INCOME
- ---------------------- --------- -------- ------ ------ -------- ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Arden Realty Group.... 3,126 935 -- 4,061 $ 26,068 $ -- $ -- $ 3,282
Brandywine Realty
Trust............... 1,369 530 274 1,625 12,775 5,453 649 1,408
CenterPoint Properties
Corp................ 1,622 -- 490 1,132 -- 11,621 4,416 1,346
Developers Diversified
Realty Corp......... 2,150 175 -- 2,325 6,698 -- -- 3,045
Essex Property
Trust............... 1,336 -- 62 1,274 -- 1,799 231 1,210
First Industrial
Realty Trust........ 2,007 243 -- 2,250 7,311 -- -- 2,256
General Growth
Properties.......... 2,954 -- 56 2,898 -- 1,367 622 1,362
Highwoods
Properties.......... 2,483 245 -- 2,728 8,143 -- -- 2,533
JP Realty............. 1,053 181 50 1,184 4,178 880 378 993
Kimco Realty Corp..... 2,093 650 208 2,535 22,298 4,883 3,171 2,542
LNR Property Corp..... 1,472 856 6 2,322 20,313 127 22 55
Macerich Co........... 1,879 259 25 2,113 7,246 486 214 1,718
Mack-Cali Realty
Corp................ 3,540 498 -- 4,038 18,129 -- -- 1,828
Newhall Land & Farming
Company............. 1,890 -- 117 1,773 -- 1,809 1,718 598
Prime Group Realty
Trust............... 962 1,158 -- 2,120 11,432 -- -- 1,040
Reckson Associates
Realty Corp. ....... 3,485 -- 125 3,360 -- 1,676 1,458 1,050
Reckson Services
Industries.......... -- 1,613 -- 1,613 1,661 -- -- --
Rouse Co. ............ 5,292 36 1,283 4,045 1,140 25,104 14,242 2,598
SL Green Realty
Corp................ 882 520 25 1,377 11,742 525 142 802
TriNet Corporate
Realty Trust........ 1,150 787 -- 1,937 29,145 -- -- 2,480
Vornado Realty
Trust............... 4,273 818 65 5,026 33,104 1,168 1,729 3,616
-------- ------- ----------- --------
$221,383 $56,898 $28,992 $ 35,762
-------- ------- ----------- --------
-------- ------- ----------- --------
</TABLE>
NOTE 6. 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, 1998, the
Fund's expenses were reduced by $149,125 under this arrangement.
NOTE 7. BORROWINGS
The Fund, in conjunction with Cohen & Steers Special Equity Fund, Inc. and
Cohen & Steers Equity Income Fund, Inc., has entered into a Line of Credit
Agreement with Chase Manhattan Bank for $250,000,000. During the six months
ended June 30, 1998, the Fund did not have any loans outstanding. The loan, if
used, will be collateralized by the Fund's portfolio.
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14
<PAGE>
<PAGE>
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COHEN & STEERS REALTY SHARES, INC.
<TABLE>
<S> <C>
OFFICERS AND DIRECTORS KEY INFORMATION
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 SUB-ADMINISTRATOR AND TRANSFER AGENT
Director Chase Global Funds Services Co.
73 Tremont Street
George Grossman Boston, MA 02108
Director (800) 437-9912
Jeffrey H. Lynford
Director CUSTODIAN
The Chase Manhattan Bank
Willard H. Smith, Jr. One Chase Manhattan Plaza
Director New York, NY 10081
Elizabeth O. Reagan LEGAL COUNSEL
Vice President Dechert Price & Rhoads
30 Rockefeller Plaza
Adam Derechin New York, NY 10112
Vice President and
Assistant Treasurer NASDAQ Symbol: CSRSX
William Goodwin
Assistant Secretary Website: www.cohenandsteers.com
Net asset value (NAV) can be found in the daily mutual
fund listings in the financial section of most major
newspapers under Cohen & Steers.
This report is authorized for delivery only to
shareholders of Cohen & Steers Realty Shares, Inc. unless
accompanied or preceded by the delivery of a currently
effective prospectus setting forth details of the Fund.
</TABLE>
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15
<PAGE>
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[LOGO]
COHEN & STEERS
REALTY SHARES
SEMI-ANNUAL REPORT
JUNE 30, 1998
COHEN & STEERS
REALTY SHARES
757 THIRD AVENUE
NEW YORK, NY 10017
- ----------------
First Class Mail
U.S. Postage
PAID
Boston, MA
Permit No. 56712
- ----------------
STATEMENT OF DIFFERENCES
The dagger symbol shall be expressed as.................... `D'
The division sign shall be expressed as.................... [div]
