<PAGE>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY SHARES, INC.
July 20, 1999
To Our Shareholders:
We are pleased to submit to you the semi-annual report for Cohen & Steers
Realty Shares for the quarter and six months ended June 30, 1999. The net asset
value at that date was $40.21. In addition, a regular quarterly dividend of
$0.47 was declared for shareholders of record on June 23, 1999 and paid on June
24, 1999.
MIDYEAR REVIEW
For the three months ended June 30, 1999, Cohen & Steers Realty Shares had
a total return, based on income and change in net asset value, of 12.4%. 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 8.6%,
compared to the NAREIT Equity REIT Index return of 4.8%.
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.
This dramatically reduced 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
- --------------------------------------------------------------------------------
1
<PAGE>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY SHARES, INC.
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.
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
Our focus on the nation's leading real estate companies, which we call our
'Realty Majors' strategy, enabled us to outpace the broader stock market for the
quarter, and to once again perform far better than general real estate
benchmarks so far this year. The vital signs of this REIT recovery remain very
strong:
1. ECONOMIC GROWTH. A healthy U.S. economy and recovering foreign economies
bode well for continued demand for goods, services and, importantly, space in
nearly every form of real estate.
2. NEW CONSTRUCTION. While there are increases in the supply of space due
to new development, it does not appear to be significantly greater, if at all,
than demand in most major markets.
3. EARNINGS GROWTH. REIT industry earnings are growing at approximately a
10% annual rate, and this compares well with most other industries in America.
4. VALUATION. Compared to most other public companies, REITs remain
undervalued from a price-to-earnings multiple, dividend yield and price-to-asset
value standpoint.
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.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY SHARES, INC.
We believe that one of the wild cards in the supply/demand picture for REIT
shares, at least for the remainder of the year, is a continued lack of equity
issuance. Conventional wisdom is that once share prices recover, companies will
rush to sell stock, and that supply will once again depress prices. To the
contrary, we expect that most of the major companies will refrain from competing
with the private market for property acquisitions and, therefore, will not find
it necessary to expand their equity capital bases. Most managements today lament
to us the lack of investment opportunities rather than their depressed stock
prices. Thus, 1999 may be a year in which opportunistic investing is out of
favor simply because there is a shortage of opportunities. As a result, we
believe that managements will work hard to rationalize and digest the
acquisitions made over the past several years and focus more heavily on
improving internal growth. Unlike so-called 'financial buyers', who are willing
to use a high degree of leverage to achieve acceptable returns, the public
market discipline prevents REITs from employing such strategies.
We trust that astute management understands that improving earnings and a
rising NAV, without the threat of dilutive equity offerings, is a formula for
producing above-average investment returns. Further, maintaining a strong
balance sheet for a period when greater opportunities surface is perhaps the
wisest financial strategy. These are, in fact, our most important investment
selection criteria and form the foundation of our investment strategy. With this
framework in place, we will continue to pursue satisfactory investment returns.
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.
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY SHARES, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER VALUE
OF SHARES (NOTE 1)
--------- ------------
<S> <C> <C>
EQUITIES 100.01%
APARTMENT/RESIDENTIAL 15.78%
Apartment Investment & Management
Co. -- Class A................... 2,816,500 $120,405,375
AvalonBay Communities............... 2,534,400 93,772,800
Charles E. Smith Residential
Realty........................... 896,800 30,435,150
'D'Essex Property Trust............. 975,200 34,497,700
------------
279,111,025
------------
DIVERSIFIED 15.42%
*Catellus Development Corp.......... 844,400 13,088,200
*Crescent Operating................. 301,200 2,051,925
'D'LNR Property Corp................ 2,331,500 49,835,812
Newhall Land & Farming Co........... 418,700 10,310,488
*'D'Reckson Services Industries..... 1,612,700 24,392,088
'D'Vornado Realty Trust............. 4,905,100 173,211,344
------------
272,889,857
------------
HEALTH CARE 7.26%
*HCR Manor Care..................... 1,504,300 36,385,256
Health Care Property Investors...... 915,200 26,426,400
Nationwide Health Properties........ 2,355,000 44,892,188
*'D'Ventas.......................... 3,871,600 20,809,850
------------
128,513,694
------------
HOTEL 6.00%
Starwood Hotels & Resorts
Worldwide........................ 3,475,700 106,226,081
------------
INDUSTRIAL 8.39%
#AMB Property Corp. 144............. 17,825 --
AMB Property Corp................... 3,522,500 82,778,750
First Industrial Realty Trust....... 596,900 16,377,444
ProLogis Trust...................... 2,431,900 49,245,975
------------
148,402,169
------------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY SHARES, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER VALUE
OF SHARES (NOTE 1)
--------- ------------
<S> <C> <C>
OFFICE 22.19%
'D'Arden Realty Group............... 3,365,500 $ 82,875,437
**Brookfield Properties Corp........ 1,074,500 13,902,219
Cousins Properties.................. 1,170,500 39,577,531
Equity Office Properties Trust...... 1,312,500 33,632,813
Highwoods Properties................ 2,507,400 68,796,788
'D'Mack-Cali Realty Corp............ 4,036,600 124,882,312
'D'SL Green Realty Corp............. 1,414,100 28,900,669
------------
392,567,769
------------
OFFICE/INDUSTRIAL 11.77%
'D'Prime Group Realty Trust......... 1,466,500 25,205,469
PS Business Parks................... 1,034,300 25,211,063
'D'Reckson Associates Realty
Corp............................. 3,344,600 78,598,100
Spieker Properties.................. 2,039,500 79,285,562
------------
208,300,194
------------
SELF STORAGE 2.16%
Public Storage...................... 1,362,100 38,138,800
------------
SHOPPING CENTER 11.04%
COMMUNITY CENTER 4.88%
Developers Diversified Realty
Corp............................. 2,098,200 34,882,575
Kimco Realty Corp................... 1,317,600 51,551,100
------------
86,433,675
------------
REGIONAL MALL 6.16%
General Growth Properties........... 1,335,000 47,392,500
JP Realty........................... 99,600 2,048,025
Macerich Co......................... 1,624,000 42,630,000
Rouse Co............................ 664,500 16,861,687
------------
108,932,212
------------
TOTAL SHOPPING CENTER............... 195,365,887
------------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY SHARES, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
(NOTE 1)
--------------
<S> <C> <C> <C>
TOTAL EQUITIES (Identified
cost -- $1,633,710,814)................ 100.01% $1,769,515,476
LIABILITIES IN EXCESS OF OTHER ASSETS..... (0.01)% (236,312)
------ --------------
NET ASSETS (Equivalent to $40.21 per share
based on 44,004,326 shares of capital
stock outstanding)..................... 100.00% $1,769,279,164
------ --------------
------ --------------
</TABLE>
- ------------
* Non-income producing security.
** Brookfield Properties Corp. is a Canadian company listed both on the Toronto
and New York Stock Exchanges. The Toronto Stock Exchange is deemed the
principal exchange for valuation purposes. The market value of the Fund's
position in Canadian dollars on June 30, 1999 was $20,576,675 based on an
exchange rate of 0.543 Canadian dollars to 1 U.S. dollar.
'D' The Fund owns 5% or more of this company's outstanding voting shares.
# As of June 30, 1999, security is restricted and is subject to registration
with the Securities and Exchange Commission. Escrow shares held by the
company's transfer agent. These shares have been valued at $0 market value
due to the uncertainty of the Fund receiving them.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY SHARES, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (Identified
cost -- $1,633,710,814) (Notes 1 and 5).............. $1,769,515,476
Cash.................................................. 20,510
Dividends receivable.................................. 8,340,450
Receivable for fund shares sold....................... 3,688,618
Receivable for investment securities sold............. 436,454
Other assets.......................................... 16,716
--------------
Total Assets.................................... 1,782,018,224
--------------
LIABILITIES:
Payable for outstanding borrowings (Note 7)........... 8,022,240
Payable for fund shares redeemed...................... 2,716,753
Payable to investment adviser......................... 1,255,514
Payable to administrator.............................. 385,493
Other liabilities..................................... 359,060
--------------
Total Liabilities............................... 12,739,060
--------------
NET ASSETS applicable to 44,004,326 shares of $0.001 par
value common stock outstanding (Note 4)................. $1,769,279,164
--------------
--------------
NET ASSET VALUE PER SHARE:
($1,769,279,164[div]44,004,326 shares outstanding).... $ 40.21
--------------
--------------
NET ASSETS consist of:
Paid-in capital (Notes 1 and 4)....................... $1,663,926,359
Distributions in excess of net investment income...... (150,506)
Accumulated net realized loss on investments sold..... (30,301,351)
Net unrealized appreciation on investments............ 135,804,662
--------------
$1,769,279,164
--------------
--------------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY SHARES, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
Investment Income (Note 1):
Dividend income (net of $14,264 of foreign withholding
tax and including $16,515,597 received from
affiliated issuers) (Note 5)......................... $ 50,767,724
Interest income....................................... 195,609
-------------
Total Income.................................... 50,963,333
-------------
Expenses:
Investment advisory fees (Note 2)..................... 7,468,063
Administration and transfer agent fees (Note 2)....... 1,303,592
Interest expense (Note 7)............................. 199,376
Reports to shareholders............................... 197,202
Custodian fees........................................ 103,324
Professional fees..................................... 59,566
Registration and filing fees.......................... 51,076
Directors' fees and expenses (Note 2)................. 15,820
Miscellaneous......................................... 185,340
-------------
Total Expenses.................................. 9,583,359
Reduction of expenses (Note 6)........................ (150,630)
-------------
Net Expenses.................................... 9,432,729
-------------
Net Investment Income....................................... 41,530,604
-------------
Net Realized and Unrealized Gain/(Loss) on Investments:
Net realized loss on investments (includes realized
loss of $8,568,984 on sales of investments in
affiliated issuers) (Note 5)......................... (55,637,007)
Net change in unrealized appreciation/(depreciation)
on investments....................................... 145,488,509
-------------
Net realized and unrealized gain/(loss) on
investments.................................... 89,851,502
-------------
Net Increase in Net Assets Resulting from Operations........ $ 131,382,106
-------------
-------------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
8
<PAGE>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY SHARES, 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............. $ 41,530,604 $ 114,388,885
Net realized gain/(loss) on
investments.................... (55,637,007) 49,313,119
Net change in unrealized
appreciation/(depreciation) on
investments.................... 145,488,509 (720,604,899)
-------------- --------------
Net increase/(decrease) in
net assets resulting from
operations............... 131,382,106 (556,902,895)
-------------- --------------
Dividends and Distributions to
Shareholders from (Note 1):
Net investment income............. (41,681,110) (92,852,026)
Net realized gain on
investments.................... -- (82,995,761)
Tax return of capital............. -- (7,514,066)
-------------- --------------
Total dividends and
distributions to
shareholders............. (41,681,110) (183,361,853)
-------------- --------------
Capital Stock Transactions (Note 4):
Decrease in net assets from Fund
share transactions............. (253,762,011) (759,389,895)
-------------- --------------
Total decrease in net
assets................... (164,061,015) (1,499,654,643)
Net Assets:
Beginning of period............... 1,933,340,179 3,432,994,822
-------------- --------------
End of period (including
distributions in excess of net
investment income of $150,506
at June 30, 1999).............. $1,769,279,164 $1,933,340,179
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
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, 1999 ------------------------------------------------
PER SHARE OPERATING PERFORMANCE (UNAUDITED) 1998 1997 1996 1995 1994
- ------------------------------- ----------- -------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............. $ 37.98 $ 50.18 $ 45.09 $ 34.62 $32.90 $31.92
-------- -------- -------- -------- ------ ------
Income from investment operations:
Net investment income........................ 0.94 1.97 1.87 1.86 1.86 1.66
Net realized and unrealized gain/(loss) on
investments................................ 2.23 (10.89) 7.40 11.04 1.69 0.98
-------- -------- -------- -------- ------ ------
Total from investment operations........ 3.17 (8.92) 9.27 12.90 3.55 2.64
-------- -------- -------- -------- ------ ------
Less dividends and distributions to shareholders
from:
Net investment income........................ (0.94) (1.59) (1.88) (1.76) (1.33) (1.09)
Net realized gain on investments............. -- (1.56) (2.30) (0.55) -- --
Tax return of capital........................ -- (0.13) -- (0.12) (0.50) (0.57)
-------- -------- -------- -------- ------ ------
Total dividends and distributions to
shareholders.......................... (0.94) (3.28) (4.18) (2.43) (1.83) (1.66)
-------- -------- -------- -------- ------ ------
Net asset value, end of period................... $ 40.21 $ 37.98 $ 50.18 $ 45.09 $34.62 $32.90
-------- -------- -------- -------- ------ ------
-------- -------- -------- -------- ------ ------
- ----------------------------------------------------------------------------------------------------------------------
Total investment return.......................... 8.55%(1) - 18.07% 21.16% 38.48% 11.13% 8.31%
-------- -------- -------- -------- ------ ------
-------- -------- -------- -------- ------ ------
- ----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions)...... $1,769.3 $1,933.3 $3,433.0 $2,036.4 $793.1 $458.1
-------- -------- -------- -------- ------ ------
-------- -------- -------- -------- ------ ------
Ratios of expenses to average daily net
assets (before expense reduction).......... 1.09%(2) 1.03% 1.06% 1.10% 1.16% 1.26%
-------- -------- -------- -------- ------ ------
-------- -------- -------- -------- ------ ------
Ratios of expenses to average daily net
assets (net of expense reduction).......... 1.07%(2) 1.03% 1.05% 1.08% 1.12% 1.14%
-------- -------- -------- -------- ------ ------
-------- -------- -------- -------- ------ ------
Ratio of net investment income to average
daily net assets (before expense
reduction)................................. 4.71%(2) 4.24% 4.02% 5.27% 6.01% 5.59%
-------- -------- -------- -------- ------ ------
-------- -------- -------- -------- ------ ------
Ratio of net investment income to average
daily net assets (net of expense
reduction)................................. 4.73%(2) 4.24% 4.04% 5.28% 6.05% 5.71%
-------- -------- -------- -------- ------ ------
-------- -------- -------- -------- ------ ------
Portfolio turnover rate...................... 15.09%(1) 30.18% 40.44% 33.23% 22.68% 39.00%
-------- -------- -------- -------- ------ ------
-------- -------- -------- -------- ------ ------
</TABLE>
- ------------------------
(1) Not annualized.
(2) Annualized.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
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 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 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 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
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>
- --------------------------------------------------------------------------------
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. These differences are primarily due to
return of capital and capital gain distributions received by the Fund on
portfolio securities.
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, 1999, the Fund incurred $7,468,063 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, 1999, the Fund paid the Adviser
$175,719 in fees under this administration agreement.
In addition, Cohen & Steers Realty Shares, Inc., Cohen & Steers Special
Equity Fund, Inc., Cohen & Steers Equity Income Fund, Inc. and Cohen & Steers
Realty Income Fund, Inc. (the 'Funds') have entered into a fund accounting,
transfer agency and sub-administration agreement with The Chase Manhattan Bank
('Chase') pursuant to which an affiliate of Chase performs administration
functions for the Funds. Chase receives a monthly sub-administration fee at the
annual rate of 0.08% on the first $500 million of the Funds' average daily net
assets and at lower rates on the Funds' average daily net assets in excess of
that amount.
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
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 $15,820.
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 $266,353,685 and $525,842,139,
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........................................... $1,633,710,814
--------------
Gross unrealized appreciation............................ $ 222,174,861
Gross unrealized depreciation............................ $ (86,370,199)
--------------
Net unrealized appreciation.............................. $ 135,804,662
--------------
--------------
</TABLE>
NOTE 4. CAPITAL STOCK
The Fund is authorized to issue 200 million shares of capital stock at a
par value of $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, 1999 DECEMBER 31, 1998
---------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Sold..................... 7,868,037 $ 309,040,739 19,345,027 $ 869,232,043
Issued as reinvestment of
dividends............. 929,206 34,738,351 3,881,513 158,738,009
Redeemed................. (15,703,343) (597,541,101) (40,731,134) (1,787,359,947)
----------- -------------- ----------- ---------------
Net decrease............. (6,906,100) $ (253,762,011) (17,504,594) $ (759,389,895)
----------- -------------- ----------- ---------------
----------- -------------- ----------- ---------------
</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, 1999 totaled
$643,208,781.
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
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
EQUITIES SHARES SHARES SHARES SHARES
-------- --------- -------- ------ ------
<S> <C> <C> <C> <C>
Arden Realty Group.... 3,681 -- 315 3,366
Essex Property
Trust............... 1,244 -- 269 975
LNR Property Corp..... 2,500 -- 168 2,332
Mack-Cali Realty
Corp................ 4,319 -- 282 4,037
Prime Group Realty
Trust............... 1,649 -- 182 1,467
Reckson Associates
Realty Corp......... 3,359 -- 14 3,345
Reckson Services
Industries.......... 1,613 -- -- 1,613
SL Green Realty
Corp................ 1,439 -- 25 1,414
Ventas................ -- 3,872 -- 3,872
Vornado Realty
Trust............... 5,051 -- 146 4,905
<CAPTION>
PURCHASE SALES GAIN/(LOSS) DIVIDEND
EQUITIES COST COST ON SALES INCOME
-------- -------- ------- ----------- --------
<S> <C> <C> <C> <C>
Arden Realty Group.... $ -- $ 8,873 $(1,563) $ 3,074
Essex Property
Trust............... -- 7,868 (515) 1,133
LNR Property Corp..... -- 4,185 (1,039) 60
Mack-Cali Realty
Corp................ -- 11,770 (3,020) 4,747
Prime Group Realty
Trust............... -- 3,667 (1,016) 993
Reckson Associates
Realty Corp......... 88 390 (70) 1,129
Reckson Services
Industries.......... -- -- -- --
SL Green Realty
Corp................ -- 636 (181) 999
Ventas................ 16,063 -- -- 4,381
Vornado Realty
Trust............... -- 6,398 (1,165) --
-------- ------- ------- -------
$ 16,151 $43,787 $(8,569) $16,516
-------- ------- ------- -------
-------- ------- ------- -------
</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, 1999, the
Fund's expenses were reduced by $150,630 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. At June 30, 1999, the Fund
had loans outstanding totaling $8,000,000. During the six months ended June 30,
1999, the average daily balance of loans outstanding was $14,681,111 at a
weighed average interest rate of 5.45%. The maximum amount of loans outstanding
at any time during the six months ended was $70,000,000 on April 7, 1999, which
was 4.30% of total assets. The loan is collateralized by the Fund's portfolio to
the extent of the loan outstanding.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY SHARES, INC.
OFFICERS AND DIRECTORS
Robert H. Steers
Director and Chairman
Martin Cohen
Director and President
Gregory C. Clark
Director
George Grossman
Director
Jeffrey H. Lynford
Director
Willard H. Smith, Jr.
Director
Elizabeth O. Reagan
Vice President
Adam Derechin
Vice President and Assistant Treasurer
Lawrence B. Stoller
Assistant Secretary
KEY INFORMATION
INVESTMENT ADVISER
Cohen & Steers Capital Management, Inc.
757 Third Avenue
New York, NY 10017
(212) 832-3232
FUND SUB-ADMINISTRATOR AND TRANSFER AGENT
Chase Global Funds Services Co.
73 Tremont Street
Boston, MA 02108
(800) 437-9912
CUSTODIAN
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, NY 10081
LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
NASDAQ Symbol: CSRSX
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. Past performance of course is no guarantee
of future results and your investment may be worth
more or less at the time you sell.
- --------------------------------------------------------------------------------
15
<PAGE>
COHEN & STEERS
REALTY SHARES
SEMI-ANNUAL REPORT
JUNE 30, 1999
COHEN & STEERS
REALTY SHARES
757 THIRD AVENUE
NEW YORK, NY 10017
STATEMENT OF DIFFERENCES
The dagger symbol shall be expressed as ..............................'D'
