<PAGE>
================================================================================
COHEN & STEERS REALTY SHARES, INC.
February 3, 2000
To Our Shareholders:
We are pleased to submit to you our report for the quarter and year ended
December 31, 1999. The net asset value on that date was $36.91. In addition, a
distribution of $0.57 per share (including a regular $0.47 per share
distribution plus a special income distribution of $0.10 per share) was declared
for shareholders of record on December 15, 1999 and paid on December 16, 1999.
1999 INVESTMENT REVIEW
For the quarter, Cohen & Steers Realty Shares had a total return, based on
income and change in net asset value, of 4.04%. This performance compares
favorably to the NAREIT Equity REIT Index* total return of -- 1.01%. For the
year ended December 31, 1999, the Fund's total return was 2.68% which compared
to the NAREIT Equity REIT Index total return of -- 4.62%.
The REIT bear market continued in earnest in 1999, and for only the second
time in history, and the first time in 25 years, REITs recorded back-to-back
years of negative returns. As is well known, this performance came in the face
of continued strong real estate fundamentals, rising inflation expectations and
historically attractive REIT valuations.
The best performing sectors in 1999 were Apartment and Office. Both were
positively affected by the strong economy, exposure to the growth of the
Internet and knowledge-based industries, and financial market discipline that
constrained capital flows and new construction that might have led to
overbuilding. The worst performing companies were owners of Health Care
facilities, which were buffeted by Medicare reforms that reduced the
profitability of nursing homes, and overbuilding in the assisted living industry
that has caused severe financial distress for their operators. Also performing
poorly was the Hotel sector, which suffered due to the increasing level of new
hotel construction. The Retail sector, of course, was adversely affected by
investor fears about the growing threat of the Internet on real estate based
shopping.
What is perhaps most interesting about performance in 1999 is what
investment themes did not work, despite widely held beliefs that certain
valuation parameters and corporate policies would stem the tide of persistent
investor selling. While so-called 'value' investors in general suffered during
the year, in the REIT universe neither value nor growth styles of management
provided better returns. Net asset values (NAV) per share failed to provide a
floor to REIT share prices, and now most trade well below NAV. Current dividend
yield also provided little or no support as share price declines produced an
unprecedented number of double-digit dividend yields in the REIT universe. Share
buy-backs, which totaled several $billion, and were widely heralded as both
managements' strongest defense and their greatest investment opportunity, failed
to do more than barely cushion the fall of REIT prices. And finally, increased
merger and acquisition activity, nearly everyone's expected outcome of the bear
market, not only failed to materialize, but in the few transactions that did
take place, the premium paid for the acquired company was disappointingly
modest.
Three factors worked well for us and resulted in our exceptionally strong
relative performance. The first was our 'Realty Majors' strategy emphasizing the
biggest, best managed and strongest capitalized companies in the REIT universe.
The Cohen & Steers Realty Majors Index, for example, experienced a -- 1.32%
total return for the year, fully 330 basis points in excess of the NAREIT Equity
REIT Index return. Second, we were strongly weighted
1
================================================================================
<PAGE>
================================================================================
COHEN & STEERS REALTY SHARES, INC.
in the aforementioned Apartment and Office sectors, the best performers for the
year. And third, we established and maintained positions in certain companies,
most notably Reckson Service Industries, which are leading the real estate
industry's transformation to the technology age by providing state of the art
Internet and communication access and other essential services to property
owners and tenants.
We believe that technology will play an increasingly significant role --
aside from its effect on the overall economy -- in the future of the real
estate industry. Understanding these trends, their impact on different
geographic regions, property sectors, and varying company strategies will be
critical to investment success in the future. We intend to follow these trends
and companies very closely and, most importantly, to profit from this research.
We have therefore established a new sector: Services and Technology. Because of
these companies' volatility and higher risk profiles, we will limit this
sector's weighting so that the portfolio's real estate characteristics are not
diluted. However, we do expect to continue to participate in this dynamic sector
with a goal of enhancing investment performance.
INVESTMENT OUTLOOK
As 2000 begins, little if anything has changed in the REIT investment
environment. The economy continues to grow at a substantial pace and real estate
fundamentals remain strong. We expect REIT earnings to grow by 8%, on average,
this year, which is about in line with projections for the S&P 500. REITs are
generally very well capitalized and these companies are expected to again record
strong dividend growth. The REIT modernization legislation passed in 1999 has
broadened these companies' power to control their destinies due to their new
ability, starting in 2001, to establish taxable subsidiary companies that can
engage in previously prohibited services and related businesses. Nonetheless,
REIT shares remain at record low valuations and investor sentiment continues to
strongly favor high technology and Internet-related companies.
In our opinion, REITs continue to suffer from the lack of cyclical tailwinds
from which they benefited in the mid-1990's, and from investor fears that
cyclical headwinds may be just around the corner, the result of either a slowing
economy (thereby reducing demand) or a boom in new construction (increasing
supply). Thus, to commit to this sector one must be satisfied that neither of
these are an issue or, if they are, that the stocks are cheap enough and have
discounted these factors. While we are no better at predicting the economy than
anyone else, it appears that there are very few impediments to continued
economic growth, although perhaps not at the torrid pace of the past year. We
also see ample evidence that the combination of enhanced real estate information
flow and capital market discipline can be sufficient to control the amount of
new construction in most property types and major regions of the country. As a
result, we are not concerned that a supply/demand imbalance in the real estate
market is about to develop. Consequently, due to the current level of REIT
valuations, we also do not see a lot of risk in their share prices.
The continued strength of the economy has justifiably caused fears of
further interest rate increases this year, and many have suggested that this
will be negative for real estate and REITs. This conclusion, however, may not be
entirely correct and, again, recent experience is substantiating this. Again,
using the supply and demand analogy, as long as interest rate increases do not
choke off economic growth altogether, the demand side of the equation should
stay intact. Importantly, real estate development is very sensitive to interest
rates. Rising interest rates over the past year have already had the effect of
slowing construction. We would expect that any additional rise in rates will
further reduce development activity and nearly ensure limitations on new supply.
This may also
2
================================================================================
<PAGE>
================================================================================
COHEN & STEERS REALTY SHARES, INC.
precipitate a rise in required current returns (capitalization rates) on both
new development and property purchases and a concomitant decline in property
values. This situation may be exactly what the decline in REIT share prices has
been anticipating. Again, as long as the economy continues to grow, rental
income and, therefore, REIT earnings should not be negatively affected. Thus,
REIT share prices may hold up relatively well. Further, this may create a new
buying opportunity for the REITs that have retained or can access capital. It is
for this reason that we have advocated that companies marshal as much liquidity
as possible, and have focused our investments on those that have done so.
Within the context of the entire REIT universe, we expect a continuation of
divergent trends between different property sectors and companies. While we
expect the 'Majors' strategy to continue as an important investment theme, we
recognize that sector selection will play an increasingly important role in
investment performance. We continue to like the Office sector, but favor urban
locations. We have begun to increase our positions in the Health Care sector
based on early signs that the worst may be over for both the owners and
operators of health care facilities. Similarly, we have begun to increase our
weighting in the Hotel sector, as we see abatement in the growth of new hotel
construction and continued strong demand for rooms, particularly in the urban,
upscale segment. We are continuing to underweight the Retail sector due to a
peaking of earnings momentum and the continued threat of the Internet with
respect to retailers' sales and profit margins. Further, we are reducing or
eliminating any holdings where managements have not adapted well to a capital
constrained environment or have not adopted a business strategy that addresses
the changed fundamental trends.
In our opinion, waiting for REITs to return to investor favor is not like
waiting for bell-bottom pants and wide ties to come back into vogue. Real estate
remains a large and essential, albeit changing, industry and REITs continue to
be the prominent vehicle for investment. As always, it is our goal to deliver to
investors a superior level of investment performance relative to the returns of
the equity REIT market as a whole.
Sincerely,
Martin Cohen Robert H. Steers
MARTIN COHEN ROBERT H. STEERS
President Chairman
- ------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------
* The NAREIT Equity REIT Index is an unmanaged, market capitalization weighted
index of all publicly-traded REITs that invest predominately in the equity
ownership of real estate. The index is designed to reflect the performance of
all publicly-traded REITs as a whole.
3
================================================================================
<PAGE>
================================================================================
COHEN & STEERS REALTY SHARES, INC.
PERFORMANCE REVIEW
The investment objective of Cohen & Steers Realty Shares, Inc. is total
return through investment in real estate securities. The Fund pursues its
investment objective by seeking both current income and capital appreciation.
Securities in the portfolio are selected by the adviser based on the outlook for
various property types and regions of the country, and fundamental research on
the individual companies. Among the investment criteria applied to individual
companies are organizational structure, management depth, track record of
profitability, balance sheet strength and growth potential.
The Fund's investment performance in 1999 was significantly in excess of its
benchmark. Although real estate securities in general performed poorly in 1999,
the Fund's results were positively affected by three factors. First, the Fund
maintained a strategy of investing in the largest and best managed companies in
the real estate industry, and these companies in aggregate performed better than
average. Second, the Fund maintained a strong weighting in the Office and
Apartment sectors, which were among the best performing in the industry. And
third, the Fund maintained a large position in Reckson Service Industries, a
company that provides a variety of services to the real estate industry, and
whose share price rose substantially during the year.
The performance of the Fund's cumulative return since its inception in 1991
has comfortably exceeded that of its benchmark.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
FOR PERIODS ENDED DEC. 31, 1999
- ----------------------------------------------------------------------------
1 YEAR SINCE INCEPTION (7/2/91)
- ----------------------------------------------------------------------------
<S> <C> <C>
Fund 2.68% 11.97%
- ----------------------------------------------------------------------------
NAREIT Equity -4.62% 10.22%
- ----------------------------------------------------------------------------
S&P 500 21.04% 20.04%
- ----------------------------------------------------------------------------
</TABLE>
GROWTH OF A $10,000 INVESTMENT
SINCE INCEPTION
<TABLE>
<CAPTION>
COHEN & STEERS NAREIT S&P
<S> <C> <C> <C>
7/2/91 10,000 10,000 10,000
9/30/91 10,112 10,409 10,535
12/31/91 10,792 10,970 11,418
3/31/92 10,962 11,043 11,129
6/30/92 11,226 11,334 11,340
9/30/92 12,111 12,108 11,698
12/31/92 12,959 12,571 12,287
3/31/93 15,615 15,291 12,824
6/30/93 15,014 14,852 12,887
9/30/93 16,523 16,241 13,219
12/31/93 15,389 15,041 13,526
3/31/94 16,314 15,553 13,014
6/30/94 16,517 15,840 13,068
9/30/94 16,219 15,516 13,707
12/31/94 16,669 15,518 13,704
3/31/95 16,268 15,492 15,038
6/30/95 16,996 16,403 16,474
9/30/95 17,910 17,176 17,784
12/31/95 18,523 17,888 18,854
3/31/96 18,853 18,294 19,866
6/30/96 19,982 19,108 20,758
9/30/96 21,435 20,359 21,400
12/31/96 25,651 24,196 23,185
3/31/97 26,254 24,364 23,806
6/30/97 27,369 25,576 27,963
9/30/97 30,334 28,598 30,057
12/31/97 31,077 29,098 30,920
3/31/98 30,614 28,962 35,233
6/30/98 29,169 27,634 36,396
9/30/98 25,703 24,726 32,774
12/31/98 25,462 24,005 39,757
3/31/99 24,591 22,848 41,737
6/30/99 27,638 25,152 44,679
9/30/99 25,131 23,129 41,887
12/31/99 26,146 22,896 48,120
</TABLE>
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate. When shares are redeemed, they may be worth
more or less than the original cost.
* Commencement of operations.
'D' The comparative indices are not adjusted to reflect expenses or other fees
that the SEC requires to be reflected in the Fund's performance. The Fund's
performance assumes the reinvestment of all dividends and distributions. The
NAREIT Equity REIT Index is comprised of 167 real estate investment trusts.
The S&P 500 Index is an unmanaged list of common stocks that is frequently
used as a general measure of stock market performance. For more information,
including charges and expenses, please read the prospectus carefully before
you invest.
4
================================================================================
<PAGE>
================================================================================
COHEN & STEERS REALTY SHARES, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
NUMBER VALUE
OF SHARES (NOTE 1)
---------- --------------
<S> <C> <C>
EQUITIES 97.90%
APARTMENT/RESIDENTIAL 16.83%
Apartment Investment & Management
Co. -- Class A..................... 2,628,700 $ 104,655,119
AvalonBay Communities................. 2,534,400 86,961,600
Charles E. Smith Residential Realty... 618,000 21,861,750
Equity Residential Properties Trust... 188,800 8,059,400
Essex Property Trust.................. 734,400 24,969,600
--------------
246,507,469
--------------
HEALTH CARE 7.62%
Health Care Property Investors........ 1,121,200 26,768,650
*Manor Care............................ 1,504,300 24,068,800
'D'Nationwide Health Properties.......... 2,666,400 36,663,000
Omega Healthcare Investors............ 346,900 4,401,294
*'D'Ventas................................ 4,718,200 19,757,462
--------------
111,659,206
--------------
HOTEL 5.56%
MeriStar Hospitality Corp............. 40,100 641,600
Starwood Hotels & Resorts Worldwide... 3,441,900 80,884,650
--------------
81,526,250
--------------
INDUSTRIAL 6.45%
#AMB Property Corp. 144A............... 13,941 --
AMB Property Corp..................... 2,308,100 46,017,744
First Industrial Realty Trust......... 161,300 4,425,669
ProLogis Trust........................ 2,284,800 43,982,400
--------------
94,425,813
--------------
OFFICE 30.19%
Arden Realty Group.................... 2,826,000 56,696,625
**Brookfield Properties Corp............ 1,335,000 13,935,954
Cousins Properties.................... 455,400 15,455,137
Crescent Real Estate Equities Co...... 804,100 14,775,337
Equity Office Properties Trust........ 1,621,000 39,917,125
Highwoods Properties.................. 1,279,700 29,753,025
'D'Mack-Cali Realty Corp................. 3,180,300 82,886,569
'D'SL Green Realty Corp.................. 1,414,100 30,756,675
'D'Vornado Realty Trust.................. 4,864,900 158,109,250
--------------
442,285,697
--------------
</TABLE>
See accompanying notes to financial statements.
5
================================================================================
<PAGE>
================================================================================
COHEN & STEERS REALTY SHARES, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
NUMBER VALUE
OF SHARES (NOTE 1)
---------- --------------
<S> <C> <C>
OFFICE/INDUSTRIAL 12.73%
'D'Prime Group Realty Trust.............. 1,391,200 $ 21,128,850
PS Business Parks..................... 1,004,300 22,847,825
'D'Reckson Associates Realty Corp........ 3,344,600 68,564,300
Spieker Properties.................... 2,029,500 73,949,906
--------------
186,490,881
--------------
SELF STORAGE 2.38%
Public Storage........................ 1,539,200 34,920,600
--------------
SERVICES & TECHNOLOGY 6.28%
*Allied Riser Communications........... 269,300 5,571,144
*Crescent Operating.................... 301,200 828,300
*'D'Reckson Service Industries............ 1,371,300 85,534,837
--------------
91,934,281
--------------
SHOPPING CENTER 9.86%
COMMUNITY CENTER 3.10%
Developers Diversified Realty Corp.... 1,034,500 13,319,188
Kimco Realty Corp..................... 947,300 32,089,787
--------------
45,408,975
--------------
REGIONAL MALL 6.76%
General Growth Properties............. 1,445,500 40,474,000
Macerich Co........................... 1,606,500 33,435,281
Rouse Co.............................. 349,500 7,426,875
Simon Property Group.................. 773,400 17,739,863
--------------
99,076,019
--------------
TOTAL SHOPPING CENTER................. 144,484,994
--------------
TOTAL EQUITIES (Identified
cost -- $1,429,036,362)........ 1,434,235,191
--------------
</TABLE>
See accompanying notes to financial statements.
6
================================================================================
<PAGE>
================================================================================
COHEN & STEERS REALTY SHARES, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- --------------
<S> <C> <C> <C>
COMMERCIAL PAPER 1.43%
Eiffel Funding, 4.25%, due 1/3/00.............. $18,910,000 $ 18,905,535
Leggett & Platt Corp., 4.25%, due 1/3/00....... 1,983,480 1,983,012
--------------
COMMERCIAL PAPER (Identified cost --
$20,888,547)............................ 20,888,547
--------------
TOTAL INVESTMENTS (Identified cost --
$1,449,924,909)........................ 99.33% 1,455,123,738
OTHER ASSETS IN EXCESS OF LIABILITIES.... 0.67% 9,869,985
------- --------------
NET ASSETS (Equivalent to $36.91 per
share on 39,693,180 shares of capital
stock outstanding)..................... 100.00% $1,464,993,723
------- --------------
------- --------------
</TABLE>
- ---------
* Non-income producing security.
'D' The Fund owns 5% or more of this company's outstanding voting shares
(Note 6).
# As of December 31, 1999, security is restricted and is subject to
registration with the Securities and Exchange Commission. Escrow shares are
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.
** Brookfield Properties Corp. is a Canadian company listed 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 December 31, 1999 was $20,225,250 based on an exchange
rate of 1 Canadian dollar to 0.689 U.S. dollars.
See accompanying notes to financial statements.
7
================================================================================
<PAGE>
================================================================================
COHEN & STEERS REALTY SHARES, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (Identified
cost -- $1,449,924,909) (Notes 1 and 6).............. $1,455,123,738
Dividends receivable.................................... 10,863,910
Receivable for fund shares sold......................... 4,744,502
Receivable for investment securities sold............... 381,574
Other assets............................................ 98,945
--------------
Total Assets....................................... 1,471,212,669
--------------
LIABILITIES:
Payable for fund shares redeemed........................ 3,017,049
Payable for investment securities purchased............. 1,526,090
Payable to investment adviser........................... 1,015,747
Payable to administrator................................ 434,594
Unrealized depreciation on foreign currency forward
contract (Note 4).................................... 2,571
Other liabilities....................................... 222,895
--------------
Total Liabilities.................................. 6,218,946
--------------
NET ASSETS applicable to 39,693,180 shares of $0.001 par
value common stock outstanding (Note 5)................. $1,464,993,723
--------------
--------------
NET ASSET VALUE PER SHARE:
($1,464,993,723[div]39,693,180 shares outstanding)...... $ 36.91
--------------
--------------
NET ASSETS consist of:
Paid-in capital (Notes 1 and 5)......................... $1,495,706,848
Accumulated net realized loss on investments sold....... (35,909,383)
Net unrealized appreciation on investments and foreign
currency forward contract (Note 4)................... 5,196,258
--------------
$1,464,993,723
--------------
--------------
</TABLE>
See accompanying notes to financial statements.
8
================================================================================
<PAGE>
================================================================================
COHEN & STEERS REALTY SHARES, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
Investment Income (Note 1):
Dividend income (net of $38,621 foreign withholding tax
and including $61,668,431 received from affiliated
issuers) (Note 6).................................... $102,459,942
Interest income......................................... 451,548
------------
Total Income....................................... 102,911,490
------------
Expenses:
Investment advisory fees (Note 2)....................... 14,080,229
Administration and transfer agent fees (Note 2)......... 2,432,944
Interest expense (Note 8)............................... 254,474
Reports to shareholders................................. 192,613
Custodian fees and expenses............................. 186,253
Professional fees....................................... 73,591
Registration and filing fees............................ 60,211
Directors' fees and expenses (Note 2)................... 32,606
Miscellaneous........................................... 368,687
------------
Total Expenses..................................... 17,681,608
Reduction of expenses (Note 7).......................... (199,795)
------------
Net Expenses....................................... 17,481,813
------------
Net Investment Income....................................... 85,429,677
------------
Net Realized and Unrealized Gain/(Loss) on Investments:
Net realized loss on investments (includes net realized
loss of $38,359,627 on sales of investments in
affiliated issuers) (Note 6)......................... (74,867,037)
Net change in unrealized appreciation/(depreciation) on
investments and foreign currency forward contracts... 14,880,105
------------
Net realized and unrealized gain/(loss) on
investments and foreign currency forward
contracts (Note 4).............................. (59,986,932)
------------
Net Increase in Net Assets Resulting from Operations........ $ 25,442,745
------------
------------
</TABLE>
See accompanying notes to financial statements.
9
================================================================================
<PAGE>
================================================================================
COHEN & STEERS REALTY SHARES, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
Change in Net Assets:
From Operations:
Net investment income............... $ 85,429,677 $ 114,388,885
Net realized gain/(loss) on
investments...................... (74,867,037) 49,313,119
Net change in unrealized
appreciation/(depreciation) on
investments and foreign currency
forward contract (Note 4)........ 14,880,105 (720,604,899)
-------------- --------------
Net increase/(decrease) in net
assets resulting from
operations................... 25,442,745 (556,902,895)
-------------- --------------
Dividends and Distributions to
Shareholders from (Note 1):
Net investment income............... (71,807,679) (92,852,026)
Net realized gain on investments.... -- (82,995,761)
Tax return of capital............... (12,406,847) (7,514,066)
-------------- --------------
Total dividends and
distributions to
shareholders................. (84,214,526) (183,361,853)
-------------- --------------
Capital Stock Transactions (Note 5):
Decrease in net assets from Fund
share transactions............... (409,574,675) (759,389,895)
-------------- --------------
Total decrease in net assets... (468,346,456) (1,499,654,643)
Net Assets:
Beginning of year................... 1,933,340,179 3,432,994,822
-------------- --------------
End of year......................... $1,464,993,723 $1,933,340,179
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to financial statements.
10
================================================================================
<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 YEAR ENDED DECEMBER 31,
--------------------------------------------------
PER SHARE OPERATING PERFORMANCE: 1999 1998 1997 1996 1995
- -------------------------------- -------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......... $ 37.98 $ 50.18 $ 45.09 $ 34.62 $32.90
-------- -------- -------- -------- ------
Income from investment operations:
Net investment income................... 2.01 1.97 1.87 1.86 1.86
Net realized and unrealized gain/(loss)
on investments and foreign currency
forward contract (Note 4)............. (1.10) (10.89) 7.40 11.04 1.69
-------- -------- -------- -------- ------
Total from investment operations... 0.91 (8.92) 9.27 12.90 3.55
-------- -------- -------- -------- ------
Less dividends and distributions to
shareholders from:
Net investment income................... (1.69) (1.59) (1.88) (1.76) (1.33)
Net realized gain on investments........ -- (1.56) (2.30) (0.55) --
Tax return of capital................... (0.29) (0.13) -- (0.12) (0.50)
-------- -------- -------- -------- ------
Total dividends and distributions
to shareholders.................. (1.98) (3.28) (4.18) (2.43) (1.83)
-------- -------- -------- -------- ------
Net asset value, end of year................ $ 36.91 $ 37.98 $ 50.18 $ 45.09 $34.62
-------- -------- -------- -------- ------
- ------------------------------------------------------------------------------------------------
Total investment return..................... 2.68% -18.07% 21.16% 38.48% 11.13%
-------- -------- -------- -------- ------
-------- -------- -------- -------- ------
- ------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in millions)... $1,465.0 $1,933.3 $3,433.0 $2,036.4 $793.1
-------- -------- -------- -------- ------
-------- -------- -------- -------- ------
Ratios of expenses to average daily net
assets (before expense reduction)..... 1.07% 1.04% 1.06% 1.10% 1.16%
-------- -------- -------- -------- ------
-------- -------- -------- -------- ------
Ratios of expenses to average daily net
assets (net of expense reduction)..... 1.06% 1.03% 1.05% 1.08% 1.12%
-------- -------- -------- -------- ------
-------- -------- -------- -------- ------
Ratios of net investment income to
average daily net assets (before
expense reduction).................... 5.15% 4.23% 4.02% 5.27% 6.01%
-------- -------- -------- -------- ------
-------- -------- -------- -------- ------
Ratios of net investment income to
average daily net assets (net of
expense reduction).................... 5.16% 4.24% 4.04% 5.28% 6.05%
-------- -------- -------- -------- ------
-------- -------- -------- -------- ------
Portfolio turnover rate................. 21.34% 30.18% 40.44% 33.23% 22.68%
-------- -------- -------- -------- ------
-------- -------- -------- -------- ------
</TABLE>
See accompanying notes to financial statements.
11
================================================================================
<PAGE>
================================================================================
COHEN & STEERS REALTY SHARES, INC.
NOTES TO FINANCIAL STATEMENTS
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 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
12
================================================================================
<PAGE>
================================================================================
COHEN & STEERS REALTY SHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
from non-taxable components of the dividends from the Fund's portfolio
investments. As a result, the Fund had a return of capital of $12,406,847 ($0.29
per share) for the year ended December 31, 1999, which has been deducted from
paid-in capital. 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. During the year ended December 31,
1999, the Fund decreased undistributed net investment income and decreased
accumulated net realized loss on investments sold by $13,621,998. 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. At December 31, 1999,
the Fund had a capital loss carryforward of $50,948,490 expiring in 2007.
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 year
ended December 31, 1999, the Fund incurred $14,080,229 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 year ended December 31, 1999, the Fund paid the Adviser
$331,299 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')
13
================================================================================
<PAGE>
================================================================================
COHEN & STEERS REALTY SHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
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 year ended December 31, 1999, fees and related expenses
accrued from non-affiliated directors totaled $32,606.
NOTE 3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, excluding short-term investments, for
the year ended December 31, 1999 totaled $351,899,719 and $796,829,189,
respectively.
At December 31, 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..................................... $1,434,885,803
--------------
Gross unrealized appreciation...................... $ 195,324,477
Gross unrealized depreciation...................... $ (175,086,542)
--------------
--------------
Net unrealized appreciation........................ $ 20,237,935
--------------
--------------
</TABLE>
NOTE 4. FOREIGN CURRENCY FORWARD CONTRACTS
At December 31, 1999, Cohen & Steers Realty Shares, Inc. entered into a
Foreign Currency Forward Contract which contractually obligate the Fund to
receive currency at a specified future date.
The open contract is as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
FOREIGN IN EXCHANGE SETTLEMENT APPRECIATION/
CONTRACT CURRENCY FOR DATE VALUE (DEPRECIATION)
-------- -------- --- ---- ----- --------------
<S> <C> <C> <C> <C> <C>
Sell: Canadian Dollar....... 204,255 $138,168 01/03/2000 $140,739 $(2,571)
</TABLE>
14
================================================================================
<PAGE>
================================================================================
COHEN & STEERS REALTY SHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. 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 YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
Sold........................ 13,508,463 $ 512,840,372 19,345,027 $ 869,232,043
Issued as reinvestment of
dividends................. 1,948,633 69,716,308 3,881,513 158,738,009
Redeemed.................... (26,674,342) (992,131,355) (40,731,134) (1,787,359,947)
----------- ------------- ----------- ---------------
Net decrease................ (11,217,246) $(409,574,675) (17,504,594) $ (759,389,895)
----------- ------------- ----------- ---------------
----------- ------------- ----------- ---------------
</TABLE>
NOTE 6. 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 December 31, 1999 totaled
$503,400,943.
Affiliates, their investment income, and gain/(loss) from sales of
affiliates are as follows (in thousands):
SUMMARY OF TRANSACTIONS WITH AFFILIATES:
(AMOUNT 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>
*Apartment Investment & Management
Co............................... 2,883 -- 254 2,629 $ -- $ 10,010 $ (486) $ 6,965
*Arden Realty Group................ 3,681 -- 855 2,826 -- 23,494 (3,640) 5,589
*Developers Diversified Realty
Corp............................. 3,579 -- 2,544 1,035 -- 47,033 (7,590) 2,625
*Essex Property Trust.............. 1,244 -- 510 734 -- 14,912 429 2,044
*General Growth Properties......... 2,108 111 773 1,446 3,218 25,447 906 2,953
*Highwoods Properties.............. 3,561 -- 2,281 1,280 -- 68,475 (11,686) 5,591
*LNR Property Corp................. 2,500 -- 2,500 -- -- 56,544 (11,096) 116
*Macerich Co....................... 2,036 -- 429 1,607 -- 11,716 (984) 3,253
Mack-Cali Realty Corp............. 4,319 -- 1,139 3,180 -- 42,600 (12,003) 11,095
Nationwide Health................. 1,011 1,655 -- 2,666 29,829 -- -- 3,755
Prime Group Realty Trust.......... 1,649 -- 258 1,391 -- 5,177 (1,264) 1,932
Reckson Associates Realty Corp.... 3,359 -- 14 3,345 -- 390 (70) 4,854
Reckson Service Industries........ 1,613 62 304 1,371 1,279 1,528 10,561 --
SL Green Realty Corp.............. 1,439 -- 25 1,414 -- 636 (181) 2,006
Ventas............................ -- 4,718 -- 4,718 19,789 -- -- --
*Vornado Operating Co.............. 252 -- 252 -- -- 1,712 163 --
Vornado Realty Trust.............. 5,051 -- 186 4,865 -- 8,059 (1,419) 8,890
------- -------- -------- -------
$54,115 $317,733 $(38,360) $61,668
------- -------- -------- -------
------- -------- -------- -------
</TABLE>
- ---------
* As of December 31, 1999, no longer an affiliate.
15
================================================================================
<PAGE>
================================================================================
COHEN & STEERS REALTY SHARES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. DIRECTED BROKERAGE ARRANGEMENTS
The Adviser has directed certain portfolio trades to brokers who paid a
portion of the Fund's expenses. For the year ended December 31, 1999, the Fund's
expenses were reduced by $199,795 under this arrangement.
NOTE 8. 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 $200,000,000. At December 31, 1999, the
Fund had no loans outstanding. During the year ended December 31, 1999, the
average daily balance of loans outstanding was $12,525,758 at a weighted average
interest rate of 5.54%. The maximum amount of loans outstanding at any time
during the year 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.
16
================================================================================
<PAGE>
================================================================================
COHEN & STEERS REALTY SHARES, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Cohen & Steers Realty Shares, Inc.:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Cohen & Steers Realty Shares, Inc
(the 'Fund') at December 31, 1999, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States. These financial statements and financial highlights
(hereafter referred to as 'financial statements') are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
New York, New York
February 3, 2000
17
================================================================================
<PAGE>
================================================================================
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 CUSTODIAN
Director The Chase Manhattan Bank
One Chase Manhattan Plaza
Willard H. Smith, Jr. New York, NY 10081
Director
LEGAL COUNSEL
Elizabeth O. Reagan Simpson Thacher & Bartlett
Vice President 425 Lexington Avenue
New York, NY 10017
Adam Derechin
Vice President and Assistant DISTRIBUTOR
Treasurer Cohen & Steers Securities, Inc.
757 Third Avenue
Lawrence B. Stoller New York, NY 10017
Assistant Secretary
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.
</TABLE>
18
================================================================================
<PAGE>
COHEN & STEERS
REALTY SHARES
757 THIRD AVENUE
NEW YORK, NY 10017
[LOGO]
COHEN & STEERS
- -------------------
REALTY SHARES
- -------------------
ANNUAL REPORT
DECEMBER 31, 1999
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as ................................. 'D'
The division sign shall be expressed as ................................. [div]
