<Page>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act File Number: 811-9993
Cohen & Steers Advantage Income Realty Fund, Inc.
(Exact name of registrant as specified in charter)
757 Third Avenue, New York, NY 10017
(Address of principal executive offices) (Zip code)
Robert H. Steers
Cohen & Steers Capital Management, Inc.
757 Third Avenue
New York, New York 10017
(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 832-3232
Date of fiscal year end: December 31
Date of reporting period: December 31, 2004
<Page>
Item 1. Reports to Stockholders.
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
February 21, 2005
To Our Shareholders:
We are pleased to submit to you our report for the quarter and year ended
December 31, 2004. The net asset value at that date was $22.94 per common share.
The total return, including income, for Cohen & Steers Advantage Income Realty
Fund and its relevant benchmarks were:
<Table>
<Caption>
NET ASSET VALUE(a) MARKET PRICE(a)
------------------- -------------------
QUARTER- YEAR- QUARTER- YEAR-
ENDED ENDED ENDED ENDED
12/31/04 12/31/04 12/31/04 12/31/04
-------- -------- -------- --------
Cohen & Steers Advantage Income Realty
Fund(b).............................. 14.9% 32.1% 26.1% 31.8%
NAREIT Equity REIT Index(c)............ 15.2% 31.6% 15.2% 31.6%
Morgan Stanley REIT Preferred Index(d). 2.7% 7.3% 2.7% 7.3%
</Table>
During the quarter, three $0.12 share monthly dividends and one special
dividend of $0.07 per share were declared and paid. The special year-end
dividend consisted of a $0.04 per share long-term capital gain and a $0.03 per
share distribution of investment income earned in excess of what we distributed
throughout the course of the year.(e)
In addition, the fund's board of directors announced an increase of $0.03
per common share in the fund's regular monthly distribution, raising the monthly
distribution to $0.15 per common share. The new monthly distribution rate
represents a 25% increase to the prior monthly distribution rate. In connection
with this increase, the fund's board of directors announced the adoption of a
level rate distribution policy. The new distribution rate reflects both the
increased investment income that the fund's investment manager believes the fund
will earn and the decision by the board of directors to augment investment
income with the fund's capital, which has increased significantly since the
fund's initial public offering due to unrealized appreciation in the fund's
portfolio
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(a) As a closed-end investment company, the price of the fund's New York Stock
Exchange-traded shares will be set by market forces and at times may deviate
from the net asset value per share of the fund.
(b) For the year, the fund averaged 83% REIT common stock and 17% preferred
stock and other fixed income investments.
(c) The NAREIT Equity REIT Index ('Equity REITs') is an unmanaged
market-capitalization-weighted index of all tax-qualified Equity REITs
listed on the NYSE, AMEX, and the Nasdaq that have 75% or more of their
gross invested book assets invested directly or indirectly in the equity
ownership of real estate.
(d) The Morgan Stanley REIT Preferred Index is an unmanaged index of all
exchange-traded perpetual preferred securities of equity REITs, weighted by
capitalization and considered representative of real estate preferred stock
performance.
(e) Please note that distributions paid by the fund to shareholders are subject
to recharacterization for tax purposes. The final tax treatment of these
distributions is reported to shareholders after the close of each fiscal
year.
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1
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
investments. As of December 31, 2004, the fund had unrealized appreciation in
its portfolio investments equivalent to $10.13 per common share.
INVESTMENT REVIEW
One year ago, in our year-end letter to shareholders, we shared our belief
that REITs would experience 'a continuation of strong performance' as a result
of strong expected economic fundamentals. We predicted that GDP would increase
by at least 4% in 2004, creating 1.5 to 2.0 million jobs and leading to
improving real estate fundamentals and accelerating cash flow growth rates for
REITs. We are pleased to report that all of these predictions have been
realized.
Additionally, we believe that investors of all types -- individual and
institutional, in the United States and abroad -- continued to gravitate toward
REITs in recognition of their historical investment characteristics, including a
secure and growing dividend stream, diversification away from the broader stock
and bond markets, and competitive total returns. In addition, as more and more
investors came to appreciate the investment characteristics of real estate, REIT
merger and acquisition activity heated up. The prices paid for real estate
companies over the course of 2004 continued to validate the higher asset values
associated with high quality U.S. commercial real estate assets. For all these
reasons, the portfolio experienced another year of very strong absolute returns
while at the same time providing current income at levels that were superior to
that of the REIT market, as measured by the dividend yield of the NAREIT Equity
REIT Index.
Regional mall companies continued to lead the REIT industry in performance.
Benefiting from strong sales growth, rapid consolidation of ownership (resulting
in greater leverage with retailers), strong demand for space by retailers, and a
relatively fixed supply of franchise assets, regional malls returned 45.1%.
Mills Corporation was our best performing mall stock, returning 52.4%. Shopping
centers benefited from some of the same trends in retailing and returned 37.0%.
Though we maintained a significant weighting in both these sectors, our
underweight positions -- due to the lack of available yield opportunities in of
these sectors -- detracted from the fund's overall performance.
The industrial and apartment sectors, both cyclical in nature, benefited
from a strong economy and generated 34.1% and 34.7% respectively. AvalonBay
Communities, for example, was the best performing stock in the fund generating a
65.0% total return.
Office companies trailed the index on average by a wide margin, returning
23.4% as a group. Office fundamentals, however, varied widely across the U.S.
Although the dividend yields in this sector are generally well above average,
our overweight here was a drag on the fund's total return performance. The
fund's best office holding was Kilroy Realty with a 37.6% total return while the
worst performer was Equity Office Properties with a total return of 9.1%. The
worst performing stock in the fund was Affordable Residential Communities, a
manufactured housing company -- lower apartment rents and affordable for-sale
housing have continued to disadvantage this low-priced housing alternative.
Affordable Residential Communities returned -4.8%, one of only a small handful
of REITs with a negative total return in 2004.
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2
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
INVESTMENT OUTLOOK
We anticipate that economic fundamentals in 2005 will be substantially
similar to 2004 and in a few ways even better. We believe that GDP growth will
be in the 3.5% range with job growth of about 2 million. In our view, barring
any large, exogenous economic shocks, this will result in continuing improvement
in the unemployment rate and real wage gains. In short, we believe the economic
recovery should become self-sustaining and somewhat steadier.
This should provide a continued positive backdrop for real estate
fundamentals, characterized by higher occupancies, rents and cash flows for most
property types and in most regions of the country. As a result, our estimates
indicate that REIT cash flow and dividend growth will continue to acceleration
through 2005 and 2006. We expect REIT cash flow to increase 9.2% and 9.5% while
dividend growth is projected at 5.9% and 6.2% in 2005 and 2006, respectively. We
believe the growth in earnings and dividends will support strong REIT
valuations. Further, we believe this growth to be superior to what may be
expected from most other sectors of the equity market.
Although past performance is no guarantee of future results, history has
shown that accelerating cash flow and dividend growth rates, which we anticipate
for at least the next two years, can have a salutary effect on stock prices. For
REITs as with other stocks, it has generally been when growth rates peaked and
began declining that stock prices peaked. Not coincidentally, when REIT cash
flow growth rates last peaked in early 1998, the REIT index peaked as well, and
total returns turned negative. By 1998, real estate in the United States had
been in recovery for several years and growth rates had been accelerating. But
with rents having escalated dramatically in 1996 and 1997, an explosion of new
construction in 1998 began to attenuate the dramatic market rental rate
increases that commercial landlords had been experiencing. In short, real estate
had fully recovered and even though demand from the economy was growing nicely,
supply had risen to meet that demand, causing earnings growth rates to peak.
Accordingly, if the current real estate cycle continues to improve and
economic growth remains steady in the 2.5% to 4% range, we believe that real
estate stocks can continue to perform well, until such time as market rents rise
to the level where developers are induced to build new buildings and rental
increases are stifled by new competitive product. We believe that this
eventuality is still a couple of years away. Rents, though rising in most
markets, are generally nowhere near levels that would justify new construction
and will not be for some time in our view. In most instances, we believe that it
will be several years before new construction makes sense, given that the price
of building a building has also escalated dramatically in accordance with the
price of steel, concrete, lumber and labor.
In summary, we anticipate that a steadily growing economy will support
demand for real estate and that muted new construction will constrain the supply
of real estate in many markets. With respect to REITs, we believe that cash flow
growth will continue to accelerate along with dividend growth. We further
believe that correctly anticipating these changing growth rates will be the key
to REIT stock price performance again in 2005. Valuations are somewhat above
historical averages, partially reflecting some of these positives in our view.
However,
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3
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
valuations are not at levels that indicate to us a peak in stock prices. As it
relates to REIT preferred stocks, we will adhere to the proven strategy of
maintaining an allocation to REIT preferred stocks which provide a premium
yield, enhance the stability of the overall portfolio, and generally provide a
total return that we believe is attractive in what we generally believe will be
a low return environment. As a result, we believe the fund's overall portfolio
may deliver attractive total returns in 2005, although investors are cautioned
not to assume that returns will continue at the pace of the past two years.
Sincerely,
MARTIN COHEN ROBERT H. STEERS
MARTIN COHEN ROBERT H. STEERS
President Chairman
JOSEPH M. HARVEY JAMES S. CORL
JOSEPH M. HARVEY JAMES S. CORL
Portfolio Manager Portfolio Manager
VISIT COHEN & STEERS ONLINE AT COHENANDSTEERS.COM
For more information about any of our funds, visit
cohenandsteers.com, where you'll find daily net asset
values, fund fact sheets and portfolio highlights. You can
also access newsletters, education tools and market updates
covering the REIT, utility and preferred securities sectors.
In addition, our Web site contains comprehensive information
about our firm, including our most recent press releases,
profiles of our senior investment professionals, and an
overview of our investment approach.
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
OUR LEVERAGE STRATEGY
(UNAUDITED)
While we do not attempt to predict what future interest
rates will be, it has been our philosophy to utilize
interest rate swap transactions to seek to reduce the
interest rate risk inherent in our utilization of leverage.
Our leverage strategy involves issuing auction market
preferred shares (AMPS) to raise additional capital for the
fund, with an objective of increasing the net income
available for shareholders. As of December 31, 2004, AMPS
represented 33% of the fund's managed net assets.
Considering that AMPS have variable dividend rates, we seek
to lock in the rate on a majority of this additional capital
through interest rate swap agreements (where we effectively
convert our variable rate obligation to a fixed rate
obligation for the term of the swap agreements).
Specifically, we have fixed the rate on 55% of our
borrowings at an average interest rate of 4.75%, for an
average remaining period of 3.8 years (when we first entered
into the swaps, the average term was 6.6 years). By locking
in a large portion of our leveraging costs, we have
endeavored to adequately protect the dividend-paying ability
of the fund, which is one of the reasons the fund has been
able to increase its monthly dividend on several occasions.
The use of leverage increases the volatility of the fund's
net asset value in both up and down markets. However, we
believe that locking in a portion of the fund's leveraging
costs for the term of the swap agreements partially protects
the fund from any impact that an increase in short-term
interest rates may have as a result of the use of leverage.
LEVERAGE FACTS(a)
<Table>
Leverage (as % of managed net assets)............... 33%
% Fixed Rate........................................ 55%
% Variable Rate..................................... 45%
Average Rate on Swaps............................... 4.75%
Average Term on Swaps............................... 3.8 years
Current Rate on AMPS................................ 2.7%
</Table>
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(a) Data as of December 31, 2004. Information subject to change.
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5
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
DECEMBER 31, 2004
TOP TEN HOLDINGS
(UNAUDITED)
<Table>
<Caption>
% OF
MARKET MANAGED
SECURITY VALUE ASSETS
-------- ----------- -------
1. Ventas................................................... $37,891,584 4.27%
2. Mack-Cali Realty Corp.................................... 33,426,986 3.77
3. Vornado Realty Trust..................................... 33,017,581 3.72
4. Health Care Property Investors........................... 29,517,540 3.33
5. Liberty Property Trust................................... 28,123,200 3.17
6. Reckson Associates Realty Corp........................... 27,563,681 3.11
7. Archstone-Smith Trust.................................... 24,944,790 2.81
8. Prentiss Properties Trust................................ 23,168,300 2.61
9. Nationwide Health Properties, 7.677%, Series A........... 23,094,500 2.60
10. Equity Office Properties Trust........................... 22,649,536 2.55
</Table>
SECTOR BREAKDOWN
(Based on Managed Assets)
(Unaudited)
[PIE CHART]
<Table>
Office/Industrial 33.80%
Health Care 14.49%
Shopping Center 14.23%
Residential 13.75%
Diversified 9.97%
Cash & Other Liabilities
in Excess of Other Assets 4.54%
Hotel 3.25%
Self Storage 3.10%
Mortgage 2.87%
</Table>
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6
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2004
<Table>
<Caption>
DIVIDEND
NUMBER VALUE YIELD(a)
OF SHARES (NOTE 1) (UNAUDITED)
--------- ------------ ------------
EQUITIES 142.66%(b)
COMMON STOCK 116.06%
DIVERSIFIED 12.69%
Capital Trust -- Class A............... 66,200 $ 2,033,002 6.51%
Colonial Properties Trust.............. 392,900 15,429,183 6.82
Crescent Real Estate Equities Co....... 692,800 12,650,528 8.21
iStar Financial........................ 265,900 12,034,634 6.16
Vornado Realty Trust................... 433,700 33,017,581 3.99
------------
75,164,928
------------
HEALTH CARE 17.32%
Health Care Property Investors......... 1,066,000 29,517,540 6.03
Health Care REIT....................... 379,500 14,477,925 6.29
LTC Properties......................... 86,000 1,712,260 6.03
Nationwide Health Properties........... 799,400 18,985,750 6.23
Ventas................................. 1,382,400 37,891,584 4.74
------------
102,585,059
------------
HOTEL 2.43%
Hospitality Properties Trust........... 268,000 12,328,000 6.26
Strategic Hotel Capital................ 124,500 2,054,250 5.33
------------
14,382,250
------------
INDUSTRIAL 3.25%
First Industrial Realty Trust.......... 472,700 19,253,071 6.83
------------
MORTGAGE 4.30%
Gramercy Capital Corp.................. 535,000 9,918,900 3.24
Newcastle Investment Corp.............. 488,337 15,519,350 7.87
------------
25,438,250
------------
</Table>
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(a) Dividend yield is computed by dividing the security's current annual
dividend rate by the last sale price on the principal exchange, or market,
on which such security trades. The dividend yield has not been audited.
(b) Percentages indicated are based on the net assets applicable to common
shares of the fund.
See accompanying notes to financial statements.
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7
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
DIVIDEND
NUMBER VALUE YIELD
OF SHARES (NOTE 1) (UNAUDITED)
--------- ------------ ------------
OFFICE 33.55%
Arden Realty........................... 529,100 $ 19,957,652 5.36%
BioMed Realty Trust.................... 59,800 1,328,158 4.86
Brandywine Realty Trust................ 633,100 18,606,809 5.99
CarrAmerica Realty Corp................ 627,800 20,717,400 6.06
Equity Office Properties Trust......... 777,800 22,649,536 6.87
Highwoods Properties................... 393,300 10,894,410 6.14
HRPT Properties Trust.................. 425,200 5,455,316 6.55
Kilroy Realty Corp..................... 92,200 3,941,550 4.63
Mack-Cali Realty Corp.................. 726,200 33,426,986 5.47
Maguire Properties..................... 398,800 10,951,048 5.83
Prentiss Properties Trust.............. 606,500 23,168,300 5.86
Reckson Associates Realty Corp......... 840,100 27,563,681 5.18
------------
198,660,846
------------
OFFICE/INDUSTRIAL 4.75%
Liberty Property Trust................. 651,000 28,123,200 5.65
------------
RESIDENTIAL 16.66%
APARTMENT 16.29%
AMLI Residential Properties Trust...... 166,200 5,318,400 6.00
American Campus Communities............ 89,100 2,003,859 6.00
Archstone-Smith Trust.................. 651,300 24,944,790 4.49
AvalonBay Communities.................. 179,400 13,508,820 3.72
Camden Property Trust.................. 228,600 11,658,600 4.98
GMH Communities Trust.................. 165,200 2,329,320 6.45
Gables Residential Trust............... 385,900 13,811,361 6.73
Home Properties........................ 222,100 9,550,300 5.86
Mid-America Apartment Communities...... 223,200 9,200,304 5.68
Town & Country Trust................... 150,000 4,144,500 6.23
------------
96,470,254
------------
MANUFACTURED HOME 0.37%
Affordable Residential Communities..... 153,500 2,202,725 8.71
------------
TOTAL RESIDENTIAL...................... 98,672,979
------------
</Table>
See accompanying notes to financial statements.
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8
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
DIVIDEND
NUMBER VALUE YIELD
OF SHARES (NOTE 1) (UNAUDITED)
--------- ------------ ------------
SELF STORAGE 4.64%
Public Storage -- Series A............. 802,400 $ 23,036,904 8.53%
Sovran Self Storage.................... 57,300 2,414,622 5.74
U-Store-It Trust....................... 117,800 2,043,830 6.46
------------
27,495,356
------------
SHOPPING CENTER 16.47%
COMMUNITY CENTER 5.96%
Cedar Shopping Centers................. 150,000 2,145,000 6.29
Heritage Property Investment Trust..... 307,000 9,851,630 6.54
Kramont Realty Trust................... 800,000 18,720,000 5.56
New Plan Excel Realty Trust............ 151,700 4,108,036 6.09
Urstadt Biddle Properties -- Class A... 26,100 445,005 5.16
------------
35,269,671
------------
REGIONAL MALL 10.51%
CBL & Associates Properties............ 54,000 4,122,900 4.26
Glimcher Realty Trust.................. 400,800 11,106,168 6.93
Macerich Co............................ 358,100 22,488,680 4.14
Mills Corp............................. 345,600 22,035,456 3.73
Simon Property Group................... 38,000 2,457,460 4.02
------------
62,210,664
------------
TOTAL SHOPPING CENTER.................. 97,480,335
------------
TOTAL COMMON STOCK
(Identified cost --
$445,591,436)................... 687,256,274
------------
PREFERRED STOCK 26.60%
DIVERSIFIED 2.24%
Colonial Properties Trust,
9.25%, Series C..................... 8,300 220,365 8.70
Crescent Real Estate Equities Co.,
6.75%, Series A (Convertible)....... 371,300 8,276,277 7.58
iStar Financial, 8.00%, Series D....... 111,000 2,823,285 7.86
iStar Financial, 7.65%, Series G....... 75,300 1,942,740 7.40
------------
13,262,667
------------
</Table>
See accompanying notes to financial statements.
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9
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
DIVIDEND
NUMBER VALUE YIELD
OF SHARES (NOTE 1) (UNAUDITED)
--------- ------------ ------------
HEALTH CARE 4.39%
Health Care REIT, 7.625%, Series F..... 114,900 $ 2,901,225 7.56%
Nationwide Health Properties, 7.677%,
Series A............................ 221,000 23,094,500 7.35
------------
25,995,725
------------
HOTEL 2.09%
FelCor Lodging Trust, $1.95, Series
A (Convertible)..................... 114,500 2,903,720 7.69
FelCor Lodging Trust, 9.00%, Series
B................................... 36,000 922,680 8.78
Host Marriott Corp., 10.00%, Series
B................................... 11,200 288,960 9.69
Host Marriott Corp., 10.00%, Series
C................................... 39,100 1,031,067 9.48
Host Marriott Corp., 8.875%, Series
E................................... 10,000 277,750 7.99
Innkeepers USA, 8.00%, Series C........ 56,000 1,442,000 7.77
LaSalle Hotel Properties, 10.25%,
Series A............................ 200,000 5,480,000 9.34
------------
12,346,177
------------
OFFICE 5.47%
Alexandria Real Estate Equities,
9.10%, Series B..................... 53,900 1,455,300 8.44
Cousins Properties, 7.50%, Series B.... 140,000 3,516,800 7.48
HRPT Properties Trust, 8.75%, Series
B................................... 128,000 3,539,840 7.92
Highwoods Properties, 8.625%, Series
A................................... 18,550 19,431,125 8.23
Maguire Properties, 7.625%, Series A... 72,200 1,848,320 7.46
SL Green Realty Corp., 7.625%, Series
C................................... 40,000 1,026,000 7.45
SL Green Realty Corp., 7.875%, Series
D................................... 60,000 1,557,000 7.59
------------
32,374,385
------------
OFFICE/INDUSTRIAL 3.62%
PS Business Parks, 9.50%, Series D..... 800,000 21,456,000 8.87
------------
</Table>
See accompanying notes to financial statements.
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10
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
DIVIDEND
NUMBER VALUE YIELD
OF SHARES (NOTE 1) (UNAUDITED)
--------- ------------ ------------
RESIDENTIAL -- APARTMENT 3.94%
Apartment Investment & Management Co.,
8.75%, Series D..................... 17,301 $ 432,525 8.76%
Apartment Investment & Management Co.,
9.375%, Series G.................... 52,800 1,443,552 8.56
Apartment Investment & Management Co.,
10.10%, Series Q.................... 18,600 494,202 9.52
Apartment Investment & Management Co.,
10.00%, Series R(a)................. 616,800 16,425,384 9.39
Associated Estates Realty Corp.,
8.70%, Series B..................... 70,000 1,816,500 8.40
Mid-America Apartment Communities,
8.30%, Series H..................... 103,600 2,693,600 8.00
------------
23,305,763
------------
SHOPPING CENTER 4.85%
COMMUNITY CENTER 1.01%
Developers Diversified Realty Corp.,
8.60%, Series F..................... 100,000 2,687,000 8.00
Federal Realty Investment Trust, 8.50%,
Series B............................ 20,100 545,313 7.85
New Plan Excel Realty Trust, 7.80%,
Series D............................ 20,000 1,036,876 7.52
Urstadt Biddle Properties, 8.50%,
Series C............................ 16,000 1,724,000 7.89
------------
5,993,189
------------
</Table>
- ----------
(a) 190,300 shares segregated as collateral for the interest rate swap
transactions.
See accompanying notes to financial statements.
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11
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
DIVIDEND
NUMBER VALUE YIELD
OF SHARES (NOTE 1) (UNAUDITED)
--------- ------------ ------------
REGIONAL MALL 3.84%
CBL & Associates Properties, 7.375%,
Series D............................ 210,000 $ 5,218,500 7.40%
Glimcher Realty Trust, 8.75%, Series F. 40,000 1,042,000 8.41
Mills Corp., 9.00%, Series B........... 83,800 2,321,260 8.12
Mills Corp., 9.00%, Series C........... 85,000 2,363,000 8.09
Pennsylvania Real Estate Investment
Trust, 11.00%, Series A............. 125,600 7,598,800 9.09
Simon Property Group, 8.375%, Series J. 33,800 1,929,980 7.34
Taubman Centers, 8.30%, Series A....... 88,600 2,260,186 8.15
------------
22,733,726
------------
TOTAL SHOPPING CENTER.................. 28,726,915
------------
TOTAL PREFERRED STOCK
(Identified cost --
$137,961,260)................... 157,467,632
------------
TOTAL EQUITIES
(Identified cost -- $583,552,696) 844,723,906
------------
</Table>
See accompanying notes to financial statements.
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12
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2004
<Table>
<Caption>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
----------- -------------
CORPORATE BOND 0.35%
Host Marriott LP, 9.50%, due 01/15/07
(Identified cost -- $1,901,086)............... $ 1,900,000 $ 2,090,000
-------------
COMMERCIAL PAPER 7.66%
State Street Corp., 1.70%, due 01/03/05.......... 5,336,000 5,335,496
UBS Financial, 1.70%, due 01/03/05............... 40,000,000 39,996,222
-------------
TOTAL COMMERCIAL PAPER
(Identified cost -- $45,331,718).......... 45,331,718
-------------
TOTAL INVESTMENTS
(Identified cost -- $630,785,500)............ 150.67% 892,145,624
LIABILITIES IN EXCESS OF OTHER ASSETS.......... (0.85)% (5,008,243)
LIQUIDATION VALUE OF AUCTION RATE CUMULATIVE
PREFERRED SHARES SERIES M, SERIES W, AND
SERIES TH (Equivalent to $25,000 per share
based on 2,500 shares outstanding for
Series M, Series W, and 2,040 shares
outstanding for Series TH)................... (29.72)% (176,000,000)
LIQUIDATION VALUE OF AUCTION MARKET PREFERRED
SHARES SERIES T7 AND SERIES F28 (Equivalent
to $25,000 per share based on 2,600 shares
outstanding for Series T7 and 2,160 shares
outstanding for Series F28).................. (20.10)% (119,000,000)
------- -------------
NET ASSETS APPLICABLE TO COMMON SHARES
(Equivalent to $22.94 per share based on
25,810,480 shares of capital stock
outstanding)................................. 100.00% $ 592,137,381
------ -------------
------ -------------
</Table>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
<Table>
ASSETS:
Investments in securities, at value
(Identified cost -- $630,785,500) (Note 1)............ $ 892,145,624
Cash.................................................... 763
Dividends and interest receivable....................... 4,864,696
Unrealized appreciation on interest rate swap
transactions (Notes 1 and 6).......................... 313,317
Other assets............................................ 30,214
--------------
Total Assets........................................ 897,354,614
--------------
LIABILITIES:
Unrealized depreciation on interest rate swap
transactions (Notes 1 and 6).......................... 6,328,226
Payable for investment securities purchased............. 2,179,590
Payable for dividends declared on common shares......... 631,143
Payable for dividends declared on preferred shares...... 333,560
Payable to investment manager........................... 319,983
Preferred offering costs payable........................ 251,112
Payable to administrator................................ 14,884
Payable for directors fees.............................. 5,472
Other liabilities....................................... 153,263
--------------
Total Liabilities................................... 10,217,233
--------------
LIQUIDATION VALUE OF PREFERRED SHARES:
Auction rate cumulative preferred shares, Series M
($25,000 liquidation value, $0.001 par value, 2,500
shares issued and outstanding) (Notes 1 and 5)........ 62,500,000
Auction rate cumulative preferred shares, Series W
($25,000 liquidation value, $0.001 par value, 2,500
shares issued and outstanding) (Notes 1 and 5)........ 62,500,000
Auction rate cumulative preferred shares, Series TH
($25,000 liquidation value, $0.001 par value, 2,040
shares issued and outstanding) (Notes 1 and 5)........ 51,000,000
Auction market preferred shares, Series T7 ($25,000
liquidation value, $0.001 par value,
2,600 shares issued and outstanding) (Notes 1 and 5).. 65,000,000
Auction market preferred shares, Series F28 ($25,000
liquidation value, $0.001 par value,
2,160 shares issued and outstanding) (Notes 1 and 5).. 54,000,000
--------------
295,000,000
--------------
TOTAL NET ASSETS APPLICABLE TO COMMON SHARES................ $ 592,137,381
--------------
--------------
TOTAL NET ASSETS APPLICABLE TO COMMON SHARES consist of:
Common stock ($0.001 par value, 25,810,480 shares issued
and outstanding) (Notes 1 and 5)...................... $ 337,108,967
Distribution in excess of net investment income......... (291,647)
Accumulated net realized loss on investments............ (25,154)
Net unrealized appreciation on investments and interest
rate swap transactions................................ 255,345,215
--------------
$ 592,137,381
--------------
--------------
NET ASSET VALUE PER COMMON SHARE:
($592,137,381[div]25,810,480 shares outstanding).......... $ 22.94
--------------
--------------
MARKET PRICE PER COMMON SHARE............................... $ 22.25
--------------
--------------
MARKET PRICE PREMIUM/(DISCOUNT) TO NET ASSET VALUE PER
COMMON SHARE.............................................. (3.01)%
--------------
--------------
</Table>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
<Table>
Investment Income (Note 1):
Dividend income......................................... $ 34,908,180
Interest income......................................... 476,299
------------
Total Income....................................... 35,384,479
------------
Expenses:
Investment management fees (Note 2)..................... 6,372,311
Preferred remarketing fee............................... 592,944
Reports to shareholders................................. 245,166
Administration fees (Note 2)............................ 243,482
Professional fees....................................... 129,424
Custodian fees and expenses............................. 54,379
Directors' fees and expenses (Note 2)................... 49,967
Transfer agent fees and expenses........................ 16,625
Miscellaneous........................................... 117,679
------------
Total Expenses..................................... 7,821,977
Reduction of Expenses (Note 2).......................... (3,148,671)
------------
Net Expenses....................................... 4,673,306
------------
Net Investment Income....................................... 30,711,173
------------
Net Realized and Unrealized Gain/(Loss) on Investments
(Note 1):
Net realized gain on investments........................ 8,505,867
Net realized loss on interest rate swap transactions.... (5,444,444)
Net change in unrealized appreciation on investments.... 113,360,481
Net change in unrealized depreciation on interest rate
swap transactions..................................... 3,423,088
------------
Net realized and unrealized gain/(loss) on
investments...................................... 119,844,992
------------
Net Increase Resulting from Operations...................... 150,556,165
Less Dividends and Distributions to Preferred Shareholders
from:
Net investment income and net realized gain on
investments........................................... (3,797,144)
------------
Net Increase in Net Assets from Operations Applicable to
Common Shares............................................. $146,759,021
------------
------------
</Table>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS APPLICABLE TO COMMON SHARES
<Table>
<Caption>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
----------------- -----------------
Change in Net Assets Applicable to Common Shares:
From Operations:
Net investment income........................ $ 30,711,173 $ 28,593,225
Net realized gain on investments and interest
rate swap transactions.................... 3,061,423 11,114,034
Net change in unrealized appreciation on
investments and interest rate swap
transactions.............................. 116,783,569 132,032,766
------------ ------------
Net increase in net assets resulting
from operations....................... 150,556,165 171,740,025
------------ ------------
Less Dividends and Distributions to Preferred
Shareholders from:
Net investment income........................ (2,926,350) (1,644,347)
Net realized gain on investments............. (870,794) (717,573)
------------ ------------
Total dividends and distributions to
preferred shareholders................ (3,797,144) (2,361,920)
------------ ------------
Net increase in net assets from
operations applicable to common
shares................................ 146,759,021 169,378,105
------------ ------------
Less Dividends and Distributions to Common
Shareholders from:
Net investment income........................ (22,720,808) (25,982,706)
Net realized gain on investments............. (7,630,825) (11,338,539)
Tax return of capital........................ (8,235,035) (581,826)
------------ ------------
Total dividends and distributions to
common shareholders................... (38,586,668) (37,903,071)
------------ ------------
Capital Stock Transactions (Note 5):
Increase in net assets from shares issued to
common shareholders for reinvestment of
dividends................................. -- 4,390,201
Increase in net assets from preferred share
offering cost adjustment.................. 148,454 --
Decrease in net assets from underwriting
commissions and offering expenses from
issuance of preferred shares.............. (1,030,242) (875,287)
------------ ------------
Net increase/(decrease) in net assets
from capital stock transactions....... (881,788) 3,514,914
------------ ------------
Total increase in net assets applicable
to common shares...................... 107,290,565 134,989,948
Net Assets Applicable to Common Shares:
Beginning of year............................ 484,846,816 349,856,868
------------ ------------
End of year(a)............................... $592,137,381 $484,846,816
------------ ------------
------------ ------------
</Table>
- -------------------
(a) Includes distribution in excess of net investment income of $291,647 at
December 31, 2004 and undistributed net investment income of $88,782 at
December 31, 2003.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
FINANCIAL HIGHLIGHTS
The following table includes selected data for a common 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 PERIOD
FOR THE YEAR ENDED DECEMBER 31, MAY 31, 2001(a)
------------------------------------------ THROUGH
PER SHARE OPERATING PERFORMANCE: 2004 2003 2002 DECEMBER 31, 2001
- -------------------------------- ------------ ------------ ------------ -----------------
Net asset value per common share, beginning of
period......................................... $18.78 $13.71 $14.03 $14.33
------ ------ ------ ------
Income from investment operations:
Net investment income........................ 0.98 1.11(b) 1.02 0.64
Net realized and unrealized gain/(loss) on
investments................................ 4.86 5.56 0.07 (0.02)
------ ------ ------ ------
Total income from investment
operations............................. 5.84 6.67 1.09 0.62
------ ------ ------ ------
Less dividends and distributions to preferred
shareholders from:
Net investment income........................ (0.11) (0.06) (0.09) (0.07)
Net realized gain on investments............. (0.04) (0.03) -- --
------ ------ ------ ------
Total dividends and distributions to
preferred shareholders................. (0.15) (0.09) (0.09) (0.07)
------ ------ ------ ------
Total from investment operations
applicable to common shares............ 5.69 6.58 1.00 0.55
------ ------ ------ ------
Less: Offering and organization costs charged to
paid-in capital -- common shares............... -- -- -- (0.03)
Preferred share offering cost adjustment...... 0.01 -- -- --
Offering and organization costs charged to
paid-in capital -- preferred shares............ (0.04) (0.03) (0.03) (0.07)
Dilutive effect of common share offering..... -- -- -- (0.03)
------ ------ ------ ------
Total offering and organization costs.... (0.03) (0.03) (0.03) (0.13)
------ ------ ------ ------
Less dividends and distributions to common
shareholders from:
Net investment income........................ (0.88) (1.01) (1.29) (0.58)
Net realized gain on investments............. (0.30) (0.45) -- --
Tax return of capital........................ (0.32) (0.02) -- (0.14)
------ ------ ------ ------
Total dividends and distributions to
common shareholders.................... (1.50) (1.48) (1.29) (0.72)
------ ------ ------ ------
Net increase/(decrease) in net asset value per
common shares.................................. 4.16 5.07 (0.32) (0.30)
------ ------ ------ ------
Net asset value, per common share, end of
period......................................... $22.94 $18.78 $13.71 $14.03
------ ------ ------ ------
------ ------ ------ ------
Market value, per common share, end of period... $22.25 $18.26 $14.02 $14.70
------ ------ ------ ------
------ ------ ------ ------
..............................................................................................................
Net asset value total return(c)................. 32.13% 50.29% 6.72% 3.27%(d)
------ ------ ------ ------
------ ------ ------ ------
Market value return(c).......................... 31.80% 42.83% 4.16% 3.15%(d)
------ ------ ------ ------
------ ------ ------ ------
..............................................................................................................
</Table>
- -------------------
(a) Commencement of operations.
(b) Calculation based on average shares outstanding.
(c) Total market value return is computed based upon the New York Stock Exchange
market price of the fund's shares and excludes the effects of brokerage
commissions. Dividends and distributions, if any, are assumed for purposes
of this calculation, to be reinvested at prices obtained under the fund's
dividend reinvestment plan. Total net asset value return measures the
changes in value over the period indicated, taking into account dividends as
reinvested.
(d) Not annualized.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<Table>
<Caption>
FOR THE PERIOD
FOR THE YEAR ENDED DECEMBER 31, MAY 31, 2001(a)
------------------------------------------ THROUGH
RATIOS/SUPPLEMENTAL DATA: 2004 2003 2002 DECEMBER 31, 2001
- ------------------------- ------------ ------------ ------------ -----------------
Net assets applicable to common shares, end of
period (in millions)........................... $592.1 $485.0 $349.9 $351.6
------ ------ ------ ------
------ ------ ------ ------
Ratio of expenses to average daily net assets
applicable to common shares (before expense
reduction)(b).................................. 1.52% 1.61% 1.41% 1.39%(c)
------ ------ ------ ------
------ ------ ------ ------
Ratio of expenses to average daily net assets
applicable to common shares (net of expense
reduction)(b).................................. 0.91% 0.99% 0.84% 0.86%(c)
------ ------ ------ ------
------ ------ ------ ------
Ratio of net investment income to average daily
net assets applicable to common shares (before
expense reduction)(b).......................... 5.37% 6.59% 6.98% 8.00%(c)
------ ------ ------ ------
------ ------ ------ ------
Ratio of net investment income to average daily
net assets applicable to common shares (net of
expense reduction)(b).......................... 5.99% 7.22% 7.55% 8.53%(c)
------ ------ ------ ------
------ ------ ------ ------
Ratio of expenses to average daily managed
assets (before expense reduction)(b,e)......... 1.04% 1.09% 1.04% 1.10%(c)
------ ------ ------ ------
------ ------ ------ ------
Ratio of expenses to average daily managed
assets (net of expense reduction)(b,e)......... 0.62% 0.67% 0.62% 0.68%(c)
------ ------ ------ ------
------ ------ ------ ------
Portfolio turnover rate......................... 3.23% 20.19% 22.27% 23.95%(d)
------ ------ ------ ------
------ ------ ------ ------
PREFERRED SHARES:
Liquidation value, end of period (in 000's)..... $295,000 $230,000 $176,000 $125,000
------ ------ ------ ------
------ ------ ------ ------
Total shares outstanding (in 000's)............. 12 9 7 5
------ ------ ------ ------
------ ------ ------ ------
Asset coverage per share........................ $75,181 $77,701 $74,695 $95,322
------ ------ ------ ------
------ ------ ------ ------
Liquidation preference per share................ $25,000 $25,000 $25,000 $25,000
------ ------ ------ ------
------ ------ ------ ------
Average market value per share(f)............... $25,000 $25,000 $25,000 $25,000
------ ------ ------ ------
------ ------ ------ ------
</Table>
- -------------------
(a) Commencement of operations.
(b) Ratios do not reflect dividend payments to preferred shareholders.
(c) Annualized.
(d) Not annualized.
(e) Average daily managed assets represents net assets applicable to common
shares plus liquidation preference of preferred shares.
(f) Based on weekly prices.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Cohen & Steers Advantage Income Realty Fund, Inc. (the fund) was
incorporated under the laws of the State of Maryland on June 21, 2000 and is
registered under the Investment Company Act of 1940, as amended, as a
nondiversified, closed-end 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 accounting principles generally accepted in the
United States of America (GAAP). The preparation of the financial statements in
accordance with GAAP 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 or, if no asked price is available, at the bid price. If no bid or
asked prices are quoted on such day, then the security is valued by such method
as the board of directors shall determine in good faith to reflect its fair
market value.
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 investment
manager to be over-the-counter, but excluding securities admitted to trading on
the Nasdaq National List, are valued at the last official closing prices as
reported by Nasdaq, the National Quotations Bureau or such other comparable
sources as the board of directors deems appropriate to reflect their fair market
value. 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 or, if no asked price is
available, at the bid price. However, certain fixed-income securities may be
valued on the basis of prices provided by a pricing service when such prices are
believed by the board of directors to reflect the fair market value of such
securities. Where securities are traded on more than one exchange and also
over-the-counter, the securities will generally be valued using the quotations
the board of directors believes reflect most closely the value of such
securities.
Short-term debt securities, which have a maturity of 60 days or less, are
valued at amortized cost which approximates value.
Any securities for which market quotations are not readily available shall
be valued in accordance with the procedures approved by the board of directors.
- --------------------------------------------------------------------------------
19
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Interest Rate Swaps: The fund uses interest rate swaps in connection with
the sale of auction rate preferred shares. The interest rate swaps are intended
to reduce or eliminate the risk that an increase in short-term interest rates
could have on the performance of the fund's common shares as a result of the
floating rate structure of preferred shares. In these interest rate swaps, the
fund agrees to pay the other party to the interest rate swap (which is known as
the counterparty) a fixed rate payment in exchange for the counterparty agreeing
to pay the fund a variable rate payment that is intended to approximate the
fund's variable rate payment obligation on the auction rate cumulative preferred
shares and auction market preferred shares. The payment obligation is based on
the notional amount of the swap. Depending on the state of interest rates in
general, the use of interest rate swaps could enhance or harm the overall
performance of the common shares. The market value of interest rate swaps is
based on pricing models that consider the time value of money, volatility, the
current market and contractual prices of the underlying financial instrument.
Unrealized gains are reported as an asset and unrealized losses are reported as
a liability on the Statement of Assets and Liabilities. The change in value of
swaps, including the accrued periodic amounts of interest to be paid or received
on swaps is reported as unrealized gains or losses in the Statement of
Operations. A realized gain or loss is recorded upon payment or receipt of a
periodic payment or termination of swap agreements. Swap agreements involve, to
varying degrees, elements of market and counterparty risk, and exposure to loss
in excess of the related amounts reflected in the Statement of Assets and
Liabilities.
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. Interest income is recorded on the
accrual basis. Dividend income is recorded on the ex-dividend date. The fund
records distributions received in excess of income from underlying investments
as a reduction of cost of investments and/or realized gain. Such amounts are
based on estimates if actual amounts are not available, and actual amounts of
income, realized gain and return of capital may differ from the estimated
amounts. The fund adjusts the estimated amounts of the components of
distributions (and consequently its net investment income) as an increase to
unrealized appreciation/(depreciation) and realized gain/(loss) on investments
as necessary once the issuers provide information about the actual composition
of the distributions.
Dividends and Distributions to Shareholders: Dividends from net investment
income are declared and paid to common shareholders monthly. Distributions to
shareholders are recorded on the ex-dividend date. A portion of the fund's
dividend may consist of amounts in excess of net investment income derived from
nontaxable 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.
Dividends from net investment income and capital gain distributions are
determined in accordance with U.S. federal income tax regulations which may
differ from GAAP.
Series M, Series T7, Series W, and Series TH preferred shares pay dividends
based on a variable interest rate set at auctions, normally held every seven
days. Dividends for Series M, Series T7, Series W, and Series TH preferred
- --------------------------------------------------------------------------------
20
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
shares are declared and recorded for the subsequent seven day period on the
auction date. In most instances, dividends are payable every seven days, on the
first business day following the end of the dividend period.
Series F28 preferred shares pay dividends based on a variable interest rate
set at auctions, normally held every 28 days. Dividends for Series F28 preferred
shares are declared and recorded for the subsequent 28 day period on the auction
date. In most instances, dividends are payable every 28 days, on the first
business day following the end of the dividend period.
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 MANAGEMENT FEES, ADMINISTRATION FEES AND OTHER TRANSACTIONS
WITH AFFILIATES
Investment Management Fees: Cohen & Steers Capital Management, Inc. (the
investment manager) serves as the investment manager to the fund, pursuant to an
investment management agreement (the management agreement). The investment
manager furnishes a continuous investment program for the fund's portfolio,
makes the day-to-day investment decisions for the fund and generally manages the
fund's investments in accordance with the stated polices of the fund, subject to
the general supervision of the board of directors of the fund. The investment
manager also performs certain administrative services for the fund.
For the services under the management agreement, the fund pays the
investment manager a management fee, computed daily and paid monthly at an
annual rate of 0.85% of the fund's average daily managed asset value. Managed
asset value is the net asset value of the common shares plus the liquidation
preference of the preferred shares. For the year ended December 31, 2004, the
fund incurred investment management fees of $6,372,311.
The investment manager has contractually agreed to waive its investment
management fee in the amount of 0.42% of average daily managed asset value for
the first five fiscal years of the fund's operations, 0.35% of average daily
managed asset value in year six, 0.28% of average daily managed asset value in
year seven, 0.21% of average daily managed asset value in year eight, 0.14% of
average daily managed asset value in year nine and 0.07% of average daily
managed asset value in year 10. As long as this waiver continues, it may lower
the fund's expenses and increase its total return. For the year ended
December 31, 2004, the investment manager waived management fees of $3,148,671.
Administration Fees: Pursuant to an administration agreement, the investment
manager also performs certain administrative and accounting functions for the
fund and receives a fee of 0.02% of the fund's average daily managed asset
value. For the year ended December 31, 2004, the fund incurred $149,937 in
administration fees.
- --------------------------------------------------------------------------------
21
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Director's Fees: Certain directors and officers of the fund are also
directors, officers and/or employees of the investment manager. None of the
directors and officers so affiliated received compensation from the fund for
their services. For the year ended December 31, 2004, fees and related expenses
accrued for nonaffiliated directors totaled $49,967.
Other: During the period, the fund may have purchased securities in which an
affiliate of the investment manager served as placement agent for the issuer.
NOTE 3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, excluding short-term investments, for the
year ended December 31, 2004, totaled $52,984,978 and $24,308,480, respectively.
NOTE 4. INCOME TAXES
The fund had a return of capital of $8,235,035 ($0.32 per share) for the
year ended December 31, 2004.
Short-term capital gains are reflected in the financial statements as
realized gains on investments but are typically treated as ordinary income for
tax purposes.
The dividends and distributions to shareholders are characterized for tax
purposes as follows:
<Table>
<Caption>
FOR THE YEAR ENDED
DECEMBER 31,
---------------------------
2004 2003
----------- -----------
Preferred Shareholders:
Ordinary income.............................. $ 2,955,121(a) $ 1,644,347
Long-term capital gain....................... 842,023 717,573
----------- -----------
Total dividends and distributions to
preferred shareholders............... $ 3,797,144 $ 2,361,920
----------- -----------
----------- -----------
Common Shareholders:
Ordinary income.............................. $22,972,927 $25,982,706
Long-term capital gain....................... 7,378,706 11,338,539
Tax return of capital........................ 8,235,035 581,826
----------- -----------
Total dividends and distributions to
common shareholders.................. $38,586,668 $37,903,071
----------- -----------
----------- -----------
</Table>
- -------------------
(a) Under federal income tax rules, the tax character of $333,560 will be
determined based upon 2005 earnings and profits.
- --------------------------------------------------------------------------------
22
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 2004, the cost of investments and net unrealized
appreciation for federal income tax purposes were as follows:
<Table>
Aggregate cost.................................... $630,810,657
------------
------------
Gross unrealized appreciation..................... $261,705,615
Gross unrealized depreciation..................... (370,648)
------------
Net unrealized appreciation on investments........ 261,334,967
Net unrealized depreciation on interest rate swap
transactions.................................... (5,972,993)
------------
Net unrealized appreciation....................... $255,361,974
------------
------------
</Table>
Differences between book and tax basis unrealized appreciation are primarily
due to wash sales on portfolio securities and differing treatment of swap
income/expense. Net investment income and net realized gains differ for
financial statement and tax purposes primarily due to differing treatment of
interest rate swap payments and wash sales on portfolio securities. To the
extent such differences are permanent in nature, such amounts are reclassified
within the capital accounts. During the year ended December 31, 2004, the fund
decreased undistributed net investment income by $5,444,444, increased
accumulated net realized loss on investments by $5,441,244, and increased
paid-in capital by $3,200, relating primarily to differing treatment of interest
rate swap income/expense.
For the year ended December 31, 2004, the fund did not have any
undistributed ordinary income or capital gains.
NOTE 5. CAPITAL STOCK
The fund is authorized to issue 100 million shares of common stock at a par
value of $0.001 per share. At December 31, 2004, Cohen & Steers Capital
Management, Inc. owned approximately 9,500 shares.
During the year ended December 31, 2004 the fund issued no shares of common
stock for the reinvestment of dividends. An adjustment of $148,454 related to
preferred offering costs was credited to common stock during the year ended
December 31, 2004.
The fund's articles of incorporation authorize the issuance of fund
preferred shares, par value $0.001 per share, in one or more classes or series,
with rights as determined by the board of directors, by action of the board of
directors without the approval of the common shareholders.
On November 19, 2004, the fund issued 2,600 auction market preferred shares,
Series T7 (par value $0.001). Proceeds paid to the fund amounted to $63,969,758
after deduction of underwriting commissions and offering expenses of $1,030,242.
This issue has received a 'AAA/Aaa' rating from Standard & Poor's and Moody's.
On September 15, 2003, the fund issued 2,160 auction market preferred
shares, Series F28 (par value $0.001). Proceeds paid to the fund amounted to
$53,124,713 after deduction of underwriting commissions and offering expenses of
$875,287. This issue has received a 'AAA/Aaa' rating from Standard & Poor's and
Moody's.
Preferred shares are senior to the fund's common shares and will rank on a
parity with shares of any other series of preferred shares, and with shares of
any other series of preferred stock of the fund, as to the payment of
- --------------------------------------------------------------------------------
23
<Page>
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
dividends and the distribution of assets upon liquidation. If the fund does not
timely cure a failure to (1) maintain a discounted value of its portfolio equal
to the preferred shares basic maintenance amount, as required by the fund's
articles supplementary for preferred shares (2) maintain the 1940 Act preferred
shares asset coverage, or (3) file a required certificate related to asset
coverage on time, the preferred shares will be subject to a mandatory redemption
at the redemption price of $25,000 per share plus an amount equal to accumulated
but unpaid dividends thereon to the date fixed for redemption. To the extent
permitted under the 1940 Act and Maryland Law, the fund at its option may
without consent of the holders of preferred shares, redeem preferred shares
having a dividend period of one year or less, in whole, or in part, on the
business day after the last day of such dividend period upon not less than 15
calendar days and not more than 40 calendar days prior to notice. The optional
redemption price is $25,000 per share plus an amount equal to accumulated but
unpaid dividends thereon to the date fixed for redemption.
The fund's common shares and preferred shares have equal voting rights of
one vote per share and vote together as a single class. In addition, the
affirmative vote of the holders of a majority, as defined in the 1940 Act, of
the outstanding preferred shares shall be required to (1) approve any plan of
reorganization that would adversely affect the auction rate cumulative preferred
shares and (2) approve any matter that materially and adversely affects the
rights, preferences, or powers of that series.
NOTE 6. INVESTMENTS IN INTEREST RATE SWAPS
The fund has entered into interest rate swap agreements with Salomon Swapco
Inc., Royal Bank of Canada, and Merrill Lynch Derivative Products AG. Under the
agreements the fund receives a floating rate of interest and pays a respective
fixed rate of interest on the nominal values of the swaps. Details of the swaps
at December 31, 2004 are as follows:
<Table>
<Caption>
UNREALIZED
NOTIONAL FLOATING RATE(a) APPRECIATION/
COUNTERPARTY AMOUNT FIXED RATE (RESET MONTHLY) TERMINATION DATE (DEPRECIATION)
- -------------------------------- ----------- ---------- --------------- ----------------- --------------
Salomon Swapco Inc.............. $31,250,000 5.3025% 2.4200% July 30, 2006 $(1,013,131)
Salomon Swapco Inc.............. $19,125,000 3.4065% 2.4100% June 18, 2007 39,807
Salomon Swapco Inc.............. $31,250,000 5.5920% 2.4200% July 30, 2008 (2,038,585)
Salomon Swapco Inc.............. $19,125,000 4.0800% 1.2638% December 18, 2009 (105,129)
Salomon Swapco Inc.............. $31,250,000 5.8240% 2.4200% July 30, 2011 (3,103,561)
Royal Bank of Canada............ $14,500,000 2.7950% 2.2900% October 2, 2007 273,510
Merrill Lynch Derivative
Products AG................... $14,500,000 3.9950% 2.4130% October 22, 2009 (67,820)
-----------
$(6,014,909)
-----------
-----------
</Table>
- -------------------
(a) Based on LIBOR (London Interbank Offered Rate). Represents rates in effect
at December 31, 2004.
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24
<Page>
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Cohen & Steers Advantage Income Realty Fund, 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 Advantage Income
Realty Fund, Inc. (the 'Fund') at December 31, 2004, 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 periods presented, in conformity with accounting principles generally
accepted in the United States of America. 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 the standards of the
Public Company Accounting Oversight Board (United States). Those standards
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, 2004 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 21, 2005
- --------------------------------------------------------------------------------
25
<Page>
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
AVERAGE ANNUAL TOTAL RETURNS(a)
(PERIODS ENDED DECEMBER 31, 2004) (UNAUDITED)
<Table>
<Caption>
SINCE INCEPTION
ONE YEAR (5/31/01)
- -------- ---------------
32.13% 24.41%
</Table>
The performance data quoted represent past performance. Past performance is no
guarantee of future results. The rate of return will vary and the principal
value of an investment will fluctuate and shares, if sold, may be worth more or
less than their original cost. Current performance may be lower or higher than
the performance data quoted.
TAX INFORMATION -- 2004 (UNAUDITED)
Pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003, the
fund designates qualified dividend income of $133,960. Additionally, the fund
designates long term capital gains distributions of $6,170,909 at the 15% rate
and $2,049,820 at the 25% rate or the maximum allowable.
Shareholders are advised to consult with their own tax advisors as to the
Federal, State and local tax status of the income received.
REINVESTMENT PLAN
We urge shareholders who want to take advantage of this plan and whose
shares are held in 'Street Name' to consult your broker, as soon as possible to
determine if you must change registration into your own name to participate.
OTHER INFORMATION
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the fund may purchase, from time to time, shares of its
common stock in the open market.
A description of the policies and procedures that the fund uses to determine
how to vote proxies relating to portfolio securities is available (i) without
charge, upon request, by calling 1-800-330-7348, (ii) on our Web site at
cohenandsteers.com, or (iii) on the Securities and Exchange Commission's (SEC)
Web site at http://www.sec.gov. In addition, the fund's proxy voting record for
the most recent 12-month period ended June 30 is available (i) without charge,
upon request, by calling 1-800-330-7348 or (ii) on the SEC's Web site at
http://www.sec.gov.
Please note that the distributions paid by the fund to shareholders are
subject to recharacterization for tax purposes. The final tax treatment of these
distributions is reported to shareholders on their 1099-DIV forms, which are
mailed to shareholders after the close of each fiscal year. As noted in the
shareholder letter, the fund has adopted a level rate distribution policy. Under
this policy, the fund will pay distributions in excess of the fund's net
- -------------------
(a) Based on net asset value.
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26
<Page>
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
investment company taxable income and this excess will be a tax-free return of
capital distributed from the fund's assets. The fund's shareholders of record
will be notified of the approximate amount of capital returned to shareholders
for each distribution. Distributions of capital decrease the fund's total assets
and, therefore, could have the effect of increasing the fund's expense ratio. In
addition, in order to make these distributions, the fund may have to sell
portfolio securities at a less than opportune time.
The fund files its complete schedule of portfolio holdings with the SEC for
the first and third quarters of each fiscal year on Form N-Q. The fund's Forms
N-Q are available (i) without charge, upon request by calling 1-800-330-7348, or
(ii) on the SEC's website at http://www.sec.gov. In addition, the Forms N-Q may
be reviewed and copied at the SEC's Public Reference Room in Washington, DC.
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
As required, the fund has submitted to the New York Stock Exchange ('NYSE')
the annual certification of the fund's chief executive officer that he is not
aware of any violation of the NYSE's Corporate Governance listing standards. The
fund also has included the certifications of the Fund's chief executive officer
and chief financial officer required by Section 302 of the Sarbanes-Oxley Act of
2002 as exhibits to the fund's Form N-CSR for the year ended December 31, 2004
filed with the SEC.
Joseph M. Harvey was appointed as a portfolio manager of the fund in August
2004. He joined Cohen & Steers Capital Management, the fund's advisor, in 1992
and currently serves as its president. Mr. Harvey also serves as president of
the advisor's parent company, Cohen & Steers, Inc. Prior to August 2003, he was
a senior vice president and director of investment research for the advisor.
James S. Corl was appointed as a portfolio manager in December 2004. He
joined the advisor in 1997 and currently serves as an executive vice president.
Mr. Corl is also an executive vice president of the advisor's parent company,
Cohen & Steers, Inc. Prior to that, Mr. Corl was a senior vice president of the
advisor.
- --------------------------------------------------------------------------------
27
<Page>
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
PRIVACY POLICY
The fund is committed to maintaining the privacy of its
shareholders and to safeguarding their personal information.
The following is provided to help you understand what
personal information the fund collects, how we protect that
information, and why in certain cases we may share this
information with others.
The fund does not receive any personal information relating
to shareholders who purchase shares through an intermediary
that acts as the record owner of the shares. In the case of
shareholders who are record owners of the fund, to conduct
and process your business in an accurate and efficient
manner, we must collect and maintain certain personal
information about you. This is the information we collect on
applications or other forms, and from the transactions you
make with us.
The fund does not disclose any personal information about
its shareholders or former shareholders to anyone, except as
required or permitted by law or as is necessary to service
shareholder accounts. We will share information with
organizations, such as the fund's transfer agent, that
assist the fund in carrying out its daily business
operations. These organizations will use this information
only for purposes of providing the services required or as
otherwise as may be required by law. These organizations are
not permitted to share or use this information for any other
purpose. In addition, the fund restricts access to personal
information about its shareholders to employees of the
adviser who have a legitimate business need for the
information.
- --------------------------------------------------------------------------------
28
<Page>
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
MANAGEMENT OF THE FUND
The business and affairs of the fund are managed under the direction of the
board of directors. The board of directors approves all significant agreements
between the fund and persons or companies furnishing services to it, including
the fund's agreements with its advisor, administrator, custodian and transfer
agent. The management of the fund's day-to-day operations is delegated to its
officers, the advisor and the fund's administrator, subject always to the
investment objective and policies of the fund and to the general supervision of
the board of directors.
The directors and officers of the fund and their principal occupations
during the past five years are set forth below. The statement of additional
information (SAI) includes additional information about fund directors and is
available, without charge, upon request by calling 1-800-330-7348.
<Table>
<Caption>
NUMBER OF
FUNDS WITHIN
FUND
COMPLEX
PRINCIPAL OCCUPATION OVERSEEN BY
DURING PAST 5 YEARS DIRECTOR LENGTH
POSITION(S) HELD TERM OF (INCLUDING OTHER (INCLUDING OF TIME
NAME, ADDRESS AND AGE(a) WITH FUND OFFICE DIRECTORSHIPS HELD) THE FUND) SERVED
- ------------------------ --------- ------ ------------------- --------- ------
Interested Directors(b)
Robert H. Steers ..... Director, chairman 2006 Co-chairman and co-chief 14 Since
Age: 51 of the board, executive officer of the inception
and secretary advisor since 2003 and prior
to that, chairman of the
advisor. President of Cohen &
Steers Securities, LLC, the
fund's distributor.
Martin Cohen ......... Director, 2007 Co-chairman and co-chief 14 Since
Age: 55 president and executive officer of the inception
treasurer advisor since 2003 and prior
to that, president of the
advisor. Vice president of
Cohen & Steers Securities,
LLC, the fund's distributor.
Disinterested
Directors
Bonnie Cohen(c) ...... Director 2005 Consultant. Prior thereto, 14 Since
Age: 61 Undersecretary of State, inception
United States Department of
State. Director of Wellsford
Real Properties, Inc.
George Grossman ...... Director 2006 Attorney-at-law. 14 Since
Age: 50 inception
(table continued on next page)
</Table>
- -------------------
(a) The address for all directors is 757 Third Avenue, New York, NY 10017.
(b) 'Interested person,' as defined in the 1940 Act, of the fund because of
affiliation with Cohen & Steers Capital Management, Inc., the fund's
advisor.
(c) Martin Cohen and Bonnie Cohen are unrelated.
- --------------------------------------------------------------------------------
29
<Page>
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
(table continued from previous page)
<Table>
<Caption>
NUMBER OF
FUNDS WITHIN
FUND
COMPLEX
PRINCIPAL OCCUPATION OVERSEEN BY
DURING PAST 5 YEARS DIRECTOR LENGTH
POSITION(S) HELD TERM OF (INCLUDING OTHER (INCLUDING OF TIME
NAME, ADDRESS AND AGE(a) WITH FUND OFFICE DIRECTORSHIPS HELD) THE FUND) SERVED
- ---------------------- --------- ------ ------------------- --------- ------
Richard E. Kroon Director 2005 Board member of Finlay Enterprises, Inc. 14 2004 to
Age: 62 (operator of department store fine present
jewelry leased departments), and several
private companies; member of Investment
Subcommittee, Monmouth University;
retired Chairman and Managing Partner of
Sprout Group venture capital funds, then
an affiliate of Donaldson, Lufkin and
Jenrette Securities Corporation; and
former chairman of the National Venture
Capital Association.
Richard J. Norman .... Director 2007 Private investor. President of the Board 14 Since
Age: 61 of Directors of Maryland Public inception
Television and board member of The
Salvation Army. Prior thereto,
investment representative of Morgan
Stanley Dean Witter.
Frank K. Ross ........ Director 2007 Board member of NCRIC Group, Inc. 14 2004 to
Age: 61 (insurance) and Pepco Holdings, Inc. present
(electric utility). Formerly,
Midatlantic Area Managing Partner for
Audit and Risk Advisory Services at KPMG
LLP and Managing Partner of its
Washington, DC office.
Willard H. Smith, Jr. . Director 2005 Board member of Essex Property Trust, 14 Since
Age: 68 Inc., Highwoods Properties, Inc., Realty inception
Income Corporation and Crest Net Lease,
Inc. Managing director at Merrill Lynch
& Co., Equity Capital Markets Division
from 1983 to 1995.
C. Edward Ward, Jr. .. Director 2005 Member of the board of trustees of 14 2004 to
Age: 58 Manhattan College, Riverdale, New York. present
Formerly head of closed-end fund
listings for the New York Stock
Exchange.
</Table>
- -------------------
(a) The address of each officer is 757 Third Avenue, New York, NY 10017.
- --------------------------------------------------------------------------------
30
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
The officers of the fund (other than Messrs. Cohen and Steers, whose
biographies are provided above), their addresses, their ages, and their
principal occupations for at least the past five years are set forth below.
<Table>
<Caption>
POSITION(S) HELD
NAME, ADDRESS AND AGE(a) WITH FUND PRINCIPAL OCCUPATION DURING PAST 5 YEARS
---------------------- --------- ----------------------------------------
Joseph M. Harvey ........ Vice president President of the advisor since 2003 and, prior to
Age: 40 that, senior vice president and director of
investment research of the advisor.
Adam M. Derechin ........ Vice president and Chief operating officer of the advisor since 2003
Age: 40 assistant treasurer and prior to that, senior vice president of the
advisor.
Lawrence B. Stoller ..... Assistant secretary Executive vice president and general counsel of
Age: 41 the advisor, since 2004; Chief legal officer of
Cohen & Steers Securities, LLC. Prior to that,
senior vice president and general counsel of the
advisor, associate general Counsel, Neuberger
Berman Management, Inc. (money manager); and
assistant general counsel, The Dreyfus
Corporation (money manager).
John E. McLean .......... Chief compliance Vice president and associate general counsel of
Age: 34 officer Cohen & Steers Capital Management since September
2003. Prior to that, vice president, Law &
Regulation, J. & W. Seligman & Co. Incorporated
(money manager); and associate, Battle Fowler LLP
(law firm).
</Table>
- -------------------
(a) The address of each officer is 757 Third Avenue, New York, NY 10017.
- --------------------------------------------------------------------------------
31
<Page>
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
MEET THE COHEN & STEERS FAMILY OF OPEN-END FUNDS:
<Table>
FOR HIGH CURRENT INCOME: FOR TOTAL RETURN
COHEN & STEERS COHEN & STEERS
REALTY INCOME FUND REALTY SHARES
DESIGNED FOR INVESTORS SEEKING A HIGH DESIGNED FOR INVESTORS SEEKING MAXIMUM
DIVIDEND YIELD AND CAPITAL APPRECIATION, TOTAL RETURN THROUGH BOTH CURRENT INCOME
INVESTING PRIMARILY IN REITS AND CAPITAL APPRECIATION, INVESTING
PRIMARILY IN REITS
A, B, C AND I SHARES AVAILABLE
SYMBOL: CSRSX
SYMBOLS: CSEIX, CSBIX, CSCIX, CSDIX
ALSO AVAILABLE: COHEN & STEERS
INSTITUTIONAL REALTY SHARES (CSRIX)
REQUIRES A HIGHER MINIMUM PURCHASE, BUT
OFFERS A LOWER TOTAL EXPENSE RATIO
FOR TOTAL RETURN: FOR CAPITAL APPRECIATION
COHEN & STEERS COHEN & STEERS
UTILITY FUND REALTY FOCUS FUND
DESIGNED FOR INVESTORS SEEKING MAXIMUM DESIGNED FOR INVESTORS SEEKING MAXIMUM
TOTAL RETURN THROUGH BOTH CURRENT INCOME CAPITAL APPRECIATION, INVESTING IN A
AND CAPITAL APPRECIATION, INVESTING LIMITED NUMBER OF REITS AND OTHER REAL
PRIMARILY IN UTILITIES ESTATE COMPANIES
A, B, C AND I SHARES AVAILABLE CONCENTRATED, HIGHLY FOCUSED PORTFOLIO
SYMBOLS: CSUAX, CSUBX, CSUCX, CSUIX A, B, C AND I SHARES AVAILABLE
SYMBOLS: CSFAX, CSFBX, CSFCX, CSSPX
</Table>
FOR MORE INFORMATION ABOUT ANY COHEN & STEERS FUND
OR TO OBTAIN A PROSPECTUS PLEASE CONTACT US AT:
1-800-330-7348, OR VISIT OUR WEB SITE AT COHENANDSTEERS.COM
PLEASE CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE
FUND CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND
OTHER INFORMATION ABOUT THE FUND.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
COHEN & STEERS SECURITIES, LLC, DISTRIBUTOR
- --------------------------------------------------------------------------------
32
<Page>
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COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
<Table>
OFFICERS AND DIRECTORS KEY INFORMATION
Robert H. Steers INVESTMENT MANAGER
Director and chairman Cohen & Steers Capital Management, Inc.
757 Third Avenue
Martin Cohen New York, NY 10017
Director and president (212) 832-3232
Bonnie Cohen FUND SUBADMINISTRATOR AND CUSTODIAN
Director State Street Bank and Trust Company
225 Franklin Street
George Grossman Boston, MA 02110
Director
TRANSFER AGENT -- COMMON SHARES
Richard E. Kroon Equiserve Trust Company
Director 250 Royall Street
Canton, MA 02021
Richard J. Norman (800) 426-5523
Director
TRANSFER AGENT -- PREFERRED SHARES
Frank K. Ross The Bank of New York
Director 100 Church Street
New York, NY 10007
Willard H. Smith Jr.
Director LEGAL COUNSEL
Simpson Thacher & Bartlett LLP
C. Edward Ward, Jr. 425 Lexington Avenue
Director New York, NY 10017
Adam Derechin New York Stock Exchange Symbol: RLF
Vice president and assistant treasurer Web site: cohenandsteers.com
Joseph M. Harvey This report is for shareholder
Vice president information. This is not a
prospectus intended for use in the
Lawrence B. Stoller purchase or sale of fund shares.
Assistant secretary Past performance is of course no
guarantee of future results and
your investment may be worth more
or less at the time you sell.
</Table>
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33
<Page>
COHEN & STEERS
ADVANTAGE INCOME REALTY FUND
757 THIRD AVENUE
NEW YORK, NY 10017
COHEN & STEERS
ADVANTAGE INCOME REALTY FUND
- ----------------------------
ANNUAL REPORT
DECEMBER 31, 2004
<Page>
Item 2. Code of Ethics.
The registrant has adopted a Code of Ethics that applies to its Principal
Executive Officer and Principal Financial Officer. The registrant undertakes to
provide to any person without charge, upon request, a copy of the Code of
Ethics. Such request can be made by calling 800-330-7348 or writing to the
Secretary of the registrant, 757 Third Avenue, New York, NY 10017.
Item 3. Audit Committee Financial Expert.
The registrant's Board has determined that Frank K. Ross, a member of the
registrant's Audit Committee, is an "audit committee financial expert" and
"independent," as such terms are defined in this Item.
Item 4. Principal Accountant Fees and Services.
(a) - (d) Aggregate fees billed to the registrant for the last two fiscal years
for professional services rendered by the registrant's principal accountant were
as follows:
2004 2003
---- ----
Audit Fees $80,000 $74,151
Audit-Related Fees 15,000 40,000
Tax Fees 12,600 9,300
All Other Fees -- --
Audit-related fees were billed in connection with the preparation and issuance
of certification reports to rating agencies relating to the registrant's
preferred shares. Tax fees were billed in connection with the preparation of tax
returns, calculation and designation of dividends and other miscellaneous tax
services.
Aggregate fees billed by the registrant's principal accountant for the last two
fiscal years for non-audit services provided to the registrant's investment
adviser (not including a sub-adviser whose role is primarily portfolio
management and is subcontracted or overseen by another investment adviser) and
any entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registered investment
company, where the engagement relates directly to the operations and financial
reporting of the registrant, were as follows:
2004 2003
---- ----
Audit-Related Fees -- --
Tax Fees -- --
All Other Fees $62,500 $49,500
<Page>
These other fees were billed in connection with internal control reviews and
AIMR performance reviews.
(e)(1) The Audit Committee is required to pre-approve audit and non-audit
services performed for the registrant by the principal accountant. The Audit
Committee also is required to pre-approve non-audit services performed by the
registrant's principal accountant for the registrant's investment adviser and
any sub-adviser (not including any sub-adviser whose role is primarily portfolio
management and is subcontracted with or overseen by another investment adviser)
and any entity controlling, controlled by or under common control with the
registrant's investment adviser that provides ongoing services to the
registrant, if the engagement for services relates directly to the operations
and financial reporting of the registrant.
The audit committee may delegate pre-approval authority to one or more of its
members who are independent members of the board of directors of the registrant.
The member or members to whom such authority is delegated shall report any
pre-approval decisions to the Audit Committee at its next scheduled meeting. The
Audit Committee may not delegate its responsibility to pre-approve services to
be performed by the registrant's principal accountant for the investment
adviser.
(e) (2) No services included in (b) - (d) above were approved by the Audit
Committee pursuant to paragraphs (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) For the fiscal years ended December 31, 2004 and December 31, 2003, the
aggregate fees billed by the registrant's principal accountant for non-audit
services rendered to the registrant and for non-audit services rendered to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser) and any entity controlling, controlled by or under
common control with the registrant's investment adviser that provides ongoing
services to the registrant were $95,600 and $98,800, respectively.
(h) The registrant's audit committee considered whether the provision of
non-audit services that were rendered to the registrant's investment adviser
(not including any sub-adviser whose role is primarily portfolio management and
is subcontracted with or overseen by another investment adviser) and any
entity controlling, controlled by or under common control with the registrant's
investment adviser that provides ongoing services to the registrant that were
not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X
was compatible with maintaining the principal accountant's independence.
Item 5. Audit Committee of Listed Registrants.
The registrant has a standing audit committee established in accordance with
Section 3(a)(58)(A) of the Exchange Act. The members of the committee are Frank
K. Ross (chairman), Bonnie
<Page>
Cohen, George Grossman, Richard E. Kroon, Richard J. Norman, Willard H. Smith
Jr. and C. Edward Ward.
Item 6. Schedule of Investments.
Included in Item 1 above.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
COHEN & STEERS CAPITAL MANAGEMENT, INC.
STATEMENT OF POLICIES AND PROCEDURES REGARDING THE VOTING OF
SECURITIES
This statement sets forth the policies and procedures that Cohen & Steers
Capital Management, Inc. ("C&S") follows in exercising voting rights with
respect to securities held in our client portfolios. All proxy-voting rights
that are exercised by C&S shall be subject to this Statement of Policy and
Procedures.
I. Objectives
Voting rights are an important component of corporate governance. C&S has three
overall objectives in exercising voting rights:
A. Responsibility. C&S shall seek to ensure that there is an effective
means in place to hold companies accountable for their actions. While management
must be accountable to its board, the board must be accountable to a company's
shareholders. Although accountability can be promoted in a variety of ways,
protecting shareholder voting rights may be among our most important tools.
B. Rationalizing Management and Shareholder Concerns. C&S seeks to ensure
that the interests of a company's management and board are aligned with those of
the company's shareholders. In this respect, compensation must be structured to
reward the creation of shareholder value.
C. Shareholder Communication. Since companies are owned by their
shareholders, C&S seeks to ensure that management effectively communicates with
its owners about the company's business operations and financial performance. It
is only with effective communication that shareholders will be able to assess
the performance of management and to make informed decisions on when to buy,
sell or hold a company's securities.
II. General Principles
In exercising voting rights, C&S shall conduct itself in accordance with the
general principles set forth below.
<Page>
1. The ability to exercise a voting right with respect to a security is a
valuable right and, therefore, must be viewed as part of the asset
itself.
2. In exercising voting rights, C&S shall engage in a careful evaluation
of issues that may materially affect the rights of shareholders and
the value of the security.
3. Consistent with general fiduciary principles, the exercise of voting
rights shall always be conducted with reasonable care, prudence and
diligence.
4. In exercising voting rights on behalf of clients, C&S shall conduct
itself in the same manner as if C&S were the constructive owner of the
securities.
5. To the extent reasonably possible, C&S shall participate in each
shareholder voting opportunity.
6. Voting rights shall not automatically be exercised in favor of
management-supported proposals.
7. C&S, and its officers and employees, shall never accept any item of
value in consideration of a favorable proxy voting decision.
III. General Guidelines
Set forth below are general guidelines that C&S shall follow in exercising proxy
voting rights:
Prudence
In making a proxy voting decision, C&S shall give appropriate consideration to
all relevant facts and circumstances, including the value of the securities to
be voted and the likely effect any vote may have on that value. Since voting
rights must be exercised on the basis of an informed judgment, investigation
shall be a critical initial step.
Third Party Views
While C&S may consider the views of third parties, C&S shall never base a proxy
voting decision solely on the opinion of a third party. Rather, decisions shall
be based on a reasonable and good faith determination as to how best to maximize
shareholder value.
Shareholder Value
Just as the decision whether to purchase or sell a security is a matter of
judgment, determining whether a specific proxy resolution will increase the
market value of a security is a matter of
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judgment as to which informed parties may differ. In determining how a proxy
vote may affect the economic value of a security, C&S shall consider both
short-term and long-term views about a company's business and prospects,
especially in light of our projected holding period on the stock (e.g., C&S may
discount long-term views on a short-term holding).
IV. Specific Issues
Set forth below are guidelines as to how specific proxy voting issues shall be
analyzed and assessed. While these guidelines will provide a framework for our
decision making process, the mechanical application of these guidelines can
never address all proxy voting decisions. When new issues arise or old issues
present nuances not encountered before, C&S must be guided by its reasonable
judgment to vote in a manner that C&S deems to be in the best interests of its
clients.
A. Stock-Based Compensation
Approval of Plans or Plan Amendments. By their nature, compensation plans must
be evaluated on a case-by-case basis. As a general matter, C&S always favors
compensation plans that align the interests of management and shareholders. C&S
generally approves compensation plans under the following conditions:
10% Rule. The dilution effect of the newly authorized shares, plus the shares
reserved for issuance in connection with all other stock related plans,
generally should not exceed 10%.
Exercise Price. The minimum exercise price of stock options should be at least
equal to the market price of the stock on the date of grant.
Plan Amendments. Compensation plans should not be materially amended without
shareholder approval.
Non-Employee Directors. Awards to non-employee directors should not be subject
to management discretion, but rather should be made under non-discretionary
grants specified by the terms of the plan.
Repricing/Replacement of Underwater Options. Stock options generally should not
be re-priced, and never should be re-priced without shareholder approval. In
addition, companies should not issue new options, with a lower strike price, to
make up for previously issued options that are substantially underwater. C&S
will vote against the election of any slate of directors that, to its knowledge,
has authorized a company to re-price or replace underwater options during the
most recent year without shareholder approval.
Reload/Evergreen Features. We will generally vote against plans that enable the
issuance of reload options and that provide an automatic share replenishment
("evergreen") feature.
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Measures to Increase Executive Long-Term Stock Ownership. We support measures to
increase the long-term stock ownership by a company's executives. These include
requiring senior executives to hold a minimum amount of stock in a company
(often expressed as a percentage of annual compensation), requiring stock
acquired through option exercise to be held for a certain minimum amount of
time, and issuing restricted stock awards instead of options. In this respect,
we support the expensing of option grants because it removes the incentive of a
company to issue options in lieu of restricted stock. We also support employee
stock purchase plans, although we generally believe the discounted purchase
price should be at least 85% of the current market price.
Vesting. Restricted stock awards normally should vest over at least a two-year
period.
Other stock awards. Stock awards other than stock options and restricted stock
awards should be granted in lieu of salary or a cash bonus, and the number of
shares awarded should be reasonable.
B. Change of Control Issues
While we recognize that a takeover attempt can be a significant distraction for
the board and management to deal with, the simple fact is that the possibility
of a corporate takeover keeps management focused on maximizing shareholder
value. As a result, C&S opposes measures that are designed to prevent or
obstruct corporate takeovers because they can entrench current management. The
following are C&S's guidelines on change of control issues:
Shareholder Rights Plans. C&S acknowledges that there are arguments for and
against shareholder rights plans, also known as "poison pills." Companies should
put their case for rights plans to shareholders. We generally vote against any
directors who, without shareholder approval, to our knowledge have instituted a
new poison pill plan, extended an existing plan, or adopted a new plan upon the
expiration of an existing plan during the past year.
Golden Parachutes. C&S opposes the use of accelerated employment contracts that
result in cash grants of greater than three times annual compensation (salary
and bonus) in the event of termination of employment following a change in
control of a company. In general, the guidelines call for voting against "golden
parachute" plans because they impede potential takeovers that shareholders
should be free to consider. We generally withhold our votes at the next
shareholder meeting for directors who to our knowledge approved golden
parachutes.
Approval of Mergers - C&S votes against proposals that require a super-majority
of shareholders to approve a merger or other significant business combination.
We support proposals that seek to lower super-majority voting requirements.
C. Routine Issues
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Director Nominees in a Non-Contested Election - C&S generally votes in favor of
management proposals on director nominees.
Director Nominees in a Contested Election - By definition, this type of board
candidate or slate runs for the purpose of seeking a significant change in
corporate policy or control. Therefore, the economic impact of the vote in favor
of or in opposition to that director or slate must be analyzed using a higher
standard normally applied to changes in control. Criteria for evaluating
director nominees as a group or individually should include: performance;
compensation, corporate governance provisions and takeover activity; criminal
activity; attendance at meetings; investment in the company; interlocking
directorships; inside, outside and independent directors; whether the chairman
and CEO titles are held by the same person; number of other board seats; and
other experience. It is impossible to have a general policy regarding director
nominees in a contested election.
Board Composition - C&S supports the election of a board that consists of at
least a majority of independent directors. We generally withhold our support for
non-independent directors who serve on a company's audit, compensation and/or
nominating committees. We also generally withhold support for director
candidates who have not attended a sufficient number of board or committee
meetings to effectively discharge their duties as directors.
Classified Boards - Because a classified board structure prevents shareholders
from electing a full slate of directors at annual meetings, C&S generally votes
against classified boards. We vote in favor of shareholder proposals to
declassify a board of directors unless a company's charter or governing
corporate law allows shareholders, by written consent, to remove a majority of
directors at any time, with or without cause.
Barriers to Shareholder Action - We vote to support proposals that lower the
barriers to shareholder action. This includes the right of shareholders to call
a meeting and the right of shareholders to act by written consent.
Cumulative Voting - Having the ability to cumulate our votes for the election of
directors - that is, cast more than one vote for a director about whom they feel
strongly - generally increases shareholders' rights to effect change in the
management of a corporation. We generally support, therefore, proposals to adopt
cumulative voting.
Ratification of Auditors - Votes generally are cast in favor of proposals to
ratify an independent auditor, unless there is a reason to believe the auditing
firm is no longer performing its required duties or there are exigent
circumstances requiring us to vote against the approval of the recommended
auditor. For example, our general policy is to vote against an independent
auditor that receives more than 50% of its total fees from a company for
non-audit services.
D. Stock Related Items
Increase Additional Common Stock - C&S's guidelines generally call for approval
of increases in authorized shares, provided that the increase is not greater
than three times the number of
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shares outstanding and reserved for issuance (including shares reserved for
stock-related plans and securities convertible into common stock, but not shares
reserved for any poison pill plan).
Votes generally are cast in favor of proposals to authorize additional shares of
stock except where the proposal:
1. creates a blank check preferred stock; or
2. establishes classes of stock with superior voting rights.
Blank Check Preferred Stock - Votes generally are cast in opposition to
management proposals authorizing the creation of new classes of preferred stock
with unspecific voting, conversion, distribution and other rights, and
management proposals to increase the number of authorized blank check preferred
shares. C&S may vote in favor of this type of proposal when it receives
assurances to its reasonable satisfaction that (i) the preferred stock was
authorized by the board for the use of legitimate capital formation purposes and
not for anti-takeover purposes, and (ii) no preferred stock will be issued with
voting power that is disproportionate to the economic interests of the preferred
stock. These representations should be made either in the proxy statement or in
a separate letter from the company to C&S.
Preemptive Rights - Votes are cast in favor of shareholder proposals restoring
limited preemptive rights.
Dual Class Capitalizations - Because classes of common stock with unequal voting
rights limit the rights of certain shareholders, C&S votes against adoption of a
dual or multiple class capitalization structure.
E. Social Issues
C&S believes that it is the responsibility of the board and management to run a
company on a daily basis. With this in mind, in the absence of unusual
circumstances, we do not believe that shareholders should be involved in
determining how a company should address broad social and policy issues. As a
result, we generally vote against these types of proposals, which are generally
initiated by shareholders, unless we believe the proposal has significant
economic implications.
F. Other Situations
No set of guidelines can anticipate all situations that may arise. Our portfolio
managers and analysts will be expected to analyze proxy proposals in an effort
to gauge the impact of a proposal on the financial prospects of a company, and
vote accordingly. These policies are intended to provide guidelines for voting.
They are not, however, hard and fast rules because corporate governance issues
are so varied.
V. Proxy Voting Procedures
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C&S shall maintain a record of all voting decisions for the period required by
applicable laws. In each case in which C&S votes contrary to the stated policies
set forth in these guidelines, the record shall indicate the reason for such a
vote.
The Investment Committee of C&S shall have responsibility for voting proxies,
under the supervision of the Director of Research. The Director of Research's
designee shall be responsible for ensuring that the Investment Committee is
aware of all upcoming proxy voting opportunities. The Designee shall ensure that
proxy votes are properly recorded and that the requisite information regarding
each proxy voting opportunity is maintained. The General Counsel of C&S shall
have overall responsibility for ensuring that C&S complies with all proxy voting
requirements and procedures.
VI. Recordkeeping
The Designee shall be responsible for recording and maintaining the following
information with respect to each proxy voted by C&S:
o Name of the company
o Ticker symbol
o CUSIP number
o Shareholder meeting date
o Brief identification of each matter voted upon
o Whether the matter was proposed by management or a shareholder
o Whether C&S voted on the matter
o If C&S voted, then how C&S voted
o Whether C&S voted with or against management
The General Counsel of C&S shall be responsible for maintaining and updating
these Policies and Procedures, and for maintaining any records of written client
requests for proxy voting information and documents that were prepared by C&S
and were deemed material to making a voting decision or that memorialized the
basis for the decision.
C&S shall rely on the SEC's EDGAR filing system with respect to the requirement
to maintain proxy materials regarding client securities.
VII. Conflicts of Interest
There may be situations in which C&S may face a conflict between its interests
and those of its clients or fund shareholders. Potential conflicts are most
likely to fall into three general categories:
o Business Relationships - This type of conflict would occur if C&S or an
affiliate has a substantial business relationship with the company or a
proponent of a proxy proposal relating to the company (such as an employee
group) such that failure to vote in favor of management (or the proponent) could
harm the relationship of C&S or its affiliate with the company or
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proponent. In the context of C&S, this could occur if Cohen & Steers Capital
Advisors, a wholly owned subsidiary of C&S ("Capital Advisors"), has a material
business relationship with a company that C&S has invested in on behalf of its
clients, and C&S is encouraged to vote in favor of management as an inducement
to acquire or maintain the Capital Advisors relationship.
o Personal Relationships - C&S or an affiliate could have a personal
relationship with other proponents of proxy proposals, participants in proxy
contests, corporate directors or director nominees.
o Familial Relationships - C&S or an affiliate could have a familial
relationship relating to a company (e.g., spouse or other relative who serves as
a director or nominee of a public company).
The next step is to identify if a conflict is material. A material matter is one
that is reasonably likely to be viewed as important by the average shareholder.
Materiality will be judged under a two-step approach:
o Financial Based Materiality - C&S presumes a conflict to be non-material
unless it involves at least $500,000.
o Non-Financial Based Materiality - Non-financial based materiality would impact
the members of the C&S Investment Committee, who are responsible for making
proxy voting decisions.
Finally, if a material conflict exists, C&S shall vote in accordance with the
advice of a proxy voting service. C&S currently uses ISS to provide advice on
proxy voting decisions.
The General Counsel of C&S shall have responsibility for supervising and
monitoring conflicts of interest in the proxy voting process according to the
following process:
1. Identifying Conflicts - The General Counsel of C&S is responsible for
monitoring the relationships of Capital Advisors for purposes of C&S's Inside
Information Policies and Procedures. The General Counsel of C&S(or his designee)
maintains a watch list and a restricted list. The Investment Committee is
unaware of the content of the watch list and therefore it is only those
companies on the restricted list, which is made known to everyone at C&S, for
which potential concerns might arise. When a company is placed on the restricted
list, the General Counsel of C&S(or his designee) shall promptly inquire of the
Designee as to whether there is a pending proxy voting opportunity with respect
to that company, and continue to inquire on a weekly basis until such time as
the company is no longer included on the restricted list. When there is a proxy
voting opportunity with respect to a company that has been placed on the
restricted list, the General Counsel of C&S shall inform the Investment
Committee that no proxy vote is to be submitted for that company until the
General Counsel completes the conflicts analysis.
For purposes of monitoring personal or familial relationships, the General
Counsel of C&S (or his designee) shall receive on at least an annual basis from
each member of the Investment
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Committee written disclosure of any personal or familial relationships with
public company directors that could raise potential conflict of interest
concerns. Investment Committee members also shall agree in writing to advise the
General Counsel of C&S if (i) there are material changes to any previously
furnished information, (ii) a person with whom a personal or familial
relationship exists is subsequently nominated as a director or (iii) a personal
or familial relationship exists with any proponent of a proxy proposal or a
participant in a proxy contest.
2. Identifying Materiality - The General Counsel of C&S (or his designee) shall
be responsible for determining whether a conflict is material. He shall evaluate
financial based materiality in terms of both actual and potential fees to be
received. Non-financial based items impacting a member of the Investment
Committee shall be presumed to be material.
3. Communication with Investment Committee; Voting of Proxy - If the General
Counsel of C&S determines that the relationship between Capital Advisors and a
company is financially material, he shall communicate that information to the
members of the Investment Committee and instruct them, and the Designee, that
C&S will vote its proxy based on the advice of ISS or other consulting firm then
engaged by C&S. Any personal or familial relationship, or any other business
relationship, that exists between a company and any member of the Investment
Committee shall be presumed to be material, in which case C&S again will vote
its proxy based on the advice of ISS or other consulting firm then engaged by
C&S. The fact that a member of the Investment Committee personally owns
securities issued by a company will not disqualify C&S from voting common stock
issued by that company, since the member's personal and professional interests
will be aligned.
In cases in which C&S will vote its proxy based on the advice of ISS or other
consulting firm then engaged by C&S, the General Counsel of C&S(or his designee)
shall be responsible for ensuring that the Designee votes proxies in this
manner. The General Counsel of C&S will maintain a written record of each
instance when a conflict arises and how the conflict is resolved (e.g., whether
the conflict is judged to be material, the basis on which the materiality is
decision is made and how the proxy is voted).
VIII. Cohen & Steers Funds
Proxies relating to portfolio securities held by any Cohen & Steers Fund shall
be voted in accordance with this Statement of Policies and Procedures. For this
purpose, the Board of Directors of the Cohen & Steers Funds has delegated to C&S
the responsibility for voting proxies on behalf of the Funds. The General
Counsel of C&S shall make an annual presentation to the Board regarding this
Statement of Policy and Procedures, including whether any revisions are
recommended, and shall report to the Board at each regular, quarterly meeting
with respect to any conflict of interest situation that arose regarding the
proxy voting process.
IV. Annual Review; Reporting
The chief compliance officer (CCO) of C&S (or his designee) shall conduct an
annual review to assess compliance with these policies and procedures. This
review will include sampling a
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limited number of proxy votes during the prior year to determine if they were
consistent with these policies and procedures. The results of this review will
be reported to the General Counsel of C&S and the CCO of the Funds.
Any violations of these policies and procedures shall be reported to the General
Counsel or CCO of C&S. If the violation relates to any Cohen & Steers Fund, the
General Counsel or CCO of C&S shall report such violation to the CCO of the
Funds.
Item 8. Portfolio Managers of Closed-End Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial officer
have concluded that the registrant's disclosure controls and procedures are
sufficient to ensure that information required to be disclosed by the registrant
in this Form N-CSR was recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms, based upon such officers' evaluation of these controls and procedures as
of a date within 90 days of the filing date of this report.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the second fiscal quarter of the period covered
by this report that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Not applicable.
(a) (2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(a) under the Investment Company Act of 1940.
(b) Certifications of chief executive officer and chief financial officer as
required by Rule 30a- 2(b) under the Investment Company Act of 1940.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
COHEN & STEERS ADVANTAGE INCOME REALTY FUND, INC.
By: /s/ Robert H. Steers
-------------------------------
Name: Robert H. Steers
Title: Chairman
Date: March 8, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Robert H. Steers By: /s/ Martin Cohen
------------------------------- ---------------------------------
Name: Robert H. Steers Name: Martin Cohen
Title: Chairman, Secretary and Title: President, Treasurer
and principal and principal
executive officer financial officer
Date: March 8, 2005
STATEMENT OF DIFFERENCES
The section symbol shall be expressed as.............................. 'SS'
The division sign shall be expressed as............................... [div]