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: 811-6302
Cohen & Steers Realty Shares, Inc.
(Exact name of registrant as specified in charter)
757 Third Avenue, New York, NY 10017
(Address of principal executive offices) (Zip code)
Adam M. Derechin
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: June 30, 2005
Item 1. Reports to Stockholders.
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COHEN & STEERS REALTY SHARES, INC.
July 28, 2005
To Our Shareholders:
We are pleased to submit to you our report for the quarter and six months
ended June 30, 2005. The net asset value at that date was $73.48. In addition, a
regular dividend of $0.56 was declared for shareholders of record on June 23,
2005 and was paid on June 24, 2005.
INVESTMENT REVIEW
For the quarter, Cohen & Steers Realty Shares had a total return, based on
income and change in net asset value, of 15.3%. This compares to the NAREIT
Equity REIT Index's(a) total return of 14.5%. For the six months, the fund's
total return was 7.2%, compared to NAREIT's 6.4%.
In our last quarterly report, we suggested that negative sentiment in the
market for REIT shares, as manifested in the peaking of short interest in the
REIT index trading vehicles, was a bullish contrarian indicator and that REIT
shares were trading at or below the value of their underlying real estate
assets -- not above, as Wall Street analysts had almost unanimously suggested.
Additionally, for quite some time, we have discussed our view that the
risk-adjusted returns of real estate would continue to be relatively attractive
in a low return environment. Recent events have validated all of these beliefs.
During the quarter, continued momentum in the recovery of real estate
fundamentals and REIT earnings, and a flurry of merger and buyout activity,
drove REIT share prices to new highs. Buyout activity reached a crescendo in
June as Catellus, Gables Residential and CRT Properties all announced that they
were being acquired.
The table below illustrates major REIT buyout activity over the last year:
REIT M&A PRICES EXCEED NAVS
<Table>
<Caption>
Target Target
Total Pre-announce Pre-announce
Property Transaction NAV per Price per Offer Price
Announced Acquirer/Target Type Value (billion) Share Share per Share
- --------- --------------------------- --------------- --------------- ----------------- ------------ ---------
08/20/04 General Growth/Rouse Mall $12.6 $39.00-$45.25 $50.61 $67.50
10/04/04 Camden/Summit Apartment $ 1.9 $19.81-$26.75 $27.84 $31.37
10/25/04 Colonial/Cornerstone Apartment $ 1.5 $ 7.75-$ 9.00 $10.07 $10.80
12/19/04 Centro/Kramont Shopping Center $ 1.2 $18.00-$20.00 $20.80 $23.50
06/06/05 ProLogis/Catellus Industrial $ 4.9 $26.00-$30.24 $29.24 $33.80
06/07/05 ING Clarion/Gables Apartment $ 2.8 $31.39-$43.00 $38.12 $43.50
06/17/05 DRA Advisors/CRT Properties Office $ 1.7 $19.50-$20.60 $24.09 $27.80
- --------- -----
AVERAGE/TOTAL $26.6
-----
-----
<Caption>
Offer Price PERCENT DIFFERENCE
Premium to BETWEEN OFFER
Pre-announce PRICE & MIDPOINT Implied
Announced Price per Share NAV ESTIMATE Cap Rate
- --------- --------------- ------------ --------
08/20/04 33.4% 62.2% 5.7%
10/04/04 12.7% 34.8% 5.8%
10/25/04 7.2% 29.0% 6.5%
12/19/04 13.0% 23.7% 6.9%
06/06/05 15.6% 20.2% 6.1%
06/07/05 14.1% 17.0% 5.8%
06/17/05 15.4% 38.7% 7.1%
- --------- ----- ----- ----
AVERAGE/T 15.9% 32.2% 6.3%
----- ----- ----
----- ----- ----
</Table>
- -------------------
(a) The NAREIT Equity REIT Index is an unmanaged, market capitalization weighted
index of all publicly traded REITs that invest predominantly in the equity
ownership of real estate. The index is designed to reflect the performance
of all publicly traded equity REITs as a whole.
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1
<Page>
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COHEN & STEERS REALTY SHARES, INC.
Several observations are worth noting. These seven buyouts were sizeable,
totaling approximately $27 billion in value across all four 'core' property
types: retail, apartment, industrial and office. Several of these deals were
public-to-public mergers while others were leveraged buyouts by private sponsors
backed by major institutional sources -- in other words, the acquirers were all
highly credible and sophisticated. In our view, the debt providers for these
transactions have also validated the real estate asset pricing implied by these
deals. On average, the implied capitalization rate (the current income generated
by these properties compared to the price paid for the investment) for these
sales was 6.3%, consistent with the high quality single property transactions
that we observe in the private marketplace but certainly lower than the
capitalization rate regime that existed for many years. Finally, these deals
were all struck at significant premiums to the pre-announcement target stock
prices -- ranging from 7.2% to 33.4%.
Perhaps even more interesting for the rest of the REIT market, all of these
deals were struck at prices above the commonly perceived value of the target
company's real estate net asset value (NAV). In every instance, the deal price
was greater than most, if not all the published analyst estimates of NAV. These
deals implied lower capitalization rates for major real estate assets than any
of the Wall Street analysts had heretofore been willing to use, even though
similar implied capitalization rates had been observed in the private market for
some time. As a result, many Wall Street analysts who had been negative on the
REIT sector for most of the previous three years, and who fostered a sense of
disbelief among many investors, turned more positive on the REIT group, lowering
their assumed capitalization rates and boosting their NAV estimates. In short,
although there was near unanimity among REIT pundits that the stocks had been
expensive, the evidence above suggests that they certainly were not.
Although economic data points indicating a moderating pace of growth have
become more common, we continue to believe that the economy is fundamentally
healthy and that any short-term moderation in economic growth will not
meaningfully disturb the forward momentum in occupancies and rents for most
property types in most areas of the country. Accordingly, two of the best
performing property sectors in the quarter were the regional mall and apartment
sectors, delivering 21% and 17% total returns, respectively. Driven by continued
strong economic growth, these two sectors led the REIT group as rent and
occupancy gains continued to gather momentum. Our stock selection in apartment,
office, shopping center and industrial sectors, as well as our overweight in the
regional mall sector, were the most significant contributors to our relative
performance during the quarter. Our investment discipline, which balances both
the consideration of underlying real estate asset value and future cash flow
growth prospects, has continued to steer us in the right direction in the search
for value in the REIT sector.
Manufactured housing was the worst performing property sector. It continues
to lag the others as a fundamental recovery has not yet become visible enough to
excite investors. While the for-sale housing boom is indirectly benefiting the
apartment sector by constraining supply of new rental apartments via condo
conversions, there has been no such ancillary impact on the manufactured home
sector. The hotel sector also trailed the overall REIT market, as concerns about
slowing economic growth tempered enthusiasm for this cyclical sector. Our stock
selection in this property sector was the largest detractor from our relative
performance.
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2
<Page>
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COHEN & STEERS REALTY SHARES, INC.
INVESTMENT OUTLOOK
In the mid to late 1990s, real estate company share prices as a group
consistently traded at large premiums to NAV -- up to 30% for the REIT group as
a whole. The public market's perception of the value and growth prospects of
real estate assets was clearly ahead of that of the private market, and this
enabled massive amounts of assets to flow from private to public ownership.
REITs were, in fact, the marginal buyers of most large real estate assets during
this time period, and REIT market capitalization expanded dramatically through
IPOs and secondary offerings of existing companies.
Today, the public market and private market views of real estate value are
much more closely aligned, as evidenced by the fact that most commentators see
REIT valuations as closer than many had realized to private market NAV. This has
profound implications for the way the real estate stock cycle will evolve, in
our opinion.
We believe that assets will continue to flow from private to public hands as
skilled public players seek out selective, strategic acquisition and development
opportunities and as the moderate but steady and disciplined pace of IPO
activity continues. Additionally, we think that current strong investor interest
in REITs' investment attributes, as well as the improved outlook on the sector
by analysts offer an attractive environment for companies to utilize secondary
stock offerings in order to finance these activities. However, if private market
values continue to be strong as well, as we expect, REIT equity issuance should
not get out of hand as it did during the latter stages of the REIT stock cycle
in the late 1990s. The large premiums to asset value that resulted in many
instances in undisciplined equity issuance contributed significantly to the
severity of the downturn in REIT share prices in 1998 and 1999.
We also believe that assets will continue to flow from public to private and
from public to public -- as public companies that can neither create value for
shareholders nor achieve an attractive valuation are taken private or merged
into other public companies. Again, the converging views of real estate asset
value by both private and public capital markets, in conjunction with continued
strong private market demand for real estate assets can potentially serve as a
governor on REIT stock prices -- helping to guard against the massive discounts
to asset value that persisted in late 1999 and 2000 in the aftermath of the REIT
bear market.
Our investment outlook and strategy continues to be predicated on the
beliefs that the U.S. economy will continue to expand, the Federal Reserve is
nearing the end of the monetary tightening cycle, and that most property sectors
will continue to realize improving occupancies and rental rates. We have focused
the portfolio on those sectors that we believe are benefiting most from the
cyclical recovery in occupancies and rents: office, self storage, hotel and
certain segments of the apartment market (including student housing). We have
trimmed some retail holdings based on less attractive relative valuation,
according to our proprietary valuation model, as this sector's fundamentals stay
steady while others' improve. The rally in the second quarter, combined with the
dynamics of the merger environment, has created many shifts in relative
valuation for individual companies, and we continually rebalance the portfolio
to capture those shifts.
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3
<Page>
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COHEN & STEERS REALTY SHARES, INC.
In closing, while REIT share prices continue to perform well, and valuations
inch higher, we believe that in a low return environment, with fundamentals
improving and the interaction between private and public real estate increasing,
REITs can continue to provide attractive investment returns.
Sincerely,
MARTIN COHEN ROBERT H. STEERS
MARTIN COHEN ROBERT H. STEERS
Co-chairman Co-chairman
JAMES S. CORL
JAMES S. CORL
Portfolio Manager
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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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4
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COHEN & STEERS REALTY SHARES, INC.
EXPENSE EXAMPLE
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including redemption fees; and (2) ongoing costs including management
fees and other fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period 01/01/05-06/30/05.
ACTUAL EXPENSES
The first line of the table below provides information about actual account
values and expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading entitled 'Expenses Paid During Period' to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing cost of
investing in the fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
redemption fees. Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
<Table>
<Caption>
EXPENSES PAID
BEGINNING ENDING DURING PERIOD*
ACCOUNT VALUE ACCOUNT VALUE JANUARY 1, 2005-
JANUARY 1, 2005 JUNE 30, 2005 JUNE 30, 2005
--------------- ------------- -------------
Actual (7.21% return)....................................... $1,000.00 $1,072.10 $5.03
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,019.93 $4.91
</Table>
- -------------------
* Expenses are equal to the fund's annualized expense ratio of 0.98% multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
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5
<Page>
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COHEN & STEERS REALTY SHARES, INC.
JUNE 30, 2005
TOP TEN HOLDINGS
(UNAUDITED)
<Table>
<Caption>
MARKET % OF
VALUE NET ASSETS
SECURITY ------------ ----------
--------
1. Boston Properties...................................... $156,695,000 6.72%
2. Simon Property Group................................... 136,846,622 5.86
3. Vornado Realty Trust................................... 115,277,520 4.94
4. ProLogis............................................... 109,468,896 4.69
5. AvalonBay Communities.................................. 107,253,920 4.60
6. Equity Office Properties Trust......................... 80,975,807 3.47
7. Equity Residential..................................... 80,970,862 3.47
8. Host Marriott Corp..................................... 78,713,250 3.37
9. Brookfield Properties Corp............................. 75,477,600 3.23
10. Mills Corp............................................. 75,403,916 3.23
</Table>
SECTOR BREAKDOWN
(Based on Net Assets)
(Unaudited)
[PIE CHART]
<Table>
Office & Industrial 36.82%
Shopping Center 22.84%
Residential 19.72%
Hotel 6.86%
Self Storage 5.72%
Diversified 4.94%
Health Care 2.09%
Other Assets in Excess of Liabilities 1.01%
</Table>
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6
<Page>
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COHEN & STEERS REALTY SHARES, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 2005 (UNAUDITED)
<Table>
<Caption>
NUMBER VALUE
OF SHARES (NOTE 1)
--------- --------------
EQUITIES 98.99%
DIVERSIFIED 4.94%
Vornado Realty Trust.......................... 1,433,800 $ 115,277,520
--------------
HEALTH CARE 2.09%
Ventas........................................ 1,612,600 48,700,520
--------------
HOTEL 6.86%
Hilton Hotels Corp............................ 1,393,400 33,232,590
Host Marriott Corp............................ 4,497,900 78,713,250
Starwood Hotels & Resorts Worldwide........... 823,500 48,232,395
--------------
160,178,235
--------------
INDUSTRIAL 8.65%
AMB Property Corp............................. 1,354,600 58,830,278
Catellus Development Corp..................... 1,022,913 33,551,546
ProLogis...................................... 2,720,400 109,468,896
--------------
201,850,720
--------------
OFFICE 26.87%
American Financial Realty Trust............... 1,102,600 16,957,988
Arden Realty.................................. 958,300 34,479,634
BioMed Realty Trust........................... 624,000 14,882,400
Boston Properties............................. 2,238,500 156,695,000
Brandywine Realty Trust....................... 299,600 9,182,740
Brookfield Properties Corp.................... 2,620,750 75,477,600
CarrAmerica Realty Corp....................... 787,900 28,506,222
Equity Office Properties Trust................ 2,446,399 80,975,807
Kilroy Realty Corp............................ 797,900 37,892,271
Mack-Cali Realty Corp......................... 476,100 21,567,330
Maguire Properties............................ 866,200 24,548,108
Prentiss Properties Trust..................... 632,500 23,048,300
Reckson Associates Realty Corp................ 1,085,000 36,401,750
SL Green Realty Corp.......................... 816,300 52,651,350
Trizec Properties............................. 668,200 13,744,874
--------------
627,011,374
--------------
</Table>
See accompanying notes to financial statements.
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7
<Page>
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COHEN & STEERS REALTY SHARES, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 2005 (UNAUDITED)
<Table>
<Caption>
NUMBER VALUE
OF SHARES (NOTE 1)
--------- --------------
OFFICE/INDUSTRIAL 1.30%
Liberty Property Trust........................ 684,900 $ 30,347,919
--------------
30,347,919
--------------
RESIDENTIAL 19.72%
APARTMENT 17.98%
Apartment Investment & Management Co.......... 965,300 39,500,076
Archstone-Smith Trust......................... 1,538,200 59,405,284
AvalonBay Communities......................... 1,327,400 107,253,920
BRE Properties................................ 1,303,400 54,547,290
Equity Residential............................ 2,199,100 80,970,862
Essex Property Trust.......................... 423,300 35,159,298
GMH Communities Trust......................... 400,400 5,545,540
Post Properties............................... 1,026,300 37,059,693
--------------
419,441,963
--------------
MANUFACTURED HOME 1.74%
Affordable Residential Communities............ 775,800 10,356,930
Sun Communities............................... 812,200 30,205,718
--------------
40,562,648
--------------
TOTAL RESIDENTIAL............................. 460,004,611
--------------
SELF STORAGE 5.72%
Public Storage................................ 1,186,800 75,065,100
Shurgard Storage Centers...................... 1,268,900 58,318,644
--------------
133,383,744
--------------
SHOPPING CENTER 22.84%
COMMUNITY CENTER 5.68%
Developers Diversified Realty Corp............ 821,000 37,733,160
Federal Realty Investment Trust............... 607,200 35,824,800
Pan Pacific Retail Properties................. 674,700 44,786,586
Regency Centers Corp.......................... 249,600 14,277,120
--------------
132,621,666
--------------
</Table>
See accompanying notes to financial statements.
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8
<Page>
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COHEN & STEERS REALTY SHARES, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 2005 (UNAUDITED)
<Table>
<Caption>
NUMBER VALUE
OF SHARES (NOTE 1)
--------- --------------
REGIONAL MALL 17.16%
CBL & Associates Properties................... 378,200 $ 16,289,074
General Growth Properties..................... 1,597,400 65,637,166
Macerich Co................................... 863,900 57,924,495
Mills Corp.................................... 1,240,400 75,403,916
Simon Property Group.......................... 1,887,800 136,846,622
Taubman Centers............................... 1,416,800 48,298,712
--------------
400,399,985
--------------
TOTAL SHOPPING CENTER......................... 533,021,651
--------------
TOTAL EQUITIES (Identified
cost -- $1,333,981,651)................ 2,309,776,294
--------------
<Caption>
PRINCIPAL
AMOUNT
-----------
COMMERCIAL PAPER 0.92%
New Center Asset Trust, 2.20%, due
07/01/2005 (Identified cost
-- $21,544,000)............................... $21,544,000 21,544,000
--------------
TOTAL INVESTMENTS (Identified
cost -- $1,355,525,651)....................... 99.91% 2,331,320,294
OTHER ASSETS IN EXCESS OF LIABILITIES........... 0.09% 2,092,052
------ --------------
NET ASSETS (Equivalent to $73.48 per share based
on 31,757,170 shares of capital stock
outstanding).................................. 100.00% $2,333,412,346
------ --------------
------ --------------
</Table>
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Note: Percentages indicated are based on the net assets of the fund.
See accompanying notes to financial statements.
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9
<Page>
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COHEN & STEERS REALTY SHARES, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2005 (UNAUDITED)
<Table>
ASSETS:
Investments in securities, at value (Identified
cost -- $1,355,525,651) (Note 1)..................... $2,331,320,294
Cash.................................................... 441,393
Dividends receivable.................................... 10,573,383
Receivable for fund shares sold......................... 3,664,337
Receivable for investment securities sold............... 871,769
Other assets............................................ 25,061
--------------
Total Assets....................................... 2,346,896,237
--------------
LIABILITIES:
Payable for investment securities purchased............. 9,683,103
Payable for fund shares redeemed........................ 1,886,176
Payable to investment advisor........................... 1,539,409
Payable to administrator................................ 37,760
Payable to directors.................................... 4,936
Other liabilities....................................... 332,507
--------------
Total Liabilities.................................. 13,483,891
--------------
NET ASSETS applicable to 31,757,170 shares of $0.001 par
value common stock outstanding............................ $2,333,412,346
--------------
--------------
NET ASSET VALUE PER SHARE:
($2,333,412,346[div]31,757,170 shares outstanding)...... $ 73.48
--------------
--------------
NET ASSETS consist of:
Paid-in capital......................................... $1,303,931,962
Dividends in excess of net investment income............ (17,782,708)
Accumulated undistributed net realized gain on
investments.......................................... 71,468,449
Net unrealized appreciation on investments.............. 975,794,643
--------------
$2,333,412,346
--------------
--------------
</Table>
See accompanying notes to financial statements.
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10
<Page>
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COHEN & STEERS REALTY SHARES, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2005 (UNAUDITED)
<Table>
Investment Income (Note 1):
Dividend income (net of $111,822 of foreign withholding
tax)................................................. $ 27,943,634
Interest income......................................... 175,912
------------
Total Income....................................... 28,119,546
------------
Expenses:
Investment advisory fees (Note 2)....................... 8,725,008
Transfer agent fees..................................... 859,007
Administration fees (Note 2)............................ 363,421
Reports to shareholders................................. 141,570
Custodian fees and expenses............................. 78,303
Professional fees....................................... 64,570
Line of credit fees and expenses (Note 6)............... 47,021
Registration and filing fees............................ 31,675
Directors' fees and expenses (Note 2)................... 26,235
Miscellaneous........................................... 67,263
------------
Total Expenses..................................... 10,404,073
------------
Net Investment Income....................................... 17,715,473
------------
Net Realized and Unrealized Gain on Investments:
Net realized gain on investments........................ 78,579,944
Net change in unrealized appreciation on investments.... 54,404,229
------------
Net realized and unrealized gain on investments.... 132,984,173
------------
Net Increase in Net Assets Resulting from Operations........ $150,699,646
------------
------------
</Table>
See accompanying notes to financial statements.
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11
<Page>
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COHEN & STEERS REALTY SHARES, INC.
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<Table>
<Caption>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31, 2004
---------------- -----------------
Change in Net Assets:
From Operations:
Net investment income.................... $ 17,715,473 $ 36,553,767
Net realized gain on investments......... 78,579,944 163,858,811
Net change in unrealized appreciation on
investments........................... 54,404,229 416,457,207
-------------- --------------
Net increase in net assets resulting
from operations................... 150,699,646 616,869,785
-------------- --------------
Dividends and Distributions to Shareholders
from (Note 1):
Net investment income.................... (35,498,181) (36,553,767)
Net realized gain on investments......... -- (161,275,302)
Tax return of capital.................... -- (11,713,058)
-------------- --------------
Total dividends and distributions to
shareholders...................... (35,498,181) (209,542,127)
-------------- --------------
Capital Stock Transactions (Note 5):
Increase/(decrease) in net assets from
fund share transactions............... (46,468,697) 176,097,871
-------------- --------------
Total increase in net assets........ 68,732,768 583,425,529
Net Assets:
Beginning of period...................... 2,264,679,578 1,681,254,049
-------------- --------------
End of period(a)......................... $2,333,412,346 $2,264,679,578
-------------- --------------
-------------- --------------
</Table>
- -------------------
(a) Includes dividends in excess of net investment income of $17,782,708 and $0,
respectively.
See accompanying notes to financial statements.
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12
<Page>
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COHEN & STEERS REALTY SHARES, INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
The following table includes selected data for a share outstanding
throughout each period and other performance information derived from the
financial statements. It should be read in conjunction with the financial
statements and notes thereto.
<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED DECEMBER 31,
MONTHS ENDED ------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE: JUNE 30, 2005 2004 2003 2002 2001 2000
- -------------------------------- ------------- ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of
period...................... $ 69.66 $ 55.64 $ 43.34 $ 44.41 $ 44.26 $ 36.91
-------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income..... 0.56(a) 1.21 1.47 1.72 1.77 1.92
Net realized and unrealized
gain/(loss) on
investments............. 4.37 19.71 14.63 (0.42) 0.65 7.67
-------- -------- -------- -------- -------- --------
Total income from
investment
operations.......... 4.93 20.92 16.10 1.30 2.42 9.59
-------- -------- -------- -------- -------- --------
Less dividends and distributions
to shareholders from:
Net investment income..... (1.12) (1.21) (1.88) (2.38) (1.74) (1.91)
Net realized gain on
investments............. -- (5.32) (1.93) -- -- --
Tax return of capital..... -- (0.38) -- -- (0.53) (0.33)
-------- -------- -------- -------- -------- --------
Total dividends and
distributions to
shareholders........ (1.12) (6.91) (3.81) (2.38) (2.27) (2.24)
-------- -------- -------- -------- -------- --------
Redemption fees retained by
fund........................ 0.01 0.01 0.01 0.01 -- --
-------- -------- -------- -------- -------- --------
Net increase/(decrease)
in net asset value... 3.82 14.02 12.30 (1.07) 0.15 7.35
-------- -------- -------- -------- -------- --------
Net asset value, end of
period...................... $ 73.48 $ 69.66 55.64 $ 43.34 $ 44.41 $ 44.26
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
===========================================================================================================================
Total investment return...... 7.21%(c) 38.48% 38.09% 2.79% 5.70% 26.63%
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
===========================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
- -------------------------
Net assets, end of period
(in millions)............... $2,333.4 $2,264.7 $1,681.3 $1,255.4 $1,387.1 $1,309.0
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Ratio of expenses to average
daily net assets (before
expense reduction).......... 0.98%(b) 1.01% 1.07% 1.08% 1.09% 1.07%
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Ratio of expenses to average
daily net assets (net of
expense reduction).......... 0.98%(b) 1.01% 1.07% 1.08% 1.09% 1.07%
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Ratio of net investment income
to average daily net assets
(before expense reduction).. 1.66%(b) 2.00% 2.96% 3.70% 4.02% 4.53%
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Ratio of net investment income
to average daily net assets
(net of expense reduction).. 1.66%(b) 2.00% 2.96% 3.70% 4.02% 4.53%
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Portfolio turnover rate...... 11.96%(c) 28.84% 36.64% 37.30% 44.52% 33.49%
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</Table>
- -------------------
(a) Calculated based on the average shares outstanding during the period.
(b) Annualized.
(c) Not annualized.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Cohen & Steers Realty Shares, Inc. (the fund) was incorporated under the
laws of the State of Maryland on April 26, 1991 and is registered under the
Investment Company Act of 1940, as amended, as a nondiversified, open-end
management investment company. The fund's investment objective is total return.
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.
Securities not listed on the New York Stock Exchange but listed on other
domestic or foreign securities exchanges or admitted to trading on the National
Association of Securities Dealers Automated Quotations, Inc. (Nasdaq) national
market system are valued in a similar manner. Securities traded on more than one
securities exchange are valued at the last sale price on the business day as of
which such value is being determined as reflected on the tape at the close of
the exchange representing the principal market for such securities.
Readily marketable securities traded in the over-the-counter market,
including listed securities whose primary market is believed by Cohen & Steers
Capital Management, Inc. to be over-the-counter, but excluding securities
admitted to trading on the Nasdaq National List, are valued at the official
closing prices as reported by Nasdaq, the National Quotation Bureau, or such
other comparable sources as the Board of Directors deem 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. 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 most closely reflect
the value of such securities.
Securities for which market prices are unavailable will be valued at fair
value pursuant to procedures approved by the fund's Board of Directors.
Circumstances in which market prices may be unavailable include, but are not
limited to, when trading in a security is suspended, the exchange on which the
security is traded is subject to an unscheduled close or disruption or material
events occur after the close of the exchange on which the security is
principally traded. In these circumstances, the fund determines fair value in a
manner that fairly reflects the market value of the security on the valuation
date based on consideration of any information or factors
- --------------------------------------------------------------------------------
14
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
it deems appropriate. These may include recent transactions in comparable
securities, information relating to the specific security and developments in
the markets.
The fund's use of fair value pricing may cause the net asset value of fund
shares to differ from the net asset value that would be calculated using market
quotations. Fair value pricing involves subjective judgments and it is possible
that the fair value determined for a security may be materially different than
the value that could be realized upon the sale of that security.
To the extent the fund holds securities that are primarily listed on foreign
exchanges that trade on weekends or days when the fund does not price its
shares, the value of the securities held in the fund may change on days when you
will not be able to purchase or redeem fund shares.
Short-term debt securities, which have a maturity date of 60 days or less,
are valued at amortized cost, which approximates value.
Security Transactions and Investment Income: Security transactions are
recorded on trade date. Realized gains and losses on investments sold are
recorded on the basis of identified cost. 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 quarterly. Dividends and distributions to
shareholders are recorded on the ex-dividend date and are automatically
reinvested in full and fractional shares of the fund based on the net asset
value per share at the close of business on the ex-dividend date unless the
shareholder has elected to have them paid in cash.
Distributions paid by the fund are subject to recharacterization for tax
purposes. Based upon the results of operations for the six months ended
June 30, 2005, the advisor considers it likely that a portion of the dividends
will be reclassified to return of capital and distributions of net realized
capital gains upon the final determination of the fund's taxable income for the
year. 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.
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
- --------------------------------------------------------------------------------
15
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Internal Revenue Code applicable to regulated investment companies, and by
distributing substantially all of its taxable earnings to its shareholders.
Accordingly, no provision for federal income or excise tax is necessary.
NOTE 2. INVESTMENT ADVISORY AND ADMINISTRATION FEES AND OTHER TRANSACTIONS WITH
AFFILIATES
Investment Advisory Fees: Cohen & Steers Capital Management, Inc. (the
advisor) serves as the fund's investment advisor pursuant to an investment
advisory agreement (the advisory agreement). Under the terms of the advisory
agreement, the advisor provides the fund with the day-to-day investment
decisions and generally manages the fund's investments in accordance with the
stated policies of the fund, subject to the supervision of the fund's Board of
Directors. For the services provided to the fund, the advisor receives a fee,
accrued daily and paid monthly at the annual rate of 0.85% for the first $1.5
billion and 0.75% thereafter of the average daily net assets of the fund.
Administration Fees: The fund has entered into an administration agreement
with the advisor under which the advisor performs certain administrative
functions for the fund and receives a fee, accrued daily and paid monthly at the
annual rate of 0.02% of the fund's average daily net assets. For the six months
ended June 30, 2005, the fund paid the advisor $212,831 in fees under this
administration agreement.
Directors' Fees: Certain directors and officers of the fund are also
directors, officers, and/or employees of the advisor. None of the directors and
officers so affiliated received compensation from the fund for their services.
NOTE 3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, excluding short-term investments, for the
six months ended June 30, 2005 totaled $256,217,436 and $291,399,544,
respectively.
NOTE 4. INCOME TAX INFORMATION
At June 30, 2005, the cost of investments and net unrealized appreciation
for federal income tax purposes were as follows:
<Table>
Aggregate cost................................... $1,355,525,651
--------------
--------------
Gross unrealized appreciation.................... $ 977,080,896
Gross unrealized depreciation.................... $ (1,286,253)
--------------
Net unrealized appreciation...................... $ 975,794,643
--------------
--------------
</Table>
- --------------------------------------------------------------------------------
16
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE 5. CAPITAL STOCK
The fund is authorized to issue 200 million shares of capital stock at a par
value of $0.001 per share. The Board of Directors of the fund is authorized to
reclassify and issue any unissued shares of the fund without shareholder
approval. Transactions in fund shares were as follows:
<Table>
<Caption>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 30, 2004
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- -------------
Sold.................... 4,090,109 $ 275,914,563 9,189,186 $ 568,728,496
Issued as reinvestment
of dividends and
distributions......... 471,569 32,482,325 2,900,758 193,593,680
Redeemed................ (5,313,038) (355,143,545) (9,582,741) (574,159,008)
Redemptions in-kind(a).. -- -- (216,917) (12,498,761)
Redemption fees retained
by fund............... -- 277,960 -- 433,464
---------- ------------- ---------- -------------
Net increase
(decrease)............ (751,360) $ (46,468,697) 2,290,286 $ 176,097,871
---------- ------------- ---------- -------------
---------- ------------- ---------- -------------
</Table>
- -------------------
(a) Certain fund shareholders who met the minimum investment requirements of
Cohen & Steers Institutional Realty Shares, Inc. were permitted to redeem
shares of the fund in-kind and make subsequent in-kind purchases in Cohen &
Steers Institutional Realty Shares, Inc.
NOTE 6. BORROWINGS
The fund, in conjunction with Cohen & Steers Institutional Realty Shares,
Inc., Cohen & Steers Realty Focus Fund, Inc., Cohen & Steers Realty Income Fund,
Inc., and Cohen & Steers Utility Fund, Inc. is a party to a $150,000,000
syndicated credit agreement (the credit agreement) with State Street Bank and
Trust Company, as administrative agent and operations agent, and the lenders
identified in the credit agreement.
During the six months ended June 30, 2005, the fund did not utilize the line
of credit.
- --------------------------------------------------------------------------------
17
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY SHARES, INC.
AVERAGE ANNUAL TOTAL RETURNS
(PERIODS ENDED JUNE 30, 2005) (UNAUDITED)
<Table>
<Caption>
SINCE INCEPTION
ONE YEAR FIVE YEARS TEN YEARS (7/2/91)
-------- ---------- --------- --------
38.20% 20.79% 15.81% 15.34%
</Table>
The performance data quoted represents past performance. Past performance is
no guarantee of future results. The investment return and principal value of an
investment will fluctuate and shares, when redeemed, may be worth more or less
than their original cost. Current performance may be lower or higher than the
performance data quoted. Performance information current to the most recent
month-end can be obtained by visiting our website at cohenandsteers.com. The
performance table does not reflect the deduction of taxes that a shareholder
would pay on fund distributions on the redemption of fund shares.
OTHER INFORMATION
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 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.
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.
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. The fund may pay
distributions in excess of the fund's net investment company taxable income and
this excess would be a tax-free return of capital distributed from the fund's
assets. To the extent this occurs, the fund's shareholders of record will be
notified of the estimated amount of capital returned to shareholders for each
such distribution and this information will also be available at
cohenandsteers.com. 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.
- --------------------------------------------------------------------------------
18
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY SHARES, INC.
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The board of directors of the fund, including a majority of the directors
who are not parties to the fund's Investment Advisory Agreement, or interested
persons of any such party ('Independent Directors'), has the responsibility
under the 1940 Act to approve the fund's Investment Advisory Agreement for its
initial two year term and its continuation annually thereafter at a meeting of
the board called for the purpose of voting on the approval or continuation. At
meetings held in person on March 7, 2005, the Investment Advisory Agreement was
discussed and was unanimously continued for a one-year term by the fund's board,
including the Independent Directors. The Independent Directors were represented
by independent counsel who assisted them in their deliberations during the Board
meeting and executive session.
In considering whether to continue the Investment Advisory Agreement, the
board reviewed materials provided by the fund's investment advisor (the
'Advisor') and Fund counsel, which included, among other things, fee and expense
information and performance comparisons of funds with investment objectives and
policies similar to those of the fund prepared by Morningstar Associates LLC
('Morningstar') and summaries of the fee and expense information prepared by the
Advisor, information regarding the past performance of the Advisor prepared by
Morningstar, sales and redemption data for the fund and memoranda outlining the
legal duties of the board. The board also met with investment advisory personnel
from the Advisor. The board considered factors relating to both the selection of
the Advisor and the approval of the advisory fee when reviewing the Investment
Advisory Agreement. In particular, the board considered the following:
(i) The nature, extent and quality of services to be provided by the
Advisor: The directors reviewed the services that the Advisor provides to the
fund, including, but not limited to, making the day-to-day investment decisions
for the fund, and generally managing the fund's investments in accordance with
the stated policies of the fund. The directors also discussed with officers and
portfolio managers of the fund the amount of time the Advisor dedicated to the
fund during the last year and the types of transactions that were being done on
behalf of the fund. The directors also listened to a presentation by the Advisor
on its investment philosophy with respect to the fund and the investment outlook
for the fund. Additionally, the directors considered the services provided by
the Advisor to its other open-end investment companies that invest substantially
in real estate securities and have investment objectives and strategies similar
to the fund, including in particular Cohen & Steers Institutional Realty Shares,
Inc.
In addition, the board considered the education, background and experience
of the personnel at the Advisor. They also took into consideration the favorable
history and reputation of the portfolio managers for the fund, finding that this
has had, and would likely continue to have, a favorable impact on the success of
the fund. The board noted that the Advisor's experience in investing in real
estate securities generally helped further the fund's objectives. Lastly, the
directors noted the Advisor's ability to attract quality and experienced
personnel. The directors concluded that the scope of services provided by the
Advisor to the fund, including compliance with investment restrictions and tax
reporting requirements, was consistent with services provided by the Advisor for
other funds and accounts in both nature and quality.
- --------------------------------------------------------------------------------
19
<Page>
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COHEN & STEERS REALTY SHARES, INC.
(ii) Investment performance of the fund and the Advisor: The directors
reviewed the past investment performance of the fund, as well as the past
investment performance of the fund's peer group. In particular, they focused on
materials provided by Morningstar. The directors noted that the fund had had
exceptional performance during the past three years relative to its peer group,
due in large part to the implementation of a new valuation model in 2002. In
particular, the directors noted that, according to Morningstar, in the specialty
real estate category, the fund had the best total returns for 1 year of any of
its peers, had the second-best total returns for 3 years and had just below
average total returns for 5 years, reflecting the period prior to the
implementation of the current valuation model. The directors also noted that the
fund was currently outperforming its benchmarks.
The directors reviewed the Advisor's performance for other open-end real
estate funds. In particular, the directors noted that the Advisor managed
several real estate funds, other than the fund, that were outperforming their
benchmark indices and their competitors. The directors recognized that past
performance is not an indicator of future performance, but found that the
Advisor had the necessary expertise to manage the fund in accordance with its
investment objectives and strategies. The directors determined that the Advisor
would continue to be an appropriate investment adviser for the fund and that
fund performance was satisfactory.
(iii) Cost of the services to be provided and profits to be realized by the
Advisor from the relationship with the Fund: Next, the directors considered the
cost of the services provided by the Advisor. As part of their analysis, the
directors gave substantial consideration to the fees and expense ratios of the
fund provided by Morningstar. Under the Investment Advisory Agreement, the fund
pays the Advisor a monthly management fee computed at the annual rate of 0.85%
of the average daily net assets of the fund for the first $1.5 billion and 0.75%
of the average daily net assets above $1.5 billion.
In reviewing the investment advisory fee, the directors considered the
advisory fees of the fund's peer group (selected by Morningstar), and noted that
the fund's fee was just above the peer group average, although they also noted
that at current asset levels this fee was in-line with the peer group average.
In addition, the directors noted that the total management fee (advisory fee
plus affiliated administration fee) at current asset levels was slightly below
the peer group average. The directors also noted that the Corporation's total
expense ratio was substantially lower than its peer group average. The directors
concluded that the fund's investment management fee was projected to continue to
be in line with the average investment management fee charged to peer group
funds.
The directors also reviewed information regarding the profitability to the
Advisor of its relationship with the fund. The board considered the level of the
Advisor's profits and whether the profits were reasonable for the Advisor. The
profitability analysis took into consideration fall out benefits from the
Advisor's relationship with the fund, including fees paid to the Advisor under
the Administration Agreement. The director's found that the profits realized by
the Advisor from its relationship with the fund were reasonable and consistent
with fiduciary duties.
(iv) The extent to which economies of scale would be realized as the fund
grows and whether fee levels would reflect such economies of scale: The
directors noted that at current asset levels, the effective advisory fee was
0.83%, reflecting the breakpoint in the advisory fee for assets above $1.5
billion. The directors found that there
- --------------------------------------------------------------------------------
20
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY SHARES, INC.
may be further economies of scale as the fund continues to grow and that such
economies of scale would be passed on to the shareholders.
(v) Comparison of services rendered and fees paid to those under other
investment advisory contracts, such as contracts of the same and other
investment advisers or other clients: As discussed above in (i) and (iii), the
directors compared both the services rendered and the fees paid under the
Investment Advisory Agreement to other contracts of the Advisor and compared the
fees paid under the Investment Advisory Agreement to contracts of other
investment advisers managing real estate securities. The directors also
considered fees charged by the Advisor to institutional and other clients. The
directors determined that the services and fees were comparable to those being
offered under the other contracts by the Advisor and other investment advisers.
The directors took into consideration other benefits to be derived by the
Advisor in connection with the Investment Advisory Agreement, noting
particularly the research and related services, within the meaning of Section
28(e) of the Securities Exchange Act of 1934, as amended, that the Advisor would
be eligible to receive by allocating the fund's brokerage transactions. The
directors also noted the administrative services provided under the
Administration Agreement by the Advisor for the fund such as operational
services and furnishing office space and facilities for the fund, and providing
persons satisfactory to the board to serve as officers of the fund, noting that
these services were beneficial to the fund.
No single factor was determinative to the decision of the board. Rather,
after weighing all of the reasons discussed above, the board, including the
Independent Directors, unanimously approved the continuation of the Investment
Advisory Agreement.
- --------------------------------------------------------------------------------
21
<Page>
- --------------------------------------------------------------------------------
COHEN & STEERS REALTY SHARES, INC.
MEET THE COHEN & STEERS FAMILY OF OPEN-END FUNDS:
<Table>
FOR TOTAL RETURN: FOR TOTAL RETURN:
COHEN & STEERS COHEN & STEERS
REALTY SHARES INSTITUTIONAL REALTY SHARES
DESIGNED FOR INVESTORS SEEKING MAXIMUM TOTAL DESIGNED FOR INSTITUTIONAL INVESTORS SEEKING
RETURN, INVESTING PRIMARILY IN REITS MAXIMUM TOTAL RETURN, INVESTING PRIMARILY IN
SYMBOL: CSRSX REITS
SYMBOL: CSRIX
FOR HIGH CURRENT INCOME: FOR CAPITAL APPRECIATION:
COHEN & STEERS COHEN & STEERS
REALTY INCOME FUND REALTY FOCUS FUND
DESIGNED FOR INVESTORS SEEKING HIGH CURRENT DESIGNED FOR INVESTORS SEEKING MAXIMUM CAPITAL
INCOME, INVESTING PRIMARILY IN REITS APPRECIATION, INVESTING IN A LIMITED NUMBER OF
SYMBOLS: CSEIX, CSBIX, CSCIX, CSDIX REITS AND OTHER REAL ESTATE SECURITIES
SYMBOLS: CSFAX, CSFBX, CSFCX, CSSPX
FOR TOTAL RETURN: FOR TOTAL RETURN:
COHEN & STEERS COHEN & STEERS
INTERNATIONAL REALTY FUND UTILITY FUND
DESIGNED FOR INVESTORS SEEKING MAXIMUM TOTAL DESIGNED FOR INVESTORS SEEKING MAXIMUM TOTAL
RETURN, INVESTING PRIMARILY IN INTERNATIONAL RETURN, INVESTING PRIMARILY IN UTILITIES
REAL ESTATE SECURITIES SYMBOLS: CSUAX, CSUBX, CSUCX, CSUIX
SYMBOLS: IRFAX, IRFCX, IRFIX
</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
- --------------------------------------------------------------------------------
22
<Page>
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COHEN & STEERS REALTY SHARES, INC.
<Table>
OFFICERS AND DIRECTORS KEY INFORMATION
Robert H. Steers INVESTMENT ADVISOR
Director and co-chairman Cohen & Steers Capital Management, Inc.
757 Third Avenue
Martin Cohen New York, NY 10017
Director and co-chairman (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
Richard E. Kroon Boston Financial Data Services, Inc.
Director 66 Brooks Drive
Braintree, MA 02184
Richard J. Norman (800) 437-9912
Director
LEGAL COUNSEL
Frank K. Ross Simpson Thacher & Bartlett LLP
Director 425 Lexington Avenue
New York, NY 10017
Willard H. Smith Jr.
Director DISTRIBUTOR
Cohen & Steers Securities, LLC
C. Edward Ward, Jr. 757 Third Avenue
Director New York, NY 10017
Adam M. Derechin Nasdaq Symbol: CSRSX
President and chief executive officer
Web site: cohenandsteers.com
Joseph M. Harvey
Vice president Net asset value (NAV) can be found in
the daily mutual fund listings in the
James S. Corl financial section of most major
Vice president newspapers under Cohen & Steers.
Lawrence B. Stoller This report is authorized for delivery
Secretary only to shareholders of Cohen & Steers
Realty Shares, Inc. unless accompanied
Jay J. Chen or preceded by the delivery of a
Treasurer currently effective prospectus setting
forth details of the fund. Past
John E. McLean performance is of course no guarantee
Chief compliance officer and assistant secretary of future results and your investment
may be worth more or less at the time
you sell.
</Table>
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23
<Page>
COHEN & STEERS
REALTY SHARES
- ------------------------
SEMIANNUAL REPORT
JUNE 30, 2005
COHEN & STEERS
REALTY SHARES
757 THIRD AVENUE
NEW YORK, NY 10017
<Page>
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
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.
Not applicable.
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.
None.
Item 11. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial officer
have concluded, based upon their evaluation of the registrant's disclosure
controls and procedures as conducted
within 90 days of the filing date of this report, that these disclosure controls
and procedures provide reasonable assurance that material information required
to be disclosed by the registrant in the report it files or submits on Form
N-CSR is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms and that
such material information is accumulated and communicated to the registrant's
management, including its principal executive officer and principal financial
officer, as appropriate, in order to allow timely decisions regarding required
disclosure.
(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.
(a)(3) Not applicable.
(b) Certifications of principal executive officer and principal financial
officer as required by Rule 30a- 2(b) under the Investment Company Act of 1940.
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 REALTY SHARES, INC.
By: /s/ Adam M. Derechin
-------------------------------
Name: Adam M. Derechin
Title: President and Chief Executive Officer
Date: August 23, 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/ Adam M. Derechin
-------------------------------
Name: Adam M. Derechin
Title: President and Chief Executive Officer
(principal executive officer)
By: /s/ Jay J. Chen
----------------------------------------
Name: Jay J. Chen
Title: Treasurer
(principal financial officer)
Date: August 23, 2005
STATEMENT OF DIFFERENCES
The division sign shall be expressed as ................................. [div]
The section symbol shall be expressed as................................. 'SS'