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As filed with the Securities and Exchange Commission on February 19, 1997
File No. 33-________
811-________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. ____ [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. ___
COHEN & STEERS SPECIAL EQUITY FUND, INC.
(Exact Name of Registrant as Specified in Charter)
757 Third Avenue, New York, New York 10017
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 832-3232
------------------------------
Robert H. Steers
Cohen & Steers Special Equity Fund, Inc.
757 Third Avenue, New York, New York 10017
(Name and address of agent for service of process)
------------------------------
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this registration statement.
It is proposed that this filing will become effective (check appropriate box)
___ immediately upon filing pursuant to paragraph (b) of Rule 485
___ on (date) pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on (date) pursuant to paragraph (a)(1) of Rule 485
___ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
___ on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
___ This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, Registrant declares that an indefinite number of its shares of common
stock are being registered under the Securities Act of 1933 by this registration
statement.
The Registrant hereby amends this Registration Statement under the Securities
Act of 1933 on such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in
accordance with the provisions of Section 8(a) of the Securities Act of 1933 or
until the Registration Statement shall become effective on such date as the
Commission, acting pursuant to Section 8(a), may determine.
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COHEN & STEERS SPECIAL EQUITY FUND, INC.
Cross Reference Sheet pursuant to Rule 404A(a)
<TABLE>
<CAPTION>
Prospectus and Statement
Form of Additional Information
N-1A ITEM Form Caption Caption
- --------- --------------------------------- --------------------------
<S> <C> <C>
1 Cover Page Cover Page
2 Synopsis Fee Table
3 Condensed Financial Information Not Included
4 General Description of Registrant Investment Objectives and
Policies; Types of
Investments; Investment
Techniques; Risk Factors;
Diversification and
Portfolio Turnover
5 Management of the Fund Management of the Fund;
Custodian and Transfer and
Dividend Disbursing Agent
6 Capital Stock and Other Securities Organization and Description
of Capital Stock; Dividends
and Distribution; Taxation
7 Purchase of Securities Being Purchase of Shares
Offered
8 Redemption or Repurchase Redemption of Shares
9 Legal Proceedings Not Applicable
10 Cover Page Cover Page**
11 Table of Contents Table of Contents**
12 General Information and History Not Applicable
13 Investment Objectives and Policies Additional Information about
Investment Restrictions and
Policies; Additional
Information about Investment
Techniques; Portfolio Turnover
14 Management of the Registrant Management of the Fund**
15 Control Persons and Principal Management of the Fund**;
Holders of Securities Advisor and Investment
Advisory Agreement
16 Investment Advisory and Other Advisor and Investment
Advisory Agreement; Fund
Administration; Custodian
and Transfer and Dividend
Disbursing Agent**
17 Brokerage Allocation Diversification and
Portfolio Turnover**;
Portfolio Transactions and Brokerage
</TABLE>
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<TABLE>
<S> <C> <C>
18 Capital Stock and Other Securities Organization and Description
of Capital Stock**
19 Purchase, Redemption, and Pricing Redemption of Shares**
of Securities Being Offered
20 Tax Status Taxation
21 Underwriters Not Applicable
22 Calculation of Yield Quotations Performance Information*;
of Money Market Funds Performance Information**
23 Financial Statements Financial Statements; Report
of Independent Accountants
</TABLE>
* Prospectus
** Statement of Additional Information
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COHEN & STEERS SPECIAL EQUITY FUND, INC.
Cohen & Steers Special Equity Fund, Inc. is a non-diversified, open-end
management investment company that seeks maximum capital appreciation over the
long-term through investment primarily in real estate oriented companies. Under
normal circumstances, at least 65% of the Fund's total assets will be invested
in the equity securities of a limited number of companies which are engaged in
business in the real estate industry or related industries or in companies which
own significant real estate assets, and which are believed by the investment
adviser to have unrecognized intrinsic value. The Fund may also invest up to 35%
of its total assets in equity or debt securities of companies engaged in any
business, in money market instruments, and in options, financial futures, and
currency contracts. Investments are selected for long-term capital appreciation;
current income is incidental to the Fund's investment objective.
The Fund's investment objective is suitable for investors who are
willing to hold their shares through periods of market fluctuations and the
accompanying changes in share values. The Fund is not intended for investors
seeking short-term price appreciation or for "market timers." Cohen & Steers
Capital Management, Inc. serves as investment adviser to the Fund.
This Prospectus sets forth concisely the information a prospective
investor should know before investing in the Fund. A Statement of Additional
Information dated February ___, 1997, containing additional and more detailed
information about the Fund, has been filed with the Securities and Exchange
Commission and is hereby incorporated by reference into this Prospectus. It is
available without charge and can be obtained by writing or calling the Fund at
the address and telephone number printed on the back cover of this prospectus.
The Board of Directors of the Fund believes that unrestrained growth in
the Fund's assets might impair investment flexibility and therefore would not be
in the best interests of the Fund's shareholders. The Fund will cease offering
its shares to new investors for a period of at least six months when total
assets reach $150 million. This limitation will not apply to existing
shareholders of record who will be permitted to continue to authorize investment
in the Fund and to reinvest dividends or capital gains distributions. After the
Fund has been closed for at least six months, the Fund will evaluate whether to
re-open the Fund to new investors.
________________________________________________________________________________
INVESTORS ARE ADVISED TO READ THIS PROSPECTUS
AND RETAIN IT FOR FUTURE REFERENCE.
________________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
FEBRUARY ___, 1997
________________________________________________________________________________
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FEE TABLE
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Shareholder Transaction Expenses
<S> <C>
Sales load imposed on purchases...................................................None
Sales load imposed on reinvested dividends........................................None
Deferred sales load...............................................................None
Redemption charge (as a percent of
redemption proceeds)............................................................2.0%
during the
first year;
0% thereafter
Annual Fund Operating Expenses (as a percentage of average net assets)
Management fees..................................................................0.90%
Other expenses*..................................................................0.45%
-----
Total fund operating expenses ...................................................1.35%
</TABLE>
* After reimbursement of expenses.
<TABLE>
<S> <C>
Example
You would pay the following expenses on a $1,000 investment, assuming a
5% annual return (cumulatively through the end of each time period):
1 year...........................................................................$ __
3 years..........................................................................$ __
5 years..........................................................................$ __
10 years..........................................................................$ __
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The assumption in the Example of a 5% annual return is required by
regulations of the SEC applicable to all mutual funds. The assumed 5% annual
return is not a prediction of, and does not represent, the projected or actual
performance of the Fund's shares. "Other Expenses" are based on estimated
amounts for the Fund's current fiscal year.
The investment adviser has voluntarily agreed to limit the total
expenses of the Fund (excluding interest, taxes, brokerage, and extraordinary
expenses) to an annual rate of 1.35% of the Fund's average net assets until
December 31, 1997. As long as this temporary expense limitation continues, it
may lower the Fund's expenses and increase its total return. After December 31,
1997, the expense limitation may be terminated or revised at any time, at which
time the Fund's expenses may increase and its total return may be reduced
depending on the total assets of the Fund.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE. The fundamental investment objective of Cohen &
Steers Special Equity Fund, Inc. (the "Fund") is to obtain maximum capital
appreciation over the long-term through investment primarily in real estate
oriented companies. Under normal circumstances, at least 65% of the Fund's total
assets will be invested in the equity securities of a limited number of
companies which are engaged in business in the real estate industry
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or related industries or in companies which own significant real estate assets,
and which are believed by the investment adviser to be undervalued. The Fund may
also invest up to 35% of its total assets in equity or debt securities of
companies engaged in any business, in money market instruments, and in options,
financial futures, and currency contracts, as described in more detail below.
Investments are selected based upon the potential for long-term capital
appreciation; current income is incidental to the Fund's investment objective.
DEFINITION OF COMPANIES IN THE REAL ESTATE INDUSTRY. A company is
considered to be in the real estate industry (residential, commercial or
industrial) or a related industry if it satisfies one of the following tests:
1. Revenues and Net Profits. At least 50% of the company's gross revenues
or net profits are derived from construction, ownership, management,
operation, financing, sales, or development of real estate, or from the
extraction of timber or minerals from real estate owned or leased by the
company either as a lessor or as a lessee under a lease granting the
designated development or extraction rights, or from businesses which
have a clear relationship to the ownership, management, use, operation,
or development of real estate or appurtenances to real estate.
2. Valuation of Assets. At least 50% of the company's intrinsic value, as
determined by the investment adviser, is attributable to the value of
real estate owned or leased by the company either as lessor or as
lessee, to the value of timber or minerals on such real estate, or to
the value of the stream of fees or revenues to be derived from the
management or operation of real estate or to the rights to extract
timber or minerals from real estate.
Under the above definitions, at least 65% of the Fund's assets will be
invested in companies such as real estate investment trusts; manufacturers and
distributors of construction materials, equipment and building supplies;
financial institutions which make or service mortgages on real estate; hotel and
hotel management companies; retail chains; railroads; and lumber, paper, forest
product, timber, mining and oil companies as well as other similar types of
companies which have a clear relationship to real estate or the real estate
industry. A company which is engaged in one or more businesses outside the real
estate industry will be considered to be in the real estate industry for
purposes of evaluating compliance with the Fund's investment objective if it
satisfies one of the above tests.
POLICY ON INDUSTRY CONCENTRATION. With the exception of issuers in the
real estate or related industries, the Fund will not invest as much as 25% of
its net assets in securities of issuers in any one industry. As described in the
prior section, the Fund's investment in companies engaged in businesses outside
the real estate industry which possess significant real estate holdings will be
deemed to be in the real estate industry for purposes of its investment
objective and its policy on industry concentration. This concentration policy
will not limit the Fund's purchase of obligations issued by the U.S. Government
and its agencies or instrumentalities, or cash equivalents (which will not be
used to concentrate investments in a single industry other than real estate).
TYPES OF INVESTMENTS
EQUITY SECURITIES. Equity securities in which the Fund may invest
include common stock, preferred stock, convertible preferred stock, convertible
bonds and warrants.
REAL ESTATE INVESTMENT TRUSTS. The Fund is authorized to invest in the
equity securities of real estate investment trusts or "REITs." A REIT is a
corporation or a business trust that would otherwise be taxed as a corporation,
which meets the definitional requirements of the Internal Revenue Code of 1986,
as amended (the "Code"). The Code permits a qualifying REIT to deduct dividends
paid, thereby effectively eliminating corporate level federal income tax and
making the REIT a pass-through vehicle for federal income tax purposes. To meet
the definitional requirements of the Code, a REIT must, among other things,
invest substantially all of its assets in interests in real estate (including
mortgages and other REITs) or cash and government securities; derive most of its
income from rents from real property or interest on loans secured by mortgages
on real property; and distribute to shareholders annually 95% or more of its
otherwise taxable income.
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FIXED INCOME SECURITIES. The Fund may invest a maximum of 25% of its net
assets in investment grade and non-investment grade debt securities of
companies, including real estate industry companies, and preferred stock of such
companies. Securities rated non-investment grade (lower than Baa by Moody's
Investor Services Inc. ("Moody's") or lower than BBB by Standard and Poor's
Corporation ("S&P")) are sometimes referred to as "high yield" or "junk" bonds.
Investors should consider the following risks associated with high yield, high
risk securities before investing in the Fund.
High yield securities may be regarded as speculative with respect to the
issuer's continuing ability to make principal and interest payments. Analysis of
the creditworthiness of issuers of high yield securities may be more complex
than for issuers of higher quality debt securities, and the ability of a Fund to
achieve its investment objective may, to the extent of its investment in high
yield securities, be more dependent upon such creditworthiness analysis than
would be the case if the Fund were investing in higher quality securities.
High yield securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than higher grade
securities. The prices of high yield securities have been found to be less
sensitive to interest-rate changes than more highly rated investments, but more
sensitive to adverse economic downturns or individual corporate developments.
Yields on high yield securities will fluctuate. If the issuer of high yield
securities defaults, the Fund may incur additional expenses to seek recovery.
The secondary markets in which high yield securities are traded may be
less liquid than the market for higher grade securities. Less liquidity in the
secondary trading markets could adversely affect the price at which the Fund
could sell a particular high yield security when necessary to meet liquidity
needs or in response to a specific economic event, such as a deterioration in
the creditworthiness of the issuer, and could adversely affect and cause large
fluctuations in the daily net asset value of the Fund's shares. Adverse
publicity and investor perceptions may decrease the values and liquidity of high
yield securities.
It is reasonable to expect that any adverse economic conditions could
disrupt the market for high yield securities, have an adverse impact on the
value of such securities, and adversely affect the ability of the issuers of
such securities to repay principal and pay interest thereon. New laws and
proposed new laws may adversely impact the market for high yield securities. See
the Appendix for additional information about the classifications of investment
grade and non-investment grade debt and preferred stocks.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest a maximum of 15%
of its net assets in restricted securities (securities which are not registered
or which are not deemed to be readily marketable) and all other illiquid
securities, including repurchase agreements with maturities of more than seven
days. Securities that may be resold without registration pursuant to Rule 144A
may be treated as liquid for these purposes, subject to the supervision and
oversight of, and in accordance with guidelines established by, the Board of
Directors to determine whether there is a readily available market for such
securities. Illiquid securities may include securities issued by certain REITs
or other real estate companies that are not listed on a major stock exchange,
options sold in the over-the-counter market, and forward foreign currency
contracts which are not exchange traded.
Restricted or non-registered securities may be sold only in privately
negotiated transactions, in a public offering with respect to which a
registration statement is in effect under the Securities Act of 1933 or pursuant
to Rule 144 promulgated under such Act. Where registration is required, the Fund
may be obligated to pay all or part of the registration expense, and a
considerable period may elapse between the time of the decision to sell and the
time the Fund may be permitted to sell a security under an effective
registration statement. If during such a period adverse market conditions were
to develop, the Fund might obtain a less favorable price than prevailed when it
decided to sell. Restricted securities will be valued in such manner as the
Board of Directors of the Fund in good faith deems appropriate to reflect their
fair market value.
FOREIGN SECURITIES. The Fund may invest up to 15% of total assets in
securities of foreign issuers which meet the same criteria for investment as
domestic companies, or sponsored and unsponsored depositary receipts for such
securities. The Fund may be subject to additional investment risks for these
securities that are different in some respects from those incurred by
investments in securities of domestic issuers. Such risks include currency
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risks, future political and economic developments, the possible imposition of
foreign withholding taxes on interest income payable on the securities, the
possible establishment of exchange controls, the possible seizure or
nationalization of foreign deposits, or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on such securities. There can be no assurance that such laws may
not become applicable to certain of the Fund's investments. In addition, there
may be less publicly available information about a foreign issuer than about a
domestic issuer, and foreign issuers may not be subject to the same accounting,
auditing and financial recordkeeping standards and requirements as domestic
issuers.
CASH RESERVES. The Fund's cash reserves, held to provide sufficient
flexibility to take advantage of new opportunities for investments and for other
cash needs, will be invested in money market instruments and generally will not
exceed 15% of total assets. If the investment adviser has difficulty finding an
adequate number of undervalued equity securities, all or any portion of the
Fund's assets may also be invested temporarily in money market instruments. Cash
reserves in excess of 35% of total assets will be maintained for defensive
purposes only.
Money market instruments in which the Fund may invest its cash reserves
will generally consist of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and such obligations which are
subject to repurchase agreements. A repurchase agreement is an instrument under
which an investor such as the Fund purchases a U.S. Government security from a
vendor, with an agreement by the vendor to repurchase the security at the same
price, plus interest at a specified rate. In such a case, the security is held
by the Fund, in effect, as collateral for the repurchase obligation. Repurchase
agreements may be entered into with member banks of the Federal Reserve System
or "primary dealers" (as designated by the Federal Reserve Bank of New York) in
United States Government securities. Repurchase agreements usually have a short
duration, often less than one week. In entering into the repurchase agreement
for the Fund, the investment adviser will evaluate and monitor the
creditworthiness of the vendor. In the event that a vendor should default on its
repurchase obligation, the Fund might suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
the vendor becomes bankrupt, the Fund might be delayed, or may incur costs or
possible losses of principal and income, in selling the collateral.
Other acceptable money market instruments include commercial paper rated
by any nationally recognized rating agency, such as Moody's or Standard &
Poor's, certificates of deposit, bankers' acceptances issued by domestic banks
having total assets in excess of one billion dollars, and money market
investment companies (limited to a maximum of 5% of total assets).
INVESTMENT TECHNIQUES
The Fund is authorized to use the following investment techniques,
subject to the accompanying restrictions. Although these techniques or
strategies are used regularly by some investment companies, the investment
adviser expects that the Fund's use of these techniques will not be routine and
will be limited to special situations.
BORROWING. The Fund may borrow up to 30% of the value its assets to
increase its holdings of portfolio securities. The Fund is required to maintain
continuous asset coverage of 300% with respect to such borrowings and to sell
(within three days) sufficient portfolio holdings to restore such coverage if it
should decline to less than 300% due to market fluctuations or otherwise, even
if such liquidations of the Fund's portfolio are disadvantageous from an
investment standpoint. Leveraging by means of borrowing, which is deemed to be a
speculative technique, may exaggerate the effect of any increase or decrease in
the value of portfolio securities on the Fund's net asset value. Money borrowed
also will be subject to interest and other costs (which may include commitment
fees and/or the cost of maintaining minimum average balances) which may or may
not exceed the income received from the securities purchased with borrowed
funds.
OPTIONS ON SECURITIES AND STOCK INDICES. The Fund may write (i.e., sell)
covered put and call options and purchase put and call options on securities or
stock indices that are listed on a national securities or commodities exchange.
An option on a security is a contract that gives the purchaser of the option, in
return for the premium paid, the right to buy a specified security (in the case
of a call option) or to sell a specified security (in the case of a put option)
from or to the writer of the option at a designated price during the term of the
option. An option on
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a stock index gives the purchaser of the option, in return for the premium paid,
the right to receive from the seller cash equal to the difference between the
closing price of the index and the exercise price of the option.
The Fund may write a call or put option only if the option is "covered."
This means that so long as the Fund is obligated as the writer of a call option,
it will own the underlying securities subject to the call, or hold a call at the
same or lower exercise price, for the same exercise period, and on the same
securities as the written call. A put is covered if the Fund maintains
collateral consisting of cash or liquid portfolio securities with a value equal
to the exercise price in a segregated account, or holds a put on the same
underlying security at an equal or greater exercise price. The value of the
underlying securities on which options may be written at any one time will not
exceed 25% of the total assets of the Fund. The Fund will not purchase put or
call options if the aggregate premium paid for such options would exceed 5% of
its total assets at the time of purchase.
FUTURES CONTRACTS. The Fund may buy and sell financial futures
contracts, stock and bond index futures contracts, foreign currency futures
contracts and options on any of the foregoing. A financial futures contract is
an agreement between two parties to buy or sell a specified debt security at a
set price on a future date. An index futures contract is an agreement to take or
make delivery of an amount of cash based on the difference between the value of
the index at the beginning and at the end of the contract period. A futures
contract on a foreign currency is an agreement to buy or sell a specified amount
of a currency for a set price on a future date.
The Fund may use financial futures contracts and related options for
"bona fide hedging" purposes, as such term is defined in applicable regulations
of the Commodity Futures Trading Commission. The Fund will also be authorized to
enter into such contracts and options for nonhedging purposes, for example, to
enhance total return or provide market exposure pending the investment of cash
balances, but only to the extent that aggregate initial margin deposits plus
premiums paid by it for open futures options positions, less the amount by which
any such positions are "in-the-money," would not exceed 5% of the Fund's total
assets. The Fund may lose the expected benefit of the transactions if interest
rates, currency exchange rates or securities prices change in an unanticipated
manner. Such unanticipated changes in interest rates, currency exchange rates or
securities prices may also result in poorer overall performance of the Fund than
if the Fund had not entered into any futures transactions.
FORWARD FOREIGN CURRENCY CONTRACTS. The Fund may enter into forward
foreign currency exchange contracts ("forward contracts") to attempt to minimize
the risk to the Fund from adverse changes in the relationship between the U.S.
dollar and foreign currencies. A forward contract is an obligation to purchase
or sell a specific currency for an agreed price at a future date which is
individually negotiated and privately traded by currency traders and their
customers.
The Fund will enter into forward contracts under the following
circumstances. First, when the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, it may desire to "lock in"
the U.S. dollar price of the security in relation to another currency by
entering into a forward contract to buy the amount of foreign currency needed to
settle the transaction. Second, when it is believed that the currency of a
particular foreign country may suffer or enjoy a substantial movement against
another currency, it may enter into a forward contract to sell or buy the amount
of the former foreign currency (or another currency which acts as a proxy for
that currency) approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency. The second investment practice
is generally referred to as "cross-hedging." The Fund's forward transactions may
call for the delivery of one foreign currency in exchange for another foreign
currency and may at times not involve currencies in which its portfolio
securities are denominated.
The Fund will not enter into forward foreign currency contracts if, as a
result, the Fund will have more than 15% of the value of its net assets
committed to the consummation of such contracts. To the extent such contracts
would be deemed to be illiquid, they will be included in the maximum limitation
of 15% of net assets invested in restricted or illiquid securities.
RISKS OF OPTIONS, FUTURES AND FOREIGN CURRENCY CONTRACTS. Options,
futures, and foreign currency contracts are forms of derivatives. The use of
options and futures as hedging techniques may not succeed where the price
movements of the securities underlying the options and futures do not follow the
price movements of the
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portfolio securities subject to the hedge. Gains on investments in options and
futures depend on the portfolio manager's ability to predict correctly the
direction of stock prices, interest rates, and other economic factors. Where a
liquid secondary market for options or futures does not exist, the Fund may not
be able to close its position and, in such an event would be unable to control
its losses. The loss from investing in futures contracts is potentially
unlimited. The use of forward foreign currency contracts may limit gains from a
positive change in the relationship between the U.S. dollar and foreign
currencies. Unanticipated changes in currency prices may cause poorer overall
performance for the Fund than if it had not engaged in such contracts.
SHORT SALES. The Fund may enter into short sales, provided the dollar
amount of short sales at any one time would not exceed 25% of the net assets of
the Fund, and the value of securities of any one issuer in which the Fund is
short would not exceed the lesser of 2% of the value of the Fund's net assets or
2% of the securities of any class of any issuer. The Fund must maintain
collateral in a segregated account consisting of cash or liquid portfolio
securities with a value equal to the current market value of the shorted
securities, which is marked to market daily. If the Fund owns an equal amount of
such securities or securities convertible into or exchangeable for, without
payment of any further consideration, securities of the same issuer as, and
equal in amount to, the securities sold short (which sales are commonly referred
to as "short sales against the box"), the above requirements are not applicable.
RISK FACTORS
The risks related to the particular types of securities in which the
Fund may invest and the investment techniques which it may use are discussed in
the preceding sections describing those securities and techniques. In addition,
the following general investment risks should be considered.
Under normal circumstances, at least 65% of the Fund's total assets will
be invested in the equity securities of companies engaged in the real estate
industry or in businesses related to the real estate industry. Because the Fund
will be concentrated in this industry, the Fund may be subject to the risks
associated with the direct ownership of real estate. For example, real estate
values may fluctuate as a result of general and local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, changes in zoning laws, casualty or condemnation losses,
regulatory limitations on rents, changes in neighborhood values, changes in the
appeal of properties to tenants and increase in interest rates. The value of
securities of companies which service the real estate business sector may also
be affected by such risks. Thus, the value of the Fund's shares may change at
different rates compared to the value of shares of a mutual fund with
investments in many different industries.
Because the Fund may invest a substantial portion of its assets in
REITs, the Fund may also be subject to certain risks associated with direct
investments in REITs. REITs may be affected by changes in the value of their
underlying properties and by defaults by borrowers or tenants. Furthermore,
REITs are dependent upon specialized management skills, have limited
diversification and are, therefore, subject to risks inherent in financing a
limited number of projects. REITs depend generally on their ability to generate
cash flow to make distributions to shareholders, and certain REITs have
self-liquidation provisions by which mortgages held may be paid in full and
distributions of capital returns may be made at any time. In addition, the
performance of a REIT may be affected by changes in the tax laws or by its
failure to qualify for tax-free pass-through of income.
Because prices of equity securities fluctuate from day to day, the value
of the Fund's portfolio and the Fund's price per share will vary based upon
general market conditions. There is no assurance that the investment objectives
of the Fund can be achieved, and the value of your investment as a shareholder
upon redemption may be more or less than the purchase price.
DIVERSIFICATION AND PORTFOLIO TURNOVER
The Special Equity Fund is non-diversified under the federal securities
laws. As a non-diversified portfolio, there are no restrictions under the
securities laws limiting the percentage of assets that may be invested in the
securities of any one issuer. However, the Fund intends to qualify as a
"regulated investment company" under Subchapter M of the federal Internal
Revenue Code of 1986. See "Taxation." To satisfy these federal tax require-
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ments, there are certain diversification requirements and investment limits.
With respect to 50% of total assets, not more than 5% of total assets may be
invested in the securities of any one issuer and the Fund may not acquire more
than 10% of all outstanding voting securities of any one issuer; with respect to
the other 50% of total assets, not more than 25% of total assets may be invested
in the securities of any one issuer or related issuers.
Under these investment requirements, the Fund must invest in at least
twelve securities positions. Ten of the positions may not exceed 5% of total
assets each at the time of purchase; the remaining two positions could each
comprise 25% of total assets at the time of purchase. Generally, it is
anticipated that the portfolio will consist of more than twelve positions. To
the extent that the Fund is less diversified, it may be more susceptible to
adverse economic, political, or regulatory developments affecting a single
issuer than would be the case if it were more broadly diversified.
The Fund may engage in portfolio trading when considered appropriate,
but short-term trading will not be used as the primary means of achieving its
investment objective. Although the Fund cannot accurately predict its portfolio
turnover rate, it is not expected to exceed 100% in normal circumstances.
However, there are no limits on the rate of portfolio turnover, and investments
may be sold without regard to length of time held when, in the opinion of the
investment adviser, investment considerations warrant such action. Higher
portfolio turnover rates, such as rates in excess of 100%, and short-term
trading involve correspondingly greater commission expenses and transaction
costs.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The overall management of the business and affairs of the Fund is vested
with 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 investment adviser, administrator,
sub-administrator, custodian and transfer agent. The management of the Fund's
day-to-day operations is delegated to its officers, to Cohen & Steers Capital
Management, Inc., the Fund's investment adviser (the "Adviser" or "Cohen &
Steers"), and to the Fund's administrator and sub-administrator, subject always
to the investment objective and policies of the Fund and to general supervision
by the Board of Directors. The Directors and officers of the Fund and their
principal occupations are set forth below.
Robert H. Steers, Chairman of the Board, is the Chairman and one
of the principals of the Adviser.
Martin Cohen, Director and President, is the President and one of
the principals of the Adviser.
Elizabeth O. Reagan, Vice President, is a Senior Vice President
of the Adviser.
THE ADVISER
Cohen & Steers, with offices located at 757 Third Avenue, New York, New
York 10017, has been retained to provide investment advice, and, in general, to
conduct the management and investment program of the Fund under the overall
supervision and control of the Directors of the Fund. Cohen & Steers, a
registered investment adviser, was formed in 1986 and is the leading U.S.
manager of portfolios dedicated to investments in real estate investment trusts
("REITs"). Its current clients include pension plans, endowment funds and mutual
funds, including Cohen & Steers Realty Income Fund, Inc. and Cohen & Steers
Total Return Realty Fund, Inc., both of which are closed-end investment
companies, and Cohen & Steers Realty Shares, Inc., which is an open-end
investment company. All of Cohen & Steers' client accounts are invested
principally in real estate securities. Its principal officers include Robert H.
Steers, Chairman; and Martin Cohen, President. Mr. Cohen and Mr. Steers are
responsible for the day-to-day management of the Fund's portfolio. Mr. Cohen and
Mr. Steers may be deemed "controlling persons" of the Adviser on the basis of
their ownership of the Adviser's stock.
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INVESTMENT ADVISORY AGREEMENT
Pursuant to an investment advisory agreement (the "Advisory Agreement")
the Adviser 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 policies of the Fund,
subject to the general supervision of the Board of Directors of the Fund. The
Adviser also selects brokers and dealers to execute purchase and sale orders for
the portfolio transactions of the Fund. Consistent with the Conduct Rules of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, the Adviser may consider sales of shares of the Fund as a
factor in the selection of brokers and dealers to enter into portfolio
transactions with the Fund. The Adviser provides persons satisfactory to the
Directors of the Fund to serve as officers of the Fund. Such officers, as well
as certain other employees and Directors of the Fund, may be directors,
officers, or employees of the Adviser. Under the Advisory Agreement, the Fund
pays the Adviser a monthly management fee in an amount equal to 1/12th of .90%
of the average daily net assets of the Fund (approximately .90% on an annual
basis). This fee is higher than that incurred by most other investment
companies.
In addition to the payments to the Adviser under the Advisory Agreement
described above, the Fund pays certain other costs of its operations including
(a) custody, transfer and dividend disbursing expenses, (b) fees of Directors
who are not affiliated with the Adviser, (c) legal and auditing expenses, (d)
clerical, accounting and other office costs, (e) costs of printing the Fund's
prospectuses and shareholder reports, (f) costs of maintaining the Fund's
existence, (g) interest charges, taxes, brokerage fees and commissions, (h)
costs of stationery and supplies, (i) expenses and fees related to registration
and filing with the Securities and Exchange Commission and with state regulatory
authorities, and (j) upon the approval of the Board of Directors, costs of
personnel of the Adviser or its affiliates rendering clerical, accounting and
other office services.
ADMINISTRATOR AND SUB-ADMINISTRATOR
The Adviser has entered into an administration agreement with the Fund
(the "Administration Agreement") under which the Adviser performs certain
administrative functions for the Fund, including (i) providing office space,
telephone, office equipment and supplies for the Fund; (ii) paying compensation
of the Fund's officers for services rendered as such; (iii) authorizing
expenditures and approving bills for payment on behalf of the Fund; (iv)
supervising preparation of the periodic updating of the Fund's registration
statement, including the prospectus and statement of additional information, for
the purpose of filings with the Securities and Exchange Commission and state
securities administrators and monitoring and maintaining the effectiveness of
such filings, as appropriate; (v) supervising preparation of quarterly reports
to the Fund's shareholders, notices of dividends, capital gains distributions
and tax credits, and attending to routine correspondence and other
communications with individual shareholders; (vi) supervising the daily pricing
of the Fund's investment portfolio and the publication of the net asset value of
the Fund's shares, earnings reports and other financial data; (vii) monitoring
relationships with organizations providing services to the Fund, including the
Custodian, Transfer Agent and printers; (viii) providing trading desk facilities
for the Fund; (ix) supervising compliance by the Fund with recordkeeping
requirements under the 1940 Act and regulations thereunder, maintaining books
and records for the Fund (other than those maintained by the Custodian and
Transfer Agent) and preparing and filing of tax reports other than the Fund's
income tax returns; and (x) providing executive, clerical and secretarial help
needed to carry out these responsibilities.
In accordance with the terms of the Administration Agreement and with
the approval of the Fund's Board of Directors, the Adviser has caused the Fund
to retain The Chase Manhattan Bank ("Chase") as sub-administrator under a fund
accounting and administration agreement (the "Sub-Administration Agreement").
Under the Sub-Administration Agreement, Chase has assumed responsibility for
performing certain of the foregoing administrative functions, including
determining the Fund's net asset value and preparing such figures for
publication, maintaining certain of the Fund's books and records that are not
maintained by the Adviser, custodian or transfer agent, preparing financial
information for the Fund's income tax returns, proxy statements, quarterly and
annual shareholders reports, and Commission filings, and responding to
shareholder inquiries. Under the terms of the Administration Agreement, the Fund
pays Chase a monthly administration fee at the annual rate of .08% on the first
$500 million of the Fund's average daily net assets and at lower rates on the
Fund's average daily net assets in excess of that amount. Chase Global Funds
Services Company, 73 Tremont Street, Boston, Massachusetts 02108,
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a wholly-owned subsidiary of Chase, has been retained by Chase to provide to the
Fund the administrative services described above. Chase also serves as the
Fund's custodian and transfer agent. See "Custodian and Transfer and Dividend
Disbursing Agent," below. Chase Global Funds Services Company has been similarly
retained by Chase to provide transfer agency services to the Fund and is
hereafter sometimes referred to as the "Transfer Agent."
Under the Administration Agreement, the Adviser remains responsible for
monitoring and overseeing the performance by Chase and Chase Global Funds
Services Company of their obligations to the Fund under their respective
agreements with the Fund, subject to the overall authority of the Fund's Board
of Directors. For its services under the Administration Agreement, the Adviser
receives a monthly fee from the Fund at the annual rate of .02% of the Fund's
average daily net assets.
DETERMINATION OF NET ASSET VALUE
Net asset value per share will be determined on each day the New York
Stock Exchange is open for trading and on each other day on which there is a
sufficient degree of trading in the Fund's investments to affect the net asset
value, as of the close of trading on the New York Stock Exchange by adding the
market value of all securities in the Fund's portfolio and other assets,
subtracting liabilities, incurred or accrued, and dividing by the total number
of the Fund's shares then outstanding.
For purposes of determining the Fund's net asset value per share,
readily marketable portfolio securities listed on the New York Stock Exchange
are valued, except as indicated below, at the last sale price reflected on the
consolidated tape 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 on such day. If no bid or asked prices are quoted on such day, then the
security is valued by such method as the Directors shall determine in good faith
to reflect its fair market value. Readily marketable 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 List are valued in a like
manner. Portfolio securities traded on more than one securities exchange are
valued at the last sale price on the business day as of which such value is
being determined as reflected on the tape at the close of the exchange
representing the principal market for such securities.
Readily marketable securities traded in the over-the-counter market,
including listed securities whose primary market is believed by the Adviser to
be over-the-counter, but excluding securities admitted to trading on the NASDAQ
National List, are valued at the mean of the current bid and asked prices as
reported by NASDAQ or, in the case of securities not quoted by NASDAQ, the
National Quotation Bureau or such other comparable sources as the Directors deem
appropriate to reflect their fair market value. Where securities are traded on
more than one exchange and also over-the-counter, the securities will generally
be valued using the quotations the Board of Directors believes reflect most
closely the value of such securities.
PURCHASE OF SHARES
Shares of the Fund may be purchased through Cohen & Steers Securities,
Inc., the Fund's distributor and an affiliate of the Adviser, acting as agent
for the Fund. The minimum initial investment is $10,000 per investor. The Fund
reserves the right, in its sole discretion, to waive the minimum initial
investment amount for certain investors. The Fund reserves the right to reject
any purchase order. Shareholder accounts may be maintained through brokerage
firms or other financial institutions. Such institutions may impose their own
minimum investment amounts (subject to the $10,000 minimum per investor for
initial investments) and may make arrangements for their customers to purchase
and redeem Fund shares by telephone, in which event a transaction fee may be
charged by the institution (not by the Fund). Subsequent investments must be at
least $500 and will not be permitted if, as a result of redemption, the value of
the investor's account is less than $10,000 (after giving effect to the proposed
purchase).
Orders for shares of the Fund will become effective at the net asset
value per share next determined after receipt by Chase Global Funds Services
Company, the Transfer Agent, of a check drawn on any bank or domestic
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savings institution or after receipt by the Chase Manhattan Bank, the Fund's
custodian, of a bank wire or Federal Reserve Wire. Checks must be payable in
United States dollars and will be accepted subject to collection at full face
value. All funds will be invested in full and fractional shares.
By investing in the Fund, a shareholder appoints the Transfer Agent, as
agent, to establish an open account to which all shares purchased will be
credited, together with any dividends and capital gain distributions that are
paid in additional shares. See "Dividends and Distributions." Although most
shareholders elect not to receive stock certificates, certificates for full
shares can be obtained on specific written request to the Transfer Agent. No
certificates are issued for fractional shares. IT IS MORE COMPLICATED TO REDEEM
SHARES HELD IN CERTIFICATE FORM.
The Board of Directors of the Fund believes that unrestrained growth in
the Fund's assets might impair investment flexibility and therefore would not be
in the best interests of the Fund's shareholders. The Fund will cease offering
its shares to new investors for a period of at least six months when total
assets reach $150 million. This limitation willnot apply to existing
shareholders of record who will be permitted to continue to authorize investment
in the Fund and to reinvest dividends or capital gains distributions. After the
Fund has been closed for at least six months, the Fund will evaluate whether to
re-open the Fund to new investors.
INITIAL PURCHASE BY WIRE
1. Telephone toll free from any continental state: (800) 437-9912 ((617)
557-8000 for Massachusetts residents). Give the name of the Fund,
name(s) in which shares are to be registered, address, social security
or tax identification number (where applicable), dividend payment
election, amount to be wired, name of the wiring bank and name and
telephone number of the person to be contacted in connection with the
order. A wire reference control number will be assigned.
2. Instruct the wiring bank to transmit the specified amount in federal
funds ($10,000 or more) to the Custodian):
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, NY 10081-1000
ABA # 021000021
Account: DDA #
Attn: Cohen & Steers Special Equity Fund, Inc.
For further credit to: (Account name)
Account Number:
Wire Reference Control #:
3. Complete the Subscription Agreement included at the end of this
Prospectus. Mail the Subscription Agreement to the Transfer Agent:
Chase Global Funds Services Company
73 Tremont St.
Boston, MA 02108-3913
ADDITIONAL PURCHASES BY WIRE
1. Telephone toll free from any continental state: (800) 437-9912 ((617)
557-8000 for Massachusetts residents). Give the name of the Fund, the
account number, the amount to be wired, name of the wiring bank and name
and telephone number of the person to be contacted in connection with
the order. A wire reference control number will be assigned.
2. Instruct the wiring bank to transmit the specified amount in federal
funds to the Custodian (minimum: $500 or, if greater, the amount
necessary to increase the value of the investor's account to $10,000):
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The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, NY 10081-1000
ABA # 021000021
Account: DDA #
Attn: Cohen & Steers Special Equity Fund
For further credit to: (Account Name)
Account Number:
Wire Reference Control #:
INITIAL PURCHASE BY MAIL
1. Complete the Subscription Agreement included at the end of this
Prospectus.
2. Mail the Subscription Agreement and a check for $10,000 or more, payable
to the Fund, to the Transfer Agent at the address set forth above.
ADDITIONAL PURCHASES BY MAIL
1. Make a check payable to the Fund (minimum: $500 or, if greater, the
amount necessary to increase the value of the investor's account to
$10,000). Write the shareholder's Fund account number on the check.
2. Mail the check and the detachable stub from the Statement of Account (or
a letter providing the account number) to the Transfer Agent at the
address set forth above.
REDEMPTION OF SHARES
Upon receipt by the Transfer Agent of a redemption request in proper
form, shares of the Fund will be redeemed at their next determined net asset
value, less any applicable redemption charge. See "Determination of Net Asset
Value." Shares redeemed within 12 months of purchase are subject to a redemption
charge, payable to the Fund, equal to 2.0% of the net asset value of the shares
redeemed. Accordingly, the proceeds of such a redemption will equal 98% of the
aggregate net asset value of the shares redeemed. Shares acquired through the
reinvestment of dividends and distributions by the Fund will not be subject to
any redemption charge. For purposes of determining whether a redemption charge
is payable, shares acquired through the reinvestment of dividends and
distributions will first be redeemed, and thereafter shares will be redeemed in
the order that they were purchased.
REDEMPTION BY TELEPHONE
You may submit redemption requests by telephone by calling Chase Global
Funds Services Company at (800) 437-9912 ((617) 557-8000 for Massachusetts
residents) and requesting that the proceeds be directed as indicated in the
Subscription Agreement. Requests for redemption made by telephone will be
accepted if a proper redemption request is received prior to 4:00 p.m., Eastern
time. Shares will be redeemed at the net asset value determined as of the
closing of trading on the New York Stock Exchange on that day, less any
applicable redemption charge. If a proper request is received after 4:00 p.m.
Eastern time, the shares will be redeemed as of the close of trading on the New
York Stock Exchange on the next business day. You may not make a redemption
request by telephone if the proceeds are to be wired or mailed to a bank account
number or address other than the one specified on the Subscription Agreement.
Such requests must be in writing accompanied by a signature guarantee. If you
would like to change your wiring instructions or the address to which your check
should be mailed, your written notification must be signed by all of the
account's registered shareholders, accompanied by a signature guarantee and sent
to Chase Global Funds Services Company, at the address listed above. The
guarantor of a signature must be a trust company or national bank, a member bank
of the Federal Reserve System, a member firm of a national securities exchange
or any other guarantor approved by Chase Global Funds Services Company.
Telephone redemption privileges may be modified or suspended without notice
during periods of drastic economic
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or market changes. TELEPHONE REDEMPTION PRIVILEGES MAY BE MODIFIED OR TERMINATED
AT ANY TIME BY THE FUND UPON 30 DAYS NOTICE TO SHAREHOLDERS.
REDEMPTION BY MAIL
Shares may be redeemed by submitting a written request for redemption to
the Transfer Agent:
Chase Global Funds Services Company
73 Tremont Street
Boston, Massachusetts 02108-3913
A written redemption request must (i) state the number of shares or
dollar amount to be redeemed, (ii) identify the shareholder account number and
tax identification number, and (iii) be signed by each registered owner exactly
as the shares are registered. If the shares to be redeemed were issued in
certificate form, the certificate must be endorsed for transfer (or be
accompanied by a duly executed stock power) and must be submitted to Chase
Global Funds Services Company together with a redemption request. When proceeds
of a redemption are to be paid to someone other than the shareholder, either by
wire or check, the signature(s) on the letter of instruction must be guaranteed
regardless of the amount of the redemption. The guarantor of a signature must be
a trust company or national bank, a member bank of the Federal Reserve System, a
member firm of a national securities exchange or any other guarantor approved by
Chase Global Funds Services Company. Chase Global Funds Services Company may
require additional supporting documents for redemptions made by corporations,
executors, administrators, trustees and guardians. A redemption request will not
be deemed to be properly received until Chase Global Funds Services Company
receives all required documents in proper form.
OTHER REDEMPTION INFORMATION
Checks for redemption proceeds will normally be mailed within five
business days, but will not be mailed until all checks in payment for the
purchase of the shares to be redeemed have been collected, which may take up to
21 days or more. Unless other instructions are given in proper form, a check for
the proceeds of a redemption will be sent to the shareholder's address of
record. The Custodian may benefit from the use of redemption proceeds until the
check issued to a redeeming shareholder for such proceeds has cleared.
The Fund may suspend the right of redemption during any period when (i)
trading on the New York Stock Exchange is restricted or that Exchange is closed,
other than customary weekend and holiday closings, (ii) the Securities and
Exchange Commission (the "SEC") has by order permitted such suspension or (iii)
an emergency, as defined by rules of the SEC, exists making disposal of
portfolio securities or determination of the value of the net assets of the Fund
not reasonably practicable.
The proceeds of redemption may be more or less than the amount invested
and, therefore, a redemption may result in a gain or loss for federal income tax
purposes.
The Fund reserves the right to redeem upon not less than 30 days'
written notice the shares in an account that has a value of $2,000 or less as
the result of voluntary redemption. However, any shareholder affected by the
exercise of this right will be allowed to make additional investments prior to
the date fixed for redemption to avoid liquidation of the account.
DIVIDENDS AND DISTRIBUTIONS
Dividends from the Fund's investment income will be declared and
distributed quarterly. The Fund intends to distribute net realized capital
gains, if any, at least annually although the Board of Directors may in the
future determine to retain realized capital gains and not distribute them to
shareholders. For information concerning the tax treatment of the Fund's
distribution policies for the Fund and its shareholders, see "Taxation."
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Distributions will automatically be paid in full and fractional shares
of the Fund based on the net asset value per share at the close of business on
the payable date unless the shareholder has elected to have them paid in cash.
TAXATION
The following discussion is intended for general information only. An
investor should consult with his or her own tax adviser as to the tax
consequences of an investment in the Fund, including the status of distributions
under applicable state or local law.
FEDERAL INCOME TAXES
The Fund intends to continue to qualify annually and elect to be treated
as a regulated investment company under the Code. To qualify, the Fund must meet
certain income, distribution and diversification requirements. In any year in
which the Fund qualifies as a regulated investment company and timely
distributes all of its taxable income, the Fund generally will not pay any U.S.
federal income or excise tax.
Dividends paid out of the Fund's investment company taxable income
(including dividends, interest and net short-term capital gains) will be taxable
to a U.S. shareholder as ordinary income. Because a portion of the Fund's income
may consist of dividends paid by U.S. corporations, a portion of the dividends
paid by the Fund may be eligible for the corporate dividends-received deduction.
Distributions of net capital gains (the excess of net long-term capital gains
over net short-term capital losses), if any, designated as capital gain
dividends are taxable as long-term capital gains, regardless of how long the
shareholder has held the Fund's shares. Dividends are taxable to shareholders in
the same manner whether received in cash or reinvested in additional Fund
shares.
A distribution will be treated as paid on December 31 of the current
calendar year if it is declared by the Fund in October, November or December
with a record date in such a month and paid by the Fund during January of the
following calendar year. Such distributions will be taxable to shareholders in
the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received.
Each year the Fund will notify shareholders of the tax status of
dividends and distributions.
Upon the sale or other disposition of shares of the Fund, a shareholder
may realize a capital gain or loss which will be long-term or short-term,
generally depending upon the shareholder's holding period for the shares.
The Fund may be required to withhold U.S. federal income tax at the rate
of 31% of all taxable distributions payable to shareholders who fail to provide
the Fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the IRS that they are subject to
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may be credited against the shareholder's U.S. federal income tax
liability.
Further information relating to tax consequences is contained in the
Statement of Additional Information.
STATE AND LOCAL TAXES
Fund distributions also may be subject to state and local taxes.
Shareholders should consult their own tax advisers regarding the particular tax
consequences of an investment in the Fund.
ORGANIZATION AND DESCRIPTION OF CAPITAL STOCK
The Fund was incorporated on February ___, 1997 as a Maryland
corporation and is authorized to issue 50,000,000 shares of common stock, $.001
par value (the "Common Stock"). The Fund's Board of Directors may, without
shareholder approval, increase or decrease the number of authorized but unissued
shares of the Fund's Common Stock. Each of the Fund's shares has equal dividend,
distribution, liquidation and voting rights. There are no conversion or
preemptive rights in connection with any shares of the Fund. All shares of the
Fund when
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duly issued will be fully paid and nonassessable. The rights of the holders of
shares of Common Stock may not be modified except by the vote of a majority of
the shares outstanding. The Fund is empowered to establish, without shareholder
approval, additional portfolios which may have different investment objectives.
The Fund is not required to hold regular annual shareholders' meetings.
A shareholders' meeting shall, however, be called by the secretary upon the
written request of the holders of not less than 10% of the outstanding shares of
the Fund. The Fund will assist shareholders wishing to communicate with one
another for the purpose of requesting such a meeting.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Chase, which has its principal business address at One Chase Manhattan
Plaza, New York, New York 10081-1000, has been retained to act as Custodian of
the Fund's investments and to serve as the Fund's transfer and dividend
disbursing agent. Chase has retained its wholly-owned subsidiary, Chase Global
Funds Services Company, to provide transfer and dividend disbursing agency
services to the Fund. Neither Chase nor Chase Global Funds Services Company has
any part in deciding the Fund's investment policies or which securities are to
be purchased or sold for the Fund's portfolio.
REPORTS TO SHAREHOLDERS
The fiscal year of the Fund ends on December 31 of each year. The Fund
sends to its shareholders, at least semi-annually, reports showing the
investments and other information (including unaudited financial statements). An
annual report, containing financial statements audited by the Fund's independent
accountants, is sent to shareholders each year.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise its "average annual total
return" over various periods of time. This total return figure shows the average
percentage change in value of an investment in the Fund from the beginning date
of the measuring period to the ending date of the measuring period. The figure
reflects changes in the price of the Fund's shares and assumes that any income
dividends and/or capital gains distributions made by the Fund during the period
are reinvested in shares of the Fund. Figures will be given for recent one-,
five- and ten-year periods (when applicable), and may be given for other periods
as well (such as from commencement of the Fund's operations, or on a
year-by-year basis). When considering "average" total return figures for periods
longer than one year, investors should note that the Fund's annual total return
for any one year in the period might have been greater or less than the average
for the entire period. The Fund also may use "aggregate" total return figures
for various periods, representing the cumulative change in value of an
investment in the Fund for the specific period (again reflecting changes in the
Fund's share price and assuming reinvestment of dividends and distributions).
Aggregate total returns may be shown by means of schedules, charts or graphs,
and may indicate subtotals of the various components of total return (that is,
the change in value of initial investment, income dividends and capital gains
distributions).
It is important to note that total return figures are based on
historical earnings and are not intended to indicate future performance. The
Statement of Additional Information further describes the methods used to
determine the Fund's performance.
ADDITIONAL INFORMATION
Any shareholder inquiries may be directed to the Fund at the address or
telephone number listed on the back cover of this Prospectus. This Prospectus,
including the Statement of Additional Information which has been incorporated by
reference herein, does not contain all the information set forth in the
Registration Statement filed by the Fund with the SEC under the Securities Act
of 1933. Copies of the Registration Statement may be obtained at a reasonable
charge from the SEC or may be examined, without charge, at the offices of the
SEC in Washington, D.C. (http://www.sec.gov).
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COHEN & STEERS SPECIAL EQUITY FUND, INC.
757 THIRD AVENUE
NEW YORK, NEW YORK 10017
(212) 832-3232
________________________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY __, 1997
Cohen & Steers Special Equity Fund, Inc. (the "Fund") is a
non-diversified, open-end management investment company that seeks maximum
capital appreciation over the long-term through investment primarily in real
estate oriented companies. Cohen & Steers Capital Management, Inc. serves as
investment adviser (the "Adviser" or "Cohen & Steers") to the Fund.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY THE FUND'S
PROSPECTUS DATED FEBRUARY __, 1997 (THE "PROSPECTUS"). THIS STATEMENT OF
ADDITIONAL INFORMATION CONTAINS ADDITIONAL AND MORE DETAILED INFORMATION THAN
THAT SET FORTH IN THE PROSPECTUS AND SHOULD BE READ IN CONJUNCTION WITH THE
PROSPECTUS, ADDITIONAL COPIES OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY WRITING
OR CALLING THE FUND AT THE ADDRESS AND TELEPHONE NUMBER GIVEN ABOVE.
________________________________________________________________________________
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Table of Contents
<TABLE>
<CAPTION>
Page
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<S> <C>
ADDITIONAL INFORMATION ABOUT INVESTMENT RESTRICTIONS AND POLICIES.......................... 22
ADDITIONAL INFORMATION ABOUT INVESTMENT TECHNIQUES......................................... 23
PORTFOLIO TURNOVER......................................................................... 26
MANAGEMENT OF THE FUND..................................................................... 26
Compensation of Directors and Certain Officers..................................... 27
Adviser and Investment Advisory Agreement.......................................... 28
Administrator and Sub-Administrator................................................ 29
DETERMINATION OF NET ASSET VALUE........................................................... 30
REDEMPTION OF SHARES....................................................................... 30
PORTFOLIO TRANSACTIONS AND BROKERAGE....................................................... 30
TAXATION................................................................................... 31
Taxation of the Fund............................................................... 31
Distributions...................................................................... 32
Currency Fluctuations -- "Section 988" Gains or Losses............................. 32
Sale of Shares..................................................................... 32
Investments in Real Estate Investment Trusts....................................... 33
Passive Foreign Investment Companies............................................... 33
Foreign Withholding Taxes.......................................................... 33
Backup Withholding................................................................. 33
Foreign Shareholders............................................................... 34
Other Taxation..................................................................... 35
ORGANIZATION AND DESCRIPTION OF CAPITAL STOCK.............................................. 35
DISTRIBUTOR................................................................................ 35
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT....................................... 35
PERFORMANCE INFORMATION.................................................................... 35
ACCOUNTANTS................................................................................ 37
</TABLE>
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ADDITIONAL INFORMATION ABOUT INVESTMENT RESTRICTIONS AND POLICIES
Cohen & Steers Special Equity Fund, Inc. (the "Fund") is a registered
open-end management investment company. The fundamental investment objective and
the general investment policies and investment techniques are described in the
Prospectus. The Fund has also adopted certain investment restrictions limiting
the following activities except as specifically authorized:
The Fund may not:
(1) Borrow money, except that it may borrow from banks to
increase its holdings of portfolio securities in an amount not to exceed
30% of the value of its total assets and may borrow for temporary or
emergency purposes from banks and entities other than banks in an amount
not to exceed 5% of the value of its total assets; provided that
aggregate borrowing at any time may not exceed 30% of the Fund's total
assets;
(2) Issue any senior securities, except that collateral
arrangements with respect to transactions such as forward contracts,
futures contracts, short sales or options, including deposits of initial
and variation margin, shall not be considered to be the issuance of a
senior security for purposes of this restriction;
(3) Act as an underwriter of securities issued by other
persons, except insofar as the Fund may be deemed an underwriter in
connection with the disposition of securities;
(4) Purchase or sell real estate, except that the Fund may
invest in securities of companies that deal in real estate or are
engaged in the real estate business, including real estate investment
trusts, and securities secured by real estate or interests therein and
the Fund may hold and sell real estate acquired through default,
liquidation, or other distributions of an interest in real estate as a
result of the Fund's ownership of such securities:
(5) Purchase or sell commodities or commodity futures
contracts, except that the Fund may invest in financial futures
contracts, options thereon and similar instruments;
(6) Make loans to other persons except through the lending
of securities held by it (but not to exceed a value of one-third of
total assets), through the use of repurchase agreements, and by the
purchase of debt securities, all in accordance with its investment
policies;
(7) Purchase restricted or "illiquid" securities,
including repurchase agreements maturing in more than seven days, if as
a result, more than 15% of the Fund's net assets would then be invested
in such securities (excluding securities which are eligible for resale
pursuant to Rule 144A under the Securities Act of 1933);
(8) Acquire or retain securities of any investment
company, except that the Fund may (a) acquire securities of investment
companies up to the limits permitted by Sec. 12(d)(1) of the Investment
Company Act of 1940, and (b) acquire securities of any investment
company as part of a merger, consolidation or similar transaction;
(9) Make short sales whereby the dollar amount of short
sales at any one time would exceed 25% of the net assets of the Fund;
provided the Fund maintains collateral in a segregated account
consisting of cash or liquid portfolio securities with a value equal to
the current market value of the shorted securities, which is marked to
market daily. If the Fund owns an equal amount of such securities or
securities convertible into or exchangeable for, without payment of any
further consideration, securities of the same issuer as, and equal in
amount to, the securities sold short (which sales are commonly referred
to as "short sales against the box"), such restrictions shall not apply;
(10) Invest in puts, calls, straddles, spreads or any
combination thereof, except that the Fund may (a) purchase put and call
options on securities and securities indexes, and (b) write covered put
and
21
<PAGE>
<PAGE>
call options on securities and securities indexes, provided that (i)
the securities underlying such options are within the investment
policies of the Fund; (ii) at the time of such investment, the value of
the aggregate premiums paid for such securities does not exceed 5% of
the Fund's total assets; and (iii) the value of the underlying
securities on which options may be written at any one time does not
exceed 25% of total assets;
(11) Invest in oil, gas or other mineral exploration
programs, development programs or leases, except that the Fund may
purchase securities of companies engaging in whole or in part in such
activities;
(12) Pledge, mortgage or hypothecate its assets except in
connection with permitted borrowings; or
(13) Purchase securities on margin, except short-term
credits as are necessary for the purchase and sale of securities,
provided that the deposit or payment of initial or variation margin in
connection with futures contracts or related options will not be deemed
to be a purchase on margin.
FUNDAMENTAL INVESTMENT RESTRICTIONS. The Investment Objective and
Policies set forth in the Prospectus and the Investment Restrictions numbered 1
through 6 in this Statement of Additional Information have been adopted as
fundamental policies of the Fund. Under the Investment Company Act of 1940, as
amended (the "1940 Act"), a fundamental policy may not be changed without the
vote of a majority of the outstanding voting securities of the Fund, as defined
under the 1940 Act. "Majority" means the lesser of (1) 67% or more of the shares
present at a meeting of shareholders of the Fund, if the holders of more than
50% of the outstanding shares of the Fund are present or represented by proxy,
or (2) more than 50% of the outstanding shares of the Fund. Investment
restrictions numbered 7 through 13 above, are non-fundamental and may be changed
at any time by vote of a majority of the Board of Directors.
ADDITIONAL INFORMATION ABOUT INVESTMENT TECHNIQUES
The following sections provide expanded discussion of several of the
types of investments and investment techniques which may be used by the Fund.
Real Estate Investment Trusts. REITs are sometimes informally
characterized as equity REITs, mortgage REITs and hybrid REITs. An equity REIT
invests primarily in the fee ownership or leasehold ownership of land and
buildings and derives its income primarily from rental income. An equity REIT
may also realize capital gains (or losses) by selling real estate properties in
its portfolio that have appreciated (or depreciated) in value. A mortgage REIT
invests primarily in mortgages on real estate, which may secure construction,
development or long-term loans. A mortgage REIT generally derives its income
primarily from interest payments on the credit it has extended. A hybrid REIT
combines the characteristics of equity REITs and mortgage REITs, generally by
holding both ownership interests and mortgage interests in real estate. It is
anticipated, although not required, that under normal circumstances a majority
of the Fund's investments in REITs will consist of equity REITs.
Futures Contracts. The Fund may purchase and sell financial futures
contracts. A futures contract is an agreement to buy or sell a specific security
or financial instrument at a particular price on a stipulated future date.
Although some financial futures contracts call for making or taking delivery of
the underlying securities, in most cases these obligations are closed out before
the settlement date. The closing of a contractual obligation is accomplished by
purchasing or selling an identical offsetting futures contract. Other financial
futures contracts by their terms call for cash settlements.
The Fund may also buy and sell index futures contracts with respect to
any stock or bond index traded on a recognized stock exchange or board of trade.
An index futures contract is a contract to buy or sell units of an index at a
specified future date at a price agreed upon when the contract is made. The
stock index futures contract specifies that no delivery of the actual stocks
making up the index will take place. Instead, settlement in cash must occur upon
the termination of the contract, with the settlement being the difference
between the contract price and the actual level of the stock index at the
expiration of the contract.
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<PAGE>
At the time the Fund purchases a futures contract, an amount of cash or
liquid portfolio securities equal to the market value of the futures contract
will be deposited in a segregated account with the Fund's custodian. When
writing a futures contract, the Fund will maintain with its custodian similar
liquid assets that, when added to the amounts deposited with a futures
commission merchant or broker as margin, are equal to the market value of the
instruments underlying the contract. Alternatively, the Fund may "cover" its
position by owning the instruments underlying the contract (or, in the case of
an index futures contract, a portfolio with a volatility substantially similar
to that of the index on which the futures contract is based), or holding a call
option permitting the Fund to purchase the same futures contract at a price no
higher than the price of the contract written by the Fund (or at a higher price
if the difference is maintained in liquid assets with the Fund's custodian).
The Fund will be authorized to use financial futures contracts and
related options for "bona fide hedging" purposes, as such term is defined in
applicable regulations of the Commodity Futures Trading Commission ("CFTC"). The
Fund will also be authorized to enter into such contracts and related options
for nonhedging purposes, for example to enhance total return or provide market
exposure pending the investment of cash balances, but only to the extent that
aggregate initial margin deposits plus premiums paid by it for open futures
options positions, less the amount by which any such positions are
"in-the-money," would not exceed 5% of the Fund's total assets. The Fund may
lose the expected benefit of the transactions if interest rates, currency
exchange rates or securities prices change in an unanticipated manner. Such
unanticipated changes in interest rates, currency exchange rates or securities
prices may also result in poorer overall performance than if the Fund had not
entered into any futures transactions.
Options on Securities and Stock-Indices. The Fund may write covered call
and put options and purchase call and put options on securities or stock indices
that are traded on United States exchanges.
An option on a security is a contract that gives the purchaser of the
option, in return for the premium paid, the right to buy a specified security
(in the case of a call option) or to sell a specified security (in the case of a
put option) from or to the writer of the option at a designated price during the
term of the option. An option on a securities index gives the purchaser of the
option, in return for the premium paid, the right to receive from the seller
cash equal to the difference between the closing price of the index and the
exercise price of the option.
The Fund may write a call or put option only if the option is "covered."
A call option on a security written by the Fund is covered if the Fund owns the
underlying security covered by the call or has an absolute and immediate right
to acquire that security without additional cash consideration (or for
additional cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other securities held in its portfolio. A call
option on a security is also covered if the Fund holds a call on the same
security and in the same principal amount as the call written where the exercise
price of the call held (a) is equal to or less than the exercise price of the
call written or (b) is greater than the exercise price of the call written if
the difference is maintained by the Fund in cash or liquid portfolio securities
in a segregated account with its custodian. A put option on a security written
by the Fund is "covered" if the Fund maintains similar liquid assets with a
value equal to the exercise price in a segregated account with its custodian, or
else holds a put on the same security and in the same principal amount as the
put written where the exercise price of the put held is equal to or greater than
the exercise price of the put written.
The Fund will cover call options on stock indices by owning securities
whose price changes, in the opinion of the investment adviser are expected to be
similar to those of the index, or in such other manner as may be in accordance
with the rules of the exchange on which the option is traded and applicable laws
and regulations. Nevertheless, where the Fund covers a call option on a stock
index through ownership of securities, such securities may not match the
composition of the index. In that event, the Fund will not be fully covered and
could be subject to risk of loss in the event of adverse changes in the value of
the index. The Fund will cover put options on stock indices by segregating
assets equal to the option's exercise price, or in such other manner as may be
in accordance with the rules of the exchange on which the option is traded and
applicable laws and regulations.
The Fund will receive a premium from writing a put or call option, which
increases the Fund's gross income in the event the option expires unexercised or
is closed out at a profit. If the value of a security or an index
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<PAGE>
on which the Fund has written a call option falls or remains the same, the Fund
will realize a profit in the form of the premium received (less transaction
costs) that could offset all or a portion of any decline in the value of the
portfolio securities being hedged. If the value of the underlying security or
index rises, however, the Fund will realize a loss in its call option position,
which will reduce the benefit of any unrealized appreciation in the Fund's stock
investments. By writing a put option, the Fund assumes the risk of a decline in
the underlying security or index. To the extent that the price changes of the
portfolio securities being hedged correlate with changes in the value of the
underlying security or index, writing covered put options on securities or
indices will increase the Fund's losses in the event of a market decline,
although such losses will be offset in part by the premium received for writing
the option.
The Fund may also purchase put options to hedge its investments against
a decline in value. By purchasing a put option, the Fund will seek to offset a
decline in the value of the portfolio securities being hedged through
appreciation of the put option. If the value of the Fund's investments does not
decline as anticipated, or if the value of the option does not increase, the
Fund's loss will be limited to the premium paid for the option plus related
transaction costs. The success of this strategy will depend, in part, on the
accuracy of the correlation between the changes in value of the underlying
security or index and the changes in value of the Fund's security holdings being
hedged.
The Fund may purchase call options on individual securities to hedge
against an increase in the price of securities that the Fund anticipates
purchasing in the future. Similarly, the Fund may purchase call options to
attempt to reduce the risk of missing a broad market advance, or an advance in
an industry or market segment, at a time when the Fund holds uninvested cash or
short-term debt securities awaiting investment. When purchasing call options,
the Fund will bear the risk of losing all or a portion of the premium paid if
the value of the underlying security or index does not rise.
There can be no assurance that a liquid market will exist when the Fund
seeks to close out an option position. Trading could be interrupted, for
example, because of supply and demand imbalances arising from a lack of either
buyers or sellers, or the options exchange could suspend trading after the price
has risen or fallen more than the maximum specified by the exchange. Although
the Fund may be able to offset to some extent any adverse effects of being
unable to liquidate an option position, the Fund may experience losses in some
cases as a result of such inability.
Foreign Currency Contracts and Currency Hedging Transactions. In order
to hedge against foreign currency exchange rate risks, the Fund may enter into
forward foreign currency exchange contracts and foreign currency futures
contracts, as well as purchase put or call options on foreign currencies, as
described below. The Fund may also conduct its foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market.
The Fund may enter into forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to the Fund from adverse
changes in the relationship between the U.S. dollar and foreign currencies. A
forward contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date which is individually negotiated and privately
traded by currency traders and their customers. The Fund may enter into a
forward contract, for example, when it enters into a contract for the purchase
or sale of a security denominated in a foreign currency in order to "lock in"
the U.S. dollar price of the security. In addition, for example, when the Fund
believes that a foreign currency may suffer or enjoy a substantial movement
against another currency, it may enter into a forward contract to sell an amount
of the former foreign currency (or another currency which acts as a proxy for
that currency) approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency. This second investment practice
is generally referred to as "cross-hedging." Because in connection with the
Fund's foreign currency forward transactions an amount of the Fund's assets
equal to the amount of the purchase will be held aside or segregated to be used
to pay for the commitment, the Fund will always have cash or other liquid assets
available sufficient to cover any commitments under these contracts or to limit
any potential risk. The segregated account will be marked-to-market on a daily
basis. In addition, the Fund will not enter into such forward contracts if, as a
result, the Fund will have more than 15% of the value of its total assets
committed to such contracts. While these contracts are not presently regulated
by the CFTC, the CFTC may
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<PAGE>
in the future assert authority to regulate forward contracts. In such event, the
Fund's ability to utilize forward contracts in the manner set forth above may be
restricted. Forward contracts may limit potential gain from a positive change in
the relationship between the U.S. dollar and foreign currencies. Unanticipated
changes in currency prices may result in poorer overall performance for the Fund
than if it had not engaged in such contracts.
The Fund may purchase and write put and call options on foreign
currencies for the purpose of protecting against declines in the dollar value of
foreign portfolio securities and against increases in the dollar cost of foreign
securities to be acquired. As is the case with other kinds of options, however,
the writing of an option on foreign currency will constitute only a partial
hedge, up to the amount of the premium received, and the Fund could be required
to purchase or sell foreign currencies at disadvantageous exchange rates,
thereby incurring losses. The purchase of an option on foreign currency may
constitute an effective hedge against fluctuation in exchange rates although, in
the event of rate movements adverse to the Fund's position, the Fund may forfeit
the entire amount of the premium plus related transaction costs.
The Fund may enter into exchange-traded contracts for the purchase or
sale for future delivery of foreign currencies ("foreign currency futures").
This investment technique will be used only to hedge against anticipated future
changes in exchange rates which otherwise might adversely affect the value of
the Fund's portfolio securities or adversely affect the prices of securities
that the Fund intends to purchase at a later date. The successful use of
currency futures will usually depend on the investment adviser's ability to
forecast currency exchange rate movements correctly. Should exchange rates move
in an unexpected manner, the Fund may not achieve the anticipated benefits of
foreign currency futures or may realize losses.
PORTFOLIO TURNOVER
The Fund may engage in portfolio trading when considered appropriate,
but short-term trading will not be used as the primary means of achieving its
investment objective. Although the Fund cannot accurately predict its portfolio
turnover rate, it is not expected to exceed 100% in normal circumstances.
However, there are no limits on the rate of portfolio turnover, and investments
may be sold without regard to length of time held when, in the opinion of the
investment adviser, investment considerations warrant such action. Higher
portfolio turnover rates, such as rates in excess of 100%, and short-term
trading involve correspondingly greater commission expenses and transaction
costs.
MANAGEMENT OF THE FUND
The directors and officers of the Fund and their principal occupations
during the past five years are set forth below. Each such director and officer
is also a director or officer of Cohen & Steers Realty Income Fund, Inc. and
Cohen & Steers Total Return Realty Fund, Inc., both of which are closed-end
investment companies sponsored by the investment adviser, and Cohen & Steers
Realty Shares, Inc., which is an open-end investment company also sponsored by
the investment adviser.
<TABLE>
<CAPTION>
Principal Occupation
Name and Address and Age Office during the Past 5 Years
- ------------------------ ------ -----------------------
<S> <C> <C>
*Robert H. Steers Director, Chairman, Chairman of Cohen & Steers
757 Third Avenue Secretary Capital Management, Inc.,
New York, New York the Fund's investment
Age: ____ adviser. Chairman and
President of Cohen & Steers
Securities, Inc.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Principal Occupation
Name and Address and Age Office during the Past 5 Years
- ------------------------ ------ -----------------------
<S> <C> <C>
*Martin Cohen Director, President, President of Cohen & Steers
757 Third Avenue Treasurer Capital Management, Inc.,
New York, New York the Fund's investment
Age: ____ adviser. Vice President of
Cohen & Steers Securities,
Inc.
Elizabeth O. Reagan Vice President Senior Vice President of
757 Third Avenue Cohen & Steers Capital
New York, New York Management, Inc., the Fund's
Age: ____ investment adviser, since
1996 and prior to that Vice
President of Cohen & Steers
Capital Management, Inc.
Ms. Reagan is also Vice
President of Cohen & Steers
Securities, Inc.
</TABLE>
- --------------------------
* Directors who are "interested persons" of the Fund, as defined in the
Investment Company Act of 1940.
The Directors of the Fund who are employees of the investment adviser or
officers or employees of any of its affiliates receive no remuneration from the
Fund. Each of the other Directors is paid an annual retainer of $_____, and a
fee of $____ for each meeting attended and is reimbursed for the expenses of
attendance at such meetings.
COMPENSATION OF DIRECTORS AND CERTAIN OFFICERS
The following table sets forth information regarding estimated
compensation of Directors by the Fund and by the fund complex of which the Fund
is a part for the Fund's current fiscal year. Officers of the Fund or any other
fund in the fund complex which is a U.S. registered investment Company. In the
Column headed "Total Compensation From Registrant and Fund Complex Paid to
Directors," the number in parentheses indicated the total number of boards in
the fund complex on which the Director serves.
COMPENSATION TABLE
FISCAL YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Total
Compensation
Pension or From
Retirement Estimated Registrant
Aggregate Benefits Annual and Fund
Compensation Accrued As Benefits Complex
From Part of Fund Upon Paid to
Name of Person, Position Registrant Expenses Retirement Directors
------------------------ ---------- -------- ---------- ---------
<S> <C> <C> <C> <C>
Martin Cohen**, Director and President.. $ 0 N/A N/A $ 0 (4)
Robert H. Steers*, Director and 0 N/A N/A 0 (4)
Chairman............................
</TABLE>
- --------------------
* Member of the Audit Committee.
** "Interested person," as defined in the Investment Company Act of 1940,
of the Fund because of the affiliation with Cohen & Steers Capital
Management, Inc., the Fund's investment adviser.
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ADVISER AND INVESTMENT ADVISORY AGREEMENT
Cohen & Steers Capital Management, Inc. (the "Adviser" or "Cohen &
Steers"), a registered investment adviser, was formed in 1986 and specializes in
the management of real estate securities portfolios. Its current clients include
pension plans of leading corporations, endowment funds and mutual funds,
including Cohen & Steers Realty Income Fund, Inc. and Cohen & Steers Total
Return Realty Fund, Inc., both of which are closed-end investment companies and
Cohen & Steers Realty Shares, Inc., an open-end investment company. Mr. Cohen
and Mr. Steers may be deemed "controlling persons" of the Adviser on the basis
of their ownership of the Adviser's stock.
Certain other clients of the Adviser may have investment objectives and
policies similar to those of the Fund. The Adviser may, from time to time, make
recommendations which result in the purchase or sale of a particular security by
its other clients simultaneously with the Fund. If transactions on behalf of
more than one client during the same period increase the demand for securities
being sold there may be an adverse effect on price. It is the policy of the
Adviser to allocate advisory recommendations and the placing of orders in a
manner which is deemed equitable by the Adviser to the accounts involved,
including the Fund. When two or more of the clients of the Adviser (including
the Fund) are purchasing or selling the same security on a given day through the
same broker-dealer, such transactions may be averaged as to price.
Pursuant to an investment advisory agreement (the "Advisory Agreement"),
the Adviser furnishes a continuous investment program for the Fund's portfolio,
makes the day-to-day investment decisions for the Fund, executes the purchase
and sale orders for the portfolio transactions of the Fund and generally manages
the Fund's investments in accordance with the stated policies of the Fund,
subject to the general supervision of the Board of Directors of the Fund.
Under the Advisory Agreement, the Fund will pay the Adviser a monthly
management fee in an amount equal to 1/12th of .90% of the average daily value
of the net assets of the Fund (approximately .90% on an annual basis).
The Adviser also provides the Fund with such personnel as the Fund may
from time to time request for the performance of clerical, accounting and other
office services, such as coordinating matters with the administrator, the
transfer agent and the custodian, which the Adviser is not required to furnish
under the Advisory Agreement. The personnel rendering these services, who may
act as officers of the Fund, may be employees of the Adviser or its affiliates.
The cost to the Fund of these services must be agreed to by the Fund and is
intended to be no higher than the actual cost to the Adviser or its affiliates
of providing the services. The Fund does not pay for services performed by
officers of the Adviser or its affiliates. The Fund may from time to time hire
its own employees or contract to have services performed by third parties, and
the management of the Fund intends to do so whenever it appears advantageous to
the Fund.
The Advisory Agreement was approved on March __, 1997 by the Fund's
Directors, including a majority of the Directors who are not interested persons
as defined in the Investment Company Act of 1940, as amended (the "1940 Act") of
the Fund or the Adviser.
The Advisory Agreement continues in effect from year to year, provided
that its continuance is specifically approved annually by the Directors or by a
vote of the shareholders, and in either case by a majority of the Directors who
are not parties to the Advisory Agreement or interested persons of any such
party, by vote cast in person at a meeting called for the purpose of voting on
such approval.
The Advisory Agreement is terminable without penalty by the Fund on
sixty days' written notice when authorized either by majority vote of its
outstanding voting securities or by a vote of a majority of its Directors, or by
the Adviser on sixty days' written notice, and will automatically terminate in
the event of its assignment. The Advisory Agreement provides that in the absence
of willful misfeasance, bad faith or gross negligence on the part of the
Adviser, or of reckless disregard of its obligations thereunder, the Adviser
shall not be liable for any action or failure to act in accordance with its
duties thereunder.
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ADMINISTRATOR AND SUB-ADMINISTRATOR
The Adviser has entered into an administration agreement with the Fund
(the "Administration Agreement") under which the Adviser performs certain
administrative functions for the Fund, including (i) providing office space,
telephone, office equipment and supplies for the Fund; (ii) paying compensation
of the Fund's officers for services rendered as such; (iii) authorizing
expenditures and approving bills for payment on behalf of the Fund; (iv)
supervising preparation of the periodic updating of the Fund's registration
statement, including the prospectus and statement of additional information, for
the purpose of filings with the Securities and Exchange Commission and state
securities administrators and monitoring and maintaining the effectiveness of
such filings, as appropriate; (v) supervising preparation of quarterly reports
to the Fund's shareholders, notices of dividends, capital gains distributions
and tax credits, and attending to routine correspondence and other
communications with individual shareholders; (vi) supervising the daily pricing
of the Fund's investment portfolio and the publication of the net asset value of
the Fund's shares, earnings reports and other financial data; (vii) monitoring
relationships with organizations providing services to the Fund, including the
Custodian, Transfer Agent and printers; (viii) providing trading desk facilities
for the Fund; (ix) supervising compliance by the Fund with recordkeeping
requirements under the 1940 Act and regulations thereunder, maintaining books
and records for the Fund (other than those maintained by the Custodian and
Transfer Agent) and preparing and filing of tax reports other than the Fund's
income tax returns; and (x) providing executive, clerical and secretarial help
needed to carry out these responsibilities.
In accordance with the terms of the Administration Agreement and with
the approval of the Fund's Board of Directors, the Adviser has caused the Fund
to retain The Chase Manhattan Bank ("Chase") as sub-administrator under a fund
accounting and administration agreement (the "Sub-Administration Agreement").
Under the Sub-Administration Agreement, Chase has assumed responsibility for
performing certain of the foregoing administrative functions, including
determining the Fund's net asset value and preparing such figures for
publication, maintaining certain of the Fund's books and records that are not
maintained by the Adviser, custodian or transfer agent, preparing financial
information for the Fund's income tax returns, proxy statements, quarterly and
annual shareholders reports, and Commission filings, and responding to
shareholder inquiries. Under the terms of the Administration Agreement, the Fund
pays Chase a monthly administration fee at the annual rate of .08% on the first
$500 million of the Fund's average daily net assets and at lower rates on the
Fund's average daily net assets in excess of that amount. Chase Global Funds
Services Company, 73 Tremont Street, Boston, Massachusetts 02108, a wholly-owned
subsidiary of Chase, has been retained by Chase to provide to the Fund the
administrative services described above. Chase also serves as the Fund's
custodian and transfer agent. See "Custodian and Transfer and Dividend
Disbursing Agent," below. Chase Global Funds Services Company has been similarly
retained by Chase to provide transfer agency services to the Fund and is
hereafter sometimes referred to as the "Transfer Agent."
Under the Administration Agreement, the Adviser remains responsible for
monitoring and overseeing the performance by Chase and Chase Global Funds
Services Company of their obligations to the Fund under their respective
agreements with the Fund, subject to the overall authority of the Fund's Board
of Directors. For its services under the Administration Agreement, the Adviser
receives a monthly fee from the Fund at the annual rate of .02% of the Fund's
average daily net assets.
The Administration Agreement is terminable by either party on sixty
days' written notice to the other. The Administration Agreement provides that in
the absence of willful misfeasance, bad faith or gross negligence on the part of
the Administrator, or of reckless disregard of its obligations thereunder, the
Adviser shall not be liable for any action or failure to act in accordance with
its duties thereunder.
DETERMINATION OF NET ASSET VALUE
Net asset value per share is determined by the Fund on each day the New
York Stock Exchange is open for trading, and on any other day during which there
is a sufficient degree of trading in the investments of the Fund to affect
materially the Fund's net asset value. The New York Stock Exchange is closed on
Saturdays, Sundays, and on New Years' Day, Presidents' Day (the third Monday in
February), Good Friday, Memorial Day (the last Monday in May), Independence Day,
Labor Day (the first Monday in September), Thanksgiving Day and Christmas
28
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Day (collectively, the "Holidays"). When any Holiday falls on a Saturday, the
Exchange is closed the preceding Friday, and when any holiday falls on a Sunday,
the Exchange is closed the following Monday. No redemptions will be made on
Martin Luther King Day (the third Monday in January), Columbus Day (the second
Monday in October) and Veteran's Day, nor on any of the Holidays.
For purposes of determining the Fund's net asset value per share, all
assets and liabilities initially expressed in foreign currencies will be
converted into United States dollars at the mean of the bid and asked prices of
such currencies against the United States dollar last quoted by a major bank
which is a regular participant in the institutional foreign exchange markets or
on the basis of a pricing service which takes into account the quotes provided
by a number of such major banks.
REDEMPTION OF SHARES
Payment of the redemption price for shares redeemed may be made either
in cash or in portfolio securities (selected in the discretion of the Board of
Directors of the Fund and taken at their value used in determining the Fund's
net asset value per share as described in the Prospectus under "Determination of
Net Asset Value"), or partly in cash and partly in portfolio securities.
However, payments will be made wholly in cash unless the Board of Directors
believes that economic conditions exist which would make such a practice
detrimental to the best interests of the Fund. If payment for shares redeemed is
made wholly or partly in portfolio securities, brokerage costs may be incurred
by the investor in converting the securities to cash. The Fund will not
distribute in kind portfolio securities that are not readily marketable.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the supervision of the Directors, decisions to buy and sell
securities for the Fund and negotiation of its brokerage commission rates are
made by the Adviser. Transactions on United States stock exchanges involve the
payment by the Fund of negotiated brokerage commissions. There is generally no
stated commission in the case of securities traded in the over-the-counter
market but the price paid by the Fund usually includes an undisclosed dealer
commission or mark-up. In certain instances, the Fund may make purchases of
underwritten issues at prices which include underwriting fees.
In selecting a broker to execute each particular transaction, the
Adviser will take the following into consideration: the best net price
available; the reliability, integrity and financial condition of the broker; the
size and difficulty in executing the order; and the value of the expected
contribution of the broker to the investment performance of the Fund on a
continuing basis. Accordingly, the cost of the brokerage commissions to the Fund
in any transaction may be greater than that available from other brokers if the
difference is reasonably justified by other aspects of the portfolio execution
services offered. Subject to such policies and procedures as the Directors may
determine, the Adviser shall not be deemed to have acted unlawfully or to have
breached any duty solely by reason of its having caused the Fund to pay a broker
that provides research services to the Adviser an amount of commission for
effecting a portfolio investment transaction in excess of the amount of
commission another broker would have charged for effecting that transaction, if
the Adviser determines in good faith that such amount of commission was
reasonable in relation to the value of the research service provided by such
broker viewed in terms of either that particular transaction or the Adviser's
ongoing responsibilities with respect to the Fund. Research and investment
information is provided by these and other brokers at no cost to the Adviser and
is available for the benefit of other accounts advised by the Adviser and its
affiliates, and not all of the information will be used in connection with the
Fund. While this information may be useful in varying degrees and may tend to
reduce the Adviser's expenses, it is not possible to estimate its value and in
the opinion of the Adviser it does not reduce the Adviser's expenses in a
determinable amount. The extent to which the Adviser makes use of statistical,
research and other services furnished by brokers is considered by the Adviser in
the allocation of brokerage business but there is no formula by which such
business is allocated. The Adviser does so in accordance with its judgment of
the best interests of the Fund and its shareholders. The Adviser may also take
into account payments made by brokers effecting transactions for the Fund to
other persons on behalf of the Fund for services provided to it for which it
would be obligated to pay (such as custodial and professional fees). In
addition, consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc., and subject to seeking best price and
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execution, the Adviser may consider sales of shares of the Fund as a factor in
the selection of brokers and dealers to enter into portfolio transactions with
the Fund.
TAXATION
TAXATION OF THE FUND
The Fund intends to qualify annually and to elect to be treated as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code").
To qualify as a regulated investment company, the Fund must, among other
things, (a) derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stock, securities or foreign currencies or
other income derived with respect to its business of investing in such stock,
securities or currencies; (b) derive less than 30% of its gross income from the
sale or other disposition of certain assets (namely, (i) stock or securities,
(ii) options, futures, and forward contracts (other than those on foreign
currencies), and (iii) foreign currencies (including options, futures, and
forward contracts on such currencies) not directly related to the Fund's
principal business of investing in stock or securities (or options and futures
with respect to stocks or securities)) held less than 3 months; (c) diversify
its holdings so that, at the end of each quarter of the taxable year, (i) at
least 50% of the market value of the Fund's assets is represented by cash and
cash items (including receivables), U.S. Government securities, the securities
of other regulated investment companies and other securities, with such other
securities of any one issuer limited for the purposes of this calculation to an
amount not greater than 5% of the value of the Fund's total assets and not
greater than 10% of the outstanding voting securities of such issuer, and (ii)
not more than 25% of the value of its total assets is invested in the securities
of any one issuer (other than U.S. Government securities or the securities of
other regulated investment companies); and (d) distribute at least 90% of its
investment company taxable income (which includes, among other items, dividends,
interest and net short-term capital gains in excess of net long-term capital
losses) each taxable year.
As a regulated investment company, the Fund generally will not be
subject to U.S. federal income tax on its investment company taxable income and
net capital gains (the excess of net long-term capital gains over net short-term
capital losses), if any, that it distributes to shareholders. The Fund intends
to distribute to its shareholders, at least annually, substantially all of its
investment company taxable income and net capital gains. Amounts not distributed
on a timely basis in accordance with a calendar year distribution requirement
are subject to a nondeductible 4% excise tax. To prevent imposition of the
excise tax, the Fund must distribute during each calendar year an amount equal
to the sum of (1) at least 98% of its ordinary income (not taking into account
any capital gains or losses) for the calendar year, (2) at least 98% of its
capital gains in excess of its capital losses (adjusted for certain ordinary
losses) for the one-year period ending on October 31 of the calendar year, and
(3) any ordinary income and capital gains for previous years that was not
distributed during those years. A distribution will be treated as paid on
December 31 of the current calendar year if it is declared by the Fund in
October, November or December with a record date in such a month and paid by the
Fund during January of the following calendar year. Such distributions will be
taxable to shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
To prevent application of the excise tax, the Fund intends to make its
distributions in accordance with the calendar year distribution requirement.
DISTRIBUTIONS
Dividends paid out of the Fund's investment company taxable income will
be taxable to a U.S. shareholder as ordinary income. Because a portion of the
Fund's income may consist of dividends paid by U.S. corporations, a portion of
the dividends paid by the Fund may be eligible for the corporate
dividends-received deduction. Distributions of net capital gains, if any,
designated as capital gain dividends are taxable as long-term capital gains,
regardless of how long the shareholder has held the Fund's shares, and are not
eligible for the dividends-received deduction. Shareholders receiving
distributions in the form of additional shares, rather than cash, generally will
have a cost basis in each such share equal to the net asset value of a share of
the Fund on the reinvestment date.
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Shareholders will be notified annually as to the U.S. federal tax status of
distributions, and shareholders receiving distributions in the form of
additional shares will receive a report as to the net asset value of those
shares.
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time the Fund accrues receivables or liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables, or pays such liabilities, generally are treated as ordinary income
or ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency, gains or losses attributable to fluctuations in the value of
foreign currency between the date of acquisition of the security and the date of
disposition also are treated as ordinary gain or loss. These gains or losses,
referred to under the Code as "section 988" gains or losses, may increase or
decrease the amount of the Fund's investment company taxable income to be
distributed to its shareholders as ordinary Income.
SALE OF SHARES
Upon the sale or other disposition of shares of the Fund, a shareholder
may realize a capital gain or loss which will be long-term or short-term,
generally depending upon the shareholder's holding period for the shares. Any
loss realized on a sale or exchange will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30 days before and
ending 30 days after disposition of the shares. In such a case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on a disposition of Fund shares held by the
shareholder for six months or less will be treated as a long-term capital loss
to the extent of any distributions of net capital gains received by the
shareholder with respect to such shares.
INVESTMENTS IN REAL ESTATE INVESTMENT TRUSTS
The Fund may invest in real estate investment trusts ("REITs") that hold
residual interests in real estate mortgage investment conduits ("REMICs"). Under
Treasury regulations that have not yet been issued, but may apply retroactively,
a portion of the Fund's income from a REIT that is attributable to the REIT's
residual interest in a REMIC (referred to in the Code as an "excess inclusion")
will be subject to federal income tax in all events. These regulations are also
expected to provide that excess inclusion income of a regulated investment
company, such as the Fund, will be allocated to shareholders of the regulated
investment company in proportion to the dividends received by such shareholders,
with the same consequences as if the shareholders held the related REMIC
residual interest directly. In general, excess inclusion income allocated to
shareholders (i) cannot be offset by net operating losses (subject to a limited
exception for certain thrift institutions), (ii) will constitute unrelated
business taxable income to entities (including a qualified pension plan, an
individual retirement account, a 401(k) plan, a Keogh plan or other tax-exempt
entity) subject to tax on unrelated business income, thereby potentially
requiring such an entity that is allocated excess inclusion income, and
otherwise might not be required to file a tax return, to file a tax return and
pay tax on such income, and (iii) in the case of a foreign shareholder, will not
qualify for any reduction in U.S. federal withholding tax. In addition, if at
any time during any taxable year a "disqualified organization" (as defined in
the Code) is a record holder of a share in a regulated investment company, then
the regulated investment company will be subject to a tax equal to that portion
of its excess inclusion income for the taxable year that is allocable to the
disqualified organization, multiplied by the highest federal income tax rate
imposed on corporations. The Adviser does not intend on behalf of the Fund to
invest in REITs, a substantial portion of the assets of which consists of
residual interests in REMICs.
PASSIVE FOREIGN INVESTMENT COMPANIES
If the Fund invests in stock of certain foreign investment companies,
the Fund may be subject to U.S. federal income taxation on a portion of any
"excess distribution" with respect to, or gain from the disposition of, such
stock. The tax would be determined by allocating such distribution or gain
ratably to each day of the Fund's holding period for the stock. The distribution
or gain so allocated to any taxable year of the Fund, other than the taxable
year of the excess distribution or disposition, would be taxed to the Fund at
the highest ordinary income tax
31
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<PAGE>
rate in effect for such year, and the tax would be further increased by an
interest charge to reflect the value of the tax deferral deemed to have resulted
from the ownership of the foreign company's stock. Any amount of distribution or
gain allocated to the taxable year of the distribution or disposition would be
included in the Fund's investment company taxable income and, accordingly, would
not be taxable to the Fund to the extent distributed by the Fund as a dividend
to its shareholders.
The Fund may be able to make an election, in lieu of being taxable in
the manner described above, to include annually in income its pro rata share of
the ordinary earnings and net capital gain of the foreign investment company,
regardless of whether it actually received any distributions from the foreign
company. These amounts would be included in the Fund's investment company
taxable income and net capital gain which, to the extent distributed by the Fund
as ordinary or capital gain dividends, as the case may be, would not be taxable
to the Fund. In order to make this election, the Fund would be required to
obtain certain annual information from the foreign investment companies in which
it invests, which in many cases may be difficult to obtain. Alternatively, the
Fund may be eligible to elect to mark to market its foreign investment company
stock, resulting in the stock being treated as sold at fair market value on the
last business day of each taxable year. Any resulting gain would be reported as
ordinary income, and any resulting loss would not be recognized. If this
election were made, the special rules described above with respect to excess
distributions and dispositions would still apply.
FOREIGN WITHHOLDING TAXES
Income received by the Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries.
BACKUP WITHHOLDING
The Fund may be required to withhold U.S. federal income tax at the rate
of 31% of all taxable distributions payable to shareholders who fail to provide
the Fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the IRS that they are subject to
backup withholding. Corporate shareholders and certain other shareholders
specified in the Code generally are exempt from such backup withholding. Backup
withholding is not an additional tax. Any amounts withheld may be credited
against the shareholder's U.S. federal income tax liability.
FOREIGN SHAREHOLDERS
U.S. taxation of a shareholder who, as to the United States, is a
nonresident alien individual, a foreign trust or estate, a foreign corporation
or foreign partnership ("foreign shareholder") depends on whether the income of
the Fund is "effectively connected" with a U.S. trade or business carried on by
the shareholder.
Income Not Effectively Connected. If the income from the Fund is not
"effectively connected" with a U.S. trade or business carried on by the foreign
shareholder, distributions of investment company taxable income will be subject
to a U.S. tax of 30% (or lower treaty rate, except in the case of any excess
inclusion income allocated to the shareholder (see "Taxation -- Investments in
Real Estate Investment Trusts," above)), which tax is generally withheld from
such distributions.
Distributions of capital gain dividends and any amounts retained by the
Fund which are designated as undistributed capital gains will not be subject to
U.S. tax at the rate of 30% (or lower treaty rate) unless the foreign
shareholder is a nonresident alien individual and is physically present in the
United States for more than 182 days during the taxable year and meets certain
other requirements. However, this 30% tax on capital gains of nonresident alien
individuals who are physically present in the United States for more than the
182-day period only applies in exceptional cases because any individual present
in the United States for more than 182 days during the taxable year is generally
treated as a resident for U.S. income tax purposes; in that case, he or she
would be subject to U.S. income tax on his or her worldwide income at the
graduated rates applicable to U.S. citizens, rather than the 30% U.S. tax. In
the case of a foreign shareholder who is a nonresident alien individual, the
Fund may be required to withhold U.S. income tax at a rate of 31% of
distributions of net capital gains unless the foreign shareholder
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certifies his or her non-U.S. status under penalties of perjury or otherwise
establishes an exemption. See "Taxation -- Backup Withholding," above. If a
foreign shareholder is a nonresident alien individual, any gain such shareholder
realizes upon the sale or exchange of such shareholder's shares of the Fund in
the United States will ordinarily be exempt from U.S. tax unless (i) the gain is
U.S. source income and such shareholder is physically present in the United
States for more than 182 days during the taxable year and meets certain other
requirements, or is otherwise considered to be a resident alien of the United
States, or (ii) at any time during the shorter of the period during which the
foreign shareholder held shares of the Fund and the five year period ending on
the date of the disposition of those shares, the Fund was a "U.S. real property
holding corporation" and the foreign shareholder held more than 5% of the shares
of the Fund, in which event the gain would be taxed in the same manner as for a
U.S. shareholder as discussed above and a 10% U.S. withholding tax would be
imposed on the amount realized on the disposition of such shares to be credited
against the foreign shareholder's U.S. income tax liability on such disposition.
A corporation is a "U.S. real property holding corporation" if the fair market
value of its U.S. real property interests equals or exceeds 50% of the fair
market value of such interests plus its interests in real property located
outside the United States plus any other assets used or held for use in a
business. In the case of the Fund, U.S. real property interests include
interests in stock in U.S. real property holding corporations (other than stock
of a REIT controlled by U.S. persons and holdings of 5% or less in the stock of
publicly traded U.S. real property holding corporations) and certain
participating debt securities.
Income Effectively Connected. If the income from the Fund is
"effectively connected" with a U.S. trade or business carried on by a foreign
shareholder, then distributions of investment company taxable income and capital
gain dividends, any amounts retained by the Fund which are designated as
undistributed capital gains and any gains realized upon the sale or exchange of
shares of the Fund will be subject to U.S. income tax at the graduated rates
applicable to U.S. citizens, residents and domestic corporations. Foreign
corporate shareholders may also be subject to the branch profits tax imposed by
the Code.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may differ from those described herein.
Foreign shareholders are advised to consult their own tax advisers with respect
to the particular tax consequences to them of an investment in the Fund.
OTHER TAXATION
Fund shareholders may be subject to state, local and foreign taxes on
their Fund distributions. Shareholders are advised to consult their own tax
advisers with respect to the particular tax consequences to them of an
investment in the Fund.
ORGANIZATION AND DESCRIPTION OF CAPITAL STOCK
The Fund was incorporated on February ___, 1997 as a Maryland
corporation and is authorized to issue 50,000,000 shares of Common Stock, $.001
par value. The Fund's shares have no preemptive, conversion, exchange or
redemption rights. Each share has equal voting, dividend, distribution and
liquidation rights. All shares of the Fund, when duly issued, will be fully paid
and nonassessable. Shareholders are entitled to one vote per share. All voting
rights for the election of directors are noncumulative, which means that the
holders of more than 50% of the shares can elect 100% of the Directors then
nominated for election if they choose to do so and, in such event, the holders
of the remaining shares will not be able to elect any Directors. The foregoing
description is subject to the provisions contained in the Fund's Articles of
Incorporation and By-Laws.
The Board of Directors is authorized to reclassify and issue any
unissued shares of the Fund without shareholder approval. Accordingly, in the
future, the Directors may create additional series of shares with different
investment objectives, policies or restrictions. Any issuance of shares of
another class would he governed by the 1940 Act and Maryland law.
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DISTRIBUTOR
Cohen & Steers Securities, Inc., an affiliate of the Adviser, serves
without charge as the Distributor of shares of the Fund. Cohen & Steers
Securities, Inc. is not obligated to sell any specific amount of shares and will
sell shares, as agent for the Fund, on a continuous basis only against orders to
purchase shares.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Chase, which has its principal business at 770 Broadway, New York, New
York 10003 has been retained to act as Custodian of the Fund's investments and
as the Fund's transfer and dividend disbursing agent. Chase Global Funds
Services Co., a wholly-owned subsidiary of Chase, has been retained by Chase to
provide the Fund's transfer and dividend disbursing agency services and serves
as the Fund's Transfer and Dividend Disbursing Agent. Chase Global Funds
Services Co. has its principal business at 73 Tremont Street, Boston,
Massachusetts 02108-3913. Neither Chase nor Chase Global Funds Services Co.
determines the investment policies of the Fund or decides which securities the
Fund will buy or sell.
PERFORMANCE INFORMATION
From time to time, the Fund may quote the Fund's total return in
advertisements or in reports and other communications to shareholders. The
Fund's performance will vary from time to time depending upon market conditions,
the composition of its portfolio and its operating expenses. Consequently, any
given performance quotation should not be considered representative of the
Fund's performance for any specified period in the future. In addition, because
performance will fluctuate, it may not provide a basis for comparing an
investment in the Fund with certain bank deposits or other investments that pay
a fixed yield for a stated period of time. Investors comparing the Fund's
performance with that of other mutual funds should give consideration to the
quality and maturity of the respective investment companies' portfolio
securities.
Average Annual Total Return
The Fund's "average annual total return" figures described in the
Prospectus are computed according to a formula prescribed by the SEC. The
formula can be expressed as follows:
P(1+T)'pp'n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 investment
made at the beginning of a 1-, 5-, or 10-year period at the
end of a 1-, 5-, or 10-year period (or fractional portion
thereof), assuming reinvestment of all dividends and
distributions.
Aggregate Total Return
The Fund's aggregate total return figures described in the Prospectus
represent the cumulative change in the value of an investment in the Fund for
the specified period and are computed by the following formula:
AGGREGATE TOTAL RETURN = ERV - P
-------
P
Where: P = a hypothetical initial payment of $1,000
ERV = Ending Redeemable Value of a hypothetical $1,000 investment
made at the beginning of the 1-, 5-, or 10-year period at the
end of a 1-, 5-, or 10-year period (or fractional portion
thereof), assuming reinvestment of all dividends and
distributions.
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Yield
Quotations of yield for the Fund will be based on all investment income
per share earned during a particular 30-day period (including dividends and
interest), less expenses accrued during the period ("net investment income") and
are computed by dividing net investment income by the maximum offering price per
share on the last day of the period, according to the following formula:
2[( a-b + 1)'pp'6 - 1]
--------
cd
Where: a = dividends and interest earned during the period,
b = expenses accrued for the period (net of reimbursements),
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends, and
d = the maximum offering price per share on the last day of the
period.
In reports or other communications to shareholders of the Fund or in
advertising materials, the Fund may compare its performance with that of (i)
other mutual funds listed in the rankings prepared by Lipper Analytical
Services, Inc., publications such as Barrons, Business Week, Forbes, Fortune,
Institutional Investor, Kiplinger's Personal Finance, Money, Morningstar Mutual
Fund Values, The New York Times, The Wall Street Journal and USA Today or other
industry or financial publications or (ii) the Standard and Poor's Index of 500
Stocks, the Dow Jones Industrial Average and other relevant indices and industry
publications. The Fund may also compare the historical volatility of its
portfolio to the volatility of such indices during the same time periods.
(Volatility is a generally accepted barometer of the market risk associated with
a portfolio of securities and is generally measured in comparison to the stock
market as a whole -- the beta -- or in absolute terms -- the standard
deviation.)
ACCOUNTANTS
Legal matters in connection with the issuance of the shares of the Fund
offered hereby will be passed upon by Dechert Price & Rhoads, 30 Rockefeller
Plaza, New York, New York 10112. Dechert Price & Rhoads has relied on the
opinion of , for matters relating to Maryland law.
Coopers & Lybrand L.L.P., 1301 Avenue of the Americas, New York, New
York 10019 have been appointed as independent accountants for the Fund.
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PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a)Financial Statements
Included in Part A of the Registration Statement:
None.
Included in Part B of the Registration Statement:
Report of Independent Certified Accountants*
Statement of Assets and Liabilities*
Notes to Financial Statements*
Included in Part C of the Registration Statement:
None.
(b)Exhibits
<TABLE>
<S> <C>
1. Articles of Incorporation
2. By-Laws
3. Not Applicable
4. Not Applicable
5. Form of Investment Advisory Agreement
6. Distribution Agreement*
7. Not Applicable
8. Form of Custodian Agreement with The Chase Manhattan Bank*
9. Administration Agreement
10. Opinion and Consent of Dechert Price & Rhoads*
11. Consent of Independent Certified Public Accountants*
12. Not Applicable
13. Not Applicable
14. Not Applicable
15. Not Applicable
16. Not Applicable
</TABLE>
- ----------
* To be filed in a pre-effective amendment.
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<PAGE>
<TABLE>
<S> <C>
17. Not Applicable
18. Powers of Attorney*
</TABLE>
Item 25. Persons Controlled by or under Common Control with Registrant.
None. The Registrant is a recently organized corporation and has no
outstanding shares of common stock.
Item 26. Number of Holders of Securities.
None. The Registrant is a recently organized corporation and has not
issued any securities as of the date of this Registration Statement.
Item 27. Indemnification.
It is the Registrant's policy to indemnify its directors and
officers, employees and other agents to the maximum extent permitted
by Section 2-418 of the General Corporation Law of the State of
Maryland and as set forth in Article SEVENTH, Section 7.4 of
Registrant's Articles of Incorporation, filed as Exhibit 1, and
Article VIII of the Registrant's By-laws filed as Exhibit 2, all set
forth below. The liability of the Registrant's directors and officers
is dealt with in Article SEVENTH, Section 7.4 of Registrant's
Articles of Incorporation and Article VIII, Section 1 through Section
6, of the Registrant's By-laws, as set forth below. The liability of
Cohen & Steers Capital Management, Inc., the Registrant's investment
adviser (the "Adviser"), for any loss suffered by the Registrant or
its shareholders is set forth in Section of the Investment Advisory
Agreement filed as Exhibit 5 to this Registration Statement. The
liability of Cohen & Steers Capital Management, Inc., the
Registrant's administrator (the "Administrator"), for any loss
suffered by the Registrant or its shareholders is set forth in
Section of the Administration Agreement filed as Exhibit 9 to this
Registration Statement.
Item 28. Business and Other Connections of Investment Advisor
The descriptions of the Adviser under the caption "Management of the
Fund" in the Prospectus and in the Statement of Additional
Information constituting Parts A and B, respectively, of this
Registration Statement are incorporated by reference herein. Mr.
Robert H. Steers, Director and Chairman of the Adviser, and Mr.
Martin Cohen, Director and President of the Adviser, have had no
other business connections of a substantial nature during the past
two fiscal years.
Cohen & Steers Capital Management, Inc. acts as investment adviser
to, in addition to the Registrant, the following investment
companies:
Cohen & Steers Realty Shares, Inc.
Cohen & Steers Realty Income Fund, Inc.
Cohen & Steers Total Return Realty Fund, Inc.
Frank Russell Investment Management Company Real Estate
Securities Fund
Item 29. Principal Underwriters
(a) Cohen & Steers Securities, Inc. is the principal underwriter for
the Registrant.
(b) The following are directors and officers of Cohen & Steers
Securities, Inc. the principal address of these persons is 757 Third
Avenue, New York, New York 10017.
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<TABLE>
<CAPTION>
Position and Positions and
Name Officers with Distributor Offices with Registrant
---- ------------------------- -----------------------
<S> <C> <C>
Robert H. Steers President and Chairman Chairman, Director
of the Board
Martin Cohen Senior Vice President President, Director
Elizabeth Reagan Vice President Vice President
</TABLE>
(c) Not applicable
Item 30. Location of Accounts and Records.
The majority of the accounts, books and other documents required to
be maintained by Section 31(a) of the Investment Company Act of 1940
and the Rules thereunder will be maintained as follows: Journals,
ledgers, securities records and other original records will be
maintained principally at the offices of the Registrant's
Sub-Administrator and Custodian, The Chase Manhattan Bank, One Chase
Manhattan Plaza, New York, New York 10081-1000. All other records so
required to be maintained will be maintained at the offices of Cohen
& Steers Capital Management, Inc., 757 Third Avenue, New York, New
York 10017.
Item 31. Not Applicable
Item 32. The Registrant undertakes to call a meeting of shareholders for
the purpose of voting upon the question of removal of a director, if
requested to do so by the holders of at least 10% of the Fund's
outstanding shares, and that it will assist communication with other
shareholders as required by Section 16(c) of the Investment Company
Act of 1940.
The Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six
months from the effective date of this post-effective amendment to
the Registrant's 1933 Act Registration Statement.
38
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, Registrant has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York on the
13th day of February, 1997.
COHEN & STEERS SPECIAL EQUITY FUND, INC.
By: \s\ Martin Cohen
-------------------------------------
Martin Cohen
President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <S> <C>
\s\ Martin Cohen Director, President and Treasurer 2/13/97
- -------------------------
Martin Cohen
\s\ Robert H. Steers Director, Chairman and Secretary 2/13/97
- -------------------------
Robert H. Steers
</TABLE>
39
STATEMENT OF DIFFERENCES
Characters normally expressed as superscript shall be preceded by...'pp'
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ARTICLES OF INCORPORATION
OF
COHEN & STEERS SPECIAL EQUITY FUND, INC.
FIRST: (1) The name of the incorporator is Jennifer A. Olvey.
(2) The incorporator's post office address is 30 Rockefeller
Plaza, New York, New York 10112.
(3) The incorporator is over eighteen years of age.
(4) The incorporator is forming the corporation named in these
Articles of Incorporation under the general laws of the State of Maryland.
SECOND: The name of the corporation (hereinafter called the
"Corporation") is Cohen & Steers Special Equity Fund, Inc.
THIRD: (1) The purpose for which the Corporation is formed is to
conduct, operate and carry on the business of an investment company registered
under the Investment Company Act of 1940.
(2) The Corporation may engage in any other business and shall
have all powers conferred upon or permitted to corporations by the Maryland
General Corporation Law.
FOURTH: The post office address of the principal office of the
Corporation within the State of Maryland is 32 South Street, Baltimore, Maryland
21202 in care of The Corporation Trust, Incorporated; and the resident agent of
the Corporation in the State of Maryland is The Corporation Trust, Incorporated,
32 South Street, Baltimore, Maryland 21202.
FIFTH: (1) The total number of shares of stock of all classes which
the Corporation shall have authority to issue is fifty million (50,000,000), all
of which shall be Common Stock having a par value of one-tenth of one cent
($.001) per share and an aggregate par value of fifty thousand dollars
($50,000). Such shares and the holders thereof shall be subject to the following
provisions:
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(a) Each holder of Common Stock may require the
Corporation to redeem all or any part of the Common Stock owned by that holder,
upon request to the Corporation or its designated agent, at the net asset value
of the shares of Common Stock next determined following receipt of the request
in a form approved by the Corporation and accompanied by surrender of the
certificate or certificates for the shares, if any. The Board of Directors may
establish procedures for redemption of Common Stock. The right of a holder of
Common Stock redeemed by the Corporation to receive dividends thereon and all
other rights with respect to the shares shall terminate at the time as of which
the redemption price has been determined, except the right to receive the
redemption price and any dividend or distribution to which that holder had
become entitled as the record stockholder on the record date for that dividend.
(b) (i) The term "Minimum Amount" when used herein shall
mean ten thousand dollars ($10,000) unless otherwise fixed by the Board
of Directors from time to time, provided that the Minimum Amount may not
in any event exceed one hundred thousand dollars ($100,000). The Board
of Directors may establish differing Minimum Amounts for categories of
holders of Common Stock based on such criteria as the Board of Directors
may deem appropriate.
(ii) If the net asset value of the shares of Common
Stock held by a stockholder shall be less than the Minimum Amount then
in effect with respect to the category of holders in which the
stockholder is included, the Corporation may redeem all of those shares,
upon notice given to the holder in accordance with paragraph (iii) of
this subsection (b), to the extent that the Corporation may lawfully
effect such redemption under the laws of the State of Maryland.
(iii) The notice referred to in paragraph (ii) of this
subsection (b) shall be in writing personally delivered or deposited in
the mail, at least thirty days (or such other number of days as may be
specified from time to time by the Board of Directors) prior to such
redemption. If mailed, the notice shall be addressed to the stockholder
at his post office address as shown on the books of the Corporation, and
sent by first class mail, postage prepaid. The price for shares acquired
by the
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Corporation pursuant to this subsection (b) shall be an amount equal to
the net asset value of such shares.
(c) Payment for shares of Common Stock redeemed by the
Corporation shall be made by the Corporation within seven business days
of such surrender out of the funds legally available therefor, provided
that the Corporation may suspend the right of the stockholders to redeem
shares of Common Stock and may postpone the right of those holders to
receive payment for any shares when permitted or required to do so by
applicable statutes or regulations. Payment of the aggregate price of
shares surrendered for redemption may be made in cash or, at the option
of the Corporation, wholly or partly in such portfolio securities of the
Corporation as the Corporation shall select.
(d) Shares of Common Stock shall be entitled to dividends
or distributions, in cash, in property or in shares of Common Stock, as
may be declared from time to time by the Board of Directors, acting in
its sole discretion, out of the assets lawfully available therefor. The
Board of Directors may provide that dividends shall be payable only with
respect to those shares of Common Stock that have been held of record
continuously by the stockholder for a specified period, not to exceed 72
hours, prior to the record date of the dividend.
(e) On each matter submitted to a vote of the
stockholders, each holder of Common Stock shall be entitled to one vote
for each share standing in his name on the books of the Corporation. All
holders of shares of stock shall vote as a single class except with
respect to any matter which affects only one or more classes of stock,
in which case only the holders of shares of the class or classes
affected shall be entitled to vote.
(f) The Board of Directors is authorized to classify or to
reclassify, from time to time, any unissued shares of stock of the
Corporation, whether now or hereafter authorized, by setting, changing
or eliminating the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications or
terms and conditions of or rights to require redemption of the stock.
(g) The Corporation may issue shares of Common Stock in
fractional denominations to the same extent as its whole shares, and
shares in fractional denominations
3
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shall be shares of stock having proportionately to the respective
fractions represented thereby all the rights of whole shares,
including without limitation, the right to vote, the right to receive
dividends and distributions, and the right to participate upon the
liquidation of the Corporation, but excluding the right to receive a
stock certificate representing fractional shares.
(2) No stockholder shall be entitled to any preemptive right
other than as the Board of Directors may establish.
SIXTH: The number of directors of the Corporation shall be two. The
number of directors of the Corporation may be changed pursuant to the By-Laws of
the Corporation. The names of the initial directors, each of whom shall serve
until the first annual meeting or until his successor is duly chosen and
qualifies, are Robert H. Steers and Martin Cohen.
SEVENTH: The following provisions are inserted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the Board
of directors and stockholders.
(a) In addition to its other powers explicitly or implicitly
granted under these Articles of incorporation, by law or otherwise, the Board of
Directors of the Corporation:
(i) is expressly authorized to make, alter, amend or
repeal the By-Laws of the Corporation;
(ii) may from time to time determine whether, to what
extent at what times and places, and under what conditions and
regulations the accounts and books of the Corporation, or any of them,
shall be open to the inspection of the stockholders, and no stockholder
shall have any right to inspect any account, book or document of the
Corporation except as conferred by statute or as authorized by the Board
of Directors of the Corporation;
(iii) is empowered to authorize, without stockholder
approval, the issuance and sale from time to time of shares of stock of
the Corporation whether now or hereafter authorized;
(iv) is authorized to adopt procedures for determination
of the net asset
4
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value of shares of any class of the Corporation's stock; and
(v) is authorized to declare dividends out of funds
legally available therefor on shares of each class of stock of the
Corporation payable in such amounts and at such times as it determines,
including declaration by means of a formula or similar method and
including dividends declared or payable more frequently than meetings of
the Board of Directors.
(b) Notwithstanding any provision of the Maryland General
Corporation Law requiring a greater proportion than a majority of the votes of
the Corporation's stock entitled to be cast in order to take or authorize any
action, any such action may be taken or authorized upon the concurrence of a
majority of the aggregate number of votes entitled to be cast thereon.
(c) The presence in person or by proxy of the holders of
shares entitled to cast one-third of the votes entitled to be cast shall
constitute a quorum at any meeting of the stockholders, except with respect to
any matter which, under applicable statutes or regulatory requirements, requires
approval by a separate vote of one or more classes of stock, in which case the
presence in person or by proxy of the holders of shares entitled to cast
one-third of the votes entitled to be cast on the matter shall constitute a
quorum.
(d) Any determination made in good faith by or pursuant to
the direction of the Board of Directors, as to the amount of the assets, debts,
obligations, or liabilities of the Corporation, as to the amount of any reserves
or charges set up and the propriety thereof, as to the time of or purpose for
creating such reserves or charges, as to the use, alteration or cancellation of
any reserves or charges (whether or not any debt, obligation, or liability for
which such reserves or charges shall have been created shall be then or
thereafter required to be paid or discharged), as to the value of or the method
of valuing any investment owned or held by the Corporation, as to market value
or fair value of any investment or fair value of any other asset of the
Corporation, as to the allocation of any asset of the Corporation to a
particular class or classes of the Corporation's stock, as to the charging of
any liability of the Corporation to a particular class or classes of the
Corporation's stock, as to the number of shares of the Corporation outstanding,
as to the
5
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estimated expense to the Corporation in connection with purchases of its shares,
as to the ability to liquidate investments in orderly fashion, or as to any
other matters relating to the issue, sale, redemption or other acquisition or
disposition of investments or shares of the Corporation, shall be final and
conclusive and shall be binding upon the Corporation and all holders of its
shares, past, present and future, and shares of the Corporation are issued and
sold on the condition and understanding that any and all such determinations
shall be binding as aforesaid.
EIGHTH: (1) To the full extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law, no
director or officer of the Corporation shall have any liability to the
Corporation or its stockholders for damages. This limitation on liability
applies to events occurring at the time a person serves as a director or officer
of the Corporation whether or not that person is a director or officer at the
time of any proceeding in which liability is asserted.
(2) The Corporation shall indemnify and advance expenses to its
currently acting and its former directors to the full extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify and advance expenses to it officers to the
same extent as its directors and may do so to such further extent as is
consistent with law. The Board of Directors may by By-Law, resolution or
agreement make further provision for indemnification of directors, officers,
employees and agents to the full extent permitted by the Maryland Corporation
Law.
(3) No provision of the Article shall be effective to protect
or purport to protect any director or officer of the Corporation against any
liability to the Corporation or its stockholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
(4) References to the Maryland General Corporation Law in this
Article are to that law as from time to time amended. No amendment to the
charter of the Corporation shall affect any right of any person under this
Article based on any event, omission or proceeding prior to the amendment.
6
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NINTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in these Articles of Incorporation or in any
amendment hereto in the manner now or hereafter prescribed by the laws of the
State of Maryland, including any amendment which alters the contract rights, as
expressly set forth in these Articles of Incorporation, of any outstanding
stock, and all rights conferred upon stockholders herein are granted subject to
this reservation.
IN WITNESS WHEREOF, the undersigned, being the incorporator of the
Corporation, has adopted and signed these Articles of Incorporation and does
hereby acknowledge that the adoption and signing are her act.
_________________________________________
Jennifer A. Olvey
Incorporator
Dated: February ___, 1997
7
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BY-LAWS
OF
COHEN & STEERS SPECIAL EQUITY FUND, INC.
---------------------------
ARTICLE I
Offices
Section 1. Principal Office in Maryland. The Corporation shall
have a principal office in the City of Baltimore, State of Maryland.
Section 2. Other Offices. The Corporation may have offices also
at such other places within and without the State of Maryland as the Board of
Directors may from time to time determine or as the business of the Corporation
may require.
ARTICLE II
Meetings of Stockholders
Section 1. Place of Meeting. Meetings of stockholders shall be
held at such place, either within the State of Maryland or at such other place
within the United States, as shall be fixed from time to time by the Board of
Directors.
Section 2. Annual Meetings. The Corporation shall not be required
to hold an annual meeting of stockholders in any year in which the election of
directors is not required to be acted on by stockholders under the Investment
Company Act of 1940. If the Corporation is required to hold a meeting of
stockholders to elect directors, the meeting shall be designated as the annual
meeting of stockholders for that year and shall be held no later than 120 days
after the occurrence of the event requiring the meeting. Any business may be
considered at an annual meeting of stockholders without the purpose of the
meeting having been specified in the notice.
Section 3. Notice of Annual Meeting. Written or printed notice of
the annual meeting, stating the place, date and hour thereof, shall be given to
each stockholder entitled to vote thereat and each other shareholder entitled to
notice thereof not less than ten nor more than ninety days before the date of
the meeting.
Section 4. Special Meetings. Special meetings of stockholders may
be called by the chairman, the president or by the Board of Directors and shall
be called by the
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secretary upon the written request of holders of shares entitled to cast not
less than twenty-five percent of all the votes entitled to be cast at such
meeting. Such request shall state the purpose or purposes of such meeting and
the matters proposed to be acted on thereat. In the case of such request for a
special meeting, upon payment by such stockholders to the Corporation of the
estimated reasonable cost of preparing and mailing a notice of such meeting, the
secretary shall give the notice of such meeting. The secretary shall not be
required to call a special meeting to consider any matter which is substantially
the same as a matter acted upon at any special meeting of stockholders held
within the preceding twelve months unless requested to do so by holders of
shares entitled to cast not less than a majority of all votes entitled to be
cast at such meeting. Notwithstanding the foregoing, to the extent required by
the Investment Company Act of 1940, special meetings of stockholders for the
purpose of voting upon the question of removal of any director or directors of
the Corporation shall be called by the secretary upon the written request of
holders of shares entitled to cast not less than ten percent of all the votes
entitled to be cast at such meeting.
Section 5. Notice of Special Meeting. Written or printed notice
of a special meeting of stockholders, stating the place, date, hour and purpose
thereof, shall be given by the secretary to each stockholder entitled to vote
thereat and each other shareholder entitled to notice thereof not less than ten
nor more than ninety days before the date fixed for the meeting.
Section 6. Business of Special Meetings. Business transacted at
any special meeting of stockholders shall be limited to the purposes stated in
the notice thereof.
Section 7. Quorum. The holders of shares entitled to cast
one-third of the votes entitled to be cast thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business, except with respect to any matter
which, under applicable statutes or regulatory requirements or the Corporation's
charter, requires approval by a separate vote of one or more classes of stock,
in which case the presence in person or by proxy of the holders of shares
entitled to cast one-third of the votes entitled to be cast on the matter shall
constitute a quorum. A meeting of stockholders convened on the date for which it
is called may be adjourned from time to time without further notice to a date
not more than 120 days after the record date.
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Section 8. Voting. When a quorum is present at any meeting, the
affirmative vote of a majority of the votes cast by stockholders entitled to
vote on the matter, shall decide any question brought before such meeting
(except that directors may be elected by the affirmative vote of a plurality of
the votes cast), unless the question is one upon which by express provision of
the Investment Company Act of 1940, as from time to time in effect, or other
statutes or rules or orders of the Securities and Exchange Commission or any
successor thereto or of the Articles of Incorporation a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 9. Proxies. Each stockholder shall at every meeting of
stockholders be entitled to vote in person or by written proxy signed by the
stockholder or by his duly authorized attorney-in-fact. No proxy shall be voted
after eleven months from its date, unless otherwise provided in the proxy.
Section 10. Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, to express consent to corporate action
in writing without a meeting, or to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date
which shall be not more than ninety days and, in the case of a meeting of
stockholders, not less than ten days prior to the date on which the particular
action requiring such determination of stockholders is to be taken. In lieu of
fixing a record date, the Board of Directors may provide that the stock transfer
books shall be closed for a stated period, but not to exceed, in any case,
twenty days. If the stock transfer books are closed for the purpose of
determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten days immediately
preceding such meeting. If no record date is fixed and the stock transfer books
are not closed for the determination of stockholders: (1) The record date for
the determination of stockholders entitled to notice of, or to vote at, a
meeting of stockholders shall be at the close of business on the day on which
notice of the meeting of stockholders is mailed or the day thirty days before
the meeting, whichever is the closer date to the meeting; and (2) The record
date for
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the determination of stockholders entitled to receive payment of a dividend or
an allotment of any rights shall be at the close of business on the day on which
the resolution of the Board of Directors, declaring the dividend or allotment of
rights, is adopted, provided that the payment or allotment date shall not be
more than sixty days after the date of the adoption of such resolution. If a
record date has been fixed for the determination of stockholders entitled to
vote at a meeting, only the stockholders of record on the record date shall be
entitled to vote at the meeting and such stockholders shall be entitled to vote
at the meeting notwithstanding the subsequent transfer or redemption of the
shares owned of record on such date.
Section 11. Inspectors of Election. The directors, in advance of
any meeting, may, but need not, appoint one or more inspectors to act at the
meeting or any adjournment thereof. If an inspector or inspectors are not
appointed, the person residing at the meeting may, but need not, appoint one or
more inspectors. In case any person who may be appointed as an inspector fails
to appear or act, the vacancy may be filled by appointment made by the directors
in advance of the meeting or at the meeting by the person presiding thereat.
Each inspector, if any, before entering upon the discharge of his duties, may be
required to take and sign an oath faithfully to execute the duties of inspector
at such meeting with strict impartiality and according to the best of his
ability. The inspectors, if any, shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting or any stockholder, the inspector or
inspectors, if any, shall make a report in writing of any challenge, question or
matter determined by him or them and execute a certificate of any fact found by
him or them.
Section 12. Informal Action by Stockholders. Except to the extent
prohibited by the Investment Company Act of 1940, as from time to time in
effect, or rules or orders of the Securities and Exchange Commission or any
successor thereto, any action required or
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permitted to be taken at any meeting of stockholders may be taken without a
meeting if a consent in writing, setting forth such action, is signed by all the
stockholders entitled to vote on the subject matter thereof and any other
stockholders entitled to notice of a meeting of stockholders (but not to vote
thereat) have waived in writing any rights which they may have to dissent from
such action, and such consent and waiver are filed with the records of the
Corporation.
Article III
Board of Directors
Section 1. Number of Directors. The number of directors
constituting the entire Board of Directors (which initially was fixed at one in
the Corporation's Articles of Incorporation) may be increased or decreased from
time to time by the vote of a majority of the entire Board of Directors within
the limits permitted by law but at no time may be more than twenty, but the
tenure of office of a director in office at the time of any decrease in the
number of directors shall not be affected as a result thereof. The directors
shall be elected to hold offices at the annual meeting of stockholders and each
director shall hold office until the next annual meeting of stockholders or
until his successor is elected and qualifies. Any director may resign at any
time upon written notice to the Corporation. Any director may be removed, either
with or without cause, at any meeting of stockholders duly called and at which a
quorum is present by the affirmative vote of the majority of the votes entitled
to be cast thereon, and the vacancy in the Board of Directors caused by such
removal may be filled by the stockholders at the time of such removal. Directors
need not be stockholders.
Section 2. Vacancies and Newly-Created Directorships. Any vacancy
occurring in the Board of Directors for any cause other than by reason of an
increase in the number of directors may be filled by a majority of the remaining
members of the Board of Directors although such majority is less than a quorum.
Any vacancy occurring by reason of an increase in the number of directors may be
filled by a majority of the entire Board of Directors. A director elected by the
Board of Directors to fill a vacancy shall be elected to hold office until the
next annual meeting of stockholders or until his successor is elected and
qualifies.
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Section 3. Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Articles of Incorporation or by these
By-Laws conferred upon or reserved to the stockholders.
Section 4. Meetings. The Board of Directors of the Corporation or
any committee thereof may hold meetings, both regular and special, either within
or without the State of Maryland. Regular meetings of the Board of Directors may
be held without notice at such time and at such place as shall from time to time
be determined by the Board of Directors. Special meetings of the Board of
Directors may be called by the chairman, the president or by two or more
directors. Notice of special meetings of the Board of Directors shall be given
by the secretary to each director at least three days before the meeting if by
mail or at least 24 hours before the meeting if given in person or by telephone
or by telegraph. The notice need not specify the business to be transacted.
Section 5. Quorum and Voting. During such times when the Board of
Directors shall consist of more than one director, a quorum for the transaction
of business at meetings of the Board of Directors shall consist of one-third of
the entire Board of Directors, but in no event less than two directors. The
action of a majority of the directors present at a meeting at which a quorum is
present shall be the action of the Board of Directors. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 6. Committees. The Board of Directors may appoint from
among its members an executive committee and other committees of the Board of
Directors, each committee to be composed of two or more of the directors of the
Corporation. The Board of Directors may delegate to such committees any of the
powers of the Board of Directors except those which may not by law be delegated
to a committee. Such committee or committees shall have the name or names as may
be determined from time to time by resolution adopted by the Board of Directors.
Unless the Board of Directors designates one or more directors as alternate
members of any committee, who may replace an absent or
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disqualified member at any meeting of the committee, the members of any such
committee present at any meeting and not disqualified from voting may, whether
or not they constitute a quorum, appoint another member of the Board of
Directors to act at the meeting in the place of any absent or disqualified
member of such committee. At meetings of any such committee, a majority of the
members or alternate members of such committee shall constitute a quorum for the
transaction of business and the act of a majority of the members or alternate
members present at any meeting at which a quorum is present shall be the act of
the committee.
Section 7. Minutes of Committee Meetings. The committees shall
keep regular minutes of their proceedings.
Section 8. Informal Action by Board of Directors and Committees.
Any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a meeting if a
written consent thereto is signed by all members of the Board of Directors or of
such committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board of Directors or committee, provided,
however, that such written consent shall not constitute approval of any matter
which pursuant to the Investment Company Act of 1940 and the rules thereunder
requires the approval of directors by vote cast in person at a meeting.
Section 9. Meeting by Conference Telephone. The members of the
Board of Directors or any committee thereof may participate in a meeting of the
Board of Directors or committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and such participation shall
constitute presence in person at such meeting, provided, however, that such
participation shall not constitute presence in person with respect to matters
which pursuant to the Investment Company Act of 1940 and the rules thereunder
require the approval of directors by vote cast in person at a meeting.
Section 10. Fees and Expenses. The directors may be paid their
expenses of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors, a stated
salary as director or such other compensation as the Board of Directors may
approve. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation
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therefor. Members of special or standing committees may be allowed like
reimbursement and compensation for attending committee meetings.
ARTICLE IV
Notices
Section 1. General. Notices to directors and stockholders mailed
to them at their post office addresses appearing on the books of the Corporation
shall be deemed to be given at the time when deposited in the United States
mail.
Section 2. Waiver of Notice. Whenever any notice is required to
be given under the provisions of the statutes, of the Articles of Incorporation
or of these By-Laws, each person entitled to said notice waives notice if,
before or after the meeting he signs a written waiver of notice and such waiver
is filed with the records of the meeting. Attendance of a person at a meeting
shall constitute a waiver of notice of such meeting except when the person
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.
ARTICLE V
Officers
Section 1. General. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a chairman of the Board of
Directors, a president, a secretary and a treasurer. The Board of Directors may
choose also such vice presidents and additional officers or assistant officers
as it may deem advisable. Any number of offices, except the offices of president
and vice president and chairman and vice president, may be held by the same
person. No officer shall execute, acknowledge or verify any instrument in more
than one capacity if such instrument is required by law to be executed,
acknowledged or verified by two or more officers.
Section 2. Other Officers and Agents. The Board of Directors may
appoint such other officers and agents as it desires who shall hold their
offices for such terms and
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shall exercise such powers and perform such duties as shall be determined from
time to time by the Board of Directors.
Section 3. Tenure of Officers. The officers of the Corporation
shall hold office at the pleasure of the Board of Directors. Each officer shall
hold his office until his successor is elected and qualifies or until his
earlier resignation or removal. Any officer may resign at any time upon written
notice to the Corporation. Any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors when, in its
judgment, the best interests of the Corporation will be served thereby. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise shall be filled by the Board of Directors.
Section 4. Chairman of the Board of Directors. The chairman of
the Board of Directors shall preside at all meetings of the stockholders and of
the Board of Directors. Unless otherwise determined by the Board of Directors,
he shall be the chief executive officer and shall have general and active
management of the business of the Corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect. He shall be ex
officio a member of all committees designated by the Board of Directors except
as otherwise determined by the Board of Directors. He shall have authority to
execute instruments and contracts on behalf of the Corporation except where
required by law to be otherwise signed and executed and except where the signing
and execution thereof shall be expressly delegated by the Board of Directors to
some other officer or agent of the Corporation.
Section 5. President. The president shall act under the direction
of the chairman and in the absence or disability of the chairman shall perform
the duties and exercise the powers of the chairman. Unless otherwise determined
by the Board of Directors, he shall be the chief operating officer and shall
perform such other duties and have such other powers as the chairman or the
Board of Directors may from time to time prescribe. He shall have authority to
execute instruments and contracts on behalf :the Corporation except where
required by law to be otherwise signed and except where the signing and
execution thereof shall be expressly delegated by the Board of Directors to some
other officer or agent of the Corporation.
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Section 6. Vice Presidents. The vice presidents shall act under
the direction of the chairman and the president and in the absence or disability
of the president shall perform the duties and exercise the powers of the
president. They shall perform such other duties and have such other powers as
the chairman, the president or the Board of Directors may from time to time
prescribe. The Board of Directors may designate one or more executive vice
presidents or may otherwise specify the order of seniority of the vice
presidents and, in that event, the duties and powers of the president shall
descend to the vice presidents in the specified order of seniority.
Section 7. Secretary. The secretary shall act under the direction
of the chairman and the president. Subject to the direction of the chairman and
the president he shall attend all meetings of the Board of Directors and all
meetings of stockholders and record the proceedings in a book to be kept for
that purpose and shall perform like duties for the committees designated by the
Board of Directors when required. He shall give, or cause to be given, notice of
all meetings of stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the chairman or the
Board of Directors. He shall keep in safe custody the seal of the Corporation
and shall affix the seal or cause it to be affixed to any instrument requiring
it.
Section 8. Assistant Secretaries. The assistant secretaries in
the order of their seniority, unless otherwise determined by the chairman, the
president or the Board of Directors, shall, in the absence or disability of the
secretary, perform the duties and exercise the powers of the secretary. They
shall perform such other duties and have such other powers as the chairman, the
president or the Board of Directors may from time to time prescribe.
Section 9. Treasurer. The treasurer shall act under the direction
of the chairman and the president. Subject to the direction of the chairman and
the president he shall have the custody of the corporate funds and securities
and shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such depositories as
may be designated by the Board of Directors. He shall disburse the funds of the
Corporation as may be ordered by the chairman, the president or the Board of
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Directors, taking proper vouchers for such disbursements, and shall render to
the chairman, the president and the Board of Directors, at its regular meetings,
or when the Board of Directors so requires, an account of all his transactions
as treasurer and of the financial condition of the Corporation.
Section 10. Assistant Treasurers. The assistant treasurers in the
order of their seniority, unless otherwise determined by the chairman, the
president or the Board of Directors, shall, in the absence or disability of the
treasurer, perform the duties and exercise the powers of the treasurer. They
shall perform such other duties and have such other powers as the chairman, the
president or the Board of Directors may from time to time prescribe.
ARTICLE VI
Certificates of Stock
Section 1. General. Every holder of stock of the Corporation who
has made full payment of the consideration for such stock shall be entitled upon
request to have a certificate, signed by, or in the name of the Corporation by,
the chairman, the president or a vice president and countersigned by the
treasurer or an assistant treasurer or the secretary or an assistant secretary
of the Corporation, certifying the number of whole shares of each class of stock
owned by him in the Corporation.
Section 2. Fractional Share Interests. The Corporation may issue
fractions of a share of stock. Fractional shares of stock shall have
proportionately to the respective fractions represented thereby all the rights
of whole shares, including the right to vote, the right to receive dividends and
distributions and the right to participate upon liquidation of the Corporation,
excluding, however, the right to receive a stock certificate representing such
fractional shares.
Section 3. Signatures on Certificates. Any of or all the
signatures on a certificate may be a facsimile. In case any officer who has
signed or whose facsimile signature has been placed upon a certificate shall
cease to be such officer before such certificate is issued, it may be issued
with the same effect as if he were such officer at the date of issue. The seal
of the Corporation or a facsimile thereof may, but need not, be affixed to
certificates of stock.
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Section 4. Lost, Stolen or Destroyed Certificates. The Board of
Directors may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of any affidavit of that
fact by the person claiming the certificate or certificates to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate or
certificates alleged to have been lost, stolen or destroyed.
Section 5. Transfer of Shares. Upon request by the registered
owner of shares, and if a certificate has been issued to represent such shares
upon surrender to the Corporation or a transfer agent of the Corporation of a
certificate for shares of stock duly endorsed or accompanied by proper evidence
of succession, assignment or authority to transfer, it shall be the duty of the
Corporation, if it is satisfied that all provisions of the Articles of
Incorporation, of the By-Laws and of the law regarding the transfer of shares
have been duly complied with, to record the transaction upon its books, issue a
new certificate to the person entitled thereto upon request for such
certificate, and cancel the old certificate, if any.
Section 6. Registered Owners. The Corporation shall be entitled
to recognize the person registered on its books as the owner of shares to be the
exclusive owner for all purposes including voting and dividends, and the
Corporation shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Maryland.
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ARTICLE VII
Miscellaneous
Section 1. Reserves. There may be set aside out of any funds of
the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for such other purpose as the
Board of Directors shall think conducive to the interest of the Corporation, and
the Board of Directors may modify or abolish any such reserve.
Section 2. Dividends. Dividends upon the stock of the Corporation
may, subject to the provisions of the Articles of Incorporation and of
applicable law, be declared by the Board of Directors at any time. Dividends may
be paid in cash, in property or in shares of the Corporation's stock, subject to
the provisions of the Articles of Incorporation and of applicable law.
Section 3. Capital Gains Distributions. The amount and number of
capital gains distributions paid to the stockholders during each fiscal year
shall be determined by the Board of Directors. Each such payment shall be
accompanied by a statement as to the source of such payment, to the extent
required by law.
Section 4. Checks. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.
Section 5. Fiscal Year. The fiscal year of the Corporation shall
be fixed by resolution of the Board of Directors.
Section 6. Seal. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its organization and the words
"Corporate Seal, Maryland." The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or in another manner reproduced or by placing
the word "(seal)" adjacent to the signature of the person authorized to sign the
document on behalf of the Corporation.
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ARTICLE VIII
Indemnification
Section 1. Indemnification of Directors and Officers. The
Corporation shall indemnify its directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify its officers to the same extent as its
directors and to such further extent as is consistent with law. The Corporation
shall indemnify its directors and officers who while serving as directors or
officers also serve at the request of the Corporation as a director, officer,
partner, trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, other enterprise or employee benefit plan to
the fullest extent consistent with law. The indemnification and other rights
provided by this Article shall continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. This Article shall not protect any such person
against any liability to the Corporation or any stockholder thereof to which
such person would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office ("disabling conduct").
Section 2. Advances. Any current or former director or officer of
the Corporation seeking indemnification within the scope of this Article shall
be entitled to advances from the Corporation for payment of the reasonable
expenses incurred by him in connection with the matter as to which he is seeking
indemnification without requiring a preliminary determination of ultimate
entitlement to indemnification except as provided below, to the fullest extent
permissible under the Maryland General Corporation Law. The person seeking
indemnification shall provide to the Corporation a written affirmation of his
good faith belief that the standard of conduct necessary for indemnification by
the Corporation has been met and a written undertaking to repay any such advance
if it should ultimately be determined that the standard of conduct has not been
met. In addition, at least one of the following additional conditions shall be
met: (a) the person seeking indemnification shall provide a security in form and
amount acceptable to the Corporation for his undertaking; (b) the Corporation is
insured against losses arising by reason of the advance; or (c) a majority of a
quorum of directors of the Corporation who are neither
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"interested persons" as defined in Section 2(a)(19) of the Investment Company
Act of 1940, as amended, nor parties to the proceeding ("disinterested non-party
directors"), or independent legal counsel, in a written opinion, shall have
determined, based on a review of facts readily available to the Corporation at
the time the advance is proposed to be made, that there is reason to believe
that the person seeking indemnification will ultimately be found to be entitled
to indemnification.
Section 3. Procedure. At the request of any person claiming
indemnification under this Article, the Board of Directors shall determine, or
cause to be determined, in a manner consistent with the Maryland General
Corporation Law, whether the standards required by this Article have been met.
Indemnification shall be made only following: (a) a final decision on the merits
by a court or other body before whom the proceeding was brought that the person
to be indemnified was not liable by reason of disabling conduct or (b) in the
absence of such a decision, a reasonable determination, based upon a review of
the facts, that the person to be indemnified was not liable by reason of
disabling conduct by (i) the vote of a majority o a quorum of disinterested
non-party directors or (ii) an independent legal counsel in a written opinion.
Section 4. Indemnification of Employees and Agents. Employees and
agents who are not officers or directors of the Corporation may be indemnified,
and reasonable expenses may be advanced to such employees or agents, as may be
provided by action of the Board of Directors or by contract, subject to any
limitations imposed by the Investment Company Act of 1940.
Section 5. Other Rights. The Board of Directors may make further
provision consistent with law for indemnification and advance of expenses to
directors, officers, employees and agents by resolution, agreement or otherwise.
The indemnification provided by this Article shall not be deemed exclusive of
any other right, with respect to indemnification or otherwise, to which those
seeking indemnification may be entitled under any insurance or other agreement
or resolution of stockholders or disinterested directors or otherwise. The
rights provided to any person by this Article shall be enforceable against the
Corporation by such person who shall be presumed to have relied upon it in
serving or continuing to serve as a director, officer, employee, or agent as
provided above.
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Section 6. Amendments. References in this Article are to the
Maryland General Corporation Law and to the Investment Company Act of 1940 as
from time to time amended. No amendment of these By-laws shall effect any right
of any person under this Article based on any event, omission or proceeding
prior to the amendment.
ARTICLE IX
Amendments
The Board of Directors shall have the power to make, alter and
repeal by-laws of the Corporation.
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INVESTMENT ADVISORY AGREEMENT
COHEN & STEERS SPECIAL EQUITY FUND, INC.
757 Third Avenue
New York, New York 10017
February , 1997
COHEN & STEERS CAPITAL MANAGEMENT, INC.
757 Third Avenue
New York, New York 10017
Dear Sirs:
We, the undersigned Cohen & Steers Special Equity Fund, Inc.,
herewith confirm our agreement with you as follows:
1. We are an open-end, non-diversified management investment company
registered under the Investment Company Act of 1940 (the "Act"). We are
currently authorized to issue separate classes of shares and our Directors are
authorized to reclassify and issue any unissued shares to any number of
additional classes or series (portfolios) each having its own investment
objective, policies and restrictions, all as more fully described in the
prospectus and the statement of additional information constituting parts of the
Registration Statement filed on our behalf under the Securities Act of 1933 and
the Act. We propose to engage in the business of investing and reinvesting our
assets in securities of the type and in accordance with the limitations
specified in our Articles of Incorporation, By-Laws, Registration Statement
filed affecting our portfolio and on your own initiative will furnish us from
time to time with such information as you may believe appropriate for this
purpose, whether concerning the individual issuers whose securities are
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included in our portfolio, the industries in which they engage, or the
conditions prevailing in the economy generally. You will also furnish us with
such statistical and analytical information with respect to our portfolio
securities as you may believe appropriate or as we reasonably may request. In
making such purchases and sales of our portfolio securities, you will bear in
mind the policies set from time to time by our Board of Directors as well as the
limitations imposed by our Articles of Incorporation and in our Registration
Statement under the Act and the Securities Act of 1933, the limitations in the
Act and of the Internal Revenue Code of 1986, as amended, in respect of
regulated investment companies.
(d) is understood that you will from time to time employ or
associate with yourselves such persons as you believe to be particularly fitted
to assist you in the execution of your duties hereunder, the cost of performance
of such duties to be borne and paid by you. No obligation may be incurred on our
behalf in any such respect. During the continuance of this agreement at our
request you will provide us persons satisfactory to our Board of Directors to
serve as our officers.
3. We hereby confirm that we shall be responsible and hereby assume
the obligation for payment of all our expenses, including: (a) payment of the
fee payable to you under paragraph 5 hereof; (b) charges and expenses of our
administrator, sub-administrator, custodian, transfer, and dividend disbursing
agent; (c) fees of directors who are not your affiliated persons;
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(d) legal and auditing expenses; (e) compensation of our officers, Directors and
employees who do not devote any part of their time to your affairs or the
affairs of your affiliates other than us; (f) costs of printing our prospectuses
and stockholder reports; (g) costs of proxy solicitation; (h) cost of
maintenance of corporate existence; (i) interest charges, taxes, brokerage fees
and commissions; (j) costs of stationery and supplies; (k) expenses and fees
related to registration and filing with the Securities and Exchange commission
and with state regulatory authorities; and (l) upon the approval of the Board of
Directors, costs of your personnel or your affiliates rendering clerical,
accounting and other office services.
4. We shall expect of you, and you will give us the benefit of, your
best judgment and efforts in rendering these services to us, and we agree as an
inducement to your undertaking these services that you shall not be liable
hereunder for any mistake of judgment or in any event whatsoever, except for
lack of good faith, provided that nothing herein shall be deemed to protect, or
purport to protect, you against any liability to us or to our security holders
to which you would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of your duties hereunder, or by
reason of your reckless disregard of your obligations and duties hereunder.
5. In consideration of the foregoing we will pay you a monthly fee
at an annualized rate of .90 of 1% of our average
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daily net assets. Such fee shall be payable in arrears on the last day of each
calendar month for services performed hereunder during such month. If our
initial Registration Statement is declared effective by the Securities and
Exchange Commission after the beginning of a month or this agreement terminates
prior to the end of a month, such fee shall be prorated according to the
proportion which such portion of the month bears to the full month.
6. This agreement shall become effective on the date on which our
pending Registration Statement on Form N-1A relating to our shares becomes
effective and shall remain in effect until the first meeting of our shareholders
held after such date and, if approved by the vote of a majority of the
outstanding voting securities, as defined in the Act, at such meeting, continue
in effect until December 31, 1998 and may be continued for successive
twelve-month periods (computed from each January 1) with respect to each
portfolio provided that such continuance is specifically approved at least
annually by the Board of Directors or by majority vote of the holders of the
outstanding voting securities of such portfolio (as defined in the Act), and, in
either case, by a majority of the Board of Directors who are not interested
persons as defined in the Act, of any party to this agreement (other than as
Directors of our corporation), provided further, however, that if the
continuation of this agreement is not approved, you may continue to render the
services described herein in the manned to the extent permitted by the Act and
the
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rules and regulations thereunder. Upon the effectiveness of this agreement, it
shall supersede all previous agreements between us covering the subject matter
hereof. This agreement may be terminated at any time, without the payment of any
penalty, by vote of a majority of the outstanding voting securities (as so
defined) or by a vote of a majority of the Board of Directors on 60 days'
written notice to you, or by you on 60 days' written notice to us.
7. This agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged by you and this agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and any
interpretation thereof contained in rules or regulations promulgated by the
Securities and Exchange Commission thereunder.
8. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, or
the right of any of your officers, directors or employees, who may also be a
Director, officer or employee of ours, or persons otherwise affiliated with us
(within the meaning of the Act) to engage in any other business or to devote
time and attention to the management or other aspects of any other business,
whether of a similar or dissimilar nature, or
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to render services of any kind to any other trust, corporation, firm, individual
or association.
9. If you cease to act as our investment adviser, or, in any event,
if you so request in writing, we agree to take all necessary action to change
our name to a name not including the term "Cohen & Steers". You may from time to
time make available without charge to us for our use such marks or symbols owned
by you, including marks or symbols containing the term "Cohen & Steers" or any
variation thereof, as you may consider appropriate. Any such marks or symbols so
made available will remain your property and you shall have the right, upon
notice in writing, to require us to cease the use of such mark or symbol at any
time.
10. This agreement shall be construed in accordance with the laws of
the State of New York, provided, however, that nothing herein shall be construed
as being inconsistent with the Act.
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If the foregoing is in accordance with your understanding, will you
kindly so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
COHEN & STEERS SPECIAL EQUITY
FUND, INC.
By: ______________________________
Name:
Title:
Agreed to and accepted
as of the date first set
forth above
COHEN & STEERS CAPITAL MANAGEMENT, INC.
By: ___________________________
Name:
Title:
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ADMINISTRATION AGREEMENT
AGREEMENT dated as of ______________, 1997 between COHEN & STEERS
SPECIAL EQUITY FUND, INC. (hereinafter referred to as the "Company"), a
non-diversified, open-end management investment company, and COHEN & STEERS
CAPITAL MANAGEMENT, INC. (hereinafter referred to as to the "Administrator").
In consideration of the mutual agreements herein made, the
Company and the Administrator understand and agree as follows:
1. The Administrator agrees, during the term of this Agreement,
to be responsible for:
(a) providing office space, telephone, office equipment and
supplies for the Company;
(b) paying compensation of the Company's officers for services
rendered as such;
(c) authorizing expenditures and approving bills for payment
on behalf of the Company;
(d) supervising preparation of the periodic updating of the
Company's registration statement, including prospectus and
statement of additional information, for the purpose of
filings with the Securities and Exchange Commission and
state securities administrators and monitoring and
maintaining the effectiveness of such filings, as
appropriate;
(e) supervising preparation of quarterly reports to the
Company's shareholders, notices of dividends, capital
gains distributions and tax credits, and attending to
routine correspondence and other communications with
individual shareholders;
(f) supervising the daily pricing of the Company's investment
portfolio and the publication of the net asset value of
the Company's shares, earnings reports and other financial
data;
(g) monitoring relationships with organizations providing
services to the Company, including the Custodian, Transfer
Agent and printers;
(h) providing trading desk facilities for the Company;
(i) supervising compliance by the Company with recordkeeping
requirements under the Investment Company Act of 1940 (the
"1940 Act") and regulations thereunder, maintaining books
and records for the Company (other than those maintained
by the Custodian and Transfer Agent) and preparing and
filing of tax reports other than the Company's income tax
returns; and
(j) providing executive, clerical and secretarial help needed
to carry out these responsibilities.
2. In rendering the services required under this Agreement, the
Administrator may, subject to the approval of the Company's Board of Directors,
cause such services or any portion thereof to be provided by another person
pursuant to a sub-administration agreement; provided that in such event the
Administrator shall remain responsible for monitoring and overseeing the
performance by such person of its
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obligations to the Company under such sub-administration agreement. Subject to
the approval of the Company's Board of Directors, the fees and appropriate
out-of-pocket expenses of such other person will be paid or reimbursed by the
Company.
3. The Company agrees, during the term of this Agreement to pay
to the Administrator as compensation for the foregoing a fee equal on an annual
basis to 0.02% of the Company's average daily net assets, payable in arrears at
the end of each month. The Company shall reimburse the Administrator for its
reasonable out-of-pocket expenses incurred in carrying out its obligations under
this Agreement.
4. This Agreement shall remain in full force and effect through
December 31, 1998 and thereafter from year to year, provided such continuance is
approved annually by the Board of Directors of the Company.
5. This Agreement may be terminated by either party at any time
on sixty (60) days' written notice without payment of penalty, provided that
such termination by the Company shall be directed or approved by the vote of a
majority of the Directors of the Company in office at the time or by the vote of
a majority of the outstanding voting securities of the Company (as defined in
the 1940 Act); and will terminate automatically and immediately in the event of
its assignment (as defined in the 1940 Act).
6. In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Administrator, or of reckless disregard of its
obligations hereunder, the Administrator shall not be subject to liability for
any act or omission in the course of, or connected with, rendering services
hereunder; provided, however, that in no event shall the Administrator be
subject to liability for any act or omission of any sub-administrator for the
Company retained in accordance with paragraph 2 of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their authorized officers as of the date first set forth
above.
COHEN & STEERS SPECIAL EQUITY FUND, INC.
By: _____________________________________
COHEN & STEERS CAPITAL MANAGEMENT, INC.
By: _____________________________________
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