<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 19, 1998
FILE NO. 333-30919
811-8287
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 3 [x]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 4 [x]
------------------------
COHEN & STEERS EQUITY INCOME 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 EQUITY INCOME FUND, INC.
757 THIRD AVENUE, NEW YORK, NEW YORK 10017
(NAME AND ADDRESS OF AGENT FOR SERVICE OF PROCESS)
------------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
[ ] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b) OF RULE 485.
[x] 60 DAYS AFTER FILING 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 (b) OF RULE 485.
[ ] ON (DATE) PURSUANT TO PARAGRAPH (a)(1) 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.
------------------------
TITLE OF SECURITIES BEING REGISTERED
COHEN & STEERS EQUITY INCOME FUND, INC. -- CLASS A COMMON STOCK
COHEN & STEERS EQUITY INCOME FUND, INC. -- CLASS B COMMON STOCK
COHEN & STEERS EQUITY INCOME FUND, INC. -- CLASS C COMMON STOCK
COHEN & STEERS EQUITY INCOME FUND, INC. -- CLASS I COMMON STOCK
________________________________________________________________________________
<PAGE>
<PAGE>
COHEN & STEERS EQUITY INCOME FUND, INC.
(CLASS A, CLASS B AND CLASS C SHARES)
CROSS REFERENCE SHEET
(AS REQUIRED BY 404(c))
<TABLE>
<CAPTION>
N-1A ITEM LOCATION IN PROSPECTUS
- -------------- ------------------------------------
(CAPTION)
<S> <C> <C>
Item 1. Cover Page................................................... Cover Page
Item 2. Synopsis..................................................... Fee Table
Item 3. Condensed Financial Information.............................. Financial Highlights
Item 4. General Description of Registrant............................ Investment Objective and Policies;
Investment Restrictions
Item 5. Management of the Registrant................................. Management of the Fund
Item 5A. Management's Discussion of Fund Performance.................. Not Applicable
Item 6. Capital Stock and Other Securities........................... Taxation; Organization and
Description of Capital Stock;
Sales Charges
Item 7. Purchase of Securities Being Offered......................... Determination of Net Asset Value;
Purchase of Shares; Sales Charges
Item 8. Redemption or Repurchase..................................... Redemption of Shares; Exchange
Privilege
Item 9. Pending Legal Proceedings.................................... Not Applicable
<CAPTION>
LOCATION IN STATEMENT OF
PART B ADDITIONAL INFORMATION (CAPTION)
- -------------- ------------------------------------
<S> <C> <C>
Item 10. Cover Page................................................... Cover Page
Item 11. Table of Contents............................................ Table of Contents
Item 12. General Information and History.............................. Not Applicable
Item 13. Investment Objectives and Policies........................... Investment Objective and Policies;
Investment Restrictions
Item 14. Management of the Fund....................................... Management of the Fund
Item 15. Control Persons and Principal Holders of Securities.......... Organization and Description of
Capital Stock
Item 16. Investment Advisory and Other Services....................... Management of the Fund -- Adviser
and Investment Advisory Services
Item 17. Brokerage Allocation and Other Practices..................... Portfolio Transactions and Brokerage
Item 18. Capital Stock and Other Securities........................... Organization and Description of
Capital Stock
Item 19. Purchase, Redemption and Pricing of Securities Being Determination of Net Asset Value;
Offered.................................................... Redemption of Shares; Contingent
Deferred Sales Charges
Item 20. Tax Status................................................... Taxation
Item 21. Underwriters................................................. Principal Underwriter
Item 22. Calculation of Performance Data.............................. Performance Information
Item 23. Financial Statements......................................... Financial Statements
</TABLE>
<PAGE>
<PAGE>
COHEN & STEERS EQUITY INCOME FUND, INC.
(CLASS I SHARES)
CROSS REFERENCE SHEET
(AS REQUIRED BY 404(c))
<TABLE>
<CAPTION>
N-1A ITEM LOCATION IN PROSPECTUS
- -------------- ------------------------------------
(CAPTION)
<S> <C> <C>
Item 1. Cover Page................................................... Cover Page
Item 2. Synopsis..................................................... Fee Table
Item 3. Condensed Financial Information.............................. Not Applicable
Item 4. General Description of Registrant............................ Investment Objective and Policies;
Investment Restrictions
Item 5. Management of the Registrant................................. Management of the Fund
Item 5A. Management's Discussion of Fund Performance.................. Not Applicable
Item 6. Capital Stock and Other Securities........................... Taxation; Organization and
Description of Capital Stock
Item 7. Purchase of Securities Being Offered......................... Determination of Net Asset Value;
Purchase of Shares
Item 8. Redemption or Repurchase..................................... Redemption of Shares
Item 9. Pending Legal Proceedings.................................... Not Applicable
<CAPTION>
LOCATION IN STATEMENT OF
PART B ADDITIONAL INFORMATION (CAPTION)
- -------------- ------------------------------------
<S> <C> <C>
Item 10. Cover Page................................................... Cover Page
Item 11. Table of Contents............................................ Table of Contents
Item 12. General Information and History.............................. Not Applicable
Item 13. Investment Objectives and Policies........................... Investment Objective and Policies;
Investment Restrictions
Item 14. Management of the Fund....................................... Management of the Fund
Item 15. Control Persons and Principal Holders of Securities.......... Organization and Description of
Capital Stock
Item 16. Investment Advisory and Other Services....................... Management of the Fund -- Adviser
and Investment Advisory Services
Item 17. Brokerage Allocation and Other Practices..................... Portfolio Transactions and Brokerage
Item 18. Capital Stock and Other Securities........................... Organization and Description of
Capital Stock
Item 19. Purchase, Redemption and Pricing of Securities Being Determination of Net Asset Value;
Offered.................................................... Redemption of Shares
Item 20. Tax Status................................................... Taxation
Item 21. Underwriters................................................. Principal Underwriter
Item 22. Calculation of Performance Data.............................. Performance Information
Item 23. Financial Statements......................................... Financial Statements
</TABLE>
<PAGE>
<PAGE>
[Logo]
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Cohen & Steers Equity Income Fund, Inc. (the 'Fund') Inc. is a non-diversified,
open-end management investment company that seeks to achieve high current income
through investment in real estate securities. Capital appreciation is a
secondary objective. Under normal circumstances, the Fund will invest at least
65% of its total assets in the equity securities of real estate companies. Up to
35% of the Fund's total assets may be invested in debt securities issued or
guaranteed by real estate companies. The Fund may also invest in options,
financial futures and currency contracts. There can be no assurance that the
Fund will achieve its investment objectives. Cohen & Steers Capital Management,
Inc. serves as investment adviser to the Fund (the 'Adviser').
This Prospectus relates only to the Class A, Class B and Class C shares of the
Fund and sets forth concisely the information a prospective investor should know
before investing in the Fund. A Statement of Additional Information dated March
1, 1998 (Amended , 1998), 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 Fund also offers Class I shares which are available for purchase only by
certain investors. A prospectus for the Class I shares can be obtained by
writing or calling the Fund at the address and telephone number printed on the
back cover of this prospectus.
- --------------------------------------------------------------------------------
INVESTORS ARE ADVISED TO READ THIS PROSPECTUS AND
RETAIN IT FOR FUTURE REFERENCE.
- --------------------------------------------------------------------------------
The Fund's shares are not deposits or obligations of, or guaranteed or endorsed
by, any bank, and the Fund's shares are not federally insured or guaranteed
by the U.S. Government, the Federal Deposit Insurance Corporation, the
Federal Reserve Board or any other agency. Shares of the Fund
involve investment risks, including the possible loss of principal.
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 COM-
MISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
MARCH 1, 1998
(AMENDED , 1998)
- --------------------------------------------------------------------------------
<PAGE>
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FEE TABLE
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------------------------ --------------
<S> <C> <C> <C>
Maximum sales charge on purchases (as
a percentage of offering price).... 4.50%(1) 0% 0%
Maximum sales load imposed on
reinvested dividends (and other
distributions)..................... 0% 0% 0%
Maximum deferred sales load (as a
percentage of original purchase
price or redemption proceeds,
whichever is lower)................ 0%(2) 5% in 1st year 1% in 1st year
4% in 2nd year
3% in 3rd and 4th years
2% in 5th year
1% in 6th year
None thereafter(3)
</TABLE>
- ------------
(1) Sales charges are reduced for large purchases.
(2) A contingent deferred sales charge of 1% applies on certain redemptions made
within 12 months following purchases without a sales charge.
(3) Class B shares of the Fund automatically convert to Class A shares at the
end of the month which precedes the 8th anniversary of the purchase date.
Annual Fund Operating Expenses (as a percentage of average net assets)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------- ------- -------
<S> <C> <C> <C>
Management fees...................................................... 0.75% 0.75% 0.75%
Rule 12b-1 fees*..................................................... 0.25% 0.75%** 0.75%
Service fees......................................................... 0.10% 0.25% 0.25%
Other expenses'D'.................................................... 0.40% 0.40% 0.40%
------- ------- -------
Total fund operating expenses........................................ 1.50% 2.15% 2.15%
</TABLE>
- ------------
* 12b-1 expenses may not exceed 0.25% per annum of the average net assets
attributable to the Class A shares or 0.75% per annum of the average net
assets attributable to the Class B and Class C shares. Due to these
distribution expenses, long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the National
Association of Securities Dealers, Inc.
** Until conversion which occurs automatically at the end of the month which
precedes the 8th anniversary of the purchase date.
'D' After reimbursement of expenses.
2
<PAGE>
<PAGE>
For expense information about the Class I shares of the Fund, see the separate
prospectus relating to that class.
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):
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Class A........................................................................... $ 60 $91
Class B
Assumes redemption at end of period......................................... $ 72 $98
Assumes no redemption at end of period...................................... $ 22 $68
Class C........................................................................... $ 32 $68
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH
MAY BE MORE OR LESS THAN THOSE SHOWN. YOUR EXPENSES WILL BE LESS IF YOU QUALIFY
TO PURCHASE SHARES AT A REDUCED OR NO SALES CHARGE.
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 Securities and Exchange Commission (the 'Commission')
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 Adviser has voluntarily agreed to limit the total expenses of the Fund
(excluding interest, taxes, brokerage, and extraordinary expenses) to an annual
rate of 1.50% of the average net assets of the Fund attributable to the Class A
shares, 2.15% of the average net assets of the Fund attributable to the Class B
shares, and 2.15% of the average net assets of the Fund attributable to the
Class C shares until December 31, 1998. As long as these temporary expense
limitations continue, they may lower the expenses and increase the total return
attributable to each class of shares. After December 31, 1998, the expense
limitation on any or all classes of shares may be terminated or revised at any
time, at which time the expenses of such class may increase and its total return
may be reduced depending on the total assets of the Fund attributable to such
class. Without the expense reimbursement, it is estimated that the total
operating expenses for the current fiscal year for the Class A, Class B and
Class C shares of the Fund would have amounted to 2.21%, 2.86% and 2.86%,
respectively, of the Fund's average net assets attributable to such class for
the period. During the fiscal period ended December 31, 1997, with respect to
the Class A shares, the Adviser reimbursed expenses amounting to 1.99%
(annualized) of the average net assets of the Fund attributable to the Class A
shares. Without such reimbursement, 'Total Fund Operating Expenses' for the
Class A shares would have been 3.49% annualized.
3
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following information, which relates to the Class A shares of the Fund for
the period from September 2, 1997 (commencement of operations) to December 31,
1997, has been audited by Coopers & Lybrand L.L.P., independent accountants,
whose report thereon appears in the Fund's Annual Report which as been
incorporated by reference in the Statement of Additional Information. Further
information concerning investment performance is contained in the Fund's annual
report to shareholders, which is available without charge. The Fund did not
begin offering Class B and Class C shares until January 6, 1998.
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
<TABLE>
<CAPTION>
Period Ended December 31, 1997*
- ------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period..................................................... $ 11.46
----------
Income from investment operations
Net investment income............................................................... 0.25
Net realized and unrealized gains on investments.................................... 0.83
----------
Total from investment operations.............................................. 1.08
----------
Less distributions from:
Net investment income............................................................... (0.17)
Realized gain on investment......................................................... (0.03)
Tax return of capital............................................................... (0.02)
----------
Total distributions........................................................... (0.22)
----------
Net asset value, end of period........................................................... $ 12.32
==========
Total investment return.................................................................. 9.46%
==========
Ratios/Supplemental Data:
Net assets, end of period (in millions)............................................. $ 34.622
==========
Ratio of expenses to average net assets............................................. 1.50%**'D'
==========
Ratio of net investment income to average net assets................................ 11.46%**'D'
==========
Portfolio turnover rate............................................................. 87.20%
==========
Average Commission Rate............................................................. $ 0.0445
</TABLE>
- ------------
* For the period September 2, 1997 (commencement of operations) to December
31, 1997.
** Annualized.
'D' The Adviser and/or the administrator did not impose a portion of their fees
for the periods indicated. If these fees had been incurred by the Fund, the
ratios would have been:
<TABLE>
<S> <C>
Ratios (to average daily net assets):
Expenses............................................................ 3.49%**
=====
Net investment income............................................... 9.47%**
=====
</TABLE>
4
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<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objective is to achieve high current income through
investment in real estate securities. Capital appreciation is a secondary
objective. There can be no assurance that the Fund's investment objectives will
be achieved. The Fund's investment objectives cannot be changed without the
approval of a majority of its outstanding voting securities.
Under normal circumstances, the Fund will invest at least 65% of its total
assets in the equity securities of real estate companies. Such equity securities
will consist of (i) common shares (including shares and units of beneficial
interest of REITs), (ii) rights or warrants to purchase common shares, (iii)
securities convertible into common shares where the conversion feature
represents, in the investment adviser's view, a significant element of the
securities' value, and (iv) preferred shares.
For purposes of the Fund's investment policies, a 'real estate company' is one
that derives at least 50% of its revenues from the ownership, construction,
financing, management or sale of commercial, industrial, or residential real
estate or that has at least 50% of its assets in such real estate. With the
exception of REITs, most real estate companies do not pay dividends at the
higher end of the range for common stocks as a group. The Fund's investment
adviser, however, anticipates that the Fund's equity investments in real estate
companies will primarily be in securities that do pay high dividends relative to
the stock market as a whole.
Up to 35% of the Fund's total assets may be invested in debt securities issued
or guaranteed by real estate companies. The Fund may also invest in options,
financial futures and currency contracts. When, in the judgment of the Adviser,
market or general economic conditions justify a temporary defensive position,
the Fund may deviate from its investment objectives and policies and invest all
or any portion of its assets in high-grade debt securities, including corporate
debt securities, U.S. government securities, and short-term money market
instruments, without regard to whether the issuer is a real estate company.
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS
The Fund is authorized to invest without limit 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, and 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.
- --------------------------------------------------------------------------------
DEBT SECURITIES
The Fund may invest a maximum of 35% of its total assets in investment grade and
non-investment grade debt securities of companies, including real estate
industry 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
5
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<PAGE>
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 Appendix
A 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.
6
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<PAGE>
- --------------------------------------------------------------------------------
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 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.
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 S&P's, certificates of
deposit, bankers' acceptances issued by domestic banks having total assets in
excess of one billion dollars, and money market mutual funds.
- --------------------------------------------------------------------------------
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.
Because the Fund will be concentrated in the real estate industry, the Fund may
be subject to the risks associated with the direct ownership of real
7
<PAGE>
<PAGE>
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 an 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/or 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. In certain cases, the organizational documents of a REIT may grant the
REIT's sponsors the right to exercise control over the operations of the REIT
notwithstanding their minority share ownership; a conflict of interest (for
example, the desire to postpone certain taxable events) could influence such
sponsors to not act in the best interests of the REIT's shareholders. Many REITs
are subject in their organizational documents to various anti-takeover
provisions that could have the effect of delaying or preventing a transaction or
change in control of the REIT that might involve a premium price for the REIT's
shares or otherwise may not be in the best interests of the REIT's shareholders.
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.
- --------------------------------------------------------------------------------
NON-DIVERSIFIED STATUS; PORTFOLIO TURNOVER
The Fund is classified as a 'non-diversified' investment company under the
Investment Company Act of 1940 (the '1940 Act'), which means the Fund is not
limited by the 1940 Act in the proportion of its assets that may be invested in
the securities of a single issuer. However, the Fund intends to conduct its
operations so as to qualify as a regulated investment company for purposes of
the Code, which generally will relieve the Fund of any liability for Federal
income tax to the extent its earnings are distributed to shareholders. See
'Taxation.' To so qualify, among other requirements, the Fund will limit its
investments so that, at the close of each quarter of the taxable year, (i) not
more than 25% of the market value of the Fund's total assets will be invested in
the securities of a single issuer, and (ii) with respect to 50% of the market
value of its total assets, not more than 5% of the market value of its total
assets will be invested in the securities of a single issuer and the Fund will
not own more than 10% of the outstanding voting securities of a single issuer.
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
8
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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% under 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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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 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
9
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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 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.
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- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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,
custodian and transfer agent. The management of the Fund's day-to-day operations
is delegated to its officers, the Adviser and the 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, Director, Chairman and Secretary, is the Chairman and one of
the principals of Cohen & Steers Capital Management, Inc. ('Cohen & Steers' or
the 'Adviser').
Martin Cohen, Director, President and Treasurer, is the President and one of the
principals of the Adviser.
Gregory C. Clark, Director, is the principal of Wellspring Management Group.
George Grossman, Director, is an attorney at law in private practice.
Jeffrey H. Lynford, Director, is Chairman of Wellsford Group, Inc. and of
Wellsford Real Properties, Inc.
Willard H. Smith Jr., Director, is a board member of several REIT companies.
Elizabeth O. Reagan, Vice President, is a Senior Vice President of the Adviser.
Adam Derechin, Vice President and Assistant Treasurer, is a Vice President of
the Adviser.
- --------------------------------------------------------------------------------
THE ADVISER
Cohen & Steers Capital Management, Inc., 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 Board of 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 &
11
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Steers Realty Shares, Inc. and Cohen & Steers Special Equity Fund, Inc., both of
which are open-end investment companies. 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, and have been since the formation of the Adviser, 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.
- --------------------------------------------------------------------------------
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 Rules of Fair
Practice 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 0.75%
of the average daily net assets of the Fund. 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. For the fiscal year ended December 31, 1997, the Fund's
expenses attributable to the Class A shares, including the management fee,
equaled 1.50% (annualized) of the Fund's average net assets attributable to the
Class A shares (net of reimbursements equivalent to 1.99% (annualized) of
average net assets attributable to the Class A shares).
- --------------------------------------------------------------------------------
Year 2000
Like other investment companies, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by the Adviser, the Distributor or other service providers
to the Fund do not properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known as the 'Year 2000
Problem.' The Adviser and the Distributor are taking steps that they believe are
reasonably designed to address the Year 2000 Problem with respect to computer
systems that they use and the Adviser is taking steps to obtain reasonable
assurances that comparable steps are being taken by the Fund's other service
providers. At this time, however, there can be no assurance that
12
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these steps will be sufficient to avoid any adverse impact to the Fund.
The Year 2000 Problem is expected to impact corporations, which may include
issuers of portfolio securities held by the Fund, to varying degrees based upon
various factors, including, but not limited to, the corporation's industry
sector and degree of technological sophistication. The Fund is unable to predict
what impact, if any, the Year 2000 Problem will have on issuers of the portfolio
securities held by the Fund.
- --------------------------------------------------------------------------------
ADMINISTRATOR AND SUB-ADMINISTRATOR
The Adviser has also 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. For its services under the
Administration Agreement, the Adviser receives a monthly fee from the Fund at
the annual rate of 0.02% of the Fund's average daily net assets.
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 Chase Manhattan Bank ('Chase') as sub-administrator under a mutual fund
services agreement (the 'Mutual Fund Services Agreement'). Under the Mutual Fund
Services 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. The Adviser remains
responsible for monitoring and overseeing the performance by Chase in regards to
its obligations to the Fund under its agreement with the Fund, subject to the
overall authority of the Fund's Board of Directors.
Under the terms of the Mutual Fund Services Agreement, the Fund pays Chase a
monthly fee at the annual rate of 0.08% on the first $500 million of the Fund's
average daily net assets and at lower rates on 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
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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.'
- --------------------------------------------------------------------------------
DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the 1940
Act (the 'Distribution Plan'). Under the Distribution Plan, the Fund may pay
Cohen & Steers Securities, Inc., the Fund's principal underwriter ('CSSI'), a
quarterly distribution-related fee at an annual rate not to exceed 0.25% of the
average daily value of the Fund's net assets attributable to the Class A shares
and 0.75% of the average daily value of the Fund's net assets attributable to
the Class B and Class C shares. The Class I shares do not participate in the
Distribution Plan. CSSI is obligated to use the amounts received under the
Distribution Plan for payments to qualifying dealers for their assistance in the
distribution of the Fund's shares and the provision of shareholder services and
for other expenses such as advertising costs and the payment for the printing
and distribution of prospectuses to prospective investors. Payments received
under the Distribution Plan with respect to Class A and Class C shares will not
be used to pay any interest expenses, carrying charges or other financing costs
or allocation of overhead of CSSI. Payments received with respect to Class B
shares may be used for these purposes. CSSI bears distribution expenses to the
extent they are not covered by payments under the Distribution Plan. Any
distribution expenses incurred by CSSI in any fiscal year of the Fund, which are
not reimbursed from payments under the Plan accrued in such fiscal year, will
not be carried over for payment under the Distribution Plan in any subsequent
year.
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE PLAN
The Fund has adopted a shareholder services plan which provides that the Fund
may obtain the services of qualified financial institutions to act as
shareholder servicing agents for their customers. Under this plan, the Fund may
enter into agreements pursuant to which the shareholder servicing agents perform
certain shareholder services not otherwise provided by the Fund's transfer
agent. For these services, the Fund may pay the shareholder servicing agent a
fee at an annual rate of up to 0.10% of the average daily net asset value of the
Fund's Class A shares and up to 0.25% of the average daily net asset value of
the Fund's Class B and Class C shares owned by investors for which the
shareholder servicing agent maintains a servicing relationship. The Class I
shares do not participate in the Shareholder Service Plan.
Among the services provided by shareholder servicing agents are: answering
customer inquiries regarding account matters; assisting in designating and
changing various account options; aggregating and processing purchase and
redemption orders and transmitting and receiving funds for shareholder orders;
transmitting, on behalf of the Fund, proxy statements, prospectuses and
shareholder reports to shareholders and tabulating proxies; processing dividend
payments and providing subaccounting services for Fund shares held beneficially;
and providing such other services as the Fund or a shareholder may request.
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- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
Net asset value per share of each Class 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 scheduled 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 attributable to that Class, subtracting liabilities attributable to that
Class (incurred or accrued) and dividing by the total number of the shares of
such Class then outstanding.
For purposes of determining the net asset value of each Class of the Fund,
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 Board of 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. However, certain fixed-income
securities may be valued on the basis of prices provided by a pricing service
when such prices are believed by the Board of Directors to reflect the fair
market value of such securities. The prices provided by a pricing service take
into account institutional size trading in similar groups of securities and any
developments related to specific securities. Where securities are traded on more
than one exchange and also over-the-counter, the securities will generally be
valued using the quotations the Board of Directors believes reflect most closely
the value of such securities.
- --------------------------------------------------------------------------------
SALES CHARGES
- --------------------------------------------------------------------------------
CHOOSING A CLASS OF SHARES
This prospectus offers three classes of shares: Class A, Class B and Class C.
Each class has its own cost structure.
Class A shares are sold to investors who prefer to pay an initial sales load and
have the benefit of lower continuing fees. Class B shares are sold to investors
choosing to pay no initial load, a higher distribution fee and a contingent
deferred sales charge with respect to redemptions within six years of purchase
15
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and who desire shares to convert automatically to Class A shares after eight
years. Investors may elect to purchase Class C shares, however, if they
determine that it is advantageous to have all their assets invested initially
and they are uncertain as to the length of time they intend to hold their assets
in the Fund.
Investors who expect to maintain their investment for an extended period of time
might choose to purchase Class A shares because over time the accumulated
continuing distribution fees of Class B and Class C shares may exceed the
initial sales load and lower on-going fee of Class A shares. This consideration
must be weighed against the fact that the amount invested in the Fund will be
reduced by the initial sales load on Class A shares deducted at the time of
purchase. Furthermore, the distribution fees on Class B and Class C shares will
be offset to the extent any return is realized on the additional funds initially
invested therein that would have been equal to the amount of the initial sales
load on Class A shares.
Investors who qualify for reduced initial sales loads might also choose to
purchase Class A shares because the sales load deducted at the time of purchase
would be waived. However, investors should consider the effect of the 1%
contingent deferred sales charge imposed on shares on which the initial sales
load was waived because the amount of Class A shares purchased was $1,000,000 or
more. In addition, Class B shares will be converted automatically to Class A
shares after a period of approximately eight years, and thereafter investors
will be subject to lower ongoing fees. Shares purchased through reinvestment of
dividends and distributions on Class B shares also will convert automatically to
Class A shares along with the underlying shares on which they were earned.
Investors should bear in mind that total asset based sales charges (i.e., the
higher continuing distribution fee plus the contingent deferred sales charge) on
Class B shares that are redeemed may exceed the total asset based sales charges
that would be payable on the same amount of Class A or Class C shares,
particularly if the Class B shares are redeemed shortly after purchase or if the
investor qualifies for a reduced sales load on the Class A shares.
Investors should understand that the purpose and function of the initial sales
loads (and deferred sales charges, when applicable) with respect to Class A
shares is the same as those of the deferred sales charges and higher
distribution fees with respect to Class B and Class C shares in that the sales
charges and distribution fees applicable to each class provide for the financing
of the distribution of the shares of the Fund.
Class B and Class C shares are subject to the same ongoing distribution fees but
Class C shares are subject to a contingent deferred sales charge for a shorter
period of time (one year as opposed to six years) than Class B shares. However,
unlike Class C shares, Class B shares automatically convert to Class A shares,
which are subject to lower ongoing fees.
The three classes of shares represent interests in the same portfolio of
investments, have the same rights and are generally identical in all respects
except that each class bears its separate distribution and, potentially, certain
other class expenses and has exclusive voting rights with respect to any matter
to which a separate vote of any class is required by the 1940 Act or Maryland
law. The net income attributable to each class and dividends payable on the
shares of each class will be reduced by the amount of distribution and other
expenses of each class. Class B and Class C shares bear higher distribution
fees, which will cause the Class B and Class C shares to pay lower dividends
than the Class A shares.
Although Class C shareholders are subject to a shorter contingent deferred sales
charge period at a lower rate, they forgo the Class B automatic conversion
feature, making their investment subject to higher distribution fees
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for an indefinite period of time. Each class has advantages and disadvantages
for different investors, and investors should choose the class that best suits
their circumstances and their objectives.
Dealers and agents may receive different compensation for selling Class A, Class
B or Class C shares.
- --------------------------------------------------------------------------------
CLASS A SHARES -- INITIAL SALES CHARGE
An initial sales charge may apply, as described below, when purchasing Class A
shares of the Fund. Sales charges may be reduced for large purchases as
indicated below.
<TABLE>
<CAPTION>
SALES CHARGE AS DEALER
A PERCENTAGE OF CONCESSION
----------------------- AS % OF
OFFERING NET AMOUNT OFFERING
INVESTMENT AMOUNT PRICE INVESTED PRICE
- ----------------------------------------------------------------- --------- ----------- ----------
<S> <C> <C> <C>
Less than $100,000............................................... 4.50% 4.71% 4.00%
$100,000 but less than $250,000.................................. 3.75% 3.90% 3.25%
$250,000 but less than $500,000.................................. 2.75% 2.83% 2.50%
$500,000 but less than $1 million................................ 2.25% 2.30% 2.00%
$1 million or more and certain other investments described
below......................................................... see below see below see below
</TABLE>
Investments of $1 million or more are sold with no initial sales charge. A 1%
CONTINGENT DEFERRED SALES CHARGE MAY BE IMPOSED ON CERTAIN REDEMPTIONS MADE
WITHIN ONE YEAR OF PURCHASE BY CLASS A ACCOUNTS OF $1 MILLION OR MORE. A dealer
concession of up to 1% may be paid by CSSI on these investments. Investments by
certain individuals and entities including employees and other associated
persons of dealers authorized to sell shares of the Fund and Cohen & Steers are
not subject to a sales charge. (see 'Sales at Net Asset Value,' below).
REDUCING THE SALES CHARGE. As shown in the table above, the size of the total
investment in the Class A shares of the Fund will affect the sales charge.
Described below are several methods to reduce the applicable sales charge. In
order to obtain a reduction in the sales charge, an investor must notify, at the
time of purchase, his dealer, the transfer agent or CSSI of the applicability of
one of the following:
Rights of Aggregation. The investment schedule above applies to the total amount
being invested by any 'person,' which term includes an individual, his spouse
and children under the age of 21, a trustee or other fiduciary purchasing for a
single trust, estate or single fiduciary account (including a pension,
profit-sharing or other employee benefit trust created pursuant to a plan
qualified under the Code) although more than one beneficiary is involved, or any
United States bank or investment adviser purchasing shares for its investment
advisory clients or customers. Any such person purchasing for several accounts
at the same time may combine these investments into a single transaction in
order to reduce the applicable sales charge.
Rights of Accumulation. The Class A shares of the Fund may be purchased at a
reduced sales charge by a 'person' (as defined above) who is already a
shareholder by taking into account not only the amount then being invested, but
also the current net asset value of the shares of the Fund already held by such
person. If the current net asset value of the qualifying shares already held
plus the net asset value of the current purchase exceeds a point in the schedule
of sales charges at which the charge is reduced to a lower percentage, the
entire
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current purchase is eligible for the reduced charge. To be entitled to a reduced
sales charge pursuant to the Rights of Accumulation, the investor must notify
his dealer, the transfer agent or CSSI at the time of purchase that he wishes to
take advantage of such entitlement, and give the numbers of his account, and
those accounts held in the name of his spouse or for a minor child, and the
specific relationship of each such other person to the investor.
Letter of Intention. An investor may also qualify for a reduced sales charge by
completing a Letter of Intention (the 'Letter') set forth in the Subscription
Agreement or on a separate form for this purpose which is available from the
Fund. This enables the investor to aggregate purchases of shares of the Fund
during a 12-month period for purposes of calculating the applicable sales
charge. All shares of the Fund currently owned by the investor will be credited
as purchases toward the completion of the Letter at the greater of their net
asset value on the date the Letter is executed or their cost. No retroactive
adjustment will be made if purchases exceed the amount indicated in the Letter.
For each investment made, the investor must notify his dealer, the transfer
agent or CSSI that a Letter is on file along with all account numbers associated
with the Letter.
The Letter is not a binding obligation on the investor. However, 5% of the
amount specified in the Letter will be held in escrow, and if the investor's
purchases are less than the amount specified, the investor will be requested to
remit to the Fund an amount equal to the difference between the sales charge
paid and the sales charge applicable to the aggregate purchases actually made.
If not remitted within 20 days after written request, an appropriate number of
escrowed shares will be redeemed in order to realize the difference. However,
the sales charge applicable to the investment will in no event be higher than if
the shareholder had not submitted a Letter.
Sales at Net Asset Value. Class A shares of the Fund may be sold at net asset
value (i.e., without a sales charge) (i) to registered representatives or
employees (and their immediate families) of authorized dealers, or to any trust,
pension, profit-sharing or other benefit plan for only such persons, (ii) to
banks or trust companies or their affiliates when the bank, trust company, or
affiliate is authorized to make investment decisions on behalf of a client,
(iii) to investment advisers and financial planners who place trades for their
own accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services, (iv) to clients of such investment
advisers and financial planners who place trades for their own accounts if the
accounts are linked to the master account of such investment adviser or
financial planner on the books and records of the broker, agent, investment
adviser or financial institution, and (v) to retirement and deferred
compensation plans and trusts used to fund those plans, including, but not
limited to those defined in Section 401(a), 403(b) or 457 of the Code and 'rabbi
trusts.' Investors may be charged a fee if they effect transactions in Fund
shares through a broker or agent. Class A shares of the Fund may also be sold at
net asset value to current officers, directors and employees (and their
immediate families) of the Fund, the Adviser, CSSI, employees (and their
immediate families) of certain firms providing services to the Fund (such as the
custodian and shareholder servicing agent), and to any trust, pension,
profit-sharing or other benefit plan for only such persons. The Fund may also
issue Class A shares at net asset value in connection with the acquisition of,
or merger or consolidation with, another investment company.
The sales of Class A shares at net asset value described in this section are
made upon the written assurance of the purchaser that the purchase is made for
investment purposes and that the Class A shares will not be resold except
through redemption. Such notice must be given to the transfer agent or CSSI at
the time of purchase on a form for this purpose as available from the Fund.
18
<PAGE>
<PAGE>
[Logo]
SUBSCRIPTION AGREEMENT
MAILING INSTRUCTIONS:
1. Complete Subscription Agreement
2. Make check payable to 'Cohen & Steers Equity Income Fund'
3. Mail Subscription Agreement and check to: Cohen & Steers Equity Income Fund,
Inc.
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208
FOR ASSISTANCE PLEASE CALL: (800) 437-9912
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
COHEN & STEERS EQUITY INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
1 ACCOUNT TYPE (Please print; indicate only one registration type)
[ ] INDIVIDUAL OR JOINT ACCOUNT
</TABLE>
<TABLE>
<S> <C> <C>
- -
__________________________________________________________ ________________________
Name Social Security Number
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
__________________________________________________________
Name of Joint Registrant, if any.
(For joint registrations, the account registrants will be joint tenants with the right of survivorship and not
tenants in common unless tenants in common or community property registrations are requested.)
[ ] TRUST [ ] CORPORATION [ ] PARTNERSHIP [ ] OTHER ENTITY
-
__________________________________________________________ _________________________
Name of Entity Tax Identification Number
__________________________________________________________ _______________________________________
Name of Trust Agreement (if applicable) Date of Trust Agreement (if applicable)
[ ] UNIFORM GIFT TO MINORS, OR [ ] UNIFORM TRANSFER TO MINORS (where allowed by Law)
__________________________________________________________ Under the ____________ (state of residence
Name of Adult Custodian (only one permitted) of minor) Uniform Gifts/Transfer to
Minor's Act
- -
__________________________________________________________ ______________________________
Name of Minor (only one permitted) Minor's Social Security Number
- ------------------------------------------------------------------------------------------------------------------
2 MAILING ADDRESS
( )
__________________________________________________________ _____________________
Street or P.O. Box Home Telephone Number
( )
__________________________________________________________ _____________________
City and State Zip Code Business Telephone Number
- ------------------------------------------------------------------------------------------------------------------
3 INVESTMENT INFORMATION
CLASS OF SHARES (please check one:) [ ] A [ ] B [ ] C
(Class A purchased if no box checked)
$______________ Amount to invest ($1,000 minimum investment). Do not send cash. Investment will be paid for by
(please check one):
[ ] Check or draft made payable to 'Cohen & Steers Equity Income Fund, Inc.'
[ ] Wire through the Federal Reserve System.* __________________________________________________
Wire Reference Control Number
* Call (800) 437-9912 to notify the Fund of investments by wire and to obtain a Wire Reference Control Number.
- ------------------------------------------------------------------------------------------------------------------
4 AUTOMATIC INVESTMENT PLAN
The Automatic Investment Plan makes possible regularly scheduled monthly purchases of Fund shares. The Fund's
Transfer Agent can arrange for an amount of money selected by you ($100 minimum) to be deducted from your
checking account and used to purchase shares of the Fund.
Please debit $________________ from my checking account beginning on ________________________*.
(Month)
Please debit my account on (check one): [ ] 1st of Month [ ] 15th of Month
*To initiate the Automatic Investment Plan, Section 9 of this Subscription Agreement must be completed.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
5 REDUCED SALES CHARGE (CLASS A ONLY)
RIGHTS OF AGGREGATION OR ACCUMULATION
</TABLE>
<TABLE>
<S> <C> <C>
[ ] I apply for Rights of Aggregation reduced sales charges based on the following accounts:
[ ] I apply for Rights of Accumulation reduced sales charges based on the following accounts:
Account Name Social Security Number
------------ ----------------------
1. - -
______________________________________________________________ _________________________________
2. - -
______________________________________________________________ _________________________________
3. - -
______________________________________________________________ _________________________________
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
LETTER OF INTENT
[ ] I am already investing under an existing Letter of Intent.
[ ] I agree to the Letter of Intent provisions in the Fund's current prospectus. During a 12 month period, I
plan to invest a dollar amount of at least: [ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000
NET ASSET VALUE PURCHASE
[ ] I certify that I qualify for an exemption from the sales charge by meeting the conditions set forth in the
Prospectus.
- ------------------------------------------------------------------------------------------------------------------
6 EXCHANGE PRIVILEGES
Exchange privileges will be automatically granted unless you check the box below. Shareholders wishing to
exchange into other Cohen & Steers Funds should consult the Exchange Privilege section of the Prospectus. (Note:
If shares are being purchased through a dealer, please contact your dealer for availability of this service.)
[ ] I decline the exchange privilege.
- ------------------------------------------------------------------------------------------------------------------
7 REDEMPTION PRIVILEGES
Shareholders may select the following redemption privileges by checking the box(es) below. See REDEMPTION OF
SHARES section of the Prospectus for further details. Redemption privileges will be automatically declined for
boxes not checked.
[ ] I authorize the Transfer Agent to redeem shares in my account(s) by telephone, in accordance with the
procedures and conditions set forth in the Fund's current Prospectus.
[ ] I wish to have redemption proceeds paid by wire (please complete Section 9).
- ------------------------------------------------------------------------------------------------------------------
8 DISTRIBUTION OPTIONS
Dividends and capital gains may be reinvested or paid by check. If no options are selected below, both dividends
and capital gains will be reinvested in additional Fund shares.
Dividends [ ] Pay in cash. [ ] Reinvest.
Capital Gains [ ] Pay in cash. [ ] Reinvest.
[ ] I wish to have my distributions paid by wire (please complete Section 9).
- ------------------------------------------------------------------------------------------------------------------
9 BANK OF RECORD (FOR WIRE INSTRUCTIONS AND /OR THE AUTOMATIC INVESTMENT PLAN)
PLEASE ATTACH A VOIDED CHECK FROM YOUR BANK ACCOUNT.
__________________________________________________________ ________________________________
Bank Name Bank ABA Number
__________________________________________________________ ________________________________
Street or P.O. Box Bank Account Number
__________________________________________________________ ________________________________
City and State Zip Code Account Name
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
10 SIGNATURE AND TAXPAYER CERTIFICATION
By signing this form, the Investor represents and warrants that: (a) the Investor has the full right, power and
authority to invest in the Fund; and (b) the Investor has received a current prospectus of the Fund and agrees
to be bound by its terms. Persons signing as representatives or fiduciaries of corporations, partnerships,
trusts or other organizations are required to furnish corporate resolutions or similar documents providing
evidence that they are authorized to effect securities transactions on behalf of the Investor (alternatively,
the secretary or designated officer of the organization may certify the authority of the persons signing on the
space provided below). In addition, signatures of representatives or fiduciaries of corporations and other
entities must be accompanied by a signature guarantee by a commercial bank that is a member of the Federal
Deposit Insurance Corporation, a trust company or a member of a national securities exchange.
PLEASE CHECK ONE:
[ ] U.S. CITIZEN/TAXPAYER
UNDER THE PENALTIES OF PERJURY, THE UNDERSIGNED CERTIFIES THAT: (1) THE TAXPAYER IDENTIFICATION NUMBER PROVIDED
IS CORRECT, AND (2) I/WE ARE NOT SUBJECT TO BACKUP WITHHOLDING BECAUSE: (A) I/WE ARE EXEMPT FROM BACKUP
WITHHOLDING, OR (B) I/WE HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE ('IRS') THAT I/WE ARE SUBJECT TO
BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR (C) THE IRS HAS NOTIFIED ME
THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. NOTE: IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE
CURRENTLY SUBJECT TO BACKUP WITHHOLDING BECAUSE OF UNDER-REPORTING INTEREST OF DIVIDENDS ON YOUR TAX RETURN, YOU
MUST CROSS OUT ITEM 2 ABOVE.
[ ] NON U.S. CITIZEN/TAXPAYER (FORM W-8 ATTACHED)
INDICATE COUNTRY OF RESIDENCE FOR TAX PURPOSES _______________________________
UNDER PENALTY OF PERJURY, I/WE CERTIFY THAT I/WE ARE NOT U.S. CITIZENS AND I/WE ARE EXEMPT FOREIGN PERSONS AS
DEFINED BY THE IRS. THE IRS DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE
CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
I certify that (1) the information provided on this Subscription Agreement is true, correct and complete, (2) I
have read the prospectus for the Fund and agree to the terms thereof, and (3) I am of legal age or an
emancipated minor.
x x
_______________________________________ _____________ ___________________________________________ _________
Signature (Owner, Trustee, Etc.) Date Signature (Joint Owner, Co-Trustee) Date
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
FOR AUTHORIZED DEALER USE ONLY
We hereby authorize the Transfer Agent to act as our agent in connection with the transactions authorized by
the Subscription Agreement and agree to notify the Transfer Agent of any purchases made under a Letter of
Intent, Rights of Accumulation or Rights of Aggregation. If the Subscription Agreement includes a Telephone
Redemption Privilege, we guarantee the signature(s) above.
_________________________________________________________________ _______________________________
Dealer's Name Dealer Number
_________________________________________________________________ _______________________________
Main Office Address Branch Number
_________________________________________________________________ _______________________________
Representative's Name Rep. Number
( )
_________________________________________________________________ _______________________________
Branch Address Telephone Number
_________________________________________________________________ _______________________________
Authorized Signature of Dealer Date
</TABLE>
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
CLASS B SHARES -- DEFERRED SALES CHARGE ALTERNATIVE
The Class B shares can be purchased at net asset value without an initial sales
charge. However, if the Class B shares are redeemed within six years after
purchase, they are subject to a contingent deferred sales charge (expressed as a
percentage of the lesser of the current net asset value or original cost) which
will vary according to the number of years from the purchase of Class B shares
until the redemption of those shares. The amount of the contingent deferred
sales charge on Class B shares is set forth below.
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE CDSC
- ------------------- ----
<S> <C>
Less than 1 year........................................ 5.0%
1 to 2 years............................................ 4.0%
2 to 4 years............................................ 3.0%
4 to 5 years............................................ 2.0%
5 to 6 years............................................ 1.0%
6 years or more......................................... None
</TABLE>
Class B shares are subject to higher distribution fees than Class A shares for a
period of eight years (after which they convert to Class A shares). Shares
purchased through reinvestment of dividends on Class B shares also will convert
automatically to Class A shares along with the underlying shares on which they
were earned. Conversion occurs at the end of the month which precedes the eight
anniversary of the purchase date.
The higher fees mean a higher expense ratio, so Class B shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A shares.
- --------------------------------------------------------------------------------
CLASS C SHARES -- ASSET-BASED SALES CHARGE
The Class C shares can be purchased at net asset value without any initial sales
charge. Unlike Class B shares, Class C shares do not automatically convert to
Class A shares after eight years. The Class C shares incur higher distribution
fees than Class A shares. The higher fees mean a higher expenses ratio, so Class
C shares pay correspondingly lower dividends and may have a lower net asset
value than Class A shares.
A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE IMPOSED ON REDEMPTIONS MADE WITHIN
ONE YEAR OF PURCHASE BY CLASS C ACCOUNTS.
- --------------------------------------------------------------------------------
GENERAL
In addition to the discount or commission paid to dealers, CSSI may from time to
time pay additional cash or other incentives to dealers in connection with the
sale of shares of the Fund. Such additional amounts may be utilized, in whole or
in part, in some cases together with other revenues of such dealers, to provide
additional compensation to registered representatives who sell shares of the
Fund. On some occasions, such cash or other incentives will be conditioned upon
the sale of a specified minimum dollar amount of the shares of the Fund during a
specific period of time. Such incentives may take the form of payment for
attendance at seminars, meals, sporting events or theater performances, or
payment for travel,
19
<PAGE>
<PAGE>
lodging and entertainment incurred in connection with travel by persons
associated with a dealer and their immediate family members to urban or resort
locations within or outside of the United States. Such dealer may elect to
receive cash incentives of equivalent amount in lieu of such payments.
- --------------------------------------------------------------------------------
APPLICATION OF THE CONTINGENT DEFERRED SALES CHARGE
Shares obtained from dividend or distribution reinvestment are not subject to
the contingent deferred sales charge. The contingent deferred sales charge, if
applicable, is deducted from the amount of the redemption. The contingent
deferred sales charge will be waived on redemptions of shares following the
death or disability of a shareholder or to meet the requirements of certain
qualified retirement plans. See the Statement of Additional Information for more
information.
- --------------------------------------------------------------------------------
REINSTATEMENT PRIVILEGE
If a shareholder redeems Class A shares and then decides to reinvest them, the
shareholder may, within 120 calendar days of the date of redemption, use all or
any part of the proceeds of the redemption to reinstate, free of an initial
sales charge, all or any part of the investment in Class A shares of the Fund.
If a shareholder redeems Class A shares and the redemption was subject to a
contingent deferred sales charge, the shareholder may reinstate all or any part
of the investment in shares of the same class of the Fund within 120 calendar
days of the date of redemption and receive a credit for the applicable
contingent deferred sales charge paid. Such investment will be reinstated at the
net asset value per share established as of the close of trading on the New York
Stock Exchange on the day the request is received. The transfer agent must be
informed that the purchase represents a reinstated investment. REINSTATED SHARES
MUST BE REGISTERED EXACTLY AND BE OF THE SAME CLASS AS THE SHARES PREVIOUSLY
REDEEMED; AND THE FUND'S MINIMUM INITIAL INVESTMENT AMOUNT MUST BE MET AT THE
TIME OF REINSTATEMENT.
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS
In addition to offering Class A, Class B and Class C shares, the Fund offers
Class I shares, which are described in a separate prospectus and are available
for purchase only by certain investors. The Class I shares are generally
distributed directly by the Underwriter and do not have a front-end sales charge
or a CDSC, and are not subject to Distribution Plan expenses. To obtain the
prospectus that describes the Fund's Class I shares, contact the Fund or the
Underwriter by writing to the address or by calling the telephone number listed
on the back cover of this prospectus.
- --------------------------------------------------------------------------------
PURCHASE OF SHARES
The minimum initial investment to open a shareholder account of any class is
$1,000. The minimum amount for subsequent investments in any class is $250. The
Fund's shares may be purchased through authorized dealers or directly through
CSSI, the Fund's principal underwriter. A Subscription Agreement should
accompany this Prospectus. For accounts opened directly through CSSI, a
completed and signed Subscription Agreement is required for the initial account
opened with the Fund.
20
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
INITIAL PURCHASE BY WIRE
1. Telephone toll free from any continental state: (800) 437-9912. Give the name
of the Fund, the Class(es) of shares, 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
($1,000 or more per Class purchased) to the Custodian:
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, NY 10081-1000
ABA # 021000021
Account: DDA # 910-2-733012
Attn: Cohen & Steers Equity Income Fund, Inc.
For further credit to: (Account name)
Account Number:
Wire Reference Control #:
3. Complete the Subscription Agreement located in the center of this Prospectus.
Mail the Subscription Agreement to the Transfer Agent:
Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208
- --------------------------------------------------------------------------------
ADDITIONAL PURCHASES BY WIRE
1. Telephone toll free from any continental state: (800) 437-9912. Give the name
of the Fund, the Class(es) of shares, 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: $250 per Class purchased or, if greater, the amount
necessary to increase the value of the investor's account of a Class to $1,000):
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, NY 10081-1000
ABA # 021000021
Account: DDA # 910-2-733012
Attn: Cohen & Steers Equity Income Fund, Inc.
For further credit to: (Account Name)
Account Number:
Wire Reference Control #:
- --------------------------------------------------------------------------------
INITIAL PURCHASE BY MAIL
1. Complete the Subscription Agreement located in the center of this Prospectus.
2. Mail the Subscription Agreement and a check for $1,000 or more per Class
purchased, 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: $250 per Class purchased or, if
greater, the amount necessary to increase the value of the investor's account of
a Class to $1,000). Write the shareholder's Fund account number and the Class of
shares to be purchased 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.
21
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
PURCHASES THROUGH DEALERS
Investors may purchase the Fund's shares through selected securities dealers
with whom CSSI has sales agreements. A prospective investor may obtain
additional Subscription Agreements from such authorized dealers. For a list of
authorized dealers, please contact the Fund at (800) 437-9912.
Financial service firms that do not have a sales agreement with CSSI also may
place orders for purchases of the Fund's shares, but may charge the investor a
transaction fee in addition to the applicable sales load.
Authorized dealers and financial service firms are responsible for promptly
transmitting purchase orders to CSSI.
- --------------------------------------------------------------------------------
PURCHASES THROUGH CSSI
Shares of the Fund may be purchased through CSSI by mailing a check made payable
to Cohen & Steers Equity Income Fund, Inc. along with the completed Subscription
Agreement to Cohen & Steers Equity Income Fund, Inc. c/o Chase Global Funds
Services Company, P.O. Box 2798, Boston, MA 02208-9915. CSSI will deduct any
applicable sales charge from the investor's payment.
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN
The Fund's automatic investment plan (the 'Plan') provides a convenient way to
invest in the Fund. Under the Plan, you can have money transferred automatically
from your checking account to the Fund each month to buy additional shares. If
you are interested in this Plan, please refer to the automatic investment plan
section of Subscription Agreement included with this prospectus or contact your
dealer. The market value of the Fund's shares may fluctuate and a systematic
investment plan such as this will not assure a profit or protect against a loss.
You may discontinue the program at any time by notifying the Fund by mail or
phone.
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
You may exchange some or all of your Fund shares for shares of the other mutual
funds managed by Cohen & Steers as well as for shares of Cohen & Steers Vista
Cash Management Fund, subject to the applicable contingent deferred charge, if
any. If you acquire shares of other Cohen & Steers funds by purchase (rather
than by exchange of Fund shares), you may exchange these shares for Fund shares,
subject to the applicable Fund initial sales charge, if any.
An exchange of shares pursuant to the exchange privilege may result in a
shareholder realizing a taxable gain or loss for income tax purposes. The
exchange privilege is available to shareholders residing in any state in which
the shares being acquired may be legally sold. A shareholder wishing to utilize
the exchange privilege should read the prospectus of the fund whose shares are
being acquired. Certain dealers may limit or prohibit the right of shareholders
to utilize the exchange privilege.
The Fund reserves the right to limit or terminate the exchange privilege as to
any shareholder who makes exchanges more than four times a year. The Fund can
modify or revoke the exchange privilege for all shareholders upon 60 days prior
written notice. There is no special charge for the exchange privilege. For
additional information concerning exchanges, or to effect exchanges, contact the
Fund at (800) 437-9912.
22
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
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 contingent deferred sales charge. See 'Determination of Net
Asset Value.'
Shareholders may redeem either through authorized dealers, by telephone, or
through Chase. Shares held in the dealer's 'street name' must be redeemed
through the dealer.
- --------------------------------------------------------------------------------
REDEMPTIONS THROUGH DEALERS
Shareholders who have an account with an authorized dealer may submit a
redemption request to such dealer. Authorized dealers are responsible for
promptly transmitting redemption requests to CSSI. Dealers may impose a charge
for handling redemption transactions placed through them and may have particular
requirements concerning redemptions. Accordingly, shareholders should contact
their authorized dealers for more information.
- --------------------------------------------------------------------------------
REDEMPTION BY TELEPHONE
You may submit redemption requests by telephone by calling Chase Global Funds
Services Company at (800) 437-9912 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 close of trading on the New York Stock Exchange on that
day. If a proper request is received after 4:00 p.m. Eastern time, the shares
will be redeemed as of the scheduled 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 or market changes. TELEPHONE REDEMPTION
PRIVILEGES MAY BE MODIFIED OR TERMINATED AT ANY TIME BY THE FUND UPON 30 DAYS
NOTICE TO SHAREHOLDERS.
23
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
REDEMPTION BY MAIL
Shares may be redeemed by submitting a written request for redemption to the
Transfer Agent:
Chase Global Funds Services Company
P.O. Box 2798
Boston, Massachusetts 02208-9915
Attn: Cohen & Steers Equity Income
Fund, Inc.
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 evidencing the authority of the person
making the redemption (including evidence of appointment or incumbency). 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 15 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 $1,000 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.
24
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
The Fund's policy will be to make quarterly distributions from investment
company taxable income of the Fund. Net capital gains (net long-term capital
gain in excess of net short-term capital loss), if any, are expected to be
distributed at least annually. Investment company taxable income of the Fund
consists of all of the Fund's taxable income other than the excess, if any, of
net long-term capital gain over net short-term capital loss, reduced by
deductible expenses of the Fund. The expenses of each class of shares of the
Fund are accrued each day. In addition, the Fund currently expects that a
portion of its dividends will consist of amounts in excess of investment company
taxable income derived from non-taxable components of the cash flow from the
real estate underlying the Fund's portfolio investments. These amounts would be
considered a return of capital and thus would not be subject to current
taxation. To the extent practicable, the Fund will attempt to pay quarterly
distributions to shareholders of each class of shares at a constant rate, which
may be adjusted from time to time by the Fund's Board of Directors, although
there can be no assurance that it will be able to do so. In order to maintain
such quarterly distributions, short-term capital gains, and amounts representing
a return of the shareholder's capital, may from time to time be included in
quarterly distributions. See 'Taxation.'
Dividends paid by the Fund, if any, with respect to Class A, Class B, Class C
and Class I shares will be calculated in the same manner at the same time on the
same day and will be in the same amount, except that the higher distribution and
service fees applicable to Class B or Class C shares will be borne exclusively
by that class.
- --------------------------------------------------------------------------------
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 elect and qualify annually 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.
25
<PAGE>
<PAGE>
A distribution of an amount in excess of the Fund's current and accumulated
earnings and profits will be treated by a shareholder as a return of capital
which is applied against and reduces the shareholder's basis in his or her
shares. To the extent that the amount of any such distribution exceeds the
shareholder's basis in his or her shares, the excess will be treated by the
shareholder as gain from a sale or exchange of the 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
Fund was incorporated on July 3, 1997 as a Maryland corporation and is
authorized to issue 200,000,000 shares of common stock, $0.001 par value (the
'Common Stock'). The authorized shares of the Fund are currently divided into
four classes designated Class A Common Stock, Class B Common Stock, Class C
Common Stock and Class I 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 class of shares represents an
interest in the same assets of the Fund and is identical in all respects except
that (i) each class is subject to different sales charges and distribution and
service fees, which may affect performance, and (ii) each class has exclusive
voting rights on any matter submitted to shareholders that relates solely to its
arrangement and has separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the interests of
any other class. With the exceptions noted above, 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 duly issued will be fully paid and nonassessible. 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
26
<PAGE>
<PAGE>
approval, additional portfolios, which may have different investment objectives,
or additional classes of shares.
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 role 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',
which is computed separately for Class A, Class B and Class C shares, over
various periods of time. Each total return figure shows the average percentage
change in value of an investment in the specified class of shares from the
beginning date of the measuring period to the ending date of the measuring
period. The figure reflects changes in the price of such class' shares and
assumes that any income dividends and/or capital gains distributions made by the
Fund during the period are reinvested in shares of that class 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).
For the Class A shares, each type of total return will be calculated assuming
the deduction of the maximum sales commission of 4.50% and the reinvestment of
all income dividends and capital gains distributions.
27
<PAGE>
<PAGE>
Advertisements may quote performance rankings or ratings of the Fund by
financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare the Fund's performance to
various indices.
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).
28
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A: DESCRIPTION OF BOND RATINGS
- --------------------------------------------------------------------------------
MOODY'S RATINGS
Bonds rated Aa by Moody's are judged by Moody's to be of high quality by all
standards. Together with bonds rated Aaa (Moody's highest rating), they comprise
what are generally known as high-grade bonds. Aa bonds are rated lower than Aaa
bonds because margins of protection may not be as large as those of Aaa bonds,
or fluctuations of protective elements may be of greater amplitude, or there may
be other elements present which make the long-term risks appear somewhat larger
than those applicable to Aaa securities. Bonds which are rated A by Moody's
possess many favorable investment attributes and are to be considered upper
medium-grade obligations. Factors giving security to payment of principal and
interest are considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Moody's Baa rated bonds are considered medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Bonds which are rated Ba are judged to have speculative elements because their
future cannot be considered as well assured. Uncertainty of position
characterizes bonds in this class, because the protection of interest and
principal payments may be very moderate and not well safeguarded.
Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period of time may be small. Bonds
which are rated Caa are of poor standing. Such securities may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of attaining any real
investment standing.
- --------------------------------------------------------------------------------
S&P's RATINGS
Bonds rated AA by S&P have a very strong capacity to pay interest and differ
only in a small degree from issues rated AAA (S&P's highest rating). Bonds rated
AAA are considered by S&P to be the highest grade obligations and have an
extremely strong capacity to pay interest and principal. Bonds rated A by S&P
have a strong capacity to pay principal and interest, although they are somewhat
more susceptible to the adverse effects of changes in circumstances and economic
conditions.
S&P's BBB rated bonds are regarded as having adequate capacity to pay interest
and principal. Although these bonds normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and principal.
Bonds rated BB, B, CCC, CC and C are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and principal
in accordance
29
<PAGE>
<PAGE>
with the terms of the obligation. BB indicates the lowest degree of speculation
and C the highest degree of speculation. While such bonds may have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
30
<PAGE>
<PAGE>
____________________________________ ___________________________________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
----------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fee Table.................................................................................................. 2
Financial Highlights....................................................................................... 4
Investment Objectives and Policies......................................................................... 5
Investment Techniques...................................................................................... 9
Management of the Fund..................................................................................... 11
Determination of Net Asset Value........................................................................... 15
Sales Charges.............................................................................................. 15
Purchase of Shares......................................................................................... 20
Exchange Privilege......................................................................................... 22
Redemption of Shares....................................................................................... 23
Dividends and Distributions................................................................................ 25
Taxation................................................................................................... 25
Organization and Description of Capital Stock.............................................................. 26
Custodian and Transfer and Dividend Disbursing Agent....................................................... 27
Reports to Shareholders.................................................................................... 27
Performance Information.................................................................................... 27
Additional Information..................................................................................... 28
Appendix A: Description of Bond Ratings.................................................................... 29
</TABLE>
[Logo]
CLASS A
CLASS B
CLASS C
----------
PROSPECTUS
----------
INVESTMENT ADVISER
COHEN & STEERS CAPITAL MANAGEMENT, INC.
757 THIRD AVENUE
NEW YORK, NEW YORK 10017
TELEPHONE: (212) 832-3232
TRANSFER AGENT
CHASE GLOBAL FUNDS SERVICES COMPANY
73 TREMONT ST.
BOSTON, MASSACHUSETTS 02108-3913
TELEPHONE: (800) 437-9912
MARCH 1, 1998
(AMENDED , 1998)
____________________________________ ___________________________________
<PAGE>
<PAGE>
[Logo]
- --------------------------------------------------------------------------------
Cohen & Steers Equity Income Fund, Inc. (the 'Fund') Inc. is a non-diversified,
open-end management investment company that seeks to achieve high current income
through investment in real estate securities. Capital appreciation is a
secondary objective. Under normal circumstances, the Fund will invest at least
65% of its total assets in the equity securities of real estate companies. Up to
35% of the Fund's total assets may be invested in debt securities issued or
guaranteed by real estate companies. The Fund may also invest in options,
financial futures and currency contracts. There can be no assurance that the
Fund will achieve its investment objectives. Cohen & Steers Capital Management,
Inc. serves as investment adviser to the Fund (the 'Adviser').
This Prospectus relates only to the Class I shares of the Fund and sets forth
concisely the information a prospective investor should know before
investing in the Fund. A Statement of Additional Information dated March 1,
1998 (Amended , 1998), 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 Fund also offers Class A, Class B and Class C shares. Shares of these
classes are subject to sales charges and other expenses, which may
affect their performance. A prospectus for these classes of shares can be
obtained by writing or calling the Fund at the address and
telephone number printed on the back cover of this prospectus.
- --------------------------------------------------------------------------------
INVESTORS ARE ADVISED TO READ THIS PROSPECTUS AND
RETAIN IT FOR FUTURE REFERENCE.
- --------------------------------------------------------------------------------
The Fund's shares are not deposits or obligations of, or guaranteed or endorsed
by, any bank, and the Fund's shares are not federally insured or guaranteed
by the U.S. Government, the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other agency. Shares of the Fund involve investment
risks, including the possible loss of principal.
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 COM-
MISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
MARCH 1, 1998
(AMENDED , 1998)
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
FEE TABLE
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
CLASS I
-------
<S> <C>
Maximum sales charge on purchases (as a percentage of offering price)...................... None
Maximum sales load imposed on reinvested dividends (and other distributions)............... None
Maximum deferred sales load (as a percentage of original purchase price or redemption
proceeds, whichever is lower)........................................................... None
</TABLE>
Annual Fund Operating Expenses (as a percentage of average net assets)
<TABLE>
<CAPTION>
CLASS I
-------
<S> <C>
Management fees............................................................................ 0.75%
Rule 12b-1 fees............................................................................ 0.00%
Other expenses'D'..........................................................................
-------
Total fund operating expenses..............................................................
</TABLE>
- ------------
'D' After reimbursement of expenses.
For expense information about the Class A, Class B and Class C shares of the
Fund, see the separate prospectus relating to those classes.
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):
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Class I.......................................................................... $ -- $--
</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 Securities and Exchange Commission (the 'Commission')
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 Adviser has voluntarily agreed to limit the total expenses of the Fund
(excluding interest, taxes, brokerage, and extraordinary expenses) to an annual
rate of % of the average net assets of the Fund attributable to the Class I
shares until December 31, 1998. As long as this temporary expense limitation
continues, it may lower the expenses and increase the total return attributable
to the Class I shares. After December 31, 1998, the expense limitation on the
Class I shares may be terminated or revised at any time, at which time the
expenses of such class may increase and its total return may be reduced
depending on the total assets of the Fund attributable to such class. Without
the expense reimbursement, it is estimated that the total operating expenses for
the current fiscal year for the Class I shares of the Fund would have amounted
to % of the Fund's average net assets attributable to such class for the
period.
2
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objective is to achieve high current income through
investment in real estate securities. Capital appreciation is a secondary
objective. There can be no assurance that the Fund's investment objectives will
be achieved. The Fund's investment objectives cannot be changed without the
approval of a majority of its outstanding voting securities.
Under normal circumstances, the Fund will invest at least 65% of its total
assets in the equity securities of real estate companies. Such equity securities
will consist of (i) common shares (including shares and units of beneficial
interest of REITs), (ii) rights or warrants to purchase common shares, (iii)
securities convertible into common shares where the conversion feature
represents, in the investment adviser's view, a significant element of the
securities' value, and (iv) preferred shares.
For purposes of the Fund's investment policies, a 'real estate company' is one
that derives at least 50% of its revenues from the ownership, construction,
financing, management or sale of commercial, industrial, or residential real
estate or that has at least 50% of its assets in such real estate. With the
exception of REITs, most real estate companies do not pay dividends at the
higher end of the range for common stocks as a group. The Fund's investment
adviser, however, anticipates that the Fund's equity investments in real estate
companies will primarily be in securities that do pay high dividends relative to
the stock market as a whole.
Up to 35% of the Fund's total assets may be invested in debt securities issued
or guaranteed by real estate companies. The Fund may also invest in options,
financial futures and currency contracts. When, in the judgment of the Adviser,
market or general economic conditions justify a temporary defensive position,
the Fund may deviate from its investment objectives and policies and invest all
or any portion of its assets in high-grade debt securities, including corporate
debt securities, U.S. government securities, and short-term money market
instruments, without regard to whether the issuer is a real estate company.
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS
The Fund is authorized to invest without limit 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, and 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.
- --------------------------------------------------------------------------------
DEBT SECURITIES
The Fund may invest a maximum of 35% of its total assets in investment grade and
non-investment grade debt securities of companies, including real estate
industry 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
3
<PAGE>
<PAGE>
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 Appendix
A 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.
4
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
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 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.
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 S&P's, certificates of
deposit, bankers' acceptances issued by domestic banks having total assets in
excess of one billion dollars, and money market mutual funds.
- --------------------------------------------------------------------------------
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.
Because the Fund will be concentrated in the real estate industry, the Fund may
be subject to the risks associated with the direct ownership of real
5
<PAGE>
<PAGE>
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 an 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/or 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. In certain cases, the organizational documents of a REIT may grant the
REIT's sponsors the right to exercise control over the operations of the REIT
notwithstanding their minority share ownership; a conflict of interest (for
example, the desire to postpone certain taxable events) could influence such
sponsors to not act in the best interests of the REIT's shareholders. Many REITs
are subject in their organizational documents to various anti-takeover
provisions that could have the effect of delaying or preventing a transaction or
change in control of the REIT that might involve a premium price for the REIT's
shares or otherwise may not be in the best interests of the REIT's shareholders.
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.
- --------------------------------------------------------------------------------
NON-DIVERSIFIED STATUS; PORTFOLIO TURNOVER
The Fund is classified as a 'non-diversified' investment company under the
Investment Company Act of 1940 (the '1940 Act'), which means the Fund is not
limited by the 1940 Act in the proportion of its assets that may be invested in
the securities of a single issuer. However, the Fund intends to conduct its
operations so as to qualify as a regulated investment company for purposes of
the Code, which generally will relieve the Fund of any liability for Federal
income tax to the extent its earnings are distributed to shareholders. See
'Taxation.' To so qualify, among other requirements, the Fund will limit its
investments so that, at the close of each quarter of the taxable year, (i) not
more than 25% of the market value of the Fund's total assets will be invested in
the securities of a single issuer, and (ii) with respect to 50% of the market
value of its total assets, not more than 5% of the market value of its total
assets will be invested in the securities of a single issuer and the Fund will
not own more than 10% of the outstanding voting securities of a single issuer.
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
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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% under 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.
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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.
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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 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.
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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
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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.
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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.
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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 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.
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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.
- --------------------------------------------------------------------------------
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,
custodian and transfer agent. The management of the Fund's day-to-day operations
is delegated to its officers, the Adviser and the 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, Director, Chairman and Secretary, is the Chairman and one of
the principals of Cohen & Steers Capital Management, Inc. ('Cohen & Steers' or
the 'Adviser').
Martin Cohen, Director, President and Treasurer, is the President and one of the
principals of the Adviser.
Gregory C. Clark, Director, is the principal of Wellspring Management Group.
George Grossman, Director, is an attorney at law in private practice.
Jeffrey H. Lynford, Director, is Chairman of Wellsford Group, Inc. and of
Wellsford Real Properties, Inc.
Willard H. Smith Jr., Director, is a board member of several REIT companies.
Elizabeth O. Reagan, Vice President, is a Senior Vice President of the Adviser.
Adam Derechin, Vice President and Assistant Treasurer, is a Vice President of
the Adviser.
- --------------------------------------------------------------------------------
THE ADVISER
Cohen & Steers Capital Management, Inc., 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 Board of 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 &
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Steers Realty Shares, Inc. and Cohen & Steers Special Equity Fund, Inc., both of
which are open-end investment companies. 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, and have been since the formation of the Adviser, 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 Rules of Fair
Practice 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 0.75%
of the average daily net assets of the Fund. 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.
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Year 2000
Like other investment companies, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by the Adviser, the Distributor or other service providers
to the Fund do not properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known as the 'Year 2000
Problem.' The Adviser and the Distributor are taking steps that they believe are
reasonably designed to address the Year 2000 Problem with respect to computer
systems that they use and the Adviser is taking steps to obtain reasonable
assurances that comparable steps are being taken by the Fund's other service
providers. At this time, however, there can be no assurance that these steps
will be sufficient to avoid any adverse impact to the Fund.
The Year 2000 Problem is expected to impact corporations, which may include
issuers of portfolio securities held by the Fund, to varying degrees based upon
various factors, including, but not limited to, the corporation's industry
sector
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and degree of technological sophistication. The Fund is unable to predict what
impact, if any, the Year 2000 Problem will have on issuers of the portfolio
securities held by the Fund.
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ADMINISTRATOR AND SUB-ADMINISTRATOR
The Adviser has also 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. For its services under the
Administration Agreement, the Adviser receives a monthly fee from the Fund at
the annual rate of 0.02% of the Fund's average daily net assets.
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 Chase Manhattan Bank ('Chase') as sub-administrator under a mutual fund
services agreement (the 'Mutual Fund Services Agreement'). Under the Mutual Fund
Services 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. The Adviser remains
responsible for monitoring and overseeing the performance by Chase in regards to
its obligations to the Fund under its agreement with the Fund, subject to the
overall authority of the Fund's Board of Directors.
Under the terms of the Mutual Fund Services Agreement, the Fund pays Chase a
monthly fee at the annual rate of 0.08% on the first $500 million of the Fund's
average daily net assets and at lower rates on 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.'
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DETERMINATION OF NET ASSET VALUE
Net asset value per share of each Class 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 scheduled 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 attributable to that Class, subtracting liabilities attributable to that
Class (incurred or accrued) and dividing by the total number of the shares of
such Class then outstanding.
For purposes of determining the net asset value of each Class of the Fund,
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 Board of 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. However, certain fixed-income
securities may be valued on the basis of prices provided by a pricing service
when such prices are believed by the Board of Directors to reflect the fair
market value of such securities. The prices provided by a pricing service take
into account institutional size trading in similar groups of securities and any
developments related to specific securities. Where securities are traded on more
than one exchange and also over-the-counter, the securities will generally be
valued using the quotations the Board of Directors believes reflect most closely
the value of such securities.
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PURCHASE OF SHARES
The Class I shares can be purchased at net asset value. There is no front-end or
contingent deferred sales charge.
Class I shares are available for purchase only by: (a) retirement plans
introduced by persons not associated with brokers or dealers that are primarly
engaged in the retail securities business and rollover individual retirement
accounts from such plans; (b) tax-exempt employee benefit plans of the Adviser
or its affiliates and securities dealer firms with a selling agreement with the
Underwriter; (c) institutional advisory accounts of the Adviser or its
affiliates and related employee benefit plans and rollover individual retirement
accounts from such institutional advisory accounts; (d) a bank, trust company or
similar financial institution investing for its own account or for the account
of its trust customers for whom such financial institution is exercising
investment discretion in purchasing Class I shares, except where the investment
is part of a program that requires payment to the financial institution of a
Rule 12b-1 Plan fee; and (e) registered investment advisers investing on behalf
of clients that consist solely of institutions and high net-worth individuals
having at least $1,000,000 entrusted to the adviser for investment purposes, but
only if the adviser is not affiliated or associated with a broker or dealer and
derives compensation for its services exclusively from its clients for such
advisory services.
The minimum initial investment to open a Class I shareholder account is $100,000
for individuals and $250,000 in the aggregate for advisers. The minimum amount
for subsequent Class I investments is $ . The Fund's Class I shares may be
purchased through authorized dealers or directly through CSSI, the Fund's
principal underwriter. A Subscription Agreement should accompany this
Prospectus. For accounts opened directly through CSSI, a completed and signed
Subscription Agreement is required for the initial account opened with the Fund.
In addition to offering Class I shares, the Fund also offers Class A, Class B
and Class C shares which are described in a separate prospectus. To obtain a
prospectus relating to such classes, contact the underwriter by writing to the
address or by calling the phone numbers listed on the back cover of this
Prospectus.
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INITIAL PURCHASE BY WIRE
1. Telephone toll free from any continental state: (800) 437-9912. Give the name
of the Fund, the Class of shares, 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
($100,000 or more) to the Custodian:
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, NY 10081-1000
ABA # 021000021
Account: DDA # 910-2-733012
Attn: Cohen & Steers Equity Income Fund, Inc.
For further credit to: (Account name)
Account Number:
Wire Reference Control #:
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3. Complete the Subscription Agreement located in the center of this Prospectus.
Mail the Subscription Agreement to the Transfer Agent:
Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208
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ADDITIONAL PURCHASES BY WIRE
1. Telephone toll free from any continental state: (800) 437-9912. Give the name
of the Fund, the Class of shares, 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:
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, NY 10081-1000
ABA # 021000021
Account: DDA # 910-2-733012
Attn: Cohen & Steers Equity Income Fund, Inc.
For further credit to: (Account Name)
Account Number:
Wire Reference Control #:
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INITIAL PURCHASE BY MAIL
1. Complete the Subscription Agreement located in the center of this Prospectus.
2. Mail the Subscription Agreement and a check payable to the Fund, to the
Transfer Agent at the address set forth above.
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ADDITIONAL PURCHASES BY MAIL
1. Make a check payable to the Fund. Write the shareholder's Fund account number
and the Class of shares to be purchased 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.
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EXCHANGE PRIVILEGE
You may exchange some or all of your Fund shares for shares of the other mutual
funds managed by Cohen & Steers as well as for shares of Cohen & Steers Vista
Cash Management Fund. If you acquire shares of other Cohen & Steers funds by
purchase (rather than by exchange of Fund shares), you may exchange these shares
for Fund shares.
An exchange of shares pursuant to the exchange privilege may result in a
shareholder realizing a taxable gain or loss for income tax purposes. The
exchange privilege is available to shareholders residing in any state in which
the shares being acquired may be legally sold. A shareholder wishing to utilize
the exchange privilege should read the prospectus of the fund whose shares are
being acquired. Certain dealers may limit or prohibit the right of shareholders
to utilize the exchange privilege.
The Fund reserves the right to limit or terminate the exchange privilege as to
any shareholder who makes exchanges more than four times a year. The Fund can
modify or revoke the exchange privilege for all shareholders upon 60 days' prior
written notice. There is no special charge for the exchange privilege. For
additional information concerning exchanges, or to effect exchanges, contact the
Fund at (800) 437-9912.
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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.
See 'Determination of Net Asset Value.'
Shareholders may redeem either by telephone or through Chase.
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REDEMPTION BY TELEPHONE
You may submit redemption requests by telephone by calling Chase Global Funds
Services Company at (800) 437-9912 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 close of trading on the New York Stock Exchange on that
day. If a proper request is received after 4:00 p.m. Eastern time, the shares
will be redeemed as of the scheduled 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 or market changes. TELEPHONE REDEMPTION
PRIVILEGES MAY BE MODIFIED OR TERMINATED AT ANY TIME BY THE FUND UPON 30 DAYS'
NOTICE TO SHAREHOLDERS.
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REDEMPTION BY MAIL
Shares may be redeemed by submitting a written request for redemption to the
Transfer Agent:
Chase Global Funds Services Company
P.O. Box 2798
Boston, Massachusetts 02208-9915
Attn: Cohen & Steers Equity Income
Fund, Inc.
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
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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
evidencing the authority of the person making the redemption (including evidence
of appointment or incumbency). A redemption request will not be deemed to be
properly received until Chase Global Funds Services Company receives all
required documents in proper form.
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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 15 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 $1,000 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.
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DIVIDENDS AND DISTRIBUTIONS
The Fund's policy will be to make quarterly distributions from investment
company taxable income of the Fund. Net capital gains (net long-term capital
gain in excess of net short-term capital loss), if any, are expected to be
distributed at least annually. Investment company taxable income of the Fund
consists of all of the Fund's taxable income other than the excess, if any, of
net long-term capital gain over net short-term capital loss, reduced by
deductible expenses of the Fund. The expenses of each class of shares of the
Fund are accrued each day. In addition, the Fund currently expects that a
portion of its dividends will consist of amounts in excess of investment company
taxable income derived from non-taxable components of the cash flow from the
real estate underlying the Fund's portfolio investments. These amounts would be
considered a return of capital and thus would not be subject to current
taxation. To the extent practicable, the Fund will attempt to pay quarterly
distributions to shareholders of each class of shares at a constant rate, which
may be adjusted from time to time by the Fund's Board of Directors, although
there can be no assurance that it will be able to do so. In order to maintain
such quarterly distributions, short-term capital gains, and amounts representing
a return of the shareholder's capital, may from time to time be included in
quarterly distributions. See 'Taxation.'
16
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<PAGE>
Dividends paid by the Fund, if any, with respect to Class A, Class B, Class C
and Class I shares will be calculated in the same manner at the same time on the
same day and will be in the same amount, except that the distribution and
service fees applicable to Class A, Class B or Class C shares will be borne
exclusively by that class.
- --------------------------------------------------------------------------------
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 elect and qualify annually 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 of an amount in excess of the Fund's current and accumulated
earnings and profits will be treated by a shareholder as a return of capital
which is applied against and reduces the shareholder's basis in his or her
shares. To the extent that the amount of any such distribution exceeds the
shareholder's basis in his or her shares, the excess will be treated by the
shareholder as gain from a sale or exchange of the 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.
17
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<PAGE>
- --------------------------------------------------------------------------------
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
Fund was incorporated on July 3, 1997 as a Maryland corporation and is
authorized to issue 200,000,000 shares of common stock, $.001 par value (the
'Common Stock'). The authorized shares of the Fund are currently divided into
four classes designated Class A Common Stock, Class B Common Stock, Class C
Common Stock and Class I 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 class of shares represents an
interest in the same assets of the Fund and is identical in all respects except
that (i) each class is subject to different sales charges and distribution and
service fees, which may affect performance, and (ii) each class has exclusive
voting rights on any matter submitted to shareholders that relates solely to its
arrangement and has separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the interests of
any other class. With the exceptions noted above, 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 duly issued will be fully paid and nonassessible. 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, or additional classes of shares.
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 role 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.
18
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<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
From time to time, the Fund may advertise its 'average annual total return' for
its Class I shares over various periods of time. Each total return figure shows
the average percentage change in value of an investment in the specified class
of shares from the beginning date of the measuring period to the ending date of
the measuring period. The figure reflects changes in the price of such class'
shares and assumes that any income dividends and/or capital gains distributions
made by the Fund during the period are reinvested in shares of that class 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).
Advertisements may quote performance rankings or ratings of the Fund by
financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare the Fund's performance to
various indices.
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).
19
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A: DESCRIPTION OF BOND RATINGS
- --------------------------------------------------------------------------------
MOODY'S RATINGS
Bonds rated Aa by Moody's are judged by Moody's to be of high quality by all
standards. Together with bonds rated Aaa (Moody's highest rating), they comprise
what are generally known as high-grade bonds. Aa bonds are rated lower than Aaa
bonds because margins of protection may not be as large as those of Aaa bonds,
or fluctuations of protective elements may be of greater amplitude, or there may
be other elements present which make the long-term risks appear somewhat larger
than those applicable to Aaa securities. Bonds which are rated A by Moody's
possess many favorable investment attributes and are to be considered upper
medium-grade obligations. Factors giving security to payment of principal and
interest are considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Moody's Baa rated bonds are considered medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Bonds which are rated Ba are judged to have speculative elements because their
future cannot be considered as well assured. Uncertainty of position
characterizes bonds in this class, because the protection of interest and
principal payments may be very moderate and not well safeguarded.
Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period of time may be small. Bonds
which are rated Caa are of poor standing. Such securities may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of attaining any real
investment standing.
- --------------------------------------------------------------------------------
S&P's RATINGS
Bonds rated AA by S&P have a very strong capacity to pay interest and differ
only in a small degree from issues rated AAA (S&P's highest rating). Bonds rated
AAA are considered by S&P to be the highest grade obligations and have an
extremely strong capacity to pay interest and principal. Bonds rated A by S&P
have a strong capacity to pay principal and interest, although they are somewhat
more susceptible to the adverse effects of changes in circumstances and economic
conditions.
S&P's BBB rated bonds are regarded as having adequate capacity to pay interest
and principal. Although these bonds normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and principal.
Bonds rated BB, B, CCC, CC and C are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and principal
in accordance
20
<PAGE>
<PAGE>
with the terms of the obligation. BB indicates the lowest degree of speculation
and C the highest degree of speculation. While such bonds may have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
21
<PAGE>
<PAGE>
- -------------------------------------------------------------------------------
COHEN & STEERS EQUITY INCOME FUND, INC. -- CLASS I SHARES ONLY
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
1 ACCOUNT TYPE (Please print; indicate only one registration type)
[ ] INDIVIDUAL OR JOINT ACCOUNT
</TABLE>
<TABLE>
<S> <C> <C>
- -
__________________________________________________________ __________________________________
Name Social Security Number
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
__________________________________________________________
Name of Joint Registrant, if any.
(For joint registrations, the account registrants will be joint tenants with the right of survivorship and not
tenants in common unless tenants in common or community property registrations are requested.)
[ ] TRUST [ ] CORPORATION [ ] PARTNERSHIP [ ] OTHER ENTITY
-
__________________________________________________________ __________________________________
Name of Entity Tax Identification Number
__________________________________________________________ __________________________________
Name of Trust Agreement (if applicable) Date of Trust Agreement (if applicable)
[ ] UNIFORM GIFT TO MINORS, OR [ ] UNIFORM TRANSFER TO MINORS (where allowed by Law)
__________________________________________________________ Under the ______________ (state of residence
Name of Adult Custodian (only one permitted) of minor) Uniform Gifts/Transfer to
Minor's Act
- -
__________________________________________________________ __________________________________
Name of Minor (only one permitted) Minor's Social Security Number
- ------------------------------------------------------------------------------------------------------------------
2 MAILING ADDRESS
( )
__________________________________________________________ __________________________________
Street or P.O. Box Home Telephone Number
( )
__________________________________________________________ __________________________________
City and State Zip Code Business Telephone Number
- ------------------------------------------------------------------------------------------------------------------
3 INVESTMENT INFORMATION
$_______________ Amount to invest ($100,000 minimum investment for individual, or $250,000 minimum
investment for adviser). Do not send cash. Investment will be paid for by
(please check one):
[ ] Check or draft made payable to 'Cohen & Steers Equity Income Fund, Inc.'
[ ] Wire through the Federal Reserve System.* ______________________________
Wire Reference Control Number
* Call (800) 437-9912 to notify the Fund of investments by wire and to obtain a Wire Reference Control Number.
- ------------------------------------------------------------------------------------------------------------------
4 EXCHANGE PRIVILEGES
Exchange privileges will be automatically granted unless you check the box below. Shareholders wishing to
exchange into other Cohen & Steers Funds should consult the Exchange Privilege section of the Prospectus. (Note:
If shares are being purchased through a dealer, please contact your dealer for availability of this service.)
[ ] I decline the exchange privilege.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
5 REDEMPTION PRIVILEGES
Shareholders may select the following redemption privileges by checking the box(es) below. See REDEMPTION OF
SHARES section of the Prospectus for further details. Redemption privileges will be automatically declined for
boxes not checked.
[ ] I authorize the Transfer Agent to redeem shares in my account(s) by telephone, in accordance with the
procedures and conditions set forth in the Fund's current Prospectus.
[ ] I wish to have redemption proceeds paid by wire (please complete Section 9).
- ------------------------------------------------------------------------------------------------------------------
6 DISTRIBUTION OPTIONS
Dividends and capital gains may be reinvested or paid by check. If no options are selected below, both dividends
and capital gains will be reinvested in additional Fund shares.
Dividends [ ] Pay in cash. [ ] Reinvest.
Capital Gains [ ] Pay in cash. [ ] Reinvest.
[ ] I wish to have my distributions paid by wire (please complete Section 9).
- ------------------------------------------------------------------------------------------------------------------
7 BANK OF RECORD (FOR WIRE INSTRUCTIONS AND /OR THE AUTOMATIC INVESTMENT PLAN)
PLEASE ATTACH A VOIDED CHECK FROM YOUR BANK ACCOUNT.
__________________________________________________________ _____________________________
Bank Name Bank ABA Number
__________________________________________________________ _____________________________
Street or P.O. Box Bank Account Number
__________________________________________________________ _____________________________
City and State Zip Code Account Name
- ------------------------------------------------------------------------------------------------------------------
8 SIGNATURE AND TAXPAYER CERTIFICATION
By signing this form, the Investor represents and warrants that: (a) the Investor has the full right, power and
authority to invest in the Fund; and (b) the Investor has received a current prospectus of the Fund and agrees
to be bound by its terms. Persons signing as representatives or fiduciaries of corporations, partnerships,
trusts or other organizations are required to furnish corporate resolutions or similar documents providing
evidence that they are authorized to effect securities transactions on behalf of the Investor (alternatively,
the secretary or designated officer of the organization may certify the authority of the persons signing on the
space provided below). In addition, signatures of representatives or fiduciaries of corporations and other
entities must be accompanied by a signature guarantee by a commercial bank that is a member of the Federal
Deposit Insurance Corporation, a trust company or a member of a national securities exchange.
PLEASE CHECK ONE:
[ ] U.S. CITIZEN/TAXPAYER
UNDER THE PENALTIES OF PERJURY, THE UNDERSIGNED CERTIFIES THAT: (1) THE TAXPAYER IDENTIFICATION NUMBER PROVIDED
IS CORRECT, AND (2) I/WE ARE NOT SUBJECT TO BACKUP WITHHOLDING BECAUSE: (A) I/WE ARE EXEMPT FROM BACKUP
WITHHOLDING, OR (B) I/WE HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE ('IRS') THAT I/WE ARE SUBJECT TO
BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR (C) THE IRS HAS NOTIFIED ME
THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. NOTE: IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE
CURRENTLY SUBJECT TO BACKUP WITHHOLDING BECAUSE OF UNDER-REPORTING INTEREST OF DIVIDENDS ON YOUR TAX RETURN, YOU
MUST CROSS OUT ITEM 2 ABOVE.
[ ] NON U.S. CITIZEN/TAXPAYER (FORM W-8 ATTACHED)
INDICATE COUNTRY OF RESIDENCE FOR TAX PURPOSES _____________________________
UNDER PENALTY OF PERJURY, I/WE CERTIFY THAT I/WE ARE NOT U.S. CITIZENS AND I/WE ARE EXEMPT FOREIGN PERSONS AS
DEFINED BY THE IRS. THE IRS DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE
CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
I certify that (1) the information provided on this Subscription Agreement is true, correct and complete, (2) I
have read the prospectus for the Fund and agree to the terms thereof, and (3) I am of legal age or an
emancipated minor.
x x
__________________________________________ _________ __________________________________________ __________
Signature (Owner, Trustee, Etc.) Date Signature (Joint Owner, Co-Trustee) Date
</TABLE>
Mail to: Chase Global Funds Services Company, P.O. Box 2798, Boston, MA 02208
<PAGE>
<PAGE>
____________________________________ ___________________________________
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fee Table.................................................................................................. 2
Investment Objectives and Policies......................................................................... 3
Investment Techniques...................................................................................... 7
Management of the Fund..................................................................................... 9
Determination of Net Asset Value........................................................................... 12
Purchase of Shares......................................................................................... 13
Exchange Privilege......................................................................................... 14
Redemption of Shares....................................................................................... 15
Dividends and Distributions................................................................................ 16
Taxation................................................................................................... 17
Organization and Description of Capital Stock.............................................................. 18
Custodian and Transfer and Dividend Disbursing Agent....................................................... 18
Reports to Shareholders.................................................................................... 18
Performance Information.................................................................................... 19
Additional Information..................................................................................... 19
Appendix A: Description of Bond Ratings.................................................................... 20
</TABLE>
[Logo]
CLASS I
----------
PROSPECTUS
----------
INVESTMENT ADVISER
COHEN & STEERS CAPITAL MANAGEMENT, INC.
757 THIRD AVENUE
NEW YORK, NEW YORK 10017
TELEPHONE: (212) 832-3232
TRANSFER AGENT
CHASE GLOBAL FUNDS SERVICES COMPANY
73 TREMONT ST.
BOSTON, MASSACHUSETTS 02108-3913
TELEPHONE: (800) 437-9912
MARCH 1, 1998
(AMENDED , 1998)
____________________________________ ___________________________________
<PAGE>
<PAGE>
[Logo]
757 Third Avenue
New York, New York 10017
(212) 832-3232
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1998
(AMENDED , 1998)
Cohen & Steers Equity Income Fund, Inc. (the 'Fund') is a non-diversified,
open-end management investment company that seeks to achieve high current income
through investment in real estate securities. Capital appreciation is a
secondary objective. Under normal circumstances, the Fund will invest at least
65% of its total assets in the equity securities of real estate companies. Up to
35% of the Fund's total assets may be invested in debt securities issued or
guaranteed by real estate companies. The Fund may also invest in options,
financial futures and currency contracts. There can be no assurance that the
Fund will achieve its investment objectives. 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 MARCH 1, 1998 (AMENDED , 1998) (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.
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Restrictions and Policies.......................................................... 1
Investment Techniques......................................................................... 2
Management of the Fund........................................................................ 6
Determination of Net Asset Value.............................................................. 12
Redemption of Shares.......................................................................... 13
Contingent Deferred Sales Charges............................................................. 13
Portfolio Transactions and Brokerage.......................................................... 15
Taxation...................................................................................... 16
Organization and Description of Capital Stock................................................. 23
Principal Underwriter......................................................................... 23
Custodian and Transfer and Dividend Disbursing Agent.......................................... 23
Performance Information....................................................................... 23
Legal Matters................................................................................. 25
Accountants................................................................................... 25
Financial Statements.......................................................................... 25
</TABLE>
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS AND POLICIES
Cohen & Steers Equity Income Fund, Inc. (the 'Fund') is a registered open-end
management investment company. The fundamental investment objectives 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, or pledge its assets, except that the Fund may borrow money
from banks for temporary or emergency purposes, including the meeting of
redemption requests which might require the untimely disposition of securities.
Borrowing in the aggregate may not exceed 15%, and borrowing for purposes other
than meeting redemptions may not exceed 5%, of the value of the Fund's total
assets (including the amount borrowed) less liabilities (not including the
amount borrowed) at the time the borrowing is made. Outstanding borrowings in
excess of 5% of the value of the Fund's total assets will be repaid before any
subsequent investments are made;
(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
1
<PAGE>
<PAGE>
and securities indexes, and (b) write covered put and 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 Objectives 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.
- --------------------------------------------------------------------------------
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 securities issued by equity REITs.
2
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
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.
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
3
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<PAGE>
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 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
4
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<PAGE>
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 that is 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 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
5
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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.
- --------------------------------------------------------------------------------
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 Adviser, and Cohen & Steers Realty Shares, Inc. and
Cohen & Steers Special Equity Fund, Inc., both of which are open-end investment
companies sponsored by the Adviser.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS DURING THE PAST
NAME AND ADDRESS OFFICE FIVE YEARS
---------------- ------ ----------
<S> <C> <C>
*Robert H. Steers ............... Director, Chairman Chairman of Cohen & Steers Capital Management,
757 Third Avenue and Secretary Inc., the Fund's investment adviser.
New York, New York Chairman and President of Cohen & Steers
Age: 44 Securities, Inc.
*Martin Cohen ................... Director, President President of Cohen & Steers Capital
757 Third Avenue and Treasurer Management, Inc., the Fund's investment
New York, New York adviser. Vice President of Cohen & Steers
Age: 48 Securities, Inc.
Gregory C. Clark ................ Director Principal of Wellspring Management Group.
376 Mountain Laurel Drive
Aspen, Colorado
Age: 50
George Grossman ................. Director Attorney at law.
17 Elm Place
Rye, New York
Age: 43
</TABLE>
6
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<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS DURING THE PAST
NAME AND ADDRESS OFFICE FIVE YEARS
---------------- ------ ----------
<S> <C> <C>
Jeffrey H. Lynford .............. Director Chairman of Wellsford Group Inc. since 1986
610 Fifth Avenue and of Wellsford Real Properties, Inc.
New York, New York since 1992. Mr. Lynford is also an Emeritus
Age: 49 Trustee of the National Trust for Historic
Preservation.
Willard H. Smith Jr. ............ Director Board member Essex Property Trust, Inc.,
7 Slayton Drive Highwoods Properties, Inc., Realty Income
Short Hills, New Jersey Corporation and Willis Lease Finance
Age: 60 Corporation. Managing director at Merrill
Lynch & Co., Equity Capital Markets
Division from 1983 to 1995.
Elizabeth O. Reagan ............. Vice President Senior Vice President of Cohen & Steers
757 Third Avenue Capital Management, Inc., the Fund's
New York, New York investment adviser, since 1996 and prior to
Age: 34 that Vice President of Cohen & Steers
Capital Management, Inc.
Adam Derechin ................... Vice President and Vice President of Cohen & Steers Capital
757 Third Avenue Assistant Treasurer Management, Inc., the Fund's investment
New York, New York adviser, since 1995. Administrator to Cohen
Age: 33 & Steers Capital Management, Inc. since
1993. Prior to that studied at the
University of Maryland at College Park.
</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 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 $5,500, and a fee of $500
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 compensation of Directors
by the Fund and by the fund complex of which the Fund is a part for the fiscal
year ended December 31, 1997. Officers of the Fund and Directors who are
interested persons of the Fund do not receive any compensation from the Fund or
any other fund in the fund complex which is a U.S. registered investment
company. Neither the Fund nor any other fund in the fund complex of which the
Fund is a part provides compensation in the form of pension or retirement
benefits to any of its directors. In the Column headed 'Total Compensation From
Registrant and Fund Complex Paid to Directors,' the number in parentheses
indicates the total number of boards in the fund complex on which the Director
serves.
7
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<PAGE>
Compensation Table
Fiscal Year Ended December 31, 1997
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
FROM REGISTRANT
AGGREGATE AND FUND
COMPENSATION COMPLEX PAID TO
NAME OF PERSON, POSITION FROM REGISTRANT DIRECTORS
------------------------ --------------- ---------
<S> <C> <C>
Gregory C. Clark*, Director............... $ 2,833 $31,458(5)
Martin Cohen**, Director and President.... 0 0(5)
George Grossman*, Director................ 2,833 31,458(5)
Jeffrey H. Lynford*, Director............. 2,833 31,458(5)
Willard H. Smith Jr.*, Director........... 2,833 31,458(5)
Robert H. Steers**, Director and
Chairman............................... 0 0(5)
</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.
- --------------------------------------------------------------------------------
ADVISER AND INVESTMENT ADVISORY AGREEMENT
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. and Cohen & Steers Special
Equity Fund, Inc., both of which are open-end investment companies. 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.
8
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Under the Advisory Agreement, the Fund will pay the Adviser a monthly management
fee in an amount equal to 1/12th of 0.75% of the average daily value of the net
assets of the Fund. During the period from September 2, 1997 (commencement of
operations) through December 31, 1997, the Adviser received a management fee
from the Fund in the amount of $45,083.
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 August 13, 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 and by the sole initial shareholder of the Fund on August 13,
1997.
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 60 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 60
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.
- --------------------------------------------------------------------------------
ADMINISTRATOR AND SUB-ADMINISTRATOR
The Adviser has also 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 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
9
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<PAGE>
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. For its services
under the Administration Agreement, the Adviser receives a monthly fee from the
Fund at the annual rate of 0.02% of the Fund's average daily net assets.
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 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 Administration Agreement, the Adviser remains
responsible for monitoring and overseeing the performance by Chase of its
obligations to the Fund under its agreement with the Fund, subject to the
overall authority of the Fund's Board of Directors.
Under the terms of the Administration Agreement, the Fund pays Chase a monthly
administration fee at the annual rate of 0.08% on the first $500 million of the
Fund's average daily net assets and at lower rates on 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.'
During the period from September 2, 1997 (commencement of operations) through
December 31, 1997, the Adviser received adminstration fees from the Fund in the
amount of $1,196, and Chase received sub-administration fees from the Fund in
the amount of $19,972.
The Sub-Administration Agreement is terminable by either party on 60 days'
written notice to the other. The Sub-Administration Agreement provides that in
the absence of willful misfeasance, bad faith or gross negligence on the part of
the Sub-Administrator, or of reckless disregard of its obligations thereunder,
Chase shall not be liable for any action or failure to act in accordance with
its duties thereunder.
10
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- --------------------------------------------------------------------------------
DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan and related agreements pursuant to Rule
12b-1 under the Investment Company Act of 1940, which provides that investment
companies may pay distribution expenses, directly or indirectly, pursuant to a
Distribution Plan adopted by the investment company's Board and approved by its
shareholders. Under the Distribution Plan, the Fund makes assistance payments to
brokers, financial institutions and other financial intermediaries ('payee(s)')
for shareholder accounts ('qualified accounts') as to which a payee has rendered
distribution assistance services to shareholders at annual rates of 0.25%, 0.75%
and 0.75% of the average net asset value of the Fund attributable to Class A
shares, Class B shares and Class C shares, respectively. The Class I shares do
not participate in the Distribution Plan. Substantially all such monies are paid
by CSSI to payees for their distribution assistance with any remaining amounts
being used to partially defray other expenses (including interest and other
financing costs in the case of Class B shares) incurred by CSSI in distributing
Fund shares. In addition to the amounts required by the Distribution Plan, CSSI
may, in its discretion, pay additional amounts from its own resources. Beginning
with the second year after an investment is made, payees receive an annual
distribution assistance payment of 0.25% of the average daily net asset value
attributable to shares for which the payee provides services. This fee is paid
quarterly in arrears. The Directors have determined that there is a reasonable
likelihood the Distribution Plan will benefit the Fund and its shareholders.
The Distribution Plan became effective on September 2, 1997 with respect to
Class A shares and was amended as of January 6, 1998 to permit the distribution
of Class B and Class C shares. During the period from September 2, 1997
(commencement of operations) through December 31, 1997, with respect to the
Class A shares, the Fund paid distribution services fees for expenditures under
the Distribution Plan, in the aggregate amount of $13,370, which constituted
0.25% of the Fund's average daily net assets attributable to the Class A shares
during the period. Of the $13,370 paid by the Fund under the Distribution Plan,
with respect to the Class A shares, $0 was spent on advertising, $0 was spent on
the printing and mailing of prospectuses for persons other than current
shareholders, $13,370 was spent for compensation to broker-dealers and other
financial intermediaries (including $13,370 for compensation to sales personnel
and $0 was spent on printing of sales literature, travel, entertainment, due
diligence and other promotional expenses.
The Glass-Steagall Act prohibits all entities which receive deposits from
engaging to any extent in the business of issuing, underwriting, selling, or
distributing securities, although national and state chartered banks are
permitted to purchase and sell securities upon the order and for the account of
their customers. Those persons who wish to provide assistance in the form of
activities not primarily intended to result in the sale of Fund shares (such as
administrative and account maintenance services) may include banks, upon advice
of counsel that they are permitted to do so under applicable laws and
regulations, including the Glass-Steagall Act. In such event, no preference will
be given to securities issued by such banks as investments and the assistance
payments received by such banks under the Distribution Plan may or may not
compensate the banks for their administrative and account maintenance services
for which the banks may also receive compensation from the bank accounts they
11
<PAGE>
<PAGE>
service. It is Fund management's position that payments to banks pursuant to the
Distribution Plan for activities not primarily intended to result in the sale of
Fund shares, such as administrative and account maintenance services, do not
violate the Glass-Steagall Act. However, this is an unsettled area of the law
and if a determination contrary to management's position is made by a bank
regulatory agency or court concerning payments to banks contemplated by the
Distribution Plan, any such payments will be terminated and any shares
registered in the bank's name, for its underlying customer, will be registered
in the name of that customer. Financial institutions providing distribution
assistance or administrative services for the Fund may be required to register
as securities dealers in certain states.
Under the Distribution Plan, the Fund's Treasurer reports quarterly the amounts
and purposes of assistance payments. During the continuance of the Distribution
Plan the selection and nomination of the disinterested Directors are at the
discretion of the disinterested Directors currently in office.
The Distribution Plan and related agreements were duly approved by the
shareholders and may be terminated at any time by a vote of the shareholders or
by vote of the disinterested Directors. The Distribution Plan and related
agreements may be renewed from year to year if approved by a vote of the
majority of the Board of Directors, and by the vote of a majority of the
disinterested Directors cast in person at a meeting called for the purpose of
voting on such renewal. The Distribution Plan may not be amended to increase
materially the amount to be spent for distribution without shareholder approval.
All material amendments to the Distribution Plan must be approved by a vote of
the Board of Directors and of the disinterested Directors, cast in person at a
meeting called for the purpose of such vote.
Pursuant to the rules of the NASD, CSSI is required to limit aggregate initial
sales charges, deferred sales charges and asset-based sales charges to 6.25% of
total gross sales of each class of shares. Interest charges on unreimbursed
distribution expenses equal to the prime rate plus one percent per annum may be
added to the 6.25% limitation. Sales from the reinvestment of dividends and
distributions are not included in the calculation of the 6.25% limitation. The
annual asset-based sales charge on shares of the Fund may not exceed .75 of 1%
per class. The 6.25% limitation applies to each class of the Fund rather than on
a per shareholder basis. If aggregate sales charges were to exceed 6.25% of
total gross sales of any class, all sales charges on shares of that class would
be suspended.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
Net asset value per share of each class 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
materially affect the Fund's net asset value. The New York Stock Exchange is
closed on Saturdays, Sundays, and on New Years' Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas 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, Jr. Day, Columbus Day and
Veteran's Day, nor on any of the Holidays.
12
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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.
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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' less any applicable contingent deferred sales charge on redemptions of
Class B shares made within six years of purchase and on certain redemptions of
Class A and Class C shares made within 12 months following purchases without a
sales charge), 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.
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CONTINGENT DEFERRED SALES CHARGES
CLASS A SHARES
With respect to purchases of $1,000,000 or more, Class A shares redeemed within
one year of purchase will be subject to a contingent deferred sales charge equal
to 1% of the lesser of the cost of the shares being redeemed or their net asset
value at the time of redemption. Accordingly, no sales charge will be imposed on
increases in net asset value above the initial purchase price. In addition, no
charge will be assessed on shares derived from reinvestment of dividends or
capital gains distributions. In determining, the contingent deferred sales
charge applicable to a redemption of Class A shares, it will be assumed that the
redemption is, first, of any shares that are not subject to a contingent
deferred sales charge (for example, because an initial sales charge was paid
with respect to the shares, or they have been held beyond the period during
which the charge applies or were acquired upon the reinvestment of dividends and
distributions) and, second, of shares held longest during the time they are
subject to the sales charge. Proceeds from the contingent deferred sales charge
on Class A shares are paid to CSSI and are used by CSSI to defray the expenses
of CSSI related to providing distribution-related services to the Fund in
connection with the sales of Class A shares, such as the payment of compensation
to selected dealers or financial intermediaries for selling Class A shares.
CLASS B SHARES
Class B shares that are redeemed within six years of purchase will be subject to
a contingent deferred sales charge at the rates set forth in the prospectus
charged as a percentage of the dollar amount subject thereto. The charge will be
assessed on an amount equal to the lesser of the cost of the shares being
redeemed or their net asset value at the time of redemption. Accordingly, no
sales charge will be imposed on increases in net asset value above
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the initial purchase price. In addition, no charge will be assessed on shares
derived from reinvestment of dividends or capital gains distributions.
Proceeds from the contingent deferred sales charge on the Class B shares are
paid to CSSI and are used by CSSI to defray the expenses of CSSI related to
providing distribution-related services to the Fund in connection with the sale
of the Class B shares, including payments to dealers and other financial
intermediaries for selling Class B shares and interest and other financing costs
associated with the Class B shares.
In determining the contingent deferred sales charge applicable to a redemption
of Class B shares, it will be assumed that the redemption is, first, of any
shares that were acquired upon the reinvestment of dividends or distributions
and, second, of any shares held longest during the time they are subject to the
sales charge. When shares acquired in an exchange are redeemed, the applicable
contingent deferred sales charge and conversion schedules will be the schedules
that applied at the time of the purchase of shares of the corresponding class of
the fund originally purchased by the shareholder.
The contingent deferred sales charge is waived on redemptions of shares (i)
following the death or disability, as defined in the Internal Revenue Code of
1986, as amended (the 'Code'), of a shareholder, (ii) to the extent that the
redemption represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who has attained
the age of 70 1/2, or (iii) that had been purchased by present or former
directors of the Fund, by the relative of any such person, by any trust,
individual retirement account or retirement plan account for the benefit of any
such person or relative, or by the estate of any such person or relative.
Conversion Feature. At the end of the month which precedes the eighth
anniversary of the purchase date of a shareholder's Class B shares, such Class B
shares will automatically convert to Class A shares and will no longer be
subject to higher distribution and service fees. Such conversion will occur on
the basis of the relative net asset values of the two classes, without the
imposition of any sales load, fee or other charge. The purpose of the conversion
feature is to reduce the distribution and service fees paid by holders of Class
B shares that have been outstanding long enough for CSSI to have been
compensated for distribution expenses incurred in the sale of such shares.
For purposes of conversion to Class A, Class B shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B shares in
a shareholder's account will be considered to be held in a separate sub-account.
Each time any Class B shares in the shareholder's account (other than those in
the sub-account) convert to Class A, an equal pro-rata portion of the Class B
shares in the sub-account will also convert to Class A.
CLASS C SHARES
Class C shares that are redeemed within one year of purchase will be subject to
a contingent deferred sales charge of 1%, charged as a percentage of the dollar
amount subject thereto. The charge will be assessed on an amount equal to the
lesser of the cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed on increases in
net asset value above the initial purchase price. In addition, no charge will be
assessed on shares derived from reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge on Class C shares will be
waived on certain redemptions, as described above under 'Contingent Deferred
Sales Charges -- Class B Shares.' In determining the contingent deferred sales
charge applicable to a redemption of Class C shares, it will be assumed that the
redemption is, first, of any
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shares that are not subject to a contingent deferred sales charge (for example,
because the shares have been held beyond the period during which the charge
applies or were acquired upon the reinvestment of dividends or distributions)
and, second, of shares held longest during the time they are subject to the
sales charge.
Proceeds from the contingent deferred sales charge are paid to CSSI and are used
by CSSI to defray the expenses of CSSI related to providing distribution-related
services to the Fund in connection with the sale of the Class C shares, such as
the payment of compensation to dealers and financial intermediaries for selling
Class C shares.
CLASS I SHARES
Class I shares are not subject to a contingent deferred sales charge.
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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
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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 Rules of Fair Practice 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.
For the period September 2, 1997 (commencement of operations) through December
31, 1997, the Fund paid a total of $123,606 in brokerage commissions with
respect to portfolio transactions aggregating $66,166,853. Of such amount,
$73,422 in brokerage commissions with respect to portfolio transactions
aggregating $28,682,288 was placed with brokers or dealers who provide research
and investment information. The Fund's portfolio turnover rate for the fiscal
period ended December 31, 1997 was 87.2%.
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TAXATION
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TAXATION OF THE FUND
The Fund intends to qualify annually and to elect to be treated as a regulated
investment company under 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) for taxable years beginning before January 1, 1998, 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 (this restriction will not be applicable beginning in 1998);
(c) diversify its holding so that, at 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 Funds intends to
distribute to its shareholders, at least annually, substantially all of its
investment company taxable income and net capital gains. Amounts not distributed
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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 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.
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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 value of a share of the
Fund on the reinvestment date.
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.
A distribution of an amount in excess of the Fund's current and accumulated
earnings and profits will be treated by a shareholder as a return of capital
which is applied against and reduces the shareholder's basis in his or her
shares. To the extent that the amount of any such distribution exceeds the
shareholder's basis in his or her shares, the excess will be treated by the
shareholder as gain from a sale or exchange of the shares.
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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.
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ORIGINAL ISSUE DISCOUNT SECURITIES
Investments by the Fund in zero coupon or other discount securities will result
in income to the Fund equal to a portion of the excess of the face value of the
securities over their issue price (the 'original issue discount') each year that
the securities are held, even though the Fund receives no cash interest
payments. This income is included in determining the amount of income which the
Fund must distribute to maintain its status as a regulated investment company
and to avoid the payment of federal income tax and the 4% excise tax. In
addition, if the Fund invests in certain high yield original issue discount
securities issued by corporations, a portion of the original issue discount
accruing on any such obligation may be eligible for the deduction for dividends
received by corporations. In such event, dividends of investment company taxable
income received from the Fund by its corporate shareholders, to the extent
attributable to such portion of accrued original issue discount, may be eligible
for this deduction for dividends received by corporations if so designated by
the Fund in a written notice to shareholders.
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MARKET DISCOUNT BONDS
Gains derived by the Fund from the disposition of any market discount bonds
(i.e., bonds purchased other than at original issue, where the face value of the
bonds exceeds their purchase price) held by the Fund will be taxed as ordinary
income to the extent of the accrued market discount of the bonds, unless the
Fund elects to include the market discount in income as it accrues.
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OPTIONS AND HEDGING TRANSACTIONS
The taxation of equity options and over-the-counter options on debt securities
is governed by Code section 1234. Pursuant to Code section 1234, the premium
received by the Fund for selling a put or call option is not included in income
at the time of receipt. If the option expires, the premium is short-term capital
gain to the Fund. If the Fund enters into a closing transaction, the difference
between the amount paid to close out its position and the premium is received is
short-term capital gain or loss. If a call option written by the Fund is
exercised, thereby requiring the Fund to sell the underlying security, the
premium will increase the amount realized upon the sale of such security and any
resulting gain or loss will be capital gain or loss, and will be long-term or
short-term depending upon the holding period of the security. With respect to a
put or call option that is purchased by the Fund, if the option is sold, any
resulting gain or loss will be a capital gain or loss, and will be long-term or
short-term, depending upon the holding period of the option. If the option
expires, the resulting loss is a capital loss and is long-term or short-term
depending upon the holding period of the option. If the option is exercised, the
cost of the option, in the case of a call option, is added to the basis of the
purchased security and, in the case of a put option, reduces the amount realized
on the underlying security in determining gain or loss.
Certain options, futures contracts and forward contracts in which the Fund may
invest are 'Section 1256 contracts.' Gains or losses on section 1256 contracts
generally are considered 60% long-term and 40% short-term capital gains or
losses ('60-40'); however, foreign currency gains or losses (as discussed below)
arising from certain section 1256 contracts may be treated as ordinary income or
loss. Also, section 1256 contracts held by the Fund at the end of each taxable
year (and, generally, for purposes of the 4% excise tax, on October 31 of each
year) are 'marked-to-market' (that is, treated as sold at fair market value),
resulting in
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unrealized gains or losses being treated as though they were realized.
Generally, the hedging transactions undertaken by the Fund may result in
'straddles' for U.S. federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by the Fund. In addition, losses
realized by the Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to the Fund of engaging in hedging
transactions are not entirely clear. Hedging transactions may increase the
amount of short-term capital gain realized by the Fund which is taxed as
ordinary income when distributed to shareholders.
The Fund may make one or more of the elections available under the Code which
are applicable to straddles. If the Fund makes any of the elections, the amount,
character and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because the straddle rules may affect the character of gains or losses, defer
losses and/or accelerate the recognition of gains or losses from the affected
straddle positions, the amount which may be distributed to shareholders, and
which will be taxed to them as ordinary income or long-term capital gain, may be
increased or decreased as compared to a fund that did not engage in such hedging
transactions.
A Fund will not realize gain or loss on a short sale of a security until it
closes the transaction by delivering the borrowed security to the lender. All or
a portion of any gain arising from a short sale may be treated as short-term
capital gain, regardless of the period for which the Fund held the security used
to close the short sale. In addition, the Fund's holding period for any security
which is substantially identical to that which is sold short may be reduced or
eliminated as a result of the short sale. In many cases, the Fund is required to
recognize gain (but not loss) upon entering into a short sale with respect to an
appreciated security that the Fund owns, as though the Fund constructively sold
the security at the time of entering into the short sale.
Notwithstanding any of the foregoing, the Fund may recognize gain (but not loss)
from a constructive sale of certain 'appreciated financial positions' if the
Fund enters into a short sale, offsetting notational principal contract, futures
or forward contract transactions with respect to the appreciated position or
substantially identical property. Appreciated financial positions subject to
this constructive sale treatment are interests (including options, futures and
forward contracts and short sales) in stock, partnership interests, certain
actively traded trust instruments and certain debt instruments. Constructive
sale treatment of appreciated financial positions does not apply to certain
transactions closed in the 90-day period ending with the 30th day after the
close of the Fund's taxable year, if certain conditions are met.
Similarly, if the Fund enters into a short sale of property that becomes
substantially worthless, the fund will recognize gain at that time as though it
had closed the short sale. Future regulations may supply similar treatment to
other transactions with respect to property that becomes substantially
worthless.
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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 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, and on disposition of certain options, futures and foreign
currency contracts, gains or losses attributable to fluctuations in the value of
foreign currency between the date of acquisition of the security or contract 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.
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INVESTMENT 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
existing Treasury regulations, 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.
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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 rate in effect for such year, and the tax would be further
increased by an interest
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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 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;
any resulting loss and any loss from an actual dispostion of the stock would be
reported as ordinary loss to the extent of any net marked-to-market gains
reported in prior years.
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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.
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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.
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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
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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
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 entited 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.
22
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
ORGANIZATION AND DESCRIPTION OF CAPITAL STOCK
The Fund was incorporated on July 3, 1997 as a Maryland corporation and is
authorized to issue 200,000,000 shares of Common Stock, $.001 par value. The
authorized shares of the Fund are currently divided into three classes
designated Class A Common Stock, Class B Common Stock, Class C Common Stock and
Class I Common Stock. The Fund's shares have no preemptive or conversion rights.
Each class of shares represents an interest in the same assets of the Fund and
is identical in all respects except that (i) each class is subject to different
sales charges and distributions and service fees, which may affect performance,
and (ii) each class has exclusive voting rights on any matter submitted to
shareholders that relates solely to its arrangement and has separate voting
rights on any matter submitted to shareholders in which the interests of one
class differ from the interests of any other class. With the exceptions noted
above, 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.
- --------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER
Cohen & Steers Securities, Inc., an affiliate of the Adviser, serves as the
principal underwriter of the 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. Total return will be
calculated separately for Class A, Class B, Class C and Class I shares. The
performance of each class of shares will vary from time to time depending upon
market conditions, the composition of the Fund's portfolio and such class'
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.
23
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
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
<TABLE>
<S> <C>
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 payment of the maximum sales charge and reinvestment of all dividends and distributions.
</TABLE>
- --------------------------------------------------------------------------------
AGGREGATE TOTAL RETURNS
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
<TABLE>
<S> <C>
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 the 1-, 5- or 10-year period (or fractional portion thereof),
assuming payment of the maximum sales charge and reinvestment of all dividends and distributions.
</TABLE>
- --------------------------------------------------------------------------------
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:
(a - b
2[ ----- + 1)'pp'6 - 1]
cd
<TABLE>
<S> <C>
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.
</TABLE>
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
24
<PAGE>
<PAGE>
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.)
- --------------------------------------------------------------------------------
LEGAL MATTERS
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 Center, New
York, New York 10112.
- --------------------------------------------------------------------------------
ACCOUNTANTS
Coopers & Lybrand L.L.P., 1301 Avenue of the Americas, New York, New York 10019
have been appointed as independent accountants for the Fund.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
The Fund's audited financial statements for the year ended December 31, 1997,
including notes thereto, are incorporated by reference in this Statement of
Additional Information from the Fund's Annual Report dated December 31, 1997.
25
<PAGE>
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Part A -- Condensed Financial Information.
Part B -- Financial Statements for the fiscal year ended December 31,
1997, including notes thereto are incorporated by reference in the
Statement of Additional Information from the Fund's Annual Report dated as
of December 31, 1997.
Part C -- None.
(b) Exhibits
1. Articles of Incorporation*, with Articles Supplementary filed with
the Secretary of State of the State of Maryland on January 21, 1998.
2. By-Laws*
3. Not Applicable
4. Specimen certificate for common stock, par value $.001 per share**
5. Form of Investment Advisory Agreement**
6. Form of Underwriting Agreement
7. Not Applicable
8. Form of Domestic Custody Agreement**
9. (A) Form of Administration Agreement**
(B) Mutual Fund Services (Sub-Administration) Agreement**
(C) Shareholder Service Plan**
(D) Form of Shareholder Service Agreement**
10. Opinion and Consent of Dechert Price & Rhoads**
11. Consent of Independent Accountants
12. Not Applicable
13. Investment Representation Letter**
14. Not Applicable
15. Distribution Plan**
16. Not Applicable
17. Financial Data Schedule
18. Multiple-Class Plan
19. Powers of Attorney***
- ------------
* Filed with initial registration statement on July 9, 1997.
** Filed with Pre-Effective Amendment No. 1 on August 21, 1997.
*** Filed with Post-Effective Amendment No. 1 on November 6, 1997.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not Applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of January 31, 1998, there were 1,535 record holders of the Class A
shares, 111 record holders of the Class B shares and 62 record holders of the
Class C shares of the Registrant.
ITEM 27. INDEMNIFICATION
It is the Registrant's policy to indemnify its directors, officers,
employees and other agents to the maximum extent permitted by Section 2 - 418 of
the General Corporation Law of the State of Maryland as set forth in Article
SEVENTH, Section 7.4 of Registrant's Articles of Incorporation, filed as Exhibit
C-1
<PAGE>
<PAGE>
1, and Article VIII of the Registrant's By-Laws, filed as Exhibit 2. 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. 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 4 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, for any loss suffered by the Registrant or
its shareholders is set forth in Section 6 of the Administration Agreement,
filed as Exhibit 9 to this Registration Statement.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
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.
Cohen & Steers Special Equity 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.
<TABLE>
<CAPTION>
POSITION AND POSITIONS AND
NAME OFFICES WITH DISTRIBUTOR OFFICES WITH REGISTRANT
---- ------------------------ -----------------------
<S> <C> <C>
Robert H. Steers.............. President and Chairman Chairman, Director and
Secretary
Martin Cohen.................. Vice President President, Director and
Treasurer
</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. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
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.
C-2
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for effectiveness of this Post-Effective Amendment
No. 3 to its Registration Statement pursuant to Rule 485(b) under the Securities
Act of 1933 and has duly caused this Post-Effective Amendment No. 3 to its
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York and the State of New York, on the 19th
day of March, 1998.
COHEN & STEERS EQUITY INCOME FUND, INC.
By: /s/ Martin Cohen
-------------------------------------
Name: Martin Cohen
Title: President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 3 has been signed below by the following
persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE
By: /s/ Martin Cohen President, Treasurer March 19, 1998
------------------------- and Director
(Martin Cohen)
By: /s/ Robert H. Steers March 19, 1998
------------------------- Director
(Robert H. Steers)
By: * March 19, 1998
------------------------- Director
(Gregory C. Clark)
By: * March 19, 1998
------------------------- Director
(George Grossman)
By: * March 19, 1998
------------------------- Director
(Jeffery H. Lynford)
By: * March 19, 1998
------------------------- Director
(Willard H. Smith)
By: /s/ Robert H. Steers March 19, 1998
-------------------------
* Robert H. Steers
as Attorney-In-Fact
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------ ---------------------- ----
<S> <C> <C>
1. -Articles Supplementary..............................................
6. -Distribution Agreement (Class I Shares Only)........................
15. -Consent of Independent Accountants..................................
18. -Amended and Restated Multiple Class Plan Pursuant to Rule 18f-3.....
</TABLE>
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as............................... 'D'
Characters normally expressed as superscript shall be preceded by..... 'pp'
<PAGE>
<PAGE>
EXHIBIT 1
COHEN & STEERS EQUITY INCOME FUND, INC.
ARTICLES SUPPLEMENTARY
COHEN & STEERS EQUITY INCOME FUND, INC., a Maryland corporation
registered as an open-ended management investment company under the Investment
Company Act of 1940 (the "Act") and having its principal office in Baltimore,
Maryland (hereinafter called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: Immediately prior to the filing of these Articles
Supplementary, the number of authorized shares of stock of the Corporation set
forth in the Corporation's charter was two hundred million (200,000,000) shares
of the par value of one tenth of one cent ($0.001) per share and of the
aggregate par value of two hundred thousand dollars ($200,000), all of which
shares were designated and classified as Common Stock.
SECOND: On January 9, 1998, the Corporation filed Articles
Supplementary with the State Department of Assessments and Taxation of Maryland
that designated fifty million (50,000,000) shares of the authorized stock of the
Corporation as Class A Common Stock, fifty million (50,000,000) of such shares
as Class B Common Stock and fifty million (50,000,000) of such shares as Class C
Common Stock, with fifty million (50,000,000) of such shares remaining
unclassified.
THIRD: The Board of Directors of the Corporation, at a meeting
duly convened and held on March 10, 1998, adopted a resolution, in accordance
with paragraph (1)(f) of Article FIFTH of the Corporation's Articles of
Incorporation, to designate and classify fifty million (50,000,000) shares of
the Corporation's authorized but unclassified and unissued shares of stock as
Class I Common Stock.
FOURTH: As amended hereby, until such time as the Board of
Directors shall provide otherwise in accordance with paragraph (1)(f) of Article
FIFTH of the Corporation's Articles of Incorporation, fifty million (50,000,000)
shares of the authorized stock of the Corporation are designated as Class A
Common Stock, fifty million (50,000,000) of such shares are designated as Class
B Common Stock, fifty million (50,000,000) of such shares are designated as
Class C Common Stock, and fifty million (50,000,000) of such shares are
designated as Class I Common Stock. The Board of Directors' power to classify
and reclassify any unissued shares of capital stock are not changed by these
Articles Supplementary.
FIFTH: The shares of stock of the Corporation classified pursuant
to these Articles Supplementary have been so classified by the Board of
Directors under the authority contained in the Articles of Incorporation.
<PAGE>
<PAGE>
SIXTH: The preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of each class of the Corporation's stock shall be as
set forth in the Corporation's charter and shall be subject to all provisions
thereof relating to shares of the Corporation generally, including in particular
the following:
(a)Assets attributable to each class of the Corporation's stock
shall be invested in the same investment portfolio.
(b)As more fully set forth hereafter, the assets and liabilities
and the income and expenses of each class of the Corporation's
stock may be determined separately and, accordingly, the net
asset value, the dividends payable to holders, and the amounts
distributable in the event of dissolution of the Corporation
to holders of shares of the Corporation's stock may vary from
class to class. Except for these differences and certain other
differences hereafter set forth, each class of the
Corporation's stock shall have the same preferences,
conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and
conditions of and rights to require redemption.
(c)The allocation of the assets and liabilities, investment
income or capital gains and expenses of the Corporation among
the Class A Common Stock, Class B Common Stock, Class C Common
Stock and Class I Common Stock, respectively, shall be
determined by the Board of Directors in a manner that is
consistent with Rule 18f-3 under the Act. The determination of
the Board of Directors shall be conclusive as to the
allocation of investment income or capital gains, expenses and
liabilities (including accrued expenses and reserves) and
assets to a particular class or classes.
(d)Shares of each class of stock shall be entitled to such
dividends or distributions of investment income and capital
gains, in stock or in cash or both, as may be declared from
time to time by the Board of Directors with respect to such
class. Dividends or distributions shall be paid on shares of a
class of stock only out of the assets attributable to that
class. Specifically, and without limiting the generality of
the foregoing, the dividends and distribution of investment
income and capital gains with respect to any class of shares
may vary from dividends and distribution of investment income
and capital gains with respect to the any other class of
shares to reflect differing allocations of expenses of the
Corporation among the holders of the various classes of shares
and any resultant differences among the net asset values of
each class of shares, to such extent and for such purposes as
the Board of Directors may deem appropriate.
2
<PAGE>
<PAGE>
(e)The issuance of shares of each class of the Corporation's
stock (including fractional shares) shall be subject to such
sales charges or other charges payable on such issuance as may
be provided under the terms of issuance of such class of
shares. The proceeds of the redemption of shares of a class of
the Corporation's stock (including fractional shares) shall be
reduced by the amount of any contingent deferred sales charges
or other charges payable on such redemption as may be provided
under the terms of issuance of such class of shares.
(f)Subject to any applicable requirements of the Act, or rules
or orders of the Securities and Exchange Commission or any
successor thereto, all holders of shares of stock shall vote
as a single class except with respect to any matter which
affects 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. Specifically, and not by way of limitation
of the foregoing, the holders of a particular class of the
Corporation's stock shall have (i) exclusive voting rights
with respect to provisions of any distribution plan adopted by
the Corporation pursuant to 12b-1 under the Act (a "Plan")
applicable to such class of stock, and (ii) no voting rights
with respect to provisions of any Plan applicable to any other
class of the Corporation's stock.
(g)In the event of the liquidation or dissolution of the
Corporation, the holders of a class of the Corporation's stock
shall be entitled to receive, as a class, out of the assets of
the Corporation available for distribution to stockholders,
the assets attributable to that class less the liabilities
allocated to that class. The assets so distributable to the
stockholders of a class shall be distributed among such
stockholders in proportion to the number of shares of that
class held by them and recorded on the books to the
Corporation. In the event that there are any assets available
for distribution that are not attributable to any particular
class of stock, such assets shall be allocated among the
classes in proportion to the net asset values of the
respective classes.
3
<PAGE>
<PAGE>
IN WITNESS WHEREOF, Cohen & Steers Equity Income Fund, Inc. has
caused these Articles Supplementary to be signed in its name and on its behalf
by its authorized officers who acknowledge that these Articles Supplementary are
the act of the Corporation, that to the best of their knowledge, information and
belief, all matters and facts set forth herein relating to the authorization and
approval of these Articles Supplementary are true in all material respects and
that this statement is made under the penalties of perjury, on this ____ day of
March, 1998.
COHEN & STEERS EQUITY INCOME FUND, INC.
By: ______________________________________
Name: Martin Cohen
Title: President
ATTEST: ________________________________
Name: Robert H. Steers
Title: Secretary
4
<PAGE>
<PAGE>
EXHIBIT 6
COHEN & STEERS EQUITY INCOME FUND, INC.
757 Third Avenue
New York, New York 10017
March ___, 1998
Cohen & Steers Securities, Inc.
757 Third Avenue
New York, New York 10017
Distribution Agreement (Class I Shares Only)
Dear Sirs:
1. In consideration of the agreements on your part herein
contained and of the payment by us to you of a fee of $1 per year and on the
terms and conditions set forth herein, we have agreed that you shall be, for the
period of this agreement, a distributor, as our agent, for the unsold portion of
such number of Class I shares of our common stock, $.001 par value per share, as
may be effectively registered from time to time under the Securities Act of
1933, as amended (hereinafter referred to as the "Act").
2. We hereby agree that you will act as our agent, and hereby
appoint you our agent, to offer, and to solicit offers to subscribe to, the
unsold balance of Class I shares of our common stock as shall then be
effectively registered under the Act. All subscriptions for Class I shares of
our common stock obtained by you shall be directed to us for acceptance and
shall not be binding on us until accepted by us. You shall have no authority to
make binding subscriptions on our behalf. We reserve the right to sell Class I
shares of our common stock through other distributors or directly to investors
through subscriptions received by us at our principal office in New York, New
York. The right given to you under this agreement shall not apply to Class I
<PAGE>
<PAGE>
shares of our common stock issued in connection with (a) the merger or
consolidation of any other investment company with us, (b) our acquisition by
purchase or otherwise of all or substantially all of the assets or stock of any
other investment company, or (c) the reinvestment in Class I shares of our
common stock by our stockholders of dividends or other distributions or any
other offering by us of securities to our stockholders.
3. You will use your best efforts to obtain subscriptions to
Class I shares of our common stock upon the terms and conditions contained
herein and in the then current Prospectus and Statement of Additional
Information relating to the Class I shares including the offering price. You
will send to us promptly all subscriptions placed with you. We will advise you
of the approximate net asset value per Class I share or net asset value per
Class I share (as used in the Prospectus or Statement of Additional Information)
on any date requested by you and at such other times as it shall have been
determined by us. We shall furnish you from time to time, for use in connection
with the offering of Class I shares of our common stock, such other information
with respect to us and Class I shares of our common stock as you may reasonably
request. We shall supply you with such copies of our current Prospectus and
Statement of Additional Information in effect from time to time as you may
request. You are not authorized to give any information or to make any
representations, other than those contained in the Registration Statement,
Prospectus or Statement or Additional Information, as then in effect, filed
under the Act covering Class I shares of our common stock or which we may
authorize in writing. You may use employees, agents and other persons who may
not be your employees or agents, at your cost and expense, to assist you in
carrying out your obligations hereunder, but no such employee, agent or other
person shall be deemed to be your agent or have any rights under this agreement.
<PAGE>
<PAGE>
4. We reserve the right to suspend the offering of Class I shares
of our common stock at any time, in the absolute discretion of our Board of
Directors, and upon notice of such suspension you shall cease to offer Class I
shares of our common stock hereunder.
5. Both of us will cooperate with each other in taking such
action as may be necessary to qualify Class I shares of our common stock for
sale under the securities laws of such states as we may designate, provided,
that you shall not be required to register as a broker-dealer or file a consent
to service of process in any such state. Pursuant to our Investment Advisory
Agreement dated August 14, 1997, with Cohen & Steers Capital Management, Inc.,
we will pay all fees and expenses of registering Class I shares of our common
stock under the Act and of qualification of Class I shares of our common stock
and our qualification under applicable state securities laws. You shall pay all
expenses relating to your broker-dealer qualification.
6. We represent to you that our Registration Statement,
Prospectus and Statement of Additional Information (as in effect from time to
time) under the Act have been or will be, as the case may be, carefully prepared
in conformity with the requirements of the Act and the rules and regulations of
the Securities and Exchange Commission thereunder. We represent and warrant to
you that your Registration Statement, Prospectus and Statement of Additional
Information contain or will contain all statements required to be stated therein
in accordance with the Act and the rules and regulations of said Commission, and
that all statements of fact contained or to be contained therein are or will be
true and correct at the time indicated or the effective date as the case may be;
that our Registration Statement, Prospectus and Statement of Additional
Information when any of them shall become effective or be authorized for use,
will not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading to a purchaser of Class I shares of our
<PAGE>
<PAGE>
common stock. We will from time to time file such amendment or amendments to our
Registration Statement, Prospectus and Statement of Additional Information as,
in the light of future developments, shall, in the opinion of our counsel, be
necessary in order to have our Registration Statement, Prospectus and Statement
of Additional Information at all times contain all material facts required to be
stated therein or necessary to make any statements therein not misleading to a
purchaser of Class I shares of our common stock, but, if we shall not file such
amendment or amendments within fifteen days after receipt by us of a written
request from you to do so, you may, at your option, terminate this agreement
immediately. We shall not file any amendment to our Registration Statement,
Prospectus or Statement of Additional Information without giving you reasonable
notice thereof in advance; provided, however, that nothing contained in this
agreement shall in any way limit our right to file at any time such amendments
to our Registration Statement, Prospectus or Statement of Additional Information
of whatever character, as we may deem advisable, such right being in all
respects absolute and unconditional. We represent and warrant to you that any
amendment to our Registration Statement, Prospectus or Statement of Additional
Information hereafter filed by us will, when it becomes effective, contain all
statements required to be stated therein in accordance with the Act and the
rules and regulations of said Commission, that all statements of fact contained
therein will, when the same shall become effective, be true and correct and that
no such amendment, when it becomes effective, will include an untrue statement
of a material fact or will omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading to a
purchaser of our Class I shares.
7. We agree to indemnify, defend and hold you, and any person who
controls you within the meaning of Section 15 of the Act, free and harmless from
and against any and all
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claims, demands, liabilities and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any counsel fees incurred
in connection therewith) which you or any such controlling person may incur,
under the Act, or under common law or otherwise, arising out of or based upon
any alleged untrue statement of a material fact contained in our Registration
Statement, Prospectus or Statement of Additional Information in effect from time
to time under the Act or arising out of or based upon any alleged omission to
state a material fact required to be stated in either thereof or necessary to
make the statements in either thereof not misleading; provided, however, that in
no event shall anything herein contained be so construed as to protect you
against any liability to us or 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, or by reason of your reckless disregard of your
obligations and duties under this agreement. Our agreement to indemnify you and
any such controlling person as aforesaid is expressly conditioned upon our being
notified of any action brought against you or any such controlling person, such
notification to be given by letter or by telegram addressed to us at our
principal office in New York, New York, and sent to us by the person against
whom such action is brought within ten days after the summons or other first
legal process shall have been served. The failure so to notify us of any such
action shall not relieve us from any liability which we may have to the person
against whom such action is brought by reason of any such alleged untrue
statement or omission otherwise than on account of our indemnity agreement
contained in this paragraph 7. We will be entitled to assume the defense of any
suit brought to enforce any such claim, and to retain counsel of good standing
chosen by us and approved by you. In the event we do elect to assume the defense
of any such suit and retain counsel of good standing approved by you, the
defendant or defendants in such suit shall bear the fees and expenses of any
additional counsel retained by any
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of them; but in case we do not elect to assume the defense of any such suit, or
in case you do not approve of counsel chosen by us, we will reimburse you or the
controlling person or persons named as defendant or defendants in such suit, for
the fees and expenses of any counsel retained by you or them. Our
indemnification agreement contained in this paragraph 7 and our representations
and warranties in this agreement shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of you or any
controlling person and shall survive the sale of any Class I shares of our
common stock made pursuant to subscriptions obtained by you. This agreement of
indemnity will inure exclusively to your benefit, to the benefit of your
successors and assigns, and to the benefit of any controlling persons and their
successors and assigns. We agree promptly to notify you of the commencement of
any litigation or proceeding against us in connection with the issue and sale of
any Class I shares of our common stock.
8. You agree to indemnify, defend and hold us, our several
officers and directors, and any person who controls us within the meaning of
Section 15 of the Act, free and harmless from and against any and all claims,
demands, liabilities, and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any reasonable counsel fees
incurred in connection therewith) which we, our officers or directors, or any
such controlling person may incur under the Act or under common law or
otherwise, but only to the extent that such liability, or expense incurred by
us, our officers or directors or such controlling person resulting from such
claims or demands shall arise out of or be based upon any alleged untrue
statement of a material fact contained in information furnished in writing by
you to us for use in our Registration Statement, Prospectus or Statement of
Additional Information in effect from time to time under the Act, or shall arise
out of or be based upon any alleged omission to state a
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material fact in connection with such information required to be stated in the
Registration Statement, Prospectus or Statement of Additional Information or
necessary to make such information not misleading. Your agreement to indemnify
us, our officers or directors, and any such controlling person as aforesaid is
expressly conditioned upon your being notified of any action brought against us,
our officers or directors or any such controlling person, such notification to
be given by letter or telegram addressed to you at your principal office in New
York, New York, and sent to you by the person against whom such action is
brought, within ten days after the summons or other first legal process shall
have been served. You shall have a right to control the defense of such action,
with counsel of your own choosing, satisfactory to us, if such action is based
solely upon such alleged misstatement or omission on your part, and in any other
event you and we, our officers or directors or such controlling person shall
each have the right to participate in the defense or preparation of the defense
of any such action. The failure so to notify you of any such action shall not
relieve you from any liability which you may have to us, to our officers or
directors, or to such controlling person by reason of any such untrue statement
or omission on your part otherwise than on account of your indemnity agreement
contained in this paragraph 8.
9. We agree to advise you immediately:
(a) of any request by the Securities and Exchange Commission
for amendments to our Registration Statement, Prospectus or Statement of
Additional Information or for additional information,
(b) in the event of the issuance by the Securities and
Exchange Commission of any stop order suspending the effectiveness of our
Registration Statement,
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Prospectus or Statement of Additional Information or the initiation of any
proceedings for that purpose,
(c) of the happening of any material event which makes untrue
any statement made in our Registration Statement, Prospectus or Statement of
Additional Information or which requires the making of a change in any thereof
in order to make the statements therein not misleading, and
(d) of all action of any Securities and Exchange Commission
with respect to any amendments to our Registration Statement, Prospectus or
Statement of Additional Information which may from time to time be filed with
the Securities and Exchange Commission under the Act.
10. This Agreement shall become effective on the date hereof and
shall remain in effect until December 31, 1999, and thereafter automatically for
successive twelve-month periods (computed from each January 1) provided that
such continuance is specifically approved at least annually by a vote of a
majority of our outstanding voting securities, as defined in the Investment
Company Act of 1940, as amended, or by our Board of Directors, and in either
case by a majority of our directors who are not parties to this agreement or
interested persons, as defined in the Investment Company Act of 1940, of any
such party. This agreement may be terminated at any time, without the payment of
any penalty, by vote of a majority of our outstanding voting securities (as so
defined), or by a vote of a majority of our Directors who are not parties to
this agreement or interested persons (as defined in the Investment Company Act
of 1940, as amended) of any party to this agreement, on sixty days' written
notice to you, or by you on sixty days' written notice to us.
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11. 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. 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.
12. 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, 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 to render services of
any kind to any other corporation, firm, individual or association.
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 Equity Income Fund, Inc.
By___________________________
Martin Cohen
President
Accepted:
Cohen & Steers Securities, Inc.
By_____________________________
Robert H. Steers
President
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[COOPERS & LYBRAND LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
------------------------
We consent to the incorporation by reference in this Post-Effective Amendment
No. 3 to the Registration Statement of Cohen & Steers Equity Income Fund, Inc.,
on Form N-1A (File No. 333-30919) of our report dated February 3, 1998, on our
audit of the financial statements and financial highlights of Cohen & Steers
Equity Income Fund, Inc., which report is included in the Annual Report to
Shareholders for the year ended December 31, 1997, which is also incorporated by
reference in this Post-Effective Amendment to the Registration Statement.
We also consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Accountants" in the Statement of Additional
Information.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
New York, New York
March 13, 1998
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EXHIBIT 18
AMENDED AND RESTATED
MULTIPLE CLASS PLAN
PURSUANT TO RULE 18f-3
FOR
COHEN & STEERS EQUITY INCOME FUND, INC.
WHEREAS, Cohen & Steers Equity Income Fund, Inc. (the "Fund") engages
in business as an open-end, management investment company and is registered
as such under the Investment Company Act of 1940, as amended (the "Act");
WHEREAS, the Fund desires to adopt a Multiple Class Plan pursuant to
Rule 18f-3 under the Act (the "Plan") with respect to the Fund; and
WHEREAS, the Fund employs Cohen & Steers Capital Management, Inc. (the
"Adviser") as its investment manager and adviser and Cohen & Steers Securities,
Inc., a wholly-owned subsidiary of the Adviser ("Underwriter"), as underwriter
of the securities of which it is the issuer.
NOW, THEREFORE, the Fund hereby adopts the Plan, in accordance with Rule
18f-3 under the Act on the following terms and conditions:
1. Features of the Classes. The Fund issues its shares of common stock
in four classes: "Class A Shares," "Class B Shares," "Class C Shares" and "Class
I Shares." Shares of each class of the Fund shall represent an equal pro rata
interest in the Fund and, generally, shall have identical voting, dividend,
distribution, liquidation, and other rights, preferences, powers, restrictions,
limitations, qualifications, and terms and conditions, except that: (a) each
class shall have a different designation; (b) each class of shares shall bear
any Class Expenses, as defined in Section 5 below; and (c) each class shall have
exclusive voting rights on any matter submitted to shareholders that relates
solely to its distribution arrangement and each class shall have separate voting
rights on any matter submitted to shareholders in which the interests of one
class differ from the interests of any other class. In addition, Class A, Class
B, Class C and Class I shares of the Fund shall have the features described in
Sections 2, 3, 4 and 5 below.
2. Service Plan. The Fund has adopted a Service Plan with respect to the
Class A, Class B and Class C shares of the Fund, which provides that the Fund
may pay a service fee at an annual rate of up to 0.10% of the average daily net
asset value of the Class A shares and up to 0.25% of the average daily net asset
value of the Class B and Class C shares owned by investors for which the
shareholder servicing agent maintains a servicing relationship as compensation
for service activities. The Class I shares do not participate in the Service
Plan.
As used herein, the term "service activities" shall mean activities in
connection with the provision of personal, continuing services to investors in
the Fund, including, but not limited to, answering customer inquiries regarding
account matters, assisting in designating and changing various account options,
aggregating and processing purchase and redemption orders and transmitting and
receiving funds for shareholder orders, transmitting on behalf of the Fund,
proxy
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statements, prospectuses and shareholder reports to shareholders and tabulating
proxies, processing dividend payments and providing subaccounting services for
Fund shares held beneficially, and providing such other services as the Fund or
a shareholder may request; provided, however, that if the National Association
of Securities Dealers Inc. ("NASD") adopts a definition of "service fee" for
purposes of Section 2830 of the Rules of Conduct of the NASD that differs from
the definition of "service activities" hereunder, or if the NASD adopts a
related definition intended to define the same concept, the definition of
"service activities" in this Paragraph shall be automatically amended, without
further action of the Board of Directors, to conform to such NASD definition.
Overhead and other expenses of Distributor related to its "service activities,"
including telephone and other communications expenses, may be included in the
information regarding amounts expended for such activities.
3. Distribution Plan. The Fund has adopted a Distribution Plan with
respect to the Class A, Class B and Class C shares of the Fund pursuant to Rule
12b-1 promulgated under the Securities Exchange Act of 1934. The Distribution
Plan authorizes the Fund to make assistance payments to the Distributor for
distribution services at an annual rate of up to 0.25% of the average net asset
value of the Class A shares. With respect to the Class B and Class C shares, the
Distribution Plan authorizes the Fund to make payments of up to 0.75% of the
average net asset value attributable to the Class B and Class C shares to
compensate financial intermediaries with trail or maintenance commissions. The
Distribution Plan further authorizes the Distributor to make assistance payments
to brokers, financial institutions and other financial intermediaries
("payee(s)") for shareholder accounts as to which a payee has rendered
distribution services to the Class A, Class B or Class C shares. The Class I
shares do not participate in the Distribution Plan.
As used herein, the term "distribution services" shall include services
rendered by Distributor as distributor of the Class A, Class B and Class C
shares in connection with any activities or expense primarily intended to result
in the sale of Class A, Class B or Class C shares, including, but not limited
to, compensation to registered representatives or other employees of Distributor
or to other broker-dealers that have entered into an Authorized Dealer Agreement
with Distributor, compensation to and expenses of employees of Distributor who
engage in or support distribution of the Fund's shares; telephone expenses;
interest expenses; printing of prospectuses and reports for other than existing
shareholders; preparation, printing and distribution of sales literature and
advertising materials; and profit and overhead on the foregoing.
4. Allocation of Income and Expenses. (a) The gross income of the Fund
shall, generally, be allocated to each class on the basis of net assets. To the
extent practicable, certain expenses (other than Class Expenses as defined below
which shall be allocated more specifically) shall be subtracted from the gross
income on the basis of the net assets of each class of the Fund. These expenses
include:
(1) Expenses incurred by the Fund (for example, fees of
Directors, auditors and legal counsel) not attributable to a particular
class of shares of the Fund ("Fund Level Expenses"); and
(2) Expenses incurred by the Fund not attributable to any
particular class of the Fund's shares (for example, advisory fees,
custodial fees, or other expenses relating to the management of the
Fund's assets) ("Fund Expenses").
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(b) Expenses attributable to a particular class ("Class Expenses") shall
be limited to: (i) payments made pursuant to a distribution plan and/or a
service plan; (ii) transfer agent fees attributable to a specific class; (iii)
printing and postage expenses related to preparing and distributing materials
such as shareholder reports, prospectuses and proxies to current shareholders of
a specific class; (iv) Blue Sky registration fees incurred by a class; (v) SEC
registration fees incurred by a class; (vi) the expense of administrative
personnel and services to support the shareholders of a specific class; (vii)
litigation or other legal expenses relating solely to one class; and (viii)
directors' fees incurred as a result of issues relating to one class. Expenses
in category (i) above must be allocated to the class for which such expenses are
incurred. All other "Class Expenses" listed in categories (ii)-(viii) above may
be allocated to a class but only if the President and Chief Financial Officer
have determined, subject to Board approval or ratification, which of such
categories of expenses will be treated as Class Expenses consistent with
applicable legal principles under the Act and the Internal Revenue Code of 1986,
as amended.
Therefore, expenses of the Fund shall be apportioned to each class of
shares depending on the nature of the expense item. Fund Level Expenses and Fund
Expenses will be allocated among the classes of shares based on their relative
net asset values. Approved Class Expenses shall be allocated to the particular
class to which they are attributable. In addition, certain expenses may be
allocated differently if their method of imposition changes. Thus, if a Class
Expense can no longer be attributed to a class, it shall be charged to the Fund
for allocation among classes, as determined by the Board of Directors. Any
additional Class Expenses not specifically identified above which are
subsequently identified and determined to be properly allocated to one class of
shares shall not be so allocated until approved by the Board of Directors of the
Company in light of the requirements of the Act and the Internal Revenue Code of
1986, as amended.
5. Exchange Privileges. The Class A, Class B, Class C and Class I shares
of the Fund may be exchanged for shares of other Cohen & Steers funds. The
exchange privileges may be modified or terminated at any time, or from time to
time, upon 60 days' notice to shareholders. Any applicable sales charge or
contingent deferred sale charge will apply to exchanged shares at the time of
the exchange.
6. Conversion Features. There shall be no conversion features associated
with the Class A, Class C or Class I shares of the Fund. The Class B shares of
the Fund convert automatically into Class A shares at the end of the month which
precedes the eighth anniversary of the purchase date.
7. Quarterly and Annual Reports. The Directors shall receive quarterly
and annual statements concerning all allocated Class Expenses and distribution
and servicing expenditures complying with paragraph (b)(3)(ii) of Rule 12b-1, as
it may be amended from time to time. In the statements, only expenditures
properly attributable to the sale or servicing of a particular class of shares
will be used to justify any distribution or servicing fee or other expenses
charged to that class. Expenditures not related to the sale or servicing of a
particular class shall not be presented to the Directors to justify any fee
attributable to that class. The statements, including the allocations upon which
they are based, shall be subject to the review and approval of the independent
Directors in the exercise of their fiduciary duties.
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8. Waiver or Reimbursement of Expenses. Expenses may be waived or
reimbursed by any adviser to the Fund or any other provider of services to the
Fund without the prior approval of the Fund's Board of Directors.
9. Effectiveness of Plan. The Plan shall not take effect until it has
been approved by votes of a majority of both (a) the Directors of the Fund and
(b) those Directors of the Fund who are not "interested persons" of the Fund (as
defined in the Act) and who have no direct or indirect financial interest in the
operation of this Plan, cast in person at a meeting (or meetings) called for the
purpose of voting on this Plan.
10. Material Modifications. This Plan may not be amended to modify
materially its terms unless such amendment is approved in the manner provided
for initial approval in Paragraph 9 hereof.
11. Limitation of Liability. The Directors and the shareholders of the
Fund shall not be liable for any obligations of the Fund under this Plan, and
Distributor or any other person, in asserting any rights or claims under this
Plan, shall look only to the assets and property of the Fund in settlement of
such right or claim, and not to such Directors or shareholders.
IN WITNESS WHEREOF, the Fund has adopted this Amended and Restated
Multiple Class Plan as of the ____ day of ________, 1998, to be effective
_____________, 1998.
COHEN & STEERS EQUITY INCOME FUND, INC.
By:___________________________
Name:
Title:
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