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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1999
FILE NOS. 333-30919
811-8287
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 5
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 6
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COHEN & STEERS EQUITY INCOME FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
757 THIRD AVENUE, NEW YORK, NY 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 832-3232
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COPY TO:
ROBERT H. STEERS SARAH E. COGAN, ESQ.
COHEN & STEERS EQUITY INCOME FUND, INC. SIMPSON THACHER & BARTLETT
757 THIRD AVENUE 425 LEXINGTON AVE.
NEW YORK, NY 10017 NEW YORK, NY 10017
(NAME AND ADDRESS OF AGENT OF SERVICE OF PROCESS)
</TABLE>
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APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of this registration statement
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK
APPROPRIATE BOX):
[ ] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B)
[x] ON MAY 1, 1999 PURSUANT TO PARAGRAPH (B)
[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1)
[ ] ON [DATE] PURSUANT TO PARAGRAPH (A)(1)
[ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(2)
[ ] ON [DATE] PURSUANT TO PARAGRAPH (A)(2) OF RULE 485
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[Logo]
757 THIRD AVENUE
NEW YORK, NEW YORK 10017
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CLASS A, CLASS B AND CLASS C SHARES
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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
P.O. Box 2798
Boston, Massachusetts 02208-2798
Telephone: (800) 437-9912
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED OF THE FUND'S SHARES OR DETERMINED WHETHER
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANYONE WHO INDICATES
OTHERWISE IS COMMITTING A CRIME.
MAY 1, 1999
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TABLE OF CONTENTS
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PAGE
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RISK/RETURN SUMMARY............................................................................ 1
Investment Objectives and Principal Investment Strategies................................ 1
Who Should Invest........................................................................ 1
Principal Risks.......................................................................... 1
Historical Fund Performance.............................................................. 2
FEES AND EXPENSES OF THE FUND.................................................................. 3
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS....................... 5
Objectives............................................................................... 5
Principal Investment Strategies.......................................................... 5
Principal Risks of Investing in the Fund................................................. 6
MANAGEMENT OF THE FUND......................................................................... 8
The Investment Adviser................................................................... 8
Portfolio Managers....................................................................... 9
PURCHASES AND REDEMPTIONS...................................................................... 9
Pricing of Shares........................................................................ 9
Purchasing the Class of Shares that is Best for You...................................... 9
Class A Shares........................................................................... 10
Class B Shares........................................................................... 11
Class C Shares........................................................................... 11
A Note on Contingent Deferred Sales Charges.............................................. 12
Institutional Class...................................................................... 12
Purchase Minimums........................................................................ 12
Form of Payment.......................................................................... 12
Purchases of Shares...................................................................... 13
Exchange Privilege....................................................................... 14
Redemptions of Shares.................................................................... 15
ADDITIONAL INFORMATION......................................................................... 16
Distribution Plan........................................................................ 16
Shareholder Service Plan................................................................. 17
Dividends and Distributions.............................................................. 17
Tax Considerations....................................................................... 17
FINANCIAL HIGHLIGHTS........................................................................... 18
</TABLE>
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COHEN & STEERS EQUITY INCOME FUND, INC.
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RISK/RETURN SUMMARY
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INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
The Fund's investment goal is high current income through investment in real
estate securities. Capital appreciation is a secondary investment goal.
Normally, the Fund invests at least 65% of its total assets in common stocks and
other equity securities issued by real estate companies, such as 'real estate
investment trusts' ('REITs'). A real estate company generally derives at least
50% of its revenue from real estate or has at least 50% of its assets in real
estate. A REIT is a company dedicated to owning, and usually operating, income
producing real estate, or to financing real estate. The Fund's investment
portfolio includes shares of Equity REITs, which are companies that invest the
majority of their assets directly in real property and derive income primarily
from the collection of rents. Equity REITs can also realize capital gains by
selling properties that have appreciated in value. REITs are not taxed on income
distributed to shareholders provided they comply with the requirements of the
Internal Revenue Code. The Fund may also invest up to 35% of its total assets in
debt securities, including high yield debt securities, issued or guaranteed by
real estate and other companies.
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WHO SHOULD INVEST
Cohen & Steers Equity Income Fund may be suitable for you if you are seeking:
Some exposure to real estate to add to your portfolio mix;
A fund that may perform differently than a general stock or bond fund to add to
your portfolio;
Liquidity in a real estate-related investment;
High current income; and
The potential for long-term capital growth.
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PRINCIPAL RISKS
Investment Risk. An investment in the Fund is subject to investment risk,
including the possible loss of the entire principal amount that you invest.
Stock Market Risk. Your investment in Fund shares represents an indirect
investment in the REIT shares and other real estate securities owned by the
Fund. The value of these equity securities, like other stock market investments,
may move up or down, sometimes rapidly and unpredictably. Your Fund shares at
any point in time may be worth less than what you invested, even after taking
into account the reinvestment of Fund dividends and distributions.
Real Estate Market and REIT Risk. Additionally, since the Fund concentrates its
assets in the real estate industry, your investment in the Fund will be closely
linked to the performance of the real estate markets. Property values may fall
due to increasing vacancies or declining rents resulting from unanticipated
economic, legal, cultural or technological developments. REIT prices also may
drop because of the failure of borrowers to pay their loans and poor management.
Smaller Companies. Even the larger REITs in the industry tend to be small to
medium-sized companies in relation to the equity markets as a whole. REIT
shares, therefore, can be more
1
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volatile than, and perform differently from, larger company stocks.
Debt Securities Risk. High yield securities may be more susceptible to real or
perceived adverse economic and competitive industry conditions than higher grade
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 those securities, and adversely affect the ability of the issuers
of those securities to repay principal and interest on those securities.
Less Diversification. As a 'non-diversified' investment company, the Fund can
invest in fewer individual companies than a diversified investment company.
Because a concentrated portfolio is more likely to experience large market price
fluctuations, the Fund may be subject to a greater risk of loss than a
diversified company.
Your investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
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HISTORICAL FUND PERFORMANCE
You should review the following information regarding the past performance of
the Fund. It shows how the Fund's investment return can change from year to year
and how the Fund's returns can vary from the performance of selected broad
market indices over various time periods. This information is intended to give
you some indication of the risk associated with an investment in the Fund. Past
performance is not, however, an indication as to how the Fund may perform in the
future.
THIS CHART SHOWS THE ANNUAL TOTAL RETURN FOR THE CLASS A SHARES OF EACH YEAR
SINCE THE CLASS A SHARES OF THE FUND COMMENCED OPERATIONS.
COHEN & STEERS EQUITY INCOME FUND, INC.
ANNUAL TOTAL RETURNS*
[PERFORMANCE CHART]
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1997 1998
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9.46% -10.56%
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HIGHEST QUARTERLY RETURN DURING THIS PERIOD: 5.50%
LOWEST QUARTERLY RETURN DURING THIS PERIOD: -6.83%
</TABLE>
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* The bar chart shows the annual return of the Class A shares of the Fund. The
annual returns for the Class B and Class C shares of the Fund are
substantially similar to the annual returns of the Class A shares because all
of the shares of the Fund are invested in the same portfolio of securities.
The annual returns differ only to the extent that the classes do not have the
same expenses. The Class A shares of the Fund commenced operations on
September 2, 1997.
2
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THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PAST YEAR AND
THE PERIOD SINCE THE FUND COMMENCED OPERATIONS, AND COMPARES THESE RETURNS WITH
THE PERFORMANCE OF TWO INDICES.
AVERAGE ANNUAL TOTAL RETURNS
(for periods ended December 31, 1998)
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SINCE
1 YEAR INCEPTION**
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CLASS A SHARES
Cohen & Steers Equity Income Fund................................................... -10.56% -1.58%
NAREIT All REIT Index*'D'........................................................... -18.82% -8.68%
S&P 500'r'*......................................................................... 28.58% 28.37%
CLASS B SHARES
Cohen & Steers Equity Income Fund -- -11.37%
NAREIT All REIT Index*'D'........................................................... -- -18.82%
S&P 500'r'*......................................................................... -- 30.19%
CLASS C SHARES
Cohen & Steers Equity Income Fund................................................... -- -11.08%
NAREIT All REIT Index*'D'........................................................... -- -18.82%
S&P 500'r'*......................................................................... -- 30.99%
</TABLE>
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* The NAREIT Index of All REITs is comprised of 210 real estate investment
trusts. The Standard & Poor's 500 Composite Stock Index ('S&P 500') is an
unmanaged index of 500 large capitalization, publicly traded stocks
representing a variety of industries. Performance figures include
reinvestment of income dividends and capital gains distributions. You should
note that the Fund is a professionally managed mutual fund while the indices
are unmanaged, do not incur expenses and are not available for investment.
'D' Prior to January 4, 1999, the NAREIT All REIT Index was published monthly.
Total returns and cumulative values are calculated from the date nearest
each class inception for which comparable performance data exist.
** The inception dates were: Class A-September 2, 1997; Class B-January 15,1998;
and Class C-January 14, 1998.
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FEES AND EXPENSES OF THE FUND
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THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU COULD PAY IF YOU BUY AND
HOLD SHARES OF THE FUND.
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CLASS A CLASS B CLASS C
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SHAREHOLDER FEES (fees paid directly from your
investment):
Maximum sales charge (load) (as a percentage of offering 4.50%(1) 0%
price).................................................. 0%
Maximum sales charge (load) imposed on reinvested 0% 0%
dividends (and other distributions)..................... 0%
Maximum deferred sales charge (load) (as a percentage of
original purchase price or redemption proceeds,
whichever is lower)..................................... 0%(2) 5% IN 1ST YEAR 1% IN 1ST
4% IN 2ND YEAR YEAR
3% IN 3RD AND 4TH YEARS
2% IN 5TH YEAR
1% IN 6TH YEAR
NONE THEREAFTER(3)
</TABLE>
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(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 a purchase 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.
3
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ANNUAL FUND OPERATING EXPENSES (expenses
that are deducted from Fund assets): CLASS A CLASS B CLASS C
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<S> <C> <C> <C>
Management Fee.................................................................... 0.75% 0.75% 0.75%
DISTRIBUTION (12 B-1) FEES........................................................ 0.25% 0.75%* 0.75%
Service Fee....................................................................... 0.10% 0.25% 0.25%
Other Expenses**.................................................................. 0.82% 0.82% 0.82%
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Total Other Expenses......................................................... 1.17% 1.82% 1.82%
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Total Annual Fund Operating Expenses**............................................ 1.92% 2.57% 2.57%
------- ------- -------
------- ------- -------
Fee Waiver and Expense Reimbursement**............................................ 0.42% 0.42% 0.42%
NET EXPENSES**.................................................................... 1.50% 2.15% 2.15%
------- ------- -------
------- ------- -------
</TABLE>
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* Until conversion which occurs automatically at the end of the month which
precedes the 8th anniversary of the purchase date.
** This table uses actual 1998 expense amounts. Pursuant to a written contract
between the investment adviser and the Fund, the investment adviser has
agreed to waive a portion of its investment advisory fees and assume certain
expenses of the Fund other than brokerage commissions, extraordinary items,
interest and taxes to the extent annual fund operating expenses exceed 1.50%
of the Fund's average daily net assets attributable to the Class A shares,
2.15% of the Fund's average daily net assets attributable to the Class B
shares and 2.15% of the Fund's average daily net assets attributable to the
Class C shares. The investment adviser has agreed to maintain these expense
limitations with regard to each class of shares of the Fund through December
31, 1999.
EXAMPLE
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE FUND
WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES THAT YOU
INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND THEN REDEEM ALL OF
YOUR SHARES AT THE END OF THOSE PERIODS. THE EXAMPLE ALSO ASSUMES THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER, BASED ON
THESE ASSUMPTIONS YOUR COSTS WOULD BE:
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<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
Class A shares..................................... $638 $1,031 $1,448 $2,608
Class B shares
Assuming redemption at the end of the
period..................................... 763 1,109 1,581 2,772
Assuming no redemption at the end of the
period..................................... 263 809 1,381 2,772
Class C shares..................................... 363 809 1,381 2,933
</TABLE>
4
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INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES
AND RELATED RISKS
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OBJECTIVES
The investment objective of Cohen & Steers Equity Income Fund, Inc. (the 'Fund')
is high current income through investment in real estate securities. Capital
appreciation is a secondary objective. There can be no assurance that the Fund
will achieve its investment objectives. The Fund, of course, will concentrate
its investments in the real estate industry.
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PRINCIPAL INVESTMENT STRATEGIES
In making investment decisions on behalf of the Fund, the investment adviser
relies on a fundamental analysis of each company. The investment adviser reviews
each company's potential for success in light of the company's current financial
condition, its industry position, and economic and market conditions. The
investment adviser evaluates a number of factors, including growth potential,
earnings estimates and the quality of management.
The following are the Fund's principal investment strategies. A more detailed
description of the Fund's investment policies and restrictions and more detailed
information about the Fund's investments are contained in the Fund's Statement
of Additional Information ('SAI').
Real Estate Companies
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
has at least 50% of its assets in such real estate.
Under normal circumstances, the Fund will invest at least 65% of its total
assets in the equity securities of real estate companies. These equity
securities can consist of:
common stocks (including REIT shares);
rights or warrants to purchase common stocks;
securities convertible into common stocks where the conversion feature
represents, in the investment adviser's view, a significant element of the
securities' value; and
preferred stocks.
Real Estate Investment Trusts
The Fund may invest without limit in shares of real estate investment trusts
('REITs'). REITs pool investors' funds for investment primarily in income
producing real estate or real estate related loans or interests. A REIT is not
taxed on income distributed to shareholders if, among other things, it
distributes to its shareholders at least 95% of its taxable income (other than
net capital gains) for each taxable year.
Types of REITs. REITs can generally be classified as Equity REITs, Mortgage
REITs and Hybrid REITs. Equity REITs, which invest the majority of their assets
directly in real property, derive their income primarily from rents. Equity
REITs can also realize capital gains by selling properties that have appreciated
in value. Mortgage REITs, which invest the majority of their assets in real
estate mortgages, derive their income primarily from interest payments. Hybrid
REITs combine the characteristics of both Equity REITs and Mortgage REITs.
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.
5
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('Moody's') or lower than BBB by Standard and Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. ('S&P')), are sometimes referred to
as 'high yield' or 'junk' bonds.
Illiquid Securities
The Fund will not invest more than 15% of its net assets in illiquid securities.
A security is illiquid if, for legal or market reasons, it cannot be promptly
sold (i.e., within seven days) at a price which approximates its fair value.
Defensive Position
When the Fund's investment adviser believes that market or general economic
conditions justify a temporary defensive position, the Fund may deviate from its
investment objectives and invest all or any portion of its assets in high-grade
debt securities, without regard to whether the issuer is a real estate company.
When and to the extent the Fund assumes a temporary defensive position, it may
not pursue or achieve its investment objective.
- --------------------------------------------------------------------------------
PRINCIPAL RISKS OF INVESTING IN THE FUND
Because prices of equity securities fluctuate from day to day, the value of the
Fund's portfolio and the price per share will vary based upon general market
conditions.
General Risks of Securities Linked to the Real Estate Market
The Fund will not invest in real estate directly, but only in securities issued
by real estate companies. However, because of its policy of concentration in the
securities of companies in the real estate industry, the Fund is also subject to
the risks associated with the direct ownership of real estate. These risks
include:
declines in the value of real estate;
risks related to general and local economic conditions;
possible lack of availability of mortgage funds;
overbuilding;
extended vacancies of properties;
increased competition;
increases in property taxes and operating expenses;
changes in zoning laws;
losses due to costs resulting from the clean-up of environmental problems;
liability to third parties for damages resulting from environmental problems;
casualty or condemnation losses;
limitations on rents;
changes in neighborhood values and the appeal of properties to tenants; and
changes in interest rates
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 a mix of different
industries.
In addition to these risks, Equity REITs may be affected by changes in the value
of the underlying property owned by the trusts, while Mortgage REITs may be
affected by the quality of any credit extended. Further, Equity and Mortgage
REITs are dependent upon management skills and generally may not be diversified.
Equity and Mortgage REITs are also subject to heavy cash flow dependency,
defaults by borrowers and self-liquidation. In addition, Equity and Mortgage
REITs could possibly fail to qualify for tax free pass-through of income under
the Internal Revenue Code, or to maintain their exemptions from registration
under the Investment Company Act of 1940, as amended. The above factors may also
adversely affect a borrower's or a lessee's ability to meet its obligations to
the REIT. In the event of a default by a borrower or lessee, the REIT may
experience delays in enforcing its rights as a mortgagee or lessor and may incur
substantial costs associated with protecting its investments.
In addition, even the larger REITs in the industry tend to be small to
medium-sized companies in relation to the equity markets as a
6
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whole. Accordingly, REIT shares can be more volatile than -- and at times will
perform differently from -- large-capitalization stocks such as those found in
the Dow Jones Industrial Average. In addition, because smaller-capitalization
stocks are typically less liquid than large-capitalization stocks, REIT shares
may sometimes experience greater share-price fluctuations than the stocks of
larger companies.
Risks of Investment in Debt Securities
High yield securities may be considered speculative with respect to the issuer's
continuing ability to make principal and interest payments. Analysis of the
creditworthiness of issuers of high yield securities may be more complex than
for issuers of higher quality debt securities, and the ability of the Fund to
achieve its investment objective may, to the extent it is invested 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.
Year 2000
Computer users around the world are faced with the dilemma of the Year 2000
issue, which stems from the use of two digits in most computer systems to
designate the year. When the year advances from 1999 to 2000, many computers
will not recognize '00' as the Year 2000. This issue could potentially affect
every aspect of computer-related activity, on an individual and corporate level.
The Fund could be adversely impacted if the computer systems used by the
investment adviser and other service providers have not been converted to meet
the requirements of the new century. The Fund's investment adviser has evaluated
its internal systems and expects them to be fully capable to handle the change
of millennium. The investment adviser is monitoring on an ongoing basis the
progress of the Fund's service providers to convert their systems to comply with
the requirements of Year 2000. The investment adviser currently has no reason to
believe that these service providers will not be fully and timely compliant.
However, you should be aware that there can be no assurance that all systems
will be successfully converted prior to January 1, 2000, in which case it would
become necessary for the Fund to enter into agreements with new service
providers or to make other arrangements.
Portfolio Turnover
The Fund may engage in portfolio trading when considered appropriate, but
short-term trading will not be used as the primary means of achieving its
investment objective. Although the
7
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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. A higher turnover rate results in
correspondingly greater brokerage commissions and other transactional expenses
which are borne by the Fund. High portfolio turnover may result in the
realization of net short-term capital gains by the Fund which, when distributed
to shareholders, will be taxable as ordinary income. See 'Tax Considerations.'
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MANAGEMENT OF THE FUND
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THE INVESTMENT 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 Capital Management, Inc., a registered investment adviser,
was formed in 1986 and is the leading U.S. manager of portfolios dedicated to
investments in 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., which are closed-end investment
companies, and Cohen & Steers Equity Income Fund, Inc., Cohen & Steers Realty
Shares, Inc., and Cohen & Steers Special Equity Fund, Inc., which are open-end
investment companies. All of Cohen & Steers' client accounts are invested
principally in real estate securities.
Under its Investment Advisory Agreement with the Fund, the investment 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 investment
adviser performs certain administrative services for the Fund and 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 investment adviser.
Under the Advisory Agreement, the investment adviser pays all employee costs
and other ordinary operating costs of the Fund. Excluded from ordinary operating
costs are interest charges, taxes, brokerage fees, extraordinary legal and
accounting fees and expenses, other extraordinary expenses, and payments made
under the Fund's distribution plan.
The investment adviser also selects brokers and dealers to execute the Fund's
portfolio transactions. Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking best price and
execution, the investment adviser may consider sales of shares of the Fund as a
factor in the selection of brokers and dealers to execute portfolio transactions
on behalf of the Fund.
For its services under the Advisory Agreement, and for paying the ordinary
operating expenses of the Fund, the Fund pays the investment adviser a monthly
management fee at the annual rate of 0.75% of the average daily net asset value
of the Fund. This fee is higher than the fees incurred by most other investment
companies.
8
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PORTFOLIO MANAGERS
The Fund's portfolio managers, who have managed the Fund since its inception,
are:
Martin Cohen -- Mr. Cohen is a Director, President and Treasurer of the Fund.
He is, and has been since their inception, President of Cohen & Steers Capital
Management, Inc., the Fund's investment adviser, and Vice President of Cohen &
Steers Securities, Inc., the Fund's distributor.
Robert H. Steers -- Mr. Steers is a Director, Chairman and Secretary of the
Fund. He is, and has been since their inception, Chairman of Cohen & Steers
Capital Management, Inc., the Fund's investment adviser, and President of
Cohen & Steers Securities, Inc., the Fund's distributor.
Steven R. Brown -- Mr. Brown joined Cohen & Steers in 1992 and currently serves
as a Senior Vice President in investment research at Cohen & Steers Capital
Management, Inc. He is a member of NAREIT and ICSC and currently serves on the
ICSC Research Advisory Task Force.
================================================================================
PURCHASES AND REDEMPTIONS
- --------------------------------------------------------------------------------
PRICING OF SHARES
The price at which you can purchase and redeem each class of the Fund's shares
is the net asset value of that class of shares next determined after we receive
your order in proper form, less any applicable initial or contingent deferred
sales charge. We calculate our net asset value per share as of the close of
trading on the New York Stock Exchange on each day the Exchange is open for
trading. We determine net asset value per share for each class by adding the
market value of all securities and other assets in the Fund's portfolio
attributable to that class, subtracting liabilities attributable to that
class, and dividing by the total number of shares of that class then
outstanding.
- --------------------------------------------------------------------------------
PURCHASING THE CLASS OF SHARES THAT IS BEST FOR YOU
All mutual funds incur costs for the distribution and servicing of their shares.
Many funds pay for these costs by charging a variety of fees to their
shareholders. Some of the most common fees include:
<TABLE>
<S> <C>
Initial Sales Loads....................... A percentage fee deducted from
your initial investment.
Contingent Deferred Sales Charges......... A percentage fee deducted from
your sales proceeds based on the
length of time you own your shares.
Distribution 12b-1 Fees................... An annual percentage fee used to
pay for distribution expenses.
Service Fees.............................. An annual percentage fee used to pay for the
cost of servicing shareholder accounts.
</TABLE>
This prospectus offers three separate classes of shares to give you the most
flexibility in choosing a fee structure that is most beneficial to you. As
described below, the classes utilize a combination of the above fees and other
features to suit your investment needs.
9
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
CLASS A SHARES
Initial Sales Loads -- The following initial sales loads apply to Class A
shares:
<TABLE>
<CAPTION>
SALES CHARGE AS
A PERCENTAGE OF
----------------------
OFFERING NET AMOUNT
INVESTMENT AMOUNT PRICE INVESTED
- ------------------------- -------- ----------
<S> <C> <C>
Less than $100,000............ 4.50% 4.71%
$100,000 but less than
$250,000.................... 3.75% 3.90%
$250,000 but less than
$500,000.................... 2.75% 2.83%
$500,000 but less than $1
million..................... 2.25% 2.30%
$1 million or more............ None None
</TABLE>
Contingent Deferred Sales Charge -- None, but if you invest $1,000,000 or more
in Class A shares and sell those shares within one year of their purchase, you
may pay a charge equal to 1% of the lesser of the current net asset value or
the original cost of the shares that you sell.
Distribution 12b-1 Fees -- 0.25% of average daily net assets annually.
Service Fees -- 0.10% of average daily net assets annually.
You may want to purchase Class A shares if:
you prefer to pay an initial sales load and have the benefit of lower
continuing fees;
you expect to maintain your investment for an extended period of time; and
you qualify for a reduced initial sales load due to the size of your
investment.
The following is additional information about Class A shares:
Higher Dividends. The net income attributable to, and dividends payable on, the
shares of each class is reduced by the amount of annual distribution and other
expenses of each class. Because Class A shares bear lower annual distribution
and other expenses, they will tend to pay higher dividends than Class B and
Class C shares.
Reinstatement Privilege. If you redeem your Class A shares and then decide to
reinvest in Class A shares, you may, within 120 calendar days of the date of
your redemption, use all or any part of the proceeds of the redemption to
reinstate, free of an initial sales load, all or any part of your investment
in Class A shares of the Fund. If you redeem your Class A shares and your
redemption was subject to a contingent deferred sales charge, you may reinstate
all or any part of your investment in Class A shares within 120 calendar days
of the date of your redemption and receive a credit for the applicable
contingent deferred sales charge that you paid. Your 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 that your request is received.
The transfer agent must be informed that your new 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.
Reducing Your Class A Initial Sales Load. As demonstrated in the table above,
the size of your investment in Class A shares will affect the initial sales load
that you pay. The Fund offers certain methods that you can use to reduce the
applicable initial sales load. These methods include: rights of aggregation,
rights of accumulation, letter of intention and sales at net asset value. If you
are interested in learning more about of these methods, please consult the SAI.
Please note that in order to obtain a reduction in your initial sales load, you
must notify your dealer, the transfer agent or Cohen & Steers Securities, Inc.
('CSSI'), the Fund's principal underwriter, of the applicability of one of the
reduction methods at the time of your purchase.
10
<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>
1 ACCOUNT TYPE (Please print; indicate only one registration type)
[ ] INDIVIDUAL OR JOINT ACCOUNT
- -
__________________________________________________________ ______________________________
Name Social Security Number
__________________________________________________________
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>
- ---------------------------------------------------------------------------------------------------------------
5 REDUCED SALES CHARGE (CLASS A ONLY)
RIGHTS OF AGGREGATION OR ACCUMULATION
[ ] 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. _________________________________________________ ______________________________
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 in 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>
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 THAT
THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
-----------------------------------------------------------------------------------------------------------------
I certify that (i) 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
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
Initial Sales Loads -- None.
Contingent Deferred Sales Charge -- If you redeem your Class B shares within
six years of their purchase, you will be subject to the following charge which
is based on the lesser of the current net asset value of your shares or their
original cost:
<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>
Distribution 12b-1 Fees -- 0.75% of average daily net assets annually, until
your Class B shares are converted to Class A shares, which will occur
automatically at the end of the month which precedes the 8th anniversary of
your purchase date.
Service Fees -- 0.25% of average daily net assets annually.
You may want to purchase Class B shares if:
you choose to pay no initial sales load and higher continuing fees; and
you prefer to have all of your assets invested initially.
The following is additional information about Class B shares:
Automatic Conversion through Reinvestment. Class B shares that you purchase
through reinvestment of dividends and distributions will convert automatically
to Class A shares in the same manner (discussed above) as other Class B shares
that you may own.
Potentially Higher Costs. You should bear in mind that higher continuing
distribution fees plus applicable contingent deferred sales charges may cause
the total fees you pay to exceed the total fees that would be payable on the
same amount of Class A or Class C shares, particularly if you sell your Class B
shares shortly after you purchase them or if you qualify for a reduced initial
sales load when purchasing Class A shares.
Lower Dividends. The net income attributable to, and dividends payable on, the
shares of each class is reduced by the amount of annual distribution and other
expenses of each class. Because Class B shares bear higher annual distribution
and other expenses than Class A shares, they will tend to pay lower dividends
than Class A shares.
- --------------------------------------------------------------------------------
CLASS C SHARES
Initial Sales Loads -- None.
Contingent Deferred Sales Charge -- You may pay a charge equal to 1% of the
lesser of the current net asset value of your shares or their original cost if
you sell your shares within one year of their purchase.
Distribution 12b-1 Fees -- 0.75% of average daily net assets.
Service Fees -- 0.25% of average daily net assets.
You may want to purchase Class C shares if:
you prefer to have all of your assets invested initially; and
you are uncertain as to the length of time you intend to hold your shares of
the Fund.
The following is additional information about Class C shares:
No Automatic Conversion Feature. Although as a Class C shareholder you benefit
from a shorter contingent deferred sales charge period, you forgo the Class B
automatic conversion feature, making your investment subject to higher
distribution fees for an indefinite period of time, and potentially
costing you more than owning Class A or Class B shares.
11
<PAGE>
<PAGE>
Lower Dividends. The net income attributable to, and dividends payable on, the
shares of each class is reduced by the amount of annual distribution and other
expenses of each class. Because Class C shares bear higher annual distribution
and other expenses than Class A shares, they will tend to pay lower dividends
than Class A shares.
Each class has advantages and disadvantages for different investors. You should
choose the class that best suits your circumstances and objectives.
- --------------------------------------------------------------------------------
A NOTE ON CONTINGENT DEFERRED SALES CHARGES
All contingent deferred sales charges 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.
- --------------------------------------------------------------------------------
INSTITUTIONAL CLASS
In addition to offering Class A, Class B and Class C shares, the Fund also
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 Cohen & Steers Securities, Inc. ('CSSI') and
do not have a front-end sales load or a contingent deferred sales charge, and
are not subject to distribution plan expenses. To obtain the prospectus that
describes the Fund's Class I shares, contact the Fund or CSSI by writing to
the address or by calling the telephone number listed on the back cover of
this prospectus.
- --------------------------------------------------------------------------------
PURCHASE MINIMUMS
You may open an account with the Fund with a minimum investment of $1,000.
Additional investments must be at least $250. We are free to reject any purchase
order.
You can purchase the Fund's shares through authorized dealers or directly
through CSSI. 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.
- --------------------------------------------------------------------------------
FORM OF PAYMENT
We will accept payment for shares in two forms:
1. A check drawn on any bank or domestic savings institution. Checks must be
payable in U.S. dollars and will be accepted subject to collection at full
face value.
2. A bank wire or Federal Reserve Wire of federal funds.
12
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
PURCHASES OF SHARES
Initial Purchase By Wire
1. Telephone toll free from any continental state: (800) 437-9912. When you
contact the transfer agent, you will need the following information:
name of the Fund;
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.
The transfer agent will assign you an account number and a wire reference
control number.
2. Instruct the wiring bank to transmit at least the required minimum amount
(see 'Purchase Minimums' above) 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 attached to the end of this Prospectus.
Mail the Subscription Agreement to the transfer agent:
Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Initial Purchase By Mail
1. Complete the Subscription Agreement included in the center of this
Prospectus.
2. Mail the Subscription Agreement and a check in at least the required minimum
amount per class purchased (see 'Purchase Minimums' above), payable to the Fund,
to the transfer agent at the above address.
Additional Purchases By Wire
1. Telephone toll free from any continental state: (800) 437-9912. When you
contact the transfer agent, you will need the following information:
name of the Fund;
class of shares;
account number;
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.
The transfer agent will assign you a wire reference control number.
2. Instruct the wiring bank to transmit at least the required minimum amount
(see 'Purchase Minimums' above) 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 #:
Additional Purchases By Mail
1. Make a check payable to the Fund in at least the required minimum amount (see
'Purchase Minimums' above). Write your 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 your account number) to the transfer agent at the address set
forth above.
13
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
PURCHASES THROUGH DEALERS
You may purchase the Fund's shares through selected securities dealers with whom
CSSI has sales agreements. You 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 you a
transaction fee in addition to the applicable initial sales charge.
Authorized dealers and financial service firms are responsible for promptly
transmitting purchase orders to CSSI.
- --------------------------------------------------------------------------------
PURCHASES THROUGH CSSI
You may purchase shares of the Fund 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 02208-2798. CSSI will deduct any
applicable sales charge from your 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, or for shares of Cohen & Steers Vista Cash
Management Fund, subject to the applicable contingent deferred sales charge, if
any. If you acquire shares of other Cohen & Steers funds by purchase (rather
than by exchange of Fund shares), you may exchange those shares for Fund shares,
subject to the applicable initial sales charge, if any.
An exchange of shares may result in your realizing a taxable gain or loss for
income tax purposes. See 'Tax Considerations.' The exchange privilege is
available to shareholders residing in any state in which the shares being
acquired may be legally sold. Before you exercise the exchange privilege, you
should read the prospectus of the fund whose shares you are acquiring. Certain
dealers may limit or prohibit your right to use the exchange privilege.
14
<PAGE>
<PAGE>
There is no charge for the exchange privilege. We may limit or terminate your
exchange privilege if you make exchanges more than four times a year. WE MAY
MODIFY OR REVOKE THE EXCHANGE PRIVILEGE FOR ALL SHAREHOLDERS UPON 60 DAYS
PRIOR WRITTEN NOTICE. For additional information concerning exchanges, or
to make an exchange, please call the transfer agent at (800) 437-9912.
- --------------------------------------------------------------------------------
REDEMPTIONS OF SHARES
You may redeem your shares through authorized dealers, by telephone or through
the transfer agent. If your shares are held in your dealer's 'street name,' you
must redeem your shares through your dealer.
Redemptions Through Dealers
If you have an account with an authorized dealer, you may submit a redemption
request to that 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, you should contact your
authorized dealer for more information.
Redemption By Telephone
To redeem shares by telephone, call the Fund's transfer agent at (800) 437-9912.
In order to be honored at that day's price, we must receive any telephone
redemption requests by 4:00 p.m., Eastern time. If we receive your telephone
redemption request after 4:00 p.m., Eastern time, your redemption request will
be honored at the next day's price.
If you would like to change your telephone redemption instructions, you must
send the transfer agent written notification signed by all of the account's
registered owners, accompanied by signature guarantee(s), as described below.
We may modify or suspend telephone redemption privileges without notice during
periods of drastic economic or market changes. WE MAY MODIFY OR TERMINATE THE
TELEPHONE REDEMPTION PRIVILEGE AT ANY TIME ON 30 DAYS NOTICE TO SHAREHOLDERS.
Redemption By Mail
You can redeem Fund shares by sending a written request for redemption to the
transfer agent:
Chase Global Funds Services Company
P.O. Box 2798
Boston, Massachusetts 02208-2798
Attn: Cohen & Steers Equity Income Fund, Inc.
A written redemption request must:
state the number of shares or dollar amount to be redeemed;
identify your account number and tax identification number; and
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 the transfer agent together with a redemption request.
Other Redemption Information
Payment of Redemption Proceeds. The Fund will send you the proceeds by check. If
you made the election to receive redemption proceeds by wire on the Subscription
Agreement, the Fund will send you the proceeds by wire to your designated bank
account. When proceeds of a redemption are to be paid to someone other than the
shareholder, either by wire or check, you must send a letter of instruction and
the signature(s) on the letter of instruction must be guaranteed, as described
below, regardless of the amount of the redemption. The transfer agent will
normally mail checks for redemption pro-
15
<PAGE>
<PAGE>
ceeds within five business days. Redemptions by wire will normally be sent
within two business days. The Fund will delay the payment of redemption
proceeds, however, if your check used to pay for the shares to be redeemed has
not cleared, which may take up to 15 days or more.
The Fund will pay redemption proceeds in cash, by check or wire, unless the
Board of Directors believes that economic conditions exist which make redeeming
in cash detrimental to the best interests of the Fund. In the unlikely event
that this were to occur, all or a portion of your redemption proceeds would
consist of readily marketable portfolio securities of the Fund transferred into
your name. You would then incur brokerage costs in converting the securities to
cash.
Signature Guarantees. 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 the Fund's
transfer agent. For redemptions made by corporations, executors, administrators
or guardians, the transfer agent may require additional supporting documents
evidencing the authority of the person making the redemption (including evidence
of appointment or incumbency). For additional information regarding the specific
documentation required, contact the transfer agent at (800) 437-9912.
The transfer agent will not consider your redemption request to be properly made
until it receives all required documents in proper form.
Redemption of Small Accounts. If your Fund account has a value of $1,000 or less
as the result of voluntary redemption, we may redeem your remaining shares. We
will, however, give you 30 days notice of our intention to do so. During this
30-day notice period, you can make additional investments to avoid the forced
liquidation of your account.
================================================================================
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
DISTRIBUTION PLAN
The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940
Act (a 'Distribution Plan') which allows the Fund to pay distribution fees for
the sale and distribution of its shares. Under this plan, the Fund may pay CSSI
a quarterly distribution fee at an annual rate of up to 0.25% of 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. Because these fees are paid out of the Fund's assets on an
ongoing basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges.
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.
16
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
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.
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.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
The Fund will declare and pay dividends from its investment income quarterly.
The Fund intends to distribute net realized capital gains, if any, at least once
each year, normally in December. The transfer agent will automatically reinvest
your dividends and distributions in additional shares of the Fund unless you
elected on your Subscription Agreement to have them paid to you in cash.
We will calculate the dividends payable on each class of the Fund's shares in
the same manner at the same time on the same day.
- --------------------------------------------------------------------------------
TAX CONSIDERATIONS
The following brief tax discussion assumes you are a U.S. shareholder. In the
SAI we have provided more detailed information regarding the tax consequences of
investing in the Fund.
Dividends paid to you out of the Fund's 'investment company taxable income'
(which includes dividends the Fund receives on REIT shares, interest income, and
net short-term capital gains) will be taxable to you as ordinary income.
Distributions of net capital gains (the excess of net long-term capital gains
over net short-term capital losses), if any, are taxable to you as long-term
capital gains, regardless of how long you have held your Fund shares. A
distribution of an amount in excess of the Fund's earnings is treated as a
non-taxable return of capital that reduces your tax basis in your shares; any
such distribution in excess of your tax basis is treated as gain from a sale of
your shares. The tax treatment of your dividends and distributions will be the
same regardless of whether they were paid to you in cash or reinvested in
additional Fund shares.
A distribution will be treated as paid to you 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 during January of the following
year. Each year, we will notify you of the tax status of dividends and other
distributions.
If you redeem your Fund shares, or exchange them for shares of another Cohen &
Steers fund, you may realize a capital gain or loss which will be long-term or
short-term, depending on your holding period for the shares.
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We may be required to withhold U.S. federal income tax at the rate of 31% of all
taxable distributions payable if you:
fail to provide us with your correct tax payer identification number;
fail to make required certifications; or
have been notified by the IRS that you are subject to backup withholding.
Backup withholding is not an additional tax. Any amounts withheld may be
credited against your U.S. federal income tax liability.
Fund distributions also may be subject to state and local taxes. You should
consult with your own tax adviser regarding the particular consequences of
investing in the Fund.
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FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance since its inception. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the Fund's audited financial statements, are included in the
current annual report, which is available free of charge upon request.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
---------------------------------------- ------------------ ------------------
FOR PERIOD FOR PERIOD FOR PERIOD
SEPTEMBER 2, JANUARY 15, JANUARY 14,
1997'D' 1998'D' 1998'D'
FISCAL YEAR ENDED THROUGH THROUGH THROUGH
PER SHARE OPERATING PERFORMANCE DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1998 DECEMBER 31, 1998
- -------------------------------------- ----------------- ------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period.............................. $ 12.32 $ 11.46 $ 12.35 $ 12.31
------- ------- ------- -------
Income from investment operations
Net investment income............. 0.73 0.25 0.64 0.64
Net realized and unrealized
gains/(losses) on investments... (2.00) 0.83 (2.01) (1.97)
------- ------- ------- -------
Total from investment
operations.................... (1.27) 1.08 (1.37) (1.33)
------- ------- ------- -------
Less dividends and distributions to
shareholder from:
Net investment income............. (0.51) (0.17) (0.49) (0.49)
Net Realized gain on
investments..................... -- (0.03) -- --
Tax return of capital............. (0.23) (0.02) (0.22) (0.33)
------- ------- ------- -------
Total dividend and distributions
to shareholders............... (0.74) (0.22) (0.71) (0.72)
------- ------- ------- -------
Net asset value, end of period........ $ 10.31 $ 12.32 $ 10.27 $ 10.26
------- ------- ------- -------
------- ------- ------- -------
- -----------------------------------------------------------------------------------------------------------------------------
Total investment return(1)............ -10.56% 9.46%(2) -11.37%(2) -11.08%(2)
------- ------- ------- -------
------- ------- ------- -------
- -----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period (in
millions)........................... $31,581 $34,622 $ 10,114 $ 13,159
------- ------- ------- -------
------- ------- ------- -------
Ratio of expenses to average daily net
assets (before expense reduction)... 1.92% 3.49%(3) 2.57%(3) 2.57%(3)
------- ------- ------- -------
------- ------- ------- -------
Ratio of expenses to average daily net
assets (net of expense reduction)... 1.50% 1.50%(3) 2.15%(3) 2.15%(3)
------- ------- ------- -------
------- ------- ------- -------
Ratio of net investment income to
average daily net assets (before
expense reduction).................. 5.89% 9.47%(3) 5.99%(3) 6.13%(3)
------- ------- ------- -------
------- ------- ------- -------
Ratio of net investment income to
average daily net assets (net of
expense reduction).................. 6.32% 11.46%(3) 6.43%(3) 6.56%(3)
------- ------- ------- -------
------- ------- ------- -------
Portfolio turnover rate............... 96.47% 87.20%(2) 96.47%(2) 96.47%(2)
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
- ------------
'D' Commencement of operations
(1) Total investment return would have been lower had certain fees not been
reimbursed by Adviser.
(2) Not annualized.
(3) Annualized.
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[Logo]
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TO OBTAIN ADDITIONAL INFORMATION ABOUT THE FUND
If you would like additional information about Cohen & Steers Equity Income
Fund, Inc., the following documents are available to you without any charge,
upon request:
Annual/Semi-Annual Reports -- Additional information about the Fund's
investments is available in the Fund's annual and semi-annual report to
shareholders. In these reports, you will find a discussion of the market
conditions and investment strategies that significantly affected the Fund's
performance during its most recent fiscal year.
Statement of Additional Information -- Additional information about the Fund's
structure and operations can be found in the Statement of Additional
Information ('SAI'). The information presented in the Statement of Additional
Information is incorporated by reference into the prospectus and is legally
considered to be part of this prospectus.
To request a free copy of any of the materials described above, or to make any
other inquiries, please contact us:
<TABLE>
<S> <C>
By telephone (800) 437-9912
By mail Cohen & Steers Equity Income Fund, Inc.
c/o Chase Global Fund Services Company
P.O. Box 2798
Boston, Massachusetts 02208-2798
By e-mail [email protected]
On the Internet http://www.cohenandsteers.com
</TABLE>
Our prospectus and SAI may also be available from your broker or financial
adviser. Reports and other information about the Fund (including the Fund's
Statement of Additional Information) may also be obtained from the Securities
and Exchange Commission:
By going to the Commission's Public Reference Room in Washington, D.C. where
you can review and copy the information. Information on the operation of the
Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330.
By accessing the Commission's Internet site at http://www.sec.gov where you can
view, download and print the information.
By writing to the Public Reference Section of the Securities and Exchange
Commission, Washington, D.C. 20549-6009 where, upon payment of a duplicating
fee, copies of the information will be sent to you.
SEC File No. 811-8287
757 THIRD AVENUE, NEW YORK, NEW YORK 10017
<PAGE>
<PAGE>
[Logo]
757 THIRD AVENUE
NEW YORK, NEW YORK 10017
(800) 437-9912
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1999
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, BUT SHOULD BE READ
IN CONJUNCTION WITH THE PROSPECTUS OF COHEN & STEERS EQUITY INCOME FUND, INC.,
DATED THE SAME DATE AS THE DATE HEREOF, AS SUPPLEMENTED FROM TIME TO TIME (THE
'PROSPECTUS'). THIS STATEMENT OF ADDITIONAL INFORMATION IS INCORPORATED BY
REFERENCE IN ITS ENTIRETY INTO THE PROSPECTUS. THE FINANCIAL STATEMENTS AND
NOTES CONTAINED IN THE ANNUAL REPORT AND SEMI-ANNUAL REPORT ARE INCORPORATED BY
REFERENCE INTO THIS STATEMENT OF ADDITIONAL INFORMATION. COPIES OF THE STATEMENT
OF ADDITIONAL INFORMATION, PROSPECTUS, ANNUAL AND SEMI-ANNUAL REPORTS MAY BE
OBTAINED FREE OF CHARGE BY WRITING OR CALLING THE ADDRESS OR PHONE NUMBER SHOWN
ABOVE.
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
================================================================================
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Objectives and Policies............................................................. 3
Investment Restrictions........................................................................ 8
Management of the Fund......................................................................... 10
Compensation of Directors and Certain Officers................................................. 11
Investment Advisory and Other Services......................................................... 11
Portfolio Transactions and Brokerage........................................................... 13
Organization and Description of Capital Stock.................................................. 14
Distribution Plan.............................................................................. 15
Determination of Net Asset Value............................................................... 17
Reducing the Initial Sales Load on Class A Shares.............................................. 17
Redemption of Shares........................................................................... 19
Contingent Deferred Sales Charges.............................................................. 19
Other Share Information........................................................................ 21
Taxation....................................................................................... 21
Performance Information........................................................................ 28
Counsel and Independent Accountants............................................................ 30
Financial Statements........................................................................... 30
</TABLE>
2
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================================================================================
STATEMENT OF ADDITIONAL INFORMATION
Cohen & Steers Equity Income Fund, Inc. (the 'Fund') is a non-diversified,
open-end, management investment company organized as a Maryland corporation on
July 3, 1997.
Much of the information contained in this Statement of Additional Information
expands on subjects discussed in the Prospectus. No investment in the shares of
the Fund should be made without first reading the Prospectus.
================================================================================
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION REGARDING FUND INVESTMENTS
The following descriptions supplement the descriptions of the principal
investment objectives, strategies and risks as set forth in the Prospectus.
Except as otherwise provided below, the Fund's investment policies are not
fundamental and may be changed by the Board of Directors of the Fund without the
approval of the shareholders; however, the Fund will not change its investment
policies without written notice to shareholders.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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. 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. Other
acceptable money market instruments include commercial paper rated by any
nationally recognized rating agency, such as Moody's or S&P, certificates of
deposit, bankers' acceptances issued by domestic banks having total assets in
excess of one billion dollars, and money market mutual funds.
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
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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.
- --------------------------------------------------------------------------------
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 foreign securities
that are different in some respects than 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 will 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.
- --------------------------------------------------------------------------------
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).
4
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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
non-hedging purposes, for example to enhance total return or provide market
exposure pending the investment of cash balances, but only to the extent that
aggregate initial margin deposits plus premiums paid by it for open futures
options positions, less the amount by which any such positions are 'in-the-
money,' would not exceed 5% of the Fund's total assets. The Fund may lose the
expected benefit of the transactions if interest rates, currency exchange rates
or securities prices change in an unanticipated manner. Such unanticipated
changes in interest rates, currency exchange rates or securities prices may
also result in poorer overall performance than if the Fund had not entered
into any futures transactions.
- --------------------------------------------------------------------------------
OPTIONS ON SECURITIES AND STOCK INDICES
The Fund may write covered call and put options and purchase call and put
options on securities or stock indices that are traded on United States
exchanges.
An option on a security is a contract that gives the purchaser of the option, in
return for the premium paid, the right to buy a specified security (in the case
of a call option) or to sell a specified security (in the case of a put option)
from or to the writer of the option at a designated price during the term of the
option. An option on a securities index gives the purchaser of the option, in
return for the premium paid, the right to receive from the seller cash equal to
the difference between the closing price of the index and the exercise price of
the option.
The Fund may write a call or put option only if the option is 'covered.' A call
option on a security written by the Fund is covered if the Fund owns the
underlying security covered by the call or has an absolute and immediate right
to acquire that security without additional cash consideration (or for
additional cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other securities held in its portfolio. A call
option on a security is also covered if the Fund holds a call on the same
security and in the same principal amount as the call written where the exercise
price of the call held (a) is equal to or less than the exercise price of the
call written or (b) is greater than the exercise price of the call written if
the difference is maintained by the Fund in cash or liquid portfolio securities
in a segregated account with its custodian. A put option on a security written
by the Fund is 'covered' if the Fund maintains similar liquid assets with a
value equal to the exercise price in a segregated account with its custodian,
or else holds a put on the same security and in the same principal amount as
the put written where the exercise price of the put held is equal to or greater
than the exercise price of the put written. The 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.
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
5
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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 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
6
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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.
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. 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 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.
- --------------------------------------------------------------------------------
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
7
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securities subject to the hedge. Gains on investments in options and futures
depend on the portfolio manager's ability to predict correctly the direction of
stock prices, interest rates and other economic factors. Where a liquid
secondary market for options or futures does not exist, the Fund may not be able
to close its position and, in such an event would be unable to control its
losses. The loss from investing in futures contracts is potentially unlimited.
The use of forward foreign currency contracts may limit gains from a positive
change in the relationship between the U.S. dollar and foreign currencies.
Unanticipated changes in currency prices may cause poorer overall performance
for the Fund than if it had not engaged in such contracts.
- --------------------------------------------------------------------------------
SHORT SALES
The Fund may enter into short sales, provided the dollar amount of short sales
at any one time would not exceed 25% of the net assets of the Fund, and the
value of securities of any one issuer in which the Fund is short would not
exceed the lesser of 2% of the value of the Fund's net assets or 2% of the
securities of any class of any issuer. The Fund must maintain collateral in a
segregated account consisting of cash or liquid portfolio securities with a
value equal to the current market value of the shorted securities, which is
marked-to-market daily. If the Fund owns an equal amount of such securities or
securities convertible into or exchangeable for, without payment of any further
consideration, securities of the same issuer as, and equal in amount to, the
securities sold short (which sales are commonly referred to as 'short sales
against the box'), the above requirements are not applicable.
================================================================================
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The fundamental investment objectives and the general investment policies and
investment techniques of the Fund 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 or commodities, 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;
8
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<PAGE>
5. Purchase or sell commodities or commodity futures contracts, except that the
Fund may invest in financial futures contracts, options thereon and similar
instruments;
6. Make loans to other persons except through the lending of securities held by
it (but not to exceed a value of one-third of total assets), through the use of
repurchase agreements, and by the purchase of debt securities, all in accordance
with its investment policies;
7. Purchase restricted or 'illiquid' securities, including repurchase agreements
maturing in more than seven days, if as a result, more than 15% of the Fund's
net assets would then be invested in such securities (excluding securities which
are eligible for resale pursuant to Rule 144A under the Securities Act of 1933);
8. Acquire or retain securities of any investment company, except that the Fund
may (a) acquire securities of investment companies up to the limits permitted by
Sec. 12(d)(1) of the Investment Company Act of 1940, and (b) acquire securities
of any investment company as part of a merger, consolidation or similar
transaction;
9. Make short sales whereby the dollar amount of short sales at any one time
would exceed 25% of the net assets of the Fund; provided the Fund maintains
collateral in a segregated account consisting of cash or liquid portfolio
securities with a value equal to the current market value of the shorted
securities, which is marked to market daily. If the Fund owns an equal amount of
such securities or securities convertible into or exchangeable for, without
payment of any further consideration, securities of the same issuer as, and
equal in amount to, the securities sold short (which sales are commonly referred
to as 'short sales against the box'), such restrictions shall not apply;
10. Invest in puts, calls, straddles, spreads or any combination thereof, except
that the Fund may (a) purchase put and call options on securities and securities
indexes, and (b) write covered put and 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.
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 of the
outstanding voting securities' 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.
9
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<PAGE>
================================================================================
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
The overall management of the business and affairs of the Fund is vested with
the Board of Directors. The directors approve 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 investment adviser and the Fund's administrator, subject
always to the investment objective and policies of the Fund and to the general
supervision of the directors. [As of April , 1999, the directors and officers
as a group beneficially owned, directly or indirectly, less than 1% of the
outstanding shares 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. An asterisk (*) has been placed next to the
name of each director who is an 'interested person' of the Fund, as such term is
defined in the 1940 Act, by virtue of such person's affiliation with the Fund or
the Adviser.
<TABLE>
<CAPTION>
POSITION(S)
HELD WITH
NAME, ADDRESS AND AGE FUND PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS
- --------------------------------- ------------------- -------------------------------------------------------------------
<S> <C> <C>
*Robert H. Steers ............... Director, Chairman Chairman of Cohen & Steers Capital Management, Inc., the Fund's
757 Third Avenue and Secretary investment adviser. President of Cohen & Steers Securities, Inc.
New York, New York
Age: 46
*Martin Cohen ................... Director, President President of Cohen & Steers Capital Management, Inc., the Fund's
757 Third Avenue and Treasurer investment adviser. Vice President of Cohen & Steers Securities,
New York, New York Inc.
Age: 50
Gregory C. Clark ................ Director Principal of Wellspring Management Group.
376 Mountain Laurel Drive
Aspen, Colorado
Age: 52
George Grossman ................. Director Attorney at law.
17 Elm Place
Rye, New York
Age: 45
Jeffrey H. Lynford .............. Director Chairman of Wellsford Group Inc. since 1986 and of Wellsford
610 Fifth Avenue Residential Property Trust from 1992 to May 1997. Mr. Lynford is
New York, New York also a Trustee of Equity Residential Properties Trust and an
Age: 51 Emeritus Trustee of the National Trust for Historic Preservation.
Willard H. Smith Jr. ............ Director Board member of Essex Property Trust, Inc., Highwoods Properties,
7 Slayton Drive Inc., Realty Income Corporation and Willis Lease Finance
Short Hills, New Jersey Corporation. Managing director at Merrill Lynch & Co., Equity
Age: 62 Capital Markets Division from 1983 to 1995.
Elizabeth O. Reagan ............. Vice President Senior Vice President of Cohen & Steers Capital Management, Inc.,
757 Third Avenue the Fund's investment adviser, since 1996 and prior to that Vice
New York, New York President of Cohen & Steers Capital Management, Inc.
Age: 36
Adam Derechin ................... Vice President and Senior Vice President of Cohen & Steers Capital Management, Inc.,
757 Third Avenue Assistant Treasurer the Fund's investment adviser, since 1998 and prior to that Vice
New York, New York President of Cohen & Steers Capital Management, Inc.
Age: 35
</TABLE>
10
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<PAGE>
================================================================================
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, 1998. 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. 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. 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.
COMPENSATION TABLE
FISCAL YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
FROM FUND AND
AGGREGATE FUND COMPLEX
COMPENSATION PAID TO
NAME OF PERSON, POSITION FROM FUND DIRECTORS
- --------------------------------------------------------------------------------------- ------------ ---------------
<S> <C> <C>
Gregory C. Clark*, Director............................................................ $7,500 $37,500(5)
Martin Cohen**, Director and President................................................. 0 0(5)
George Grossman*, Director............................................................. 7,500 37,500(5)
Jeffrey H. Lynford*, Director.......................................................... 7,500 37,500(5)
Willard H. Smith Jr.*, Director........................................................ 7,500 37,500(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.
================================================================================
INVESTMENT ADVISORY AND OTHER SERVICES
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISER
Cohen & Steers Capital Management, Inc. ('Cohen & Steers'), with offices located
at 757 Third Avenue, New York, New York 10017 is the investment adviser to the
Fund.
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.
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.
11
<PAGE>
<PAGE>
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. For the fiscal years ended December 31, 1998, and December
31, 1997, the Adviser received management fees from the Fund in the following
amounts:
<TABLE>
<CAPTION>
FISCAL YEAR GROSS MANAGEMENT NET
ENDED* MANAGEMENT FEE FEE WAIVERS MANAGEMENT FEES
- ----------------- --------------- ----------- ---------------
<S> <C> <C> <C>
December 31, 1998 $ 407,654 233,943 173,711
December 31, 1997 $ 45,083 45,083 --
</TABLE>
* The Class A shares commenced operations on September 2, 1997. The Class B
shares commenced operations on January 15, 1998. The Class C shares commenced
operations on January 14, 1998. The Class I shares commenced operations on
July 15, 1999.
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.
- --------------------------------------------------------------------------------
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 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
12
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<PAGE>
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, P.O. Box 2798, Boston,
Massachusetts 02208, 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.'
For the fiscal year ended December 31, 1998, and for the period September 2,
1997 (commencement of operations) through December 31, 1997, the Adviser
received administration fees from the Fund in the amount of $10,871 and $1,196,
respectively, and Chase received sub-administration fees from the Fund in the
amount of $106,089 and $13,931, respectively.
- --------------------------------------------------------------------------------
DISTRIBUTOR
Cohen & Steers Securities, Inc., an affiliate of the Adviser, serves without
charge as the Distributor of shares of the Fund. Cohen & Steers Securities, Inc.
is not obligated to sell any specific amount of shares and will sell shares,
as agent for the Fund, on a continuous basis only against orders to purchase
shares.
- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Chase, which has its principal business at One Chase Manhattan Plaza, New York,
New York 10081-1000 has been retained to act as custodian of the Fund's
investments and as the Fund's transfer and dividend disbursing agent. Chase has
retained its wholly-owned subsidiary, Chase Global Funds Services Company, to
provide transfer and dividend disbursing agency services to the Fund. Neither
Chase nor Chase Global Funds Services Company has any part in deciding the
Fund's investment policies or which securities are to be purchased or sold for
the Fund's portfolio.
================================================================================
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
13
<PAGE>
<PAGE>
States stock exchanges involve the payment by the Fund of negotiated brokerage
commissions. There is generally no stated commission in the case of securities
traded in the over-the-counter market but the price paid by the Fund usually
includes an undisclosed dealer commission or mark-up. In certain instances, the
Fund may make purchases of underwritten issues at prices which include
underwriting fees.
In selecting a broker to execute each particular transaction, the Adviser will
take the following into consideration: the best net price available; the
reliability, integrity and financial condition of the broker; the size and
difficulty in executing the order; and the value of the expected contribution of
the broker to the investment performance of the Fund on a continuing basis.
Accordingly, the cost of the brokerage commissions to the Fund in any
transaction may be greater than that available from other brokers if the
difference is reasonably justified by other aspects of the portfolio execution
services offered. Subject to such policies and procedures as the Directors may
determine, the Adviser shall not be deemed to have acted unlawfully or to have
breached any duty solely by reason of its having caused the Fund to pay a broker
that provides research services to the Adviser an amount of commission for
effecting a portfolio investment transaction in excess of the amount of
commission another broker would have charged for effecting that transaction, if
the Adviser determines in good faith that such amount of commission was
reasonable in relation to the value of the research service provided by such
broker viewed in terms of either that particular transaction or the Adviser's
ongoing responsibilities with respect to the Fund. Research and investment
information is provided by these and other brokers at no cost to the Adviser and
is available for the benefit of other accounts advised by the Adviser and its
affiliates, and not all of the information will be used in connection with the
Fund. While this information may be useful in varying degrees and may tend to
reduce the Adviser's expenses, it is not possible to estimate its value and in
the opinion of the Adviser it does not reduce the Adviser's expenses in a
determinable amount. The extent to which the Adviser makes use of statistical,
research and other services furnished by brokers is considered by the Adviser in
the allocation of brokerage business but there is no formula by which such
business is allocated. The Adviser does so in accordance with its judgment of
the best interests of the Fund and its shareholders. The Adviser may also take
into account payments made by brokers effecting transactions for the Fund to
other persons on behalf of the Fund for services provided to it for which it
would be obligated to pay (such as custodial and professional fees). In
addition, consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc., and subject to seeking best price and 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 fiscal year ended December 31, 1998, and for the period September 2,
1997 (commencement of operations) through December 31, 1997, the Fund paid a
total of $336,009 and $123,606 in brokerage commissions, respectively. Of such
amount, $199,917 and $73,422 in brokerage commissions was placed with brokers or
dealers who provide research and investment information. The Fund's portfolio
turnover rate for the fiscal year ended December 31, 1998 was 96.47%.
================================================================================
ORGANIZATION AND DESCRIPTION OF CAPITAL STOCK
- --------------------------------------------------------------------------------
The Fund was incorporated on July 3, 1998, 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 four 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
14
<PAGE>
<PAGE>
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.
As of April 9, 1999, there were 5,560,913 shares of the Fund's common stock
outstanding. Also as of that date, the Fund knew of no person who owned 5% or
more of the Fund's shares.
================================================================================
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. For the fiscal year ended December 31, 1998, with
respect to the Class A shares, the Fund paid distribution services fees for
expenditures under the Distribution Plan, in the aggregate amount of $93,238,
which constituted 0.25% of the Fund's average daily net assets attributable to
the Class A shares during the period. Of the $93,238 paid by the Fund under the
Distribution Plan, with respect to the Class A shares, $93,238 was spent for
compensation to broker-dealers and other financial intermediaries.
For the period January 15, 1998 (commencement of operations) through December
31, 1998, with respect to the Class B shares, the Fund paid distribution
services fees for expenditures under the Distribution Plan, in the aggregate
amount of $57,273, which constituted 0.75% of the Fund's average daily net
assets attributable to the Class B shares during the period. Of the $57,273 paid
by the Fund under the Distribution Plan, with respect to the Class B shares,
$57,273 was spent
15
<PAGE>
<PAGE>
for compensation to broker-dealers and other financial intermediaries.
For the period January 14, 1998 (commencement of operations) through December
31, 1998, with respect to the Class C shares, the Fund paid distribution
services fees for expenditures under the Distribution Plan, in the aggregate
amount of $54,877, which constituted 0.75% of the Fund's average daily net
assets attributable to the Class C shares during the period. Of the $54,877 paid
by the Fund under the Distribution Plan, with respect to the Class C shares,
$54,877 was spent for compensation to broker-dealers and other financial
intermediaries.
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
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 0.75 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.
16
<PAGE>
<PAGE>
================================================================================
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.
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 source 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.
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.
================================================================================
REDUCING THE INITIAL SALES LOAD ON CLASS A SHARES
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As discussed in the prospectus, the size of the total investment in the Class A
shares of the Fund will affect your sales load. Described below are several
methods to reduce the applicable sales load. In order to obtain a reduction in
the sales load, an investor must notify, at the time of purchase, his dealer,
the transfer agent or CSSI of the applicability of one of the following:
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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 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
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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
investment 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.
================================================================================
REDEMPTION OF SHARES
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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 and in this Statement of
Additional Information 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.
================================================================================
CONTINGENT DEFERRED SALES CHARGES
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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.
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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 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
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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 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.
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CLASS I SHARES
Class I shares are not subject to a contingent deferred sales charge.
================================================================================
OTHER SHARE INFORMATION
- --------------------------------------------------------------------------------
A dealer concession of up to 1% may be paid by CSSI on investments in Class A
shares of $1 million or more. Also, 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, 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.
================================================================================
TAXATION
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Set forth below is a discussion of certain U.S. federal income tax issues
concerning the Fund and the purchase, ownership and disposition of Fund shares.
This discussion does not purport to be complete or to deal with all aspects of
federal income taxation that may be relevant to shareholders in light of their
particular circumstances. This discussion is based upon present provisions of
the Internal Revenue Code of 1986, as amended (the 'Code'), the regulations
promulgated thereunder, and judicial and administrative ruling authorities,
all of which are subject to change, which change may be retroactive.
Prospective investors should consult
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their own tax advisors with regard to the federal tax consequences of the
purchase, ownership, or disposition of Fund shares, as well as the tax
consequences arising under the laws of any state, foreign country, or other
taxing jurisdiction.
- --------------------------------------------------------------------------------
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) 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 (c) 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 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.
- --------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends paid out of the Fund's investment company taxable income will be
taxable to a U.S. shareholder as ordinary income. If a portion of the Fund's
income consists of
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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 to a
shareholder as long-term capital gains, regardless of how long the shareholder
has held Fund shares. Shareholders receiving distributions in the form of
additional shares, rather than cash, generally will have a cost basis in each
such share equal to the net asset value of a share of the Fund on the
reinvestment date. 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.
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.
- --------------------------------------------------------------------------------
SALE OR EXCHANGE OF SHARES
Upon the sale or other disposition of shares of the Fund, including an exchange
of shares in the Fund for shares of another Cohen & Steers fund, a shareholder
may realize a capital gain or loss which will be long-term or short-term,
depending upon the shareholder's holding period for the shares. A shareholder
who exchanges shares in the Fund for shares of another Cohen & Steers fund will
have a tax basis in the newly-acquired fund shares equal to the amount invested
and will begin a new holding period for federal income tax purposes.
If a shareholder exchanges shares in the Fund for shares in another Cohen &
Steers fund pursuant to a reinvestment right, the sales charge incurred in the
purchase of the Fund shares exchanged may not be added to tax basis in
determining gain or loss for federal income tax purposes. Instead, the sales
charge for the exchanged Fund shares shall be added to basis for purposes of
determining gain or loss on the disposition of the newly-acquired fund shares,
if such newly-acquired fund shares are not disposed of in a similar exchange
transaction. Any loss realized on a sale or exchange will be disallowed to the
extent the shares disposed of are replaced (including through reinvestment of
dividends) 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
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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.
- --------------------------------------------------------------------------------
MARKET DISCOUNT BONDS
Gain 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.
- --------------------------------------------------------------------------------
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; 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 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
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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.
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 notional principal contract, futures
or forward contract transaction 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 does not apply to certain transactions closed in the 90-day
period ending with the 30th day after the close of the taxable year, if certain
conditions are met.
- --------------------------------------------------------------------------------
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
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exception for certain thrift institutions), (ii) will constitute unrelated
business taxable income to entities (including a qualified pension plan, an
individual retirement account, a 401(k) plan, a Keogh plan or other tax-exempt
entity) subject to tax on unrelated business income, thereby potentially
requiring such an entity that is allocated excess inclusion income, and
otherwise might not be required to file a tax return, to file a tax return and
pay tax on such income, and (iii) in the case of a foreign shareholder, will not
qualify for any reduction in U.S. federal withholding tax. In addition, if at
any time during any taxable year a 'disqualified organization' (as defined in
the Code) is a record holder of a share in a regulated investment company, then
the regulated investment company will be subject to a tax equal to that portion
of its excess inclusion income for the taxable year that is allocable to the
disqualified organization, multiplied by the highest federal income tax rate
imposed on corporations. The Adviser does not intend on behalf of the Fund to
invest in REITs, a substantial portion of the assets of which consists of
residual interests in REMICs.
- --------------------------------------------------------------------------------
PASSIVE FOREIGN INVESTMENT COMPANIES
If the Fund invests in stock of certain foreign investment companies, the Fund
may be subject to U.S. federal income taxation on a portion of any 'excess
distribution' with respect to, or gain from the disposition of, such stock. The
tax would be determined by allocating such distribution or gain ratably to each
day of the Fund's holding period for the stock. The distribution or gain so
allocated to any taxable year of the Fund, other than the taxable year of the
excess distribution or disposition, would be taxed to the Fund at the highest
ordinary income tax rate in effect for such year, and the tax would be further
increased by an interest charge to reflect the value of the tax deferral deemed
to have resulted from the ownership of the foreign company's stock. Any amount
of distribution or gain allocated to the taxable year of the distribution or
disposition would be included in the Fund's investment company taxable income
and, accordingly, would not be taxable to the Fund to the extent distributed by
the Fund as a dividend to its shareholders.
The Fund may be able to make an election, in lieu of being taxable in the manner
described above, to include annually in income its pro rata share of the
ordinary earnings and net capital gain of the foreign investment company,
regardless of whether it actually received any distributions from the foreign
company. These amounts would be included in the Fund's investment company
taxable income and net capital gain which, to the extent distributed by the Fund
as ordinary or capital gain dividends, as the case may be, would not be taxable
to the Fund. In order to make this election, the Fund would be required to
obtain certain annual information from the foreign investment companies in which
it invests, which in many cases may be difficult to obtain. Alternatively, the
Fund may 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.
- --------------------------------------------------------------------------------
FOREIGN SHAREHOLDERS
U.S. taxation of a shareholder who, as to the United States, is a nonresident
alien individual, a foreign trust or estate, a foreign corporation or foreign
partnership ('foreign shareholder') depends on whether the income of the Fund is
'effectively connected' with a U.S. trade or business carried on by the
shareholder.
Income Not Effectively Connected. If the income from the Fund is not
'effectively connected' with a U.S. trade or business carried on by the foreign
shareholder, distributions of investment company taxable income will be subject
to a U.S. tax of 30% (or lower treaty rate, except in the case of any excess
inclusion income allocated to the shareholder (see 'Taxation -- Investments in
Real Estate Investment Trusts' above)), which tax is generally withheld from
such distributions.
Distributions of capital gain dividends and any amounts retained by the Fund
which are designated as undistributed capital gains will not be subject to U.S.
tax at the rate of 30% (or lower treaty rate) unless the foreign shareholder is
a nonresident alien individual and is physically present in the United States
for more than 182 days during the taxable year and meets certain other
requirements. However, this 30% tax on capital gains of nonresident alien
individuals who are physically present in the United States for more than the
182 day period only applies in exceptional cases because any individual present
in the United States for more than 182 days during the taxable year is generally
treated as a resident for U.S. income tax purposes; in that case, he or she
would be subject to U.S. income tax on his or her worldwide income at the
graduated rates applicable to U.S. citizens, rather than the 30% U.S. tax. In
the case of a foreign shareholder who is a nonresident alien individual, the
Fund may be required to withhold U.S. income tax at a rate of 31% of
distributions of net capital gains unless the foreign shareholder 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
27
<PAGE>
<PAGE>
interests plus its interests in real property located outside the United States
plus any other assets used or held for use in a business. In the case of the
Fund, U.S. real property interests include interests in stock in U.S. real
property holding corporations (other than stock of a REIT controlled by U.S.
persons and holdings of 5% or less in the stock of publicly traded U.S. real
property holding corporations) and certain participating debt securities.
Income Effectively Connected. If the income from the Fund is 'effectively
connected' with a U.S. trade or business carried on by a foreign shareholder,
then distributions of investment company taxable income and capital gain
dividends, any amounts retained by the Fund which are designated as
undistributed capital gains and any gains realized upon the sale or exchange
of shares of the Fund will be subject to U.S. income tax at the graduated
rates applicable to U.S. citizens, residents and domestic corporations.
Foreign corporate shareholders may also be subject to the branch profits
tax imposed by the Code.
The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may differ from those described herein. Foreign
shareholders are advised to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in the Fund.
- --------------------------------------------------------------------------------
OTHER TAXATION
Fund shareholders may be subject to state, local and foreign taxes on their Fund
distributions. Shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the Fund.
================================================================================
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund may quote the Fund's total return, aggregate total
return or yield in advertisements or in reports and other communications to
shareholders. The Fund's performance will vary depending upon market conditions,
the composition of its portfolio and its operating expenses. Consequently, any
given performance quotation should not be considered representative of the
Fund's performance in the future. In addition, because performance will
fluctuate, it may not provide a basis for comparing an investment in the Fund
with certain bank deposits or other investments that pay a fixed yield for a
stated period of time. Investors comparing the Fund's performance with that of
other mutual funds should give consideration to the quality and maturity of the
respective investment companies' portfolio securities.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
The Fund's 'average annual total return' figures described in the Prospectus are
computed according to a formula prescribed by the SEC. The formula can be
expressed as follows:
P(1 + T)'pp'n = ERV
<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 reinvestment of all dividends and distributions.
</TABLE>
28
<PAGE>
<PAGE>
The Fund's average annual total return for its Class A shares for the year ended
December 31, 1998 and for the period from September 2, 1997 (commencement of
operations) to December 31, 1998 were - 10.56% and 9.46%, respectively.
The Fund's average annual total return for its Class B shares for the period
from January 15, 1998 (commencement of operations) to December 31, 1998 was
- 11.37%.
The Fund's average annual total return for its Class C shares for the period
from January 14, 1998 (commencement of operations) to December 31, 1998 was
- 11.08%.
- --------------------------------------------------------------------------------
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 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 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.)
29
<PAGE>
<PAGE>
================================================================================
COUNSEL AND INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Simpson Thacher & Bartlett serves as counsel to the Fund, and is located at 425
Lexington Avenue, New York, New York 10017-3909.
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036 have been appointed as independent accountants for the Fund.
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Fund's audited financial statements for the year ended December 31, 1998,
including notes thereto, are incorporated by reference in this Statement of
Additional Information from the Fund's Annual Report dated December 31, 1998.
30
<PAGE>
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
1. Articles of Incorporation(1), with Articles Supplementary filed with
the Secretary of State of the State of Maryland on January 21, 1998.(4)
2. By-Laws(1)
3. The rights of security holders are defined in the Registrant's Articles
of Incorporation (Article FIFTH and Article SEVENTH, Sections (b) and (c)) filed
as Exhibit 1 to this Registration Statement and the Registrant's By-Laws
(Article II and Article VI) filed as Exhibit 2 to this Registration Statement.
4. Form of Investment Advisory Agreement(2)
5. (A) Amended and Restated Underwriting Agreement (Class A, Class B and
Class C shares only)(4)
(B) Form of Distribution Agreement (Class I shares only)(3)
6. Not Applicable
7. Form of Domestic Custody Agreement(2)
8. (A) Form of Administration Agreement(2)
(B) Mutual Fund Services (Sub-Administration) Agreement(2)
(C) Shareholder Service Plan(2)
(D) Form of Shareholder Service Agreement(2)
9. Opinion and Consent of Dechert Price & Rhoads(2)
10. Consent of Independent Accountants*
11. Not Applicable
12. Investment Representation Letter(2)
13. Distribution Plan(4)
14. Financial Data Schedule*
15. Multiple-Class Plan(5)
16. Powers of Attorney(3)
- ------------
(1) Filed with initial registration statement on July 9, 1997 and incorporated
by reference herein.
(2) Filed with Pre-Effective Amendment No. 1 on August 21, 1997 and incorporated
by reference herein.
(3) Filed with Post-Effective Amendment No. 1 on November 6, 1997 and
incorporated by reference herein.
(4) Filed with Post-Effective Amendment No. 2 on February 25, 1998 and
incorporated by reference herein.
(5) Filed with Post-Effective Amendment No. 3 on March 19, 1998 and incorporated
by reference herein.
* Filed herein.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not Applicable.
ITEM 25. 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
EIGHTH of Registrant's Articles of Incorporation, filed as Exhibit 1, and
Article VIII, Section 1, of the Registrant's By-Laws, filed as Exhibit 2. The
Liability of the Registrant's directors and officers is dealt with in Article
EIGHTH of Registrant's Articles of Incorporation and Article VIII,
C-1
<PAGE>
<PAGE>
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 4 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 8(A) to this Registration Statement. The liability of Cohen &
Steers Securities, Inc., the Registrant's distributor, for any loss suffered by
the Registrant of its shareholders is set forth in Section 8 of the Distribution
Agreement filed as Exhibit 5 to this Registration Statement.
ITEM 26. 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.
The following is a list of the Directors and Officers of the Adviser. None
of the persons listed below has had other business connections of a substantial
nature during the past two fiscal years.
<TABLE>
<CAPTION>
NAME TITLE
- ---------------------------------------------- ----------------------------------------------
<S> <C>
Robert H. Steers.............................. Chairman, Director
Martin Cohen.................................. President, Director
Joseph M. Harvey.............................. Senior Vice President & Director of Research
Steven R. Brown............................... Senior Vice President
Elizabeth O. Reagan........................... Senior Vice President
John J. McCombe............................... Senior Vice President
Adam Derechin................................. Senior Vice President
Scott G. Ramsey............................... Vice President
James S. Corl................................. Vice President
Sheila J. Morrissey........................... Vice President
Michael J. Kozoriz............................ Vice President
</TABLE>
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 27. 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 POSITION AND
NAME OFFICES WITH DISTRIBUTOR OFFICES WITH REGISTRANT
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C>
Robert H. Steers.............. President Chairman, Director and
Secretary
Martin Cohen.................. Vice President President, Director and
Treasurer
Jay Chen...................... Assistant Treasurer None
</TABLE>
(c) Not Applicable.
C-2
<PAGE>
<PAGE>
ITEM 28. 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 29. MANAGEMENT SERVICES
Not Applicable.
ITEM 30. UNDERTAKINGS
Not Applicable.
C-3
<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 has duly caused
this Post-Effective Amendment No. 5 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 27th day of April 1999.
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. 5 has been signed below by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<S> <C> <C>
By: /s/ MARTIN COHEN President, Treasurer and Director April 27, 1999
.........................................
(MARTIN COHEN)
By: /s/ ROBERT H. STEERS Director April 27, 1999
.........................................
(ROBERT H. STEERS)
By: * Director April 27, 1999
.........................................
(GREGORY C. CLARK)
By: * Director April 27, 1999
.........................................
(GEORGE GROSSMAN)
By: * Director April 27, 1999
.........................................
(JEFFREY H. LYNFORD)
By: * Director April 27, 1999
.........................................
(WILLARD H. SMITH JR.)
By: /s/ ROBERT H. STEERS April 27, 1999
.........................................
* ROBERT H. STEERS
AS ATTORNEY-IN-FACT
</TABLE>
C-4
STATEMENT OF DIFFERENCES
------------------------
The registered trademark symbol shall be expressed as.................. 'r'
The dagger symbol shall be expressed as .............................. 'D'
Characters normally expressed as superscript shall be preceded by .... 'pp'
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
------------------------
We consent to the incorporation by reference in this Post-Effective Amendment
No. 5 to the Registration Statement of Cohen & Steers Equity Income Fund, Inc.
on Form N-1A (File Nos. 333-30919 and 811-8287) of our report dated February 5,
1999, on our audit of the financial statements and financial highlights of
Cohen & Steers Equity Income Fund, Inc., which is included in the Annual Report
to shareholders for the year ended December 31, 1998, which report is also
incorporated by reference in this Post-Effective Amendment to the Registration
Statement.
We also consent to the reference to our firm under the caption 'Financial
Highlights' in the Prospectus and under the caption 'Counsel and Independent
Accountants' in the Statement of Additional Information.
PricewaterhouseCoopers LLP
New York, New York
April 26, 1999
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001041917
<NAME> COHEN & STEERS EQUITY INCOME FUND, INC., CLASS A SHARES
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 60,003,035
<INVESTMENTS-AT-VALUE> 53,995,917
<RECEIVABLES> 2,226,727
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 89,179
<TOTAL-ASSETS> 56,311,823
<PAYABLE-FOR-SECURITIES> 420,227
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 753,504
<TOTAL-LIABILITIES> 1,173,731
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 64,476,644
<SHARES-COMMON-STOCK> 3,063,888
<SHARES-COMMON-PRIOR> 2,810,443
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (192,557)
<ACCUMULATED-NET-GAINS> (3,138,877)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (6,007,118)
<NET-ASSETS> 55,138,092
<DIVIDEND-INCOME> 4,267,096
<INTEREST-INCOME> 114,225
<OTHER-INCOME> 0
<EXPENSES-NET> (912,137)
<NET-INVESTMENT-INCOME> 3,469,184
<REALIZED-GAINS-CURRENT> (3,215,018)
<APPREC-INCREASE-CURRENT> (7,042,185)
<NET-CHANGE-FROM-OPS> (6,788,019)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,727,901)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (779,461)
<NUMBER-OF-SHARES-SOLD> 2,253,885
<NUMBER-OF-SHARES-REDEEMED> (2,085,114)
<SHARES-REINVESTED> 84,674
<NET-CHANGE-IN-ASSETS> 20,516,547
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 76,141
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 641,597
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,146,080
<AVERAGE-NET-ASSETS> 54,431,462
<PER-SHARE-NAV-BEGIN> 12.32
<PER-SHARE-NII> 0.73
<PER-SHARE-GAIN-APPREC> (2.00)
<PER-SHARE-DIVIDEND> (0.51)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> (0.23)
<PER-SHARE-NAV-END> 10.31
<EXPENSE-RATIO> 1.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001041917
<NAME> COHEN & STEERS EQUITY INCOME FUND, INC., CLASS B SHARES
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 60,003,035
<INVESTMENTS-AT-VALUE> 53,995,917
<RECEIVABLES> 2,226,727
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 89,179
<TOTAL-ASSETS> 56,311,823
<PAYABLE-FOR-SECURITIES> 420,227
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 753,504
<TOTAL-LIABILITIES> 1,173,731
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 64,476,644
<SHARES-COMMON-STOCK> 984,511
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (192,557)
<ACCUMULATED-NET-GAINS> (3,138,877)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (6,007,118)
<NET-ASSETS> 55,138,092
<DIVIDEND-INCOME> 4,267,096
<INTEREST-INCOME> 114,225
<OTHER-INCOME> 0
<EXPENSES-NET> (912,137)
<NET-INVESTMENT-INCOME> 3,469,184
<REALIZED-GAINS-CURRENT> (3,215,018)
<APPREC-INCREASE-CURRENT> (7,042,185)
<NET-CHANGE-FROM-OPS> (6,788,019)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (384,680)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (172,568)
<NUMBER-OF-SHARES-SOLD> 1,078,288
<NUMBER-OF-SHARES-REDEEMED> (102,886)
<SHARES-REINVESTED> 9,109
<NET-CHANGE-IN-ASSETS> 20,516,547
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 76,141
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 641,597
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,146,080
<AVERAGE-NET-ASSETS> 54,431,462
<PER-SHARE-NAV-BEGIN> 12.35
<PER-SHARE-NII> 0.64
<PER-SHARE-GAIN-APPREC> (2.01)
<PER-SHARE-DIVIDEND> (0.49)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> (0.22)
<PER-SHARE-NAV-END> 10.27
<EXPENSE-RATIO> 2.16
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001041917
<NAME> COHEN & STEERS EQUITY INCOME FUND, INC., CLASS C SHARES
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 60,003,035
<INVESTMENTS-AT-VALUE> 53,995,917
<RECEIVABLES> 2,226,727
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 89,179
<TOTAL-ASSETS> 56,311,823
<PAYABLE-FOR-SECURITIES> 420,227
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 753,504
<TOTAL-LIABILITIES> 1,173,731
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 64,476,644
<SHARES-COMMON-STOCK> 1,282,019
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (192,557)
<ACCUMULATED-NET-GAINS> (3,138,877)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (6,007,118)
<NET-ASSETS> 55,138,092
<DIVIDEND-INCOME> 4,267,096
<INTEREST-INCOME> 114,225
<OTHER-INCOME> 0
<EXPENSES-NET> (912,137)
<NET-INVESTMENT-INCOME> 3,469,184
<REALIZED-GAINS-CURRENT> (3,215,018)
<APPREC-INCREASE-CURRENT> (7,042,185)
<NET-CHANGE-FROM-OPS> (6,788,019)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (407,655)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (178,553)
<NUMBER-OF-SHARES-SOLD> 1,425,149
<NUMBER-OF-SHARES-REDEEMED> (152,842)
<SHARES-REINVESTED> 9,712
<NET-CHANGE-IN-ASSETS> 20,516,547
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 76,141
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 641,597
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,146,080
<AVERAGE-NET-ASSETS> 54,431,462
<PER-SHARE-NAV-BEGIN> 12.31
<PER-SHARE-NII> 0.64
<PER-SHARE-GAIN-APPREC> (1.97)
<PER-SHARE-DIVIDEND> (0.49)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> (0.23)
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<PAGE>
<TABLE> <S> <C>
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<CIK> 0001041917
<NAME> COHEN & STEERS EQUITY INCOME FUND, INC., CLASS I SHARES
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<S> <C>
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<PAGE>
