COHEN & STEERS EQUITY INCOME FUND INC, 485BPOS, 2000-04-25

COHEN & STEERS EQUITY INCOME FUND INC
485BPOS, 2000-04-25

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 2000

FILE NOS. 333-30919
811-8287
________________________________________________________________________________
________________________________________________________________________________

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. 6

AND

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

AMENDMENT NO. 7

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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

<TABLE>
<S> <C>
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, 2000 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, 2000
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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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...................................... 8
HOW TO PURCHASE AND SELL FUND SHARES........................ 9
Pricing of Fund Shares.................................. 9
Purchasing the Class of Fund 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 Fund Shares................................ 13
Purchases Through Dealers............................... 14
Purchases Through CSSI.................................. 14
Automatic Investment Plan............................... 14
Exchange Privilege...................................... 14
How to Sell Fund 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 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 investment objective. The Fund may change its
investment objective without shareholder approval, although it has no current
intention to do so.

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, Inc. 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 Markets 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 volatile than, and perform differently from,
larger company stocks. There may be less trading in a smaller company's stock,
which means that buy and sell transactions in that

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stock could have a larger impact on the stock's price than is the case with
larger company stocks. Further, smaller companies may have fewer business lines;
changes in any one line of business, therefore, may have a greater impact on a
smaller company's stock price than is the case for a larger company.

As of March 31, 2000, the market capitalization of REITs ranged in size from
approximately $5 million to $6.3 billion.

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.

Non-Diversification. As a 'non-diversified' investment company, the Fund can
invest in fewer individual companies than a diversified investment company.
Because a non-diversified portfolio is more likely to experience large market
price fluctuations, the Fund may be subject to a greater risk of loss than a
fund that has a diversified portfolio.

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. THIS CHART DOES NOT
REFLECT THE SALES CHARGES IMPOSED ON CLASS A SHARES; IF THESE AMOUNTS WERE
REFLECTED, RETURNS WOULD BE LESS THAN THOSE SHOWN.

[GRAPHIC]

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HIGHEST QUARTERLY RETURN DURING THIS PERIOD: 11.46%
LOWEST QUARTERLY RETURN DURING THIS PERIOD: - 8.24%
</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.

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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, 1999)

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<CAPTION>
SINCE
1 YEAR INCEPTION**
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<S> <C> <C>
CLASS A SHARES
Cohen & Steers Equity Income Fund....................... - 9.68% - 5.14%
NAREIT Equity REIT Index*'D'............................ - 4.62% - 5.77%
S&P 500'r'*............................................. 21.04% 23.61%
CLASS B SHARES
Cohen & Steers Equity Income Fund....................... - 10.68% - 8.89%
NAREIT Equity REIT Index*'D'............................ - 4.62% - 11.52%
S&P 500'r'*............................................. 21.04% 26.64%
CLASS C SHARES
Cohen & Steers Equity Income Fund....................... - 5.99% - 8.74%
NAREIT Equity REIT Index*'D'............................ - 4.62% - 11.51%
S&P 500'r'*............................................. 21.04% 26.12%
</TABLE>

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* The NAREIT Index of Equity REITs is comprised of 165 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 Equity 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.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
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<S> <C> <C> <C>
SHAREHOLDER FEES (fees paid directly from
your investment):
Maximum sales charge (load) (as a
percentage of offering price)........... 4.50%(1) 0% 0%
Maximum sales charge (load) imposed on
reinvested dividends (and other
distributions).......................... 0% 0% 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.

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<TABLE>
<CAPTION>
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.......................................... 0.60% 0.65% 0.64%
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Total Other Expenses........................................ 1.10% 1.65% 1.64%
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Total Annual Fund Operating Expenses........................ 1.70% 2.40% 2.39%
---- ---- ----
---- ---- ----
</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.

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:

<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
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<S> <C> <C> <C> <C>
Class A shares....................... $615 $ 962 $1,331 $2,368
Class B shares.......................
Assuming redemption at the end of
the period..................... 743 1,047 1,480 2,482
Assuming no redemption at the end
of the period.................. 243 748 1,280 2,482
Class C shares
Assuming redemption at the end of
the period..................... 342 745 1,275 2,726
Assuming no redemption at the end
of the period.................. 242 745 1,275 2,726
</TABLE>

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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. 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 substantially all of its taxable income (other
than net capital gains) for each taxable year. As a result, REITs tend to pay
relatively higher dividends than other types of companies and the Fund intends
to use these REIT dividends in an effort to meet the current income goal of its
investment objective.

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.

<PAGE>

Debt Securities

The Fund may invest a maximum of 35% of its total assets in investment grade and
non-investment grade debt securities of companies, including real estate
industry companies. Securities rated non-investment grade (lower than Baa by
Moody's Investor Services Inc. ('Moody's') or lower than BBB by Standard and
Poor's 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.

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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 of 1986, as amended ('Code'), or to maintain their
exemptions from registration under the Investment Company Act of 1940, as
amended ('1940 Act'). 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

<PAGE>

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 whole. There may
be less trading in a smaller company's stock, which means that buy and sell
transactions in that stock could have a larger impact on the stock's price than
is the case with larger company stocks. Smaller companies also may have fewer
lines of business so that changes in any one line of business may have a greater
impact on a smaller company's stock price than is the case for a larger company.
Further, smaller company stocks may perform in different cycles than larger
company stocks. Accordingly, REIT shares can be more volatile than -- and at
times will perform differently from -- large company stocks such as those found
in the Dow Jones Industrial Average.

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.

Portfolio Turnover

The Fund may engage in portfolio trading when considered appropriate, but
short-term trading will not be used as the primary means of achieving its
investment objective. Although the Fund cannot accurately predict its portfolio
turnover rate, it is not expected to exceed 100% 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.'

<PAGE>

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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 a 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 Institutional Realty Shares, Inc., Cohen & Steers
Realty Shares, Inc., Cohen & Steers Special Equity Fund, Inc. and the Fund,
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.

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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

<PAGE>

at Cohen & Steers Capital Management, Inc. He is a member of NAREIT and ICSC
and currently serves on the ICSC Research Advisory Task Force.

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HOW TO PURCHASE AND SELL FUND SHARES

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PRICING OF FUND 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. Proper form means that your request includes the Fund name and
account number, states the amount of the transaction (in dollars or shares),
includes the signatures of all owners exactly as registered in the account,
signature guarantees (if necessary), any supporting legal documentation that may
be required and any outstanding certificates representing shares to be redeemed.
We calculate our net asset value per share as of the close of trading on the New
York Stock Exchange generally 4:00 p.m. Eastern Time, 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. Securities for which market prices are unavailable will be valued
at fair value as determined by the Fund's Board of Directors.

- --------------------------------------------------------------------------------

PURCHASING THE CLASS OF FUND 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 A percentage fee deducted from
Charges....................... 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.

<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.

<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>

<TABLE>
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
COHEN & STEERS EQUITY INCOME FUND, INC.

- ---------------------------------------------------------------------------------------------------
1 ACCOUNT TYPE (Please print; indicate only one registration type)
[ ] INDIVIDUAL OR JOINT ACCOUNT
</TABLE>

<TABLE>
<S> <C> <C>
------------------------------------------ ---------------------
Name Social Security Number

----------------------------------------------
</TABLE>

<TABLE>
<S> <C> <C>
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
----------------------------------------- Date of Trust Agreement (if
Name of Trust Agreement (if applicable) 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. See the PURCHASE OF FUND SHARES section of the Prospectus for
wire instructions.

- ---------------------------------------------------------------------------------------------------
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>

<TABLE>
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
5 REDUCED SALES CHARGE (CLASS A ONLY)
RIGHTS OF AGGREGATION OR ACCUMULATION
</TABLE>

<TABLE>
<S> <C> <C> <C> <C> <C>
[ ] I apply for Rights of Aggregation reduced sales charges based on the following accounts:

[ ] I apply for Rights of Accumulation reduced sales charges based on the following accounts:

Account Name Social Security Number

1.
----------------------------------------- ----------------------------------------
2.
----------------------------------------- ----------------------------------------
3.
----------------------------------------- ----------------------------------------
</TABLE>

<TABLE>
<S> <C> <C> <C> <C> <C>
LETTER OF INTENT

[ ] I am already investing under an existing Letter of Intent.

[ ] I agree to the Letter of Intent provisions in the Fund's current prospectus. During a 12 month period, I
plan to invest a dollar amount of at least: [ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000

NET ASSET VALUE PURCHASE

[ ] I certify that I qualify for an exemption from the sales charge by meeting the conditions set forth in the
Prospectus.

- -----------------------------------------------------------------------------------------------------------------------
6 EXCHANGE PRIVILEGES
Exchange privileges will be automatically granted unless you check the box below. Shareholders wishing to
exchange into other Cohen & Steers Funds should consult the EXCHANGE PRIVILEGE section of the Prospectus. (Note:
If shares are being purchased through a dealer, please contact your dealer for availability of this service.)

[ ] I decline the exchange privilege.

- -----------------------------------------------------------------------------------------------------------------------
7 REDEMPTION PRIVILEGES
Shareholders may select the following redemption privileges by checking the box(es) below. See HOW TO SELL FUND
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>

<TABLE>
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
10 SIGNATURE AND TAXPAYER CERTIFICATION

By signing this form, the Investor represents and warrants that: (a) the Investor has the full right, power and
authority to invest in the Fund; and (b) the Investor has received a current prospectus of the Fund and agrees to
be bound by its terms. Persons signing as representatives or fiduciaries of corporations, partnerships, trusts or
other organizations are required to furnish corporate resolutions or similar documents providing evidence that
they are authorized to effect securities transactions on behalf of the Investor (alternatively, the secretary or
designated officer of the organization may certify the authority of the persons signing on the space provided
below). In addition, signatures of representatives or fiduciaries of corporations and other entities must be
accompanied by a signature guarantee by a commercial bank that is a member of the Federal Deposit Insurance
Corporation, a trust company or a member of a national securities exchange.

--------------------------------------------------------------------------------------------------------------------
PLEASE CHECK ONE:
[ ] U.S. CITIZEN/TAXPAYER
UNDER THE PENALTIES OF PERJURY, THE UNDERSIGNED CERTIFIES THAT: (1) THE TAXPAYER IDENTIFICATION NUMBER PROVIDED
IS CORRECT, AND (2) I/WE ARE NOT SUBJECT TO BACKUP WITHHOLDING BECAUSE: (A) I/WE ARE EXEMPT FROM BACKUP
WITHHOLDING, OR (B) I/WE HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE ('IRS') THAT I/WE ARE SUBJECT TO
BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR (C) THE IRS HAS NOTIFIED ME
THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. NOTE: IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE
CURRENTLY SUBJECT TO BACKUP WITHHOLDING BECAUSE OF UNDER-REPORTING INTEREST OF DIVIDENDS ON YOUR TAX RETURN, YOU
MUST CROSS OUT ITEM 2 ABOVE.
[ ] NON U.S. CITIZEN/TAXPAYER (FORM W-8 ATTACHED)
INDICATE COUNTRY OF RESIDENCE FOR TAX PURPOSES _____________________
UNDER PENALTY OF PERJURY, I/WE CERTIFY THAT I/WE ARE NOT U.S. CITIZENS AND I/WE ARE EXEMPT FOREIGN PERSONS AS
DEFINED BY THE IRS. THE IRS DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAT THE
CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
--------------------------------------------------------------------------------------------------------------------

I certify that (1) the information provided on this Subscription Agreement is true, correct and complete, (2) I
have read the prospectus for the Fund and agree to the terms thereof, and (3) I am of legal age or an emancipated
minor.
</TABLE>

<TABLE>
<S> <C> <C> <C> <C>
x x
----------------------------------- ----- ---------------------------------- ------
Signature (Owner, Trustee, Etc.) Date Signature (Joint Owner, Co-Trustee) Date
</TABLE>

<TABLE>
<S> <C> <C> <C> <C>
FOR AUTHORIZED DEALER USE ONLY
We hereby authorize the Transfer Agent to act as our agent in connection with the transactions
authorized by the Subscription Agreement and agree to notify the Transfer Agent of any purchases
made under a Letter of Intent, Rights of Accumulation or Rights of Aggregation. If the Subscription
Agreement includes a Telephone Redemption Privilege, we guarantee the signature(s) above.

-------------------------------------------------- -----------------------------------------
Dealer's Name Dealer Number

-------------------------------------------------- -----------------------------------------
Main Office Address Branch Number

-------------------------------------------------- -----------------------------------------
Representative's Name Rep. Number

( )
-------------------------------------------------- -----------------------------------------
Branch Address Telephone Number

-------------------------------------------------- -----------------------------------------
Authorized Signature of Dealer Date
</TABLE>

<PAGE>

- --------------------------------------------------------------------------------

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.

<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.

<PAGE>

- --------------------------------------------------------------------------------

PURCHASES OF FUND SHARES

Initial Purchase By Wire

1. Telephone toll free from any U.S. 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: (provided by
Transfer Agent)

Wire Reference Control #: (provided by
Transfer Agent)

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 U.S. 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: (provided by
Transfer Agent)

Wire Reference Control #: (provided by
Transfer Agent)

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 your account statement (or a
letter providing your account number) to the transfer agent at the address set
forth above.

<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.

<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 have
adopted reasonable procedures that are designed to ensure that any telephonic
exchange instructions are genuine. Neither the Fund nor its agents will be
liable for any loss or expenses if we act in accordance with these procedures.
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.

- --------------------------------------------------------------------------------
HOW TO SELL FUND SHARES

You may sell or '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

<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 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 Guarantee. 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 any 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 may make additional investments to increase your
account value to $1,000 (the minimum purchase amount) or more and avoid having
the Fund automatically liquidate 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.

<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.

<PAGE>

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.

- --------------------------------------------------------------------------------
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
------------------------------------------- ---------------------------
FOR THE FOR PERIOD FOR PERIOD
YEAR ENDED SEPTEMBER 2*, FOR THE JANUARY 15*,
DECEMBER 31, THROUGH YEAR ENDED THROUGH
--------------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31,
PER SHARE OPERATING PERFORMANCE 1999 1998 1997 1999 1998
- ------------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $10.31 $12.32 $11.46 $10.27 $12.35
------ ------ ------ ------ ------
Income from investment operations
Net investment income............... 0.76 0.73 0.25 0.68 0.64
Net realized and unrealized
gains/(losses) on investments...... (1.32) (2.00) 0.83 (1.29) (2.01)
------ ------ ------ ------ ------
Total from investment operations... (0.56) (1.27) 1.08 (0.61) (1.37)
------ ------ ------ ------ ------
Less dividends and distributions to
shareholders from:
Net investment income............... (0.60) (0.51) (0.17) (0.56) (0.49)
Net Realized gain on investments.... -- -- (0.03) -- --
Tax return of capital............... (0.12) (0.23) (0.02) (0.12) (0.22)
------ ------ ------ ------ ------
Total dividends and distributions
to shareholders.................. (0.72) (0.74) (0.22) (0.68) (0.71)
------ ------ ------ ------ ------
Net asset value, end of period......... $ 9.03 $10.31 $12.32 $ 8.98 $10.27
------ ------ ------ ------ ------
------ ------ ------ ------ ------
- --------------------------------------------------------------------------------------------------------------------
Total investment return**.............. -5.42% -10.56% 9.46%(1)(2) -5.98% -11.37%(1)(2)
------ ------ ------ ------ ------
------ ------ ------ ------ ------
- --------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period (in
millions)............................. $ 26.0 $ 31.6 $ 34.6 $ 15.1 $ 10.1
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio of expenses to average daily net
assets (before expense reduction)..... 1.70% 1.92% 3.49%(3) 2.40% 2.60%(3)
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio of expenses to average daily net
assets
(net of expense reduction)............ 1.60% 1.49% 1.50%(3) 2.26% 2.15%(3)
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio of net investment income to
average daily net assets (before
expense reduction).................... 7.50% 5.89% 9.47%(3) 7.09% 5.99%(3)
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio of net investment income to
average daily net assets (net of
expense reduction).................... 7.60% 6.32% 11.46%(3) 7.23% 6.44%(3)
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Portfolio turnover rate................ 62.51% 96.47% 87.20%(2) 62.51% 96.47%(2)
------ ------ ------ ------ ------
------ ------ ------ ------ ------

<CAPTION>
CLASS C
---------------------------
FOR PERIOD
FOR THE JANUARY 14*,
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
PER SHARE OPERATING PERFORMANCE 1999 1998
- ------------------------------- ---- ----
<S> <C> <C>
Net asset value, beginning of period... $10.26 $12.31
------ ------
Income from investment operations
Net investment income............... 0.68 0.64
Net realized and unrealized
gains/(losses) on investments...... (1.29) (1.97)
------ ------
Total from investment operations... (0.61) (1.33)
------ ------
Less dividends and distributions to
shareholders from:
Net investment income............... (0.56) (0.49)
Net Realized gain on investments.... -- --
Tax return of capital............... (0.12) (0.23)
------ ------
Total dividends and distributions
to shareholders.................. (0.68) (0.72)
------ ------
Net asset value, end of period......... $ 8.97 $10.26
------ ------
------ ------
- ---------------------------------------
Total investment return**.............. -5.99% -11.08%(1)(2)
------ ------
------ ------
- ---------------------------------------
Ratios/Supplemental Data:
Net assets, end of period (in
millions)............................. $ 19.6 $ 13.2
------ ------
------ ------
Ratio of expenses to average daily net
assets (before expense reduction)..... 2.39% 2.59%(3)
------ ------
------ ------
Ratio of expenses to average daily net
assets
(net of expense reduction)............ 2.25% 2.15%(3)
------ ------
------ ------
Ratio of net investment income to
average daily net assets (before
expense reduction).................... 7.09% 6.13%(3)
------ ------
------ ------
Ratio of net investment income to
average daily net assets (net of
expense reduction).................... 7.23% 6.57%(3)
------ ------
------ ------
Portfolio turnover rate................ 62.51% 96.47%(2)
------ ------
------ ------
</TABLE>

- ---------

* Initial offering of shares

'D' Commencement of operations

(1) Total investment return would have been lower had certain fees not been
reimbursed by the Adviser.

(2) Not annualized.
(3) Annualized.

** Does not reflect sales charges, which would reduce returns.

<PAGE>

[Logo]

- --------------------------------------------------------------------------------
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 SAI 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 SAI)
may also be obtained from the Securities and Exchange Commission (the 'SEC'):

By going to the SEC'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 SEC at 1-202-942-8090.

By accessing the SEC's Internet site at http://www.sec.gov where you can view,
download and print the information.

By electronic request at the following e-mail address: [email protected], or
by writing to the Public Reference Section of the SEC, Washington, D.C.
20549-0102. 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>

[Logo]

757 THIRD AVENUE
NEW YORK, NEW YORK 10017

- --------------------------------------------------------------------------------
CLASS I SHARES
- --------------------------------------------------------------------------------

PROSPECTUS

Investment Adviser
Cohen & Steers Capital Management, Inc.
757 Third Avenue
New York, New York 10017
Telephone: (212) 832-3232

Transfer Agent
Chase Global Fund 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, 2000
- --------------------------------------------------------------------------------

<PAGE>

- --------------------------------------------------------------------------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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............................................. 3

Objectives.............................................. 3

Principal Investment Strategies......................... 4

Principal Risks of Investing in the Fund................ 5

MANAGEMENT OF THE FUND...................................... 7

The Investment Adviser.................................. 7

Portfolio Managers...................................... 7

HOW TO PURCHASE AND SELL FUND SHARES........................ 8

Pricing of Fund Shares.................................. 8

Types of Shareholders Qualified to Purchase Class I
Shares............................................... 8

Purchase Minimums....................................... 9

Additional Classes Offered.............................. 9

Form of Payment......................................... 9

Purchases of Fund Shares................................ 9

Exchange Privilege...................................... 10

How To Sell Fund Shares................................. 11

ADDITIONAL INFORMATION...................................... 12

Dividends and Distributions............................. 12

Tax Considerations...................................... 12

FINANCIAL HIGHLIGHTS........................................ 13
</TABLE>

<PAGE>

COHEN & STEERS EQUITY INCOME FUND, INC.

- --------------------------------------------------------------------------------
RISK/RETURN SUMMARY
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES

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.

- --------------------------------------------------------------------------------
WHO SHOULD INVEST

Cohen & Steers Equity Income Fund, Inc. 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.

- --------------------------------------------------------------------------------
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.

Real Estate Markets 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 becasue of the failure of borrowers to pay their loans and poor management.

<PAGE>

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 volatile than, and perform differently from, larger
company stocks. There may be less trading in a smaller company's stock, which
means that buy and sell transactions in that stock could have a larger impact on
the stock's price than is the case with larger company stocks. Further, smaller
companies may have fewer business lines; changes in any one line of buisness,
therefore, may have a greater impact on a smaller company's stock price than is
the case for a larger company.

As of March 31, 2000, the market capitalization of REITs ranged in size from
approximately $5 million to $6.3 billion.

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.

- --------------------------------------------------------------------------------
HISTORICAL FUND PERFORMANCE

THIS CHART SHOWS THE FUND'S TOTAL RETURN FOR EACH YEAR SINCE CLASS I SHARES OF
THE FUND COMMENCED OPERATIONS ON JULY 15, 1998.

[GRAPHIC]

<TABLE>
<S> <C>
Highest quarterly return during this period: 11.47%
Lowest quarterly return during this period: - 8.76%
</TABLE>

<PAGE>

THIS TABLE SHOWS THE FUND'S ANNUAL TOTAL RETURNS FOR THE PERIOD SINCE THE FUND
COMMENCED OPERATIONS, AND COMPARES THESE RETURNS WITH THE PERFORMANCE OF TWO
INDICES.

AVERAGE ANNUAL TOTAL RETURNS
(for period ended December 31, 1999)

<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION**
------ -----------
<S> <C> <C>
Cohen & Steers Equity Income Fund -- Class I shares......... -5.12% -10.11%
NAREIT Equity REIT Index*................................... -4.62% -12.07%'D'
S&P 500'r'*................................................. 21.04% 18.10%
</TABLE>

- ---------

* The NAREIT Index of Equity REITs is comprised of 165 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.

** The inception date for Class I shares was July 15, 1998.

- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE FUND
- --------------------------------------------------------------------------------
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU COULD PAY IF YOU BUY AND
HOLD SHARES OF THE FUND.

<TABLE>
<S> <C>
SHAREHOLDER FEES (fees paid directly from your investment): None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted
from Fund assets):

Management Fee.............................................. 0.75%
Other Expenses.............................................. 0.59%
Total Annual Fund Operating Expenses........................ 1.34%
</TABLE>

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:

<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C>
$136 $425 $734 $1,613
</TABLE>

- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES
AND RELATED RISKS
- --------------------------------------------------------------------------------

OBJECTIVES

<PAGE>

- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT STRATEGIES

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

Debt Securities

Illiquid Securities

The Fund will not invest more than 15% of its net assets in illiquid securities.
A security is illiquid if,

<PAGE>

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

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

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.

<PAGE>

transactions in that stock could have a larger impact on the stock's price than
is the case with larger company stocks. Smaller companies also may have fewer
lines of business so that changes in any one line of business may have a greater
impact on a smaller company's stock price than is the case for a larger company.
Further, smaller company stocks may perform in different cycles than larger
company stocks. Accordingly, REIT shares can be more volatile than -- and at
times will perform differently from -- large company stocks such as those found
in the Dow Jones Industrial Average.

Risks of Investment in Debt Securities

Portfolio Turnover

<PAGE>

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 Directors of the Fund.
Cohen & Steers Capital Management, Inc., a registered investment adviser, was
formed in 1986 and is a 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 Institutional Realty Shares, Inc., Cohen & Steers
Realty Shares, Inc. Cohen & Steers Special Equity Fund, Inc. and the Fund, which
are open-end investment companies. All of Cohen & Steers' client accounts are
invested principally in real estate securities.

- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS

The Fund's portfolio managers, who have managed the Fund since its inception,
are:

Steven R. Brown -- Mr. Brown joined Cohen & Steers in 1992 and currently
serves as a

<PAGE>

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.

- --------------------------------------------------------------------------------
HOW TO PURCHASE AND SELL FUND SHARES
- --------------------------------------------------------------------------------

PRICING OF FUND SHARES

The price at which you can purchase and redeem the Fund's Class I shares is the
net asset value of the shares next determined after we receive your order in
proper form. Proper form means that your request includes the Fund name and
account number, states the amount of the transaction (in dollars or shares),
includes the signatures of all owners exactly as registered in the account,
signature guarantees (if necessary), any supporting legal documentation that may
be required and any outstanding certificates representing shares to be redeemed.
We calculate our net asset value per share as of the close of trading on the New
York Stock Exchange generally 4:00 p.m. Eastern Time, on each day the Exchange
is open for trading. We determine net asset value per share for the Class I
shares by adding the market value of all securities and other assets in the
Fund's portfolio attributable to the Class I shares, subtracting liabilities
attributable to the Class I shares, and dividing by the total number of Class I
shares then outstanding. Securities for which market prices are unavailable will
be valued at fair value as determined by the Fund's Board of Directors.

- --------------------------------------------------------------------------------
TYPES OF SHAREHOLDERS QUALIFIED TO PURCHASE CLASS I SHARES

Class I shares are available for purchase only by:

retirement plans introduced by persons not associated with brokers or dealers
that are primarily engaged in the retail securities business and rollover
individual retirement accounts from such plans;

tax-exempt employee benefit plans of the investment adviser or its affiliates
and securities dealer firms with a selling agreement with Cohen & Steers
Securities, Inc. ('CSSI'), the Fund's principal underwriter;

institutional advisory accounts of the investment adviser or its affiliates
and related employee benefit plans and rollover individual retirement accounts
from such institutional advisory accounts;

a bank, trust company or similar financial institution investing for its own
account or for the account of its trust customers for whom such financial
institution is exercising investment discretion in purchasing Class I shares,
except where the investment is part of a program that requires payment to the
financial institution of a Rule 12b-1 Plan fee; and

registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least
$1,000,000 entrusted to the adviser for investment purposes, but only if the
adviser is not affiliated or associated with a broker or dealer and derives
compensation for its services exclusively from its clients for such advisory
services.

<PAGE>

- --------------------------------------------------------------------------------
PURCHASE MINIMUMS

If you are an individual, you may open a Class I account with the Fund with a
minimum investment of $100,000. If you are an adviser, you may open a Class I
account with the Fund with an aggregate minimum investment of $250,000.
Additional Class I investments must be at least $500. We are free to reject any
purchase order.

You can purchase the Fund's Class I 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.

- --------------------------------------------------------------------------------
ADDITIONAL CLASSES OFFERED

In addition to offering Class I shares, the Fund also offers Class A, Class B
and Class C shares which are described in a separate prospectus. To obtain a
prospectus for these classes, contact the transfer agent using the address or
phone numbers listed on the back cover of this Prospectus.

- --------------------------------------------------------------------------------
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.

- --------------------------------------------------------------------------------
PURCHASES OF FUND SHARES

Initial Purchase By Wire

1. Telephone toll free from any U.S. 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: (provided by Transfer Agent)
Wire Reference Control #: (provided by Transfer Agent)

3. Complete the Subscription Agreement attached to of this Prospectus. Mail the
Subscription Agreement to the transfer agent:

Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798

<PAGE>

Initial Purchase By Mail
1. Complete the Subscription Agreement included at the end of this Prospectus.

2. Mail the Subscription Agreement and a check in at least the required minimum
amount (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 U.S. 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: (provided by Transfer Agent)
Wire Reference Control #: (provided by Transfer Agent)

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 your account statement (or a
letter providing your account number) to the transfer agent at the address set
forth above.

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EXCHANGE PRIVILEGE

You may exchange some or all of your Fund shares for shares of the other mutual
funds managed by Cohen & Steers, or for shares of Cohen & Steers Vista Cash
Management Fund. If you acquire shares of other Cohen & Steers funds by purchase
(rather than by exchange of Fund shares), you may exchange those shares for Fund
shares, subject to any applicable contingent deferred sales charge.

<PAGE>

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HOW TO SELL FUND SHARES

You may sell or 'redeem' your shares by telephone or through the transfer agent.

Redemption By Telephone

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.

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 proceeds 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.

<PAGE>

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 any 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 may make additional investments to increase your
account value to $100,000 (the minimum purchase amount) or more and avoid having
the Fund automatically liquidate your account.

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 Fund shares;
any such distributions in excess of your basis are 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.

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.

<PAGE>

[Logo]

757 THIRD AVENUE
NEW YORK, NEW YORK 10017
(800) 437-9912
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 2000

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 STATEMENT OF ADDITIONAL INFORMATION, 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>

- --------------------------------------------------------------------------------
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........................ 14

Organization and Description of Capital Stock............... 15

Distribution Plan........................................... 15

Determination of Net Asset Value............................ 17

Reducing the Initial Sales Load on Class A Shares........... 18

Sale of Fund Shares......................................... 19

Contingent Deferred Sales Charges........................... 20

Other Share Information..................................... 22

Taxation.................................................... 22

Performance Information..................................... 29

Counsel and Independent Accountants......................... 30

Financial Statements........................................ 30
</TABLE>

<PAGE>

- --------------------------------------------------------------------------------
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

<PAGE>

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 financial 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 on 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).

<PAGE>

The Fund will be authorized to use financial futures contracts and related
options for 'bona fide hedging' purposes, as such term is used 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 transactions in financial futures contracts 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 U.S. 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 owns a call option on the same
security and in the same principal amount as the call option written where the
exercise price of the call option held (a) is equal to or less than the exercise
price of the call option written or (b) is greater than the exercise price of
the call option 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 owns a put option on the same security and
in the same principal amount as the put option written where the exercise price
of the put option held is equal to or greater than the exercise price of the put
option 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

<PAGE>

could be subject to risk of loss in the event of adverse changes in the value of
the index. The Fund will cover put options on stock indices by segregating
assets equal to the option's exercise price, or in such other manner as may be
in accordance with the rules of the exchange on which the option is traded and
applicable laws and regulations.

The Fund will receive a premium for writing a put or call option, which will
increase 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 ('forward contracts') and
foreign currency futures contracts ('foreign currency futures'), 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 contracts to attempt to minimize the risk to the
Fund from adverse changes in the relationship between the

<PAGE>

U.S. dollar and foreign currencies. A forward contract is an obligation to
purchase or sell a specific currency for an agreed price on 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 enter into exchange-traded foreign currency futures for the
purchase or sale for future delivery of foreign currencies. 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 foreign 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.

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.

- --------------------------------------------------------------------------------
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

<PAGE>

underlying the options and futures do not follow the price movements of the
portfolio securities subject to the hedge. Gains on investments in options and
futures depend on the portfolio manager's ability to predict correctly the
direction of stock prices, interest rates and other economic factors. Where a
liquid secondary market for options or futures does not exist, the Fund may not
be able to close its position and, in such an event would be unable to control
its losses. The loss from investing in futures contracts is potentially
unlimited. The use of forward foreign currency contracts may limit gains from a
positive change in the relationship between the U.S. dollar and foreign
currencies. Unanticipated changes in currency prices may cause poorer overall
performance for the Fund than if it had not engaged in such contracts.

- --------------------------------------------------------------------------------
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 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,

<PAGE>

liquidation, or other distributions of an interest in real estate as a result of
the Fund's ownership of such securities;

5. Purchase or sell commodities or commodity futures contracts, except that the
Fund may invest in financial futures contracts, options thereon and similar
instruments;

6. Make loans to other persons except through the lending of securities held by
it (but not to exceed a value of one-third of total assets), through the use of
repurchase agreements, and by the purchase of debt securities, all in accordance
with its investment policies;

7. Purchase restricted or 'illiquid' securities, including repurchase agreements
maturing in more than seven days, if as a result, more than 15% of the Fund's
net assets would then be invested in such securities (excluding securities which
are eligible for resale pursuant to Rule 144A under the Securities Act of 1933);

8. Acquire or retain securities of any investment company, except that the Fund
may (a) acquire securities of investment companies up to the limits permitted by
Sec. 12(d)(1) of the Investment Company Act of 1940, and (b) acquire securities
of any investment company as part of a merger, consolidation or similar
transaction;

9. Make short sales whereby the dollar amount of short sales at any one time
would exceed 25% of the net assets of the Fund; provided the Fund maintains
collateral in a segregated account consisting of cash or liquid portfolio
securities with a value equal to the current market value of the shorted
securities, which is marked to market daily. If the Fund owns an equal amount of
such securities or securities convertible into or exchangeable for, without
payment of any further consideration, securities of the same issuer as, and
equal in amount to, the securities sold short (which sales are commonly referred
to as 'short sales against the box'), such restrictions shall not apply;

10. Invest in puts, calls, straddles, spreads or any combination thereof, except
that the Fund may (a) purchase put and call options on securities and securities
indexes, and (b) write covered put and 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.

<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 14, 2000, 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 Institutional Realty
Shares, Inc., Cohen & Steers Realty Shares, Inc. and Cohen & Steers Special
Equity Fund, Inc., 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 investment
757 Third Avenue and Secretary adviser. President of Cohen & Steers Securities, Inc.
New York, New York
Age: 47

Martin Cohen* .................. Director, President of Cohen & Steers Capital Management, Inc., the Fund's
757 Third Avenue President and investment adviser. Vice President of Cohen & Steers Securities, Inc.
New York, New York Treasurer
Age: 51

Gregory C. Clark ............... Director President of Wellspring Management Group.
376 Mountain Laurel Drive
Aspen, Colorado
Age: 53

George Grossman ................ Director Attorney at law.
17 Elm Place
Rye, New York
Age: 46

Jeffrey H. Lynford ............. Director Chairman of Wellsford Group Inc. since 1986 and of Wellsford Residential
610 Fifth Avenue Property Trust from 1992 to May 1997. Mr. Lynford is also a Trustee of
New York, New York Equity Residential Properties Trust and an Emeritus Trustee of the
Age: 52 National Trust for Historic Preservation.

Willard H. Smith Jr. ........... Director Board member of Essex Property Trust, Inc., Highwoods Properties, Inc.,
5208 Renaissance Avenue Realty Income Corporation and Willis Lease Finance Corporation. Managing
San Diego, California director at Merrill Lynch & Co., Equity Capital Markets Division from
Age: 63 1983 to 1995.

Elizabeth O. Reagan ............ Vice President Senior Vice President of Cohen & Steers Capital Management, Inc., the
757 Third Avenue Fund's investment adviser, since 1996 and prior to that Vice President of
New York, New York Cohen & Steers Capital Management, Inc.
Age: 37
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
POSITION(S)
HELD WITH
NAME, ADDRESS AND AGE FUND PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS
--------------------- ---- -----------------------------------------------
<S> <C> <C>
Adam Derechin .................. Vice President and Senior Vice President of Cohen & Steers Capital
757 Third Avenue Assistant Management, Inc., the Fund's investment adviser, since
New York, New York Treasurer 1998 and prior to that Vice President of Cohen &
Age: 35 Steers Capital Management, Inc.

Lawrence B. Stoller ............ Assistant Senior Vice President and General Counsel, Cohen &
757 Third Avenue Secretary Steers Capital Management, Inc., the Fund's investment
New York, New York adviser, since 1999. Prior to that, Associate
Age: 36 General Counsel, Neuberger Berman Management Inc.
(money manager); Assistant General Counsel, The
Dreyfus Corporation (money manager); and Associate,
Dechert Price & Rhoads (law firm).
</TABLE>

- --------------------------------------------------------------------------------
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, 1999. 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. In the column headed 'Total Compensation From Fund
and Fund Complex Paid to Directors,' the compensation paid to each Director
represents five of six funds that each Director serves in the fund complex.
(Cohen & Steers Institutional Realty Shares, Inc. commenced operations in
January of 2000.) The Directors do not receive any pension or retirement
benefits from the fund complex.

<TABLE>
<CAPTION>
COMPENSATION TABLE
FISCAL YEAR ENDED DECEMBER 31, 1999
TOTAL
COMPENSATION
AGGREGATE FROM FUND AND
COMPENSATION FUND COMPLEX
NAME OF PERSON, POSITION FROM FUND PAID TO DIRECTORS
------------------------ --------- -----------------
<S> <C> <C>
Gregory C. Clark*, Director................................. $7,500 $37,500
Martin Cohen**, Director and President...................... 0 0
George Grossman*, Director.................................. 7,500 37,500
Jeffrey H. Lynford*, Director............................... 7,000 35,000
Willard H. Smith Jr.*, Director............................. 7,500 37,500
Robert H. Steers**, Director and Chairman................... 0 0
</TABLE>

- ---------

* Member of the Audit Committee.

** 'Interested person,' as defined in the 1940 Act, 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

<PAGE>

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 Institutional
Realty Shares, Inc., Cohen & Steers Realty Shares, Inc. and Cohen & Steers
Special Equity Fund, Inc., 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.

Under the Advisory Agreement, the Fund will pay the Adviser a monthly advisory
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, 1999, 1998, and
December 31, 1997, the Adviser received advisory fees from the Fund in the
following amounts:

<TABLE>
<CAPTION>
GROSS ADVISORY NET
FISCAL YEAR ENDED* ADVISORY FEE FEE WAIVERS ADVISORY FEES
------------------ ------------ ----------- -------------
<S> <C> <C> <C>
December 31, 1999.... $467,165 $ 0 $467,165
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 the Prospectus and Statement of Additional Information, for
the purpose of filings with the SEC 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

<PAGE>

individual shareholders; (vi) supervising the daily pricing of the Fund's
investment portfolio and the publication of the net asset value of the Fund's
shares, earnings reports and other financial data; (vii) monitoring
relationships with organizations providing services to the Fund, including the
Custodian, Transfer Agent and printers; (viii) providing trading desk facilities
for the Fund; (ix) supervising compliance by the Fund with recordkeeping
requirements under the 1940 Act and regulations thereunder, maintaining books
and records for the Fund (other than those maintained by the Custodian and
Transfer Agent) and preparing and filing of tax reports other than the Fund's
income tax returns; and (x) providing executive, clerical and secretarial help
needed to carry out these responsibilities. For its services under the
Administration Agreement, the Adviser receives a monthly fee from the Fund at
the annual rate of 0.02% of the Fund's average daily net assets.

In accordance with the terms of the Administration Agreement and with the
approval of the Fund's Board of Directors, the Adviser has caused the Fund to
retain Chase Manhattan Bank ('Chase') as sub-administrator under a fund
accounting and administration agreement (the 'Sub-Administration Agreement').
Under the Sub-Administration Agreement, Chase has assumed responsibility for
performing certain of the foregoing administrative functions, including
(i) determining the Fund's net asset value and preparing these figures for
publication; (ii) maintaining certain of the Fund's books and records that are
not maintained by the Adviser, custodian or transfer agent; (iii) preparing
financial information for the Fund's income tax returns, proxy statements,
shareholders reports, and SEC 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, 1999, 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 $12,458,
$10,871 and $1,196, respectively, and Chase received sub-administration fees
from the Fund in the amount of $84,343, $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.

<PAGE>

- --------------------------------------------------------------------------------

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.

- --------------------------------------------------------------------------------

CODE OF ETHICS

The Fund, and the Investment Adviser and Distributor, have adopted codes of
ethics that are designed to ensure that the interests of Fund shareholders come
before the interests of those involved in managing the Fund. The codes of
ethics, among other things, prohibit management personnel from investing in
REITs and real estate securities, prohibit purchases in an initial public
offering and require pre-approval for investments in private placements. The
Fund's Independent Directors are prohibited from purchasing or selling any
security if they knew or reasonably should have known at the time of the
transaction that, within the most recent 15 days, the security is being or has
been considered for purchase or sale by the Fund, or is being purchased or sold
by the Fund.

- --------------------------------------------------------------------------------
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 U.S. 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

<PAGE>

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, 1999, 1998, and for the period
September 2, 1997 (commencement of operations) through December 31, 1997, the
Fund paid a total of $276,216, $336,009 and $123,606 in brokerage commissions,
respectively. Of such amount, $76,521, $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, 1999 was 62.51%.

- --------------------------------------------------------------------------------
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
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 14, 2000, there were 8,666,606 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

<PAGE>

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, 1999 and
1998, respectively, with respect to the Class A shares, the Fund paid
distribution services fees for expenditures under the Distribution Plan, in the
aggregate amount of $72,346 and $93,238, respectively, which constituted 0.25%
of the Fund's average daily net assets attributable to the Class A shares during
the period. Of the $72,346 and $93,238, respectively, paid by the Fund under the
Distribution Plan, with respect to the Class A shares, $72,346 and $93,238,
respectively, was spent for compensation to broker-dealers and other financial
intermediaries.

For the fiscal year ended December 31, 1999 and 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 $94,647 and $57,273,
respectively, which constituted 0.75% of the Fund's average daily net assets
attributable to the Class B shares during the period. Of the $94,647 and $57,273
were paid by the Fund under the Distribution Plan, with respect to the Class B
shares, $94,647 and $57,273 were spent for compensation to broker-dealers and
other financial intermediaries.

For the fiscal year ended December 31, 1999 and 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 $138,445 and $54,877,
respectively, which constituted 0.75% of the Fund's average daily net assets
attributable to the Class C shares during the period. Of the $138,445 and
$54,877 paid by the Fund under the Distribution Plan, with respect to the
Class C shares, $138,445 and $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

<PAGE>

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.

- --------------------------------------------------------------------------------
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

<PAGE>

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
U.S. dollars at the mean of the bid and asked prices of such currencies against
the U.S. 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
- --------------------------------------------------------------------------------

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:

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
U.S. 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.

<PAGE>

This enables the investor to aggregate purchases of shares of the Fund during a
12-month period for purposes of calculating the applicable sales charge. All
shares of the Fund currently owned by the investor will be credited as purchases
toward the completion of the Letter at the greater of their net asset value on
the date the Letter is executed or their cost. No retroactive adjustment will be
made if purchases exceed the amount indicated in the Letter. For each investment
made, the investor must notify his dealer, the transfer agent or CSSI that a
Letter is on file along with all account numbers associated with the Letter.

The Letter is not a binding obligation on the investor. However, 5% of the
amount specified in the Letter will be held in escrow, and if the investor's
purchases are less than the amount specified, the investor will be requested to
remit to the Fund an amount equal to the difference between the sales charge
paid and the sales charge applicable to the aggregate purchases actually made.
If not remitted within 20 days after written request, an appropriate number of
escrowed shares will be redeemed in order to realize the difference. However,
the sales charge applicable to the investment will in no event be higher than if
the shareholder had not submitted a Letter.

Sales at Net Asset Value. Class A shares of the Fund may be sold at net asset
value (i.e., without a sales charge) (i) to registered representatives or
employees (and their immediate families) of authorized dealers, or to any trust,
pension, profit-sharing or other benefit plan for only such persons, (ii) to
banks or trust companies or their affiliates when the bank, trust company, or
affiliate is authorized to make investment decisions on behalf of a client,
(iii) to investment advisers and financial planners who place trades for their
own accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services, (iv) to clients of such investment
advisers and financial planners who place trades for their own accounts if the
accounts are linked to the master account of such investment adviser or
financial planner on the books and records of the broker, agent, investment
adviser or financial institution, and (v) to retirement and deferred
compensation plans and trusts used to fund those plans, including, but not
limited to those defined in Section 401(a), 403(b) or 457 of the Code and 'rabbi
trusts.' Investors may be charged a fee if they effect transactions in Fund
shares through a broker or agent. Class A shares of the Fund may also be sold at
net asset value to current officers, directors and employees (and their
immediate families) of the Fund, the 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.

- --------------------------------------------------------------------------------
SALE OF FUND SHARES

- --------------------------------------------------------------------------------

Payment of the price for shares that are sold or '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

<PAGE>

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
- --------------------------------------------------------------------------------
CLASS A SHARES

With respect to purchases of $1,000,000 or more, Class A shares redeemed within
one year of purchase will be subject to a contingent deferred sales charge equal
to 1% of the lesser of the cost of the shares being redeemed or their net asset
value at the time of redemption. Accordingly, no sales charge will be imposed on
increases in net asset value above the initial purchase price. In addition, no
charge will be assessed on shares derived from reinvestment of dividends or
capital gains distributions. In determining, the contingent deferred sales
charge applicable to a redemption of Class A shares, it will be assumed that the
redemption is, first, of any shares that are not subject to a contingent
deferred sales charge (for example, because an initial sales charge was paid
with respect to the shares, or they have been held beyond the period during
which the charge applies or were acquired upon the reinvestment of dividends and
distributions) and, second, of shares held longest during the time they are
subject to the sales charge. Proceeds from the contingent deferred sales charge
on Class A shares are paid to CSSI and are used by CSSI to defray the expenses
of CSSI related to providing distribution-related services to the Fund in
connection with the sales of Class A shares, such as the payment of compensation
to selected dealers or financial intermediaries for selling Class A shares.

- --------------------------------------------------------------------------------
CLASS B SHARES

Class B shares that are redeemed within six years of purchase will be subject to
a contingent deferred sales charge at the rates set forth in the prospectus
charged as a percentage of the dollar amount subject thereto. The charge will be
assessed on an amount equal to the lesser of the cost of the shares being
redeemed or their net asset value at the time of redemption. Accordingly, no
sales charge will be imposed on increases in net asset value above 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.

<PAGE>

The contingent deferred sales charge is waived on redemptions of shares
(i) following the death or disability, as defined in the Internal Revenue Code
of 1986, as amended (the 'Code'), of a shareholder, (ii) to the extent that the
redemption represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who has attained
the age of 70 1/2, or (iii) that had been purchased by present or former
directors of the Fund, by the relative of any such person, by any trust,
individual retirement account or retirement plan account for the benefit of any
such person or relative, or by the estate of any such person or relative.

Conversion Feature. At the end of the month which precedes the eighth
anniversary of the purchase date of a shareholder's Class B shares, such
Class B shares will automatically convert to Class A shares and will no longer
be subject to higher distribution and service fees. Such conversion will occur
on the basis of the relative net asset values of the two classes, without the
imposition of any sales load, fee or other charge. The purpose of the conversion
feature is to reduce the distribution and service fees paid by holders of
Class B shares that have been outstanding long enough for CSSI to have been
compensated for distribution expenses incurred in the sale of such shares.

For purposes of conversion to Class A, Class B shares purchased through the
reinvestment of dividends and distributions paid in respect of Class B shares in
a shareholder's account will be considered to be held in a separate sub-account.
Each time any Class B shares in the shareholder's account (other than those in
the sub-account) convert to Class A, an equal pro-rata portion of the Class B
shares in the sub-account will also convert to Class A.

- --------------------------------------------------------------------------------
CLASS C SHARES

Class C shares that are redeemed within one year of purchase will be subject to
a contingent deferred sales charge of 1%, charged as a percentage of the dollar
amount subject thereto. The charge will be assessed on an amount equal to the
lesser of the cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed on increases in
net asset value above the initial purchase price. In addition, no charge will be
assessed on shares derived from reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge on Class C shares will be
waived on certain redemptions, as described above under 'Contingent Deferred
Sales Charges -- Class B Shares.' In determining the contingent deferred sales
charge applicable to a redemption of Class C shares, it will be assumed that the
redemption is, first, of any shares that are not subject to a contingent
deferred sales charge (for example, because the shares have been held beyond the
period during which the charge applies or were acquired upon the reinvestment of
dividends or distributions) and, second, of shares held longest during the time
they are subject to the sales charge.

Proceeds from the contingent deferred sales charge are paid to CSSI and are used
by CSSI to defray the expenses of CSSI related to providing distribution-related
services to the Fund in connection with the sale of the Class C shares, such as
the payment of compensation to dealers and financial intermediaries for selling
Class C shares.

- --------------------------------------------------------------------------------
CLASS I SHARES

Class I shares are not subject to a contingent deferred sales charge.

<PAGE>

- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------

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 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

<PAGE>

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 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 FUND 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

<PAGE>

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.

- --------------------------------------------------------------------------------
ORIGINAL ISSUE DISCOUNT SECURITIES

Investments by the Fund in zero coupon or other discount securities will result
in income to the Fund equal to a portion of the excess of the face value of the
securities over their issue price (the 'original issue discount') each year that
the securities are held, even though the Fund receives no cash interest
payments. This income is included in determining the amount of income which the
Fund must distribute to maintain its status as a regulated investment company
and to avoid the payment of federal income tax and the 4% excise tax. In
addition, if the Fund invests in certain high yield original issue discount
securities issued by corporations, a portion of the original issue discount
accruing on any such obligation may be eligible for the deduction for dividends
received by corporations. In such event, dividends of investment company taxable
income received from the Fund by its corporate shareholders, to the extent
attributable to such portion of accrued original issue discount, may be eligible
for this deduction for dividends received by corporations if so designated by
the Fund in a written notice to shareholders.

- --------------------------------------------------------------------------------
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

<PAGE>

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 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 prior to the end of
the 30th day after the close of the taxable year, if certain conditions are met.

<PAGE>

- --------------------------------------------------------------------------------
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.

- --------------------------------------------------------------------------------
INVESTMENT IN REAL ESTATE INVESTMENT TRUSTS

The Fund may invest in real estate investment trusts ('REITs') that hold
residual interests in real estate mortgage investment conduits ('REMICs'). Under
existing Treasury regulations, a portion of the Fund's income from a REIT that
is attributable to the REIT's residual interest in a REMIC (referred to in the
Code as an 'excess inclusion') will be subject to federal income tax in all
events. These regulations are also expected to provide that excess inclusion
income of a regulated investment company, such as the Fund, will be allocated to
shareholders of the regulated investment company in proportion to the dividends
received by such shareholders, with the same consequences as if the shareholders
held the related REMIC residual interest directly. In general, excess inclusion
income allocated to shareholders (i) cannot be offset by net operating losses
(subject to a limited exception for certain thrift institutions), (ii) will
constitute unrelated business taxable income to entities (including a qualified
pension plan, an individual retirement account, a 401(k) plan, a Keogh plan or
other tax-exempt entity) subject to tax on unrelated business income, thereby
potentially requiring such an entity that is allocated excess inclusion income,
and otherwise might not be required to file a tax return, to file a tax return
and pay tax on such income, and (iii) in the case of a foreign shareholder, will
not qualify for any reduction in U.S. federal withholding tax. In addition, if
at any time during any taxable year a 'disqualified organization' (as defined in
the Code) is a record holder of a share in a regulated investment company, then
the regulated investment company will be subject to a tax equal to that portion
of its excess inclusion income for the taxable year that is allocable to the
disqualified organization, multiplied by the highest federal income tax rate
imposed on corporations. The Adviser does not intend on behalf of the Fund to
invest in REITs, a substantial portion of the assets of which consists of
residual interests in REMICs.

- --------------------------------------------------------------------------------
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

<PAGE>

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.

- --------------------------------------------------------------------------------
FOREIGN WITHHOLDING TAXES

Income received by the Fund from sources within foreign countries may be subject
to withholding and other taxes imposed by such countries.

- --------------------------------------------------------------------------------
BACKUP WITHHOLDING

The Fund may be required to withhold U.S. federal income tax at the rate of 31%
of all taxable distributions payable to shareholders who fail to provide the
Fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service 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

<PAGE>

certain other requirements. However, this 30% tax on capital gains of
nonresident alien individuals who are physically present in the United States
for more than the 182 day period only applies in exceptional cases because any
individual present in the United States for more than 182 days during the
taxable year is generally treated as a resident for U.S. income tax purposes; in
that case, he or she would be subject to U.S. income tax on his or her worldwide
income at the graduated rates applicable to U.S. citizens, rather than the 30%
U.S. tax. In the case of a foreign shareholder who is a nonresident alien
individual, the Fund may be required to withhold U.S. income tax at a rate of
31% of distributions of net capital gains unless the foreign shareholder
certifies his or her non-U.S. status under penalties of perjury or otherwise
establishes an exemption. See 'Taxation -- Backup Withholding,' above. If a
foreign shareholder is a nonresident alien individual, any gain such shareholder
realizes upon the sale or exchange of such shareholder's shares of the Fund in
the United States will ordinarily be exempt from U.S. tax unless (i) the gain is
U.S. source income and such shareholder is physically present in the United
States for more than 182 days during the taxable year and meets certain other
requirements, or is otherwise considered to be a resident alien of the United
States, or (ii) at any time during the shorter of the period during which the
foreign shareholder held shares of the Fund and the five year period ending on
the date of the disposition of those shares, the Fund was a 'U.S. real property
holding corporation' and the foreign shareholder held more than 5% of the shares
of the Fund, in which event the gain would be taxed in the same manner as for a
U.S. shareholder as discussed above and a 10% U.S. withholding tax would be
imposed on the amount realized on the disposition of such shares to be credited
against the foreign shareholder's U.S. income tax liability on such disposition.
A corporation is a 'U.S. real property holding corporation' if the fair market
value of its U.S. real property interests equals or exceeds 50% of the fair
market value of such interests plus its interests in real property located
outside the United States plus any other assets used or held for use in a
business. In the case of the Fund, U.S. real property interests include
interests in stock in U.S. real property holding corporations (other than stock
of a REIT controlled by U.S. persons and holdings of 5% or less in the stock of
publicly traded U.S. real property holding corporations) and certain
participating debt securities.

Income Effectively Connected. If the income from the Fund is 'effectively
connected' with a U.S. trade or business carried on by a foreign shareholder,
then distributions of investment company taxable income and capital gain
dividends, any amounts retained by the Fund which are designated as
undistributed capital gains and any gains realized upon the sale or exchange of
shares of the Fund will be subject to U.S. income tax at the graduated rates
applicable to U.S. citizens, residents and domestic corporations. Foreign
corporate shareholders may also be subject to the branch profits tax imposed by
the Code.

The tax consequences to a foreign shareholder 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.

<PAGE>

- --------------------------------------------------------------------------------
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> <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>

The Fund's average annual total return for its Class A shares for the year ended
December 31, 1999 and for the period from September 2, 1997 (commencement of
operations) to December 31, 1999 were - 9.68% and - 5.14%, respectively.

The Fund's average annual total return for its Class B shares for the year ended
December 31, 1999 and for the period from January 15, 1998 (commencement of
operations) to December 31, 1999 was - 10.68% and - 8.89%, respectively.

The Fund's average annual total return for its Class C shares for the year ended
December 31, 1999 and for the period from January 14, 1998 (commencement of
operations) to December 31, 1999 was - 5.99% and - 8.74%, respectively. The
Fund's average annual total return for its Class I shares for the year ended
December 31, 1999 and for the period from July 15, 1998 (commencement of
operations) to December 31, 1999 was - 5.12% and - 10.11%, respectively.

- -------------------------------------------------------------------------------
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

<PAGE>

<TABLE>
<S> <C> <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[( cd + 1)6 - 1]

<TABLE>
<S> <C> <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.)

- --------------------------------------------------------------------------------
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, 1999,
including notes thereto, are incorporated by reference in this Statement of
Additional Information from the Fund's Annual Report dated December 31, 1999.

<PAGE>

PART C

OTHER INFORMATION

ITEM 23. EXHIBITS

(a). Articles of Incorporation(1), with Articles Supplementary filed with
the Secretary of State of the State of Maryland on January 21, 1998.(4)

(b). By-Laws(1)

(c). 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 (a) to this Registration Statement and the Registrant's By-Laws
(Article II and Article VI) filed as Exhibit (b) to this Registration Statement.

(d). Form of Investment Advisory Agreement(2)

(e). (i) Amended and Restated Underwriting Agreement (Class A, Class B and
Class C shares only)(4)

(ii) Form of Distribution Agreement (Class I shares only)(5)

(f). Not Applicable

(g). Form of Domestic Custody Agreement(2)

(h). (i) Form of Administration Agreement(2)

(ii) Mutual Funds Service (Sub-Administration) Agreement(2)

(iii) Shareholder Service Plan(2)

(iv) Form of Shareholder Service Agreement(2)

(i). Opinion and Consent of Dechert Price & Rhoads(2)

(j). Consent of Independent Accountants*

(k). Not Applicable

(l). Investment Representation Letter(2)

(m). Distribution Plan(4)

(n). Multiple-Class Plan(5)

(p). Code of Ethics

(i) Fund

(ii) Adviser/Distributor

(q). 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 22, 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

C-1

<PAGE>

as set forth in Article EIGHTH of Registrant's Articles of Incorporation, filed
as Exhibit (a), and Article VIII, Section 1, of the Registrant's By-Laws, filed
as Exhibit (b). The Liability of the Registrant's directors and officers is
dealt with in Article EIGHTH of Registrant's Articles of Incorporation and
Article VIII, Section 1 through Section 6, of the Registrant's By-Laws. The
liability of Cohen & Steers Capital Management, Inc., the Registrant's
investment adviser (the 'Adviser'), for any loss suffered by the Registrant or
its shareholders is set forth in Section 4 of the Investment Advisory Agreement,
filed as Exhibit d 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 (h)(i) 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 (e) 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
Lawrence B. Stoller.................. Senior Vice President and General
Counsel
William J. Frischling................ Senior Vice President
James S. Corl........................ Senior Vice President
Sheila J. Stoltz..................... Vice President
Michael J. Kozoriz................... Vice President
Jay J. Chen.......................... Vice President
Terrance R. Ober..................... Vice President
</TABLE>

Cohen & Steers Capital Management, Inc. acts as investment adviser to, in
addition to the Registrant, the following investment companies:

Cohen & Steers Institutional Realty Shares, Inc.

Cohen & Steers Realty Income Fund, Inc.

Cohen & Steers Realty Shares, Inc.

Cohen & Steers Total Return Realty Fund, Inc.

Cohen & Steers Special Equity Fund, Inc.

Frank Russell Investment Management Company -- Real Estate Securities
Fund

Russell Insurance Funds -- Real Estate Securities Fund

American Skandia Trust -- AST Cohen & Steers Realty Portfolio

C-2

<PAGE>

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 J. Chen............. Assistant Treasurer None
</TABLE>

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, as amended,
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>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all the requirements for effectiveness of this Registration Statement
under Rule 485(b) under the Securities Act of 1933, as amended and has duly
caused this Post-Effective Amendment No. 6 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 25th day of April 2000.

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. 6 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 25, 2000
......................................
(MARTIN COHEN)

By: /s/ ROBERT H. STEERS Director April 25, 2000
......................................
(ROBERT H. STEERS)

By: * Director April 25, 2000
......................................
(GREGORY C. CLARK)

By: * Director April 25, 2000
......................................
(GEORGE GROSSMAN)

By: * Director April 25, 2000
......................................
(JEFFREY H. LYNFORD)

By: * Director April 25, 2000
......................................
(WILLARD H. SMITH JR.)

By: /s/ ROBERT H. STEERS April 25, 2000
......................................
* ROBERT H. STEERS
AS ATTORNEY-IN-FACT
</TABLE>

C-4

STATEMENT OF DIFFERENCES
------------------------

The registered trademark symbol shall be expressed as...................... 'r'
Characters normally expressed as superscript shall be preceded by.......... 'pp'

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 11 to the registration statement on Form N-1A ("Registration
Statement") (File Nos. 33-40215 and 811-6302) of our report dated February 3,
2000, relating to the financial statements and financial highlights which
appears in the December 31, 1999 Annual Report to shareholders of Cohen &
Steers Realty Shares, Inc., which is also incorporated by reference into the
Registration Statement. We also consent to the references to us under the
headings "Financial Highlights" and "Counsel and Independent Accountants" in
such Registration Statement.

PricewaterhouseCoopers LLP

New York, New York
April 24, 2000

<PAGE>

COHEN & STEERS FUNDS

Code of Ethics

Adopted Pursuant to Rule 17j-1
Under the Investment Company Act of 1940

1. Purposes

This Code of Ethics has been adopted by the Board of Directors of each
Cohen & Steers Fund in accordance with Rule 17j-l(c) under the Investment
Company Act of 1940 (the "Act"). Rule 17j-1 generally proscribes fraudulent or
manipulative practices with respect to purchases or sales of securities held or
to be acquired by investment companies. The purpose of this Code of Ethics is to
provide regulations and procedures consistent with the Act and Rule 17j-1
designed to give effect to the general prohibitions set forth in Rule 17j-l(b),
which read as follows:

"(b) Unlawful actions. It shall be unlawful for any affiliated
person of or principal underwriter for a Fund, or any affiliated person
of an investment adviser of or principal underwriter for a Fund, in
connection with the purchase or sale, directly or indirectly, by such
person of a Security Held or to be Acquired by the Fund:

(1) To employ any device, scheme or artifice to
defraud the Fund;

(2) To make any untrue statement of a material fact
to the Fund or omit to state a material fact necessary in
order to make the statements made to the Fund, in light of the
circumstances under which they are made, not misleading;

(3) To engage in any act, practice, or course of
business which operates or would operate as a fraud or deceit
on the Fund; or

(4) To engage in any manipulative practice with
respect to the Fund.

All material changes to this Code also shall be subject to Board
approval. In approving the Code and any material changes, the Directors shall
determine that the Code contains provisions reasonably necessary to prevent
"Access Persons" (as defined below) from engaging in any conduct specified in
Rule 17j-1(b). Prior to approving this Code or any material changes, the
Investment Adviser, on behalf of itself and each Fund, shall provide a
certification that the Fund has adopted procedures reasonably necessary to
prevent Access Persons from violating this Code of Ethics.

2. Application

(a) This Code of Ethics applies to the "Access Persons" of each Fund
(as such term is defined in Section 3).

(b) Each Fund will maintain a list of all its Access Persons and will
provide each

<PAGE>

Access Person with a copy of this Code of Ethics.

3. Definitions

(a) "Fund" means each Cohen & Steers Fund.

(b) "Investment Adviser" means Cohen & Steers Capital Management, Inc.

(d) "Advisory Person" of the Fund or of the Investment Adviser means
(a) any employee of the Fund or of the Investment Adviser (or of any company in
a control relationship to the Fund or Investment Adviser, including any
subsidiary or affiliate of the Investment Adviser), and (b) any other natural
person in a control relationship to the Fund or the Investment Adviser who
obtains information concerning recommendations made to the Fund with regard to
the purchase or sale of Covered Securities by the Fund.

(e) A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been made and communicated or,
with respect to the person making the recommendation, when the person gives
serious consideration to making a recommendation.

(f) "Beneficial ownership" shall be interpreted in the same manner as
it would be in determining whether a person is subject to the provisions of
Section 16 of the Securities Exchange Act of 1934, and the rules and regulations
thereunder.

(g) "Control" shall have the same meaning as that set forth in Section
2(a)(9) of the Act.

(h) "Independent Director" means a director of the Fund who is not an
"interested person" of the Fund within the meaning of Section 2(a)(19) of the
Act.

(i) "Purchase or Sale of a Covered Security" includes, among other
things, the writing of an option to purchase or sell a Covered Security.

(j) "Covered Security" shall have the meaning set forth in Section
2(a)(36) of the Investment Company Act of 1940, except that it shall not include
direct obligations of the Government of the United States; bankers' acceptances,
bank certificates of deposit, commercial paper, and high-quality short-term debt
instruments, including repurchase agreements; or shares issued by registered
open-end Funds.

4. Exempted Transactions

The prohibitions of Section 5 of this Code shall not apply to:

<PAGE>

(a) Purchases or sales effected in any account over which the Access
Person has no direct or indirect influence or control (including any account
that is managed on a discretionary basis by a person other than the Access
Person and with respect to which the Access Person does not in fact influence or
control the transactions).

(b) Purchases or sales of securities that are not eligible for purchase
or sale by a Fund.

(d) Purchases that are part of an automatic dividend reinvestment plan.

(e) Purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its securities, to the extent those rights
were acquired from the issuer, and sales of rights so acquired.

(f) Purchases or sales of securities that receive the prior approval of
the Chairman or the President of a Fund (such approving officer having no
personal interest in the purchases or sales) because they: (i) are only remotely
potentially harmful to a Fund, (ii) would be very unlikely to affect a highly
institutional market, or (iii) clearly are not related economically to the
securities to be purchased, or sold or held by a Fund.

5. Prohibited Purchases and Sales

(a) Unless prior approval is obtained in accordance with Section 4(f)
above, no officer, director or employee of the Fund, and no Advisory Person of
the Fund or of the Investment Adviser, shall purchase or sell, directly or
indirectly, any Covered Security in which he has, or by reason of such
transactions acquires, any direct or indirect beneficial ownership and which the
person knew or reasonably should have known at the time of such purchase or sale
that, within the most recent 15 days:

(1) is being or has been considered for purchase or
sale by a Fund; or

(3) is being purchased or sold by a Fund.

(b) No Access Person shall reveal to any other person (except in the
normal course of his duties on behalf of the Fund or the Investment Adviser) any
information regarding securities transactions by the Fund or the consideration
by the Fund or the Investment Adviser of any securities transactions.

<PAGE>

(c) With the exception of the Independent Directors, no Access Person
shall purchase any Covered Security issued in an initial public offering
("IPO"). No Independent Director shall invest in any shares issued in an IPO if,
at the time of that transaction, the Independent Director knew or, in the
ordinary course of fulfilling his official duties, should have known that,
during the 15-day period immediately preceding or after the date of the
transaction, the Covered Security is or was purchased or sold by the Fund, or is
or was being considered for purchase or sale by the Fund.

(d) With the exception of the Independent Directors, no Access Person
shall purchase any Covered Security issued in a private placement unless the
Chairman or President approves the transaction in advance. In determining
whether or not to grant such approval, the Chairman or President will consider
whether the investment opportunity should be reserved for the Fund and whether
the opportunity is being offered by virtue of the Access Person's position with
the Fund or the Investment Adviser. The Assistant Secretary shall maintain a
written record of decisions to permit these transactions, along with the reasons
supporting the decision. Any Access Person who has been authorized to acquire
securities in a private placement must disclose the investment to the Chairman
or President if the Access Person is involved in any subsequent consideration of
an investment in the issuer, and these investment decisions will be subject to
independent review by the Board of Directors.

No Independent Director shall invest in any shares issued in a
private placement if, at the time of that transaction, the Independent Director
knew or, in the ordinary course of fulfilling his official duties, should have
known that, during the 15-day period immediately preceding or after the date of
the transaction, the Covered Security is or was being purchased or sold by the
Fund, or is or was being considered for purchase or sale by the Fund.

6. Reporting

(a) Every Access Person, except the Independent Directors, shall report
to the Secretary or Assistant Secretary of the Fund (i) a list of all Covered
Securities held, and any account held with a broker, dealer or bank, at the time
the person becomes an Access Person; (ii) each year thereafter, a list of all
Covered Securities and accounts held; and (iii) the information described in
Section 6(c) of this Code with respect to transactions in any Covered Security
in which the Access Person has, or by reason of such transaction acquires, any
direct or indirect beneficial ownership in the Covered Security; provided,
however, that an Access Person shall not be required to make a report with
respect to transactions effected in any account over which the Access Person
does not have any direct or indirect influence or control or in any account that
is managed on a discretionary basis by a person other than the Access Person and
with respect to which the Access Person does not in fact influence or control
the transactions. The Secretary or Assistant Secretary of each Fund shall
maintain the reports and other records required by Rule 17j-1 under the Act.

(b) An Independent Director need only report to the Secretary or
Assistant Secretary of the Fund a transaction if the Independent Director, at
the time of that transaction, knew or, in the ordinary course of fulfilling his
official duties, should have known that, during the 15-day

<PAGE>

period immediately preceding or after the date of the transaction, the Covered
Security is or was being purchased or sold by the Fund, or is or was being
considered for purchase or sale by the Fund. An Independent Director need not
provide an initial or annual report of portfolio holdings and accounts.

(c) Every report shall be in writing and shall be delivered not later
than (i) 10 days after the person becomes an Access Person, with respect to the
initial portfolio holdings and accounts report; and (ii) 10 days after the end
of the calendar quarter in which a transaction to which the report relates was
effected. Quarterly reports shall contain the following information:

(1) The date of the transaction, the title, interest rate
and maturity date (if applicable), the number of
shares and the principal amount of each Covered
Security involved;

(2) The nature of the transaction (i.e., purchase, sale
or any other type of acquisition or disposition);

(3) The price at which the transaction was effected;

(4) The name of the broker, dealer or bank with or
through whom the transaction was effected;

(5) The name of any broker, dealer or bank with whom an
account was opened during the quarter; and

(6) The date the report is submitted.

(d) Any report may contain a statement that the report shall not be
construed as an admission by the person making the report that he has any direct
or indirect beneficial ownership in the security to which the report relates.

(e) All reports furnished pursuant to this Section shall be reviewed by
the Funds' Assistant Secretary, who shall report to the Chairman and President
all potential violations of the Code of Ethics. These will be kept confidential,
subject to the rights of inspection by the Directors of each Fund and by the
Securities and Exchange Commission.

(f) The Investment Adviser, on behalf each Fund, shall furnish annually
to the Directors a written report (i) describing any issues arising under this
Code of Ethics or the related supervisory procedures, including but not limited
to information about material violations of the Code of Ethics or procedures,
and sanctions imposed in response to the material violations; and (ii)
certifying that the Fund has adopted procedures reasonably necessary to prevent
Access Persons from violating the Code of Ethics.

<PAGE>

7. Sanctions

Upon receiving notice of a violation of this Code, the Directors of the
each Fund may impose such sanctions as they deem appropriate, including, among
other things, a letter of censure or suspension or termination of the employment
of the violator.

Explanatory Notes to Code of Ethics

1. The information on portfolio holdings, and securities transactions,
received and recorded by the Investment Adviser pursuant to the requirements of
Rule 204-2(a)(12) under the Investment Advisers Act of 1940 shall be deemed to
satisfy the reporting requirements imposed on Access Persons of the Investment
Adviser by Section 6 of this Code of Ethics.

2. For purposes of Section 3(c), 3(d) and 5 of this Code of Ethics, all
employees of the Investment Adviser, and its affiliates and subsidiaries, shall
be deemed Advisory Persons of the Fund or of the Investment Adviser.

September 1999

<PAGE>

COHEN & STEERS CAPITAL MANAGEMENT, INC.

CODE OF ETHICS

INTRODUCTION

This Code of Ethics shall apply to all directors, officers and employees of
Cohen & Steers Capital Management, Inc., and of each of its subsidiaries and
affiliates.

FOR PURPOSES OF THIS CODE:

(a) "Access Person" means any director, officer or employee of Cohen & Steers
Capital Management, Inc., and of each of its subsidiaries or affiliates ("Cohen
& Steers").

(b) Purchase or sale of a security includes, among other things, the writing of
any option to purchase or sell a security or any transaction by reason of which
a person acquires or disposes of any direct or indirect ownership in a security.

(c) A security is "being considered for purchase or sale" when a recommendation
to purchase or sell a security has been made and communicated and, with respect
to the person making the recommendation, when a person seriously considers
making such a recommendation.

THIS CODE APPLIES TO ALL TRANSACTIONS (OTHER THAN BONA FIDE CLIENT TRANSACTIONS)
IN ALL ACCOUNTS IN WHICH AN ACCESS PERSON MAY EXERCISE CONTROL OR HAS A
BENEFICIAL INTEREST. UPON DISCOVERING A VIOLATION OF THIS CODE, THE CHAIRMAN OR
PRESIDENT MAY IMPOSE SUCH SANCTIONS AS DEEMED APPROPRIATE, INCLUDING A LETTER OF
CENSURE OR SUSPENSION OR EVEN TERMINATION OF THE EMPLOYMENT OF THE VIOLATOR.
FURTHER, ANY PROFITS REALIZED IN CONNECTION WITH A VIOLATION OF THIS CODE WILL
BE REQUIRED TO BE DISGORGED.

PROHIBITED TRANSACTIONS

The following transactions are prohibited, except as provided for below:

(a) No Access Person shall purchase or sell any security that the Access Person
knew or reasonably should have known is being or has been considered for
purchase or sale for a Client, or is being purchased or sold by a Client.

<PAGE>

(b) No Access Person shall purchase or sell any security issued or guaranteed
by a real estate investment trust or other company engaged in the real estate
business (as defined below), except that an Access Person may invest in shares
of Cohen & Steers Realty Shares, Inc., Cohen & Steers Special Equity Fund, Inc.
and Cohen & Steers Equity Income Fund, Inc. and, with the written prior approval
of the Chairman or President, shares of Cohen & Steers Realty Income Fund, Inc.
and Cohen & Steers Total Return Realty Fund, Inc. (see Attachment A).

(d) No Access Person shall purchase any security issued in a private placement
unless the Chairman or President approves the transaction in advance. In
determining whether or not to grant approval, the Chairman or President will
consider whether the investment opportunity should be reserved for a Client and
whether the opportunity is being offered by virtue of the Access Person's
position with Cohen & Steers. The general counsel shall maintain a written
record of decisions to permit these transactions, along with the reasons
supporting the decision. Any Access Person who has been authorized to acquire
securities in a private placement must disclose the investment to the Chairman
or President if the Access Person is involved in any subsequent consideration of
an investment in the issuer, and these investment decisions will be subject to
independent review by investment personnel with no personal interest in the
issuer.

(e) No Access Person shall execute any securities transaction on a day during
which any Client has a pending buy or sell order in that same security until
that order is executed or withdrawn. Furthermore, no Access Person shall buy or
sell a security within seven calendar days before or after a Client trades in
that security.

(f) No Access Person shall receive any gift of more than de minimis value from
any person or entity that does business with or on behalf of Cohen & Steers, its
affiliates and subsidiaries, or a Client.

(g) No Access Person shall serve on the board of directors of a publicly traded
company, unless approved in advance by the Chairman or President. This
authorization will be provided only if the Chairman or President concludes that
service on the board would be consistent with the interests of Clients. Access
Persons who have received this approval shall not trade for a Client or their
own account in the securities of the company while in possession of material,
non-public information ("Inside Information"). Cohen & Steers' Inside
Information Policy and Procedures provide further details on the obligations of
Access Persons concerning Inside Information.

EXEMPTED TRANSACTIONS

<PAGE>

The prohibitions of this Code shall not apply to:

(a) Purchases or sales effected in any account over which the Access Person has
no direct or indirect influence (including any account that is managed on a
discretionary basis by a person other than the Access Person and with respect to
which the Access Person does not in fact influence or control the transactions).

(b) Purchases or sales that are non-volitional on the part of either the Access
Person or a Client.

(d) Purchases effected upon the exercise of rights issued by an issuer pro rata
to all holders of a class of its securities, to the extent these rights were
acquired from the issuer, and sales of rights so acquired.

(e) Purchases or sales that receive the prior approval of the Chairman or
President of Cohen & Steers (such approving officer having no personal interest
in such purchases or sales) because they: (i) are only remotely potentially
harmful to any Client account, (ii) would be very unlikely to affect a highly
institutional market, or (iii) clearly are not related economically to the
securities to be purchased, or sold or held on behalf of a Client or (iv) are a
result of the sale of securities that were acquired prior to February 1995 (and
such person was an employee of Cohen & Steers Capital Management, Inc. prior to
February 1995) or acquired prior to the time a person became an employee of
Cohen & Steers. The general counsel shall maintain a written record of decisions
to permit these transactions, along with the reasons supporting the decision.

REPORTING

(a) Every Access Person shall report all transactions in any security in which
the Access Person has, or by reason of such transaction acquires, any direct or
indirect beneficial ownership in the security; provided, however, that an Access
Person shall not be required to report transactions effected for any account
over which the Access Person does not have any direct or indirect influence or
control.

(b) Every report shall be made not later than 10 days after the end of the
calendar quarter in which the transaction to which the report relates was
effected, and shall contain the following information:

(i) the date of the transaction, the title, interest rate and maturity
date (if applicable), the number of shares, and the principal amount of
the security involved;

(ii) the nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);

<PAGE>

(iii) the price at which the transaction was effected;

(iv) the name of the broker, dealer or bank with or through whom the
transaction was effected;

(v) with respect to any account established by the Access Person during
the quarter, the name of the broker, dealer or bank with whom the
Access Person established the account and the date the account was
established; and

(vi) the date the report is submitted.

(c) Any report may contain a statement that the report shall not be construed
as an admission that the person making the report has any direct or indirect
beneficial ownership in the security to which the report relates.

(d) Every Access Person must provide a list of all personal securities holdings
no later than 10 days after commencement of employment ("Initial Holdings
Report") and no later than 30 days after the beginning of each year ("Annual
Holdings Report") thereafter (see Attachment B). Both the Initial Holdings
Report and Annual Holdings Report also shall provide the name of any broker,
dealer or bank with whom the Access Person maintained an account in which any
securities were held for the direct or indirect benefit of the Access Person.
Each Annual Holdings Report must provide information that is current as of a
date no more than 30 days before the report is submitted. Both the Initial
Holdings Report and the Annual Holdings Report shall state the date the report
is submitted by the Access Person.

(e) The Applicant's compliance administrator and general counsel shall be
responsible for reviewing all quarterly securities transaction reports, the
Initial Holdings Report and the Annual Holdings Report, and shall report to the
Chairman and President all potential violations of this Code of Ethics. The
Chairman and President, in consultation with the general counsel, shall
determine the appropriate response to any violation.

(f) All Access Persons must certify on the attached form initially and annually
thereafter that they have read and understand this Code of Ethics and that they
recognize that they are subject to the provisions of this Code. Furthermore, all
Access Persons must certify annually that they have complied with the
requirements of the Code of Ethics and that they have reported all personal
securities transactions and accounts required to be reported pursuant to the
Code.

FUND BOARD APPROVAL AND REPORTING

The Board of Directors of each Cohen & Steers Fund, including a majority of the
Directors who are not "interested persons" (as defined in the Investment Company
Act of

<PAGE>

1940), must approve this Code and any material changes to the Code. This
approval shall be based on a determination that the Code contains provisions
reasonably necessary to prevent Access Persons from engaging in any conduct
prohibited by Rule 17j-1 under the Investment Company Act of 1940. In connection
with this approval, Cohen & Steers shall provide a certification to the Board
that Cohen & Steers has adopted procedures reasonably necessary to prevent
Access Persons from violating the Code.

Cohen & Steers shall furnish annually to the Directors a written report (i)
describing any issues arising under the Code of Ethics and related supervisory
procedures, including but not limited to information about material violations
of the Code or procedures and sanctions imposed in response to the material
violations, and (ii) certifying that Cohen & Steers has adopted procedures that
are reasonably necessary to prevent Access Persons from violating the Code.

ADDITIONAL DEFINITIONS

(a) "Beneficial ownership" shall be interpreted in the same manner as it would
be in determining whether a person is subject to the provisions of Section 16 of
the Securities Exchange Act of 1934, and the rules and regulations thereunder,
except that the determination of direct or indirect beneficial ownership shall
apply to all securities which an Access Person has or acquires.

(b) "Security" shall have the meaning set forth in Section 2(a) (36) of the
Investment Company Act, except that it shall not include direct obligations of
the Government of the United States; bankers' acceptances, bank certificates of
deposit, commercial paper and high-quality short-term debt instruments,
including repurchase agreements; and shares of registered open-end investment
companies.

(c) A company is engaged in the "real estate business" if it 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. Any questions as to whether a company is engaged
in the real estate business should be referred to the Chairman or President.

<PAGE>

COHEN & STEERS CAPITAL MANAGEMENT, INC.
CERTIFICATION OF PERSONAL SECURITIES TRANSACTIONS
AND COMPLIANCE WITH THE CODE OF ETHICS

I hereby certify that I have received, read and understand the
Cohen & Steers Code of Ethics. Furthermore, I understand that I am
subject to the Code of Ethics and that any failure to follow the Code
could subject me to discipline, including the possible termination of
my employment with Cohen & Steers.

I further certify that, for the preceding calendar year, I
have complied with the requirements of the Code of Ethics in effect
for the year and that I have reported all personal securities
transactions, holdings and accounts required to be reported pursuant
to this Code.

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Name

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Signature

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Date

<PAGE>

ATTACHMENT B

COHEN & STEERS CAPITAL MANAGEMENT INC.
Personal Securities Holdings and Accounts

Name: ___________________________________

As agreed by signing the Code of Ethics, my personal securities holdings are as
follows:

---------------------------------- -----------------------------------------------
# OF SHARES/FACE VALUE SECURITY
---------------------------------- -----------------------------------------------
<S> <C>

---------------------------------- -----------------------------------------------

</TABLE>

In addition, I maintain accounts with the following brokers, dealers or banks:

1. _______________________________________________________

2. _______________________________________________________

3. _______________________________________________________

4. _______________________________________________________

5. _______________________________________________________

<PAGE>

ATTACHMENT B

Attach an additional schedule if necessary.

*Include all transactions which: (a) involve securities (except direct
obligations of the U.S. Government; money market instruments; and mutual funds)
in which you have direct or indirect "beneficial ownership" (beneficial
ownership meaning yourself, your spouse, minor children or relatives of yours or
your spouse sharing your home) and, (b) occurred in accounts over which you have
direct or indirect influence or control.

SIGNATURE

DATE