<PAGE>
COHEN & STEERS
EQUITY INCOME FUND
757 THIRD AVENUE
NEW YORK, NY 10017
COHEN & STEERS
EQUITY INCOME FUND
----------------
QUARTERLY REPORT
MARCH 31, 2000
<PAGE>
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COHEN & STEERS EQUITY INCOME FUND, INC.
April 17, 2000
To Our Shareholders:
We are pleased to submit to you our report for Cohen & Steers Equity Income
Fund for the quarter ended March 31, 2000. The net asset values per share at
that date were $8.97, $8.90, and $8.89 for Class A, Class B, and Class C shares,
respectively. Class I shares had a net asset value of $8.95. In addition, a
distribution of $0.17 per share was declared for shareholders of record on March
22, 2000 and paid on March 23, 2000 to all four classes of shares.
INVESTMENT REVIEW
For the three months ended March 31, 2000, Cohen & Steers Equity Income Fund
had a total return, based on income and change in net asset value, of 1.2% for
Class A shares. Class B and C shares both returned 1.0% for the quarter.
Class I shares returned 1.4%. This performance compared to the Fund's benchmark,
the NAREIT Equity REIT Index* return of 2.5%. Fund performance information does
not take into account sales loads or contingent deferred sales charges, if any,
which would reduce an investor's returns.
Despite the near-chaotic behavior in nearly every corner of the financial
markets so far this year, REITs remained steady and produced positive, albeit
modest, returns which were competitive with the overall stock market. The Hotel
and Regional Mall sectors, among the most depressed during 1999, rebounded to be
among the best performers during the quarter as their fundamentals proved to be
much better than expected. The Office sector also performed well as strong
employment growth coupled with a restrained supply picture has continued to
favor office building owners. Meanwhile, the Health Care sector once again
produced negative returns as many of the beleaguered operators of these
facilities continue to undergo financial restructuring.
NAREIT EQUITY REIT INDEX 12 MONTH TOTAL RETURNS
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
QUARTER ENDED
- -----------------------------------------------------------------------------------------------------------------
1Q92 1Q93 1Q94 1Q95 1Q96
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11.3 13.3 16.3 14.6 38.5 31 34.1 19.7 1.7 6.6 -4.5 3.2 -0.4 3.6 10.7 15.3 18.1 16.5 18.5 35.3
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
- --------------------------------------------------------------------------
1Q97 1Q98 1Q99 1Q00
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
33.2 33.8 40.5 20.3 18.9 8 -13.5 -17.5 -21.1 -9 -6.5 -4.6 2.6
</TABLE>
Source: NAREIT
In our opinion, investment performance so far in 2000 appears to represent
an important shift in investor sentiment and an improved supply/demand picture
for REIT shares. In addition to the competitive returns in the latest quarter,
and perhaps more importantly, REITs have produced positive 12-month returns for
the first time since mid-1998. As shown in the chart it appears that on a
cyclical basis, the REIT bear market may be coming to an end.
Perhaps predictably, a number of influential Wall Street strategists have
begun to recommend that their clients reduce their overall equity exposure and
add REITs in their place. REITs are apparently again being viewed as both a safe
haven for capital as well as a good source of current income. In a world where
growth has been of foremost significance and current income has simply been
unimportant to most investors, persistent efforts by the Federal Reserve to slow
the economy by raising interest rates may have finally convinced market
participants that the Fed will eventually prevail. Such a slowdown would
probably favor income-oriented securities and, as a result, the U.S. Treasury
market has staged a strong rally. This rally, no doubt, has been enhanced by the
Treasury's program of repurchasing securities with funds generated by the budget
surplus. Considering that interest rates are low while the economy is still
showing strong growth, one can only imagine how low interest rates may
ultimately fall to once the economy shows
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1
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COHEN & STEERS EQUITY INCOME FUND, INC.
some signs of weakness. With equity REITs in general currently yielding well
over 8%, and with these dividends having exhibited impressive growth over the
past several years, REIT investment characteristics are becoming more highly
valued.
<TABLE>
<CAPTION>
CAPITAL RAISED BY REITS ($MILLIONS)
<S> <C> <C> <C>
FIRST QUARTER OF: DEBT EQUITY TOTAL
- ------------------------------------------------
1998 $5,427 $9,009 $14,436
- ------------------------------------------------
1999 4,047 1,600 5,647
- ------------------------------------------------
2000 1,938 646 2,584
- ------------------------------------------------
</TABLE>
Source: NAREIT
On the supply side, it is also symptomatic of a bottoming of REIT share
prices that capital raising has virtually ground to a halt. As shown in the
table, REITs raised only $646 million in equity (more than half of which was
preferred stock) in the first quarter, a 60% decline from a year ago, and a 93%
decline from two years ago. Debt capital raised declined by a lesser, but still
significant amount. Further, total equity issuance by REITs during the 12-month
period ended March 31, at $5.8 billion, was the lowest 12-month total since the
second quarter of 1993.
In addition to the lack of demand for new capital, outflows from real estate
mutual funds slowed to a trickle, and the supply of existing REIT shares
continued to shrink as many companies have persistently repurchased stock in the
open market. By quarter's end, 59 REITs had authorized buybacks totaling nearly
$6 billion. As a consequence of all the above, the REIT industry appears to us
to be at or close to a bottom.
INVESTMENT OUTLOOK
For most of the past two years REITs were unable to raise capital because it
was either not available, or too high priced. Today, however, it is our
perception that the psychology of REIT management has begun to change. Resigned
to the reality that the capital markets may not always be open to them, and
because there are not a great deal of new investment opportunities, more and
more companies are adopting self-financing business plans. This entails constant
reevaluation of properties held in the portfolio and aggressively selling or
repositioning those that do not meet their investment criteria. Proceeds from
these sales are commonly used to fund higher return opportunities, repay debt or
repurchase stock. Many other companies are finding privately financed joint
ventures to be a preferable way to take advantage of opportunities. In short,
many companies are learning to live well without constantly tapping the capital
markets.
To the extent that this thinking prevails, the supply side of the REIT share
equation will continue to improve. The commonly held belief that at the first
uptick in prices, REITs will flood the market with new stock issuance, has often
helped to abort any meaningful recovery in their prices. A wide adoption of this
new business model would be a clear departure from recent thinking. There are
two other factors worthy of mention. First, the shares of nearly all REITs began
the year at such unprecedented low valuations that even a strong price rally
would still leave them undervalued. Second, because many companies have just
recently implemented extensive repurchase programs of their own stock, it would
be illogical for them to quickly reissue that equity unless they were confronted
with some extraordinary investment opportunities. In these cases, however, it
would be highly likely that any top tier company would be able to access capital
privately in both a more efficient and low cost manner.
Meanwhile, without the benefit of a great deal of new investments and little
or no additional capital, the REIT industry has continued to enjoy healthy
growth in earnings. Funds from operations (FFO) per share grew at an average of
10% in 1999 and are widely expected to grow by a further 9% in 2000. This growth
potential is not confined to any single property type or geographic region -- it
is an industry-wide phenomenon that is the result of the strong economy
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2
<PAGE>
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COHEN & STEERS EQUITY INCOME FUND, INC.
and discipline with respect to new construction. We do, however, expect the
Office, Industrial and Apartment sectors to enjoy the highest growth rates and
have accordingly maintained a strong weighting in these property types. We are
particularly optimistic about owners of office buildings in major cities due to
the demand for space fueled by employment growth, the impediments to new
construction and the long lead times required to bring on new supply. We are
somewhat concerned about the retail environment and have consequently maintained
an under-weighted position in the sector. Following the strongest sales growth
in a decade, the prospect of slower economic growth and the continued pressure
of the Internet on both retail sales and margins, we expect investor psychology
to be less positive on this sector than on many others.
Two trends that we expect to continue are the emergence of more technology
initiatives by property owners, and a clarification of plans by many REITs to
establish taxable subsidiaries that will be allowed to operate beginning in
2001. Property owners are increasingly able to deliver goods and services to
tenants and, in addition, manage their properties more efficiently due to
advances in technology and the Internet. These initiatives enable the property
owners to potentially increase revenue and reduce costs. For example, it appears
that some REITs are targeting taxable subsidiaries as a means of either 1)
providing services to tenants, 2) holding properties on a shorter-term basis
than what is allowed in the REIT itself, or 3) purchasing properties that are
expected to produce a high return but may be outside of the mainstream of the
company's existing portfolio. Importantly, these initiatives are not only
potentially additive to earnings but are also enabling many companies to employ
'new economy' strategies using their 'old economy' asset bases.
It is always difficult to reconcile the efficiency of the financial market
with the emotional extremes to which it tends to move. Just as many have
questioned the high valuations afforded technology stocks, we have questioned
the low valuations of realty stocks in light of their strong fundamentals. We
believe that recent market activity is bringing valuations of both groups more
in line with true underlying fundamentals. If these trends continue, it is our
hope that the Fund will be able to deliver rewarding returns on both an absolute
and relative basis.
Sincerely,
MARTIN COHEN ROBERT H. STEERS
MARTIN COHEN ROBERT H. STEERS
President Chairman
STEVEN R. BROWN
STEVEN R. BROWN
Portfolio Manager
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Cohen & Steers is online at WWW.COHENANDSTEERS.COM. Visit our website for
daily NAVs, portfolio information, performance information, recent news
articles, literature and insights on the REIT market.
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* The NAREIT Equity REIT Index is an unmanaged, market capitalization weighted
index of all publicly-traded REITs that invest predominately in the equity
ownership of real estate. The index is designed to reflect the performance of
all publicly-traded REITs as a whole.
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3
<PAGE>
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COHEN & STEERS EQUITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS
MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER DIVIDEND
OF SHARES VALUE YIELD*
---------- ----------- ------------
<S> <C> <C> <C> <C>
EQUITIES 90.88%
COMMON STOCK 82.54%
APARTMENT/RESIDENTIAL 16.40%
Apartment Investment & Management Co. -- Class
A............................................... 43,300 $ 1,653,519 7.33%
Camden Property Trust............................. 84,900 2,297,606 7.69
Charles E. Smith Residential Realty............... 20,700 747,787 6.23
Colonial Properties Trust......................... 27,000 641,250 10.11
Gables Residential Trust.......................... 67,100 1,509,750 9.42
Home Properties of New York....................... 51,800 1,385,650 7.93
Summit Properties................................. 87,800 1,679,175 9.15
United Dominion Realty Trust...................... 232,800 2,342,550 10.63
-----------
12,257,287
-----------
HEALTH CARE 9.08%
Health Care Property Investors.................... 114,900 2,922,769 11.32
Healthcare Realty Trust........................... 97,400 1,631,450 13.13
Nationwide Health Properties...................... 169,700 1,771,244 17.63
**Ventas.......................................... 139,000 460,437 --
-----------
6,785,900
-----------
HOTEL 7.99%
FelCor Lodging Trust.............................. 98,300 1,738,681 12.44
Host Marriott Corp................................ 170,000 1,508,750 9.46
MeriStar Hospitality Corp......................... 156,500 2,728,969 11.58
-----------
5,976,400
-----------
INDUSTRIAL 6.23%
First Industrial Realty Trust..................... 85,300 2,324,425 9.10
Pacific Gulf Properties........................... 118,900 2,333,413 8.97
-----------
4,657,838
-----------
OFFICE 23.80%
Arden Realty Group................................ 126,300 2,636,512 8.91
Brandywine Realty Trust........................... 160,200 2,743,425 9.34
CarrAmerica Realty Corp........................... 105,300 2,224,463 8.76
Crescent Real Estate Equities Co.................. 141,600 2,478,000 12.57
Highwoods Properties.............................. 107,800 2,290,750 10.45
Mack-Cali Realty Corp............................. 130,500 3,327,750 9.10
SL Green Realty Corp.............................. 88,000 2,090,000 6.11
-----------
17,790,900
-----------
OFFICE/INDUSTRIAL 5.57%
Liberty Property Trust............................ 117,300 2,807,869 8.69
Prime Group Realty Trust.......................... 26,900 385,006 9.43
Reckson Associates Realty Corp. -- Class B........ 47,300 969,650 10.93
-----------
4,162,525
-----------
</TABLE>
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4
<PAGE>
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COHEN & STEERS EQUITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER DIVIDEND
OF SHARES VALUE YIELD*
---------- ----------- ------------
<S> <C> <C> <C> <C>
SHOPPING CENTER 12.67%
COMMUNITY CENTER 3.32%
Pan Pacific Retail Properties..................... 55,100 $ 1,015,906 9.11%
Philips International Realty Corp................. 88,000 1,463,000 9.08
-----------
2,478,906
-----------
REGIONAL MALL 9.35%
JP Realty......................................... 89,200 1,588,875 10.78
Macerich Co....................................... 104,500 2,155,312 9.89
Simon Property Group.............................. 79,900 1,917,600 8.42
Taubman Centers................................... 119,500 1,329,438 8.81
-----------
6,991,225
-----------
TOTAL SHOPPING CENTER............................. 9,470,131
-----------
SPECIALTY 0.80%
Entertainment Properties Trust.................... 45,300 597,394 13.35
-----------
TOTAL COMMON STOCK (Identified
cost -- $68,145,514)........................ 61,698,375
-----------
PREFERRED STOCK 8.34%
Apartment Investment & Management Co., 9.00%,
Series C........................................ 52,000 932,750 12.54
Apartment Investment & Management Co., 9.375%,
Series G........................................ 62,400 1,173,900 12.44
Camden Property Trust, $2.25, Series A
(Convertible)................................... 56,600 1,255,813 10.14
Crown American Realty Trust, 11.00%, Series A..... 9,800 363,825 14.81
Liberty Properties Trust, 8.80%, Series A......... 25,700 515,606 10.97
Reckson Associates Realty Corp., 7.625%, Series A
(Convertible)................................... 33,600 636,300 10.09
SL Green Realty Corp., 8.00%, Series A
(Convertible)................................... 53,100 1,354,050 7.84
-----------
TOTAL PREFERRED STOCK (Identified
cost -- $7,652,838)......................... 6,232,244
-----------
TOTAL EQUITIES (Identified
cost -- $75,798,352)........................ 67,930,619
-----------
<CAPTION>
PRINCIPAL
AMOUNT
----------
<S> <C> <C> <C>
CORPORATE BOND 1.70%
#Macerich Co. 144A, Convertible, 7.25%, due
12/15/02
(Identified cost -- $1,266,971)................. $1,520,000 1,269,200
-----------
<CAPTION>
PRINCIPAL
AMOUNT
----------
<S> <C> <C> <C>
COMMERCIAL PAPER 9.25%
Republic Industrial Funding, 6.15%, due
4/3/00 (Indentified
cost -- $6,918,635).................... $6,921,000 6,918,635
-----------
TOTAL INVESTMENTS (Identified
cost -- $83,983,958)........................... 101.83% 76,118,454
LIABILITIES IN EXCESS OF OTHER ASSETS............ (1.83)% (1,365,817)
------ -----------
NET ASSETS....................................... 100.00% $74,752,637
------ -----------
------ -----------
</TABLE>
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5
<PAGE>
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COHEN & STEERS EQUITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
MARCH 31, 2000 (UNAUDITED)
<TABLE>
<S> <C>
CLASS A
Net Assets............................................... $30,725,009
-----------
Shares issued and outstanding ($0.001 par value common
stock outstanding)...................................... 3,426,156
-----------
Net asset value and redemption value per share'D'........ $ 8.97
-----------
-----------
Maximum offering price per share ($8.97 [div] 0.955)'DD'. $ 9.39
-----------
-----------
CLASS B
Net Assets............................................... $15,535,177
-----------
Shares issued and outstanding ($0.001 par value common
stock outstanding)...................................... 1,745,272
-----------
Net asset value and offering price per share'D'.......... $ 8.90
-----------
-----------
CLASS C
Net Assets............................................... $20,345,869
-----------
Shares issued and outstanding ($0.001 par value common
stock outstanding)...................................... 2,288,595
-----------
Net asset value and offering price per share'D'.......... $ 8.89
-----------
-----------
CLASS I
Net Assets............................................... $ 8,146,582
-----------
Shares of issued and outstanding ($0.001 par value
common stock outstanding)............................... 910,450
-----------
Net asset value, offering and redemption price per
share'D'................................................ $ 8.95
-----------
-----------
</TABLE>
- -------------------
* Dividend yield is computed by dividing the security's current annual
dividend rate by the last sale price on the principal exchange, or market,
on which such security trades.
** Non-income producing security.
# Security is restricted and subject to rule 144A and trades infrequently.
The Fund prices this security by obtaining a bid and ask price from two
market makers on a weekly basis. The average of the bid and ask prices is
used as the security's price.
'D' Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
'DD' On investments of $100,000 or more, the offering price is reduced.
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6
<PAGE>
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COHEN & STEERS EQUITY INCOME FUND, INC.
FINANCIAL HIGHLIGHTS'D'
MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE
NET ASSETS PER SHARE
---------------------------------------------------- -------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS A CLASS B CLASS C CLASS I
----------- ----------- ----------- ---------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period: 12/31/99...... $25,954,600 $15,139,498 $19,649,851 $2,759,141 $ 9.03 $ 8.98 $ 8.97 $ 9.00
----------- ----------- ----------- ---------- ------ ------ ------ ------
Net investment income........... $ 433,709 $ 209,393 $ 272,521 $ 84,253 $ 0.13 $ 0.12 $ 0.13 $ 0.20
Net realized and unrealized
gain/(loss) on investments..... (3,637) (65,285) (81,037) 6,920 (0.02) (0.03) (0.04) (0.08)
Distributions from net
investment income.............. (567,111) (291,301) (367,136) (60,659) (0.17) (0.17) (0.17) (0.17)
Capital stock transactions:
Sold......................... 7,064,929 1,286,621 3,277,313 5,493,400
Distributions reinvested..... 183,757 17,349 38,718 17,592
Redeemed..................... (2,341,238) (761,098) (2,444,361) (154,065)
----------- ----------- ----------- ---------- ------ ------ ------ ------
Net increase (decrease) in net
asset value....................... 4,770,409 395,679 696,018 5,387,441 (0.06) (0.08) (0.08) (0.05)
----------- ----------- ----------- ---------- ------ ------ ------ ------
End of period: 3/31/00............. $30,725,009 $15,535,177 $20,345,869 $8,146,582 $ 8.97 $ 8.90 $ 8.89 $ 8.95
----------- ----------- ----------- ---------- ------ ------ ------ ------
----------- ----------- ----------- ---------- ------ ------ ------ ------
</TABLE>
- -------------------
'D' Financial information included in this report has been taken from the
records of the Fund without examination by independent accountants.
AVERAGE ANNUAL TOTAL RETURNS -- CLASS A
(PERIODS ENDED MARCH 31, 1999) (UNAUDITED)
<TABLE>
<CAPTION>
ONE YEAR SINCE INCEPTION (9/2/97)
- --------------------------- ---------------------------
INCLUDING EXCLUDING INCLUDING EXCLUDING
SALES CHARGE SALES CHARGE SALES CHARGE SALES CHARGE
- ------------ ------------ ------------ ------------
<S> <C> <C> <C>
-3.75% 0.78% -4.20% -2.47%
</TABLE>
Returns on the Fund's other share classes will vary because of differing expense
ratios and sales charges.
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7
<PAGE>
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COHEN & STEERS EQUITY INCOME FUND, INC.
OFFICERS AND DIRECTORS
Robert H. Steers
Director and Chairman
Martin Cohen
Director and President
Gregory C. Clark
Director
George Grossman
Director
Jeffrey H. Lynford
Director
Willard H. Smith, Jr.
Director
Elizabeth O. Reagan
Vice President
Adam Derechin
Vice President and Assistant Treasurer
Lawrence B. Stoller
Assistant Secretary
KEY INFORMATION
INVESTMENT ADVISER
Cohen & Steers Capital Management, Inc.
757 Third Avenue
New York, NY 10017
(212) 832-3232
SUB-ADMINISTRATOR AND TRANSFER AGENT
Chase Global Funds Services Co.
73 Tremont Street
Boston, MA 02108
(800) 437-9912
CUSTODIAN
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, NY 10081
LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
DISTRIBUTOR
Cohen & Steers Securities, Inc.
757 Third Avenue
New York, NY 10017
NASDAQ Symbol: Class A--CSEIX
Class B--CSBIX
Class C--CSCIX
Website: www.cohenandsteers.com
Net asset value (NAV) can be found in the daily mutual fund listings in the
financial section of most major newspapers under Cohen & Steers.
This report is authorized for delivery only to shareholders of Cohen & Steers
Equity Income Fund, Inc. unless accompanied or preceded by the delivery of a
currently effective prospectus setting forth details of the Fund. Past
performance, of course, is no guarantee of future results and your investment
may be worth more or less at the time you sell.
- --------------------------------------------------------------------------------
8
STATEMENT OF DIFFERENCES
The dagger symbol shall be expressed as................................ 'D'
The double dagger symbol shall be expressed as......................... 'DD'
The division sign should be expressed as............................... [div]
