<PAGE>
COHEN & STEERS
EQUITY INCOME FUND
757 THIRD AVENUE
NEW YORK, NY 10017
[GRAPHIC OMITTED]
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COHEN & STEERS
--------------
EQUITY INCOME FUND
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------------------
SEMI-ANNUAL REPORT
JUNE 30, 2000
<PAGE>
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COHEN & STEERS EQUITY INCOME FUND, INC.
July 20, 2000
To Our Shareholders:
We are pleased to submit to you the semi-annual report for Cohen & Steers
Equity Income Fund, Inc. for the quarter and six months ended June 30, 2000. The
net asset values per share at that date were $9.95, $9.86, and $9.85 for
Class A, Class B, and Class C shares, respectively. Class I shares had a net
asset value of $9.95. In addition, a distribution of $0.17 per share was
declared for shareholders of record on June 22, 2000 and paid on June 23, 2000
to all four classes of shares.
MIDYEAR REVIEW
For the three months ended June 30, 2000, Cohen & Steers Equity Income Fund
had a total return, based on income and change in net asset value, of 12.8% for
Class A shares. Class B and C shares both returned 12.7% for the quarter.
Class I shares returned 13.1%. This performance compared to the Fund's
benchmark, the NAREIT Equity REIT Index* return of 10.5%. The Fund's total
return for the six months ended June 30, 2000 was 14.2% for Class A shares.
Class B shares and C shares both returned 13.8%. Class I shares returned 14.6%.
The NAREIT Equity REIT Index return was 13.2%. Fund performance information does
not take into account sales loads or contingent deferred sales charges, if any.
Stated simply, the first half of this year has been full of encouraging news
and positive statistics for REIT investors. The group has made what we believe
is a significant bottom and has registered its best absolute and relative
returns in years. For example, the second quarter's absolute total return was
the best since the third quarter of 1997, and relative to the major stock market
averages, REITs turned in their best performance since the first quarter of
1993.
This turnabout was precipitated by a host of technical and fundamental
factors. In our view, it is clear now that REITs were substantially oversold by
the end of last year, and therefore due for a bounce. In addition, the
volatility and price decline in technology stocks, which had been the market
standouts over the past two years, tilted investor sentiment more towards the
stability offered by REITs. More important, in our opinion, was that the
combination of strong underlying real estate fundamentals and exceptional
valuations were just too compelling for investors to ignore any longer. REIT
earnings grew at a healthy rate in the first quarter, surprising many Wall
Street analysts and reflecting the continued strengthening of most property
markets. Whereas most analysts were expecting average cash flow per share growth
in the 7% range, the industry recorded average growth in the 9% range. Further,
income growth for many companies with properties in the strongest markets
actually reaccelerated in the first half of the year, soaring to the low-teens.
As these earnings were reported, most realty stocks reacted very favorably.
In the meantime, construction activity in nearly all property types peaked
in the early part of the year and has since begun to decline substantially.
Thus, it appears that the rally in REIT shares also reflects expectations for a
continuation of what has been an ideal economic and financial market environment
for property owners. Assuming that the Federal Reserve is successful in
engineering an economic slowdown but with no recession, a so-called "soft
landing," we would not expect to see a material rise in construction activity
for the foreseeable future. This would enable property markets to continue to
enjoy positive supply/demand conditions.
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COHEN & STEERS EQUITY INCOME FUND, INC.
Our current holdings reflect our favorable view of the Office, Industrial
and Hotel sectors. Both the Office markets and the Industrial markets are
currently enjoying a "landlord's market" where demand for space is equal to or
greater than the supply. In this environment we expect rent growth at a rate
greater than inflation. The Hotel sector continues to benefit from greater than
anticipated demand and a decline in construction activity, as well as an
extremely attractive valuation level. We are also maintaining our position in
the Health Care sector. While some of this sector's leaders performed well in
the first half, we expect continued improving performance as the senior care
industry moves forward in its nascent recovery.
INVESTMENT OUTLOOK
We believe that one of the strongest determinants of the direction of REIT
share prices is the direction of the underlying property values, which in turn
influences REIT net asset values (NAVs) per share. When the market expects
property values and NAVs to rise, such as they did in the mid 1990's, REIT share
prices can rise strongly and even sell at a premium to the then current NAVs. We
believe that in the bear market of 1998-99, the reverse took place, whereby the
market expected NAVs to decline, due to concerns about deflation and its impact
on hard assets, as well as the prospect of increased construction at the tail
end of the economic cycle. In short order, REITs began to trade at a meaningful
discount from NAV. This expected decline in NAVs, however, never took place. The
near-absence of capital in the REIT industry and the capital market discipline
imposed on all property market participants effectively attenuated construction
and development activity.
Without capital, nearly all REITs were forced to adopt self-financing
business plans and recycle capital through property sales in order to enhance
shareholder value. Share buybacks became very common and, naturally, purchases
of shares at a discount to NAV increased the NAV of the remaining shares. There
continues to be nearly no new common equity financing in the industry. In the
meantime, real estate fundamentals at the property level have remained very
strong. The growing economy has caused the demand for space to exceed supply in
many markets, and this has resulted in higher occupancy levels and stronger rent
growth than nearly anyone could have imagined.
Consequently, we believe that NAVs are on the rise once again. Current and
prospective NAV growth is coming from several sources. If one assumes that the
capitalization rates (earnings yield) for most property types remain unchanged,
then property values should rise in line with operating income growth. Since we
expect industry-wide growth in operating income of 6% this year, this would
imply a commensurate growth in property values. Further, because most REITs
employ fixed-rate debt financing, the growth in earnings and NAV per share is
magnified. In addition, because of the inflation that has been experienced in
land, materials and labor costs for the real estate industry, the replacement
values for many properties are rising. If one adds to this the fact that many
REITs own properties in prime locations that cannot be duplicated, it is easy to
see the potential for continued value creation.
One further factor that we would expect to have a material impact on REIT
share valuations, and the Fund as well, is dividend yield. If the Federal
Reserve is successful in slowing the growth of the economy, we would expect this
ultimately to lead to a leveling off or even a reduction in long-term interest
rates, as well as the yields on U.S. Treasury and high-grade corporate bonds. At
the same time, investor sentiment for higher yielding or "junk" bonds has turned
negative as the performance in this sector has deteriorated over the past few
years. We
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2
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COHEN & STEERS EQUITY INCOME FUND, INC.
believe this could be beneficial overall for REITs, as yield-oriented investors
look for other income producing alternatives. Moreover, since the percentage of
cash flow that the average REIT is paying out to investors is at a historically
low level, under our forecast REITs generally should continue to be able to
maintain significant dividend income returns.
Ironically, in what we consider to be a positive sign, the flow of money
into real estate mutual funds has been remarkably low this year; less than $400
million flowed into the funds, whose total assets are about $8 billion. While
this is a reversal of the outflows experienced last year, it is well below the
levels experienced in the prior bull market. Considering the extraordinary
relative performance of the sector during the first six months and the velocity
at which capital flows in this day and age, we would have expected a much higher
level of investor attention. The reason we find this encouraging is that this
"quiet recovery", in our view, is typical of what many sectors experience at the
beginning of a reversal and this may indicate that we are still in the early
phases of this upturn.
Nonetheless, the question most asked of us lately is "is it too late to
invest in REITs?" While their strong absolute and relative performance clearly
places REITs in a somewhat less undervalued position than they were six months
ago, we believe the growth in earnings and asset values so far this year
justifies much of their price appreciation. In addition, even after this price
increase, relative to stocks, bonds and their own underlying asset values, we
believe that REITs remain solidly undervalued. Thus, we remain optimistic about
the future of REITs and will continue to seek attractive returns for our
investors.
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 now 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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COHEN & STEERS EQUITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF VALUE DIVIDEND
SHARES (NOTE 1) YIELD*
--------- ----------- ------------
<S> <C> <C> <C> <C>
EQUITIES 95.35%
COMMON STOCK 86.81%
APARTMENT/RESIDENTIAL 17.90%
Apartment Investment & Management
Co. -- Class A........................... 43,300 $ 1,872,725 6.47%
Camden Property Trust...................... 104,800 3,078,500 7.66
Colonial Properties Trust.................. 66,200 1,812,225 8.77
Gables Residential Trust................... 109,600 2,829,050 8.21
Home Properties of New York................ 102,800 3,084,000 7.07
Summit Properties.......................... 87,800 1,843,800 8.33
United Dominion Realty Trust............... 291,200 3,203,200 9.73
-----------
17,723,500
-----------
HEALTH CARE 9.16%
Health Care Property Investors............. 127,400 3,471,650 10.72
Healthcare Realty Trust.................... 142,400 2,429,700 13.01
Nationwide Health Properties............... 195,300 2,721,994 13.20
**Ventas..................................... 139,000 443,062 --
-----------
9,066,406
-----------
HOTEL 7.70%
FelCor Lodging Trust....................... 96,300 1,781,550 11.89
Host Marriott Corp. ....................... 170,000 1,593,750 8.96
Innkeepers USA............................. 105,900 966,337 12.27
MeriStar Hospitality Corp. ................ 156,500 3,286,500 9.62
-----------
7,628,137
-----------
INDUSTRIAL 7.27%
First Industrial Realty Trust.............. 131,200 3,870,400 8.41
Pacific Gulf Properties.................... 132,900 3,330,806 7.02
-----------
7,201,206
-----------
OFFICE 19.69%
Arden Realty Group......................... 134,300 3,156,050 7.91
Brandywine Realty Trust.................... 201,900 3,861,338 8.37
CarrAmerica Realty Corp. .................. 88,700 2,350,550 6.98
Crescent Real Estate Equities Co. ......... 141,600 2,902,800 10.73
Highwoods Properties....................... 139,800 3,355,200 9.25
Mack-Cali Realty Corp. .................... 150,800 3,873,675 9.03
-----------
19,499,613
-----------
</TABLE>
See accompanying notes to financial statements.
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COHEN & STEERS EQUITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF VALUE DIVIDEND
SHARES (NOTE 1) YIELD*
--------- ----------- ------------
<S> <C> <C> <C> <C>
OFFICE/INDUSTRIAL 11.77%
Duke-Weeks Realty Corp..................... 75,000 $ 1,678,125 6.97%
Liberty Property Trust..................... 152,600 3,958,063 8.02
Prentiss Properties Trust.................. 126,200 3,028,800 8.08
Prime Group Realty Trust................... 21,100 320,456 8.89
Reckson Associates Realty Corp.
--Class B................................ 105,100 2,673,481 8.81
-----------
11,658,925
-----------
SELF STORAGE 0.87%
Storage USA................................ 29,100 858,450 9.36
-----------
SHOPPING CENTER 12.45%
COMMUNITY CENTER 4.03%
First Washington Realty Trust.............. 15,900 350,794 8.84
Pan Pacific Retail Properties.............. 55,100 1,108,887 8.35
Philips International Realty Corp.......... 145,500 2,528,062 8.69
-----------
3,987,743
-----------
REGIONAL MALL 8.42%
JP Realty.................................. 113,100 2,014,594 10.78
Macerich Co................................ 104,400 2,303,325 9.25
Simon Property Group....................... 79,900 1,772,781 9.10
Taubman Centers............................ 204,500 2,249,500 8.91
-----------
8,340,200
-----------
TOTAL SHOPPING CENTER...................... 12,327,943
-----------
TOTAL COMMON STOCK (Identified
cost -- $85,255,784)................ 85,964,180
-----------
PREFERRED STOCK 8.54%
Apartment Investment & Management Co.,
9.00%, Series C.......................... 52,000 1,030,250 11.36
Apartment Investment & Management Co.,
9.375%, Series G......................... 64,000 1,332,000 11.24
Camden Property Trust, $2.25, Series A
(Convertible)............................ 56,600 1,369,013 9.30
CarrAmerica Realty Corp., 8.57%,
Series B................................. 54,000 1,122,188 10.30
Colonial Properties Trust, 8.75%,
Series A................................. 78,700 1,716,644 10.04
Crown American Realty Trust, 11.00%,
Series A................................. 9,800 369,950 14.57
Liberty Properties Trust, 8.80%,
Series A................................. 25,700 536,488 10.54
United Dominion Realty Trust, 9.25%,
Series A................................. 42,950 982,481 10.10
-----------
TOTAL PREFERRED STOCK (Identified
cost -- $8,910,855)................. 8,459,014
-----------
TOTAL EQUITIES (Identified
cost -- $94,166,639)................ 94,423,194
-----------
</TABLE>
See accompanying notes to financial statements.
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5
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COHEN & STEERS EQUITY INCOME FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- -----------
<S> <C> <C> <C> <C>
CORPORATE BOND 1.36%
#Macerich Co. 144A, Convertible, 7.25%,
due 12/15/02 (Identified
cost -- $1,290,277)...................... $1,520,000 $ 1,347,100
-----------
COMMERCIAL PAPER 3.71%
Tampa Electric Co., 6.81%, due 7/5/00
(Identified cost -- $3,671,224).......... 3,674,000 3,671,224
-----------
TOTAL INVESTMENTS (Identified
cost -- $99,128,140) ..................... 100.42% 99,441,518
LIABILITIES IN EXCESS OF OTHER ASSETS ...... (0.42)% (419,066)
------ -----------
NET ASSETS ................................. 100.00% $99,022,452
====== ===========
</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 subject to Rule 144A and trades infrequently. The Fund
prices this security by obtaining a bid and ask price from two market makers
on weekly basis. The average of the bid and ask prices is used as the
security's price.
See accompanying notes to financial statements.
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COHEN & STEERS EQUITY INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (Identified
cost -- $99,128,140) (Note 1)........................ $ 99,441,518
Cash.................................................... 702
Dividends and interest receivable....................... 743,951
Receivable for fund shares sold......................... 101,831
Receivable for investment securities sold............... 1,544
Unamortized organization costs and other assets
(Note 1)............................................. 53,346
------------
Total Assets....................................... 100,342,892
------------
LIABILITIES:
Payable for investment securities purchased............. 1,020,842
Payable for distribution fees........................... 74,486
Payable to investment adviser........................... 59,264
Payable for shareholder servicing fees.................. 38,070
Payable for fund shares redeemed........................ 10,238
Payable to administrator................................ 1,781
Other liabilities....................................... 115,759
------------
Total Liabilities.................................. 1,320,440
------------
NET ASSETS.................................................. $ 99,022,452
============
NET ASSETS consist of:
Paid-in capital (Notes 1 and 4)......................... $107,417,558
Distributions in excess of net investment income........ (253,610)
Accumulated net realized loss on investments............ (8,454,874)
Net unrealized appreciation on investments.............. 313,378
------------
$ 99,022,452
============
</TABLE>
See accompanying notes to financial statements.
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COHEN & STEERS EQUITY INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED)
JUNE 30, 2000
<TABLE>
<S> <C>
CLASS A SHARES:
NET ASSETS.............................................. $ 40,094,903
Shares issued and outstanding ($0.001 par value common
stock outstanding) (Note 4).......................... 4,029,102
------------
Net asset value and redemption value per share'D'....... $ 9.95
============
Maximum offering price per share
($9.95[div]0.955)'DD'................................ $ 10.42
============
CLASS B SHARES:
NET ASSETS.............................................. $ 19,810,493
Shares issued and outstanding ($0.001 par value common
stock outstanding) (Note 4).......................... 2,008,763
------------
Net asset value and offering price per share'D'......... $ 9.86
============
CLASS C SHARES:
NET ASSETS.............................................. $ 27,349,135
Shares issued and outstanding ($0.001 par value common
stock outstanding) (Note 4).......................... 2,776,836
------------
Net asset value and offering price per share'D'......... $ 9.85
============
CLASS I SHARES:
NET ASSETS.............................................. $ 11,767,921
Shares issued and outstanding ($0.001 par value common
stock outstanding) (Note 4).......................... 1,183,115
------------
Net asset value, offering and redemption value per
share................................................ $ 9.95
============
</TABLE>
---------
'D' Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge which varies with the length
of time shares are held.
'DD' On investments of $100,000 or more, the offering price is reduced.
See accompanying notes to financial statements.
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COHEN & STEERS EQUITY INCOME FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
Investment Income (Note 1):
Dividend income......................................... $ 3,250,365
Interest income......................................... 197,766
-----------
Total Income....................................... 3,448,131
-----------
Expenses:
Investment advisory fees (Note 2)....................... 287,099
Distribution fees -- Class A (Note 2)................... 61,276
Distribution fees -- Class B (Note 2)................... 39,155
Distribution fees -- Class C (Note 2)................... 82,113
Shareholder servicing fees -- Class A (Note 2).......... 15,662
Shareholder servicing fees -- Class B (Note 2).......... 20,425
Shareholder servicing fees -- Class C (Note 2).......... 27,371
Administration and transfer agent fees (Note 2)......... 60,950
Professional fees....................................... 47,521
Reports to shareholders................................. 46,729
Registration and filing fees............................ 27,515
Directors' fees and expenses (Note 2)................... 17,023
Amortization of organization expenses (Note 1).......... 12,112
Custodian fees and expenses............................. 11,649
Miscellaneous........................................... 9,955
-----------
Total Expenses..................................... 766,555
-----------
Reduction of expenses (Note 5).......................... (12,595)
-----------
Net Expenses....................................... 753,960
-----------
Net Investment Income....................................... 2,694,171
-----------
Net Realized and Unrealized Gain/(Loss) on Investments:
Net realized loss on investments........................ (3,209,851)
Net change in unrealized appreciation/(depreciation) on
investments.......................................... 11,472,742
-----------
Net realized and unrealized gain/(loss) on
investments..................................... 8,262,891
-----------
Net Increase in Net Assets Resulting from Operations........ $10,957,062
===========
</TABLE>
See accompanying notes to financial statements.
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COHEN & STEERS EQUITY INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
---------------- ------------------
<S> <C> <C>
Change in Net Assets:
From Operations:
Net investment income................... $ 2,694,171 $ 4,642,104
Net realized loss on investments........ (3,209,851) (3,922,609)
Net change in unrealized
appreciation/(depreciation)
on investments....................... 11,472,742 (5,152,246)
----------- -----------
Net increase/(decrease) in net
assets resulting from
operations....................... 10,957,062 (4,432,751)
----------- -----------
Dividends and Distributions to Shareholders
from (Note 1):
Net investment income:
Class A............................ (1,233,550) (1,770,835)
Class B............................ (624,792) (763,543)
Class C............................ (830,212) (1,113,354)
Class I............................ (259,227) (119,317)
Tax return of capital:
Class A............................ -- (362,892)
Class B............................ -- (156,256)
Class C............................ -- (228,696)
Class I............................ -- (23,720)
----------- -----------
Total dividends and
distributions to
shareholders................ (2,947,781) (4,538,613)
----------- -----------
Capital Stock Transactions (Note 4):
Increase in net assets from Fund share
transactions......................... 27,510,081 17,336,362
----------- -----------
Total increase in net assets....... 35,519,362 8,364,998
Net Assets:
Beginning of period..................... 63,503,090 55,138,092
----------- -----------
End of period (including distributions
in excess of net investment income of
$253,610 at June 30, 2000)........... $99,022,452 $63,503,090
=========== ===========
</TABLE>
See accompanying notes to financial statements.
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COHEN & STEERS EQUITY INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding
throughout each period and other performance information derived from the
Financial Statements. It should be read in conjunction with the Financial
Statements and notes thereto.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------------
FOR THE
PERIOD
SEPTEMBER 2,
FOR THE SIX 1997'D'
MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31, THROUGH
JUNE 30, 2000 ----------------------------------------------- DECEMBER 31,
PER SHARE OPERATING PERFORMANCE: (UNAUDITED) 1999 1998 1997
-------------------------------- ------------- -------------------- -------------------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period.................... $9.03 $10.31 $ 12.32 $11.46
----- ------ ------- ------
Income from investment
operations:
Net investment income. 0.32 0.76 0.73 0.25
Net realized and unrealized
gain/(loss) on
investments........... 0.94 (1.32) (2.00) 0.83
----- ------ ------- ------
Total from investment
operations........ 1.26 (0.56) (1.27) 1.08
----- ------ ------- ------
Less dividends and distributions
to shareholders from:
Net investment income... (0.34) (0.60) (0.51) (0.17)
Net realized gain on
investments........... -- -- -- (0.03)
Tax return of capital... -- (0.12) (0.23) (0.02)
----- ------ ------- ------
Total dividends and
distributions to
shareholders...... (0.34) (0.72) (0.74) (0.22)
----- ------ ------- ------
Net asset value, end of
period.................... $9.95 $ 9.03 $ 10.31 $12.32
===== ====== ======= ======
--------------------------------------------------------------------------------------------------------------------
Total investment return..... 14.20%(2) - 5.42% - 10.56%(1) 9.46%(1)(2)
===== ====== ======= ======
--------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
-------------------------
Net assets, end of period
(in millions)......... $40.1 $ 26.0 $ 31.6 $ 34.6
===== ====== ======= ======
Ratios of expenses to average
daily net assets (before
expense reduction).... 1.69%(3) 1.70% 1.92% 3.49%(3)
===== ====== ======= ======
Ratios of expenses to average
daily net assets (net of
expense reduction).... 1.66%(3) 1.60% 1.49% 1.50%(3)
===== ====== ======= ======
Ratio of net investment income to
average daily net
assets (before expense
reduction)............ 7.19%(3) 7.50% 5.89% 9.47%(3)
===== ====== ======= ======
Ratio of net investment income to
average daily net
assets (net of expense
reduction)............ 7.22%(3) 7.60% 6.32% 11.46%(3)
===== ====== ======= ======
Portfolio turnover rate. 16.23%(2) 62.51% 96.47% 87.20%(2)
===== ====== ======= ======
</TABLE>
---------
'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.
See accompanying notes to financial statements.
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COHEN & STEERS EQUITY INCOME FUND, INC.
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------
FOR THE
PERIOD
FOR THE SIX JANUARY 15*
MONTHS ENDED FOR THE THROUGH
JUNE 30, 2000 YEAR ENDED DECEMBER 31,
PER SHARE OPERATING PERFORMANCE: (UNAUDITED) DECEMBER 31, 1999 1998
-------------------------------- ------------- ----------------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period................... $ 8.98 $10.27 $ 12.35
------ ------ -------
Income from investment operations:
Net investment income.............................. 0.29 0.68 0.64
Net realized and unrealized gain/(loss) on
investments...................................... 0.93 (1.29) (2.01)
------ ------ -------
Total from investment operations............... 1.22 (0.61) (1.37)
------ ------ -------
Less dividends and distributions to shareholders from:
Net investment income.............................. (0.34) (0.56) (0.49)
Net realized gain on investments................... -- -- --
Tax return of capital.............................. -- (0.12) (0.22)
------ ------ -------
Total dividends and distributions to
shareholders................................. (0.34) (0.68) (0.71)
------ ------ -------
Net asset value, end of period......................... $ 9.86 $ 8.98 $ 10.27
====== ====== =======
------------------------------------------------------------------------------------------------------
Total investment return................................ 13.83%(2) - 5.98% - 11.37%(1)(2)
====== ====== =======
------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
-------------------------
Net assets, end of period (in millions)............ $ 19.8 $ 15.1 $ 10.1
====== ====== =======
Ratios of expenses to average daily net assets
(before expense reduction)....................... 2.36%(3) 2.40% 2.60%(3)
====== ====== =======
Ratios of expenses to average daily net assets
(net of expense reduction)....................... 2.33%(3) 2.26% 2.15%(3)
====== ====== =======
Ratio of net investment income to average daily net
assets (before expense reduction)................ 6.49%(3) 7.09% 5.99%(3)
====== ====== =======
Ratio of net investment income to average daily net
assets (net of expense reduction)................ 6.52%(3) 7.23% 6.44%(3)
====== ====== =======
Portfolio turnover rate............................ 16.23%(2) 62.51% 96.47%(2)
====== ====== =======
</TABLE>
---------
* Initial offering of shares.
(1) Total investment return would have been lower had certain fees not been
reimbursed by the Adviser.
(2) Not annualized.
(3) Annualized.
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
12
<PAGE>
--------------------------------------------------------------------------------
COHEN & STEERS EQUITY INCOME FUND, INC.
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------
FOR THE
PERIOD
FOR THE SIX JANUARY 14*
MONTHS ENDED FOR THE THROUGH
JUNE 30, 2000 YEAR ENDED DECEMBER 31,
PER SHARE OPERATING PERFORMANCE (UNAUDITED) DECEMBER 31, 1999 1998
------------------------------- ------------- ----------------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period................... $ 8.97 $10.26 $ 12.31
------ ------ -------
Income from investment operations:
Net investment income.............................. 0.30 0.68 0.64
Net realized and unrealized gain/(loss) on
investments...................................... 0.92 (1.29) (1.97)
------ ------ -------
Total from investment operations............... 1.22 (0.61) (1.33)
------ ------ -------
Less dividends and distributions to shareholders from:
Net investment income.............................. (0.34) (0.56) (0.49)
Net realized gain on investments................... -- -- --
Tax return of capital.............................. -- (0.12) (0.23)
------ ------ -------
Total dividends and distributions to
shareholders................................. (0.34) (0.68) (0.72)
------ ------ -------
Net asset value, end of period......................... $ 9.85 $ 8.97 $ 10.26
====== ====== =======
------------------------------------------------------------------------------------------------------
Total investment return................................ 13.84%(2) - 5.99% 11.08%(1)(2)
====== ====== =======
------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
-------------------------
Net assets, end of period (in millions)............ $ 27.3 $ 19.6 $ 13.2
====== ====== =======
Ratios of expenses to average daily net assets
(before expense reduction)....................... 2.36%(3) 2.39% 2.59%(3)
====== ====== =======
Ratios of expenses to average daily net assets
(net of expense reduction)....................... 2.33%(3) 2.25% 2.15%(3)
====== ====== =======
Ratio of net investment income to average daily net
assets (before expense reduction)................ 6.47%(3) 7.09% 6.13%(3)
====== ====== =======
Ratio of net investment income to average daily net
assets (net of expense reduction)................ 6.50%(3) 7.23% 6.57%(3)
====== ====== =======
Portfolio turnover rate............................ 16.23%(2) 62.51% 96.47%(2)
====== ====== =======
</TABLE>
---------
* Initial offering of shares.
(1) Total investment return would have been lower had certain fees not been
reimbursed by the Adviser.
(2) Not annualized.
(3) Annualized.
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
13
<PAGE>
--------------------------------------------------------------------------------
COHEN & STEERS EQUITY INCOME FUND, INC.
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
CLASS I
------------------------------------------------
FOR THE
PERIOD
FOR THE SIX JULY 15*
MONTHS ENDED FOR THE THROUGH
JUNE 30, 2000 YEAR ENDED DECEMBER 31,
PER SHARE OPERATING PERFORMANCE (UNAUDITED) DECEMBER 31, 1999 1998
------------------------------- ------------- ----------------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period................... $ 9.00 $10.28 $ 11.99
------ ------ -------
Income from investment operations:
Net investment income.............................. 0.39 0.72 0.35
Net realized and unrealized gain/(loss) on
investments...................................... 0.90 (1.25) (1.62)
------ ------ -------
Total from investment operations............... 1.29 (0.53) (1.27)
------ ------ -------
Less dividends and distributions to shareholders from:
Net investment income.............................. (0.34) (0.62) (0.20)
Net realized gain on investments................... -- -- --
Tax return of capital.............................. -- (0.13) (0.24)
------ ------ -------
Total dividends and distributions to
shareholders................................. (0.34) (0.75) (0.44)
------ ------ -------
Net asset value, end of period......................... $ 9.95 $ 9.00 $ 10.28
====== ====== =======
------------------------------------------------------------------------------------------------------
Total investment return................................ 14.59%(2) - 5.12% - 10.59%(1)(2)
====== ====== =======
------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
-------------------------
Net assets, end of period (in millions)............ $ 11.8 $ 2.8 $ 0.3
====== ====== =======
Ratios of expenses to average daily net assets
(before expense reduction)....................... 1.39%(3) 1.34% 1.54%(3)
====== ====== =======
Ratios of expenses to average daily net assets
(net of expense reduction)....................... 1.34%(3) 1.26% 1.16%(3)
====== ====== =======
Ratio of net investment income to average daily net
assets (before expense reduction)................ 8.86%(3) 9.13% 7.48%(3)
====== ====== =======
Ratio of net investment income to average daily net
assets (net of expense reduction)................ 8.91%(3) 9.21% 7.86%(3)
====== ====== =======
Portfolio turnover rate............................ 16.23%(2) 62.51% 96.47%(2)
====== ====== =======
</TABLE>
---------
* Initial offering of shares.
(1) Total investment return would have been lower had certain fees not been
reimbursed by the Adviser.
(2) Not annualized.
(3) Annualized.
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
14
<PAGE>
--------------------------------------------------------------------------------
COHEN & STEERS EQUITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Cohen & Steers Equity Income Fund, Inc. (the "Fund") was incorporated under
the laws of the State of Maryland on July 3, 1997 and is registered under the
Investment Company Act of 1940, as amended, as an open-end, non-diversified
management investment company. The authorized shares of the Fund are divided
into four classes designated Class A, Class B, Class C and Class I shares. Each
of the Fund's shares has equal dividend, liquidation and voting rights (except
for matters relating to distribution and shareholder servicing of such shares).
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles. The
preparation of the financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
Portfolio Valuation: Investments in securities that are listed on the New
York Stock Exchange are valued, except as indicated below, at the last sale
price reflected 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
for the day.
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
Market System are valued in a similar manner. Securities traded on more than one
securities exchange are valued at the last sale price on the business day as of
which such value is being determined as reflected on the tape at the close of
the exchange representing the principal market for such securities.
Readily marketable securities traded in the over-the-counter market,
including listed securities whose primary market is believed by Cohen & Steers
Capital Management, Inc. 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, the National Quotation
Bureau or such other comparable sources as the Board of Directors deems
appropriate to reflect their fair market value. Fixed income securities are
stated on the basis of valuations provided by a pricing service when such prices
are believed by the Board of Directors to reflect the fair market value of such
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.
Short-term debt securities, which have a maturity value of 60 days or less,
are valued at amortized cost which approximates value.
Security Transactions and Investment Income: Security transactions are
recorded on trade date. Realized gains and losses on investments sold are
recorded on the basis of identified cost for accounting and tax purposes.
--------------------------------------------------------------------------------
15
<PAGE>
--------------------------------------------------------------------------------
COHEN & STEERS EQUITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Dividend income is recorded on the ex-dividend date. Interest income is
recognized on the accrual basis. Discounts and premiums on securities purchased
are amortized using the effective yield basis over their respective lives.
Dividends and Distributions to Shareholders: Dividends from net investment
income are declared and paid quarterly. A portion of the Fund's dividends may
consist of amounts in excess of net investment income derived from non-taxable
components of the dividends from the Fund's portfolio investments. Net realized
capital gains, unless offset by any available capital loss carryforward, are
distributed to shareholders annually. Distributions to shareholders are recorded
on the ex-dividend date.
Dividends will automatically be reinvested in full and fractional shares of
the Fund based on the net asset value per share at the close of business on the
ex-dividend date unless the shareholder has elected to have them paid in cash.
Dividends from net investment income and capital gain distributions are
determined in accordance with U.S. Federal income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to return of capital and capital gain distributions received by
the Fund on portfolio securities.
Federal Income Taxes: It is the policy of the Fund to qualify as a regulated
investment company, if such qualification is in the best interest of the
shareholders, by complying with the requirements of Subchapter M of the Internal
Revenue Code applicable to regulated investment companies, and by distributing
substantially all of its taxable earnings to its shareholders. Accordingly, no
provision for federal income or excise tax is necessary.
Organization Costs: All costs incurred in connection with organizing and
establishing the Fund are being amortized on the straight-line basis over a
period of five years from the date on which the Fund commenced operations. For
the six months ended June 30, 2000, the Fund amortized $12,112 in organization
costs.
NOTE 2. INVESTMENT ADVISORY AND ADMINISTRATION FEES AND OTHER TRANSACTIONS WITH
AFFILIATES
Investment Advisory Fees: Cohen & Steers Capital Management, Inc. (the
"Adviser") serves as the Fund's investment adviser pursuant to an investment
advisory agreement (the "Advisory Agreement"). Under the terms of the Advisory
Agreement, the Adviser provides the Fund with the day-to-day investment
decisions and generally manages the Fund's investments in accordance with the
stated policies of the Fund, subject to the supervision of the Fund's Board of
Directors. For the services provided to the Fund, the Adviser receives a monthly
management fee in an amount equal to 1/12th of 0.75% of the average daily net
assets of the Fund. For the six months ended June 30, 2000, the Fund incurred
$287,099 in advisory fees.
Administration Fees: The Fund has entered into an administration agreement
with the Adviser under which the Adviser performs certain administrative
functions for the Fund and receives a fee of 0.02% of the Fund's average daily
net assets. For the six months ended June 30, 2000, the Fund has paid the
Adviser $1,781 in fees under this administration agreement.
In addition, Cohen & Steers Equity Income Fund, Inc., Cohen & Steers Realty
Shares, Inc., Cohen & Steers Institutional Realty Shares, Inc., Cohen & Steers
Special Equity Fund, Inc. and Cohen & Steer Realty Income Fund, Inc. (the
"Funds") have entered into a fund accounting, transfer agency and
sub-administration agreement
--------------------------------------------------------------------------------
16
<PAGE>
--------------------------------------------------------------------------------
COHEN & STEERS EQUITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
with Chase Manhattan Bank ("Chase") pursuant to which an affiliate of Chase
performs administration functions for the Fund. Chase receives a monthly
sub-administration fee at the annual rate of 0.08% on the first $500 million of
the Funds' average daily net assets and at lower rates on the Funds' average
daily net assets in excess of that amount.
Distribution Fees: Cohen & Steers Securities, Inc. (the "Distributor"), an
affiliated entity of Cohen & Steers Capital Management, Inc., distributes the
shares of the Fund.
The Fund has adopted a Distribution Plan (the "Plan") on behalf of the Fund
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Plan,
the Fund may not incur distribution fees which exceed an annual rate of 0.25% of
the average daily net assets attributable to the Class A shares and 0.75% of the
average daily net assets attributable to the Class B and Class C shares. For the
six months ended June 30, 2000, the Fund has paid $182,544 in fees under the
Plan.
Shareholder Servicing Fees: 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. 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. For the six months ended June 30, 2000, the
Fund paid $63,458 under the shareholder servicing plan.
Directors' Fees: Certain directors and officers of the Fund are also
directors, officers and/or employees of the Adviser. None of the directors and
officers so affiliated received compensation for their services as directors of
the Fund. Fees and related expenses accrued for non-affiliated directors totaled
$17,023 for the six months ended June 30, 2000.
NOTE 3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, excluding short-term investments, for the
six months ended June 30, 2000 totaled $38,156,069 and $12,051,754,
respectively.
At June 30, 2000, the cost and unrealized appreciation or depreciation in
value of the investments owned by the Fund, as computed on a federal income tax
basis, are as follows:
<TABLE>
<S> <C>
Aggregate cost..................................... $99,128,140
-----------
Gross unrealized appreciation...................... $ 5,750,426
Gross unrealized depreciation...................... $(5,437,048)
-----------
Net unrealized appreciation........................ $ 313,378
===========
</TABLE>
--------------------------------------------------------------------------------
17
<PAGE>
--------------------------------------------------------------------------------
COHEN & STEERS EQUITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE 4. CAPITAL STOCK
The Fund is authorized to issue 200 million shares of capital stock, par
value $0.001 per share. The Board of Directors of the Fund may increase or
decrease the aggregate number of shares of common stock that the Fund has
authority to issue. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
----------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
CLASS A:
Sold....................... 1,723,834 $16,077,337 1,210,999 $ 11,853,588
Issued as reinvestment of
dividends................ 37,807 355,685 76,115 704,671
Redeemed................... (606,603) (5,637,186) (1,476,936) (14,412,028)
--------- ----------- ---------- ------------
Net increase/(decrease).... 1,155,038 $10,795,836 (189,822) $ (1,853,769)
========= =========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
--------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- -------- -----------
<S> <C> <C> <C> <C>
CLASS B:
Sold.......................... 501,699 $4,831,403 931,595 $ 9,074,475
Issued as reinvestment of
dividends................... 4,262 40,210 7,295 67,734
Redeemed...................... (183,187) (1,698,485) (237,412) (2,272,888)
-------- ---------- -------- -----------
Net increase.................. 322,774 $3,173,128 701,478 $ 6,869,321
======== ========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
--------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- --------- -----------
<S> <C> <C> <C> <C>
CLASS C:
Sold.......................... 943,781 $8,849,356 1,864,885 $18,374,227
Issued as reinvestment of
dividends................... 9,043 84,960 14,281 132,084
Redeemed...................... (366,922) (3,319,782) (970,253) (8,987,021)
-------- ---------- --------- -----------
Net increase.................. 585,902 $5,614,534 908,913 $ 9,519,290
======== ========== ========= ===========
</TABLE>
--------------------------------------------------------------------------------
18
<PAGE>
--------------------------------------------------------------------------------
COHEN & STEERS EQUITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
CLASS I:
Sold............................ 877,033 $7,911,660 304,835 $3,051,047
Issued as reinvestment of
dividends..................... 17,680 175,300 2,989 27,276
Redeemed........................ (18,031) (160,377) (28,923) (276,803)
------- ---------- ------- ----------
Net increase.................... 876,682 $7,926,583 278,901 $2,801,520
======= ========== ======= ==========
</TABLE>
NOTE 5. DIRECTED BROKERAGE ARRANGEMENTS
The Adviser has directed certain portfolio trades to brokers who paid a
portion of the Fund's expenses. For the year ended June 30, 2000, the Fund's
expenses were reduced by $12,595 under this arrangement.
NOTE 6. BORROWINGS
The Fund, in conjunction with Cohen & Steers Realty Shares, Inc., Cohen &
Steers Institutional Realty Shares, Inc. and Cohen & Steers Special Equity Fund,
Inc., has entered into a Line of Credit Agreement with Chase Manhattan Bank for
$200,000,000. The loan, if used, will be collateralized by the Fund's portfolio.
During the six months ended June 30, 2000, the Fund did not have any loans
outstanding.
-------------------
AVERAGE ANNUAL TOTAL RETURNS -- CLASS A
(PERIODS ENDED JUNE 30, 2000) (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>
- 6.51% 1.99% - 1.10% 1.99%
</TABLE>
Returns on the Fund's other share classes will vary because of differing
expense ratios and sales charges.
--------------------------------------------------------------------------------
19
<PAGE>
--------------------------------------------------------------------------------
COHEN & STEERS EQUITY INCOME FUND, INC.
OFFICERS AND DIRECTORS KEY INFORMATION
Robert H. Steers INVESTMENT ADVISER
Director and Chairman Cohen & Steers Capital Management, Inc.
757 Third Avenue
Martin Cohen New York, NY 10017
Director and President (212) 832-3232
Gregory C. Clark SUB-ADMINISTRATOR AND TRANSFER AGENT
Director Chase Global Funds Services Co.
73 Tremont Street
George Grossman Boston, MA 02108
Director (800) 437-9912
Jeffrey H. Lynford CUSTODIAN
Director The Chase Manhattan Bank
One Chase Manhattan Plaza
Willard H. Smith, Jr. New York, NY 10081
Director
LEGAL COUNSEL
Elizabeth O. Reagan Simpson Thacher & Bartlett
Vice President 425 Lexington Avenue
New York, NY 10017
Adam Derechin
Vice President and Assistant Treasurer DISTRIBUTOR
Cohen & Steers Securities, Inc.
Lawrence B. Stoller 757 Third Avenue
Assistant Secretary New York, NY 10017
NASDAQ Symbol: Class A - CSEIX
Class B - CSBIX
Class C - CSCIX
Class I - CSDIX
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 is of course no guarantee
of future results and your investment
may be worth more or less at the time
you sell.
--------------------------------------------------------------------------------
20
STATEMENT OF DIFFERENCES
The dagger symbol shall be expressed as......................................'D'
The double dagger symbol shall be expressed as..............................'DD'
The division sign shall be expressed as....................................[div]
