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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1999
FILE NOS. 33-40215
811-6302
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 10 [x]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 11 [x]
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COHEN & STEERS REALTY SHARES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
757 THIRD AVENUE, NEW YORK, NY 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 832-3232
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<S> <C>
ROBERT H. STEERS COPY TO:
COHEN & STEERS REALTY SHARES, INC. SARAH E. COGAN, ESQ.
757 THIRD AVENUE, SIMPSON THACHER & BARTLETT
NEW YORK, NY 10017 425 LEXINGTON AVE.
(NAME AND ADDRESS OF AGENT OF SERVICE OF PROCESS) NEW YORK, NY 10017
</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, 1998 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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A NO-LOAD MUTUAL FUND
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PROSPECTUS
Investment Adviser
Cohen & Steers Capital Management, Inc.
757 Third Avenue
New York, New York 10017
Telephone: (212) 832-3232
Transfer Agent
Chase Global Funds Services Company
P.O. Box 2798
Boston, Massachusetts 02208-2798
Telephone: (800) 437-9912
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED OF THE FUND'S SHARES OR DETERMINED WHETHER THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANYONE WHO INDICATES OTHERWISE
IS COMMITTING A CRIME.
MAY 1, 1999
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TABLE OF CONTENTS
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PAGE
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RISK/RETURN SUMMARY............................................................................ 1
Investment Objective and Principal Investment Strategies................................. 1
Who Should Invest........................................................................ 1
Principal Risks.......................................................................... 1
Historical Fund Performance.............................................................. 2
FEES AND EXPENSES OF THE FUND.................................................................. 3
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS........................ 4
Objective................................................................................ 4
Principal Investment Strategies.......................................................... 4
Principal Risks of Investing in the Fund................................................. 5
MANAGEMENT OF THE FUND......................................................................... 6
The Investment Adviser................................................................... 6
Portfolio Managers....................................................................... 7
PURCHASES AND REDEMPTIONS...................................................................... 7
Pricing of Shares........................................................................ 7
Purchase Minimums........................................................................ 7
Form of Payment.......................................................................... 8
Purchases of Shares...................................................................... 8
Exchange Privilege....................................................................... 9
Redemptions of Shares.................................................................... 9
ADDITIONAL INFORMATION......................................................................... 10
Shareholder Services Plan................................................................ 10
Dividends and Distributions.............................................................. 10
Tax Considerations....................................................................... 11
FINANCIAL HIGHLIGHTS........................................................................... 12
</TABLE>
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COHEN & STEERS REALTY SHARES, INC.
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RISK/RETURN SUMMARY
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INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
The Fund's investment goal is total return through investment in real estate
securities. In pursuing total return, the Fund equally emphasizes both capital
appreciation and current income.
Normally, the Fund invests substantially all of its 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.
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WHO SHOULD INVEST
Cohen & Steers Realty Shares may be suitable for you if you are seeking:
Some exposure to real estate to add to your portfolio mix;
A fund that may perform differently than a general stock or bond fund to add to
your portfolio;
Liquidity in a real estate-related investment;
High current income; and
The potential for long-term capital growth.
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PRINCIPAL RISKS
Investment Risk. An investment in the Fund is subject to investment risk,
including the possible loss of the entire principal amount that you invest.
Stock Market Risk. Your investment in Fund shares represents an indirect
investment in the REIT shares and other real estate securities owned by the
Fund. The value of these equity securities, like other stock market investments,
may move up or down, sometimes rapidly and unpredictably. Your Fund shares at
any point in time may be worth less than what you invested, even after taking
into account the reinvestment of Fund dividends and distributions.
Real Estate Market and REIT Risk. Additionally, since the Fund concentrates its
assets in the real estate industry, your investment in the Fund will be closely
linked to the performance of the real estate markets. Property values may fall
due to increasing vacancies or declining rents resulting from unanticipated
economic, legal, cultural or technological developments. REIT prices also
may drop because of the failure of borrowers to pay their loans and poor
management.
Smaller Companies. Even the larger REITs in the industry tend to be small to
medium-sized companies in relation to the equity markets as a whole. REIT shares
therefore can be more volatile than, and perform differently from, larger
company stocks.
Less Diversification. As a 'non-diversified' investment company, the Fund can
invest in fewer individual companies than a diversified investment company.
Because a concentrated portfolio is more likely to experience large market price
fluctuations, the Fund could be subject to a greater risk of loss than a
diversified company.
Your investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
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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 FUND'S TOTAL RETURN FOR EACH YEAR SINCE THE FUND COMMENCED
OPERATIONS.
COHEN & STEERS REALTY SHARES
ANNUAL TOTAL RETURNS
[PERFORMANCE CHART]
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<CAPTION>
1991 1992 1993 1994 1995 1996 1997 1998
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7.9% 20.1% 18.8% 8.3% 11.1% 38.5% 21.2% -18.1%
</TABLE>
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HIGHEST QUARTERLY RETURN DURING THIS PERIOD: 20.5%
LOWEST QUARTERLY RETURN DURING THIS PERIOD: -11.9%
</TABLE>
THIS TABLE SHOWS THE FUND'S AVERAGE ANNUAL TOTAL RETURNS FOR THE PAST ONE AND
FIVE YEARS AND THE PERIOD SINCE THE FUND COMMENCED OPERATIONS, AND COMPARES
THESE RETURNS WITH THE PERFORMANCE OF THREE INDICES.
AVERAGE ANNUAL TOTAL RETURNS
(for periods ended December 31, 1998)
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<CAPTION>
SINCE
1 YEAR 5 YEARS INCEPTION**
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<S> <C> <C> <C>
Cohen & Steers Realty Shares.................................................. -18.07% 10.60% 13.27%
NAREIT All REIT Index*........................................................ -18.82% 9.33% 11.40%
Wilshire Real Estate Securities Index*........................................ -17.43% 9.36% 9.07%
S&P 500'r'*................................................................... 28.58% 28.20% 20.20%
</TABLE>
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* The NAREIT Index of All REITs is comprised of 210 real estate investment
trusts. The Wilshire Real Estate Securities Index is comprised of 119
companies operating in the real estate industry and includes REITs. This
Index does not include REITs with investments in health care facilities. The
Fund invests in REITs with health care facilities. 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 was July 2, 1991.
2
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FEES AND EXPENSES OF THE FUND
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THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU COULD PAY IF YOU BUY AND
HOLD SHARES OF THE FUND.
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SHAREHOLDER FEES (fees paid directly from your investment): None
ANNUAL FUND OPERATING EXPENSES* (expenses that are deducted
from Fund assets):
MANAGEMENT FEE...................................................................... 0.84%
OTHER EXPENSES
SERVICE FEE*...................................................... 0.05%
OTHER EXPENSES:................................................... 0.20%
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TOTAL OTHER EXPENSES................................................................ 0.25%
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TOTAL ANNUAL FUND OPERATING EXPENSES:**............................................. 1.09%
</TABLE>
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* While the Fund has adopted a shareholder services plan, to date the Fund has
not paid any service fees. The Fund's actual 1998 operating expenses,
therefore, were 1.04% of average net assets for the year before expense
reductions from directed brokerage arrangement (see the following footnote).
Shareholders will receive a notice from the Fund before the Fund begins to
pay service fees.
** The investment adviser has directed certain portfolio transactions to brokers
who paid a portion of the Fund's expenses. For the year ended December 31,
1998, the Fund's expenses were reduced by $342,466 under these arrangements.
Although the Fund did not pay these expenses directly, this amount has been
added to the Fund's 'Other Expenses' in accordance with disclosure
regulations. Had these costs not been reflected in the table, the Fund's
total operating expenses would have been 1.08% (1.03% without the service
fees). The Management of the Fund believes these arrangements benefit the
Fund and the Fund's shareholders and intends to continue such arrangements in
the current year.
EXAMPLE
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE FUND
WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES THAT YOU
INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED AND THEN REDEEM ALL OF
YOUR SHARES AT THE END OF THOSE PERIODS. THE EXAMPLE ALSO ASSUMES THAT YOUR
INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME. ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER, BASED ON
THESE ASSUMPTIONS YOUR COSTS WOULD BE:
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<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<S> <C> <C> <C>
$112 $348 $604 $1,334
</TABLE>
3
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INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
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OBJECTIVE
The investment objective of Cohen & Steers Realty Shares, Inc. (the 'Fund') is
total return through investment in real estate securities. The Fund pursues its
investment objective of total return by seeking, with approximately equal
emphasis, capital appreciation and current income. There can be no assurance
that the Fund will achieve its investment objective. The Fund, of course, will
concentrate its investments in the real estate industry.
- --------------------------------------------------------------------------------
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 substantially all of its assets
in the equity securities of real estate companies. These equity securities can
consist of:
common stocks (including REIT shares);
rights or warrants to purchase common stocks;
securities convertible into common stocks where the conversion feature
represents, in the investment adviser's view, a significant element of the
securities' value; and
preferred stocks.
Real Estate Investment Trusts
The Fund may invest without limit in shares of real estate investment trusts
('REITs'). REITs pool investors' funds for investment primarily in income
producing real estate or real estate related loans or interests. A REIT is not
taxed on income distributed to shareholders if, among other things, it
distributes to its shareholders at least 95% of its taxable income (other than
net capital gains) for each taxable year.
Types of REITs. REITs can generally be classified as Equity REITs, Mortgage
REITs and Hybrid REITs. Equity REITs invest the majority of their assets
directly in real property and derive their income primarily from rents. Equity
REITs can also realize capital gains by selling properties that have appreciated
in value. Mortgage REITs invest the majority of their assets in real estate
mortgages and derive their income primarily from interest payments. Hybrid REITs
combine the characteristics of both Equity REITs and Mortgage REITs. The Fund
invests primarily in Equity REITs.
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 objective 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.
4
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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 Fund's price per share will vary based upon general
market conditions.
General Risks of Securities Linked to the Real Estate Market
The Fund will not invest in real estate directly, but only in securities issued
by real estate companies. However, because of its policy of concentration in the
securities of companies in the real estate industry, the Fund is also subject to
the risks associated with the direct ownership of real estate. These risks
include:
declines in the value of real estate;
risks related to general and local economic conditions;
possible lack of availability of mortgage funds;
overbuilding;
extended vacancies of properties;
increased competition;
increases in property taxes and operating expenses;
changes in zoning laws;
losses due to costs resulting from the clean-up of environmental problems;
liability to third parties for damages resulting from environmental problems;
casualty or condemnation losses;
limitations on rents;
changes in neighborhood values and the appeal of properties to tenants; and
changes in interest rates
Thus, the value of the Fund's shares may change at different rates compared to
the value of shares of a mutual fund with investments in a mix of different
industries.
In addition to these risks, Equity REITs may be affected by changes in the value
of the underlying property owned by the trusts, while Mortgage REITs may be
affected by the quality of any credit extended. Further, Equity and Mortgage
REITs are dependent upon management skills and generally may not be
diversified. Equity and Mortgage REITs are also subject to heavy cash flow
dependency, defaults by borrowers and self-liquidation. In addition, Equity and
Mortgage REITs could possibly fail to qualify for tax free pass-through of
income under the Internal Revenue Code, or to maintain their exemptions from
registration under the Investment Company Act of 1940, as amended. The above
factors may also adversely affect a borrower's or a lessee's ability to meet its
obligations to the REIT. In the event of a default by a borrower or lessee, the
REIT may experience delays in enforcing its rights as a mortgagee or lessor and
may incur substantial costs associated with protecting its investments.
In addition, even the larger REITs in the industry tend to be small to medium-
sized companies in relation to the equity markets as a whole. Accordingly,
REIT shares can be more volatile than -- and at times will perform differently
from -- large-capitalization stocks such as those found in the Dow Jones
Industrial Average. In addition, because smaller-capitalization stocks are
typically less liquid than large-capitalization stocks, REIT shares may
sometimes experience greater share-price fluctuations than the stocks of larger
companies.
Year 2000
Computer users around the world are faced with the dilemma of the Year 2000
issue, which stems from the use of two digits in most computer systems to
designate the year. When the year advances from 1999 to 2000, many computers
will not recognize '00' as the Year 2000. This issue could potentially affect
every aspect of computer-related activity, on an individual and corporate level.
The Fund could be adversely impacted if the computer systems used by the
investment adviser and other service providers have not been converted to meet
the requirements of the new century. The Fund's investment adviser has evaluated
its internal systems and expects them to be fully capable to handle the change
of millennium. The investment adviser is monitoring on an ongoing
5
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basis the progress of the Fund's service providers to convert their systems to
comply with the requirements of Year 2000. The investment adviser currently has
no reason to believe that these service providers will not be fully and timely
compliant. However, you should be aware that there can be no assurance that all
systems will be successfully converted prior to January 1, 2000, in which case
it would become necessary for the Fund to enter into agreements with new service
providers or to make other arrangements.
Portfolio Turnover
The Fund anticipates that its annual portfolio turnover rate will not exceed
150%, but the turnover rate will not be a limiting factor when the investment
adviser deems portfolio changes appropriate. The turnover rate may vary greatly
from year to year. An annual turnover rate of 150% occurs, for example, when
all of the securities held by the Fund are replaced one and one-half times in
a period of one year. 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.'
================================================================================
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISER
Cohen & Steers Capital Management, Inc., with offices located at 757 Third
Avenue, New York, New York 10017, has been retained to provide investment
advice, and, in general, to conduct the management and investment program of the
Fund under the overall supervision and control of the Board of Directors of the
Fund. Cohen & Steers Capital Management, Inc., a registered investment adviser,
was formed in 1986 and is the leading U.S. manager of portfolios dedicated to
investments in REITs. Its current clients include pension plans, endowment funds
and mutual funds, including Cohen & Steers Realty Income Fund, Inc. and Cohen &
Steers Total Return Realty Fund, Inc., which are closed-end investment
companies, and Cohen & Steers Equity Income Fund, Inc., Cohen & Steers Realty
Shares, Inc., and Cohen & Steers Special Equity Fund, Inc., which are open-end
investment companies. All of Cohen & Steers' client accounts are invested
principally in real estate securities.
Under its Investment Advisory Agreement with the Fund, the investment adviser
furnishes a continuous investment program for the Fund's portfolio, makes the
day-to-day investment decisions for the Fund, and generally manages the
Fund's investments in accordance with the stated policies of the Fund, subject
to the general supervision of the Board of Directors of the Fund. The investment
adviser performs certain administrative services for the Fund and provides
persons satisfactory to the Board of 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 and other extraordinary expenses.
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.
6
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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 0.85% of the average daily net asset value
of the Fund up to $2.5 billion, plus 0.75% of such assets in excess of $2.5
billion. This fee is higher than that incurred by most other investment
companies. The Fund's effective management fee during 1998 was 0.84% of assets.
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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.
================================================================================
PURCHASES AND REDEMPTIONS
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PRICING OF SHARES
The price at which you can purchase and redeem the Fund's shares is the net
asset value of the shares next determined after we receive your order in proper
form. We calculate our net asset value per share as of the close of trading on
the New York Stock Exchange on each day the Exchange is open for trading. We
determine net asset value per share by adding the market value of all securities
and other assets in the Fund's portfolio, subtracting the Fund's liabilities,
and dividing by the total number of shares of the Fund then outstanding.
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PURCHASE MINIMUMS
You may open an account with the Fund with a minimum investment of $10,000. (We
are authorized to waive these minimums for particular investors.) Additional
investments must be at least $500 or, if as a result of redemption the value of
your account is less than $10,000, the minimum additional investment is the
greater of $500 or the amount necessary to increase the value of your account to
$10,000. We are free to reject any purchase order.
You may invest in the Fund through accounts with certain brokers, in which case
your broker may charge you a transaction fee when you purchase or redeem shares.
Brokers are free to increase or decrease the investment minimums, except that
the minimum for initial investments may not be reduced below $2,000.
7
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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 SHARES
Initial Purchase By Wire
1. Telephone toll free from any continental state: (800) 437-9912. When you
contact the transfer agent, you will need the following information:
name of the Fund;
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 Realty Shares
For further credit to: (Account name)
Account Number:
Wire Reference Control #:
3. Complete the Subscription Agreement attached to the end of this Prospectus.
Mail the Subscription Agreement to the transfer agent:
Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Initial Purchase By Mail
1. Complete the Subscription Agreement included 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 continental state: (800) 437-9912. When you
contact the transfer agent, you will need the following information:
name of the Fund;
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 Realty Shares
For further credit to: (Account Name)
Account Number:
Wire Reference Control #:
Additional Purchases By Mail
1. Make a check payable to the Fund in at least the required minimum amount (see
'Purchase Minimums' above). Write your Fund account number on the check.
8
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2. Mail the check and the detachable stub from the Statement of Account (or a
letter providing your account number) to the transfer agent at the address
set forth above.
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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, subject to any applicable initial sales charges. 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 charges.
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. Your
broker may limit or prohibit your right to use the exchange privilege.
There is no charge for the exchange privilege (although your broker may impose a
transaction fee). We may limit or terminate your exchange privilege if you make
exchanges more than four times a year. WE MAY MODIFY OR REVOKE THE EXCHANGE
PRIVILEGE FOR ALL SHAREHOLDERS UPON 60 DAYS PRIOR WRITTEN NOTICE. For additional
information concerning exchanges, or to make an exchange, please call the
transfer agent at (800) 437-9912.
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REDEMPTIONS OF SHARES
You may redeem your shares by telephone or through the transfer agent.
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 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 Realty Shares
A written redemption request must:
state the number of shares or dollar amount to be redeemed;
identify the your account number and tax identification number; and
be signed by each registered owner exactly as the shares are registered.
If the shares to be redeemed were issued in certificate form, the certificate
must be endorsed for transfer (or be accompanied by a duly executed stock power)
and must be submitted to the transfer agent together with a redemption request.
Other Redemption Information
Payment of Redemption Proceeds. The Fund will send you the proceeds by check. If
you made the
9
<PAGE>
<PAGE>
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.
The Fund will pay redemption proceeds in cash, by check or wire, unless the
Board of Directors believes that economic conditions exist which make redeeming
in cash detrimental to the best interests of the Fund. In the unlikely event
that this were to occur, all or a portion of your redemption proceeds would
consist of readily marketable portfolio securities of the Fund transferred into
your name. You would then incur brokerage costs in converting the securities
to cash.
Signature Guarantees. The guarantor of a signature must be a trust company or
national bank, a member bank of the Federal Reserve System, a member firm of a
national securities exchange or any other guarantor approved by the Fund's
transfer agent. For redemptions made by corporations, executors, administrators
or guardians, the transfer agent may require additional supporting documents
evidencing the authority of the person making the redemption (including evidence
of appointment or incumbency). For additional information regarding the specific
documentation required, contact the transfer agent at (800) 437-9912. The
transfer agent will not consider your redemption request to be properly made
until it receives all required documents in proper form.
Redemption of Small Accounts. If your Fund account has a value of $2,000 or less
as the result of voluntary redemption, we may redeem your remaining shares. We
will, however, give you 30 days notice of our intention to do so. During this
30-day notice period, you can make additional investments to avoid the forced
liquidation of your account.
================================================================================
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES 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 of up to 0.05% of the average daily net assets of the Fund 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.
10
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<PAGE>
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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 tax 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.
11
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<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past five years. 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>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE 1998 1997 1996 1995 1994
- ------------------------------------ ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year.............................. $ 50.18 $ 45.09 $ 34.62 $ 32.90 $ 31.92
Income from investment operations
Net investment income........... 1.97 1.87 1.86 1.86 1.66
Net realized and unrealized
gain/(loss) on investments.... (10.89) 7.40 11.04 1.69 0.98
---------- ---------- ---------- -------- --------
Total from investment
operations................ (8.92) 9.27 12.90 3.55 2.64
---------- ---------- ---------- -------- --------
Less dividends and distributions to
shareholders from:
Net investment income........... (1.59) (1.88) (1.76) (1.33) (1.09)
Net Realized gain on
investments................... (1.56) (2.30) (0.55) -- --
Tax return of capital........... (0.13) -- (0.12) (0.50) (0.57)
---------- ---------- ---------- -------- --------
Total dividends and
distributions to
shareholders.............. (3.28) (4.18) (2.43) (1.83) (1.66)
---------- ---------- ---------- -------- --------
Net asset value, end of year........ $ 37.98 $ 50.18 $ 45.09 $ 34.62 $ 32.90
---------- ---------- ---------- -------- --------
---------- ---------- ---------- -------- --------
- ----------------------------------------------------------------------------------------------------------
Total investment return............. -18.07% 21.16% 38.48% 11.13% 8.31%
---------- ---------- ---------- -------- --------
---------- ---------- ---------- -------- --------
- ----------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of year
(in millions)................. $1,933,340 $3,432,995 $2,036,379 $793,084 $458,098
---------- ---------- ---------- -------- --------
---------- ---------- ---------- -------- --------
Ratio of expenses to average
daily net assets (before
expense reduction)............ 1.04% 1.06% 1.10% 1.16% 1.26%
---------- ---------- ---------- -------- --------
---------- ---------- ---------- -------- --------
Ratio of expenses to average
daily net assets (net of
expense reduction)............ 1.03% 1.05% 1.08% 1.12% 1.14%
---------- ---------- ---------- -------- --------
---------- ---------- ---------- -------- --------
Ratio of net investment income
to average daily net assets
(before expense reduction).... 4.23% 4.02% 5.27% 6.01% 5.59%
---------- ---------- ---------- -------- --------
---------- ---------- ---------- -------- --------
Ratio of net investment income
to average daily net assets
(net of expense reduction).... 4.24% 4.04% 5.28% 6.05% 5.71%
---------- ---------- ---------- -------- --------
---------- ---------- ---------- -------- --------
Portfolio turnover rate......... 30.18% 40.44% 33.23% 22.68% 39.00%
---------- ---------- ---------- -------- --------
---------- ---------- ---------- -------- --------
</TABLE>
12
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<PAGE>
COHEN & STEERS REALTY SHARES, INC.
SUBSCRIPTION AGREEMENT
<TABLE>
<S> <C>
1 ACCOUNT TYPE (Please print; indicate only one registration type)
[ ] INDIVIDUAL OR JOINT ACCOUNT
- -
__________________________________________________________ _________________________________________
Name Social Security Number
__________________________________________________________
Name of Joint Registrant, if any.
(For joint registrations, the account registrants will be
joint tenants with the right of survivorship and not tenants
in common unless tenants in common or community property
registrations are requested.)
[ ] TRUST [ ] CORPORATION [ ] PARTNERSHIP [ ] OTHER ENTITY
-
__________________________________________________________ _________________________________________
Name of Entity Tax Identification Number
__________________________________________________________ _________________________________________
Name of Trust Agreement (if applicable) Date of Trust Agreement (if applicable)
[ ] UNIFORM GIFT TO MINORS, OR [ ] UNIFORM TRANSFER TO MINORS (where allowed by Law)
__________________________________________________________ Under the ________________ (state of residence
Name of Adult Custodian (only one permitted) of minor) Uniform Gifts/Transfer to Minor's Act
- -
__________________________________________________________ ______________________________
Name of Minor (only one permitted) Minor's Social Security Number
2 MAILING ADDRESS
__________________________________________________________ (__________)___________________
Street or P.O. Box Home Telephone Number
__________________________________________________________ (__________)___________________
City and State Zip Code Business Telephone Number
3 INVESTMENT INFORMATION
$ ________ Amount to invest ($10,000 minimum investment). Do not send cash. Investment will be paid for by
(please check one):
[ ] Check or draft made payable to 'Cohen & Steers Realty Shares, 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 SHARES section of the Prospectus for wire instructions.
4 EXCHANGE PRIVILEGES
Exchange privileges will be automatically granted unless you check the box below. Shareholders wishing to
exchange into other Cohen & Steers Funds should consult the EXCHANGE PRIVILEGE section of the Prospectus.
(Note: If shares are being purchased through a dealer, please contact your dealer for availability of this
service.)
[ ] I decline the exchange privilege.
PLEASE CONTINUE APPLICATION ON REVERSE SIDE.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C>
5 REDEMPTION PRIVILEGES
Shareholders may select the following redemption privileges by checking the box(es) below. See REDEMPTION OF
SHARES section of the Prospectus for further details. Redemption privileges will be automatically declined
for boxes not checked.
[ ] I authorize the Transfer Agent to redeem shares in my account(s) by telephone, in accordance with the
procedures and conditions set forth in the Fund's current Prospectus.
[ ] I wish to have redemption proceeds paid by wire (please complete Section 7).
6 DISTRIBUTION OPTIONS
Dividends and capital gains may be reinvested or paid in cash. If no options are selected below, both
dividends and capital gains will be reinvested in additional Fund shares.
Dividends [ ] Reinvest. [ ] Pay in cash.
Capital Gains [ ] Reinvest. [ ] Pay in cash.
[ ] I wish to have my distributions paid by wire (please complete Section 7).
7 BANK OF RECORD (FOR WIRE INSTRUCTIONS)
PLEASE ATTACH A VOIDED CHECK FROM YOUR BANK ACCOUNT.
_____________________________________________ ____________________________________________
Bank Name Bank ABA Number
_____________________________________________ ____________________________________________
Street or P.O. Box Bank Account Number
_____________________________________________ ____________________________________________
City and State Zip Code Account Name
8 SIGNATURE AND TAXPAYER CERTIFICATION
By signing this form, the Investor represents and warrants that: (a) the Investor has the full right, power
and authority to invest in the Fund; and (b) the Investor has received a current prospectus of the Fund and
agrees to be bound by its terms. Persons signing as representatives or fiduciaries of corporations,
partnerships, trusts or other organizations are required to furnish corporate resolutions or similar
documents providing evidence that they are authorized to effect securities transactions on behalf of the
Investor (alternatively, the secretary or designated officer of the organization may certify the authority
of the persons signing on the space provided below). In addition, signatures of representatives or
fiduciaries of corporations and other entities must be accompanied by a signature guarantee by a commercial
bank that is a member of the Federal Deposit Insurance Corporation, a trust company or a member of a
national securities exchange.
-----------------------------------------------------------------------------------------------------------
PLEASE CHECK ONE:
[ ] U.S. CITIZEN/TAXPAYER
UNDER THE PENALTIES OF PERJURY, THE UNDERSIGNED CERTIFIES THAT: (1) THE TAXPAYER IDENTIFICATION NUMBER
PROVIDED IS CORRECT, AND (2) I/WE ARE NOT SUBJECT TO BACKUP WITHHOLDING BECAUSE: (A) I/WE ARE EXEMPT FROM
BACKUP WITHHOLDING, OR (B) I/WE HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE ('IRS') THAT I/WE ARE
SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR (C) THE IRS
HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. NOTE: IF YOU HAVE BEEN NOTIFIED BY THE
IRS THAT YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING BECAUSE OF UNDER-REPORTING INTEREST OF DIVIDENDS ON
YOUR TAX RETURN, YOU MUST CROSS OUT ITEM 2 ABOVE.
[ ] NON U.S. CITIZEN/TAXPAYER (FORM W-8 ATTACHED)
INDICATE COUNTRY OF RESIDENCE FOR TAX PURPOSES ___________________________
UNDER PENALTY OF PERJURY, I/WE CERTIFY THAT I/WE ARE NOT U.S. CITIZENS AND I/WE ARE EXEMPT FOREIGN PERSONS
AS DEFINED BY THE IRS. THE IRS DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN
THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
-----------------------------------------------------------------------------------------------------------
I certify that (1) the information provided on this Subscription Agreement is true, correct and complete,
(2) I have read the prospectus for the Fund and agree to the terms thereof, and (3) I am of legal age or an
emancipated minor.
X_____________________________________ _________ X_________________________________________ ___________
Signature (Owner, Trustee, Etc.) Date Signature (Joint Owner, Co-Trustee) Date
Mail to: Chase Global Funds Services Company, P.O. Box 2798, Boston, MA 02208
</TABLE>
<PAGE>
<PAGE>
[Logo]
TO OBTAIN ADDITIONAL INFORMATION ABOUT THE FUND
If you would like additional information about Cohen & Steers Realty Shares,
Inc., the following documents are available to you without any charge, upon
request:
Annual/Semi-Annual Reports -- Additional information about the Fund's
investments is available in the Fund's annual and semi-annual report to
shareholders. In these reports, you will find a discussion of the market
conditions and investment strategies that significantly affected the Fund's
performance during its most recent fiscal year.
Statement of Additional Information -- Additional information about the Fund's
structure and operations can be found in the Statement of Additional
Information ('SAI'). The information presented in the Statement of Additional
Information is incorporated by reference into the prospectus and is legally
considered to be part of this prospectus.
To request a free copy of any of the materials described above, or to make any
other inquiries, please contact us:
<TABLE>
<S> <C>
By telephone (800) 437-9912
By mail Cohen & Steers Realty Shares
c/o Chase Global Fund Services Company
P.O. Box 2798
Boston, Massachusetts 02208-2798
By e-mail [email protected]
On the Internet http://www.cohenandsteers.com
</TABLE>
Our prospectus and SAI may also be available from your broker or financial
adviser. Reports and other information about the Fund (including the Fund's
Statement of Additional Information) may also be obtained from the Securities
and Exchange Commission:
By going to the Commission's Public Reference Room in Washington, D.C. where
you can review and copy the information. Information on the operation of the
Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330.
By accessing the Commission's Internet site at http://www.sec.gov where you can
view, download and print the information.
By writing to the Public Reference Section of the Securities and Exchange
Commission, Washington, D.C. 20549-6009 where, upon payment of a duplicating
fee, copies of the information will be sent to you.
SEC File No. 811-6302
757 THIRD AVENUE, NEW YORK, NEW YORK 10017
<PAGE>
<PAGE>
[Logo]
757 THIRD AVENUE
NEW YORK, NEW YORK 10017
(800) 437-9912
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1999
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS,
BUT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS OF
COHEN & STEERS REALTY SHARES, INC., DATED THE SAME DATE AS THE DATE HEREOF,
AS SUPPLEMENTED FROM TIME TO TIME (THE 'PROSPECTUS'). THIS
STATEMENT OF ADDITIONAL INFORMATION IS INCORPORATED BY REFERENCE IN ITS
ENTIRETY INTO THE PROSPECTUS. THE FINANCIAL STATEMENTS AND NOTES
CONTAINED IN THE ANNUAL REPORT AND SEMI-ANNUAL REPORT
ARE INCORPORATED BY REFERENCE INTO THIS STATEMENT OF
ADDITIONAL INFORMATION. COPIES OF THE STATEMENT OF ADDITIONAL
INFORMATION, PROSPECTUS, ANNUAL AND SEMI-ANNUAL REPORTS MAY BE
OBTAINED FREE OF CHARGE BY WRITING OR CALLING THE ADDRESS
OR PHONE NUMBER SHOWN ABOVE.
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
================================================================================
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Objective and Policies.............................................................. 3
Investment Restrictions........................................................................ 9
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
Determination of Net Asset Value............................................................... 15
Redemption of Shares........................................................................... 16
Taxation....................................................................................... 16
Performance Information........................................................................ 22
Counsel and Independent Accountants............................................................ 24
Financial Statements........................................................................... 24
</TABLE>
2
<PAGE>
<PAGE>
================================================================================
STATEMENT OF ADDITIONAL INFORMATION
Cohen & Steers Realty Shares, Inc. (the 'Fund') is a non-diversified, no-load,
open-end, investment company organized as a Maryland corporation on April 26,
1991.
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 OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION REGARDING FUND INVESTMENTS
The following descriptions supplement the descriptions of the principal
investment objective, 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 equity REITs.
- --------------------------------------------------------------------------------
FOREIGN SECURITIES
The Fund may invest up to 10% of its total assets in securities of foreign real
estate companies. Investing in securities issued by foreign corporations
involves considerations and possible risks not typically associated with
investing in securities issued by domestic corporations. The values of foreign
investments are affected by changes in currency rates or exchange control
regulations, application of foreign tax laws, including withholding taxes,
changes in governmental administration or economic or monetary policy (in the
United States or abroad) or changed circumstances in dealings between nations.
Costs are incurred in connection with conversions between various currencies.
In addition, foreign brokerage commissions are generally higher than in the
United States, and foreign securities markets may be less liquid, more volatile
and less subject to governmental supervision than in the United States.
Investments in foreign countries could be affected by other factors not
present in the United States, including expropriation, confiscatory taxation,
lack of uniform accounting and auditing standards and potential difficulties
in enforcing contractual obligations and could be subject to extended
settlement periods.
3
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
ILLIQUID SECURITIES
The Fund will not invest in illiquid securities if immediately after such
investment more than 15% of the Fund's net assets (taken at market value) would
be invested in such securities. For this purpose, illiquid securities include,
among others, securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale. Securities that
have legal or contractual restrictions on resale but have a readily available
market are not deemed illiquid for purposes of this limitation.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the 'Securities Act')
and securities which are otherwise not readily marketable. Securities which have
not been registered under the Securities Act are referred to as private
placements or restricted securities and are purchased directly from the issuer
or in the secondary market. Mutual funds do not typically hold a significant
amount of these restricted or other illiquid securities because of the potential
for delays on resale and uncertainty in valuation. Limitations on resale may
have an adverse effect on the marketability of portfolio securities and a mutual
fund might be unable to dispose of restricted or other illiquid securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days. A mutual fund might also have to
register such restricted securities in order to dispose of them, resulting in
additional expense and delay. Adverse market conditions could impede such a
public offering of securities.
In recent years, however, a large institutional market has developed for certain
securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
The Securities and Exchange Commission (the 'SEC') has adopted Rule 144A which
allows a broader institutional trading market for securities otherwise subject
to restriction on resale to the general public. Rule 144A establishes a 'safe
harbor' from the registration requirements of the Securities Act of resales of
certain securities to qualified institutional buyers. The Adviser anticipates
that the market for certain restricted securities will expand further as a
result of this new regulation and the development of automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers.
The Adviser will monitor the liquidity of restricted securities in the Fund's
portfolio under the supervision of the Board of Directors. In reaching liquidity
decisions, the Adviser will consider, inter alia, the following factors: (1) the
frequency of trades and quotes for the security; (2) the number of dealers
wishing to purchase or sell the security and the number of other potential
purchasers; (3) dealer undertakings to make a market in the security; and (4)
the nature of the security and the nature of the marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer).
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
The Fund may also enter into repurchase agreements. A repurchase agreement is an
instrument under which an investor, such as the Fund, purchases a U.S.
Government security
4
<PAGE>
<PAGE>
from a vendor, with an agreement by the vendor to repurchase the security at the
same price, plus interest at a specified rate. In such a case, the security is
held by the Fund, in effect, as collateral for the repurchase obligation.
Repurchase agreements may be entered into with member banks of the Federal
Reserve System or 'primary dealers' (as designated by the Federal Reserve Bank
of New York) in United States Government securities. Repurchase agreements
usually have a short duration, often less than one week. In entering
into the repurchase agreement for the Fund, the 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 proceed from the sale of the collateral were less than the repurchase
price. If the vendor becomes bankrupt, the Fund might be delayed, or may incur
costs or possible losses of principal and income, in selling the collateral.
- --------------------------------------------------------------------------------
FUTURES CONTRACTS
The Fund may purchase and sell financial futures contracts. A futures contract
is an agreement to buy or sell a specific security or financial instrument at a
particular price on a stipulated future date. Although some financial futures
contracts call for making or taking delivery of the underlying securities, in
most cases these obligations are closed out before the settlement date. The
closing of a contractual obligation is accomplished by purchasing or selling an
identical offsetting futures contract. Other financial futures contracts by
their terms call for cash settlements.
The Fund may also buy and sell index futures contracts with respect to any stock
or bond index traded on a recognized stock exchange or board of trade. An index
futures contract is a contract to buy or sell units of an index at a specified
future date at a price agreed upon when the contract is made. The stock index
futures contract specifies that no delivery of the actual stocks making up the
index will take place. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the difference between
the contract price and the actual level of the stock index at the expiration of
the contract.
At the time the Fund purchases a futures contract, an amount of cash or liquid
portfolio securities equal to the market value of the futures contract will be
deposited in a segregated account with the Fund's custodian. When writing
a futures contract, the Fund will maintain with its custodian similar
liquid assets that, when added to the amounts deposited with a futures
commission merchant or broker as margin, are equal to the market value of the
instruments underlying the contract. Alternatively, the Fund may 'cover' its
position by owning the instruments underlying the contract (or, in the case of
an index futures contract, a portfolio with a volatility substantially similar
to that of the index on which the futures contract is based), or holding a call
option permitting the Fund to purchase the same futures contract at a price no
higher than the price of the contract written by the Fund (or at a higher price
if the difference is maintained in liquid assets with the Fund's custodian).
The Fund will be authorized to use financial futures contracts and related
options for 'bona fide hedging' purposes, as such term is defined in applicable
regulations of the Commodity Futures Trading Commission ('CFTC'). The Fund will
also be authorized to enter into such contracts and related options for
nonhedging purposes, for example to enhance total return or provide market
exposure pending the investment of cash balances, but only to the extent that
aggregate initial margin deposits plus premiums paid by it for open futures
options positions, less the amount by which any such positions are
'in-the-money,' would not exceed
5
<PAGE>
<PAGE>
5% of the Fund's total assets. The Fund may lose the expected benefit of the
transactions if interest rates, currency exchange rates or securities prices
change in an unanticipated manner. Such unanticipated changes in interest
rates, currency exchange rates or securities prices may also result in poorer
overall performance than if the Fund had not entered into any futures
transactions.
- --------------------------------------------------------------------------------
OPTIONS ON SECURITIES AND STOCK-INDICES
The Fund may write covered call and put options and purchase call and put
options on securities or stock indices that are traded on United States
exchanges.
An option on a security is a contract that gives the purchaser of the option, in
return for the premium paid, the right to buy a specified security (in the case
of a call option) or to sell a specified security (in the case of a put option)
from or to the writer of the option at a designated price during the term of the
option. An option on a securities index gives the purchaser of the option, in
return for the premium paid, the right to receive from the seller cash equal to
the difference between the closing price of the index and the exercise price of
the option.
The Fund may write a call or put option only if the option is 'covered.' A call
option on a security written by the Fund is covered if the Fund owns the
underlying security covered by the call or has an absolute and immediate right
to acquire that security without additional cash consideration (or for
additional cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other securities held in its portfolio. A call
option on a security is also covered if the Fund holds a call on the same
security and in the same principal amount as the call written where the exercise
price of the call held (a) is equal to or less than the exercise price of the
call written or (b) is greater than the exercise price of the call written if
the difference is maintained by the Fund in cash or liquid portfolio securities
in a segregated account with its custodian. A put option on a security written
by the Fund is 'covered' if the Fund maintains similar liquid assets with a
value equal to the exercise price in a segregated account with its custodian,
or else holds a put on the same security and in the same principal amount as
the put written where the exercise price of the put held is equal to or greater
than the exercise price of the put written. The value of the underlying
securities on which options may be written at any one time will not exceed
25% of the total assets of the Fund. The Fund will not purchase put or call
options if the aggregate premium paid for such options would exceed 5% of its
total assets at the time of purchase.
The Fund will cover call options on stock indices by owning securities whose
price changes, in the opinion of the investment adviser are expected to be
similar to those of the index, or in such other manner as may be in accordance
with the rules of the exchange on which the option is traded and applicable laws
and regulations. Nevertheless, where the Fund covers a call option on a stock
index through ownership of securities, such securities may not match the
composition of the index. In that event, the Fund will not be fully covered and
could be subject to risk of loss in the event of adverse changes in the value of
the index. The Fund will cover put options on stock indices by segregating
assets equal to the option's exercise price, or in such other manner as may be
in accordance with the rules of the exchange on which the option is traded and
applicable laws and regulations.
The Fund will receive a premium from writing a put or call option, which
increases the Fund's gross income in the event the option expires unexercised or
is closed out at a profit. If the value of a security or an index on which the
Fund has written a call option falls or remains the same, the Fund will realize
a profit in the
6
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<PAGE>
form of the premium received (less transaction costs) that could offset all or a
portion of any decline in the value of the portfolio securities being hedged. If
the value of the underlying security or index rises, however, the Fund will
realize a loss in its call option position, which will reduce the benefit of any
unrealized appreciation in the Fund's stock investments. By writing a put
option, the Fund assumes the risk of a decline in the underlying security or
index. To the extent that the price changes of the portfolio securities being
hedged correlate with changes in the value of the underlying security or index,
writing covered put options on securities or indices will increase the Fund's
losses in the event of a market decline, although such losses will be offset in
part by the premium received for writing the option.
The Fund may also purchase put options to hedge its investments against a
decline in value. By purchasing a put option, the Fund will seek to offset a
decline in the value of the portfolio securities being hedged through
appreciation of the put option. If the value of the Fund's investments does not
decline as anticipated, or if the value of the option does not increase, the
Fund's loss will be limited to the premium paid for the option plus related
transaction costs. The success of this strategy will depend, in part, on the
accuracy of the correlation between the changes in value of the underlying
security or index and the changes in value of the Fund's security holdings
being hedged.
The Fund may purchase call options on individual securities to hedge against an
increase in the price of securities that the Fund anticipates purchasing in the
future. Similarly, the Fund may purchase call options to attempt to reduce the
risk of missing a broad market advance, or an advance in an industry or market
segment, at a time when the Fund holds uninvested cash or short-term debt
securities awaiting investment. When purchasing call options, the Fund will bear
the risk of losing all or a portion of the premium paid if the value of the
underlying security or index does not rise.
There can be no assurance that a liquid market will exist when the Fund seeks to
close out an option position. Trading could be interrupted, for example, because
of supply and demand imbalances arising from a lack of either buyers or sellers,
or the options exchange could suspend trading after the price has risen or
fallen more than the maximum specified by the exchange. Although the Fund may be
able to offset to some extent any adverse effects of being unable to liquidate
an option position, the Fund may experience losses in some cases as a result of
such inability.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY CONTRACTS AND CURRENCY HEDGING TRANSACTIONS
In order to hedge against foreign currency exchange rate risks, the Fund may
enter into forward foreign currency exchange contracts and foreign currency
futures contracts, as well as purchase put or call options on foreign
currencies, as described below. The Fund may also conduct its foreign currency
exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign currency exchange market.
The Fund may enter into forward foreign currency exchange contracts ('forward
contracts') to attempt to minimize the risk to the Fund from adverse changes in
the relationship between the U.S. dollar and foreign currencies. A forward
contract is an obligation to purchase or sell a specific currency for an agreed
price at a future date which is individually negotiated and privately traded
by currency traders and their customers. The Fund may enter into a forward
contract, for example, when it enters into a contract for the purchase or sale
of a security denominated in a foreign currency in order to 'lock in' the U.S.
dollar price of the security. In addition, for example, when the Fund believes
that a foreign currency may suffer or enjoy a substantial movement against
another currency, it may enter into a
7
<PAGE>
<PAGE>
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 sufficient to cover any
commitments under these contracts or to limit any potential risk. The segregated
account will be marked-to-market on a daily basis. In addition, the Fund will
not enter into such forward contracts if, as a result, the Fund will have more
than 15% of the value of its total assets committed to such contracts. While
these contracts are not presently regulated by the CFTC, the CFTC may in the
future assert authority to regulate forward contracts. In such event, the Fund's
ability to utilize forward contracts in the manner set forth above may be
restricted. Forward contracts may limit potential gain from a positive change in
the relationship between the U.S. dollar and foreign currencies. Unanticipated
changes in currency prices may result in poorer overall performance for the Fund
than if it had not engaged in such contracts.
The Fund may purchase and write put and call options on foreign currencies for
the purpose of protecting against declines in the dollar value of foreign
portfolio securities and against increases in the dollar cost of foreign
securities to be acquired. As is the case with other kinds of options, however,
the writing of an option on foreign currency will constitute only a partial
hedge, up to the amount of the premium received, and the Fund could be required
to purchase or sell foreign currencies at disadvantageous exchange rates,
thereby incurring losses. The purchase of an option on foreign currency may
constitute an effective hedge against fluctuation in exchange rates although,
in the event of rate movements adverse to the Fund's position, the Fund may
forfeit the entire amount of the premium plus related transaction costs.
The Fund may enter into exchange-traded contracts for the purchase or sale for
future delivery of foreign currencies ('foreign currency futures'). This
investment technique will be used only to hedge against anticipated future
changes in exchange rates which otherwise might adversely affect the value of
the Fund's portfolio securities or adversely affect the prices of securities
that the Fund intends to purchase at a later date. The successful use of
currency futures will usually depend on the investment adviser's ability to
forecast currency exchange rate movements correctly. Should exchange rates move
in an unexpected manner, the Fund may not achieve the anticipated benefits of
foreign currency futures or may realize losses.
- --------------------------------------------------------------------------------
RISKS OF OPTIONS, FUTURES AND FOREIGN CURRENCY CONTRACTS
Options, futures and foreign currency contracts are forms of derivatives. The
use of options and futures as hedging techniques may not succeed where the price
movements of the securities underlying the options and futures do not follow the
price movements of the portfolio 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
8
<PAGE>
<PAGE>
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.
================================================================================
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The fundamental investment objectives and the general investment policies and
investment techniques of the Fund are described in the Prospectus. The Fund has
also adopted certain investment restrictions limiting the following activities
except as specifically authorized:
The Fund may not:
1. Make loans except through the purchase of debt obligations in accordance with
its investment objective and policies;
2. 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;
3. Invest in illiquid securities if immediately after such investment more than
15% of the Fund's net assets (taken at market value) would be invested in such
securities;
4. Issue any senior securities, except to the extent permitted by the Investment
Company Act of 1940, as amended (the '1940 Act').
5. Purchase or sell real estate or commodities, except that the Fund may
purchase securities issued by companies in the real estate industry and will, as
a matter of fundamental policy, concentrate its investments in such securities;
6. Pledge, hypothecate, mortgage or otherwise encumber its assets, except to
secure permitted borrowings;
7. Participate on a joint or joint and several basis in any securities trading
account;
8. Invest in companies for the purpose of exercising control;
9. Make short sales of securities or maintain a short position, unless at all
times when a short position is open 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 issue as, and equal in
amount to, the securities sold short ('short sales against the box'), and unless
not more than 10% of the Fund's net assets (taken at market value) is held as
collateral for such sales at any one time;
10. Purchase a security if, as a result (unless the security is acquired
pursuant to a plan of reorganization or an offer of exchange), the Fund would
own any securities of an open-end investment company or more than 3% of the
value of the Fund's total assets would be invested in securities of any
closed-end investment company or more than 10% of such value in closed-end
investment companies in general;
11. Invest in interests in oil, gas, or other mineral exploration or development
programs;
12. Purchase securities on margin, except for such short-term credits as may be
necessary for the clearance of transactions and except for borrowings in an
amount not exceeding 10% of the value of the Fund's total assets; or
13. Act as an underwriter of securities, except that the Fund may acquire
restricted securities under circumstances in which, if such securities were
sold, the Fund might be deemed to be an underwriter for purposes of the
Securities Act.
The investment restrictions set forth above have been adopted as fundamental
policies of the Fund. Under 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.
9
<PAGE>
<PAGE>
================================================================================
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
The overall management of the business and affairs of the Fund is vested with
the Board of Directors. The directors approve all significant agreements between
the Fund and persons or companies furnishing services to it, including the
Fund's agreements with its investment adviser, administrator, custodian and
transfer agent. The management of the Fund's day-to-day operations is delegated
to its officers, the investment adviser and the Fund's administrator, subject
always to the investment objective and policies of the Fund and to the general
supervision of the directors. [As of April , 1999, the directors and officers
as a group beneficially owned, directly or indirectly, less than 1% of the
outstanding shares of the Fund.]
The directors and officers of the Fund and their principal occupations during
the past five years are set forth below. Each Director and officer of the Fund
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 Equity Income
Fund, Inc. and Cohen & Steers Special Equity Fund, Inc., both of which are
open-end investment companies also sponsored by the Adviser. An asterisk (*) has
been placed next to the name of each director who is an 'interested person' of
the Fund, as such term is defined in the 1940 Act, by virtue of such person's
affiliation with the Fund or the Adviser.
<TABLE>
<CAPTION>
POSITION(S)
HELD WITH
NAME, ADDRESS AND AGE FUND PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS
- --------------------------------- ------------------- -------------------------------------------------------------------
<S> <C> <C>
*Robert H. Steers ............... Director, Chairman Chairman of Cohen & Steers Capital Management, Inc., the Fund's
757 Third Avenue and Secretary investment adviser. President of Cohen & Steers Securities, Inc.
New York, New York
Age: 46
*Martin Cohen ................... Director, President President of Cohen & Steers Capital Management, Inc., the Fund's
757 Third Avenue and Treasurer investment adviser. Vice President of Cohen & Steers Securities,
New York, New York Inc.
Age: 50
Gregory C. Clark ................ Director Principal of Wellspring Management Group.
376 Mountain Laurel Drive
Aspen, Colorado
Age: 52
George Grossman ................. Director Attorney at law.
17 Elm Place
Rye, New York
Age: 45
Jeffrey H. Lynford .............. Director Chairman of Wellsford Group Inc. since 1986 and of Wellsford
610 Fifth Avenue Residential Property Trust from 1992 to May 1997. Mr. Lynford is
New York, New York also a Trustee of Equity Residential Properties Trust and an
Age: 51 Emeritus Trustee of the National Trust for Historic Preservation.
Willard H. Smith Jr. ............ Director Board member of Essex Property Trust, Inc., Highwoods Properties,
7 Slayton Drive Inc., Realty Income Corporation and Willis Lease Finance
Short Hills, New Jersey Corporation. Managing director at Merrill Lynch & Co., Equity
Age: 62 Capital Markets Division from 1983 to 1995.
</TABLE>
10
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<PAGE>
<TABLE>
<CAPTION>
POSITION(S)
HELD WITH
NAME, ADDRESS AND AGE FUND PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS
- --------------------------------- ------------------- -------------------------------------------------------------------
<S> <C> <C>
Elizabeth O. Reagan ............. Vice President Senior Vice President of Cohen & Steers Capital Management, Inc.,
757 Third Avenue the Fund's investment adviser, since 1996 and prior to that Vice
New York, New York President of Cohen & Steers Capital Management, Inc.
Age: 36
Adam Derechin ................... Vice President and Senior Vice President of Cohen & Steers Capital Management, Inc.,
757 Third Avenue Assistant Treasurer the Fund's investment adviser, since 1998 and prior to that Vice
New York, New York President of Cohen & Steers Capital Management, Inc.
Age: 35
</TABLE>
================================================================================
COMPENSATION OF DIRECTORS AND CERTAIN OFFICERS
- --------------------------------------------------------------------------------
The following table sets forth information regarding compensation of Directors
by the Fund and by the fund complex of which the Fund is a part for the fiscal
year ended December 31, 1998. Officers of the Fund and Directors who are
interested persons of the Fund do not receive any compensation from the Fund or
any other fund in the fund complex which is a U.S. registered investment
company. Each of the other Directors is paid an annual retainer of $5,500, and
a fee of $500 for each meeting attended and is reimbursed for the expenses of
attendance at such meetings. In the Column headed 'Total Compensation to
Directors by Fund Complex,' the compensation paid to each Director represents
the five funds that each Director serves in the fund complex. The Directors do
not receive any pensions or retirement benefits from the fund complex.
COMPENSATION TABLE
FISCAL YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
FROM FUND AND
AGGREGATE FUND COMPLEX
COMPENSATION PAID TO
NAME OF PERSON, POSITION FROM FUND DIRECTORS
- --------------------------------------------------------------------------------------- ------------ ---------------
<S> <C> <C>
Gregory C. Clark*, Director............................................................ $7,500 $37,500
Martin Cohen**, Director and President................................................. 0 0
George Grossman*, Director............................................................. 7,500 37,500
Jeffrey H. Lynford*, Director.......................................................... 7,500 37,500
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 Investment Company Act of 1940, of the
Fund because of the affiliation with Cohen & Steers Capital Management, Inc.,
the Fund's investment adviser.
================================================================================
INVESTMENT ADVISORY AND OTHER SERVICES
- --------------------------------------------------------------------------------
THE INVESTMENT ADVISER
Cohen & Steers Capital Management, Inc. ('Cohen & Steers'), with offices located
at 757 Third Avenue, New York, New York 10017 is the investment adviser to the
Fund.
Cohen & Steers, a registered investment adviser, was formed in 1986 and
specializes in the management of real estate securities portfolios. Its current
clients include pension plans of leading corporations, endowment funds and
11
<PAGE>
<PAGE>
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 Equity Income Fund, Inc. and Cohen & Steers Special
Equity Fund, Inc., both of which are open-end investment companies. Mr. Cohen
and Mr. Steers may be deemed 'controlling persons' of the Adviser on the basis
of their ownership of the Adviser's stock.
Pursuant to an investment advisory agreement (the 'Advisory Agreement'), the
Adviser furnishes a continuous investment program for the Fund's portfolio,
makes the day-to-day investment decisions for the Fund, executes the purchase
and sale orders for the portfolio transactions of the Fund and generally manages
the Fund's investments in accordance with the stated policies of the Fund,
subject to the general supervision of the Board of Directors of the Fund.
Under the Advisory Agreement, the Fund will pay the Adviser a monthly management
fee in an amount equal to 1/12th of 0.85% of the average daily value of the net
assets of the Fund up to $2.5 billion, plus 1/12th of 0.75% of such assets in
excess of $2.5 billion. (Prior to April 1, 1997, the monthly management fee was
1/12th of .85% of the average daily value of all net assets of the Fund.) For
the fiscal years ended December 31, 1998, 1997 and 1996, the Adviser received
the following management fees from the Fund:
<TABLE>
<CAPTION>
GROSS MANAGEMENT FEE NET MANAGEMENT
FISCAL YEAR ENDED MANAGEMENT FEES WAIVERS FEES
- ----------------------- --------------- -------------- ------------------
<S> <C> <C> <C>
December 31, 1998 $22,579,469 $0 $22,579,469
December 31, 1997 $23,991,224 $0 $23,991,224
December 31, 1996 $ 9,704,419 $0 $ 9,704,419
</TABLE>
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
tatement, including prospectus and statement of additional information, for
the purpose of filings with the Securities and Exchange Commission and state
securities administrators and monitoring and maintaining the effectiveness of
such filings, as appropriate; (v) supervising preparation of quarterly reports
to the Fund's shareholders, notices of dividends, capital gains distributions
and tax credits, and attending to routine correspondence and other
12
<PAGE>
<PAGE>
communications with individual shareholders; (vi) supervising the daily pricing
of the Fund's investment portfolio and the publication of the net asset value of
the Fund's shares, earnings reports and other financial data; (vii) monitoring
relationships with organizations providing services to the Fund, including the
Custodian, Transfer Agent and printers; (viii) providing trading desk facilities
for the Fund; (ix) supervising compliance by the Fund with recordkeeping
requirements under the 1940 Act and regulations thereunder, maintaining books
and records for the Fund (other than those maintained by the Custodian and
Transfer Agent) and preparing and filing of tax reports other than the Fund's
income tax returns; and (x) providing executive, clerical and secretarial help
needed to carry out these responsibilities. For its services under the
Administration Agreement, the Adviser receives a monthly fee from the Fund at
the annual rate of 0.02% of the Fund's average daily net assets.
In accordance with the terms of the Administration Agreement and with the
approval of the Fund's Board of Directors, the Adviser has caused the Fund to
retain Chase Manhattan Bank ('Chase') as sub-administrator under a fund
accounting and administration agreement (the 'Sub-Administration Agreement').
Under the Sub-Administration Agreement, Chase has assumed responsibility for
performing certain of the foregoing administrative functions, including
determining the Fund's net asset value and preparing such figures for
publication, maintaining certain of the Fund's books and records that are not
maintained by the Adviser, custodian or transfer agent, preparing financial
information for the Fund's income tax returns, proxy statements, quarterly and
annual shareholders reports, and Commission filings, and responding to
shareholder inquiries. The Adviser remains responsible for monitoring and
overseeing the performance by Chase and Chase Global Funds Services Company
of their obligations to the Fund under their respective agreements 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 the Fund's average daily
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 years ended December 31, 1998, 1997 and 1996, the Adviser
received Administration fees from the Fund in the amounts of $539,651, $572,847
and $228,410, respectively, and Chase received sub-administration fees from the
Fund in the amounts of $1,156,631, $1,215,695 and $772,468.
- --------------------------------------------------------------------------------
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.
13
<PAGE>
<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.
================================================================================
PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
Subject to the supervision of the Directors, decisions to buy and sell
securities for the Fund and negotiation of its brokerage commission rates are
made by the Adviser. Transactions on United States stock exchanges involve the
payment by the Fund of negotiated brokerage commissions. There is generally no
stated commission in the case of securities traded in the over-the-counter
market but the price paid by the Fund usually includes an undisclosed dealer
commission or mark-up. In certain instances, the Fund may make purchases of
underwritten issues at prices which include underwriting fees.
In selecting a broker to execute each particular transaction, the Adviser will
take the following into consideration: the best net price available; the
reliability, integrity and financial condition of the broker; the size and
difficulty in executing the order; and the value of the expected contribution of
the broker to the investment performance of the Fund on a continuing basis.
Accordingly, the cost of the brokerage commissions to the Fund in any
transaction may be greater than that available from other brokers if the
difference is reasonably justified by other aspects of the portfolio execution
services offered. Subject to such policies and procedures as the Directors may
determine, the Adviser shall not be deemed to have acted unlawfully or to have
breached any duty solely by reason of its having caused the Fund to pay a broker
that provides research services to the Adviser an amount of commission for
effecting a portfolio investment transaction in excess of the amount of
commission another broker would have charged for effecting that transaction, if
the Adviser determines in good faith that such amount of commission was
reasonable in relation to the value of the research service provided by such
broker viewed in terms of either that particular transaction or the Adviser's
ongoing responsibilities with respect to the Fund. Research and investment
information is provided by these and other brokers at no cost to the Adviser
and is available for the benefit of other accounts advised by the Adviser and
its affiliates, and not all of the information will be used in connection with
the Fund. While this information may be useful in varying degrees and may tend
to reduce the Adviser's expenses, it is not possible to estimate its value and
in the opinion of the Adviser it does not reduce the Adviser's expenses in a
determinable amount. The extent to which the Adviser makes use of statistical,
research and other services furnished by brokers is considered by the Adviser
in the allocation of brokerage business but there is no formula by which such
business is allocated. The Adviser does so in accordance with its judgment
of the best interests of the Fund and its shareholders. The Adviser may also
take into account payments made by brokers effecting transactions for the Fund
to other persons on 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.
14
<PAGE>
<PAGE>
For the fiscal years ended December 31, 1998, 1997 and 1996, the Fund paid a
total of $4,794,426, $5,415,596 and $2,724,912 in brokerage commissions,
respectively. Of such amount, $1,125,213, $1,244,671 and $733,405,
respectively, was placed with brokers or dealers who provide research and
investment information. The Fund's annualized portfolio turnover rate for the
fiscal year ended December 31, 1998 was 30.18%.
================================================================================
ORGANIZATION AND DESCRIPTION OF CAPITAL STOCK
- --------------------------------------------------------------------------------
The Fund was incorporated on April 26, 1991 as a Maryland corporation and is
authorized to issue 200,000,000 shares of Common Stock, $0.001 par value. The
Fund presently has one class of shares. The Fund's shares have no preemptive,
conversion, exchange or redemption rights. 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
outstanding 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.
The Board of Directors is authorized to reclassify and issue any unissued shares
of the Fund without shareholder approval. Accordingly, in the future, the
Directors may create additional series of shares with different investment
objectives, policies or restrictions. Any issuance of shares of another class
would be governed by the 1940 Act and Maryland law.
As of April 9, 1999, there were 43,080,663 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.
================================================================================
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
Net asset value per share 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 affect materially
the Fund's net asset value.
For purposes of determining the Fund's net asset value per share, 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 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 Automatic Quotations, Inc. ('NASDAQ') National List are
valued in a like manner. Portfolio securities traded on more than one securities
exchange are valued at the last sale price on the business day as of which such
value is being determined as reflected on the tape at the close of the exchange
representing the principal market for such securities.
Readily marketable securities traded in the over-the-counter market, including
listed securities
15
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<PAGE>
whose primary market is believed by the Adviser to be over-the-counter, but
excluding securities admitted to trading on the NASDAQ National List, are valued
at the mean of the current bid and asked prices as reported by NASDAQ or, in the
case of securities not quoted by NASDAQ, the National Quotation Bureau or such
other comparable sources as the Directors deem appropriate to reflect their fair
market value. Where securities are traded on more than one exchange and also
over-the-counter, the securities will generally be valued using the quotations
the Board of Directors believes reflect most closely the value of such
securities.
For purposes of determining the Fund's net asset value per share, all assets and
liabilities initially expressed in foreign currencies will be converted into
United States dollars at the mean of the bid and asked prices of such currencies
against the United States dollar last quoted by a major bank which is a regular
participant in the institutional foreign exchange markets or on the basis of a
pricing service which takes into account the quotes provided by a number of such
major banks.
================================================================================
REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
Payment of the redemption price for shares redeemed may be made either in cash
or in portfolio securities (selected in the discretion of the Board of Directors
of the Fund and taken at their value used in determining the Fund's net asset
value per share as described in the Prospectus and in this Statement of
Additional Information), 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. The
Fund has filed a formal election with the Securities and Exchange Commission
pursuant to which the Fund will only effect a redemption in portfolio securities
where the particular stockholder of record is redeeming more than $250,000 or
1% of the Fund's total net assets, whichever is less, during any 90-day period.
In the opinion of the Adviser, however, the amount of a redemption request
would have to be significantly greater than $250,000 or 1% of total net assets
before a redemption wholly or partly in portfolio securities was made.
================================================================================
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.
16
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<PAGE>
- --------------------------------------------------------------------------------
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 holdings so that, at the end of each quarter of
the taxable year, (i) at least 50% of the market value of the Fund's assets is
represented by cash and cash items (including receivables), U.S. Government
securities, the securities of other regulated investment companies and other
securities, with such other securities of any one issuer limited for the
purposes of this calculation to an amount not greater than 5% of the value of
the Fund's total assets and not greater than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its total
assets is invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated investment
companies); and (c) distribute at least 90% of its investment company taxable
income (which includes, among other items, dividends, interest and net
short-term capital gains in excess of net long-term capital losses) each taxable
year.
As a regulated investment company, the Fund generally will not be subject to
U.S. federal income tax on its investment company taxable income and net capital
gains (the excess of net long-term capital gains over net short-term capital
losses), if any, that it distributes to shareholders. The Fund 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 on
December 31 of the current calendar year if it is declared by the Fund in
October, November or December with a record date in such a month and paid by
the Fund during January of the following calendar year. Such distributions will
be taxable to shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
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
17
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<PAGE>
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.
- --------------------------------------------------------------------------------
OPTIONS AND HEDGING TRANSACTIONS
The taxation of equity options and over-the-counter options on debt securities
is governed by Code section 1234. Pursuant to Code section 1234, the premium
received by the Fund for selling a put or call option is not included in income
at the time of receipt. If the option expires, the premium is short-term capital
gain to the Fund. If the Fund enters into a closing transaction, the difference
between the amount paid to close out its position and the premium is received is
short-term capital gain or loss. If a call option written by the Fund is
exercised, thereby requiring the Fund to sell the underlying security, the
premium will increase the amount realized upon the sale of such security and any
resulting gain or loss will be capital gain or loss, and will be long-term or
short-term depending upon the holding period of the security. With respect to a
put or call option that is purchased by the Fund, if the option is sold, any
resulting gain or loss will be a capital gain or loss, and will be long-term or
short-term, depending upon the holding period of the option. If the option
expires, the resulting loss is a capital loss and is long-term or short-term
depending upon the holding period of the option. If the option is exercised, the
cost of the option, in the case of a call option, is added to the basis of the
purchased security and, in the case of a put option, reduces the amount realized
on the underlying security in determining gain or loss.
Certain options, futures contracts and forward contracts in which the Fund may
invest are 'section 1256 contracts.' Gains or losses on section 1256 contracts
generally are considered 60% long-term and 40% short-term capital gains or
losses; however, foreign currency gains or losses (as discussed below) arising
from certain section 1256 contracts may be treated as ordinary income or loss.
Also, section 1256 contracts held by the Fund at the end of each taxable year
(and, generally, for purposes of the 4% excise tax, on October 31 of each year)
are 'marked-to-market' (that is, treated as sold at fair market value),
resulting in unrealized gains or losses being treated as though they were
realized.
Generally, the hedging transactions undertaken by the Fund may result in
'straddles' for U.S. federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by the Fund. In addition, losses
realized by the Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to the Fund of engaging in hedging
transactions are not entirely clear. Hedging transactions may increase the
amount of short-term capital gain realized by the Fund 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
18
<PAGE>
<PAGE>
the elections, the amount, character and timing of the recognition of gains or
losses from the affected straddle positions will be determined under rules that
vary according to the election(s) made. The rules applicable under certain of
the elections may operate to accelerate the recognition of gains or losses from
the affected straddle positions.
Because the straddle rules may affect the character of gains or losses, defer
losses and/or accelerate the recognition of gains or losses from the affected
straddle positions, the amount which may be distributed to shareholders, and
which will be taxed to them as ordinary income or long-term capital gain, may be
increased or decreased as compared to a fund that did not engage in such hedging
transactions.
Notwithstanding any of the foregoing, the Fund may recognize gain (but not loss)
from a constructive sale of certain 'appreciated financial positions' if the
Fund enters into a short sale, offsetting notional principal contract, futures
or forward contract transaction with respect to the appreciated position or
substantially identical property. Appreciated financial positions subject to
this constructive sale treatment are interests (including options, futures and
forward contracts and short sales) in stock, partnership interests, certain
actively traded trust instruments and certain debt instruments. Constructive
sale treatment does not apply to certain transactions closed in the 90-day
period ending with the 30th day after the close of the taxable year, if certain
conditions are met.
- --------------------------------------------------------------------------------
CURRENCY FLUCTUATIONS -- 'SECTION 988' GAINS OR LOSSES
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time the Fund accrues receivables or liabilities
denominated in a 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, gains or losses attributable to fluctuations in the value of
foreign currency between the date of acquisition of the security 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.
- --------------------------------------------------------------------------------
SALE OR EXCHANGE OF SHARES
Upon the sale or other disposition of shares of the Fund, including an exchange
of shares in the Fund for shares of another Cohen & Steers fund, a shareholder
may realize a capital gain or loss which will be long-term or short-term,
depending upon the shareholder's holding period for the shares. A shareholder
who exchanges shares in the Fund for shares of another Cohen & Steers fund will
have a tax basis in the newly-acquired fund shares equal to the amount invested
and will begin a new holding period for federal income tax purposes.
If a shareholder exchanges shares in the Fund for shares in another Cohen &
Steers fund pursuant to a reinvestment right, the sales charge incurred in the
purchase of the Fund shares exchanged may not be added to tax basis in
determining gain or loss for federal income tax purposes. Instead, the sales
charge for the exchanged Fund shares shall be added to basis for purposes
of determining gain or loss on the disposition of the newly-acquired fund
shares, if such newly-acquired fund shares are not disposed of in a similar
exchange transaction. Any loss realized on a sale or exchange will be disallowed
to the extent the shares disposed of are replaced (including through
reinvestment of dividends) within a period of 61 days beginning 30 days before
and ending 30 days after disposition of the shares. Any loss realized by a
19
<PAGE>
<PAGE>
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.
- --------------------------------------------------------------------------------
INVESTMENTS 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
Treasury regulations that have not yet been issued, but may apply retroactively,
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
The Fund may invest in shares of foreign corporations that may be classified
under the Code as passive foreign investment companies ('PFICs'). In general, a
foreign corporation is classified as a PFIC if at least one-half of its assets
constitute investment-type assets, or 75% or more of its gross income is
investment-type income. If the Fund receives a so-called `excess distribution'
with respect to PFIC stock, the Fund itself may be subject to a tax on a portion
of the excess distribution, whether or not the corresponding income is
distributed by the Fund to shareholders. In general, under the PFIC rules, an
excess distribution is treated as having been realized ratably over the period
during which the Fund held the PFIC shares. The Fund will itself be subject to
tax on the portion, if any, of an excess distribution that is so allocated to
prior Fund taxable years and an interest factor will be added to the tax, as if
the tax had been payable in such prior taxable years. Certain distributions from
a PFIC as well as gain from the sale of PFIC shares are treated as excess
distributions. Excess distributions are characterized as ordinary income even
though, absent application of the PFIC rules, certain excess distributions might
have been classified as capital gain.
The Fund may be eligible to elect alternative tax treatment with respect to PFIC
shares. Under an
20
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<PAGE>
election that currently is available in come circumstances, the Fund would be
required to include in its gross income its share of the earnings of a PFIC on a
current basis, regardless of whether distributions were received from the PFIC
in a given year. If this election were made, the special rules, discussed above,
relating to the taxation of excess distributions, would not apply. In addition,
another election would involve marking to market the Fund's PFIC shares at the
end of each taxable year, with the result that unrealized gains would be treated
as though they were realized and reported as ordinary income. Any mark-to-market
losses and any loss from an actual disposition of PFIC shares would be
deductible as ordinary losses to the extent of any net mark-to-market gains
included in income 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 IRS that they are subject to
backup withholding. Corporate shareholders and certain other shareholders
specified in the Code generally are exempt from such backup withholding. Backup
withholding is not an additional tax. Any amounts withheld may be credited
against the shareholder's U.S. federal income tax liability.
- --------------------------------------------------------------------------------
FOREIGN SHAREHOLDERS
U.S. taxation of income from the Fund to a shareholder who is a nonresident
alien individual, a foreign trust or estate, a foreign corporation or foreign
partnership ('foreign shareholder') depends on whether the income of the Fund is
'effectively connected' with a U.S. trade or business carried on by the
shareholder.
Income Not Effectively Connected. If the income from the Fund is not
'effectively connected' with a U.S. trade or business carried on by the foreign
shareholder, distributions of investment company taxable income will be subject
to a U.S. tax of 30% (or lower treaty rate, except in the case of any excess
inclusion income allocated to the shareholder (see 'Taxation -- Investments in
Real Estate Investment Trusts,' above)), which tax is generally withheld from
such distributions.
Distributions of capital gain dividends and any amounts retained by the Fund
which are designated as undistributed capital gains will not be subject
to U.S. tax at the rate of 30% (or lower treaty rate) unless the foreign
shareholder is a nonresident alien individual and is physically present in the
United States for more than 182 days during the taxable year and meets certain
other requirements. However, this 30% tax on capital gains of nonresident
alien individuals who are physically present in the United States for more
than the 182 day period only applies in exceptional cases because any individual
present in the United States for more than 182 days during the taxable year is
generally treated as a resident for U.S. income tax purposes; in that case,
he or she would be subject to U.S. income tax on his or her worldwide income
at the graduated rates applicable to U.S. citizens, rather than the 30% U.S.
tax. In the case of a foreign shareholder who is a nonresident alien individual,
the Fund may be required to withhold U.S. income tax at a rate of 31% of
distributions of net capital gains
21
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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
tock 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.
================================================================================
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.
22
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- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
The Fund's 'average annual total return' figures described in the Prospectus are
computed according to a formula prescribed by the SEC. The formula can be
expressed as follows:
P(1 + T)'pp'n = ERV
<TABLE>
<S> <C>
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 investment made at the beginning of a 1-, 5-, or
10-year period at the end of a 1-, 5-, or 10-year period (or fractional portion thereof),
assuming reinvestment of all dividends and distributions.
</TABLE>
The Fund's average annual total return for the year ended December 31, 1998, for
the five years ended December 31, 1998 and for the period from July 2, 1991
(commencement of operations) to December 31, 1998 were -18.07%, 10.60% and
13.27%, 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
<TABLE>
<S> <C>
Where: P = a hypothetical initial payment of $1,000.
ERV = Ending Redeemable Value of a hypothetical $1,000 investment made at the beginning of the 1-, 5- or
10-year period at the end of the 1-, 5- or 10-year period (or fractional portion thereof),
assuming reinvestment of all dividends and distributions.
</TABLE>
- --------------------------------------------------------------------------------
YIELD
Quotations of yield for the Fund will be based on all investment income per
share earned during a particular 30-day period (including dividends and
interest), less expenses accrued during the period ('net investment income')
and are computed by dividing net investment income by the maximum offering price
per share on the last day of the period, according to the following formula:
a - b
2[( ----- + 1)'pp'6 - 1]
cd
<TABLE>
<S> <C>
Where: a = dividends and interest earned during the period,
b = expenses accrued for the period (net of reimbursements),
c = the average daily number of shares outstanding during the period that were entitled to receive
dividends, and
d = the maximum offering price per share on the last day of the period.
</TABLE>
In reports or other communications to shareholders of the Fund or in advertising
materials, the Fund may compare its performance with that of (i) other mutual
funds listed in the rankings prepared by Lipper Analytical Services, Inc.,
publications such as Barrons, Business Week, Forbes, Fortune, Institutional
Investor, Kiplinger's Personal Finance, Money, Morningstar Mutual Fund Values,
The New York Times, The Wall Street
23
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<PAGE>
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, 1998,
including notes thereto, are incorporated by reference in this Statement
of Additional Information from the Fund's Annual Report dated as of
December 31, 1998.
24
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PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
1. Articles of Incorporation,(1) with Articles Supplementary filed with the
Secretary of State of the State of Maryland on December 26, 1996(4)
2. By-Laws(2)
3. The rights of security holders are defined in the Registrant's Articles
of Incorporation (Article FIFTH and Article SEVENTH, Sections (b) and (c)) filed
as Exhibit 1 to this Registration Statement and the Registrant's By-Laws
(Article II and Article VI) filed as Exhibit 2 to this Registration Statement.
4. (A) Form of Investment Advisory Agreement(2)
(B) Amendment to Form of Investment Advisory Agreement(4)
5. Distribution Agreement*
6. Not Applicable
7. Form of Custodian Agreement(2)
8. (A) Form of Transfer Agency Agreement(2)
(B) Form of Administration Agreement(3)
(C) Shareholder Service Plan(4)
(D) Form of Shareholder Service Agreement(4)
9. (A) Opinion and Consent of Dechert Price & Rhoads(2)
(B) Opinion and Consent of Venable, Baetjer and Howard(2)
10. Consent of Independent Accountants*
11. Not Applicable
12. Investment Representation Letter(2)
13. Not Applicable
14. Financial Data Schedule**
15. Not Applicable
- ------------
(1) Filed with initial registration statement on April 29, 1991 and incorporated
by reference herein.
(2) Filed with Pre-Effective Amendment No. 1 on June 17, 1991 and incorporated
by reference herein.
(3) Filed with Post-Effective Amendment No. 6 on March 12, 1996 and incorporated
by reference herein.
(4) Filed with Post-Effective Amendment No. 7 on March 31, 1997 and incorporated
by reference herein.
* To be filed by subsequent Post-Effective Amendment.
** Filed herein.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 25. INDEMNIFICATION
It is the Registrant's policy to indemnify its directors, officers,
employees and other agents to the maximum extent permitted by Section 2-418 of
the General Corporation Law of the State of Maryland as set forth in Article
EIGHTH of Registrant's Articles of Incorporation, filed as Exhibit 1, and
Article VIII, Section 1, of the Registrant's By-Laws, filed as Exhibit 2. The
Liability of the Registrant's directors and officers is dealt with in Article
EIGHTH of Registrant's Articles of Incorporation and Article VIII, 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 5 of the Investment Advisory Agreement, filed as Exhibit 4 to this
Registration Statement. The liability of Cohen & Steers Capital Management,
Inc., the
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<PAGE>
<PAGE>
Registrant's administrator, for any loss suffered by the Registrant or its
shareholders is set forth in Section 6 of the Administration Agreement, filed as
Exhibit 8(A) to this Registration Statement. The liability of Cohen & Steers
Securities, Inc., the Registrant's distributor, for any loss suffered by the
Registrant of its shareholdes is set forth in Section 8 of the Distribution
Agreement filed as Exhibit 5 to this Registration Statement.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The descriptions of the Adviser under the caption 'Management of the Fund'
in the Prospectus and in the Statement of Additional Information constituting
Parts A and B, respectively, of this Registration Statement are incorporated by
reference herein.
The following is a list of the Directors and Officers of the Adviser. None
of the persons listed below has had other business connections of a substantial
nature during the past two fiscal years.
<TABLE>
<CAPTION>
NAME TITLE
- ---------------------------------------------- ----------------------------------------------
<S> <C>
Robert H. Steers.............................. Chairman, Director
Martin Cohen.................................. President, Director
Joseph M. Harvey.............................. Senior Vice President & Director of Research
Steven R. Brown............................... Senior Vice President
Elizabeth O. Reagan........................... Senior Vice President
John J. McCombe............................... Senior Vice President
Adam Derechin................................. Senior Vice President
Scott G. Ramsey............................... Vice President
James S. Corl................................. Vice President
Sheila J. Morrissey........................... Vice President
Michael J. Kozoriz............................ Vice President
</TABLE>
Cohen & Steers Capital Management, Inc. acts as investment adviser to, in
addition to the Registrant, the following investment companies:
Cohen & Steers Equity Income Fund, Inc.
Cohen & Steers Realty Income Fund, Inc.
Cohen & Steers Total Return Realty Fund, Inc.
Cohen & Steers Special Equity Fund, Inc.
Frank Russell Investment Management Company Real Estate Securities
Fund
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Cohen & Steers Securities, Inc. is the principal underwriter for the
Registrant.
(b) The following are directors and officers of Cohen & Steers Securities,
Inc. The principal address of these persons is 757 Third Avenue, N.Y., N.Y.
10017.
<TABLE>
<CAPTION>
POSITION AND POSITION AND
NAME OFFICES WITH DISTRIBUTOR OFFICES WITH REGISTRANT
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C>
Robert H. Steers.............. President Chairman, Director and
Secretary
Martin Cohen.................. Vice President President, Director and
Treasurer
Jay Chen...................... Assistant Treasurer None
</TABLE>
(c) Not applicable.
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<PAGE>
<PAGE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
Registrant incorporates herein by reference its response to this item
contained in Pre-Effective Amendment No. 1 filed on June 17, 1991.
ITEM 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. UNDERTAKINGS
Not applicable
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<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant has duly caused
this Post-Effective Amendment No. 10 to its Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York and the State of New York, on the 27th day of April, 1999.
COHEN & STEERS REALTY SHARES, 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. 10 has been signed below by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
By: /s/ MARTIN COHEN President, Treasurer and Director April 27, 1999
.........................................
(MARTIN COHEN)
By: /s/ ROBERT H. STEERS Director April 27, 1999
.........................................
(ROBERT H. STEERS)
By: * Director April 27, 1999
.........................................
(GREGORY C. CLARK)
By: * Director April 27, 1999
.........................................
(GEORGE GROSSMAN)
By: * Director April 27, 1999
.........................................
(JEFFREY H. LYNFORD)
By: * Director April 27, 1999
.........................................
(WILLARD H. SMITH JR.)
By: /s/ ROBERT H. STEERS April 27, 1999
.........................................
* ROBERT H. STEERS
AS ATTORNEY-IN-FACT
</TABLE>
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STATEMENT OF DIFFERENCES
------------------------
The registered trademark symbol shall be expressed as.................... 'r'
Characters normally expressed as superscript shall be preceded by........ 'pp'
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
------------------------
We consent to the incorporation by reference in this Post-Effective Amendment
No. 10 to the Registration Statement of Cohen & Steers Realty Shares, Inc. on
Form N-1A (File Nos. 33-40215 and 811-6302) of our report dated January 29,
1999, on our audit of the financial statements and financial highlights of
Cohen & Steers Realty Shares, Inc., which report is included in the Annual
Report to shareholders for the year ended December 31, 1998, which report is
also incorporated by reference in this Post-Effective Amendment to the
Registration Statement.
We also consent to the reference to our firm under the caption 'Financial
Highlights' in the Prospectus and under the caption 'Counsel and Independent
Accountants' in the Statement of Additional Information.
PricewaterhouseCoopers LLP
New York, New York
April 26, 1999
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000874505
<NAME> COHEN & STEERS REALTY SHARES, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 1,946,155,022
<INVESTMENTS-AT-VALUE> 1,936,471,175
<RECEIVABLES> 23,344,894
<ASSETS-OTHER> 113,730
<OTHER-ITEMS-ASSETS> 9,926
<TOTAL-ASSETS> 1,959,939,725
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 26,599,546
<TOTAL-LIABILITIES> 26,599,546
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,917,688,370
<SHARES-COMMON-STOCK> 50,910,426
<SHARES-COMMON-PRIOR> 68,415,020
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 25,335,656
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (9,683,847)
<NET-ASSETS> 1,933,340,179
<DIVIDEND-INCOME> 137,607,485
<INTEREST-INCOME> 4,559,914
<OTHER-INCOME> 0
<EXPENSES-NET> (27,778,514)
<NET-INVESTMENT-INCOME> 114,388,885
<REALIZED-GAINS-CURRENT> 49,313,119
<APPREC-INCREASE-CURRENT> (720,604,899)
<NET-CHANGE-FROM-OPS> (556,902,895)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (92,852,026)
<DISTRIBUTIONS-OF-GAINS> (82,995,761)
<DISTRIBUTIONS-OTHER> (7,514,066)
<NUMBER-OF-SHARES-SOLD> 19,345,027
<NUMBER-OF-SHARES-REDEEMED> (40,731,134)
<SHARES-REINVESTED> 3,881,513
<NET-CHANGE-IN-ASSETS> (1,499,654,643)
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 22,579,469
<INTEREST-EXPENSE> 31,868
<GROSS-EXPENSE> 28,120,980
<AVERAGE-NET-ASSETS> 2,694,875,604
<PER-SHARE-NAV-BEGIN> 50.18
<PER-SHARE-NII> 1.97
<PER-SHARE-GAIN-APPREC> (10.89)
<PER-SHARE-DIVIDEND> (1.59)
<PER-SHARE-DISTRIBUTIONS> (1.56)
<RETURNS-OF-CAPITAL> (0.13)
<PER-SHARE-NAV-END> 37.98
<EXPENSE-RATIO> 1.03
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
