COHEN & STEERS REALTY SHARES INC, 485APOS, 1997-03-31

COHEN & STEERS REALTY SHARES INC
485APOS, 1997-03-31

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 1997

FILE NO. 33-40215
811-6302
________________________________________________________________________________

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]

PRE-EFFECTIVE AMENDMENT NO. [ ]

POST-EFFECTIVE AMENDMENT NO. 7 [x]

AND/OR

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]

AMENDMENT NO. 8 [x]

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

COHEN & STEERS REALTY SHARES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

757 THIRD AVENUE, NEW YORK, NEW YORK 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 832-3232

MARTIN COHEN
COHEN & STEERS REALTY SHARES, INC.
757 THIRD AVENUE, NEW YORK, NEW YORK 10017
(NAME AND ADDRESS OF AGENT FOR SERVICE OF PROCESS)

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

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)

[ ] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b)

[x] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(1)

[ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(2)

[ ] ON (DATE) PURSUANT TO PARAGRAPH (b)

[ ] ON (DATE) PURSUANT TO PARAGRAPH (a)(1)

[ ] ON (DATE) PURSUANT TO PARAGRAPH (a)(2) OF RULE 485.

IF APPROPRIATE, CHECK THE FOLLOWING BOX:

[ ] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.

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

REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SHARES OF BENEFICIAL
INTEREST UNDER THE SECURITIES ACT OF 1933 PURSUANT TO RULE 24f-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940. REGISTRANT FILED ITS 24f-2 NOTICE FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1996, ON FEBRUARY 24, 1996.

________________________________________________________________________________

CROSS REFERENCE SHEET
(AS REQUIRED BY 404(c))
<TABLE>
<CAPTION>
N-1A ITEM
- -------------- LOCATION IN PROSPECTUS
------------------------------------
(CAPTION)
<S> <C> <C>
Item 1. Cover Page................................................... Cover Page
Item 2. Synopsis..................................................... Fee Table
Item 3. Condensed Financial Information.............................. Financial Highlights
Item 4. General Description of Registrant............................ Investment Objective and Policies;
Investment Restrictions
Item 5. Management of the Registrant................................. Management of the Fund
Item 5A. Management's Discussion of Fund Performance.................. *
Item 6. Capital Stock and Other Securities........................... Taxation: Organization and
Description of Capital Stock
Item 7. Purchase of Securities Being Offered......................... Determination of Net Asset Value;
Purchase of Shares
Item 8. Redemption or Repurchase..................................... Redemption of Shares
Item 9. Pending Legal Proceedings.................................... Not Applicable

LOCATION IN STATEMENT OF
PART B ADDITIONAL INFORMATION (CAPTION)
- -------------- ------------------------------------
<S> <C> <C>
Item 10. Cover Page................................................... Cover Page
Item 11. Table of Contents............................................ Table of Contents
Item 12. General Information and History.............................. Organization and Description of
Capital Stock
Item 13. Investment Objectives and Policies........................... Investment Objective and Policies;
Investment Restrictions
Item 14. Management of the Fund....................................... Management of the Fund
Item 15. Control Persons and Principal Holders of Securities.......... Organization and Description of
Capital Stock
Item 16. Investment Advisory and Other Services....................... Management of the Fund -- Adviser
and Investment Advisory Services
Item 17. Brokerage Allocation and Other Practices..................... Portfolio Transactions and Brokerage
Item 18. Capital Stock and Other Securities........................... Organization and Description of
Capital Stock
Item 19. Purchase, Redemption and Pricing of Securities Being Determination of Net Asset Value;
Offered.................................................... Redemption of Shares
Item 20. Tax Status................................................... Taxation
Item 21. Underwriters................................................. Distributor
Item 22. Calculation of Performance Data.............................. Performance Information
Item 23. Financial Statements......................................... Financial Statements
</TABLE>

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

* Contained in the annual report of Registrant

[Logo]

- --------------------------------------------------------------------------------
Cohen & Steers Realty Shares, Inc. is a non-diversified, open-end management
investment company that seeks 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. Cohen & Steers Capital Management, Inc.
serves as investment adviser to the Fund.

This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. A Statement of Additional Information
dated May 1, 1997, containing additional and more detailed information about
the Fund, has been filed with the Securities and Exchange Commission and is
hereby incorporated by reference into this Prospectus. It is available without
charge and can be obtained by writing or calling the
Fund at the address and telephone number printed on the back cover of this
prospectus.

------------------------------------------
- --------------------------------------------------------------------------------
INVESTORS ARE ADVISED TO READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE
REFERENCE.
- --------------------------------------------------------------------------------
------------------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

MAY 1, 1997

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

- --------------------------------------------------------------------------------
FEE TABLE
- --------------------------------------------------------------------------------

Shareholder Transaction Expenses

None.

Annual Fund Operating Expenses (as a percentage of average net assets)

<TABLE>
<S> <C>
Management fees..................................................... 0.85%
Service fees*....................................................... 0%
Other expenses...................................................... 0.23%
----
Total fund operating expenses....................................... 1.08%

* The Fund does not anticipate paying or accruing any service fees until January 1, 1998 or later.

</TABLE>

Example

You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return (cumulatively through the end of each time period):

<TABLE>
<S> <C>
1 year............................................................. $ 11
3 years............................................................ $ 35
5 years............................................................ $ 60
10 years............................................................ $132
</TABLE>

THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH
MAY BE MORE OR LESS THAN THOSE SHOWN.

The purpose of this table is to assist the investor in understanding the various
costs and expenses that an investor in the Fund will bear.

The Adviser has directed certain portfolio transactions to brokers who paid a
portion of the Fund's expenses. For the year ended December 31, 1996, the Fund's
expenses were reduced by $140,729 under these arrangements. Although the Fund
did not directly pay these expenses, this amount has been added to the Fund's
'Other Expenses' in accordance with recently-adopted disclosure regulations. Had
these costs not been reflected in this table, the Fund's total operating
expenses would have been 1.10%. 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.

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the Financial
Statements. It should be read in conjunction with the Financial Statements and
notes thereto.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE 1996 1995 1994 1993 1992
- --------------------------------------------------- ---------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year................. $ 34.62 $ 32.90 $ 31.92 $ 29.58 $ 26.55
---------- -------- -------- -------- -------
Income from investment operations
Net investment income......................... 1.86 1.86 1.66 1.29 1.51
Net realized and unrealized gains on
investments................................. 11.04 1.69 0.98 4.24 3.55
---------- -------- -------- -------- -------
Total from investment operations......... 12.90 3.55 2.64 5.53 5.06
---------- -------- -------- -------- -------
Less distributions from:
Net investment income......................... (1.76) (1.33) (1.09) (1.27) (1.80)
Realized gain on investments.................. (0.55) 0.00 0.00 (1.64) (0.18)
In excess of net realized gains............... 0.00 0.00 0.00 (0.04) 0.00
Tax return of capital......................... (0.12) (0.50) (0.57) (0.24) (0.05)
---------- -------- -------- -------- -------
Total distributions...................... (2.43) (1.83) (1.66) (3.19) (2.03)
---------- -------- -------- -------- -------
Net asset value, end of year....................... $ 45.09 $ 34.62 $ 32.90 $ 31.92 $ 29.58
---------- -------- -------- -------- -------
---------- -------- -------- -------- -------
Total investment return............................ 38.48% 11.13% 8.31% 18.76% 20.09%
---------- -------- -------- -------- -------
---------- -------- -------- -------- -------
Ratios/Supplemental Data:
Net assets, end of year (in millions)......... $2,036.379 $793.084 $458.098 $163.478 $49.481
---------- -------- -------- -------- -------
---------- -------- -------- -------- -------
Ratio of expenses to average daily net assets
(before expense reduction).................. 1.10% 1.16% 1.26% 1.35% 1.77%
---------- -------- -------- -------- -------
---------- -------- -------- -------- -------
Ratio of expenses to average daily net assets
(net of expense reduction).................. 1.08% 1.12% 1.14% 1.18% 1.25%
---------- -------- -------- -------- -------
---------- -------- -------- -------- -------
Ratio of net investment income to average
daily net assets (net of expense
reduction).................................. 5.28% 6.05% 5.71% 4.57% 5.92%
---------- -------- -------- -------- -------
---------- -------- -------- -------- -------
Ratio of net investment income to average
daily net asset (before expense
reduction).................................. 5.27% 6.01% 5.59% 4.40% 5.40%
---------- -------- -------- -------- -------
---------- -------- -------- -------- -------
Portfolio turnover rate....................... 33.23% 22.68% 39.00% 65.28% 14.81%
---------- -------- -------- -------- -------
---------- -------- -------- -------- -------
Averge Commission Rate(a)..................... $ 0.0678 N/A N/A N/A N/A
---------- -------- -------- -------- -------
---------- -------- -------- -------- -------
</TABLE>

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

(a) For fiscal year beginning on or after September 1, 1995, a portfolio is
required to disclose the average commission rate per share it paid for
trades on which commissions were charged.

- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------

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 (both realized and unrealized) and current
income. There can be no assurance that the Fund's investment objective will be
achieved. The Fund's investment objective cannot be changed without approval of
a majority of its outstanding voting securities. All of the Fund's policies,
other than its investment objective and the investment limitations described
below under 'Investment Restrictions,' may be changed by the Fund's Board of
Directors without shareholder approval.

Under normal circumstances, the Fund will invest substantially all of its assets
in the equity securities of real estate companies. Such equity securities will
consist of (i) common stocks (including shares in real estate investment
trusts), (ii) rights or warrants to purchase common stocks, (iii) securities
convertible into common stocks where the conversion feature represents, in the
investment adviser's view, a significant element of the securities' value, and
(iv) preferred stocks. 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 that has at least 50% of its assets in
such real estate. The Fund may invest up to 10% of its total assets in
securities of foreign real estate companies. See 'Risks of Investment in Foreign
Securities,' below. When, in the judgment of the Fund's investment adviser,
market or general economic conditions justify a temporary defensive position,
the Fund will deviate from its investment objective and invest all or any
portion of its assets in high-grade debt securities, including corporate debt
securities, U.S. government securities, and short-term money market instruments,
without regard to whether the issuer is a real estate company. The Fund may also
at any time invest funds awaiting investment or held as reserves to satisfy
redemption requests or to pay dividends and other distributions to shareholders
in short-term money market instruments.

The Fund will not invest more than 15% of its net assets in illiquid 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. Cohen & Steers Capital Management,
Inc., the Fund's investment adviser (the 'Adviser' or 'Cohen & Steers'), will
monitor the liquidity of such restricted securities under the supervision of the
Board of Directors. See the Fund's Statement of Additional Information for
further discussion of illiquid securities.

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

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 it complies with several
requirements relating to its organization, ownership, assets, and income and a
requirement that it distribute to its shareholders at least 95% of its taxable
income (other than net capital gains) for each taxable year. REITs can generally
be classified as Equity REITs, Mortgage REITs and Hybrid REITs. Equity REITs,
which invest

the majority of their assets directly in real property, derive their income
primarily from rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs, which invest the
majority of their assets in real estate mortgages, derive their income primarily
from interest payments. Hybrid REITs combine the characteristics of both Equity
REITs and Mortgage REITs.

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

RISKS OF INVESTMENT IN REAL ESTATE SECURITIES

The Fund will not invest in real estate directly, but only in securities issued
by real estate companies. However, the Fund may be subject to risks similar to
those associated with the direct ownership of real estate (in addition to
securities markets risks) because of its policy of concentration in the
securities of companies in the real estate industry. These include declines in
the value of real estate, risks related to general and local economic
conditions, dependency on management skill, heavy cash flow dependency, 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.

In addition to these risks, Equity REITs may be affected by changes in the value
of the underlying property owned by the trusts, while Mortgage REITs may be
affected by the quality of any credit extended. Further, Equity and Mortgage
REITs are dependent upon management skills and generally may not be diversified.
Equity and Mortgage REITs are also subject to heavy cash flow dependency,
defaults by borrowers and self-liquidation. In addition, Equity and Mortgage
REITs could possibly fail to qualify for tax free pass-through of income under
the Internal Revenue Code of 1986, as amended (the 'Code'), or to maintain their
exemptions from registration under the Investment Company Act of 1940 (the '1940
Act'). The above factors may also adversely affect a borrower's or a lessee's
ability to meet its obligations to the REIT. In the event 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.

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

RISKS OF INVESTMENT IN 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.

- --------------------------------------------------------------------------------
INVESTMENT TECHNIQUES
- --------------------------------------------------------------------------------

The Fund is authorized to use the following investment techniques, subject to
the accompanying restrictions. Although these techniques or strategies are used
regularly by some investment companies, the investment adviser expects that the
Fund's use of these techniques will not be routine and will be limited to
special situations.

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

OPTIONS ON SECURITIES AND STOCK INDICES

The Fund may write (i.e., sell) covered put and call options and purchase put
and call options on securities or stock indices that are listed on a national
securities or commodities exchange. 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 stock 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.' This
means that so long as the Fund is obligated as the writer of a call option, it
will own the underlying securities subject to the call, or hold a call at the
same or lower exercise price, for the same exercise period, and on the same
securities as the written call. A put is covered if the Fund maintains
collateral consisting of cash or liquid portfolio securities with a value equal
to the exercise price in a segregated account, or holds a put on the same
underlying security at an equal or greater exercise price. 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.

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

FUTURES CONTRACTS

The Fund may buy and sell financial futures contracts, stock and bond index
futures contracts, foreign currency futures contracts and options on any of the
foregoing. A financial futures contract is an agreement between two parties to
buy or sell a specified debt security at a set price on a future date. An index
futures contract is an agreement to take or make delivery of an amount of cash
based on the difference between the value of the index at the beginning and at
the end of the contract period. A futures contract on a foreign currency is an
agreement to buy or sell a specified amount of a currency for a set price on a
future date.

The Fund may 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. The Fund will also be authorized to enter
into such contracts and 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% 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 of the Fund than if the Fund had not entered into
any futures transactions.

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

FORWARD FOREIGN CURRENCY CONTRACTS

The Fund will enter into forward contracts under the following circumstances.
First, when the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, it may desire to 'lock in' the U.S.
dollar price of the security in relation to another currency by entering into a
forward contract to buy the amount of foreign currency needed to settle the
transaction. Second, when it is believed that the currency of a particular
foreign country may suffer or enjoy a substantial movement against another
currency, it may enter into a forward contract to sell or buy the 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. The second investment practice
is generally referred to as 'cross-hedging.' The Fund's forward transactions may
call for the delivery of one foreign currency in exchange for another foreign
currency and may at times not involve currencies in which its portfolio
securities are denominated.

The Fund will not enter into forward foreign currency contracts if, as a result,
the Fund will have more than 15% of the value of its net assets committed to the
consummation of such contracts. To the extent such contracts would be deemed to
be illiquid, they will be included in the maximum limitation of 15% of net
assets invested in restricted or illiquid securities.

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

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 relationship between the
U.S. dollar and foreign currencies. Unanticipated changes in currency prices may
cause poorer overall performance for the Fund than if it had not engaged in such
contracts.

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

SHORT SALES

The Fund may enter into short sales, provided the dollar amount of short sales
at any one time would not exceed 25% of the net assets of the Fund, and the
value of securities of any one issuer in which the Fund is short would not
exceed the lesser of 2% of the value of the Fund's net assets or 2% of the
securities of any class of any issuer. The Fund must maintain collateral in a
segregated account consisting of cash or liquid portfolio securities with a
value

equal to the current market value of the shorted securities, which is marked to
market daily. If the Fund owns an equal amount of such securities or securities
convertible into or exchangeable for, without payment of any further
consideration, securities of the same issuer as, and equal in amount to, the
securities sold short (which sales are commonly referred to as 'short sales
against the box'), the above requirements are not applicable.

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

NON-DIVERSIFIED STATUS; PORTFOLIO TURNOVER

The Fund is classified as a 'non-diversified' investment company under the 1940
Act, which means the Fund is not limited by the 1940 Act in the proportion of
its assets that may be invested in the securities of a single issuer. However,
the Fund intends to conduct its operations so as to qualify as a regulated
investment company for purposes of the Code, which generally will relieve the
Fund of any liability for Federal income tax to the extent its earnings are
distributed to shareholders. See 'Taxation.' To so qualify, among other
requirements, the Fund will limit its investments so that, at the close of each
quarter of the taxable year, (i) not more than 25% of the market value of the
Fund's total assets will be invested in the securities of a single issuer, and
(ii) with respect to 50% of the market value of its total assets, not more than
5% of the market value of its total assets will be invested in the securities of
a single issuer and the Fund will not own more than 10% of the outstanding
voting securities of a single issuer. The Fund's investments in securities
issued by the U.S. Government, its agencies and instrumentalities are not
subject to these limitations. Because the Fund, as a non-diversified investment
company, may invest in a smaller number of individual issuers than a diversified
investment company, an investment in the Fund may present greater risk to an
investor than an investment in a diversified company.

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 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 'Taxation.'

- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------

The Fund has adopted certain investment restrictions, which may not be changed
without the approval of the holders of a majority of the Fund's outstanding
voting securities as defined below. The percentage limitations set forth below,
as well as those described elsewhere in this Prospectus, apply only at the time
an investment is made or other relevant action is taken by the Fund.

In addition to other fundamental investment restrictions listed in the Statement
of Additional Information, the Fund will 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, as defined in 'Investment Objective and
Policies,' if immediately after such investment more than 15% of the Fund's net
assets (taken at market value) would be invested in such securities; or

4. Purchase or sell real estate, 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.

The foregoing restrictions are fundamental policies that may not be changed
without the approval of a majority of the Fund's outstanding voting securities.
As used in this Prospectus, a majority of the Fund's outstanding voting
securities means the lesser of (a) more than 50% of its outstanding voting
securities or (b) 67% or more of the voting securities present at a meeting at
which more than 50% of the outstanding voting securities are present or
represented by proxy. Fund policies and restrictions which are not fundamental
may be modified by the Board of Directors without shareholder approval if, in
the reasonable exercise of its business judgment, modification is determined to
be necessary or appropriate to carry out the Fund's objective. However, the Fund
will not change its investment policies or restrictions without written notice
to shareholders.

- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------

BOARD OF DIRECTORS

The overall management of the business and affairs of the Fund is vested with
the Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to it,
including the Fund's agreements with its Adviser, administrator, custodian and
transfer agent. The management of the Fund's day-to-day operations is delegated
to its officers, the Adviser and the administrator, subject always to the
investment objective and policies of the Fund and to general supervision by the
Board of Directors. The Directors and officers of the Fund and their principal
occupations are set forth below.

Robert H. Steers, Chairman of the Board, is the Chairman and one of the
principals of the Adviser.

Martin Cohen, Director and President, is the President and one of the principals
of the Adviser.

Gregory C. Clark, Director, is the principal of Wellspring Management Group.

George Grossman, Director, is an attorney at law in private practice.

Jeffrey H. Lynford, Director, is Chairman of Wellsford Group, Inc. and of
Wellsford Residential Property Trust.

Willard H. Smith Jr., Director, is a board member of several REIT companies.

Elizabeth O. Reagan, Vice President, is a Senior Vice President of the Adviser.

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

THE 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 Directors of the Fund.
Cohen & Steers, a registered investment adviser, was formed in 1986 and is the
leading U.S. manager of portfolios dedicated to investments in real estate
investment trusts ('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., both of which are
closed-end investment companies. All of Cohen & Steers' client accounts are
invested principally in real estate securities. Its principal officers include
Robert H. Steers, Chairman; and Martin Cohen, President. Mr. Cohen and Mr.
Steers are responsible for the day-to-day management of the Fund's portfolio.
Mr. Cohen and Mr. Steers may be deemed 'controlling persons' of the Adviser on
the basis of their ownership of the Adviser's stock.

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

INVESTMENT ADVISORY AGREEMENT

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, 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
Adviser also selects brokers and dealers to execute purchase and sale orders for
the portfolio transactions of the Fund. Consistent with the Rules of Fair
Practice 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. The Adviser provides persons satisfactory
to the Directors of the Fund to serve as officers of the Fund. Such officers, as
well as certain other employees and Directors of the Fund, may be directors,
officers, or employees of the Adviser. Under the Advisory Agreement, the Fund
pays the Adviser a monthly management fee in an amount equal to 1/12th of .85%
of the average daily net assets of the Fund up to $2.5 billion, plus 1/12th of
.75% of such assets in excess of $2.5 billion. This fee is higher than that
incurred by most other investment companies.

In addition to the payments to the Adviser under the Advisory Agreement
described above, the Fund pays certain other costs of its operations including
(a) custody, transfer and dividend disbursing expenses, (b) fees of Directors
who are not affiliated with the Adviser, (c) legal and auditing expenses, (d)
clerical, accounting and other office costs, (e) costs of printing the Fund's
prospectuses and shareholder reports, (f) costs of maintaining the Fund's
existence, (g) interest charges, taxes, brokerage fees and commissions, (h)
costs of stationery and supplies, (i) expenses and fees related to registration
and filing with the Securities and Exchange Commission and with state regulatory
authorities, and (j) upon the approval of the Board of Directors, costs of
personnel of the Adviser or its affiliates rendering clerical, accounting and
other office services. For the fiscal year ended December 31, 1996, the Fund's
expenses, including the management fee, equaled 1.08% of the Fund's average net
assets (net of administrative fee waived and directed brokerage arrangements,
equivalent to 0.02% of average net assets).

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

ADMINISTRATOR AND SUB-ADMINISTRATOR

The Adviser has also entered into an administration agreement with the Fund (the
'Administration Agreement') under which the Adviser performs certain
administrative functions for the Fund, including (i) providing office space,
telephone, office equipment and supplies for the Fund; (ii) paying compensation
of the Fund's officers for services rendered as such; (iii) authorizing
expenditures and approving bills for payment on behalf of the Fund; (iv)
supervising preparation of the periodic updating of the Fund's registration
statement, including prospectus and statement of additional information, for the
purpose of filings with the Securities and Exchange Commission and state
securities administrators and monitoring and maintaining the effectiveness of
such filings, as appropriate; (v) supervising preparation of quarterly reports
to the Fund's shareholders, notices of dividends, capital gains distributions
and tax credits, and attending to routine correspondence and other
communications with individual shareholders; (vi) supervising the daily pricing
of the Fund's investment portfolio and the publication of the net asset value of
the Fund's shares, earnings reports and other financial data; (vii) monitoring
relationships with organizations providing services to the Fund, including the
Custodian, Transfer Agent and printers; (viii) providing trading desk facilities
for the Fund; (ix) supervising compliance by the Fund with recordkeeping
requirements under the 1940 Act and regulations thereunder, maintaining books
and records for the Fund (other than those maintained by the Custodian and
Transfer Agent) and preparing and filing of tax reports other than the Fund's
income tax returns; and (x) providing executive, clerical and secretarial help
needed to carry out these responsibilities.

Under the Sub-Administration Agreement, Chase has assumed responsibility for
performing certain of the foregoing administrative functions, including
determining the Fund's net asset value and preparing such figures for
publication, maintaining certain of the Fund's books and records that are not
maintained by the Adviser, custodian or transfer agent, preparing financial
information for the Fund's income tax returns, proxy statements, quarterly and
annual shareholders reports, and Commission filings, and responding to
shareholder inquiries. Under the terms of the Administration Agreement, the Fund
pays Chase a monthly administration fee at the annual rate of .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 asssets in excess of that amount. Chase Global Funds
Services Company, 73 Tremont Street, Boston, Massachusetts 02108, 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.'

Under the Administration Agreement, 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. For its services under the Administration Agreement, the Adviser
receives a monthly fee from the Fund at the annual rate of .02% of the Fund's
average daily net assets.

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

SHAREHOLDER SERVICING

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 subaccouting services for Fund shares held beneficially;
and providing such other services as the Fund or a shareholder may request.

- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------

Net asset value per share will be determined on each day the New York Stock
Exchange is open for trading and on each other day on which there is a
sufficient degree of trading in the Fund's investments to affect the net asset
value, as of the close of trading on the New York Stock Exchange by adding the
market value of all securities in the Fund's portfolio and other assets,
subtracting liabilities, incurred or accrued, and dividing by the total number
of the Fund's shares then outstanding.

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 Automated Quotations, Inc. ('NASDAQ') National List are valued in a like
manner. Portfolio securities traded on more than one securities exchange are
valued at the last sale price on the business day as of which such value is
being determined as reflected on the tape at the close of the exchange
representing the principal market for such securities.

Readily marketable securities traded in the over-the-counter market, including
listed securities whose primary market is believed by the Adviser to be over-
the-counter, but excluding securities admitted to trading on the NASDAQ National
List, are valued at the mean of the current bid and asked prices as reported by
NASDAQ or, in the case of securities not quoted by NASDAQ, the National
Quotation Bureau or such other comparable 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.

- --------------------------------------------------------------------------------
PURCHASE OF SHARES
- --------------------------------------------------------------------------------

Shares of the Fund may be purchased through Cohen & Steers Securities, Inc., the
Fund's distributor and an affiliate of the Adviser, acting as agent for the
Fund. The minimum initial investment is $10,000 and the minimum subsequent
investment is $500. The Fund reserves the right, in its sole discretion, to
waive the minimum initial investment amount for certain investors. The Fund
reserves the right to reject any purchase order. Shareholder accounts may be
maintained through brokerage firms or other financial institutions. Such
institutions, which may impose their own minimum investment amounts, may make
arrangements for their customers to purchase and redeem Fund shares by
telephone, in which event a transaction fee may be charged by the institution
(not by the Fund). The minimum for initial investments through such institutions
may be as low as $2,000 per investor.

Orders for shares of the Fund will become effective at the net asset value per
share next determined after receipt by Chase Global Funds Services Company, the
Transfer Agent, of a check drawn on any bank or domestic savings institution or
after receipt by Chase Manhattan Bank, the Fund's custodian, of a bank wire or
Federal Reserve Wire. Checks must be payable in United States dollars and will
be accepted subject to collection at full face value. All funds will be invested
in full and fractional shares.

By investing in the Fund, a shareholder appoints the Transfer Agent, as agent,
to establish an open account to which all shares purchased will be credited,
together with any dividends and capital gain distributions that are paid in
additional shares. See 'Dividends and Distributions.' Although most shareholders
elect not to receive stock certificates, certificates for full shares can be
obtained on specific written request to the Transfer Agent. No certificates are
issued for fractional shares. IT IS MORE COMPLICATED TO REDEEM SHARES HELD IN
CERTIFICATE FORM.

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

INITIAL PURCHASE BY WIRE

1. Telephone toll free from any continental state: (800) 437-9912 ((617)
557-8000 for Massachusetts residents). Give the 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. A wire reference control number will
be assigned.

2. Instruct the wiring bank to transmit the specified amount in federal funds
($10,000 or more) to the Custodian:

The Chase Manhattan Bank
3 Chase MetroTech Center
Brooklyn, NY 11245
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 included at the end of this Prospectus.
Mail the Subscription Agreement to the Transfer Agent:

Chase Global Funds Services Company
73 Tremont St.
Boston, MA 02108-3913

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

ADDITIONAL PURCHASES BY WIRE

1. Telephone toll free from any continental state: (800) 437-9912 ((617)
557-8000 for Massachusetts residents). Give the name of the Fund, the account
number, the 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. A wire
reference control number will be assigned.

2. Instruct the wiring bank to transmit the specified amount in federal funds
($500 or more) 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 #:

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

INITIAL PURCHASE BY MAIL

1. Complete the Subscription Agreement included at the end of this Prospectus.

2. Mail the Subscription Agreement and a check for $10,000 or more, payable to
the Fund, to the Transfer Agent at the address set forth above.

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

ADDITIONAL PURCHASES BY MAIL

1. Make a check ($500 or more) payable to the Fund. Write the shareholder's Fund
account number on the check.

2. Mail the check and the detachable stub from the Statement of Account (or a
letter providing the account number) to the Transfer Agent at the address set
forth above.

- --------------------------------------------------------------------------------
REDEMPTION OF SHARES
- --------------------------------------------------------------------------------

Upon receipt by the Transfer Agent of a redemption request in proper form,
shares of the Fund will be redeemed at their next determined net asset value.
See 'Determination of Net Asset Value.'

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

REDEMPTION BY TELEPHONE

You may submit redemption requests by telephone by calling Chase Global Funds
Services Company at (800) 437-9912 ((617) 557-8000 for Massachusetts residents)
and requesting that the proceeds be directed as indicated in the Subscription
Agreement. Requests for redemption made by telephone will be accepted if a
proper redemption request is received

prior to 4:00 p.m., Eastern time. Shares will be redeemed at the net asset value
determined as of the closing of trading on the New York Stock Exchange on that
day. If a proper request is received after 4:00 p.m. Eastern time, the shares
will be redeemed as of the close of trading on the New York Stock Exchange on
the next business day. You may not make a redemption request by telephone if the
proceeds are to be wired or mailed to a bank account number or address other
than the one specified on the Subscription Agreement. Such requests must be in
writing accompanied by a signature guarantee. If you would like to change your
wiring instructions or the address to which your check should be mailed, your
written notification must be signed by all of the account's registered
shareholders, accompanied by a signature guarantee and sent to Chase Global
Funds Services Company, at the address listed above. 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 Chase Global Funds Services Company. Telephone redemption
privileges may be modified or suspended without notice during periods of drastic
economic or market changes. TELEPHONE REDEMPTION PRIVILEGES MAY BE MODIFIED OR
TERMINATED AT ANY TIME BY THE FUND UPON 30 DAYS NOTICE TO SHAREHOLDERS.

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

REDEMPTION BY MAIL

Shares may be redeemed by submitting a written request for redemption to the
Transfer Agent:

Chase Global Funds Services Company
73 Tremont St.
Boston, Massachusetts 02108-3913

A written redemption request must (i) state the number of shares or dollar
amount to be redeemed, (ii) identify the shareholder account number and tax
identification number, and (iii) 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 Chase
Global Funds Services Company together with a redemption request. When proceeds
of a redemption are to be paid to someone other than the shareholder, either by
wire or check, the signature(s) on the letter of instruction must be guaranteed
regardless of the amount of the redemption. 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
Chase Global Funds Services Company. Chase Global Funds Services Company may
require additional supporting documents for redemptions made by corporations,
executors, administrators, trustees and guardians. A redemption request will not
be deemed to be properly received until Chase Global Funds Services Company
receives all required documents in proper form.

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

OTHER REDEMPTION INFORMATION

Checks for redemption proceeds will normally be mailed within five business
days, but will not be mailed until all checks in payment for the purchase of the
shares to be redeemed have been collected, which may take up to 21 days or more.
Unless other instructions are given in proper form, a check for the proceeds of
a redemption will be sent to the shareholder's address of record. The Custodian
may benefit from the use of redemption proceeds until the check issued to a
redeeming shareholder for such proceeds has cleared.

The Fund may suspend the right of redemption during any period when (i) trading
on the New York Stock Exchange is restricted or that Exchange is closed, other
than customary weekend and holiday closings, (ii) the Securities and Exchange
Commission (the 'SEC') has by order permitted such sus-

pension or (iii) an emergency, as defined by rules of the SEC, exists making
disposal of portfolio securities or determination of the value of the net assets
of the Fund not reasonably practicable.

The proceeds of redemption may be more or less than the amount invested and,
therefore, a redemption may result in a gain or loss for federal income tax
purposes.

The Fund reserves the right to redeem upon not less than 30 days' written notice
the shares in an account that has a value of $2,000 or less as the result of
voluntary redemption. However, any shareholder affected by the exercise of this
right will be allowed to make additional investments prior to the date fixed for
redemption to avoid liquidation of the account.

- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------

Dividends from the Fund's investment income will be declared and distributed
quarterly. The Fund intends to distribute net realized capital gains, if any, at
least annually although the Board of Directors may in the future determine to
retain realized capital gains and not distribute them to shareholders. For
information concerning the tax treatment of the Fund's distribution policies for
the Fund and its shareholders, see 'Taxation.'

Distributions will automatically be paid in full and fractional shares of the
Fund based on the net asset value per share at the close of business on the
payable date unless the shareholder has elected to have them paid in cash.

- --------------------------------------------------------------------------------
TAXATION
- --------------------------------------------------------------------------------

The following discussion is intended for general information only. An investor
should consult with his or her own tax adviser as to the tax consequences of an
investment in the Fund, including the status of distributions under applicable
state or local law.

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

FEDERAL INCOME TAXES

The Fund intends to continue to qualify annually and elect to be treated as a
regulated investment company under the Code. To qualify, the Fund must meet
certain income, distribution and diversification requirements. In any year in
which the Fund qualifies as a regulated investment company and timely
distributes all of its taxable income, the Fund generally will not pay any U.S.
federal income or excise tax.

Dividends paid out of the Fund's investment company taxable income (including
dividends, interest and net short-term capital gains) will be taxable to a U.S.
shareholder as ordinary income. Because a portion of the Fund's income may
consist 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 as long-term capital gains, regardless of how long the
shareholder has held the Fund's shares. Dividends are taxable to shareholders in
the same manner whether received in cash or reinvested in additional Fund
shares.

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.

Each year the Fund will notify shareholders of the tax status of dividends and
distributions.

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. Backup withholding is not an additional tax. Any amounts
withheld may be credited against the shareholder's U.S. federal income tax
liability.

Further information relating to tax consequences is contained in the Statement
of Additional Information.

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

STATE AND LOCAL TAXES

Fund distributions also may be subject to state and local taxes. Shareholders
should consult their own tax advisers regarding the particular tax consequences
of an investment in the Fund.

- --------------------------------------------------------------------------------
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, $.001 par value (the
'Common Stock'). The Fund's Board of Directors may, without shareholder
approval, increase or decrease the number of authorized but unissued shares of
the Fund's Common Stock. Each of the Fund's shares has equal dividend,
distribution, liquidation and voting rights. There are no conversion or
preemptive rights in connection with any shares of the Fund. All shares of the
Fund when duly issued will be fully paid and nonassessible. The rights of the
holders of shares of Common Stock may not be modified except by the vote of a
majority of the shares outstanding. The Fund is empowered to establish, without
shareholder approval, additional portfolios which may have different investment
objectives.

The Fund is not required to hold regular annual shareholders' meetings. A
shareholders' meeting shall, however, be called by the secretary upon the
written request of the holders of not less than 10% of the outstanding shares of
the Fund. The Fund will assist shareholders wishing to communicate with one
another for the purpose of requesting such a meeting.

- --------------------------------------------------------------------------------
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
- --------------------------------------------------------------------------------

Chase, which has its principal business address at 3 Chase MetroTech Center,
Brooklyn, NY 11245, has been retained to act as Custodian of the Fund's
investments and to serve 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.

- --------------------------------------------------------------------------------
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------

The fiscal year of the Fund ends on December 31 of each year. The Fund sends to
its shareholders, at least semi-annually, reports showing the investments and
other information (including unaudited financial statements). An annual report,
containing financial statements audited by the Fund's independent accountants,
is sent to shareholders each year.

- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time, the Fund may advertise its 'average annual total return' over
various periods of time. This total return figure shows the average percentage
change in value of an investment in the Fund from the beginning date of the
measuring period to the ending date of the measuring period. The figure reflects
changes in the price of the Fund's shares and assumes that any income dividends
and/or capital gains distributions made by the Fund during the period are
reinvested in shares of the Fund. Figures will be given for recent one-, five-
and ten-year periods (when applicable), and may be given for other periods as
well (such as from commencement of the Fund's operations, or on a year-by-year
basis). When considering 'average' total return figures for periods longer than
one year, investors should note that the Fund's annual total return for any one
year in the period might have been greater or less than the average for the
entire period. The Fund also may use 'aggregate' total return figures for
various periods, representing the cumulative change in value of an investment in
the Fund for the specific period (again reflecting changes in the Fund's share
price and assuming reinvestment of dividends and distributions). Aggregate total
returns may be shown by means of schedules, charts or graphs, and may indicate
subtotals of the various components of total return (that is, the change in
value of initial investment, income dividends and capital gains distributions).

It is important to note that total return figures are based on historical
earnings and are not intended to indicate future performance. The Statement of
Additional Information further describes the methods used to determine the
Fund's performance.

- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------

Any shareholder inquiries may be directed to the Fund at the address or
telephone number listed on the back cover of this Prospectus. This Prospectus,
including the Statement of Additional Information which has been incorporated by
reference herein, does not contain all the information set forth in the
Registration Statement filed by the Fund with the SEC under the Securities Act
of 1933. Copies of the Registration Statement may be obtained at a reasonable
charge from the SEC or may be examined, without charge, at the offices of the
SEC in Washington, D.C. (http://www.sec.gov).

____________________________________ ___________________________________

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.

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

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fee Table..................................................................................................... 2
Financial Highlights.......................................................................................... 3
Investment Objective and Policies............................................................................. 4
Investment Techniques......................................................................................... 6
Investment Restrictions....................................................................................... 8
Management of the Fund........................................................................................ 9
Determination of Net Asset Value.............................................................................. 12
Purchase of Shares............................................................................................ 13
Redemption of Shares.......................................................................................... 14
Dividends and Distributions................................................................................... 16
Taxation...................................................................................................... 16
Organization and Description of Capital Stock................................................................. 17
Custodian and Transfer and Dividend Disbursing Agent.......................................................... 18
Reports to Shareholders....................................................................................... 18
Performance Information....................................................................................... 18
Additional Information........................................................................................ 18
</TABLE>

[Logo]

------------------
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
73 TREMONT ST.
BOSTON, MASSACHUSETTS 02108-3913
TELEPHONE: (800) 437-9912

MAY 1 , 1997

____________________________________ ___________________________________

[Logo]

757 Third Avenue
New York, New York 10017
(212) 832-3232
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 1997

Cohen & Steers Realty Shares, Inc. (the 'Fund') is a non-diversified, open-end
management investment company that seeks 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. Cohen & Steers Capital Management, Inc. serves as investment adviser
(the 'Adviser' or 'Cohen & Steers') to the Fund.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS
DATED MAY 1, 1997 (THE 'PROSPECTUS'). THIS STATEMENT OF ADDITIONAL
INFORMATION CONTAINS ADDITIONAL AND MORE DETAILED INFORMATION THAN THAT SET
FORTH IN THE PROSPECTUS AND SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS,
ADDITIONAL COPIES OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY WRITING OR CALLING
THE FUND AT THE ADDRESS AND TELEPHONE NUMBER GIVEN ABOVE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies........................................................... 1

Investment Techniques....................................................................... 2

Investment Restrictions..................................................................... 6

Management of the Fund...................................................................... 7

Determination of Net Asset Value............................................................ 12

Redemption of Shares........................................................................ 12

Portfolio Transactions and Brokerage........................................................ 13

Taxation.................................................................................... 14

Organization and Description of Capital Stock............................................... 18

Distributor................................................................................. 19

Custodian and Transfer and Dividend Disbursing Agent........................................ 19

Performance Information..................................................................... 19

Counsel and Independent Accountants......................................................... 21

Financial Statements........................................................................ 21
</TABLE>

- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------

The following discussion of the Fund's investment objective and policies
supplements, and should be read in conjunction with, the information regarding
the Fund's investment objective and policies 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.

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

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 recently 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 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 investment adviser will evaluate
and monitor the creditworthiness of the vendor. In the event that a vendor
should default on its repurchase obligation, the Fund might suffer a loss to the
extent that the 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.

- --------------------------------------------------------------------------------
INVESTMENT TECHNIQUES
- --------------------------------------------------------------------------------

The following sections provide expanded discussion of several of the types of
investments and investment techniques which may be used by the Fund.

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

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.

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

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% 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 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 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 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.

- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------

The Fund is subject to certain investment restrictions, in addition to those
listed in the Prospectus, which are deemed fundamental policies of the Fund.
Such fundamental policies are those which cannot be changed without the approval
of the holders of a majority of the Fund's outstanding shares which means the
vote of (i) 67% or more of the Fund's shares present at a meeting, if the
holders of more than 50% of the outstanding shares of the Fund are present or
represented by proxy, or (ii) more than 50% of the Fund's outstanding shares,
whichever is less.

The Fund may not:

1. Pledge, hypothecate, mortgage or otherwise
encumber its assets, except to secure permitted borrowings;

2. Participate on a joint or joint and several basis in any securities trading
account;

3. Invest in companies for the purpose of exercising control;

4. 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 (it is the Fund's present intention
to make such sales only for the purpose of deferring realization of gain or loss
for Federal income tax purposes);

5. 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; or

6. (a) invest in interests in oil, gas, or other mineral exploration or
development programs; (b) 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 (c) 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.

- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------

The directors and officers of the Fund and their principal occupations during
the past five years are set forth below. Each such director and officer is also
a director or officer of Cohen & Steers Realty Income Fund, Inc. and Cohen &
Steers Total Return Realty Fund, Inc., both of which are closed-end investment
companies sponsored by the Adviser.

<TABLE>
<CAPTION>
NAME AND ADDRESS OFFICE PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS
- --------------------------------- ------------------- --------------------------------------------------------
<S> <C> <C>
*Robert H. Steers ............... Director, Chairman Chairman of Cohen & Steers Capital Management, Inc., the
757 Third Avenue Fund's investment adviser. Chairman and President of
New York, New York Cohen & Steers Securities, Inc.
Age: 44

*Martin Cohen ................... Director, President President of Cohen & Steers Capital Management, Inc.,
757 Third Avenue the Fund's investment adviser. Vice President of Cohen &
New York, New York Steers Securities, Inc.
Age: 48

Gregory C. Clark ................ Director Principal of Wellspring Management Group.
P.O. Box 5697
Snowmass Village,
Colorado
Age: 50

George Grossman ................. Director Attorney at law.
17 Elm Place
Rye, New York
Age: 43
</TABLE>

<TABLE>
<CAPTION>
NAME AND ADDRESS OFFICE PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS
- --------------------------------- ------------------- --------------------------------------------------------
<S> <C> <C>
Jeffrey H. Lynford .............. Director Chairman of Wellsford Group Inc. since 1986 and of
610 Fifth Avenue Wellsford Residential Property Trust since 1992. Mr.
New York, New York Lynford is also an Emeritus Trustee of the National
Age: 49 Trust for Historic Preservation.

Willard H. Smith Jr. ............ Director Board member Essex Property Trust, Inc., Highwoods
7 Slayton Drive Properties, Inc., Realty Income Corporation and
Short Hills, New Jersey Willis Lease Finance Corporation. Managing director
Age: 60 at Merrill Lynch & Co., Equity Capital Markets
Division from 1983 to 1995.

Elizabeth O. Reagan ............. Vice President Senior Vice President of Cohen & Steers Capital
757 Third Avenue Management, Inc., the Fund's investment adviser,
New York, New York since 1996 and prior to that Vice President of Cohen
Age: 34 & Steers Capital Management, Inc. Ms. Reagan is also
Vice President of Cohen & Steers Securities, Inc.
</TABLE>

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

* Directors who are 'interested persons' of the Fund, as defined in the
Investment Company Act of 1940.

The Directors of the Fund who are employees of the Adviser or officers or
employees of any of its affiliates receive no remuneration from the Fund. 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.

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

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, 1996. 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. In the Column headed 'Total Compensation From Registrant and Fund
Complex Paid to Directors,' the number in parentheses indicates the total number
of boards in the fund complex on which the Director serves.

<TABLE>
<CAPTION>
COMPENSATION TABLE
FISCAL YEAR ENDED DECEMBER 31, 1996
PENSION OR TOTAL
RETIREMENT ESTIMATED COMPENSATION
AGGREGATE BENEFITS ANNUAL FROM REGISTRANT
COMPENSATION ACCRUED AS BENEFITS AND FUND
FROM PART OF FUND UPON COMPLEX PAID TO
NAME OF PERSON, POSITION REGISTRANT EXPENSES RETIREMENT DIRECTORS
- --------------------------------------------------- ------------ ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Gregory C. Clark*, Director........................ $7,500 N/A N/A $22,500(3)
Martin Cohen**, Director and President............. 0 N/A N/A 0(3)
George Grossman*, Director......................... 7,500 N/A N/A 22,500(3)
Jeffrey H. Lynford*, Director...................... 7,500 N/A N/A 22,500(3)
Willard H. Smith Jr.*`D', Director................. 5,625 N/A N/A 16,875(3)
Robert H. Steers**, Director and Chairman.......... 0 N/A N/A 0(3)
</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.

`D' Joined the Board of Directors on June 11, 1996.

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

ADVISER AND INVESTMENT ADVISORY AGREEMENT

Cohen & Steers, a registered investment adviser, was formed in 1986 and
specializes in the management of real estate securities portfolios. Its current
clients include pension plans of leading corporations, endowment funds and
mutual funds, including Cohen & Steers Realty Income Fund, Inc. and Cohen &
Steers Total Return Realty Fund, Inc., both of which are closed-end investment
companies. Mr. Cohen and Mr. Steers may be deemed 'controlling persons' of the
Adviser on the basis of their ownership of the Adviser's stock.

Certain other clients of the Adviser may have investment objectives and policies
similar to those of the Fund. The Adviser may, from time to time, make
recommendations which result in the purchase or sale of a particular security by
its other clients simultaneously with the Fund. If transactions on behalf of
more than one client during the same period increase the demand for securities
being sold there may be an adverse effect on price. It is the policy of the
Adviser to allocate advisory recommendations and the placing of orders in a
manner which is deemed equitable by the Adviser to the accounts involved,
including the Fund. When two or more of the clients of the Adviser (including
the Fund) are purchasing or selling the same security on a given day through the
same broker-dealer, such transactions may be averaged as to price.

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 .85% of the average daily value of the net
assets of the Fund up to $2.5 billion, plus 1/12th of .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.) During the years ended December 31, 1996,
1995 and 1994, the Adviser received a management fee from the Fund in the amount
of $9,704,419, $4,956,723 and $2,752,145, respectively.

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.

The Advisory Agreement was approved on June 5, 1991 by the Fund's Directors,
including a majority of the Directors who are not interested persons as defined
in the Investment Company Act of 1940, as amended (the '1940 Act') of the Fund
or the Adviser and by the sole initial shareholder of the Fund on June 14, 1991.
The Advisory Agreement was approved by the shareholders of the Fund at their
first annual meeting held on April 28, 1992.

The Advisory Agreement continues in effect from year to year, provided that its
continuance is specifically approved annually by the Directors or by a vote of
the shareholders, and in either case by a majority of the Directors who are not
parties to the Advisory Agreement or interested persons of any such party, by
vote cast in person at a meeting called for the purpose of voting on such
approval. The Advisory Agreement was most recently so approved by the Directors
at their meeting held on December 4, 1996.

The Advisory Agreement is terminable without penalty by the Fund on sixty days'
written notice when authorized either by majority vote of its outstanding voting
securities or by a vote of a majority of its Directors, or by the Adviser on
sixty days' written notice, and will automatically terminate in the event of its
assignment. The Advisory Agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence on the part of the Adviser, or of
reckless disregard of its obligations thereunder, the Adviser shall not be
liable for any action or failure to act in accordance with its duties
thereunder.

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

ADMINISTRATOR AND SUB-ADMINISTRATOR

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.

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. Under the terms of the Administration Agreement, the Fund
pays Chase a monthly administration fee at the annual rate of .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 asssets in excess of that amount. Chase Global Funds
Services Company, 73 Tremont Street, Boston, Massachusetts 02108, 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 year ending December 31, 1994 the Fund's prior Administrator received an
administration fee from the Fund in the amount of $326,609 (net of reimbursement
of $162,177). For the year ended December 31, 1996 and December 31, 1995, the
Adviser received Administration fees from the fund in the amounts of $228,410
and $61,772, respectively, and Chase received sub-administration fees from the
Fund in the amounts of $772,468 and $688,290 (net of waivers of $117,113),
respectively.

The Administration Agreement is terminable by either party on sixty days'
written notice to the other. The Administration Agreement provides that in the
absence of willful misfeasance, bad faith or gross negligence on the part of the
Administrator, or of reckless disregard of its obligations thereunder, U.S.
Trust shall not be liable for any action or failure to act in accordance with
its duties thereunder.

- --------------------------------------------------------------------------------
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. The New York Stock Exchange is closed on Saturdays,
Sundays, and on New Years' Day, Presidents' Day (the third Monday in February),
Good Friday, Memorial Day (the last Monday in May), Independence Day, Labor Day
(the first Monday in September), Thanksgiving Day and Christmas Day
(collectively, the 'Holidays'). When any Holiday falls on a Saturday, the
Exchange is closed the preceding Friday, and when any holiday falls on a Sunday,
the Exchange is closed the following Monday. No redemptions will be made on
Martin Luther King Day (the third Monday in January), Columbus Day (the second
Monday in October) and Veteran's Day, nor on any of the Holidays.

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 under 'Determination of Net Asset
Value'), 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.

- --------------------------------------------------------------------------------
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 Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to seeking best price and execution,
the Adviser may consider sales of shares of the Fund as a factor in the
selection of brokers and dealers to enter into portfolio transactions with the
Fund.

For the years ended December 31, 1996, 1995 and 1994, the Fund paid a total of
$8,703,119, $3,021,179 and $3,049,221 in brokerage commissions with respect to
portfolio transactions aggregating $1,522,810,641, $553,557,388 and
$490,721,086, respectively. Of such amount, $733,405, $572,896 and $622,809 in
brokerage commissions with respect to portfolio transactions aggregating
$274,587,726, $104,969,223 and $100,230,685, 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, 1996
was 33.2%.

- --------------------------------------------------------------------------------
TAXATION
- --------------------------------------------------------------------------------

TAXATION OF THE FUND

The Fund intends to qualify annually and to elect to be treated as a regulated
investment company under the Internal Revenue Code of 1986, as amended (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) derive less than 30% of its gross income from the sale or other
disposition of certain assets (namely, (i) stock or securities, (ii) options,
futures, and forward contracts (other than those on foreign currencies), and
(iii) foreign currencies (including options, futures, and forward contracts on
such currencies) not directly related to the Fund's principal business of
investing in stock or securities (or options and futures with respect to stocks
or securities)) held less than 3 months; (c) 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 (d) 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. Because a portion of the
Fund's income may consist 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, if any, designated as
capital gain dividends are taxable as long-term capital gains, regardless of how
long the shareholder has held the Fund's shares, and are not eligible for the
dividends-received deduction. Shareholders receiving distributions in the form
of additional shares, rather than cash, generally will have a cost basis in each
such share equal to the net asset value of a share of the Fund on the
reinvestment date. 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.

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

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 lncome.

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

SALE OF SHARES

Upon the sale or other disposition of shares of the Fund, a shareholder may
realize a capital gain or loss which will be long-term or short-term, generally
depending upon the shareholder's holding period for the shares. Any loss
realized on a sale or exchange will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30 days before and
ending 30 days after disposition of the shares. In such a case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on a disposition of Fund shares held by the
shareholder for six months or less will be treated as a long-term capital loss
to the extent of any distributions of net capital gains received by the
shareholder with respect to such shares.

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

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

If the Fund invests in stock of certain foreign investment companies, the Fund
may be subject to U.S. federal income taxation on a portion of any 'excess
distribution' with respect to, or gain from the disposition of, such stock. The
tax would be determined by allocating such distribution or gain ratably to each
day of the Fund's holding period for the stock. The distribution or gain so
allocated to any taxable year of the Fund, other than the taxable year of the
excess distribution or disposition, would be taxed to the Fund at the highest
ordinary income tax rate in effect for such year, and the tax would be further
increased by an interest charge to reflect the value of the tax deferral deemed
to have resulted from the ownership of the foreign company's stock. Any amount
of distribution or gain allocated to the taxable year of the distribution or
disposition would be included in the Fund's investment company taxable income
and, accordingly, would not be taxable to the Fund to the extent distributed by
the Fund as a dividend to its shareholders.

The Fund may be able to make an election, in lieu of being taxable in the manner
described above, to include annually in income its pro rata share of the
ordinary earnings and net capital gain of the foreign investment company,
regardless of whether it actually received any distributions from the foreign
company. These amounts would be included in the Fund's investment company
taxable income and net capital gain which, to the extent distributed by the Fund
as ordinary or capital gain dividends, as the case may be, would not be taxable
to the Fund. In order to make this election, the Fund would be required to
obtain certain annual information from the foreign investment companies in which
it invests, which in many cases may be difficult to obtain. Alternatively, the
Fund may be eligible to elect to mark to market its foreign investment company
stock, resulting in the stock being treated as sold at fair market value on the
last business day of each taxable year. Any resulting gain would be reported as
ordinary income, and any resulting loss would not be recognized. If this
election were made, the special rules described above with respect to excess
distributions and dispositions would still apply.

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

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 a shareholder who, as to the United States, is a nonresident
alien individual, a foreign trust or estate, a foreign corporation or foreign
partnership ('foreign shareholder') depends on whether the income of the Fund is
'effectively connected' with a U.S. trade or business carried on by the
shareholder.

Income Not Effectively Connected. If the income from the Fund is not
'effectively connected' with a U.S. trade or business carried on by the foreign
shareholder, distributions of investment company taxable income will be subject
to a U.S. tax of 30% (or lower treaty rate, except in the case of any excess
inclusion income allocated to the shareholder (see 'Taxation -- Investments in
Real Estate Investment Trusts,' above)), which tax is generally withheld from
such distributions.

Distributions of capital gain dividends and any amounts retained by the Fund
which are designated as undistributed capital gains will not be subject to U.S.
tax at the rate of 30% (or lower treaty rate) unless the foreign shareholder is
a nonresident alien individual and is physically present in the United States
for more than 182 days during the taxable year and meets certain other
requirements. However, this 30% tax on capital gains of nonresident alien
individuals who are physically present in the United States for more than the
182-day period only applies in exceptional cases because any individual present
in the United States for more than 182 days during the taxable year is generally
treated as a resident for U.S. income tax purposes; in that case, he or she
would be subject to U.S. income tax on his or her worldwide income at the
graduated rates applicable to U.S. citizens, rather than the 30% U.S. tax. In
the case of a foreign shareholder who is a nonresident alien individual, the
Fund may be required to withhold U.S. income tax at a rate of 31% of
distributions of net capital gains unless the foreign shareholder certifies his
or her non-U.S. status under penalties of perjury or otherwise establishes an
exemption. See 'Taxation -- Backup Withholding,' above. If a foreign shareholder
is a nonresident alien individual, any gain such shareholder realizes upon the
sale or exchange of such shareholder's shares of the Fund in the United States
will ordinarily be exempt from U.S. tax unless (i) the gain is U.S. source
income and such shareholder is physically present in the United States for more
than 182 days during the taxable year and meets certain other requirements, or
is otherwise considered to be a resident alien of the United States, or (ii) at
any time during the shorter of the period during which the foreign shareholder
held shares of the Fund and the five year period

ending on the date of the disposition of those shares, the Fund was a 'U.S. real
property holding corporation' and the foreign shareholder held more than 5% of
the shares of the Fund, in which event the gain would be taxed in the same
manner as for a U.S. shareholder as discussed above and a 10% U.S. withholding
tax would be imposed on the amount realized on the disposition of such shares to
be credited against the foreign shareholder's U.S. income tax liability on such
disposition. A corporation is a 'U.S. real property holding corporation' if the
fair market value of its U.S. real property interests equals or exceeds 50% of
the fair market value of such interests plus its interests in real property
located outside the United States plus any other assets used or held for use in
a business. In the case of the Fund, U.S. real property interests include
interests in stock in U.S. real property holding corporations (other than stock
of a REIT controlled by U.S. persons and holdings of 5% or less in the stock of
publicly traded U.S. real property holding corporations) and certain
participating debt securities.

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

The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may differ from those described herein. Foreign
shareholders are advised to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in the Fund.

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

OTHER TAXATION

Fund shareholders may be subject to state, local and foreign taxes on their Fund
distributions. Shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the Fund.

The Fund was incorporated on April 26, 1991 as a Maryland corporation and is
authorized to issue 200,000,000 shares of Common Stock, $.001 par value. 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 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 he governed by the 1940 Act and Maryland law.

At March 18, 1997, there were 59,090,973 shares of the Fund's common stock
outstanding. At such date the Directors and officers as a group beneficially
owned, directly or indirectly, including the power to vote or to dispose of,
less than 1% of the outstanding shares of the Fund. Also as of that date, the
Fund knew of no person who owned 5% or more of the Fund's Shares.

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

Chase, which has its principal business at 770 Broadway, New York, New York
10003 has been retained to act as Custodian of the Fund's investments and as the
Fund's transfer and dividend disbursing agent. Chase Global Funds Services Co.,
a wholly-owned subsidiary of Chase, has been retained by Chase to provide the
Fund's transfer and dividend disbursing agency services and serves as the Fund's
Transfer and Dividend Disbursing Agent. Chase Global Funds Services Co. has its
principal business at 73 Tremont Street, Boston, Massachusetts 02108-3913.
Neither Chase nor Chase Global Funds Services Co. determines the investment
policies of the Fund or decides which securities the Fund will buy or sell.

- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time, the Fund may quote the Fund's total return in advertisements
or in reports and other communications to shareholders. The Fund's performance
will vary from time to time 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 for
any specified period in the future. In addition, because performance will
fluctuate, it may not provide a basis for comparing an investment in the Fund
with certain bank deposits or other investments that pay a fixed yield for a
stated period of time. Investors comparing the Fund's performance with that of
other mutual funds should give consideration to the quality and maturity of the
respective investment companies' portfolio securities.

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

AVERAGE ANNUAL TOTAL RETURN

The Fund's 'average annual total return' figures described in the Prospectus are
computed according to a formula prescribed by the SEC. The formula can be
expressed as follows:

P(1 + T)'pp'n = ERV

<TABLE>
<S> <C>
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 investment made at the beginning of a 1-, 5-,
or 10-year period at the end of a 1-, 5-, or 10-year period (or fractional portion thereof),
assuming reinvestment of all dividends and distributions.
</TABLE>

The Fund's average annual total return for the year ended December 31, 1996 and
for the period from July 2, 1991 (commencement of operations) to December 31,
1996 was 38.48% and 16.63%, 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[(cd + 1)6 - 1]

<TABLE>
<S> <C>
Where: a = dividends and interest earned during the period,
b = expenses accrued for the period (net of reimbursements),
c = the average daily number of shares outstanding during the period that were entitled to receive
dividends, and
d = the maximum offering price per share on the last day of the period.
</TABLE>

In reports or other communications to shareholders of the Fund or in advertising
materials, the Fund may compare its performance with that of (i) other mutual
funds listed in the rankings prepared by Lipper Analytical Services, Inc.,
publications such as Barrons, Business Week, Forbes, Fortune, Institutional
Investor, Kiplinger's Personal Finance, Money, Morningstar Mutual Fund Values,
The New York Times, The Wall Street Journal and USA Today or other industry or
financial publications or (ii) the Standard and Poor's Index of 500 Stocks, the
Dow Jones Industrial Average and other relevant indices and industry
publications. The Fund may also compare the historical volatility of its
portfolio to the volatility of such indices during the same time periods.
(Volatility is a generally accepted barometer of the market risk associated with
a portfolio of securities and is generally measured in comparison to the stock
market as a whole -- the beta -- or in absolute terms -- the standard
deviation.)

- --------------------------------------------------------------------------------
COUNSEL AND INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

Legal matters in connection with the issuance of the shares of the Fund offered
hereby will be passed upon by Dechert Price & Rhoads, 30 Rockefeller Center, New
York, New York 10112. Dechert Price & Rhoads has relied on the opinion of
Venable, Baetjer and Howard, 1800 Mercantile Bank & Trust Building, 2 Hopkins
Plaza, Baltimore, Maryland 21201, for matters relating to Maryland law.

Coopers & Lybrand L.L.P., 1301 Ave of the Americas, New York, New York 10019
have been appointed as independent accountants for the Fund.

- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

The Fund's audited financial statements for the year ended December 31, 1996,
including notes thereto, are incorporated by reference in this Statement of
Additional Information from the Fund's Annual Report dated as of December 31,
1996.

PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements

Part A -- Condensed Financial Information

Part B -- Financial Statements for the year ended December 31, 1996,
including notes thereto are incorporated by reference in the Statement of
Additional Information from the Fund's Annual Report dated as of December
31, 1996.

(b) Exhibits

1. Articles of Incorporation*, with Articles Supplementary filed with
the Secretary of State of the State of Maryland on December 26, 1996.

2. By-Laws**

3. Not Applicable

4. Specimen certificate for common stock, par value $.001 per share**

5. (A) Amendment to Form of Investment Advisory Agreement

(B) Form of Administration Agreement****

6. Not Applicable

7. Not Applicable

8. Form of Custodian Agreement**

9. (A) Form of Transfer Agency Agreement**

(B) Shareholder Service Plan

10. (A) Opinion and Consent of Dechert Price & Rhoads**

(B) Opinion and Consent of Venable, Baetjer and Howard**

11. Consent of Independent Accountants

12. Not Applicable

13. Investment Representation Letter**

14. Not Applicable

15. Not Applicable

16. Schedule for Computation of Performance Quotation***

17. Financial Data Schedule

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

* Filed with initial registration statement on April 29, 1991.

** Filed with Pre-Effective Amendment No. 1 on June 17, 1991.

*** Filed with Post-Effective Amendment No. 3 on March 17, 1993.

**** Filed with Post-Effective Amendment No. 6 on March 12, 1996.

C-1

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

None.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES

8,718 record holders of Common Stock, par value $.001 per share, as of
March 18, 1997.

ITEM 27. INDEMNIFICATION

Registrant incorporates herein by reference its response to this item
contained in Pre-Effective Amendment No. 1 filed on June 17, 1991.

ITEM 28. 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. Mr. Robert H. Steers, Director and Chairman of the Adviser,
and Mr. Martin Cohen, Director and President of the Adviser, have had no other
business connections of a substantial nature during the past two fiscal years.

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

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 29. 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 POSITIONS AND
NAME OFFICES WITH DISTRIBUTOR OFFICES WITH REGISTRANT
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C>
Robert H. Steers.............. President and Chairman of the Chairman, Director
Board
Martin Cohen.................. Senior Vice President President, Director
Elizabeth Reagan.............. Vice President Vice President
</TABLE>

ITEM 30. 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 31. MANAGEMENT SERVICES

Registrant incorporates herein by reference its response to this item
contained in Pre-Effective Amendment No. 1 filed on June 17, 1991.

ITEM 32. UNDERTAKINGS

Registrant incorporates herein by reference its response to this item
contained in Pre-Effective Amendment No. 1 filed on June 17, 1991.

C-2

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. 7 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York and State of New York, on the 31st day of March, 1997.

COHEN & STEERS REALTY SHARES, INC.

By /s/ MARTIN COHEN
...................................
MARTIN COHEN
PRESIDENT

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
1. Acting Principal Executive Officer:

/s/ MARTIN COHEN President March 31, 1997
.........................................
(MARTIN COHEN)

2. Principal Financial and
Accounting Officer:

/s/ MARTIN COHEN Treasurer March 31, 1997
.........................................
(MARTIN COHEN)

3. Majority of Directors:
Gregory C. Clark
George Grossman
Jeffrey H. Lynford
Robert H. Steers

By /s/ MARTIN COHEN March 31, 1997
.........................................
(MARTIN COHEN)
ATTORNEY-IN-FACT

/S/ MARTIN COHEN March 31, 1997
.........................................
(MARTIN COHEN)
</TABLE>

C-3

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
- -------
<C> <S>
1 Articles Supplementary
5(A). Amendment to Investment Advisory Agreement
9(B). Shareholder Service Plan
9(C). Form of Shareholder Service Agreement
11(A). Consent of Independent Accountants
11(B). Report of Independent Accountants
17. Financial Data Schedule
19. Schedule III -- Investments in Affiliates
</TABLE>

STATEMENT OF DIFFERENCES

The dagger symbol shall be expressed as............................. `D'
Characters normally expressed as superscript shall be preceded by... 'pp'

<PAGE>

ARTICLES SUPPLEMENTARY

Cohen & Steers Realty Shares, Inc., a Maryland corporation having its
principal office in Baltimore City, Maryland (the "Corporation"), hereby files
Articles Supplementary to its Articles of Incorporation as follows:

FIRST: The Corporation is registered as an open-end investment company
under the Investment Company Act of 1940.

SECOND: Immediately prior to the filing of these Articles Supplementary,
the number of authorized shares indicated in the Corporation's Articles of
Incorporation was fifty million (50,000,000) shares of par value of one tenth
of one cent ($0.001) per share and of the aggregate par value of fifty thousand
dollars ($50,000), all of which shares were designated as shares of capital
stock of the Corporation's sole series, Cohen & Steers Realty Shares (the
"Series").

THIRD: Such number of authorized shares is increased to two hundred
million (200,000,000) shares, of the par value of one tenth of one cent
($0.001) per share and of the aggregate par value of two hundred thousand
dollars ($200,000) and all of such shares are designated as shares of capital
stock of the Series.

FOURTH: The total number of shares of capital stock that the Corporation
has authority to issue has been increased by the Corporation's board of
directors in accordance with Section 2-105(c) of the General Corporation Law
of Maryland.

IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its President and attested by its
Secretary on December 23, 1996.

ATTEST: COHEN & STEERS REALTY SHARES, INC.

/s/ Robert H. Steers /s/ Martin Cohen
_______________________________ By:________________________________
Secretary President

I, Martin Cohen, President of Cohen & Steers Realty Shares, Inc. (the
"Corporation") do hereby verify that I have executed these Articles
Supplementary and acknowledge the same to be my act; that adoption of these
Articles Supplementary by the Corporation was a valid corporation act; that,
to the best of my knowledge, information and belief, the matters and facts set
forth herein are true in all material respects; and that this statement is made
under the penalties for perjury.

/s/ Martin Cohen
------------------------------
Martin Cohen

<PAGE>

AMENDMENT NO. 1
TO
INVESTMENT ADVISORY AGREEMENT

COHEN & STEERS REALTY SHARES, INC.
757 THIRD AVENUE
NEW YORK, NEW YORK 10017

March 13, 1997

COHEN & STEERS CAPITAL MANAGEMENT, INC.
757 Third Avenue
New York, New York 10017

Dear Sirs:

We, the undersigned Cohen & Steers Realty Shares, Inc., hereby amend our
agreement with you dated June 28, 1991 (the 'Agreement') as follows:

Effective April 1, 1997, the first sentence of Paragraph 5 of the
Agreement shall be stricken and replaced by the following:

'In consideration of the foregoing, we will pay you a monthly fee
at an annualized rate of .85 of 1% of our average daily nets
assets up to $2.5 billion, plus .75 of 1% of such assets in
excess of $2.5 billion.'

In all other respects, the Agreement shall remain in effect without change.

If the foregoing is in accordance with your understanding, will you kindly
so indicate by signing and returning to us the enclosed copy hereof.

Very truly yours,

COHEN & STEERS REALTY SHARES, INC.

By: /s/ Robert H. Steers
...................................
NAME: Robert H. Steers
TITLE: Chairman

Agreed to and accepted as of
the date first set forth above

COHEN & STEERS CAPITAL MANAGEMENT, INC.

By: /s/ Martin Cohen
.................................
NAME: Martin Cohen
TITLE: President

<PAGE>

EXHIBIT 9(B)

COHEN & STEERS REALTY SHARES, INC.
SHAREHOLDER SERVICE PLAN

May 1, 1997

This Shareholder Service Plan (the "Plan") is adopted by Cohen & Steers
Realty Shares, Inc. (the "Fund") with respect to the shares of common stock of
the Fund.

SECTION 1. SERVICE AGREEMENTS; PAYMENTS

(a) The Fund is authorized to enter into Shareholder Service Agreements
(the"Agreements"), the form of which shall be approved by the Board of Directors
of the Fund (the "Board") or its delegate, with financial institutions and other
persons who provide services for and maintain shareholder accounts ("Service
Providers") as set forth in this Plan.

(b) Pursuant to the Agreements, as compensation for the services described
in Section 2 below, the Fund may pay the Service Provider a fee at an annual
rate of up to 0.05% of the average daily net assets of the Fund represented by
the shareholder accounts for which the Service Provider maintains a service
relationship; provided, however, that the Fund shall not directly or indirectly
pay any amounts, whether Payments (as defined in the Agreements) or
otherwise, that exceed any applicable limits imposed by law or the National
Association of Securities Dealers, Inc.

(c) Each Agreement shall contain a representation by the Service Provider
that any compensation payable to the Service Provider in connection with an
investment in a Fund of the assets of its customers, (i) will be disclosed by
the Service Provider to its customers, (ii) will be authorized by its customers,
and (iii) will not result in an excessive fee to the Service Provider.

SECTION 2. SERVICE ACTIVITIES

Service activities include (a) establishing and maintaining accounts and
records relating to clients of Service Provider; (b) answering shareholder
inquiries regarding the manner in which purchases, exchanges and redemptions of
shares of the Fund may be effected and other matters pertaining to the Fund's
services; (c) providing necessary personnel and facilities to establish and
maintain shareholder accounts and records; (d) assisting shareholders in
arranging for processing purchase, exchange and redemption transactions; (e)
arranging for the wiring of funds; (f) guaranteeing shareholder signatures in
connection with redemption orders and transfers and changes in
shareholder-designated accounts; (g) integrating periodic statements with other
shareholder transactions; and (h) providing such other related services as the
shareholder may request.

SECTION 3. AMENDMENT AND TERMINATION

(a) Any material amendment to the Plan shall be effective only upon
approval of the Board, including a majority of the directors who are not
interested persons of the Fund as defined in the Investment Company Act of 1940
(the "Disinterested Directors"), pursuant to a vote cast in person at a meeting
called for the purpose of voting on the amendment to the Plan.

(b) The Plan may be terminated without penalty at any time by a vote of a
majority of the Disinterested Directors.

-2-

<PAGE>

EXHIBIT 9(C)

COHEN & STEERS REALTY SHARES, INC.
SHAREHOLDER SERVICE AGREEMENT

AGREEMENT made this day of , 199 , between Cohen & Steers Realty
Shares, Inc. (the "Fund"), a corporation organized under the laws of State of
Maryland and registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "Act") with its principal place
of business at 757 Third Avenue, New York, New York 10017 and the institution
executing this document below (the "Institution").

WHEREAS, the Fund has adopted a Shareholder Service Plan with respect to
the Fund (the "Service Plan") that authorizes the Fund to pay fees to qualified
financial institutions for maintaining and providing services to shareholder
accounts of the Fund; and

WHEREAS, the Fund desires that Institution perform certain service
activities on behalf of the Fund with respect to the Fund and Institution is
willing to perform those services on the terms and conditions set forth in this
Agreement;

NOW, THEREFORE, for and in consideration of the representations, covenants
and agreements contained herein and other valuable consideration, the
undersigned parties do hereby agree as follows:

SECTION 1. SERVICE ACTIVITIES

In connection with providing services and maintaining shareholder accounts
of the Fund with respect to its various customers, Institution may provide
services including: (a) establishing and maintaining accounts and records
relating to clients of Institution; (b) answering shareholder inquiries
regarding the manner in which purchases, exchanges and redemptions of shares of
the Fund may be effected and other matters pertaining to the Fund's services;
(c) providing necessary personnel and facilities to establish and maintain
shareholder accounts and records; (d) assisting shareholders in arranging for
processing purchase, exchange and redemption transactions; (e) arranging for the
wiring of funds; (f) guaranteeing shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
(g) integrating periodic statements with other shareholder transactions; and (h)
providing such other related services as the shareholder may request.
Institution shall not be obligated to perform any specific service for its
clients. Institution's appointment shall be nonexclusive and CSCM may enter into
similar agreements with other persons.

SECTION 2. COMPENSATION

(a) As compensation for Institution's service activities with respect to
the Fund, the Fund shall pay Institution fees in the amounts listed on Schedule
A to this Agreement (the "Payments").

-1-

(b) The Payments shall be accrued daily and paid monthly or at such other
interval as the Fund and Institution shall agree.

(c) On behalf of the Fund, Institution may spend such amounts and incur
such expenses as it deems appropriate or necessary on any service activities.
Such expenses may include compensation to employees and expenses, including
overhead and telephone and other communication expenses, of Institution.
Institution shall be solely liable for any expenses it incurs.

SECTION 3. REPRESENTATIONS OF INSTITUTION

Institution represents that:

(a) the compensation payable to it under this Agreement in connection with
the investment in the Fund of the assets of its customers (i) will be disclosed
by the Institution to its customers, (ii) will be authorized by its customers,
and (iii) will not result in an excessive fee to Institution;

(b) if it is a member of the National Association of Securities Dealers,
Inc. ("NASD"), it shall abide by the Rules of Conduct of the NASD;

(c) it will, in connection with sales and offers to sell shares, furnish to
or otherwise insure that each person to whom any such sale or offer is made
receives a copy of the Fund's then current prospectus;

(d) it will purchase shares only for the purpose of covering purchase
orders already received or for its own bona fide investment purposes;

(e) the performance of all its obligations hereunder will comply with all
applicable laws and regulations, including any applicable Federal securities
laws and any requirements to deliver confirmations to its customers, the
provisions of its charter documents and bylaws and all material contractual
obligations binding upon the Institution; and

(f) it will promptly inform the Fund of any change in applicable laws or
regulations (or interpretations thereof) or in its charter or bylaws or material
contracts which would prevent or impair full performance of any of its
obligations hereunder.

SECTION 4. FUND LITERATURE

Institution is not authorized to make any representations concerning shares
of the Fund except those contained in the Fund's then current prospectus and
statement of additional information ("SAI") and printed information issued by
the Fund or by Cohen & Steers Securities, Inc., the Fund's distributor ("CSSI")
as information supplemental to the prospectus. The Fund or CSSI will supply
Institution upon its request with prospectuses, SAIs, reasonable quantities
of supplemental sales literature and additional information. Institution agrees
not to use other advertising or sales material relating to the Fund unless
approved in writing by the Fund or CSSI in advance of such use. Institution
shall have no responsibility with regard to the accuracy or

-2-

completeness of any of the printed information furnished by Fund and shall be
held harmless by Fund from and against any cost or loss arising therefrom.

SECTION 5. REPORTS

Institution shall prepare and furnish to the Fund, at the Fund's request,
written reports seeing forth all amounts expended by Institution and identifying
the activities for which the expenditures were made.

SECTION 6. INDEMNIFICATION

Institution agrees to indemnify and hold harmless the Fund and CSSI from
any claims, expenses, or liabilities incurred by the Fund or CSSI as a result of
any act or omission of the Institution in connection with its services under
this Agreement.

SECTION 7. EFFECTIVENESS, DURATION AND TERMINATION

(a) This Agreement shall become effective on the date hereof and, upon its
effectiveness, shall supersede all previous agreements between the parties
covering the subject matter hereof.

(b) This Agreement may be terminated as follows:

(i) at any time, without the payment of any penalty, by the vote of a
majority of the Directors of the Fund;

(ii) automatically in the event of the termination of the
Service Plan or by vote of a majority of the Fund's Directors who are not
"interested persons" of the Fund within the meaning of the Investment
Company Act of 1940;

(iii) automatically in the event of the assignment of this Agreement
as defined in the Act; and

(iv) by either party to the Agreement without cause by giving the
other party at least sixty (60) days' written notice of its intention to
terminate.

SECTION 8. NOTICES

Any notice under this Agreement shall be in writing and shall be addressed
and delivered, or mailed postage prepaid, to the other party's principal place
of business, or to such other place as shall have been previously specified by
written notice given to the other party.

SECTION 9. AMENDMENTS

Subject to approval of material amendments to the form of this Agreement by
the Fund's Board of Directors, this Agreement may be amended by the parties at
any time. In addition, this Agreement may be amended by the Fund from time to
time by the following procedure: the Fund will mail a copy of the amendment
to Institution at its principal place of business or such other address as
Institution shall in writing provide to the Fund. If Institution does not object
to the amendment within thirty (30) days after its receipt, the amendment will
become part of the Agreement. The Institution's objection must be in writing and
be received by the Fund within the thirty days.

-3-

SECTION 10. USE OF THE FUND'S NAME

Institution shall not use the name of the Fund on any checks, bank drafts,
bank statements or forms for other than internal use in a manner not approved by
the Fund prior thereto in writing; provided, however, that the approval of the
Fund shall not be required for the use of the Fund's name which merely refers in
accurate and factual terms to the Fund in connection with the Institution's role
hereunder or which is required by any appropriate regulatory, governmental or
judicial authority; and further provided that in no event shall such approval be
unreasonably withheld or delayed.

SECTION 11. MISCELLANEOUS

(a) This Agreement shall be construed in accordance with the laws of the
State of New York.

(b) If any provision of this Agreement shall be held invalid by a court
decision, statute, rule or otherwise, the remainder of the Agreement shall not
be affected thereby.

-4-

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.

INSTITUTION:

-----------------------------------------
Name of Institution

By:--------------------------------------

Name:------------------------------------

Title:-----------------------------------

COHEN & STEERS REALTY SHARES, INC.

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

By:--------------------------------------

Name:
Title:

-5-

COHEN & STEERS REALTY SHARES, INC.
SHAREHOLDER SERVICE AGREEMENT
Schedule A

PAYMENTS PURSUANT TO THE SERVICE PLAN

0.05% of the average annual daily net assets of the Fund represented by shares
owned by investors for which Institution provides services pursuant to this
Agreement.

-6-

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in this Post-
Effective Amendment No. 7 to the Registration Statement of Cohen & Steers Realty
Shares, Inc., on Form N-1A (File No. 33-40215) of our report dated February 3,
1997, 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, 1996, which is
also incorporated by reference in this Post-Effective Amendment to the
Registration Statement. We also consent to the inclusion of our report dated
February 3, 1997 on our audit of the financial statement schedule of Cohen &
Steers Realty Shares, Inc.

We also consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Counsel and Independent Accountants" in the
Statement of Additional Information.

/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.

New York, New York
March 31, 1997

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

Our report on the financial statements and financial highlights of Cohen &
Steers Realty Shares, Inc. has been incorporated by reference in this
Post-Effective Amendment to the Registration Statement from page 17 of the 1996
Annual Report to Shareholders of Cohen & Steers Realty Shares, Inc. In
connection with our audits of such financial statements and financial
highlights, we have also audited Schedule III-Investments in Affiliates.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.

/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.

New York, New York
February 3, 1997

<PAGE>

[ARTICLE] 6
[CIK] 0000874505
[NAME] COHEN & STEERS REALTY SHARES, INC.
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] JAN-01-1996
[PERIOD-END] DEC-31-1996
[INVESTMENTS-AT-COST] 1,600,498
[INVESTMENTS-AT-VALUE] 2,019,576
[RECEIVABLES] 56,097
[ASSETS-OTHER] 1
[OTHER-ITEMS-ASSETS] 86
[TOTAL-ASSETS] 2,075,760
[PAYABLE-FOR-SECURITIES] 29,446
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 9,935
[TOTAL-LIABILITIES] 39,381
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 1,593,429
[SHARES-COMMON-STOCK] 45,162
[SHARES-COMMON-PRIOR] 22,908
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 23,872
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 419,078
[NET-ASSETS] 2,036,379
[DIVIDEND-INCOME] 68,919
[INTEREST-INCOME] 3,836
[OTHER-INCOME] 0
[EXPENSES-NET] (12,380)
[NET-INVESTMENT-INCOME] 60,375
[REALIZED-GAINS-CURRENT] 31,989
[APPREC-INCREASE-CURRENT] 370,633
[NET-CHANGE-FROM-OPS] 462,996
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (57,513)
[DISTRIBUTIONS-OF-GAINS] (23,649)
[DISTRIBUTIONS-OTHER] (3,926)
[NUMBER-OF-SHARES-SOLD] 28,020
[NUMBER-OF-SHARES-REDEEMED] (7,607)
[SHARES-REINVESTED] 1,841
[NET-CHANGE-IN-ASSETS] 1,243,295
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 8,530
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 9,704
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 12,521
[AVERAGE-NET-ASSETS] 1,414,732
[PER-SHARE-NAV-BEGIN] 34.62
[PER-SHARE-NII] 1.86
[PER-SHARE-GAIN-APPREC] 11.04
[PER-SHARE-DIVIDEND] (1.76)
[PER-SHARE-DISTRIBUTIONS] (0.55)
[RETURNS-OF-CAPITAL] (0.12)
[PER-SHARE-NAV-END] 45.09
[EXPENSE-RATIO] 1.08
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>

<PAGE>

COHEN & STEERS REALTY SHARES, INC.
SCHEDULE III -- INVESTMENTS IN AFFILIATES
DECEMBER 31, 1996

<TABLE>
<CAPTION>
BEGINNING PURCHASE SALE ENDING PURCHASE SALE GAIN/(LOSS) DIVIDEND MARKET
EQUITIES SHARES SHARES SHARES SHARES COST COST ON SALES INCOME VALUE
- --------------- --------- --------- ------- --------- ------------ ----------- ----------- ----------- ------------

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Avalon
Properties... 1,005,500 1,163,600 265,300 1,903,800 $ 27,177,258 $ 5,772,559 $ 854,277 $ 1,957,271 $ 54,734,250
Cali Realty
Corp......... 732,200 1,686,600 0 2,418,800 43,584,185 0 0 1,636,215 74,680,450
Camden Property
Trust........ 655,000 482,500 100,000 1,037,500 12,062,202 2,448,924 (230,998) 1,600,323 29,698,438
CarrAmerica
Realty
Corp......... 338,100 2,134,300 0 2,472,400 51,322,897 0 0 2,044,525 72,317,700
Center Point
Properties... 0 1,145,600 6,100 1,139,500 27,529,576 146,400 343 876,785 37,318,625
Charles E.
Smith
Residential
Realty....... 500,800 14,800 0 515,600 353,011 0 0 997,538 15,081,300
Chelsea GCA
Realty....... 305,300 383,500 0 688,800 11,238,494 0 0 1,511,437 28,849,700
Colonial
Properties
Trust........ 596,000 609,200 0 1,205,200 14,958,927 0 0 1,867,900 36,607,950
Columbus Realty
Trust........ 546,400 271,200 40,000 777,600 5,542,869 775,000 (27,425) 919,929 17,690,400
Cousins
Properties... 931,700 652,200 0 1,583,900 12,876,993 0 0 1,408,118 44,547,188
Highwoods
Properties... 561,100 2,703,100 103,200 3,131,000 77,509,465 2,177,297 743,682 2,001,642 105,671,250
Irvine
Apartment
Communities... 0 1,013,900 0 1,013,900 20,581,466 0 0 704,852 25,347,500
JP Realty...... 834,300 61,500 0 895,800 1,314,870 0 0 1,466,721 23,178,825
Marcerich
Co........... 960,100 786,400 0 1,746,500 16,943,528 0 0 2,153,282 45,627,313
Omega
Healthcare... 0 1,000,000 0 1,000,000 30,500,000 0 0 -- 33,250,000
Prentiss
Properties
Trust........ 0 1,412,700 0 1,412,700 29,373,738 0 0 437,937 35,317,500
Reckson
Associates
Realty
Corp......... 383,100 622,000 165,000 840,100 20,388,200 4,048,115 888,520 1,480,086 35,494,225
Spieker
Properties... 489,300 1,810,400 10,000 2,289,700 50,830,197 197,500 117,939 2,825,616 82,429,200
Sunrise
Assisted
Living....... 0 1,268,400 0 1,268,400 28,876,662 0 0 -- 35,356,650
Taubman
Centers...... 724,700 2,875,000 724,700 2,875,000 36,248,813 7,094,708 (31,289) 676,168 37,015,625
The Mills
Corp......... 125,300 923,600 23,900 1,025,000 15,620,932 427,710 (3,230) 1,875,305 24,471,875
Vornado Realty
Trust........ 784,000 492,900 0 1,276,900 20,597,622 0 0 2,374,486 67,037,250
Weeks Corp..... 609,400 361,600 13,000 958,000 10,205,735 250,250 137,202 1,002,280 31,853,500
------------ ----------- ----------- ----------- ------------
$565,637,640 $23,338,463 $2,449,021 $31,818,416 $993,576,714
------------ ----------- ----------- ----------- ------------
------------ ----------- ----------- ----------- ------------
</TABLE>

<PAGE>