<PAGE>
<PAGE>
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
July 24, 1996
To Our Shareholders:
We are pleased to submit to you the semi-annual report for Cohen & Steers
Total Return Realty Fund, Inc. for the six months ended June 30, 1996. The net
asset value per share at that date was $13.97. In addition, during the quarter
three $0.08 per share monthly dividends were declared and paid.
MID-YEAR REVIEW
Real estate securities recorded a period of excellent absolute and relative
performance in the second quarter. For the first time since 1994, Equity REIT
returns matched those of common stocks as the S&P 500 Index and the NAREIT
Equity REIT Index both had a total return of 4.5%. In addition, these excellent
returns came amid a declining bond market; the total return of the Lehman
Brothers Government/Corporate Bond Index was 0.5%. The Fund's total return based
on income and change in net asset value for the quarter and six months ended
June 30, 1996 were 5.4% and 7.7%, respectively.
The best performing broad industry group during the quarter was Shopping
Centers, led by the Regional Mall sector. It was our heavy concentration in
owners of shopping centers that enabled us to outperform the NAREIT Equity Index
in the second quarter and the first half of the year. This group, which was
perhaps the most out-of-favor in all of the real estate industry at the
beginning of the year, staged a dramatic recovery due to the fast growing
economy and high levels of consumer confidence and spending. Also performing
well in the second quarter was the Office sector. As we mentioned in our
previous report, we continue to be very enthusiastic about office properties due
to the very favorable supply/demand situation for office space, and our heavy
weighting in this sector also enhanced our total return.
Capital-raising by REITs in the first half of 1996 approximated $3.4
billion in equity and $1.2 billion in debt. With modest capital appreciation the
stock market capitalization of all equity REITs rose by 12% to $64.9 billion at
June 30, compared to $58.1 billion six months earlier. There were no initial
public offerings of REITs so far this year and, in fact, there was a net
reduction of 5% in the number of existing equity REITs to 169 at June 30, from
178 at the beginning of the year. This is the result of an ongoing consolidation
of the industry with capital increasingly becoming more concentrated in the
hands of the largest companies. Often this capital is raised privately in an
offering limited to only the largest institutional investors. We were very
pleased to have made two substantial new investments in this manner during the
quarter.
This trend has raised several issues with regard to the influence of REITs
on the real estate industry in general and, in turn, the influence of investment
advisers on the REIT market. As we have mentioned in the past, the so-called
securitization of real estate over the past several years is the result of
investor recognition that capital market conditions must dictate the required
returns from all asset classes. This is unlike the situation that existed in the
1980s when the tax code allowed substantial tax relief for individuals owning
real estate even though that real estate may have been purchased on entirely
uneconomic terms. Similarly, real estate held directly by institutions was
valued on an appraisal system which often ignored economic realities of the
capital or real estate
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
markets. In this period, a handful of firms dominated the real estate
syndication and investment advisory businesses. Along with highly imprudent
lending standards on the part of financial institutions, these factors strongly
contributed to speculation and an unprecedented boom in construction that ended
in what was perhaps the greatest real estate depression of all time. By the
early 1990's the real estate industry was in need of a complete financial
overhaul and recapitalization that was largely accomplished through the public
markets. The U.S. Government liquidated several hundred billion dollars of
assets seized from financial institutions. In the process, over 100 companies
came public and together with the already-existing companies raised over $50
billion in equity and debt.
This transformation from private to public ownership was painful for many
property owners and their real estate advisers but resulted in what is a much
more rational allocation of capital in the real estate industry. The current
consolidation of the industry is a logical extension of that allocation process,
with the best-managed and best-positioned companies enjoying healthy market
valuations and ready access to low-cost capital. These companies continue to
acquire property from private hands at a steady and substantial pace. Those
entities, both public and private, which are not efficient employers of capital
are either liquidating their portfolios or merging with those that are.
Importantly, unlike the environment in which the real estate investment advisers
of the 1980's operated, access to capital by the public companies is not
unconstrained; their cost of capital is largely controlled by the financial
market's continual evaluation of their investment strategy and performance. This
effectively provides a governor on the flow of capital and may, in the long run,
attenuate the amplitude of the real estate cycle by preventing many of the
excesses of the past from repeating themselves. This has caused many to believe
that the REIT industry is embarking on a period of substantial growth and
prosperity over the coming years.
A situation that has inspired some comment and criticism pertains to the
role of the investment advisory community on REITs and, by definition, the real
estate industry. Some observers have drawn a parallel between the real estate
advisers of the 1980s and the investment advisers of today, suggesting that
these advisers exert undue control or influence over the REIT market. The facts,
however, indicate otherwise. There are a number of institutional advisers who
specialize in REIT investments who control approximately 6% of the shares of
equity REITs on behalf of pension and endowment funds. Roughly another 4% of the
shares is owned by about 30 mutual funds that specialize in this area of
investment. Some firms, such as Cohen & Steers, represent both categories of
investors. This combined 10% ownership of the shares is insignificant compared
to the 90% held by insiders and the balance of the investment community at
large. It is therefore our opinion that any concerns about the concentration of
ownership by any firm or group is totally unwarranted. On the contrary, we
believe that the public market mechanism is as efficient for REITs as it is for
any other market sector and we believe that this will contribute to the
continued growth of the industry.
OUTLOOK
While owners of shopping centers are not as undervalued as they were at the
beginning of the year, we continue to find good value in this sector,
particularly in companies with above-average prospects for internal growth
through occupancy and rental increases, and external growth through acquisition.
We believe, however,
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
that any material change in the outlook for continued growth in the economy
would cause us to consider reducing our weighting. In addition, we continue to
add to our holdings in owners of office buildings due to the persistence of the
very favorable supply/demand situation for office space. In our opinion, the
expansion of the economy and the growth in jobs augur well for continued vacancy
rate declines and rental rate increases. Interestingly, office buildings may be
viewed as good defensive investments in the event of an economic downturn.
Office leases are primarily written for multi-year periods, thereby making them
less sensitive to short-term changes in the economy or the fortunes of a
particular tenant (provided that the tenant does not go bankrupt). In addition,
the office cycle has not progressed to the point where speculative construction
is feasible.
We believe that real estate securities continue to offer investors a high
level of current income and are enjoying another year of strong dividend growth.
Increasingly, they are attracting the attention of investors seeking these
characteristics as well as the low stock market sensitivity that provides
portfolio diversification. As a result, our portfolio currently appears headed
toward a year of satisfactory total returns.
Sincerely,
<TABLE>
<S> <C>
MARTIN COHEN ROBERT H. STEERS
MARTIN COHEN ROBERT H. STEERS
President Chairman
</TABLE>
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------------- -----------
<S> <C> <C>
EQUITIES 96.41%
APARTMENT/RESIDENTIAL 26.30%
Amli Residential Properties Trust..................... 100,000 $ 2,062,500
Associated Estates Realty Corp........................ 165,300 3,471,300
Avalon Properties..................................... 98,200 2,135,850
Camden Property Trust................................. 106,000 2,517,500
Charles E. Smith Residential Realty................... 89,400 2,145,600
Colonial Properties Trust............................. 170,700 4,139,475
Columbus Realty Trust................................. 105,000 2,034,375
Oasis Residential..................................... 40,300 881,563
Pacific Gulf Properities.............................. 124,000 2,077,000
Summit Properties..................................... 137,100 2,690,587
Wellsford Residential Property Trust.................. 134,300 3,021,750
-----------
27,177,500
-----------
HEALTH CARE 4.00%
American Health Properties............................ 87,200 1,929,300
Omega Healthcare Investors............................ 80,000 2,210,000
-----------
4,139,300
-----------
OFFICE 8.42%
Beacon Properties Corp................................ 45,000 1,153,125
Cali Realty Corp...................................... 99,600 2,415,300
CarrAmerica Realty Corp............................... 127,400 3,057,600
Reckson Associates Realty Corp........................ 63,000 2,079,000
-----------
8,705,025
-----------
SHOPPING CENTER 57.69%
Community Center: 21.82%
Alexander Haagen Properties........................... 85,000 1,083,750
Bradley Real Estate................................... 125,200 1,815,400
Developers Diversified Realty Corp.................... 126,400 4,029,000
Federal Realty Investment Trust....................... 131,400 2,956,500
Mid-America Realty Investments........................ 128,300 1,122,625
Pennsylvania Real Estate Investment Trust............. 165,500 3,206,562
Price REIT, Series B.................................. 119,700 3,875,288
Regency Realty Corp................................... 64,500 1,354,500
Sizeler Property Investors............................ 103,800 908,250
Vornado Realty Trust.................................. 53,700 2,194,988
-----------
22,546,863
-----------
</TABLE>
See notes to financial statements.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------------- ------------
<S> <C> <C> <C>
Factory Outlet: 7.20%
Chelsea GCA Realty................................... 70,000 $ 2,222,500
Horizon Group........................................ 188,000 3,854,000
Tanger Factory Outlet Centers........................ 58,700 1,364,775
------------
7,441,275
------------
Regional Mall: 28.67%
CBL & Associates Properties.......................... 100,400 2,246,450
DeBartolo Realty Corp................................ 401,700 6,477,413
Glimcher Realty Trust................................ 297,600 5,022,000
JP Realty............................................ 132,800 2,838,600
Macerich Company..................................... 153,000 3,213,000
Simon Property Group................................. 31,300 766,850
Taubman Centers...................................... 345,900 3,848,137
The Mills Corp....................................... 110,100 1,926,750
Urban Shopping Centers............................... 138,400 3,287,000
------------
29,626,200
------------
TOTAL SHOPPING CENTER............................. 59,614,338
------------
TOTAL EQUITIES (Identified Cost -- $96,593,149)... 99,636,163
------------
<CAPTION>
PAR
AMOUNT
----------------
<S> <C> <C> <C>
CORPORATE BONDS 1.77%
Trizec Finance, Ltd. 10.875% 10/15/05
(Identified cost -- $1,786,518)......... $1,800,000 1,827,000
------------
TOTAL INVESTMENTS (Identified cost -- $98,379,667)..... 98.18% 101,463,163
OTHER ASSETS IN EXCESS OF LIABILITIES.................. 1.82% 1,875,991
--------- ------------
NET ASSETS (Equivalent to $13.97 per
share based on 7,399,100 shares of
capital stock outstanding).............. 100.00% $103,339,154
--------- ------------
--------- ------------
</TABLE>
See notes to financial statements.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (identified cost -- $98,379,667) (Note 1)................ $101,463,163
Receivable for investment securities sold.................................................... 2,214,131
Dividends receivable......................................................................... 943,030
Interest receivable.......................................................................... 41,182
Unamortized organization costs and other assets (Note 1)..................................... 45,389
------------
Total Assets........................................................................... 104,706,895
------------
LIABILITIES:
Loan payable (Notes 1 and 7)................................................................. 1,082,879
Payable for dividends declared............................................................... 156,140
Investment advisory fees payable (Note 2).................................................... 59,551
Administrative fees payable (Note 2)......................................................... 17,015
Interest payable (Notes 1 and 7)............................................................. 7,337
Accrued expenses and other liabilities....................................................... 44,819
------------
Total Liabilities...................................................................... 1,367,741
------------
NET ASSETS applicable to 7,399,100 shares of $.001 par value common stock outstanding (Note 4)..... $103,339,154
------------
------------
NET ASSET VALUE PER SHARE:
($103,339,154[div]7,399,100 shares of common stock outstanding)................................. $ 13.97
------------
------------
MARKET PRICE PER SHARE............................................................................. $ 13.50
------------
------------
MARKET PRICE PREMIUM (DISCOUNT) TO NET ASSET VALUE PER SHARE....................................... (3.36%)
------------
------------
NET ASSETS consist of:
Paid-in capital (Notes 1 and 4).............................................................. $ 97,455,675
Net unrealized appreciation on investments................................................... 3,083,496
Accumulated net realized gain on investments sold............................................ 2,694,758
Accumulated net investment income............................................................ 105,225
------------
$103,339,154
------------
------------
</TABLE>
See notes to financial statements.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
Investment Income (Note 1):
Dividend income............................................................................... $ 4,097,999
Interest income............................................................................... 120,994
-----------
Total Income............................................................................ 4,218,993
-----------
Expenses:
Investment advisory fees (Note 2)............................................................. 348,765
Administrative fees (Note 2).................................................................. 99,648
Transfer agent fees........................................................................... 29,636
Professional fees (Note 6).................................................................... 21,032
Directors' fees and expenses (Note 2)......................................................... 13,986
Interest expense (Notes 1 and 7).............................................................. 12,977
Reports to shareholders....................................................................... 12,541
Custodian fees................................................................................ 8,573
Registration fees............................................................................. 8,041
Amortization of organization expenses (Note 1)................................................ 6,385
Insurance..................................................................................... 5,175
Miscellaneous................................................................................. 4,562
-----------
Total Expenses.......................................................................... 571,321
Reduction of Expenses (Note 6).......................................................... (9,054)
-----------
Net Expenses............................................................................ 562,267
-----------
Net Investment Income............................................................................... 3,656,726
-----------
Realized and Unrealized Gain on Investments:
Net realized gain on investments.............................................................. 840,393
Net change in unrealized appreciation on investments.......................................... 2,968,241
-----------
Net realized and unrealized gain on investments......................................... 3,808,634
-----------
Net increase in net assets resulting from operations................................................ $ 7,465,360
-----------
-----------
</TABLE>
See notes to financial statements.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
June 30, 1996* December 31, 1995
-------------- -----------------
<S> <C> <C>
Change in Net Assets:
From Operations:
Net investment income....................................... $ 3,656,726 $ 6,483,190
Net realized gain (loss) on investments..................... 840,393 (355,997)
Net change in unrealized appreciation on investments........ 2,968,241 2,265,610
-------------- -----------------
Net increase in net assets resulting from
operations......................................... 7,465,360 8,392,803
-------------- -----------------
Dividends and Distributions from (Note 1):
Net investment income....................................... (3,551,501) (5,200,915)
Tax return of capital....................................... 0 (1,902,118)
-------------- -----------------
Total dividends and distributions........................... (3,551,501) (7,103,033)
-------------- -----------------
Total increase in net assets.......................... 3,913,859 1,289,770
Net Assets:
Beginning of period......................................... 99,425,295 98,135,525
-------------- -----------------
End of period............................................... $103,339,154 $99,425,295
-------------- -----------------
-------------- -----------------
</TABLE>
* Unaudited
See notes to financial statements.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1996 -----------------------------
PER SHARE OPERATING PERFORMANCE: (unaudited) 1995 1994 1993(a)
- --------------------------------------------------------------- ---------------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........................... $ 13.44 $ 13.26 $ 13.30 $ 13.96(c)
------------ ------- ------- -------
Net investment income..................................... 0.49 0.88 0.83 0.18
Net realized and unrealized gain (loss) on investments.... 0.52 0.26 0.01 (0.60)
------------ ------- ------- -------
Total from investment operations.................... 1.01 1.14 0.84 (0.42)
------------ ------- ------- -------
Less dividends and distributions from:
Net investment income..................................... (0.48) (0.70) (0.47) (0.18)
Distributions in excess of net investment income.......... 0.00 0.00 0.00 0.03
Tax return of capital..................................... 0.00 (0.26) (0.41) (0.03)
------------ ------- ------- -------
Total from dividends and distributions.............. (0.48) (0.96) (0.88) (0.24)
------------ ------- ------- -------
Net increase (decrease) in net asset value.......... 0.53 0.18 (0.04) (0.66)
------------ ------- ------- -------
Net asset value, end of period................................. $ 13.97 $ 13.44 $ 13.26 $ 13.30
------------ ------- ------- -------
------------ ------- ------- -------
Market value, end of period.................................... $ 13.50 $13.375 $12.375 $ 13.50
------------ ------- ------- -------
------------ ------- ------- -------
Total market value return(d)................................... +4.59% +16.38% - 2.32% - 8.48%
------------ ------- ------- -------
------------ ------- ------- -------
Total net asset value return(d)................................ +7.71% +9.14% +6.45% - 4.26%(c)
------------ ------- ------- -------
------------ ------- ------- -------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).................. $103,339 $99,425 $98,136 $98,388
------------ ------- ------- -------
------------ ------- ------- -------
Ratio of expenses to average net assets(e)................ 1.13%(b) 1.23% 1.31% 1.15%(b)
------------ ------- ------- -------
------------ ------- ------- -------
Ratio of net investment income to average net assets(e)... 7.38%(b) 6.79% 6.19% 5.21%(b)
------------ ------- ------- -------
------------ ------- ------- -------
Portfolio turnover rate................................... 14% 51% 65% 16%
------------ ------- ------- -------
------------ ------- ------- -------
Average Commission Rate(f)................................ $ 0.0685 N/A N/A N/A
------------ ------- ------- -------
------------ ------- ------- -------
</TABLE>
- ------------
(a) For the period September 27, 1993 (Commencement of Operation) to December
31, 1993.
(b) Annualized.
(c) Net of offering costs of $0.14 per share.
(d) Total market value return is computed based upon the New York Stock Exchange
market price of the Fund's shares and excludes the effects of sales loads or
brokerage commissions. Dividends and distributions, if any, are assumed for
purposes of this calculation, to be reinvested at prices obtained under the
Fund's dividend reinvestment plan. Total net asset value return measures the
changes in value over the period indicated, taking into account dividends as
reinvested.
(e) Net of expense reduction. Had the reduction not occurred, the expense ratio
and net investment income ratio would have amounted to 1.15% and 7.36%,
respectively, for the six months ended June 30, 1996, 1.25% and 6.78%,
respectively, for the year ended December 31, 1995, 1.35% and 6.14%,
respectively, for the year ended December 31, 1994 and 1.22% and 5.14%,
respectively, for the period September 27, 1993 (Commencement of Operations)
to December 31, 1993. See Note 6 in the notes to financial statements.
(f) For fiscal years 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.
See notes to financial statements.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Cohen & Steers Total Return Realty Fund, Inc. (the 'Fund') was incorporated
under the laws of the State of Maryland on September 4, 1992 and is registered
under the Investment Company Act of 1940 (the 'Act'), as amended, as a
closed-end, non-diversified management investment company. The Fund had no
operations until September 13, 1993 when it sold 7,100 shares of common stock
for $100,110 to Cohen & Steers Capital Management, Inc. (the 'Adviser').
Investment operations commenced on September 27, 1993. The following is a
summary of significant accounting policies consistently followed by the Fund in
the preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles. The preparation of the financial
statements in accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures on the financial statements. Actual results could differ from
those estimates.
Portfolio Valuation: Investments in securities that are listed on the New
York Stock Exchange are valued, except as indicated below, at the last sale
price reflected at the close of the New York Stock Exchange on the business day
as of which such value is being determined. If there has been no sales on such
day, the securities are valued at the mean of the closing bid and asked prices
for the day.
Securities not listed on the New York Stock Exchange but listed on other
domestic or foreign securities exchanges or admitted to trading on the National
Association of Securities Dealers Automated Quotations, Inc. ('NASDAQ') National
Market System are valued in a similar manner. Securities traded on more than one
securities exchange are valued at the last sale price on the business day as of
which such value is being determined as reflected on the tape at the close of
the exchange representing the principal market for such securities.
Readily marketable securities traded in the over-the-counter market,
including listed securities whose primary market is believed by 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, the National Quotations Bureau or such other comparable
sources as the Board of Directors deems 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.
Short-term debt securities, which have a maturity of 60 days or less, are
valued at amortized cost which approximates value.
Security Transactions and Investment Income: Security transactions are
recorded on a trade date basis. Realized gains and losses on investments sold
are recorded on the basis of identified cost for accounting and tax purposes.
Interest income is recorded on the accrual basis. Dividend income is recorded on
the ex-dividend date.
Dividends and Distributions to Shareholders: Dividends from investment
company taxable income are declared and paid monthly. A portion of the Fund's
dividends may consist of amounts in excess of investment company taxable income
derived from non-taxable components of the dividends from the Fund's portfolio
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
investments. As a result, the Fund had a tax return of capital of $1,902,118
($0.26 per share) for the year ended December 31, 1995 and $3,005,871 ($0.41 per
share) for the year ended December 31, 1994 which has been deducted from paid-in
capital. Net realized capital gains, unless offset by any available capital loss
carryforward, are distributed to shareholders annually. Distributions to
shareholders are recorded on the ex-dividend date.
Dividends from net income and capital gain distributions are determined in
accordance with U.S. Federal income tax regulations which may differ from
generally accepted accounting principles. During the year ended December 31,
1995, the Fund decreased paid-in capital by $2,721,547, increased undistributed
net investment income by $619,843 and increased accumulated net realized gain on
investment securities sold by $2,101,704. These differences are primarily due to
return of capital distributions received by the Fund on portfolio securities.
Federal Income Taxes: It is the policy of the Fund to qualify as a
regulated investment company, if such qualification is in the best interest of
the shareholders, by complying with the requirements of Subchapter M of the
Internal Revenue Code applicable to regulated investment companies, and by
distributing substantially all of its taxable earnings to its shareholders.
Accordingly, no provision for Federal income or excise tax is necessary. At
December 31, 1995, the Fund had, for federal income tax purposes, an unused
capital loss carryforward of $960,869 to be applied against future realized
gains, if any. If not applied, the capital loss carryforward will expire in
2002.
Organization Costs: All costs incurred in connection with organizing and
establishing the Fund are being amortized on the straight-line basis over a
period of five years from the date on which the Fund commenced operations.
Borrowings and Leverage: The Fund may borrow for leveraging purposes when
an investment opportunity arises but the Adviser believes that it is not
appropriate to liquidate any existing investments. The Fund will only borrow
when the Adviser believes that the cost of borrowing to carry the assets to be
acquired through leverage will be lower than the return earned by the Fund on
its longer-term portfolio investments. Should the differential between interest
rates on borrowed funds and the return from investment assets purchased with
such funds narrow, the Fund would realize less of a positive return, with the
additional risk that, during periods of adverse market conditions, the market
value of the Fund's entire portfolio holdings (including those acquired through
leverage) may decline far in excess of incremental returns the Fund may have
achieved in the interim.
NOTE 2. INVESTMENT ADVISORY FEES, ADMINISTRATION FEES AND OTHER TRANSACTIONS
WITH AFFILIATES
Investment Advisory Fees: Cohen & Steers Capital Management, Inc. serves as
the investment adviser to the Fund. The Adviser is responsible for the actual
management of the Fund's portfolio. The responsibility for making decisions to
buy, sell or hold a particular investment rests with the Adviser, subject to
review by the Board of Directors and the applicable provisions of the Act. For
the services provided pursuant to the Advisory Agreement, the Adviser is
entitled to receive a fee, computed weekly and payable monthly at an annual rate
of 0.70% of the Fund's average weekly net assets. For the six months ended June
30, 1996, the Fund incurred investment advisory fees of $348,765.
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11
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Administrative Fees: Princeton Administrators, L.P., ('the Administrator')
serves as the administrator pursuant to an Administration Agreement with the
Fund. Under such Agreement, the Administrator generally assists in certain
aspects of the Fund's operations, other than providing investment advice,
subject to the overall authority of the Fund's Board of Directors. The
Administrator determines the Fund's net asset value weekly, prepares such
figures for publication on a weekly basis, maintains certain books and records
that are not maintained by the Adviser, custodian or transfer agent, assists in
the preparation of financial information for the Fund's income tax returns,
proxy statements, and stockholder reports.
Under the terms of the Administration Agreement, the Fund has agreed to pay
a fee computed weekly and payable monthly, at an annual rate of 0.20% of the
Fund's average weekly net assets subject to a monthly minimum of $12,500. For
the six months ended June 30, 1996, the Fund incurred administrative fees of
$99,648.
Director's Fees: Certain directors of the Fund are also directors, officers
and/or employees of the Adviser. None of the directors so affiliated received
compensation for their services. Similarly, none of the Fund's officers received
compensation from the Fund. For the six months ended June 30, 1996, the Fund
incurred directors' fees of $13,986.
NOTE 3. PURCHASES AND SALES OF SECURITIES
During the six months ended June 30, 1996, purchases and sales of
securities, excluding short-term investments, aggregated $13,685,404 and
$14,763,119, respectively.
At June 30, 1996, the cost and unrealized appreciation or depreciation in
value of the investments owned by the Fund, as computed on a federal income tax
basis, are as follows:
<TABLE>
<S> <C>
Aggregated cost............................................................. $98,379,667
-----------
-----------
Gross unrealized appreciation............................................... $ 6,911,218
Gross unrealized depreciation............................................... (3,827,722)
-----------
Net unrealized appreciation................................................. $ 3,083,496
-----------
-----------
</TABLE>
NOTE 4. COMMON STOCK
There are 100,000,000 shares of $0.001 par value common stock authorized.
Of the 7,399,100 shares of common stock outstanding at June 30, 1996, Cohen &
Steers Capital Management, Inc. owned 8,584 shares.
NOTE 5. SUBSEQUENT EVENTS
On July 1, 1996, the Board of Directors of the Fund declared a dividend of
$0.08 per share payable on July 31, 1996, to shareholders of record on July 15,
1996.
NOTE 6. DIRECTED BROKERAGE ARRANGEMENT
The Adviser directed certain portfolio trades to brokers who paid a portion
of the Fund's expenses. For the six months ended June 30, 1996, the Fund's
expenses were reduced by $9,054 under this agreement.
- --------------------------------------------------------------------------------
12
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. BORROWINGS
The Fund has entered into a Line of Credit Agreement with State Street Bank
& Trust Company for $15,000,000. At June 30, 1996, the par value of loans
outstanding was $1,082,879 at an interest rate of 6.50%. During the six months
ended June 30, 1996, the average daily balance of loans outstanding was $902,398
at a weighted average interest rate of 6.32%. The maximum amount of loans
outstanding at any time during the period was $1,576,044 as of June 5, 1996,
which was 1.52% of total assets. The loan is collateralized by the Fund's
portfolio.
NOTE 8. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
NET INCREASE
NET REALIZED AND (DECREASE)
TOTAL NET UNREALIZED GAIN IN NET ASSETS
INVESTMENT INVESTMENT (LOSS) RESULTING DIVIDENDS AND
QUARTERLY PERIOD INCOME INCOME ON INVESTMENTS FROM OPERATIONS DISTRIBUTIONS
- ----------------- ---------------- ------------------ -------------------- -------------------- ------------------
PER PER PER PER PER
FISCAL 1996 AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE
- ----------------- --------- ----- ---------- ----- ----------- ------ ----------- ------ ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31......... $2,007,254 $0.27 $1,732,336 $0.23 $ 435,758 $ 0.06 $ 2,168,094 $ 0.29 $1,775,760 $0.24
June 30.......... 2,211,739 0.30 1,924,390 0.26 3,372,876 0.46 5,297,266 0.72 1,775,741 0.24
---------- ----- ---------- ----- ----------- ------ ----------- ------ ---------- -----
$4,218,993 $0.57 $3,656,726 $0.49 $ 3,808,634 $ 0.52 $ 7,465,360 $ 1.01 $3,551,501 $0.48
---------- ----- ---------- ----- ----------- ------ ----------- ------ ---------- -----
---------- ----- ---------- ----- ----------- ------ ----------- ------ ---------- -----
<CAPTION>
NET ASSETS AT
QUARTERLY PERIOD END OF PERIOD
- ----------------- ---------------------
PER
FISCAL 1996 AMOUNT SHARE
- ----------------- ------------ ------
<S> <C> <C>
March 31......... $ 99,823,010 $13.49
June 30.......... 103,339,154 13.97
</TABLE>
<TABLE>
<CAPTION>
NET INCREASE
NET REALIZED AND (DECREASE)
TOTAL NET UNREALIZED GAIN IN NET ASSETS
INVESTMENT INVESTMENT (LOSS) RESULTING DIVIDENDS AND
QUARTERLY PERIOD INCOME INCOME ON INVESTMENTS FROM OPERATIONS DISTRIBUTIONS
- ----------------- ---------------- ------------------ -------------------- -------------------- ------------------
PER PER PER PER PER
FISCAL 1995 AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE
- ----------------- --------- ----- ---------- ----- ----------- ------ ----------- ------ ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31......... $1,667,686 $0.23 $1,362,753 $0.19 $(4,071,089) $(0.55) $(2,708,336) $(0.36) $1,775,751 $0.24
June 30.......... 1,808,803 0.24 1,522,730 0.20 2,302,462 0.31 3,825,192 0.51 1,775,768 0.24
September 30..... 1,818,584 0.25 1,520,958 0.21 3,607,617 0.49 5,128,575 0.70 1,775,764 0.24
December 31...... 2,363,515 0.32 2,076,749 0.28 70,623 0.01 2,147,372 0.29 1,775,750 0.24
---------- ----- ---------- ----- ----------- ------ ----------- ------ ---------- -----
$7,658,588 $1.04 $6,483,190 $0.88 $ 1,909,613 $ 0.26 $ 8,392,803 $ 1.14 $7,103,033 $0.96
---------- ----- ---------- ----- ----------- ------ ----------- ------ ---------- -----
---------- ----- ---------- ----- ----------- ------ ----------- ------ ---------- -----
<CAPTION>
NET ASSETS AT
QUARTERLY PERIOD END OF PERIOD
- ----------------- ---------------------
PER
FISCAL 1995 AMOUNT SHARE
- ----------------- ------------ ------
<S> <C> <C>
March 31......... $ 93,651,438 $12.66
June 30.......... 95,700,862 12.93
September 30..... 99,053,673 13.39
December 31...... 99,425,295 13.44
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NET INCREASE
NET REALIZED AND (DECREASE)
TOTAL NET UNREALIZED GAIN IN NET ASSETS
INVESTMENT INVESTMENT (LOSS) RESULTING DIVIDENDS AND
QUARTERLY PERIOD INCOME INCOME ON INVESTMENTS FROM OPERATIONS DISTRIBUTIONS
- ----------------- ---------------- ------------------ -------------------- -------------------- ------------------
PER PER PER PER PER
FISCAL 1994 AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE
- ----------------- --------- ----- ---------- ----- ----------- ------ ----------- ------ ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
September 30..... $1,836,747 $0.25 $1,468,997 $0.20 $(4,003,614) $(0.54) $(2,534,617) $(0.34) $1,775,775 $0.24
December 31...... 2,122,241 0.29 1,757,803 0.23 (242,001) (0.03) 1,515,802 0.20 1,775,764 0.24
---------- ----- ---------- ----- ----------- ------ ----------- ------ ---------- -----
$3,958,988 $0.54 $3,226,800 $0.43 $(4,245,615) $(0.57) $(1,018,815) $(0.14) $3,551,539 $0.48
---------- ----- ---------- ----- ----------- ------ ----------- ------ ---------- -----
---------- ----- ---------- ----- ----------- ------ ----------- ------ ---------- -----
<CAPTION>
NET ASSETS AT
QUARTERLY PERIOD END OF PERIOD
- ----------------- ---------------------
PER
FISCAL 1994 AMOUNT SHARE
- ----------------- ------------ ------
<S> <C> <C>
September 30..... $ 98,395,487 $13.30
December 31...... 98,135,525 13.26
</TABLE>
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase, from time to time, shares of its
common stock in the open market.
- --------------------------------------------------------------------------------
13
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
PROXY RESULTS
During the six-month period ended June 30, 1996, Cohen & Steers Total
Return Realty Fund, Inc. shareholders voted on the following proposals at the
annual meeting held on April 25, 1996. The description of each proposal and
number of shares voted are as follows:
<TABLE>
<CAPTION>
Shares Voted Shares Voted
For Without Authority
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. To elect Gregory C. Clark as Director 6,916,988 112,094
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. To ratify Coopers & Lybrand L.L.P. as the Fund's certified 6,869,130 81,026 78,926
public accountants
- --------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
OFFICERS AND DIRECTORS
Robert H. Steers
Director and Chairman
Martin Cohen
Director and President
Gregory C. Clark
Director
George Grossman
Director
Jeffrey H. Lynford
Director
Willard H. Smith
Director
Elizabeth O. Reagan
Vice President
INVESTMENT ADVISER
Cohen & Steers Capital Management, Inc.
757 Third Avenue
New York, NY 10017
(212) 832-3232
FUND ADMINISTRATOR
Princeton Administrators, L.P.
P.O. Box 9095
Princeton, NJ 08543-9095
(800) 688-0928
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
LEGAL COUNSEL
Dechert Price & Rhoads
477 Madison Avenue
New York, NY 10022
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of Fund shares.
- --------------------------------------------------------------------------------
15
<PAGE>
<PAGE>
[LOGO]
COHEN & STEERS
TOTAL RETURN REALTY FUND
757 THIRD AVENUE
NEW YORK, N.Y. 10017
SEMI-ANNUAL REPORT
JUNE 30, 1996
STATEMENT OF DIFFERENCES
The mathematical division symbol will be represented by [div]
