<PAGE>
<PAGE>
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
July 21, 1997
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, 1997. The net
asset value per share at that date was $17.72. In addition, during the quarter,
three $0.08 per share dividends were declared and paid.
MID-YEAR REVIEW
Real estate securities have experienced a somewhat erratic period thus far
in 1997. By mid-year, however, the Fund's 7.9% return based on income and change
in net asset value is in line with our mid-teens annual total return
expectation. This is also consistent with the long-term returns that REITs have
traditionally provided.
In April, REITs suffered their largest monthly price decline since
November, 1994 (-3.4%), primarily the result of the supply imbalance caused by a
flood of equity issuance. In the first half of this year, REITs raised $9.7
billion in common equity, a record for any six month period. With supply
pressures abating and a continuation of strong real estate fundamentals, REITs
posted strong returns in both May (+2.9%) and June (+4.9%), which more than
erased April's decline. This strong rebound was consistent throughout all
mainstream property sectors.
Also helping performance in the spring were the very strong earnings
reported by REITs. Most reported profits above consensus expectations, and the
companies in our universe reported average per share growth of approximately 10%
compared to last year's first quarter. Initial indications appear to us that a
similar pattern is likely to emerge when second quarter earnings are announced
in the next several weeks. This confirms our expectation that the REIT industry
is still in a high growth phase which justifies improved valuations and share
pricing that anticipates expanding earnings and asset values.
An important recent development is that the long-term debt market appears
to be becoming much more accommodating to the REIT industry. Whereas for the
past several years, most REITs were able to borrow money for only five to seven
year terms, the more credit worthy companies are now issuing ten to twenty year
fixed-rate debt. Further, the cost of this debt has declined significantly due
to the combination of lower interest rates and a narrowing of spreads from
benchmark rates. This lower cost of debt is enhancing REITs' returns on equity
and the longer maturity is much better suited to the long-term nature of REIT
assets.
INVESTMENT OUTLOOK
We believe that the rate of earnings growth for the industry as a whole is
likely to slow somewhat over the next several years as the real estate cycle
enters into a mature phase. This will happen as three previously wide gaps begin
to close: the gap between existing occupancy rates and full occupancy; the gap
between existing rental rates and market rates; and the gap between the market
value of many properties and their replacement cost. Occupancies and rental
rates have risen as the robust national economy over the past six years, against
a backdrop of limited new construction, has engendered a strong real estate
recovery. This improvement in fundamentals has
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
fostered a substantial return of capital to the industry from both public and
private market sources, thereby increasing real estate values.
Despite this already strong rebound, we do not believe that the real estate
cycle has by any means passed its peak or that the industry is headed for a
reversal of the positive trends now in place. We believe, however, that the
return to equilibrium conditions warrants a change in investment strategy, which
we have now almost completely executed. This strategy emphasizes the following
four themes.
1. STRONG INTERNAL GROWTH PROSPECTS. We are highly focused on companies
that own properties where the above-mentioned gaps are still relatively
wide, thereby permitting increases in occupancies and/or rents.
Similarly, we have identified those few companies that can still
purchase property at a meaningful discount to replacement cost. Many of
these companies are in the Office sector, particularly owners of central
business district office buildings, and it is for this reason that our
weighting in this sector is very high. In addition, most REITs have a
distinct advantage in the acquisition of office properties due to the
tax deferral that their operating partnership structure can offer
potential sellers.
2. PROTECTED OR UNIQUE MARKETS. These companies occupy a strong position in
markets with significant barriers to entry due to the requirement of
special expertise, or where there is a shortage of space that cannot be
easily created. They include several developers of apartment communities
in densely populated areas where special expertise is required to obtain
zoning and building permits. In the Office sector, many urban markets
tend to be protected due to high density, a scarcity of land, strict
building codes, and unusual operating complexity.
3. UNIQUE BUSINESS PLANS OR VALUE-ADDED STRATEGIES. We are attracted to
companies we believe are positioned to earn above-average profits by
employing techniques not available to (or not thought of by) their
competitors. There now exist a number of real estate companies that have
a recognized national brand name, and are maximizing rental revenues
while enjoying significant economies of scale. As many other companies
in our universe grow we expect them to become low cost providers of
products and services to their tenant bases, adding revenues which will
improve their profitability.
4. CONSOLIDATORS. Although the real estate cycle is maturing, the industry
remains highly fragmented and in dramatic need of better management and
further consolidation. For the first time in history, REITs are
attracting a substantial number of property owners wishing to sell
either for cash or an exchange of shares. The potential sellers span the
spectrum of individual and institutional owners. The largest, best
managed and best capitalized companies are the ones that are positioned
to make the most attractive acquisitions. These companies can solidify
their industry positions and achieve profit growth far exceeding that of
lesser competitors. The shares of these companies will, in our opinion,
maintain premium valuations that reflect their competitive positions.
In addition to the four themes described above, we remain committed to our
normal qualitative and quantitative investment standards and are particularly
attuned to each company's dividend growth potential. With
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
both interest rates and inflation quite low, and the dividend yield of the stock
market at an all-time low, REITs may be ideal investment vehicles for many
investors. If we are correct about the current state of the real estate cycle,
the income component of REIT returns will be valued more highly and this may
serve to offset generally slowing industry growth. Therefore, we are very
pleased to have identified companies that have both substantial dividend yields
and we believe are capable of sustaining healthy growth in earnings and
dividends.
As mentioned earlier, although we see the real estate cycle entering a
mature phase, it is by no means on the verge of a decline. The real estate
industry suffered perhaps its worst depression ever in the late 1980's and early
1990's and has emerged from that period in a much leaner and healthier position.
There simply is not a lot of new development taking place and the capital
flowing to the industry is nowhere near the amount that funded the overbuilding
of the 1980's. Further, this capital is primarily being used to purchase
existing properties rather than underwrite new development. Importantly, the
emergence of the public market as the principal allocator of capital to the
industry has introduced a measure of discipline that has never before existed.
As discussed above, we see no shortage of excellent investment opportunities and
we remain confident in our ability to earn satisfactory returns.
Sincerely,
<TABLE>
<S> <C>
/s/ MARTIN COHEN /s/ 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, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------------- -----------
<S> <C> <C> <C>
EQUITIES 101.32%
APARTMENT/RESIDENTIAL 21.45%
Associated Estates Realty Corp. ...................... 139,700 $ 3,282,950
Avalon Properties..................................... 109,700 3,140,163
Camden Property Trust................................. 85,200 2,694,450
Charles E. Smith Residential Realty................... 139,100 4,016,513
Colonial Properties Trust............................. 127,900 3,757,063
Columbus Realty Trust................................. 105,000 2,388,750
Oasis Residential -- Preferred........................ 210,200 5,438,925
Summit Properties..................................... 164,700 3,396,937
-----------
28,115,751
-----------
DIVERSIFIED 4.18%
Pacific Gulf Properties............................... 172,200 3,788,400
Santa Anita Realty Enterprises........................ 54,400 1,689,800
-----------
5,478,200
-----------
HEALTH CARE 10.93%
American Health Properties............................ 154,900 3,891,863
Health Care REIT...................................... 140,700 3,420,769
Healthcare Realty Trust............................... 20,800 579,800
Meditrust Corp. ...................................... 56,700 2,260,912
National Health Investors............................. 32,300 1,267,775
Omega Healthcare Investors............................ 88,800 2,902,650
-----------
14,323,769
-----------
HOTEL 3.19%
Innkeepers USA Trust.................................. 141,900 2,128,500
Sunstone Hotel........................................ 141,900 2,057,550
-----------
4,186,050
-----------
INDUSTRIAL 2.13%
EastGroup Properties.................................. 138,750 2,792,344
-----------
OFFICE 8.32%
Alexandria Real Estate Equities....................... 125,900 2,761,931
Brandywine Realty Trust............................... 100,000 2,025,000
Cali Realty Corp. .................................... 83,400 2,835,600
CarrAmerica Realty Corp. ............................. 114,500 3,291,875
-----------
10,914,406
-----------
</TABLE>
See notes to financial statements.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------------- -----------
<S> <C> <C> <C>
OFFICE/INDUSTRIAL 4.32%
Kilroy Realty......................................... 38,400 $ 969,600
Reckson Associates Realty Corp. ...................... 83,000 1,909,000
TriNet Corporate Realty Trust......................... 84,100 2,780,556
-----------
5,659,156
-----------
SELF STORAGE 0.93%
Sovran Self Storage................................... 41,700 1,219,725
-----------
SHOPPING CENTER 45.87%
Community Center: 21.55%
Alexander Haagen Properties........................... 31,900 518,375
Bradley Real Estate................................... 125,200 2,410,100
Burnham Pacific Properties............................ 201,000 2,763,750
Developers Diversified Realty Corp. .................. 37,700 1,508,000
Federal Realty Investment Trust....................... 91,200 2,462,400
Glimcher Realty Trust................................. 271,800 5,605,875
Mid-America Realty Investments........................ 128,300 1,242,906
Pennsylvania Real Estate Investment Trust............. 214,700 4,817,331
Price REIT............................................ 67,400 2,451,675
Regency Realty Corp. ................................. 60,100 1,637,725
Sizeler Property Investors............................ 103,800 1,070,437
Western Investment Real Estate Trust.................. 127,200 1,764,900
-----------
28,253,474
-----------
Factory Outlet: 8.09%
Chelsea GCA Realty.................................... 70,000 2,660,000
Horizon Group......................................... 474,000 6,369,375
Tanger Factory Outlet Centers......................... 58,700 1,577,563
-----------
10,606,938
-----------
</TABLE>
See notes to financial statements.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ------------
<S> <C> <C> <C>
Regional Mall: 16.23%
CBL & Associates Properties................................. 100,400 $ 2,409,600
JP Realty................................................... 120,300 3,263,137
Macerich Company............................................ 137,900 3,826,725
Simon DeBartolo Group....................................... 105,300 3,369,600
Taubman Centers............................................. 160,000 2,120,000
The Mills Corp. ............................................ 117,600 3,256,050
Urban Shopping Centers...................................... 94,900 3,024,938
------------
21,270,050
------------
TOTAL SHOPPING CENTER.................................... 60,130,462
------------
TOTAL INVESTMENTS (Identified cost -- $110,466,191).............. 101.32% 132,819,863
LIABILITIES IN EXCESS OF OTHER ASSETS............................ (1.32%) (1,734,138)
------ ------------
NET ASSETS (Equivalent to $17.72 per
share based on 7,399,100 shares of
capital stock outstanding)........................ 100.00% $131,085,725
------ ------------
------ ------------
</TABLE>
See notes to financial statements.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (identified cost -- $110,466,191) (Note 1)............... $132,819,863
Dividends receivable......................................................................... 796,156
Unamortized organization costs and other assets (Note 1)..................................... 23,973
------------
Total Assets........................................................................... 133,639,992
------------
LIABILITIES:
Loan payable (Notes 1 and 6)................................................................. 2,009,815
Payable for investment securities purchased.................................................. 298,366
Payable for dividends declared............................................................... 103,455
Investment advisory fees payable (Note 2).................................................... 74,946
Administrative fees payable (Note 2)......................................................... 16,060
Interest payable (Notes 1 and 6)............................................................. 13,003
Accrued expenses and other liabilities....................................................... 38,622
------------
Total Liabilities...................................................................... 2,554,267
------------
NET ASSETS applicable to 7,399,100 shares of $.001 par value common stock outstanding (Note 4)..... $131,085,725
------------
------------
NET ASSET VALUE PER SHARE:
($131,085,725[div]7,399,100 shares of common stock outstanding)................................. $ 17.72
------------
------------
MARKET PRICE PER SHARE............................................................................. $ 17.125
------------
------------
MARKET PRICE PREMIUM (DISCOUNT) TO NET ASSET VALUE PER SHARE....................................... (3.36%)
------------
------------
NET ASSETS consist of:
Paid-in capital (Notes 1 and 4).............................................................. $ 97,386,653
Net unrealized appreciation on investments................................................... 22,353,671
Accumulated net realized gain on investments sold............................................ 11,008,927
Accumulated net investment income............................................................ 336,474
------------
$131,085,725
------------
------------
</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, 1997 (UNAUDITED)
<TABLE>
<S> <C>
Investment Income (Note 1):
Dividend income............................................................................... $ 4,683,339
Interest income............................................................................... 25,605
-----------
Total Income............................................................................ 4,708,944
-----------
Expenses:
Investment advisory fees (Note 2)............................................................. 440,894
Interest expense (Notes 1 and 6).............................................................. 170,888
Administrative fees (Note 2).................................................................. 104,948
Transfer agent fees........................................................................... 28,303
Custodian fees................................................................................ 21,744
Professional fees............................................................................. 17,962
Directors' fees and expenses (Note 2)......................................................... 14,872
Reports to shareholders....................................................................... 14,726
Amortization of organization expenses (Note 1)................................................ 12,312
Registration fees............................................................................. 7,531
Insurance..................................................................................... 6,017
Miscellaneous................................................................................. 4,209
-----------
Total Expenses.......................................................................... 844,406
Reduction of Expenses (Note 5).......................................................... (23,374)
-----------
Net Expenses............................................................................ 821,032
-----------
Net Investment Income............................................................................... 3,887,912
-----------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments.............................................................. 6,861,305
Net change in unrealized appreciation on investments.......................................... (918,176)
-----------
Net realized and unrealized gain (loss) on investments.................................. 5,943,129
-----------
Net increase in net assets resulting from operations................................................ $ 9,831,041
-----------
-----------
</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, 1997* December 31, 1996
-------------- -----------------
<S> <C> <C>
Change in Net Assets:
From Operations:
Net investment income...................................... $ 3,887,912 $ 7,519,381
Net realized gain on investments........................... 6,861,305 2,177,775
Net change in unrealized appreciation on investments....... (918,176) 23,156,592
-------------- -----------------
Net increase in net assets resulting from
operations........................................ 9,831,041 32,853,748
-------------- -----------------
Dividends and Distributions from (Note 1):
Net investment income...................................... (3,551,438) (7,102,966)
Net realized gain on investments........................... -- (369,955)
-------------- -----------------
Total dividends and distributions.......................... (3,551,438) (7,472,921)
-------------- -----------------
Total increase in net assets......................... 6,279,603 25,380,827
Net Assets:
Beginning of period........................................ 124,806,122 99,425,295
-------------- -----------------
End of period.............................................. $131,085,725 $ 124,806,122
-------------- -----------------
-------------- -----------------
</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, 1997 -----------------------------------------
PER SHARE OPERATING PERFORMANCE: (unaudited) 1996 1995 1994 1993(a)
- ---------------------------------------------------------- ---------------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period...................... $ 16.87 $ 13.44 $ 13.26 $ 13.30 $ 13.96(c)
-------- -------- ------- ------- -------
Net investment income................................ 0.53 1.02 0.88 0.83 0.18
Net realized and unrealized gain (loss) on
investments........................................ 0.80 3.42 0.26 0.01 (0.60)
-------- -------- ------- ------- -------
Total from investment operations................ 1.33 4.44 1.14 0.84 (0.42)
-------- -------- ------- ------- -------
Less dividends and distributions from:
Net investment income................................ (0.48) (0.96) (0.70) (0.47) (0.18)
Distributions in excess of net investment income..... (0.00) (0.00) (0.00) (0.00) (0.03)
Net realized gain on investments..................... (0.00) (0.05) (0.00) (0.00) (0.00)
Tax return of capital................................ (0.00) (0.00) (0.26) (0.41) (0.03)
-------- -------- ------- ------- -------
Total from dividends and distributions.......... (0.48) (1.01) (0.96) (0.88) (0.24)
-------- -------- ------- ------- -------
Net increase (decrease) in net asset value...... 0.85 3.43 0.18 (0.04) (0.66)
-------- -------- ------- ------- -------
Net asset value, end of period............................ $ 17.72 $ 16.87 $ 13.44 $ 13.26 $ 13.30
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
Market value, end of period............................... $ 17.125 $ 16.50 $13.375 $12.375 $ 13.50
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
Total market value return(d).............................. +6.72% +32.37% +16.38% - 2.32% - 8.48%
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
Total net asset value return(d)........................... +7.99% +34.68% +9.14% +6.45% - 4.26%(c)
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)............. $131,086 $124,806 $99,425 $98,136 $98,388
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
Ratio of expenses to average weekly net assets
(before expense reduction)......................... 1.35%(b) 1.20% 1.25% 1.35% 1.22%(b)
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
Ratio of expenses to average weekly net assets (net
of expense reduction).............................. 1.32%(b) 1.16% 1.23% 1.31% 1.15%(b)
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
Ratio of net investment income to average weekly net
assets (net of expense reduction).................. 6.23%(b) 7.21% 6.79% 6.19% 5.21%(b)
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
Ratio of net investment income to average weekly net
assets (before expense reduction).................. 6.19%(b) 7.16% 6.78% 6.14% 5.14%(b)
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
Portfolio turnover rate.............................. 22% 31% 51% 65% 16%
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
Average Commission Rate(e)........................... $ 0.0630 $ 0.0678 N/A N/A N/A
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
</TABLE>
- ------------
(a) For the period September 27, 1993 (commencement of operations) 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) 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 of
assets and liabilities at the date of the financial statements and the reported
amounts of income and expenses during the reporting period. Actual results could
differ from those estimates.
Portfolio Valuation: Investments in securities that are listed on the New
York Stock Exchange are valued, except as indicated below, at the last sale
price reflected at the close of the New York Stock Exchange on the business day
as of which such value is being determined. If there has been no 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 unless the Board of Directors determines that this does
not represent fair 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
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
company taxable income derived from non-taxable components of the dividends from
the Fund's portfolio investments. Net realized capital gains, unless offset by
any available capital loss carryforward, are distributed to shareholders
annually. Distributions to shareholders are recorded on the ex-dividend date.
Dividends 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. These differences are primarily due to
payment of distributions subject to capital loss carryforward.
Federal Income Taxes: It is the policy of the Fund to qualify as a
regulated investment company, if such qualification is in the best interest of
the shareholders, by complying with the requirements of Subchapter M of the
Internal Revenue Code applicable to regulated investment companies, and by
distributing substantially all of its taxable earnings to its shareholders.
Accordingly, no provision for Federal income or excise tax is necessary.
Organization Costs: All costs incurred in connection with organizing and
establishing the Fund are being amortized on the straight-line basis over a
period of five years from the date on which the Fund commenced operations.
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 borrow only
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, 1997, the Fund incurred investment advisory fees of $440,894.
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
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
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. On
March 1, 1997, administrative fees were reduced to 0.15% of the Fund's average
weekly net assets subject to a monthly minimum of $12,500. For the six months
ended June 30, 1997, the Fund incurred administrative fees of $104,948.
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, 1997, the Fund
incurred directors' fees of $14,872.
NOTE 3. PURCHASES AND SALES OF SECURITIES
During the six months ended June 30, 1997, purchases and sales of
securities, excluding short-term investments, aggregated $29,107,878 and
$35,298,671, respectively.
At June 30, 1997, 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............................................................ $110,466,191
------------
------------
Gross unrealized appreciation.............................................. $ 22,754,610
Gross unrealized depreciation.............................................. (400,938)
------------
Net unrealized appreciation................................................ $ 22,353,672
------------
------------
</TABLE>
NOTE 4. COMMON STOCK
There are 100,000,000 shares of $.001 par value common stock authorized. Of
the 7,399,100 shares of common stock outstanding at June 30, 1997, Cohen &
Steers Capital Management, Inc. owned 9,139 shares.
NOTE 5. 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, 1997, the Fund's
expenses were reduced by $23,374 under this agreement.
NOTE 6. BORROWINGS
The Fund has entered into a Line of Credit Agreement with State Street Bank
& Trust Company for $15,000,000. At June 30, 1997, the par value of loans
outstanding was $2,009,815 at an interest rate of 7.25%. During the six months
ended June 30, 1997, the average daily balance of loans outstanding was
$5,805,747 at a weighted average interest rate of 6.37%. The maximum amount of
loans outstanding at any time during the period was $11,427,243 as of January
15, 1997, which was 8.27% of total assets. The loan is collateralized by the
Fund's portfolio.
- --------------------------------------------------------------------------------
13
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE 7. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
NET REALIZED AND NET INCREASE
TOTAL NET UNREALIZED GAIN IN NET ASSETS
INVESTMENT INVESTMENT (LOSS) RESULTING DIVIDENDS AND
QUARTERLY PERIOD INCOME INCOME ON INVESTMENTS FROM OPERATIONS DISTRIBUTIONS
- ------------------ ---------------- ------------------ -------------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER PER PER PER PER
FISCAL 1997 AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE
- ------------------ ---------- ----- ---------- ----- ----------- ------ ----------- ----- ---------- -----
March 31.......... $2,311,924 $0.31 $1,846,121 $0.25 $ (50,760) $(0.01) $ 1,795,361 $0.24 $1,775,726 $0.24
June 30........... 2,397,020 0.33 2,041,791 0.28 5,993,889 0.81 8,035,680 1.09 1,775,712 0.24
---------- ----- ---------- ----- ----------- ------ ----------- ----- ---------- -----
$4,708,944 $0.64 $3,887,912 $0.53 $ 5,943,129 $ 0.80 $ 9,831,041 $1.33 $3,551,438 $0.48
---------- ----- ---------- ----- ----------- ------ ----------- ----- ---------- -----
---------- ----- ---------- ----- ----------- ------ ----------- ----- ---------- -----
</TABLE>
<TABLE>
<CAPTION>
NET ASSETS AT
QUARTERLY PERIOD END OF PERIOD
- ------------------ ---------------------
<S> <C> <C>
PER
FISCAL 1997 AMOUNT SHARE
- ------------------ ------------ ------
March 31.......... $124,825,757 $16.87
June 30........... 131,085,725 17.72
</TABLE>
<TABLE>
<CAPTION>
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
September 30...... 1,870,487 0.25 1,580,139 0.22 5,010,695 0.67 6,590,834 0.89 1,775,736 0.24
December 31....... 2,637,159 0.36 2,282,516 0.31 16,515,038 2.23 18,797,554 2.54 2,145,684 0.29
---------- ----- ---------- ----- ----------- ------ ----------- ----- ---------- -----
$8,726,639 $1.18 $7,519,381 $1.02 $25,334,367 $ 3.42 $32,853,748 $4.44 $7,472,921 $1.01
---------- ----- ---------- ----- ----------- ------ ----------- ----- ---------- -----
---------- ----- ---------- ----- ----------- ------ ----------- ----- ---------- -----
</TABLE>
<TABLE>
<CAPTION>
PER
FISCAL 1996 AMOUNT SHARE
- ------------------ ------------ ------
<S> <C> <C>
March 31.......... $ 99,817,629 $13.49
June 30........... 103,339,154 13.97
September 30...... 108,154,252 14.62
December 31....... 124,806,122 16.87
</TABLE>
<TABLE>
<CAPTION>
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>
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
---------- ----- ---------- ----- ----------- ------ ----------- ----- ---------- -----
$4,182,099 $0.57 $3,597,707 $0.49 $ 3,678,240 $ 0.50 $ 7,275,947 $0.99 $3,551,514 $0.48
---------- ----- ---------- ----- ----------- ------ ----------- ----- ---------- -----
---------- ----- ---------- ----- ----------- ------ ----------- ----- ---------- -----
</TABLE>
<TABLE>
<CAPTION>
PER
FISCAL 1995 AMOUNT SHARE
- ------------------ ------------ ------
<S> <C> <C>
September 30...... $ 99,053,673 $13.39
December 31....... 99,425,295 13.44
</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.
PROXY RESULTS
During the six month period ended June 30, 1997, Cohen & Steers Total
Return Realty Fund, Inc. shareholders voted on the following proposals at the
annual meeting held on April 24, 1997. The description of each proposal and
number of shares voted are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Shares Voted Shares Voted
For Authority Withheld
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. To elect Directors
George Grossman 6,875,434 52,876
Robert H. Steers 6,880,105 48,205
- --------------------------------------------------------------------------------------------------------------
</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 6,839,482 19,838 68,990
certified 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
Jeffrey H. Lynford
Director
Willard H. Smith Jr.
Director
Elizabeth O. Reagan
Vice President
Adam Derechin
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
1-800-543-6217
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
LEGAL COUNSEL
Dechert Price & Rhoads
30 Rockefeller Plaza
New York, NY 10112
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>
COHEN & STEERS
TOTAL RETURN REALTY FUND
757 THIRD AVENUE
NEW YORK, NY 10017
[COHEN & STEERS LOGO]
SEMI-ANNUAL REPORT
JUNE 30, 1997
First Class Mail
U.S. Postage
PAID
Boston, MA
Permit No. 56712
STATEMENT OF DIFFERENCES
------------------------
The division symbol shall be expressed as .................[div]
