<PAGE>
COHEN & STEERS
TOTAL RETURN REALTY FUND
757 THIRD AVENUE
NEW YORK, NY 10017
[GRAPHIC OMITTED]
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COHEN & STEERS
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TOTAL RETURN REALTY FUND
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SEMI-ANNUAL REPORT
JUNE 30, 2000
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
July 20, 2000
To Our Shareholders:
We are pleased to submit to you the semi-annual report for Cohen & Steers
Total Return Realty Fund for the quarter and six months ended June 30, 2000. The
net asset value per share at that date was $11.56. In addition, during the
quarter, three $0.08 per share monthly dividends were declared and paid.
MIDYEAR REVIEW
For the quarter ended June 30, 2000, Cohen & Steers Total Return Realty Fund
had a total return, based on income and change in net asset value, of 12.7%.
This performance compares to the NAREIT Equity REIT Index* total return of
10.5%. For the six months ended June 30, 2000, total return was 13.5% compared
to the NAREIT Equity REIT Index total return of 13.2%.
Stated simply, the first half of this year has been full of encouraging news
and positive statistics for REIT investors. The group has made what we believe
is a significant bottom and has registered its best absolute and relative
returns in years. For example, the second quarter's absolute total return was
the best since the third quarter of 1997, and relative to the major stock market
averages, REITs turned in their best performance since the first quarter of
1993.
This turnabout was precipitated by a host of technical and fundamental
factors. In our view, it is clear now that REITs were substantially oversold by
the end of last year, and therefore due for a bounce. In addition, the
volatility and price decline in technology stocks, which had been the market
standouts over the past two years, tilted investor sentiment more towards the
stability offered by REITs. More important, in our opinion, was that the
combination of strong underlying real estate fundamentals and exceptional
valuations were just too compelling for investors to ignore any longer. REIT
earnings grew at a healthy rate in the first quarter, surprising many Wall
Street analysts and reflecting the continued strengthening of most property
markets. Whereas most analysts were expecting average cash flow per share growth
in the 7% range, the industry recorded average growth in the 9% range. Further,
income growth for many companies with properties in the strongest markets
actually reaccelerated in the first half of the year, soaring to the low-teens.
As these earnings were reported, most realty stocks reacted very favorably.
In the meantime, construction activity in nearly all property types peaked
in the early part of the year and has since begun to decline substantially.
Thus, it appears that the rally in REIT shares also reflects expectations for a
continuation of what has been an ideal economic and financial market environment
for property owners. Assuming that the Federal Reserve is successful in
engineering an economic slowdown but with no recession, a so-called "soft
landing," we would not expect to see a material rise in construction activity
for the foreseeable future. This would enable property markets to continue to
enjoy positive supply/demand conditions.
Our current holdings reflect our favorable view of the Office, Industrial
and Hotel sectors. Both the office markets and the industrial markets are
currently enjoying a "landlord's market" as demand for space is equal to or
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
greater than the supply. In this environment we expect rent growth at a rate
greater than inflation. The Hotel sector continues to benefit from greater than
anticipated demand and a decline in construction activity as well as extremely
attractive valuation levels. We are also maintaining our position in the Health
Care sector. While this sector's leaders performed well in the first half, we
expect continued improving performance as the senior care industry moves forward
in its recovery.
INVESTMENT OUTLOOK
We believe that one of the strongest determinants of the direction of REIT
share prices is the direction of the underlying property values, which in turn
influences REIT net asset values (NAVs) per share. When the market expects
property values and NAVs to rise, such as they did in the mid 1990's, REIT share
prices can rise strongly and even sell at a premium to the then current NAVs. We
believe that in the bear market of 1998-99, the reverse took place, whereby the
market expected NAVs to decline, due to concerns about deflation and its impact
on hard assets, as well as the prospect of increased construction at the tail
end of the economic cycle. In short order, REITs began to trade at a meaningful
discount from NAV. This expected decline in NAVs, however, never took place. The
near-absence of capital in the REIT industry and the capital market discipline
imposed on all property market participants effectively attenuated construction
and development activity.
Without capital, nearly all REITs were forced to adopt self-financing
business plans and recycle capital through property sales in order to enhance
shareholder value. Share buybacks became very common and, naturally, purchases
of shares at a discount to NAV increased the NAV of the remaining shares. There
continues to be nearly no new common equity financing in the industry. In the
meantime, real estate fundamentals at the property level have remained very
strong. The growing economy has caused the demand for space to exceed supply in
many markets, and this has resulted in higher occupancy levels and stronger rent
growth than nearly anyone could have imagined.
Consequently, we believe that NAVs are on the rise once again. Current and
prospective NAV growth is coming from several sources. If one assumes that the
capitalization rates (earnings yield) for most property types remain unchanged,
then property values should rise in line with operating income growth. Since we
expect industry-wide growth in operating income of 6% this year, this would
imply a commensurate growth in property values. Further, because most REITs
employ fixed-rate debt financing, the growth in earnings and NAV per share is
magnified. In addition, because of the inflation that has been experienced in
land, materials and labor costs for the real estate industry, the replacement
values for many properties are rising. If one adds to this the fact that many
REITs own properties in prime locations that cannot be duplicated, it is easy to
see the potential for continued value creation.
One further factor that we would expect to have a material impact on REIT
share valuations is dividend yield. If the Federal Reserve is successful in
slowing the growth of the economy, we would expect this ultimately to lead to a
leveling off or even a reduction in long-term interest rates, as well as the
yields on U.S. Treasury and high-grade corporate bonds. At the same time,
investor sentiment for higher yielding or "junk" bonds has turned
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
negative as the performance in this sector has deteriorated over the past few
years. We believe this could be beneficial overall for REITs, as yield-oriented
investors look for other income producing alternatives. Moreover, since the
percentage of cash flow that the average REIT is paying out to investors is at a
historically low level, under our forecast REITs generally should continue to be
able to maintain significant dividend yields.
Ironically, in what we consider to be a positive sign, the flow of money
into real estate mutual funds has been remarkably low this year; less than $400
million flowed into these funds, whose total assets are about $8 billion. While
this is a reversal of the outflows experienced last year, it is well below the
levels experienced in the prior bull market. Considering the extraordinary
relative performance of the sector during the first six months and the velocity
at which capital flows in this day and age, we would have expected a much higher
level of investor attention. The reason we find this encouraging is that this
"quiet recovery", in our view, is typical of what many sectors experience at the
beginning of a reversal and this may indicate that we are still in the early
phases of this upturn.
Nonetheless, the question most asked of us lately is "is it too late to
invest in REITs?" While their strong absolute and relative performance clearly
places REITs in a somewhat less undervalued position than they were six months
ago, we believe the growth in earnings and asset values so far this year
justifies much of their price appreciation. In addition, even after this price
increase, relative to stocks, bonds and their own underlying asset values, we
believe that REITs remain solidly undervalued. Thus, we remain optimistic about
the future of REITs and will continue to seek attractive returns for our
investors.
Sincerely,
Martin Cohen Robert H. Steers
MARTIN COHEN ROBERT H. STEERS
President Chairman
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Cohen & Steers is online at www.cohenandsteers.com. Visit our website for weekly
NAVs, portfolio information, performance information, recent news articles,
literature and insights on the REIT market.
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* The NAREIT Equity REIT Index is an unmanaged, market capitalization weighted
index of all publicly-traded REITs that invest predominately in the equity
ownership of real estate. The index is designed to reflect the performance of
all publicly-traded REITs as a whole.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
SCHEDULE OF INVESTMENTS
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER VALUE
OF SHARES (NOTE 1)
---------- -----------
<S> <C> <C>
EQUITIES 96.22%
COMMON STOCK 85.91%
APARTMENT/RESIDENTIAL 15.56%
Apartment Investment & Management Co. -- Class A.... 35,700 $ 1,544,025
Camden Property Trust............................... 72,400 2,126,750
Colonial Properties Trust........................... 64,100 1,754,737
Gables Residential Trust............................ 59,900 1,546,169
Home Properties of New York......................... 57,600 1,728,000
Summit Properties................................... 87,500 1,837,500
United Dominion Realty Trust........................ 252,100 2,773,100
-----------
13,310,281
-----------
HEALTH CARE 11.27%
Health Care Property Investors...................... 133,800 3,646,050
Healthcare Realty Trust............................. 112,500 1,919,531
Nationwide Health Properties........................ 240,900 3,357,544
*Ventas............................................. 225,000 717,188
-----------
9,640,313
-----------
HOTEL 7.71%
FelCor Lodging Trust................................ 86,100 1,592,850
Host Marriott Corp. ................................ 143,800 1,348,125
MeriStar Hospitality Corp. ......................... 174,200 3,658,200
-----------
6,599,175
-----------
INDUSTRIAL 6.71%
First Industrial Realty Trust....................... 86,400 2,548,800
Pacific Gulf Properties............................. 127,400 3,192,962
-----------
5,741,762
-----------
OFFICE 22.55%
Arden Realty Group.................................. 131,400 3,087,900
Brandywine Realty Trust............................. 196,100 3,750,413
CarrAmerica Realty Corp. ........................... 79,500 2,106,750
Crescent Real Estate Equities Co. .................. 167,200 3,427,600
Highwoods Properties................................ 145,700 3,496,800
Mack-Cali Realty Corp. ............................. 133,400 3,426,713
-----------
19,296,176
-----------
OFFICE/INDUSTRIAL 7.96%
Liberty Property Trust.............................. 139,400 3,615,687
Prentiss Properties Trust........................... 17,000 408,000
Prime Group Realty Trust............................ 92,100 1,398,769
Reckson Associates Realty Corp. -- Class B.......... 54,500 1,386,344
-----------
6,808,800
-----------
</TABLE>
See accompanying notes to financial statements.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER VALUE
OF SHARES (NOTE 1)
---------- -----------
<S> <C> <C>
SELF STORAGE 0.36%
Storage USA......................................... 10,400 $ 306,800
-----------
SHOPPING CENTER 13.79%
COMMUNITY CENTER 4.27%
Pan Pacific Retail Properties....................... 66,000 1,328,250
Philips International Realty Corp. ................. 133,600 2,321,300
-----------
3,649,550
-----------
REGIONAL MALL 9.52%
JP Realty........................................... 111,400 1,984,312
Macerich Co. ....................................... 126,500 2,790,906
Simon Property Group................................ 81,300 1,803,844
Taubman Centers..................................... 142,500 1,567,500
-----------
8,146,562
-----------
TOTAL SHOPPING CENTER............................... 11,796,112
-----------
TOTAL COMMON STOCK (Identified
cost -- $74,883,051).......................... 73,499,419
-----------
PREFERRED STOCK 10.31%
Apartment Investment & Management Co., 9.375%,
Series G.......................................... 125,100 2,603,644
Camden Property Trust, $2.25, Series A
(Convertible)..................................... 90,100 2,179,294
CarrAmerica Realty Corp., 8.57%, Series B........... 41,000 852,031
Colonial Properties Trust, 8.75%, Series A.......... 69,500 1,515,969
Crown American Realty Trust, 11.00%, Series A....... 44,300 1,672,325
-----------
TOTAL PREFERRED STOCK (Identified
cost -- $9,553,983)........................... 8,823,263
-----------
TOTAL EQUITIES (Identified
cost -- $84,437,034).......................... 82,322,682
-----------
PRINCIPAL
AMOUNT
----------
CORPORATE BOND 0.98%
#Macerich Co. 144A, Convertible, 7.25%, due 12/15/02
(Identified cost -- $770,715)..................... $ 945,000 837,506
-----------
COMMERCIAL PAPER 2.34%
American Express Credit Corp., 6.78%, due 7/3/00
(Identified cost -- $1,998,247)................... 1,999,000 1,999,000
-----------
TOTAL INVESTMENTS (Identified cost -- $87,205,456)... 99.54% 85,159,188
OTHER ASSETS IN EXCESS OF LIABILITIES............... 0.46% 392,121
------ -----------
NET ASSETS (Equivalent to $11.56 per share based on
7,399,100 shares of capital stock outstanding)... 100.00% $85,551,309
====== ===========
</TABLE>
---------
* Non-income producing security.
# Security is restricted subject to Rule 144A and trades infrequently. The Fund
prices this security by obtaining a bid and ask price from two market makers
on a weekly basis. The average of the bid and ask prices is used as the
security's price.
See accompanying notes to financial statements.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (Identified
cost -- $87,205,456) (Note 1)........................ $85,159,188
Cash.................................................... 364
Dividends and interest receivable....................... 600,785
Receivable for investment securities sold............... 4,632
Other assets............................................ 532
-----------
Total Assets....................................... 85,765,501
-----------
LIABILITIES:
Payable for dividends declared.......................... 59,223
Payable to investment adviser........................... 49,680
Payable to administrator................................ 12,500
Other liabilities....................................... 92,789
-----------
Total Liabilities.................................. 214,192
-----------
NET ASSETS applicable to 7,399,100 shares of $0.001 par
value common stock outstanding (Note 4)................. $85,551,309
===========
NET ASSET VALUE PER SHARE:
($85,551,309[div]7,399,100 shares outstanding).......... $ 11.56
===========
MARKET PRICE PER SHARE...................................... $ 11.56
===========
MARKET PRICE PREMIUM/(DISCOUNT) TO NET ASSET VALUE PER
SHARE..................................................... 0.00%
===========
NET ASSETS consist of:
Paid-in capital (Notes 1 and 4)......................... $94,897,831
Distributions in excess of net investment income........ (505,832)
Accumulated net realized loss on investments sold....... (6,794,422)
Net unrealized depreciation on investments.............. (2,046,268)
-----------
$85,551,309
===========
</TABLE>
See accompanying 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, 2000 (UNAUDITED)
<TABLE>
<S> <C>
Investment Income (Note 1):
Dividend income......................................... $ 3,452,558
Interest income......................................... 80,684
-----------
Total Income....................................... 3,533,242
-----------
Expenses:
Investment advisory fees (Note 2)....................... 281,339
Administration fees (Note 2)............................ 75,000
Transfer agent fees..................................... 28,366
Custodian fees and expenses............................. 34,870
Professional fees....................................... 22,966
Reports to shareholders................................. 21,463
Directors' fees and expenses (Note 2)................... 16,186
Registration and filing fees............................ 8,041
Miscellaneous........................................... 7,977
-----------
Total Expenses..................................... 496,208
-----------
Reduction of Expenses (Note 6).......................... (8,507)
-----------
Net Expenses....................................... 487,701
-----------
Net Investment Income....................................... 3,045,541
-----------
Net Realized and Unrealized Gain/(Loss) on Investments:
Net realized loss on investments........................ (5,692,284)
Net change in unrealized depreciation on investments.... 13,091,331
-----------
Net realized and unrealized gain/(loss) on
investments..................................... 7,399,047
-----------
Net Increase in Net Assets Resulting from Operations........ $10,444,588
===========
</TABLE>
See accompanying notes to financial statements.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
----------- -----------------
<S> <C> <C>
Change in Net Assets:
From Operations:
Net investment income................ $ 3,045,541 $ 7,480,109
Net realized loss on investments..... (5,692,284) (4,610,583)
Net change in unrealized depreciation
on investments.................... 13,091,331 (8,273,337)
----------- -----------
Net increase/(decrease) in net
assets resulting from
operations.................... 10,444,588 (5,403,811)
----------- -----------
Dividends and Distributions to
shareholders from
(Note 1):
Net investment income................ (3,551,373) (6,160,687)
Net realized gain on investments..... -- --
Tax return of capital................ -- (1,163,676)
----------- -----------
Total dividends and distributions to
shareholders...................... (3,551,373) (7,324,363)
----------- -----------
Total increase/(decrease) in net
assets........................ 6,893,215 (12,728,174)
Net Assets:
Beginning of period.................. 78,658,094 91,386,268
----------- -----------
End of period (including
distributions in excess of net
investment income of $505,832).... $85,551,309 $78,658,094
=========== ===========
</TABLE>
See accompanying notes to financial statements.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding
throughout each period and other performance information derived from the
Financial Statements. It should be read in conjunction with the Financial
Statements and notes thereto.
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, 2000 --------------------------------------------
PER SHARE OPERATING PERFORMANCE: (UNAUDITED) 1999 1998 1997 1996 1995
-------------------------------- ----------- ------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 10.63 $ 12.35 $17.51 $16.87 $13.44 $ 13.26
-------- ------- ------ ------ ------ -------
Income from investment operations:
Net investment income........................... 0.41 1.01 1.17 1.10 1.02 0.88
Net realized and unrealized gain/(loss) on
investments................................... 1.00 (1.74) (3.36) 2.38 3.42 0.26
-------- ------- ------ ------ ------ -------
Total from investment operations............ 1.41 (0.73) (2.19) 3.48 4.44 1.14
-------- ------- ------ ------ ------ -------
Less dividends and distributions to shareholders
from:
Net investment income........................... (0.48) (0.83) (0.74) (0.96) (0.96) (0.67)
Net realized gain on investments................ -- -- (2.05) (1.88) (0.05) --
Tax return of capital........................... -- (0.16) (0.18) -- -- (0.29)
-------- ------- ------ ------ ------ -------
Total from dividends and distributions to
shareholders.............................. (0.48) (0.99) (2.97) (2.84) (1.01) (0.96)
-------- ------- ------ ------ ------ -------
Net increase/(decrease) in net asset
value..................................... 0.93 (1.72) (5.16) 0.64 3.43 0.18
-------- ------- ------ ------ ------ -------
Net asset value, end of period..................... $ 11.56 $ 10.63 $12.35 $17.51 $16.87 $ 13.44
======== ======= ====== ====== ====== =======
Market value, end of period........................ $11.5625 $10.625 $12.81 $17.75 $16.50 $13.375
======== ======= ====== ====== ====== =======
--------------------------------------------------------------------------------------------------------------------
Total market value return (1)...................... 13.55%(2) - 10.18% - 12.20% 24.96% 32.37% 16.38%
======== ======= ====== ====== ====== =======
Total net asset value return (1)................... 13.47%(2) - 6.77% - 14.21% 20.57% 34.68% 9.14%
======== ======= ====== ====== ====== =======
--------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions)......... $ 85.6 $ 78.7 $ 91.4 $129.6 $124.8 $ 99.4
======== ======= ====== ====== ====== =======
Ratio of expenses to average weekly net assets
(before expense reduction).................... 1.24%(3) 1.18% 1.14% 1.22% 1.20% 1.25%
======== ======= ====== ====== ====== =======
Ratio of expenses to average weekly net assets
(net of
expense reduction)............................ 1.22%(3) 1.12% 1.12% 1.17% 1.16% 1.23%
======== ======= ====== ====== ====== =======
Ratio of net investment income to average weekly
net assets (before expense reduction)......... 7.60%(3) 8.61% 7.35% 6.12% 7.16% 6.78%
======== ======= ====== ====== ====== =======
Ratio of net investment income to average weekly
net assets
(net of expense reduction).................... 7.62%(3) 8.67% 7.37% 6.17% 7.21% 6.79%
======== ======= ====== ====== ====== =======
Portfolio turnover rate......................... 20%(2) 62% 76% 41% 31% 51%
======== ======= ====== ====== ====== =======
</TABLE>
-------------------
(1) 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.
(2) Not annualized.
(3) Annualized.
See accompanying 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, 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 sale on such
day, the securities are valued at the mean of the closing bid and asked prices
for the day.
Securities not listed on the New York Stock Exchange but listed on other
domestic or foreign securities exchanges or admitted to trading on the National
Association of Securities Dealers Automated Quotations, Inc. ("NASDAQ") National
Market System are valued in a similar manner. Securities traded on more than one
securities exchange are valued at the last sale price on the business day as of
which such value is being determined as reflected on the tape at the close of
the exchange representing the principal market for such securities.
Readily marketable securities traded in the over-the-counter market,
including listed securities whose primary market is believed by 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 trade date. 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. Interest
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
income is recognized on the accrual basis. Discounts and premiums of securities
purchased are amortized using the effective yield basis over their respective
lives.
Dividends and Distributions to Shareholders: Dividends from net investment
income are declared and paid monthly. A portion of the Fund's dividend may
consist of amounts in excess of net investment income derived from non-taxable
components of the dividends from the Fund's portfolio investments. Net realized
capital gains, unless offset by any available capital loss carryforward, are
distributed to shareholders annually. Distributions to shareholders are recorded
on the ex-dividend date.
Dividends from net investment income and capital gain distributions are
determined in accordance with U.S. Federal income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to return of capital and capital gain distributions received by
the Fund on portfolio securities.
Federal Income Taxes: It is the policy of the Fund to qualify as a regulated
investment company, if such qualification is in the best interest of the
shareholders, by complying with the requirements of Subchapter M of the Internal
Revenue Code applicable to regulated investment companies, and by distributing
substantially all of its taxable earnings to its shareholders. Accordingly, no
provision for Federal income or excise tax is necessary.
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. (the
"Adviser") serves as the investment adviser to the Fund, pursuant to an Advisory
Agreement (the "Advisory Agreement"). 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, 2000, the Fund incurred investment advisory fees of $281,339.
Administration Fees: Princeton Administrators, L.P., ("the Administrator")
serves as the administrator pursuant to an Administration Agreement (the
"Administration Agreement"), as amended, with the Fund. Under such
Administration 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
--------------------------------------------------------------------------------
11
<PAGE>
--------------------------------------------------------------------------------
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Administrator determines the Fund's net asset value daily, 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 0.15% of the
Fund's average weekly net assets subject to a monthly minimum of $12,500. For
the six months ended June 30, 2000, the Fund incurred administrative fees of
$75,000.
Director's Fees: Certain directors and officers of the Fund are also
directors, officers and/or employees of the Adviser. None of the directors and
officers so affiliated received compensation for their services. Fees and
related expenses accrued for non-affiliated directors totaled $16,186 for the
six months ended June 30, 2000.
NOTE 3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, excluding short-term investments, for the
six months ended June 30, 2000, totaled $15,973,560 and $17,202,847,
respectively.
At June 30, 2000, the cost and unrealized appreciation/(depreciation) in
value of the investments owned by the Fund are as follows:
<TABLE>
<S> <C>
Aggregated cost.................................... $87,205,456
-----------
Gross unrealized appreciation...................... $ 5,127,876
Gross unrealized depreciation...................... (7,174,144)
-----------
Net unrealized depreciation........................ $(2,046,268)
===========
</TABLE>
NOTE 4. COMMON STOCK
At June 30, 2000, the Fund has one class of common stock, par value $0.001
per share, of which 100 million shares are authorized and 7,399,100 shares are
outstanding. Cohen & Steers Capital Management, Inc. owned 14,167 shares.
NOTE 5. SUBSEQUENT EVENTS
On July 6, 2000, the Board of Directors on the Fund declared a dividend of
$0.08 per share payable on July 31, 2000 to shareholders or record on July 14,
2000.
NOTE 6. DIRECTED BROKERAGE ARRANGEMENT
The Adviser directed certain portfolio trades to brokers who paid a portion
of the Fund's expenses. For the year ended June 30, 2000, the Fund's expenses
were reduced by $8,507 under this arrangement.
--------------------------------------------------------------------------------
12
<PAGE>
--------------------------------------------------------------------------------
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE 7. BORROWINGS
The Fund has entered into a Line of Credit Agreement with State Street Bank
& Trust Company for $15,000,000. During the six months ended June 30, 2000,
there were no loans outstanding. The loan is collateralized by the Fund's
portfolio to the extent of the loan outstanding.
NOTE 8. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
NET
NET REALIZED AND INCREASE/(DECREASE)
QUARTERLY TOTAL INVESTMENT NET INVESTMENT UNREALIZED GAIN/(LOSS) IN NET ASSETS RESULTING
PERIOD INCOME INCOME ON INVESTMENT FROM OPERATIONS
--------- ---------------- ------------------ ----------------------- -----------------------
PER PER PER PER
FISCAL 2000 AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE
----------- ------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 31..... $1,574,958 $0.21 $1,334,931 $0.18 $ (785,149) $(0.10) $ 549,782 $ 0.08
June 30...... 1,958,284 0.26 1,710,610 0.23 8,184,196 1.10 9,894,806 1.33
---------- ----- ---------- ----- ------------ ------ ------------ ------
$3,533,242 $0.47 $3,045,541 $0.41 $ 7,399,047 $ 1.00 $ 10,444,588 $ 1.41
========== ===== ========== ===== ============ ====== ============ ======
PER PER PER PER
FISCAL 1999 AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE
----------- ------ ----- ------ ----- ------ ----- ------ -----
March 31..... $2,129,342 $0.29 $1,873,539 $0.25 $ (6,579,081) $(0.89) $ (4,705,542) $(0.64)
June 30...... 1,961,183 0.27 1,727,962 0.23 7,909,724 1.07 9,637,686 1.30
September 30. 2,319,601 0.31 2,085,459 0.28 (4,867,462) (0.66) (2,782,003) (0.38)
December 31.. 2,033,387 0.28 1,793,149 0.25 (9,347,101) (1.26) (7,553,952) (1.01)
---------- ----- ---------- ----- ------------ ------ ------------ ------
$8,443,513 $1.15 $7,480,109 $1.01 $(12,883,920) $(1.74) $ (5,403,811) $(0.73)
========== ===== ========== ===== ============ ====== ============ ======
PER PER PER PER
FISCAL 1998 AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE
----------- ------ ----- ------ ----- ------ ----- ------ -----
September 30. $2,228,505 $0.30 $1,910,803 $0.26 $ (9,818,779) $(1.33) $ (7,907,976) $(1.07)
December 31.. 2,331,357 0.32 2,028,419 0.27 (5,369,304) (0.72) (3,340,885) (0.45)
---------- ----- ---------- ----- ------------ ------ ------------ ------
$4,559,862 $0.62 $3,939,222 $0.53 $(15,188,083) $(2.05) $(11,248,861) $(1.52)
========== ===== ========== ===== ============ ====== ============ ======
</TABLE>
<TABLE>
<CAPTION>
QUARTERLY DIVIDENDS AND NET ASSETS AT
PERIOD DISTRIBUTIONS END OF PERIOD
--------- ------------- -------------
PER PER
FISCAL 2000 AMOUNT SHARE AMOUNT SHARE
----------- ------ ----- ------ -----
<S> <C> <C>
March 31..... $ (1,775,684) $(0.24) $ 77,432,192 $10.47
June 30...... (1,775,689) (0.24) 85,551,309 11.56
------------ ------
$ (3,551,373) $(0.48)
============ ======
PER PER
FISCAL 1999 AMOUNT SHARE AMOUNT SHARE
----------- ------ ----- ------ -----
March 31..... $ (1,775,248) $(0.24) $ 84,905,478 $11.48
June 30...... (1,775,721) (0.24) 92,767,443 12.54
September 30. (1,775,714) (0.24) 83,437,777 11.28
December 31.. (1,997,680) (0.27) 78,658,094 10.63
------------ -------
$ (7,324,363) $(0.99)
============ ======
PER PER
FISCAL 1998 AMOUNT SHARE AMOUNT SHARE
----------- ------ ----- ------ -----
September 30. $ (1,775,716) $(0.24) $111,375,051 $15.05
December 31.. (16,647,897) (2.25) 91,386,268 12.35
------------ ------
$(18,423,613) $(2.49)
============ ======
</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.
--------------------------------------------------------------------------------
-------------------
AVERAGE ANNUAL TOTAL RETURNS*
(PERIODS ENDED JUNE 30, 2000)
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS SINCE INCEPTION (9/27/93)
-------- ---------- -------------------------
<S> <C> <C>
0.48% 9.71% 7.74%
</TABLE>
-------------------
* Based on net asset value.
--------------------------------------------------------------------------------
13
<PAGE>
--------------------------------------------------------------------------------
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
PROXY RESULTS
During the six month period ended June 30, 2000, Cohen & Steers Total Return
Realty Fund, Inc. shareholders voted on the following proposals at the annual
meeting held on April 25, 2000. The description of each proposal and number of
shares voted are as follows:
<TABLE>
----------------------------------------------------------------------------------------------------
SHARES VOTED SHARES VOTED
FOR AUTHORITY WITHHELD
----------------------------------------------------------------------------------------------------
<S> <C> <C>
1. To elect Directors
George Grossman................................ 6,869,433 122,693
Robert H. Steers............................... 6,870,683 121,443
</TABLE>
<TABLE>
----------------------------------------------------------------------------------------------------
SHARES VOTED SHARES VOTED SHARES VOTED
FOR AGAINST ABSTAIN
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. To ratify PricewaterhouseCoopers LLP as
the Fund's certified public accountantants.......... 6,871,505 52,354 68,267
----------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
14
<PAGE>
--------------------------------------------------------------------------------
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
<TABLE>
<CAPTION>
OFFICERS AND DIRECTORS
<S> <C>
Robert H. Steers INVESTMENT ADVISER
Director and Chairman Cohen & Steers Capital Management, Inc.
757 Third Avenue
Martin Cohen New York, NY 10017
Director and President (212) 832-3232
Gregory C. Clark FUND ADMINISTRATOR
Director Princeton Administrators, L.P.
P.O. Box 9095
George Grossman Princeton, NJ 08543-9095
Director (800) 543-6217
Jeffrey H. Lynford CUSTODIAN AND TRANSFER AGENT
Director State Street Bank and Trust Company
P.O. Box 8200
Willard H. Smith, Jr. Boston, MA 02266-8200
Director
LEGAL COUNSEL
Elizabeth O. Reagan Simpson Thacher & Bartlett
Vice President 425 Lexington Avenue
New York, NY 10017
Adam Derechin
Vice President and Assistant Treasurer New York Stock Exchange Symbol: RFI
Website: www.cohenandsteers.com
Lawrence B. Stoller
Assistant Secretary
This report is for shareholder
information. This is not a prospectus
intended for use in the purchase or sale
of Fund shares. Past performance is, of
course, no guarantee of future results
and your investment may be worth more
or less at the time you sell.
</TABLE>
--------------------------------------------------------------------------------
15
STATEMENT OF DIFFERENCES
The division sign shall be express as............................[div]
