Edgar Filing: COHEN & STEERS TOTAL RETURN REALTY FUND INC

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES

Investment Company Act File Number: 811-7154

Cohen & Steers Total Return Realty Fund, Inc.
(Exact name of registrant as specified in charter)

757 Third Avenue, New York, NY 10017
(Address of principal executive offices) (Zip code)

Robert H. Steers
Cohen & Steers Capital Management, Inc.
757 Third Avenue
New York, New York 10017
(Name and address of agent for service)

Registrant's telephone number, including area code: (212) 832-3232

Date of fiscal year end: December 31

Date of reporting period: June 30, 2004

Item 1. Reports to Stockholders.

The registrant's semi-annual report to shareholders, for the period ended June
30, 2004 is included herein.

Item 2. Code of Ethics.

Not applicable.

Item 3. Audit Committee Financial Expert.

Not applicable.

Item 4. Principal Accountant Fees and Services.

Not applicable.

Item 5. Audit Committee of Listed Registrants.

Not applicable.

Item 6. Schedule of Investments.

Not applicable.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.

Not applicable.

Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.

Not applicable.

Item 9. Submission of Matters to a Vote of Security Holders.

Not applicable.

Item 10. Controls and Procedures.

(a) The registrant's principal executive officer and principal financial officer
have concluded that the registrant's disclosure controls and procedures are
sufficient to ensure that information required to be disclosed by the registrant
in this Form N-CSR was recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange

Commission's rules and forms, based upon such officers' evaluation of these
controls and procedures as of a date within 90 days of the filing date of this
report.

(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.

Item 11. Exhibits.

(a) (2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(a) under the Investment Company Act of 1940.

(b) Certifications of chief executive officer and chief financial officer as
required by Rule 30a-2(b) under the Investment Company Act of 1940.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

By: /s/ Robert H. Steers
-----------------------------
Name: Robert H. Steers
Title: Chairman

Date: August 24, 2004

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

By: /s/ Robert H. Steers By: /s/ Martin Cohen
-------------------------------------- --------------------------------------
Name: Robert H. Steers Name: Martin Cohen
Title: Chairman, Secretary Title: President, Treasurer
and principal executive officer and principal financial officer

Date: August 24, 2004

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

July 26, 2004

To Our Shareholders:

We are pleased to submit to you our report for the quarter and six months
ended June 30, 2004. The net asset value at that date was $17.15. In addition,
during the quarter, three $0.085 per share monthly dividends were declared and
paid.

INVESTMENT REVIEW

For the quarter, Cohen & Steers Total Return Realty Fund had a total return,
based on income and change in net asset value, of -6.3%. This compares to the
NAREIT Equity REIT Index's(a) total return of -5.8%. For the six months ended
June 30, 2004, the fund's total return was 3.9%, compared to NAREIT's 5.5%.

The second quarter of 2004 brought further evidence of a strengthening U.S.
economic recovery. The release of the March report on U.S. non-farm payrolls in
early April forced many of the pessimistic, economic naysayers to acknowledge
that the recovery was, in fact, for real.

The second quarter began with a dramatic decline in REIT stock prices,
followed by a dramatic rebound and, most importantly, in our view a decisive
rotation in leadership within the REIT market. By way of review, the March jobs
report took the capital markets by surprise on April 2 and sent the bond market
reeling, resulting in the worst quarter for the bond market since the first
quarter of 1994. REITs dropped 18% from their highs at the end of March, before
bottoming on May 10. We characterized this decline as technical in nature,
driven by the valuation concerns of some investors, and one that we believed
presented an attractive investment opportunity. In our view, the very jobs
report that set off the decline in REIT share prices was likely to contribute to
improving real estate fundamentals and greater cash flow for REITs.

We are pleased to report that since then REITs have rebounded significantly,
recording a 14% total return from May 10 through the end of June, and were one
of the best performing asset classes over this time period. The strong returns
of the last two months are certainly inconsistent with the notion put forward by
some pundits that REITs tipped into a bear market in the second quarter in
sympathy with the bond market. In fact, if the first half of 2004 is a proper
guide, we believe REITs are on pace to deliver the low- to mid-teens total
return profile that is consistent with the sector's long-term average.

While many observers focused on the uncharacteristic volatility in REIT
share prices, the more interesting story in the second quarter was a rotation of
leadership within the REIT market. The defensive issues, which had led the REIT
group since 2001, have ceded their market leadership to the more cyclically
inclined companies that we believe will respond to the economic recovery most
quickly and most dramatically. The broad distribution of returns across sectors
during the quarter highlights in greater detail this change in leadership, as
well as the above-average volatility experienced during the quarter. The best
performing sectors were apartment and hotel,

-------------------
(a) The NAREIT Equity REIT Index is an unmanaged, market capitalization weighted
index of all publicly traded REITs that invest predominantly in the equity
ownership of real estate. The index is designed to reflect the performance
of all publicly traded equity REITs as a whole.

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

which generated total returns of 2.2% and -2.6% respectively. Conversely, the
worst performing sectors during the quarter were health care (-13.4% total
return) and regional mall (-11.5%). The obvious difference between the two
groups is the short lease duration and more variable demand patterns of the
strong performing cyclical sectors versus the long lease terms and relatively
consistent demand profiles of the laggards, which tend not to respond quickly to
accelerating economic growth.

The fund's best performing investments during the quarter were in the
apartment and industrial sectors, which produced total returns of 1.1% and
-0.5% respectively, while the worst performing sector for the fund was the
healthcare sector, which had a -13.9% total return. Apartment companies
AvalonBay Communities and Mid-America Apartment Communities were the fund's best
performing holdings, contributing total returns of 6.8% and 3.9% respectively.
Laggards during the quarter included Health Care REIT, with a total return of
-18.5% and Glimcher Realty Trust, which generated a total return of -16.6%.

Our performance during the quarter was also enhanced by our position in
Keystone Property Trust, a small-cap industrial REIT that announced it was being
acquired by a joint venture between Prologis Trust and affiliates of Eaton Vance
Management for $23.80 per share in cash, a 14% premium to the previous day's
closing price. This transaction is significant for two reasons, among others.
One is that it highlights the fact that, in our view, Wall Street continues to
underestimate real estate values (the consensus net asset value estimate for
Keystone prior to the deal was approximately $18.50 per share). Additionally, we
believe the transaction represents another validation of our strategy, as
Keystone embodied many of the key attributes we look for in investment
candidates. Specifically, these attributes include companies that are relatively
underfollowed, small to mid-cap in size with an above-average dividend yield,
and that are trading at a lower price/NAV ratio than their peers.

INVESTMENT OUTLOOK

In the wake of the REIT stock price decline in the second quarter, many
investors have asked us whether REITs can continue to perform well in what many
are concerned (overly so, in our view) may be a period of rising interest rates.

Our view has always been and continues to be that real estate fundamentals
are the primary driver of REIT returns over the long run. Still, we regularly
examine the extent to which REITs are correlated with other asset classes. We
have found that over the long term REIT share price behavior has not been
statistically related in any material way to the performance of bonds or
interest rates. In other words, over time, the performance of the bond market
has explained virtually none of the performance of REITs.

Over the short term, REITs may appear to correlate with interest rates, as
we have seen recently. However, although we can say with certainty that rising
rates result in poor returns for bonds, the REIT return equation cannot be
solved using interest rates as the only input variable. Importantly, we have
also found that in the 12 months following periods of rising interest rates, as
the dampening effect of higher interest rates on security returns has subsided
and the acceleration of real estate fundamentals has kicked in, REIT performance
historically has been consistently very strong.

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

Nonetheless, we cannot ignore the fact that interest rates can have an
impact on REIT earnings and asset values. Higher interest rates will increase
the cost of REITs' debt capital over time, although the impact will be mitigated
by REITs' use of primarily long-term, fixed-rate debt. Higher interest rates may
also result in higher real estate capitalization rates, which would tend to
lower estimates of property values. However, we believe that if interest rates
are rising due to a stronger economy and attendant higher inflationary
expectations (which in the past have been favorable for real estate
fundamentals), this could serve to offset at least some of the impact that
higher interest rates would otherwise have on capitalization rates.

Higher interest rates can also have some beneficial effects on REITs. The
higher inflationary expectations, which are partially driving higher interest
rates, push up the price of building costs, especially inputs like steel,
concrete, lumber, labor and construction period interest. Thus the overall
replacement cost of real estate escalates, which flows through eventually in the
form of higher market rents. Already we are hearing reports that construction
costs have risen by as much as 25% over the past two years. If capitalization
rates were to rise, the return on assets that REITs could achieve on external
acquisitions of property should increase. Furthermore, higher debt costs will
tend to choke off development of new, competitive real estate. These higher debt
costs tend to have a greater impact on the private developers who typically
build the majority of new buildings and use a higher proportion of debt in their
capital structure.

Our conclusion is that, although changes in interest rates have a varied
impact on REITs, the positive and negative impacts have historically tended to
offset one another, such that the overall impact on REIT returns has not
generally been material, thus, the historical lack of correlation. What remains
material is the supply and demand for real estate and how that impacts building
occupancies and rents. The most important thing to recognize about the prospects
for REIT returns, in our view, is that the job growth that occurred in March of
this year was followed up with strong job growth reports for both April and May.
With this key economic driver in place, we believe the prospects for higher
building occupancies and rents, and thus for higher cash flows for REITs, are
excellent.

At this point, with the first dose of Fed tightening already under our belts
and a further rise in interest rates widely anticipated among economists and
investors alike, it is safe to say that whatever impact investors believe rising
interest rates may have on REITs has been well digested by the stock market. The
net effect has been to bring REIT valuations in line with historical averages.
In our view, the favorable prospects for accelerating cash

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

flow growth over the next couple of years in combination with these valuations
give us confidence that REITs can continue to generate attractive total returns.

Sincerely,

MARTIN COHEN ROBERT H. STEERS
MARTIN COHEN ROBERT H. STEERS
President Chairman

GREG E. BROOKS, CFA
GREG E. BROOKS, CFA
Portfolio Manager

Cohen & Steers is online at cohenandsteers.com

We have enhanced both the look and features of our Web site
to give you more information about our company, our funds
and the REIT market in general. Check out our interactive
Asset Allocation Tool, which allows you to hypothetically
add REITs to any portfolio to see how they impact expected
total returns and risk. Or try the Fund Performance
Calculator and see how our funds have performed versus the
S&P 500 Index or Nasdaq Composite. As always, you can also
get daily net asset values, fund fact sheets, portfolio
highlights, recent news articles and our overall insights on
the REIT market.

So visit us today at cohenandsteers.com

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

SCHEDULE OF INVESTMENTS
JUNE 30, 2004 (UNAUDITED)

NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD(a)
--------- ------------ ------------

EQUITIES 98.89%(b)
COMMON STOCK 78.85%
DIVERSIFIED 9.81%
Colonial Properties Trust.............. 82,100 $ 3,163,313 6.96%
Crescent Real Estate Equities Co. ..... 170,600 2,750,072 9.31
iStar Financial........................ 36,900 1,476,000 6.98
Vornado Realty Trust................... 143,200 8,178,152 4.97
------------
15,567,537
------------
HEALTH CARE 10.12%
Health Care Property Investors......... 230,000 5,529,200 6.95
Health Care REIT....................... 27,600 897,000 7.38
Nationwide Health Properties........... 161,800 3,058,020 7.83
Ventas................................. 281,700 6,577,695 5.57
------------
16,061,915
------------
HOTEL 1.02%
Hospitality Properties Trust........... 38,400 1,624,320 6.81
------------
INDUSTRIAL 1.51%
First Industrial Realty Trust.......... 64,700 2,386,136 7.43
------------
MORTGAGE 1.95%
Newcastle Investment Corp. ............ 103,027 3,085,659 8.01
------------

-------------------
(a) Dividend yield is computed by dividing the security's current annual
dividend rate by the last sale price on the principal exchange, or market,
on which such security trades.
(b) Percentages indicated are based on the net assets of the fund.

See accompanying notes to financial statements.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 2004 (UNAUDITED)

NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD
--------- ------------ ------------

OFFICE 21.91%
Arden Realty........................... 160,000 $ 4,705,600 6.87%
Brandywine Realty Trust................ 184,900 5,027,431 6.47
CarrAmerica Realty Corp................ 155,100 4,688,673 6.62
Equity Office Properties Trust......... 203,400 5,532,480 7.35
HRPT Properties Trust.................. 71,900 719,719 7.99
Mack-Cali Realty Corp.................. 150,800 6,240,104 6.09
Maguire Properties..................... 93,000 2,303,610 6.46
Prentiss Properties Trust.............. 165,300 5,540,856 6.68
------------
34,758,473
------------
OFFICE/INDUSTRIAL 6.56%
Kilroy Realty Corp..................... 56,600 1,930,060 5.81
Liberty Property Trust................. 135,600 5,452,476 6.02
Reckson Associates Realty Corp. ....... 110,000 3,020,600 6.18
------------
10,403,136
------------
RESIDENTIAL 12.48%
APARTMENT 12.23%
Archstone-Smith Trust.................. 152,900 4,484,557 5.86
AvalonBay Communities.................. 69,900 3,950,748 4.95
Camden Property Trust.................. 78,900 3,613,620 5.55
Gables Residential Trust............... 122,900 4,176,142 7.09
Home Properties........................ 47,000 1,832,060 6.36
Mid-America Apartment Communities...... 35,400 1,341,306 6.18
------------
19,398,433
------------
MANUFACTURED HOME 0.25%
Affordable Residential Communities..... 24,300 403,380 7.53
------------
TOTAL RESIDENTIAL...................... 19,801,813
------------
SELF STORAGE 0.15%
Sovran Self Storage.................... 6,200 236,716 6.31
------------

See accompanying notes to financial statements.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 2004 (UNAUDITED)

NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD
--------- ------------ ------------

SHOPPING CENTER 13.34%
COMMUNITY CENTER 4.01%
Developers Diversified Realty Corp. ... 22,600 $ 799,362 5.20%
Federal Realty Investment Trust........ 52,400 2,179,316 4.71
Heritage Property Investment Trust..... 51,300 1,388,178 7.76
Kramont Realty Trust................... 69,500 1,112,000 8.13
Urstadt Biddle Properties -- Class A... 60,000 888,600 5.81
------------
6,367,456
------------
REGIONAL MALL 9.33%
CBL & Associates Properties............ 42,100 2,315,500 5.27
Glimcher Realty Trust.................. 95,200 2,105,824 8.69
Macerich Co............................ 110,500 5,289,635 5.10
Mills Corp............................. 109,000 5,090,300 5.10
------------
14,801,259
------------
TOTAL SHOPPING CENTER.................. 21,168,715
------------
TOTAL COMMON STOCK
(Identified cost -- $82,496,464) 125,094,420
------------
PREFERRED STOCK 20.04%
DIVERSIFIED 1.20%
Colonial Properties Trust, 9.25%,
Series C............................ 600 15,570 8.91
Colonial Properties Trust, 8.125%,
Series D............................ 14,600 374,198 7.93
Crescent Real Estate Equities Co.,
6.75%, Series A (Convertible)....... 75,500 1,508,490 8.45
------------
1,898,258
------------
HEALTH CARE 2.83%
Nationwide Health Properties, 7.677%,
Series P............................ 47,000 4,491,438 8.03
------------

See accompanying notes to financial statements.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 2004 (UNAUDITED)

NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD
--------- ------------ ------------

HOTEL 0.21%
FelCor Lodging Trust, 9.00%, Series B.. 2,900 $ 72,500 9.00%
Host Marriott Corp, 10.00%, Series C... 3,500 92,050 9.51
Host Marriott Financial Trust, 6.75%,
QUIPS(a) (Convertible).............. 3,200 166,400 6.50
------------
330,950
------------
INDUSTRIAL 0.26%
Keystone Property Trust, 9.125%,
Series D............................ 16,100 416,990 8.81
------------
OFFICE 3.83%
Alexandria Real Estate Equities, 9.10%,
Series B............................ 13,900 371,408 8.51
HRPT Properties Trust, 8.75%,
Series B............................ 52,800 1,388,640 8.32
Highwoods Properties, 8.625%,
Series A............................ 4,300 4,310,750 8.60
------------
6,070,798
------------
RESIDENTIAL -- APARTMENT 3.32%
Apartment Investment & Management Co.,
8.75%, Series D..................... 6,431 161,482 8.71
Apartment Investment & Management Co.,
9.375%, Series G.................... 113,200 2,931,880 9.05
Apartment Investment & Management Co.,
10.10%, Series Q.................... 25,000 655,000 9.64
Apartment Investment & Management Co.,
10.00%, Series R.................... 18,100 477,116 9.48
Mid-America Apartment Communities,
8.30%, Series H..................... 17,300 435,095 8.25
Post Properties, 8.50%, Series A....... 11,000 606,375 7.80
------------
5,266,948
------------

-------------------
(a) QUIPS Quarterly Income Preferred Securities.

See accompanying notes to financial statements.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 2004 (UNAUDITED)

NUMBER VALUE DIVIDEND
OF SHARES (NOTE 1) YIELD
--------- ------------ ------------

SHOPPING CENTER 8.39%
COMMUNITY CENTER 0.93%
Developers Diversified Realty Corp.,
8.60%, Series F..................... 1,600 $ 41,360 8.33%
Ramco-Gershenson Property Trust, 9.50%,
Series B............................ 11,600 306,820 9.05
Saul Centers, 8.00%, Series A.......... 26,800 683,400 7.84
Urstatdt Biddle Properties, 8.50%,
Series C............................ 4,000 438,000 7.76
------------
1,469,580
------------
OUTLET CENTER 0.46%
Chelsea Property Group, 8.375%,
Series A............................ 13,000 736,937 7.39
------------
REGIONAL MALL 7.00%
CBL & Associates Properties, 8.75%,
Series B............................ 13,000 686,400 8.29
Glimcher Realty Trust, 8.125%,
Series G............................ 16,000 380,000 8.55
Mills Corp., 9.00%, Series B........... 73,800 1,966,032 8.45
Mills Corp., 9.00%, Series C........... 25,000 663,125 8.52
Mills Corp., 8.75%, Series E........... 26,000 681,460 8.35
Pennsylvania Real Estate Investment
Trust, 11.00%, Series A............. 55,400 3,263,060 9.34
Taubman Centers, 8.30%, Series A....... 139,500 3,466,575 8.35
------------
11,106,652
------------
TOTAL SHOPPING CENTER.................. 13,313,169
TOTAL PREFFERED STOCK
(Identified cost -- $28,004,704) 31,788,551
------------
TOTAL EQUITIES (Identified
cost -- $110,501,168)........... 156,882,971
------------

PRINCIPAL
AMOUNT
---------

CORPORATE BOND 0.41%
Host Marriott, LP, 9.50%,
due 01/15/07
(Identified cost -- $600,418)....... $600,000 658,500
------------
TOTAL INVESTMENTS (Identified
cost -- $111,101,586).............. 99.30% 157,541,471
OTHER ASSETS IN EXCESS OF LIABILITIES 0.70% 1,108,738
------ ------------
NET ASSETS (Equivalent to $17.15 per
share based on 9,249,159 shares of
capital stock outstanding)......... 100.00% $158,650,209
------ ------------
------ ------------

See accompanying notes to financial statements.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2004 (UNAUDITED)

ASSETS:
Investments in securities, at value (Identified
cost -- $111,101,586) (Note 1)....................... $157,541,471
Cash.................................................... 377,443
Dividends and interest receivable....................... 896,298
Other assets............................................ 17,575
------------
Total Assets....................................... 158,832,787
------------
LIABILITIES:
Payable to investment advisor........................... 89,845
Payable for professional fees........................... 39,851
Payable to directors.................................... 4,751
Payable to administrator................................ 3,076
Other liabilities....................................... 45,055
------------
Total Liabilities.................................. 182,578
------------
NET ASSETS applicable to 9,249,159 shares of $0.001 par
value common stock outstanding (Note 5)................... $158,650,209
------------
------------
NET ASSET VALUE PER SHARE:
($158,650,209[div]9,249,159 shares outstanding)........... $ 17.15
------------
------------
MARKET PRICE PER SHARE...................................... $ 17.06
------------
------------
MARKET PRICE PREMIUM/(DISCOUNT) TO NET ASSET VALUE PER
SHARE..................................................... (0.52%)
------------
------------
NET ASSETS consist of:
Paid-in capital (Notes 1 and 5)......................... $112,560,482
Distributions in excess of net investment income........ (1,681,891)
Accumulated net realized gain on investments............ 1,331,733
Net unrealized appreciation on investments.............. 46,439,885
------------
$158,650,209
------------
------------

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, 2004 (UNAUDITED)

Investment Income (Note 1):
Dividend income......................................... $3,741,622
Interest income......................................... 30,895
----------
Total Income....................................... 3,772,517
----------
Expenses:
Investment advisory fees (Note 2)....................... 552,236
Reports to shareholders................................. 73,260
Professional fees....................................... 36,183
Directors' fees and expenses (Note 2)................... 20,138
Administration fees..................................... 13,580
Transfer agent fees and expenses........................ 11,644
Custodian fees and expenses............................. 10,280
Registration and filing fees............................ 6,566
Line of credit fees (Note 6)............................ 3,562
Miscellaneous........................................... 9,881
----------
Total Expenses..................................... 737,330
----------
Net Investment Income....................................... 3,035,187
----------
Net Realized and Unrealized Gain on Investments:
Net realized gain on investments........................ 1,575,391
Net change in unrealized appreciation on investments.... 1,610,783
----------
Net realized and unrealized gain on investments.... 3,186,174
----------
Net Increase in Net Assets Resulting from Operations........ $6,221,361
----------
----------

See accompanying notes to financial statements.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)

FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2004 DECEMBER 31, 2003
----------------- ------------------

Change in Net Assets:
From Operations:
Net investment income.................. $ 3,035,187 $ 5,365,361
Net realized gain on investments....... 1,575,391 3,136,985
Net change in unrealized appreciation
on investments...................... 1,610,783 33,087,426
------------ ------------
Net increase in net assets
resulting from operations....... 6,221,361 41,589,772
------------ ------------
Dividends and Distributions to Shareholders
from (Note 1):
Net investment income.................. (4,717,078) (5,365,361)
Net realized gain on investments....... -- (3,196,876)
Tax return of capital.................. -- (917,957)
------------ ------------
Total dividends and distributions
to shareholders................. (4,717,078) (9,480,194)
------------ ------------
Total increase in net assets...... 1,504,283 32,109,578
------------ ------------
Net Assets:
Beginning of period.................... 157,145,926 125,036,348
------------ ------------
End of period(a)....................... $158,650,209 $157,145,926
------------ ------------
------------ ------------

-------------------
(a) Includes distributions in excess of net investment income of $1,681,891 and
$0 at June 30, 2004 and December 31, 2003, respectively.

See accompanying notes to financial statements.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

FINANCIAL HIGHLIGHTS (UNAUDITED)

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.

FOR THE FOR THE YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED ---------------------------------------------------------
PER SHARE OPERATING PERFORMANCE: JUNE 30, 2004 2003 2002 2001 2000 1999
-------------------------------- ------------- --------- --------- --------- --------- ---------

Net asset value, beginning of
period............................... $16.99 $13.52 $13.41 $12.35 $ 10.63 $ 12.35
------ ------ ------ ------ ------- -------
Income from investment operations:
Net investment income.............. 0.33 0.58 0.64 0.77 0.75 0.83
Net realized and unrealized
gain/(loss) on investments....... 0.34 3.92 0.43 1.28 1.93 (1.56)
------ ------ ------ ------ ------- -------
Total income from investment
operations................... 0.67 4.50 1.07 2.05 2.68 (0.73)
------ ------ ------ ------ ------- -------
Less dividends and distributions to
shareholders from:
Net investment income.............. (0.51) (0.58) (0.75) (0.77) (0.74) (0.83)
Net realized gain on investments... -- (0.35) (0.21) -- -- --
Tax return of capital.............. -- (0.10) -- (0.22) (0.22) (0.16)
------ ------ ------ ------ ------- -------
Total from dividends and
distributions to
shareholders................. (0.51) (1.03) (0.96) (0.99) (0.96) (0.99)
------ ------ ------ ------ ------- -------
Net increase/(decrease) in net
assets....................... 0.16 3.47 0.11 1.06 1.72 (1.72)
------ ------ ------ ------ ------- -------
Net asset value, end of period........ $17.15 $16.99 $13.52 $13.41 $ 12.35 $ 10.63
------ ------ ------ ------ ------- -------
------ ------ ------ ------ ------- -------
Market value, end of period........... $17.06 $17.74 $14.19 $13.60 $11.875 $10.625
------ ------ ------ ------ ------- -------
------ ------ ------ ------ ------- -------
--------------------------------------------------------------------------------------------------------------------
Total market value return(a).......... - 0.98%(b) 33.36% 11.53% 23.34% 21.53% - 10.18%
------ ------ ------ ------ ------- -------
------ ------ ------ ------ ------- -------
Total net asset value return(a)....... 3.94%(b) 34.05% 7.77% 16.82% 26.17% - 6.77%
------ ------ ------ ------ ------- -------
------ ------ ------ ------ ------- -------
--------------------------------------------------------------------------------------------------------------------

RATIOS/SUPPLEMENTAL DATA:
-------------------------

Net assets, end of year (in millions). 158.7 157.1 125.0 124.1 91.4 78.7
------ ------ ------ ------ ------- -------
------ ------ ------ ------ ------- -------
Ratio of expenses to average daily net
assets (before expense reduction).... 0.93%(c) 0.95% 0.96% 1.18% 1.16% 1.18%
------ ------ ------ ------ ------- -------
------ ------ ------ ------ ------- -------
Ratio of expenses to average daily net
assets (net of expense reduction).... 0.93%(c) 0.95% 0.96% 1.18% 1.15% 1.12%
------ ------ ------ ------ ------- -------
------ ------ ------ ------ ------- -------
Ratio of net investment income to
average daily net assets (before
expense reduction)................... 3.85%(c) 3.93% 4.59% 5.86% 6.56% 7.08%
------ ------ ------ ------ ------- -------
------ ------ ------ ------ ------- -------
Ratio of net investment income to
average daily net assets (net of
expense reduction)................... 3.85%(c) 3.93% 4.59% 5.86% 6.57% 7.14%
------ ------ ------ ------ ------- -------
------ ------ ------ ------ ------- -------
Portfolio turnover rate............... 2%(b) 22% 30% 34% 31% 62%
------ ------ ------ ------ ------- -------
------ ------ ------ ------ ------- -------

-------------------
(a) 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 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.

(b) Not annualized.

See accompanying notes to financial statements.
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13

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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,
nondiversified management investment company.

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 accounting principles generally accepted in the
United States of America. 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. If no bid or asked prices are quoted on such day, then the security
is valued by such method as the board of directors shall determine in good faith
to reflect its fair market value.

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 Cohen & Steers
Capital Management, Inc. to be over-the-counter, but excluding securities
admitted to trading on the Nasdaq national list, are valued at the official
closing 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. Interest income is recorded on the
accrual basis. Dividend income is recorded on the ex-dividend date. The fund
records distributions received in excess of income from underlying investments
as a reduction of cost of investments and/or realized gain. Such

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14

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

amounts are based on estimates if actual amounts are not available, and actual
amounts of income, realized gain and return of capital may differ from the
estimated amounts. The fund adjusts the estimated amounts of the components of
distributions (and consequently its net investment income) as an increase to
unrealized appreciation/(depreciation) on investments as necessary once the
issuers provide information about the actual composition of the distributions.

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. Distributions to shareholders are recorded
on the ex-dividend date. Dividends will automatically be reinvested in full and
fractional shares of the fund based on open market purchases made by Equiserve
(the Plan Agent) on payable date unless the shareholder has elected to have them
paid in cash.

A portion of the fund's dividend may consist of amounts in excess of net
investment income derived from nontaxable 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.

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 advisor believes that it is not
appropriate to liquidate any existing investments. The fund will only borrow
when the advisor 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. The fund had no borrowings during the six months ended
June 30, 2004.

NOTE 2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Advisory Fees: Cohen & Steers Capital Management, Inc. (the
advisor) serves as the investment advisor to the fund, pursuant to an advisory
agreement (the advisory agreement). The advisor is responsible for the

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15

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

actual management of the fund's portfolio. The responsibility for making
decisions to buy, sell or hold a particular investment rests with the advisor,
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 advisor
is entitled to receive a fee, computed daily and payable monthly at an annual
rate of 0.70% of the fund's average daily net assets. For the six months ended
June 30, 2004, the fund incurred investment advisory fees of $552,236.

Director's Fees: Certain directors and officers of the fund are also
directors, officers and/or employees of the advisor. None of the directors and
officers so affiliated received compensation from the fund for their services.
For the six months ended June 30, 2004, fees and related expenses accrued for
nonaffiliated directors totaled $20,138.

NOTE 3. PURCHASES AND SALES OF SECURITIES

Purchases and sales of securities, excluding short-term investments, for the
six months ended June 30, 2004, totaled $3,066,423 and $3,164,238, respectively.

NOTE 4. INCOME TAXES

At June 30, 2004, the cost of investments and net unrealized appreciation
for federal income tax purposes were as follows:

Aggregate cost.................................... $111,101,586
------------
------------
Gross unrealized appreciation..................... $ 46,460,017
Gross unrealized depreciation..................... $ (20,132)
------------
Net unrealized appreciation....................... $ 46,439,885
------------
------------

NOTE 5. COMMON STOCK

At June 30, 2004, the fund had one class of common stock, par value $0.001
per share, of which 100 million shares are authorized and 9,249,159 shares are
outstanding. Cohen & Steers Capital Management, Inc. owned 43,105 shares.

NOTE 6. BORROWINGS

The fund, in conjunction with Cohen & Steers Realty Shares, Inc. Cohen &
Steers Institutional Realty Shares, Inc., Cohen & Steers Special Equity Fund,
Inc., Cohen & Steers Equity Income Fund, Inc., and Cohen & Steers Utility Fund,
Inc. has entered into a $200,000,000 credit agreement (the credit agreement)
with Fleet National Bank, as administrative agent, State Street Bank and Trust
Company, as operations agent, and the lenders identified in the credit
agreement.

During the six months ended June 30, 2004, did not utilize the line of
credit. For the six months ended June 30, 2004, the fund paid commitment fees
and other expenses of $3,562.

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16

--------------------------------------------------------------------------------
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

AVERAGE ANNUAL TOTAL RETURNS(a)
(PERIODS ENDED JUNE 30, 2004) (UNAUDITED)

SINCE INCEPTION
ONE YEAR FIVE YEARS TEN YEARS (9/27/93)
-------- ---------- --------- ---------

22.16% 14.40% 12.01% 11.53%

The performance data quoted represents past performance. Past performance is no
guarantee of future results. The rate of return will vary and the principal
value of an investment will fluctuate and shares, if sold, may be worth more or
less than their original cost. Current performance may be lower or higher than
performance data quoted.

REINVESTMENT PLAN

We urge shareholders who want to take advantage of this plan
and whose shares are held in 'Street Name' to consult your
broker as soon as possible to determine if you must change
registration into your own name to participate.

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.

A description of the policies and procedures that the fund
uses to determine how to vote proxies relating to portfolio
securities is available (i) without charge, upon request, by
calling 1-800-330-7348, (ii) on our Web site at
cohenandsteers.com or (iii) on the Securities and Exchange
Commission's Web site at http://www.sec.gov.

-------------------
(a) Based on net asset value.

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17

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

PROXY RESULTS

During the six month period ended June 30, 2004, Cohen & Steers Total Return
Realty Fund, Inc. shareholders voted on the following proposals at the annual
meeting held on April 29, 2004. The description of each proposal and number of
shares voted are as follows:

SHARES VOTED AUTHORITY
FOR WITHHELD

1. To elect Directors
Martin Cohen............................................. 8,819,453 83,359
Richard J. Norman........................................ 8,819,172 83,641
Frank K. Ross............................................ 8,810,622 92,191

SHARES VOTED SHARES VOTED SHARES VOTED
FOR AGAINST ABSTAIN

2. To ratify PricewaterhouseCoopers LLP as the
fund's independent registered public
accountants.................................. 8,765,117 64,488 73,207

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18

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

The fund is committed to maintaining the privacy of its
shareholders and to safeguarding their personal information.
The following is provided to help you understand what
personal information the fund collects, how we protect that
information, and why in certain cases we may share this
information with others.

The fund does not receive any personal information relating
to shareholders who purchase shares through an intermediary
that acts as the record owner of the shares. In the case of
shareholders who are record owners of the fund, to conduct
and process your business in an accurate and efficient
manner, we must collect and maintain certain personal
information about you. This is the information we collect on
applications or other forms, and from the transactions you
make with us.

The fund does not disclose any personal information about
its shareholders or former shareholders to anyone, except as
required or permitted by law or as is necessary to service
shareholder accounts. We will share information with
organizations, such as the fund's transfer agent, that
assist the fund in carrying out its daily business
operations. These organizations will use this information
only for purposes of providing the services required or as
otherwise as may be required by law. These organizations are
not permitted to share or use this information for any other
purpose. In addition, the fund restricts access to personal
information about its shareholders to employees of the
adviser who have a legitimate business need for the
information.

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19

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

MEET THE COHEN & STEERS FAMILY OF OPEN-END FUNDS:

FOR HIGH CURRENT INCOME: FOR TOTAL RETURN:

COHEN & STEERS COHEN & STEERS
EQUITY INCOME FUND REALTY SHARES

IDEAL FOR INVESTORS SEEKING A HIGH DIVIDEND IDEAL FOR INVESTORS SEEKING MAXIMUM TOTAL
YIELD AND CAPITAL APPRECIATION, INVESTING RETURN THROUGH BOTH CURRENT INCOME AND
PRIMARILY IN REITS CAPITAL APPRECIATION, INVESTING PRIMARILY IN
REITS
A, B, C AND I SHARES AVAILABLE
SYMBOL: CSRSX
SYMBOLS: CSEIX, CSBIX, CSCIX, CSDIX
ALSO AVAILABLE: COHEN & STEERS INSTITUTIONAL
REALTY SHARES (CSRIX) REQUIRES A HIGHER
MINIMUM PURCHASE, BUT OFFERS A LOWER TOTAL
EXPENSE RATIO

FOR TOTAL RETURN FOR CAPITAL APPRECIATION

COHEN & STEERS COHEN & STEERS
UTILITY FUND SPECIAL EQUITY FUND

IDEAL FOR INVESTORS SEEKING MAXIMUM TOTAL IDEAL FOR INVESTORS SEEKING MAXIMUM CAPITAL
RETURN THROUGH BOTH CURRENT INCOME AND APPRECIATION, INVESTING IN A LIMITED NUMBER
CAPITAL APPRECIATION, INVESTING PRIMARILY IN OF REITS AND OTHER REAL ESTATE COMPANIES
UTILITIES
CONCENTRATED, HIGHLY FOCUSED PORTFOLIO
SYMBOLS: CSUAX, CSUBX, CSUCX, CSUIX
SYMBOL: CSSPX

FOR MORE INFORMATION ABOUT ANY COHEN & STEERS FUND
OR TO OBTAIN A PROSPECTUS PLEASE CONTACT US AT:
1-800-330-7348, OR VISIT OUR WEB SITE AT COHENANDSTEERS.COM

PLEASE CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE
FUND CAREFULLY BEFORE INVESTING. A PROSPECTUS CONTAINING THIS AND OTHER
INFORMATION ABOUT THE FUND MAY BE OBTAINED BY FOLLOWING THE
INSTRUCTIONS ABOVE. PLEASE READ THE PROSPECTUS
CAREFULLY BEFORE INVESTING.

COHEN & STEERS SECURITIES, LLC, DISTRIBUTOR

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20

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

OFFICERS AND DIRECTORS KEY INFORMATION

Robert H. Steers INVESTMENT ADVISOR
Director and chairman Cohen & Steers Capital Management, Inc.
757 Third Avenue
Martin Cohen New York, NY 10017
Director and president (212) 832-3232

Bonnie Cohen FUND ADMINISTRATOR AND CUSTODIAN
Director State Street Corp.
225 Franklin Street
George Grossman Boston, MA 02110
Director
TRANSFER AGENT
Richard J. Norman Equiserve Trust Company
Director 250 Royall Street
Canton, MA 02021
Frank K. Ross (800) 426-5523
Director
LEGAL COUNSEL
Willard H. Smith Jr. Simpson Thacher & Bartlett LLP
Director 425 Lexington Avenue
New York, NY 10017
Greg E. Brooks
Vice president New York Stock Exchange Symbol: RFI

Joseph M. Harvey Web site: cohenandsteers.com
Vice president
This report is for shareholder
Adam Derechin information. This is not a prospectus
Vice president and assistant treasurer intended for use in the purchase or
sale of fund shares. Past performance
Lawrence B. Stoller is of course no guarantee of future
Assistant secretary results and your investment may be
worth more or less at the time you
sell.

--------------------------------------------------------------------------------
21

COHEN & STEERS
TOTAL RETURN REALTY FUND
757 THIRD AVENUE
NEW YORK, NY 10017

COHEN & STEERS
------------------------
TOTAL RETURN REALTY FUND

-------------------------
SEMIANNUAL REPORT
JUNE 30, 2004

STATEMENT OF DIFFERENCES

The division sign shall be expressed as................................. [div]

The section symbol shall be expressed as................................ 'SS'