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, 2003

Item 1. Reports to Stockholders.

The registrant's semi-annual report to shareholders, for the period ended June
30, 2003, is hereby included.

Item 9. Controls and Procedures.

(b) There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Item 10. Exhibits.

(a)(2)(i) Certification, dated as of August 19, 2003, of Robert H. Steers,
principal executive officer of the registrant.

(a)(2)(ii) Certification, dated as of August 19, 2003, of Martin Cohen,
principal financial officer of the registrant.

(b) (1) Certification, dated as of August 19, 2003, of Robert H. Steers, chief
executive officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.

(b) (2) Certification, dated as of August 19, 2003, of Martin Cohen, chief
financial officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.

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, Chairman

Date: August 19, 2003

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, Chairman, Secretary and principal executive officer

Date: August 19, 2003

By: /s/ Martin Cohen, President, Treasurer and principal financial officer

Date: August 19, 2003

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

July 23, 2003

To Our Shareholders:

We are pleased to submit to you our report for the quarter and six months
ended June 30, 2003. The net asset value at that date was $14.92. In addition,
during the quarter, three $0.085 per share monthly dividends were declared and
paid.

MIDYEAR REVIEW

For the quarter, Cohen & Steers Total Return Realty Fund had a total return,
based on income and change in net asset value, of 12.9%. This compares to the
NAREIT Equity REIT Index's(a) total return of 13.1%. For the six months ended
June 30, 2003, the fund's total return was 14.1%, compared to NAREIT's 13.9%.

At long last, nearly every sector of the U.S. financial markets provided
exceptional returns in the second quarter. REITs extended their winning streak
to over three years, and posted their best quarterly return since the fourth
quarter of 1996. In addition, the stock market arose from its three year slump
and posted its best performance (15.4% total return for the S&P 500 Index) since
the fourth quarter of 1998. Bonds extended what has now been, effectively, a
22-year bull market, with the 30-year Treasury bond registering a total return
of 5.4%.

There was an avalanche of geopolitical and economic news in the past three
months, most of it with positive implications. War in Iraq abated while steps
toward peace in the Middle East were promising. Congress passed tax cut
legislation, with a great deal of benefit going to investors by virtue of
lowered levies on dividends and capital gains. Interest rates reached their
lowest level in over 50 years, as the Fed's accommodative monetary policy
continued unabated. Consumer and business confidence clearly began to rise, and
more Americans now own homes than ever before. While these positive developments
have yet to ignite job creation, capital spending and strong overall economic
growth -- with the exception of housing -- we believe that forecasts for
accelerated growth in the second half of 2003 and beyond have clearly gained
credibility. We believe this renewed optimism has helped the outlook for both
real estate and REITs.

We are very pleased with our performance relative to our benchmark. The
strongest contributors to our out-performance were our overweight in the
regional mall sector and our underweight in the apartment, hotel and self
storage sectors. Also contributing to our out-performance was our stock
selection in the health care, apartment and industrial sectors. Our investment
in REIT preferred stocks detracted from our performance, as the total return of
these securities, though positive, lagged that of the overall REIT market.

REITs are operating in an environment that they have never before
experienced. In nearly all of the previous cycles that we can remember, when
coming out of a recession real estate fundamentals have been dismal, property
owners were in distress, and equity and debt capital was unavailable at a
reasonable price as investors and lenders shunned the asset class. In this
cycle, however, there is virtually no distress on the part of any major property
owners. While there is no doubt that real estate fundamentals are
weak -- vacancy rates are high and many

-------------------
(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.

property-level cash flows have been flat or declining -- fundamentals are more
disparate across sectors than we have ever seen coming out of a recession. Most
notable is the retail sector where occupancies and rents remain very strong.
Instead of capital fleeing the industry, it is now more plentiful than ever and
has never carried a lower cost. Investors that have been waiting for an
opportunity to acquire assets at bargain prices have been disappointed, as
prices have remained firm, or even risen, nearly across the board.

Consequently, the opportunity set for REITs is entirely different from past
history. Instead of an asset pricing opportunity, property owners now have a
liability pricing opportunity. Record low interest rates have allowed REITs to
refinance existing higher cost debt and boost earnings, just as homeowners and
homebuyers have been doing as they finance and refinance their mortgages. In
addition, REITs have been able to take advantage of the strong demand for
property by selling assets, enabling them to reposition and upgrade the quality
of their portfolios, while simultaneously strengthening their balance sheets.
For some investors, REITs themselves are the opportunity -- there were four
major acquisitions of public REITs in the first half of the year, and we suspect
that there will be even more merger and acquisition activity in the second half
of the year.

The strong REIT equity market offered renewed opportunities in the first
half of the year. Two initial public offerings were completed in late June, as
American Financial Realty and Maguire Properties together raised $1.4 billion in
common stock. This compares to just one IPO in 2002 (Heritage Properties), which
raised $450 million. Lower interest rates enabled REITs to tap the preferred
stock market as $1.7 billion was raised in the first half of 2003, compared to
$1.2 billion in the first half of 2002. Much of this capital was used to
refinance, at lower rates, preferred issues that reached their call dates. An
important source of demand for these securities has been mutual funds
specializing strictly in preferred stocks. REITs also issued $6.8 billion of
unsecured debt, mostly at historically low interest rates.

Despite such market conditions, equity issuance was modest in the first half
of the year, as was demand for REIT shares. Common equity issuance, at $1.4
billion, was at a historical low and well below last year's $2.1 billion pace at
mid-year. Capital flows into real estate mutual funds were $1.6 billion,
compared to $2.5 billion in the first half of 2002. Largely due to capital
appreciation, real estate mutual fund assets stood at a record $20 billion at
mid-year, up from $15 billion just six months ago. Some observers have suggested
that REITs were relatively disadvantaged by the recent tax bill's exclusion of
REITs from the lowered 15% dividend tax rate for investors, because REITs
already don't pay taxes at the corporate level. Nonetheless their substantial
dividend yield potential (still superior to nearly all alternatives on an
after-tax basis) and growth potential have enabled REITs to remain the
investment of choice for many real estate and income-oriented investors.

Finally, the matter of corporate governance has become one of the most
important issues in the financial world. As the nation's leading REIT investor
and a very long-term holder of these securities, we view corporate governance as
one of our most important responsibilities. While REITs in general tend to score
rather well in comparison to other industries, many concerns remain. In the
proxy-voting period of 2003, Cohen & Steers voted in opposition to management
proposals or directors on 22 separate occasions. Most of these related to poison
pills, board classification and independence, and compensation. Our emphasis on
corporate governance issues is not new; in 2002 we voted in opposition to
management 17 times, and in 2001, 21 times.

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

INVESTMENT OUTLOOK

In our opinion, the single most important investment variable today relates
to the current interest rate climate and the prospect of a low-return
environment for the foreseeable future. We have experienced a secular re-
pricing of the cost of money, as the inflation risk premium has effectively been
extinguished from the bond market. As short-term interest rates approach zero,
investors, savers, retirees, pension funds, foundations and endowments, and a
host of financial managers are at a loss to find appropriate means to fulfill
both long-term and short-term obligations. For example, a recent survey by
Morgan Stanley Research found that nearly 90% of the 292 S&P 500 component
companies they surveyed have annual return expectations of 8% or more for their
pension fund assets. These obligations simply cannot be satisfied through U.S.
Treasury or investment grade corporate debt securities whose coupons are far
below this minimum return expectation. The experience of the equity markets over
the past several years has served to rein in exposure to the volatility and low
current income of stocks in general. Ironically, despite this aversion to the
risk of equity markets, there has been a marked shift towards alternative and
riskier investments, including high yield bonds, commodities, foreign
securities, hedge funds and other vehicles, a trend that, frankly, we have
difficulty figuring out.

In today's market environment, many investors are finding REITs to be a very
appealing asset class. Offering the potential for high income, tangible
underlying asset value, low correlation to other assets and long-term growth,
REITs are becoming increasingly more appreciated by investors. Further, we
believe that the prudent use of leverage -- which is plentiful today at a modern
record low cost -- by real estate owners and investors has helped real estate
prices have remained firm despite weak fundamentals. Moreover, in our view, it
explains why REITs are trading closer to some analysts' net asset value
estimates than might otherwise be expected.

The entire notion of net asset value is subject to considerable debate. It
is our opinion that many analysts are underestimating REIT NAVs because they are
ignoring three important variables. First, the capitalization rate used to value
current rental streams and the discount rate used to value future rental streams
are at a low point in history, suggesting that higher valuations are warranted.
Second is the replacement cost of REIT assets. From Class A downtown office
buildings to dominant regional malls, the cost to replace these
assets -- assuming that one could at all -- far exceeds most current value
estimates of such properties. And third, since we believe we are just beginning
new economic and real estate growth cycles, investors should consider the
potential for real assets to appreciate as economic conditions improve. With
little or no speculative building taking place, except in the apartment sector,
it is unlikely that there will be a glut of new space coming on to the market
just as demand is increasing. This should necessarily precipitate an increase in
occupancy rates, rents and asset values.

In our view, the key to continued positive returns from REITs is the future
course of the U.S. economy. As mentioned, signs of a recovery are beginning to
emerge. In light of the massive fiscal and monetary stimulus currently in place,
we are confident that in the coming quarters the economy will demonstrate
increasing strength.

With respect to strategy, we are encouraged that our office sector holdings
are beginning to produce positive results. In our opinion, we are early in this
cycle and are making few changes except with respect to some individual
holdings. We believe that regional malls, the stars of the REIT industry over
the past three years, are likely to show the strongest earnings growth and
therefore remain a slight overweight position. We continue to

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

maintain a well-below market position in the shopping center sector, based on
our belief that this sector is currently trading at the greatest premium to net
asset value in our universe. Additionally, we remain underweight in the
apartment sector, due to low demand created by ongoing incentives for, and the
unparalleled attractiveness of, single-family home ownership.

In light of the continued bull market for bonds, which only seemed to
accelerate during the second quarter, some comments regarding our thoughts on
REIT preferred stocks are in order. The good news for REITs is that strength in
the bond market and demand generated by significant capital entering the market
have presented very attractively priced opportunities. Many companies have taken
advantage by issuing new preferreds, with proceeds being used to redeem
higher-priced existing preferreds and for other corporate purposes. However,
these factors have made REIT preferred stocks less attractive. As a result, we
marginally reduced our allocation to REIT preferreds during the quarter.
Subsequent to quarter-end, we have observed a reversal in the strength of the
bond market, and will look to take advantage if REIT preferred pricing adjusts
accordingly.

When any sector performs as well as -- and for as long as -- REITs have, an
abundance of skeptics invariably appear, both among industry analysts as well as
outside observers. We remain firm in our belief that we are at the beginning of
a new cycle and that real estate owners are entering the new cycle in a very
strong position. Further, we are not inclined to be market timers because we
have not seen any timing strategies that have been consistently successful. We
are confident that REITs will continue to play an important role in investors'
portfolio needs.

Sincerely,

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

GREG E. BROOKS
GREG E. BROOKS
Portfolio Manager

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

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, 2003 (UNAUDITED)

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

EQUITIES 97.78%
COMMON STOCK 75.97%
DIVERSIFIED 9.91%
Colonial Properties Trust..................... 82,100 $ 2,889,099 7.56%
Crescent Real Estate Equities Co.............. 170,600 2,833,666 9.03
iStar Financial............................... 36,900 1,346,850 7.26
Vornado Realty Trust.......................... 151,600 6,609,760 6.24
------------
13,679,375
------------
HEALTH CARE 8.64%
Health Care Property Investors................ 100,100 4,239,235 7.84
Health Care REIT.............................. 27,600 841,800 7.67
Nationwide Health Properties.................. 161,800 2,577,474 9.29
Ventas........................................ 281,700 4,267,755 7.06
------------
11,926,264
------------
INDUSTRIAL 2.68%
First Industrial Realty Trust................. 64,700 2,044,520 8.67
Keystone Property Trust....................... 89,500 1,656,645 7.02
------------
3,701,165
------------
OFFICE 24.19%
Arden Realty.................................. 160,000 4,152,000 7.78
Brandywine Realty Trust....................... 184,900 4,552,238 7.15
CarrAmerica Realty Corp....................... 155,100 4,313,331 7.19
Equity Office Properties Trust................ 219,600 5,931,396 7.40
Highwoods Properties.......................... 124,200 2,769,660 7.62
Mack-Cali Realty Corp......................... 155,800 5,668,004 6.93
Maguire Properties............................ 53,800 1,035,650 8.31
Prentiss Properties Trust..................... 165,300 4,957,347 7.47
------------
33,379,626
------------

-------------------
(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.

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

SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 2003 (UNAUDITED)

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

OFFICE/INDUSTRIAL 6.23%
Kilroy Realty Corp............................ 56,600 $ 1,556,500 7.20%
Liberty Property Trust........................ 135,600 4,691,760 6.94
Reckson Associates Realty Corp. -- Class B.... 110,000 2,343,000 12.16
------------
8,591,260
------------
RESIDENTIAL -- APARTMENT 10.72%
Archstone-Smith Trust......................... 152,900 3,669,600 7.13
AvalonBay Communities......................... 69,900 2,980,536 6.57
Camden Property Trust......................... 78,900 2,757,555 7.27
Gables Residential Trust...................... 122,900 3,715,267 7.97
Home Properties of New York................... 47,000 1,656,280 6.92
Mid-America Apartment Communities............. 200 5,402 8.66
------------
14,784,640
------------
SELF STORAGE 0.05%
Sovran Self Storage........................... 2,200 69,300 7.62
------------
SHOPPING CENTER 13.55%
COMMUNITY CENTER 4.92%
Developers Diversified Realty Corp............ 46,600 1,325,304 5.77
Federal Realty Investment Trust............... 67,200 2,150,400 6.06
Heritage Property Investment Trust............ 51,300 1,389,204 7.75
Kramont Realty Trust.......................... 69,500 1,146,750 7.88
Urstadt Biddle Properties -- Class A.......... 60,000 771,600 6.53
------------
6,783,258
------------
REGIONAL MALL 8.63%
CBL & Associates Properties................... 50,900 2,188,700 6.09
Glimcher Realty Trust......................... 95,200 2,132,480 8.57
Macerich Co................................... 110,500 3,881,865 6.49
Mills Corp.................................... 110,600 3,710,630 6.74
------------
11,913,675
------------
TOTAL SHOPPING CENTER......................... 18,696,933
------------
TOTAL COMMON STOCK (Identified
cost -- $87,381,210)................... 104,828,563
------------

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

SCHEDULE OF INVESTMENTS -- (CONTINUED)
JUNE 30, 2003 (UNAUDITED)

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

PREFERRED STOCK 21.81%
DIVERSIFIED 1.48%
Colonial Properties Trust, 9.25%, Series C.... 600 $ 16,170 8.57%
Colonial Properties Trust, 8.125%, Series D... 14,600 382,374 7.75
Crescent Real Estate Equities Co., 6.75%,
Series A (Convertible)...................... 75,500 1,645,900 7.75
------------
2,044,444
------------
HEALTH CARE 2.63%
Nationwide Health Properties, 7.677%, Series
P........................................... 47,000 3,630,750 9.94
------------
HOTEL 0.20%
FelCor Lodging Trust, 9.00%, Series B......... 2,900 64,032 10.19
Host Marriott Corp, 10.00%, Series C.......... 3,500 87,395 10.01
Host Marriott Financial Trust, 6.75% QUIPS
(Convertible)(a)............................ 3,200 130,211 8.31
------------
281,638
------------
INDUSTRIAL 0.38%
Keystone Property Trust, 9.125%, Series D..... 18,800 521,700 8.22
------------
OFFICE 4.43%
Alexandria Real Estate Equities, 9.10%, Series
B........................................... 13,900 392,675 8.07
HRPT Properties Trust, 8.75%, Series B........ 52,800 1,454,640 7.95
Highwoods Properties, 8.625%, Series A........ 4,300 4,265,063 8.70
------------
6,112,378
------------
RESIDENTIAL -- APARTMENT 3.74%
Apartment Investment & Management Co., 8.75%,
Series D.................................... 10,000 251,900 8.69
Apartment Investment & Management Co., 9.375%,
Series G.................................... 113,200 3,129,980 8.46
Apartment Investment & Management Co., 10.10%,
Series Q.................................... 25,000 675,250 9.37
Apartment Investment & Management Co., 10.00%,
Series R.................................... 18,100 493,225 9.17
Post Properties, 8.50%, Series A.............. 11,000 607,750 7.69
------------
5,158,105
------------

---------------------
(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, 2003 (UNAUDITED)

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

SHOPPING CENTER 8.95%
COMMUNITY CENTER 0.55%
Developers Diversified Realty Corp., 8.60%,
Series F.................................... 1,600 $ 42,976 8.00%
Ramco-Gershenson Property Trust, 9.50%, Series
B........................................... 11,600 319,580 8.64
Urstatdt Biddle Properties, 8.50%, Series C,
144A(b)..................................... 4,000 389,940 8.72
------------
752,496
------------
OUTLET CENTER 0.51%
Chelsea Property Group, 8.375%, Series A...... 13,000 702,000 7.76
------------
REGIONAL MALL 7.89%
CBL & Associates Properties, 8.75%, Series
B........................................... 13,000 713,050 7.99
Crown American Realty Trust, 11.00%, Series
A........................................... 55,400 3,265,830 9.33
Mills Corp., 9.00%, Series B.................. 73,800 2,029,500 8.18
Mills Corp., 9.00%, Series C.................. 25,000 687,500 8.18
Mills Corp., 8.75%, Series E.................. 26,000 687,700 8.28
Taubman Centers, 8.30%, Series A.............. 139,500 3,508,425 8.27
------------
10,892,005
------------
TOTAL SHOPPING CENTER......................... 12,346,501
------------
TOTAL PREFFERED STOCK (Identified
cost -- $26,638,462)................... 30,095,516
------------
TOTAL EQUITIES (Identified
cost -- $114,019,672).................. 134,924,079
------------

PRINCIPAL VALUE
AMOUNT (NOTE 1)
---------- ------------

CORPORATE BOND 0.47%
Host Marriott, LP, 9.50%, due 1/15/07
(Identified cost -- $600,557)............... $ 600,000 $ 648,000
------------
COMMERCIAL PAPER 0.70%
State Street Boston Corp., 1.10%, due 7/1/03
(Identified cost -- $964,000)............... 964,000 964,000
------------
TOTAL INVESTMENTS (Identified
cost -- $115,584,229) ....................... 98.95% 136,536,079
OTHER ASSETS IN EXCESS OF LIABILITIES ........... 1.05% 1,453,416
------------
NET ASSETS (Equivalent to $14.92 per share based on
9,249,159 shares of capital stock
outstanding) ................................ 100.00% $137,989,495
------------
------------

-------------------
(b) As of June 30, 2003, this security is subject to Rule 144A and is pending
registration with the Securities and Exchange Commission. The fund prices
this security at fair value using procedures approved by the fund's board of
directors.

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

STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)

ASSETS:
Investments in securities, at value (Identified
cost -- $115,584,229) (Note 1)....................... $136,536,079
Cash.................................................... 955
Dividends and interest receivable....................... 863,741
Receivable for investment securities sold............... 744,929
Other assets............................................ 13,970
------------
Total Assets....................................... 138,159,674
------------
LIABILITIES:
Payable to investment advisor........................... 78,598
Payable for professional fees........................... 36,585
Payable for investment securities purchased............. 30,182
Payable to administrator................................ 2,336
Other liabilities....................................... 22,478
------------
Total Liabilities.................................. 170,179
------------
NET ASSETS applicable to 9,249,159 shares of $0.001 par
value common stock outstanding (Note 5)................... $137,989,495
------------
------------
NET ASSET VALUE PER SHARE:
($137,989,495 [div] 9,249,159 shares outstanding)......... $ 14.92
------------
------------
MARKET PRICE PER SHARE...................................... $ 15.98
------------
------------
MARKET PRICE PREMIUM TO NET ASSET VALUE PER SHARE........... 7.10%
------------
------------
NET ASSETS consist of:
Paid-in capital (Notes 1 and 4)......................... $113,478,440
Undistributed net investment income..................... 7,661
Accumulated net realized gain on investments............ 3,551,544
Net unrealized appreciation on investments.............. 20,951,850
------------
$137,989,495
------------
------------

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, 2003 (UNAUDITED)

Investment Income (Note 1):
Dividend income......................................... $ 5,166,927
Interest income......................................... 36,958
-----------
Total Income....................................... 5,203,885
-----------
Expenses:
Investment advisory fees (Note 2)....................... 440,841
Reports to shareholders................................. 48,758
Professional fees....................................... 38,025
Directors' fees and expenses (Note 2)................... 21,773
Transfer agent fees and expenses........................ 14,561
Custodian fees and expenses............................. 13,138
Administration fees..................................... 13,017
Registration and filing fees............................ 10,179
Miscellaneous........................................... 17,799
-----------
Total Expenses..................................... 618,091
-----------
Net Investment Income....................................... 4,585,794
-----------
Net Realized and Unrealized Gain on Investments:
Net realized gain on investments........................ 319,003
Net change in unrealized appreciation on investments.... 12,626,483
-----------
Net realized and unrealized gain on investments.... 12,945,486
-----------
Net Increase in Net Assets Resulting from Operations........ $17,531,280
-----------
-----------

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, 2003 DECEMBER 31, 2002
------------- -----------------

Change in Net Assets:
From Operations:
Net investment income..................... $ 4,585,794 $ 8,857,879
Net realized gain on investments.......... 319,003 8,070,085
Net change in unrealized
appreciation/(depreciation) on
investments............................ 12,626,483 (7,076,462)
------------ ------------
Net increase in net assets resulting
from operations.................... 17,531,280 9,851,502
------------ ------------
Dividends and Distributions to Shareholders
from (Note 1):
Net investment income..................... (4,578,133) (6,959,063)
Net realized gain on investments.......... -- (1,919,755)
------------ ------------
Total dividends and distributions to
shareholders....................... (4,578,133) (8,878,818)
------------ ------------
Total increase in net assets......... 12,953,147 972,684
------------ ------------
Net Assets:
Beginning of period....................... 125,036,348 124,063,664
------------ ------------
End of period............................. $137,989,495 $125,036,348
------------ ------------
------------ ------------

See accompanying notes to financial statements.
--------------------------------------------------------------------------------
12

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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 SIX FOR THE YEAR ENDED DECEMBER 31,
MONTHS ENDED ------------------------------------------------------
PER SHARE OPERATING PERFORMANCE: JUNE 30, 2003 2002 2001 2000 1999 1998
-------------------------------- ------------- ------ ------- ------- ----------- -----------

Net asset value, beginning of period...... $13.52 $13.41 $ 12.35 $ 10.63 $ 12.35 $ 17.51
------ ------ ------- ------- ----------- -----------
Income from investment operations:
Net investment income................. 0.50 0.96 0.97 0.94 1.01 1.17
Net realized and unrealized
gain/(loss) on investments.......... 1.40 0.11 1.08 1.74 (1.74) (3.36)
------ ------ ------- ------- ----------- -----------
Total income from investment
operations...................... 1.90 1.07 2.05 2.68 (0.73) (2.19)
------ ------ ------- ------- ----------- -----------
Less dividends and distributions to
shareholders from:
Net investment income................. (0.50) (0.75) (0.77) (0.74) (0.83) (0.74)
Net realized gain on investments...... -- (0.21) -- -- -- (2.05)
Tax return of capital................. -- -- (0.22) (0.22) (0.16) (0.18)
------ ------ ------- ------- ----------- -----------
Total dividends and distributions
to shareholders................. (0.50) (0.96) (0.99) (0.96) (0.99) (2.97)
------ ------ ------- ------- ----------- -----------
Net increase/(decrease) in net
assets.......................... 1.40 0.11 1.06 1.72 (1.72) (5.16)
------ ------ ------- ------- ----------- -----------
Net asset value, end of period............ $14.92 $13.52 $ 13.41 $ 12.35 $ 10.63 $ 12.35
------ ------ ------- ------- ----------- -----------
------ ------ ------- ------- ----------- -----------
Market value, end of period............... $15.98 $14.19 $ 13.60 $11.875 $ 10.625 $ 12.81
------ ------ ------- ------- ----------- -----------
------ ------ ------- ------- ----------- -----------
------------------------------------------------------------------------------------------------------------------
Total market value return(a).............. 16.39%(b) 11.53% 23.34% 21.53% - 10.18% - 12.20%
------ ------ ------- ------- ----------- -----------
------ ------ ------- ------- ----------- -----------
Total net asset value return(a)........... 14.05%(b) 7.77% 16.82% 26.17% - 6.77% - 14.21%
------ ------ ------- ------- ----------- -----------
------ ------ ------- ------- ----------- -----------
------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
-------------------------
Net assets, end of period (in millions)... $138.0 $125.0 $ 124.1 $ 91.4 $ 78.7 $ 91.4
------ ------ ------- ------- ----------- -----------
------ ------ ------- ------- ----------- -----------
Ratio of expenses to average daily net
assets (before expense reduction)....... 0.98%(c) 0.96% 1.18% 1.16% 1.18% 1.14%
------ ------ ------- ------- ----------- -----------
------ ------ ------- ------- ----------- -----------
Ratio of expenses to average daily net
assets (net of expense reduction)....... 0.98%(c) 0.96% 1.18% 1.15% 1.12% 1.12%
------ ------ ------- ------- ----------- -----------
------ ------ ------- ------- ----------- -----------
Ratio of net investment income to average
daily net assets (before expense
reduction).............................. 7.28%(c) 6.94% 7.39% 8.24% 8.61% 7.35%
------ ------ ------- ------- ----------- -----------
------ ------ ------- ------- ----------- -----------
Ratio of net investment income to average
daily net assets (net of expense
reduction).............................. 7.28%(c) 6.94% 7.39% 8.25% 8.67% 7.37%
------ ------ ------- ------- ----------- -----------
------ ------ ------- ------- ----------- -----------
Portfolio turnover rate................... 18%(b) 30% 34% 31% 62% 76%
------ ------ ------- ------- ----------- -----------
------ ------ ------- ------- ----------- -----------

-------------------
(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.
--------------------------------------------------------------------------------
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 (the act), 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 for accounting and tax purposes.
Interest income is recorded on the accrual basis. Dividend income is recorded on
the ex-dividend date. Interest income is recognized on the accrual basis.

--------------------------------------------------------------------------------
14

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

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

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 the net asset value per share at the
close of business on the ex-dividend 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.

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 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 adviser 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, 2003, the fund incurred investment advisory fees of $440,841.

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15

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

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

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 from the fund for their services.
For the six months ended June 30, 2003, fees and related expenses accrued for
nonaffiliated directors totaled $21,773.

NOTE 3. PURCHASES AND SALES OF SECURITIES

Purchases and sales of securities, excluding short-term investments, for the
six months ended June 30, 2003, totaled $24,414,578 and $23,006,911,
respectively.

NOTE 4. INCOME TAXES

At June 30, 2003, the cost of investments and net unrealized appreciation
for federal income tax purposes were as follows:

Aggregate cost.................................... $115,584,229
------------
------------

Gross unrealized appreciation..................... $ 22,351,505
Gross unrealized depreciation..................... $ (1,399,655)
------------

Net unrealized appreciation....................... $ 20,951,850
------------
------------

Net investment income and net realized gains differ for financial statement
and tax purposes primarily due to return of capital and capital gain
distributions received by the fund on portfolio securities. To the extent such
differences are permanent in nature, such amounts are reclassified within the
capital accounts. Short-term capital gains are reflected in the financial
statements as realized gains on investments but are typically reclassified as
ordinary income for tax purposes.

NOTE 5. COMMON STOCK

At June 30, 2003, the fund has 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 40,764 shares.

--------------------------------------------------------------------------------
16

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

AVERAGE ANNUAL TOTAL RETURNS (a)
(PERIODS ENDED JUNE 30, 2003) (UNAUDITED)

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

8.08% 8.41% 10.50%

--------------------------------------------------------------------------------
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 the 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) Based on net asset value.
--------------------------------------------------------------------------------
17

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

PROXY RESULTS

Cohen & Steers Total Return Realty Fund, Inc. shareholders voted on the
following proposals at the annual meeting held on April 24, 2003. The
description of each proposal and number of shares voted are as follows:

-----------------------------------------------------------------------------------------
SHARES VOTED SHARES VOTED
FOR AUTHORITY WITHHELD
-----------------------------------------------------------------------------------------

1. To elect Directors
George Grossman..................................... 8,791,321 69,094
Robert H. Steers.................................... 8,721,381 138,034

-------------------------------------------------------------------------------------------
SHARES VOTED SHARES VOTED SHARES VOTED
FOR AGAINST ABSTAIN
-------------------------------------------------------------------------------------------

2. To ratify PricewaterhouseCoopers LLP as the
fund's independent accountants.............. 8,738,777 43,219 77,419

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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
A, B, C AND I SHARES AVAILABLE REITS
SYMBOLS: CSEIX, CSBIX, CSCIX, CSDIX SYMBOL: CSRSX

FOR CAPITAL APPRECIATION: FOR TOTAL RETURN:

COHEN & STEERS COHEN & STEERS
SPECIAL EQUITY FUND INSTITUTIONAL REALTY SHARES

IDEAL FOR INVESTORS SEEKING MAXIMUM CAPITAL IDEAL FOR INVESTORS SEEKING MAXIMUM TOTAL
APPRECIATION, INVESTING IN A LIMITED NUMBER RETURN THROUGH BOTH CURRENT INCOME AND
OF COMPANIES ENGAGED IN THE REAL ESTATE OR CAPITAL APPRECIATION, INVESTING PRIMARILY IN
RELATED INDUSTRIES REITS
CONCENTRATED, HIGHLY FOCUSED PORTFOLIO OFFERS LOW TOTAL EXPENSE RATIO
SYMBOL: CSSPX HIGHER MINIMUM PURCHASE REQUIRED
SYMBOL: CSRIX

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

THE PROSPECTUS CONTAINS MORE INFORMATION ABOUT EACH FUND INCLUDING ALL CHARGES AND EXPENSES,
AND SHOULD BE READ CAREFULLY BEFORE YOU INVEST.

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

Gregory C. Clark FUND ADMINISTRATOR AND CUSTODIAN
Director State Street Corp.
225 Franklin Street
Bonnie Cohen Boston, MA 02110
Director
TRANSFER AGENT
George Grossman Equiserve Trust Company
Director 150 Royall Street
Canton, MA 02021
Richard J. Norman (800) 426-5523
Director
LEGAL COUNSEL
Willard H. Smith Jr. Simpson Thacher & Bartlett
Director 425 Lexington Avenue
New York, NY 10017
Greg E. Brooks
Vice president New York Stock Exchange Symbol: RFI

Adam Derechin Web site: cohenandsteers.com
Vice president and assistant treasurer
This report is for shareholder
Lawrence B. Stoller information. This is not a prospectus
Assistant secretary 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.

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

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

COHEN & STEERS
TOTAL RETURN REALTY FUND

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

SEMIANNUAL REPORT
JUNE 30, 2003

STATEMENT OF DIFFERENCES

The section symbol shall be expressed as.............................. 'SS'
The division sign shall be expressed as............................... [div]