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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

August 9, 2007

To Our Shareholders:

We are pleased to submit to you our report for the six months ended June 30, 2007. The net asset value at that date was $18.08 per common share. The fund's common stock is traded on the New York Stock Exchange and its share price can differ from its net asset value; at period end, the fund's closing price on the NYSE was $17.46. The total return, including income, for Cohen & Steers Total Return Realty Fund and the comparative benchmarks were:

				Six Months Ended June 30, 2007
Cohen & Steers Total Return Realty Fund at Market Valuea					-11.10	%
Cohen & Steers Total Return Realty Fund at Net Asset Valuea					-5.23	%
FTSE NAREIT Equity REIT Indexb					-5.89	%
S&P 500 Indexb					6.96	%
Blend—80% FTSE NAREIT Equity REIT Index 20% Merrill Lynch REIT Preferred Indexb					-4.54	%

 

The performance data quoted represent past performance. Past performance is no guarantee of future results. The investment return 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 the performance data quoted.

Three monthly dividends of $0.1125 per common share were declared and will be paid to common shareholders on July 31, 2007, August 31, 2007 and September 28, 2007.^c

^a  As a closed-end investment company, the price of the fund's New York Stock Exchange-traded shares will be set by market forces and at times may deviate from the net asset value per share of the fund.

^b The FTSE 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. The S&P 500 Index is an unmanaged index of common stocks that is frequently used as a general measure of stock market performance. The Merrill Lynch REIT Preferred Index is an unmanaged index of real estate preferred securities.

^c  Please note that distributions paid by the fund to shareholders are subject to recharacterization for tax purposes. The final tax treatment of these distributions is reported to shareholders after the close of each fiscal year on form 1099-DIV.

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

Investment Review

Following four years of strong absolute and relative performance, including a 35% total return in 2006 (as measured by the FTSE NAREIT Equity REIT Index) and seven years of positive returns, REITs had generally negative returns in the first half of 2007. REITs began the year on a positive note, buoyed by a January bidding contest between Vornado and The Blackstone Group for control of Equity Office Properties (EOP). Blackstone prevailed, purchasing EOP at a sizable premium, prompting investors at that time to raise valuation estimates for publicly traded real estate securities.

REITs struggled over the remainder of the period, however, declining nearly 20% from their February highs. This reflected concerns over rising interest rates and uncertainty about whether asset pricing would suffer. Expectations for Federal Reserve monetary easing were pushed back as economic growth continued and inflation fears persisted. The possibility that the Fed might in fact raise rates entered the picture, and the yield on the 10-year Treasury bond in June climbed to 5.26%, its highest level in five years; the yield retreated to 5.03% by period end.

Growth rates for real estate companies generally stabilized, after accelerating in the past few years. This signaled an end to the stock-multiple expansion phase of the real estate cycle, and set expectations for more normalized returns for REITs. Put another way, capitalization rate compression for real estate assets is likely over (a cap rate is the inverse of the earnings multiple).

Most property sectors declined. Among the poorest performing sectors were self storage, due to concerns that a slowing economy might materially affect demand; and health care, as these companies are typically more sensitive to rising interest rates, due to the long-term nature of their leases.

Apartments stage partial recovery

Apartments initially underperformed on concerns about the weakening housing market. However, the group's performance improved late in the period when Archstone-Smith, a leading apartment REIT, agreed to be acquired by a partnership sponsored by Tishman Speyer and Lehman Brothers for $22.2 billion, a 22.7% premium to the stock price before a rumor of the deal was published on May 24, 2007. This deal underscored for the market the overall positive prospects for apartment fundamentals and the sustainability of apartment asset pricing. The sector outperformed for the period as a whole.

Merger activity stimulated the hotel sector's relative performance. Late in the quarter, Equity Inns, the third-largest hotel REIT as measured by the number of hotels owned, announced that it would be acquired by an affiliate of Whitehall Street Global Real Estate in a transaction valued at $2.2 billion. This represented a 19% premium to the stock's previous day closing price.

Rising yields pressure preferred securities

The Merrill Lynch REIT Preferred Index had a total return of 0.4% for the period. After a positive first quarter, preferreds were buffeted by rising bond yields and widening credit spreads late in the second quarter. The fund

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

maintained an allocation to preferred securities in order to enhance potential income and dampen volatility. We believe that quality is a primary criterion for investment selection in the preferred market, and find little value in moving down the credit scale at this point in the cycle.

Performance hampered by health care overweight, aided by preferred security selection

The fund underperformed its hybrid benchmark, hindered by our overweight in the health care sector and underweights in the specialty, hotel and regional mall sectors. Stock selection in the apartment, mortgage and office sectors also detracted from performance. Factors that helped the fund's relative performance included our underweight in the shopping center and self storage sectors and stock selection in the industrial, self storage and diversified sectors. The fund's allocation to preferred securities helped its performance in both absolute and relative terms, as security selection was favorable.

Investment Outlook

Before REITs can manage a sustainable performance recovery, investors may require more clarity on inflation and economic growth. In our opinion, if the economy gains momentum, it would likely benefit real estate companies; however, it might cause the Fed to raise interest rates, unsettling stock prices, including REITs. A cooling economy, on the other hand, would likely prompt the Fed to cut rates, which could lift stocks, as a rate reduction is not currently expected by the market.

We believe that a fair degree of pessimism has now been priced into REITs, including the possibility of some decline in property asset values. We believe REITs, on the whole, are attractively valued, with many trading at compelling discounts (more than 20% in some cases) to their underlying net asset values, compared with their long-term average of a 5% premium to NAV. The private equity market continues to value REITs more aggressively than the public market, as evidenced by the continued privatizations of real estate companies.

From a property sector perspective we continue to favor apartments, and believe that recent events underscore our view that a downward trend in owner-occupied housing prices, coupled with tightening credit standards, are clear positives for the sector. In our view, uncertainty in the housing market should ultimately result in lower overall home ownership rates in the next five years, which in turn should benefit apartment owners. We also like the self-storage and office sectors on a stock-specific basis, and believe that the market has taken too negative a view of these sectors.

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

Sincerely,

MARTIN COHEN				ROBERT H. STEERS
Co-chairman				Co-chairman
JOSEPH M. HARVEY				JAMES S. CORL
Portfolio Manager				Portfolio Manager
WILLIAM F. SCAPELL				THOMAS N. BOHJALIAN
Portfolio Manager				Portfolio Manager

 

The views and opinions in the preceding commentary are as of the date stated and are subject to change. This material represents an assessment of the market environment at a specific point in time, should not be relied upon as investment advice and is not intended to predict or depict performance of any investment.

Visit Cohen & Steers online at cohenandsteers.com

For more information about any of our funds, visit cohenandsteers.com, where you'll find daily net asset values, fund fact sheets and portfolio highlights. You can also access newsletters, education tools and market updates covering REIT, utility and preferred securities sectors.

In addition, our Web site contains comprehensive information about our firm, including our most recent press releases, profiles of our senior investment professionals, and an overview of our investment approach.

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

JUNE 30, 2007

Top Ten Holdings^a
(Unaudited)

Security				Market Value				% of Net Assets
Vornado Realty Trust				$	9,259,512				5.5	%
Macerich Co.					8,612,890				5.1
Ventas					7,672,276				4.6
AvalonBay Communities					7,061,472				4.2
Mack-Cali Realty Corp.					5,701,539				3.4
Liberty Property Trust					5,675,756				3.4
Brandywine Realty Trust					5,284,014				3.2
Nationwide Health Properties, 7.677%, Series A					4,723,500				2.8
Health Care Property Investors					4,298,998				2.6
Nationwide Health Properties					4,278,560				2.6

 

^a  Top ten holdings are determined on the basis of the market value of individual securities held. The fund may also hold positions in other types of securities issued by the companies listed above. See the Schedule of Investments for additional details on such other positions.

Sector Breakdown

(Based on Net Assets)
(Unaudited)

5

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

SCHEDULE OF INVESTMENTS

June 30, 2007 (Unaudited)

								Number of Shares				Value
COMMON STOCK					75.9	%
DIVERSIFIED					10.6	%
British Land Co., PLC (United Kingdom)									38,512			$	1,036,302
Colonial Properties Trust									82,100				2,992,545
Entertainment Properties Trust									20,500				1,102,490
iStar Financial									57,000				2,526,810
Unibail-Rodamco (France)									3,200				823,547
Vornado Realty Trust									84,300				9,259,512
													17,741,206
HEALTH CARE					12.4	%
Health Care Property Investors									148,600				4,298,998
Health Care REIT									27,600				1,113,936
Nationwide Health Properties									157,300				4,278,560
Omega Healthcare Investors									35,500				561,965
Senior Housing Properties Trust									135,228				2,751,890
Ventas									211,649				7,672,276
													20,677,625
HOTEL					3.6	%
DiamondRock Hospitality Co.									99,100				1,890,828
Hospitality Properties Trust									51,700				2,145,033
Strategic Hotels & Resorts									86,700				1,949,883
													5,985,744
INDUSTRIAL					1.9	%
DCT Industrial Trust									121,800				1,310,568
ING Industrial Fund (Australia)									512,202				1,016,133
ProLogis European Properties (Netherlands)									48,400				848,315
													3,175,016
MORTGAGE					2.0	%
Annaly Capital Management									50,500				728,210
Newcastle Investment Corp.									107,827				2,703,223
													3,431,433

 

See accompanying notes to financial statements.
6

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

SCHEDULE OF INVESTMENTS—(Continued)

June 30, 2007 (Unaudited)

								Number of Shares				Value
OFFICE					12.9	%
BioMed Realty Trust									64,057			$	1,609,112
Brandywine Realty Trust									184,885				5,284,014
Derwent London PLC (United Kingdom)									22,800				840,149
HRPT Properties Trust									107,300				1,115,920
ING Office Fund (Australia)									718,800				1,066,448
Kilroy Realty Corp.									27,000				1,912,680
Mack-Cali Realty Corp.									131,100				5,701,539
Maguire Properties									99,100				3,402,103
Mapeley Ltd. (United Kingdom)									10,300				580,377
													21,512,342
OFFICE/INDUSTRIAL					5.0	%
EastGroup Properties									18,500				810,670
First Potomac Realty Trust									34,624				806,393
Liberty Property Trust									129,200				5,675,756
Parkway Properties									20,300				975,009
													8,267,828
RESIDENTIAL—APARTMENT					16.3	%
American Campus Communities									48,969				1,385,333
Apartment Investment & Management Co.									52,800				2,662,176
Archstone-Smith Trust									31,308				1,850,616
AvalonBay Communities									59,400				7,061,472
Camden Property Trust									53,500				3,582,895
Education Realty Trust									92,100				1,292,163
Home Properties									81,800				4,247,874
Mid-America Apartment Communities									38,600				2,025,728
UDR									122,672				3,226,273
													27,334,530
SELF STORAGE					2.3	%
Extra Space Storage									68,300				1,126,950
Sovran Self Storage									33,400				1,608,544
U-Store-It Trust									68,100				1,116,159
													3,851,653

 

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

SCHEDULE OF INVESTMENTS—(Continued)

June 30, 2007 (Unaudited)

								Number of Shares				Value
SHOPPING CENTER					8.9	%
COMMUNITY CENTER					2.4	%
Cedar Shopping Centers									90,200			$	1,294,370
Inland Real Estate Corp.									55,300				938,994
Urstadt Biddle Properties—Class A									102,700				1,746,927
													3,980,291
REGIONAL MALL					6.5	%
Glimcher Realty Trust									95,500				2,387,500
Macerich Co.									104,500				8,612,890
													11,000,390
TOTAL SHOPPING CENTER													14,980,681
TOTAL COMMON STOCK (Identified cost—$74,879,498)													126,958,058
PREFERRED STOCK					22.3	%
DIVERSIFIED					1.9	%
Colonial Properties Trust, 8.125%, Series D									14,600				371,278
Crescent Real Estate Equities Co., 6.75%, Series A (Convertible)									39,700				986,942
Digital Realty Trust, 8.50%, Series A									10,700				277,665
Digital Realty Trust, 7.875%, Series B									13,200				333,168
iStar Financial, 7.875%, Series E									25,000				630,000
Lexington Realty Trust, 7.55%, Series D									26,000				632,840
													3,231,893
HEALTH CARE					3.8	%
Health Care REIT, 7.625%, Series F									17,000				428,740
Health Care REIT, 7.50%, Series G									38,800				1,154,688
Nationwide Health Properties, 7.677%, Series A									47,000				4,723,500
													6,306,928

 

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

SCHEDULE OF INVESTMENTS—(Continued)

June 30, 2007 (Unaudited)

								Number of Shares				Value
HOTEL					2.0	%
Hospitality Properties Trust, 7.00%, Series C									16,000			$	388,800
LaSalle Hotel Properties, 7.25%, Series G									20,000				472,000
Strategic Hotels & Resorts, 8.50%, Series A									10,000				247,500
Strategic Hotels & Resorts, 8.25%, Series B									11,000				274,450
Strategic Hotels & Resorts, 8.25%, Series C									53,500				1,357,830
Sunstone Hotel Investors, 8.00%, Series A									22,000				553,520
													3,294,100
INDUSTRIAL					0.3	%
EastGroup Properties, 7.95%, Series D									21,000				526,680
MORTGAGE					0.5	%
Anthracite Capital, 8.25%, Series D									13,300				310,223
Newcastle Investment Corp., 8.375%, Series D									7,000				175,350
NorthStar Realty Finance Corp., 8.25%, Series B									15,000				356,100
													841,673
OFFICE					4.1	%
BioMed Realty Trust, 7.375%, Series A									30,000				750,000
Brandywine Realty Trust, 7.50%, Series C									9,028				224,075
Highwoods Properties, 8.625%, Series A									4,300				4,171,000
HRPT Properties Trust, 8.75%, Series B									52,800				1,339,536
SL Green Realty Corp., 7.625%, Series C									15,000				375,150
													6,859,761
OFFICE/INDUSTRIAL					0.6	%
Duke Realty Corp., 6.625%, Series J									7,800				187,512
PS Business Parks, 6.70%, Series P									37,100				872,592
													1,060,104
RESIDENTIAL—APARTMENT					3.0	%
Apartment Investment & Management Co., 9.375%, Series G									113,200				2,892,260
Apartment Investment & Management Co., 7.75%, Series U									40,000				1,024,000
Mid-America Apartment Communities, 8.30%, Series H									17,300				437,690
Post Properties, 8.50%, Series A									7,900				418,700
UDR, 6.75%, Series G									11,900				293,097
													5,065,747

 

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

SCHEDULE OF INVESTMENTS—(Continued)

June 30, 2007 (Unaudited)

								Number of Shares				Value
SELF STORAGE					1.7	%
Public Storage, 7.25%, Series I									29,700			$	758,835
Public Storage, 7.25%, Series K									36,300				934,362
Public Storage, 6.75%, Series L									12,000				293,520
Public Storage, 6.625%, Series M									33,200				793,480
													2,780,197
SHOPPING CENTER					4.4	%
COMMUNITY CENTER					1.7	%
Cedar Shopping Centers, 8.875%, Series A									10,000				261,400
Ramco-Gershenson Property Trust, 9.50%, Series B									11,600				293,016
Regency Centers Corp., 7.45%, Series C									34,800				874,524
Saul Centers, 8.00%, Series A									26,800				680,452
Urstadt Biddle Properties, 8.50%, Series C									4,000				440,000
Weingarten Realty Investors, 6.50%, Series F									11,000				261,250
													2,810,642
REGIONAL MALL					2.7	%
CBL & Associates Properties, 7.75%, Series C									11,000				276,540
Glimcher Realty Trust, 8.125%, Series G									16,000				399,200
Pennsylvania REIT, 11.00%, Series A									45,400				2,393,488
Simon Property Group, 8.375%, Series J									13,000				877,500
Taubman Centers, 7.625%, Series H									25,900				650,867
													4,597,595
TOTAL SHOPPING CENTER													7,408,237
TOTAL PREFERRED STOCK (Identified cost—$35,201,241)													37,375,320

 

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

SCHEDULE OF INVESTMENTS—(Continued)

June 30, 2007 (Unaudited)

								Principal Amount				Value
CORPORATE BOND					0.3	%
HEALTH CARE
Ventas Realty LP/Capital Corp., 6.75%, due 4/1/17 (Identified cost—$497,039)								$	500,000			$	496,250
COMMERCIAL PAPER					1.8	%
San Paolo U.S. Finance Co., 4.15%, due 7/2/07 (Identified cost—$2,945,661)									2,946,000				2,945,661
TOTAL INVESTMENTS (Identified cost—$113,523,439)					100.3	%							167,775,289
LIABILITIES IN EXCESS OF OTHER ASSETS					(0.3	)%							(528,422	)
NET ASSETS (Equivalent to $18.08 per share based on 9,249,159 shares of common stock outstanding)					100.0	%						$	167,246,867

 

Glossary of Portfolio Abbreviation

REIT  Real Estate Investment Trust

Note: 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.

STATEMENT OF ASSETS AND LIABILITIES

June 30, 2007 (Unaudited)

ASSETS:
Investments in securities, at value (Identified cost—$113,523,439)				$	167,775,289
Dividends and interest receivable					802,758
Receivable for investment securities sold					25,196
Other assets					14,757
Total Assets					168,618,000
LIABILITIES:
Payable for investment securities purchased					1,030,004
Payable for dividends declared					150,234
Payable for investment advisory fees					99,232
Payable for directors' fees					7,310
Other liabilities					84,353
Total Liabilities					1,371,133
NET ASSETS applicable to 9,249,159 shares of $0.001 par value common stock outstanding				$	167,246,867
NET ASSETS consist of:
Paid-in-capital				$	103,122,451
Dividends in excess of net investment income					(4,163,161	)
Accumulated undistributed net realized gain on investments					14,036,574
Net unrealized appreciation					54,251,003
				$	167,246,867
NET ASSET VALUE PER SHARE:
($167,246,867 ÷ 9,249,159 shares outstanding)				$	18.08
MARKET PRICE PER SHARE				$	17.46
MARKET PRICE DISCOUNT TO NET ASSET VALUE PER SHARE					(3.43	)%

 

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, 2007 (Unaudited)

Investment Income:
Dividend income (net of $13,085 of foreign withholding tax)				$	2,799,063
Interest income					100,107
Total Income					2,899,170
Expenses:
Investment advisory fees					631,741
Shareholder reporting expenses					50,123
Professional fees					34,594
Directors' fees and expenses					31,675
Custodian fees and expenses					20,798
Transfer agent fees and expenses					14,087
Administration fees					12,454
Registration fees					9,789
Miscellaneous					8,561
Total Expenses					813,822
Net Investment Income					2,085,348
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) on:
Investments					14,119,154
Foreign currency transactions					(64	)
Net realized gain					14,119,090
Net change in unrealized appreciation on:
Investments					(25,346,733	)
Foreign currency translations					(868	)
Net change in unrealized appreciation					(25,347,601	)
Net realized and unrealized loss on investments					(11,228,511	)
Net Decrease in Net Assets Resulting from Operations				$	(9,143,163	)

 

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 Six Months Ended June 30, 2007				For the Year Ended December 31, 2006
Change in Net Assets:
From Operations:
Net investment income				$	2,085,348			$	4,879,030
Net realized gain on investments					14,119,090				18,826,353
Net change in unrealized appreciation on investments					(25,347,601	)			19,610,641
Net increase (decrease) in net assets resulting from operations					(9,143,163	)			43,316,024
Dividends and Distributions to Shareholders from:
Net investment income					(6,173,818	)			(4,914,345	)
Net realized gain on investments					—				(18,650,549	)
Tax return of capital					—				(3,720,135	)
Total dividends and distributions to shareholders					(6,173,818	)			(27,285,029	)
Total increase (decrease) in net assets					(15,316,981	)			16,030,995
Net Assets:
Beginning of period					182,563,848				166,532,853
End of perioda				$	167,246,867			$	182,563,848

 

^a  Includes dividends in excess of net investment income of $4,163,161 and $74,691, 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 Six Months Ended				For the Year Ended December 31,
Per Share Operating Performance:				June 30, 2007				2006				2005				2004				2003				2002
Net asset value, beginning of period				$	19.74			$	18.01			$	19.72			$	16.99			$	13.52			$	13.41
Income from investment operations:
Net investment income					0.23				0.52				0.49	a			0.64				0.58				0.64
Net realized and unrealized gain (loss) on investments					(1.22	)			4.16				0.67				3.24				3.92				0.43
Total income (loss) from investment operations					(0.99	)			4.68				1.16				3.88				4.50				1.07
Less dividends and distributions to shareholders from:
Net investment income					(0.67	)			(0.53	)			(0.49	)			(0.64	)			(0.58	)			(0.75	)
Net realized gain on investments					—				(2.02	)			(1.90	)			(0.35	)			(0.35	)			(0.21	)
Tax return of capital					—				(0.40	)			(0.48	)			(0.16	)			(0.10	)			—
Total dividends and distributions to shareholders					(0.67	)			(2.95	)			(2.87	)			(1.15	)			(1.03	)			(0.96	)
Net increase (decrease) in net assets					(1.66	)			1.73				(1.71	)			2.73				3.47				0.11
Net asset value, end of period				$	18.08			$	19.74			$	18.01			$	19.72			$	16.99			$	13.52
Market value, end of period				$	17.46			$	20.32			$	18.53			$	20.12			$	17.74			$	14.19
Total market value returnb					–11.10	%c			26.74	%			6.25	%			20.83	%			33.36	%			11.53	%
Total net asset value returnb					–5.23	%c			26.68	%			5.37	%			23.65	%			34.05	%			7.77	%
Ratios/Supplemental Data:
Net assets, end of period (in millions)				$	167.2			$	182.6			$	166.5			$	182.4			$	157.1			$	125.0
Ratio of expenses to average daily net assets					0.90	%d			0.88	%			0.91	%			0.92	%			0.95	%			0.96	%
Ratio of net investment income to average daily net assets					2.31	%d			2.70	%			2.56	%			3.62	%			3.93	%			4.59	%
Portfolio turnover rate					13	%c			18	%			15	%			3	%			22	%			30	%

 

^a  Calculation based on average shares outstanding.

^b  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. Total net asset value return measures the changes in value over the period indicated, taking into account dividends as reinvested. Dividends and distributions, if any, are assumed for purposes of these calculations, to be reinvested at prices obtained under the fund's dividend reinvestment plan.

^c  Not annualized.

^d  Annualized.

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

NOTES TO FINANCIAL STATEMENTS (Unaudited)

Note 1. Significant Accounting Policies

Cohen & Steers Total Return Realty Fund, Inc. (the fund) was incorporated under the laws of the State of Maryland on September 4, 1992 and is registered under the Investment Company Act of 1940 as amended, as a nondiversified, closed-end management investment company. The fund's investment objective is maximum total return.

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 (GAAP). The preparation of the financial statements in accordance with GAAP 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 or, if no asked price is available, at the bid price.

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. (the advisor) 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 Quotation Bureau, or such other comparable sources as the Board of Directors deems appropriate to reflect their fair market value. 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, or if no asked price is available, at the bid price. However, certain fixed-income securities may be valued on the basis of prices provided by a pricing service when such prices are believed by the Board of Directors to reflect the fair market value of such securities. 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 most closely reflect the value of such securities.

Securities for which market prices are unavailable, or securities for which the advisor determines that bid and/or asked price does not reflect market value, will be valued at fair value pursuant to procedures approved by the fund's Board of Directors. Circumstances in which market prices may be unavailable include, but are not limited to, when trading in a security is suspended, the exchange on which the security is traded is subject to an unscheduled close or disruption or material events occur after the close of the exchange on which the security is

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

NOTES TO FINANCIAL STATEMENTS (Unaudited)—(Continued)

principally traded. In these circumstances, the fund determines fair value in a manner that fairly reflects the market value of the security on the valuation date based on consideration of any information or factors it deems appropriate. These may include recent transactions in comparable securities, information relating to the specific security and developments in the markets.

The fund's use of fair value pricing may cause the net asset value of fund shares to differ from the net asset value that would be calculated using market quotations. Fair value pricing involves subjective judgments and it is possible that the fair value determined for a security may be materially different than the value that could be realized upon the sale of that security.

Short-term debt securities, which have a maturity date 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. Discounts are accreted and premiums are amortized over the life of the respective securities. Dividend income is recorded on the ex-dividend date except for certain dividends on foreign securities, which are recorded as soon as the fund is informed after 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 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) and realized gain/(loss) on investments as necessary once the issuers provide information about the actual composition of the distributions.

Foreign Currency Translation and Forward Foreign Currency Contracts: The books and records of the fund are maintained in U.S. dollars as follows: (1) the foreign currency market value of investment securities, other assets and liabilities and forward foreign currency contracts (forward contracts) are translated at the exchange rates prevailing at the end of the period; and (2) purchases, sales, income and expenses are translated at the exchange rates prevailing on the respective dates of such transactions. The resultant exchange gains and losses are recorded as realized and unrealized gain/loss on foreign exchange transactions. Pursuant to U.S. federal income tax regulations, certain foreign exchange gains/losses included in realized and unrealized gain/loss are included in or are a reduction of ordinary income for federal income tax purposes. The fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of the securities. Forward contracts are valued daily at the appropriate exchange rates. The resultant unrealized exchange gains and losses are recorded as unrealized foreign currency gain or loss. The fund records realized gains or losses on delivery of the currency or at the time the forward contract is extinguished (compensated) by entering into a closing transaction prior to delivery.

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

NOTES TO FINANCIAL STATEMENTS (Unaudited)—(Continued)

Foreign Securities: The fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the ability to repatriate funds, less complete financial information about companies and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers.

Dividends and Distributions to Shareholders: Dividends from net investment income and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from GAAP. Dividends from net investment income are declared and paid monthly. Net realized capital gains, unless offset by any available capital loss carryforward, are distributed to shareholders annually. Dividends and distributions to shareholders are recorded on the ex-dividend date and are automatically reinvested in full and fractional shares of the fund unless the shareholder has elected to have them paid in cash.

Distributions paid by the fund are subject to recharacterization for tax purposes. Based upon the results of operations for the six months ended June 30, 2007, the advisor considers it likely that a portion of the dividends will be reclassified to return of capital and distributions of net realized capital gains upon the final determination of the fund's taxable income for the year.

Federal Income Taxes: It is the policy of the fund to continue 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, 2007.

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

NOTES TO FINANCIAL STATEMENTS (Unaudited)—(Continued)

Note 2. Investment Advisory Fees and Other Transactions with Affiliates

Investment Advisory Fees: The advisor serves as the fund's investment advisor pursuant to an advisory agreement (the advisory agreement). Under the terms of the advisory agreement, the advisor provides the fund with day-to-day investment decisions and generally manages the fund's investments in accordance with the stated policies of the fund, subject to the supervision of the fund's Board of Directors.

For the services under the advisory agreement, the fund pays the advisor an advisory fee, accrued daily and paid monthly, at an annual rate of 0.70% of the fund's average daily net assets.

Directors' and Officers' Fees: Certain directors and officers of the fund are also directors, officers, and/or employees of the advisor. The fund does not pay compensation to any affiliated directors and officers except for the Chief Compliance Officer, who received $583 from the fund for the six months ended June 30, 2007.

Note 3. Purchases and Sales of Securities

Purchases and sales of securities, excluding short-term investments, for the six months ended June 30, 2007 totaled $23,968,092 and $26,343,350, respectively.

Note 4. Income Tax Information

As of June 30, 2007, the federal tax cost and net unrealized appreciation were as follows:

Cost for federal income tax purposes				$	113,523,439
Gross unrealized appreciation				$	55,319,854
Gross unrealized depreciation					(1,068,004	)
Net unrealized appreciation				$	54,251,850

 

Note 5. Common Stock

The fund is authorized to issue 100 million shares of common stock at a par value of $0.001 per share. During the six months ended June 30, 2007 and the year ended December 31, 2006, there were no transactions in shares of common stock.

Note 6. Other

In the normal course of business, the fund enters into contracts that provide general indemnifications. The fund's maximum exposure under these arrangements is dependent on claims that may be made against the fund in the future and, therefore, cannot be estimated; however, based on experience, the risk of material loss from such claims is considered remote.

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

NOTES TO FINANCIAL STATEMENTS (Unaudited)—(Continued)

Note 7. New Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position must meet before being recognized in the financial statements. FIN 48 is effective for fiscal years beginning after December 15, 2006. An assessment of the fund's tax positions has been made and it has been determined that there is no impact to the fund's financial statements.

In September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the fund's financial statements.

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

PROXY RESULTS (Unaudited)

During the six months ended June 30, 2007, Cohen & Steers Total Return Realty Fund, Inc. shareholders voted on the following proposals at the annual meeting held on April 19, 2007. The description of each proposal and number of shares voted are as follows:

				Shares Voted For				Authority Withheld
To Elect Directors
Martin Cohen					8,638,706				86,129
Richard J. Norman					8,636,646				88,189
Frank K. Ross					8,638,461				86,374

 

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

AVERAGE ANNUAL TOTAL RETURNS

(periods ended June 30, 2007) (Unaudited)

Based on Net Asset Value																Based on Market Value
One Year				Five Years				Ten Years				Since Inception (9/27/93)				One Year				Five Years				Ten Years				Since Inception (9/27/93)
	9.26	%			14.71	%			11.51	%			12.20	%			16.02	%			13.70	%			11.50	%			11.33	%

 

The performance data quoted represent past performance. Past performance is no guarantee of future results. The investment 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 the 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.

OTHER INFORMATION

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 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. In addition, the fund's proxy voting record for the most recent 12-month period ended June 30 is available (i) without charge, upon request, by calling 800-330-7348 or (ii) on the SEC's Web site at http://www.sec.gov.

The fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q are available (i) without charge, upon request by calling 800-330-7348, or (ii) on the SEC's Web site at http://www.sec.gov. In addition, the Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.

Please note that the distributions paid by the fund to shareholders are subject to recharacterization for tax purposes. The fund may also pay distributions in excess of the fund's net investment company taxable income and this excess would be a tax-free return of capital distributed from the fund's assets. To the extent this occurs, the fund's shareholders of record will be notified of the estimated amount of capital returned to shareholders for each such distribution and this information will also be available at cohenandsteers.com. The final tax treatment of all distributions is reported to shareholders on their 1099-DIV forms, which are mailed after the close of each calendar year. Distributions of capital decrease the fund's total assets and, therefore, could have the effect of increasing the fund's expense ratio. In addition, in order to make these distributions, the fund may have to sell portfolio securities at a less than opportune time.

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

Meet the Cohen & Steers family of open-end funds:

COHEN & STEERS
REALTY SHARES

  •  Designed for investors seeking maximum total return, investing primarily in REITs

  •  Symbol: CSRSX

COHEN & STEERS
REALTY INCOME FUND

  •  Designed for investors seeking high current income, investing primarily in REITs

  •  Symbols: CSEIX, CSBIX, CSCIX, CSDIX

COHEN & STEERS
INTERNATIONAL REALTY FUND

  •  Designed for investors seeking maximum total return, investing primarily in international real estate securities

  •  Symbols: IRFAX, IRFCX, IRFIX

COHEN & STEERS
DIVIDEND VALUE FUND

  •  Designed for investors seeking high current income and long-term growth of income and capital appreciation, investing primarily in dividend paying common stocks and preferred stocks

  •  Symbols: DVFAX, DVFCX, DVFIX

COHEN & STEERS
INSTITUTIONAL GLOBAL REALTY SHARES

  •  Designed for investors seeking maximum total return, investing primarily in global real estate securities

  •  Symbol: GRSIX

COHEN & STEERS
INSTITUTIONAL REALTY SHARES

  •  Designed for institutional investors seeking maximum total return, investing primarily in REITs

  •  Symbol: CSRIX

COHEN & STEERS
REALTY FOCUS FUND

  •  Designed for investors seeking maximum capital appreciation, investing in a limited number of REITs and other real estate securities

  •  Symbols: CSFAX, CSFBX, CSFCX, CSSPX

COHEN & STEERS
UTILITY FUND

  •  Designed for investors seeking maximum total return, investing primarily in utilities

  •  Symbols: CSUAX, CSUBX, CSUCX, CSUIX

COHEN & STEERS
ASIA PACIFIC REALTY SHARES

  •  Designed for investors seeking maximum total return, investing primarily in real estate securities located in the Asia Pacific region

  •  Symbols: APFAX, APFCX, APFIX

COHEN & STEERS
EUROPEAN REALTY SHARES

  •  Designed for investors seeking maximum total return, investing primarily in real estate securities located in Europe

  •  Symbols: EURAX, EURCX, EURIX

Please consider the investment objectives, risks, charges and expenses of the fund carefully before investing. A prospectus containing this and other information can be obtained by calling 800-330-7348 or by visiting cohenandsteers.com. Please read the prospectus carefully before investing.

Cohen & Steers Securities, LLC, Distributor

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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.

OFFICERS AND DIRECTORS

Robert H. Steers
Director and co-chairman

Martin Cohen
Director and co-chairman

Bonnie Cohen
Director

George Grossman
Director

Richard E. Kroon
Director

Richard J. Norman
Director

Frank K. Ross
Director

Willard H. Smith Jr.
Director

C. Edward Ward, Jr.
Director

Adam M. Derechin
President and chief executive officer

Joseph M. Harvey
Vice president

James S. Corl
Vice president

William F. Scapell
Vice president

Thomas N. Bohjalian
Vice president

John E. McLean
Secretary

James Giallanza
Treasurer and chief financial officer

Lisa D. Phelan
Chief compliance officer

KEY INFORMATION

Investment Advisor

Cohen & Steers Capital Management, Inc.
280 Park Avenue
New York, NY 10017
(212) 832-3232

Fund Administrator and Custodian

State Street Corp.
One Lincoln Street
Boston, MA 02111

Transfer Agent

The Bank of New York
101 Barclay Street
New York, NY 10286
(800) 432-8224

Legal Counsel

Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY 10038

New York Stock Exchange Symbol: RFI

Web site: cohenandsteers.com

This report is for shareholder information. This is not a prospectus intended for use in the purchase or sale of fund shares. Past performance is of course no guarantee of future results and your investment may be worth more or less at the time you sell.

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COHEN & STEERS

TOTAL RETURN REALTY FUND

280 PARK AVENUE

NEW YORK, NY 10017

SEMIANNUAL REPORT

JUNE 30, 2007

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