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: 811-07154
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: December 31, 2003
Item 1. Reports to Stockholders.
The registrant's annual report to shareholders, for the period ended December
31, 2003, is hereby included.
Item 2. Code of Ethics.
On February 5, 2004, the registrant adopted a code of ethics that applies to the
registrant's principal executive and principal financial officers. A copy of the
code of ethics is attached as Exhibit 10(a)(1).
Item 3. Audit Committee Financial Expert.
The registrant's audit committee has determined that it does not currently have
an audit committee financial expert serving on its audit committee. Although no
single audit committee member possesses the attributes necessary for
qualification as an audit committee financial expert, several members have
significant experience in the management of their personal assets and the assets
of the businesses with which they are or have been associated. All members of
the audit committee are also financially literate and have the necessary
education and experience to be effective members of the audit committee. In
addition, the registrant's nominating committee intends to recommend the
appointment and election of an additional director who will qualify as an audit
committee financial expert and the registrant's board will consider this
nomination at a future meeting.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees. The aggregate audit fees billed by the registrant's principal
accountant to the registrant were $35,000 for the fiscal year ended December 31,
2002 and $41,000 for the fiscal year ended December 31, 2003.
(b) Audit-Related Fees. There were no audit-related fees billed by the
registrant's principal accountant to the registrant for the fiscal years ended
December 31, 2002 and December 31, 2003.
(c) Tax Fees. The aggregate tax fees billed by the registrant's principal
accountant to the registrant were $9,400 for the fiscal year ended December 31,
2002 and $10,300 for the fiscal year ended December 31, 2003. These fees were
billed in connection with the preparation of tax returns, calculation and
designation of dividends and other miscellaneous tax services.
(d) All Other Fees. There were no other fees billed by the registrant's
principal accountant to the registrant for the fiscal years ended December 31,
2002 and December 31, 2003.
For the fiscal year ended December 31, 2002, the aggregate fees billed by the
registrant's principal accountant to the registrant's investment adviser for
services provided by the principal accountant were $46,000. These fees were
billed in connection with internal control reviews and AIMR performance reviews
and were not required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X since this portion of the Rule was not effective until
2003.
For the fiscal year ended December 31, 2003, the aggregate fees billed by the
registrant's principal accountant to the registrant's investment adviser for
services provided by the principal accountant and approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X were $49,500. These fees were billed
in connection with internal control reviews and AIMR performance reviews.
(e)(1) Before the registrant's principal accountant is engaged to render audit
or non-audit services to the registrant and non-audit services to the
registrant's investment adviser and its affiliates, each engagement is approved
by the registrant's audit committee.
(e)(2) None.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrant's principal accountant
for services rendered to the registrant and the registrant's investment adviser
and its affiliates were $55,400 for the fiscal year ended December 31, 2002 and
$59,800 for the fiscal year ended December 31, 2003.
(h) This item was not applicable for the fiscal year ended December 31, 2003
since no such non-pre-approved services were rendered. For the fiscal year ended
December 31, 2002, the registrant's audit committee did consider whether the
provision of non-audit services that were rendered to the registrant's
investment adviser and its affiliates was compatible with maintaining the
principal accountant's independence. These non-audit services were not
pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X
since this portion of the Rule was not effective until 2003.
Item 5. Audit Committee of Listed Registrants.
The registrant has a standing audit committee established in accordance with
Section 3(a)(58)(A) of the Exchange Act. The members of the committee are
Gregory C. Clark, Bonnie Cohen, George Grossman, Richard J. Norman and Willard
H. Smith Jr.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
COHEN & STEERS CAPITAL MANAGEMENT, INC.
STATEMENT OF POLICIES AND PROCEDURES REGARDING THE VOTING OF
SECURITIES
This statement sets forth the policies and procedures that Cohen & Steers
Capital Management, Inc. ("C&S") follows in exercising voting rights with
respect to securities held in our client
portfolios. All proxy-voting rights that are exercised by C&S shall be subject
to this Statement of Policy and Procedures.
I. Objectives
Voting rights are an important component of corporate governance. C&S has three
overall objectives in exercising voting rights:
A. Responsibility. C&S shall seek to ensure that there is an effective
means in place to hold companies accountable for their actions. While management
must be accountable to its board, the board must be accountable to a company's
shareholders. Although accountability can be promoted in a variety of ways,
protecting shareholder voting rights may be among our most important tools.
B. Rationalizing Management and Shareholder Concerns. C&S seeks to ensure
that the interests of a company's management and board are aligned with those of
the company's shareholders. In this respect, compensation must be structured to
reward the creation of shareholder value.
C. Shareholder Communication. Since companies are owned by their
shareholders, C&S seeks to ensure that management effectively communicates with
its owners about the company's business operations and financial performance. It
is only with effective communication that shareholders will be able to assess
the performance of management and to make informed decisions on when to buy,
sell or hold a company's securities.
II. General Principles
In exercising voting rights, C&S shall conduct itself in accordance with the
general principles set forth below.
1. The ability to exercise a voting right with respect to a security is a
valuable right and, therefore, must be viewed as part of the asset
itself.
2. In exercising voting rights, C&S shall engage in a careful evaluation
of issues that may materially affect the rights of shareholders and
the value of the security.
3. Consistent with general fiduciary principles, the exercise of voting
rights shall always be conducted with reasonable care, prudence and
diligence.
4. In exercising voting rights on behalf of clients, C&S shall conduct
itself in the same manner as if C&S were the constructive owner of the
securities.
5. To the extent reasonably possible, C&S shall participate in each
shareholder voting opportunity.
6. Voting rights shall not automatically be exercised in favor of
management-supported proposals.
7. C&S, and its officers and employees, shall never accept any item of
value in consideration of a favorable proxy voting decision.
III. General Guidelines
Set forth below are general guidelines that C&S shall follow in exercising proxy
voting rights:
Prudence
In making a proxy voting decision, C&S shall give appropriate consideration to
all relevant facts and circumstances, including the value of the securities to
be voted and the likely effect any vote may have on that value. Since voting
rights must be exercised on the basis of an informed judgment, investigation
shall be a critical initial step.
Third Party Views
While C&S may consider the views of third parties, C&S shall never base a proxy
voting decision solely on the opinion of a third party. Rather, decisions shall
be based on a reasonable and good faith determination as to how best to maximize
shareholder value.
Shareholder Value
Just as the decision whether to purchase or sell a security is a matter of
judgment, determining whether a specific proxy resolution will increase the
market value of a security is a matter of judgment as to which informed parties
may differ. In determining how a proxy vote may affect the economic value of a
security, C&S shall consider both short-term and long-term views about a
company's business and prospects, especially in light of our projected holding
period on the stock (e.g., C&S may discount long-term views on a short-term
holding).
IV. Specific Issues
Set forth below are guidelines as to how specific proxy voting issues shall be
analyzed and assessed. While these guidelines will provide a framework for our
decision making process, the mechanical application of these guidelines can
never address all proxy voting decisions. When new issues arise or old issues
present nuances not encountered before, C&S must be guided by
its reasonable judgment to vote in a manner that C&S deems to be in the best
interests of its clients.
A. Stock-Based Compensation
Approval of Plans or Plan Amendments. By their nature, compensation plans must
be evaluated on a case-by-case basis. As a general matter, C&S always favors
compensation plans that align the interests of management and shareholders. C&S
generally approves compensation plans under the following conditions:
10% Rule. The dilution effect of the newly authorized shares, plus the shares
reserved for issuance in connection with all other stock related plans,
generally should not exceed 10%.
Exercise Price. The minimum exercise price of stock options should be at least
equal to the market price of the stock on the date of grant.
Plan Amendments. Compensation plans should not be materially amended without
shareholder approval.
Non-Employee Directors. Awards to non-employee directors should not be subject
to management discretion, but rather should be made under non-discretionary
grants specified by the terms of the plan.
Repricing/Replacement of Underwater Options. Stock options generally should not
be re-priced, and never should be re-priced without shareholder approval. In
addition, companies should not issue new options, with a lower strike price, to
make up for previously issued options that are substantially underwater. C&S
will vote against the election of any slate of directors that, to its knowledge,
has authorized a company to re-price or replace underwater options during the
most recent year without shareholder approval.
Reload/Evergreen Features. We will generally vote against plans that enable the
issuance of reload options and that provide an automatic share replenishment
("evergreen") feature.
Measures to Increase Executive Long-Term Stock Ownership. We support measures to
increase the long-term stock ownership by a company's executives. These include
requiring senior executives to hold a minimum amount of stock in a company
(often expressed as a percentage of annual compensation), requiring stock
acquired through option exercise to be held for a certain minimum amount of
time, and issuing restricted stock awards instead of options. In this respect,
we support the expensing of option grants because it removes the incentive of a
company to issue options in lieu of restricted stock. We also support employee
stock purchase plans, although we generally believe the discounted purchase
price should be at least 85% of the current market price.
Vesting. Restricted stock awards normally should vest over at least a two-year
period.
Other stock awards. Stock awards other than stock options and restricted stock
awards should be granted in lieu of salary or a cash bonus, and the number of
shares awarded should be reasonable.
B. Change of Control Issues
While we recognize that a takeover attempt can be a significant distraction for
the board and management to deal with, the simple fact is that the possibility
of a corporate takeover keeps management focused on maximizing shareholder
value. As a result, C&S opposes measures that are designed to prevent or
obstruct corporate takeovers because they can entrench current management. The
following are C&S's guidelines on change of control issues:
Shareholder Rights Plans. C&S acknowledges that there are arguments for and
against shareholder rights plans, also known as "poison pills." Companies should
put their case for rights plans to shareholders. We generally vote against any
directors who, without shareholder approval, to our knowledge have instituted a
new poison pill plan, extended an existing plan, or adopted a new plan upon the
expiration of an existing plan during the past year.
Golden Parachutes. C&S opposes the use of accelerated employment contracts that
result in cash grants of greater than three times annual compensation (salary
and bonus) in the event of termination of employment following a change in
control of a company. In general, the guidelines call for voting against "golden
parachute" plans because they impede potential takeovers that shareholders
should be free to consider. We generally withhold our votes at the next
shareholder meeting for directors who to our knowledge approved golden
parachutes.
Approval of Mergers. C&S votes against proposals that require a super-majority
of shareholders to approve a merger or other significant business combination.
We support proposals that seek to lower super-majority voting requirements.
C. Routine Issues
Director Nominees in a Non-Contested Election - C&S generally votes in favor of
management proposals on director nominees.
Director Nominees in a Contested Election - By definition, this type of board
candidate or slate runs for the purpose of seeking a significant change in
corporate policy or control. Therefore, the economic impact of the vote in favor
of or in opposition to that director or slate must be analyzed using a higher
standard normally applied to changes in control. Criteria for evaluating
director nominees as a group or individually should include: performance;
compensation, corporate governance provisions and takeover activity; criminal
activity; attendance at meetings; investment in the company; interlocking
directorships; inside, outside and independent directors; whether the chairman
and CEO titles are held by the same person; number of other board seats; and
other experience. It is impossible to have a general policy regarding director
nominees in a contested election.
Board Composition - C&S supports the election of a board that consists of at
least a majority of independent directors. We generally withhold our support for
non-independent directors who serve on a company's audit, compensation and/or
nominating committees. We also generally withhold support for director
candidates who have not attended a sufficient number of board or committee
meetings to effectively discharge their duties as directors.
Classified Boards - Because a classified board structure prevents shareholders
from electing a full slate of directors at annual meetings, C&S generally votes
against classified boards. We vote in favor of shareholder proposals to
declassify a board of directors unless a company's charter or governing
corporate law allows shareholders, by written consent, to remove a majority of
directors at any time, with or without cause.
Barriers to Shareholder Action - We vote to support proposals that lower the
barriers to shareholder action. This includes the right of shareholders to call
a meeting and the right of shareholders to act by written consent.
Cumulative Voting - Having the ability to cumulate our votes for the election of
directors - that is, cast more than one vote for a director about whom they feel
strongly - generally increases shareholders' rights to effect change in the
management of a corporation. We generally support, therefore, proposals to adopt
cumulative voting.
Ratification of Auditors - Votes generally are cast in favor of proposals to
ratify an independent auditor, unless there is a reason to believe the auditing
firm is no longer performing its required duties or there are exigent
circumstances requiring us to vote against the approval of the recommended
auditor. For example, our general policy is to vote against an independent
auditor that receives more than 50% of its total fees from a company for
non-audit services.
D. Stock Related Items
Increase Additional Common Stock - C&S's guidelines generally call for approval
of increases in authorized shares, provided that the increase is not greater
than three times the number of shares outstanding and reserved for issuance
(including shares reserved for stock-related plans and securities convertible
into common stock, but not shares reserved for any poison pill plan).
Votes generally are cast in favor of proposals to authorize additional shares of
stock except where the proposal:
1. creates a blank check preferred stock; or
2. establishes classes of stock with superior voting rights.
Blank Check Preferred Stock - Votes generally are cast in opposition to
management proposals authorizing the creation of new classes of preferred stock
with unspecific voting, conversion, distribution and other rights, and
management proposals to increase the number of authorized blank check preferred
shares. C&S may vote in favor of this type of proposal when it receives
assurances to its reasonable satisfaction that (i) the preferred stock was
authorized by the board
for the use of legitimate capital formation purposes and not for anti-takeover
purposes, and (ii) no preferred stock will be issued with voting power that is
disproportionate to the economic interests of the preferred stock. These
representations should be made either in the proxy statement or in a separate
letter from the company to C&S.
Preemptive Rights - Votes are cast in favor of shareholder proposals restoring
limited preemptive rights.
Dual Class Capitalizations - Because classes of common stock with unequal voting
rights limit the rights of certain shareholders, C&S votes against adoption of a
dual or multiple class capitalization structure.
E. Social Issues
C&S believes that it is the responsibility of the board and management to run a
company on a daily basis. With this in mind, in the absence of unusual
circumstances, we do not believe that shareholders should be involved in
determining how a company should address broad social and policy issues. As a
result, we generally vote against these types of proposals, which are generally
initiated by shareholders, unless we believe the proposal has significant
economic implications.
F. Other Situations
No set of guidelines can anticipate all situations that may arise. Our portfolio
managers and analysts will be expected to analyze proxy proposals in an effort
to gauge the impact of a proposal on the financial prospects of a company, and
vote accordingly. These policies are intended to provide guidelines for voting.
They are not, however, hard and fast rules because corporate governance issues
are so varied.
V. Proxy Voting Procedures
C&S shall maintain a record of all voting decisions for the period required by
applicable laws. In each case in which C&S votes contrary to the stated policies
set forth in these guidelines, the record shall indicate the reason for such a
vote.
The Investment Committee of C&S shall have responsibility for voting proxies,
under the supervision of Joseph Harvey, Senior Vice President and Director of
Research. Ed Lee shall be responsible for ensuring that the Investment Committee
is aware of all upcoming proxy voting opportunities. Mr. Lee shall ensure that
proxy votes are properly recorded and that the requisite information regarding
each proxy voting opportunity is maintained. Larry Stoller, Senior Vice
President and General Counsel of C&S, shall have overall responsibility for
ensuring that C&S complies with all proxy voting requirements and procedures.
VI. Recordkeeping
Mr. Lee shall be responsible for recording and maintaining the following
information with respect to each proxy voted by C&S:
* Name of the company
* Ticker symbol
* CUSIP number
* Shareholder meeting date
* Brief identification of each matter voted upon
* Whether the matter was proposed by management or a shareholder
* Whether C&S voted on the matter
* If C&S voted, then how C&S voted
* Whether C&S voted with or against management
Mr. Stoller shall be responsible for maintaining and updating this Policy and
Procedures, and for maintaining any records of written client requests for proxy
voting information and documents that were prepared by C&S and were deemed
material to making a voting decision or that memorialized the basis for the
decision.
C&S shall rely on the SEC's EDGAR filing system with respect to the requirement
to maintain proxy materials regarding client securities.
VII. Conflicts of Interest
There may be situations in which C&S may face a conflict between its interests
and those of its clients or fund shareholders. Potential conflicts are most
likely to fall into three general categories:
* Business Relationships - This type of conflict would occur if C&S or an
affiliate has a substantial business relationship with the company or a
proponent of a proxy proposal relating to the company (such as an employee
group) such that failure to vote in favor of management (or the proponent) could
harm the relationship of C&S or its affiliate with the company or proponent. In
the context of C&S, this could occur if Cohen & Steers Capital Advisors, a
wholly owned subsidiary of C&S ("Capital Advisors"), has a material business
relationship with a company that C&S has invested in on behalf of its clients,
and C&S is encouraged to vote in favor of management as an inducement to acquire
or maintain the Capital Advisors relationship.
* Personal Relationships - C&S or an affiliate could have a personal
relationship with other proponents of proxy proposals, participants in proxy
contests, corporate directors or director nominees.
* Familial Relationships - C&S or an affiliate could have a familial
relationship relating to a company (e.g., spouse or other relative who serves as
a director or nominee of a public company).
The next step is to identify if a conflict is material. A material matter is one
that is reasonably likely to be viewed as important by the average shareholder.
Materiality will be judged under a two-step approach:
* Financial Based Materiality - C&S presumes a conflict to be non-material
unless it involves at least $500,000.
* Non-Financial Based Materiality - Non-financial based materiality would impact
the members of the C&S Investment Committee, who are responsible for making
proxy voting decisions.
Finally, if a material conflict exists, C&S shall vote in accordance with the
advice of a proxy voting service. C&S currently uses ISS to provide advice on
proxy voting decisions.
Mr. Stoller shall have responsibility for supervising and monitoring conflicts
of interest in the proxy voting process according to the following process:
1. Identifying Conflicts - Mr. Stoller is responsible for monitoring the
relationships of Capital Advisors for purposes of C&S's Inside Information
Policy and Procedures. Mr. Stoller (or his designee) maintains a watch list and
a restricted list. The Investment Committee is unaware of the content of the
watch list and therefore it is only those companies on the restricted list,
which is made known to everyone at C&S, for which potential concerns might
arise. When a company is placed on the restricted list, Mr. Stoller (or his
designee) shall promptly inquire of Mr. Lee as to whether there is a pending
proxy voting opportunity with respect to that company, and continue to inquire
on a weekly basis until such time as the company is no longer included on the
restricted list. When there is a proxy voting opportunity with respect to a
company that has been placed on the restricted list, Mr. Stoller shall inform
the Investment Committee that no proxy vote is to be submitted for that company
until Mr. Stoller completes the conflicts analysis.
For purposes of monitoring personal or familial relationships, Mr. Stoller (or
his designee) shall receive on at least an annual basis from each member of the
Investment Committee written disclosure of any personal or familial
relationships with public company directors that could raise potential conflict
of interest concerns. Investment Committee members also shall agree in writing
to advise Mr. Stoller if (i) there are material changes to any previously
furnished information, (ii) a person with whom a personal or familial
relationship exists is subsequently nominated as a director or (iii) a personal
or familial relationship exists with any proponent of a proxy proposal or a
participant in a proxy contest.
2. Identifying Materiality - Mr. Stoller (or his designee) shall be responsible
for determining whether a conflict is material. He shall evaluate financial
based materiality in terms of both actual and potential fees to be received.
Non-financial based items impacting a member of the Investment Committee shall
be presumed to be material.
3. Communication with Investment Committee; Voting of Proxy - If Mr. Stoller
determines that the relationship between Capital Advisors and a company is
financially material, he shall communicate that information to the members of
the Investment Committee and instruct them,
and Mr. Lee, that C&S will vote its proxy based on the advice of ISS or other
consulting firm then engaged by C&S. Any personal or familial relationship, or
any other business relationship, that exists between a company and any member of
the Investment Committee shall be presumed to be material, in which case C&S
again will vote its proxy based on the advice of ISS or other consulting firm
then engaged by C&S. The fact that a member of the Investment Committee
personally owns securities issued by a company will not disqualify C&S from
voting common stock issued by that company, since the member's personal and
professional interests will be aligned.
In cases in which C&S will vote its proxy based on the advice of ISS or other
consulting firm then engaged by C&S, Mr. Stoller (or his designee) shall be
responsible for ensuring that Mr. Lee votes proxies in this manner. Mr. Stoller
will maintain a written record of each instance when a conflict arises and how
the conflict is resolved (e.g., whether the conflict is judged to be material,
the basis on which the materiality is decision is made and how the proxy is
voted).
VIII. Cohen & Steers Funds
Proxies relating to portfolio securities held by any Cohen & Steers Fund shall
be voted in accordance with this Statement of Policies and Procedures. For this
purpose, the Board of Directors of the Cohen & Steers Funds has delegated to C&S
the responsibility for voting proxies on behalf of the Funds. Mr. Stoller shall
make an annual presentation to the Board regarding this Statement of Policy and
Procedures, including whether any revisions are recommended, and shall report to
the Board at each regular, quarterly meeting with respect to any conflict of
interest situation that arose regarding the proxy voting process.
Item 8. [Reserved]
Item 9. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial officer
have concluded that the registrant's disclosure controls and procedures are
sufficient to ensure that information required to be disclosed by the registrant
in this Form N-CSR was recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms, based upon such officers' evaluation of these controls and procedures as
of a date within 90 days of the filing date of this report.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10. Exhibits.
(a) (1) Code of Ethics for Principal Executive and Principal Financial Officers
(a) (2) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2(a) under the Investment Company Act of 1940.
(b) Certifications of chief executive officer and chief financial officer as
required by Rule 30a- 2(b) under the Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
By: /s/ Robert H. Steers
----------------------------------
Name: Robert H. Steers
Title: Chairman
Date: February 27, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Robert H. Steers By: /s/ Martin Cohen
---------------------------------- ----------------------------------
Name: Robert H. Steers Name: Martin Cohen
Title: Chairman, Secretary and Title: President, Treasurer
and principal executive and principal financial
officer officer
Date: February 27, 2004
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
February 17, 2004
To Our Shareholders:
We are pleased to submit to you our report for the quarter and year ended
December 31, 2003. The net asset value at that date was $16.99 per share. In
addition, during the quarter, three $0.085 per share monthly dividends and one
$0.02 per share special dividend were declared and paid. The special year-end
dividend consisted of a $0.02 per share capital gain distribution.
2003 REVIEW
For the quarter, Cohen & Steers Total Return Realty Fund had a total return,
based on income and change in net asset value, of 10.1%, bringing the total
return for the year to 34.1%. This compares to NAREIT Equity REIT Index's(a)
return of 10.0% and 37.1% for the quarter and year ended December 31, 2003,
respectively.
Exceeding even the most optimistic expectations, and frustrating many
skeptics, 2003 was simply the best year for REIT investors in the modern era
(since 1991). This was the year that REITs gained wider acceptance as both an
important asset class and a financial instrument. We have long believed that
REITs' investment characteristics -- namely high current yield, low correlation
to other asset classes and strong total return potential -- were highly
desirable. Record low returns on fixed-income investments made REIT current
income and dividend growth capabilities all the more attractive. In our view,
their low correlation to other asset classes, particularly following a major
bear market in equities, offered a welcomed respite to investors whose risk
tolerance has been dramatically reduced. The resilience of REIT cash flows and
asset values, despite the sluggish economy and weak real estate markets,
contributed to investors' confidence in their ability to produce healthy growth
once these macro trends began to reverse, as they did in the second half of the
year.
While almost all REITs performed well in 2003, there were some interesting
trends with respect to sector performance. The health care sector produced the
best returns both in the fourth quarter (17.2%) and full year (53.6%). Health
care fundamentals were better than expected due to a surprise increase in
nursing home reimbursement in 2003, in spite of federal and local budget
deficits. During the fourth quarter, the hotel sector fared second best (14.2%),
followed by regional malls (12.5%). The full year runner-up to health care was
the mall sector, delivering 52.2%. As was the case in the past several years,
underperformers for both the quarter and full year were apartment and office
building owners.
Our results for the year reflected the industry's strong gains. The fund's
best performing investments during the year were in the health care, regional
mall and shopping center sectors. Lagging sectors for the fund were office and
mixed office/industrial. In terms of individual securities, our best-performing
holding was Ventas Inc., a
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(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 REITs as a whole.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
health care REIT that produced a total return of 106% for the year. Other
significant contributors include shopping center owner Developers Diversified
Realty, which generated a total return of 62.1%, and regional mall owner Mills
Corp., which produced a total return of 60.3%. The fund's poorest performing
holdings included Apartment Investment & Management Company, which generated a
total return of 0.2% for the year, as well as Crescent Real Estate Equities,
which generated a total return of 13.4%.
We believe that REITs became an important component of many investment
portfolios in 2003. Pension, endowment and charitable funds, along with many
insurance companies found them to be attractive instruments with which to
satisfy liabilities and other obligations. Investors shifting their investment
objectives from pure growth to income and growth, particularly those approaching
retirement age, found REITs to be one of the most attractive alternatives. REITs
were included more than ever in portfolios of income-oriented and diversified
investment vehicles and funds, both public and private, leveraged and
unleveraged. For many investors who began to anticipate an increase in inflation
and interest rates, REITs may have become a perceived safe haven from both, as
REITs have historically performed well in high inflation and high interest rate
environments. The consistent strong returns from REITs even attracted the
attention of many die-hard direct real estate investors who had trouble finding
bargains in the private market.
To be sure, there were a fair number of fundamental reasons for REITs to
have done well in 2003. Real estate has undergone a re-pricing over the past
year, appreciating in value despite rising vacancies and softness in rents.
Investors in both the public and private markets seemed to ignore recent market
conditions, and instead valued property based on expected future cash flows.
This strong real estate pricing bolstered REIT asset values. Low interest rates
have clearly added to this pricing situation as it has enabled leveraged buyers
to purchase properties at lower current returns than would be possible, or
prudent, in a higher rate environment. Nonetheless, we are still not convinced
that private real estate buyers in general have fully adapted, as much as REITs
have, to the extraordinary credit market conditions that have prevailed.
Over the past two years low interest rates and ready access to the financial
markets have enabled most REITs to re-price their liabilities by retiring or
refinancing high cost debt, or by adding to their leverage without assuming
meaningfully higher risk. This phenomenon has not necessarily been fully
appreciated by the investment community, in our opinion, but has undoubtedly
enhanced equity values. In addition to stabilizing balance sheets and extending
debt maturities, this has improved both the absolute level and, in our view, the
quality of REIT earnings. As a result, REIT earnings performance overall in 2003
greatly exceeded what one would have expected in light of soft real estate
markets. For example, the weighted average earnings per share of the 110 largest
REITs declined by approximately 2.0%. More surprisingly, the dividends per share
of the same group of companies grew by approximately 3.8% on average.
As REITs consistently performed well throughout the year (rising in 11 out
of 12 months), investor expectations for improving fundamentals were vindicated
by economic statistics. The 8.2% rise in third quarter GDP was the highest rate
of economic growth in 20 years. Following this showing, the expected 5.0% fourth
quarter growth rate in our view should essentially dispel any lingering doubts
about the durability of the U.S.
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2
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
economic recovery. Moreover, robust profit growth of corporate America validated
the across-the-board rise in stock prices. The bottom line for investors in 2003
is that all major equity market indexes ended the year at annual highs in price,
and REITs ended the year at record high share prices.
INVESTMENT OUTLOOK
We believe that the key to REIT performance in 2004 will be the course of
the U.S. economy. Not interest rates. Not Wall Street estimates of NAVs. Not
valuations based on last year's earnings. A strong economy is essential to
supporting real estate fundamentals. And strong fundamentals are essential to
supporting REIT earnings growth and share prices. We remain optimistic about the
course of the economy. In light of the return of business and consumer
confidence, soaring profitability, ongoing fiscal stimulus and
still-accommodative monetary policy, we believe the economy will remain strong.
Our expectation is that in 2004 GDP will increase by at least 4%.
We also believe that for the first time since the economic recovery began,
the U.S. will experience strong job growth. We expect that 1.5 to 2.0 million
jobs will be created this year. To the extent that this occurs, several dynamics
of the real estate markets are likely to change significantly, primarily in the
office and apartment sectors. Growth in service jobs will directly benefit
owners of office buildings, particularly in larger cities such as New York,
Boston, and Washington. We are already seeing vacancy rates begin to decline,
coincident with companies now shifting from layoffs to new hiring, such as those
in the financial service industry. Because a relatively high percentage of new
jobholders tend to rent apartments, the strong job growth we expect should
benefit owners of multi-family properties. Our apartment holdings are
concentrated in those markets that are expected to be at the forefront of the
expected job growth (particularly, in the southeast and southwest), as well as
companies that have a strong presence in the northeast and western states where
there is a higher tendency to rent apartments due to high population density and
high home prices. We believe the hotel industry should benefit from increased
business travel and increased tourism due to the weak dollar. However, our
current weight in the hotel sector is unlikely to increase unless or until more
companies reinstate their dividends and we believe they are sustainable.
Generally speaking, we expect the retail sector to continue to exhibit
strong fundamentals in 2004. With ongoing economic growth, we expect consumers
to continue their recent spending patterns. Both regional mall and shopping
center owners should benefit from these trends. However, while mall valuations
remain generally attractive (as opposed to the shopping center sector, which is
trading at a significant premium), both sectors currently offer
lower-than-average dividend yields. Thus, we will continue to be underweight in
the retail sector.
Following the extraordinary returns that REITs delivered in 2003, it is
natural to ask whether they can continue to perform well this year. As shown in
the table below, the years following those in which REITs have turned in their
best total returns have historically shown a continuation of strong performance.
Thus, one should not assume that one year of very strong performance is
necessarily followed by a subpar year. If the past is any guide to what
investors may see in 2004, it appears that strong trends tend to remain in
place.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
NAREIT EQUITY REIT RETURNS FOLLOWING BEST PERFORMING YEARS
TOTAL RETURN IN THE FOLLOWING:
TOTAL ----------------------------------
YEAR RETURN 3 MOS. 6 MOS. 9 MOS. 12 MOS.
---- ------ ------ ------ ------ -------
1976 47.6% 7.6% 14.0% 15.0% 22.4%
1979 35.9% -4.4% 7.1% 17.0% 24.4%
1983 30.6% 4.4% 3.8% 13.8% 20.9%
1991 35.7% 0.7% 3.3% 10.4% 14.6%
1996 35.3% 0.7% 5.7% 18.2% 20.3%
2000 26.4% 0.4% 11.4% 8.5% 13.9%
2003 37.1% -- -- -- --
Past performance is no guarantee of future results. Returns are historical,
include changes in share price and reflect reinvestment of all distributions.
This information is presented for illustrative purposes only and does not
represent the past performance of the fund. Investors cannot invest in this
unmanaged index.
Whereas REIT share prices are much higher than they were one year ago, we
believe the health of the industry and the outlook for profit growth are
stronger as well. In our experience, bear markets rarely, if ever, commence at
this stage of economic and real estate cycles. In fact, the strengthening real
estate markets are attracting an increasing amount of investment capital -- it
is our understanding that a record amount of capital has been allocated to
direct property ownership. We expect this to help to maintain strong pricing in
most real estate markets. In our opinion, the rise in REIT prices has not
changed the investment characteristics that investors are increasingly seeking.
It remains our belief that while REITs are no longer as undervalued as they
were over the past several years, the conditions to sustain continued strength
and growth in this asset class are firmly in place. While we can rationally
expect there to be share price corrections along the way -- as there always
are -- we believe that REITs can still deliver solid, long-term returns to
investors. In light of these strong fundamentals, combined with the valuation of
REITs in comparison to many other asset classes, we believe that REITs will
continue to appeal to
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
investors seeking the potential for portfolio diversification, a high level of
current income and attractive total returns.
Sincerely,
MARTIN COHEN ROBERT H. STEERS
MARTIN COHEN ROBERT H. STEERS
President Chairman
GREG E. BROOKS
GREG E. BROOKS
Portfolio Manager
Cohen & Steers is online at COHENANDSTEERS.COM
We have enhanced both the look and features of our Web site
to give you more information about our company, our funds,
and the REIT market in general. Check out our new
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
DECEMBER 31, 2003
DIVIDEND
NUMBER VALUE YIELD
OF SHARES (NOTE 1) (UNAUDITED)(a)
---------- ------------ --------------
EQUITIES 98.74%(b)
COMMON STOCK 78.54%
DIVERSIFIED 11.66%
Colonial Properties Trust................... 82,100 $ 3,251,160 6.72%
Crescent Real Estate Equities Co............ 170,600 2,922,378 8.76
iStar Financial............................. 36,900 1,435,410 6.81
Newcastle Investment Corp................... 103,027 2,792,032 7.38
Vornado Realty Trust........................ 144,700 7,922,325 5.19
------------
18,323,305
------------
HEALTH CARE 10.31%
Health Care Property Investors.............. 115,000 5,842,000 6.54
Health Care REIT............................ 27,600 993,600 6.50
Nationwide Health Properties................ 161,800 3,163,190 7.57
Ventas...................................... 281,700 6,197,400 4.86
------------
16,196,190
------------
HOTEL 0.37%
Hospitality Properties Trust................ 14,200 586,176 6.98
------------
INDUSTRIAL 2.65%
First Industrial Realty Trust............... 64,700 2,183,625 8.12
Keystone Property Trust..................... 89,500 1,977,055 5.98
------------
4,160,680
------------
OFFICE 21.92%
Arden Realty................................ 160,000 4,854,400 6.66
Brandywine Realty Trust..................... 184,900 4,949,773 6.57
CarrAmerica Realty Corp. ................... 155,100 4,618,878 6.72
Equity Office Properties Trust.............. 203,400 5,827,410 6.98
Mack-Cali Realty Corp. ..................... 155,800 6,484,396 6.05
Maguire Properties.......................... 93,000 2,259,900 6.58
Prentiss Properties Trust................... 165,300 5,453,247 6.79
------------
34,448,004
------------
-------------------
(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. The dividend yield has not been audited.
(b) Percentages indicated are based on the net assets of the fund.
See accompanying notes to financial statements.
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6
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2003
DIVIDEND
NUMBER VALUE YIELD
OF SHARES (NOTE 1) (UNAUDITED)
---------- ------------ -----------
OFFICE/INDUSTRIAL 6.24%
Kilroy Realty Corp. ......................... 56,600 $ 1,853,650 6.05%
Liberty Property Trust....................... 135,600 5,274,840 6.22
Reckson Associates Realty Corp. ............. 110,000 2,673,000 6.99
------------
9,801,490
------------
RESIDENTIAL -- APARTMENT 11.75%
Archstone-Smith Trust........................ 152,900 4,278,142 6.11
AvalonBay Communities........................ 69,900 3,341,220 5.86
Camden Property Trust........................ 78,900 3,495,270 5.73
Gables Residential Trust..................... 122,900 4,269,546 6.94
Home Properties.............................. 47,000 1,898,330 6.14
Mid-America Apartment Communities............ 35,400 1,188,732 6.97
------------
18,471,240
------------
SELF STORAGE 0.15%
Sovran Self Storage.......................... 6,200 230,330 6.49
------------
SHOPPING CENTER 13.49%
COMMUNITY CENTER 4.39%
Developers Diversified Realty Corp. ......... 22,600 758,682 4.89
Federal Realty Investment Trust.............. 67,200 2,579,808 5.11
Heritage Property Investment Trust........... 51,300 1,459,485 7.38
Kramont Realty Trust......................... 69,500 1,257,950 7.18
Urstadt Biddle Properties -- Class A......... 60,000 849,000 5.94
------------
6,904,925
------------
REGIONAL MALL 9.10%
CBL & Associates Properties.................. 42,100 2,378,650 5.13
Glimcher Realty Trust........................ 95,200 2,130,576 8.58
Macerich Co. ................................ 110,500 4,917,250 5.48
Mills Corp. ................................. 110,600 4,866,400 5.14
------------
14,292,876
------------
TOTAL SHOPPING CENTER........................ 21,197,801
------------
TOTAL COMMON STOCK (Identified
cost -- $83,410,565).................. 123,415,216
------------
See accompanying notes to financial statements.
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7
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2003
DIVIDEND
NUMBER VALUE YIELD
OF SHARES (NOTE 1) (UNAUDITED)
---------- ------------ -----------
PREFERRED STOCK 20.20%
DIVERSIFIED 3.54%
Colonial Properties Trust, 9.25%, Series C... 600 $ 16,092 8.61%
Colonial Properties Trust, 8.125%, Series
D......................................... 14,600 396,536 7.47
Crescent Real Estate Equities Co., 6.75%,
Series A (Convertible).................... 75,500 1,765,945 7.23
Pennsylvania Real Estate Investment Trust,
11.00%, Series A.......................... 55,400 3,379,400 9.02
------------
5,557,973
------------
HEALTH CARE 2.82%
Nationwide Health Properties, 7.677%,
Series P.................................. 47,000 4,427,400 8.15
------------
HOTEL 0.21%
FelCor Lodging Trust, 9.00%, Series B........ 2,900 72,674 8.98
Host Marriott Corp, 10.00%, Series C......... 3,500 95,445 9.17
Host Marriott Financial Trust, 6.75%,
QUIPS(a) (Convertible).................... 3,200 163,200 6.63
------------
331,319
------------
INDUSTRIAL 0.32%
Keystone Property Trust, 9.125%, Series D.... 18,800 510,420 8.40
------------
OFFICE 3.95%
Alexandria Real Estate Equities, 9.10%,
Series B.................................. 13,900 390,590 8.11
HRPT Properties Trust, 8.75%, Series B....... 52,800 1,470,480 7.86
Highwoods Properties, 8.625%, Series A....... 4,300 4,353,750 8.52
------------
6,214,820
------------
RESIDENTIAL -- APARTMENT 3.51%
Apartment Investment & Management Co., 8.75%,
Series D.................................. 6,431 162,383 8.67
Apartment Investment & Management Co.,
9.375%, Series G.......................... 113,200 3,063,192 8.65
Apartment Investment & Management Co.,
10.10%, Series Q.......................... 25,000 676,250 9.35
Apartment Investment & Management Co.,
10.00%, Series R.......................... 18,100 491,777 9.20
Mid-America Apartment Communities, 8.30%,
Series H.................................. 17,300 451,876 7.96
Post Properties, 8.50%, Series A............. 11,000 673,640 6.94
------------
5,519,118
------------
-------------------
(a) QUIPS Quarterly Income Preferred Securities
See accompanying notes to financial statements.
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8
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
SCHEDULE OF INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2003
DIVIDEND
NUMBER VALUE YIELD
OF SHARES (NOTE 1) (UNAUDITED)
---------- ------------ -----------
SHOPPING CENTER 5.85%
COMMUNITY CENTER 0.50%
Developers Diversified Realty Corp., 8.60%,
Series F.................................. 1,600 $ 42,720 8.05%
Ramco-Gershenson Property Trust, 9.50%,
Series B.................................. 11,600 325,380 8.48
Urstatdt Biddle Properties, 8.50%, Series
C......................................... 4,000 421,000 8.08
------------
789,100
------------
OUTLET CENTER 0.46%
Chelsea Property Group, 8.375%, Series A..... 13,000 717,437 7.59
------------
REGIONAL MALL 4.89%
CBL & Associates Properties, 8.75%, Series
B......................................... 13,000 712,400 7.99
Mills Corp., 9.00%, Series B................. 73,800 2,032,452 8.17
Mills Corp., 9.00%, Series C................. 25,000 691,125 8.14
Mills Corp., 8.75%, Series E................. 26,000 704,600 8.08
Taubman Centers, 8.30%, Series A............. 139,500 3,546,090 8.18
------------
7,686,667
------------
TOTAL SHOPPING CENTER........................ 9,193,204
------------
TOTAL PREFERRED STOCK (Identified
cost -- $26,999,814).................. 31,754,254
------------
TOTAL EQUITIES (Identified
cost -- $110,410,379)................. 155,169,470
------------
PRINCIPAL
AMOUNT
----------
CORPORATE BOND 0.43%
Host Marriott, LP, 9.50%, due 01/15/07
(Identified cost -- $600,489)............. $ 600,000 670,500
------------
TOTAL INVESTMENTS (Identified
cost -- $111,010,868) .................... 99.17% 155,839,970
OTHER ASSETS IN EXCESS OF LIABILITIES ...... 0.83% 1,305,956
------ ------------
NET ASSETS (Equivalent to $16.99 per share based on
9,249,159
shares of capital stock outstanding) ..... 100.00% $157,145,926
------ ------------
------ ------------
See accompanying notes to financial statements.
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9
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2003
ASSETS:
Investments in securities, at value (Identified
cost -- $111,010,868) (Note 1)....................... $155,839,970
Cash.................................................... 430,852
Dividends and interest receivable....................... 1,030,420
Other assets............................................ 4,324
------------
Total Assets....................................... 157,305,566
------------
LIABILITIES:
Payable to investment advisor........................... 91,874
Payable for professional fees........................... 35,516
Payable to administrator................................ 2,160
Other liabilities....................................... 30,090
------------
Total Liabilities.................................. 159,640
------------
NET ASSETS applicable to 9,249,159 shares of $0.001 par
value common stock outstanding (Note 5)................... $157,145,926
------------
------------
NET ASSET VALUE PER SHARE:
($157,145,926[div]9,249,159 shares outstanding)......... $ 16.99
------------
------------
MARKET PRICE PER SHARE...................................... $ 17.74
------------
------------
MARKET PRICE PREMIUM TO NET ASSET VALUE PER SHARE........... 4.41%
------------
------------
NET ASSETS consist of:
Paid-in capital (Notes 1 and 4)......................... $112,560,482
Accumulated net realized loss on investments............ (243,658)
Net unrealized appreciation on investments.............. 44,829,102
------------
$157,145,926
------------
------------
See accompanying notes to financial statements.
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10
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
Investment Income (Note 1):
Dividend income......................................... $ 6,596,560
Interest income......................................... 67,815
-----------
Total Income....................................... 6,664,375
-----------
Expenses:
Investment advisory fees (Note 2)....................... 955,238
Reports to shareholders................................. 90,004
Professional fees....................................... 77,848
Directors' fees and expenses (Note 2)................... 42,442
Custodian fees and expenses............................. 26,846
Transfer agent fees and expenses........................ 26,236
Administration fees..................................... 25,441
Registration and filing fees............................ 23,751
Miscellaneous........................................... 31,208
-----------
Total Expenses..................................... 1,299,014
-----------
Net Investment Income....................................... 5,365,361
-----------
Net Realized and Unrealized Gain on Investments:
Net realized gain on investments........................ 3,136,985
Net change in unrealized appreciation on investments.... 33,087,426
-----------
Net realized and unrealized gain on investments.... 36,224,411
-----------
Net Increase in Net Assets Resulting from Operations........ $41,589,772
-----------
-----------
See accompanying notes to financial statements.
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11
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002(a)
----------------- --------------------
Change in Net Assets:
From Operations:
Net investment income.................. $ 5,365,361 $ 5,861,717
Net realized gain on investments....... 3,136,985 10,271,809
Net change in unrealized
appreciation/(depreciation) on
investments......................... 33,087,426 (6,282,024)
------------ ------------
Net increase in net assets
resulting from operations....... 41,589,772 9,851,502
------------ ------------
Dividends and Distributions to Shareholders
from (Note 1):
Net investment income.................. (5,365,361) (6,959,063)
Net realized gain on investments....... (3,196,876) (1,919,755)
Tax return of capital.................. (917,957) --
------------ ------------
Total dividends and distributions
to shareholders................. (9,480,194) (8,878,818)
------------ ------------
Total increase in net assets...... 32,109,578 972,684
------------ ------------
Net Assets:
Beginning of year...................... 125,036,348 124,063,664
------------ ------------
End of year............................ $157,145,926 $125,036,348
------------ ------------
------------ ------------
-------------------
(a) See Note 1.
See accompanying notes to financial statements.
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12
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding
throughout each year and other performance information derived from the
financial statements. It should be read in conjunction with the financial
statements and notes thereto.
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------
PER SHARE OPERATING PERFORMANCE: 2003 2002(b) 2001(b) 2000(b) 1999(b)
-------------------------------- ------- ------- ------- ------- -----------
Net asset value, beginning of year.............. $ 13.52 $ 13.41 $ 12.35 $ 10.63 $ 12.35
------- ------- ------- ------- -----------
Income from investment operations:
Net investment income....................... 0.58 0.64 0.77 0.75 0.83
Net realized and unrealized gain/(loss) on
investments............................... 3.92 0.43 1.28 1.93 (1.56)
------- ------- ------- ------- -----------
Total income from investment
operations............................ 4.50 1.07 2.05 2.68 (0.73)
------- ------- ------- ------- -----------
Less dividends and distributions to shareholders
from:
Net investment income....................... (0.58) (0.75) (0.77) (0.74) (0.83)
Net realized gain on investments............ (0.35) (0.21) -- -- --
Tax return of capital....................... (0.10) -- (0.22) (0.22) (0.16)
------- ------- ------- ------- -----------
Total from dividends and distributions
to shareholders....................... (1.03) (0.96) (0.99) (0.96) (0.99)
------- ------- ------- ------- -----------
Net increase/(decrease) in net assets... 3.47 0.11 1.06 1.72 (1.72)
------- ------- ------- ------- -----------
Net asset value, end of year.................... $ 16.99 $ 13.52 $ 13.41 $ 12.35 $ 10.63
------- ------- ------- ------- -----------
------- ------- ------- ------- -----------
Market value, end of year....................... $ 17.74 $ 14.19 $ 13.60 $11.875 $ 10.625
------- ------- ------- ------- -----------
------- ------- ------- ------- -----------
----------------------------------------------------------------------------------------------------------
Total market value return(c).................... 33.36% 11.53% 23.34% 21.53% -10.18%
------- ------- ------- ------- -----------
------- ------- ------- ------- -----------
Total net asset value return(c)................. 34.05% 7.77% 16.82% 26.17% -6.77%
------- ------- ------- ------- -----------
------- ------- ------- ------- -----------
----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
-------------------------
Net assets, end of year (in millions)........... $ 157.1 $ 125.0 $ 124.1 $ 91.4 $ 78.7
------- ------- ------- ------- -----------
------- ------- ------- ------- -----------
Ratio of expenses to average daily net assets
(before expense reduction).................... 0.95% 0.96% 1.18% 1.16% 1.18%
------- ------- ------- ------- -----------
------- ------- ------- ------- -----------
Ratio of expenses to average daily net assets
(net of expense reduction).................... 0.95% 0.96% 1.18% 1.15% 1.12%
------- ------- ------- ------- -----------
------- ------- ------- ------- -----------
Ratio of net investment income to average daily
net assets
(before expense reduction).................... 3.93% 4.59% 5.86% 6.56% 7.08%
------- ------- ------- ------- -----------
------- ------- ------- ------- -----------
Ratio of net investment income to average daily
net assets
(net of expense reduction).................... 3.93% 4.59% 5.86% 6.57% 7.14%
------- ------- ------- ------- -----------
------- ------- ------- ------- -----------
Portfolio turnover rate......................... 22% 30% 34% 31% 62%
------- ------- ------- ------- -----------
------- ------- ------- ------- -----------
-------------------
(b) See Note 1.
(c) 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.
See accompanying notes to financial statements.
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13
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Cohen & Steers Total Return Realty Fund, Inc. (the fund) was incorporated
under the laws of the State of Maryland on September 4, 1992 and is registered
under the Investment Company Act of 1940 as amended, as a closed-end,
nondiversified management investment company.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
policies are in conformity with accounting principles generally accepted in the
United States of America. The preparation of the financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates.
Portfolio Valuation: Investments in securities that are listed on the New
York Stock Exchange are valued, except as indicated below, at the last sale
price reflected at the close of the New York Stock Exchange on the business day
as of which such value is being determined. If there has been no sale on such
day, the securities are valued at the mean of the closing bid and asked prices
for the day. If no bid or asked prices are quoted on such day, then the security
is valued by such method as the board of directors shall determine in good faith
to reflect its fair market value.
Securities not listed on the New York Stock Exchange but listed on other
domestic or foreign securities exchanges or admitted to trading on the National
Association of Securities Dealers Automated Quotations, Inc. (Nasdaq) national
market system are valued in a similar manner. Securities traded on more than one
securities exchange are valued at the last sale price on the business day as of
which such value is being determined as reflected on the tape at the close of
the exchange representing the principal market for such securities.
Readily marketable securities traded in the over-the-counter market,
including listed securities whose primary market is believed by Cohen & Steers
Capital Management, Inc. to be over-the-counter, but excluding securities
admitted to trading on the Nasdaq national list, are valued at the official
closing prices as reported by Nasdaq, the National Quotations Bureau, or such
other comparable sources as the board of directors deems appropriate to reflect
their fair market value. Where securities are traded on more than one exchange
and also over-the-counter, the securities will generally be valued using the
quotations the board of directors believes reflect most closely the value of
such securities.
Short-term debt securities, which have a maturity of 60 days or less, are
valued at amortized cost, which approximates value.
Security Transactions and Investment Income: Security transactions are
recorded on trade date. Realized gains and losses on investments sold are
recorded on the basis of identified cost. Interest income is recorded on the
accrual basis. Dividend income is recorded on the ex-dividend date. The fund
records distributions received in excess of income from underlying investments
as a reduction of cost of investments and/or realized gain. Such
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14
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
amounts are based on estimates if actual amounts are not available, and actual
amounts of income, realized gain and return of capital may differ from the
estimated amounts. The fund adjusts the estimated amounts of the components of
distributions (and consequently its net investment income) as necessary once the
issuers provide information about the actual composition of the distributions.
Revision of Financial Information: Due to the nature of commercial real
estate and the REIT structure, which generally is not subject to corporate tax,
REIT dividends can be characterized as a combination of net income, capital
gains (from asset dispositions) and return of capital (which generally relates
to property depreciation). To date, it has been the fund's policy to distribute
to its shareholders all dividends received, regardless of dividend
characterization, from the securities it holds in the year that such dividends
were received. The fund has reclassified a portion of its net investment income
as an increase to net realized gain on investments and as an increase to
unrealized appreciation/(depreciation) on investments for the current year and
for prior periods. These reclassifications are being done to recognize the
return of capital and realized gains that have been reported by the securities
held in the portfolio of investments. These changes for the year ended December
31, 2002 are reflected in the Statement of Changes in Net Assets as follows:
PREVIOUSLY AS
REPORTED REVISED
-------- -------
Net investment income.............................. $ 8,857,879 $ 5,861,717
Net realized gain on investments................... 8,070,085 10,271,809
Net change in unrealized
appreciation/(depreciation) on investments....... (7,076,462) (6,282,024)
----------- -----------
Net increase in net assets resulting from
operations....................................... $ 9,851,502 $ 9,851,502
----------- -----------
----------- -----------
On the Financial Highlights, the net investment income per share figures
have been reduced and the net realized gain/(loss) on investments per share have
been correspondingly increased. In addition, the ratios of net investment income
have been reduced. These reclassifications do not change the actual dividends
that were received by the fund, nor do they alter any taxpayer records, as such
adjustments have historically been captured in the fund's tax reporting to its
shareholders.
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15
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The reclassifications for the Financial Highlights are as follows:
DECREASE IN RATIOS
OF NET INVESTMENT
INCREASE IN NET INCOME TO AVERAGE
REALIZED AND DAILY NET ASSETS
UNREALIZED (BEFORE EXPENSE
DECREASE IN NET GAIN/(LOSS) ON REDUCTION AND NET
YEAR ENDED INVESTMENT INCOME INVESTMENTS OF EXPENSE
DECEMBER 31, PER SHARE PER SHARE REDUCTION)
------------ --------- --------- ----------
2002 $0.32 $0.32 2.35%
2001 $0.20 $0.20 1.53%
2000 $0.19 $0.19 1.68%
1999 $0.18 $0.18 1.53%
These reclassifications had no effect on net assets or the net increase in
net assets resulting from operations or cash received from the underlying
investments.
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 adviser believes that it is not
appropriate to liquidate any existing investments. The fund will only borrow
when the adviser believes that the cost of borrowing to carry the assets to be
acquired through leverage will
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 year ended December 31, 2003.
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 advisor is
entitled to receive a fee, computed daily and payable monthly at an annual rate
of 0.70% of the fund's average daily net assets. For the year ended December 31,
2003, the fund incurred investment advisory fees of $955,238.
Director's Fees: Certain directors and officers of the fund are also
directors, officers and/or employees of the advisor. None of the directors and
officers so affiliated received compensation from the fund for their services.
For the year ended December 31, 2003, fees and related expenses accrued for
nonaffiliated directors totaled $42,442.
NOTE 3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, excluding short-term investments, for the
year ended December 31, 2003, totaled $31,752,830 and $30,408,582, respectively.
NOTE 4. INCOME TAXES
The fund had a return of capital of $917,957 ($0.10 per share) for the year
ended December 31, 2003 which has been deducted from paid-in capital.
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17
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Short-term capital gains are reflected in the financial statements as
realized gains on investments but are typically treated as ordinary income for
tax purposes. The dividends and distributions to shareholders for tax purposes
are characterized as follows:
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
2003 2002
---- ----
Ordinary income................. $5,365,361 $6,959,063
Long-term capital gains......... 3,196,876 1,919,755
Tax return of capital........... 917,957 --
---------- ----------
$9,480,194 $8,878,818
---------- ----------
---------- ----------
At December 31, 2003 the cost of investments and net unrealized appreciation
for federal income tax purposes were as follows:
Aggregate cost.................................... $111,254,526
------------
------------
Gross unrealized appreciation..................... $ 44,683,622
Gross unrealized depreciation..................... (98,178)
------------
Net unrealized appreciation....................... $ 44,585,444
------------
------------
Net investment income and net realized gains differ for financial statement
and tax purposes primarily due to wash sales on portfolio securities. To the
extent such differences are permanent in nature, such amounts are reclassified
within the capital accounts.
Components of distributable earnings on a tax basis consists of
undistributed ordinary income of $0 and undistributed capital gains of $0.
NOTE 5. COMMON STOCK
At December 31, 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 41,824
shares.
NOTE 6. BORROWINGS
The fund, in conjunction with other Cohen & Steers funds, has entered into a
$200,000,000 credit agreement (the credit agreement) with Fleet National Bank,
as administrative agent, State Street Bank and Trust Company, as operations
agent, and the lenders identified in the credit agreement.
During the year ended December 31, 2003, the fund had no loans outstanding.
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18
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of
Cohen & Steers Total Return Realty Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Cohen & Steers Total Return Realty
Fund, Inc. (the 'Fund') at December 31, 2003, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as 'financial statements') are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 2003 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
As explained in Note 1, the Fund has revised amounts previously reported as
net investment income to reflect the reclassification of distributions in excess
of income received from underlying investments. These reclassifications had no
effect on net assets or the net increase in net assets resulting from
operations.
PRICEWATERHOUSECOOPERS LLP
New York, New York
February 17, 2004
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19
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
AVERAGE ANNUAL TOTAL RETURNS(a)
(PERIODS ENDED DECEMBER 31, 2003) (UNAUDITED)
SINCE INCEPTION
ONE YEAR FIVE YEARS (9/27/93)
-------- ---------- ---------------
34.05% 14.69% 11.70%
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.
TAX INFORMATION -- 2003 (UNAUDITED)
For the year ended December 31, 2003, the fund had qualifying income
distributions of $160,736 and Post May 5th long term capital gains distributions
of $1,051,889. Pursuant to the Jobs and Growth Tax Relief Reconciliation Act of
2003, this dividend is eligible for a maximum allowable rate of 15% for
individuals.
For the year ended December 31, 2003 the fund had long term capital gains
distributions of $3,196,876.
Shareholders are advised to consult with their own tax advisors as to the
Federal, State, and local tax status of the income received.
-------------------
(a) Based on net asset value.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
DIVIDEND REINVESTMENT PLAN
The fund has a Dividend Reinvestment Plan (the plan). Each shareholder may
elect to have all distributions of dividends and capital gains automatically
reinvested in additional shares by Equiserve Trust Company (the plan agent), as
agent for shareholders pursuant to the plan. The plan agent will effect
purchases of shares under the plan in the open market. Shareholders who do not
participate in the plan will receive all distributions in cash paid by check
mailed directly to the shareholder of record (or if the shares are held in
street or other nominee name, then to the nominee) by the plan agent, as
dividend disbursing agent. Shareholders whose shares are held in the name of a
broker or nominee should contact the broker or nominee to determine whether and
how they may participate in the plan.
The plan agent serves as agent for the shareholders in administering the
plan. After the fund declares a dividend or makes a capital gain distribution,
the plan agent will, as agent for the participants, receive the cash payment and
use it to buy shares in the open market, on the New York Stock Exchange or
elsewhere, for the participants' accounts. The fund will not issue any new
shares in connection with the plan.
Participants in the plan may withdraw from the plan upon written notice to
the plan agent. Such withdrawal will be effective immediately if received not
less than 10 days prior to a dividend record date; otherwise, it will be
effective for all subsequent dividend record dates. When a participant withdraws
from the plan or upon termination of the plan as provided below, certificates
for whole shares credited to his or her account under the plan will be issued
and a cash payment will be made for any fraction of a share credited to such
account, or the plan agent will sell the participant's shares and send the
participant the proceeds less a service fee and brokerage commissions.
The plan agent maintains each shareholder's account in the plan and
furnishes written confirmations of all transactions in the accounts, including
information needed by the shareholders for personal and tax records. Shares in
the account of each plan participant will be held by the plan agent on behalf of
the participant. Proxy material relating to shareholders' meetings of the fund
will include those shares purchased as well as shares held pursuant to the plan.
If shares are held in the name of a brokerage firm, bank, or other nominee,
shareholders should contact the nominee to see if it will participate in the
plan on their behalf. If shareholders wish to participate in the plan, but their
brokerage firm, bank or other nominee is unable to participate on their behalf,
they should request to reregister shares in their own name, which will enable
participation in the plan.
The plan agent's fees for the handling of reinvestment of dividends and
other distributions will be paid by the fund. Each participant will pay a pro
rata share of brokerage commissions incurred with respect to the plan agent's
open market purchases in connection with the reinvestment of distributions.
There are no other charges to participants for reinvesting dividends or capital
gain distributions.
The automatic reinvestment of dividends and other distributions will not
relieve participants of any income tax that may be payable or required to be
withheld on such dividends or distributions.
Experience under the plan may indicate that changes are desirable.
Accordingly, the fund reserves the right to amend or terminate the plan as
applied to any distribution paid subsequent to written notice of the change sent
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
to all shareholders of the fund at least 90 days before the record date for the
dividend or distribution. The plan also may be amended or terminated by the plan
agent by at least 90 days' written notice to all shareholders of the fund. All
correspondence concerning the plan should be directed to the plan agent at
Equiserve Trust Company, 150 Royall Street, Canton, MA 02021 (telephone:
900-426-5523).
ADDITIONAL INFORMATION
During the period, there have been no material changes in the fund's
investment objectives or fundamental policies that have not been approved by the
shareholders. There have been no changes in the fund's charter or by-laws that
would delay or prevent a change in control of the fund which have not been
approved by shareholders. There have been no changes in the principal risk
factors associated with the investment in the fund.
A portion of the fund's dividends and distributions may not be tied to the
fund's investment income and capital gains and could represent a return of the
fund's capital. Any return of capital would not represent yield or investment on
the fund's investment portfolio.
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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
PRIVACY POLICY
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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COHEN & STEERS TOTAL RETURN REALTY FUND, INC.
INFORMATION ABOUT FUND DIRECTORS
NUMBER OF
PORTFOLIOS
OVERSEEN
WITHIN THE
POSITION(S) HELD TERM OF LENGTH OF PRINCIPAL OCCUPATION(S) FUND
NAME, ADDRESS AND AGE WITH FUND OFFICE TIME SERVED DURING PAST FIVE YEARS COMPLEX
-------------------------- ------------------ ----------- ----------- ----------------------------- ----------
Robert H. Steers ......... Director, chairman 2006 Since Co-chairman and co-chief 10
757 Third Avenue and secretary inception executive officer of Cohen &
New York, New York Steers Capital Management,
Age: 50 Inc., the fund's investment
manager since 2003. Prior
thereto, Chairman of Cohen &
Steers Capital Management,
Inc.
Martin Cohen ............. Director, 2004 Since Co-chairman and co-chief 10
757 Third Avenue president and inception executive officer of Cohen &
New York, New York treasurer Steers Capital Management,
Age: 55 Inc., the fund's investment
manager. Prior thereto,
President of Cohen & Steers
Capital Managment, Inc.
Gregory C. Clark ......... Director 2005 Since Private investor. Prior 10
99 Jane Street inception thereto, President of
New York, New York Wellspring Management Group
Age: 56 (investment advisory firm).
Bonnie Cohen ............. Director 2005 2001 to Consultant. Prior thereto, 10
1924 Phelps Place, N.W. present Undersecretary of State,
Washington, D.C. United States department of
Age: 61 state.
George Grossman .......... Director 2006 Since Attorney-at-law. 10
17 Elm Place inception
Rye, New York
Age: 50
Richard J. Norman ........ Director 2004 2001 to Private investor. Prior 10
7520 Hackamore Drive present thereto, Investment
Potomac, Maryland Representative of Morgan
Age: 60 Stanley Dean Witter.
Willard H. Smith, Jr. .... Director 2005 1996 to Director. Board member of 10
7231 Encelia Drive present Essex Property Trust, Inc.,
La Jolla, California Highwoods Properties, Inc.
Age: 67 and Realty Income
Corporation. Managing
director at Merrill Lynch &
Co., Equity Capital Markets
Division from 1993 to 1995.
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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 LOGO] REALTY SHARES LOGO]
IDEAL FOR INVESTORS SEEKING A HIGH DIVIDEND IDEAL FOR INVESTORS SEEKING MAXIMUM TOTAL
YIELD AND CAPITAL APPRECIATION, INVESTING RETURN THROUGH BOTH CURRENT INCOME AND
PRIMARILY IN REITS CAPITAL APPRECIATION, INVESTING PRIMARILY IN
REITS
A, B, C AND I SHARES AVAILABLE
SYMBOL: CSRSX
SYMBOLS: CSEIX, CSBIX, CSCIX, CSDIX
FOR CAPITAL APPRECIATION: FOR TOTAL RETURN:
[COHEN & STEERS [COHEN & STEERS
SPECIAL EQUITY FUND LOGO] INSTITUTIONAL REALTY SHARES LOGO]
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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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.
Martin Cohen 757 Third Avenue
Director and president New York, NY 10017
(212) 832-3232
Gregory C. Clark
Director FUND ADMINISTRATOR AND CUSTODIAN
State Street Corp.
Bonnie Cohen 225 Franklin Street
Director Boston, MA 02110
George Grossman TRANSFER AGENT
Director Equiserve Trust Company
150 Royall Street
Richard J. Norman Canton, MA 02021
Director (800) 426-5523
Willard H. Smith Jr. LEGAL COUNSEL
Director Simpson Thacher & Bartlett
425 Lexington Avenue
Greg E. Brooks New York, NY 10017
Vice president
New York Stock Exchange Symbol: RFI
Adam Derechin
Vice president and assistant treasurer Web site: cohenandsteers.com
Lawrence B. Stoller This report is for shareholder
Assistant secretary 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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26
COHEN & STEERS
TOTAL RETURN REALTY FUND
757 THIRD AVENUE
NEW YORK, NY 10017
COHEN & STEERS
TOTAL RETURN REALTY FUND
ANNUAL REPORT
DECEMBER 31, 2003
STATEMENT OF DIFFERENCES
The division sign shall be expressed as............................... [div]
The section symbol shall be expressed as.............................. 'SS'