UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number 811-02363
--------------------
Cornerstone Total Return Fund, Inc.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
237 Park Avenue, New York, NY 10017
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Kayadti A. Madison
Cornerstone Total Return Fund, Inc., 237 Park Avenue, New York, NY 10017
-----------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 272-3550
--------------------
Date of fiscal year end: December 31, 2008
-----------------
Date of reporting period: September 30, 2008
------------------
ITEM 1: SCHEDULE OF INVESTMENTS
================================================================================
CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS -- SEPTEMBER 30, 2008 (UNAUDITED)
================================================================================
NO. OF
DESCRIPTION SHARES VALUE
------------------------------------------------- ----------------------------
EQUITY SECURITIES - 99.81%
CLOSED-END FUNDS - 6.56%
Adams Express Company (a) 59,400 $ 640,332
Alpine Global Premier Properties Fund 3,000 19,470
Boulder Total Return Fund, Inc. 7,500 109,275
Central Europe and Russia Fund, Inc. (The) ^ 2,500 76,725
Denali Fund (The) ^ 8,500 125,120
Dreman/Claymore Dividend & Income Fund 56,500 294,365
H&Q Healthcare Investors 11,400 156,180
H&Q Life Sciences Investors 6,000 63,480
Japan Equity Fund * 13,000 70,330
Liberty All-Star Equity Fund 5,000 22,550
Liberty All-Star Growth Fund, Inc. 39,075 135,590
Petroleum & Resources Corporation (a) 3,000 88,560
Templeton Emerging Markets Fund ^ 3,000 46,020
Zweig Fund, Inc. 37,000 132,460
----------
1,980,457
----------
CONSUMER DISCRETIONARY - 8.06%
Amazon.com, Inc. * 2,500 181,900
Bed Bath & Beyond Inc. ^ * 2,500 78,525
Comcast Corporation, Class A 9,012 176,906
Comcast Corporation, Special Class A 4,250 83,810
DIRECTV Group, Inc. (The) * 4,000 104,680
Ford Motor Company ^ * 14,000 72,800
Gap, Inc. (The) 3,000 53,340
Goodyear Tire & Rubber Company (The) ^ * 2,500 38,275
Home Depot, Inc. (The) 5,000 129,450
Johnson Controls, Inc. 2,500 75,825
Lowe's Companies, Inc. 5,000 118,450
Mattel, Inc. 1,500 27,060
McDonald's Corporation ^ 5,100 314,670
News Corporation, Class B ^ 2,500 30,375
NIKE, Inc., Class B ^ 2,500 167,250
Omnicom Group Inc. 3,000 115,680
Pulte Homes, Inc. 2,500 34,925
Staples, Inc. ^ 3,150 70,875
Time Warner Inc. 11,000 144,210
TJX Companies, Inc. (The) 2,500 76,300
Walt Disney Company (The) ^ 11,000 337,590
----------
2,432,896
----------
CONSUMER STAPLES - 11.66%
Altria Group, Inc. 5,000 99,200
Archer-Daniels-Midland Company ^ 2,500 54,775
Coca-Cola Company (The) 5,000 264,400
Colgate-Palmolive Company 2,500 188,375
ConAgra Foods, Inc. 2,500 48,650
CVS Caremark Corporation 4,175 140,530
H.J. Heinz Company 2,700 134,757
Kraft Foods Inc, Class A 5,328 174,492
Kroger Co. (The) 3,600 98,928
PepsiCo, Inc. 5,000 356,350
Philip Morris International Inc. 7,700 370,370
Procter & Gamble Company (The) 8,472 590,414
Sara Lee Corporation 2,500 31,575
Walgreen Co. 3,100 95,976
Wal-Mart Stores, Inc. ^ 14,500 868,405
----------
3,517,197
----------
ENERGY - 12.41%
Chesapeake Energy Corporation 2,500 89,650
Chevron Corporation 10,068 830,409
Devon Energy Corporation 2,500 228,000
El Paso Corporation 5,000 63,800
EOG Resources, Inc. ^ 1,000 89,460
Exxon Mobil Corporation 17,500 1,359,050
Halliburton Company 2,500 80,975
Peabody Energy Corporation ^ 2,500 112,500
Schlumberger Limited 5,000 390,450
Spectra Energy Corporation ^ 2,500 59,500
Transocean Inc. 1,000 109,840
Weatherford International Ltd. * 5,000 125,700
Williams Companies, Inc. (The) ^ 2,500 59,125
XTO Energy, Inc. 3,125 145,375
----------
3,743,834
----------
FINANCIALS - 13.54%
AFLAC Incorporated 1,500 88,125
American International Group, Inc. 8,331 27,742
Ameriprise Financial, Inc. 1,220 46,604
Aon Corporation 2,500 112,400
Bank of America Corporation ^ 17,521 613,235
Bank of New York Mellon Corporation 4,800 156,384
BB&T Corporation ^ 2,000 75,600
Charles Schwab Corporation (The) 8,200 213,200
Chubb Corporation (The) 2,000 109,800
Goldman Sachs Group, Inc. (The) 3,000 384,000
Hartford Financial Services Group, Inc. (The) 2,500 102,475
Hudson City Bancorp, Inc. ^ 2,500 46,125
JPMorgan Chase & Co. 18,200 849,940
MetLife, Inc. 3,000 168,000
Morgan Stanley 4,000 92,000
State Street Corporation 1,600 91,008
Travelers Companies, Inc. (The) 5,092 230,158
Unum Group ^ 2,500 62,750
U.S. Bancorp 2,500 90,050
Wells Fargo & Company 14,000 525,420
----------
4,085,016
----------
HEALTHCARE - 12.42%
Aetna Inc. 4,000 144,440
Baxter International Inc. 2,500 164,075
Bristol-Myers Squibb Company ^ 4,000 83,400
Celgene Corporation * 2,500 158,200
Gilead Sciences, Inc. * 7,000 319,060
Johnson & Johnson 15,500 1,073,840
Laboratory Corporation of America Holdings * 2,500 173,750
McKesson Corporation ^ 2,500 134,525
Medco Health Solutions, Inc. * 1,562 70,290
Medtronic, Inc. 4,500 225,450
Merck & Co. Inc. 10,700 337,692
Pfizer Inc. ^ 12,000 221,280
Schering-Plough Corporation ^ 4,400 81,268
St. Jude Medical, Inc. ^ * 2,500 108,725
Stryker Corporation ^ 2,000 124,600
UnitedHealth Group Incorporated ^ 3,500 88,865
Waters Corporation * 2,500 145,450
Wyeth 2,500 92,350
----------
3,747,260
----------
INDUSTRIALS - 10.41%
Allied Waste Industries, Inc. * 2,500 27,775
Caterpillar Inc. 2,500 149,000
CSX Corporation 5,000 272,850
Danaher Corporation 2,500 173,500
Deere & Company 2,000 99,000
Emerson Electric Co. 2,500 101,975
General Dynamics Corporation ^ 2,500 184,050
General Electric Company 40,000 1,020,000
Illinois Tool Works Inc. 2,500 111,125
Lockheed Martin Corporation 2,500 274,175
Raytheon Company 2,500 133,775
United Parcel Service, Inc., Class B 4,000 251,560
United Technologies Corporation 4,400 264,264
Waste Management, Inc. 2,500 78,725
----------
3,141,774
----------
INFORMATION TECHNOLOGY - 14.70%
Agilent Technologies Inc. * 2,500 74,150
Apple, Inc. * 4,000 454,640
Automatic Data Processing, Inc. 2,500 106,875
Cisco Systems, Inc. * 13,000 293,280
Corning Incorporated 6,000 93,840
eBay Inc. * 6,500 145,470
EMC Corporation ^ * 8,000 95,680
Google Inc. ^ * 1,000 400,520
Hewlett-Packard Company 5,000 231,200
Intel Corporation 16,000 299,680
International Business Machines Corporation ^ 3,200 374,272
Intuit Inc. ^ * 2,500 79,025
Microsoft Corporation 26,500 707,285
Nokia ADR 2,500 46,625
Oracle Corporation * 23,600 479,316
Paychex, Inc. 2,500 82,575
QUALCOMM Inc. 6,800 292,196
Texas Instruments Incorporated 4,000 86,000
Xerox Corporation 3,000 34,590
Xilinx, Inc. ^ 2,500 58,625
----------
4,435,844
----------
MATERIALS - 2.73%
Air Products & Chemicals, Inc. 2,500 171,225
Dow Chemical Company (The) 1,500 47,670
E. I. du Pont de Nemours and Company 2,800 112,840
Freeport-McMoRan Copper & Gold, Inc. ^ 2,500 142,125
Monsanto Company ^ 3,546 350,983
----------
824,843
----------
REAL ESTATE INVESTMENT TRUST - 0.80%
Simon Property Group, Inc. ^ 2,500 242,500
----------
TELECOMMUNICATION SERVICES - 2.98%
AT&T Inc. 23,589 658,605
Verizon Communications Inc. 7,500 240,675
----------
899,280
----------
UTILITIES - 3.54%
AES Corporation (The) ^ * 3,000 35,070
Alleghany Energy Inc. ^ 2,500 91,925
American Electric Power Company, Inc. 5,500 203,940
Dominion Resources, Inc. ^ 5,000 213,900
Duke Energy Corporation 6,600 115,038
FirstEnergy Corp. 2,500 167,475
NiSource Inc. 2,500 36,900
Southern Company (The) ^ 2,500 94,225
Xcel Energy, Inc. 5,500 109,945
----------
1,068,418
----------
TOTAL EQUITY SECURITIES 30,119,319
(cost - $28,905,533) ----------
SHORT-TERM INVESTMENTS - 8.01%
MONEY MARKET SECURITY - 0.13%
JPMorgan U.S. Government Money Market Fund 38,134 38,134
----------
PRINCIPAL
AMOUNT
(000's)
---------
REPURCHASE AGREEMENTS - 7.88%
Bear, Stearns & Co. Inc. + ++
(Agreements dated 9/30/2008 to be
repurchased at $1,269,093, 3.50%,
10/1/2008, collateralized by $1,306,165
in United States Treasury Bonds) $ 1,269 1,268,970
Bear, Stearns & Co. Inc. + ++
(Agreements dated 9/30/2008 to be
repurchased at $1,109,816, 7.00%, 10/1/2008,
collateralized by $1,142,188 in United
States Treasury Bonds) 1,110 1,109,600
------------
2,378,570
------------
TOTAL SHORT-TERM INVESTMENTS
(cost - $2,416,704) 2,416,704
------------
TOTAL INVESTMENTS - 107.82%
(cost - $31,322,237) 32,536,023
------------
LIABILITIES IN EXCESS OF OTHER ASSETS - (7.82)% (2,360,013)
------------
NET ASSETS - 100.00% $ 30,176,010
============
------------------------------
(a) Affiliated investment. The Fund holds 2.12% and 0.29% (based on net assets)
of Adams Express Company and Petroleum & Resources Corporation,
respectively. A director of the Fund also serves as a director to such
companies. During the nine months ended September 30, 2008, 11,000 shares
of Adams Express Company were sold. There were no other purchases or sales
of these securities.
^ Security or a portion thereof is out on loan.
* Non-income producing security.
ADR American Depositary Receipt
+ Stated interest rate, before rebate earned by borrower of securities on
loan.
++ Represents investment purchased with collateral received for securities on
loan.
Federal Income Tax Cost: At September 30, 2008 the identified cost for federal
income tax purposes, as well as the gross unrealized appreciation from
investments for those securities having an excess of value over cost, gross
unrealized depreciation from investments for those securities having an excess
of cost over value and the net unrealized appreciation from investments were
$31,322,237, $5,963,645, $(4,749,859), and $1,213,786, respectively.
The Fund adopted Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 157, Fair Value Measurements ("FAS 157"), effective
January 1, 2008. In accordance with FAS 157, fair value is defined as the price
that the Fund would receive upon selling an investment in a timely transaction
to an independent buyer in the principal or most advantageous market of the
investment. FAS 157 established a three-tier hierarchy to maximize the use of
observable market data and minimize the use of unobservable inputs and to
establish classification of fair value measurements for disclosure
purposes.Inputs refer broadly to the assumptions that market participants would
use in pricing the asset or liability, including assumptions about risk, for
example, the risk inherent in a particular valuation technique used to measure
fair value including such a pricing model and/or the risk inherent in the inputs
to the valuation technique. Inputs may be observable or unobservable. Observable
inputs are inputs from sources independent of the reporting entity. Unobservable
inputs are inputs that reflect the reporting entity's own assumptions about the
assumptions market participants would use in pricing the asset or liability
developed based on the best information available in the circumstances. The
three-tier hierarchy of inputs is summarized in the three broad Levels listed
below.
o Level 1 - quoted prices in active markets for identical investments
o Level 2 - other significant observable inputs (including quoted prices
for similar investments, interest rates, prepayment speeds, credit
risk, etc.)
o Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities.
The following is a summary of the inputs used as of September 30, 2008 in
valuing the Fund's investments carried at value:
INVESTMENTS OTHER FINANCIAL
VALUATION INPUTS IN SECURITIES INSTRUMENTS*
--------------------------------------------- ------------- ---------------
Level 1 - Quoted Prices $ 30,119,319 $ --
Level 2 - Other Significant Observable Inputs 2,416,704 --
Level 3 - Significant Unobservable Inputs -- --
-------------- ---------------
TOTAL $ 32,536,023 $ --
============== ===============
* Other financial instruments include futures, forwards and swap contracts.
The Fund did not have any assets or liabilities that were measured at fair value
on a recurring basis using significant unobservable inputs (Level 3) at
September 30, 2008.
Securities valuation policies and other investment related disclosures are
hereby incorporated by reference to the Fund's semi-annual report previously
filed with the Securities and Exchange Commission on the Form N-CSR on September
8, 2008 with a file number 811-02363.
Other information regarding the Fund is available in the Fund's most recent
semi-annual report filed with the Securities and Exchange Commission on Form
N-CSR on September 8, 2008, file number 811-02363. This information is also
available to registered shareholders by calling (800) 937-5449. For general
inquiries, please call (212) 272-3550. This information is also available on the
website of the Securities and Exchange Commission - http://www.sec.gov
ITEM 2: CONTROLS AND PROCEDURES
(a) As of a date within 90 days from the filing date of this report, the
principal executive officer and principal financial officer concluded that the
registrant's disclosure controls and procedures (as defined in Rule 30a-3(c)
under the Investment Company Act of 1940 (the "Act")), were effective based on
their evaluation of the disclosure controls and procedures required by Rule
30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities and
Exchange Act of 1934.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred
during the registrant's last fiscal quarter that have materially affected, or
are reasonably likely to materially affect, the registrant's internal control
over financial reporting.
ITEM 3: EXHIBITS
1. The certifications of the registrant as required by Rule 30a-2(a) under
the Act are exhibits to this report.
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.
Cornerstone Total Return Fund, Inc.
/s/ Ralph W. Bradshaw
---------------------
Name: Ralph W. Bradshaw
Title: Principal Executive Officer
Date: November 26, 2008
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.
/s/ Ralph W. Bradshaw
---------------------
Name: Ralph W. Bradshaw
Title: Principal Executive Officer
Date: November 26, 2008
/s/ Kayadti A. Madison
------------------
Name: Kayadti A. Madison
Title: Principal Financial Officer
Date: November 26, 2008