Edgar Filing: CORNERSTONE TOTAL RETURN FUND INC

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CORNERSTONE TOTAL
RETURN FUND, INC.

ANNUAL REPORT
DECEMBER 31, 2002

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CONTENTS

Letter to Shareholders 1
Portfolio Summary 3
Schedule of Investments 4
Statement of Assets and Liabilities 8
Statement of Operations 9
Statements of Changes in Net Assets 10
Financial Highlights 11
Notes to Financial Statements 12
Report of Independent Accountants 16
Results of Special Meeting of Stockholders 17
Tax Information 18
Additional Information Regarding the Fund's Directors and Officers 19
Description of DividendReinvestment & Cash Purchase Plan 21
Summary of General Information 23
Shareholder Information 23
Privacy Policy Notice 24

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LETTER TO SHAREHOLDERS

January 24, 2003

Dear Fellow Shareholders:

We are pleased to report the annual results of Cornerstone Total Return Fund,
Inc. (the "Fund"), covering the year ended December 31, 2002. This Fund resulted
from the merger in October 2002 of The Cornerstone Strategic Return Fund, Inc.
with and into EIS Fund, Inc., and the subsequent name and stock ticker symbol
changes. At the end of the period, the Fund's net assets were $60.2 million and
the Net Asset Value ("NAV") per share was $12.89. The share price closed at
$11.35 and the Fund's price discount to NAV finished at 11.9%. Distributions to
shareholders during the year totaled $1.98 per share, most of which was
classified as return-of-capital. The 2002 total investment return for a
shareholder who reinvested their distributions was (19.3)%, outperforming the
fund's benchmark S&P 500 Index, which returned (22.1)% for the year.

CREATING VALUE FOR OUR SHAREHOLDERS

Cornerstone Advisors, Inc. assumed portfolio management responsibilities for the
Fund at the start of 2002. The primary goal of this Fund's investment manager is
to add value for the owners of the Fund, our shareholders, by continuing to
outperform the Fund's benchmark. This will be accomplished by focusing on
portfolio performance, minimizing expenses, and taking advantage of the Fund's
discount to NAV to benefit its shareholders.

The Fund attempts to enhance its portfolio performance by exploiting temporary
and occasional mispricing in certain securities, which represent different parts
of a fully diversified U.S. stock portfolio. The magnitude and availability of
such opportunities are unpredictable and therefore, the portfolio outperfomance
that results may vary considerably from year to year.

Over the past year, diligent attention to Fund expenses has reduced them
substantially. In addition, Cornerstone Advisors, Inc. has extended its
voluntary agreement to waive a substantial portion of its management fees to the
extent that monthly operating expenses exceed a monthly rate of 0.1%. This
effort demonstrates how seriously the manager views keeping expenses under
control. It will provide a lower expense ratio than would otherwise be the case,
resulting in what we believe to be one of the lowest expense ratios among
comparable closed-end funds.

Additional contributions to Fund performance are anticipated from various
actions designed to exploit the Fund's discount. First, repurchases of shares in
the open market have been initiated which should enhance NAV performance, reduce
the supply of shares available for sale, change the demand/supply balance, and
reduce the discount. Second, the board has established a monthly distribution
policy with a high fixed payout. These distributions allow shareholders to
receive substantial portions of their investment in cash, or to continue their
holdings in the Fund's stock by reinvesting in new shares. This policy gives
flexibility to shareholders and such high payouts have a history of reducing or
eliminating discounts in closed-end funds, possibly causing shares to trade at
premiums. Furthermore, losses in the portfolio allowed most of the distributions
for 2002 to be classified as return-of-capital, which defers the impact of
capital gains taxes until significant Fund profits are realized in future
periods.

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1

LETTER TO SHAREHOLDERS (CONCLUDED)

MARKET ENVIRONMENT AND OUTLOOK

Throughout the year, it paid to keep a long-term view as the markets in 2002
retreated through the first three quarters only to recover some of the losses in
the final period. Ultimately, not a single major U.S. industry equity group
ended the year with a gain. Like the U.S., most of the major global indices were
also down substantially. For most of 2002, our Fund's portfolio stayed fully
invested with broad diversification across and within sectors and, at various
times, utilized closed-end fund, fixed-income, and global equity positions. This
approach served us well as many sectors flip-flopped between being leader and
laggard, and led to Fund performance for the year that exceeded our benchmark.

After three straight years of market decline, we approach 2003 with cautious
optimism. While uncertainty remains, the economy continues to show signs of
recovery, and past bear markets have often ended with steep gains. We believe
the most compelling current opportunities exist primarily in the beaten-down
equity area, rather than in fixed-income investments. The world will continue to
be a dangerous place and earning disappointments or unresolved international
situations may prolong negative sentiment, but uncertainty also creates
investment opportunity. Widespread investor discomfort may in fact be a good
sign as markets often perform best after expectations are lowest.

The Fund's Board of Directors, officers and investment manager are all mindful
of the trust that our shareholders have placed in us. We know you have a choice,
we appreciate your support, and we look forward to continuing our service to you
in the future.

Sincerely,

/s/ Ralph W. Bradshaw
Ralph W. Bradshaw
Chairman

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2

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CORNERSTONE TOTAL RETURN FUND, INC.
PORTFOLIO SUMMARY - AS OF DECEMBER 31, 2002 (UNAUDITED)
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TOP TEN, BY SECTOR

Percent of
Sector Net Assets
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1. Financials 19.4
2. Healthcare 14.6
3. Consumer Discretionary 14.2
4. Information Technology 13.1
5. Industrials 11.0
6. Consumer Staples 9.3
7. Energy 5.8
8. Telecommunication Services 5.8
9. Materials 2.6
10. Utilities 2.3

TOP TEN HOLDINGS, BY ISSUER

Percent of
Holding Sector Net Assets
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1. Microsoft Corp. Information Technology 3.6
2. Exxon Mobil Corp. Energy 3.1
3. General Electric Co. Industrials 3.1
4. Wal-Mart Stores, Inc. Consumer Discretionary 3.1
5. International Business Machines Corp. Information Technology 2.5
6. Citigroup Inc. Financials 2.3
7. Pfizer Inc. Healthcare 2.3
8. American International Group, Inc. Financials 2.1
9. Johnson & Johnson Healthcare 2.0
10. Merck & Co. Inc. Healthcare 1.9

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3

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CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 2002
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NO. OF VALUE
DESCRIPTION SHARES (NOTE A)
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EQUITY SECURITIES - 99.43%
UNITED STATES - 98.10%
CLOSED-END DOMESTIC FUNDS - 1.07%

Gabelli Global

Multimedia Trust, Inc. 21,700 $138,880
John Hancock Bank & Thrift
Opportunity Fund 62,700 472,758
Petroleum & Resources Corp. 1,700 32,606
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644,244
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CONSUMER DISCRETIONARY - 12.86%
AOL Time Warner Inc. + 31,500 412,650
Bed Bath & Beyond Inc. + 2,500 86,325
Best Buy Co., Inc. + 5,000 120,750
Carnival Corp. 5,300 132,235
Clear Channel
Communications Inc. + 5,200 193,908
Comcast Corp., Class A + 8,508 200,534
Comcast Corp.,
Special Class A + 7,500 169,425
Costco Wholesale Corp. + 4,600 129,076
CVS Corp. 5,000 124,850
Dana Corp. 2,500 29,400
Delphi Corp. 5,100 41,055
Dollar General Corp. 2,500 29,875
Eastman Kodak Co. 2,500 87,600
Federated Department Stores, Inc. + 2,500 71,900
Ford Motor Co. 15,200 141,360
Fortune Brands, Inc. 2,500 116,275
Gannett Co., Inc. 2,500 179,500
Gap, Inc. (The) 6,900 107,088
General Motors Corp. 5,000 184,300
Harley-Davidson, Inc. 5,000 231,000
Harrah's Entertainment, Inc. + 2,500 99,000
Hilton Hotels Corp. 5,000 63,550
Home Depot, Inc. (The) 17,800 426,488
Johnson Controls, Inc. 1,000 80,170
Kohl's Corp. + 2,500 139,875
Limited Brands 4,500 62,685
Lowe's Companies, Inc. 6,200 232,500
Mattel, Inc. 4,500 86,175
May Department Stores Co. (The) 2,500 57,450
McDonald's Corp. 10,600 170,448
Monsanto Co. 1,773 34,130
Office Depot, Inc. + 2,500 36,900

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NO.OF VALUE
DESCRIPTION SHARES (NOTE A)
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CONSUMER DISCRETIONARY (CONTINUED)
Omnicom Group Inc. 1,500 $ 96,900
Reebok International Ltd. + 2,500 73,500
Sears, Roebuck & Co. 5,000 119,750
Staples, Inc. + 4,600 84,180
Starbucks Corp.+ 2,500 50,950
Target Corp. 7,100 213,000
TJX Companies, Inc. (The) 4,000 78,080
Viacom Inc.,
non-voting Class B + 14,000 570,640
Wal-Mart Stores, Inc. 36,400 1,838,564
Walt Disney Co. (The) 16,700 272,377
Yum! Brands, Inc. + 2,500 60,550
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7,736,968
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CONSUMER STAPLES - 9.33%
Albertson's, Inc. 2,500 55,650
Anheuser-Busch
Companies, Inc. 6,200 300,080
Archer-Daniels-Midland Co. 5,650 70,060
Campbell Soup Co. 3,200 75,104
Coca-Cola Co. (The) 21,600 946,512
Coca-Cola Enterprises Inc. 2,500 54,300
Colgate-Palmolive Co. 5,100 267,393
ConAgra Foods, Inc. 2,500 62,525
Del Monte Foods Co. 1,205 9,279
General Mills, Inc. 2,500 117,375
Gillette Co. (The) 8,600 261,096
Groupe Danone, ADR 2,700 72,090
H.J. Heinz Co. 2,700 88,749
J.M. Smucker Co. (The) 190 7,564
Kellogg Co. 2,500 85,675
Kimberly-Clark Corp. 5,000 237,350
Kroger Co. (The) + 6,600 101,970
PepsiCo, Inc. 12,600 531,972
Philip Morris Companies Inc. 19,200 778,176
Procter & Gamble Co. (The) 10,000 859,400
Safeway Inc. + 4,900 114,464
Sara Lee Corp. 6,300 141,813
Walgreen Co. 8,100 236,439
Wm. Wrigley Jr. Co. 2,500 137,200
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5,612,236
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ENERGY - 5.84%
Anadarko Petroleum Corp. 2,500 119,750
Calpine Corp. + 3,000 9,780
CenterPoint Energy, Inc. 5,700 48,450

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See accompanying notes to financial statements.

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CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 2002 (CONTINUED)
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NO.OF VALUE
DESCRIPTION SHARES (NOTE A)
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ENERGY (CONTINUED)
ChevronTexaco Corp. 8,302 $551,917
ConocoPhillips 7,878 381,216
El Paso Corp. 4,800 33,408
Exxon Mobil Corp. 53,500 1,869,290
Marathon Oil Corp. 2,500 53,225
Occidental Petroleum Corp. 5,000 142,250
Reliant Resources, Inc. + 4,494 14,381
Schlumberger Ltd. 5,100 214,659
Unocal Corp. 2,500 76,450
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3,514,776
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FINANCIALS - 19.43%

ACE Ltd. 2,500 73,350
AFLAC Inc. 4,000 120,480
Allstate Corp. (The) 5,200 192,348
American Express Co. 11,100 392,385
American International Group, Inc. 21,331 1,233,998
AmSouth Bancorp 1,800 34,560
Bank of America Corp. 10,900 758,313
Bank of New York Co., Inc. (The) 5,900 141,364
Bank One Corp. 9,300 339,915
BB&T Corp. 4,500 166,455
Capital One Financial Corp. 3,500 104,020
Charles Schwab Corp. (The) 10,700 116,095
Chubb Corp. (The) 1,500 78,300
Citigroup Inc. 40,100 1,411,119
Fannie Mae 8,200 527,506
Fifth Third Bancorp 5,100 298,605
Fiserv, Inc. + 2,500 84,875
FleetBoston Financial Corp. 8,500 206,550
Freddie Mac 5,800 342,490
Goldman Sachs Group, Inc. (The) 3,000 204,300
Hartford Financial Services
Group, Inc. (The) 4,600 208,978
Household International, Inc. 4,700 130,707
J.P. Morgan Chase & Co. 14,700 352,800
John Hancock Financial
Services, Inc. 3,500 97,650
KeyCorp 2,000 50,280
Lehman Brothers
Holdings Inc. 2,500 133,225
Marsh & McLennan
Companies, Inc. 4,600 212,566

NO. OF VALUE
DESCRIPTION SHARES (NOTE A)
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FINANCIALS (CONTINUED)

MBNA Corp. 10,050 $191,151
Mellon Financial Corp. 4,800 125,328
Merrill Lynch & Co., Inc. 6,600 250,470
MetLife, Inc. 6,000 162,240
Morgan Stanley 9,900 395,208
National City Corp. 5,300 144,796
Northern Trust Corp. 1,100 38,555
PNC Financial
Services Group 1,400 58,660
Principal Financial
Group, Inc. 2,500 75,325
Progressive Corp. (The) 2,500 124,075
Prudential Financial, Inc. 5,000 158,700
SouthTrust Corp. 1,600 39,760
State Street Corp. 1,600 62,400
SunTrust Banks, Inc. 1,500 85,380
Travelers Property
Casualty Corp., Class A + 1,731 25,359
Travelers Property
Casualty Corp., Class B + 3,558 52,125
U.S. Bancorp 15,700 333,154
Wachovia Corp. 11,600 422,704
Washington Mutual, Inc. 7,250 250,343
Wells Fargo & Co. 14,500 679,615
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11,688,582
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HEALTHCARE - 14.62%

Abbott Laboratories 13,200 528,000
Amgen Inc. + 8,300 401,222
Baxter International Inc. 5,100 142,800
Becton, Dickinson & Co. 2,500 76,725
Biomet, Inc. 2,500 71,650
Boston Scientific Corp. + 3,000 127,560
Bristol-Myers Squibb Co. 14,900 344,935
Cardinal Health, Inc. 5,000 295,950
CIGNA Corp. 800 32,896
Eli Lilly & Co. 9,100 577,850
Genzyme Corp. + 5,000 147,850
Guidant Corp. + 2,500 77,125
HCA Inc. 2,600 107,900
Health Management
Associates, Inc. 2,500 44,750
Healthsouth Corp. + 2,500 10,500
Johnson & Johnson 22,600 1,213,846
King Pharmaceuticals, Inc. + 2,500 42,975
McKesson Corp. 2,500 67,575

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See accompanying notes to financial statements.
5

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NO.OF VALUE
DESCRIPTION SHARES (NOTE A)
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HEALTHCARE (CONTINUED)
Medtronic, Inc. 10,100 $460,560
Merck & Co. Inc. 20,300 1,149,183
Pfizer Inc. 45,800 1,400,106
Pharmacia Corp. 10,400 434,720
Schering-Plough Corp. 11,400 253,080
Stryker Corp. 1,500 100,680
Tenet Healthcare Corp. + 5,000 82,000
UnitedHealth Group Inc. 2,500 208,750
Wyeth 10,500 392,700
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8,793,888
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INDUSTRIALS - 11.03%
3M Co. 2,500 308,250
American Power
Conversion Corp. + 2,500 37,875
Automatic Data
Processing, Inc. 7,500 294,375
Boeing Co. (The) 6,700 221,033
Burlington Northern
Santa Fe Corp. 5,000 130,050
Caterpillar Inc. 2,500 114,300
Cendant Corp. + 7,100 74,408
Concord EFS, Inc. + 5,000 78,700
CSX Corp. 2,500 70,775
Dover Corp. 3,500 102,060
Emerson Electric Co. 4,500 228,825
FedEx Corp. 2,500 135,550
First Data Corp. 5,000 177,050
General Dynamics Corp. 2,500 198,425
General Electric Co. 76,500 1,862,775
Honeywell International Inc. 12,300 295,200
Illinois Tool Works Inc. 2,500 162,150
Lockheed Martin Corp. 5,000 288,750
Masco Corp. 4,600 96,830
Norfolk Southern Corp. 3,000 59,970
Paychex, Inc. 5,000 139,500
Raytheon Co. 2,500 76,875
Southwest Airlines Co. 6,100 84,790
Transocean Inc. 5,000 116,000
Tyco International Ltd. 17,600 300,608
United Parcel Service Inc.,
Class B 9,000 567,720
United Technologies Corp. 4,700 291,118
Waste Management, Inc. 5,300 121,476
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6,635,438
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NO.OF VALUE
DESCRIPTION SHARES (NOTE A)
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INFORMATION TECHNOLOGY - 13.08%
Adobe Systems Inc. 2,500 $ 62,275
Agere Systems Inc., Class A + 75 108
Agere Systems Inc., Class B + 1,851 2,591
Agilent Technologies, Inc. + 5,000 89,800
Altera Corp. + 1,200 14,808
Analog Devices, Inc. + 5,000 119,350
Apple Computer, Inc. + 2,500 35,825
Applied Materials, Inc. + 19,400 252,782
Avaya Inc. + 17 41
CIENA Corp. + 1,500 7,710
Computer Associates
International, Inc. 5,200 70,200
Corning Inc. + 7,500 24,825
Dell Computer Corp. + 20,200 540,148
Electronic Data Systems Corp. 7,500 138,225
EMC Corp. + 8,000 49,120
Hewlett-Packard Co. 15,842 275,017
Intel Corp. 52,500 817,425
International Business
Machines Corp. 19,200 1,488,000
Jabil Circuit, Inc. + 2,500 44,800
JDS Uniphase Corp. + 9,700 23,959
Linear Technology Corp. 5,000 128,600
Maxim Integrated
Products, Inc. 2,500 82,600
Micron Technology, Inc. + 5,500 53,570
Microsoft Corp. + 42,400 2,192,080
Motorola, Inc. 16,100 139,265
Oracle Corp. + 43,100 465,480
PerkinElmer, Inc. 1,500 12,375
QUALCOMM Inc. + 3,400 123,726
Sanmina-SCI Corp. + 4,000 17,960
Siebel Systems, Inc. + 5,000 37,400
Solectron Corp. + 5,700 20,235
Sun Microsystems, Inc. + 24,600 76,506
Texas Instruments Inc. 13,500 202,635
VERITAS Software, Corp. + 3,200 49,984
Xerox, Corp. + 2,500 20,125
Xilinx, Inc. + 5,100 105,060
Yahoo! Inc. + 5,000 81,750
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7,866,360
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MATERIALS - 2.56%
Air Products& Chemicals, Inc. 2,500 106,875
Alcan Inc. 1,500 44,280
Alcoa Inc. 6,800 154,904

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See accompanying notes to financial statements.

NO.OF VALUE
DESCRIPTION SHARES (NOTE A)
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MATERIALS (CONTINUED)
Dow Chemical Co. (The) 7,200 $213,840
E.I. du Pont de Nemours & Co. 8,300 351,920
Engelhard Corp. 2,500 55,875
Georgia-Pacific Corp. 2,500 40,400
International Paper Co. 4,800 167,856
Newmont Mining Corp. 2,500 72,575
Praxair, Inc. 3,500 202,195
Rohm & Hass Co. 2,500 81,200
Weyerhaeuser Co. 1,000 49,210
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1,541,130
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REAL ESTATE INVESTMENT TRUSTS - 0.22%
Equity Office
Properties Trust 3,000 74,940
Plum Creek Timber
Company, Inc. 2,500 59,000
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133,940
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TELECOMMUNICATION SERVICES - 5.77%
ALLTEL Corp. 2,500 127,500
AT&T Corp. 5,260 137,339
AT&T Wireless Services Inc. + 15,567 87,954
BellSouth Corp. 15,200 393,224
Cisco Systems, Inc. + 55,500 727,050
Lucent Technologies Inc. + 7,000 8,820
SBC Communications Inc. 33,200 900,052
Sprint Corp. (FON Group) 7,100 102,808
Sprint Corp. (PCS Group) + 4,300 18,833
Verizon Communications Inc. 24,900 964,875
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3,468,455
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UTILITIES - 2.29%
American Electric Power
Company, Inc. 5,500 150,315
Dominion Resources, Inc. 5,000 274,500
Duke Energy Corp. 6,600 128,964
Edison International + 5,000 59,250
Exelon Corp. 2,500 131,925
FirstEnergy Corp. 5,000 164,850
Mirant Corp. + 4,000 7,560
Public Service Enterprise
Group Inc. 2,500 80,250

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NO.OF VALUE
DESCRIPTION SHARES (NOTE A)
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UTILITIES (CONTINUED)
Scottish Power plc, ADR 4,000 $ 91,680
Southern Co. (The) 5,000 141,950
TXU Corp. 3,700 69,116
Williams
Companies, Inc. (The) 4,800 12,960
Xcel Energy, Inc. 5,500 60,500
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1,373,820
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TOTAL UNITED STATES - 98.10%
(cost - $78,216,250) 59,009,837
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CZECH REPUBLIC - 1.33%
CONSUMER DISCRETIONARY - 1.33%
Bonton AS (cost - $894,866)*+ . 68,590 798,112
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TOTAL EQUITY SECURITIES - 99.43%
(cost - $79,111,116) 59,807,949
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PRINCIPAL
AMOUNT
(000'S)
SHORT-TERM INVESTMENT - 1.59%
REPURCHASE AGREEMENT - 1.59%
Bear, Stearns & Co., Inc.
(Agreement dated 12/31/02 to
be repurchased at $959,062)
1.10%, 01/02/03
(cost - $959,003) $959 959,003
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TOTAL INVESTMENTS - 101.02%
(cost - $80,070,119) (Notes A,C,G) 60,766,952

LIABILITIES IN EXCESS OF
OTHER ASSETS - (1.02)% (615,577)
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NET ASSETS - 100.00% $60,151,375
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* Not readily marketable security (See Note A).
+ Non-income producing security.
ADR American Depositary Receipts.

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See accompanying notes to financial statements.
7

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CORNERSTONE TOTAL RETURN FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 2002
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ASSETS

Investments, at value (Cost $80,070,119) (Note A,G) $60,766,952
Cash collateral received for securities loaned (Note E) 420,948
Receivables:
Investments sold 348,749
Dividends and reclaims 91,404
Prepaid expenses 9,316
-----------
Total Assets 61,637,369
-----------

LIABILITIES
Payables:
Investments purchased 697,344
Upon return of securities loaned (Note E) 420,948
Capital shares repurchased (Note D) 86,101
Investment management fees (Note B) 52,852
Other accrued expenses 228,749
Total Liabilities 1,485,994
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NET ASSETS (applicable to 4,665,160 shares of common stock outstanding) $60,151,375
===========

NET ASSET VALUE PER SHARE ($60,151,375 / 4,665,160) $ 12.89
===========

NET ASSETS CONSISTS OF
Capital stock, $0.01 par value; 4,665,160 shares issued and outstanding
(15,000,000 shares authorized) $ 46,652
Paid-in capital 94,168,147
Cost of 43,900 shares repurchased (520,502)
Accumulated net realized loss on investments (14,239,755)
Net unrealized depreciation in value of investments (19,303,167)
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Net assets applicable to shares outstanding $60,151,375
===========

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See accompanying notes to financial statements.
8

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CORNERSTONE TOTAL RETURN FUND, INC.
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 2002
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INVESTMENT LOSS
Income (Note A):

Dividends $ 575,235
Interest 409,655
Less: Foreign taxes withheld (1,793)
-----------
Total Investment Income 983,097
-----------

Expenses:
Investment management fees (Note B) 385,363
Legal and audit fees (Note B) 80,098
Merger fees 75,980
Printing 57,063
Administration fees 52,189
Transfer agent fees 35,111
Directors' fees 32,701
NYSE listing fees 31,664
Accounting fees 29,207
Custodian fees 14,810
Insurance 9,630
Other 5,990
-----------
Total Expenses 809,806
Less: Management fee waivers (Note B) (170,496)
Less: Fees paid indirectly (Note B) (53,498)
-----------
Net Expenses 585,812
-----------
Net Investment Income 397,285
-----------

NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss from investments (10,666)
Net change in unrealized depreciation in value of investments (8,144,534)
-----------
Net realized and unrealized loss on investments (8,155,200)
-----------

NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(7,757,915)
===========

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See accompanying notes to financial statements.
9

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CORNERSTONE TOTAL RETURN FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
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For the Years Ended
December 31,
-------------------
2002 2001
---- ----
DECREASE IN NET ASSETS

Operations:
Net investment income $ 397,285 $ 1,138,302
Net realized gain/(loss) on investments (10,666) 311,603
Net change in unrealized appreciation/(depreciation)
in value of investments (8,144,534) 221,216
------------ ------------

Net increase/(decrease) in net assets resulting from operations (7,757,915) 1,671,121
------------ ------------

Dividends and distributions to shareholders (Note A,G):
Net investment income (397,285) (1,444,190)
Return-of-capital (4,727,860) (182,628)
------------ ------------

Total dividends and distributions to shareholders (5,125,145) (1,626,818)
------------ ------------

Capital stock transactions (Note D):
Net assets received in conjunction with Merger Agreement (Note A) 33,396,970 --
Proceeds from 47,882 shares newly issued in reinvestment of distributions 610,487 --
Cost of 43,900 and 8,000 shares repurchased, respectively (520,502) (136,980)
------------ ------------

Net increase/(decrease) in net assets resulting from capital stock transactions 33,486,955 (136,980)
------------ ------------

Total increase/(decrease) in net assets 20,603,895 (92,677)
------------ ------------

NET ASSETS
Beginning of year 39,547,480 39,640,157
------------ ------------

End of year $ 60,151,375 $ 39,547,480
============ ============

See accompanying notes to financial statements.
10

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CORNERSTONE TOTAL RETURN FUND, INC.
FINANCIAL HIGHLIGHTS
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Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data for each year indicated. This information has been
derived from information provided in the financial statements and market price
data for the Fund's shares.
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FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------
2002 2001 2000 1999 1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE

Net asset value, beginning of year $ 18.30 $ 18.28 $ 17.62 $18.78 $18.52 $ 18.23 $18.94 $ 16.87 $ 18.97 $ 18.54
-------- -------- -------- ------- ------- -------- ------- -------- -------- --------
Net investment
income 0.15 0.52 1.07 1.03 1.06 1.08 1.11 1.14 1.06 1.17
Net realized and unrealized
gain/(loss) on investments (3.57) 0.24 0.63 (1.20) 0.23 0.38 (0.64) 2.05 (2.00) 0.71
-------- -------- -------- ------- ------- -------- ------- -------- -------- --------
Net increase/(decrease) in net
assets resulting from operations (3.42) 0.76 1.70 (0.17) 1.29 1.46 0.47 3.19 (0.94) 1.88
-------- -------- -------- ------- ------- -------- ------- -------- -------- --------
Dividends and distributions to shareholders:
Net investment income (0.18) (0.66) (1.05) (1.01) (1.03) (1.17) (1.18) (1.12) (1.03) (1.17)
Net realized gain on investments -- -- -- -- -- -- -- -- (0.16) (0.28)
Return-of-capital (1.80) (0.09) -- -- -- -- -- -- -- --
-------- -------- -------- ------- ------- -------- ------- -------- -------- --------
Total dividends and
distributions to shareholders (1.98) (0.75) (1.05) (1.01) (1.03) (1.17) (1.18) (1.12) (1.19) (1.45)
-------- -------- -------- ------- ------- -------- ------- -------- -------- --------
Capital stock transactions:
Anti-dilutive effect due
to capital stock repurchased 0.02 0.01 0.01 0.02 -- -- -- -- 0.03 --
Dilutive effect due to shares
issued in reinvestment of distributions (0.03) -- -- -- -- -- -- -- -- --
-------- -------- -------- ------- ------- -------- ------- -------- -------- --------
Total capital stock transactions (0.01) 0.01 0.01 0.02 -- -- -- -- 0.03 --
-------- -------- -------- ------- ------- -------- ------- -------- -------- --------
Net asset value, end of year $ 12.89 $ 18.30 $ 18.28 $17.62 $18.78 $ 18.52 $18.23 $ 18.94 $ 16.87 $ 18.97
======== ======== ======== ======= ======= ======== ======= ======== ======== ========
Market value, end of year $ 11.350 $ 16.290 $ 15.875 $14.250 $16.560 $ 16.750 $15.750 $ 16.000 $ 14.625 $ 17.500
======== ======== ======== ======= ======= ======== ======= ======== ======== ========
Total investment return (a) (19.30)% 8.91% 19.02% (8.39)% 5.55% 14.51% 5.68% 17.04% (8.64)% 5.98%
======== ======== ======== ======= ======= ======== ======= ======== ======== ========

RATIOS/SUPPLEMENTAL
DATA
Net assets,
end of year (000 omitted) $60,151 $39,547 $39,640 $38,283 $41,069 $40,490 $39,887 $41,452 $36,928 $42,130
Ratio of expenses to average
net assets, net of fee 1.50% -- -- -- -- -- -- -- -- --
waivers(b) Ratio of expenses
to average net assets,
excluding fee waivers, if 2.07% 3.01% -- -- -- -- -- -- -- --
any(c)
Ratio of expenses to
average net assets,
net of fee waivers
but excluding fees
paid indirectly, if any 1.63% -- 1.06% 1.05% 0.97% 1.08% 1.07% 1.08% 1.15% 1.08%
Ratio of net investment income
to
average net assets 1.01% 2.77% 5.97% 5.60% 5.62% 5.89% 6.02% 6.26% 5.92% 6.07%
Portfolio turnover 86.60% 0.00% 15.87% 16.09% 15.88% 2.91% 5.50% 25.07% 95.53% 81.23%

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

(a) Total investment return at market value is based on the changes in market
price of a share during the year and assumes reinvestment of dividends and
distributions, if any, at actual prices pursuant to the Fund's dividend
reinvestment plan. Total investment return does not reflect brokerage
commissions.
(b) Expenses are net of fees paid indirectly.
(c) Expenses exclude fees paid indirectly.

--------------------------------------------------------------------------------
See accompanying notes to financial statements.
11

--------------------------------------------------------------------------------
CORNERSTONE TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE A.
SIGNIFICANT ACCOUNTING POLICIES

Cornerstone Total Return Fund, Inc. (the "Fund")
was incorporated in New York on March 16, 1973 and commenced investment
operations on May 15, 1973. Its investment objective is to seek total return
consisting of capital appreciation with current income as a secondary objective.
The Fund is registered under the Investment Company Act of 1940, as amended, as
a closed-end, diversified management investment company. On October 31, 2002,
the Fund (then known as "EIS Fund, Inc.") consummated a merger with The
Cornerstone Strategic Return Fund, Inc. (the "Predecessor Fund"). Pursuant to
the terms of the agreement governing the merger, each share of common stock of
the Predecessor Fund was converted into an equivalent dollar amount of full
shares of common stock of the Fund, based on the net asset value of the Fund and
the Predecessor Fund as of October 30, 2002 ($13.35 and $7.33, respectively),
resulting in a conversion ratio of 0.5490 shares of the Fund for each share of
the Predecessor Fund resulting in the issuance of 2,500,087 Fund shares. Cash
was paid in lieu of fractional shares. Net assets of the Fund and the
Predecessor Fund as of the merger date were $29,172,812 and $33,396,970,
including unrealized depreciation of $5,895,432 and $12,013,315, respectively.
In addition, the Predecessor Fund's net assets included undistributed capital
losses of $14,137,957. Total net assets after the merger were $62,569,782. Upon
the consummation of the merger, the Fund changed its name to Cornerstone Total
Return Fund, Inc.

The following is a summary of significant accounting policies consistently
followed by the Fund:

MANAGEMENT ESTIMATES: The preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America
("GAAP") requires management to make certain estimates and assumptions that may
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.

PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. All equity securities shall be valued at the closing price
on the exchange or market on which the security is primarily traded ("Primary
Market"). If the security did not trade on the Primary Market, it shall be
valued at the closing price on another exchange where it trades. If there are no
such sale prices, the value shall be the most recent bid, and if there is no
bid, the security shall be valued at the most recent asked. If no pricing
service is available and there are more than two dealers, the value shall be the
mean of the highest bid and lowest ask. If there is only one dealer, then the
value shall be the mean if bid and ask are available, otherwise the value shall
be the bid. All other securities and assets are valued as determined in good
faith by the Board of Directors. Short-term investments having a maturity of 60
days or less are valued on the basis of amortized cost. The Board of Directors
has established general guidelines for calculating fair value of not readily
marketable securities. At December 31, 2002, the Fund held 1.33% of its net
assets in a security valued in good faith by the Board of Directors with an
aggregate cost of $894,866 and a fair value of $798,112. The net asset value per
share of the Fund is calculated weekly and on the last business day of the month
with the exception of those days on which the New York Stock Exchange is closed.

REPURCHASE AGREEMENTS: The Fund has agreed to purchase securities from financial
institutions subject to the seller's agreement to repurchase them at an
agreed-upon time and price ("repurchase agreements"). The financial institutions
with whom the Fund enters into repurchase agreements are banks and
broker/dealers, which Cornerstone Advisors, Inc. (the Fund's "Manager" or
"Cornerstone") considers creditworthy. The seller under a repurchase agreement
will be required to

--------------------------------------------------------------------------------
12

maintain the value of the securities as collateral, subject to the agreement at
not less than the repurchase price plus accrued interest. Cornerstone monitors
daily, the mark-to-market of the value of the collateral, and, if necessary,
requires the seller to maintain additional securities, so that the value of the
collateral is not less than the repurchase price. Default by or bankruptcy of
the seller would, however, expose the Fund to possible loss because of adverse
market action or delays in connection with the disposition of the underlying
securities.

INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
income tax purposes. Interest income is recorded on an accrual basis; dividend
income is recorded on the ex-dividend date.

TAXES: No provision is made for U.S. federal income or excise taxes as it is the
Fund's intention to continue to qualify as a regulated investment company and to
make the requisite distributions to its shareholders which will be sufficient to
relieve it from all or substantially all U.S. federal income and excise taxes.

DISTRIBUTIONS OF INCOME AND GAINS: Effective January 2002, the Fund initiated a
fixed, monthly distribution to shareholders. To the extent that these
distributions exceed the current earnings of the Fund, the balance will be
generated from sales of portfolio securities held by the Fund, which will either
be short-term or long-term capital gains or a tax-free return-of-capital. Prior
thereto, the Fund distributed at least annually to shareholders, substantially
all of its net investment income and net realized short-term capital gains, if
any. The Fund determines annually whether to distribute any net realized
long-term capital gains in excess of net realized short-term capital losses,
including capital loss carryovers, if any. An additional distribution may be
made to the extent necessary to avoid the payment of a 4% U.S. federal excise
tax. Dividends and distributions to shareholders are recorded by the Fund on the
ex-dividend date.

The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for U.S.
federal income tax purposes due to U.S. generally accepted accounting
principles/ tax differences in the character of income and expense recognition.

NOTE B. AGREEMENTS
Cornerstone serves as the Fund's investment manager with respect to all
investments. As compensation for its management services, Cornerstone receives
from the Fund an annual fee, calculated weekly and paid monthly, equal to 1.00%
of the Fund's average weekly net assets. Through December 31, 2002, Cornerstone
voluntarily agreed to limit the Fund's annual operating expenses (excluding
interest, taxes, brokerage commissions, legal fees, expenditures which are
capitalized in accordance with accounting principles generally accepted in the
United States of America, and other extraordinary expenses not incurred in the
ordinary course of the Fund's business) to 1.50% of the first $30,000,000 of
annual average net assets, and 1% of average annual net assets in excess of
$30,000,000. In addition, effective July 1, 2002, Cornerstone has voluntarily
agreed to lower the waiver of its management fees to the Fund to the extent that
monthly operating expenses exceed 0.10% of average net assets calculated
monthly. Such undertaking continued through the end of 2002 and Cornerstone
voluntarily agreed to continue the undertaking until December 31, 2003. For the
year ended December 31, 2002, Cornerstone earned $385,363 for investment
management services, of which it waived $170,496.

--------------------------------------------------------------------------------
13

--------------------------------------------------------------------------------
CORNERSTONE TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
Included in the Statement of Operations, under the caption FEES PAID INDIRECTLY,
are expense offsets of $53,498 arising from credits earned on portfolio
transactions executed with a broker, pursuant to a directed brokerage
arrangement.

The Fund paid or accrued approximately $83,660, of which $25,000 was
attributable to merger expense, for the year ended December 31, 2002 for legal
services to Spitzer & Feldman P.C., counsel to the Fund. Mr. Westle, a partner
of the firm, serves as secretary of the Fund.

At December 31, 2002, pursuant to regulatory filings, a single shareholder and
his affiliates owned approximately 43% of the outstanding shares of the Fund
based on a Schedule 13G/A filing with the Securities and Exchange Commission on
February 7, 2003.

NOTE C. INVESTMENT IN SECURITIES
For the year ended December 31, 2002, purchases and sales of securities, other
than short-term investments, were $46,787,509 and $33,860,519, respectively.

NOTE D. SHARE REPURCHASE PROGRAM
Pursuant to Section 23 of the Investment Company Act of 1940, as amended the
Fund may in the future purchase shares of its common stock on the open market
from time to time, at such times, and in such amounts as may be deemed
advantageous to the Fund. Nothing herein shall be considered a commitment to
purchase such shares. For the year ended December 31, 2002, the Fund repurchased
43,900 of its shares for a total cost of $ 540,395 at a weighted average
discount of 13.56% from net asset value. The discount of the individual
repurchases ranged from 9.87% - 16.26%. For the year ended December 31, 2001,
the Fund purchased 8,000 shares in the open market at a cost of $136,980. These
purchases were made at a weighted average discount to net asset value of 7.85%.
No limit has been placed on the number of shares to be purchased by the Fund
other than those imposed by federal securities laws.

All purchases are made in accordance with federal securities laws, with shares
repurchased held in treasury, effective January 1, 2002.

NOTE E. SECURITIES LENDING
To generate additional income, the Fund may lend up to 33 1/3% of its total
assets. The Fund receives payments from borrowers equivalent to the dividends
and interest that would have been earned on securities lent while simultaneously
seeking to earn interest on the investment of cash collateral. Loans are subject
to termination by the Fund or the borrower at any time, and are, therefore, not
considered to be illiquid investments. Loans of securities are required at all
times to be secured by collateral equal to at least 100% of the market value of
securities on loan. However, in the event of default or bankruptcy of the other
party to the agreement, realization and/or retention of the collateral may be
subject to legal proceedings. In the event that the borrower fails to return
securities, and collateral maintained by lender is insufficient to cover the
value of loaned securities, the borrower is obligated to pay the amount of the
shortfall (and interest thereon) to the Fund. However, there can be no assurance
the Fund can recover this amount. The value of securities on loan to brokers and
the related collateral received at December 31, 2002, were $397,391 and
$420,948, respectively. Any cash collateral received is reinvested into
repurchase agreements, which in turn are collateralized by various U.S.
Government and Agency securities.

During the year ended December 31, 2002, the Fund earned $595 in securities
lending income that is included under the caption INTEREST in the Statement of
Operations.

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

--------------------------------------------------------------------------------
CORNERSTONE TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
--------------------------------------------------------------------------------
NOTE F. COLLATERAL FOR REPURCHASE AGREEMENT

Listed below is the collateral associated with the repurchase agreement with
Bear, Stearns & Co. Inc. outstanding at December 31, 2002.

PRINCIPAL
AMOUNT MARKET
ISSUER (000'S) MATURITY VALUE
------ ------- -------- -----

United States
Treasury Bond,
(interest only) $2,365 2/15/20 $978,661
========

NOTE G. FEDERAL INCOME TAXES
Income and capital gains distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments of losses deferred due to wash sales and
Post-October losses (as later defined), and excise tax regulations.

At December 31, 2002, the components of distributable earnings on a tax basis,
for the Fund were as follows:

Capital loss carryforwards $(14,143,775)
Unrealized depreciation (19,399,147)
------------
Total loss $(33,542,922)
============

Under current tax law, certain capital losses realized after October 31 within a
taxable year may be deferred and treated as occurring on the first day of the
following tax year ("Post-October losses"). For the tax period ended December
31, 2002, the Fund did not realize any of these losses.

At December 31, 2002, the Fund had a capital loss carryforward for U.S. federal
income tax purposes of $14,143,775 of which $91,132 expires in 2008 and
$14,052,643 expires in 2010.

At December 31, 2002, 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 depreciation from investments were $80,166,099, $475,748,
$(19,874,895) and $(19,399,147), respectively.

At December 31, 2002, the Fund reclassified $4,710,268 from return-of-capital
distributions to paid-in capital, to adjust for current period permanent
book/tax differences. Net assets were not affected by these reclassifications.

--------------------------------------------------------------------------------
15

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Directors
Cornerstone Total Return Fund, Inc.
New York, New York

We have audited the accompanying statement of assets and liabilities of
Cornerstone Total Return Fund, Inc. (formerly, EIS Fund, Inc.), including the
schedule of investments, as of December 31, 2002, and the related statement of
operations, the statement of changes in net assets and the financial highlights
for the year then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended December 31,
2001 and the financial highlights for each of the nine years in the period then
ended have been audited by other auditors, whose various reports dated February
8, 2002, January 31, 1997 and January 24, 1995 expressed an unqualified opinion
on such financial statement and financial highlights.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2002 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Cornerstone Total Return Fund, Inc. as of December 31, 2002, the results of its
operations, the changes in its net assets, and the financial highlights for the
year then ended, in conformity with accounting principles generally accepted in
the United States of America.

TAIT, WELLER & BAKER

Philadelphia, Pennsylvania
February 12, 2003

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

RESULTS OF SPECIAL MEETING OF STOCKHOLDERS (UNAUDITED)

On October 25, 2002, the Special Meeting of Stockholders of Cornerstone Total
Return Fund, Inc. (the "Fund") was held and the following matters were voted
upon:

1. To consider and vote upon the approval of a Merger Agreement and Plan of
Reorganization dated October 25, 2002 whereby The Cornerstone Strategic
Return Fund, Inc. ("CRF'), a Maryland corporation, will merge with and
into EIS Fund, Inc. in accordance with the New York Business Corporation
Law and the Maryland General Corporation Law.

FOR AGAINST ABSTAIN
--- ------- -------
1,243,976 55,513 20,243

2. To amend the Certificate of Incorporation to change the name of EIS from
"EIS Fund, Inc." to "Cornerstone Total Return Fund, Inc."

FOR AGAINST ABSTAIN
--- ------- -------
1,237,593 59,425 22,714

--------------------------------------------------------------------------------
17

TAX INFORMATION (UNAUDITED)

Cornerstone Total Return Fund, Inc. (the "Fund") is required by Subchapter M of
the Internal Revenue Code of 1986, as amended, to advise its shareholders within
60 days of the Fund's year end (December 31, 2002) as to the U.S. federal tax
status of distributions received by the Fund's shareholders in respect of such
fiscal year. During the year ended December 31, 2002, the following dividends
and distributions per share were paid by the Fund:

Payment Date: 1/31/02 2/28/02 3/29/02 4/30/02 5/31/02 6/28/02
Ordinary Income: $ 0.015 $ 0.015 $ 0.015 $ 0.015 $ 0.015 $ 0.015
Return-of-Capital: $ 0.150 $ 0.150 $ 0.150 $ 0.150 $ 0.150 $ 0.150
------- ------- ------- ------- ------- -------
Total: $ 0.165 $ 0.165 $ 0.165 $ 0.165 $ 0.165 $ 0.165
======= ======= ======= ======= ======= =======

Payment Date: 7/31/02 8/30/02 9/30/02 10/25/02 11/29/02 12/31/02
Ordinary Income: $ 0.015 $ 0.015 $ 0.015 $ 0.015 $ 0.015 $ 0.015
Return-of-Capital: $ 0.150 $ 0.150 $ 0.150 $ 0.150 $ 0.150 $ 0.150
------- ------- ------- ------- ------- -------
Total: $ 0.165 $ 0.165 $ 0.165 $ 0.165 $ 0.165 $ 0.165
======= ======= ======= ======= ======= =======

Ordinary income dividends should be reported as dividend income on Form 1040.
Dividends from net investment income are taxable as ordinary income.
Return-of-capital distributions are not taxed as ordinary income dividends and
are sometimes referred to as tax-free dividends or nontaxable distributions. A
return-of-capital distribution reduces the cost basis of your shares in the
Fund. Notification for calendar year 2002 was mailed in January 2003. The
notification along with Form 1099-DIV reflects the amount to be used by calendar
year taxpayers on their U.S. federal income tax returns.

Foreign shareholders will generally be subject to U.S. withholding tax on the
amount of the ordinary income portion of the dividends received, but will not be
subject to U.S. withholding tax on the amount of their non-taxable
distributions.

In general, distributions received by tax exempt recipients (e.g., IRA's and
Keoghs) need not be reported as taxable income for U.S. federal income tax
purposes. However, some retirement trusts (e.g. corporate, Keogh and 403(b)(7)
plans) may need this information for their annual information reporting.

Shareholders are advised to consult their own tax advisers with respect to the
tax consequences of their investment in the Fund.

--------------------------------------------------------------------------------
18

ADDITIONAL INFORMATION REGARDING THE FUND'S DIRECTORS AND OFFICERS
(UNAUDITED)

Ralph W. Bradshaw* (52) Chairman of the President, Director and Shareholder of 2001; current
One West Pack Square Board of Directors Cornerstone Advisors, Inc.; Financial term ends at
Suite 1650 and President Consultant; Vice President, Deep Discount the 2003
Asheville, NC 28801 Advisors, Inc. (1993-1999); Previous Director Annual
of The Austria Fund, Inc.; Director of The Meeting.
SMALLCap Fund, Inc., Progressive Return
Fund, Inc. and Cornerstone Strategic Value
Fund, Inc.

Thomas H. Lenagh (80) Director Chairman of the Board of Inrad Corp.; 2002; current
13 Allen's Corner Rd. Independent Financial Adviser; Director of term ends at
Flemington, NJ 08822 Cornerstone Strategic Value Fund, Inc., the 2003
Progressive Return Fund, Inc., Gintel Fund, Annual
The Adams Express Company and Petroleum Meeting.
and Resources Corporation.

Edwin Meese III (71) Director Distinguished Fellow, The Heritage 2002; current
The Heritage Foundation Foundation, Washington D.C.; Distinguished term ends at
214 Massachusetts Ave. NE Visiting Fellow at the Hoover Institution, the 2003
Washington, D.C. 20002 Stanford University; Distinguished Senior Annual
Fellow at the Institute of United States Meeting.
Studies, University of London; Formerly U.S.
Attorney General under President Ronald Reagan;
Director of Cornerstone Strategic Value Fund,
Inc. and Progressive Return Fund, Inc.

Scott B. Rogers (47) Director Chief Executive Officer, Asheville Buncombe 2001; current
30 Cumberland Ave. Community Christian Ministry; President, term ends at
Asheville, NC 28801 ABCCM Doctor's Medical Clinic; Director, the 2003
Southeastern Jurisdiction Urban Networkers; Annual
Director, A-B Vision Board, Appointee, NC Meeting.
Governor's Commission on Welfare to Work;
Chairman and Director, Recycling Unlimited;
Director, Interdenominational Ministerial
Alliance; Director of Cornerstone Strategic Value
Fund, Inc. and Progressive Return Fund, Inc.

--------------------------------------------------------------------------------
19

ADDITIONAL INFORMATION REGARDING THE FUND'S DIRECTORS AND OFFICERS
(UNAUDITED) (CONCLUDED)

NAME AND POSITION(S) PRINCIPAL OCCUPATION POSITION WITH
ADDRESS (AGE) HELD WITH FUND OVER LAST 5 YEARS FUND SINCE
-------------------------------------------------------------------------------------------------------------------
Andrew A. Strauss (49) Director Attorney and senior member of Strauss & 2001; current
77 Central Avenue Associates, P.A., Attorneys, Asheville and term ends at
Suite F Hendersonville, NC; previous President of the 2003
Asheville, NC 28801 White Knight Healthcare, Inc. and LMV Annual
Leasing, Inc., a wholly owned subsidiary of Meeting.
Xerox Credit Corporation; Director of
Cornerstone Strategic Value Fund, Inc.,
Progressive Return Fund, Inc., The SMALLCap
Fund, Inc., Memorial Mission Hospital
Foundation, Deerfield Episcopal Retirement
Community and Asheville Symphony.

Glenn W. Wilcox, Sr. (71) Director Chairman of the Board and Chief Executive 2001; current
One West Pack Square Officer of Wilcox Travel Agency, Inc.; Director, term ends at
Suite 1700 Champion Industries, Inc.; Chairman of Tower the 2003
Asheville, NC 28801 Associates, Inc. (a real estate venture); Annual
Director, Wachovia Corp.; Board Trustee and Meeting.
Chairman, Appalachian State University; Board
Trustee and Director, Mars Hill College;
Director of The SMALLCap Fund, Inc.,
Cornerstone Strategic Value Fund, Inc. and
Progressive Return Fund, Inc.

Gary Bentz* (46) Director, Vice Chief Financial Officer and Shareholder of 2001; current
One West Pack Square President and Cornerstone Advisors, Inc.; Previous Director term ends at
Suite 1650 Treasurer of The Austria Fund, Inc.; Financial Consul- the 2003
Asheville, NC 28801 tant, Certified Public Accountant; Chief Annual
Financial Officer of Deep Discount Advisors, Meeting.
Inc. (1993-2000); Director, Vice President and
Treasurer of Progressive Return Fund, Inc.
and Cornerstone Strategic Value Fund, Inc.
Thomas R. Westle (49) Secretary Partner, Spitzer & Feldman P.C. (May 1998- 2001
405 Park Avenue present); Secretary of Cornerstone Strategic
New York, NY 10022 Value Fund, Inc. and Progressive
Return Fund, Inc.

--------------------------------------------------------------------------------
* Designates a director who is an "interested person" of the Fund as defined
by the Investment Company Act of 1940. Messrs. Bradshaw and Bentz are
interested persons of the Fund by virtue of their current positions with
the Investment Manager of the Fund.

--------------------------------------------------------------------------------
20

DESCRIPTION OF DIVIDEND REINVESTMENT & CASH PURCHASE PLAN
(UNAUDITED)

Shareholders who have Shares registered directly in their own names
automatically participate in the Fund's Dividend Reinvestment & Cash Purchase
Plan (the "Plan"), unless and until an election is made to withdraw from the
Plan on behalf of such participating shareholders. Shareholders who do not wish
to have distributions automatically reinvested should so notify Fifth Third Bank
(the "Agent") at Corporate Trust Operations, 38 Fountain Square Plaza, Mail Drop
# 10AT66-3212, Cincinnati, OH 45202. Under the Plan, all of the Fund's dividends
and other distributions to shareholders are reinvested in full and fractional
Shares as described below.

When the Fund declares an income dividend or a capital gain or other
distribution (each, a "Dividend" and collectively, "Dividends"), the Agent, on
the shareholders' behalf, will: (i) receive additional authorized shares from
the Fund either newly issued or repurchased from shareholders by the Fund and
held as treasury stock ("Newly Issued Shares") or, (ii) at the sole discretion
of the Board of Directors, be authorized to purchase outstanding shares on the
open market, on the American Stock Exchange or elsewhere, with cash allocated to
it by the Fund ("Open Market Purchases").

Shares acquired by the Agent in Open Market Purchases will be allocated to the
reinvesting shareholders based on the average cost of such Open Market
Purchases. Alternatively, the Agent will allocate Newly Issued Shares to the
reinvesting shareholders at a price equal to the average closing price of the
Fund over the five trading days preceding the payment date of such dividend.

Registered shareholders who acquire their shares through Open Market Purchases
and who do not wish to have their Dividends automatically reinvested should so
notify the Fund in writing. If a Shareholder has not elected to receive cash
Dividends and the Agent does not receive notice of an election to receive cash
Dividends prior to the record date of any dividend, the shareholder will
automatically receive such Dividends in additional Shares.

Participants in the Plan may withdraw from the Plan by providing written notice
to the Agent at least 30 days prior to the applicable Dividend payment date.
When a participant withdraws from the Plan, or upon termination of the Plan as
provided below, certificates for whole shares credited to his/her account under
the Plan will, upon request, be issued. Whether or not a participant requests
that certificates for whole shares be issued, a cash payment will be made for
any fraction of a Share credited to such account.

The Agent will maintain all shareholder accounts in the Plan and furnish written
confirmations of all transactions in the accounts, including information needed
by shareholders for personal and tax records. The Agent will hold shares in the
account of each Plan participant in non-certificated form in the name of the
participant, and each shareholder's proxy will include those shares purchased
pursuant to the Plan. Each participant, nevertheless, has the right to receive
certificates for whole shares owned. The Agent will distribute all proxy
solicitation materials to participating shareholders.

In the case of shareholders, such as banks, brokers or nominees, that hold
shares for others who are beneficial owners participating in the Plan, the Agent
will administer the Plan on the basis of the number of shares certified from
time to time by the record shareholder as representing the total amount of
shares registered in the Shareholder's name and held for the account of
beneficial owners participating in the Plan.

There will be no charge to participants for reinvesting Dividends other than
their share of brokerage commissions as discussed below. The Agent's fees for
administering the Plan and handling the reinvestment of Dividends will be paid
by the Fund. Each participant's account will be charged a pro-rata

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

DESCRIPTION OF DIVIDEND REINVESTMENT & CASH PURCHASE PLAN
(UNAUDITED) (CONCLUDED)

share of brokerage commissions incurred with respect to the Agent's
Open Market Purchases in connection with the reinvestment of Dividends.
Brokerage charges for purchasing small amounts of shares for individual accounts
through the Plan are expected to be less than the usual brokerage charges for
such transactions because the Agent will be purchasing shares for all the
participants in blocks and pro-rating the lower commission that may be
attainable.

The automatic reinvestment of Dividends will not relieve participants of any
income tax that may be payable on such Dividends. Participants who receive
shares pursuant to the Plan as described above will recognize taxable income in
the amount of the fair market value of those shares. In the case of non-U.S.
participants whose Dividends are subject to U.S. income tax withholding and in
the case of participants subject to 30% federal backup withholding, the Agent
will reinvest Dividends after deduction of the amount required to be withheld.

The Fund reserves the right to amend or terminate the Plan by written notice to
participants. All correspondence concerning the Plan should be directed to the
Agent at the address referred to in the first paragraph of this section.

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22

SUMMARY OF GENERAL INFORMATION

The Fund - Cornerstone Total Return Fund, Inc. is a closed-end, diversified
investment company whose shares trade on the American Stock Exchange. Its
investment objective is to seek total return, consisting of capital appreciation
and current income by investing primarily all of its assets in equity securities
of U.S. and non-U.S. issuers whose securities trade on a U.S. securities
exchange or over the counter or as American Depositary Receipts or other forms
of depositary receipts which trade in the United States. The Fund is managed by
Cornerstone Advisors, Inc.

SHAREHOLDER INFORMATION

Effective February 21, 2003, the Fund is listed on the American Stock Exchange
(symbol "CRF"). The share price is published in: THE NEW YORK TIMES (daily)
under the designation "Cnrstn TR" and THE WALL STREET JOURNAL (daily) and
BARRON'S (each Monday) under the designation "CornstnTtlRtn." The net asset
value per share is published under "Closed-End Funds" each Sunday in THE NEW
YORK TIMES under the designation "Cnrstn TR" and each Monday in THE WALL STREET
JOURNAL and BARRON'S under the designation "CornrstnTtlRtn Fd."

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NOTICE IS HEREBY GIVEN IN ACCORDANCE WITH SECTION 23(C) OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, THAT CORNERSTONE TOTAL RETURN FUND, INC. MAY
FROM TIME TO TIME PURCHASE SHARES OF ITS CAPITAL STOCK IN THE OPEN MARKET.
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23

The following is a description of Cornerstone Total Return Fund, Inc.'s (the
"Fund") policies regarding disclosure of nonpublic personal information that you
provide to the Fund or that the Fund collects from other sources. In the event
that you hold shares of the Fund through a broker-dealer or other financial
intermediary, the privacy policy of the financial intermediary would govern how
your nonpublic personal information would be shared with unaffiliated third
parties.

CATEGORIES OF INFORMATION THE FUND COLLECTS. The Fund collects the following
nonpublic personal information about you:

1. Information from the Consumer: this category includes information the Fund
receives from you on or in applications or other forms, correspondence, or
conversations (such as your name, address, phone number, social security
number, assets, income and date of birth); and
2. Information about the Consumer's transactions: this category includes
information about your transactions with the Fund, its affiliates, or
others (such as your account number and balance, payment history, parties
to transactions, cost basis information, and other financial information).

CATEGORIES OF INFORMATION THE FUND DISCLOSES. The Fund does not disclose any
nonpublic personal information about their current or former shareholders to
unaffiliated third parties, except as required or permitted by law. The Fund is
permitted by law to disclose all of the information it collects, as described
above, to its service providers (such as the Fund's custodian, administrator and
transfer agent) to process your transactions and otherwise provide services to
you.

CONFIDENTIALITY AND SECURITY. The Fund restricts access to your nonpublic
personal information to those persons who require such information to provide
products or services to you. The Fund maintains physical, electronic and
procedural safeguards that comply with federal standards to guard your nonpublic
personal information.

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CORNERSTONE TOTAL RETURN FUND, INC.

================================================================================
DIRECTORS AND CORPORATE OFFICERS
Ralph W. Bradshaw Chairman of the Board of
Directors and President
Gary A. Bentz Director, Vice President
and Treasurer
Thomas H. Lenagh Director
Edwin Meese III Director
Scott B. Rogers Director
Andrew A. Strauss Director
Glenn W. Wilcox, Sr. Director
Thomas R. Westle Secretary

INVESTMENT MANAGER STOCK TRANSFER AGENT
Cornerstone Advisors, Inc. AND REGISTRAR
One West Pack Square Fifth Third Bank
Suite 1650 Corporate Trust Operations
Asheville, NC 28801 38 Fountain Square Plaza
Mail Drop # 10AT66-3212
Cincinnati, OH 45202

ADMINISTRATOR INDEPENDENT ACCOUNTANTS
Bear Stearns Funds Tait, Weller & Baker
Management Inc. 1818 Market Street
383 Madison Avenue Suite 2400
New York, NY 10179 Philadelphia, PA 19103

CUSTODIAN LEGAL COUNSEL
Custodial Trust Company Spitzer & Feldman P.C.
101 Carnegie Center 405 Park Avenue
Princeton, NJ 08540 New York, NY 10022

EXECUTIVE OFFICES
383 Madison Avenue
New York, NY 10179

For shareholder inquiries, registered shareholders should call (800) 837-2755.
For general inquiries, please call (212) 272-2093.

[GRAPHIC OMITTED]

This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. It is not a prospectus, circular
or representation intended for use in the purchase or sale of shares of the Fund
or of any securities mentioned in this report.