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