fp0003740_nq.htm
 
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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)
 
  350 Jericho Turnpike, Suite 206             Jericho, New York
11753 
                   (Address of principal executive offices)
(Zip code)
 
Frank J. Maresca
 
  Ultimus Fund Solutions, LLC    350 Jericho Turnpike, Suite 206    Jericho, NY 11753 
(Name and address of agent for service)
 
Registrant's telephone number, including area code:  (513) 587-3400   
 
Date of fiscal year end:         December 31, 2011                          
 
Date of reporting period:       September 30, 2011                          
 
Form N-Q is to be used by management investment companies other than small business investment companies registered on Form N-5 (§§ 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to Rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.
 
A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
 
 
 
 
 
Item 1.
Schedule of Investments.
 
CORNERSTONE TOTAL RETURN FUND, INC.
  
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2011 (Unaudited)
  
   
Description
  
No. of Shares
    
Value
  
EQUITY SECURITIES - 100.06%
            
CLOSED-END FUNDS - 9.33%
            
OPTION ARBITRAGE/OPTIONS STRATEGIES - 9.01%
            
BlackRock Enhanced Capital & Income Fund, Inc.
     9,000     $ 106,290  
Eaton Vance Enhanced Equity Income Fund
     24,374       238,378  
Eaton Vance Risk-Managed Diversified Equity Income Fund
     43,800       479,610  
Eaton Vance Tax-Managed Buy-Write Income Fund
     13,000       151,060  
Eaton Vance Tax-Managed Buy-Write Opportunities Fund
     40,300       440,076  
Eaton Vance Tax-Managed Diversified Equity Income Fund
     50,085       427,225  
              1,842,639  
SECTOR EQUITY - 0.32%
                
Gabelli Healthcare & WellnessRx Trust (The) *
     9,721       65,033  
                 
                 
TOTAL CLOSED-END FUNDS
       1,907,672  
                 
CONSUMER DISCRETIONARY - 9.47%
                
Bed Bath & Beyond, Inc. *
     2,500       143,275  
Comcast Corporation - Class A
     2,012       42,051  
Comcast Corporation - Special Class A
     4,250       87,933  
DIRECTV Group, Inc. (The) - Class A *
     4,000       168,999  
Ford Motor Company *
     10,000       96,700  
Home Depot, Inc. (The)
     5,000       164,350  
Kohl's Corporation
     2,000       98,200  
Limited Brands, Inc.
     1,000       38,510  
Lowe's Companies, Inc.
     3,000       58,020  
Macy's, Inc.
     1,000       26,320  
McDonald's Corporation
     2,000       175,640  
News Corporation - Class B
     2,500       38,975  
Starbucks Corporation
     2,500       93,225  
Target Corporation
     1,500       73,560  
Time Warner, Inc.
     4,666       139,840  
TJX Companies, Inc. (The)
     2,500       138,675  
Viacom, Inc. - Class B
     2,000       77,480  
Walt Disney Company (The)
     5,000       150,800  
Yum! Brands, Inc.
     2,500       123,475  
              1,936,028  
 
See accompanying notes to schedule of investments.
 
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
  
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2011 (Unaudited) (Continued)
  
   
Description
  
No. of Shares
    
Value
  
CONSUMER STAPLES - 11.69%
            
Altria Group, Inc.
     5,000     $ 134,050  
Coca-Cola Company (The)
     5,000       337,800  
Coca-Cola Enterprises, Inc.
     2,500       62,200  
General Mills, Inc.
     3,000       115,410  
H.J. Heinz Company
     2,700       136,296  
PepsiCo, Inc.
     3,000       185,700  
Philip Morris International, Inc.
     5,000       311,900  
Procter & Gamble Company (The)
     4,972       314,131  
Walgreen Company
     2,000       65,780  
Wal-Mart Stores, Inc.
     14,000       726,600  
              2,389,867  
ENERGY - 11.07%
                
Apache Corporation
     2,000       160,480  
Chevron Corporation
     3,500       323,820  
ConocoPhillips
     5,000       316,600  
Exxon Mobil Corporation
     12,000       871,560  
Halliburton Company
     2,500       76,300  
Occidental Petroleum Corporation
     4,000       286,000  
Schlumberger Ltd.
     3,000       179,190  
Williams Companies, Inc.
     2,000       48,680  
              2,262,630  
FINANCIALS - 10.48%
                
AFLAC, Inc.
     1,500       52,425  
American Express Company
     4,000       179,600  
Bank of New York Mellon Corporation (The)
     3,000       55,770  
Capital One Financial Corporation
     2,500       99,075  
Discover Financial Services
     2,000       45,880  
Franklin Resources, Inc.
     1,000       95,640  
JPMorgan Chase & Co.
     15,200       457,824  
M&T Bank Corporation
     1,000       69,900  
Marsh & McLennan Companies, Inc.
     4,000       106,160  
MetLife, Inc.
     1,500       42,015  
Morgan Stanley
     5,000       67,500  
PNC Financial Services Group, Inc.
     1,000       48,190  
Prudential Financial, Inc.
     2,500       117,150  
State Street Corporation
     2,000       64,320  
U.S. Bancorp
     5,500       129,470  
Unum Group
     2,500       52,400  
Wells Fargo & Company
     19,000       458,280  
              2,141,599  
HEALTH CARE - 11.42%
                
Abbott Laboratories
     3,000       153,420  
 
See accompanying notes to schedule of investments.
 
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
  
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2011 (Unaudited) (Continued)
  
   
Description
  
No. of Shares
    
Value
  
HEALTH CARE (Continued)
            
Amgen, Inc.
     3,000     $ 164,850  
Baxter International, Inc.
     2,500       140,350  
Boston Scientific Corporation *
     4,000       23,640  
Bristol-Myers Squibb Company
     6,000       188,280  
Celgene Corporation *
     1,000       61,920  
Cigna Corporation
     3,000       125,820  
Eli Lilly & Company
     2,500       92,425  
Express Scripts, Inc. *
     2,400       88,968  
Gilead Sciences, Inc. *
     2,000       77,600  
Johnson & Johnson
     6,000       382,260  
McKesson Corporation
     2,500       181,750  
Medco Health Solutions, Inc. *
     1,000       46,890  
Medtronic, Inc.
     2,500       83,100  
Merck & Company, Inc.
     2,500       81,775  
Pfizer, Inc.
     6,462       114,248  
Stryker Corporation
     1,000       47,130  
UnitedHealth Group, Inc.
     2,500       115,300  
WellPoint, Inc.
     2,500       163,200  
              2,332,926  
INDUSTRIALS - 9.68%
                
3M Company
     2,500       179,475  
Danaher Corporation
     2,000       83,880  
Deere & Company
     1,500       96,855  
Emerson Electric Company
     2,500       103,275  
FedEx Corporation
     1,500       101,520  
General Dynamics Corporation
     2,000       113,780  
General Electric Company
     21,000       320,040  
Honeywell International Inc.
     2,000       87,820  
Lockheed Martin Corporation
     2,500       181,600  
Precision Castparts Corporation
     1,000       155,460  
Republic Services, Inc.
     1,125       31,568  
Southwest Airlines Company
     2,000       16,080  
Union Pacific Corporation
     2,500       204,175  
United Parcel Service, Inc. - Class B
     2,000       126,300  
United Technologies Corporation
     2,500       175,900  
              1,977,728  
INFORMATION TECHNOLOGY - 17.63%
                
Apple, Inc. *
     2,000       762,360  
Corning, Inc.
     4,000       49,440  
Dell Inc. *
     4,000       56,600  
Google, Inc. - Class A *
     1,000       514,380  
Intel Corporation
     17,000       362,610  
 
See accompanying notes to schedule of investments.
 
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
  
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2011 (Unaudited) (Continued)
  
   
Description
  
No. of Shares
    
Value
  
INFORMATION TECHNOLOGY (Continued)
            
International Business Machines Corporation
     4,000     $ 700,120  
Intuit, Inc.
     2,500       118,600  
Microsoft Corporation
     24,000       597,360  
Oracle Corporation
     12,600       362,124  
Texas Instruments, Inc.
     3,000       79,950  
              3,603,544  
MATERIALS - 2.91%
                
Air Products & Chemicals, Inc.
     1,500       114,555  
Alcoa, Inc.
     1,800       17,226  
Dow Chemical Company (The)
     2,500       56,150  
E.I. Du Pont de Nemours & Company
     4,800       191,856  
Freeport-McMoRan Copper & Gold, Inc.
     5,000       152,250  
Newmont Mining Corporation
     1,000       62,900  
              594,937  
REAL ESTATE INVESTMENT TRUST - 0.01%
                
Simon Property Group, Inc.
     16       1,760  
                 
TELECOMMUNICATION SERVICES - 3.03%
                
AT&T, Inc.
     17,089       487,378  
CenturyLink, Inc.
     4,000       132,480  
              619,858  
UTILITIES - 3.34%
                
Consolidated Edison, Inc.
     1,000       57,020  
Dominion Resources, Inc.
     2,000       101,540  
Duke Energy Corporation
     6,600       131,934  
Exelon Corporation
     3,500       149,135  
NextEra Energy, Inc.
     1,000       54,020  
NiSource, Inc.
     2,500       53,450  
Xcel Energy, Inc.
     5,500       135,795  
              682,894  
                 
TOTAL EQUITY SECURITIES (cost - $20,876,603)
       20,451,443  
                 
SHORT-TERM INVESTMENT - 0.25%
                
MONEY MARKET FUND - 0.25%
                
Fidelity Institutional Money Market Government Portfolio - Class I (cost - $50,940)
     50,940       50,940  
                 
TOTAL INVESTMENTS - 100.31% (cost - $20,927,543)
       20,502,383  
 
See accompanying notes to schedule of investments.
 
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
  
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2011 (Unaudited) (Continued)
  
   
Description
No. of Shares
  
Value
  
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.31)%
     (62,996 )
         
         
NET ASSETS - 100.00%
   $ 20,439,387  
 
* Non-income producing security.
 
See accompanying notes to schedule of investments.
 
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
NOTES TO SCHEDULES OF INVESTMENTS
September 30, 2011 (UNAUDITED)
 
Federal Income Tax Cost: At September 30, 2011 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 $20,927,543, $1,922,183, $(2,347,343) and $(425,160), respectively.
 
As required by the Fair Value Measurement and Disclosures Topic of the FASB Accounting Standards Codification, the Fund has performed an analysis of all assets and liabilities measured at fair value to determine the significance and character of all inputs to their fair value determination.
 
The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into the following three broad categories.
 
·
Level 1 – quoted unadjusted prices for identical instruments in active markets to which the Fund has access at the date of measurement.
 
·
Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.
 
·
Level 3 – model derived valuations in which one or more significant inputs or significant value drivers are unobservable.  Unobservable inputs are those inputs that reflect the Fund’s own assumptions that market participants would use to price the asset or liability based on the best available information.
 
The following is a summary of the inputs used as of September 30, 2011 in valuing the Fund’s investments carried at value:
 
Valuation Inputs
  
INVESTMENTS
IN
SECURITIES
    
OTHER
FINANCIAL
INSTRUMENTS*
  
             
Level 1 - Quoted Prices
            
  Equity Investments
  
$
20,451,443
    
$
-
  
Short-Term Investments
    
50,940
      
-
  
Level 2 - Other Significant Observable Inputs
    
-
      
-
  
Level 3 – Significant Unobservable Inputs
    
-
      
-
  
Total
  
$
20,502,383
    
$
-
  
 
* Other financial instruments include futures, forwards and swap contracts.
 
 
 
 
 
The breakdown of the Fund’s investments into major categories is disclosed in its Schedule of Investments.
 
During the nine months ended September 30, 2011, the Fund did not have any significant transfers in and out of Level 1 or Level 2.
 
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, 2011.
 
In May 2011, FASB issued ASU No. 2011-04 “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”. ASU No. 2011-04 establishes common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. generally accepted accounting principles (“GAAP”) and International Financial Reporting Standards (“IFRSs”).  ASU No. 2011-04 is effective for interim and annual periods beginning after December 15, 2011 and is applied prospectively.  Management is currently evaluating ASU No. 2011-04 and does not believe that it will have a material impact on the Fund’s financial statements and disclosures. 

The Fund is exposed to financial market risks, including the valuations of its investment portfolio.  For the nine months ended September 30, 2011, the Fund did not engage in derivative instruments and other hedging activities.
 
The Fund has evaluated the need for addition disclosures and/or adjustments resulting through the date its financial statements were issued.  Based on this evaluation, no additional disclosures or adjustments were required to such Schedule of Investments.
 
Securities valuation policies and other investment related disclosures are herby 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 2, 2011 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 the Form N-CSR on September 2, 2011, file number 811-02363.  This information is also available to registered shareholders by calling (800) 937-5449.  For general inquiries, please call (513) 326-3597.  This information is also available on the website of the Securities and Exchange Commission – http://www.sec.gov.
 
 
 
 
 
Item 2.
Controls and Procedures.
 
(a)    Based on their evaluation of the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) as of a date within 90 days of the filing date of this report, the registrant’s principal executive officer and principal financial officer have concluded that such disclosure controls and procedures are reasonably designed and are operating effectively to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which this report is being prepared, and that such information is recorded, processed, summarized, and reported on a timely basis.
 
(b)   There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) 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.
 
File as exhibits as part of this Form a separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)):  Attached hereto
 
 
 
 
 
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.
 
(Registrant)   Cornerstone Total Return Fund, Inc.                                                                                                                     
 
 
By (Signature and Title)*
/s/ Ralph W. Bradshaw
  
   
Ralph W. Bradshaw, President and Chairman
  
   
(Principal Executive Officer)
  
       
Date
November 18, 2011
    
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
 
By (Signature and Title)*
/s/ Ralph W. Bradshaw
  
   
Ralph W. Bradshaw, President and Chairman
  
   
(Principal Executive Officer)
  
       
Date
November 18, 2011
    
       
By (Signature and Title)*
/s/ Frank J. Maresca
  
   
Frank J. Maresca, Treasurer
 
    (Principal Financial Officer)  
       
Date
November 18, 2011
    
 
* Print the name and title of each signing officer under his or her signature.