fp0002236_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    New York, NY 11753
(Name and address of agent for service)
 
 
Registrant's telephone number, including area code:     (513) 326-3597               
 
 
Date of fiscal year end:         December 31, 2010                                   
 
 
Date of reporting period:       September 30, 2010                                   
 
 
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, 2010 (UNAUDITED)
  
   
Description
  
No. of Shares
    
Value
  
EQUITY SECURITIES - 99.91%
  
CLOSED-END FUNDS - 8.65%
  
CORE - 4.22%
        
Adams Express Company (The) (a)
     59,400     $ 591,624  
Royce Micro-Cap Trust, Inc.
     8,200       67,650  
Royce Value Trust, Inc.
     8,000       97,120  
              756,394  
HIGH CURRENT YIELD (LEVERAGED) - 0.37%
          
First Trust Strategic High Income Fund
     8,000       27,520  
First Trust Strategic High Income Fund III
     9,000       39,150  
              66,670  
OPTION ARBITRAGE/OPTIONS STRATEGIES - 1.06%
          
NFJ Dividend, Interest & Premium Strategy Fund
     12,000       189,120  
                 
REAL ESTATE - 0.94%
          
Cohen & Steers Quality Income Realty Fund, Inc.
     13,000       102,180  
Cohen & Steers REIT & Preferred Income Fund, Inc.
     5,000       65,550  
              167,730  
SECTOR EQUITY - 1.67%
          
Cohen & Steers Infrastructure Fund, Inc.
     3,000       47,760  
H&Q Life Sciences Investors
     9,000       86,310  
John Hancock Bank and Thrift Opportunity Fund
     6,453       95,569  
Petroleum & Resources Corporation (a)
     3,000       69,390  
              299,029  
U.S. MORTGAGE - 0.39%
          
BlackRock Income Trust, Inc.
     9,896       69,074  
                 
                 
TOTAL CLOSED-END FUNDS
       1,548,017  
                 
CONSUMER DISCRETIONARY - 9.65%
  
Bed Bath & Beyond, Inc. *
     2,500       108,525  
Comcast Corporation - Class A
     2,012       36,377  
Comcast Corporation - Special Class A
     4,250       72,293  
DIRECTV Group, Inc. (The) - Class A *
     4,000       166,519  
Ford Motor Company *
     5,000       61,200  
Gap, Inc. (The)
     2,500       46,600  
Home Depot, Inc. (The)
     5,000       158,400  
Mattel, Inc.
     1,500       35,190  
 
See accompanying notes to schedule of investments.
 
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
  
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2010 (UNAUDITED) (Continued)
  
   
CONSUMER DISCRETIONARY (Continued)
  
McDonald's Corporation
     2,000     $ 149,020  
News Corporation - Class B
     2,500       37,650  
NIKE, Inc. - Class B
     2,500       200,350  
Starbucks Corporation
     2,500       63,950  
Target Corporation
     1,500       80,160  
Time Warner, Inc.
     2,666       81,713  
TJX Companies, Inc. (The)
     2,500       111,575  
Viacom, Inc. - Class B
     1,000       36,190  
Walt Disney Company (The)
     5,000       165,550  
Yum! Brands, Inc.
     2,500       115,150  
              1,726,412  
CONSUMER STAPLES - 11.09%
  
Altria Group, Inc.
     5,000       120,100  
Coca-Cola Company (The)
     5,000       292,600  
Coca-Cola Enterprises
     2,500       77,500  
Colgate-Palmolive Company
     1,000       76,860  
ConAgra Foods, Inc.
     2,500       54,850  
General Mills, Inc.
     3,000       109,620  
H.J. Heinz Company
     2,700       127,899  
PepsiCo, Inc.
     2,000       132,880  
Philip Morris International, Inc.
     3,500       196,070  
Procter & Gamble Company (The)
     6,472       388,126  
Sara Lee Corporation
     2,500       33,575  
Wal-Mart Stores, Inc.
     7,000       374,640  
              1,984,720  
ENERGY - 9.76%
  
Chevron Corporation
     3,500       283,675  
Conocophillips
     2,500       143,575  
El Paso Corporation
     5,000       61,900  
EOG Resources, Inc.
     1,000       92,970  
Exxon Mobil Corporation
     8,000       494,320  
Halliburton Company
     2,500       82,675  
Occidental Petroleum Corporation
     4,000       313,200  
Schlumberger Ltd.
     3,000       184,830  
Southwestern Energy Company *
     1,500       50,160  
Williams Companies, Inc.
     2,000       38,220  
              1,745,525  
FINANCIALS - 12.75%
  
AFLAC, Inc.
     1,500       77,565  
American Express Company
     2,000       84,060  
Bank of America Corporation
     16,521       216,590  
BB&T Corporation
     2,000       48,160  
Capital One Financial Corporation
     2,500       98,875  
 
See accompanying notes to schedule of investments.
 
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
  
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2010 (UNAUDITED) (Continued)
  
   
FINANCIALS (Continued)
  
Chubb Corporation (The)
     1,000     $ 56,990  
Citigroup, Inc. *
     24,000       93,600  
Discover Financial Services
     1,000       16,680  
Franklin Resources, Inc.
     1,000       106,900  
Goldman Sachs Group, Inc. (The)
     1,500       216,870  
Hudson City Bancorp, Inc.
     2,500       30,650  
JPMorgan Chase & Company
     12,200       464,455  
KeyCorp
     2,500       19,900  
M&T Bank Corporation
     1,000       81,810  
Marsh & McLennan Companies, Inc.
     4,000       96,480  
MetLife, Inc.
     1,500       57,675  
Morgan Stanley
     2,000       49,360  
PNC Financial Services Group, Inc.
     1,000       51,910  
Prudential Financial, Inc.
     1,500       81,270  
SunTrust Banks, Inc.
     1,500       38,745  
Travelers Companies, Inc. (The)
     3,092       161,093  
U.S. Bancorp
     3,500       75,670  
Unum Group
     2,500       55,375  
              2,280,683  
HEALTH CARE - 10.90%
  
Abbott Laboratories
     3,000       156,720  
Allergan, Inc.
     1,000       66,530  
Amgen, Inc. *
     3,000       165,330  
Bristol-Myers Squibb Company
     4,000       108,440  
Celgene Corporation *
     1,000       57,610  
Cigna Corporation
     3,000       107,340  
Eli Lilly & Company
     2,500       91,325  
Express Scripts, Inc. *
     2,400       116,880  
Gilead Sciences, Inc. *
     2,000       71,220  
Johnson & Johnson
     5,500       340,780  
McKesson Corporation
     2,500       154,450  
Medco Health Solutions, Inc. *
     1,000       52,060  
Medtronic, Inc.
     4,500       151,110  
Merck & Company, Inc.
     2,500       92,025  
Pfizer, Inc.
     6,462       110,953  
Stryker Corporation
     1,000       50,050  
WellPoint, Inc. *
     1,000       56,640  
              1,949,463  
INDUSTRIALS - 9.76%
  
3M Company
     1,500       130,065  
Danaher Corporation
     2,000       81,220  
Deere & Company
     1,500       104,670  
Emerson Electric Company
     2,500       131,650  
 
See accompanying notes to schedule of investments.
 
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
  
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2010 (UNAUDITED) (Continued)
  
   
INDUSTRIALS (Continued)
  
FedEx Corporation
     1,500     $ 128,250  
General Dynamics Corporation
     1,000       62,810  
General Electric Company
     24,000       390,000  
Lockheed Martin Corporation
     2,500       178,200  
Precision Castparts Corporation
     1,000       127,350  
Republic Services, Inc.
     1,125       34,301  
Union Pacific Corporation
     2,500       204,500  
United Parcel Service, Inc. - Class B
     1,000       66,690  
United Technologies Corporation
     1,500       106,845  
              1,746,551  
INFORMATION TECHNOLOGY - 18.17%
  
Agilent Technologies, Inc. *
     2,500       83,425  
AOL, Inc. *
     242       5,990  
Apple, Inc. *
     2,000       567,500  
Cisco Systems, Inc. *
     10,000       219,000  
Cognizant Technology Solutions Corporation - CLASS A *
     1,500       96,705  
Corning, Inc.
     3,000       54,840  
eBay, Inc. *
     2,500       61,000  
EMC Corporation *
     3,000       60,930  
Google, Inc. - Class A *
     1,000       525,790  
Hewlett-Packard Company
     5,000       210,350  
Intel Corporation
     11,000       211,530  
International Business Machines Corporation
     2,200       295,108  
Intuit, Inc. *
     2,500       109,525  
Micron Technology, Inc. *
     2,000       14,420  
Microsoft Corporation
     14,000       342,860  
Oracle Corporation
     12,600       338,310  
Texas Instruments, Inc.
     2,000       54,280  
              3,251,563  
MATERIALS - 3.43%
  
Air Products & Chemicals, Inc.
     1,500       124,230  
E.I. Du Pont de Nemours & Company
     4,800       214,176  
Freeport-McMoRan Copper & Gold, Inc.
     2,500       213,475  
Newmont Mining Corporation
     1,000       62,810  
              614,691  
REAL ESTATE INVESTMENT TRUST - 0.01%
  
Simon Property Group, Inc.
     16       1,484  
                 
TELECOMMUNICATION SERVICES - 2.65%
  
AT&T, Inc.
     11,089       317,145  
Centurytel, Inc.
     4,000       157,840  
              474,985  
 
See accompanying notes to schedule of investments.
 
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
  
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2010 (UNAUDITED) (Continued)
  
   
UTILITIES - 3.09%
  
Consolidated Edison, Inc.
     1,000     $ 48,220  
Dominion Resources, Inc.
     2,000       87,320  
Duke Energy Corporation
     6,600       116,886  
NiSource, Inc.
     2,500       43,500  
Southern Company (The)
     3,500       130,340  
Xcel Energy, Inc.
     5,500       126,335  
              552,601  
                 
TOTAL EQUITY SECURITIES (cost - $17,852,099)
       17,876,695  
                 
                 
SHORT-TERM INVESTMENT - 0.45%
                
MONEY MARKET FUND - 0.45%
                
JPMorgan U.S. Government Money Market Fund (cost - $79,989)
     79,989       79,989  
                 
TOTAL INVESTMENTS - 100.36% (cost - $17,932,088)
       17,956,684  
                 
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.36)%
       (64,293 )
                 
NET ASSETS - 100.00%
     $ 17,892,391  

(a) Affiliated investment.  Of its net assets the Fund holds 3.31% and 0.39% 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, 2010 there were additional purchases of 3,000 shares of Petroleum & Resources Corporation with a cost of $63,070. There were no purchases of Adams Express Company and there were no sales for either of these securities.
 
* Non-income producing security.
 
See accompanying notes to schedule of investments.
 
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
NOTES TO SCHEDULES OF INVESTMENTS
September 30, 2010 (UNAUDITED)
 
Federal Income Tax Cost: At September 30, 2010 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 $17,932,088, $1,948,997, $(1,924,401) and $24,596 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, 2010 in valuing the Fund’s investments carried at value:
 
Valuation Inputs
  
INVESTMENTS
IN
SECURITIES
    
OTHER
FINANCIAL
INSTRUMENTS*
  
             
Level 1 - Quoted Prices
            
Equity Investments
   $ 17,876,695     $ -  
Short-Term Investments
     79,989       -  
Level 2 - Other Significant Observable Inputs
     -       -  
Level 3 – Significant Unobservable Inputs
     -       -  
Total
   $ 17,956,684     $ -  
* Other financial instruments include futures, forwards and swap contracts.
 
During the period ended September 30, 2010, 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, 2010.
 
Recent Accounting Pronouncement: In January 2010, the FASB Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2010-06 “Improving Disclosures about Fair Value Measurements”. ASU 2010-06 amends FASB Accounting Standards Codification Topic, Fair Value Measurements and Disclosures, to require additional disclosures regarding fair value measure­ments. Certain disclosures required by ASU No. 2010-06 are effective for interim and annual reporting periods beginning after December 15, 2009 and have been reflected herein while other required disclosures are effective for fiscal years beginning after December 15, 2010,  and for interim
 
 
 
 
 
periods within those fiscal years. Management has evaluated the impact ASU No. 2010-06 and has determined that it is not expected to have a significant impact on its financial statement disclosures.
 
The Fund is exposed to financial market risks, including the valuations of its investment portfolio.  For the nine months ended September 30, 2010, the Fund did not engage in derivative instruments and other hedging activities.
 
Management has evaluated the impact of all subsequent events on the Fund through the date the Schedule of Investments were issued, and has determined that there were no subsequent events requiring adjustment or disclosure in the 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, 2010 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, 2010, 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 12, 2010
    
 
 
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 12, 2010
    
     
By (Signature and Title)*
/s/ Frank J. Maresca
  
 
Frank J. Maresca, Treasurer
(Principal Financial Officer)
  
     
     
Date
November 12, 2010
    
 
 
* Print the name and title of each signing officer under his or her signature.