fp0008555_nq.htm
 
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)
 
200A Executive Drive         Edgewood, New York
11717
(Address of principal executive offices)
(Zip code)
 
Frank J. Maresca
 
AST Fund Solutions, LLC     200A Executive Drive 
 Edgewood, NY 11717
(Name and address of agent for service)
     
Registrant's telephone number, including area code:  (866) 668-6558                                  
 
Date of fiscal year end:      December 31                 
 
Date of reporting period:    September 30, 2013        
 
 
 
 
 
Item 1.  Schedule of Investments.
 
CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2013 (Unaudited)
 
Description
  
No. of
Shares
    
Value
  
EQUITY SECURITIES - 98.53%
            
CLOSED-END FUNDS - 25.74%
            
CONVERTIBLE SECURITIES - 0.33%
            
Putnam High Income Securities Fund
     21,395     $ 168,379  
                 
CORE - 1.10%
                
Adams Express Company (The)
     16,290       201,833  
Advent/Claymore Enhanced Growth & Income Fund
     4       39  
General American Investors Company, Inc.
     10,260       350,276  
              552,148  
CORPORATE DEBT INVESTMENT GRADE-RATED - 1.29%
          
Federated Enhanced Treasury Income Fund
     11,217       144,251  
Invesco Van Kampen Bond Fund
     28,581       501,311  
              645,562  
DEVELOPED MARKET - 0.32%
                
Aberdeen Israel Fund, Inc.
     2,400       36,912  
Singapore Fund, Inc. (The)
     9,401       122,495  
              159,407  
EMERGING MARKETS - 0.97%
                
India Fund, Inc. (The)
     23,192       444,127  
Turkish Investment Fund, Inc. (The)
     2,900       43,616  
              487,743  
GENERAL & INSURED LEVERAGED - 1.07%
                
Nuveen Dividend Advantage Municipal Fund 2
     41,295       535,596  
                 
GENERAL BOND - 0.41%
                
Nuveen Build America Bond Opportunity Fund
     11,100       205,794  
                 
GLOBAL - 2.47%
                
Alpine Global Dynamic Dividend Fund
     38,759       184,493  
Alpine Total Dynamic Dividend Fund
     86,461       347,573  
Clough Global Allocation Fund
     9,798       149,125  
Delaware Enhanced Global Dividend and Income Fund
     34,702       412,954  
Nuveen Global Value Opportunities Fund
     11,196       145,436  
              1,239,581  
GLOBAL INCOME - 0.81%
                
Nuveen Multi-Currency Short-Term Government Income Fund
     39,014       408,867  
                 
INCOME & PREFERRED STOCK - 1.78%
                
John Hancock Premium Dividend Fund
     19,800       237,006  
Nuveen Quality Preferred Income Fund 3
     23,100       182,259  
Zweig Total Return Fund, Inc. (The)
     36,204       474,272  
              893,537  
OPTION ARBITRAGE/OPTIONS STRATEGIES - 8.73%
          
AllianzGI International & Premium Strategy Fund
     28,635       302,386  
BlackRock Enhanced Equity Dividend Trust
     90,200       678,304  
BlackRock Global Opportunities Equity Trust
     156,832       2,194,080  
BlackRock International Growth and Income Trust
     156,738       1,206,883  
              4,381,653  
 
See accompanying notes to schedule of investments.
 
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2013 (Unaudited) (Continued) 
 
Description    
No. of
Shares
       Value  
REAL ESTATE - 0.66%
                
Neuberger Berman Real Estate Securities Income Fund Inc.
     73,524     $ 331,593  
                 
SECTOR EQUITY - 5.41%
                
BlackRock EcoSolutions Investment Trust
     23,594       184,033  
BlackRock Energy and Resources Trust
     14,100       363,921  
BlackRock Real Asset Equity Trust
     66,980       601,480  
BlackRock Utility and Infrastructure Trust
     32,873       573,634  
Petroleum & Resources Corporation
     17,400       470,844  
Reaves Utility Income Fund
     20,796       521,356  
              2,715,268  
U.S. MORTGAGE - 0.39%
                
First Trust Mortgage Income Fund
     12,646       194,622  
                 
TOTAL CLOSED-END FUNDS
             12,919,750  
                 
CONSUMER DISCRETIONARY - 9.45%
                
CBS Corporation - Class B
     4,000       220,640  
Comcast Corporation - Class A
     9,012       406,892  
Comcast Corporation - Special Class A
     4,250       184,322  
CST Brands, Inc.
     277       8,255  
D.R. Horton, Inc.
     2,500       48,575  
DIRECTV *
     3,000       179,250  
Ford Motor Company
     12,000       202,440  
Gap, Inc. (The)
     3,000       120,840  
Home Depot, Inc. (The)
     9,500       720,575  
Johnson Controls, Inc.
     3,000       124,500  
Lowe's Companies, Inc.
     7,000       333,270  
Macy's, Inc.
     3,000       129,810  
News Corporation - Class B *
     625       10,269  
NIKE, Inc. - Class B
     4,000       290,560  
Omnicom Group Inc.
     2,000       126,880  
Starbucks Corporation
     3,000       230,910  
Time Warner Inc.
     6,466       425,527  
TJX Companies, Inc. (The)
     4,000       225,560  
Twenty-First Century Fox, Inc.
     2,500       83,500  
Viacom Inc. - Class B
     3,000       250,740  
Walt Disney Company (The)
     6,500       419,185  
              4,742,500  
 
See accompanying notes to schedule of investments.
 
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2013 (Unaudited) (Continued) 
 
Description    
No. of
Shares
       Value  
CONSUMER STAPLES - 7.04%
                
Altria Group, Inc.
     4,000     $ 137,400  
Coca-Cola Company (The)
     17,000       643,960  
Costco Wholesale Corporation
     2,500       287,800  
CVS Caremark Corporation
     7,000       397,250  
General Mills, Inc.
     3,000       143,760  
Kraft Foods Group, Inc.
     1,000       52,440  
Kroger Co. (The)
     2,000       80,680  
Mondelēz International, Inc. - Class A
     3,000       94,260  
Walgreen Co.
     4,000       215,200  
Wal-Mart Stores, Inc.
     20,000       1,479,200  
              3,531,950  
ENERGY - 7.95%
                
Anadarko Petroleum Corporation
     1,000       92,990  
Chevron Corporation
     4,000       486,000  
ConocoPhillips
     8,000       556,080  
EOG Resources, Inc.
     2,000       338,560  
Exxon Mobil Corporation
     16,000       1,376,640  
Hess Corporation
     2,000       154,680  
Marathon Oil Corporation
     4,900       170,912  
Phillips 66
     3,000       173,460  
Schlumberger Limited
     5,500       485,980  
Valero Energy Corporation
     2,500       85,375  
Williams Companies, Inc. (The)
     2,000       72,720  
              3,993,397  
FINANCIALS - 12.59%
                
Allstate Corporation (The)
     2,500       126,375  
Aon plc
     2,500       186,100  
BB&T Corporation
     4,500       151,875  
Berkshire Hathaway Inc. - Class B *
     9,000       1,021,590  
Capital One Financial Corporation
     2,500       171,850  
Citigroup, Inc.
     12,000       582,120  
Discover Financial Services
     4,000       202,160  
Franklin Resources, Inc.
     6,000       303,300  
JPMorgan Chase & Co.
     22,200       1,147,518  
Marsh & McLennan Companies, Inc.
     3,000       130,650  
MetLife, Inc.
     5,500       258,225  
Morgan Stanley
     9,000       242,550  
Prudential Financial, Inc.
     2,000       155,960  
SunTrust Banks, Inc.
     5,000       162,100  
Wells Fargo & Company
     33,000       1,363,560  
Weyerhaeuser Company
     4,000       114,520  
              6,320,453  
 
See accompanying notes to schedule of investments.
 
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2013 (Unaudited) (Continued) 
 
Description    
No. of
Shares
       Value  
HEALTH CARE - 9.12%
                
Abbott Laboratories
     10,000     $ 331,900  
AbbVie Inc.
     6,000       268,380  
Allergan, Inc.
     2,000       180,900  
Amgen Inc.
     6,000       671,640  
Baxter International, Inc.
     1,200       78,828  
Cigna Corporation
     2,000       153,720  
Eli Lilly & Company
     11,500       578,795  
Johnson & Johnson
     10,500       910,245  
Mallinckrodt public limited company *
     250       11,022  
McKesson Corporation
     2,000       256,600  
Medtronic, Inc.
     6,000       319,500  
Pfizer, Inc.
     16,462       472,624  
St. Jude Medical, Inc.
     2,000       107,280  
Stryker Corporation
     1,000       67,590  
Wellpoint, Inc.
     2,000       167,220  
              4,576,244  
INDUSTRIALS - 7.21%
                
Boeing Company (The)
     3,000       352,500  
Deere & Company
     3,500       284,865  
General Dynamics Corporation
     2,000       175,040  
General Electric Company
     39,000       931,710  
Honeywell International Inc.
     4,000       332,160  
Lockheed Martin Corporation
     2,500       318,875  
Norfolk Southern Corporation
     2,000       154,700  
Northrop Grumman Corporation
     2,000       190,520  
Precision Castparts Corporation
     1,500       340,860  
Republic Services, Inc.
     2,000       66,720  
Union Pacific Corporation
     2,500       388,350  
Waste Management, Inc.
     2,000       82,480  
              3,618,780  
INFORMATION TECHNOLOGY - 13.36%
                
Apple Inc.
     2,000       953,500  
Cisco Systems, Inc.
     20,000       468,400  
Corning, Inc.
     6,000       87,540  
eBay Inc. *
     9,000       502,110  
Google Inc. *
     1,000       875,910  
Hewlett-Packard Company
     7,000       146,860  
International Business Machines Corporation
     3,000       555,540  
Microsoft Corporation
     36,000       1,199,160  
Oracle Corporation
     16,600       550,622  
QUALCOMM Incorporated
     7,000       471,520  
Visa Inc. - Class A
     4,000       764,400  
Yahoo! Inc. *
     4,000       132,640  
              6,708,202  
 
See accompanying notes to schedule of investments.
 
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - SEPTEMBER 30, 2013 (Unaudited) (Concluded) 
 
Description    
No. of
Shares
       Value  
MATERIALS - 1.56%
                
Air Products & Chemicals, Inc.
     1,500     $ 159,855  
Dow Chemical Company (The)
     7,000       268,800  
Ecolab Inc.
     2,000       197,520  
International Paper Company
     2,300       103,040  
Newmont Mining Corporation
     2,000       56,200  
              785,415  
TELECOMMUNICATION SERVICES - 2.67%
                
AT&T, Inc.
     17,589       594,860  
Verizon Communications, Inc.
     16,000       746,560  
              1,341,420  
UTILITIES - 1.84%
                
AES Corporation (The)
     4,600       61,134  
Consolidated Edison, Inc.
     1,500       82,710  
Exelon Corporation
     3,000       88,920  
NextEra Energy, Inc.
     2,000       160,320  
Public Service Enterprises Group, Inc.
     4,000       131,720  
Southern Company (The)
     6,000       247,080  
Xcel Energy Inc.
     5,500       151,855  
              923,739  
TOTAL EQUITY SECURITIES (cost - $43,076,865)
             49,461,850  
                 
SHORT-TERM INVESTMENTS - 1.0%
                
MONEY MARKET FUNDS - 1.0%
                
Fidelity Institutional Money Market Government Portfolio - Class I, 0.01%^ (cost - $502,199)
     502,199       502,199  
                 
TOTAL INVESTMENTS - 99.53% (cost - $43,579,064)
             49,964,049  
                 
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.47%
             235,166  
                 
NET ASSETS - 100.00%
           $ 50,199,215  
 
*
Non-income producing security.
^
The rate shown is the 7-day effective yield as of September 30, 2013.
 
See accompanying notes to schedule of investments.
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
NOTES TO SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2013 (UNAUDITED)
 
Federal Income Tax Cost: The following information is computed on a tax basis for each item as of September 30, 2013:
 
Cost of portfolio investments
   $ 43,586,188  
Gross unrealized appreciation
   $ 7,376,377  
Gross unrealized depreciation
     (998,516 )
Net unrealized appreciation
   $ 6,377,861  

The difference between the federal income tax cost of portfolio investments and the Schedule of Investments cost for the Fund is due to certain timing differences in the recognition of capital gains or losses under income tax regulations and generally accepted accounting principles.   These "book/tax" differences are temporary in nature and are due to the tax deferral of losses on wash sales.

As required by the Fair Value Measurement and Disclosures Topic of the Financial Accounting Standards Board ("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. Level2  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, 2013 in valuing the Fund's investments carried at value:
 
 
 
VALUATION INPUTS
  
INVESTMENTS
IN
SECURITIES
  
OTHER FINANCIAL INSTRUMENTS*
  
           
Level 1 – Quoted Prices
          
  Equity Investments
   $ 49,461,850   $ -  
  Short-Term Investments
     502,199     -  
Level 2 – Other Significant Observable Inputs
     -     -  
Level 3 – Significant Unobservable Inputs
     -     -  
Total
   $ 49,964,049   $ -  

*
Other financial instruments include futures, forwards and swap contracts, if any.
 
The breakdown of the Fund's investments into major categories is disclosed in its Schedule of Investments.

As of September 30, 2013, the Fund did not have any transfers in and out of any Level.

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, 2013.

The disclosures for the Fund's fiscal year beginning January 1, 2013 relate to presenting separately any Level 3 purchases, sales, issuances and settlements on a gross basis instead of one net amount. Management has evaluated the impact of ASU No. 2010-6 for the required disclosures.

The Fund is exposed to financial market risks, including the valuations of its investment portfolio. During the nine months ended September 30, 2013, the Fund did not engage in derivative instruments and other hedging activities.

The Fund has evaluated the need for additional 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 hereby incorporated by reference to the Fund's semi-annual report previously filed with the Securities and Exchange Commission on Form N-CSR on September 6, 2013 with a file number 811-02363.

Other information regarding the Fund is available in the Fund’s most recent semi-annual report. This information is also available on the Fund’s website at www.cornerstonetotalreturnfund.com; or on the website of the Securities and Exchange Commission at 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 25, 2013
    
       
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 25, 2013
    
       
By (Signature and Title)*
/s/ Frank J. Maresca
  
   
Frank J. Maresca, Treasurer
(Principal Financial Officer)
  
       
Date
November 25, 2013
    
 
* Print the name and title of each signing officer under his or her signature.