fp0004845_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)
 
Theresa M. Bridge
 
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) 326-3597                
 
Date of fiscal year end:         December 31, 2012                                                                                                                                    
 
Date of reporting period:       March 31, 2012                                                                                                                                
 
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 - MARCH 31, 2012 (Unaudited)
 
Description
  
No. of Shares
    
Value
  
EQUITY SECURITIES - 99.29%
            
CLOSED-END FUNDS - 9.50%
            
CONVERTIBLE SECURITIES - 0.06%
            
Advent/Claymore Global Convertible Securities and Income Fund
     2,965     $ 20,399  
                 
CORE - 0.20%
                
Liberty All-Star Growth Fund
     17,300       75,255  
                 
GLOBAL - 0.50%
                
Clough Global Opportunities Fund
     16,400       193,028  
                 
INCOME & PREFERRED STOCK - 0.03%
                
Nuveen Tax-Advantaged Floating Rate Fund
     5,200       12,584  
                 
OPTION ARBITRAGE/OPTIONS STRATEGIES - 7.95%
                
BlackRock Enhanced Capital & Income Fund, Inc.
     13,500       182,115  
Eaton Vance Enhanced Equity Income Fund
     37,272       412,228  
Eaton Vance Enhanced Equity Income Fund II
     21,175       230,384  
Eaton Vance Risk-Managed Diversified Equity Income Fund
     71,400       756,127  
Eaton Vance Tax-Managed Buy-Write Opportunities Fund
     40,300       521,482  
Eaton Vance Tax-Managed Diversified Equity Income Fund
     51,439       490,214  
Eaton Vance Tax-Managed Global Diversified Equity Income Fund
     47,144       420,053  
ING Global Advantage and Premium Opportunity Fund
     3,200       38,592  
              3,051,195  
REAL ESTATE - 0.17%
                
Alpine Global Premier Properties Fund
     10,128       65,832  
                 
SECTOR EQUITY - 0.59%
                
BlackRock EcoSolutions Investment Trust
     16,810       167,259  
Gabelli Healthcare & WellnessRx Trust (The)
    5,121       42,658  
Nuveen MLP & Strategic Equity Fund, Inc.
     900       16,020  
              225,937  
                 
TOTAL CLOSED-END FUNDS
       3,644,230  
 
See accompanying notes to schedule of investments.
 
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - MARCH 31, 2012 (Unaudited) (Continued)

Description
  
No. of Shares
    
Value
  
CONSUMER DISCRETIONARY - 10.05%
            
Bed Bath & Beyond, Inc. *
     2,500     $ 164,425  
CBS Corporation - Class B
     3,000       101,730  
Comcast Corporation - Class A
     4,012       120,400  
Comcast Corporation - Special Class A
     4,250       125,418  
DIRECTV - Class A *
     4,000       197,360  
Ford Motor Company
     10,000       124,900  
Home Depot, Inc. (The)
     8,000       402,480  
Kohl's Corporation
     2,000       100,060  
Limited Brands, Inc.
     2,000       96,000  
Lowe's Companies, Inc.
     5,000       156,900  
Macy's, Inc.
     3,000       119,190  
McDonald's Corporation
     4,000       392,400  
News Corporation - Class B
     2,500       49,950  
NIKE, Inc. - Class B
     2,000       216,880  
Starbucks Corporation
     2,500       139,725  
Target Corporation
     3,500       203,945  
Time Warner Cable, Inc.
     2,000       163,000  
Time Warner, Inc.
     4,666       176,142  
TJX Companies, Inc. (The)
     5,000       198,550  
Viacom, Inc. - Class B
     3,000       142,380  
Walt Disney Company (The)
     6,500       284,569  
Yum! Brands, Inc.
     2,500       177,950  
              3,854,354  
CONSUMER STAPLES - 9.16%
                
Altria Group, Inc.
     7,000       216,090  
Coca-Cola Company (The)
     10,000       740,100  
Coca-Cola Enterprises, Inc.
     2,500       71,500  
Colgate-Palmolive Company
     2,000       195,560  
CVS Caremark Corporation
     7,000       313,600  
Kraft Foods Inc. - Class A
     5,000       190,050  
Kroger Company (The)
     3,000       72,690  
Philip Morris International, Inc.
     7,000       620,270  
Walgreen Company
     3,500       117,215  
Wal-Mart Stores, Inc.
     16,000       979,200  
              3,516,275  
ENERGY - 10.51%
                
Apache Corporation
     2,000       200,880  
Chevron Corporation
     7,500       804,300  
ConocoPhillips
     6,000       456,060  
Exxon Mobil Corporation
     17,000       1,474,410  
Halliburton Company
     4,500       149,355  
Marathon Oil Corporation
     4,900       155,330  

See accompanying notes to schedule of investments.
 
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - MARCH 31, 2012 (Unaudited) (Continued)
 
Description
  
No. of Shares
    
Value
  
ENERGY (Continued)
            
Occidental Petroleum Corporation
     4,000     $ 380,920  
Peabody Energy Corporation
     2,000       57,920  
Schlumberger Ltd.
     4,000       279,720  
Williams Companies, Inc.
     2,000       61,620  
WPX Energy, Inc. *
     666       11,995  
              4,032,510  
FINANCIALS - 12.11%
                
AFLAC, Inc.
     3,000       137,970  
Allstate Corporation (The)
     2,500       82,300  
American Express Company
     6,000       347,160  
Bank of America Corporation
     40,000       382,800  
BB&T Corporation
     3,000       94,170  
Capital One Financial Corporation
     2,500       139,350  
Discover Financial Services
     4,000       133,360  
Fifth Third Bancorp
     7,000       98,350  
Franklin Resources, Inc.
     1,000       124,030  
JPMorgan Chase & Co.
     15,200       698,896  
Marsh & McLennan Companies, Inc.
     4,000       131,160  
MetLife, Inc.
     5,500       205,425  
Morgan Stanley
     8,500       166,940  
Prudential Financial, Inc.
     2,500       158,475  
State Street Corporation
     2,000       91,000  
SunTrust Banks, Inc.
     3,000       72,510  
U.S. Bancorp
     12,500       396,000  
Unum Group
     2,500       61,200  
Wells Fargo & Company
     33,000       1,126,620  
              4,647,716  
HEALTH CARE - 11.30%
                
Abbott Laboratories
     6,000       367,740  
Aetna, Inc.
     1,500       75,240  
Amgen, Inc.
     4,000       271,960  
Baxter International, Inc.
     1,200       71,736  
Bristol-Myers Squibb Company
     6,000       202,500  
Celgene Corporation *
     1,000       77,520  
Cigna Corporation
     3,000       147,750  
Covidien plc
     2,000       109,360  
Eli Lilly & Company
     2,500       100,675  
Gilead Sciences, Inc. *
     4,000       195,400  
Johnson & Johnson
     9,000       593,640  
McKesson Corporation
     2,500       219,425  
Medco Health Solutions, Inc. *
     2,000       140,600  
Medtronic, Inc.
     2,500       97,975  

See accompanying notes to schedule of investments.
 
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - MARCH 31, 2012 (Unaudited) (Continued)

Description
  
No. of Shares
    
Value
  
HEALTH CARE (Continued)
            
Merck & Company, Inc.
     16,000     $ 614,400  
Pfizer, Inc.
     16,462       373,029  
Stryker Corporation
     1,000       55,480  
Thermo Fisher Scientific Inc.
     2,000       112,760  
UnitedHealth Group, Inc.
     5,500       324,170  
WellPoint, Inc.
     2,500       184,500  
              4,335,860  
INDUSTRIALS - 9.69%
                
Boeing Company (The)
     2,000       148,740  
Caterpillar Inc.
     3,000       319,560  
CSX Corporation
     6,000       129,120  
Cummins Inc.
     1,000       120,040  
Danaher Corporation
     2,000       112,000  
Deere & Company
     2,500       202,250  
Emerson Electric Company
     2,500       130,450  
FedEx Corporation
     2,500       229,900  
General Dynamics Corporation
     2,000       146,760  
General Electric Company
     28,000       561,960  
Honeywell International Inc.
     4,000       244,200  
ITT Corporation
     2,900       66,526  
Lockheed Martin Corporation
     2,500       224,650  
Norfolk Southern Corporation
     2,000       131,660  
Northrop Grumman Corporation
     1,500       91,620  
Raytheon Company
     2,000       105,560  
Republic Services, Inc.
     1,125       34,380  
Union Pacific Corporation
     2,500       268,700  
United Parcel Service, Inc. - Class B
     3,000       242,160  
United Technologies Corporation
     2,500       207,350  
              3,717,586  
INFORMATION TECHNOLOGY - 18.44%
                
Apple, Inc. *
     4,000       2,397,880  
CA Technologies, Inc.
     2,500       68,900  
Cisco Systems, Inc.
     14,000       296,100  
eBay Inc. *
     4,000       147,560  
Google, Inc. - Class A *
     1,000       641,240  
Hewlett-Packard Company
     6,000       142,980  
Intel Corporation
     21,000       590,310  
International Business Machines Corporation
     5,000       1,043,250  
Microsoft Corporation
     36,000       1,161,000  
Oracle Corporation
     18,600       542,376  
Xerox Corporation
     5,200       42,016  
              7,073,612  

See accompanying notes to schedule of investments.

 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - MARCH 31, 2012 (Unaudited) (Continued)

Description
  
No. of Shares
    
Value
  
MATERIALS - 3.00%
            
Air Products & Chemicals, Inc.
     1,500     $ 137,700  
Alcoa, Inc.
     1,800       18,036  
CF Industries Holdings, Inc.
     600       109,590  
Dow Chemical Company (The)
     6,000       207,840  
E.I. Du Pont de Nemours and Company
     4,800       253,920  
Freeport-McMoRan Copper & Gold, Inc.
     5,000       190,200  
International Paper Company
     2,300       80,730  
Newmont Mining Corporation
     3,000       153,810  
              1,151,826  
REAL ESTATE INVESTMENT TRUST - 0.01%
                
Simon Property Group, Inc.
     16       2,331  
                 
TELECOMMUNICATION SERVICES - 2.51%
                
AT&T, Inc.
     21,089       658,609  
Verizon Communications, Inc.
     8,000       305,840  
              964,449  
UTILITIES - 3.01%
                
AES Corporation (The) *
     4,600       60,122  
American Electric Power Company, Inc.
     3,400       131,172  
Consolidated Edison, Inc.
     1,000       58,420  
Duke Energy Corporation
     6,600       138,666  
Exelon Corporation
     3,500       137,235  
FirstEnergy Corporation
     2,000       91,180  
NextEra Energy, Inc.
     2,000       122,160  
Sempra Energy
     1,500       89,940  
Southern Company (The)
     4,000       179,720  
Xcel Energy, Inc.
     5,500       145,585  
              1,154,200  
                 
TOTAL EQUITY SECURITIES (cost - $32,604,474)
       38,094,949  
                 
SHORT-TERM INVESTMENT - 0.86%
                
MONEY MARKET FUND - 0.86%
                
Fidelity Institutional Money Market Government Portfolio - Class I (cost - $332,550)
     332,550       332,550  
                 
TOTAL INVESTMENTS - 100.15% (cost - $32,937,024)
       38,427,499  
                 
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.15)%
       (59,414 )
                 
NET ASSETS - 100.00%
     $ 38,368,085  
   
* Non-income producing security.
 
See accompanying notes to schedule of investments.
 
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
NOTES TO SCHEDULE OF INVESTMENTS
March 31, 2012 (UNAUDITED)
 
Federal Income Tax Cost: At March 31, 2012 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 $32,944,148, $6,366,818, $(883,467) and $5,483,351, respectively.
 
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. 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 March 31, 2012 in valuing the Fund’s investments carried at value:
 
VALUATION INPUTS
  
INVESTMENTS
IN
SECURITIES
    
OTHER
FINANCIAL
INSTRUMENTS*
  
             
Level 1 - Quoted Prices
            
  Equity Investments
  
$
38,094,949
    
$
-
  
  Short-Term Investments
    
332,550
      
-
  
Level 2 - Other Significant Observable Inputs
    
-
      
-
  
Level 3 – Significant Unobservable Inputs
    
-
      
-
  
Total
  
$
38,427,499
    
$
-
  
 
* 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.
 
During the three months ended March 31, 2012, 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 March 31, 2012.
 
The disclosures for the Fund’s fiscal year beginning January 1, 2012 relate to presenting separately any Level 3 purchases, sales, issuances and settlements on a gross basis instead of one net amount.  Management will continue to evaluate the impact of ASU No. 2010-6 for the required disclosures.

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 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 three months ended March 31, 2012, 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 hereby incorporated by reference to the Fund’s annual report previously filed with the Securities and Exchange Commission on the Form N-CSR on March 2, 2012 with a file number 811-02363.
 
Other information regarding the Fund is available in the Fund’s most recent annual report filed with the Securities and Exchange Commission on the Form N-CSR on March 2, 2012, 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 May 24, 2012    
 
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 May 24, 2012    
   
By (Signature and Title)* /s/ Theresa M. Bridge  
    Theresa M. Bridge, Treasurer
    (Principal Financial Officer)  
       
Date May 8, 2012    
      
* Print the name and title of each signing officer under his or her signature.