fp0010268_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)
 
7 Dawson Street         Huntington Station, New York
11746
(Address of principal executive offices)
(Zip code)
 
Frank J. Maresca
 
AST Fund Solutions, LLC     7 Dawson Street
Huntington Station, NY 11746
(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:    March  31, 2014         
 
 
 
 
 
Item 1.  Schedule of Investments.
 
CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - MARCH 31, 2014 (Unaudited)

Description
  
No. of
Shares
    
Value
  
EQUITY SECURITIES - 98.67%
  
CLOSED-END FUNDS - 13.38%
  
CORE - 0.54%
  
Adams Express Company (The)
     6,090     $ 79,048  
General American Investors Company, Inc.
     10,260       361,460  
Guggenheim Equal Weight Enhanced Equity Income Fund
     1,700       31,994  
              472,502  
CORPORATE DEBT INVESTMENT GRADE-RATED - 0.46%
  
Invesco Van Kampen Bond Fund
     22,258       404,650  
                 
EMERGING MARKETS - 0.09%
  
First Trust/Aberdeen Emerging Opportunity Fund
     4,231       76,243  
                 
EMERGING MARKETS DEBT - 0.06%
  
Stone Harbor Emerging Markets Income Fund
     2,770       51,245  
                 
GENERAL & INSURED LEVERAGED - 0.37%
  
Invesco Municipal Opportunity Trust
     12,900       157,380  
Nuveen Dividend Advantage Municipal Fund 2
     7,489       101,101  
Nuveen Quality Preferred Income Fund 2
     7,749       67,261  
              325,742  
GLOBAL - 1.46%
  
Alpine Global Dynamic Dividend Fund
     19,379       193,984  
Alpine Global Total Dynamic Dividend Fund
     43,230       362,700  
Clough Global Allocation Fund
     9,798       148,734  
Delaware Enhanced Global Dividend and Income Fund
     34,702       426,835  
Nuveen Global Value Opportunities Fund
     11,196       146,668  
              1,278,921  
GLOBAL INCOME - 0.47%
  
Nuveen Multi-Currency Short-Term Government Income Fund
     39,014       409,257  
                 
HIGH CURRENT YIELD (LEVERAGED) - 0.75%
  
DWS High Income Opportunities Fund, Inc.
     45,027       657,844  
                 
INCOME & PREFERRED STOCK - 1.20%
  
John Hancock Premium Dividend Fund
     57,053       738,836  
Nuveen Quality Preferred Income Fund 3
     37,488       313,774  
              1,052,610  
LOAN PARTICIPATION - 0.00%
  
Eaton Vance Senior Income Trust
     15       103  
                 
NATURAL RESOURCES - 1.62%
  
BlackRock Energy and Resources Trust
     14,100       340,515  
BlackRock Real Asset Equity Trust
     66,980       596,122  
Petroleum & Resources Corporation
     17,400       485,808  
              1,422,445  
OPTION ARBITRAGE/OPTIONS STRATEGIES - 2.99%
  
BlackRock Enhanced Equity Dividend Trust
     90,200       716,188  
BlackRock Global Opportunities Equity Trust
     114,249       1,671,463  
BlackRock International Growth and Income Trust
     17,334       139,712  
ING Asia Pacific High Dividend Equity Income Fund
     6,712       85,444  
              2,612,807  
 
See accompanying notes to schedule of investments.
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - MARCH 31, 2014 (Unaudited)
 
Description
    
No. of
Shares
      
Value
  
REAL ESTATE - 1.22%
  
Cohen & Steers Quality Income Realty Fund, Inc.
     14,300     $ 150,579  
LMP Real Estate Income Fund Inc.
     1,400       15,176  
Neuberger Berman Real Estate Securities Income Fund Inc.
     191,405       903,432  
              1,069,187  
SECTOR EQUITY - 0.02%
  
First Trust Specialty Finance and Financial Opportunities Fund
     2,000       15,400  
                 
U.S. MORTGAGE - 0.23%
  
First Trust Mortgage Income Fund
     12,646       199,048  
                 
UTILITY - 1.90%
  
BlackRock EcoSolutions Investment Trust
     23,594       189,932  
BlackRock Utility and Infrastructure Trust
     47,373       898,192  
Reaves Utility Income Fund
     20,796       577,089  
              1,665,213  
                 
TOTAL CLOSED-END FUNDS
             11,713,217  
                 
CONSUMER DISCRETIONARY - 9.71%
                
CBS Corporation - Class B
     4,000       247,200  
Comcast Corporation - Class A
     21,012       1,051,020  
Comcast Corporation - Special Class A
     4,250       207,230  
CST Brands, Inc.
     277       8,654  
D.R. Horton, Inc.
     2,500       54,125  
DIRECTV *
     4,500       343,890  
Ford Motor Company
     31,000       483,600  
Gap, Inc. (The)
     3,000       120,180  
Home Depot, Inc. (The)
     11,500       909,995  
Johnson Controls, Inc.
     5,500       260,260  
Macy's, Inc.
     3,000       177,870  
McDonald's Corporation
     9,000       882,270  
NIKE, Inc. - Class B
     7,000       517,020  
Omnicom Group Inc.
     2,000       145,200  
Ralph Lauren Corporation
     1,000       160,930  
Target Corporation
     5,000       302,550  
Time Warner Cable Inc.
     2,500       342,950  
Time Warner Inc.
     6,466       422,424  
TJX Companies, Inc. (The)
     6,000       363,900  
Twenty-First Century Fox, Inc.
     2,500       77,800  
Viacom Inc. - Class B
     3,000       254,970  
Walt Disney Company (The)
     14,500       1,161,015  
              8,495,053  
CONSUMER STAPLES - 8.08%
                
Altria Group, Inc.
     17,000       636,310  
Archer-Daniels-Midland Company
     5,000       216,950  
Coca-Cola Company (The)
     17,000       657,220  
CVS Caremark Corporation
     13,200       988,152  
Kellogg Company
     3,000       188,130  
Kraft Foods Group, Inc.
     1,000       56,100  
Kroger Co. (The)
     5,000       218,250  
Mondelēz International, Inc. - Class A
     3,000       103,650  
PepsiCo, Inc.
     8,000       668,000  
Philip Morris International, Inc.
     8,000       654,960  
Sysco Corporation
     5,000       180,650  
Tyson Foods, Inc.
     3,000       132,030  
Wal-Mart Stores, Inc.
     31,000       2,369,330  
              7,069,732  
 
See accompanying notes to schedule of investments.
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - MARCH 31, 2014 (Unaudited)
 
Description
    
No. of
Shares
      
Value
  
ENERGY - 8.25%
                
Anadarko Petroleum Corporation
     4,000     $ 339,040  
Chesapeake Energy Corporation
     5,000       128,100  
ConocoPhillips
     8,000       562,800  
Devon Energy Corporation
     3,500       234,255  
EOG Resources, Inc.
     2,000       392,340  
Exxon Mobil Corporation
     31,000       3,028,080  
Marathon Oil Corporation
     6,900       245,088  
Occidental Petroleum Corporation
     5,000       476,450  
Phillips 66
     3,000       231,180  
Schlumberger Limited
     11,500       1,121,250  
Southwestern Energy Company
     3,000       138,030  
Valero Energy Corporation
     4,500       238,950  
Williams Companies, Inc. (The)
     2,000       81,160  
              7,216,723  
EXCHANGE-TRADED FUNDS - 3.00%
                
iShares Core S&P 500 ETF
     7,000       1,317,190  
SPDR S&P 500 ETF Trust
     7,000       1,309,280  
              2,626,470  
FINANCIALS - 13.58%
                
Allstate Corporation (The)
     4,000       226,320  
American International Group, Inc.
     11,000       550,110  
Aon plc
     2,500       210,700  
Bank of America Corporation
     76,000       1,307,200  
Bank of New York Mellon Corporation (The)
     11,000       388,190  
BB&T Corporation
     5,500       220,935  
Berkshire Hathaway Inc. - Class B *
     14,000       1,749,580  
Capital One Financial Corporation
     2,500       192,900  
Citigroup, Inc.
     23,000       1,094,800  
Fifth Third Bancorp
     9,000       206,550  
Goldman Sachs Group, Inc. (The)
     3,500       573,475  
Hartford Financial Services Group, Inc. (The)
     4,000       141,080  
JPMorgan Chase & Co.
     22,200       1,347,762  
Loews Corporation
     3,000       132,150  
Marsh & McLennan Companies, Inc.
     3,000       147,900  
MetLife, Inc.
     10,500       554,400  
Morgan Stanley
     16,000       498,720  
PNC Financial Services Group, Inc. (The)
     5,000       435,000  
Prudential Financial, Inc.
     4,000       338,600  
SunTrust Banks, Inc.
     5,000       198,950  
T. Rowe Price Group, Inc.
     2,500       205,875  
Wells Fargo & Company
     21,000       1,044,540  
Weyerhaeuser Company
     4,000       117,400  
              11,883,137  
 
See accompanying notes to schedule of investments.
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - MARCH 31, 2014 (Unaudited)
 
Description
    
No. of
Shares
      
Value
  
HEALTH CARE - 11.65%
                
Abbott Laboratories
     10,000     $ 385,100  
AbbVie Inc.
     6,000       308,400  
Aetna Inc.
     3,000       224,910  
Allergan, Inc.
     3,000       372,300  
Amgen Inc.
     6,000       740,040  
Baxter International, Inc.
     5,700       419,406  
Cardinal Health, Inc.
     4,000       279,920  
Cigna Corporation
     2,000       167,460  
Eli Lilly & Company
     11,500       676,890  
Express Scripts Holding Company *
     6,000       450,540  
Johnson & Johnson
     10,500       1,031,415  
Mallinckrodt public limited company *
     250       15,853  
McKesson Corporation
     2,000       353,140  
Medtronic, Inc.
     8,000       492,320  
Merck & Company, Inc.
     27,000       1,532,790  
Pfizer, Inc.
     31,462       1,010,559  
St. Jude Medical, Inc.
     3,000       196,170  
Stryker Corporation
     3,000       244,410  
Thermo Fisher Scientific Inc.
     3,000       360,720  
UnitedHealth Group Incorporated
     9,000       737,910  
Wellpoint, Inc.
     2,000       199,100  
              10,199,353  
INDUSTRIALS - 8.66%
                
Boeing Company (The)
     3,000       376,470  
Caterpillar Inc.
     4,000       397,480  
CSX Corporation
     8,000       231,760  
Deere & Company
     3,500       317,800  
Emerson Electric Company
     7,000       467,600  
FedEx Corporation
     3,000       397,680  
General Dynamics Corporation
     2,000       217,840  
General Electric Company
     71,000       1,838,190  
Honeywell International Inc.
     7,000       649,320  
Lockheed Martin Corporation
     2,500       408,100  
Norfolk Southern Corporation
     3,000       291,510  
Northrop Grumman Corporation
     2,000       246,760  
Precision Castparts Corporation
     1,500       379,140  
Raytheon Company
     2,000       197,580  
Republic Services, Inc.
     2,000       68,320  
Union Pacific Corporation
     4,500       844,470  
Waste Management, Inc.
     6,000       252,420  
              7,582,440  
INFORMATION TECHNOLOGY - 16.54%
                
Apple Inc.
     5,000       2,683,700  
Cisco Systems, Inc.
     40,000       896,400  
Cognizant Technology Solutions Corporation *
     6,000       303,660  
Corning, Inc.
     12,000       249,840  
eBay Inc. *
     9,000       497,160  
EMC Corporation
     13,000       356,330  
Facebook, Inc. *
     10,000       602,400  
Google Inc. *
     1,000       1,114,510  
Hewlett-Packard Company
     17,000       550,120  
Intel Corporation
     42,000       1,084,020  
International Business Machines Corporation
     7,000       1,347,430  
Micron Technology, Inc.
     7,000       165,620  
Microsoft Corporation
     51,000       2,090,490  
Oracle Corporation
     34,600       1,415,486  
QUALCOMM Incorporated
     11,000       867,460  
Yahoo! Inc. *
     7,000       251,300  
              14,475,926  
 
See accompanying notes to schedule of investments.
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - MARCH 31, 2014 (Unaudited)
 
Description
    
No. of
Shares
      
Value
  
MATERIALS - 2.33%
                
Air Products & Chemicals, Inc.
     1,500     $ 178,560  
Dow Chemical Company (The)
     11,000       534,490  
Ecolab Inc.
     2,000       215,980  
Freeport-McMoRan Copper & Gold Inc.
     8,500       281,095  
International Paper Company
     3,300       151,404  
Newmont Mining Corporation
     4,000       93,760  
PPG Industries, Inc.
     1,000       193,460  
Praxair, Inc.
     3,000       392,910  
              2,041,659  
TELECOMMUNICATION SERVICES - 2.01%
                
AT&T, Inc.
     17,589       616,846  
Verizon Communications, Inc.
     24,000       1,141,680  
              1,758,526  
UTILITIES - 1.48%
                
AES Corporation (The)
     4,600       65,688  
Consolidated Edison, Inc.
     1,500       80,475  
Entergy Corporation
     2,000       133,700  
Exelon Corporation
     7,000       234,920  
FirstEnergy Corp.
     2,000       68,060  
PPL Corporation
     4,000       132,560  
Public Service Enterprises Group, Inc.
     4,000       152,560  
Southern Company (The)
     6,000       263,640  
Xcel Energy Inc.
     5,500       166,980  
              1,298,583  
TOTAL EQUITY SECURITIES (cost - $74,531,852)
             86,360,819  
                 
SHORT-TERM INVESTMENTS - 1.77%
                
MONEY MARKET FUNDS - 1.77%
                
Fidelity Institutional Money Market Government Portfolio - Class I, 0.01%^ (cost - $1,547,380)
     1,547,380       1,547,380  
                 
TOTAL INVESTMENTS - 100.44% (cost - $76,079,232)
             87,908,199  
                 
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.44)%
             (383,916 )
                 
NET ASSETS - 100.00%
           $ 87,524,283  
 
*
Non-income producing security.
^
The rate shown is the 7-day effective yield as of March 31, 2014.
 
See accompanying notes to schedule of investments.
 
 
 
 
CORNERSTONE TOTAL RETURN FUND, INC.
NOTES TO SCHEDULE OF INVESTMENTS
MARCH 31, 2014 (UNAUDITED) 
 
Federal Income Tax Cost: The following information is computed on a tax basis for each item as of March 31, 2014:
 
Cost of portfolio investments
   $ 76,086,357  
Gross unrealized appreciation
   $ 12,643,132  
Gross unrealized depreciation
     (821,290 )
Net unrealized appreciation
   $ 11,821,842  

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 March 31, 2014 in valuing the Fund's investments carried at value:
 
 
 
VALUATION INPUTS
  
INVESTMENTS
IN
SECURITIES
    
OTHER FINANCIAL INSTRUMENTS*
  
             
Level 1 – Quoted Prices
            
  Equity Investments
   $ 86,360,819     $ -  
  Short-Term Investments
     1,547,380       -  
Level 2 – Other Significant Observable Inputs
     -       -  
Level 3 – Significant Unobservable Inputs
     -       -  
Total
   $ 87,908,199     $ -  

*
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 March 31, 2014, 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, 2014.
 
The disclosures for the Fund's fiscal year beginning January 1, 2014 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.
 
In June 2013, FASB issued Accounting Standards Update 2013-08 Financial Services – Investment Companies (Topic 946) – Amendments to the Scope, Measurement and Disclosure Requirements (“ASU 2013-08”) which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013.  ASU 2013-08 sets forth a methodology for determining whether an entity should be characterized as an investment company and prescribes fair value accounting for an investment company’s non-controlling ownership interest in another investment company.  FASB has determined that a fund registered under the Investment Company Act of 1940 automatically meets ASU 2013-08’s criteria for an investment company.  Although still evaluating the potential impacts of ASU 2013-08 to the Fund, the Investment Manager does not expect the adoption of the ASU to have an effect on the Fund.
 
The Fund is exposed to financial market risks, including the valuations of its investment portfolio. During the three months ended March 31, 2014, 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 annual report previously filed with the Securities and Exchange Commission on Form N-CSR on March 4, 2014 with a file number 811-02363.
 
Other information regarding the Fund is available in the Fund’s most recent 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
May 16, 2014
    
       
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 16, 2014
    
       
By (Signature and Title)*
/s/ Frank J. Maresca
  
   
Frank J. Maresca, Treasurer
(Principal Financial Officer)
  
       
Date
May 16, 2014
    
 
* Print the name and title of each signing officer under his or her signature.