ThZeal - The Zeal

N-CSRS 1 t306471.txt CRF OMB APPROVAL ------------------------- OMB Number: 3235-0570 Expires: January 31, 2014 Estimated average burden hours per response: 20.6 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES 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, New York 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: June 30, 2011 ------------------ Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR 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. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS ==================== Cornerstone Total Return Fund, Inc. Semi-Annual Report June 30, 2011 ===================== CONTENTS Portfolio Summary 1 Summary Schedule of Investments 2 Statement of Assets and Liabilities 4 Statement of Operations 5 Statement of Changes in Net Assets 6 Financial Highlights 7 Notes to Financial Statements 8 Results of Annual Meeting of Stockholders 13 Investment Management Agreement Approval Disclosure 14 Description of Dividend Reinvestment Plan 15 Proxy Voting and Portfolio Holdings Information 17 Privacy Policy Notice 18 Summary of General Information 21 Stockholder Information 21 ================================================================================ -------------------------------------------------------------------------------- CORNERSTONE TOTAL RETURN FUND, INC. PORTFOLIO SUMMARY - AS OF JUNE 30, 2011 (UNAUDITED) -------------------------------------------------------------------------------- SECTOR ALLOCATION Percent of Sector Net Assets -------------------------------------------------------------------------------- Information Technology 16.2 -------------------------------------------------------------------------------- Financials 13.2 -------------------------------------------------------------------------------- Energy 11.4 -------------------------------------------------------------------------------- Healthcare 11.1 -------------------------------------------------------------------------------- Consumer Staples 10.8 -------------------------------------------------------------------------------- Industrials 10.2 -------------------------------------------------------------------------------- Closed-End Funds 9.2 -------------------------------------------------------------------------------- Consumer Discretionary 8.8 -------------------------------------------------------------------------------- Materials 3.4 -------------------------------------------------------------------------------- Telecommunication Services 2.8 -------------------------------------------------------------------------------- Utilities 2.7 -------------------------------------------------------------------------------- Other 0.2 -------------------------------------------------------------------------------- TOP TEN HOLDINGS, BY ISSUER Percent of Holding Sector Net Assets -------------------------------------------------------------------------------- 1. Exxon Mobil Corporation Energy 4.0 -------------------------------------------------------------------------------- 2. Wal-Mart Stores, Inc. Consumer Staples 3.0 -------------------------------------------------------------------------------- 3. International Business Machines Corporation Information Technology 2.8 -------------------------------------------------------------------------------- 4. Apple, Inc. Information Technology 2.7 -------------------------------------------------------------------------------- 5. Microsoft Corporation Information Technology 2.5 -------------------------------------------------------------------------------- 6. JPMorgan Chase & Co. Financials 2.5 -------------------------------------------------------------------------------- 7. Eaton Vance Risk-Managed Diversified Equity Income Fund Closed-End Funds 2.2 -------------------------------------------------------------------------------- 8. AT&T, Inc. Telecommunications Service 2.2 -------------------------------------------------------------------------------- 9. Wells Fargo & Company Financials 2.2 -------------------------------------------------------------------------------- 10. Eaton Vance Tax-Managed Buy-Write Opportunities Fund Closed-End Funds 2.1 -------------------------------------------------------------------------------- ================================================================================ 1 -------------------------------------------------------------------------------- CORNERSTONE TOTAL RETURN FUND, INC. SUMMARY SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED) -------------------------------------------------------------------------------- No. of Description Shares Value -------------------------------------------------------------------------------- EQUITY SECURITIES - 99.82% CLOSED-END FUNDS - 9.19% CORPORATE DEBT FUNDS INVESTMENT GRADE-RATED - 0.63% Total Corporate Debt Funds Investment Grade-Rated (a) $ 156,140 ----------- GLOBAL INCOME - 0.53% Total Global Income (a) 131,526 ----------- HIGH CURRENT YIELD (LEVERAGED) - 0.26% Total High Current Yield (Leveraged) (a) 65,088 ----------- OPTION ARBITRAGE/OPTIONS STRATEGIES - 7.46% Eaton Vance Risk-Managed Diversified Equity Income Fund 43,700 551,494 Eaton Vance Tax-Managed Buy-Write Income Fund 13,000 179,010 Eaton Vance Tax-Managed Buy-Write Opportunities Fund 40,300 513,019 Eaton Vance Tax-Managed Diversified Equity Income Fund 41,085 448,648 Other Option Arbitrage/ Options Strategies (a) 148,488 ----------- 1,840,659 ----------- SECTOR EQUITY - 0.31% Total Sector Equity (a) 75,143 ----------- TOTAL CLOSED-END FUNDS 2,268,556 ----------- No. of Description Shares Value -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY - 8.83% DIRECTV Group, Inc. (The) - Class A * 4,000 $ 203,280 Home Depot, Inc. (The) 5,000 181,100 McDonald's Corporation 2,000 168,640 Time Warner, Inc. 4,666 169,702 Walt Disney Company (The) 5,000 195,200 Other Consumer Discretionary (a) 1,261,142 ----------- 2,179,064 ----------- CONSUMER STAPLES - 10.79% Coca-Cola Company (The) 5,000 336,450 PepsiCo, Inc. 3,000 211,290 Philip Morris International, Inc. 5,000 333,850 Procter & Gamble Company (The) 6,972 443,210 Wal-Mart Stores, Inc. 14,000 743,960 Other Consumer Staples (a) 592,911 ----------- 2,661,671 ----------- ENERGY - 11.44% Apache Corporation 2,000 246,780 Chevron Corporation 3,500 359,940 ConocoPhillips 5,000 375,950 Exxon Mobil Corporation 12,000 976,560 Occidental Petroleum Corporation 4,000 416,160 Schlumberger Ltd. 3,000 259,200 Other Energy (a) 188,000 ----------- 2,822,590 ----------- -------------------------------------------------------------------------------- See accompanying notes to financial statements. 2 -------------------------------------------------------------------------------- CORNERSTONE TOTAL RETURN FUND, INC. SUMMARY SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED) (CONCLUDED) -------------------------------------------------------------------------------- No. of Description Shares Value -------------------------------------------------------------------------------- FINANCIALS - 13.14% American Express Company 4,000 $ 206,800 Goldman Sachs Group, Inc. (The) 2,500 332,725 JPMorgan Chase & Co. 15,200 622,288 Prudential Financial, Inc. 2,500 158,975 Travelers Companies, Inc. (The) 3,092 180,511 Wells Fargo & Company 19,000 533,140 Other Financials (a) 1,209,747 ----------- 3,244,186 ----------- HEALTHCARE - 11.07% Abbott Laboratories 3,000 157,860 Amgen, Inc. * 3,000 175,050 Bristol-Myers Squibb Company 6,000 173,760 Cigna Corporation 3,000 154,290 Johnson & Johnson 6,000 399,120 McKesson Corporation 2,500 209,125 Medtronic, Inc. 4,500 173,385 WellPoint, Inc. 2,500 196,925 Other Healthcare (a) 1,092,134 ----------- 2,731,649 ----------- INDUSTRIALS - 10.23% 3M Company 2,500 237,125 General Electric Company 24,000 452,640 Lockheed Martin Corporation 2,500 202,425 Precision Castparts Corporation 1,000 164,650 Union Pacific Corporation 2,500 261,000 United Technologies Corporation 2,500 221,275 Other Industrials (a) 984,181 ----------- 2,523,296 ----------- INFORMATION TECHNOLOGY - 16.19% Apple, Inc. * 2,000 671,340 Google, Inc. - Class A * 1,000 506,380 Hewlett-Packard Company 8,000 291,200 Intel Corporation 17,000 376,720 International Business Machines Corporation 4,000 686,201 Microsoft Corporation 24,000 624,000 Oracle Corporation 12,600 414,666 No. of Description Shares Value -------------------------------------------------------------------------------- INFORMATION TECHNOLOGY (CONTINUED) Total Information Technology (a) $ 424,600 ----------- 3,995,107 ----------- MATERIALS - 3.40% E.I. Du Pont de Nemours & Company 4,800 259,440 Freeport-McMoRan Copper & Gold, Inc. 5,000 264,500 Other Materials (a) 315,888 ----------- 839,828 ----------- REAL ESTATE INVESTMENT TRUST - 0.01% Total Real Estate Investment Trust (a) 1,860 ----------- TELECOMMUNICATION SERVICES - 2.83% AT&T, Inc. 17,089 536,765 CenturyLink, Inc. 4,000 161,720 ----------- 698,485 ----------- UTILITIES - 2.70% Total Utilities (a) 665,733 ----------- TOTAL EQUITY SECURITIES (cost - $22,354,946) 24,632,025 SHORT-TERM INVESTMENTS - 0.53% MONEY MARKET SECURITY - 0.53% Fidelity Institutional Money Market Government Portfolio - Class I (cost - $ 131,651) 131,651 131,651 ----------- TOTAL INVESTMENTS - 100.35% (cost - $22,486,597) 24,763,676 ----------- LIABILITIES IN EXCESS OF OTHER ASSETS - (0.35)% (86,045) ----------- NET ASSETS - 100.00% $24,677,631 =========== -------- (a) Represents issuers not identified as a top 50 holding in terms of market value and issues or issuers not exceeding 1% of net assets individually or in the aggregate, respectively, as of June 30, 2011. * Non-income producing security. ================================================================================ See accompanying notes to financial statements. 3 -------------------------------------------------------------------------------- CORNERSTONE TOTAL RETURN FUND, INC. STATEMENT OF ASSETS AND LIABILITIES - JUNE 30, 2011 (UNAUDITED) -------------------------------------------------------------------------------- ASSETS Investments, at value (cost - $22,486,597) $ 24,763,676 Receivables: Investment sold 88,035 Dividends 34,565 Prepaid expenses 3,118 ----------- Total Assets 24,889,394 ----------- LIABILITIES Payables: Securities purchased 94,475 Investment management fees 25,024 Directors' fees 14,024 Administration fees 2,273 Other accrued expenses 75,967 ----------- Total Liabilities 211,763 ----------- NET ASSETS (applicable to 3,922,871 shares of common stock outstanding) $ 24,677,631 ============ NET ASSET VALUE PER SHARE ($24,677,631 (division) 3,922,871) $ 6.29 ============ NET ASSETS CONSISTS OF Common stock, $0.01 par value; 3,922,871 shares issued and outstanding (15,000,000 shares authorized) $ 3,923 Paid-in capital 26,263,707 Accumulated net realized loss on investments (3,867,078) Net unrealized appreciation in value of investments 2,277,079 ----------- Net assets applicable to shares outstanding $ 24,677,631 ============ -------------------------------------------------------------------------------- See accompanying notes to financial statements. 4 -------------------------------------------------------------------------------- CORNERSTONE TOTAL RETURN FUND, INC. STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 2011 (UNAUDITED) -------------------------------------------------------------------------------- INVESTMENT INCOME Income: Dividends from non-affiliated investments $ 325,461 Dividends from affiliated investments 1,782 ---------- Total Investment Income 327,243 ---------- Expenses: Investment management fees 126,898 Directors' fees 27,273 Legal and audit fees 21,722 Printing 18,348 Accounting fees 17,536 Transfer agent fees 14,870 Administration fees 14,774 Custodian fees 3,260 Insurance 2,174 Miscellaneous 1,488 Stock exchange listing fees 1,470 ---------- Total Expenses 249,813 ---------- Net Investment Income 77,430 ---------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized gain from unaffilated investments 132,246 Net realized loss from affiliated investments (1,695) Net realized loss from foreign currency related transactions (431) Capital gain distributions from affiliated regulated investment companies 1,188 Net change in unrealized appreciation in value of investments 938,650 ---------- Net realized and unrealized gain on investments 1,069,958 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,147,388 ========== -------------------------------------------------------------------------------- See accompanying notes to financial statements. 5 -------------------------------------------------------------------------------- CORNERSTONE TOTAL RETURN FUND, INC. STATEMENT OF CHANGES IN NET ASSETS -------------------------------------------------------------------------------- For the Six For the Months Ended Year Ended June 30, 2011 December 31, (Unaudited) 2010 ------------- ------------ INCREASE/(DECREASE) IN NET ASSETS Operations: Net investment income/(loss) $ 77,430 $ (8,125) Net realized gain/(loss) from investments 131,308 (74,939) Net change in unrealized appreciation in value of investments 938,650 2,089,762 ----------- ----------- Net increase in net assets resulting from operations 1,147,388 2,006,698 ----------- ----------- Dividends and distributions to stockholders: Net investment income (76,999) -- Return-of-capital (2,530,433) (4,164,904) ----------- ----------- Total dividends and distributions to stockholders (2,607,432) (4,164,904) ----------- ----------- Common stock transactions: Proceeds from rights offering of 0 and 1,006,384 shares of newly issued common stock, respectively -- 7,275,425 Offering expenses associated with rights offering (6,833) (79,196) Proceeds from 25,913 and 52,016 shares newly issued in reinvestment of dividends and distributions, respectively 231,288 475,258 ----------- ----------- Net increase in net assets from captial stock transactions 224,455 7,671,487 ----------- ----------- Total increase/(decrease) in net assets (1,235,589) 5,513,281 ----------- ----------- NET ASSETS Beginning of period 25,913,220 20,399,939 ----------- ----------- End of period $24,677,631 $25,913,220 =========== =========== -------------------------------------------------------------------------------- See accompanying notes to financial statements. 6

-------------------------------------------------------------------------------- See accompanying notes to financial statements. 7 -------------------------------------------------------------------------------- CORNERSTONE TOTAL RETURN FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -------------------------------------------------------------------------------- NOTE A. ORGANIZATION Cornerstone Total Return Fund, Inc. (the "Fund") was incorporated in New York on March 16, 1973 and commenced investment operations on May 15, 1973. Its investment objective is to seek capital appreciation with current income as a secondary objective. The Fund is registered under the Investment Company Act of 1940, as amended, as a closed-end, diversified management investment company. NOTE B. SIGNIFICANT ACCOUNTING POLICIES MANAGEMENT ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make certain estimates and assumptions that may affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. SUBSEQUENT EVENTS: The Fund has evaluated the need for additional disclosures and/or adjustments resulting from subsequent events through the date its financial statements were issued. Based on this evaluation, no additional disclosures or adjustments were required to such financial statements. PORTFOLIO VALUATION: Investments are stated at value in the accompanying financial statements. Readily marketable portfolio securities listed on the NYSE are valued, except as indicated below, at the last sale price reflected on the consolidated tape at the close of the NYSE on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. If no bid or asked prices are quoted on such day or if market prices may be unreliable because of events occurring after the close of trading, then the security is valued by such method as the Board of Directors shall determine in good faith to reflect its fair market value. Readily marketable securities not listed on the NYSE but listed on other domestic or foreign securities exchanges are valued in a like manner. Portfolio securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined as reflected on the consolidated tape at the close of the exchange representing the principal market for such securities. Securities trading on the Nasdaq Stock Market, Inc. ("NASDAQ") are valued at the closing price. Readily marketable securities traded in the over-the counter market, including listed securities whose primary market is believed by Cornerstone Advisors, Inc. (the "Investment Manager" or "Cornerstone") to be over-the-counter, are valued at the mean of the current bid and asked prices as reported by the NASDAQ or, in the case of securities not reported by the NASDAQ or a comparable source, as the Board of Directors deem appropriate to reflect their fair market value. Where securities are traded on more than one exchange and also over-the-counter, the securities will generally be valued using the quotations the Board of Directors believes reflect most closely the value of such securities. At June 30, 2011 the Fund held no securities valued in good faith by the Board of Directors. The net asset value per share of the Fund is calculated weekly and on the last business day of the month with the exception of those days on which the NYSE Amex LLC is closed. The Fund is exposed to financial market risks, including the valuations of its investment portfolio. For the six months ended June 30, 3011, the Fund did not engage in derivative instruments and other hedging activities. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are accounted for on the trade date. The cost of investments sold is determined by use of the specific identification method for both financial reporting and income tax purposes. Interest income is recorded on an accrual basis; dividend income is recorded on the ex-dividend date. -------------------------------------------------------------------------------- 8 -------------------------------------------------------------------------------- CORNERSTONE TOTAL RETURN FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- RISKS ASSOCIATED WITH INVESTMENTS IN OTHER CLOSED-END FUNDS: Closed-end investment companies are subject to the risks of investing in the underlying securities. The Fund, as a holder of the securities of the closed-end investment company, will bear its pro rata portion of the closed-end investment company's expenses, including advisory fees. These expenses are in addition to the direct expenses of the Fund's own operations. TAXES: No provision is made for U.S. federal income or excise taxes as it is the Fund's intention to continue to qualify as a regulated investment company and to make the requisite distributions to its stockholders which will be sufficient to relieve it from all or substantially all U.S. federal income and excise taxes. The Accounting for Uncertainty in Income Taxes Topic of the FASB Accounting Standards Codification defines the threshold for recognizing the benefits of tax-return positions in the financial statements as "more-likely-than-not" to be sustained by the taxing authority and requires measurement of a tax position meeting the more-likely-than-not criterion, based on the largest benefit that is more than 50 percent likely to be realized. The Fund's policy is to classify interest and penalties associated with underpayment of federal and state income taxes, if any, as income tax expense on its Statement of Operations. As of June 30, 2011, the Fund does not have any interest or penalties associated with the underpayment of any income taxes. Management reviewed any uncertain tax positions for open tax years 2007 through 2010, and for the period ended June 30, 2011. There was no material impact to the financial statements. DISTRIBUTIONS TO STOCKHOLDERS: Effective January 2002, the Fund initiated a fixed, monthly distribution to stockholders. On November 29, 2006, this distribution policy was updated to provide for the annual resetting of the monthly distribution amount per share based on the Fund's net asset value on the last business day in each October. The terms of the distribution policy will be reviewed and approved at least annually by the Fund's Board of Directors and can be modified at their discretion. To the extent that these distributions exceed the current earnings of the Fund, the balance will be generated from sales of portfolio securities held by the Fund, which will either be short-term or long-term capital gains or a tax-free return-of-capital. To the extent these distributions are not represented by net investment income and capital gains, they will not represent yield or investment return on the Fund's investment portfolio. The Fund plans to maintain this distribution policy even if regulatory requirements would make part of a return-of-capital, necessary to maintain the distribution, taxable to stockholders and to disclose that portion of the distribution that is classified as ordinary income. Although it has no current intention to do so, the Board may terminate this distribution policy at any time and such termination may have an adverse effect on the market price for the Fund's common shares. The Fund determines annually whether to distribute any net realized long-term capital gains in excess of net realized short-term capital losses, including capital loss carryovers, if any. To the extent that the Fund's taxable income in any calendar year exceeds the aggregate amount distributed pursuant to this distribution policy, an additional distribution may be made to avoid the payment of a 4% U.S. federal excise tax, and to the extent that the aggregate amount distributed in any calendar year exceeds the Fund's taxable income, the amount of that excess may constitute a return-of-capital for tax purposes. A return- of-capital distribution reduces the cost basis of an investor's shares in the Fund. Dividends and distributions to stockholders are recorded by the Fund on the ex-dividend date. MANAGED DISTRIBUTION RISK: Under the managed distribution policy, the Fund makes monthly distributions to stockholders at a rate that may include periodic distributions of its net income and net capital gains, ("Net Earnings"), or from return-of-capital. If, for any fiscal year where total cash distributions exceeded Net Earnings (the "Excess"), the Excess would decrease the Fund's total assets and, as a result, would have the likely effect of increasing the Fund's expense ratio. There is a risk that the total Net Earnings from the Fund's portfolio would not be great enough to offset the amount of cash -------------------------------------------------------------------------------- 9 -------------------------------------------------------------------------------- CORNERSTONE TOTAL RETURN FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- distributions paid to Fund stockholders. If this were to be the case, the Fund's assets would be depleted, and there is no guarantee that the Fund would be able to replace the assets. In addition, in order to make such distributions, the Fund may have to sell a portion of its investment portfolio at a time when independent investment judgment might not dictate such action. Furthermore, such assets used to make distributions will not be available for investment pursuant to the Fund's investment objective. NOTE C. FAIR VALUE 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. o Level 1 - quoted unadjusted prices for identical instruments in active markets to which the Fund has access at the date of measurement. o 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. o 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 June 30, 2011 in valuing the Fund's investments carried at value: Investments in Other Financial Valuation Inputs Securities Instruments* -------------------------------------------------------------------------------- Level 1 - Quoted Prices Equity Investments $ 24,632,025 -- Short-Term Investments 131,651 -- Level 2 - Other Significant Observable Inputs -- -- Level 3 - Significant Unobservable Inputs -- -- ------------ ------------ Total $ 24,763,676 -- ============ ============ ----------- * Other financial instruments include futures, forwards and swap contracts. The breakdown of the Fund's investments into major categories is disclosed in its Summary Schedule of Investments. During the six months ended June 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 June 30, 2011. The disclosures for the Fund's fiscal year beginning January 1, 2011 relate to presenting separately any Level 3 purchases, sales, issuances and settlements on a gross basis instead of one net amount. Management continues 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 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 -------------------------------------------------------------------------------- 10 -------------------------------------------------------------------------------- CORNERSTONE TOTAL RETURN FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- annual periods beginning after December 15, 2011 and is applied prospectively. Management is currently evaluating the impact ASU No. 2011-04 may have on financial statement disclosures. NOTE D. AGREEMENTS Certain officers of the Fund are also officers of Cornerstone or Ultimus Fund Solutions, LLC ("Ultimus"). Such officers are paid no fees by the Fund for serving as officers of the Fund. INVESTMENT MANAGEMENT AGREEMENT Cornerstone serves as the Fund's Investment Manager with respect to all investments. As compensation for its investment management services, Cornerstone receives from the Fund, an annual fee, calculated weekly and paid monthly, equal to 1.00% of the Fund's average weekly net assets. For the six months ended June 30, 2011, Cornerstone earned $126,898 for investment management services. ADMINISTRATION AGREEMENT Under the terms of the Administration Agreement, Ultimus supplies executive, administrative and regulatory services for the Fund. Ultimus supervises the preparation of reports to stockholders for the Fund, reports to and filings with the Securities and Exchange Commission and materials for meetings of the Board of Directors. For these services, the Fund pays Ultimus a monthly fee at an annual rate of 0.100% of its average daily net assets up to $250 million and 0.075% of such assets in excess of $250 million, subject to an annual minimum fee of $50,000. Ultimus has agreed to discount the annual minimum fee to $30,000 and such discount will remain in place until amended fee is agreed upon. FUND ACCOUNTING AGREEMENT Under the terms of the Fund Accounting Agreement, Ultimus calculates the net asset value per share and maintains the financial books and records of the Fund. For the performance of these services, the Fund pays Ultimus a base fee of $2,500 per month plus an asset based fee of 0.010% of the first $500 million of average daily net assets and 0.005% of such assets in excess of $500 million. NOTE E. AFFILIATED INVESTMENTS Transactions in affiliates for the six months ended June 30, 2011 were as follows: ADAMS PETROLEUM & EXPRESS RESOURCES COMPANY CORPORATION ----------- ------------ Market value at beginning of period $ 636,768 $ 81,036 ========= ======== Shares at beginning of period 59,400 3,000 Shares purchased during the period -- -- Shares sold during the period 59,400 3,000 --------- -------- Shares at end of period -- -- ========= ======== Dividend income earned during the period $ 1,782 $ -- ========= ======== Cost of purchases during the period -- -- Proceeds from sales during the period $ 669,479 $ 84,586 Net realized gain/(loss) during the period $ (23,211) $ 21,516 Capital gain distribution $ 1,188 -- Market value at end of period -- -- NOTE F. INVESTMENT IN SECURITIES For the six months ended June 30, 2011, purchases and sales of securities, other than short-term investments, were $3,173,877 and $3,996,289, respectively. NOTE G. SHARES OF COMMON STOCK The Fund has 15,000,000 shares of common stock authorized and 3,922,871 shares outstanding at June 30, 2011. Transactions in common stock for the six months ended June 30, 2011 were as follows: -------------------------------------------------------------------------------- 11 -------------------------------------------------------------------------------- CORNERSTONE TOTAL RETURN FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED) -------------------------------------------------------------------------------- Shares at beginning of period 3,896,958 Shares newly issued in reinvestment of dividends and distributions 25,913 --------- Shares at end of period 3,922,871 ========= NOTE H. SHARE REPURCHASE PROGRAM As has been done in the past to enhance stockholder value, pursuant to Section 23 of the Investment Company Act of 1940, as amended, the Fund may again in the future purchase shares of its common stock on the open market from time to time, at such times, and in such amounts as may be deemed advantageous to the Fund. Nothing herein shall be considered a commitment to purchase such shares. The Fund had no repurchases during the six months ended June 30, 2011. No limit has been placed on the number of shares to be repurchased by the Fund other than those imposed by federal securities laws. To the extent such purchases are made they will be in accordance with federal securities laws, with shares repurchased held in treasury for future use by the Fund. NOTE I. FEDERAL INCOME TAXES Income and capital gains distributions are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differing treatments of losses deferred due to wash sales and Post-October losses (as later defined), and excise tax regulations. The tax character of dividends and distributions paid to stockholders during the year ended December 31, 2010 for the Fund represented entirely of return-of-capital in the amount of $4,164,904. Accounting principles generally accepted in the United States of America require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. Under current tax law, certain capital losses realized after October 31 within a taxable year may be deferred and treated as occurring on the first day of the following tax year ("Post-October losses"). The Fund incurred no such loss. At December 31, 2010, the Fund had a capital loss carryforward for U.S. federal income tax purposes of $3,980,615, of which $425,706 expires in 2011, $358,321 expires in 2012, $420,772 expires in 2013, $57,090 expires in 2014, $2,382,884 expires in 2016, $260,903 expires in 2017 and $74,939 expires in 2018. Under the Regulated Investment Company Modernization Act of 2010 (the "Act"), net capital losses recognized after December 31, 2010, may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Under the law in effect prior to the Act, pre-enactment net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses. At June 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 $22,486,597, $3,563,042, $(1,285,963), and $2,277,079, respectively. -------------------------------------------------------------------------------- 12 RESULTS OF ANNUAL MEETING OF STOCKHOLDERS (UNAUDITED) On April 19, 2011, the Annual Meeting of Stockholders of Cornerstone Total Return Fund, Inc. was held and the following matters were voted upon based on 3,901,788 shares of common stock outstanding on February 16, 2011: (1) To approve the re-election of six directors until the 2012 Annual Meeting. Name of Directors For Withheld ------------------- ---------- ---------- Ralph W. Bradshaw 3,163,884 117,792 Thomas H. Lenagh 3,157,091 124,585 Edwin Meese III 3,123,598 158,078 Scott B. Rogers 3,162,990 118,686 Andrew A. Strauss 3,156,165 125,511 Glenn W. Wilcox, Sr. 3,159,664 122,012 -------------------------------------------------------------------------------- 13 INVESTMENT MANAGEMENT AGREEMENT APPROVAL DISCLOSURE (UNAUDITED) The Board of Directors including, the Independent Directors, (the "Board") of Cornerstone Total Return Fund, Inc. (the "Fund") considers the approval of the continuation of the Investment Management Agreement (the "Agreement") between Cornerstone Advisors, Inc. (the "Investment Manager") and the Fund on an annual basis. The most recent approval of the continuation of the Agreement occurred at an in person meeting of the Board held on February 11, 2011. The Board requested and received extensive materials and information from the Investment Manager to assist them in considering the approval of the continuance of the Agreement. Based on their review of the materials and information and discussions with management of the Investment Manager, the Board determined that the approval of the continuation of the Agreement was consistent with the best interests of the Fund and its stockholders, and would enable the Fund to continue to receive high quality services at a cost that is appropriate, reasonable, and in the best interests of the Fund and its stockholders. The Board made these determinations on the basis of the following factors, among others: (1) the nature and quality of the services provided by the Investment Manager; (2) the cost to the Investment Manager for providing such services, with special attention to the Investment Manager's profitability (and whether the Investment Manager realizes any economies of scale); (3) the direct and indirect benefits received by the Investment Manager from its relationship with the Fund and the other investment companies advised by the Investment Manager; and (4) comparative information as to the management fees, expense ratios and performance of other similarly situated closed- end investment companies. The materials provided by the Investment Manager described the services provided by the Investment Manager to the Fund and included an overview of the Investment Manager's investment philosophy, management style and plan, including regarding the Investment Manager's extensive knowledge and experience in the closed-end fund industry. The Board also discussed the knowledge of the Investment Manager with respect to managing the Fund's monthly distribution policy and the extent to which such policy contributes to the market's positive valuation of the Fund. The Board also reviewed and discussed a comparison of the Fund's performance with comparable closed- end funds and a comparison of the Fund's expense ratios and management fees with those comparable funds. Additionally, the Investment Manager presented an analysis of its profitability based on its contractual relationship with the Fund and the other investment companies advised by the Investment Manager. The Board carefully evaluated this information, taking into consideration many factors including, the overall high quality of the personnel, operations, financial condition, investment management capabilities, methodologies, and performance of the Investment Manager. The Board was advised by independent legal counsel with respect to its deliberations and its duties when considering the Agreement's continuance. Based on its review of the information requested and provided, the Board determined that the management fees payable to the Investment Manager under the Agreement are fair and reasonable in light of the services to be provided, the performance of the Fund, the profitability of the Investment Manager's relationship with the Fund, the comparability of the proposed fee to fees paid by closed-end funds in the Fund's peer group, and the level of quality of investment management personnel. The Board determined that the Agreement is consistent with the best interests of the Fund and its stockholders, and enables the Fund to receive high quality services at a cost that is appropriate, reasonable, and in the best interests of the Fund and its stockholders. Accordingly, in light of the above considerations and such other factors and information it considered relevant, the Board by a unanimous vote (including a separate vote of all the Independent Directors present in person at the meeting) approved the continuance of the Agreement with respect to the Fund. -------------------------------------------------------------------------------- 14 DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED) Cornerstone Total Return Fund, Inc. (the "Fund") operates a Dividend Reinvestment Plan (the "Plan"), sponsored and administered by American Stock Transfer & Trust Company, LLC (the "Agent"), pursuant to which the Fund's income dividends or capital gains or other distributions (each, a "Distribution" and collectively, "Distributions"), net of any applicable U.S. withholding tax, are reinvested in shares of the Fund. Stockholders automatically participate in the Fund's Plan, unless and until an election is made to withdraw from the Plan on behalf of such participating stockholder. Stockholders who do not wish to have Distributions automatically reinvested should so notify the Agent at P.O. Box 922, Wall Street Station, New York, New York 10269-0560. Under the Plan, the Fund's Distributions to stockholders are reinvested in full and fractional shares as described below. When the Fund declares a Distribution the Agent, on the stockholder's behalf, will (i) receive additional authorized shares from the Fund either newly issued or repurchased from stockholders by the Fund and held as treasury stock ("Newly Issued Shares") or (ii) purchase outstanding shares on the open market, on the NYSE Amex LLC or elsewhere, with cash allocated to it by the Fund ("Open Market Purchases"). The method for determining the number of Newly Issued Shares received when Distributions are reinvested will be determined by dividing the amount of the Distribution either by the Fund's last reported net asset value per share or by a price equal to the average closing price of the Fund over the five trading days preceding the payment date of the Distribution, whichever is lower. However, if the last reported net asset value of the Fund's shares is higher than its market price (i.e., the Fund is selling at a discount), shares may be acquired by the Agent in Open Market Purchases and allocated to the reinvesting stockholders based on the average cost of such Open Market Purchases. Whenever the Fund declares a Distribution and the last reported net asset value of the Fund's shares is higher than its market price, the Agent will apply the amount of such Distribution payable to Plan participants of the Fund in Fund shares (less such Plan participant's pro rata share of brokerage commissions incurred with respect to Open Market Purchases in connection with the reinvestment of such Distribution) to the purchase on the open market of Fund shares for such Plan participant's account. Such purchases will be made on or after the payable date for such Distribution, and in no event more than 30 days after such date except where temporary curtailment or suspension of purchase is necessary to comply with applicable provisions of federal securities laws. The Agent may aggregate a Plan participant's purchases with the purchases of other Plan participants, and the average price (including brokerage commissions) of all shares purchased by the Agent shall be the price per share allocable to each Plan participant. Registered stockholders who do not wish to have their Distributions automatically reinvested should so notify the Fund in writing. If a stockholder has not elected to receive cash Distributions and the Agent does not receive notice of an election to receive cash Distributions prior to the record date of any Distribution, the stockholder will automatically receive such Distributions in additional shares. Participants in the Plan may withdraw from the Plan by providing written notice to the Agent at least 30 days prior to the applicable Distribution payment date. When a Participant withdraws from the Plan, or upon suspension or termination of the Plan at the sole discretion of the Fund's Board of Directors, certificates for whole shares credited to his or her account under the Plan will, upon request, be issued. Whether or not a participant requests that certificates for whole shares be issued, a cash payment will be made for any fraction of a share credited to such account. -------------------------------------------------------------------------------- 15 DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED) (CONCLUDED) The Agent will maintain all stockholder accounts in the Plan and furnish written confirmations of all transactions in the accounts, including information needed by stockholders for personal and tax records. The Agent will hold shares in the account of the Plan participant in non-certificated form in the name of the participant, and each stockholder's proxy will include those shares purchased pursuant to the Plan. Each participant, nevertheless, has the right to receive certificates for whole shares owned. The Agent will distribute all proxy solicitation materials to participating stockholders. In the case of stockholders, such as banks, brokers or nominees, that hold shares for others who are beneficial owners participating in the Plan, the Agent will administer the Plan on the basis of the number of shares certified from time to time by the record stockholder as representing the total amount of shares registered in the stockholder's name and held for the account of beneficial owners participating in the Plan. Neither the Agent nor the Fund shall have any responsibility or liability beyond the exercise of ordinary care for any action taken or omitted pursuant to the Plan, nor shall they have any duties, responsibilities or liabilities except such as expressly set forth herein. Neither shall they be liable hereunder for any act done in good faith or for any good faith omissions to act, including, without limitation, failure to terminate a participants account prior to receipt of written notice of his or her death or with respect to prices at which shares are purchased or sold for the participants account and the terms on which such purchases and sales are made, subject to applicable provisions of the federal securities laws. The automatic reinvestment of Distributions will not relieve participants of any federal, state or local income tax that may be payable (or required to be withheld) on such Distributions. The Fund reserves the right to amend or terminate the Plan. There is no direct service charge to participants with regard to purchases in the Plan. All correspondence concerning the Plan should be directed to the Agent at P.O. Box 922, Wall Street Station, New York, New York 10269-0560. Certain transactions can be performed online at www.amstock.com or by calling the toll free number 888-556-0422. -------------------------------------------------------------------------------- 16 PROXY VOTING AND PORTFOLIO HOLDINGS INFORMATION (UNAUDITED) Information regarding how Cornerstone Total Return Fund, Inc. (the "Fund") voted proxies related to its portfolio securities during the 12-month period ended June 30 of each year as well as the policies and procedures that the Fund uses to determine how to vote proxies relating to its portfolio securities are available by calling (513) 326-3597 or on the website of the Securities and Exchange Commission, http://www.sec.gov. This report incorporates a Summary Schedule of Investments for the Fund. A complete Schedule of Investments for the Fund may be obtained free of charge by contacting the Fund at (513) 326-3597. The Fund files a complete schedule of its portfolio holdings for the first and third quarters of its fiscal year with the SEC on Form N-Q. The Fund's Forms N-Q is available on the SEC's website at http://www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the SEC's Public Reference Room may be obtained by calling (202) 551-8090. -------------------------------------------------------------------------------- 17 PRIVACY POLICY (UNAUDITED) -------------------------------------------------------------------------------- FACTS WHAT DOES CORNERSTONE TOTAL RETURN FUND, INC. (THE "FUND") DO WITH YOUR PERSONAL INFORMATION? -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Why? Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- What? The types of personal information we, and our service providers, on our behalf, collect and share depend on the product or service you have with us. This information can include: o Social Security number o account balances o account transactions o transaction history o wire transfer instructions o checking account information When you are no longer our customer, we continue to share your information as described in this notice. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- How? All financial companies need to share customers' personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers ' personal information; the reasons the Fund, and our service providers, on our behalf, choose to share; and whether you can limit this sharing. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 18 PRIVACY POLICY (UNAUDITED) (CONTINUED) Reasons we can share your Does the Cornerstone Can you limit personal information Fund share? this sharing? -------------------------------------------------------------------------------- FOR OUR EVERYDAY BUSINESS PURPOSES - Yes No such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus -------------------------------------------------------------------------------- FOR OUR MARKETING PURPOSES - to No We don't share offer our products and services to you -------------------------------------------------------------------------------- FOR JOINT MARKETING WITH OTHER No We don't share FINANCIAL COMPANIES -------------------------------------------------------------------------------- FOR OUR AFFILIATES' EVERYDAY BUSINESS Yes No PURPOSES - information about your transactions and experiences -------------------------------------------------------------------------------- FOR OUR AFFILIATES' EVERYDAY BUSINESS No We don't share PURPOSES - information about your creditworthiness -------------------------------------------------------------------------------- FOR OUR AFFILIATES TO MARKET TO YOU No We don't share -------------------------------------------------------------------------------- FOR NONAFFILIATES TO MARKET TO YOU No We don't share -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- QUESTIONS? Call (513) 326-3597. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- WHAT WE DO -------------------------------------------------------------------------------- WHO IS PROVIDING THIS NOTICE? Cornerstone Total Return Fund, Inc. (the "Fund") -------------------------------------------------------------------------------- HOW DOES THE FUND AND THE FUND'S To protect your personal information from SERVICE PROVIDERS, ON THE FUND'S unauthorized access and use, we and BEHALF PROTECT MY PERSONAL our service providers use security measures INFORMATION? that comply with federal law. These measures include computer safeguards and secured files and buildings. -------------------------------------------------------------------------------- HOW DOES THE FUND AND THE FUND'S We collect your personal information, for SERVICE PROVIDERS, ON THE FUND'S example, when you: BEHALF COLLECT MY PERSONAL INFORMATION? o open an account o provide account information o give us your contact information o make a wire transfer We also collect your information from others, such as credit bureaus, affiliates, or other companies. -------------------------------------------------------------------------------- 19 PRIVACY POLICY (UNAUDITED) (CONCLUDED) -------------------------------------------------------------------------------- WHY CAN'T I LIMIT ALL SHARING? Federal law gives you the right to limit only o sharing for affiliates' everyday business purposes - information about your creditworthiness o affiliates from using your information to market to you o sharing for nonaffiliates to market to you State laws and individual companies may give you additional rights to limit sharing. -------------------------------------------------------------------------------- DEFINITIONS -------------------------------------------------------------------------------- AFFILIATES Companies related by common ownership or control. They can be financial and nonfinancial companies. o CORNERSTONE ADVISORS, INC. -------------------------------------------------------------------------------- NONAFFILIATES Companies not related by common ownership or control. They can be financial and nonfinancial companies. o THE FUND DOES NOT SHARE WITH NONAFFILIATES, SO THEY CAN MARKET TO YOU. -------------------------------------------------------------------------------- JOINT MARKETING A formal agreement between nonaffiliated financial companies that together market financial products or services to you. o THE FUND DOES NOT JOINTLY MARKET. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 20 SUMMARY OF GENERAL INFORMATION (UNAUDITED) Cornerstone Total Return Fund, Inc. is a closed-end, diversified investment company whose shares trade on the NYSE Amex LLC. Its investment objective is to seek capital appreciation with current income as a secondary objective. The Fund is managed by Cornerstone Advisors, Inc. STOCKHOLDER INFORMATION (UNAUDITED) The Fund is listed on the NYSE Amex LLC (symbol "CRF"). The previous week's net asset value per share, market price, and related premium or discount are available on THE WALL STREET JOURNAL website at http://online.wsj.com/mdc/public/page/2_3040-CEF33.html under the designation "Cornerstone Total Return (CRF)" and on the BARRON'S website at http://online.barrons.com/mdc/public/page/2_3040-CEF33.html under the same designation. Such information is available weekly and may be obtained by contacting the Fund at the general inquiry phone number. -------------------------------------------------------------------------------- NOTICE IS HEREBY GIVEN IN ACCORDANCE WITH SECTION 23(C) OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, THAT CORNERSTONE TOTAL RETURN FUND, INC. MAY FROM TIME TO TIME PURCHASE SHARES OF ITS CAPITAL STOCK IN THE OPEN MARKET. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- This report, including the financial statements herein, is sent to the stockholders of the Fund for their information. The financial information included herein is taken from the records of the Fund without examination by the independent registered public accountants who do not express an opinion thereon. It is not a prospectus, circular or representation intended for use in the purchase or sale of shares of the Fund or of any securities mentioned in the report. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 21 This page intentionally left blank. This page intentionally left blank. Cornerstone Total Return Fund, Inc. ITEM 2. CODE OF ETHICS. Not required ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not required ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not required ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not required ITEM 6. INVESTMENTS. (a) -------------------------------------------------------------------------------- CORNERSTONE TOTAL RETURN FUND, INC. SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED) -------------------------------------------------------------------------------- No. of Description Shares Value -------------------------------------------------------------------------------- EQUITY SECURITIES - 99.82% CLOSED-END FUNDS - 9.19% CORPORATE DEBT FUNDS INVESTMENT GRADE-RATED - 0.63% AllianceBernstein Income Fund 6,000 $ 47,340 MFS Government Markets Income Trust 16,000 108,800 ---------- 156,140 ---------- GLOBAL INCOME - 0.53% Nuveen Multi-Currency Short-Term Government Income Fund 8,851 131,526 ---------- HIGH CURRENT YIELD (LEVERAGED) - 0.26% First Trust Strategic High Income Fund III 14,400 65,088 ---------- OPTION ARBITRAGE/OPTIONS STRATEGIES - 7.46% Eaton Vance Enhanced Equity Income Fund 12,374 148,488 Eaton Vance Risk-Managed Diversified Equity Income Fund 43,700 551,494 Eaton Vance Tax-Managed Buy-Write Income Fund 13,000 179,010 Eaton Vance Tax-Managed Buy-Write Opportunities Fund 40,300 513,019 Eaton Vance Tax-Managed Diversified Equity Income Fund 41,085 448,648 ---------- 1,840,659 ---------- SECTOR EQUITY - 0.31% Gabelli Healthcare & WellnessRx Trust (The) * 9,721 75,143 ---------- TOTAL CLOSED-END FUNDS 2,268,556 ---------- CONSUMER DISCRETIONARY - 8.83% Bed Bath & Beyond, Inc.* 2,500 145,925 Comcast Corporation - Class A 2,012 50,984 Comcast Corporation - Special Class A 4,250 102,978 DIRECTV Group, Inc. (The) - Class A * 4,000 203,280 Ford Motor Company * 10,000 137,900 Home Depot, Inc. (The) 5,000 181,100 Kohl's Corporation 2,000 100,020 Limited Brands, Inc. 1,000 38,450 Lowe's Companies, Inc. 3,000 69,930 See accompanying notes to financial statements. -------------------------------------------------------------------------------- CORNERSTONE TOTAL RETURN FUND, INC. SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- No. of Description Shares Value -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY (CONTINUED) Macy's, Inc. 1,000 $ 29,240 McDonald's Corporation 2,000 168,640 News Corporation - Class B 2,500 45,200 Starbucks Corporation 2,500 98,725 Target Corporation 1,500 70,365 Time Warner, Inc. 4,666 169,702 TJX Companies, Inc. (The) 2,500 131,325 Viacom, Inc. - Class B 2,000 102,000 Walt Disney Company (The) 5,000 195,200 Yum! Brands, Inc. 2,500 138,100 ---------- 2,179,064 ---------- CONSUMER STAPLES - 10.79% Altria Group, Inc. 5,000 132,050 Coca-Cola Company (The) 5,000 336,450 Coca-Cola Enterprises, Inc. 2,500 72,950 General Mills, Inc. 3,000 111,660 H.J. Heinz Company 2,700 143,856 PepsiCo, Inc. 3,000 211,290 Philip Morris International, Inc. 5,000 333,850 Procter & Gamble Company (The) 6,972 443,210 Sara Lee Corporation 2,500 47,475 Walgreen Company 2,000 84,920 Wal-Mart Stores, Inc. 14,000 743,960 ---------- 2,661,671 ---------- ENERGY - 11.44% Apache Corporation 2,000 246,780 Chevron Corporation 3,500 359,940 ConocoPhillips 5,000 375,950 Exxon Mobil Corporation 12,000 976,560 Halliburton Company 2,500 127,500 Occidental Petroleum Corporation 4,000 416,160 Schlumberger Ltd. 3,000 259,200 Williams Companies, Inc. 2,000 60,500 ---------- 2,822,590 ---------- FINANCIALS - 13.14% AFLAC, Inc. 1,500 70,020 American Express Company 4,000 206,800 Bank of New York Mellon Corporation (The) 3,000 76,860 Capital One Financial Corporation 2,500 129,175 Citigroup, Inc. 2,800 116,592 Discover Financial Services 2,000 53,500 Franklin Resources, Inc. 1,000 131,290 See accompanying notes to financial statements. -------------------------------------------------------------------------------- CORNERSTONE TOTAL RETURN FUND, INC. SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- No. of Description Shares Value -------------------------------------------------------------------------------- FINANCIALS (CONTINUED) Goldman Sachs Group, Inc. (The) 2,500 $ 332,725 JPMorgan Chase & Co. 15,200 622,288 M&T Bank Corporation 1,000 87,950 Marsh & McLennan Companies, Inc. 4,000 124,760 MetLife, Inc. 1,500 65,805 PNC Financial Services Group, Inc. 1,000 59,610 Prudential Financial, Inc. 2,500 158,975 State Street Corporation 2,000 90,180 Travelers Companies, Inc. (The) 3,092 180,511 U.S. Bancorp 5,500 140,305 Unum Group 2,500 63,700 Wells Fargo & Company 19,000 533,140 ---------- 3,244,186 ---------- HEALTH CARE - 11.07% Abbott Laboratories 3,000 157,860 Allergan, Inc. 1,000 83,250 Amgen, Inc. * 3,000 175,050 Baxter International, Inc. 2,500 149,225 Boston Scientific Corporation * 4,000 27,640 Bristol-Myers Squibb Company 6,000 173,760 Celgene Corporation * 1,000 60,320 Cigna Corporation 3,000 154,290 Eli Lilly & Company 2,500 93,825 Express Scripts, Inc. * 2,400 129,552 Gilead Sciences, Inc. * 2,000 82,820 Johnson & Johnson 6,000 399,120 McKesson Corporation 2,500 209,125 Medco Health Solutions, Inc. * 1,000 56,520 Medtronic, Inc. 4,500 173,385 Merck & Company, Inc. 2,500 88,225 Pfizer, Inc. 6,462 133,117 Stryker Corporation 1,000 58,690 UnitedHealth Group, Inc. 2,500 128,950 WellPoint, Inc. 2,500 196,925 ---------- 2,731,649 ---------- INDUSTRIALS - 10.23% 3M Company 2,500 237,125 Danaher Corporation 2,000 105,980 Deere & Company 1,500 123,675 Emerson Electric Company 2,500 140,625 FedEx Corporation 1,500 142,275 See accompanying notes to financial statements. -------------------------------------------------------------------------------- CORNERSTONE TOTAL RETURN FUND, INC. SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- No. of Description Shares Value -------------------------------------------------------------------------------- INDUSTRIALS (CONTINUED) General Dynamics Corporation 2,000 $ 149,040 General Electric Company 24,000 452,640 Honeywell International Inc. 2,000 119,180 Lockheed Martin Corporation 2,500 202,425 Precision Castparts Corporation 1,000 164,650 Republic Services, Inc. 1,125 34,706 Southwest Airlines Company 2,000 22,840 Union Pacific Corporation 2,500 261,000 United Parcel Service, Inc. - Class B 2,000 145,860 United Technologies Corporation 2,500 221,275 ---------- 2,523,296 ---------- INFORMATION TECHNOLOGY - 16.19% Apple, Inc. * 2,000 671,340 Applied Materials, Inc. 3,000 39,030 Corning, Inc. 5,000 90,750 Dell Inc. * 4,000 66,680 Google, Inc. - Class A * 1,000 506,380 Hewlett-Packard Company 8,000 291,200 Intel Corporation 17,000 376,720 International Business Machines Corporation 4,000 686,201 Intuit, Inc. * 2,500 129,650 Microsoft Corporation 24,000 624,000 Oracle Corporation 12,600 414,666 Texas Instruments, Inc. 3,000 98,490 ---------- 3,995,107 ---------- MATERIALS - 3.40% Air Products & Chemicals, Inc. 1,500 143,370 Alcoa, Inc. 1,800 28,548 Dow Chemical Company (The) 2,500 90,000 E.I. Du Pont de Nemours & Company 4,800 259,440 Freeport-McMoRan Copper & Gold, Inc. 5,000 264,500 Newmont Mining Corporation 1,000 53,970 ---------- 839,828 ---------- REAL ESTATE INVESTMENT TRUST - 0.01% Simon Property Group, Inc. 16 1,860 ---------- TELECOMMUNICATION SERVICES - 2.83% AT&T, Inc. 17,089 536,765 CenturyLink, Inc. 4,000 161,720 ---------- 698,485 ---------- See accompanying notes to financial statements. -------------------------------------------------------------------------------- CORNERSTONE TOTAL RETURN FUND, INC. SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED) (CONCLUDED) -------------------------------------------------------------------------------- No. of Description Shares Value -------------------------------------------------------------------------------- UTILITIES - 2.70% Consolidated Edison, Inc. 1,000 $ 53,240 Dominion Resources, Inc. 2,000 96,540 Duke Energy Corporation 6,600 124,278 Exelon Corporation 3,500 149,940 NextEra Energy, Inc. 1,000 57,460 NiSource, Inc. 2,500 50,625 Xcel Energy, Inc. 5,500 133,650 ----------- 665,733 ----------- TOTAL EQUITY SECURITIES (cost - $22,354,946) 24,632,025 ----------- SHORT-TERM INVESTMENT - 0.53% MONEY MARKET FUND - 0.53% Fidelity Institutional Money Market Government Portfolio - Class I (cost - $131,651) 131,651 131,651 ----------- TOTAL INVESTMENTS - 100.35% (cost - $22,486,597) 24,763,676 ----------- LIABILITIES IN EXCESS OF OTHER ASSETS - (0.35)% (86,045) ----------- NET ASSETS - 100.00% $24,677,631 =========== ---------- ** Non-income producing security. See accompanying notes to financial statements. (b) Not applicable ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not required ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. (a) Not required (b) There has not been a change in any of the Portfolio Managers identified in response to this Item in the registrant's most recent annual report on Form N-CSR. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. None ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant's board of directors that have been implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) or this Item. ITEM 11. 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 the information required in filings on Form N-CSR 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 second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. (a)(1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit: Not required (a)(2) 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 (a)(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act (17 CFR 270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons: Not applicable (b) Certifications required by Rule 30a-2(b) under the Act (17 CFR 270.30a-2(b)): Attached hereto Exhibit 99.CERT Certifications required by Rule 30a-2(a) under the Act Exhibit 99.906CERT Certifications required by Rule 30a-2(b) under the Act 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, Chairman and President (Principal Executive Officer) Date September 2, 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, Chairman and President (Principal Executive Officer) Date September 2, 2011 ------------------- By (Signature and Title)* /s/ Frank J. Maresca ----------------------------------------- Frank J. Maresca, Treasurer (Principal Financial Officer) Date September 2, 2011 ------------------- * Print the name and title of each signing officer under his or her signature.