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)
383 MADISON AVENUE
NEW YORK, NEW YORK 10179
(Address of principal executive offices) (Zip code)
JODI LEVINE, TREASURER
383 MADISON AVENUE
NEW YORK, NEW YORK 10179
(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 272-3550
Date of fiscal year-end: DECEMBER 31, 2004
Date of reporting period: SEPTEMBER 30, 2004
ITEM 1: SCHEDULE OF INVESTMENTS
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CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2004 (UNAUDITED)
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NO. OF
DESCRIPTION SHARES VALUE
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EQUITY SECURITIES - 99.29%
UNITED STATES - 98.07%
CLOSED-END DOMESTIC FUNDS - 5.81%
Adams Express Co. 38,800 $ 492,372
Boulder Total Return Fund, Inc. 21,100 365,452
General American Investors Co., Inc. 2,500 73,825
Salomon Brothers Fund, Inc. (The) 13,300 158,403
Tri Continental Corp. 109,000 1,810,490
Zweig Fund, Inc. 96,300 514,242
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3,414,784
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CONSUMER DISCRETIONARY - 12.80%
Bed Bath & Beyond Inc. + 2,500 92,775
Carnival Corp. 5,300 250,637
Clear Channel Communications, Inc. 2,700 84,159
Comcast Corp., Class A + 8,508 240,266
Comcast Corp., Special Class A + 4,500 125,640
Costco Wholesale Corp. 2,600 108,056
CVS Corp. 2,500 105,325
Dana Corp. 2,500 44,225
Delphi Corp. 5,100 47,379
Eastman Kodak Co. 2,500 80,550
Ford Motor Co. 15,200 213,560
Fortune Brands, Inc. 2,500 185,225
Gannett Co., Inc. 2,500 209,400
Gap, Inc. (The) 6,900 129,030
General Motors Corp. 5,000 212,400
Harley-Davidson, Inc 2,500 148,600
Harrah's Entertainment, Inc. 2,500 132,450
Hilton Hotels Corp. 2,500 47,100
Home Depot, Inc. (The) 14,800 580,160
J.C. Penney Co. Inc. 2,500 88,200
Kohl's Corp. + 2,500 120,475
Limited Brands 2,000 44,580
Lowe's Companies, Inc. 3,700 201,095
Mattel, Inc. 4,500 81,585
May Department Stores Co. (The) 2,500 64,075
McDonald's Corp. 8,100 227,043
Monsanto Co. 1,773 64,573
NIKE, Inc., Class B 2,500 197,000
Office Depot, Inc. + 2,500 37,575
Omnicom Group Inc. 1,500 109,590
Reebok International Ltd. 2,500 91,800
Rockwell Automation, Inc. 2,500 96,750
Staples, Inc. 2,100 62,622
Starbucks Corp. + 2,500 113,650
Target Corp. 4,600 208,150
Time Warner, Inc + 25,500 411,570
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CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2004 (UNAUDITED)
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NO. OF
DESCRIPTION SHARES VALUE
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TJX Companies, Inc. (The) 4,000 88,160
Tribune Co. 2,500 102,875
Univision Communications Inc., Class A + 2,500 79,025
Viacom Inc., non-voting Class B 9,000 302,040
Wal-Mart Stores, Inc. 24,900 1,324,680
Walt Disney Co. (The) 11,700 263,835
Yum! Brands, Inc. + 2,500 101,650
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7,519,535
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CONSUMER STAPLES - 7.47%
Albertson's, Inc. 2,500 59,825
Altria Group, Inc. 10,700 503,328
Anheuser-Busch Companies, Inc. 3,700 184,815
Archer-Daniels-Midland Co. 5,650 95,937
Avon Products, Inc. 2,500 109,200
Campbell Soup Co. 3,200 84,128
Coca-Cola Co. (The) 13,500 540,675
Coca-Cola Enterprises Inc. 2,500 47,250
Colgate-Palmolive Co. 2,600 117,468
ConAgra Foods, Inc. 2,500 64,275
General Mills, Inc. 2,500 112,250
Gillette Co. (The) 5,100 212,874
H.J. Heinz Co. 2,700 97,254
Kimberly-Clark Corp. 2,500 161,475
Kroger Co. (The) + 6,600 102,432
PepsiCo, Inc. 10,000 486,500
Procter & Gamble Co. (The) 15,000 811,800
Safeway Inc. 4,900 94,619
Sara Lee Corp. 6,300 144,018
Walgreen Co. 5,600 200,648
Wm. Wrigley Jr. Co. 2,500 158,275
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4,389,046
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ENERGY - 6.67%
Anadarko Petroleum Corp. 2,500 165,900
Burlington Resources Inc. 2,500 102,000
CenterPoint Energy. Inc. 5,700 59,052
ChevronTexaco Corp. 16,604 890,638
ConocoPhillips 3,669 303,977
El Paso Corp. 2,500 22,975
Exxon Mobil Corp. 36,000 1,739,880
Occidental Petroleum Corp. 2,500 139,825
Reliant Energy Inc.+ 4,494 41,929
Schlumberger Ltd. 5,100 343,281
Unocal Corp. 2,500 107,500
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3,916,957
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FINANCIALS - 18.33%
AFLAC Inc. 4,000 156,840
Allstate Corp. (The) 5,200 249,548
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CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2004 (UNAUDITED)
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NO. OF
DESCRIPTION SHARES VALUE
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American Express Co. 6,100 313,906
American International Group, Inc. 18,331 1,246,325
Bank of America Corp. 23,240 1,006,989
Bank of New York Co., Inc. (The) 5,900 172,103
BB&T Corp. 2,000 79,380
Capital One Financial Corp. 1,000 73,900
Charles Schwab Corp. (The) 8,200 75,358
Citigroup Inc. 32,600 1,438,312
Countrywide Financial Corp. 3,500 137,865
Fannie Mae 5,700 361,380
Fifth Third Bancorp 2,500 123,050
Fiserv, Inc. + 2,500 87,150
Freddie Mac 3,300 215,292
Goldman Sachs Group, Inc. (The) 6,000 559,440
Hartford Financial Services Group, Inc. (The) 1,600 99,088
J.P. Morgan Chase & Co. 12,700 504,571
Key Corp. 2,500 79,000
Lehman Brothers Holdings Inc. 2,500 199,300
Marsh & McLennan Companies, Inc. 4,600 210,496
MBNA Corp. 7,550 190,260
Mellon Financial Corp. 2,300 63,687
Merrill Lynch & Co., Inc. 1,100 54,692
MetLife Inc. 6,000 231,900
Moody's Corp. 1,000 73,250
Morgan Stanley 6,200 305,660
National City Corp. 2,500 96,550
Northern Trust Corp. 1,100 44,880
Piper Jaffray Companies, Inc. + 122 4,830
PNC Financial Services Group. 1,400 75,740
Progressive Corp. (The) 2,500 211,875
Prudential Financial, Inc. 2,500 117,600
SLM Corp. 2,500 111,500
St. Paul Travelers Companies, Inc. (The) 2,292 75,773
State Street Corp. 1,600 68,336
SunTrust Banks, Inc. 1,500 105,615
U.S. Bancorp 12,200 352,580
Wachovia Corp. 8,100 380,295
Washington Mutual, Inc. 7,250 283,330
Wells Fargo & Co. 9,000 536,670
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10,774,316
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HEALTHCARE - 12.08%
Abbott Laboratories 8,200 347,352
Aetna Inc. 1,000 99,930
Amgen Inc.+ 8,300 470,444
Anthem, Inc.+ 2,500 218,125
Baxter International Inc. 2,600 83,616
Becton, Dickinson & Co. 2,500 129,250
Biogen Idec Inc. + 2,500 152,925
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CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2004 (UNAUDITED)
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NO. OF
DESCRIPTION SHARES VALUE
--------------------------------------------------------------------------------
Biomet, Inc. 2,500 117,200
Boston Scientific Corp. + 2,500 99,325
Bristol-Myers Squibb Co. 9,600 227,232
Cardinal Health, Inc. 2,500 109,425
CIGNA Corp. 800 55,704
Eli Lilly & Co. 6,600 396,330
Forest Laboratories, Inc. + 2,500 112,450
Genzyme Corp. + 1,500 81,615
HCA, Inc. 2,600 99,190
Health Management Associates, Inc., Class A 2,500 51,075
HEALTHSOUTH Corp. + 2,500 12,625
Hospira, Inc. + 820 25,092
Johnson & Johnson 18,200 1,025,206
King Pharmaceuticals, Inc. + 2,500 29,850
McKesson Corp. 2,500 64,125
Medco Health Solutions, Inc. + 1,531 47,308
Medtronic, Inc. 7,100 368,490
Merck & Co., Inc. 12,700 419,100
Pfizer Inc. 42,460 1,299,276
Schering-Plough Corp. 8,400 160,104
Stryker Corp. 2,000 96,160
Tenet Healthcare Corp. + 5,000 53,950
UnitedHealth Group Inc. 5,000 368,700
Wyeth 7,500 280,500
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7,101,674
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INDUSTRIALS - 10.87%
3M Co. 5,000 399,850
Apollo Group, Inc., Class A 1,000 73,370
Automatic Data Processing, Inc. 2,000 82,640
Boeing Co. (The) 6,700 345,854
Burlington Northern Santa Fe Corp. 2,000 76,620
Caterpillar Inc. 2,500 201,125
Cendant Corp. 7,100 153,360
CSX Corp. 2,500 83,000
Dover Corp. 1,000 38,870
Emerson Electric Co. 2,000 123,780
FedEx Corp. 2,500 214,225
General Dynamics Corp. 2,500 255,250
General Electric Co. 64,000 2,149,120
Honeywell International Inc. 3,300 118,338
Illinois Tool Works Inc. 2,500 232,925
Lockheed Martin Corp. 2,500 139,450
Masco Corp. 4,600 158,838
Paychex, Inc. 2,500 75,375
Raytheon Co. 2,500 94,950
Southwest Airlines Co. 6,100 83,082
Transocean Inc. + 2,500 89,450
Tyco International Ltd. 11,600 355,656
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CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2004 (UNAUDITED)
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NO. OF
DESCRIPTION SHARES VALUE
--------------------------------------------------------------------------------
United Parcel Service, Inc., Class B 6,500 493,480
United Technologies Corp. 2,200 205,436
Waste Management, Inc. 5,300 144,902
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6,388,946
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INFORMATION TECHNOLOGY - 15.68%
Agere Systems Inc, Class A + 75 79
Agere Systems Inc., Class B + 1,851 1,888
Agilent Technologies, Inc. + 5,000 107,850
Analog Devices, Inc. 2,500 96,950
Apple Computer, Inc. + 2,500 96,875
Applied Materials, Inc. + 13,400 220,966
Ciena Corp 1,500 2,970
Cisco Systems, Inc. + 48,000 868,800
Computer Associates International, Inc. 2,700 71,010
Corning Inc. + 3,200 35,456
Dell Inc.+ 16,200 576,720
eBay Inc. + 3,500 321,790
Electronic Data Systems Corp. 7,500 145,425
EMC Corp. + 8,000 92,320
First Data Corp. 4,325 188,137
Hewlett-Packard Co. 15,842 297,038
Intel Corp. 44,500 892,670
Internat Business Machines Corp. 10,700 917,418
JDS Uniphase Corp. + 9,700 32,689
Lucent Technologies Inc. + 7,000 22,190
Maxim Integrated Products Inc. 2,500 105,725
Micron Technology, Inc. + 5,500 66,165
Microsoft Corp. 73,800 2,040,570
Motorola, Inc. 16,100 290,444
Oracle Corp. + 37,600 424,128
PerkinElmer, Inc. 1,500 25,830
QUALCOMM Inc. 6,800 265,472
Sanmina-SCI Corp. + 4,000 28,200
Siebel Systems, Inc. + 5,000 37,700
Solectron Corp. + 5,700 28,215
Sun Microsystems, Inc. + 24,600 99,384
Texas Instruments Inc. 13,500 287,280
VERITAS Software Corp. + 2,500 44,500
Waters Corp. + 2,500 110,250
Xerox Corp. + 6,000 84,480
Yahoo! Inc. + 8,500 288,235
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9,215,819
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MATERIALS - 2.87%
Air Products & Chemicals, Inc. 2,500 135,950
Alcan Inc. 1,500 71,700
Alcoa Inc. 6,800 228,412
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CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2004 (UNAUDITED)
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NO. OF
DESCRIPTION SHARES VALUE
--------------------------------------------------------------------------------
Dow Chemical Co. (The) 7,200 325,296
E.I. du Pont de Nemours & Co. 5,800 248,240
Georgia-Pacific Corp. 2,500 89,875
International Paper Co. 4,800 193,968
Newmont Mining Corp. 2,500 113,825
Praxair, Inc. 2,500 106,850
Rohm & Hass Co. 2,500 107,425
Weyerhaeuser Co. 1,000 66,480
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1,688,021
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REAL ESTATE INVESTMENT TRUSTS - 0.23%
Simon Property Group Inc. 2,500 134,075
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TELECOMMUNICATIONS SERVICES - 3.36%
AT&T Corp. 5,260 75,323
AT&T Wireless Services Inc. + 10,067 148,790
BellSouth Corp. 10,200 276,624
Nextel Communications, Inc., Class A + 6,000 143,040
SBC Communications Inc. 25,600 664,320
Sprint Corp (FON Group) 4,100 82,533
Verizon Communications Inc. 14,900 586,762
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1,977,392
------------
UTILITIES - 1.90%
American Electric Power Co., Inc. 5,500 175,780
Dominion Resources, Inc. 2,000 130,500
Duke Energy Corp. 6,600 151,074
Edison International 2,500 66,275
Scottish Power plc, ADR 4,000 123,360
Sempra Energy 2,500 90,475
Southern Co. (The) 2,500 74,950
TXU Corp. 3,700 177,304
Williams Companies, Inc. (The) 2,500 30,250
Xcel Energy, Inc. 5,500 95,260
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1,115,228
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TOTAL UNITED STATES
(cost $62,798,349) 57,635,793
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CZECH REPUBLIC - 1.22%
CONSUMER DISCRETIONARY - 1.22%
Bonton AS +# 68,590 119,632
Bonton Book AS +# 68,590 119,631
Bonton Discs AS +# 68,590 119,631
Bonton Film Entertainment AS +# 68,590 119,631
Bonton Music AS +# 68,590 119,631
Bonton Pictures AS +# 68,590 119,631
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717,787
------------
TOTAL CZECH REPUBLIC
(cost $894,867)
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CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2004 (UNAUDITED)
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DESCRIPTION VALUE
--------------------------------------------------------------------------------
TOTAL EQUITY SECURITIES
(cost $63,693,216) 58,353,580
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PRINCIPAL
AMOUNT
(000'S)
---------
SHORT-TERM INVESTMENTS - 0.95%
REPURCHASE AGREEMENTS - 0.95%
Bear, Stearns & Co. Inc.,
(Agreement dated 09/30/04 to be repurchased
at $87,972), 1.68%, 10/01/04 $ 88 87,972
Bear, Stearns & Co. Inc.
(Agreement dated 09/30/04 to be repurchased
at $171,011), 1.875%*, 10/01/04,
collateralized by U.S. Treasury Bonds ** 171 171,002
Bear, Stearns & Co. Inc.
(Agreement dated 09/30/04 to be repurchased
at $302,275), 0.94%*, 10/01/04,
collateralized by U.S. Treasury Bonds ** 302 302,267
------------
TOTAL SHORT-TERM INVESTMENTS
(cost - $561,241) 561,241
------------
TOTAL INVESTMENTS - 100.24%
(cost - $64,254,457) 58,914,821
------------
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.24)% (142,247)
------------
NET ASSETS - 100.00% $ 58,772,574
============
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+ Non-income producing security.
# Security fair valued in accordance with procedures established by the
Board of Directors.
* Stated interest rate, before rebate earned by borrower of securities
on loan.
** Represents investment purchased with cash collateral received,
ADR American Depositary Receipts.
Portfolio Valuation - Investments are stated at value in the accompanying
financial statements. All equity securities shall be valued at the closing price
on the exchange or market on which the security is primarily traded ("Primary
Market"). If the security did not trade on the Primary Market, it shall be
valued at the closing price on another exchange where it trades. If there are no
such sales prices, the value shall be the most recent bid, and if there is no
bid, the security shall be valued at the most recent asked. If no
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CORNERSTONE TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS--SEPTEMBER 30, 2004 (UNAUDITED)
--------------------------------------------------------------------------------
pricing service is available and there are more than two dealers, the value
shall be the mean of the highest bid and the lowest ask. If there is only one
dealer, then the value shall be the mean if bid and ask are available, otherwise
the value shall be the bid. All other securities and assets are valued as
determined in good faith by the Board of Directors. Short-term investments
having a maturity of 60 days or less are valued on the basis of amortized cost.
The Board of Directors has established general guidelines for calculating fair
value of not readily marketable securities. At September 30, 2004, the Fund held
1.22% of its net assets in securities valued in good faith by the Board of
Directors with an aggregate cost of $894,867 and a fair value of $717,787. 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 American
Stock Exchange, LLC is closed.
Repurchase Agreements - The Fund has agreed to purchase securities from
financial institutions subject to the seller's agreement to repurchase them at
an agreed-upon time and price ("repurchase agreements"). The financial
institutions with whom the Fund enters into repurchase agreements are banks and
broker/ dealers, which Cornerstone Advisors, Inc. (the Fund's "Investment
Manager" or "Cornerstone") considers creditworthy. The seller under a repurchase
agreement will be required to maintain the value of the securities as
collateral, subject to the agreement at not less than the repurchase price plus
accrued interest. Cornerstone monitors daily, the mark-to-market of the value of
the collateral, and, if necessary, requires the seller to maintain additional
securities, so that the value of the collateral is not less than the repurchase
price. Default by or bankruptcy of the seller would, however, expose the Fund to
possible loss because of adverse market action or delays in connection with the
disposition of underlying securities.
Federal Income Tax Cost - At September 30, 2004, 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 depreciation from investments were
$64,306,086, $4,705,896, $(10,097,161) and $(5,391,265), respectively.
Other information regarding the Fund is available in the Fund's most recent
Report to Shareholders. This information is available to registered shareholders
by calling (800) 937-5449. For general inquiries, please call (212) 272-3550.
This information is also available on the website of the Securities and Exchange
Commission - http://www.sec.gov.
ITEM 2: CONTROLS AND PROCEDURES
(a) As of a date within 90 days from the filing date of this report, the
principal executive officer and principal financial officer concluded that the
registrant's disclosure controls and procedures (as defined in Rule 30a-3(c)
under the Investment Company Act of 1940 (the "Act")), were effective based on
their evaluation of the disclosure controls and procedures required by Rule
30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities and
Exchange Act of 1934.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act) 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
1. The certifications of the registrant as required by Rule 30a-2(a) under the
Act are exhibits to this report.
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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.
Cornerstone Total Return Fund, Inc.
/s/ Ralph W. Bradshaw
--------------------------
Name: Ralph W. Bradshaw
Title: Principal Executive Officer
Date: November 22, 2004
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.
/s/ Ralph W. Bradshaw
--------------------------
Name: Ralph W. Bradshaw
Title: Principal Executive Officer
Date:
/s/ Jodi B. Levine
---------------------
Name: Jodi B. Levine
Title: Principal Financial Officer
Date: November 22, 2004