On September 4, the Cornerstone Total Return Fund (CRF) declined 19% to a closing price of $10.00 per share. Friday it was down another 4% to $9.60. Regardless of these wild gyrations in market prices, there remains one clear trend - Cornerstone’s net asset value (“NAV” – the real per share value) has been declining steadily for years. But don’t take my word for it, just take a look at this chart:

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The Cornerstone Total Return Fund (AMEX:CRF) has been in liquidation for years. This has taken place without shareholder approval despite New York State Laws that require shareholder approval for such actions. Cornerstone is a New York State Corporation and therefore subject to the rules and regulations of New York State. In spite of governing regulations, Cornerstone’s board of directors has unilaterally decided to distribute monthly dividends to shareholders at a rate that is totally unsustainable. Liquidation of this fund is virtually guaranteed with the current distribution policy.

The Cornerstone Total Return Fund is a closed-end mutual fund with $33 million invested in a portfolio of blue chip stocks. With 5,343,138 shares outstanding, each share of stock owns $6.27 worth of these underlying blue chip securities as of July 25, 2008. This value per share is commonly referred to as the net asset value [NAV] per share.

Investors are paying $18.50 per share of CRF when it is not worth more than $9.81, its net asset value (“NAV”) per share. Investors in CLM are paying $9.23 when it is not worth more than $5.19 per share.

The new policy sets the annual distribution rate at 21 percent of the prior year’s net asset value [NAV] per share as of the end of the month each October. This massively aggressive distribution rate will virtually guarantee that dividends will be cut annually, most likely starting in 2008. Put another way, unless the Cornerstone Funds’ NAV return is 21 percent in any given year the dividend will be cut.

As it stands now, the Cornerstone Total Return Fund - despite four straight years of underperforming its benchmark index, negative news articles and a reported Securities and Exchange Commission investigation into fixed distribution policies - defies gravity by trading at a whopping premium to NAV [as of October 13, 2006] of 92.57%. [Investors are paying $1.90 for each $1.00 of actual value.]That currently is the largest premium to NAV of any closed-end fund.