fp0011292_ncsrs.htm
 
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 811-22066

Cornerstone Progressive Return Fund
(Exact name of registrant as specified in charter)

7 Dawson Street, Huntington Station, New York
11746
(Address of principal executive offices)
(Zip code)

Frank J. Maresca
AST Fund Solutions, LLC, 7 Dawson Street, Huntington Station, New York 11746
 (Name and address of agent for service)
 
Registrant's telephone number, including area code:     (866) 668-6558

Date of fiscal year end:
December 31, 2014

Date of reporting period:
June 30, 2014
 
 
 
 
 
ITEM 1.
REPORTS TO STOCKHOLDERS.
 
 
Cornerstone Progressive
Return Fund
 
 
Semi-Annual Report
June 30, 2014
(Unaudited)
 
 
 
 
 
 
CONTENTS
 
Portfolio Summary
1
   
Schedule of Investments
2
   
Statement of Assets and Liabilities
9
   
Statement of Operations
10
   
Statement of Changes in Net Assets
11
   
Financial Highlights
12
   
Notes to Financial Statements
13
   
Results of Annual Meeting of Shareholders
18
   
Investment Management Agreement Approval Disclosure
19
   
Description of Dividend Reinvestment Plan
21
   
Proxy Voting and Portfolio Holdings Information
23
   
Privacy Policy Notice
24
   
Summary of General Information
27
   
Shareholder Information
27

 
 
 
 
Cornerstone Progressive Return Fund
Portfolio Summary – as of June 30, 2014 (unaudited)
 
SECTOR ALLOCATION
 
Sector
Percent of
Net Assets
Closed-End Funds
59.8
Exchange-Traded Funds
5.9
Information Technology
4.1
Financials
2.8
Consumer Discretionary
2.2
Energy
2.0
Health Care
2.0
Industrials
1.6
Consumer Staples
1.0
Telecommunication Services
0.9
Materials
0.5
Utilities
0.1
Other
17.1
 
TOP TEN HOLDINGS, BY ISSUER
 
 
Holding
Sector
Percent of
Net Assets
1.
Cohen & Steers Preferred Securities and Income Fund, Inc.
Closed-End Funds
3.2
2.
iShares Core S&P 500 ETF
Exchange-Traded Funds
2.9
3.
Alpine Global Total Dynamic Dividend Fund
Closed-End Funds
2.9
4.
SPDR S&P 500 ETF Trust
Exchange-Traded Funds
2.9
5.
Cohen & Steers Quality Income Realty Fund, Inc.
Closed-End Funds
2.1
6.
CBRE Clarion Global Real Estate Income Fund
Closed-End Funds
2.1
7.
BlackRock Resources & Commodities Strategy Trust
Closed-End Funds
2.0
8.
BlackRock Real Asset Equity Trust
Closed-End Funds
1.9
9.
Nuveen Energy MLP Total Return Fund
Closed-End Funds
1.9
10.
Apple Inc.
Information Technology
1.6

 
1
 
 
Cornerstone Progressive Return Fund
Schedule of Investments – June 30, 2014 (unaudited)
 
Description
  
No. of
Shares
    
Value
  
EQUITY SECURITIES — 82.87%
        
CLOSED-END FUNDS — 59.83%
        
CONVERTIBLE SECURITIES — 0.33%
        
AllianzGI Equity & Convertible Income Fund
     46,716     $ 943,663  
                 
CORE — 2.96%
                
Adams Express Company (The)
     153,410       2,109,387  
Advent/Claymore Enhanced Growth & Income Fund
     23,826       245,408  
General American Investors Company, Inc.
     65,943       2,427,362  
Guggenheim Equal Weight Enhanced Equity Income Fund
     95,151       1,905,875  
Liberty All-Star Equity Fund
     115,339       693,187  
Royce Focus Trust, Inc.
     1,300       11,115  
Source Capital, Inc.
     600       41,988  
Tri-Continental Corporation
     53,591       1,124,339  
              8,558,661  
CORPORATE DEBT INVESTMENT GRADE-RATED — 0.00%
  
Cutwater Select Income Fund
     1       27  
                 
CORPORATE DEBT INVESTMENT GRADE-RATED (LEVERAGED) — 0.00%
  
John Hancock Income Securities Trust 
     355       5,201  
                 
DEVELOPED MARKET — 0.27%
  
Aberdeen Australia Equity Fund, Inc.
     4,500       40,860  
Aberdeen Israel Fund, Inc.
     536       9,653  
Aberdeen Singapore Fund, Inc.
     26,484       345,881  
                 
Description
    
No. of
Shares
      
Value
  
DEVELOPED MARKET (continued)
  
New Ireland Fund, Inc. (The)
     21,255     $ 289,706  
Swiss Helvetia Fund, Inc. (The)
     5,847       85,191  
              771,291  
EMERGING MARKETS — 1.56%
  
First Trust/Aberdeen Emerging Opportunity Fund
     34,215       653,849  
Morgan Stanley India Investment Fund, Inc. *
     59,108       1,367,759  
Templeton Emerging Markets Fund
     2,300       41,929  
Templeton Russia and East European Fund, Inc.
     9,215       140,621  
Voya Emerging Markets High Dividend Equity Fund
     180,122       2,298,357  
              4,502,515  
EMERGING MARKETS DEBT — 0.41%
  
Stone Harbor Emerging Markets Income Fund
     6,147       129,579  
Western Asset Emerging Markets Debt Fund Inc.
     57,805       1,062,456  
              1,192,035  
FLEXIBLE INCOME — 0.36%
  
MFS Charter Income Trust
     114,139       1,054,644  
                 
ENERGY MLP — 5.89%
                
ClearBridge Energy MLP Fund Inc.
     87,210       2,603,218  
ClearBridge Energy MLP Opportunity Fund Inc.
     121,079       3,075,407  
ClearBridge Energy MLP Total Return Fund Inc.
     167,062       3,999,464  
First Trust MLP and Energy Income Fund
     88,792       1,914,356  
 
See accompanying notes to financial statements.
 
 
2
 
 
Cornerstone Progressive Return Fund
Schedule of Investments – June 30, 2014 (unaudited) (continued)
 
Description
    
No. of
Shares
       Value  
ENERGY MLP (continued)
  
Nuveen Energy MLP Total Return Fund
     245,325     $ 5,451,121  
              17,043,566  
GENERAL & INSURED LEVERAGED — 3.24%
  
BlackRock MuniHoldings Investment Quality Fund
     2,800       38,864  
BlackRock MuniHoldings Quality Fund II, Inc.
     96,305       1,276,041  
Eaton Vance National Municipal Opportunities Trust
     7,056       141,120  
Eaton Vance Tax-Advantaged Bond and Option Strategies Fund
     58,036       805,540  
Invesco Advantage Municipal Income Trust II
     133,008       1,509,641  
Invesco Municipal Opportunity Trust
     50,199       632,507  
Invesco Municipal Trust
     31,550       395,006  
Invesco Trust for Investment Grade Municipals
     119,422       1,556,069  
Invesco Value Municipal Income Trust
     0       7  
MainStay DefinedTerm Municipal Opportunities Fund
     1,500       26,760  
Managed Duration Investment Grade Municipal Fund
     5,889       81,150  
MFS Investment Grade Municipal Trust
     28,806       267,032  
Nuveen Dividend Advantage Municipal Fund 3
     113,826       1,557,140  
Nuveen Dividend Advantage Municipal Income Fund
     33,515       474,572  
                 
Description
    
No. of
Shares
       Value  
GENERAL & INSURED LEVERAGED (continued)
  
Nuveen Quality Municipal Fund, Inc.
     1,971     $ 25,840  
Nuveen Select Quality Municipal Fund, Inc.
     37,570       520,720  
Western Asset Managed Municipals Fund Inc.
     4,749       62,212  
              9,370,221  
GENERAL BOND — 0.26%
                
DWS Multi-Market Income Trust
     15,169       143,650  
MFS Multimarket Income Trust
     91,451       608,149  
              751,799  
GLOBAL — 6.84%
                
Alpine Global Dynamic Dividend Fund
     200,705       2,109,410  
Alpine Global Total Dynamic Dividend Fund
     945,029       8,429,659  
Clough Global Allocation Fund
     6,802       105,023  
Clough Global Opportunities Fund
     14,316       186,108  
Delaware Enhanced Global Dividend and Income Fund
     171,772       2,179,787  
Gabelli Global Utility & Income Trust (The)
     33,871       706,549  
GDL Fund (The)
     34,778       377,689  
Nuveen Global Value Opportunities Fund
     133,841       1,971,478  
Virtus Total Return Fund
     200,681       963,269  
Wells Fargo Advantage Global Dividend Opportunity Fund
     325,819       2,766,203  
              19,795,175  
GLOBAL INCOME — 1.17%
                
First Trust/Aberdeen Global Opportunity Income Fund
     13,647       200,338  
 
See accompanying notes to financial statements.
 
 
3
 
 
Cornerstone Progressive Return Fund
Schedule of Investments – June 30, 2014 (unaudited) (continued)
 
Description
    
No. of
Shares
       Value  
GLOBAL INCOME (continued)
  
Legg Mason BW Global Income Opportunities Fund Inc.
     89,421     $ 1,640,875  
Nuveen Global Income Opportunities Fund
     41,772       532,593  
Nuveen Multi-Currency Short-Term Government Income Fund
     74,037       831,436  
Templeton Global Income Fund
     22,400       185,024  
              3,390,266  
HIGH CURRENT YIELD (LEVERAGED) — 1.85%
  
AllianceBernstein Global High Income Fund, Inc.
     22,028       316,542  
BlackRock Corporate High Yield Fund VI, Inc.
     165,141       2,029,583  
BlackRock Debt Strategies Fund, Inc.
     6,609       27,097  
DWS High Income Opportunities Fund, Inc.
     91,689       1,354,247  
DWS High Income Trust
     68,425       643,879  
First Trust Strategic High Income Fund II
     4,604       75,275  
Franklin Universal Trust
     52,076       391,612  
Invesco High Income Trust II
     11,284       193,408  
MFS Intermediate High Income Fund
     38,669       113,687  
Neuberger Berman High Yield Strategies Fund Inc.
     15,429       213,692  
              5,359,022  
HIGH YIELD — 0.49%
                
Credit Suisse Asset Management Income Fund, Inc.
     2,200       8,030  
 First Trust High Income Long/Short Fund
     46,839       850,128  
                 
Description
    
No. of
Shares
       Value  
HIGH YIELD (continued)
  
Western Asset High Income Opportunity Fund Inc.
     7,797     $ 47,562  
Western Asset High Yield Defined Opportunity Fund Inc.
     17,728       317,508  
Western Asset Managed High Income Fund Inc.
     31,664       183,651  
              1,406,879  
HIGH YIELD MUNICIPAL DEBT — 0.18%
  
MFS High Income Municipal Trust
     76,447       366,181  
MFS High Yield Municipal Trust
     11,000       47,520  
MFS Municipal Income Trust
     18,043       119,084  
              532,785  
INCOME & PREFERRED STOCK — 1.34%
  
Cohen & Steers Limited Duration Preferred and Income Fund, Inc.
     4,961       126,307  
John Hancock Premium Dividend Fund
     70,356       956,138  
LMP Capital and Income Fund Inc.
     91,642       1,625,729  
Nuveen Quality Preferred Income Fund 3
     92,642       804,133  
Nuveen Tax-Advantaged Dividend Growth Fund
     22,622       368,739  
              3,881,046  
LOAN PARTICIPATION — 5.10%
  
Apollo Senior Floating Rate Fund Inc.
     2,500       45,125  
BlackRock Floating Rate Income Strategies Fund, Inc
     37,775       553,404  
BlackRock Floating Rate Income Trust
     13,434       190,897  
 
See accompanying notes to financial statements.
 
 
4
 
 
Cornerstone Progressive Return Fund
Schedule of Investments – June 30, 2014 (unaudited) (continued)
 
Description
    
No. of
Shares
       Value  
LOAN PARTICIPATION (continued)
  
Blackstone / GSO Senior Floating Rate Term Fund
     42,163     $ 755,139  
Eaton Vance Senior Floating-Rate Trust
     39,268       583,915  
Eaton Vance Floating-Rate Income Trust
     142,701       2,153,358  
Eaton Vance Senior Income Trust
     14,165       96,464  
First Trust Senior Floating Rate Income Fund II
     61,356       876,777  
Invesco Senior Income Trust
     243,858       1,221,729  
LMP Corporate Loan Fund Inc.
     11,943       143,555  
Nuveen Credit Strategies Income Fund
     407,270       3,812,047  
Nuveen Floating Rate Income Fund
     101,995       1,234,139  
Nuveen Senior Income Fund
     137,717       970,905  
Nuveen Short Duration Credit Opportunities Fund
     2,000       36,800  
Voya Prime Rate Trust
     358,438       2,075,356  
              14,749,610  
NATURAL RESOURCES — 5.84%
  
BlackRock Energy and Resources Trust
     46,925       1,265,567  
BlackRock Real Asset Equity Trust
     597,924       5,614,506  
BlackRock Resources & Commodities Strategy Trust
     463,946       5,757,570  
First Trust Energy Income and Growth Fund
     6,350       229,552  
First Trust Energy Infrastructure Fund
     17,166       408,036  
Petroleum & Resources Corporation
     83,545       2,604,933  
                 
Description
    
No. of
Shares
       Value  
NATURAL RESOURCES (continued)
  
Voya Natural Resources Equity Income Fund
     89,410     $ 1,028,215  
              16,908,379  
OPTION ARBITRAGE/OPTIONS STRATEGIES — 3.15%
  
BlackRock Global Opportunities Equity Trust
     250,786       3,774,329  
BlackRock International Growth and Income Trust
     445,042       3,667,146  
Voya Asia Pacific High Dividend Equity Income Fund
     55,060       735,051  
Voya Global Advantage and Premium Opportunity Fund
     74,789       922,148  
              9,098,674  
PACIFIC EX JAPAN — 1.35%
  
Aberdeen Greater China Fund, Inc.
     98,060       1,024,727  
China Fund, Inc. (The)
     117,190       2,480,912  
Taiwan Fund, Inc. *
     18,973       388,757  
              3,894,396  
REAL ESTATE — 11.24%
                
Alpine Global Premier Properties Fund
     473,372       3,521,888  
CBRE Clarion Global Real Estate Income Fund
     651,078       5,931,321  
Cohen & Steers Preferred Securities and Income Fund, Inc.
     519,678       9,369,794  
Cohen & Steers Quality Income Realty Fund, Inc.
     542,870       6,107,287  
Cohen & Steers Total Return Realty Fund, Inc.
     66,022       818,673  
LMP Real Estate Income Fund Inc.
     128,601       1,480,198  
 
See accompanying notes to financial statements.
 
 
5
 
 
Cornerstone Progressive Return Fund
Schedule of Investments – June 30, 2014 (unaudited) (continued)
 
Description
    
No. of
Shares
       Value  
REAL ESTATE (continued)
  
Neuberger Berman Real Estate Securities Income Fund Inc.
     473,465     $ 2,367,325  
Nuveen Diversified Dividend and Income Fund
     105,519       1,293,663  
Nuveen Real Estate Income Fund
     36,266       405,454  
RMR Asia Pacific Real Estate Fund
     61,347       1,208,535  
              32,504,138  
SECTOR EQUITY — 1.07%
                
First Trust Specialty Finance and Financial Opportunities Fund
     5,925       48,052  
GAMCO Natural Resources, Gold & Income Trust by Gabelli
     149,168       1,718,415  
John Hancock Financial Opportunities Fund 
     57,338       1,326,801  
              3,093,268  
U.S. MORTGAGE — 0.28%
                
First Trust Mortgage Income Fund
     31,726       503,174  
Nuveen Mortgage Opportunity Term Fund
     3,000       73,680  
Nuveen Mortgage Opportunity Term Fund 2
     9,618       228,908  
              805,762  
UTILITY — 4.50%
                
BlackRock EcoSolutions Investment Trust
     127,519       1,057,133  
BlackRock Utility and Infrastructure Trust
     133,645       2,798,526  
Brookfield Global Listed Infrastructure Income Fund Inc.
     94,367       2,364,837  
                 
Description
     No. of
Shares		       Value  
UTILITY (continued)
  
Cohen & Steers Infrastructure Fund, Inc.
     79,885     $ 1,956,384  
Duff & Phelps Global Utility Income Fund Inc.
     117,575       2,585,474  
Reaves Utility Income Fund
     74,322       2,226,687  
Wells Fargo Advantage Utilities and High Income Fund
     2,400       31,152  
              13,020,193  
VALUE — 0.15%
                
John Hancock Tax-Advantaged Dividend Income Fund
     20,529       429,672  
                 
TOTAL CLOSED-END FUNDS
       173,062,888  
                 
CONSUMER DISCRETIONARY — 2.15%
  
Comcast Corporation - Class A
     31,358       1,683,297  
DIRECTV *
     4,000       340,040  
Ford Motor Company
     30,000       517,200  
Johnson Controls, Inc.
     7,000       349,510  
Macy's, Inc.
     4,000       232,080  
Time Warner Cable Inc.
     2,000       294,600  
Time Warner Inc.
     12,000       843,000  
Walt Disney Company (The)
     23,000       1,972,020  
              6,231,747  
CONSUMER STAPLES — 0.98%
  
Archer-Daniels-Midland Company
     4,000       176,440  
CVS Caremark Corporation
     18,000       1,356,660  
Kroger Co. (The)
     8,000       395,440  
PepsiCo, Inc.
     10,000       893,400  
              2,821,940  
 
See accompanying notes to financial statements.
 
 
6
 
 
Cornerstone Progressive Return Fund
Schedule of Investments – June 30, 2014 (unaudited) (continued)
 
Description
    
No. of
Shares
       Value  
ENERGY — 2.01%
                
ConocoPhillips
     8,000     $ 685,840  
Devon Energy Corporation
     6,000       476,400  
EOG Resources, Inc.
     8,000       934,880  
Halliburton Company
     8,000       568,080  
Kinder Morgan, Inc.
     12,000       435,120  
Marathon Oil Corporation
     9,000       359,280  
Schlumberger Limited
     20,000       2,359,000  
              5,818,600  
EXCHANGE-TRADED FUNDS — 5.84%
  
iShares Core S&P 500 ETF
     43,000       8,471,000  
SPDR S&P 500 ETF Trust
     43,000       8,415,960  
              16,886,960  
FINANCIALS — 2.79%
                
Allstate Corporation (The)
     4,000       234,880  
American International Group, Inc.
     8,000       436,640  
Bank of America Corporation
     30,000       461,100  
Bank of New York Mellon Corporation (The)
     6,000       224,880  
BB&T Corporation
     5,000       197,150  
BlackRock, Inc. - Class A
     2,000       639,200  
JPMorgan Chase & Co.
     20,000       1,152,400  
Marsh & McLennan Companies, Inc.
     4,000       207,280  
MetLife, Inc.
     9,000       500,040  
Morgan Stanley
     16,000       517,280  
Prudential Financial, Inc.
     4,000       355,080  
Wells Fargo & Company
     60,000       3,153,600  
              8,079,530  
HEALTH CARE — 2.00%
                
Abbott Laboratories
     13,000       531,700  
AbbVie Inc.
     3,000       169,320  
Actavis plc *
     2,000       446,100  
Aetna Inc.
     6,000       486,480  
Allergan, Inc.
     2,500       423,050  
                 
Description
    
No. of
Shares
       Value  
HEALTH CARE (continued)
  
Baxter International
     7,000     $ 506,100  
Boston Scientific Corporation *
     2,000       25,540  
Cardinal Health, Inc.
     6,000       411,360  
Gilead Sciences, Inc. *
     14,000       1,160,740  
McKesson Corporation
     3,000       558,630  
Thermo Fisher Scientific Inc.
     5,000       590,000  
Wellpoint, Inc.
     4,500       484,245  
              5,793,265  
INDUSTRIALS — 1.60%
                
Deere & Company
     3,000       271,650  
Delta Air Lines, Inc.
     9,000       348,480  
General Dynamics Corporation
     3,000       349,650  
General Electric Company
     90,000       2,365,200  
Lockheed Martin Corporation
     3,000       482,190  
Union Pacific Corporation
     8,000       798,000  
              4,615,170  
INFORMATION TECHNOLOGY — 4.12%
  
Apple Inc.
     49,000       4,553,570  
Cisco Systems, Inc.
     30,000       745,500  
Corning, Inc.
     9,000       197,550  
Hewlett-Packard Company
     12,400       417,632  
Intel Corporation
     20,000       618,000  
International Business Machines Corporation
     8,000       1,450,160  
Microsoft Corporation
     22,000       917,400  
Oracle Corporation
     40,000       1,621,200  
QUALCOMM Incorporated
     14,500       1,148,400  
Yahoo! Inc. *
     7,000       245,910  
              11,915,322  
MATERIALS — 0.53%
                
Dow Chemical Company (The)
     14,500       746,170  
 
See accompanying notes to financial statements.
 
 
7
 
 
Cornerstone Progressive Return Fund
Schedule of Investments – June 30, 2014 (unaudited) (concluded)
 
Description    
No. of
Shares
       Value  
MATERIALS (continued)
  
LyondellBasell Industries N.V.
     8,000     $ 781,200  
              1,527,370  
TELECOMMUNICATION SERVICES — 0.93%
  
Verizon Communications, Inc.
     55,000       2,691,150  
                 
UTILITIES — 0.09%
                
Exelon Corporation
     7,000       255,360  
                 
TOTAL EQUITY SECURITIES
          
(cost - $221,287,132)
       239,699,302  
                 
SHORT-TERM INVESTMENTS — 19.27%
  
MONEY MARKET FUNDS — 19.27%
  
Fidelity Institutional Money Market Government Portfolio - Class I, 0.01%^ (cost - $55,747,943)
     55,747,943       55,747,943  
                 
TOTAL INVESTMENTS — 102.14%
          
(cost - $277,035,075)
       295,447,245  
                 
LIABILITIES IN EXCESS OF OTHER ASSETS — (2.14)%
       (6,182,814 )
                 
NET ASSETS — 100.00%
           $ 289,264,431  
 
*
Non-income producing security.
 
^
The rate shown is the 7-day effective yield as of June 30, 2014.
 
See accompanying notes to financial statements.
 
 
8
 
 
Cornerstone Progressive Return Fund
Statement of Assets and Liabilities – June 30, 2014 (unaudited)

ASSETS
      
Investments, at value (cost – $277,035,075) (Notes B and C)
   $ 295,447,245  
Cash
     1,204  
Receivables:
        
Investments sold
     380,906  
Dividends
     290,019  
Prepaid expenses
     13,166  
Total Assets
     296,132,540  
         
LIABILITIES
        
Payables:
        
Investments purchased
     6,478,960  
Investment management fees (Note D)
     216,440  
Trustees’ fees and expenses
     19,133  
Administration fees (Note D)
     15,683  
Other accrued expenses
     137,893  
Total Liabilities
     6,868,109  
         
NET ASSETS (applicable to 65,465,673 common shares of beneficial interest)
   $ 289,264,431  
         
NET ASSET VALUE PER SHARE ($289,264,431 ÷ 65,465,673)
   $ 4.42  
         
NET ASSETS CONSISTS OF
        
Paid-in capital
   $ 278,773,586  
Accumulated net realized loss on investments
     (7,921,325 )
Net unrealized appreciation in value of investments
     18,412,170  
Net assets applicable to shares outstanding
   $ 289,264,431  
 
See accompanying notes to financial statements.
 
 
9
 
 
Cornerstone Progressive Return Fund
Statement of Operations – for the Six Months Ended June 30, 2014 (unaudited)

INVESTMENT INCOME
      
Income:
      
Dividends
   $ 5,024,978  
         
Expenses:
        
Investment management fees (Note D)
     906,199  
Administration fees (Note D)
     67,965  
Trustees’ fees and expenses
     42,477  
Accounting fees
     25,622  
Custodian fees
     23,252  
Printing
     21,961  
Legal and audit fees
     21,820  
Transfer agent fees
     8,639  
Stock exchange listing fees
     6,606  
Insurance
     3,376  
Miscellaneous
     5,471  
Total Expenses
     1,133,388  
Net Investment Income
     3,891,590  
         
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
        
Net realized gain from investments
     1,873,038  
Capital gain distributions from regulated investment companies
     84,077  
Net change in unrealized appreciation in value of investments
     14,054,124  
Net realized and unrealized gain on investments
     16,011,239  
         
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
   $ 19,902,829  
 
See accompanying notes to financial statements.
 
 
10
 
 
Cornerstone Progressive Return Fund
Statement of Changes in Net Assets

   
For the Six
Months Ended
June 30, 2014
(Unaudited)
    
For the
Year Ended
December 31,
2013
  
             
INCREASE IN NET ASSETS
            
Operations:
            
Net investment income
   $ 3,891,590     $ 3,751,076  
Net realized gain from investments
     1,957,115       7,731,797  
Net change in unrealized appreciation in value of investments
     14,054,124       1,541,738  
                 
Net increase in net assets resulting from operations
     19,902,829       13,024,611  
                 
Dividends and distributions to shareholders (Note B):
                
Net investment income
     (3,891,590 )     (11,482,874 )
Return-of-capital
     (16,353,427 )     (20,156,702 )
                 
Total dividends and distributions to shareholders
     (20,245,017 )     (31,639,576 )
                 
Transactions in common shares of beneficial interest:
                
Proceeds from rights offering of 25,574,147 and 13,352,005 shares of newly issued shares, respectively
     117,896,818       64,890,744  
Offering expenses associated with rights offering
     (113,247 )     (147,557 )
Proceeds from 700,546 and 824,591 shares newly issued in reinvestment of dividends and distributions, respectively
     3,010,903       3,662,776  
                 
Net increase in net assets from common shares of beneficial interest transactions
     120,794,474       68,405,963  
                 
Total increase in net assets
     120,452,286       49,790,998  
                 
NET ASSETS
                
Beginning of period
     168,812,145       119,021,147  
End of period
   $ 289,264,431     $ 168,812,145  
 
See accompanying notes to financial statements.
 
 
11
 
 
Cornerstone Progressive Return Fund
Financial Highlights
Contained below is per share operating performance data for a share of beneficial interest outstanding, total investment return, ratios to average net assets and other supplemental data for each period indicated. This information has been derived from information provided in the financial statements and market price data for the Fund’s shares.
 
   
For the Six
Months
Ended June
30, 2014
    
For the Years Ended December 31,
  
   
(Unaudited)
    
2013
    
2012
    
2011
    
2010
    
2009
  
PER SHARE OPERATING PERFORMANCE
                                    
Net asset value, beginning of period
   $ 4.31     $ 4.76     $ 5.00     $ 5.90     $ 6.28     $ 7.16  
Net investment income #
     0.09       0.12       0.12       0.12       0.13       0.16  
Net realized and unrealized gain/(loss) on investments
     0.36       0.28       0.62       (0.11 )     1.03       1.42  
Net increase in net assets resulting from operations
     0.45       0.40       0.74       0.01       1.16       1.58  
                                                 
Dividends and distributions to shareholders:
                                                
Net investment income
     (0.09 )     (0.38 )     (0.40 )     (0.61 )     (1.14 )     (0.16 )
Return-of-capital
     (0.37 )     (0.65 )     (0.70 )     (0.63 )     (0.40 )     (2.30 )
Total dividends and distributions to shareholders
     (0.46 )     (1.03 )     (1.10 )     (1.24 )     (1.54 )     (2.46 )
                                                 
Transactions in common shares of beneficial interest:
                                                
Anti-dilutive effect due to shares issued:
                                                
Rights offering
     0.12       0.18       0.12       0.31       —       —  
Reinvestment of dividends and distributions
     0.00 +     0.00 +     0.00 +     0.02       0.00 +     —  
Total transactions in common shares of beneficial interest
     0.12       0.18       0.12       0.33       0.00 +     —  
                                                 
Net asset value, end of period
   $ 4.42     $ 4.31     $ 4.76     $ 5.00     $ 5.90     $ 6.28  
Market value, end of period
   $ 4.59     $ 5.14     $ 5.01     $ 6.04     $ 7.46     $ 8.90  
Total investment return (a)
     (0.52 )%(b)     28.59 %     3.24 %     (2.12 )%     4.73 %     65.40 %
                                                 
RATIOS/SUPPLEMENTAL DATA
                                                
Net assets, end of period (000 omitted)
   $ 289,264     $ 168,812     $ 119,021     $ 78,435     $ 55,277     $ 58,738  
Ratio of expenses to average net assets, net of fee waivers and fees paid indirectly, if any (c)
     1.25 %(e)     1.33 %     1.25 %     1.30 %     1.47 %     1.39 %
Ratio of expenses to average net assets, before fee waivers and fees paid indirectly, if any (c)
     1.25 %(e)     1.33 %     1.34 %     1.45 %     1.61 %     1.54 %
Ratio of net investment income to average net assets (d)
     4.29 %(e)     2.70 %     2.44 %     2.20 %     2.20 %     2.54 %
Portfolio turnover rate
     32.98 %(b)     101.00 %     97.29 %     112.69 %     117.45 %     115.99 %
 
 
#
Based on average shares outstanding.
 
+
Amount rounds to less than $0.01.
 
(a)
Total investment return at market value is based on the changes in market price of a share during the period and assumes reinvestment of dividends and distributions, if any, at actual prices pursuant to the Fund’s dividend reinvestment plan. Total investment return does not reflect brokerage commissions.
 
(b)
Not annualized.
 
(c)
Expenses do not include expenses of investment companies in which the Fund invests.
 
(d)
Recognition of net investment income by the Fund may be affected by the timing of the declaration of dividends, if any, by investment companies in which the Fund invests.
 
(e)
Annualized.
 
See accompanying notes to financial statements.
 
 
12
 
 
Cornerstone Progressive Return Fund
Notes to Financial Statements (unaudited)
 
NOTE A. ORGANIZATION
 
Cornerstone Progressive Return Fund (the “Fund”) was organized as a Delaware statutory trust on April 26, 2007 and commenced investment operations on September 10, 2007. Prior to such date it had no operations other than the sale and issuance of 6,668 shares at an aggregate purchase price of $100,020 on July 20, 2007. Its investment objective is to provide total return. 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 accordance 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 New York Stock Exchange (“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 Trustees 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 NASDAQ Official 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 Trustees 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 Trustees believes reflect most closely the value of such securities. At June 30, 2014, the Fund held no securities valued in good faith by the Board of Trustees.
 
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 is closed.
 
The Fund is exposed to financial market risks, including the valuations of its investment portfolio. During the six months ended June 30, 2014, the Fund did not invest in derivative instruments or engage in 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
 
 
13
 
 
Cornerstone Progressive Return Fund
Notes to Financial Statements (unaudited) (continued)

purposes. Interest income is recorded on an accrual basis; dividend income is recorded on the ex-dividend date.
 
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 qualify as a regulated investment company and to make the requisite distributions to its shareholders 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 December 31, 2013, 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 2010 through 2013, and for the six months ended June 30, 2014. There was no material impact to the financial statements.
 
Distributions to Shareholders: The Fund seeks to make a level distribution to its shareholders each month pursuant to a distribution policy adopted by the Board of Trustees (“Distribution Policy”). 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 portfolio. The distribution rate may be modified by the Board of Trustees from time to time. If, for any monthly distribution, investment company taxable income, if any (which term includes net short-term capital gain), and net tax-exempt income, if any, is less than the amount of the distribution, the difference will generally be a tax-free return of capital distributed from the Fund’s assets. The Fund’s final distribution for each calendar year is expected to include any remaining investment company taxable income and net tax exempt income undistributed during the year, as well as all net capital gain realized during the year.
 
However, if they determine it is appropriate to do so, the Board of Trustees may elect to not distribute realized gains and to pay taxes incurred. In general, the total distributions made in any taxable year (other than distributions of net capital gain or return of capital) would be treated as ordinary dividend income to the extent of the Fund’s current and accumulated earnings and profits. Distributions in excess of the earnings and profits would first be a tax-free return of capital to the extent of the adjusted tax basis in the shares.
 
The Distribution Policy described above would result in the payment of approximately the same amount or percentage to the Fund’s shareholders each month. These distributions will not be tied to the Fund’s investment income and capital gains and will not represent yield or investment return on the Fund’s portfolio. Section 19(a) of the 1940 Act and Rule 19a-1 thereunder require the Fund to provide a written statement accompanying any such payment that adequately discloses its source or sources, other than net investment income. Thus, if the source of some or all of the dividend or other distribution were the original capital contribution of the shareholder, and the payment amounted to a return of capital, the Fund would be required to provide written disclosure to that effect. Nevertheless, persons who periodically receive the payment of a dividend or
 
 
14
 
 
Cornerstone Progressive Return Fund
Notes to Financial Statements (unaudited) (continued)

other distribution may be under the impression that they are receiving net profits when they are not. Shareholders should read any written disclosure provided pursuant to Section 19(a) and Rule 19a-1 carefully, and should not assume that the source of any distribution from the Fund is net profit.
 
The Board of Trustees reserves the right to change the Distribution Policy from time to time.
 
Distribution Policy Risk: The Fund seeks to make monthly distributions to shareholders 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 distributions paid to Fund shareholders. 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.
 
 
•
Level 1 – quoted unadjusted prices for identical instruments in active markets to which the Fund has access at the date of measurement.
 
 
•
Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.
 
 
•
Level 3 – model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the Fund’s own assumptions that market participants would use to price the asset or liability based on the best available information.
 
The following is a summary of the inputs used as of June 30, 2014 in valuing the Fund’s investments carried at value:
 
Valuation Inputs
  
Investments
in Securities
    
Other
Financial
Instruments*
  
Level 1 – Quoted Prices
            
Equity Investments
   $ 239,699,302     $ —  
Short-Term Investments
     55,747,943       —  
Level 2 – Other Significant Observable Inputs
     —       —  
Level 3 – Significant Unobservable Inputs
     —       —  
Total
   $ 295,447,245     $ —  

*
Other financial instruments include futures, forwards and swap contracts.
 
The breakdown of the Fund’s investments into major categories is disclosed in its Schedule of Investments.
 
 
15
 
 
Cornerstone Progressive Return Fund
Notes to Financial Statements (unaudited) (continued)

During the six months ended June 30, 2014, the Fund did not have any transfers in and out of any Level.
 
The Fund did not have any assets or liabilities that were measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at June 30, 2014.
 
It is the Fund’s policy to recognize transfers into and out of any Level at the end of the reporting period.
 
In June 2013, FASB issued Accounting Standards Update 2013-08 Financial Services – Investment Companies (Topic 946) – Amendments to the Scope, Measurement and Disclosure Requirements (“ASU 2013-08”) which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. ASU 2013-08 sets forth a methodology for determining whether an entity should be characterized as an investment company and prescribes fair value accounting for an investment company’s non-controlling ownership interest in another investment company. FASB has determined that a fund registered under the Investment Company Act of 1940 automatically meets ASU 2013-08’s criteria for an investment company. Although still evaluating the potential impacts of ASU 2013-08 to the Fund, the Investment Manager does not expect the adoption of the ASU to have an effect on the Fund.
 
NOTE D. AGREEMENTS WITH AFFILIATES
 
At June 30, 2014, certain officers of the Fund are also officers of Cornerstone or AST Fund Solutions, LLC (“AFS”). 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, 2014, Cornerstone earned $906,199 for investment management services.
 
Administration Agreement
 
Under terms of the administration agreement, AFS supplies executive, administrative and regulatory services for the Fund. AFS supervises the preparation of reports to shareholders for the Fund, reports to and filings with the Securities and Exchange Commission and materials for meetings of the Board of Trustees. For these services, the Fund pays AFS a monthly fee at an annual rate of 0.075% of its average daily net assets, subject to an annual minimum fee of $50,000. For the six months ended June 30, 2014, AFS earned $67,965 as administrator.
 
NOTE E. INVESTMENT IN SECURITIES
 
For the six months ended June 30, 2014, purchases and sales of securities, other than short-term investments, were $116,554,530 and $58,048,282, respectively.
 
NOTE F. COMMON SHARES OF BENEFICIAL INTEREST
 
The Fund has unlimited common shares of beneficial interest authorized and has 65,465,673 shares issued and outstanding at June 30, 2014. As of that date, two individuals that control Cornerstone owned 6,210 shares related to the initial issuance of the seed capital shares of the Fund. Transactions in common shares of beneficial interest for the six months ended June 30, 2014 were as follows:
 
Shares at beginning of period
     39,190,980  
Shares newly issued from rights offering
     25,574,147  
Shares newly issued in reinvestment of dividends and distributions
     700,546  
Shares at end of period
     65,465,673  

 
16
 
 
Cornerstone Progressive Return Fund
Notes to Financial Statements (unaudited) (concluded)

NOTE G. 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 shareholders during the year ended December 31, 2013 was ordinary income of $11,482,874 and return-of-capital of $20,156,702.
 
GAAP requires 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 losses during the year ended December 31, 2013.
 
At December 31, 2013, the Fund had a capital loss carryforward for U.S. federal income tax purposes of $9,846,029 which expires in 2017.
 
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. Therefore, there may be a greater likelihood that all or a portion of the Fund’s capital loss carryforward may expire without being utilized.
 
The following information is computed on a tax basis for each item as of June 30, 2014:
 
Cost of portfolio investments
   $ 277,065,550  
Gross unrealized appreciation
   $ 19,437,531  
Gross unrealized depreciation
     (1,055,836 )
Net unrealized appreciation
   $ 18,381,695  

 
17
 
 
Results of Annual Meeting of Shareholders (unaudited)
 
On April 15, 2014, the Annual Meeting of Shareholders of the Fund was held and the following matters were voted upon based on 39,257,124 shares of beneficial interest outstanding on the record date of February 18, 2014.
 
(1)
To approve the election of five trustees to hold office until the year 2015 Annual Meeting of Shareholders.
 
Name of Trustees
  
For
  
Withhold
  
Broker Non-Votes
Ralph W. Bradshaw
  
31,105,707
  
847,552
  
233,014
Edwin Meese III
  
30,631,615
  
1,324,344
  
230,314
Scott B. Rogers
  
30,966,263
  
987,196
  
232,814
Andrew A. Strauss
  
30,906,532
  
1,046,727
  
233,014
Glenn W. Wilcox, Sr.
  
30,970,143
  
985,616
  
230,514

 
18
 
 
Investment Management Agreement Approval Disclosure (unaudited)
 
The Board of Trustees, including the Independent Trustees (the “Board”) of Cornerstone Progressive Return Fund (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 7, 2014.
 
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 the Board’s review of the materials and information as well as 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 shareholders. The Board decided that the continuation of the Agreement 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 shareholders. 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.
 
In response to a questionnaire distributed by Fund counsel to the Investment Manager in accordance with Section 15c of the Investment Company Act of 1940, as amended, the Investment Manager provided certain information to the independent members of the Board in advance of the meeting held on February 7, 2014. The materials provided by the Investment Manager described the services offered by the Investment Manager to the Fund and included an overview of the Investment Manager’s investment philosophy, management style and plan, including the Investment Manager’s extensive knowledge and experience in the closed-end fund industry. The Board noted that the Investment Manager provides quarterly reviews of the performance of the Fund and the Investment Manager’s services for the Fund. The Board also discussed the experience and 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 of 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 met in executive session to discuss the information provided and 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 the investment management personnel. The Board determined that the Agreement is consistent with the best interests of the Fund and its shareholders, and enables the
 
 
19
 
 
Investment Management Agreement Approval Disclosure (unaudited) (concluded)
 
Fund to receive high quality services at a cost that is appropriate, reasonable, and in the best interests of the Fund and its shareholders. 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 Trustees present in person at the meeting) approved the continuance of the Agreement with respect to the Fund.
 
 
20
 
 
Description of Dividend Reinvestment Plan (unaudited)
 
Cornerstone Progressive Return Fund (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.
 
Shareholders automatically participate in the Fund’s Plan, unless and until an election is made to withdraw from the Plan on behalf of such participating shareholder. Shareholders 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 shareholders are reinvested in full and fractional shares as described below.
 
When the Fund declares a Distribution, the Agent, on the shareholder’s behalf, will (i) receive additional authorized shares from the Fund either newly issued or repurchased from shareholders by the Fund and held as treasury stock (“Newly Issued Shares”) or (ii) purchase outstanding shares on the open market, on the NYSE MKT 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 shareholders 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 shareholders who do not wish to have their Distributions automatically reinvested should so notify the Fund in writing. If a shareholder 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 shareholder 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 Trustees, 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.
 
 
21
 
 
Description of Dividend Reinvestment Plan (unaudited) (concluded)
 
The Agent will maintain all shareholder accounts in the Plan and furnish written confirmations of all transactions in the accounts, including information needed by shareholders 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 shareholder’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 shareholders.
 
In the case of shareholders, 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 shareholder as representing the total amount of shares registered in the shareholder’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 participant’s 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 participant’s 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 (866) 668-6558.
 
 
22
 
 
Proxy Voting and Portfolio Holdings Information (unaudited)
 
The policies and procedures that the Fund uses to determine how to vote proxies relating to its portfolio securities are available:
 
 
•
without charge, upon request, by calling toll-free (866) 668-6558; and
 
 
•
on the website of the Securities and Exchange Commission, http://www.sec.gov.
 
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent period ended June 30 is available without charge, upon request, by calling toll-free (866) 668-6558, and on the SEC’s website at http://www.sec.gov or on the Fund’s website at www.cornerstoneprogressivereturnfund.com (See Form N-PX).
 
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 are 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 toll-free 1-800-SEC-0330.
 
 
23
 
 
Privacy Policy Notice (unaudited)
 
FACTS
WHAT DOES CORNERSTONE PROGRESSIVE RETURN FUND, (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:
   •   Social Security number
   •   account balances
   •   account transactions
   •   transaction history
   •   wire transfer instructions
   •   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.

 
24
 
 
Privacy Policy Notice (unaudited) (continued)
 
Reasons we can share your personal information
Does the Fund share?
Can you limit this sharing?
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus
Yes
No
For our marketing purposes – to offer our products and services to you
No
We don’t share
    For joint marketing with other financial companies
No
We don’t share
For our affiliates’ everyday business purposes – information about your transactions and experiences
Yes
No
For our affiliates’ everyday business purposes – information about your creditworthiness
No
We don’t share
For our affiliates to market to you
No
We don’t share
For nonaffiliates to market to you
No
We don’t share
 
What we do
Who is providing this notice?
Cornerstone Progressive Return Fund (the “Fund”)
How does the Fund and the Fund’s service providers, on the Fund’s behalf protect my personal information?
To protect your personal information from unauthorized access and use, we and our service providers use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.
How does the Fund and the Fund’s service providers, on the Fund’s behalf collect my personal information?
We collect your personal information, for example, when you:
   •   open an account
   •   provide account information
   •   give us your contact information
   •   make a wire transfer
We also collect your information from others, such as credit bureaus, affiliates, or other companies.
 
 
25
 
 
Privacy Policy Notice (unaudited) (concluded)
 
Why can’t I limit all sharing?
Federal law gives you the right to limit only
   •   sharing for affiliates’ everyday business purposes – information about your
  creditworthiness
   •   affiliates from using your information to market to you
   •   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.
   •   Cornerstone Advisors, Inc.
Nonaffiliates
Companies not related by common ownership or control. They can be financial and nonfinancial companies.
   •   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.
   •   The Fund does not jointly market.

Questions?
Call (866) 668-6558
 
 
26
 
 
Summary of General Information (unaudited)
 
Cornerstone Progressive Return Fund is a closed-end, diversified investment company whose shares trade on the NYSE MKT. Its investment objective is to provide total return. The Fund is managed by Cornerstone Advisors, Inc.
 
Shareholder Information (unaudited)
 
The Fund is listed on the NYSE MKT (symbol “CFP”). The previous week’s net asset value per share, market price, and related premium or discount, as well as certain other Fund information, are available on the Fund’s website at www.cornerstoneprogressivereturnfund.com.
 
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that Cornerstone Progressive Return Fund may from time to time purchase its shares in the open market.
 
This report, including the financial statements herein, is sent to the shareholders 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.
 
 
27
 
 
 
 
Cornerstone Progressive Return Fund
 

 
 
 
 
 
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 6.
SCHEDULE OF INVESTMENTS.
 
(a)
Not required
 
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 trustees 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 Progressive Return Fund

By (Signature and Title)*
/s/ Ralph W. Bradshaw
  
   
Ralph W. Bradshaw, Chairman and President
  
   
(Principal Executive Officer)
  
       
Date
September 2, 2014
    
 
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By (Signature and Title)*
/s/ Ralph W. Bradshaw
  
   
Ralph W. Bradshaw, Chairman and President
  
   
(Principal Executive Officer)
  
       
Date
September 2, 2014
    
       
     
By (Signature and Title)*
/s/ Frank J. Maresca
  
   
Frank J. Maresca, Treasurer
  
   
(Principal Financial Officer)
  
       
Date
September 2, 2014
    

* Print the name and title of each signing officer under his or her signature.