UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-22066

Cornerstone Progressive Return Fund

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(Exact name of registrant as specified in charter)

Registrant's telephone number, including area code: (866) 668-6558

 

 

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Cornerstone Progressive
Return Fund

Annual Report
December 31, 2014

 

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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
Report of Independent Registered Public Accounting Firm	18
2014 Tax Information	19
Additional Information Regarding the Fund’s Trustees and Corporate Officers	20
Description of Dividend Reinvestment Plan	22
Proxy Voting and Portfolio Holdings Information	24
Privacy Policy Notice	25
Summary of General Information	28
Shareholder Information	28

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Cornerstone Progressive Return Fund Portfolio Summary – as of December 31, 2014 (unaudited)

SECTOR ALLOCATION

 

Sector	Percent of Net Assets
Closed-End Funds	68.8
Exchange-Traded Funds	6.8
Information Technology	4.5
Financials	3.7
Health Care	3.1
Industrials	2.7
Consumer Discretionary	2.6
Consumer Staples	2.0
Energy	1.8
Telecommunication Services	1.0
Materials	0.5
Utilities	0.3
Other	2.2

TOP TEN HOLDINGS, BY ISSUER

 

	Holding	Sector	Percent of Net Assets
1.	Cohen & Steers Preferred Securities and Income Fund, Inc.	Closed-End Funds	3.8
2.	BlackRock Resources & Commodities Strategy Trust	Closed-End Funds	3.8
3.	iShares Core S&P 500 ETF	Exchange-Traded funds	3.4
4.	SPDR S&P 500 ETF Trust	Exchange-Traded funds	3.4
5.	Alpine Global Total Dynamic Dividend Fund	Closed-End Funds	3.1
6.	Cohen & Steers Quality Income Realty Fund, Inc.	Closed-End Funds	2.5
7.	CBRE Clarion Global Real Estate Income Fund	Closed-End Funds	2.2
8.	ClearBridge Energy MLP Opportunity Fund Inc.	Closed-End Funds	2.2
9.	ClearBridge Energy MLP Total Return Fund Inc.	Closed-End Funds	2.2
10.	Apple Inc.	Information Technology	2.1

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Cornerstone Progressive Return Fund Schedule of Investments – December 31, 2014

Description		No. of Shares				Value
EQUITY SECURITIES — 97.81%
CLOSED-END FUNDS — 68.78%
CONVERTIBLE SECURITIES — 0.49%
AllianzGI Equity & Convertible Income Fund			61,912			$	1,280,340
CORE — 5.44%
Adams Express Company (The)			294,662				4,030,976
Advent/Claymore Enhanced Growth & Income Fund			3,110				27,679
General American Investors Company, Inc.			92,121				3,224,235
Guggenheim Equal Weight Enhanced Equity Income Fund			76,345				1,558,965
Liberty All-Star Equity Fund			385,887				2,307,604
Source Capital, Inc.			16,000				1,154,064
Tri-Continental Corporation			89,526				1,916,752
							14,220,275
CORPORATE DEBT INVESTMENT GRADE-RATED — 0.00%
Cutwater Select Income Fund			1				26
DEVELOPED MARKET — 0.72%
Aberdeen Australia Equity Fund, Inc.			84,733				581,268
Aberdeen Singapore Fund, Inc.			27,892				332,473
Eurpean Equity Fund, Inc. (The)			3,000				24,600
New Ireland Fund, Inc. (The)			27,520				347,302
Swiss Helvetia Fund, Inc. (The)			53,969				601,215
							1,886,858
Description			No. of Shares				Value
EMERGING MARKETS — 2.01%
Aberdeen Chile Fund, Inc.			118,136			$	878,932
First Trust/Aberdeen Emerging Opportunity Fund			28,096				462,179
JPMorgan China Region Fund, Inc.			200				3,378
Morgan Stanley India Investment Fund, Inc. *			59,108				1,588,232
Turkish Investment Fund, Inc. (The)			33,087				365,280
Voya Emerging Markets High Dividend Equity Fund			188,122				1,948,944
							5,246,945
EMERGING MARKETS DEBT — 0.19%
Global High Income Fund Inc.			49,761				438,892
Western Asset Emerging Markets Debt Fund Inc.			3,239				51,047
							489,939
FLEXIBLE INCOME — 0.40%
MFS Charter Income Trust			114,139				1,048,937
ENERGY MLP — 9.22%
ClearBridge Energy MLP Fund Inc.			156,544				4,320,614
ClearBridge Energy MLP Opportunity Fund Inc.			247,426				5,841,728
ClearBridge Energy MLP Total Return Fund Inc.			272,606				5,831,042
First Trust MLP and Energy Income Fund			127,892				2,756,073
Nuveen Energy MLP Total Return Fund			263,725				5,358,892
							24,108,349

 

See accompanying notes to financial statements.

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Cornerstone Progressive Return Fund Schedule of Investments – December 31, 2014 (Continued)

 

Description			No. of Shares				Value
GENERAL & INSURED LEVERAGED — 2.94%
BlackRock MuniHoldings Quality Fund II, Inc.			96,305			$	1,298,191
Invesco Advantage Municipal Income Trust II			133,008				1,542,893
Invesco Municipal Opportunity Trust			50,199				645,559
Invesco Municipal Trust			31,550				399,423
Invesco Trust for Investment Grade Municipals			122,922				1,633,633
Invesco Value Municipal Income Trust			0				7
Managed Duration Investment Grade Municipal Fund			1,582				21,373
MFS Investment Grade Municipal Trust			28,806				270,200
Nuveen Dividend Advantage Municipal Fund 3			83,092				1,145,008
Nuveen Dividend Advantage Municipal Income Fund			11,119				156,889
Nuveen Quality Municipal Fund, Inc.			5,671				74,744
Nuveen Select Quality Municipal Fund, Inc.			34,936				487,707
							7,675,627
GENERAL BOND — 0.30%
Deutsche Multi-Market Income Trust			23,093				196,752
MFS Multimarket Income Trust			91,451				594,432
							791,184
Description			No. of Shares				Value
GLOBAL — 6.87%
Alpine Global Dynamic Dividend Fund			200,705			$	1,974,937
Alpine Global Total Dynamic Dividend Fund			945,029				8,023,296
Clough Global Allocation Fund			16,202				239,142
Clough Global Opportunities Fund			24,616				315,577
Delaware Enhanced Global Dividend and Income Fund			172,572				1,944,886
Gabelli Multimedia Trust Inc. (The)			44,840				448,848
GDL Fund (The)			83,098				850,093
Nuveen Global Value Opportunities Fund			87,946				1,144,177
Virtus Total Return Fund			124,984				564,928
Wells Fargo Advantage Global Dividend Opportunity Fund			325,819				2,440,384
							17,946,268
GLOBAL INCOME — 0.41%
Legg Mason BW Global Income Opportunities Fund Inc.			36,587				611,369
Nuveen Global High Income Fund			27,010				465,923
							1,077,292
GROWTH FUNDS — 0.08%
Liberty All-Star Growth Fund, Inc.			41,476				214,016

 

See accompanying notes to financial statements.

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Description			No. of Shares				Value
HIGH CURRENT YIELD (LEVERAGED) — 2.62%
AllianceBernstein Global High Income Fund, Inc.			112,427			$	1,397,468
BlackRock Corporate High Yield Fund VI, Inc.			246,309				2,807,923
BlackRock Debt Strategies Fund, Inc.			13,834				51,462
Deutsche High Income Opportunities Fund, Inc.			96,489				1,353,741
Deutsche High Income Trust			66,861				584,365
Franklin Universal Trust			54,076				383,940
Invesco High Income Trust II			10,684				160,367
MFS Intermediate High Income Fund			38,669				102,473
							6,841,739
HIGH YIELD — 0.56%
Credit Suisse Asset Management Income Fund, Inc.			1,100				3,619
First Trust High Income Long/Short Fund			46,839				749,424
Western Asset High Yield Defined Opportunity Fund Inc.			32,648				514,859
Western Asset Managed High Income Fund Inc.			37,498				191,615
							1,459,517
HIGH YIELD MUNICIPAL DEBT — 0.22%
MFS High Income Municipal Trust			83,247				406,245
MFS Municipal Income Trust			22,981				152,594
Putnam Managed Municipal Income Trust			3,400				24,650
							583,489
Description			No. of Shares				Value
INCOME & PREFERRED STOCK — 0.80%
LMP Capital and Income Fund Inc.			78,074			$	1,308,520
Nuveen Quality Preferred Income Fund 3			92,642				771,708
							2,080,228
LOAN PARTICIPATION — 5.56%
BlackRock Floating Rate Income Strategies Fund, Inc			37,775				505,807
Blackstone / GSO Senior Floating Rate Term Fund			12,620				211,259
Eaton Vance Floating-Rate Income Trust			166,601				2,314,088
Eaton Vance Senior Floating-Rate Trust			57,668				789,475
Eaton Vance Senior Income Trust			15,365				95,878
First Trust Senior Floating Rate Income Fund II			61,356				798,242
Invesco Senior Income Trust			241,758				1,102,416
Nuveen Credit Strategies Income Fund			571,540				5,012,406
Nuveen Floating Rate Income Fund			101,995				1,120,925
Nuveen Senior Income Fund			140,117				917,766
Nuveen Short Duration Credit Opportunities Fund			2,000				33,300
Voya Prime Rate Trust			305,188				1,620,548
							14,522,110
NATURAL RESOURCES — 4.52%
BlackRock Resources & Commodities Strategy Trust			1,009,976				9,806,867

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Description			No. of Shares				Value
NATURAL RESOURCES (continued)
First Trust Energy Income and Growth Fund			18,799			$	686,164
First Trust Energy Infrastructure Fund			55,059				1,309,303
							11,802,334
OPTION ARBITRAGE/OPTIONS STRATEGIES — 2.72%
AllianzGI NFJ Dividend, Interest & Premium Strategy Fund			27,600				441,600
BlackRock Global Opportunities Equity Trust			250,786				3,292,820
BlackRock International Growth and Income Trust			445,042				2,999,583
Madison Strategic Sector Premium Fund			1,300				15,483
Voya Asia Pacific High Dividend Equity Income Fund			6,400				73,152
Voya Global Equity Dividend and Premium Opportunity Fund			33,000				274,560
							7,097,198
PACIFIC EX JAPAN — 1.24%
Aberdeen Greater China Fund, Inc.			58,382				579,149
China Fund, Inc. (The)			88,790				1,618,642
Morgan Stanley Thai Fund, Inc.			61,771				728,898
Taiwan Fund, Inc.			18,973				310,209
							3,236,898
REAL ESTATE — 14.04%
Alpine Global Premier Properties Fund			569,304				4,104,682
CBRE Clarion Global Real Estate Income Fund			652,019				5,861,651
Description			No. of Shares				Value
REAL ESTATE (continued)
Cohen & Steers Preferred Securities and Income Fund, Inc.			522,978			$	9,931,352
Cohen & Steers Quality Income Realty Fund, Inc.			542,870				6,617,585
Cohen & Steers Total Return Realty Fund, Inc.			156,384				2,064,269
LMP Real Estate Income Fund Inc.			129,383				1,623,757
Neuberger Berman Real Estate Securities Income Fund Inc.			551,451				2,917,176
Nuveen Diversified Dividend and Income Fund			105,519				1,241,959
Nuveen Real Estate Income Fund			82,932				953,718
RMR Real Estate Income Fund			66,558				1,385,736
							36,701,885
SECTOR EQUITY — 2.05%
Gabelli Healthcare & WellnessRx Trust (The)			20,634				215,006
GAMCO Global Gold, Natural Resources & Income Trust			122,396				856,772
GAMCO Natural Resources, Gold & Income Trust by Gabelli			171,084				1,380,648
John Hancock Financial Opportunities Fund			85,216				2,007,689
Tekla Healthcare Investors			28,667				902,724
							5,362,839
U.S. MORTGAGE — 0.21%
First Trust Mortgage Income Fund			25,118				373,253

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Description			No. of Shares				Value
U.S. MORTGAGE (continued)
Nuveen Mortgage Opportunity Term Fund 2			7,078			$	163,997
							537,250
UTILITY — 5.18%
BlackRock Utility and Infrastructure Trust			133,645				2,771,797
Brookfield Global Listed Infrastructure Income Fund Inc.			87,960				1,837,484
Cohen & Steers Infrastructure Fund, Inc.			101,864				2,314,350
Gabelli Global Utility & Income Trust (The)			34,971				678,437
Duff & Phelps Global Utility Income Fund Inc.			161,784				3,501,006
Reaves Utility Income Fund			74,322				2,441,478
							13,544,552
TOTAL CLOSED-END FUNDS							179,756,095
CONSUMER DISCRETIONARY — 2.58%
Comcast Corporation - Class A			31,358				1,819,078
DIRECTV *			4,000				346,800
Ford Motor Company			30,000				465,000
Johnson Controls, Inc.			7,000				338,380
Macy's, Inc.			4,000				263,000
Time Warner Cable Inc.			2,000				304,120
Time Warner Inc.			12,000				1,025,040
Walt Disney Company (The)			23,000				2,166,370
							6,727,788
CONSUMER STAPLES — 2.01%
Archer-Daniels-Midland Company			8,000				416,000
Description			No. of Shares				Value
CONSUMER STAPLES (continued)
CVS Caremark Corporation			18,000			$	1,733,580
Kroger Co. (The)			8,000				513,680
Mondelēz International, Inc. - Class A			12,000				435,900
PepsiCo, Inc.			10,000				945,600
Wal-Mart Stores, Inc.			14,000				1,202,320
							5,247,080
ENERGY — 1.78%
Chevron Corporation			10,000				1,121,800
ConocoPhillips			8,000				552,480
Devon Energy Corporation			3,000				183,630
EOG Resources, Inc.			8,000				736,560
Halliburton Company			8,000				314,640
Kinder Morgan, Inc.			12,000				507,720
Marathon Oil Corporation			2,000				56,580
Phillips 66			7,000				501,900
Schlumberger Limited			8,000				683,280
							4,658,590
EXCHANGE-TRADED FUNDS — 6.79%
iShares Core S&P 500 ETF			43,000				8,896,700
SPDR S&P 500 ETF Trust			43,000				8,836,500
							17,733,200
FINANCIALS — 3.67%
Allstate Corporation (The)			4,000				281,000
American Express Company			8,000				744,320
American International Group, Inc.			8,000				448,080
Aon plc			3,000				284,490
Bank of New York Mellon Corporation (The)			6,000				243,420
BlackRock, Inc. - Class A			2,000				715,120
Discover Financial Services			3,000				196,470
Franklin Resources, Inc.			8,000				442,960
JPMorgan Chase & Co.			20,000				1,251,600

 

See accompanying notes to financial statements.

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Description			No. of Shares				Value
FINANCIALS (continued)
Marsh & McLennan Companies, Inc.			4,000			$	228,960
MetLife, Inc.			9,000				486,810
Morgan Stanley			16,000				620,800
Prudential Financial, Inc.			4,000				361,840
Wells Fargo & Company			60,000				3,289,200
							9,595,070
HEALTH CARE — 3.08%
Abbott Laboratories			13,000				585,260
AbbVie Inc.			3,000				196,320
Actavis plc *			2,000				514,820
Aetna Inc.			6,000				532,980
Allergan, Inc.			2,500				531,475
Amgen Inc.			8,000				1,274,320
Anthem, Inc.			4,500				565,515
Baxter International			7,000				513,030
Boston Scientific Corporation *			2,000				26,500
Cardinal Health, Inc.			6,000				484,380
Cigna Corporation			2,500				257,275
Gilead Sciences, Inc. *			14,000				1,319,640
McKesson Corporation			3,000				622,740
Thermo Fisher Scientific Inc.			5,000				626,450
							8,050,705
INDUSTRIALS — 2.73%
Boeing Company (The)			6,000				779,880
Deere & Company			3,000				265,410
Delta Air Lines, Inc.			9,000				442,710
FedEx Corporation			3,000				520,980
General Dynamics Corporation			3,000				412,860
General Electric Company			90,000				2,274,300
Honeywell International Inc.			6,000				599,520
Lockheed Martin Corporation			3,000				577,710
Description			No. of Shares				Value
INDUSTRIALS (continued)
Northrop Grumman Corporation			2,000			$	294,780
Union Pacific Corporation			8,000				953,040
							7,121,190
INFORMATION TECHNOLOGY — 4.56%
Apple Inc.			49,000				5,408,620
Cisco Systems, Inc.			30,000				834,450
Corning, Inc.			9,000				206,370
Hewlett-Packard Company			12,400				497,612
Intel Corporation			20,000				725,800
Microsoft Corporation			22,000				1,021,900
Oracle Corporation			40,000				1,798,800
QUALCOMM Incorporated			14,500				1,077,785
Yahoo! Inc. *			7,000				353,570
							11,924,907
MATERIALS — 0.52%
Dow Chemical Company (The)			14,500				661,345
LyondellBasell Industries N.V.			3,000				238,170
PPG Industries, Inc.			2,000				462,300
							1,361,815
TELECOMMUNICATION SERVICES — 0.98%
Verizon Communications, Inc.			55,000				2,572,900
UTILITIES — 0.33%
Exelon Corporation			7,000				259,560
PG&E Corporation			6,000				319,440
Southern Company (The)			6,000				294,660
							873,660
TOTAL EQUITY SECURITIES
(cost - $240,411,037)							255,623,000

 

See accompanying notes to financial statements.

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Description			No. of Shares				Value
SHORT-TERM INVESTMENTS — 2.34%
MONEY MARKET FUNDS — 2.34%
Fidelity Institutional Money Market Government Portfolio - Class I, 0.01%^ (cost - $6,111,599)			6,111,599			$	6,111,599
TOTAL INVESTMENTS — 100.15%
(cost - $246,522,636)							261,734,599
LIABILITIES IN EXCESS OF OTHER ASSETS — (0.15)%							(392,323	)
NET ASSETS — 100.00%						$	261,342,276

 

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*

Non-income producing security.

^

The rate shown is the 7-day effective yield as of December 31, 2014.

 

Cornerstone Progressive Return Fund Statement of Assets and Liabilities – December 31, 2014

ASSETS
Investments, at value (cost – $246,522,636) (Notes B and C)		$	261,734,599
Cash			17,981
Receivables:
Dividends			1,101,278
Investments sold			306,182
Prepaid expenses			1,599
Total Assets			263,161,639
LIABILITIES
Payables:
Investments purchased			1,423,730
Investment management fees (Note D)			222,087
Trustees’ fees and expenses			48,646
Administration fees (Note D)			16,072
Other accrued expenses			108,828
Total Liabilities			1,819,363
NET ASSETS (applicable to 16,565,151 common shares of beneficial interest)		$	261,342,276
NET ASSET VALUE PER SHARE ($261,342,276 ÷ 16,565,151)		$	15.78
NET ASSETS CONSISTS OF
Paid-in capital		$	252,159,626
Accumulated net realized loss on investments			(6,029,313	)
Net unrealized appreciation in value of investments			15,211,963
Net assets applicable to shares outstanding		$	261,342,276

 

Cornerstone Progressive Return Fund Statement of Operations – for the Year Ended December 31, 2014

INVESTMENT INCOME
Income:
Dividends		$	7,361,665
Expenses:
Investment management fees (Note D)			2,284,138
Administration fees (Note D)			171,311
Trustees’ fees and expenses			117,519
Accounting fees			56,229
Custodian fees			51,128
Printing			47,531
Legal and audit fees			47,049
Reverse stock split expenses			30,500
Transfer agent fees			16,201
Stock exchange listing fees			13,320
Insurance			7,110
Miscellaneous			19,546
Total Expenses			2,861,582
Net Investment Income			4,500,083
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investments			1,335,482
Capital gain distributions from regulated investment companies			2,513,645
Net change in unrealized appreciation in value of investments			10,853,916
Net realized and unrealized gain on investments			14,703,043
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS		$	19,203,126

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Cornerstone Progressive Return Fund Statement of Changes in Net Assets

		For the Years Ended December 31,
		2014				2013
INCREASE IN NET ASSETS
Operations:
Net investment income		$	4,500,083			$	3,751,076
Net realized gain from investments			3,849,127				7,731,797
Net change in unrealized appreciation/(depreciation) in value of investments			10,853,916				1,541,738
Net increase in net assets resulting from operations			19,203,126				13,024,611
Dividends and distributions to shareholders (Note B):
Net investment income			(8,417,055	)			(11,482,874	)
Return-of-capital			(42,411,734	)			(20,156,702	)
Total dividends and distributions to shareholders			(50,828,789	)			(31,639,576	)
Transactions in common shares of beneficial interest:*
Proceeds from rights offering of 6,393,537 and 3,338,001 shares of newly issued shares, respectively			117,896,818				64,890,744
Offering expenses associated with rights offering			(106,495	)			(147,557	)
Cash in lieu of 3 fractional shares from the reverse stock split			(53	)			—
Proceeds from 373,872 and 206,148 shares newly issued in reinvestment of dividends and distributions, respectively			6,365,524				3,662,776
Net increase in net assets from common shares of beneficial interest transactions			124,155,794				68,405,963
Total increase in net assets			92,530,131				49,790,998
NET ASSETS
Beginning of year			168,812,145				119,021,147
End of year		$	261,342,276			$	168,812,145

 

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*

Shares are adjusted for the one-for-four reverse stock split that was effective December 29, 2014.

 

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 year indicated. This information has been derived from information provided in the financial statements and market price data for the Fund’s shares.

		For the Years Ended December 31,*
		2014				2013				2012				2011				2010
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year		$	17.24			$	19.04			$	20.00			$	23.60			$	25.12
Net investment income #			0.33				0.48				0.48				0.48				0.52
Net realized and unrealized gain/(loss) on investments			1.45				1.12				2.48				(0.44	)			4.12
Net increase in net assets resulting from operations			1.78				1.60				2.96				0.04				4.64
Dividends and distributions to shareholders:
Net investment income			(0.61	)			(1.52	)			(1.60	)			(2.44	)			(4.56	)
Return-of-capital			(3.10	)			(2.60	)			(2.80	)			(2.52	)			(1.60	)
Total dividends and distributions to shareholders			(3.71	)			(4.12	)			(4.40	)			(4.96	)			(6.16	)
Transactions in common shares of beneficial interest:
Anti-dilutive effect due to shares issued:
Rights offering			0.47				0.72				0.48				1.24				—
Reinvestment of dividends and distributions			0.00	+			0.00	+			0.00	+			0.08				0.00	+
Total transactions in common shares of beneficial interest			0.47				0.72				0.48				1.32				0.00	+
Net asset value, end of year		$	15.78			$	17.24			$	19.04			$	20.00			$	23.60
Market value, end of year		$	15.21			$	20.56			$	20.04			$	24.16			$	29.84
Total investment return (a)			(7.73	)%			28.59	%			3.24	%			(2.12	)%			4.73	%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000 omitted)		$	261,342			$	168,812			$	119,021			$	78,435			$	55,277
Ratio of expenses to average net assets, net of fee waivers and fees paid indirectly, if any (b)			1.25	%			1.33	%			1.25	%			1.30	%			1.47	%
Ratio of expenses to average net assets, before fee waivers and fees paid indirectly, if any (b)			1.25	%			1.33	%			1.34	%			1.45	%			1.61	%
Ratio of net investment income to average net assets (c)			1.97	%			2.70	%			2.44	%			2.20	%			2.20	%
Portfolio turnover rate			41.11	%			101.00	%			97.29	%			112.69	%			117.45	%

 

---

*

Effective December 29, 2014, a reverse split of 1:4 occured. All per share amounts have been restated according to the terms of the reverse split.

#

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)

Expenses do not include expenses of investment companies in which the Fund invests.

(c)

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.

 

See accompanying notes to financial statements.

---

Cornerstone Progressive Return Fund Notes to Financial Statements

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. 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 Fund is an investment company that applies the accounting and reporting guidance issued in Topic 946 by the U.S. Financial Accounting Standards Board. 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 December 31, 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 year ended December 31, 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 purposes. Interest income is recorded on an accrual basis; dividend income is recorded on the ex-dividend date.

 

---

Cornerstone Progressive Return Fund Notes to Financial Statements (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 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, 2014, 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 2011 through 2013, and for the year ended December 31, 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 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.

 

---

Cornerstone Progressive Return Fund Notes to Financial Statements (continued)

 

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 December 31, 2014 in valuing the Fund’s investments carried at value:

 

Valuation Inputs		Investments in Securities				Other Financial Instruments*
Level 1 – Quoted Prices
Equity Investments		$	255,623,000			$	—
Short-Term Investments			6,111,599				—
Level 2 – Other Significant Observable Inputs			—				—
Level 3 – Significant Unobservable Inputs			—				—
Total		$	261,734,599			$	—

 

---

The breakdown of the Fund’s investments into major categories is disclosed in its Schedule of Investments.

---

Cornerstone Progressive Return Fund Notes to Financial Statements (continued)

During the year ended December 31, 2014, the Fund did not have any transfers in and out of any Level.

 

The Fund did not have any assets or liabilities that were measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at December 31, 2014.

 

It is the Fund’s policy to recognize transfers into and out of any Level at the end of the reporting period.

 

NOTE D. AGREEMENTS WITH AFFILIATES

 

At December 31, 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 year ended December 31, 2014, Cornerstone earned $2,284,138 for investment management services.

 

Administration Agreement

 

Under the 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 year ended December 31, 2014, AFS earned $171,311 as administrator.

 

NOTE E. INVESTMENT IN SECURITIES

 

For the year ended December 31, 2014, purchases and sales of securities, other than short-term investments, were $170,459,482 and $88,400,462, respectively.

 

NOTE F. COMMON SHARES OF BENEFICIAL INTEREST

 

The Fund has unlimited common shares of beneficial interest authorized and has 16,565,151 shares issued and outstanding at December 31, 2014. Transactions in common shares of beneficial interest for the year ended December 31, 2014 were as follows⁺:

 

Shares at beginning of year			9,797,745
Shares newly issued from rights offering			6,393,537
Shares newly issued in reinvestment of dividends and distributions			373,872
Shares paid cash in lieu of fractional shares from the reverse stock split			(3	)
Shares at end of year			16,565,151

 

---

+	Share amounts reflect the one-for-four reverse stock split that was effective December 29, 2014.

 

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.

 

The tax character of dividends and distributions paid to shareholders during the years ended December 31, 2014 and December 31, 2013 was as follows:

 

		2014				2013
Ordinary Income		$	8,417,055			$	11,482,874
Return-of-Capital			42,411,734				20,156,702
Total Distributions		$	50,828,789			$	31,639,576

 

---

Cornerstone Progressive Return Fund Notes to Financial Statements (concluded)

At December 31, 2014, the components of accumulated surplus on a tax basis for the Fund were as follows:

 

Capital loss carryforwards		$	(5,929,057	)
Net unrealized appreciation			15,111,706
Total accumulated surplus		$	9,182,649

 

GAAP requires that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. For the year ended December 31, 2014, the Fund reclassified $42,411,734 of return-of-capital distributions and $3,916,972 of distributions resulting from the recharacterization of capital gain distributions as ordinary income against paid-in capital on the Statement of Assets and Liabilities. 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, 2014.

 

At December 31, 2014, the Fund had a capital loss carryforward for U.S. federal income tax purposes of $5,929,057 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.

 

During the year ended December 31, 2014, the Fund reduced capital loss carryforwards by $3,916,972.

 

The following information is computed on a tax basis for each item as of December 31, 2014:

 

Cost of portfolio investments		$	246,622,893
Gross unrealized appreciation		$	19,957,618
Gross unrealized depreciation			(4,845,912	)
Net unrealized appreciation		$	15,111,706

---

Report of Independent Registered Public Accounting Firm

 

To the Shareholders and Board of Trustees
Cornerstone Progressive Return Fund
New York, New York

We have audited the accompanying statement of assets and liabilities of the Cornerstone Progressive Return Fund (the “Fund”), including the schedule of investments as of December 31, 2014, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2014, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Cornerstone Progressive Return Fund as of December 31, 2014, the results of its operations, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

TAIT, WELLER & BAKER LLP

 

Philadelphia, Pennsylvania
February 13, 2015

---

2014 Tax Information (unaudited)

 

Cornerstone Progressive Return Fund (the “Fund”) is providing this notice along with Form 1099-DIV to assist its shareholders in the preparation of their 2014 calendar year U.S. federal income tax returns. The $50,828,789 in dividends and distributions paid to shareholders in respect of such year is represented by $8,417,055 of ordinary income, and $42,411,734 of return-of-capital.

 

As indicated in this notice, a portion of the Fund’s distributions for 2014 consist of ordinary income and return of capital. To the extent a distribution has been designated as return-of-capital, those distributions do not represent yield or investment return on the Fund’s portfolio.

 

SOURCES OF DIVIDENDS AND DISTRIBUTIONS (Per Share Amounts)+
Payment Dates:		1/31/14				2/28/14				3/31/14				4/30/14				5/30/14				6/30/14
Ordinary Income(1)		$	0.0128			$	0.0128			$	0.0128			$	0.0128			$	0.0128			$	0.0128
Return-of-Capital(2)			0.0645				0.0645				0.0645				0.0645				0.0645				0.0645
Total		$	0.0773			$	0.0773			$	0.0773			$	0.0773			$	0.0773			$	0.0773
Payment Dates:		7/31/14				8/29/14				9/30/14				10/31/14				11/28/14				12/19/14
Ordinary Income(1)		$	0.0128			$	0.0128			$	0.0128			$	0.0128			$	0.0128			$	0.0128
Return-of-Capital(2)			0.0645				0.0645				0.0645				0.0645				0.0645				0.0645
Total		$	0.0773			$	0.0773			$	0.0773			$	0.0773			$	0.0773			$	0.0773

 

---

+	Per share amounts do not reflect the one-for-four reverse stock split that was effective December 29, 2014.

(1)	Ordinary Income Dividends – This is the total per share amount of ordinary income dividends and short-term capital gain distributions included in the amount reported in Box 1a on Form 1099-DIV.

(2)

Return-of-Capital – This is the per share amount of return-of-capital, or sometimes called nontaxable, distributions reported in Box 3 – under the title “Nondividend distributions” – on Form 1099-DIV. This amount should not be reported as taxable income on your current return. Rather, it should be treated as a reduction in the original cost basis of your investment in the Fund.

 

The Fund has met the requirements to pass through 62.78% of its ordinary income dividends as qualified dividends, which are subject to a maximum tax rate of 23.8% (20% qualified dividends maximum tax rate plus 3.8% Medicare tax). This is reported in Box 1b on Form 1099-DIV. Ordinary income dividends should be reported as dividend income on Form 1040. Please note that to utilize the lower tax rate for qualifying dividend income, shareholders generally must have held their shares in the Fund for at least 61 days during the 121 day period beginning 60 days before the ex-dividend date.

 

Foreign shareholders will generally be subject to U.S. withholding tax on the amount of the actual ordinary income dividend paid by the Fund.

In general, distributions received by tax-exempt recipients (e.g., IRA’s and Keoghs) need not be reported as taxable income for U.S. federal income tax purposes. However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7) plans) may need this information for their annual information reporting.

 

Shareholders are strongly advised to consult their own tax advisers with respect to the tax consequences of their investment in the Fund.

---

Additional Information Regarding the Fund’s Trustees and Corporate Officers (unaudited)

 

Name and Address* (Birth Date)	Position(s) Held with Fund	Principal Occupation over Last 5 Years	Position with Fund Since
Ralph W. Bradshaw** (Dec. 1950)	Chairman of the Board of Trustees and President	President, Cornerstone Advisors, Inc.; Financial Consultant; President and Director of Cornerstone Total Return Fund, Inc. and Cornerstone Strategic Value Fund, Inc.	2007
Robert E. Dean (Apr. 1951)	Trustee; Audit, Nominating and Corporate Governance Committee Member	Director, National Bank Holdings Corp.; Director of Cornerstone Total Return Fund, Inc. and Cornerstone Strategic Value Fund, Inc.	November 14, 2014
Edwin Meese III (Dec. 1931)	Trustee; Audit, Nominating and Corporate Governance Committee Member	Distinguished Fellow, The Heritage Foundation Washington D.C.; Distinguished Visiting Fellow at the Hoover Institution, Stanford University; Senior Adviser, Revelation L.P.; Director of Cornerstone Total Return Fund, Inc. and Cornerstone Strategic Value Fund, Inc.	2007
Scott B. Rogers (July 1955)	Trustee; Audit, Nominating and Corporate Governance Committee Member	Director, Board of Health Partners, Inc.; Chief Executive Officer, Asheville Buncombe Community Christian Ministry (“ABCCM”); President, ABCCM Doctor’s Medical Clinic; Member of North Carolina Governor’s Council on Homelessness (from July 2014); Director of Cornerstone Total Return Fund, Inc. and Cornerstone Strategic Value Fund, Inc.	2007
Andrew A. Strauss (Nov. 1953)	Trustee; Chairman of Nominating and Corporate Governance Committee and Audit Committee Member	Attorney and senior member of Strauss & Associates, P.A., Attorneys; Director of Cornerstone Total Return Fund, Inc. and Cornerstone Strategic Value Fund, Inc.	2007
Glenn W. Wilcox, Sr. (Dec. 1931)	Trustee; Chairman of Audit Committee, Nominating and Corporate Governance Committee Member	Chairman of the Board of Tower Associates, Inc.; Chairman of the Board of Wilcox Travel Agency, Inc.; Director of Champion Industries, Inc.; Director of Cornerstone Total Return Fund, Inc. and Cornerstone Strategic Value Fund, Inc.	2007

 

---

Name and Address* (Birth Date)	Position(s) Held with Fund	Principal Occupation over Last 5 Years	Position with Fund Since
Gary A. Bentz (June 1956)	Chief Compliance Officer, Secretary, and Assistant Treasurer	Chairman and Chief Financial Officer of Cornerstone Advisors, Inc.; Financial Consultant, C.P.A., Chief Compliance Officer, Secretary, and Assistant Treasurer of Cornerstone Total Return Fund, Inc. and Cornerstone Strategic Value Fund, Inc.	2007, 2008, 2009
Frank J. Maresca (Oct. 1958)	Treasurer	Executive Vice President of AST Fund Solutions, LLC (since February 2012), Executive Vice President of Ultimus Fund Solutions, LLC (from March 2009-February 2012) previous Executive Director, JP Morgan Chase & Co.; Previous President of Bear Stearns Funds Management Inc.; Previous Senior Managing Director of Bear Stearns & Co. Inc.; Treasurer of the Fund, Cornerstone Total Return Fund, Inc. and Cornerstone Strategic Value Fund, Inc. (from May 2009 through February 2012).	2013

 

*	The mailing address of each Trustee and/or Officer with respect to the Fund’s operation is 48 Wall Street, 22nd Floor, New York, NY 10005.

**	Designates a trustee who is an “interested person” of the Fund as defined by the Investment Company Act of 1940, as amended. Mr. Bradshaw is an interested person of the Fund by virtue of his current position with the Investment Manager.

 

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Description of Dividend Reinvestment Plan (unaudited)

 

Cornerstone Progressive Return Fund (the “Fund) operates a Dividend Reinvestment Plan (the “Plan”), 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 the average closing price of the Fund over the five trading days preceding the payment date of the Distribution (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. Upon notice from the Fund, the Agent will receive the distribution in cash and will purchase shares of beneficial interest in the open market, on the NYSE MKT or elsewhere, for the participants’ accounts, except that the Agent will endeavor to terminate purchases in the open market and cause the Fund to issue the remaining shares if, following the commencement of the purchases, the market value of the shares, including brokerage commissions, exceeds the net asset value at the time of valuation. These remaining shares will be issued by the Fund at a price equal to the net asset value at the time of valuation.

 

In a case where the Agent has terminated open market purchases and caused the issuance of remaining shares by the Fund, the number of shares received by the participant in respect of the cash dividend or distribution will be based on the weighted average of prices paid for shares purchased in the open market, including brokerage commissions, and the price at which the Fund issues the remaining shares. To the extent that the Agent is unable to terminate purchases in the open market before the Agent has completed its purchases, or remaining shares cannot be issued by the Fund because the Fund declared a dividend or distribution payable only in cash, and the market price exceeds the net asset value of the shares, the average share purchase price paid by the Agent may exceed the net asset value of the shares, resulting in the acquisition of fewer shares than if the dividend or distribution had been paid in shares issued by the Fund.

 

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.

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. 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.

 

Participants may at any time sell some or all their shares though the Agent. Shares may be sold via the internet at www.amstock.com or through the toll free number. Participants can also use the tear off portion attached to the bottom of their statement and mail the request to American Stock Transfer and Trust Company LLC, P.O Box 922 Wall Street Station, New York, N.Y. 10269-0560. There is a fee of $15.00 per transaction and commission of $0.10 per share.

 

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.

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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.

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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.

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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.

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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

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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 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.

 

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Cornerstone Progressive Return Fund

 

 

As of the end of the period covered by this report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. Pursuant to Item 12(a)(1), a copy of registrant's code of ethics is filed as an exhibit to this Form N-CSR. During the period covered by this report, the code of ethics has not been amended, and the registrant has not granted any waivers, including implicit waivers, from the provisions of the code of ethics.

The registrant's board of directors has determined that the registrant does not have an audit committee financial expert serving on its audit committee. The audit committee determined that, although none of its members meet the technical definition of an audit committee financial expert, the experience provided by each member of the audit committee together offer the registrant adequate oversight for the registrant's current level of financial complexity.

 

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The registrant and Cornerstone Advisors, Inc., the registrant's investment adviser, share the same proxy voting policies and procedures. The proxy voting policies and procedures of the registrant and Cornerstone Advisors, Inc. are attached as Exhibit 99.VOTEREG.

 

(a)(1) All information included in this Item is as of the date of the filing of this Form N-CSR, unless otherwise noted. Ralph W. Bradshaw is the portfolio manager of the registrant. Mr. Bradshaw has acted as portfolio manager since 2002. Mr. Bradshaw is President and Chief Financial Officer of Cornerstone Advisors, Inc. and serves as President and Chairman of the Board of the registrant, Cornerstone Progressive Return Fund and Cornerstone Strategic Value Fund, Inc.

(a)(2) Ralph W. Bradshaw manages two other closed-end registered investment companies: Cornerstone Total Return Fund, Inc. and Cornerstone Strategic Value Fund, Inc. As of December 31, 2014, net assets of Cornerstone Total Return Fund, Inc. were $168,287,331 and net assets of Cornerstone Strategic Value Fund, Inc. were $83,677,638. Mr. Bradshaw manages no accounts except for the registrant, Cornerstone Total Return Fund, Inc. and Cornerstone Strategic Value Fund, Inc. Mr. Bradshaw manages no accounts where the advisory fee is based on the performance of the account. No material conflicts of interest exist in connection with the portfolio manager's management of the registrant's investments, on the one hand, and the investment of the other accounts included in response to this Item, on the other.

(a)(3) Compensation of Ralph W. Bradshaw includes a fixed salary paid by Cornerstone Advisors, Inc. plus his share of the profits of Cornerstone Advisors, Inc. The profitability of Cornerstone Advisors, Inc. is primarily dependent upon the value of the assets of the registrant and other managed accounts. However, compensation is not directly based upon the registrant's performance or on the value of the registrant's assets.

(a)(4) The dollar range of equity securities in the registrant beneficially owned by each portfolio manager as of December 31, 2014 is as follows: Ralph W. Bradshaw: $50,001 - $100,000

None

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.

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(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.

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

 

 

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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

 

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.

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