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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
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CORNERSTONE PROGRESSIVE TOTAL RETURN FUND
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(Exact name of registrant as specified in charter)
260 MADISON AVENUE, 8th FLOOR NEW YORK, NEW YORK 10016
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(Address of principal executive offices) (Zip code)
Frank J. Maresca
ULTIMUS FUND SOLUTIONS, LLC, 260 MADISON AVENUE, 8th FLOOR NEW YORK, NY 10016
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(Name and address of agent for service)
Registrant's telephone number, including area code: (646) 881-4985
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Date of fiscal year end: DECEMBER 31, 2010
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Date of reporting period: JUNE 30, 2010
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
======================================================
TRUSTEES AND CORPORATE OFFICERS
Ralph W. Bradshaw Chairman of the Board of
Trustees and President
Thomas H. Lenagh Trustee
Edwin Meese III Trustee
Scott B. Rogers Trustee
Andrew A. Strauss Trustee
Glenn W. Wilcox, Sr. Trustee
Gary A. Bentz Chief Compliance Officer,
Secretary, and
Assistant Treasurer
Frank J. Maresca Treasurer
STOCK TRANSFER AGENT
INVESTMENT MANAGER AND REGISTRAR
Cornerstone Advisors, Inc. American Stock Transfer &
1075 Hendersonville Road Trust Co.
Suite 250 59 Maiden Lane
Asheville, NC 28803 New York, NY 10038
INDEPENDENT REGISTERED
ADMINISTRATOR PUBLIC ACCOUNTING FIRM
Ultimus Fund Solutions, LLC Tait, Weller & Baker LLP
260 Madison Avenue 1818 Market Street
8th Floor Suite 2400
New York, NY 10016 Philadelphia, PA 19103
CUSTODIAN LEGAL COUNSEL
JPMorgan Chase Bank, N.A. Blank Rome LLP
14201 North Dallas Pkwy. 405 Lexington Avenue
Second Floor New York, NY 10174
Dallas, TX 75254
EXECUTIVE OFFICES
260 Madison Avenue
8th Floor
New York, NY 10016
For shareholder inquiries, registered
shareholders should call (800) 937-5449. For
general inquiries, please call (513) 326-3597.
CFP
LISTED
NYSE
AMEX(TM)
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CORNERSTONE PROGRESSIVE
RETURN FUND
SEMI-ANNUAL REPORT
JUNE 30, 2010
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CONTENTS
Portfolio Summary 1
Summary Schedule of Investments 2
Statement of Assets and Liabilities 5
Statement of Operations 6
Statement of Changes in Net Assets 7
Financial Highlights 8
Notes to Financial Statements 9
Results of Annual Meeting of Shareholders 15
Investment Management Agreement Approval Disclosure 16
Description of Dividend Reinvestment Plan 17
Proxy Voting and Portfolio Holdings Information 19
Privacy Policy Notice 19
Summary of General Information 20
Shareholder Information 20
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CORNERSTONE PROGRESSIVE RETURN FUND
PORTFOLIO SUMMARY - AS OF JUNE 30, 2010 (UNAUDITED)
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SECTOR ALLOCATION
Percent of
Sector Net Assets
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Closed-end Funds 90.1
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Information Technology 2.0
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Consumer Staples 1.3
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Industrials 1.2
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Healthcare 1.1
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Financials 0.8
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Consumer Discretionary 0.6
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Energy 0.5
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Materials 0.2
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Other 2.2
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TOP TEN HOLDINGS, BY ISSUER
Percent of
Holding Sector Net Assets
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1. Royce Value Trust, Inc. Closed-end Funds 7.6
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2. Cohen & Steers Infrastructure Fund, Inc. Closed-end Funds 4.7
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3. AllianceBernstein Income Fund Closed-end Funds 4.6
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4. Cohen & Steers Quality Income Realty Fund, Inc. Closed-end Funds 4.5
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5. Calamos Strategic Total Return Fund Closed-end Funds 4.4
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6. Dow 30 Enhanced Premium & Income Fund, Inc. Closed-end Funds 3.3
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7. Templeton Dragon Fund, Inc. Closed-end Funds 3.2
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8. H&Q Healthcare Investors Closed-end Funds 3.1
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9. Tri-Continental Corporation Closed-end Funds 3.1
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10. Morgan Stanley India Investment Fund, Inc. Closed-end Funds 3.0
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1
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CORNERSTONE PROGRESSIVE RETURN FUND
SUMMARY SCHEDULE OF INVESTMENTS - JUNE 30, 2010 (UNAUDITED)
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No. of
Description Shares Value
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EQUITY SECURITIES - 97.64%
CLOSED-END FUNDS - 90.11%
CONVERTIBLE SECURITIES - 0.17%
Total Convertible Securities (a) $ 81,900
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CORE - 19.80%
Adams Express Company (The) (b) 141,606 1,278,702
Blue Chip Value Fund 151,350 429,834
Gabelli Equity Trust, Inc. 318,000 1,427,820
Royce Micro-Cap Trust, Inc. 146,356 1,074,253
Royce Value Trust, Inc. 351,402 3,714,319
Source Capital, Inc. 5,800 243,716
Tri-Continental Corporation 138,534 1,505,864
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9,674,508
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CORPORATE DEBT FUNDS BBB-RATED -- 5.60%
AllianceBernstein Income Fund 275,300 2,240,942
Blackrock Enhanced Government Fund, Inc. 20,400 342,108
Other Corporate Debt Funds
BBB-Rated (a) 152,895
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2,735,945
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DEVELOPED MARKET - 1.19%
Morgan Stanley Asia Pacific Fund, Inc. 16,584 225,211
Other Developed Market (a) 359,560
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584,771
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EMERGING MARKETS - 8.23%
Aberdeen Emerging Markets
Telecommunications Fund, Inc. 13,400 211,720
Morgan Stanley India Investment Fund, Inc. 65,400 1,449,264
Templeton Dragon Fund, Inc. 64,000 1,574,400
Templeton Russia & East European Fund, Inc. 31,800 527,244
Other Emerging Markets (a) 258,484
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4,021,112
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No. of
Description Shares Value
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GLOBAL INCOME - 0.65%
Evergreen International Balanced Income Fund 25,074 $ 316,685
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HIGH CURRENT YIELD (LEVERAGED) - 1.73%
First Trust Strategic High Income Fund 71,216 218,633
First Trust Strategic High Income Fund II 51,700 226,446
Other High Current Yield (Leveraged) (a) 402,225
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847,304
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INCOME & PREFERRED STOCK - 9.46%
BlackRock Preferred Opportunity Trust 44,800 459,648
Calamos Strategic Total Return Fund 279,538 2,152,443
John Hancock Preferred Income Fund 30,100 521,934
John Hancock Preferred Income Fund II 13,079 227,444
Preferred Income Strategies Fund 89,831 883,039
Other Income & Preferred Stock (a) 372,476
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4,616,984
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LOAN PARTICIPATION - 0.23%
Total Loan Participation (a) 112,959
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OPTION ARBITRAGE/OPTIONS STRATEGIES - 6.86%
BlackRock International Growth & Income Trust 36,100 316,958
Dow 30 Enhanced Premium & Income Fund, Inc. 164,900 1,604,477
Dow 30 Premium & Dividend Income Fund, Inc. 40,800 533,256
Nasdaq Premium Income & Growth Fund, Inc. 72,872 869,363
Other Option Arbitrage/Options Strategies (a) 27,945
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3,351,999
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See accompanying notes to financial statements.
2
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CORNERSTONE PROGRESSIVE RETURN FUND
SUMMARY SCHEDULE OF INVESTMENTS - JUNE 30, 2010 (UNAUDITED), (CONTINUED)
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No. of
Description Shares Value
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PACIFIC EX JAPAN - 8.83%
China Fund, Inc. (The) 41,900 $ 1,095,685
Greater China Fund, Inc. (The) 116,947 1,267,705
Taiwan Fund, Inc. 59,700 785,055
Thai Fund, Inc. (The) 69,120 651,110
Other Pacific Ex Japan (a) 519,630
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4,319,185
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REAL ESTATE - 8.52%
Alpine Global Premier Properties Fund 56,200 302,918
Cohen & Steers Quality
Income Realty Fund, Inc. 346,100 2,190,813
Cohen & Steers REIT &
Preferred Income Fund, Inc. 128,271 1,354,542
LMP Real Estate Income Fund, Inc. 26,100 215,064
Other Real Estate (a) 102,479
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4,165,816
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SECTOR EQUITY - 12.64%
Cohen & Steers Infrastructure Fund, Inc. 182,500 2,308,625
Evergreen Utilities & High Income Fund 53,900 558,404
H&Q Healthcare Investors 140,489 1,536,950
H&Q Life Sciences Investors 70,180 616,180
Macquarie Global Infrastructure
Total Return Fund, Inc. 55,934 735,532
Petroleum & Resources Corporation (b) 21,000 419,370
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6,175,061
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U.S. MORTGAGE - 2.28%
BlackRock Income Trust, Inc. 110,467 746,757
First Trust/FIDAC Mortgage Income Fund 20,031 366,968
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1,113,725
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No. of
Description Shares Value
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VALUE - 3.92%
Claymore Dividend & Income Fund 30,200 $ 361,192
Gabelli Dividend & Income Trust 104,250 1,251,000
Royce Focus Trust, Inc. 53,014 304,300
1,916,492
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TOTAL CLOSED-END FUNDS 44,034,446
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CONSUMER DISCRETIONARY - 0.55%
Other Consumer Discretionary (a) 266,788
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CONSUMER STAPLES - 1.29%
Procter & Gamble Company (The) 5,233 313,875
Other Consumer Staples (a) 317,313
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631,188
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ENERGY - 0.52%
Exxon Mobil Corporation 4,475 255,388
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FINANCIALS - 0.76%
Other Financials (a) 371,734
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HEALTHCARE - 1.12%
Johnson & Johnson 4,000 236,240
Other Health Care (a) 311,670
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547,910
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INDUSTRIALS - 1.18%
Other Industrials (a) 574,693
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INFORMATION TECHNOLOGY - 1.97%
Cisco Systems, Inc. * 18,470 393,596
Google, Inc. - Class A * 532 236,713
Other Information Technology (a) 333,431
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963,740
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See accompanying notes to financial statements.
3
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CORNERSTONE PROGRESSIVE RETURN FUND
SUMMARY SCHEDULE OF INVESTMENTS - JUNE 30, 2010 (UNAUDITED), (CONCLUDED)
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No. of
Description Shares Value
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MATERIALS - 0.14%
Total Materials (a) $ 66,167
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TOTAL EQUITY SECURITIES
(cost - $49,013,988) 47,712,054
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SHORT-TERM INVESTMENT - 2.54%
MONEY MARKET FUND - 2.54%
JPMorgan U.S. Government Money Market Fund
(cost - $ 1,242,075) 1,242,075 1,242,075
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TOTAL INVESTMENTS - 100.18%
(cost - $50,256,063) 48,954,129
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LIABILITIES IN EXCESS OF
OTHER ASSETS - (0.18)% (88,850)
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NET ASSETS - 100.00% $ 48,865,279
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(a) Represents issuers not identified as a top 50 holding in terms of market
value and issues or issuers not exceeding 1% of net assets individually
or in the aggregate, respectively, as of June 30, 2010.
(b) Affiliated investment. The Fund holds 2.62% and 0.86% (based on net
assets) of Adams Express Company and Petroleum & Resources Corporation,
respectively. A trustee of the Fund also serves as a director to such
companies. During the six months ended June 30, 2010 there were no
purchases or sales of either of these securities other than the purchase
of an additional 17,000 shares of Petroleum & Resources Corporation with
a cost of $412,311.
* Non-income producing security.
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See accompanying notes to financial statements.
4
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CORNERSTONE PROGRESSIVE RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES - JUNE 30, 2010 (UNAUDITED)
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ASSETS
Investments, at value
Unaffiliated issuers (cost - $48,514,780) $ 47,040,816
Affiliated issuer (cost - $ 1,741,283) 1,913,313
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Total investments (cost - $50,256,063) 48,954,129
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Receivables:
Dividends 12,930
Prepaid expenses 4,893
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Total Assets 48,971,952
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LIABILITIES
Payables:
Investment management fees 41,435
Trustees' fees 19,394
Other accrued expenses 45,844
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Total Liabilities 106,673
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NET ASSETS (applicable to 9,361,179 shares of
common stock outstanding; unlimited shares authorized) $ 48,865,279
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NET ASSET VALUE PER SHARE ($48,865,279 (DIV) 9,361,179) $ 5.22
======
NET ASSETS CONSISTS OF
Paid-in capital $ 85,287,137
Accumulated net realized loss on investments (35,119,924)
Net unrealized depreciation in value of investments (1,301,934)
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Net assets applicable to shares outstanding $ 48,865,279
============
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See accompanying notes to financial statements.
5
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CORNERSTONE PROGRESSIVE RETURN FUND
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED)
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INVESTMENT INCOME
Income:
Dividends (including $9,580 earned from affiliated issuers) $ 1,087,235
Securities lending 323
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Total Investment Income 1,087,558
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Expenses:
Investment management fees 272,671
Trustees' fees 39,522
Administration fees 27,717
Legal and audit fees 23,909
Accounting fees 19,715
Printing 19,291
Custodian fees 8,927
Transfer agent fees 7,439
Stock exchange listing fees 5,456
Insurance 4,536
Miscellaneous 3,034
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Total Expenses 432,217
Less: Fees paid indirectly (35,548)
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Net Expenses 396,669
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Net Investment Income 690,889
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NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain from unaffiliated investments 4,543,531
Capital gain distributions from regulated investment companies 205,784
Net change in unrealized appreciation in value of investments (6,769,614)
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Net realized and unrealized loss on investments (2,020,299)
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NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (1,329,410)
============
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See accompanying notes to financial statements.
6
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CORNERSTONE PROGRESSIVE RETURN FUND
STATEMENT OF CHANGES IN NET ASSETS
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For the Six
Months Ended
June 30, 2010 For the Year Ended
(Unaudited) December 31, 2009
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INCREASE/(DECREASE) IN NET ASSETS
Operations:
Net investment income $ 690,889 $ 1,477,832
Net realized gain/(loss) from investments 4,749,315 (20,263,956)
Net change in unrealized appreciation/(depreciation)
in value of investments (6,769,614) 33,599,505
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Net increase/(decrease) in net assets
resulting from operations (1,329,410) 14,813,381
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Dividends and distributions to shareholders:
Net investment income (690,889) (1,477,832)
Return-of-capital (7,950,733) (21,498,436)
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Total dividends and distributions to shareholders (8,641,622) (22,976,268)
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Transactions in common shares of beneficial interest:
Proceeds from 14,153 and 10,294 shares newly issued
in reinvestment of distributions, respectively 97,919 90,582
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Total decrease in net assets (9,873,113) (8,072,305)
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NET ASSETS
Beginning of period 58,738,392 66,810,697
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End of period $48,865,279 $ 58,738,392
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See accompanying notes to financial statements.
7
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CORNERSTONE PROGRESSIVE RETURN FUND
FINANCIAL HIGHLIGHTS
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Contained below is per share operating performance data for a share of common
stock 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.
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For the Six For the Six
Months Ended For the Years Ended September 10, 2007*
June 30, 2010 December 31, through
PER SHARE OPERATING (Unaudited) 2009 2008 December 31, 2007
------------- ------------------- -------------------
PERFORMANCE
Net asset value, beginning of period $ 6.28 $ 7.16 $ 14.10 $ 14.96^
------- ------- ------- --------
Net investment income # 0.08 0.16 0.16 0.06
Net realized and unrealized gain/(loss) on
investments (0.22) 1.42 (4.64) (0.35)
------- ------- ------- --------
Net increase/(decrease) in net assets
resulting from operations (0.14) 1.58 (4.48) (0.29)
------- ------- ------- --------
Dividends and distributions to shareholders:
Net investment income (0.08) (0.16) (0.16) (0.06)
Net realized capital gains -- -- -- (0.15)
Return-of-capital (0.84) (2.30) (2.30) (0.41)
------- ------- ------- --------
Total dividends and distributions to
shareholders (0.92) (2.46) (2.46) (0.62)
------- ------- ------- --------
Capital stock transactions:
Anti-dilutive effect due to issuance
of common shares -- -- -- 0.05
Anti-dilutive effect due to shares issued in
reinvestment of dividends and distributions --+ -- -- --+
------- ------- ------- --------
Total capital stock transactions -- -- -- 0.05
------- ------- ------- --------
Net asset value, end of period $ 5.22 $ 6.28 $ 7.16 $ 14.10
======= ======= ======= ========
Market value, end of period $ 6.78 $ 8.90 $ 7.10 $ 16.75
======= ======= ======= ========
Total investment return(a) (9.14)%(b) 65.40% (47.53)% 16.02%(b)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000 omitted) $48,865 $58,738 $66,811 $131,628
Ratio of expenses to average net assets,
net of fee waivers, if any (c)(d) 1.43%(e) 1.39% 1.25% 1.29%(e)
Ratio of expenses to average net assets, 1.56%(e) 1.54% 1.32% 1.42%(e)
excluding fee waivers, if any (d)(f)
Ratio of expenses to average net assets,
net of fee waivers, if any (d)(f) 1.56%(e) 1.54% 1.32% 1.42%(e)
Ratio of net investment income to
average net assets 2.49%(e) 2.54% 1.48% 1.46%(e)
Portfolio turnover rate 55.28%(b) 115.99% 20.19% 6.77%(b)
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* Commencement of operations.
^ Based on $15.00 per share public offering price less $0.04 per share of
offering expenses related to the Fund's initial public offering.
# 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 are net of fees paid indirectly.
(d) Expenses do not include expenses of investment companies in which the
Fund invests.
(e) Annualized.
(f) Expenses exclude the reduction for fees paid indirectly.
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See accompanying notes to financial statements.
8
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CORNERSTONE PROGRESSIVE RETURN FUND NOTES TO
FINANCIAL STATEMENTS (UNAUDITED)
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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 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 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, 2010, 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 Amex LLC is closed.
The Fund is exposed to financial market risks, including the valuations of its
investment portfolio. For the six months ended June 30, 2010, the Fund did not
engage in derivative instruments and other hedging activities.
REPURCHASE AGREEMENTS: The Fund has agreed to purchase securities from financial
institutions subject to the seller's agreement to repurchase them at an
agreed-upon time and price ("repurchase agreements"). The financial
institutions with whom the Fund enters into repurchase agreements are banks and
broker/dealers, which Cornerstone considers creditworthy. The seller under a
repurchase
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9
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CORNERSTONE PROGRESSIVE RETURN FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), (CONTINUED)
--------------------------------------------------------------------------------
agreement will be required to maintain the value of the securities as
collateral, subject to the agreement at not less than the repurchase price plus
accrued interest. Cornerstone monitors the mark-to-market of the value of the
collateral, and, if necessary, requires the seller to maintain additional
securities, so that the value of the collateral is not less than the repurchase
price. Default by or bankruptcy of the seller would, however, expose the Fund to
possible loss because of adverse market action or delays in connection with the
disposition of the underlying securities.
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.
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 June
30, 2010, the Fund does not have any interest or penalties associated with the
underpayment of any income taxes. Management reviewed any uncertain tax
positions for open tax years 2007 through 2009 and for the period ended June 30,
2010.
DISTRIBUTIONS TO SHAREHOLDERS: The Fund makes a level distribution to its
shareholders each month pursuant to a managed distribution policy adopted by the
Board of Trustees ("Managed 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
level 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 Managed 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
--------------------------------------------------------------------------------
10
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CORNERSTONE PROGRESSIVE RETURN FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), (CONTINUED)
--------------------------------------------------------------------------------
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 there-under 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.
The Board of Trustees reserves the right to change the monthly distribution
policy from time to time.
MANAGED DISTRIBUTION RISK: Under the managed distribution policy, the Fund makes
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.
o Level 1 - quoted unadjusted prices for identical instruments in active
markets to which the Fund has access at the date of measurement.
o Level 2 - quoted prices for similar instruments in active markets; quoted
prices for identical or similar instruments in markets that are not
active; and model-derived valuations in which all significant inputs and
significant value drivers are observable in active markets. Level 2 inputs
are those in markets for which there are few trans- actions, the prices
are not current, little public information exists or instances where
prices vary substantially over time or among brokered market makers.
o Level 3 - model derived valuations in which one or more significant inputs
or significant value drivers are unobservable. Unobservable inputs are
those inputs that reflect the Fund's own assumptions that market
participants would use to price the asset or liability based on the best
available information.
--------------------------------------------------------------------------------
11
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), (CONTINUED)
--------------------------------------------------------------------------------
The following is a summary of the inputs used as of June 30, 2010 in valuing the
Fund's investments carried at value:
INVESTMENTS IN OTHER FINANCIAL
VALUATION INPUTS SECURITIES INSTRUMENTS*
--------------------------------------------------------------------------------
Level 1 - Quoted Prices
Equity Investments $47,712,054 --
Short-Term Investments 1,242,075 --
Level 2 - Other Significant
Observable Inputs -- --
Level 3 - Significant
Unobservable Inputs -- --
----------- ------------
Total $48,954,129 --
=========== ============
--------
* Other financial instruments include futures, forwards and swap contracts.
During the period ended June 30, 2010, the Fund did not have any significant
transfers in and out of Level 1 or Level 2.
The Fund did not have any assets or liabilities that were measured at fair value
on a recurring basis using significant unobservable inputs (Level 3) at June 30,
2010.
RECENT ACCOUNTING PRONOUNCEMENT: In January 2010, the FASB Accounting Standards
Board issued Accounting Standards Update ("ASU") No. 2010-06 "Improving
Disclosures about Fair Value Measurements". ASU 2010-06 amends FASB Accounting
Standards Codification Topic, Fair Value Measurements and Disclosures, to
require additional disclosures regarding fair value measure(not)ments. Certain
disclosures required by ASU No. 2010-06 are effective for interim and annual
reporting periods beginning after December 15, 2009, and other required
disclosures are effective for fiscal years beginning after December 15, 2010,
and for interim periods within those fiscal years. Management has evaluated the
impact ASU No. 2010-06 and has determined that it is not expected to have a
significant impact on its financial statement disclosures.
NOTE D. AGREEMENTS
Certain officers of the Fund are also officers of Cornerstone or Ultimus Fund
Solutions, LLC ("Ultimus"). Such officers are paid no fees by the Fund for
serving as officers of the Fund.
INVESTMENT MANAGEMENT AGREEMENT
Cornerstone serves as the Fund's Investment Adviser 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,
2010, Cornerstone earned $272,671 for investment management services.
Included in the Statement of Operations, under the caption Fees paid indirectly,
are expense offsets of $35,548 arising from credits earned on portfolio
transactions executed with brokers, pursuant to directed brokerage arrangements.
ADMINISTRATION AGREEMENT
Under the terms of the Administration Agreement, Ultimus supplies executive,
administrative and regulatory services for the Fund. Ultimus supervises the
preparation of reports to stockholders for the Fund, reports to and filings with
the Securities and Exchange Commission and materials for meetings of the Board
of Directors. For these services, the Fund pays Ultimus a monthly fee at an
annual rate of 0.100% of its average daily net assets up to $250 million and
0.075% of such assets in excess of $250 million, subject to an annual minimum
fee of $50,000.
FUND ACCOUNTING AGREEMENT
Under the terms of the Fund Accounting Agreement, Ultimus calculates the net
asset value per share and maintains the financial books and records of the Fund.
For the performance of these services, the Fund pays Ultimus a base fee of
$2,500 per month plus an asset based fee of 0.010% of the first $500 million of
average daily net assets and 0.005% of such assets in excess of $500 million.
--------------------------------------------------------------------------------
12
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), (CONTINUED)
--------------------------------------------------------------------------------
NOTE E. AFFILIATED INVESTMENTS
Transactions in affiliates for the six months ended June 30, 2010 were as
follows:
ADAMS PETROLEUM &
EXPRESS RESOURCES
COMPANY CORPORATION
---------- ------------
Market value at
beginning of period $1,430,221 $ 94,960
========== ==========
Shares at beginning
of period 141,606 4,000
Shares purchased
during the period -- 17,000
Shares sold during
the period -- --
---------- ----------
Shares at end of period 141,606 21,000
========== ==========
Dividend income earned
during the period $ 7,080 $ 2,500
========== ==========
Cost of purchases
during the period -- $412,311
Proceeds from sales
during the period -- --
Net realized gain
during the period -- --
Market value at
end of period $1,278,702 $419,370
NOTE F. INVESTMENT IN SECURITIES
For the six months ended June 30, 2010, purchases and sales of securities, other
than short-term investments, were $29,724,171 and $37,818,692, respectively.
NOTE G. COMMON SHARES OF BENEFICIAL INTEREST
The Fund has unlimited common shares of beneficial interest authorized and has
9,361,197 shares outstanding at June 30, 2010. As of that date, two individuals
that control Cornerstone owned 8,745 shares related to the initial issuance of
the seed capital shares of the Fund. Transactions in common shares for the six
months ended June 30, 2010 were as follows:
Shares at beginning of period 9,347,026
Shares newly issued in reinvestment
of dividends and distributions 14,153
---------
Shares at end of period 9,361,179
=========
NOTE H. SHARE REPURCHASE PROGRAM
Pursuant to Section 23 of the Investment Company Act of 1940, as amended, the
Fund may purchase shares of its common shares of beneficial interest on the open
market from time to time, at such times, and in such amounts as may be deemed
advantageous to the Fund. Nothing herein shall be considered a commitment to
purchase such shares. The Fund had no repurchases during the six months ended
June 30, 2010. No limit has been placed on the number of shares to be
repurchased by the Fund other than those imposed by federal securities laws.
To the extent such purchases are made they will be in accordance with federal
securities laws, with shares repurchased held in treasury for future use by the
Fund.
NOTE I. SECURITIES LENDING
To generate additional income, the Fund may lend up to 331/3% of its total
assets. The Fund receives payments from borrowers equivalent to the dividends
and interest that would have been earned on securities lent while simultaneously
seeking to earn interest on the investment of cash collateral. Loans are subject
to termination by the Fund or the borrower at any time, and are, therefore, not
considered to be illiquid investments. Loans of securities are required at all
times to be secured by collateral equal to at least 100% of the market value of
securities on loan. However, in the event of default or bankruptcy of the other
party to the agreement, realization and/or retention of the collateral may be
subject to legal proceedings. In the event that the borrower fails to return
securities, and collateral maintained by the lender is insufficient to cover the
value of loaned securities, the borrower is obligated to pay the amount of the
shortfall (and interest thereon) to the Fund. However, there can be no assurance
the Fund can recover this amount.
The Fund had no securities on loan to brokers at June 30, 2010. During the six
months ended June 30, 2010, the Fund earned $323 in securities lending income
which is included under the caption Securities lending in the Statement of
Operations.
--------------------------------------------------------------------------------
13
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), (CONCLUDED)
--------------------------------------------------------------------------------
NOTE J. 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 during the year ended
December 31, 2009 for the Fund was ordinary income $1,477,832 and
return-of-capital $21,498,436.
Accounting principles generally accepted in the United States of America require
that certain components of net assets relating to permanent differences be
reclassified between financial and tax reporting. These reclassifications have
no effect on net assets or net asset value per share. Under current tax law,
certain capital losses realized after October 31 within a taxable year may be
deferred and treated as occurring on the first day of the following tax year
("Post-October losses").
At December 31, 2009, the Fund had a capital loss carryforward for U.S. federal
income tax purposes of $39,795,069 of which $8,177,222 expires in 2016 and
$31,617,847 expires in 2017.
At June 30, 2010, the identified cost for federal income tax purposes, as well
as the gross unrealized appreciation from investments for those securities
having an excess of value over cost, gross unrealized depreciation from
investments for those securities having an excess of cost over value and the net
unrealized depreciation from investments were $50,256,063, $1,817,699,
$(3,119,633) and $(1,301,934), respectively.
--------------------------------------------------------------------------------
14
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
On August 2, 2010, the Annual Meeting of Shareholders of the Fund was reconvened
and the following matters were voted upon based on 9,359,237 shares of common
stock outstanding on June 1, 2010:
(1) To approve the re-election of six trustees until the 2011 Annual Meeting.
NAME OF DIRECTORS FOR WITHHOLD
----------------- --------- ----------
Ralph W. Bradshaw 5,812,814 383,618
Thomas H. Lenagh 5,803,678 392,754
Edwin Meese III 5,789,213 407,219
Scott B. Rogers 5,819,875 376,557
Andrew A. Strauss 5,807,663 388,769
Glenn W. Wilcox, Sr. 5,806,605 389,827
(2) To approve the amendment of the Fund's fundamental investment objective
to be a non-fundamental investment of providing total return.
FOR AGAINST ABSTAIN
---------- ------- -------
4,165,597 368,825 92,224
--------------------------------------------------------------------------------
15
INVESTMENT MANAGEMENT AGREEMENT APPROVAL DISCLOSURE (UNAUDITED)
The Board of Trustees including, the Independent Directors, (the "Board") of
Cornerstone Progressive Return Fund, Inc. (the "Fund") considers the approval of
the continuation of the Investment Management Agreement (the "Agreement")
between Cornerstone Advisors, Inc. (the "Investment Manager") and the Fund on an
annual basis. The most recent approval of the continuation of the Agreement
occurred at an in person meeting of the Board held on February 12, 2010.
The Board requested and received extensive materials and information from the
Investment Manager to assist them in considering the approval of the continuance
of the Agreement. Based on their review of the materials and information and
discussions with management of the Investment Manager, the Board determined that
the approval of the continuation of the Agreement was consistent with the best
interests of the Fund and its shareholders, and would enable the Fund to
continue to receive high quality services at a cost that is appropriate,
reasonable, and in the best interests of the Fund and its 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.
The materials provided by the Investment Manager described the services provided
by the Investment Manager to the Fund and included an overview of the Investment
Manager's investment philosophy, management style and plan, including regarding
the Investment Manager's extensive knowledge and experience in the closed-end
fund industry. The Board also discussed the knowledge of the Investment Manager
with respect to managing the Fund's monthly distribution policy and the extent
to which such policy contributes to the market's positive valuation of the Fund.
The Board also reviewed and discussed a comparison of the Fund's performance
with comparable closed-end funds and a comparison of the Fund's expense ratios
and management fees with those comparable funds. Additionally, the Investment
Manager presented an analysis of its profitability based on its contractual
relationship with the Fund and the other investment companies advised by the
Investment Manager.
The Board carefully evaluated this information, taking into consideration many
factors including, the overall high quality of the personnel, operations,
financial condition, investment management capabilities, methodologies, and
performance of the Investment Manager. The board was advised by independent
legal counsel with respect to its deliberations and its duties when considering
the Agreement's continuance. Based on its review of the information requested
and provided, the Board determined that the management fees payable to the
Investment Manager under the Agreement are fair and reasonable in light of the
services to be provided, the performance of the Fund, the profitability of the
Investment Manager's relationship with the Fund, the comparability of the
proposed fee to fees paid by closed-end funds in the Fund's peer group, and the
level of quality of investment management personnel. The Board determined that
the Agreement is consistent with the best interests of the Fund and its
shareholders, and enables the Fund to receive high quality services at a cost
that is appropriate, reasonable, and in the best interests of the Fund and its
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 Directors present in person at
the meeting) approved the continuance of the Agreement with respect to the Fund.
--------------------------------------------------------------------------------
16
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 (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 their broker, or if a registered shareholder, the
Agent in writing at P.O. Box 922, Wall Street Station, New York, New York
10269-0560. Such written notice must be received by the Agent prior to the
record date of the Distribution or the shareholder will receive such
Distribution in shares through the Plan. 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 Amex LLC or elsewhere, with cash allocated to it by the Fund ("Open Market
Purchases").
The method for determining the number of shares to be received when
Distributions are reinvested will vary depending upon whether the net asset
value of the Fund's shares is higher or lower than its market price. If the net
asset value of the Fund's shares is lower than its market price, the number of
Newly Issued Shares received will be determined by dividing the amount of the
Distribution either by the Fund's net asset value per share or by 95% of its
market price, whichever is higher. If the net asset value of the Fund's shares
is higher than its market price, shares acquired by the Agent in Open Market
Purchases will be allocated to the reinvesting shareholders based on the average
cost of such Open Market Purchases.
Whenever the Fund declares a Distribution and the 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.
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
--------------------------------------------------------------------------------
17
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED), (CONCLUDED)
include those share 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 participants account prior to receipt
of written notice of his or her death or with respect to prices at which shares
are purchased or sold for the participants account and the terms on which such
purchases and sales are made, subject to applicable provisions of the federal
securities laws.
The automatic reinvestment of Distributions will not relieve participants of any
federal, state or local income tax that may be payable (or required to be
withheld) on such Distributions. The Fund reserves the right to amend or
terminate the Plan. There is no direct service charge to participants with
regard to purchases in the Plan.
All correspondence concerning the Plan should be directed to the Agent at P.O.
Box 922, Wall Street Station, New York, New York 10269-0560. Certain
transactions can be performed online at www.amstock.com or by calling the toll
free number 877-864-4833.
--------------------------------------------------------------------------------
18
PROXY VOTING AND PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
Information regarding how Cornerstone Progressive Return Fund (the "Fund") voted
proxies related to its portfolio securities during the 12-month period ended
June 30 of each year as well as the policies and procedures that the Fund uses
to determine how to vote proxies relating to its portfolio securities are
available by calling (513) 326-3597 or on the website of the Securities and
Exchange Commission, http://www.sec.gov.
This report incorporates a Summary Schedule of Investments for the Fund. A
complete Schedule of Investments for the Fund may be obtained free of charge by
contacting the Fund at (513) 326-3597. The Fund files a complete schedule of its
portfolio holdings for the first and third quarters of its fiscal year with the
SEC on Form N-Q. The Fund's Forms N-Q is available on the SEC's website at
http://www.sec.gov and may be reviewed and copied at the SEC's Public Reference
Room in Washington, DC. Information on the operation of the SEC's Public
Reference Room may be obtained by calling (202) 551-8090.
PRIVACY POLICY NOTICE (UNAUDITED)
The following is a description of the Fund's policies regarding disclosure of
nonpublic personal information that you provide to the Fund or that the Fund
collects from other sources. In the event that you hold shares of the Fund
through a broker-dealer or other financial intermediary, the privacy policy of
the financial intermediary would govern how your nonpublic personal information
would be shared with unaffiliated third parties.
CATEGORIES OF INFORMATION THE
FUND COLLECTS. The Fund collects the following nonpublic personal information
about you:
1. Information from the Consumer: this category includes information the Fund
receives from you on or in applications or other forms, correspondence, or
conversations (such as your name, address phone number, social security
number, assets, income and date of birth); and
2. Information about the Consumer's transactions with the Fund and its
affiliates: this category includes information about your transactions
with the Fund, its affiliates, or others (such as your account number and
balance, payment history, parties to transactions, cost basis information,
and other financial information).
CATEGORIES OF INFORMATION THE FUND DISCLOSES. The Fund does not disclose any
nonpublic personal information about their current or former shareholders to
unaffiliated third parties, except as required or permitted by law. The Fund is
permitted by law to disclose all of the information it collects, as described
above, to its service providers (such as the Fund's custodian, administrator and
transfer agent) to process your transactions and otherwise provide services to
you.
CONFIDENTIALITY AND SECURITY. The Fund restricts access to your nonpublic
personal information to those persons who require such information to provide
products or services to you. The Fund maintains physical, electronic and
procedural safeguards that comply with federal standards to guard your nonpublic
personal information.
--------------------------------------------------------------------------------
19
SUMMARY OF GENERAL INFORMATION (UNAUDITED)
Cornerstone Progressive Return Fund is a closed-end, diversified investment
company whose shares trade on the NYSE Amex LLC. 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 Amex LLC (symbol "CFP"). The previous week's net
asset value per share, market price, and related premium or discount are
published each Monday in The Wall Street Journal under the designation
"CrnrstnPrgRtFd" and Barron's under the designation "CornerstoneProgreRet". Such
information is available weekly and may be obtained by contacting the Fund at
the general inquiry phone number.
--------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN IN ACCORDANCE WITH SECTION 23(C) OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, THAT CORNERSTONE 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
independent registered public accountants who do not express an opinion there
on. 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.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
20
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 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not required
ITEM 6. SCHEDULE OF INVESTMENTS.
(a)
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2010 (UNAUDITED)
DESCRIPTION NO. OF SHARES VALUE
---------------------------------------------------------------------------------------------------
EQUITY SECURITIES - 97.64%
CLOSED-END FUNDS - 90.11%
CONVERTIBLE SECURITIES - 0.17%
Advent Claymore Convertible Securities & Income Fund 5,200 $ 81,900
-----------
CORE - 19.80%
Adams Express Company (The) (a) 141,606 1,278,702
Blue Chip Value Fund 151,350 429,834
Gabelli Equity Trust, Inc. 318,000 1,427,820
Royce Micro-Cap Trust, Inc. 146,356 1,074,253
Royce Value Trust, Inc. 351,402 3,714,319
Source Capital, Inc. 5,800 243,716
Tri-Continental Corporation 138,534 1,505,864
-----------
9,674,508
-----------
CORPORATE DEBT FUNDS BBB-RATED - 5.60%
AllianceBernstein Income Fund 275,300 2,240,942
Blackrock Enhanced Government Fund, Inc. 20,400 342,108
Hartford Income Shares Fund, Inc. 9,100 53,235
Western Asset Inflation Management Fund, Inc. 6,000 99,660
-----------
2,735,945
-----------
DEVELOPED MARKET - 1.19%
Ibero-America Fund, Inc. 21,000 108,780
Morgan Stanley Asia Pacific Fund, Inc. 16,584 225,211
New Ireland Fund, Inc. (The) 23,300 137,470
Singapore Fund, Inc. (The) 9,000 113,310
-----------
584,771
-----------
EMERGING MARKETS - 8.23%
Aberdeen Emerging Markets Telecommunications Fund, Inc. 13,400 211,720
Morgan Stanley Eastern Europe Fund, Inc. 9,000 126,270
Morgan Stanley Emerging Markets Fund, Inc. 3,605 46,180
Morgan Stanley Frontier Emerging Markets Fund 3,055 34,644
Morgan Stanley India Investment Fund, Inc. 65,400 1,449,264
Templeton Dragon Fund, Inc. 64,000 1,574,400
Templeton Emerging Markets Fund 3,000 51,390
Templeton Russia & East European Fund, Inc. 31,800 527,244
-----------
4,021,112
-----------
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2010 (UNAUDITED) (CONTINUED)
CLOSED-END FUNDS (CONTINUED)
GLOBAL INCOME - 0.65%
Evergreen International Balanced Income Fund 25,074 $ 316,685
-----------
HIGH CURRENT YIELD (LEVERAGED) - 1.73%
BlackRock Debt Strategies Fund, Inc. 18,000 68,220
BlackRock High Income Shares 19,293 38,200
BlackRock High Yield Trust 13,035 83,294
First Trust Strategic High Income Fund 71,216 218,633
First Trust Strategic High Income Fund II 51,700 226,446
First Trust Strategic High Income Fund III 48,500 187,695
Helios Strategic Income Fund, Inc. 4,700 24,816
-----------
847,304
-----------
INCOME & PREFERRED STOCK - 9.46%
BlackRock Preferred & Corporate Income Strategies Fund,
Inc. 22,600 203,852
BlackRock Preferred Opportunity Trust 44,800 459,648
Calamos Strategic Total Return Fund 279,538 2,152,443
John Hancock Preferred Income Fund 30,100 521,934
John Hancock Preferred Income Fund II 13,079 227,444
Macquarie/First Trust Global Infrastructure/Utilities
Dividend & Income Fund 15,863 168,624
Preferred Income Strategies Fund 89,831 883,039
-----------
4,616,984
-----------
LOAN PARTICIPATION - 0.23%
Invesco Van Kampen Dynamic Credit Opportunities Fund 9,900 112,959
-----------
OPTION ARBITRAGE/OPTIONS STRATEGIES - 6.86%
BlackRock International Growth & Income Trust 36,100 316,958
Dow 30 Enhanced Premium & Income Fund, Inc. 164,900 1,604,477
Dow 30 Premium & Dividend Income Fund, Inc. 40,800 533,256
ING International High Dividend Equity Income Fund 2,700 27,945
Nasdaq Premium Income & Growth Fund, Inc. 72,872 869,363
-----------
3,351,999
-----------
PACIFIC EX JAPAN - 8.83%
Asia Pacific Fund, Inc. (The) 18,100 166,158
China Fund, Inc. (The) 41,900 1,095,685
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2010 (UNAUDITED) (CONTINUED)
CLOSED-END FUNDS (CONTINUED)
PACIFIC EX JAPAN (CONTINUED)
Greater China Fund, Inc. (The) 116,947 $ 1,267,705
JF China Region Fund, Inc. 12,300 147,477
Korea Fund, Inc. (The) 3,000 104,250
Malaysia Fund, Inc. 11,900 101,745
Taiwan Fund, Inc. 59,700 785,055
Thai Fund, Inc. (The) 69,120 651,110
-----------
4,319,185
-----------
REAL ESTATE - 8.52%
Alpine Global Premier Properties Fund 56,200 302,918
Cohen & Steers Quality Income Realty Fund, Inc. 346,100 2,190,813
Cohen & Steers REIT & Preferred Income Fund, Inc. 128,271 1,354,542
LMP Real Estate Income Fund, Inc. 26,100 215,064
RMR Asia Pacific Real Estate Fund 6,901 102,479
-----------
4,165,816
-----------
SECTOR EQUITY - 12.64%
Cohen & Steers Infrastructure Fund, Inc. 182,500 2,308,625
Evergreen Utilities & High Income Fund 53,900 558,404
H&Q Healthcare Investors 140,489 1,536,950
H&Q Life Sciences Investors 70,180 616,180
Macquarie Global Infrastructure Total Return Fund, Inc. 55,934 735,532
Petroleum & Resources Corporation (a) 21,000 419,370
-----------
6,175,061
-----------
U.S. MORTGAGE - 2.28%
BlackRock Income Trust, Inc. 110,467 746,757
First Trust/FIDAC Mortgage Income Fund 20,031 366,968
-----------
1,113,725
-----------
VALUE - 3.92%
Claymore Dividend & Income Fund 30,200 361,192
Gabelli Dividend & Income Trust 104,250 1,251,000
Royce Focus Trust, Inc. 53,014 304,300
-----------
1,916,492
-----------
TOTAL CLOSED-END FUNDS 44,034,446
-----------
CONSUMER DISCRETIONARY - 0.55%
Comcast Corporation - Class A 3,358 58,328
Home Depot, Inc. (The) 2,000 56,140
Time Warner, Inc. 2,000 57,820
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2010 (UNAUDITED) (CONTINUED)
CONSUMER DISCRETIONARY (CONTINUED)
Walt Disney Company (The) 3,000 $ 94,500
-----------
266,788
-----------
CONSUMER STAPLES - 1.29%
Coca-Cola Company (The) 3,000 150,360
CVS Caremark Corporation 2,746 80,513
H.J. Heinz Company 2,000 86,440
Procter & Gamble Company (The) 5,233 313,875
-----------
631,188
-----------
ENERGY - 0.52%
Exxon Mobil Corporation 4,475 255,388
-----------
FINANCIALS - 0.76%
American Express Company 3,252 129,104
AON Corporation 3,000 111,360
Goldman Sachs Group, Inc. (The) 1,000 131,270
371,734
HEALTH CARE - 1.12%
Becton, Dickinson and Company 3,000 202,860
Johnson & Johnson 4,000 236,240
Medtronic, Inc. 3,000 108,810
-----------
547,910
-----------
INDUSTRIALS - 1.18%
3M Company 1,567 123,778
Danaher Corporation 4,000 148,480
Emerson Electric Company 2,000 87,380
United Technologies Corporation 2,108 136,830
Waste Management, Inc. 2,500 78,225
-----------
574,693
-----------
INFORMATION TECHNOLOGY - 1.97%
AOL, Inc. * 182 3,780
Automatic Data Processing, Inc. 5,000 201,300
Cisco Systems, Inc. * 18,470 393,596
Google, Inc. - Class A * 532 236,713
Intel Corporation 6,599 128,351
-----------
963,740
-----------
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2010 (UNAUDITED) (CONTINUED)
MATERIALS - 0.14%
Freeport-McMoRan Copper & Gold, Inc. 1,119 66,167
-----------
TOTAL EQUITY SECURITIES (cost - $49,013,988) 47,712,054
-----------
SHORT-TERM INVESTMENT - 2.54%
MONEY MARKET FUND - 2.54%
JPMorgan U.S. Government Money Market Fund
(cost - $1,242,075) 1,242,075 $ 1,242,075
-----------
TOTAL INVESTMENTS - 100.18% (cost - $50,256,063) 48,954,129
-----------
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.18)% (88,850)
-----------
NET ASSETS - 100.00% $48,865,279
===========
--------
(a) Affiliated investment. The Fund holds 2.62% and 0.86% (based on net assets)
of Adams Express Company and Petroleum & Resources Corporation, respectively. A
trustee of the Fund also serves as a director to such companies. During the six
months ended June 30, 2010 there were no purchases or sales of either of these
securities other than the purchase of an additional 17,000 shares of Petroleum &
Resources Corporation with a cost of $412,311 .
* Non-income producing security.
(b) Not applicable
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not required
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) Not required
(b) William A. Clark has resigned as a Portfolio Manager. As of the date
of the filing of this Form N-CSR, Ralph W. Bradshaw is the sole
Portfolio Manager of registrant.
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, 2010
--------------------------
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, 2010
--------------------------
By (Signature and Title)* /S/ FRANK J. MARESCA
------------------------------
Frank J. Maresca, Treasurer
(Principal Financial Officer)
Date SEPTEMBER 2, 2010
---------------------------
* Print the name and title of each signing officer under his or her signature.