OMB APPROVAL
OMB Number: 3235-0570
Expires: January 31, 2014
Estimated average burden
hours per response: 20.6
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-22066
Cornerstone Progressive Return Fund
(Exact name of registrant as specified in charter)
350 Jericho Turnpike, Suite 206 Jericho, New York 11753
(Address of principal executive offices) (Zip code)
Frank J. Maresca
Ultimus Fund Solutions, LLC 350 Jericho Turnpike, Suite 206 Jericho,
New York 11753
(Name and address of agent for service)
Registrant's telephone number, including area code: (513) 326-3597
Date of fiscal year end: December 31, 2010
Date of reporting period: December 31, 2010
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.
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
Report of Independent Registered Public Accounting Firm 15
Tax Information 16
Additional Information Regarding the Fund's Trustees
and Corporate Officers 17
Description of Dividend Reinvestment Plan 20
Proxy Voting and Portfolio Holdings Information 22
Privacy Policy Notice 23
Summary of General Information 26
Shareholder Information 26
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
PORTFOLIO SUMMARY - AS OF DECEMBER 31, 2010 (UNAUDITED)
--------------------------------------------------------------------------------
SECTOR ALLOCATION
Percent of
Sector Net Assets
--------------------------------------------------------------------------------
Closed-End Funds 90.2
--------------------------------------------------------------------------------
Information Technology 1.5
--------------------------------------------------------------------------------
Healthcare 1.1
--------------------------------------------------------------------------------
Industrials 1.1
--------------------------------------------------------------------------------
Consumer Staples 1.0
--------------------------------------------------------------------------------
Energy 0.8
--------------------------------------------------------------------------------
Consumer Discretionary 0.5
--------------------------------------------------------------------------------
Financials 0.5
--------------------------------------------------------------------------------
Materials 0.2
--------------------------------------------------------------------------------
Other 3.1
--------------------------------------------------------------------------------
TOP TEN HOLDINGS, BY ISSUER
Percent of
Holding Sector Net Assets
--------------------------------------------------------------------------------
1. Royce Value Trust, Inc. Closed-End Funds 6.4
--------------------------------------------------------------------------------
2. AllianceBernstein Income Fund Closed-End Funds 5.4
--------------------------------------------------------------------------------
3. Eaton Vance Risk-Managed Diversified
Equity Income Fund Closed-End Funds 5.2
--------------------------------------------------------------------------------
4. Eaton Vance Tax-Managed Diversified
Equity Income Fund Closed-End Funds 5.2
--------------------------------------------------------------------------------
5. Alpine Total Dynamic Dividend Fund Closed-End Funds 5.0
--------------------------------------------------------------------------------
6. Calamos Strategic Total Return Fund Closed-End Funds 3.3
--------------------------------------------------------------------------------
7. Alpine Global Premier Properties Fund Closed-End Funds 3.3
--------------------------------------------------------------------------------
8. Eaton Vance Tax-Managed Global Diversified
Equity Income Fund Closed-End Funds 3.1
--------------------------------------------------------------------------------
9. Dow 30 Enhanced Premium & Income Fund, Inc. Closed-End Funds 3.1
--------------------------------------------------------------------------------
10. Adams Express Company (The) Closed-End Funds 2.8
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
SUMMARY SCHEDULE OF INVESTMENTS - DECEMBER 31, 2010
--------------------------------------------------------------------------------
No. of
Description Shares Value
--------------------------------------------------------------------------------
EQUITY SECURITIES - 97.00%
CLOSED-END FUNDS - 90.19%
CORE - 19.39%
Adams Express
Company (The) (a) 141,606 $ 1,518,016
Gabelli Equity Trust, Inc. 66,280 375,808
General American Investors
Company, Inc. 46,200 1,239,084
Liberty All-Star Equity Fund 170,160 838,889
Royce Micro-Cap Trust, Inc. 124,930 1,224,314
Royce Value Trust, Inc. 241,594 3,512,777
SunAmerica Focused Alpha
Growth Fund, Inc. 20,500 359,365
Tri-Continental Corporation 109,034 1,500,308
Other Core (b) 157,431
------------
10,725,992
------------
CORPORATE DEBT FUNDS
INVESTMENT GRADE-RATED - 8.49%
AllianceBernstein
Income Fund 375,700 2,979,301
Federated Enhanced Treasury
Income Fund 59,977 1,001,616
Invesco Van Kampen
Bond Fund 25,000 466,000
Other Corporate Debt Funds
Investment Grade-Rated (b) 246,957
------------
4,693,874
------------
DEVELOPED MARKET - 0.75%
Other Developed Market (b) 417,465
------------
EMERGING MARKETS - 1.32%
Templeton Russia & East
European Fund, Inc. 23,700 542,019
Other Emerging Markets (b) 186,917
------------
728,936
------------
FLEXIBLE INCOME - 0.27%
Total Flexible Income (b) 151,966
------------
GENERAL & INSURED UNLEVERAGED - 0.26%
Other General & Insured
Unleveraged (b) 141,538
------------
No. of
Description Shares Value
--------------------------------------------------------------------------------
GENERAL MUNICIPAL LEVERAGED - 0.40%
Other General Municipal
Leveraged (b) $ 220,961
------------
GLOBAL - 7.32%
Alpine Global Dynamic
Dividend Fund 91,437 663,833
Alpine Total Dynamic
Dividend Fund 469,770 2,781,038
Clough Global
Allocation Fund 29,600 462,944
Other Global (b) 136,852
------------
4,044,667
------------
GLOBAL INCOME - 1.27%
AllianceBernstein Global
High Income Fund 48,461 692,992
Other Global Income (b) 11,900
------------
704,892
------------
HIGH CURRENT YIELD (LEVERAGED) - 3.01%
BlackRock Debt Strategies
Fund, Inc. 115,103 438,542
First Trust Strategic High
Income Fund 68,716 229,511
First Trust Strategic High
Income Fund II 51,700 241,956
Other High Current Yield
(Leveraged) (b) 749,563
------------
1,659,572
------------
HIGH YIELD MUNICIPAL DEBT - 0.71%
Other High Yield Municipal
Debt (b) 383,260
------------
INCOME & PREFERRED STOCK - 6.66%
BlackRock Credit Allocation
Income Trust II, Inc. 74,678 734,085
BlackRock Credit Allocation
Income Trust III 33,074 347,938
Calamos Strategic Total
Return Fund 279,538 2,588,522
Other Income & Preferred
Stock (b) 8,760
------------
3,679,305
------------
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
2
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
SUMMARY SCHEDULE OF INVESTMENTS - DECEMBER 31, 2010 (CONTINUED)
--------------------------------------------------------------------------------
No. of
Description Shares Value
--------------------------------------------------------------------------------
INSURED MUNICIPAL LEVERAGED - 0.67%
Nuveen Insured Quality
Municipal Fund, Inc. 17,200 $ 215,860
Other Insured Municipal
Leveraged (b) 158,350
------------
374,210
------------
LOAN PARTICIPATION - 0.94%
BlackRock Floating Rate
Income Strategies
Fund II, Inc. 18,908 259,229
Invesco Van Kampen Dynamic
Credit Opportunities Fund 21,403 261,331
------------
520,560
------------
OPTION ARBITRAGE/OPTIONS
STRATEGIES - 25.84%
BlackRock International
Growth & Income Trust 57,891 588,751
Dow 30 Enhanced Premium
& Income Fund, Inc. 164,900 1,711,662
Eaton Vance Enhanced
Equity Income Fund 24,457 309,136
Eaton Vance Enhanced
Equity Income Fund II 30,200 368,742
Eaton Vance Risk-Managed
Diversified Equity
Income Fund 218,150 2,897,032
Eaton Vance Tax-Managed
Buy-Write Income Fund 23,725 343,064
Eaton Vance Tax-Managed
Buy-Write Opportunities
Fund 92,924 1,215,446
Eaton Vance Tax-Managed
Diversified Equity
Income Fund 256,000 2,895,360
Eaton Vance Tax-Managed
Global Buy-Write
Opportunities Fund 103,000 1,261,750
Eaton Vance Tax-Managed
Global Diversified Equity
Income Fund 162,857 1,714,884
NFJ Dividend, Interest &
Premium Strategy Fund 44,521 779,563
No. of
Description Shares Value
--------------------------------------------------------------------------------
OPTION ARBITRAGE/OPTIONS
STRATEGIES (CONTINUED)
Other Option Arbitrage/
Options Strategies (b) $ 193,804
------------
14,279,194
------------
PACIFIC EX JAPAN - 1.33%
Greater China Fund,
Inc. (The) 40,447 531,878
Other Pacific Ex-Japan (b) 203,848
------------
735,726
------------
REAL ESTATE - 3.65%
Alpine Global Premier
Properties Fund 258,148 1,830,269
Other Real Estate (b) 185,996
------------
2,016,265
------------
SECTOR EQUITY - 4.83%
Cohen & Steers
Infrastructure Fund, Inc. 36,722 602,975
Evergreen Utilities and High
Income Fund 63,000 730,800
Macquarie Global
Infrastructure Total Return
Fund, Inc. 55,934 966,540
Petroleum & Resources
Corporation (a) 2,475 66,850
Other Sector Equity (a) (b) 306,594
------------
2,673,759
------------
U.S. MORTGAGE - 1.37%
BlackRock Income Trust, Inc. 110,467 755,594
------------
VALUE - 1.71%
Claymore Dividend &
Income Fund 36,200 544,086
Royce Focus Trust, Inc. 53,014 401,316
------------
945,402
------------
TOTAL CLOSED-END FUNDS 49,853,138
------------
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
3
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
SUMMARY SCHEDULE OF INVESTMENTS - DECEMBER 31, 2010 (CONCLUDED)
--------------------------------------------------------------------------------
No. of
Description Shares Value
--------------------------------------------------------------------------------
CONSUMER DISCRETIONARY - 0.54%
Other Consumer
Discretionary (b) $ 297,835
------------
CONSUMER STAPLES - 0.96%
Procter & Gamble
Company (The) 5,233 336,639
Other Consumer Staples (b) 194,398
------------
531,037
------------
ENERGY - 0.82%
ConocoPhillips 4,000 272,400
Other Energy (b) 180,972
------------
453,372
------------
FINANCIALS - 0.46%
Other Financials (b) 252,436
------------
HEALTHCARE - 1.11%
Becton, Dickinson and
Company 3,000 253,560
Johnson & Johnson 4,000 247,400
Other Healthcare (b) 111,270
------------
612,230
------------
INDUSTRIALS - 1.09%
Other Industrials (b) 600,834
------------
INFORMATION TECHNOLOGY - 1.50%
Cisco Systems, Inc. * 18,470 373,648
Google, Inc. - Class A * 532 315,992
Other Information
Technology (b) 143,069
------------
832,709
------------
No. of
Description Shares Value
--------------------------------------------------------------------------------
MATERIALS - 0.24%
Total Materials (b) $ 134,381
------------
UTILITIES - 0.09%
Total Utilities (b) 53,430
------------
TOTAL EQUITY SECURITIES
(cost - $48,949,302) 53,621,402
------------
SHORT-TERM INVESTMENTS - 3.70%
MONEY MARKET SECURITY - 3.70%
JPMorgan U.S. Government
Money Market Fund
(cost - $ 2,044,471) 2,044,471 2,044,471
------------
TOTAL INVESTMENTS - 100.70%
(cost - $50,993,773) 55,665,873
------------
LIABILITIES IN EXCESS OF
OTHER ASSETS - (0.70))% (388,875)
------------
NET ASSEETS - 100.00% $55,276,998
---------------
(a) Affiliated investment. The Fund holds 2.75% and 0.12% (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 year ended December 31, 2010 there were additional
purchases of 34,875 shares of Petroleum & Resources Corporation with a cost
of $800,706 and additional sales of 36,400 with a cost of $843,941. There
were no purchases or sales of Adams Express Company during the year.
(b) Represents issuers not identified as a top 50 holding in terms market
value and issues or issuers not exceeding 1% of net assets individually or
in the aggregate, respectively, as December 31, 2010.
* Non-income producing security.
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
4
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 2010
--------------------------------------------------------------------------------
ASSETS
Investments, at value:
Unaffiliated issuers (cost - $49,708,035) $54,081,007
Affiliated issuers (cost - $ 1,285,738) 1,584,866
------------
Total investments (cost - $50,993,773) 55,665,873
Receivables:
Investments sold 1,570,079
Dividends 173,629
------------
Total Assets 57,409,581
------------
LIABILITIES
Payables:
Securities purchased 2,011,607
Investment management fees 46,291
Trustees' fees 19,750
Other accrued expenses 54,935
------------
Total Liabilities 2,132,583
------------
NET ASSETS (applicable to 9,374,829 shares of
common share outstanding) $ 55,276,998
============
NET ASSET VALUE PER SHARE
($55,276,998 (divided by) 9,374,829) $ 5.90
============
NET ASSETS CONSISTS OF
Paid-in capital $ 80,081,591
Accumulated net realized loss on investments (29,476,693)
Net unrealized appreciation in value of investments 4,672,100
------------
Net assets applicable to shares outstanding $ 55,276,998
============
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
5
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 2010
--------------------------------------------------------------------------------
INVESTMENT INCOME
Income:
Dividends from non-affiliated investments $ 1,960,233
Dividends from affiliated investments 9,580
Securities lending 323
-----------
Total Investment Income 1,970,136
-----------
Expenses:
Investment management fees 538,817
Trustees' fees 81,801
Administration fees 54,375
Accounting fees 40,684
Legal and audit fees 40,649
Printing 38,902
Insurance 24,776
Custodian fees 18,002
Transfer agent fees 15,001
Stock exchange listing fees 9,575
Miscellaneous 4,797
-----------
Total Expenses 867,379
Less: Fees paid indirectly (78,847)
-----------
Net Expenses 788,532
-----------
Net Investment Income 1,181,604
-----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain from unaffiliated investments 10,053,969
Net realized gain from affiliated investments 105,202
Capital gain distributions from regulated investment companies 153,044
Capital gains distributions from affiliated
regulated investment companies 80,331
Net change in unrealized appreciation in value of investments (795,580)
-----------
Net realized and unrealized gain on investments 9,596,966
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $10,778,570
===========
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
6
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
For the Years Ended December 31,
--------------------------------
2010 2009
INCREASE/(DECREASE) IN NET ASSETS
Operations:
Net investment income $ 1,181,604 $ 1,477,832
Net realized gain/(loss) from investments 10,392,546 (20,263,956)
Net change in unrealized appreciation/(depreciation)
in value of investments (795,580) 33,599,505
------------ ------------
Net increase in net assets resulting
from operations 10,778,570 14,813,381
------------ ------------
Dividends and distributions to shareholders:
Net investment income (10,660,166) (1,477,832)
Return-of-capital (3,769,736) (21,498,436)
------------ ------------
Total dividends and distributions to shareholders (14,429,902) (22,976,268)
------------ ------------
Transactions in common share of beneficial interest:
Proceeds from 27,803 and 10,294 shares newly issued in
reinvestment of dividends and distributions,
respectively 189,938 90,582
------------ ------------
Total decrease in net assets (3,461,394) (8,072,305)
------------ ------------
NET ASSETS
Beginning of year 58,738,392 66,810,697
------------ ------------
End of year $ 55,276,998 $ 58,738,392
============ ============
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
7
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
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.
For the For the Period
Years Ended Sept. 10, 2007*
December 31, through
2010 2009 2008 Dec. 31, 2007
---------------------------------------------
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of period $ 6.28 $ 7.16 $ 14.10 $ 14.96^
------- ------- ------- --------
Net investment income # 0.13 0.16 0.16 0.06
Net realized and unrealized gain/(loss)
on investments 1.03 1.42 (4.64) (0.35)
------- ------- ------- --------
Net increase/(decrease) in net assets
resulting from operations 1.16 1.58 (4.48) (0.29)
------- ------- ------- --------
Dividends and distributions to shareholders:
Net investment income (1.14) (0.16) (0.16) (0.06)
Net realized capital gains -- -- -- (0.15)
Return-of-capital (0.40) (2.30) (2.30) (0.41)
------- ------- ------- --------
Total dividends and distributions to
shareholders (1.54) (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 $ 5.90 $ 6.28 $ 7.16 $ 14.10
======= ======= ======= ========
Market value, end of period $ 7.46 $ 8.90 $ 7.10 $ 16.75
======= ======= ======= ========
Total investment return (a) 4.73% 65.40% (47.53)% 16.02%(b)
======= ======= ======= ========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000 omitted) $55,277 $58,738 $66,811 $131,628
Ratio of expenses to average net assets,
net of fee waivers, if any (c)(d) 1.47% 1.39% 1.25% 1.29%(e)
Ratio of expenses to average net assets,
excluding fee waivers, if any (d)(f) 1.61% 1.54% 1.32% 1.42%(e)
Ratio of expenses to average net assets,
net of fee waivers, if any (d)(f) 1.61% 1.54% 1.32% 1.42%(e)
Ratio of net investment income to average
net assets 2.20% 2.54% 1.48% 1.46%(e)
Portfolio turnover rate 117.45% 115.99% 20.19% 6.77%(b)
* 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.
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
8
--------------------------------------------------------------------------------
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. 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 December 31, 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 year ended December 31, 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
--------------------------------------------------------------------------------
9
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
NOTES TO FINANCIAL STATEMENTS (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
December 31, 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; or expected to be taken in the
Fund's 2010 tax return. There was no material impact to the financial statements
or the disclosures thereto as a result of the adoption of this pronouncement.
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.
--------------------------------------------------------------------------------
10
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
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 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. 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.
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 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.
o Level 3 - model derived valuations in which 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 (CONTINUED)
--------------------------------------------------------------------------------
The following is a summary of the inputs used as of December 31, 2010 in valuing
the Fund's investments carried at value:
Investments in Other Financial
Valuation Inputs Securities Instruments*
--------------------------------------------------------------------------------
Level 1 - Quoted Prices
Equity Investments $53,621,402 --
Short-Term 2,044,471 --
Investments
Level 2 - Other Significant
Observable -- --
Inputs
Level 3 - Significant
Unobservable -- --
Inputs
----------- ------------
Total $55,665,873 --
=========== ============
--------
* Other financial instruments include futures, and swap contracts.
The breakdown of the Fund's investments into major categories is disclosed in
its Summary Schedule of Investments.
During the year ended December 31, 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 December
31, 2010.
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 measurements. 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.
Included in the Statement of Operations, under the caption Fees paid indirectly,
are expense offsets of $78,847 arising from credits earned on portfolio
transactions executed with brokers, pursuant to directed brokerage arrangements.
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 year ended December
31, 2010, Cornerstone earned $538,817 for investment management services.
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 Trustees. 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 (CONTINUED)
--------------------------------------------------------------------------------
NOTE E. AFFILIATED INVESTMENTS
Transactions in affiliates for the year ended December 31, 2010 were as follows:
Adams Petroleum &
Express Resources
Company Corporation
----------- -----------
Market value at
beginning of year $1,430,221 $ 94,960
========== ========
Shares at beginning
of year 141,606 4,000
Shares purchased
during the year -- 34,875
Shares sold during
the year -- 36,400
----------- ---------
Shares at end of year 141,606 2,475
=========== =========
Dividend income earned
during the year $ 22,656 $ 8,449
=========== =========
Cost of purchases
during the year -- $800,706
Proceeds from sales
during the year -- $949,143
Net realized loss
during the year -- $105,202
Capital gain distribution $ 49,561 $ 30,770
Market value at
end of year $1,518,016 $ 66,850
NOTE F. INVESTMENT IN SECURITIES
For the year ended December 31, 2010, purchases and sales of securities, other
than short-term investments, were $62,253,147 and $75,146,306, respectively.
NOTE G. COMMON SHARES OF BENEFICIAL INTEREST
The Fund has unlimited common shares of beneficial interest authorized and has
9,374,829 shares outstanding at December 31, 2010. As of that date, two
individuals that control Cornerstone owned 6,210 shares related to the initial
issuance of the seed capital shares of the Fund. Transactions in common shares
for the year ended December 31, 2010 were as follows:
Shares at beginning of year 9,347,026
Shares newly issued in reinvestment
of dividends and distributions 27,803
---------
Shares at end of year 9,374,829
=========
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 year ended December
31, 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 December 31, 2010. During the
year ended December 31, 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 (CONTINUED)
--------------------------------------------------------------------------------
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 years ended December
31, for the Fund were as follows:
Ordinary Income Return-of-Capital
---------------------------------------------------------
2010 2009 2010 2009
---- ---- ---- -----
$10,660,166 $1,477,832 $3,769,736 $21,498,436
At December 31, 2010 the components of accumulated deficit on a tax basis, for
the Fund were as follows:
Capital loss carryforward $ (29,362,102)
Net unrealized appreciation 4,557,509
-------------
Total accumulated deficit $ (24,804,593)
=============
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. For the year ended
December 31, 2010, the Fund reclass net realized gains of $9,478,562 to ordinary
income distributions and reclassed $9,478,562 from paid-in capital to
accumulated net realized loss on investments. 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 loss.
At December 31, 2010, the Fund had a capital loss carryforward for U.S. federal
income tax purposes of $29,362,102 which expires in 2017.
At December 31, 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 appreciation from investments were $51,108,364, $5,203,385,
$(645,876) and $4,557,509, respectively.
NOTE K. SUBSEQUENT EVENTS
On February 11, 2011, the Board of Trustees approved U.S. Bank, N.A. to replace
JPMorgan Chase Bank, N.A. as Custodian.
--------------------------------------------------------------------------------
14
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees
Cornerstone Progressive Return Fund
Jericho, New York
We have audited the accompanying statement of assets and liabilities of the
Cornerstone Progressive Return Fund (the "Fund"), including the summary schedule
of investments as of December 31, 2010, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
three years in the period then ended and for the period September 10, 2007
(commencement of operations) to December 31, 2007. 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, 2010, 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, 2010, 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 three years in
the period then ended and for the period September 10, 2007 (commencement of
operations) to December 31, 2007, in conformity with accounting principles
generally accepted in the United States of America.
Tait, Weller & Baker LLP
Philadelphia, Pennsylvania
February 28, 2011
--------------------------------------------------------------------------------
15
2010 TAX INFORMATION (UNAUDITED)
Cornerstone Progressive Return Fund (the "Fund") is required by Subchapter M of
the Internal Revenue Code of 1986, as amended, to advise its shareholders within
60 days of the Fund's year end (December 31, 2010) as to the federal tax status
of the dividends and distributions received by the Fund's shareholders in
respect of such fiscal year. The $14,429,902 in dividends and distributions paid
to shareholders in respect of such year, is represented by $10,660,166 of
ordinary income, and $3,769,736 of return-of-capital. As indicated in this
notice, a portion of the Fund's distributions for 2010 were comprised of a
return-of-capital; accordingly these distributions do not represent yield or
investment return on the Fund's portfolio.
SOURCES OF DIVIDENDS AND DISTRIBUTIONS
(Per Share Amounts)
Payment Dates: 1/29/10 2/26/10 3/31/10 4/30/10 5/28/10 6/30/10
--------------------------------------------------------
Ordinary Income(1) $0.1480 $0.1480 $0.1480 $0.0743 $0.0743 $0.0743
Return-of-Capital(2) 0.0570 0.0570 0.0570 0.0287 0.0287 0.0287
------- ------- ------- ------- ------- -------
Total: $0.2050 $0.2050 $0.2050 $0.1030 $0.1030 $0.1030
======= ======= ======= ======= ======= =======
Payment Dates: 7/30/10 8/31/10 9/30/10 10/29/10 11/30/10 12/31/10
--------------------------------------------------------
Ordinary Income(1) $0.0743 $0.0743 $0.0743 $0.0743 $0.0743 $0.0743
Return-of-Capital(2) 0.0287 0.0287 0.0287 0.0287 0.0287 0.0287
------- ------- ------- ------- ------- -------
Total: $0.1030 $0.1030 $0.1030 $0.1030 $0.1030 $0.1030
======= ======= ======= ======= ======= =======
-----------
(1) Ordinary Income Dividends - This is the total per share amount of ordinary
income dividends and short-tern capital gain distributions (if applicable)
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 5.17% of its ordinary income
dividends as qualified dividends, which are subject to a maximum federal tax
rate of 15%. 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
Keogh's) 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. They
will generally not be entitled to foreign tax credit or deduction for the
withholding taxes paid by the Fund.
Shareholders are strongly advised to consult their own tax advisers with respect
to the tax consequences of their investment in the Fund.
--------------------------------------------------------------------------------
16
ADDITIONAL INFORMATION REGARDING THE FUND'S TRUSTEES AND CORPORATE OFFICERS
(UNAUDITED)
Number of
Portfolios in
Name and Position Fund Complex
Address* Position(s) Principal Occupation with Fund Overseen by
(Birth Date) Held with Fund over Last 5 Years Since Trustees
----------------------------------------------------------------------------------------------------------------
Ralph W. Chairman of President, Cornerstone Advisors, Inc.; 2007 3
Bradshaw** the Board of Financial Consultant; President and
(Dec. 1950) Trustees and Director of Cornerstone Total Return
President Fund, Inc. and Cornerstone Strategic
Value Fund, Inc.
Thomas H. Trustee; Audit, Independent Financial Advisor; Director 2007 3
Lenagh Nominating of Photonics Products Group; Director of
(Nov. 1924) and Corporate Cornerstone Total Return Fund, Inc. and
Governance Cornerstone Strategic Value Fund, Inc.;
Committee Director of Adams Express Company,
Member Petroleum & Resources Corporation and
PPGI Industries.
Edwin Meese III Trustee; Audit, Distinguished Fellow, The Heritage 2007 3
(Dec. 1931) Nominating Foundation Washington D.C.;
and Corporate Distinguished Visiting Fellow at the
Governance Hoover Institution, Stanford University;
Committee Senior Adviser, Revelation L.P.; Director
Member of Cornerstone Total Return Fund, Inc. and
Cornerstone Strategic Value Fund, Inc.
Scott B. Rogers Trustee; Audit, Chairman, Board of Health Partners, 2007 3
(July 1955) Nominating Inc.; Chief Executive Officer, Asheville
and Corporate Buncombe Community Christian
Governance Ministry; and President, ABCCM
Committee Doctor's Medical Clinic; Appointee, NC
Member Governor's Commission on Welfare to
Work; Director of Cornerstone Total
Return Fund, Inc. and Cornerstone
Strategic Value Fund, Inc.
--------------------------------------------------------------------------------
17
ADDITIONAL INFORMATION REGARDING THE FUND'S TRUSTEES AND CORPORATE OFFICERS
(UNAUDITED) (CONTINUED)
Number of
Portfolios in
Name and Position Fund Complex
Address* Position(s) Principal Occupation with Fund Overseen by
(Birth Date) Held with Fund over Last 5 Years Since Trustees
------------------------------------------------------------------------------------------------------------------
Andrew A. Trustee; Attorney and senior member of Strauss 2007 3
Strauss Chairman of & Associates; Director of Cornerstone
(Nov. 1953) Nominating Total Return Fund, Inc. and Cornerstone
and Corporate Strategic Value Fund, Inc.
Governance
Committee and
Audit Committee
Member
Glenn W. Trustee; Chairman of the Board, Tower 2007 3
Wilcox, Sr. Chairman of Associates, Inc.; Chairman of the
(Dec. 1931) Audit Committee, Board and Chief Executive Officer of
Nominating Wilcox Travel Agency, Inc.; Director of
and Corporate Cornerstone Total Return Fund, Inc. and
Governance Cornerstone Strategic Value Fund, Inc.
Committee
Member
--------------------------------------------------------------------------------
18
ADDITIONAL INFORMATION REGARDING THE FUND'S TRUSTEES AND CORPORATE OFFICERS
(UNAUDITED) (CONCLUDED)
Name and Position
Address* Position(s) Principal Occupation with Fund
(Birth Date) Held with Fund over Last 5 Years Since
----------------------------------------------------------------------------------------------------------
Gary A. Bentz Chief Compliance Chairman and Chief Financial Officer 2007, 2008,
(June 1956) Officer, Secretary, of Cornerstone Advisors, Inc.; Financial 2009
and Assistant Consultant, C.P.A., Chief Compliance
Treasurer Officer, Secretary, and Assistant Treasurer
of Cornerstone Total Return Fund, Inc. and
Cornerstone Strategic Value Fund, Inc.
Frank J. Maresca Treasurer Executive Vice President of Ultimus Fund 2009
(Oct. 1958) Solutions, LLC (since March 2009); previous
Executive Director, JP Morgan Chase & Co.
(since June 2008); previous President of Bear
Stearns Funds Management, Inc.; previous
Senior Managing Director of Bear Stearns
& Co., Inc.; Treasurer of Cornerstone Total
Return Fund, Inc. and Cornerstone Strategic
Value Fund, Inc. (since May 2009).
----------------------------------------------------------------------------------------------------------
* The mailing address of each Director and/or Officer with respect to the Fund's
operation is 350 Jericho Turnpike, Suite 206, Jericho, NY
** Designates a director 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 Adviser
of the Fund.
--------------------------------------------------------------------------------
19
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 include those share purchased pursuant to the Plan. Each participant,
nevertheless, has the right
--------------------------------------------------------------------------------
20
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED) (CONCLUDED)
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.
--------------------------------------------------------------------------------
21
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.
--------------------------------------------------------------------------------
22
PRIVACY POLICY (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:
--------------------------------------------------------------------------------
o Social Security number
o account balances
o account transactions
o transaction history
o wire transfer instructions
o 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.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
23
PRIVACY POLICY (UNAUDITED) (CONTINUED)
Reasons we can share your Does the Cornerstone
personal information Fund share? Can you limit this sharing?
-----------------------------------------------------------------------------------
FOR OUR EVERYDAY BUSINESS PURPOSES Yes No
- such as to process your transactions,
maintain your account(s), respond to
court orders and legal investigations, or
report to credit bureaus
-----------------------------------------------------------------------------------
FOR OUR MARKETING PURPOSES - to No We don't share
offer our products and services to you
-----------------------------------------------------------------------------------
FOR JOINT MARKETING WITH OTHER No We don't share
FINANCIAL COMPANIES
-----------------------------------------------------------------------------------
FOR OUR AFFILIATES' EVERYDAY BUSINESS Yes No
PURPOSES - information about your
transactions and experiences
-----------------------------------------------------------------------------------
FOR OUR AFFILIATES' EVERYDAY BUSINESS No We don't share
PURPOSES - information about your
creditworthiness
-----------------------------------------------------------------------------------
FOR OUR AFFILIATES TO MARKET TO YOU No We don't share
-----------------------------------------------------------------------------------
FOR NONAFFILIATES TO MARKET TO YOU No We don't share
-----------------------------------------------------------------------------------
QUESTIONS? Call (513) 326-3597.
-----------------------------------------------------------------------------------
WHAT WE DO
-----------------------------------------------------------------------------------
WHO IS PROVIDING THIS NOTICE? Cornerstone Progressive Return Fund (the "Fund")
-----------------------------------------------------------------------------------------------
HOW DOES THE FUND AND THE FUND'S To protect your personal information from unauthorized
SERVICE PROVIDERS, ON THE FUND'S access and use, we and our service providers use security
BEHALF PROTECT MY PERSONAL measures that comply with federal law. These measures
INFORMATION? include computer safeguards and secured files and
buildings.
-----------------------------------------------------------------------------------------------
HOW DOES THE FUND AND THE FUND'S We collect your personal information, for example, when
SERVICE PROVIDERS, ON THE FUND'S you:
BEHALF COLLECT MY PERSONAL
INFORMATION? o open an account
o provide account information
o give us your contact information
o make a wire transfer
We also collect your information from others,
such as credit bureaus, affiliates, or other companies.
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
24
PRIVACY POLICY (UNAUDITED) (CONCLUDED)
WHY CAN'T I LIMIT ALL SHARING? Federal law gives you the right to limit only
o sharing for affiliates' everyday
business purposes - information about
your creditworthiness
o affiliates from using your
information to market to you
o 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.
o CORNERSTONE ADVISORS, INC.
--------------------------------------------------------------------------------
NONAFFILIATES Companies not related by common ownership or control.
They can be financial and nonfinancial companies.
o 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.
o THE FUND DOES NOT JOINTLY MARKET.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
25
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
available on The Wall Street Journal website at
http://online.wsj.com/mdc/public/page/2_3040-CEF34.html under the designation
"Cornerstone Prog Return (CFP)" and on the Barron's website at
http://online.barrons.com/mdc/public/page/2_3040-CEF34.html under the same
designation. 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. 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.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
26
This page intentionally left blank.
This page intentionally left blank.
This page intentionally left blank.
CORNERSTONE PROGRESSIVE RETURN FUND
ITEM 2. CODE OF ETHICS.
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.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's board of trustees 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.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees. The aggregate fees billed for professional services
rendered by the principal accountant for the audit of the registrant's
annual financial statements or for services that are normally provided
by the accountant in connection with statutory and regulatory filings
or engagements were $14,500 and $14,100 with respect to the
registrant's fiscal years ended December 31, 2010 and 2009,
respectively.
(b) Audit-Related Fees. No fees were billed in either of the last two
fiscal years for assurance and related services by the principal
accountant that are reasonably related to the performance of the audit
of the registrant's financial statements and are not reported under
paragraph (a) of this Item.
(c) Tax Fees. The aggregate fees billed for professional services rendered
by the principal accountant for tax compliance, tax advice, and tax
planning were $3,300 and $3,000 with respect to the registrant's
fiscal years ended December 31, 2010 and 2009, respectively. The
services comprising these fees are the preparation of the registrant's
federal and state income and federal excise tax returns.
(d) All Other Fees. No fees were billed in either of the last two fiscal
years for products and services provided by the principal accountant,
other than the services reported in paragraphs (a) through (c) of this
Item.
(e)(1) Before the principal accountant is engaged by the registrant to
render (i) audit, audit-related or permissible non-audit services to
the registrant or (ii) non-audit services to the registrant's
investment adviser and any entity controlling, controlled by, or under
common control with the adviser that provides ongoing services to the
registrant, either (a) the audit committee shall pre-approve such
engagement; or (b) such engagement shall be entered into pursuant to
pre-approval policies and procedures established by the audit
committee. Any such policies and procedures must be detailed as to the
particular service and not involve any delegation of the audit
committee's responsibilities to the registrant's investment adviser.
The audit committee may delegate to one or more of its members the
authority to grant pre-approvals. The pre-approval policies and
procedures shall include the requirement that the decisions of any
member to whom authority is delegated under this provision shall be
presented to the full audit committee at its next scheduled meeting.
Under certain limited circumstances, pre-approvals are not required if
certain de minimus thresholds are not exceeded, as such thresholds are
determined by the audit committee in accordance with applicable
Commission regulations.
(e)(2) None of the services described in paragraph (b) through (d) of this
Item were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Less than 50% of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year were attributed to work performed by persons other
than the principal accountant's full-time, permanent employees.
(g) During the fiscal years ended December 31, 2010 and 2009, aggregate
non-audit fees of $3,300 and $3,000, respectively, were billed by the
registrant's principal accountant for services rendered to the
registrant. No non-audit fees were billed in either of the last two
fiscal years by the registrant's principal accountant for services
rendered to the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and any
entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant.
(h) The principal accountant has not provided any non-audit services to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted with
or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
(a) The registrant has a separately-designated standing audit committee
established in accordance with Section 3(a)(58)(A) of the Securities and
Exchange Act of 1934. Glenn W. Wilcox, Sr., (Chairman), Edwin Meese,
III, Thomas H. Lenagh, Andrew A. Strauss and Scott B. Rogers are the
members of the registrant's audit committee.
(b) Not applicable
ITEM 6. SCHEDULE OF INVESTMENTS.
(a)
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 2010
DESCRIPTION NO. OF SHARES VALUE
------------------------------------------------------------------------------------------------
EQUITY SECURITIES - 97.00%
CLOSED-END FUNDS - 90.19%
CORE - 19.39%
Adams Express Company (The) 141,606 $1,518,016
Gabelli Equity Trust, Inc. 66,280 375,808
General American Investors Company, Inc. 46,200 1,239,084
Liberty All-Star Equity Fund 170,160 838,889
Royce Micro-Cap Trust, Inc. 124,930 1,224,314
Royce Value Trust, Inc. 241,594 3,512,777
SunAmerica Focused Alpha Growth Fund, Inc. 20,500 359,365
SunAmerica Focused Alpha Large-Cap Fund, Inc. 10,002 157,431
Tri-Continental Corporation 109,034 1,500,308
-----------
10,725,992
-----------
CORPORATE DEBT FUNDS INVESTMENT
GRADE-RATED - 8.49%
AllianceBernstein Income Fund 375,700 2,979,301
BlackRock Income Opportunity Trust, Inc. 5,000 48,450
Federated Enhanced Treasury Income Fund 59,977 1,001,616
Invesco Van Kampen Bond Fund 25,000 466,000
Rivus Bond Fund 291 5,157
Western Asset Income Fund 15,000 193,350
-----------
4,693,874
-----------
DEVELOPED MARKET - 0.75%
Ibero-America Fund, Inc. 24,000 156,960
Japan Equity Fund 16,422 100,667
New Ireland Fund, Inc. (The) 23,300 159,838
-----------
417,465
-----------
EMERGING MARKETS - 1.32%
First Israel Fund, Inc. 10,730 186,917
Templeton Russia & East European Fund, Inc. 23,700 542,019
-----------
728,936
-----------
FLEXIBLE INCOME - 0.27%
Zweig Total Return Fund, Inc. (The) 42,687 151,966
-----------
GENERAL & INSURED UNLEVERAGED - 0.26%
Nuveen Select Maturities Municipal Fund 400 3,988
Nuveen Select Tax-Free Income Portfolio 3 10,500 137,550
-----------
141,538
-----------
GENERAL MUNICIPAL LEVERAGED - 0.40%
Nuveen Enhanced Municipal Value Fund 7,000 88,970
Nuveen Municipal Income Fund 3,720 38,316
See accompanying notes to schedule of investments.
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 2010 (CONTINUED)
CLOSED-END FUNDS (CONTINUED)
Van Kampen Municipal Trust 7,500 $ 93,675
-----------
220,961
-----------
GLOBAL - 7.32%
Alpine Global Dynamic Dividend Fund 91,437 663,833
Alpine Total Dynamic Dividend Fund 469,770 2,781,038
Calamos Global Dynamic Income Fund 15,904 133,116
Clough Global Allocation Fund 29,600 462,944
DCA Total Return Fund 1,083 3,736
-----------
4,044,667
-----------
GLOBAL INCOME - 1.27%
Alliancebernstein Global High Income Fund 48,461 692,992
Western Asset Global Partners Income Fund, Inc. 1,000 11,900
-----------
704,892
-----------
HIGH CURRENT YIELD (LEVERAGED) - 3.01%
BlackRock Corporate High Yield Fund III, Inc. 15,900 107,643
BlackRock Corporate High Yield Fund V, Inc. 8,101 93,486
BlackRock Corporate High Yield Fund, Inc. 31,446 213,518
BlackRock Debt Strategies Fund, Inc. 115,103 438,542
BlackRock High Yield Trust 576 3,767
BlackRock Strategic Bond Trust 9,000 114,300
First Trust Strategic High Income Fund 68,716 229,511
First Trust Strategic High Income Fund II 51,700 241,956
First Trust Strategic High Income Fund III 48,500 210,975
Helios Strategic Income Fund, Inc. 1,102 5,874
-----------
1,659,572
-----------
HIGH YIELD MUNICIPAL DEBT - 0.71%
BlackRock Muni Assets Fund, Inc. 12,700 148,463
Invesco Municipal Income Opportunities Trust II 7,000 47,740
Invesco Municipal Income Opportunities Trust III 3,500 25,585
Nuveen Municipal High Income Opportunity Fund 2 5,500 59,510
Putnam Managed Municipal Income Trust 2,200 15,202
Western Asset Municipal High Income Fund, Inc. 12,000 86,760
-----------
383,260
-----------
INCOME & PREFERRED STOCK - 6.66%
BlackRock Credit Allocation Income Trust II 74,678 734,085
BlackRock Credit Allocation Income Trust III 33,074 347,938
Calamos Strategic Total Return Fund 279,538 2,588,522
See accompanying notes to schedule of investments.
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 2010 (CONTINUED)
CLOSED-END FUNDS (CONTINUED)
Preferred Income Strategies Fund 74,678 $ 8,760
-----------
3,679,305
-----------
INSURED MUNICIPAL LEVERAGED - 0.67%
Invesco Trust For Insured Municipals 2,000 24,120
Nuveen Insured Quality Municipal Fund, Inc. 17,200 215,860
Nuveen Insured Tax-Free Advantage Municipal Fund 7,000 93,730
Nuveen Premier Insured Municipal Income Fund, Inc. 3,000 40,500
-----------
374,210
-----------
LOAN PARTICIPATION - 0.94%
BlackRock Floating Rate Income Strategies Fund II, Inc. 18,908 259,229
Invesco Van Kampen Dynamic Credit Opportunities Fund 21,403 261,331
-----------
520,560
-----------
OPTION ARBITRAGE/OPTIONS STRATEGIES - 25.84%
BlackRock International Growth & Income Trust 57,891 588,751
Dow 30 Enhanced Premium & Income Fund, Inc. 164,900 1,711,662
Eaton Vance Enhanced Equity Income Fund 24,457 309,136
Eaton Vance Enhanced Equity Income Fund II 30,200 368,742
Eaton Vance Risk-Managed Diversified Equity Income Fund 218,150 2,897,032
Eaton Vance Tax-Managed Buy-Write Income Fund 23,725 343,064
Eaton Vance Tax-Managed Buy-Write Opportunities Fund 92,924 1,215,446
Eaton Vance Tax-Managed Diversified Equity Income Fund 256,000 2,895,360
Eaton Vance Tax-Managed Global Buy-Write Opportunities
Fund 103,000 1,261,750
Eaton Vance Tax-Managed Global Diversified Equity
Income Fund 162,857 1,714,884
Nasdaq Premium Income & Growth Fund, Inc. 13,745 193,804
NFJ Dividend, Interest & Premium Strategy Fund 44,521 779,563
-----------
14,279,194
-----------
PACIFIC EX JAPAN - 1.33%
Asia Pacific Fund, Inc. (The) 11,198 134,040
Greater China Fund, Inc. (The) 40,447 531,878
See accompanying notes to schedule of investments.
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 2010 (CONTINUED)
CLOSED-END FUNDS (CONTINUED)
JF China Region Fund, Inc. 4,421 $ 69,808
-----------
735,726
-----------
REAL ESTATE - 3.65%
Alpine Global Premier Properties Fund 258,148 1,830,269
LMP Real Estate Income Fund, Inc. 5,864 59,226
RMR Asia Pacific Real Estate Fund 6,901 126,770
-----------
2,016,265
-----------
SECTOR EQUITY - 4.83%
Cohen & Steers Infrastructure Fund, Inc. 36,722 602,975
Evergreen Utilities and High Income Fund 63,000 730,800
Gabelli Healthcare & Wellness Rx Trust (The) 17,159 121,486
H&Q Healthcare Investors 13,845 185,108
Macquarie Global Infrastructure Total Return Fund, Inc. 55,934 966,540
Petroleum & Resources Corporation (a) 2,475 66,850
-----------
2,673,759
-----------
U.S. MORTGAGE - 1.37%
BlackRock Income Trust, Inc. 110,467 755,594
-----------
VALUE - 1.71%
Claymore Dividend & Income Fund 36,200 544,086
Royce Focus Trust, Inc. 53,014 401,316
-----------
945,402
-----------
TOTAL CLOSED-END FUNDS 49,853,138
-----------
CONSUMER DISCRETIONARY - 0.54%
Comcast Corporation - Class A 3,358 73,775
DIRECTV Group, Inc. (The) - Class A * 4,000 159,720
Time Warner, Inc. 2,000 64,340
-----------
297,835
-----------
CONSUMER STAPLES - 0.96%
CVS Caremark Corporation 2,746 95,478
H.J. Heinz Company 2,000 98,920
Procter & Gamble Company (The) 5,233 336,639
-----------
531,037
-----------
ENERGY - 0.82%
ConocoPhillips 4,000 272,400
Exxon Mobil Corporation 2,475 180,972
-----------
453,372
-----------
FINANCIALS - 0.46%
AFLAC, Inc. 2,000 112,860
See accompanying notes to schedule of investments.
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - DECEMBER 31, 2010 (CONTINUED)
FINANCIALS (CONTINUED)
American Express Company 3,252 $ 139,576
-----------
252,436
-----------
HEALTH CARE - 1.11%
Becton, Dickinson and Company 3,000 253,560
Johnson & Johnson 4,000 247,400
Medtronic, Inc. 3,000 111,270
-----------
612,230
-----------
INDUSTRIALS - 1.09%
3M Company 1,567 135,232
Emerson Electric Company 2,000 114,340
Union Pacific Corporation 2,000 185,320
United Technologies Corporation 2,108 165,942
-----------
600,834
-----------
INFORMATION TECHNOLOGY - 1.50%
AOL, Inc. * 181 4,292
Cisco Systems, Inc. * 18,470 373,648
Google, Inc. - Class A * 532 315,992
Intel Corporation 6,599 138,777
-----------
832,709
-----------
MATERIALS - 0.24%
Freeport-McMoRan Copper & Gold, Inc. 1,119 134,381
-----------
UTILITIES - 0.09%
Duke Energy Corporation 3,000 53,430
-----------
TOTAL EQUITY SECURITIES (cost - $48,849,302) 53,621,402
-----------
SHORT-TERM INVESTMENTS - 3.70%
MONEY MARKET SECURITY - 3.70%
JPMorgan U.S. Government Money Market Fund
(cost - $2,044,471) 2,044,471 $ 2,044,471
-----------
TOTAL INVESTMENTS - 100.70% (cost - $50,993,773) 55,665,873
-----------
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.70)% (388,875)
-----------
NET ASSETS - 100.00% $55,276,998
===========
(a) Affiliated investment. The Fund holds 2.75% and 0.12% (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 year
ended December 31, 2010 there were additional purchases of 34,875 shares of
Petroleum & Resources Corporation with a cost of $800,706 and additional sales
of 36,400 with a cost of $843,941. There were no purchases or sales of Adams
Express Company during the year.
* Non-income producing security.
See accompanying notes to schedule of investments.
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 summary
schedule of investments as of December 31, 2010, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the three years in the period then ended and for the period September
10, 2007 (commencement of operations) to December 31, 2007. 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, 2010, 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, 2010, 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 three years in
the period then ended and for the period September 10, 2007 (commencement of
operations) to December 31, 2007, in conformity with accounting principles
generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule of investments in securities
as of December 31, 2010 appearing in Item 6 of this Form N-CSR is presented for
the purpose of additional analysis and is not a required part of the basic
financial statements. This additional information is the responsibility of the
Fund's management. Such information has been subjected to the auditing
procedures applied in our audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
TAIT, WELLER & BAKER LLP
PHILADELPHIA, PENNSYLVANIA
FEBRUARY 28, 2011
(b) Not applicable
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
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.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(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 the portfolio manager since
2007. 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 Strategic Value Fund, Inc. and Cornerstone Total Return
Fund, Inc.
(a)(2) Ralph W. Bradshaw manages two other closed-end registered investment
companies: Cornerstone Strategic Value Fund, Inc. and Cornerstone Total Return
Fund, Inc. As of December 31, 2010, net assets of Cornerstone Strategic Value
Fund, Inc. were $64,265,689 and net assets of Cornerstone Total Return Fund,
Inc. were $25,913,220. Mr. Bradshaw manages no accounts except for the
registrant, Cornerstone Strategic Value Fund, Inc. and Cornerstone Total Return
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 the portfolio manager as of December 31, 2010 is as follows: Ralph W.
Bradshaw: $10,001 - $50,000
(b) Not applicable
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: Attached hereto
(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.CODE ETH Code of Ethics
Exhibit 99.VOTEREG Proxy Voting Policies and Procedures
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 March 8, 2011
-------------------------------------------------
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 March 8, 2011
-------------------------------
By (Signature and Title)* /s/ Frank J. Maresca
----------------------------
Frank J. Maresca, Treasurer
(Principal Financial Officer)
Date March 8, 2011
----------------------------------
* Print the name and title of each signing officer under his or her signature.