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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-22066
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Cornerstone Progressive Return Fund
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(Exact name of registrant as specified in charter)
350 Jericho Turnpike, Suite 206, Jericho, New York 11753
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(Address of principal executive offices) (Zip code)
Frank J. Maresca
Ultimus Fund Solutions, LLC
350 Jericho Turnpike, Suite 206, Jericho, New York 11753
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(Name and address of agent for service)
Registrant's telephone number, including area code: (513) 587-3400
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Date of fiscal year end: December 31, 2011
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Date of reporting period: June 30, 2011
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS
====================
CORNERSTONE PROGRESSIVE
RETURN FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2011
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CONTENTS
Portfolio Summary 1
Summary Schedule of Investments 2
Statement of Assets and Liabilities 5
Statement of Operations 6
Statement of Changes in Net Assets 7
Financial Highlights 8
Notes to Financial Statements 9
Results of Annual Meeting of Stockholders 15
Investment Management Agreement Approval Disclosure 16
Description of Dividend Reinvestment Plan 17
Proxy Voting and Portfolio Holdings Information 19
Privacy Policy Notice 20
Summary of General Information 23
Stockholder Information 23
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CORNERSTONE PROGRESSIVE RETURN FUND
PORTFOLIO SUMMARY - AS OF JUNE 30, 2011 (UNAUDITED)
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SECTOR ALLOCATION
Percent of
Sector Net Assets
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Closed-End Funds 93.3
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Information Technology 1.1
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Energy 0.9
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Industrials 0.7
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Healthcare 0.7
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Financials 0.6
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Consumer Staples 0.5
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Consumer Discretionary 0.4
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Materials 0.1
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Utilities 0.1
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Other 1.6
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TOP TEN HOLDINGS, BY ISSUER
Percent of
Holding Sector Net Assets
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1. Eaton Vance Risk-Managed Diversified
Equity Income Fund Closed-End Funds 4.9
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2. Eaton Vance Tax-Managed Global Diversified
Equity Income Fund Closed-End Funds 4.8
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3. Eaton Vance Tax-Managed Global Buy-Write
Opportunities Fund Closed-End Funds 4.8
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4. Eaton Vance Tax-Managed Diversified
Equity Income Fund Closed-End Funds 4.8
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5. AllianceBernstein Income Fund Closed-End Funds 4.7
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6. Eaton Vance Tax-Managed Buy-Write
Opportunities Fund Closed-End Funds 3.5
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7. BlackRock Build America Bond Trust Closed-End Funds 3.5
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8. Calamos Strategic Total Return Fund Closed-End Funds 2.9
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9. Eaton Vance Enhanced Equity Income Fund II Closed-End Funds 2.9
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10.Eaton Vance Enhanced Equity Income Fund Closed-End Funds 2.7
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1
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CORNERSTONE PROGRESSIVE RETURN FUND
SUMMARY SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED)
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No. of
Description Shares Value
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EQUITY SECURITIES - 98.37%
CLOSED-END FUNDS - 93.25%
CORE - 0.68%
General American Investors Company, Inc. 22,600 $ 634,156
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CORPORATE DEBT FUNDS
INVESTMENT GRADE-RATED -- 11.86%
AllianceBernstein Income Fund 555,681 4,384,323
BlackRock Core Bond Trust 70,164 879,155
BlackRock Income
Opportunity Trust, Inc. 64,774 627,012
Federated Enhanced
Treasury Income Fund 59,977 932,642
Invesco Van Kampen
Bond Fund 41,104 783,031
MFS Government Markets
Income Trust 125,730 854,964
Western Asset/Claymore
Inflation-Linked Opportunities &
Income Fund 93,228 1,167,215
Other Corporate Debt Funds
Investment Grade-Rated(a) 1,394,647
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11,022,989
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DEVELOPED MARKET - 1.02%
Japan Smaller Capitalization Fund, Inc. 115,263 948,615
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EMERGING MARKETS - 2.54%
India Fund, Inc. (The) 21,000 636,300
Templeton Dragon Fund, Inc. 30,672 931,202
Other Emerging Markets(a) 792,187
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2,359,689
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EMERGING MARKETS DEBT - 0.19%
Total Emerging Markets Debt (a) 181,031
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FLEXIBLE INCOME - 5.13%
MFS Charter Income Trust 73,065 683,888
Wells Fargo Advantage
Multi-Sector Income Fund 103,484 1,593,654
Zweig Total Return Fund, Inc. (The) 648,533 2,198,527
Other Flexible Income (a) 290,736
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4,766,805
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No. of
Description Shares Value
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GENERAL & INSURED UNLEVERAGED - 0.44%
Total General & Insured Unleveraged(a) $ 412,874
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GENERAL BOND - 5.59%
BlackRock Build America Bond Trust 166,841 3,210,021
Duff & Phelps Utility &
Corporate Bond Trust Inc. 58,192 659,315
Nuveen Build America Bond Fund 56,217 1,067,561
Other General Bond(a) 258,734
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5,195,631
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GENERAL MUNICIPAL LEVERAGED - 5.92%
BlackRock MuniYield
Quality Fund III, Inc. 69,700 874,038
Nuveen Insured Municipal
Opportunity Fund, Inc. 136,178 1,838,403
Other General Municipal Leveraged(a) 2,788,354
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5,500,795
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GLOBAL - 3.51%
Alpine Total Dynamic Dividend Fund 189,014 1,147,315
Calamos Global Dynamic Income Fund 77,904 677,765
Other Global(a) 1,435,353
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3,260,433
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GLOBAL INCOME - 1.51%
Nuveen Multi-Currency
Short-Term Government Income Fund 76,905 1,142,808
Other Global Income(a) 262,691
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1,405,499
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HIGH CURRENT YIELD (LEVERAGED) - 0.78%
Other High Current Yield
(Leveraged)(a) 726,087
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HIGH YIELD MUNICIPAL DEBT - 1.47%
BlackRock Muni Assets Fund, Inc. 85,655 1,006,446
Other High Yield Municipal Debt(a) 359,027
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1,365,473
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See accompanying notes to financial statements.
2
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CORNERSTONE PROGRESSIVE RETURN FUND
SUMMARY SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED)(CONTINUED)
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No. of
Description Shares Value
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INCOME & PREFERRED STOCK - 4.37%
Calamos Strategic Total Return Fund 279,538 $ 2,675,179
Preferred Income Strategies Fund 90,564 919,225
Other Income & Preferred Stock(a) 471,756
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4,066,160
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INSURED MUNICIPAL LEVERAGED - 0.71%
Total Insured Municipal Leveraged(a) 656,388
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OPTION ARBITRAGE/OPTIONS STRATEGIES - 38.01%
BlackRock Enhanced Capital
& Income Fund, Inc. 50,336 730,879
BlackRock Enhanced Equity
Dividend Trust 98,968 819,455
Cohen & Steers Global
Income Builder, Inc. 65,569 731,094
Eaton Vance Enhanced
Equity Income Fund 208,336 2,500,032
Eaton Vance Enhanced
Equity Income Fund II 226,353 2,668,702
Eaton Vance Risk-Managed Diversified
Equity Income Fund 361,450 4,561,499
Eaton Vance Tax-Managed
Buy-Write Income Fund 147,258 2,027,743
Eaton Vance Tax-Managed Buy-Write
Opportunities Fund 252,957 3,220,143
Eaton Vance Tax-Managed Diversified Equity
Income Fund 407,200 4,446,624
Eaton Vance Tax-Managed Global Buy-Write
Opportunities Fund 367,136 4,453,360
Eaton Vance Tax-Managed Global
Diversified Equity Income Fund 429,796 4,499,964
No. of
Description Shares Value
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OPTION ARBITRAGE/OPTIONS STRATEGIES (CONTINUED)
Nuveen Equity Premium
Advantage Fund 76,057 $ 954,515
Nuveen Equity Premium and
Growth Fund 40,216 533,666
Nuveen Equity Premium
Income Fund 92,892 1,156,505
Nuveen Equity Premium
Opportunity Fund 164,182 2,039,140
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35,343,321
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PACIFIC EX JAPAN - 5.37%
China Fund, Inc. (The) 40,900 1,278,125
Greater China Fund, Inc. (The)* 72,323 918,502
Morgan Stanley China A
Share Fund, Inc. 67,600 1,845,480
Thai Fund, Inc. (The) 40,302 512,641
Other Pacific Ex-Japan (a) 437,756
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4,992,504
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REAL ESTATE - 1.30%
Alpine Global Premier
Properties Fund 160,289 1,152,478
Other Real Estate (a) 58,261
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1,210,739
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SECTOR EQUITY - 1.84%
BlackRock Energy and
Resources Trust 22,200 645,576
Evergreen Utilities and
High Income Fund 51,817 608,850
Other Sector Equity(a)(b) 459,282
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1,713,708
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U.S. MORTGAGE - 1.01%
BlackRock Income Trust, Inc. 133,770 941,741
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TOTAL CLOSED-END FUNDS 86,704,638
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See accompanying notes to financial statements.
3
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CORNERSTONE PROGRESSIVE RETURN FUND
SUMMARY SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED)(CONCLUDED)
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No. of
Description Shares Value
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CONSUMER DISCRETIONARY - 0.46%
Total Consumer Discretionary(a) $ 430,062
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CONSUMER STAPLES - 0.51%
Total Consumer Staples(a) 478,540
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ENERGY - 0.88%
Chevron Corporation 5,000 514,200
Other Energy (a) 300,760
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814,960
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FINANCIALS - 0.62%
Total Financials(a) 575,980
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HEALTHCARE - 0.66%
Total Healthcare(a) 613,080
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INDUSTRIALS - 0.71%
Total Industrials(a) 656,509
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INFORMATION TECHNOLOGY - 1.09%
International Business
Machines Corporation 3,000 514,650
Other Information Technology(a) 497,245
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1,011,895
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No. of
Description Shares Value
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MATERIALS - 0.13%
Total Materials a) $ 118,390
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UTILITIES - 0.06%
Total Utilities(a) 56,490
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TOTAL EQUITY SECURITIES
(cost - $90,009,823) 91,460,544
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RIGHTS - 0.02%
Total Rights (cost - $0)(a) 17,686
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SHORT-TERM INVESTMENTS - 2.38%
MONEY MARKET SECURITY - 2.38%
Fidelity Institutional
Money Market Government Portfolio -
Class I (cost - $ 2,215,957) 2,215,957 2,215,957
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TOTAL INVESTMENTS - 100.77%%
(cost - $92,225,780) 93,694,187
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LIABILITIES IN EXCESS OF
OTHER ASSETS - (0.77)% (714,014)
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NET ASSETS - 100.00% $92,980,173
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(a) Represents issuers not identified as a top 50 holding in terms of market
value and issues or issuers not exceeding 1% of net assets individually or
in the aggregate, respectively, as of June 30, 2011.
(b) Affiliated investment. The Fund holds 0.01% (based on net assets) of
Petroleum & Resources Corporation. A trustee of the Fund also serves as a
director to such company. During the six months ended June 30, 2011, there
was an additional purchase of 449 shares of Petroleum & Resources
Corporation with a cost of $13,138, and a sale of 2,475 shares with a cost
of $52,899 and sale proceeds of $67,212.
* Non-income producing security.
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See accompanying notes to financial statements.
4
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CORNERSTONE PROGRESSIVE RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES - JUNE 30, 2011 (UNAUDITED)
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ASSETS
Investments, at value:
Unaffiliated issuers (cost - $92,212,642) $ 93,680,946
Affiliated issuers (cost - $ 13,138) 13,241
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Total investments (cost - $92,225,780) 93,694,187
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Receivables:
Investments sold 1,355,175
Dividends 191,111
Prepaid expenses 4,256
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Total Assets 95,244,729
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LIABILITIES
Payables:
Securities purchased 2,077,327
Investment management fees 75,565
Trustees' fees 21,013
Other accrued expenses 90,651
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Total Liabilities 2,264,556
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NET ASSETS (applicable to 15,644,125 shares of
common shares of beneficial interest) $ 92,980,173
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NET ASSET VALUE PER SHARE
($92,980,173 (division) 15,644,125) $ 5.94
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NET ASSETS CONSISTS OF
Paid-in capital $115,966,320
Accumulated net realized loss on investments (24,454,554)
Net unrealized appreciation in value of investments 1,468,407
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Net assets applicable to shares outstanding $ 92,980,173
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See accompanying notes to financial statements.
5
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CORNERSTONE PROGRESSIVE RETURN FUND
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 2011 (UNAUDITED)
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INVESTMENT INCOME
Income:
Dividends from non-affiliated investments $ 2,142,411
Dividends from affiliated investments 2,043
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Total Investment Income 2,144,454
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Expenses:
Investment management fees 312,085
Trustees' fees and expenses 40,777
Administration fees 31,208
Legal and audit fees 26,192
Accounting fees 24,514
Printing 19,291
Custodian fees 8,927
Transfer agent fees 7,439
Stock exchange listing fees 4,840
Insurance 1,237
Miscellaneous 2,749
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Total Expenses 479,259
Less: Fees paid indirectly (47,574)
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Net Expenses 431,685
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Net Investment Income 1,712,769
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NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain from unaffiliated investments 4,629,910
Net realized gain from affiliated investments 390,131
Capital gain distributions from regulated
investment companies 736
Capital gain distributions from affiliated
regulated investment companies 1,362
Net change in unrealized appreciation in
value of investments (3,203,693)
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Net realized and unrealized gain on investments 1,818,446
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 3,531,215
============
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See accompanying notes to financial statements.
6
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CORNERSTONE PROGRESSIVE RETURN FUND
STATEMENT OF CHANGES IN NET ASSETS
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For the Six
Months Ended
June 30, 2011 For the Year Ended
(Unaudited) December 31, 2010
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INCREASE/(DECREASE) IN NET ASSETS
Operations:
Net investment income $ 1,712,769 $ 1,181,604
Net realized gain from investments 5,022,139 10,392,546
Net change in unrealized appreciation/(depreciation)
in value of investments (3,203,693) (795,580)
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Net increase in net assets resulting
from operations 3,531,215 10,778,570
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Dividends and distributions to shareholders:
Net investment income (1,712,769) (10,660,166)
Return-of-capital (4,728,619) (3,769,736)
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Total dividends and distributions to shareholders (6,441,388) (14,429,902)
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Transactions in common share of beneficial interest:
Proceeds from rights offering of 6,254,468 and
0 newly issued common shares of beneficial
interest, respectively 40,591,497 --
Offering expenses associated with rights offering (85,000) --
Proceeds from 14,828 and 27,803 shares newly issued in
reinvestment of dividends and distributions,
respectively 106,851 189,938
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Net increase in net assets from transactions in
common shares of beneficial interest 40,613,348 189,938
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Total increase/(decrease) in net assets 37,703,175 (3,461,394)
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NET ASSETS
Beginning of period 55,276,998 58,738,392
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End of period $ 92,980,173 $ 55,276,998
============ ============
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See accompanying notes to financial statements.
7
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CORNERSTONE PROGRESSIVE RETURN FUND
FINANCIAL HIGHLIGHTS
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Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data for each period indicated. This information has been
derived from information provided in the financial statements and market price
data for the Fund's shares.
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For the For the Period
For the Six Years Ended Sept. 10, 2007*
Months Ended December 31, through
June 30, 2011 ----------------------------------------
(Unaudited) 2010 2009 2008 Dec. 31, 2007
------------- ------ ------ ------ -------------
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of period $ 5.90 $ 6.28 $ 7.16 $ 14.10 $ 14.96^
------- ------ ------ ------- -------
Net investment income# 0.15 0.13 0.16 0.16 0.06
Net realized and unrealized gain/(loss)
on investments 0.18 1.03 1.42 (4.64) (0.35)
------- ------ ------ ------- -------
Net increase/(decrease) in net assets
resulting from operations 0.33 1.16 1.58 (4.48) (0.29)
------- ------ ------ ------- -------
Dividends and distributions to shareholders:
Net investment income (0.15) (1.14) (0.16) (0.16) (0.06)
Net realized capital gains -- -- -- -- (0.15)
Return-of-capital (0.47) (0.40) (2.30) (2.30) (0.41)
------- ------ ------ ------- -------
Total dividends and distributions
to shareholders (0.62) (1.54) (2.46) (2.46) (0.62)
------- ------ ------ ------- -------
Transactions in common shares of
beneficial interest:
Anti-dilutive effect due to shares issued:
Rights offering 0.33 -- -- -- 0.05
Reinvestment of dividends and distributions -- --+ -- -- --
------- ------ ------ ------- -------
Total transactions in common shares of
beneficial interest 0.33 -- -- -- 0.05
------- ------ ------ ------- -------
Net asset value, end of period $ 5.94 $ 5.90 $ 6.28 $ 7.16 $ 14.10
======= ======= ======= ======= ========
Market value, end of period $ 7.16 $ 7.46 $ 8.90 $ 7.10 $ 16.75
======= ======= ======= ======= ========
Total investment return (a) 4.47%(b) 4.73% 65.40% (47.53)% 16.02%(b)
======= ======= ======= ======= ========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $92,980 $55,277 $58,738 $66,811 $131,628
Ratio of expenses to average net assets,
net of fee waivers, if any (c)(d) 1.38%(e) 1.47% 1.39% 1.25% 1.29%(e)
Ratio of expenses to average net assets,
excluding fee waivers, if any (d)(f) 1.54%(e) 1.61% 1.54% 1.32% 1.42%(e)
Ratio of expenses to average net assets,
net of fee waivers, if any (d)(f) 1.54%(e) 1.61% 1.54% 1.32% 1.42%(e)
Ratio of net investment income to average
net assets 5.49%(e) 2.20% 2.54% 1.48% 1.46%(e)
Portfolio turnover rate 52.94%(b) 117.45% 115.99% 20.19% 6.77%(b)
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* Commencement of operations.
^ Based on $15.00 per share public offering price less $0.04 per share of
offering expenses related to the Fund's initial public offering.
# Based on average shares outstanding.
+ Amount rounds to less than $0.01
(a) Total investment return at market value is based on the changes in market
price of a share during the period and assumes reinvestment of dividends
and distributions, if any, at actual prices pursuant to the Fund's
dividend reinvestment plan. Total investment return does not reflect
brokerage commissions.
(b) Not annualized.
(c) Expenses are net of fees paid indirectly.
(d) Expenses do not include expenses of investment companies in which the
Fund invests.
(e) Annualized.
(f) Expenses exclude the reduction for fees paid indirectly.
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See accompanying notes to financial statements.
8
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CORNERSTONE PROGRESSIVE RETURN FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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NOTE A. ORGANIZATION
Cornerstone Progressive Return Fund (the "Fund") was organized as a Delaware
statutory trust on April 26, 2007 and commenced investment operations on
September 10, 2007. Prior to such date it had no operations other than the sale
and issuance of 6,668 shares at an aggregate purchase price of $100,020 on July
20, 2007. Its investment objective is to provide total return. The Fund is
registered under the Investment Company Act of 1940, as amended, as a
closed-end, diversified management investment company.
NOTE B. SIGNIFICANT ACCOUNTING POLICIES
MANAGEMENT ESTIMATES: The preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America
("GAAP") requires management to make certain estimates and assumptions that may
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
SUBSEQUENT EVENTS: The Fund has evaluated the need for additional disclosures
and/or adjustments resulting from subsequent events through the date its
financial statements were issued. Based on this evaluation, no additional
disclosures or adjustments were required to such financial statements.
PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. Readily marketable portfolio securities listed on the NYSE
are valued, except as indicated below, at the last sale price reflected on the
consolidated tape at the close of the NYSE on the business day as of which such
value is being determined. If there has been no sale on such day, the securities
are valued at the mean of the closing bid and asked prices on such day. If no
bid or asked prices are quoted on such day or if market prices may be unreliable
because of events occurring after the close of trading, then the security is
valued by such method as the Board of Trustees shall determine in good faith to
reflect its fair market value. Readily marketable securities not listed on the
NYSE but listed on other domestic or foreign securities exchanges are valued in
a like manner. Portfolio securities traded on more than one securities exchange
are valued at the last sale price on the business day as of which such value is
being determined as reflected on the consolidated tape at the close of the
exchange representing the principal market for such securities. Securities
trading on the Nasdaq Stock Market, Inc. ("NASDAQ") are valued at the closing
price.
Readily marketable securities traded in the over-the-counter market, including
listed securities whose primary market is believed by Cornerstone Advisors, Inc.
(the "Investment Manager" or "Cornerstone") to be over-the-counter, are valued
at the mean of the current bid and asked prices as reported by the NASDAQ or, in
the case of securities not reported by the NASDAQ or a comparable source, as the
Board of Trustees deem appropriate to reflect their fair market value. Where
securities are traded on more than one exchange and also over-the-counter, the
securities will generally be valued using the quotations the Board of Trustees
believes reflect most closely the value of such securities.
At June 30, 2011, the Fund held no securities valued in good faith by the Board
of Trustees. The net asset value per share of the Fund is calculated weekly and
on the last business day of the month with the exception of those days on which
the NYSE Amex LLC is closed.
The Fund is exposed to financial market risks, including the valuations of its
investment portfolio. For the six months ended June 30, 2011, the Fund did not
engage in derivative instruments and other hedging activities.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
income tax purposes. Interest income is recorded on an accrual basis; dividend
income is recorded on the ex-dividend date.
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9
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CORNERSTONE PROGRESSIVE RETURN FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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RISKS ASSOCIATED WITH INVESTMENTS IN OTHER CLOSED-END FUNDS: Closed-end
investment companies are subject to the risks of investing in the underlying
securities. The Fund, as a holder of the securities of the closed-end investment
company, will bear its pro rata portion of the closed-end investment company's
expenses, including advisory fees. These expenses are in addition to the direct
expenses of the Fund's own operations.
TAXES: No provision is made for U.S. federal income or excise taxes as it is the
Fund's intention to qualify as a regulated investment company and to make the
requisite distributions to its shareholders which will be sufficient to relieve
it from all or substantially all U.S. federal income and excise taxes.
The Accounting for Uncertainty in Income Taxes Topic of the FASB Accounting
Standards Codification defines the threshold for recognizing the benefits of
tax-return positions in the financial statements as "more-likely-than-not" to be
sustained by the taxing authority and requires measurement of a tax position
meeting the more-likely-than-not criterion, based on the largest benefit that is
more than 50 percent likely to be realized. The Fund's policy is to classify
interest and penalties associated with underpayment of federal and state income
taxes, if any, as income tax expense on its Statement of Operations. As of June
30, 2011, 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 2010, and for the period ended June
30, 2011 there was no material impact to the financial statements.
DISTRIBUTIONS TO SHAREHOLDERS: The Fund seeks to make a level distribution to
its shareholders each month pursuant to a distribution policy adopted by the
Board of Trustees ("Distribution Policy"). To the extent these distributions are
not represented by net investment income and capital gains, they will not
represent yield or investment return on the Fund's portfolio. The distribution
rate may be modified by the Board of Trustees from time to time. If, for any
monthly distribution, investment company taxable income, if any (which term
includes net short-term capital gain), and net tax-exempt income, if any, is
less than the amount of the distribution, the difference will generally be a
tax-free return of capital distributed from the Fund's assets. The Fund's final
distribution for each calendar year is expected to include any remaining
investment company taxable income and net tax exempt income undistributed during
the year, as well as all net capital gain realized during the year.
However, if they determine it is appropriate to do so, the Board of Trustees may
elect to not distribute realized gains and to pay taxes incurred. In general,
the total distributions made in any taxable year (other than distributions of
net capital gain or return of capital) would be treated as ordinary dividend
income to the extent of the Fund's current and accumulated earnings and profits.
Distributions in excess of the earnings and profits would first be a tax-free
return of capital to the extent of the adjusted tax basis in the shares.
The Distribution Policy described above would result in the payment of
approximately the same amount or percentage to the Fund's shareholders each
month. These distributions will not be tied to the Fund's investment income and
capital gains and will not represent yield or investment return on the Fund's
portfolio. Section 19(a) of the 1940 Act and Rule 19a-1 thereunder require the
Fund to provide a written statement accompanying any such payment that
adequately discloses its source or sources, other than net investment income.
Thus, if the source of some or all of the dividend or other distribution were
the original capital contribution of the shareholder, and the payment amounted
to a return of capital, the Fund would be required to provide written disclosure
to that effect. Nevertheless, persons who periodically receive the payment of a
dividend or other distribution may be under the impression that they are
receiving net profits when they are not. Shareholders should read any written
disclosure provided pursuant to Section 19(a) and Rule 19a-1
--------------------------------------------------------------------------------
10
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
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 instruments in active markets; quoted
prices for identical or similar instruments in markets that are not
active; and model-derived valuations in which all significant inputs and
significant value drivers are observable in active markets. Level 2 inputs
are those in markets for which there are few transactions, the prices are
not current, little public information exists or instances where prices
vary substantially over time or among brokered market makers.
o Level 3 - model derived valuations in which one or more significant inputs
or significant value drivers are unobservable. Unobservable inputs are
those inputs that reflect the Fund's own assumptions that market
participants would use to price the asset or liability based on the best
available information.
The following is a summary of the inputs used as of June 30, 2011 in valuing the
Fund's investments carried at value:
INVESTMENTS IN OTHER FINANCIAL
VALUATION INPUTS SECURITIES INSTRUMENTS*
--------------------------------------------------------------------------------
Level 1 - Quoted Prices
Equity Investments $91,478,230 --
Short-Term Investments 2,215,957 --
Level 2 - Other Significant
Observable Inputs -- --
Level 3 - Significant
Unobservable Inputs -- --
----------- ----------
Total $93,694,187 --
=========== ==========
----------
* Other financial instruments include futures, forwards and swap contracts.
The breakdown of the Fund's investments into major categories is disclosed in
its Summary Schedule of Investments.
During the six months ended June 30, 2011 the Fund did not have any significant
transfers in and out of Level 1 or Level 2.
--------------------------------------------------------------------------------
11
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
The Fund did not have any assets or liabilities that were measured at fair value
on a recurring basis using significant unobservable inputs (Level 3) at June 30,
2011.
The disclosures for the Fund's fiscal year beginning January 1, 2011 relate to
presenting separately any Level 3 purchases, sales, issuances and settlements on
a gross basis instead of one net amount. Management continues to evaluate the
impact of ASU No. 2010-6 for the required disclosure.
In May 2011, FASB issued ASU No. 2011-04 "Amendments to Achieve Common Fair
Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs". ASU No.
2011-04 establishes common requirements for measuring fair value and for
disclosing information about fair value measurements in accordance with U.S.
generally accepted accounting principles ("GAAP") and International Financial
Reporting Standards ("IFRSs"). ASU No. 2011-04 is effective for interim and
annual periods beginning after December 15, 2011 and is applied prospectively.
Management is currently evaluating the impact ASU No. 2011-04 may have on
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 $47,574 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 six months ended June
30, 2011, Cornerstone earned $312,085 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 (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
NOTE E. AFFILIATED INVESTMENTS
Transactions in affiliates for the six months ended June 30, 2011 were as
follows:
ADAMS PETROLEUM &
EXPRESS RESOURCES
COMPANY CORPORATION
---------- -----------
Market value at
beginning of period $1,518,016 $66,850
========== ==========
Shares at beginning
of period 141,606 2,475
Shares purchased
during the period -- 449
Shares sold during
the period 141,606 2,475
---------- ----------
Shares at end of period -- 449
========== ==========
Dividend income earned
during the period $ 2,043 $ --
========== ==========
Cost of purchases
during the period -- $13,138
Proceeds from sales
during the period $1,608,657 $67,212
Net realized gain
during the period $ 375,819 $14,312
Capital gain distribution $ 1,362 $ --
Market value at
end of period $ -- $13,241
NOTE F. INVESTMENT IN SECURITIES
For the six months ended June 30, 2011, purchases and sales of securities, other
than short-term investments, were $68,476,517 and $32,430,402, respectively.
NOTE G. COMMON SHARES OF BENEFICIAL INTEREST
The Fund has unlimited common shares of beneficial interest authorized and has
15,644,125 shares outstanding at June 30, 2011. As of that date, two individuals
that control Cornerstone owned 6,210 shares related to the initial issuance of
the seed capital shares of the Fund. Transactions in common shares of beneficial
interest for the six months ended June 30, 2011 were as follows:
Shares at beginning of period 9,374,829
Shares newly issued from rights offering 6,254,468
Shares newly issued in reinvestment
of dividends and distributions 14,828
----------
Shares at end of period 15,644,125
==========
NOTE H. SHARE REPURCHASE PROGRAM
Pursuant to Section 23 of the Investment Company Act of 1940, as amended, the
Fund may purchase shares of its common shares of beneficial interest on the open
market from time to time, at such times, and in such amounts as may be deemed
advantageous to the Fund. Nothing herein shall be considered a commitment to
purchase such shares. The Fund had no repurchases during the six months ended
June 30, 2011. 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. FEDERAL INCOME TAXES
Income and capital gains distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments of losses deferred due to wash sales and
Post-October losses (as later defined), and excise tax regulations.
The tax character of dividends and distributions paid during the year ended
December 31, 2010 for the Fund was ordinary income $10,660,166 and return-of-
capital $3,769,736.
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
--------------------------------------------------------------------------------
13
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
--------------------------------------------------------------------------------
or net asset value per share. Under current tax law, certain capital losses
realized after October 31 within a taxable year may be deferred and treated as
occurring on the first day of the following tax year ("Post-October losses").
The Fund incurred no such 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.
Under the Regulated Investment Company Modernization Act of 2010 (the "Act"),
net capital losses recognized after December 31, 2010, may be carried forward
indefinitely, and their character is retained as short-term and/or long-term
losses. Under the law in effect prior to the Act, pre-enactment net capital
losses were carried forward for eight years and treated as short-term losses. As
a transition rule, the Act requires that post-enactment net capital losses be
used before pre-enactment net capital losses.
At June 30, 2011, 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 $92,244,122, $2,454,365,
$(1,004,290) and $1,450,075, respectively.
--------------------------------------------------------------------------------
14
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
On April 19, 2011, the Annual Meeting of Shareholders of Cornerstone Progressive
Return Fund was held and the following matter was voted upon based on 9,377,056
common shares outstanding on February 16, 2011:
(1) To approve the re-election of six trustees until the 2012 Annual Meeting.
Name of Directors For Withheld
----------------- --------- --------
Ralph W. Bradshaw 7,914,416 252,651
Thomas H. Lenagh 7,918,500 248,567
Edwin Meese III 7,901,237 265,830
Scott B. Rogers 7,913,239 253,828
Andrew A. Strauss 7,904,066 263,001
Glenn W. Wilcox, Sr. 7,883,731 283,336
--------------------------------------------------------------------------------
15
INVESTMENT MANAGEMENT AGREEMENT APPROVAL DISCLOSURE (UNAUDITED)
The Board of Trustees including, the Independent Trustees, (the "Board") of
Cornerstone Progressive Return Fund, Inc. (the "Fund") considers the approval of
the continuation of the Investment Management Agreement (the "Agreement")
between Cornerstone Advisors, Inc. (the "Investment Manager") and the Fund on an
annual basis. The most recent approval of the continuation of the Agreement
occurred at an in person meeting of the Board held on February 11, 2011.
The Board requested and received extensive materials and information from the
Investment Manager to assist them in considering the approval of the continuance
of the Agreement. Based on their review of the materials and information and
discussions with management of the Investment Manager, the Board determined that
the approval of the continuation of the Agreement was consistent with the best
interests of the Fund and its shareholders, and would enable the Fund to
continue to receive high quality services at a cost that is appropriate,
reasonable, and in the best interests of the Fund and its shareholders. The
Board made these determinations on the basis of the following factors, among
others: (1) the nature and quality of the services provided by the Investment
Manager; (2) the cost to the Investment Manager for providing such services,
with special attention to the Investment Manager's profitability (and whether
the Investment Manager realizes any economies of scale); (3) the direct and
indirect benefits received by the Investment Manager from its relationship with
the Fund and the other investment companies advised by the Investment Manager;
and (4) comparative information as to the management fees, expense ratios and
performance of other similarly situated closed- end investment companies.
The materials provided by the Investment Manager described the services provided
by the Investment Manager to the Fund and included an overview of the Investment
Manager's investment philosophy, management style and plan, including regarding
the Investment Manager's extensive knowledge and experience in the closed-end
fund industry. The Board also discussed the knowledge of the Investment Manager
with respect to managing the Fund's monthly distribution policy and the extent
to which such policy contributes to the market's positive valuation of the Fund.
The Board also reviewed and discussed a comparison of the Fund's performance
with comparable closed- end funds and a comparison of the Fund's expense ratios
and management fees with those comparable funds. Additionally, the Investment
Manager presented an analysis of its profitability based on its contractual
relationship with the Fund and the other investment companies advised by the
Investment Manager.
The Board carefully evaluated this information, taking into consideration many
factors including, the overall high quality of the personnel, operations,
financial condition, investment management capabilities, methodologies, and
performance of the Investment Manager. The Board was advised by independent
legal counsel with respect to its deliberations and its duties when considering
the Agreement's continuance. Based on its review of the information requested
and provided, the Board determined that the management fees payable to the
Investment Manager under the Agreement are fair and reasonable in light of the
services to be provided, the performance of the Fund, the profitability of the
Investment Manager's relationship with the Fund, the comparability of the
proposed fee to fees paid by closed-end funds in the Fund's peer group, and the
level of quality of investment management personnel. The Board determined that
the Agreement is consistent with the best interests of the Fund and its
shareholders, and enables the Fund to receive high quality services at a cost
that is appropriate, reasonable, and in the best interests of the Fund and its
shareholders. Accordingly, in light of the above considerations and such other
factors and information it considered relevant, the Board by a unanimous vote
(including a separate vote of all the Independent Trustees present in person at
the meeting) approved the continuance of the Agreement with respect to the Fund.
--------------------------------------------------------------------------------
16
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED)
Cornerstone Progressive Return Fund (the "Fund) operates a Dividend Reinvestment
Plan (the "Plan"), sponsored and administered by American Stock Transfer & Trust
Company, LLC (the "Agent"), pursuant to which the Fund's income dividends or
capital gains or other distributions (each, a "Distribution" and collectively,
"Distributions"), net of any applicable U.S. withholding tax, are reinvested in
shares of the Fund.
Shareholders automatically participate in the Fund's Plan, unless and until an
election is made to withdraw from the Plan on behalf of such participating
shareholder. Shareholders who do not wish to have Distributions automatically
reinvested should so notify the Agent at P.O. Box 922, Wall Street Station, New
York, New York 10269-0560. Under the Plan, the Fund's Distributions to
shareholders are reinvested in full and fractional shares as described below.
When the Fund declares a Distribution the Agent, on the shareholder's behalf,
will (i) receive additional authorized shares from the Fund either newly issued
or repurchased from shareholders by the Fund and held as treasury stock ("Newly
Issued Shares") or (ii) purchase outstanding shares on the open market, on the
NYSE Amex LLC or elsewhere, with cash allocated to it by the Fund ("Open Market
Purchases").
The method for determining the number of Newly Issued Shares received when
Distributions are reinvested will be determined by dividing the amount of the
Distribution either by the Fund's last reported net asset value per share or by
a price equal to the average closing price of the Fund over the five trading
days preceding the payment date of the Distribution, whichever is lower.
However, if the last reported net asset value of the Fund's shares is higher
than its market price (i.e., the Fund is selling at a discount), shares may be
acquired by the Agent in Open Market Purchases and allocated to the reinvesting
shareholders based on the average cost of such Open Market Purchases.
Whenever the Fund declares a Distribution and the last reported net asset value
of the Fund's shares is higher than its market price, the Agent will apply the
amount of such Distribution payable to Plan participants of the Fund in Fund
shares (less such Plan participant's pro rata share of brokerage commissions
incurred with respect to Open Market Purchases in connection with the
reinvestment of such Distribution) to the purchase on the open market of Fund
shares for such Plan participant's account. Such purchases will be made on or
after the payable date for such Distribution, and in no event more than 30 days
after such date except where temporary curtailment or suspension of purchase is
necessary to comply with applicable provisions of federal securities laws. The
Agent may aggregate a Plan participant's purchases with the purchases of other
Plan participants, and the average price (including brokerage commissions) of
all shares purchased by the Agent shall be the price per share allocable to each
Plan participant.
Registered shareholders who do not wish to have their Distributions
automatically reinvested should so notify the Fund in writing. If a shareholder
has not elected to receive cash Distributions and the Agent does not receive
notice of an election to receive cash Distributions prior to the record date of
any Distribution, the shareholder will automatically receive such Distributions
in additional shares.
Participants in the Plan may withdraw from the Plan by providing written notice
to the Agent at least 30 days prior to the applicable Distribution payment date.
When a Participant withdraws from the Plan, or upon suspension or termination of
the Plan at the sole discretion of the Fund's Board of Directors, 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.
--------------------------------------------------------------------------------
17
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED) (CONCLUDED)
The Agent will maintain all shareholder accounts in the Plan and furnish written
confirmations of all transactions in the accounts, including information needed
by shareholders for personal and tax records. The Agent will hold shares in the
account of the Plan participant in non-certificated form in the name of the
participant, and each shareholder's proxy will include those shares purchased
pursuant to the Plan. Each participant, nevertheless, has the right to receive
certificates for whole shares owned. The Agent will distribute all proxy
solicitation materials to participating shareholders.
In the case of shareholders, such as banks, brokers or nominees, that hold
shares for others who are beneficial owners participating in the Plan, the Agent
will administer the Plan on the basis of the number of shares certified from
time to time by the record shareholder as representing the total amount of
shares registered in the shareholder's name and held for the account of
beneficial owners participating in the Plan.
Neither the Agent nor the Fund shall have any responsibility or liability beyond
the exercise of ordinary care for any action taken or omitted pursuant to the
Plan, nor shall they have any duties, responsibilities or liabilities except
such as expressly set forth herein. Neither shall they be liable hereunder for
any act done in good faith or for any good faith omissions to act, including,
without limitation, failure to terminate a 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 888-556-0422.
--------------------------------------------------------------------------------
18
PROXY VOTING AND PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
Information regarding how Cornerstone Progressive Return Fund (the "Fund") voted
proxies related to its portfolio securities during the 12-month period ended
June 30 of each year as well as the policies and procedures that the Fund uses
to determine how to vote proxies relating to its portfolio securities are
available by calling (513) 326-3597 or on the website of the Securities and
Exchange Commission, http://www.sec.gov.
This report incorporates a Summary Schedule of Investments for the Fund. A
complete Schedule of Investments for the Fund may be obtained free of charge by
contacting the Fund at (513) 326-3597. The Fund files a complete schedule of its
portfolio holdings for the first and third quarters of its fiscal year with the
SEC on Form N-Q. The Fund's Forms N-Q is available on the SEC's website at
http://www.sec.gov and may be reviewed and copied at the SEC's Public Reference
Room in Washington, DC. Information on the operation of the SEC's Public
Reference Room may be obtained by calling (202) 551-8090.
--------------------------------------------------------------------------------
19
PRIVACY POLICY (UNAUDITED)
--------------------------------------------------------------------------------
FACTS
WHAT DOES CORNERSTONE PROGRESSIVE RETURN FUND, INC. (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.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
20
PRIVACY POLICY (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
Reasons we can share your Does the Cornerstone Can you limit
personal information Fund share? 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, Inc.
(the "Fund")
--------------------------------------------------------------------------------
HOW DOES THE FUND AND THE FUND'S To protect your personal information from
SERVICE PROVIDERS, ON THE FUND'S unauthorized access and use, we and
BEHALF PROTECT MY PERSONAL our service providers use security measures
INFORMATION? that comply with federal law. These
measures include computer safeguards and
secured files and buildings.
--------------------------------------------------------------------------------
HOW DOES THE FUND AND THE FUND'S We collect your personal information, for
SERVICE PROVIDERS, ON THE FUND'S example, when 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.
--------------------------------------------------------------------------------
21
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.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
22
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-CEF33.html under the designation
"Cornerstone Prog Return (CFP)" and on the BARRON'S website at
http://online.barrons.com/mdc/public/page/2_3040-CEF33.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. The financial information
included herein is taken from the records of the Fund without examination by the
independent registered public accountants who do not express an opinion thereon.
It is not a prospectus, circular or representation intended for use in the
purchase or sale of shares of the Fund or of any securities mentioned in the
report.
--------------------------------------------------------------------------------
23
Cornerstone Progressive Return Fund
ITEM 2. CODE OF ETHICS.
Not required
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not required
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not required
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not required
ITEM 6. INVESTMENTS.
(a)
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED)
--------------------------------------------------------------------------------
No. of
Description Shares Value
--------------------------------------------------------------------------------
EQUITY SECURITIES - 98.37%
CLOSED-END FUNDS - 93.25%
CORE - 0.68%
General American Investors Company, Inc. 22,600 $ 634,156
-----------
CORPORATE DEBT FUNDS INVESTMENT GRADE-RATED - 11.86%
AllianceBernstein Income Fund 555,681 4,384,323
BlackRock Core Bond Trust 70,164 879,155
BlackRock Credit Allocation Income Trust IV 17,676 221,127
BlackRock Enhanced Government Fund, Inc. 21,067 326,960
BlackRock Income Opportunity Trust, Inc. 64,774 627,012
Federated Enhanced Treasury Income Fund 59,977 932,642
Invesco Van Kampen Bond Fund 41,104 783,031
MFS Government Markets Income Trust 125,730 854,964
Montgomery Street Income Securities, Inc. 14,485 230,891
Morgan Stanley Income Securities Inc. 12,381 213,325
Rivus Bond Fund 3,691 68,770
Transamerica Income Shares, Inc. 2,921 63,765
Western Asset Income Fund 18,100 240,187
Western Asset Investment Grade Defined
Opportunity Trust Inc. 1,418 29,622
Western Asset/Claymore Inflation-Linked
Opportunities & Income Fund 93,228 1,167,215
-----------
11,022,989
-----------
DEVELOPED MARKET - 1.02%
Japan Smaller Capitalization Fund, Inc. 115,263 948,615
-----------
EMERGING MARKETS - 2.54%
Aberdeen Emerging Markets Telecommunications
and Infrastructure Fund, Inc. 769 14,450
First Israel Fund, Inc. 8,733 150,208
First Trust/Aberdeen Emerging
Opportunity Fund 13,981 292,063
India Fund, Inc. (The) 21,000 636,300
Morgan Stanley Eastern Europe Fund, Inc. ** 6,400 118,976
Morgan Stanley Emerging Markets Fund, Inc. 2,600 41,184
Morgan Stanley Frontier Emerging Markets
Fund, Inc. 3,165 42,506
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
No. of
Description Shares Value
--------------------------------------------------------------------------------
CLOSED-END FUNDS (CONTINUED)
EMERGING MARKETS (CONTINUED)
Morgan Stanley Turkish Investment Fund, Inc.
(The) 5,896 $ 94,100
Templeton Dragon Fund, Inc. 30,672 931,202
Templeton Russia and East European
Fund, Inc. 1,800 38,700
-----------
2,359,689
-----------
EMERGING MARKETS DEBT - 0.19%
Morgan Stanley Emerging Markets Debt
Fund, Inc. 12,876 136,743
Western Asset Worldwide Income Fund Inc. 3,200 44,288
-----------
181,031
-----------
FLEXIBLE INCOME - 5.13%
MFS Charter Income Trust 73,065 683,888
Putnam Master Intermediate Income Trust 49,869 290,736
Wells Fargo Advantage Multi-Sector
Income Fund 103,484 1,593,654
Zweig Total Return Fund, Inc. (The) 648,533 2,198,527
-----------
4,766,805
-----------
GENERAL & INSURED UNLEVERAGED - 0.44%
Nuveen Select Maturities Municipal Fund 3,785 38,758
Nuveen Select Tax-Free Income Portfolio 3 27,448 374,116
-----------
412,874
-----------
GENERAL BOND - 5.59%
BlackRock Build America Bond Trust 166,841 3,210,021
Duff & Phelps Utility & Corporate Bond
Trust Inc. 58,192 659,315
MFS InterMarket Income Trust I 19,142 160,027
MFS Multimarket Income Trust 14,452 98,707
Nuveen Build America Bond Fund 56,217 1,067,561
-----------
5,195,631
-----------
GENERAL MUNICIPAL LEVERAGED - 5.92%
BlackRock Long-Term Municipal Advantage Trust 8,555 89,571
BlackRock Municipal Income Investment
Quality Trust 1,500 20,535
BlackRock Municipal Income Quality Trust 8,910 121,532
BlackRock MuniEnhanced Fund, Inc. 13,700 140,699
BlackRock MuniYield Investment Quality Fund 21,700 276,241
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
No. of
Description Shares Value
--------------------------------------------------------------------------------
CLOSED-END FUNDS (CONTINUED)
GENERAL MUNICIPAL LEVERAGED (CONTINUED)
BlackRock MuniYield Quality Fund III, Inc. 69,700 $ 874,038
BlackRock MuniYield Quality Fund, Inc. 22,529 305,493
BlackRock Strategic Municipal Trust 1,900 23,712
Eaton Vance Tax-Advantaged Bond and Option
Strategies Fund 20,170 353,378
Invesco Insured Municipal Trust 8,887 119,441
Invesco Municipal Premium Income Trust 22,536 172,175
Nuveen Dividend Advantage Municipal Fund 3 5,300 73,140
Nuveen Insured Municipal Opportunity
Fund, Inc. 136,178 1,838,403
Nuveen Municipal Income Fund 28,120 296,666
Nuveen Municipal Market Opportunity
Fund, Inc. 15,000 193,950
Nuveen Municipal Value Fund, Inc. 14,876 137,752
Nuveen Performance Plus Municipal Fund, Inc. 6,900 95,427
Nuveen Premium Income Municipal
Fund 4, Inc. 7,353 90,810
Nuveen Premium Income Municipal Fund, Inc. 7,500 99,300
Nuveen Quality Income Municipal Fund, Inc. 13,205 178,532
-----------
5,500,795
-----------
GLOBAL - 3.51%
Alpine Global Dynamic Dividend Fund 11,524 84,701
Alpine Total Dynamic Dividend Fund 189,014 1,147,315
Calamos Global Dynamic Income Fund 77,904 677,765
Clough Global Allocation Fund 29,600 455,248
Clough Global Equity Fund 23,819 352,521
Eaton Vance Tax-Advantaged Global Dividend
Opportunities Fund 2,900 62,930
Gabelli Global Multimedia Trust Inc. 34,978 278,775
Gabelli Global Utility & Income Trust (The) 400 8,356
GDL Fund (The) 14,379 192,822
-----------
3,260,433
-----------
GLOBAL INCOME - 1.51%
Nuveen Global Government Enhanced Income Fund 17,858 262,691
Nuveen Multi-Currency Short-Term Government
Income Fund 76,905 1,142,808
-----------
1,405,499
-----------
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
No. of
Description Shares Value
--------------------------------------------------------------------------------
CLOSED-END FUNDS (CONTINUED)
HIGH CURRENT YIELD (LEVERAGED) - 0.78%
BlackRock Strategic Bond Trust 7,218 $ 96,577
First Trust Strategic High Income Fund 41,016 153,810
First Trust Strategic High Income Fund II 37,941 196,534
First Trust Strategic High Income Fund III 906 4,095
Franklin Universal Trust 27,995 183,367
Helios Strategic Income Fund, Inc. 16,145 91,704
-----------
726,087
-----------
HIGH YIELD MUNICIPAL DEBT - 1.47%
BlackRock Muni Assets Fund, Inc. 85,655 1,006,446
Invesco Municipal Income Opportunities Trust 6,945 43,823
Invesco Municipal Income Opportunities
Trust II 16,100 113,666
Nuveen Municipal High Income Opportunity
Fund 2 18,355 201,538
-----------
1,365,473
-----------
INCOME & PREFERRED STOCK - 4.37%
BlackRock Preferred Opportunity Trust 34,759 376,788
Calamos Strategic Total Return Fund 279,538 2,675,179
Nuveen Tax-Advantaged Dividend Growth Fund 2,500 33,125
Nuveen Tax-Advantaged Floating Rate Fund 24,541 61,843
Preferred Income Strategies Fund 90,564 919,225
-----------
4,066,160
-----------
INSURED MUNICIPAL LEVERAGED - 0.71%
Invesco Van Kampen Trust For Insured
Municipals 16,320 208,570
Nuveen Insured Quality Municipal Fund, Inc. 5,465 72,575
Nuveen Insured Tax-Free Advantage Municipal
Fund 27,370 375,243
-----------
656,388
-----------
OPTION ARBITRAGE/OPTIONS STRATEGIES - 38.01%
BlackRock Enhanced Capital & Income
Fund, Inc. 50,336 730,879
BlackRock Enhanced Equity Dividend Trust 98,968 819,455
Cohen & Steers Global Income Builder, Inc. 65,569 731,094
Eaton Vance Enhanced Equity Income Fund 208,336 2,500,032
Eaton Vance Enhanced Equity Income Fund II 226,353 2,668,702
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
No. of
Description Shares Value
--------------------------------------------------------------------------------
CLOSED-END FUNDS (CONTINUED)
OPTION ARBITRAGE/OPTIONS STRATEGIES (CONTINUED)
Eaton Vance Risk-Managed Diversified Equity
Income Fund 361,450 $ 4,561,499
Eaton Vance Tax-Managed Buy-Write Income Fund 147,258 2,027,743
Eaton Vance Tax-Managed Buy-Write
Opportunities Fund 252,957 3,220,143
Eaton Vance Tax-Managed Diversified Equity
Income Fund 407,200 4,446,624
Eaton Vance Tax-Managed Global Buy-Write
Opportunities Fund 367,136 4,453,360
Eaton Vance Tax-Managed Global Diversified
Equity Income Fund 429,796 4,499,964
Nuveen Equity Premium Advantage Fund 76,057 954,515
Nuveen Equity Premium and Growth Fund 40,216 533,666
Nuveen Equity Premium Income Fund 92,892 1,156,505
Nuveen Equity Premium Opportunity Fund 164,182 2,039,140
-----------
35,343,321
-----------
PACIFIC EX JAPAN - 5.37%
Aberdeen Indonesia Fund, Inc. 16,000 219,680
China Fund, Inc. (The) 40,900 1,278,125
Greater China Fund, Inc. (The) * 72,323 918,502
Korea Fund, Inc. (The) 4,446 218,076
Morgan Stanley China A Share Fund, Inc. 67,600 1,845,480
Thai Fund, Inc. (The) 40,302 512,641
-----------
4,992,504
-----------
REAL ESTATE - 1.30%
Alpine Global Premier Properties Fund 160,289 1,152,478
RMR Asia Pacific Real Estate Fund 3,151 58,261
-----------
1,210,739
-----------
SECTOR EQUITY - 1.84%
BlackRock EcoSolutions Investment Trust 10,631 112,051
BlackRock Energy and Resources Trust 22,200 645,576
Evergreen Utilities and High Income Fund 51,817 608,850
Gabelli Healthcare & WellnessRx Trust (The) * 28,231 218,226
MLP & Strategic Equity Fund, Inc. 6,600 115,764
Petroleum & Resources Corporation (a) 449 13,241
-----------
1,713,708
-----------
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
No. of
Description Shares Value
--------------------------------------------------------------------------------
CLOSED-END FUNDS (CONTINUED)
U.S. MORTGAGE - 1.01%
BlackRock Income Trust, Inc. 133,770 $ 941,741
-----------
TOTAL CLOSED-END FUNDS 86,704,638
-----------
CONSUMER DISCRETIONARY - 0.46%
Comcast Corporation - Class A 3,358 85,092
DIRECTV Group, Inc. (The) - Class A * 4,000 203,280
Ford Motor Company * 5,000 68,950
Time Warner, Inc. 2,000 72,740
-----------
430,062
-----------
CONSUMER STAPLES - 0.51%
H.J. Heinz Company 2,000 106,560
Wal-Mart Stores, Inc. 7,000 371,980
-----------
478,540
-----------
ENERGY - 0.88%
Chevron Corporation 5,000 514,200
ConocoPhillips 4,000 300,760
-----------
814,960
-----------
FINANCIALS - 0.62%
AFLAC, Inc. 2,000 93,360
American Express Company 3,000 155,100
JPMorgan Chase & Co. 8,000 327,520
-----------
575,980
-----------
HEALTH CARE - 0.66%
Abbott Laboratories 3,000 157,860
Becton, Dickinson and Company 3,000 258,510
Cardinal Health, Inc. 2,000 90,840
Merck & Company, Inc. 3,000 105,870
-----------
613,080
-----------
INDUSTRIALS - 0.71%
3M Company 1,567 148,630
Emerson Electric Company 2,000 112,500
Union Pacific Corporation 2,000 208,800
United Technologies Corporation 2,108 186,579
-----------
656,509
-----------
INFORMATION TECHNOLOGY - 1.09%
AOL, Inc. * 181 3,595
International Business Machines Corporation 3,000 514,650
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED) (CONCLUDED)
--------------------------------------------------------------------------------
No. of
Description Shares Value
--------------------------------------------------------------------------------
INFORMATION TECHNOLOGY (CONTINUED)
Oracle Corporation 15,000 $ 493,650
-----------
1,011,895
-----------
MATERIALS - 0.13%
Freeport-McMoRan Copper & Gold, Inc. 2,238 118,390
-----------
UTILITIES - 0.06%
Duke Energy Corporation 3,000 56,490
-----------
TOTAL EQUITY SECURITIES (cost - $90,009,823) 91,460,544
-----------
RIGHTS - 0.02%
Japan Smaller Capitalization Fund, Inc.* (cost - $0) 65,263 17,686
-----------
SHORT-TERM INVESTMENT - 2.38%
MONEY MARKET FUND - 2.38%
Fidelity Institutional Money Market Government
Portfolio - Class I (cost - $2,215,957) 2,215,957 2,215,957
-----------
TOTAL INVESTMENTS - 100.77% (cost - $92,225,780) 93,694,187
-----------
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.77)% (714,014)
-----------
NET ASSETS - 100.00% $92,980,173
-----------
------------
* Non-income producing security.
(a) Affiliated Investment. The Fund holds 0.01% (based on net assets) of
Petroleum & Resources Corporation. A trustee of the Fund also serves as a
director to such company. During the six months ended June 30, 2011, there
was an additional purchase of 449 shares of Petroleum & Resources
Corporation with a cost of $13,138, and a sale of 2,475 shares with a cost
of $52,899 and sale proceeds of $67,212.
See accompanying notes to financial statements.
(b) Not applicable
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not required
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) Not required
(b) There has not been a change in any of the Portfolio Managers identified in
response to this Item in the registrant's most recent annual report on Form
N-CSR.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
None
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of trustees that have been
implemented after the registrant last provided disclosure in response to the
requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) or this
Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based on their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940) as of a date within 90 days of the filing date of this report, the
registrant's principal executive officer and principal financial officer have
concluded that such disclosure controls and procedures are reasonably designed
and are operating effectively to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to them
by others within those entities, particularly during the period in which this
report is being prepared, and that the information required in filings on Form
N-CSR is recorded, processed, summarized, and reported on a timely basis.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
that occurred during the second fiscal quarter of the period covered by this
report that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not required
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Act (17 CFR 270.30a-2(a)): Attached hereto
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the Act (17 CFR 270.23c-1) sent or given during the period covered by the report
by or on behalf of the registrant to 10 or more persons: Not applicable
(b) Certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)): Attached hereto
Exhibit 99.CERT Certifications required by Rule 30a-2(a) under the Act
Exhibit 99.906CERT Certifications required by Rule 30a-2(b) under the Act
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Cornerstone Progressive Return Fund
-----------------------------------------------
By (Signature and Title)* /s/ Ralph W. Bradshaw
-----------------------------------------
Ralph W. Bradshaw, Chairman and President
(Principal Executive Officer)
Date September 2, 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 September 2, 2011
-------------------
By (Signature and Title)* /s/ Frank J. Maresca
-----------------------------------------
Frank J. Maresca, Treasurer
(Principal Financial Officer)
Date September 2, 2011
-------------------
* Print the name and title of each signing officer under his or her signature.