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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-22066
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CORNERSTONE PROGRESSIVE TOTAL RETURN FUND
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(Exact name of registrant as specified in charter)
305 MADISON AVENUE, SUITE 740 NEW YORK, NEW YORK 10165
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(Address of principal executive offices) (Zip code)
Frank J. Maresca
ULTIMUS FUND SOLUTIONS, LLC 305 MADISON AVENUE, SUITE 740 NEW YORK, NY 10165
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(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 652-6155
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Date of fiscal year end: DECEMBER 31, 2009
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Date of reporting period: JUNE 30, 2009
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
TRUSTEES AND CORPORATE OFFICERS
Ralph W. Bradshaw Chairman of the Board of
Trustees and President
Thomas H. Lenagh Trustee
Edwin Meese III Trustee
Scott B. Rogers Trustee
Andrew A. Strauss Trustee
Glenn W. Wilcox, Sr. Trustee
Gary A. Bentz Chief Compliance Officer,
Secretary, and
Assistant Treasurer
William A. Clark Vice President
Frank J. Maresca Treasurer
STOCK TRANSFER AGENT
INVESTMENT MANAGER AND REGISTRAR
Cornerstone Advisors, Inc. American Stock Transfer &
One West Pack Square Trust Co.
Suite 1650 59 Maiden Lane
Asheville, NC 28801 New York, NY 10038
ADMINISTRATOR INDEPENDENT REGISTERED
Ultimus Fund Solutions, LLC PUBLIC ACCOUNTING FIRM
305 Madison Avenue Tait, Weller & Baker LLP
New York, NY 10165 1818 Market Street
Suite 2400
Philadelphia, PA 19103
CUSTODIAN LEGAL COUNSEL
JPMorgan Chase Bank, N.A. Blank Rome LLP
Second Floor 405 Lexington Avenue
14201 North Dallas Pkwy. New York, NY 10174
Dallas, TX 75254
EXECUTIVE OFFICES
305 Madison Avenue
New York, NY 10165
For shareholder inquiries, registered shareholders should call (800) 937-5449.
For general inquiries, please call (513) 326-3597.
CFP
LISTED
ALTERNEXT
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CORNERSTONE PROGRESSIVE
RETURN FUND
SEMI-ANNUAL REPORT
JUNE 30, 2009
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CONTENTS
Portfolio Summary 1
Summary Schedule of Investments 2
Statement of Assets and Liabilities 4
Statement of Operations 5
Statement of Changes in Net Assets 6
Financial Highlights 7
Notes to Financial Statements 8
Results of Annual Meeting of Shareholders 14
Description of Dividend Reinvestment Plan 15
Investment Management Agreement Approval Disclosure 17
Proxy Voting and Portfolio Holdings Information 18
Privacy Policy Notice 18
Summary of General Information 19
Shareholder Information 19
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CORNERSTONE PROGRESSIVE RETURN FUND
PORTFOLIO SUMMARY - AS OF JUNE 30, 2009 (UNAUDITED)
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SECTOR ALLOCATION
Percent of
Sector Net Assets
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Closed-End Funds 69.6
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Information Technology 5.3
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Healthcare 4.2
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Financials 4.0
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Energy 3.9
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Consumer Staples 3.7
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Industrials 3.0
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Consumer Discretionary 2.5
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Utilities 1.0
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Telecommunication Services 0.9
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Materials 0.8
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Other 1.1
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TOP TEN HOLDINGS, BY ISSUER
Percent of
Holding Sector Net Assets
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1. NFJ Dividend, Interest &
Premium Strategy Fund Closed-End Funds 15.5
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2. Royce Value Trust, Inc. Closed-End Funds 4.6
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3. Liberty All-Star Equity Fund Closed-End Funds 4.1
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4. Clough Global Opportunities Fund Closed-End Funds 3.7
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5. LMP Capital & Income Fund, Inc. Closed-End Funds 3.2
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6. Zweig Total Return Fund, Inc. (The) Closed-End Funds 2.9
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7. Exxon Mobil Corporation Energy 2.9
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8. Gabelli Global Deal Fund Closed-End Funds 2.4
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9. Tri-Continental Corporation Closed-End Funds 2.2
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10. Clough Global Equity Fund Closed-End Funds 1.9
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1
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CORNERSTONE PROGRESSIVE RETURN FUND
SUMMARY SCHEDULE OF INVESTMENTS - JUNE 30, 2009 (UNAUDITED)
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No. of
Description Shares Value
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EQUITY SECURITIES - 98.93%
CLOSED-END FUNDS - 69.58%
Adams Express Company (The) (a) 44,221 $ 371,456
Advent/Claymore Enhanced
Growth & Income Fund 32,911 298,503
Blue Chip Value Fund 219,850 556,220
Clough Global Allocation Fund 39,978 505,722
Clough Global Equity Fund 90,200 1,064,360
Clough Global Opportunities Fund 197,592 2,130,042
Franklin Universal Trust 74,600 345,398
Gabelli Dividend & Income Trust 50,210 506,117
Gabelli Global Deal Fund 101,583 1,374,418
General American Investors Company, Inc. 47,585 892,219
H&Q Healthcare Investors* 68,816 739,772
H&Q Life Sciences Investors* 104,715 907,879
John Hancock Tax-Advantaged
Dividend Income Fund 98,938 993,338
Liberty All-Star Equity Fund 684,799 2,362,557
Liberty All-Star Growth Fund 237,600 648,648
LMP Capital & Income Fund, Inc. 213,012 1,831,903
Madison/Claymore Covered
Call & Equity Strategy Fund 70,400 491,392
NFJ Dividend, Interest & Premium Strategy Fund 748,400 8,861,056
Nuveen Diversified Dividend & Income Fund 43,225 310,355
Nuveen Equity Premium Advantage Fund 48,600 537,516
Nuveen Equity Premium Income Fund 38,905 417,451
Nuveen Equity Premium Opportunity Fund 40,300 444,106
Nuveen Global Value Opportunities Fund 31,321 441,626
Nuveen Multi-Strategy Income and Growth Fund 142,895 800,212
Nuveen Multi-Strategy Income and Growth Fund 2 156,000 895,440
Royce Micro-Cap Trust, Inc. 111,633 670,914
Royce Value Trust, Inc. ^ 312,662 2,629,487
No. of
Description Shares Value
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CLOSED-END FUNDS (CONTINUED)
Source Capital, Inc. ^ 12,100 $ 417,692
SunAmerica Focused Alpha Growth Fund, Inc. 104,035 1,019,543
Tri-Continental Corporation 136,934 1,258,423
Zweig Fund, Inc. (The) 264,682 749,050
Zweig Total Return Fund, Inc. (The) 492,906 1,656,164
Other Closed-End Funds^(b) 2,713,949
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39,842,928
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CONSUMER DISCRETIONARY - 2.53%
Other Consumer Discretionary^(b) 1,447,938
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CONSUMER STAPLES - 3.66%
Procter & Gamble
Company (The) 7,733 395,156
Wal-Mart Stores, Inc. 9,000 435,960
Other Consumer Staples(b) 1,265,077
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2,096,193
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ENERGY - 3.92%
Exxon Mobil Corporation 23,475 1,641,137
Other Energy ^ (b) 602,760
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2,243,897
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FINANCIALS - 4.01%
JPMorgan Chase & Company 13,498 460,417
Wells Fargo & Company 15,206 368,898
Other Financials ^ (b) 1,467,808
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2,297,123
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HEALTH CARE - 4.22%
Amgen, Inc. * 5,119 271,000
Johnson & Johnson 13,000 738,400
Other Health Care ^ (b) 1,409,854
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2,419,254
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INDUSTRIALS - 2.99%
General Electric Company 29,918 350,639
Lockheed Martin Corporation ^ 4,000 322,600
Other Industrials ^ (b) 1,041,627
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1,714,866
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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, 2009 (UNAUDITED)(CONCLUDED)
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No. of
Description Shares Value
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INFORMATION TECHNOLOGY - 5.27%
Apple, Inc. * 2,068 $ 294,545
Cisco Systems, Inc. * 23,470 437,481
Google, Inc. - Class A * 1,032 435,081
Intel Corporation 16,599 274,714
International Business Machines Corporation 4,000 417,680
Microsoft Corporation 13,913 330,712
Oracle Corporation 20,555 440,288
Other Information Technology (b) 387,701
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3,018,202
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MATERIALS - 0.84%
Other Materials ^ (b) 481,933
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TELECOMMUNICATION SERVICES - 0.92%
AT&T, Inc. 12,636 313,978
Other Telecommunication Services (b) 215,010
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528,988
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UTILITIES - 0.99%
FPL Group, Inc. 7,000 398,020
Other Utilities ^ (b) 167,100
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565,120
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TOTAL EQUITY SECURITIES
(cost - $61,639,084) 56,656,442
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SHORT-TERM INVESTMENTS - 5.33%
MONEY MARKET SECURITY - 1.02%
JPMorgan U.S. Government Money Market Fund 583,652 583,652
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Principal
Amount
Description (000's) Value
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REPURCHASE AGREEMENTS - 4.31%
J.P. Morgan Securities Inc.+++
(Agreement dated 6/30/2009 to be repurchased at
$2,468,932)(b) $ 2,469 $ 2,468,917
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TOTAL SHORT-TERM INVESTMENTS
(cost - $3,052,569) 3,052,569
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TOTAL INVESTMENTS - 104.26%
(cost - $64,691,653) 59,709,011
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LIABILITIES IN EXCESS OF
OTHER ASSETS - (4.26)% (2,443,915)
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NET ASSETS - 100.00% $ 57,265,096
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(a) Affiliated investment. The Fund holds 0.65% (based on net assets) of
Adams Express Company. A trustee of the Fund also serves as a director
to such company. During the six months ended June 30, 2009 the Fund
purchased 44,221 shares of this security. There were no sales during
this period.
(b) 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, 2009.
* Non-income producing security.
^ Security or a portion thereof is out on loan.
+ The maturity date for all repurchase agreements held was July 1, 2009,
with interest rates ranging from 0.12% to 0.24% and collater- alized by
$2,544,517, in U.S. Treasury Bills maturing August 13, 2009. Stated
interest rate, before rebate earned by borrower of securities on loan.
++ Represents investment purchased with collateral received for securities
on loan.
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See accompanying notes to financial statements.
3
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CORNERSTONE PROGRESSIVE RETURN FUND
STATEMENT OF ASSETS AND LIABILITIES - JUNE 30, 2009 (UNAUDITED)
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ASSETS
Investments, at value, including collateral
for securities on loan of $2,468,917:
Unaffiliated issuers (cost - $ 64,320,687)(1) $ 59,337,555
Affiliated issuer (cost - $ 370,966) 371,456
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Total investments (cost - $ 64,691,653) 59,709,011
Receivables:
Investments sold 1,646,069
Dividends 125,529
Prepaid expenses 6,834
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Total Assets 61,487,443
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LIABILITIES
Payables:
Upon return of securities loaned 2,468,917
Investment purchases 1,655,724
Investment management fees (net of fee waivers) 46,967
Trustees' fees 22,346
Other accrued expenses 28,393
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Total Liabilities 4,222,347
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NET ASSETS (applicable to 9,339,119 shares of
common stock outstanding) $ 57,265,096
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NET ASSET VALUE PER SHARE ($ 57,265,096 / 9,339,119) $ 6.13
=================
NET ASSETS CONSISTS OF
Paid-in capital $ 104,131,614
Accumulated net realized loss on investments (41,883,876)
Net unrealized depreciation in value of investments (4,982,642)
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Net assets applicable to shares outstanding $ 57,265,096
=================
(1) Includes securities out on loan to brokers with a market value of
$2,100,069.
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See accompanying notes to financial statements.
4
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CORNERSTONE PROGRESSIVE RETURN FUND
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)
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INVESTMENT INCOME
Income:
Dividends $ 1,442,899
Securities lending 3,455
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Total Investment Income 1,446,354
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Expenses:
Investment management fees 287,159
Trustees' fees 41,080
Administration fees 28,756
Legal and audit fees 23,904
Accounting fees 20,717
Printing 11,388
Custodian fees 9,406
Transfer agent fees 8,998
Stock exchange listing fees 4,396
Insurance 3,801
Miscellaneous 2,487
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Total Expenses 442,092
Less: Management fee waivers (950)
Less: Fees paid indirectly (40,669)
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Net Expenses 400,473
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Net Investment Income 1,045,881
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NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized loss from investments (22,316,740)
Capital gain distributions from regulated investment companies
and real estate investment trust 38,147
Net change in unrealized depreciation in value of investments 23,151,721
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Net realized and unrealized gain on investments 873,128
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,919,009
============
See accompanying notes to financial statements.
5
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CORNERSTONE PROGRESSIVE RETURN FUND
STATEMENT OF CHANGES IN NET ASSETS
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For the Six
Months Ended For the
June 30, 2009 Year Ending
(unaudited) December 31, 2008
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INCREASE/(DECREASE) IN NET ASSETS
Operations:
Net investment income $ 1,045,881 $ 1,494,151
Net realized loss from investments (22,316,740) (19,608,587)
Capital gain distributions from regulated investment companies 38,147 3,304
Net change in unrealized depreciation in value of investments 23,151,721 (23,781,155)
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Net increase/(decrease) in net assets resulting from operations 1,919,009 (41,892,287)
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Dividends and distributions to shareholders:
Net investment income (1,045,881) (1,494,151)
Return-of-capital (10,439,643) (21,470,420)
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Total dividends and distributions to shareholders (11,485,524) (22,964,571)
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Capital stock transactions:
Proceeds from 2,387 and 3,066 shares newly issued in reinvestment
of dividends and distributions, respectively 20,914 39,846
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Total decrease in net assets (9,545,601) (64,817,012)
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NET ASSETS
Beginning of period 66,810,697 131,627,709
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End of period $ 57,265,096 $ 66,810,697
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See accompanying notes to financial statements.
6
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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
shares outstanding, total investment return, ratios to average net assets and
other supplemental data for each period indicated. This information has been
derived from information provided in the financial statements and market price
data for the Fund's shares.
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For the Six For the Period
Months Ended For The September 10, 2007*
June 30, 2009 Year Ended Through
(unaudited) December 31, 2008 December 31, 2007
----------- ----------------- -----------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 7.16 $ 14.10 $ 14.96^
-------- -------- ---------
Net investment income # 0.11 0.16 0.06
Net realized and unrealized gain/(loss)
on investments 0.09 (4.64) (0.35)
-------- -------- ---------
Net increase/(decrease) in net assets
resulting from operations 0.20 (4.48) (0.29)
-------- -------- ---------
Dividends and distributions to shareholders:
Net investment income (0.11) (0.16) (0.06)
Net realized capital gains -- -- (0.15)
Return-of-capital (1.12) (2.30) (0.41)
-------- -------- ---------
Total dividends and distributions to shareholders (1.23) (2.46) (0.62)
-------- -------- ---------
Capital stock transactions:
Anti-dilutive effect due to issuance of common shares -- -- 0.05
-------- -------- ---------
Net asset value, end of period $ 6.13 $ 7.16 $ 14.10
======== ======== =========
Market value, end of period $ 9.98 $ 7.10 $ 16.75
======== ======== =========
Total investment return (a) 61.66%(b) (47.53)% 16.02%(b)
======== ======== =========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000 omitted) $ 57,265 $ 66,811 $ 131,628
Ratio of expenses to average net assets,
net of fee waivers, if any (c) 1.40%(e) 1.25% 1.29%(e)
Ratio of expenses to average net assets,
excluding fee waivers, if any (d) 1.55%(e) 1.32% 1.42%(e)
Ratio of expenses to average net assets,
net fee waivers, if any (d) 1.54%(e) 1.32% 1.42%(e)
Ratio of net investment income to average net assets 1.15%(e) 1.48% 1.46%(e)
Portfolio turnover rate 57.73%(b) 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.
(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 exclude the reduction for fees paid indirectly.
(e) Annualized.
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See accompanying notes to financial statements.
7
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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 long-term 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.
In May 2009, the Financial Accounting Standards Board ("FASB") issued FASB
Statement No. 165, "SUBSEQUENT EVENTS." The Fund has adopted FAS 165 with these
financial statements.
FAS 165 requires the Fund to recognize in the financial statements the effects
of all subsequent events that provide additional evidence about conditions that
existed at the date of the Statement of Assets and Liabilities. For
nonrecognized subsequent events that must be disclosed to keep the financial
statements from being misleading, the Fund will be required to disclose the
nature of the event as well as an estimate of its financial effect, or a
statement that such an estimate cannot be made. In addition, FAS 165 requires
the Fund to disclose the date through which the subsequent events have been
evaluated. Management has evaluated any matters requiring such disclosure
through the date when such financial statements were issued (August 31, 2009)
and has noted no such events. Subsequent events after such date have not been
evaluated with respect to the impact on 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
Adviser" 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, 2009, 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
================================================================================
8
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CORNERSTONE PROGRESSIVE RETURN FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
exception of those days on which the NYSE Alternext US LLC is closed.
On March 19, 2008, Financial Accounting Standards Board released Statement of
Financial Accounting Standards No. 161, "Disclosures about Derivative
instruments and Hedging Activities" ("FAS 161"). FAS 161 requires qualitative
disclosures about objectives and strategies for using derivatives, quantitative
disclosures about fair value amounts of and gains and losses on derivative
instruments, and disclosures about credit-risk-related contingent features in
derivative agreements. The application of FAS 161 is required for fiscal years
beginning after November 15, 2008 and interim periods within those fiscal years.
Management has evaluated the implications of FAS 161 and its impact on the
financial statements are not material.
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 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.
In July 2006, the Financial Accounting Standards Board ("FASB") released FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48"), an
interpretation of FASB Statement No. 109. FIN 48 provides guidance for how
uncertain tax positions should be recognized, measured, presented and disclosed
in the financial statements. FIN 48 requires the accounting and disclosure of
tax positions taken or expected to be taken in the course of preparing the
Fund's tax returns to determine whether the tax positions are "more likely than
not" of being sustained by the applicable tax authority. Tax positions not
deemed to meet the more likely than not threshold would be recorded as a tax
benefit or expense in the current year. Adoption of FIN 48 is effective during
the first required financial reporting period for fiscal years beginning after
December 15, 2006. Management has adopted FIN 48 and reviewed any uncertain tax
positions for open tax years 2007 through 2008 and for the period ended June 30,
2009. There was no material impact to the financial statements or, other than as
described herein, the disclosures thereto as a result of the adoption of the
pronouncement.
DISTRIBUTIONS TO SHAREHOLDERS: The Fund makes a level distribution to its
shareholders each month pursuant to a managed distribution policy adopted by the
Board of Trustees ("Managed Distribution Policy"). To the extent these
distributions are not
================================================================================
9
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CORNERSTONE PROGRESSIVE RETURN FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
represented by net investment income and capital gains, they will not represent
yield or investment return on the Fund's portfolio. The level distribution rate
may be modified by the Board of Trustees from time to time. If, for any monthly
distribution, investment company taxable income, if any (which term includes net
short-term capital gain), and net tax-exempt income, if any, is less than the
amount of the distribution, the difference will generally be a tax-free return
of capital distributed from the Fund's assets. The Fund's final distribution for
each calendar year is expected to include any remaining investment company
taxable income and net tax exempt income undistributed during the year, as well
as all net capital gain realized during the year.
However, if they determine it is appropriate to do so, the Board of Trustees may
elect to not distribute realized gains and to pay taxes incurred. In general,
the total distributions made in any taxable year (other than distributions of
net capital gain or return of capital) would be treated as ordinary dividend
income to the extent of the Fund's current and accumulated earnings and profits.
Distributions in excess of the earnings and profits would first be a tax-free
return of capital to the extent of the adjusted tax basis in the shares.
The Managed Distribution Policy described above would result in the payment of
approximately the same amount or percentage to the Fund's shareholders each
month. These distributions will not be tied to the Fund's investment income and
capital gains and will not represent yield or investment return on the Fund's
portfolio. Section 19(a) of the 1940 Act and Rule 19a-1 thereunder require the
Fund to provide a written statement accompanying any such payment that
adequately discloses its source or sources, other than net investment income.
Thus, if the source of some or all of the dividend or other distribution were
the original capital contribution of the shareholder, and the payment amounted
to a return of capital, the Fund would be required to provide written disclosure
to that effect. Nevertheless, persons who periodically receive the payment of a
dividend or other distribution may be under the impression that they are
receiving net profits when they are not. Shareholders should read any written
disclosure provided pursuant to Section 19(a) and Rule 19a-1 carefully, and
should not assume that the source of any distribution from the Fund is net
profit.
The Board of Trustees reserves the right to change the monthly distribution
policy from time to time.
NOTE C. FAIR VALUE
The Fund adopted Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 157, Fair Value Measurements ("FAS 157"), effective
January 1, 2008. In accordance with FAS 157, fair value is defined as the price
that the Fund would receive upon selling an investment in a timely transaction
to an independent buyer in the principal or most advantageous market of the
investment. FAS 157 established a three-tier hierarchy to maximize the use of
observable market data and minimize the use of unobservable inputs and to
establish classification of fair value measurements for disclosure purposes.
Inputs refer broadly to the assumptions that market participants would use in
pricing the asset or liability, including assumptions about risk, for example,
the risk inherent in a particular valuation technique used to measure fair value
including such a pricing model and/or the risk inherent in the inputs to the
valuation technique. Inputs may be observable or unobservable. Observable inputs
are inputs that reflect the assumptions market participants would use in pricing
the asset or liability developed based on market data obtained from sources
independent of the reporting entity. Unobservable inputs are inputs that reflect
the reporting entity's own assumptions about the assumptions market participants
would use in pricing the asset or liability developed based on the best
information available in the circumstances.
================================================================================
10
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
The three-tier hierarchy
of inputs is summarized in the three broad Levels listed below.
o Level 1 - quoted prices in active markets for identical investments
o Level 2 - other significant observable inputs (including quoted prices
for similar invest- ments, interest rates, prepayment speeds, credit
risk, etc.)
o Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities.
The following is a summary of the inputs used as of June 30, 2009 in valuing the
Fund's investments carried at value:
INVESTMENTS IN OTHER FINANCIAL
VALUATION INPUTS SECURITIES INSTRUMENTS*
--------------------------------------------------------------------------------
Level 1 - Quoted Prices
Equity Investments $56,656,442 --
Short-term Investments 3,052,569 --
Level 2 - Other Significant
Observable Inputs -- --
Level 3 - Significant
Unobservable Inputs -- --
----------- -------------
Total $59,709,011 --
=========== =============
-------------
* Other financial instruments include futures, forwards and swap contracts.
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,
2009.
NOTE D. AGREEMENTS
Certain officers of the Fund are also officers of Cornerstone or Ultimus Fund
Solutions, LLC ("Ultimus"). Such officers are paid no fees by the Fund for
serving as officers of the Fund.
INVESTMENT MANAGEMENT AGREEMENT
Cornerstone serves as the Fund's Investment Adviser with respect to all
investments. As compensation for its investment management services, Cornerstone
receives from the Fund, an annual fee, calculated weekly and paid monthly, equal
to 1.00% of the Fund's average weekly net assets. Effective June 1, 2009,
Cornerstone voluntarily agreed to waive its management fees from the Fund to the
extent that the Fund's net monthly operating expenses (including basic legal
fees but excluding other legal and extraordinary expenses) exceeded an annual
rate of 0.125% of average annual weekly net assets. For the six months ended
June 30, 2009, Cornerstone earned $287,159 for investment management services of
which it waived $950. The Investment Manager may discontinue such undertaking at
any time during the fiscal year without notice to fund shareholders.
Included in the Statement of Operations, under the caption FEES PAID INDIRECTLY,
are expense offsets of $40,669 arising from credits earned on portfolio
transactions executed with brokers, pursuant to directed brokerage arrangements.
ADMINISTRATION AGREEMENT Under the terms of the Administration Agreement,
Ultimus supplies executive, administrative and regulatory services for the Fund.
Ultimus supervises the preparation of reports to stockholders for the Fund,
reports to and filings with the Securities and Exchange Commission and materials
for meetings of the Board of 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
================================================================================
11
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
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.
NOTE E. AFFILIATED INVESTMENTS
Transactions in affiliates for the six month ended June 30, 2009 were as
follows:
ADAMS
EXPRESS
COMPANY
--------
Market value at beginning of period $ --
========
Shares at beginning of period --
Shares purchased during the period 44,221
Shares sold during the period --
--------
Shares at end of period 44,221
========
Dividend income earned
during the period --
========
Cost of purchases during the period $370,996
========
Proceeds from sales during the period --
========
Net realized gain/(loss)
during the period --
========
Market value at end of period $371,456
========
NOTE F. INVESTMENT IN SECURITIES
For the six months ended June 30, 2009, purchases and sales of securities, other
than short-term investments, were $33,940,139 and $44,487,387 respectively.
NOTE G. COMMON SHARES OF BENEFICIAL INTEREST
The Fund has 9,339,119 common shares of beneficial interest authorized and
outstanding at June 30, 2009. As of that date, two individuals that control
Cornerstone owned 8,748 shares related to the initial issuance of the seed
capital shares of the Fund.
Transactions in common shares for the year ended June 30, 2009 were as follows:
Shares at beginning of period 9,336,732
Shares newly issued in reinvestment
of dividends and distributions 2,387
---------
Shares at end of period 9,339,119
=========
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, 2009. 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 33(1)/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
================================================================================
12
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
--------------------------------------------------------------------------------
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 value of securities on loan to brokers at June 30, 2009 was $2,100,069.
During the six months ended June 30, 2009, the Fund earned $3,455 in securities
lending income which is included under the caption SECURITIES LENDING in the
Statement of Operations.
NOTE J. FEDERAL INCOME TAXES
Income and capital gains distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments of losses deferred due to wash sales and
Post- October losses (as later defined), and excise tax regulations.
The tax character of dividends and distributions paid during the year ended
December 31, 2008 was ordinary income of $1,494,151 and return-of-capital
$21,470,420.
Accounting principles generally accepted in the United States of America require
that certain components of net assets relating to permanent differences be
reclassified between financial and tax reporting. These reclassifications have
no effect on net assets or net asset value per share. Under current tax law,
certain capital losses realized after October 31 within a taxable year may be
deferred and treated as occurring on the first day of the following tax year
("Post-October losses").
At December 31, 2008, the Fund had a capital loss carryforward for U.S. federal
income tax purposes of $8,177,222 which expires in 2016.
At June 30, 2009, the identified cost for federal income tax purposes, as well
as the gross unrealized appreciation from investments for those securities
having an excess of value over cost, gross unrealized depreciation from
investments for those securities having an excess of cost over value and the net
unrealized depreciation from investments were $64,691,653, $2,865,549,
$(7,848,191), and $(4,982,642), respectively.
================================================================================
13
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
On April 21, 2009, the Annual Meeting of Shareholders of Cornerstone Progressive
Return Fund was held and the following matter was voted upon based on 9,336,920
common shares outstanding on February 17, 2009:
(1) To approve the re-election of six Trustees until the 2010 Annual
Meeting.
NAME OF DIRECTORS FOR WITHHELD
Ralph W. Bradshaw 9,187,916 22,961
Thomas H. Lenagh 9,194,873 16,004
Edwin Meese III 9,194,873 16,004
Scott B. Rogers 9,194,873 16,004
Andrew A. Strauss 9,194,873 16,004
Glenn W. Wilcox, Sr. 9,192,873 18,004
================================================================================
14
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 Alternext US 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 shares purchased
pursuant
================================================================================
15
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED) (CONCLUDED)
to the Plan. Each participant, nevertheless, has the right to receive
certificates for whole shares owned. The Agent will distribute all proxy
solicitation materials to participating shareholders.
In the case of shareholders, such as banks, brokers or nominees, that hold
shares for others who are beneficial owners participating in the Plan, the Agent
will administer the Plan on the basis of the number of shares certified from
time to time by the record shareholder as representing the total amount of
shares registered in the shareholder's name and held for the account of
beneficial owners participating in the Plan.
Neither the Agent nor the Fund shall have any responsibility or liability beyond
the exercise of ordinary care for any action taken or omitted pursuant to the
Plan, nor shall they have any duties, responsibilities or liabilities except
such as expressly set forth herein. Neither shall they be liable hereunder for
any act done in good faith or for any good faith omissions to act, including,
without limitation, failure to terminate a participants account prior to receipt
of written notice of his or her death or with respect to prices at which shares
are purchased or sold for the participants account and the terms on which such
purchases and sales are made, subject to applicable provisions of the federal
securities laws.
The automatic reinvestment of Distributions will not relieve participants of any
federal, state or local income tax that may be payable (or required to be
withheld) on such Distributions. The Fund reserves the right to amend or
terminate the Plan. There is no direct service charge to participants with
regard to purchases in the Plan. All correspondence concerning the Plan should
be directed to the Agent at P.O. Box 922, Wall Street Station, New York, New
York 10269-0560. Certain transactions can be performed online at www.amstock.com
or by calling the toll free number 877-864-4833.
================================================================================
16
INVESTMENT MANAGEMENT AGREEMENT APPROVAL DISCLOSURE (UNAUDITED)
The Board of Directors including, the Independent Directors, (the "Board") of
Cornerstone Progressive Return Fund (the "Fund") considers the approval 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 Agreement occurred at an in person meeting of the Board held on
February 13, 2009.
In determining whether to approve the Agreement, 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 information requested and provided, and the
discussions with management of the Investment Manager, the Board determined that
the approval 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 to the Board 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 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 favorably received the Investment
Manager's commitment to voluntarily waive its management fees from the Fund to
the extent that monthly operating expenses exceed 0.125% of average net assets
calculated monthly (including basic legal fees but excluding other legal and
extraordinary expenses). 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, and was advised by independent legal
counsel with respect to its deliberations. 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 comparable closed-end funds,
and the level of quality of investment management personnel. The Board
determined that the Agreement is consistent with the best interests of the Fund
and its shareholders, and enables the Fund to receive high quality services at a
cost that is appropriate, reasonable, and in the best interests of the Fund and
its shareholders. Accordingly, in light of the above considerations and such
other factors and information it considered relevant, the Board by a unanimous
vote (including a separate vote of all the Independent Directors present in
person at the meeting) approved the continuance of the Agreement with respect to
the Fund.
================================================================================
17
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 are available on the SEC's website at
http://www.sec.gov and may be reviewed and copied at the SEC's Public Reference
Room in Washington, DC. Information on the operation of the SEC's Public
Reference Room may be obtained by calling (202) 551-8090.
PRIVACY POLICY NOTICE (UNAUDITED)
The following is a description of the Fund's policies regarding disclosure of
nonpublic personal information that you provide to the Fund or that the Fund
collects from other sources. In the event that you hold shares of the Fund
through a broker-dealer or other financial intermediary, the privacy policy of
the financial intermediary would govern how your nonpublic personal information
would be shared with unaffiliated third parties.
CATEGORIES OF INFORMATION THE FUND COLLECTS. The Fund collects the following
nonpublic personal information about you:
1. Information from the Consumer: this category includes information the
Fund receives from you on or in applications or other forms,
correspondence, or conversations (such as your name, address phone
number, social security number, assets, income and date of birth); and
2. Information about the Consumer's transactions: this category includes
information about your trans- actions with the Fund, its affiliates,
or others (such as your account number and balance, payment history,
parties to transactions, cost basis information, and other financial
information).
CATEGORIES OF INFORMATION THE FUND DISCLOSES. The Fund does not disclose any
nonpublic personal information about their current or former shareholders to
unaffiliated third parties, except as required or permitted by law. The Fund is
permitted by law to disclose all of the information it collects, as described
above, to its service providers (such as the Fund's custodian, administrator and
transfer agent) to process your transactions and otherwise provide services to
you.
CONFIDENTIALITY AND SECURITY. The Fund restricts access to your nonpublic
personal information to those persons who require such information to provide
products or services to you. The Fund maintains physical, electronic and
procedural safeguards that comply with federal standards to guard your nonpublic
personal information.
================================================================================
18
SUMMARY OF GENERAL INFORMATION (UNAUDITED)
Cornerstone Progressive Return Fund is a closed-end, diversified investment
company whose shares trade on the NYSE Alternext US LLC. Its investment
objective is to provide long-term total return. The Fund is managed by
Cornerstone Advisors, Inc.
SHAREHOLDER INFORMATION (UNAUDITED)
The Fund is listed on the NYSE Alternext US LLC (symbol "CFP"). The previous
week's net asset value per share, market price, and related premium or discount
are published each Monday in The Wall Street Journal under the designation
"CrnrstnPrgRtFd" and Barron's under the designation "CornerstoneProgreRet". Such
information is available weekly and may be obtained by contacting the Fund at
the general inquiry phone number.
--------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN IN ACCORDANCE WITH SECTION 23(C) OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, THAT CORNERSTONE PROGRESSIVE RETURN FUND MAY
FROM TIME TO TIME PURCHASE ITS SHARES IN THE OPEN MARKET.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. The financial information
included herein is taken from the records of the Fund with without examination
by 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.
--------------------------------------------------------------------------------
================================================================================
19
This page intentionally left blank.
CORNERSTONE PROGRESSIVE RETURN FUND
ITEM 2. CODE OF ETHICS.
Not required
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not required
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not required
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not required
ITEM 6. SCHEDULE OF INVESTMENTS.
(a)
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2009 (UNAUDITED)
DESCRIPTION NO. OF SHARES VALUE
---------------------------------------------------------------------------------------------------
EQUITY SECURITIES - 98.93%
CLOSED-END FUNDS - 69.57%
Adams Express Company (The) (a) 44,221 $ 371,456
Advent/Claymore Enhanced Growth & Income Fund 32,911 298,503
Alpine Global Premier Properties Fund 38,900 182,052
BlackRock Income Trust ^ 28,341 176,848
Blue Chip Value Fund 219,850 556,220
Chartwell Dividend & Income Fund, Inc. 6,000 19,020
Clough Global Allocation Fund 39,978 505,722
Clough Global Equity Fund 90,200 1,064,360
Clough Global Opportunities Fund 197,592 2,130,042
Cohen & Steers REIT and Utility Income Fund, Inc. 8,437 60,156
DCW Total Return Fund ^ 13,000 43,550
DWS RREEF World Real Estate & Tactical Strategies Fund, Inc. 20,000 116,000
Evergreen International Balanced Income Fund 9,000 112,860
First Trust Enhanced Equity Income Fund 16,600 146,412
First Trust/FIDAC Mortgage Income Fund 9,200 154,284
Franklin Universal Trust 74,600 345,398
Gabelli Dividend & Income Trust 50,210 506,117
Gabelli Global Deal Fund 101,583 1,374,418
Gabelli Healthcare & Wellness Rx Trust (The) 25,900 131,313
General American Investors Company, Inc. 47,585 892,219
H&Q Healthcare Investors * 68,816 739,772
H&Q Life Sciences Investors * 104,715 907,879
John Hancock Tax-Advantaged Dividend Income Fund 98,938 993,338
Lazard World Dividend & Income Fund, Inc. 20,324 179,867
Liberty All-Star Equity Fund 684,799 2,362,557
Liberty All-Star Growth Fund 237,600 648,648
LMP Capital & Income Fund, Inc. 213,012 1,831,903
Madison/Claymore Covered Call & Equity Strategy Fund 70,400 491,392
Madison Strategic Sector Premium Fund 17,843 179,501
MFS Special Value Trust 4,090 20,982
Morgan Stanley High Yield Fund, Inc. 14,573 66,453
NFJ Dividend, Interest & Premium Strategy Fund 748,400 8,861,056
Nicholas-Applegate Global Equity & Convertible Income Fund 16,358 187,299
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2009 (UNAUDITED)(CONTINUED)
CLOSED END FUNDS (CONTINUED)
Nuveen Core Equity Alpha Fund 4,000 $ 38,880
Nuveen Diversified Dividend & Income Fund 43,225 310,355
Nuveen Equity Premium Advantage Fund 48,600 537,516
Nuveen Equity Premium Income Fund 38,905 417,451
Nuveen Equity Premium Opportunity Fund 40,300 444,106
Nuveen Global Value Opportunities Fund 31,321 441,626
Nuveen Multi-Strategy Income and Growth Fund 142,895 800,212
Nuveen Multi-Strategy Income and Growth Fund 2 156,000 895,440
Nuveen Tax-Advantaged Dividend Growth Fund 13,000 119,080
RMR Asia Pacific Real Estate Fund * 4,279 67,778
Royce Focus Trust, Inc. 12,450 64,740
Royce Micro-Cap Trust, Inc. 111,633 670,914
Royce Value Trust, Inc. ^ 312,662 2,629,487
Source Capital, Inc. ^ 12,100 417,692
Spain Fund, Inc. (The) 5,000 28,200
SunAmerica Focused Alpha Growth Fund, Inc. 104,035 1,019,543
SunAmerica Focused Alpha Large-Cap Fund, Inc. 27,000 267,300
Tri-Continental Corporation 136,934 1,258,423
Van Kampen Bond Fund ^ 12,700 217,424
Western Asset Emerging Markets Floating Rate Fund 14,100 133,950
Zweig Fund, Inc. (The) 264,682 749,050
Zweig Total Return Fund, Inc. (The) 492,906 1,656,164
------------
39,842,928
------------
CONSUMER DISCRETIONARY - 2.53%
Amazon.com, Inc. * 2,000 167,320
Best Buy Company, Inc. 2,000 66,980
Comcast Corporation - Class A 5,358 77,637
DIRECTV Group, Inc. (The) ^ * 5,000 123,550
Ford Motor Company ^ * 8,000 48,560
GameStop Corporation - Class A * 2,500 55,025
Home Depot, Inc. (The) 4,000 94,520
Kohl's Corporation * 1,695 72,461
Lowe's Companies, Inc. 3,000 58,230
McDonald's Corporation 4,000 229,960
NIKE, Inc. - Class B 2,000 103,560
Staples, Inc. 2,000 40,340
Target Corporation 2,614 103,175
Time Warner, Inc. 2,000 50,380
TJX Companies, Inc. (The) 2,000 62,920
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2009 (UNAUDITED)(CONTINUED)
CONSUMER DISCRETIONARY - (CONTINUED)
Walt Disney Company (The) 4,000 $ 93,320
------------
1,447,938
------------
CONSUMER STAPLES - 3.66%
Altria Group, Inc. 3,922 64,282
Archer-Daniels-Midland Company 2,000 53,540
Coca-Cola Company (The) 5,000 239,950
CVS Caremark Corporation 2,746 87,515
H.J. Heinz Company 2,000 71,400
Kraft Foods, Inc. - Class A 5,000 126,700
Kroger Company (The) 3,000 66,150
PepsiCo, Inc. 4,000 219,840
Philip Morris International, Inc. 5,337 232,800
Procter & Gamble Company (The) 7,733 395,156
Walgreen Company 3,500 102,900
Wal-Mart Stores, Inc. 9,000 435,960
------------
2,096,193
------------
ENERGY - 3.92%
Devon Energy Corporation ^ 2,000 109,000
Exxon Mobil Corporation 23,475 1,641,137
Schlumberger Ltd. 4,598 248,798
Southwestern Energy Company * 3,000 116,550
Williams Companies, Inc. 3,000 46,830
XTO Energy, Inc. 2,139 81,582
------------
2,243,897
------------
FINANCIALS - 4.01%
AFLAC, Inc. 2,000 62,180
American Express Company 3,252 75,576
Aon Corporation ^ 3,000 113,610
BB&T Corporation ^ 6,000 131,880
Charles Schwab Corporation (The) 2,000 35,080
Chubb Corporation (The) 3,000 119,640
Goldman Sachs Group, Inc. (The) 1,500 221,160
Hudson City Bancorp, Inc. ^ 5,000 66,450
JPMorgan Chase & Company 13,498 460,417
Loews Corporation 5,000 137,000
Morgan Stanley 2,732 77,889
Public Storage 2,500 163,700
State Street Corporation 2,081 98,223
T. Rowe Price Group, Inc. 2,000 83,340
Travelers Companies, Inc. (The) 2,000 82,080
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2009 (UNAUDITED)(CONTINUED)
FINANCIALS (CONTINUED)
Wells Fargo & Company 15,206 $ 368,898
------------
2,297,123
------------
HEALTH CARE - 4.22%
Abbott Laboratories 3,229 151,892
Aetna, Inc. 3,000 75,150
Amgen, Inc. * 5,119 271,000
Becton, Dickinson and Company 3,000 213,930
Bristol-Myers Squibb Company 4,418 89,730
Eli Lilly & Company ^ 3,000 103,920
Gilead Sciences, Inc. * 2,000 93,680
Johnson & Johnson 13,000 738,400
Medco Health Solutions, Inc. ^ * 3,000 136,830
Medtronic, Inc. 3,000 104,670
Schering-Plough Corporation 4,768 119,772
St. Jude Medical, Inc. * 2,000 82,200
UnitedHealth Group, Inc. ^ 5,179 129,371
Wyeth 2,395 108,709
------------
2,419,254
------------
INDUSTRIALS - 3.00%
3M Company 1,567 94,177
Burlington Northern Santa Fe Corporation ^ 2,000 147,080
Danaher Corporation 4,000 246,960
Emerson Electric Company 5,000 162,000
General Electric Company 29,918 350,639
Lockheed Martin Corporation ^ 4,000 322,600
United Parcel Service, Inc. - Class B 3,191 159,518
United Technologies Corporation 3,108 161,492
Waste Management, Inc. 2,500 70,400
------------
1,714,866
------------
INFORMATION TECHNOLOGY - 5.27%
Apple, Inc. * 2,068 294,545
Automatic Data Processing, Inc. 5,000 177,200
Cisco Systems, Inc. * 23,470 437,481
EMC Corporation * 5,000 65,500
Google, Inc. - Class A * 1,032 435,081
Intel Corporation 16,599 274,714
International Business Machines Corporation 4,000 417,680
Microsoft Corporation 13,913 330,712
Oracle Corporation 20,555 440,288
QUALCOMM, Inc. 3,208 145,001
------------
3,018,202
------------
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2009 (UNAUDITED)(CONTINUED)
MATERIALS - 0.84%
E.I. Du Pont de Nemours & Company 2,500 64,050
Freeport-McMoRan Copper & Gold, Inc. ^ * 1,119 56,073
Monsanto Company 2,500 185,850
Nucor Corporation 1,561 69,355
Praxair, Inc. 1,500 106,605
------------
481,933
------------
TELECOMMUNICATION SERVICES - 0.92%
AT&T, Inc. 12,636 313,878
Verizon Communications, Inc. 7,000 215,010
------------
528,988
------------
UTILITIES - 0.99%
Dominion Resources, Inc. ^ 5,000 167,100
FPL Group, Inc. 7,000 398,020
------------
565,120
------------
TOTAL EQUITY SECURITIES (cost - $61,639,084) 56,656,442
------------
SHORT-TERM INVESTMENTS - 5.33%
MONEY MARKET SECURITY - 1.02%
JPMorgan U.S. Government Money Market Fund 583,652 583,652
------------
PRINCIPAL
AMOUNT (000's)
--------------
REPURCHASE AGREEMENTS - 4.31%
J.P. Morgan Securities, Inc.+++
(Agreement dated 6/30/2009 to be repurchased at
$368,849, 0.12%, 7/1/2009, collateralized by
$379,928 in United States Treasury Bill) $ 369 368,848
J.P. Morgan Securities, Inc.+++
(Agreement dated 6/30/2009 to be repurchased at
$2,100,083, 0.24%, 7/1/2009, collateralized by
$2,164,589 in United States Treasury Bill) 2,100 2,100,069
------------
2,468,917
------------
TOTAL SHORT-TERM INVESTMENTS (cost - $3,052,569) 3,052,569
TOTAL INVESTMENTS - 104.26% (cost - $64,691,653) 59,709,011
------------
LIABILITIES IN EXCESS OF OTHER ASSETS - (4.26)% (2,443,915)
------------
NET ASSETS - 100.00% $ 57,265,096
============
(a) Affiliated investment. The Fund holds 0.65% (based on net assets) of Adams
Express Company. A trustee of the Fund also serves as a director to such
company. During the six months ended June 30, 2009 the Fund purchased
44,221 shares of this security. There were no sales during this period.
^ Security or a portion thereof is out on loan.
* Non-income producing security.
+ Stated interest rate, before rebate earned by borrower of securities on loan.
++ Represents investment purchased with collateral received for securities on
loan.
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 4, 2009
--------------------------
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 4, 2009
--------------------------
By (Signature and Title)* /S/ FRANK J. MARESCA
------------------------------
Frank J. Maresca, Treasurer
(Principal Financial Officer)
Date SEPTEMBER 4, 2009
---------------------------
* Print the name and title of each signing officer under his or her signature.