N-CSRS 1 fp0005386_ncsrs.htm fp0005386_ncsrs.htm
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-22066

Cornerstone Progressive Return Fund

(Exact name of registrant as specified in charter)

350 Jericho Turnpike, Suite 206 Jericho, New York
11753
(Address of principal executive offices)
(Zip code)

Theresa M. Bridge

Ultimus Fund Solutions, LLC 350 Jericho Turnpike, Suite 206 Jericho, New York 11753

(Name and address of agent for service)

Registrant's telephone number, including area code: (513) 326-3597
 
Date of fiscal year end:
December 31, 2012

Date of reporting period:
June 30, 2012

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
 
 
Semi-Annual Report
June 30, 2012
(Unaudited)
 


 
 
 

 
 
CONTENTS
 
Portfolio Summary
1
   
Summary Schedule of Investments
2
   
Statement of Assets and Liabilities
5
   
Statement of Operations
6
   
Statement of Changes in Net Assets
7
   
Financial Highlights
8
   
Notes to Financial Statements
9
   
Results of Annual Meeting of Shareholders
14
   
Investment Management Agreement Approval Disclosure
15
   
Description of Dividend Reinvestment Plan
16
   
Proxy Voting and Portfolio Holdings Information
18
   
Privacy Policy Notice
19
   
Summary of General Information
22
   
Shareholder Information
22

 
 

 
 
Cornerstone Progressive Return Fund
Portfolio Summary – as of June 30, 2012 (unaudited)
 
SECTOR ALLOCATION
 
Sector
Percent of
Net Assets
Closed-End Funds
66.4
Information Technology
2.1
Consumer Discretionary
0.8
Financials
0.8
Industrials
0.7
Energy
0.7
Health Care
0.5
Consumer Staples
0.5
Utilities
0.1
Other
27.4
 
TOP TEN HOLDINGS, BY ISSUER
 
 
 
Holding
Sector
Percent of
Net Assets
1.
Eaton Vance Tax-Managed Global Diversified Equity Income Fund
Closed-End Funds
4.7
2.
Eaton Vance Tax-Managed Diversified Equity Income Fund
Closed-End Funds
3.8
3.
Eaton Vance Tax-Managed Global Buy-Write Opportunities Fund
Closed-End Funds
3.7
4.
BlackRock Enhanced Equity Dividend Trust
Closed-End Funds
3.7
5.
Eaton Vance Risk-Managed Diversified Equity Income Fund
Closed-End Funds
3.0
6.
BlackRock International Growth and Income Trust
Closed-End Funds
2.7
7.
India Fund, Inc. (The)
Closed-End Funds
2.2
8.
Eaton Vance Enhanced Equity Income Fund II
Closed-End Funds
2.1
9.
Eaton Vance Tax-Managed Buy-Write Opportunities Fund
Closed-End Funds
2.1
10.
Morgan Stanley China A Share Fund, Inc.
Closed-End Funds
2.0

 
1

 
 
Cornerstone Progressive Return Fund
Summary Schedule of Investments – June 30, 2012 (unaudited)

Description
 
No. of
Shares
   
Value
 
EQUITY SECURITIES – 72.57%
       
CLOSED-END FUNDS – 66.40%
       
CONVERTIBLE SECURITIES – 1.43%
       
Advent Claymore Global Convertible Securities and Income Fund II
    126,327     $ 809,756  
AGIC Equity & Convertible Income Fund
    56,110       926,937  
              1,736,693  
CORE – 2.69%
               
General American Investors Company, Inc.
    21,300       581,490  
Liberty All-Star Equity Fund
    152,465       687,617  
Source Capital, Inc.
    7,900       387,969  
Tri-Continental Corporation
    36,039       557,523  
Zweig Fund, Inc. (The)
    60,770       728,632  
Other Core (a)
            330,691  
              3,273,922  
CORPORATE DEBT FUNDS INVESTMENT GRADE-RATED – 3.13%
 
Federated Enhanced Treasury Income Fund
    55,339       799,095  
Western Asset/Claymore Inflation-Linked Opportunities & Income Fund
    144,198       1,881,784  
Western Asset/Claymore Inflation-Linked Securities & Income Fund
    75,377       979,901  
Other Corporate Debt Funds Investment Grade-Rated (a)
            140,567  
              3,801,347  
DEVELOPED MARKET – 1.56%
 
Japan Smaller Capitalization Fund, Inc.
    163,824       1,210,659  
 
Description
 
No. of
Shares
   
Value
DEVELOPED MARKET (continued)
 
Other Developed Market (a)
        $ 686,830  
            1,897,489  
EMERGING MARKETS – 3.55%
 
India Fund, Inc. (The)
    129,877       2,646,893  
Morgan Stanley India Investment Fund, Inc. *
    68,792       1,066,964  
Other Emerging Markets (a)
            602,096  
              4,315,953  
EMERGING MARKETS DEBT – 0.06%
 
Total Emerging Markets Debt (a)
            68,723  
                 
FLEXIBLE INCOME – 2.16%
 
Putnam Master Intermediate Income Trust
    123,505       632,346  
Putnam Premier Income Trust
    371,901       1,989,670  
              2,622,016  
GENERAL & INSURED LEVERAGED – 0.14%
 
Total General & Insured Leveraged (a)
            167,644  
                 
GENERAL & INSURED UNLEVERAGED – 0.02%
 
Total General & Insured Unleveraged (a)
            24,516  
                 
GENERAL BOND – 1.52%
 
Nuveen Build America Bond Fund
    64,689       1,368,172  
Nuveen Build America Bond Opportunity Fund
    22,299       481,212  
              1,849,384  
GENERAL MUNICIPAL LEVERAGED – 1.08%
 
Eaton Vance Municipal Bond Fund
    85,634       1,139,789  
Other General Municipal Leveraged (a)
            174,911  
              1,314,700  
 
See accompanying notes to financial statements.
 
 
2

 
 
Cornerstone Progressive Return Fund
Summary Schedule of Investments – June 30, 2012 (unaudited) (continued)
 
Description
 
No. of
Shares
   
Value
 
GLOBAL – 5.21%
 
Clough Global Allocation Fund
    33,200     $ 431,268  
Clough Global Equity Fund
    56,369       681,501  
Clough Global Opportunities Fund
    204,664       2,200,138  
Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund
    61,898       1,115,402  
Nuveen Global Value Opportunities Fund
    25,775       366,778  
Other Global (a)
            1,543,352  
              6,338,439  
GLOBAL INCOME – 1.20%
         
Nuveen Multi-Currency Short-Term Government Income Fund
    109,643       1,359,573  
Other Global Income (a)
            97,075  
              1,456,648  
INCOME & PREFERRED STOCK – 1.83%
 
Zweig Total Return Fund, Inc.
    175,233       2,153,617  
Other Income & Preferred Stock (a)
            74,041  
              2,227,658  
INSURED MUNICIPAL LEVERAGED – 0.08%
 
Other Insured Municipal Leveraged (a)
            100,241  
                 
LOAN PARTICIPATION – 0.11%
 
Total Loan Participation (a)
            134,123  
                 
OPTION ARBITRAGE/OPTIONS STRATEGIES – 35.82%
 
BlackRock Enhanced Capital & Income Fund, Inc.
    179,452       2,296,986  
BlackRock Enhanced Equity Dividend Trust
    613,787       4,443,818  
 
Description
   
No. of
Shares
   
Value
OPTION ARBITRAGE/OPTIONS STRATEGIES (continued)
 
BlackRock Global Opportunities Equity Trust
    55,600     $ 736,700  
BlackRock International Growth and Income Trust
    464,875       3,309,910  
Eaton Vance Enhanced Equity Income Fund
    220,336       2,335,562  
Eaton Vance Enhanced Equity Income Fund II
    245,453       2,606,711  
Eaton Vance Risk-Managed Diversified Equity Income Fund
    361,450       3,704,862  
Eaton Vance Tax-Managed Buy-Write Income Fund
    137,818       1,852,274  
Eaton Vance Tax-Managed Buy-Write Opportunities Fund
    208,578       2,592,625  
Eaton Vance Tax-Managed Diversified Equity Income Fund
    505,939       4,588,867  
Eaton Vance Tax-Managed Global Buy-Write Opportunities Fund
    424,169       4,445,291  
Eaton Vance Tax-Managed Global Diversified Equity Income Fund
    685,521       5,689,824  
ING Global Advantage and Premium Opportunity Fund
    58,039       653,519  
Nuveen Equity Premium Advantage Fund
    76,057       914,205  
Nuveen Equity Premium Income Fund
    45,251       547,537  
Nuveen Equity Premium Opportunity Fund
    119,695       1,424,370  
Other Option Arbitrage/Options Strategies (a)
            1,406,279  
              43,549,340  
 
See accompanying notes to financial statements.
 
 
3

 

Cornerstone Progressive Return Fund
Summary Schedule of Investments – June 30, 2012 (unaudited) (concluded)
 
Description
   
No. of
Shares
   
Value
 
PACIFIC EX JAPAN – 2.22%
 
Morgan Stanley China A Share Fund, Inc.
    127,933     $ 2,467,828  
Other Pacific Ex Japan (a)
            230,008  
              2,697,836  
REAL ESTATE – 1.08%
               
Neuberger Berman Real Estate Securities Income Fund Inc.
    216,652       957,602  
Other Real Estate (a)
            351,026  
              1,308,628  
SECTOR EQUITY – 1.47%
               
ING Risk Managed Natural Resources Fund
    70,642       785,539  
Petroleum & Resources Corporation
    30,400       728,384  
Other Sector Equity (a)
            270,737  
              1,784,660  
VALUE – 0.04%
               
Total Value (a)
            51,414  
                 
TOTAL CLOSED-END FUNDS
            80,721,374  
                 
CONSUMER DISCRETIONARY – 0.82%
 
Other Consumer Discretionary (a)
            997,575  
                 
CONSUMER STAPLES – 0.46%
 
Wal-Mart Stores, Inc.
    8,000       557,760  
                 
ENERGY – 0.67%
               
Chevron Corporation
    5,000       527,500  
Other Energy (a)
            290,000  
              817,500  
FINANCIALS – 0.80%
               
Other Financials (a)
            969,980  
                 
HEALTH CARE – 0.50%
               
Other Health Care (a)
            610,820  
 
Description
 
No. of
Shares
   
Value
 
INDUSTRIALS – 0.69%
           
Other Industrials (a)
        $ 843,350  
               
INFORMATION TECHNOLOGY – 2.06%
 
Apple, Inc. *
    2,000       1,168,000  
International Business Machines Corporation
    3,000       586,740  
Oracle Corporation
    25,000       742,500  
              2,497,240  
UTILITIES – 0.17%
               
Total Utilities (a)
            206,430  
                 
TOTAL EQUITY SECURITIES
         
(cost - $91,560,384)
      88,222,029  
                 
SHORT-TERM INVESTMENTS – 31.92%
 
MONEY MARKET FUNDS – 31.92%
 
Fidelity Institutional Money Market Government Portfolio - Class I (cost - $38,805,245)
    38,805,245       38,805,245  
                 
TOTAL INVESTMENTS – 104.49%
 
(cost - $130,365,629)
            127,027,274  
                 
LIABILITIES IN EXCESS OF OTHER ASSETS – (4.49)%
            (5,458,548 )
                 
NET ASSETS – 100.00%
          $ 121,568,726  
 
(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, 2012.
 
*
Non-income producing security.
 
See accompanying notes to financial statements.
 
 
4

 
 
Cornerstone Progressive Return Fund
Statement of Assets and Liabilities – June 30, 2012 (unaudited)

ASSETS
     
Investments, at value (cost – $130,365,629)
  $ 127,027,274  
Cash
    84,624  
Receivables:
       
Investments sold
    169,353  
Dividends
    160,484  
Prepaid expenses
    7,886  
Total Assets
    127,449,621  
         
LIABILITIES
       
Payables:
       
Securities purchased
    5,695,934  
Investment management fees (Note D)
    61,459  
Trustees’ fees
    16,083  
Accounting fees (Note D)
    5,585  
Other accrued expenses
    101,834  
Total Liabilities
    5,880,895  
         
NET ASSETS (applicable to 24,642,275 common shares of beneficial interest)
  $ 121,568,726  
         
NET ASSET VALUE PER SHARE ($121,568,726 ÷ 24,642,275)
  $ 4.93  
         
NET ASSETS CONSISTS OF
       
Paid-in capital
  $ 145,789,274  
Accumulated net realized loss on investments
    (20,882,193 )
Net unrealized depreciation in value of investments
    (3,338,355 )
Net assets applicable to shares outstanding
  $ 121,568,726  
 
See accompanying notes to financial statements.
 
 
5

 
 
Cornerstone Progressive Return Fund
Statement of Operations – for the Six Months Ended June 30, 2012 (unaudited)

INVESTMENT INCOME
     
Income:
     
Dividends from investments
  $ 3,137,145  
         
Expenses:
       
Investment management fees (Note D)
    397,827  
Administration fees (Note D)
    40,319  
Trustees’ fees and expenses
    30,907  
Accounting fees (Note D)
    25,721  
Printing
    17,398  
Legal and audit fees
    15,684  
Custodian fees
    9,475  
Transfer agent fees
    8,769  
Insurance
    3,431  
Miscellaneous
    115  
Total Expenses
    549,646  
Less: Fees paid indirectly
    (58,563 )
Net Expenses
    491,083  
Net Investment Income
    2,646,062  
         
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
       
Net realized gain from investments
    2,011,426  
Capital gain distributions from regulated investment companies
    266,574  
Net change in unrealized appreciation/(depreciation) in value of investments
    1,522,632  
Net realized and unrealized gain on investments
    3,800,632  
         
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
  $ 6,446,694  
 
See accompanying notes to financial statements.
 
 
6

 
 
Cornerstone Progressive Return Fund
Statement of Changes in Net Assets

   
For the Six
Months Ended
June 30, 2012
(Unaudited)
   
For the
Year Ended
December 31,
2011
 
             
INCREASE IN NET ASSETS
           
Operations:
           
Net investment income
  $ 2,646,062     $ 1,604,449  
Net realized gain from investments
    2,278,000       6,316,500  
Net change in unrealized appreciation/(depreciation)
in value of investments
    1,522,632       (9,533,087 )
                 
Net increase/(decrease) in net assets resulting from operations
    6,446,694       (1,612,138 )
                 
Dividends and distributions to shareholders:
               
Net investment income
    (2,646,062 )     (7,920,949 )
Return-of-capital
    (5,988,915 )     (8,194,697 )
                 
Total dividends and distributions to shareholders
    (8,634,977 )     (16,115,646 )
                 
Transactions in common shares of beneficial interest:
               
Proceeds from rights offering of 8,817,593 and 6,254,468
shares of newly issued common stock, respectively
    44,793,372       40,591,497  
Offering expenses associated with rights offering
    (128,254 )     (82,220 )
Proceeds from 129,978 and 65,407 shares newly issued in
reinvestment of dividends and distributions, respectively
    657,260       376,140  
                 
Net increase in net assets from capital stock transactions
    45,322,378       40,885,417  
                 
Total increase in net assets
    43,134,095       23,157,633  
                 
NET ASSETS
               
Beginning of period
    78,434,631       55,276,998  
End of period
  $ 121,568,726     $ 78,434,631  
 
See accompanying notes to financial statements.
 
 
7

 
 
Cornerstone Progressive Return Fund
Financial Highlights
Contained below is per share operating performance data for a share of common stock outstanding, total investment return, ratios to average net assets and other supplemental data for each period indicated. This information has been derived from information provided in the financial statements and market price data for the Fund’s shares

   
For the Six Months Ended June 30, 2012
   
For the Years Ended December 31,
   
For the Period Sept. 10, 2007* through
 
   
(Unaudited)
   
2011
   
2010
   
2009
   
2008
   
Dec. 31, 2007
 
PER SHARE OPERATING PERFORMANCE
                                   
Net asset value, beginning of period
  $ 5.00     $ 5.90     $ 6.28     $ 7.16     $ 14.10    
$14.96
Net investment income #
    0.17       0.12       0.13       0.16       0.16       0.06  
Net realized and unrealized gain/(loss) on investments
    0.20       (0.11 )     1.03       1.42       (4.64 )     (0.35 )
Net increase/(decrease) in net assets resulting from operations
    0.37       0.01       1.16       1.58       (4.48 )     (0.29 )
                                                 
Dividends and distributions to shareholders:
                                               
Net investment income
    (0.17 )     (0.61 )     (1.14 )     (0.16 )     (0.16 )     (0.06 )
Net realized capital gains
                                  (0.15 )
Return-of-capital
    (0.38 )     (0.63 )     (0.40 )     (2.30 )     (2.30 )     (0.41 )
Total dividends and distributions to shareholders
    (0.55 )     (1.24 )     (1.54 )     (2.46 )     (2.46 )     (0.62 )
                                                 
Transactions in common shares of beneficial interest:
                                               
Anti-dilutive effect due to shares issued:
                                               
Rights offering
    0.11       0.31                         0.05  
Reinvestment of dividends and distributions
    0.00 +     0.02       0.00 +                  
Total transactions in common shares of beneficial interest
    0.11       0.33                         0.05  
                                                 
Net asset value, end of period
  $ 4.93     $ 5.00     $ 5.90     $ 6.28     $ 7.16     $ 14.10  
Market value, end of period
  $ 5.31     $ 6.04     $ 7.46     $ 8.90     $ 7.10     $ 16.75  
Total investment return (a)
    (2.13% )(b)     (2.12% )     4.73%       65.40%       (47.53% )     16.02% (b)
                                                 
RATIOS/SUPPLEMENTAL DATA
                                               
Net assets, end of period (000 omitted)
  $ 121,569     $ 78,435     $ 55,277     $ 58,738     $ 66,811     $ 131,628  
Ratio of expenses to average net assets, net of fee waivers and fees paid indirectly, if any (c)
    1.23% (d)     1.30%       1.47%       1.39%       1.25%       1.29% (d)
Ratio of expenses to average net assets, excluding
fee waivers and fees paid indirectly, if any (c)
    1.38% (d)     1.45%       1.61%       1.54%       1.32%       1.42% (d)
Ratio of net investment income to average net assets
    6.65% (d)     2.20%       2.20%       2.54%       1.48%       1.46% (d)
Portfolio turnover rate
    35.56% (b)     112.69%       117.45%       115.99%       20.19%       6.77% (b)
 

 
*
Commencement of operations.
^
Based on $15.00 per share public offering price less $0.04 per share of offering expenses related to the Fund’s initial public offering.
#
Based on average shares outstanding.
+
Amount rounds to less than $0.01
(a)
Total investment return at market value is based on the changes in market price of a share during the period and assumes reinvestment of dividends and distributions, if any, at actual prices pursuant to the Fund’s dividend reinvestment plan. Total investment return does not reflect brokerage commissions.
(b)
Not annualized.
(c)
Expenses do not include expenses of investment companies in which the Fund invests.
(d)
Annualized.
 
See accompanying notes to financial statements.
 
 
8

 
 
Cornerstone Progressive Return Fund
Notes to Financial Statements (unaudited)
 
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 New York Stock Exchange (“NYSE”) are valued, except as indicated below, at the last sale price reflected on the consolidated tape at the close of the NYSE on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. If no bid or asked prices are quoted on such day or if market prices may be unreliable because of events occurring after the close of trading, then the security is valued by such method as the Board of Trustees shall determine in good faith to reflect its fair market value. Readily marketable securities not listed on the NYSE but listed on other domestic or foreign securities exchanges are valued in a like manner. Portfolio securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined as reflected on the consolidated tape at the close of the exchange representing the principal market for such securities. Securities trading on the Nasdaq Stock Market, Inc. (“NASDAQ”) are valued at the 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, 2012, 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 MKT is closed.
 
The Fund is exposed to financial market risks, including the valuations of its investment portfolio. During the six months ended June 30, 2012, the Fund did not invest in derivative instruments or engage in hedging activities.
 
Investment Transactions and Investment Income: Investment transactions are accounted for on the trade date. The cost of investments sold is determined by use of the specific identification method for both financial reporting and income tax
 
 
9

 

Cornerstone Progressive Return Fund
Notes to Financial Statements (unaudited) (continued)

purposes. Interest income is recorded on an accrual basis; dividend income is recorded on the ex-dividend date.
 
Risks Associated with Investments in Other Closed-end Funds: Closed-end investment companies are subject to the risks of investing in the underlying securities. The Fund, as a holder of the securities of the closed-end investment company, will bear its pro rata portion of the closed-end investment company’s expenses, including advisory fees. These expenses are in addition to the direct expenses of the Fund’s own operations.
 
Taxes: No provision is made for U.S. federal income or excise taxes as it is the Fund’s intention to qualify as a regulated investment company and to make the requisite distributions to its shareholders which will be sufficient to relieve it from all or substantially all U.S. federal income and excise taxes.
 
The Accounting for Uncertainty in Income Taxes Topic of the FASB Accounting Standards Codification defines the threshold for recognizing the benefits of tax-return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority and requires measurement of a tax position meeting the more-likely-than-not criterion, based on the largest benefit that is more than 50 percent likely to be realized. The Fund’s policy is to classify interest and penalties associated with underpayment of federal and state income taxes, if any, as income tax expense on its Statement of Operations. As of June 30, 2012, 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 2009 through 2011, and for the six months ended June 30, 2012. 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
 
 
10

 
 
Cornerstone Progressive Return Fund
Notes to Financial Statements (unaudited) (continued)

they are receiving net profits when they are not. Shareholders should read any written disclosure provided pursuant to Section 19(a) and Rule 19a-1 carefully, and should not assume that the source of any distribution from the Fund is net profit.
 
The Board of Trustees reserves the right to change the monthly distribution policy from time to time.
 
Distribution Policy Risk: The Fund seeks to make monthly distributions to shareholders at a rate that may include periodic distributions of its net income and net capital gains (“Net Earnings”), or from return-of-capital. If, for any fiscal year where total cash distributions exceeded Net Earnings (the “Excess”), the Excess would decrease the Fund’s total assets and, as a result, would have the likely effect of increasing the Fund’s expense ratio. There is a risk that the total Net Earnings from the Fund’s portfolio would not be great enough to offset the amount of cash distributions paid to Fund shareholders. If this were to be the case, the Fund’s assets would be depleted, and there is no guarantee that the Fund would be able to replace the assets. In addition, in order to make such distributions, the Fund may have to sell a portion of its investment portfolio at a time when independent investment judgment might not dictate such action. Furthermore, such assets used to make distributions will not be available for investment pursuant to the Fund’s investment objective.
 
NOTE C. FAIR VALUE
 
As required by the Fair Value Measurement and Disclosures Topic of the FASB Accounting Standards Codification, the Fund has performed an analysis of all assets and liabilities measured at fair value to determine the significance and character of all inputs to their fair value determination.
 
The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into the following three broad categories.
 
 
Level 1 – quoted unadjusted prices for identical instruments in active markets to which the Fund has access at the date of measurement.
 
 
Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.
 
 
Level 3 – model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the Fund’s own assumptions that market participants would use to price the asset or liability based on the best available information.
 
The following is a summary of the inputs used as of June 30, 2012 in valuing the Fund’s investments carried at value:
 
Valuation Inputs
 
Investments
in Securities
   
Other Financial Instruments*
 
Level 1 – Quoted Prices
           
Equity Investments
  $ 88,222,029        
Short-Term Investments
    38,805,245        
Level 2 – Other Significant Observable Inputs
           
Level 3 – Significant Unobservable Inputs
           
Total
  $ 127,027,274        
 

*
Other financial instruments include futures, forwards and swap contracts.
 
 
11

 
 
Cornerstone Progressive Return Fund
Notes to Financial Statements (unaudited) (continued)

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, 2012 the Fund did not have any transfers in and out of any Level.
 
The Fund did not have any assets or liabilities that were measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at June 30, 2012.
 
It is the Fund’s policy to recognize transfers into and out of any Level at the end of the reporting period.
 
In December 2011, FASB Issued ASU No. 2011-11 related to disclosures about offsetting assets and liabilities. The amendments in this ASU require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The ASU is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The guidance requires retrospective application for all comparative periods presented. The Investment Manager is currently evaluating the impact ASU 2011-11 will have on the 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 $58,563 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, 2012, Cornerstone earned $397,827 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. In addition, the Fund pays out-of-pocket expenses including, but not limited to, postage, supplies and costs of pricing the Fund’s portfolio securities.
 
NOTE E. INVESTMENT IN SECURITIES
 
For the six months ended June 30, 2012, purchases and sales of securities, other than short-term investments, were $36,399,355 and $28,700,120, respectively.
 
NOTE F. COMMON SHARES OF BENEFICIAL INTEREST
 
The Fund has unlimited common shares of beneficial interest authorized and has 24,642,275 shares outstanding at June 30, 2012. As of that date, two individuals that control Cornerstone owned 6,210 shares related to the initial issuance of the seed
 
 
12

 
 
Cornerstone Progressive Return Fund
Notes to Financial Statements (unaudited) (concluded)

capital shares of the Fund. Transactions in common shares of beneficial interest for the six months ended June 30, 2012 were as follows:
 
Shares at beginning of period
    15,694,704  
Shares newly issued from rights offering
    8,817,593  
Shares newly issued in reinvestment of dividends and distributions
    129,978  
Shares at end of period
    24,642,275  
 
NOTE G. FEDERAL INCOME TAXES
 
Income and capital gains distributions are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differing treatments of losses deferred due to wash sales and Post-October losses (as later defined), and excise tax regulations.
 
The tax character of dividends and distributions paid to shareholders during the year ended December 31, 2011 for the Fund was ordinary income of $7,920,949 and return of capital of $8,194,697.
 
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”). The Fund incurred no such loss during the year-ended December 31, 2011.
 
Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized after December 31, 2010 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Under the law in effect prior to the Act, pre-enactment net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses. Therefore, there may be a greater likelihood that all or a portion of the Fund’s pre-enactment capital loss carryovers may expire without being utilized.
 
At December 31, 2011, the Fund had a capital loss carryforward for U.S. federal income tax purposes of $23,136,587 which expires in 2017.
 
At June 30, 2012, 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 $130,377,712, $1,510,473, $(4,860,911), and $(3,350,438), respectively.
 
NOTE F. OTHER INVESTMENTS AND STRATEGIES
 
In order to maintain sufficient liquidity to implement investment strategies, or for temporary defensive purposes, the Fund may invest a significant portion of its assets in shares of a money market mutual fund. As of June 30, 2012, Cornerstone Progressive Return Fund had 31.92% of the value of its net assets invested in a money market mutual fund registered under the Investment Company Act of 1940.
 
 
13

 
 
Results of Annual Meeting of Shareholders (unaudited)
 
On April 16, 2012, the Annual Meeting of Shareholders of the Fund was held and the following matters were voted upon based on 15,714,784 shares of common stock outstanding on the record date of February 17, 2012:
 
 
(1)
To approve the election of five trustees to hold office until the year 2013 Annual Meeting of Shareholders.
 
Name of Directors
 
For
 
Withhold
Ralph W. Bradshaw
 
12,109,053
 
495,384
Edwin Meese III
 
11,914,465
 
689,972
Scott B. Rogers
 
12,102,200
 
502,237
Andrew A. Strauss
 
12,151,605
 
452,832
Glenn W. Wilcox, Sr.
 
12,055,458
 
548,979
 
 
14

 
 
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 10, 2012.
 
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 of 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.
 
 
15

 
 
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 MKT or elsewhere, with cash allocated to it by the Fund (“Open Market Purchases”).
 
The method for determining the number of Newly Issued Shares received when Distributions are reinvested will be determined by dividing the amount of the Distribution either by the Fund’s last reported net asset value per share or by a price equal to the average closing price of the Fund over the five trading days preceding the payment date of the Distribution, whichever is lower. However, if the last reported net asset value of the Fund’s shares is higher than 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 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.
 
 
16

 
 
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 participant’s account prior to receipt of written notice of his or her death or with respect to prices at which shares are purchased or sold for the participant’s account and the terms on which such purchases and sales are made, subject to applicable provisions of the federal securities laws.
 
The automatic reinvestment of Distributions will not relieve participants of any federal, state or local income tax that may be payable (or required to be withheld) on such Distributions. The Fund reserves the right to amend or terminate the Plan. There is no direct service charge to participants with regard to purchases in the Plan.
 
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.
 
 
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 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.
 
 
18

 
 
Privacy Policy (unaudited)
 
FACTS
WHAT DOES CORNERSTONE PROGRESSIVE RETURN FUND, (THE “FUND”) DO WITH YOUR PERSONAL INFORMATION?
Why?
Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.
What?
The types of personal information we, and our service providers, on our behalf, collect and share depend on the product or service you have with us. This information can include:
 
   •   Social Security number
   •   account balances
   •   account transactions
   •   transaction history
   •   wire transfer instructions
   •   checking account information
 
When you are no longer our customer, we continue to share your information as described in this notice.
How?
All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons the Fund, and our service providers, on our behalf, choose to share; and whether you can limit this sharing.
 
 
19

 
 
Privacy Policy (unaudited) (continued)
 
Reasons we can share your personal information
Does the Cornerstone Fund share?
Can you limit this sharing?
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus
Yes
No
For our marketing purposes – to offer our products and services to you
No
We don’t share
For joint marketing with other financial companies
No
We don’t share
For our affiliates’ everyday business purposes – information about your transactions and experiences
Yes
No
For our affiliates’ everyday business purposes – information about your creditworthiness
No
We don’t share
For our affiliates to market to you
No
We don’t share
For nonaffiliates to market to you
No
We don’t share
 
Questions?
Call (513) 326 -3597.
 
What we do
Who is providing this notice?
Cornerstone Progressive Return Fund (the “Fund”)
How does the Fund and the Fund’s service providers, on the Fund’s behalf protect my personal information?
To protect your personal information from unauthorized access and use, we and our service providers use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.
How does the Fund and the Fund’s service providers, on the Fund’s behalf collect my personal information?
We collect your personal information, for example, when you:
 
•   open an account
•   provide account information
•   give us your contact information
•   make a wire transfer
 
We also collect your information from others, such as credit bureaus, affiliates, or other companies.

 
20

 
 
Privacy Policy (unaudited) (concluded)
 
Why can’t I limit all sharing?
Federal law gives you the right to limit only
 
•   sharing for affiliates’ everyday business purposes – information about your
    creditworthiness
•   affiliates from using your information to market to you
•   sharing for nonaffiliates to market to you
 
State laws and individual companies may give you additional rights to limit sharing.
   
Definitions
Affiliates
 
Companies related by common ownership or control. They can be financial and nonfinancial companies.
 
•   Cornerstone Advisors, Inc.
Nonaffiliates
Companies not related by common ownership or control. They can be financial and nonfinancial companies.
 
•   The Fund does not share with nonaffiliates so they can market to you.
Joint marketing
A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
 
•   The Fund does not jointly market.

 
21

 
 
Summary of General Information (unaudited)
 
Cornerstone Progressive Return Fund is a closed-end, diversified investment company whose shares trade on the NYSE MKT. Its investment objective is to provide total return. The Fund is managed by Cornerstone Advisors, Inc.
 
Shareholder Information (unaudited)
 
The Fund is listed on the NYSE MKT (symbol “CFP”). The previous week’s net asset value per share, market price, and related premium or discount are available on The 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.

 
22

 
 
 
 
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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, 2012 (unaudited)
   
Description
 
No. of Shares
   
Value
 
EQUITY SECURITIES - 72.57%
           
CLOSED-END FUNDS - 66.40%
           
CONVERTIBLE SECURITIES - 1.43%
           
Advent Claymore Global Convertible Securities and Income Fund II
    126,327     $ 809,756  
AGIC Equity & Convertible Income Fund
    56,110       926,937  
              1,736,693  
CORE - 2.69%
               
Adams Express Company (The)
    19,309       203,710  
Advent/Claymore Enhanced Growth & Income Fund
    5,900       55,165  
General American Investors Company, Inc.
    21,300       581,490  
Guggenheim Enhanced Equity Strategy Fund
    4,257       71,816  
Liberty All-Star Equity Fund
    152,465       687,617  
Source Capital, Inc.
    7,900       387,969  
Tri-Continental Corporation
    36,039       557,523  
Zweig Fund, Inc. (The)
    60,770       728,632  
              3,273,922  
CORPORATE DEBT FUNDS INVESTMENT GRADE-RATED - 3.13%
               
Cutwater Select Income Fund
    1       26  
Federated Enhanced Treasury Income Fund
    55,339       799,095  
Montgomery Street Income Securities, Inc.
    2,800       44,856  
Western Asset Inflation Management Fund Inc.
    5,269       95,685  
Western Asset/Claymore Inflation-Linked Opportunities & Income Fund
    144,198       1,881,784  
Western Asset/Claymore Inflation-Linked Securities & Income Fund
    75,377       979,901  
              3,801,347  
DEVELOPED MARKET - 1.56%
               
European Equity Fund, Inc. (The)
    1,500       9,150  
Japan Equity Fund, Inc. (The)
    5,400       27,972  
Japan Smaller Capitalization Fund, Inc.
    163,824       1,210,659  
New Germany Fund, Inc. (The)
    2,100       28,350  
New Ireland Fund, Inc. (The)
    1,484       10,848  
Singapore Fund, Inc. (The)
    26,967       338,975  
Swiss Helvetia Fund, Inc. (The)
    26,805       271,535  
              1,897,489  
EMERGING MARKETS - 3.55%
               
Aberdeen Chile Fund, Inc.
    19,590       297,964  
 
 
 

 
 
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2012 (unaudited) (continued)
   
Description
 
No. of Shares
   
Value
 
EMERGING MARKETS (continued)
           
Aberdeen Emerging Markets Telecommunications and Infrastructure Fund, Inc.
    5,100     $ 95,931  
Aberdeen Latin America Equity Fund, Inc.
    600       19,164  
DWS Global High Income Fund, Inc.
    711       5,859  
First Israel Fund, Inc.
    4,794       59,302  
India Fund, Inc. (The)
    129,877       2,646,893  
Morgan Stanley India Investment Fund, Inc. *
    68,792       1,066,964  
Templeton Russia and East European Fund, Inc. *
    8,970       123,876  
              4,315,953  
EMERGING MARKETS DEBT - 0.06%
               
Morgan Stanley Emerging Markets Debt Fund, Inc.
    6,208       68,723  
                 
FLEXIBLE INCOME - 2.16%
               
Putnam Master Intermediate Income Trust
    123,505       632,346  
Putnam Premier Income Trust
    371,901       1,989,670  
              2,622,016  
GENERAL & INSURED LEVERAGED - 0.14%
               
Invesco Value Municipal Bond Trust
    10,886       167,644  
                 
GENERAL & INSURED UNLEVERAGED - 0.02%
               
Delaware Investments National Municipal Income Fund
    1,800       24,516  
                 
GENERAL BOND - 1.52%
               
Nuveen Build America Bond Fund
    64,689       1,368,172  
Nuveen Build America Bond Opportunity Fund
    22,299       481,212  
              1,849,384  
GENERAL MUNICIPAL LEVERAGED - 1.08%
               
BlackRock Municipal Income Investment Quality Trust
    1,900       29,507  
Eaton Vance Municipal Bond Fund
    85,634       1,139,789  
Invesco Value Municipal Trust
    2,200       33,418  
Nuveen Dividend Advantage Municipal Fund 3
    4,210       62,855  
 
 
 

 
 
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2012 (unaudited) (continued)
   
Description
 
No. of Shares
   
Value
 
GENERAL MUNICIPAL LEVERAGED (continued)
           
Nuveen Municipal Market Opportunity Fund, Inc.
    3,393     $ 49,131  
              1,314,700  
GLOBAL - 5.21%
               
AGIC Global Equity & Convertible Income Fund
    24,800       315,704  
Alpine Total Dynamic Dividend Fund
    42,600       177,642  
Clough Global Allocation Fund
    33,200       431,268  
Clough Global Equity Fund
    56,369       681,501  
Clough Global Opportunities Fund
    204,664       2,200,138  
Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund
    61,898       1,115,402  
First Trust Active Dividend Income Fund
    37,095       289,341  
GDL Fund (The)
    29,779       354,668  
Lazard Global Total Return & Income Fund, Inc.
    8,600       121,604  
Lazard World Dividend & Income Fund, Inc.
    25,347       284,393  
Nuveen Global Value Opportunities Fund
    25,775       366,778  
              6,338,439  
GLOBAL INCOME - 1.20%
               
Global Income & Currency Fund Inc.
    7,399       97,075  
Nuveen Multi-Currency Short-Term Government Income Fund
    109,643       1,359,573  
              1,456,648  
INCOME & PREFERRED STOCK - 1.83%
               
Dividend and Income Fund, Inc.
    22,036       74,041  
Zweig Total Return Fund, Inc. (The)
    175,233       2,153,617  
              2,227,658  
INSURED MUNICIPAL LEVERAGED - 0.08%
               
Nuveen Quality Municipal Fund, Inc.
    3,352       49,777  
Nuveen Premier Municipal Opportunity Fund, Inc.
    3,200       50,464  
              100,241  
LOAN PARTICIPATION - 0.11%
               
BlackRock Diversified Income Strategies Fund, Inc.
    13,098       134,123  
 
 
 

 
 
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2012 (unaudited) (continued)
   
Description
 
No. of Shares
   
Value
 
OPTION ARBITRAGE/OPTIONS STRATEGIES - 35.82%
           
BlackRock Enhanced Capital & Income Fund, Inc.
    179,452     $ 2,296,986  
BlackRock Enhanced Equity Dividend Trust
    613,787       4,443,818  
BlackRock Global Opportunities Equity Trust
    55,600       736,700  
BlackRock International Growth and Income Trust
    464,875       3,309,910  
Dow 30 Enhanced Premium & Income Fund Inc.
    32,000       346,560  
Eaton Vance Enhanced Equity Income Fund
    220,336       2,335,562  
Eaton Vance Enhanced Equity Income Fund II
    245,453       2,606,711  
Eaton Vance Risk-Managed Diversified Equity Income Fund
    361,450       3,704,862  
Eaton Vance Tax-Managed Buy-Write Income Fund
    137,818       1,852,274  
Eaton Vance Tax-Managed Buy-Write Opportunities Fund
    208,578       2,592,625  
Eaton Vance Tax-Managed Diversified Equity Income Fund
    505,939       4,588,867  
Eaton Vance Tax-Managed Global Buy-Write Opportunities Fund
    424,169       4,445,291  
Eaton Vance Tax-Managed Global Diversified Equity Income Fund
    685,521       5,689,824  
First Trust Enhanced Equity Income Fund
    29,580       348,157  
ING Global Advantage and Premium Opportunity Fund
    58,039       653,519  
Madison Strategic Sector Premium Fund
    18,900       208,278  
Madison/Claymore Covered Call & Equity Strategy Fund
    45,338       345,929  
Nuveen Equity Premium Advantage Fund
    76,057       914,205  
Nuveen Equity Premium and Growth Fund
    12,303       157,355  
Nuveen Equity Premium Income Fund
    45,251       547,537  
Nuveen Equity Premium Opportunity Fund
    119,695       1,424,370  
              43,549,340  
PACIFIC EX JAPAN - 2.22%
               
Asia Pacific Fund, Inc. (The) *
    800       7,608  
Asia Tigers Fund, Inc. (The) *
    607       7,770  
Greater China Fund, Inc. (The)
    2,300       24,587  
JF China Region Fund, Inc.
    100       1,211  
Korea Equity Fund, Inc. *
    1,958       17,642  
 
 
 

 
 
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2012 (unaudited) (continued)
   
Description
 
No. of Shares
   
Value
 
PACIFIC EX JAPAN (continued)
           
Malaysia Fund, Inc. (The)
    19,000     $ 171,190  
Morgan Stanley China A Share Fund, Inc.
    127,933       2,467,828  
              2,697,836  
REAL ESTATE - 1.08%
               
LMP Real Estate Income Fund, Inc.
    33,751       351,010  
Neuberger Berman Real Estate Securities Income Fund Inc.
    216,652       957,602  
RMR Asia Pacific Real Estate Fund
    1       16  
              1,308,628  
SECTOR EQUITY - 1.47%
               
BlackRock EcoSolutions Investment Trust
    14,445       115,560  
Gabelli Healthcare & WellnessRx Trust (The)
    13,731       115,203  
ING Risk Managed Natural Resources Fund
    70,642       785,539  
John Hancock Bank and Thrift Opportunity Fund
    2,433       39,974  
Petroleum & Resources Corporation
    30,400       728,384  
              1,784,660  
VALUE - 0.04%
               
Royce Focus Trust, Inc.
    8,200       51,414  
                 
                 
TOTAL CLOSED-END FUNDS
      80,721,374  
                 
CONSUMER DISCRETIONARY - 0.82%
               
Comcast Corporation - Class A
    3,358       107,355  
DIRECTV - Class A *
    4,000       195,280  
Macy's, Inc.
    2,000       68,700  
Time Warner Cable, Inc.
    2,000       164,200  
Time Warner, Inc.
    2,000       77,000  
Viacom Inc. - Class B
    2,000       94,040  
Walt Disney Company (The)
    6,000       291,000  
              997,575  
CONSUMER STAPLES - 0.46%
               
Wal-Mart Stores, Inc.
    8,000       557,760  
                 
ENERGY - 0.67%
               
Chevron Corporation
    5,000       527,500  
ConocoPhillips
    4,000       223,520  
Phillips 66 *
    2,000       66,480  
              817,500  
 
 
 

 
 
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2012 (unaudited) (continued)
   
Description
 
No. of Shares
   
Value
 
FINANCIALS - 0.80%
           
AFLAC, Inc.
    2,000     $ 85,180  
Allstate Corporation (The)
    3,000       105,270  
Discover Financial Services
    2,000       69,160  
JPMorgan Chase & Co.
    8,000       285,840  
Marsh & McLennan Companies, Inc.
    2,000       64,460  
MetLife, Inc.
    3,000       92,550  
Wells Fargo & Company
    8,000       267,520  
              969,980  
HEALTH CARE - 0.50%
               
Abbott Laboratories
    3,000       193,410  
Amgen Inc.
    4,000       292,160  
Merck & Company, Inc.
    3,000       125,250  
              610,820  
INDUSTRIALS - 0.69%
               
Caterpillar Inc.
    3,000       254,730  
CSX Corporation
    2,000       44,720  
Deere & Company
    2,000       161,740  
Norfolk Southern Corporation
    2,000       143,540  
Union Pacific Corporation
    2,000       238,620  
              843,350  
INFORMATION TECHNOLOGY - 2.06%
               
Apple Inc. *
    2,000       1,168,000  
International Business Machines Corporation
    3,000       586,740  
Oracle Corporation
    25,000       742,500  
              2,497,240  
UTILITIES - 0.17%
               
NextEra Energy, Inc.
    3,000       206,430  
                 
TOTAL EQUITY SECURITIES (cost - $91,560,384)
      88,222,029  
                 
SHORT-TERM INVESTMENTS - 31.92%
               
MONEY MARKET FUNDS - 31.92%
               
Fidelity Institutional Money Market Government Portfolio - Class I (cost - $38,805,245)
    38,805,245       38,805,245  
                 
TOTAL INVESTMENTS - 104.49% (cost - $130,365,629)
      127,027,274  
 
 
 

 
 
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2012 (unaudited) (continued)
   
Description
No. of Shares
 
Value
 
LIABILITIES IN EXCESS OF OTHER ASSETS - (4.49)%
    (5,458,548 )
         
NET ASSETS - 100.00%
  $ 121,568,726  
 

* Non-income producing security.
 
 
 

 
 
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, 2012
   
 
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, 2012
   
       
     
By (Signature and Title)*
/s/ Theresa M. Bridge
 
   
Theresa M. Bridge,  Treasurer
 
   
(Principal Financial Officer)
 
       
Date
September 4, 2012
   

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