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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
CORNERSTONE PROGRESSIVE RETURN FUND
(Exact name of registrant as specified in charter)
383 Madison Avenue, New York, New York 10179
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(Address of principal executive offices) (Zip code)
Kayadti A. Madison
383 Madison Avenue, New York, New York 10179
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(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 272-3550
Date of fiscal year end: December 31, 2008
Date of reporting period: June 30, 2008
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.
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ITEM 1. REPORTS TO STOCKHOLDERS.
The report of Cornerstone Progressive Return Fund (the "Registrant") to
stockholders for the semi-annual period ended June 30, 2008 follows.
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CORNERSTONE PROGRESSIVE
RETURN FUND
SEMI-ANNUAL REPORT
JUNE 30, 2008
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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 13
Description of Dividend Reinvestment Plan 14
Proxy Voting and Portfolio Holdings Information 16
Privacy Policy Notice 16
Summary of General Information 17
Shareholder Information 17
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CORNERSTONE PROGRESSIVE RETURN FUND
PORTFOLIO SUMMARY - AS OF JUNE 30, 2008 (UNAUDITED)
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SECTOR ALLOCATION
Percent of
Sector Net Assets
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Information Technology 17.0
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Energy 15.1
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Financials 12.5
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Healthcare 11.5
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Industrials 10.8
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Consumer Staples 10.3
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Consumer Discretionary 8.5
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Materials 3.8
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Utilities 3.7
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Telecommunication Services 3.2
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Closed-End Funds 2.4
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Other 1.2
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TOP TEN HOLDINGS, BY ISSUER
Percent of
Holding Sector Net Assets
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1. Exxon Mobil Corporation Energy 5.1
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2. General Electric Company Industrials 2.8
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3. Microsoft Corporation Information Technology 2.8
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4. Chevron Corporation Energy 2.4
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5. AT&T Inc. Telecommunication Services 2.3
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6. Wal-Mart Stores, Inc. Consumer Staples 2.3
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7. Google Inc. Information Technology 2.3
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8. Johnson & Johnson Healthcare 2.0
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9. Procter & Gamble Company (The) Consumer Staples 1.8
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10. International Business Machines Corporation Information Technology 1.7
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1
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CORNERSTONE PROGRESSIVE RETURN FUND
SUMMARY SCHEDULE OF INVESTMENTS - JUNE 30, 2008 (UNAUDITED)
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No. of
Description Shares Value
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EQUITY SECURITIES - 99.43%
CLOSED-END FUNDS - 2.39%
Dreman/Claymore Dividend & Income Fund 63,050 $ 800,735
Liberty All-Star Equity Fund 217,000 1,273,790
Other Closed-End Funds (a) 420,480
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2,495,005
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CONSUMER DISCRETIONARY - 8.52%
Comcast Corporation, Class A ^ 36,000 682,920
McDonald's Corporation 15,000 843,300
Philip Morris International Inc. 21,000 1,037,190
Walt Disney Company (The) 25,000 780,000
Other Consumer Discretionary (a) 5,565,675
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8,909,085
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CONSUMER STAPLES - 10.27%
Coca-Cola Company (The) 25,000 1,299,500
PepsiCo, Inc. ^ 12,000 763,080
Procter & Gamble Company (The) 31,000 1,885,110
Wal-Mart Stores, Inc. 43,000 2,416,600
Other Consumer Staples (a) 4,368,080
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10,732,370
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ENERGY - 15.10%
Chevron Corporation 25,000 2,478,250
ConocoPhillips 13,000 1,227,070
Devon Energy Corporation 8,000 961,280
Exxon Mobil Corporation ^ 60,000 5,287,800
Schlumberger Limited ^ 15,500 1,665,165
Other Energy (a) 4,165,459
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15,785,024
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FINANCIALS - 12.54%
American International Group, Inc. ^ 25,000 661,500
Bank of America Corporation 44,000 1,050,280
Citigroup Inc. 46,000 770,960
Goldman Sachs Group, Inc. (The) ^ 5,000 874,500
No. of
Description Shares Value
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FINANCIALS (CONTINUED)
JPMorgan Chase & Co. 39,000 $ 1,338,090
Metlife, Inc. ^ 11,000 580,470
Wells Fargo & Company 38,000 902,500
Other Financials (a) 6,935,350
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13,113,650
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HEALTHCARE - 11.47%
Abbott Laboratories 14,000 741,580
Baxter International Inc. ^ 11,000 703,340
Eli Lilly and Company 15,000 692,400
Gilead Sciences, Inc. * 13,000 688,350
Johnson & Johnson 33,000 2,123,220
Medtronic, Inc. 16,000 828,000
Merck & Co. Inc. ^ 28,000 1,055,320
Wyeth 14,000 671,440
Other Healthcare (a) 4,491,435
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11,995,085
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INDUSTRIALS - 10.85%
Danaher Corporation 8,000 618,400
Deere & Company ^ 10,000 721,300
General Electric Company 111,000 2,962,590
Honeywell International Inc. 12,000 603,360
United Parcel Service, Inc., Class B 17,000 1,044,990
United Technologies Corporation 13,000 802,100
Other Industrials (a) 4,586,430
11,339,170
INFORMATION TECHNOLOGY - 16.98%
Apple Computer Inc. ^ * 9,000 1,506,960
Cisco Systems, Inc. * 61,000 1,418,860
Google Inc. * 4,500 2,368,890
Hewlett-Packard Company 28,000 1,237,880
Intel Corporation 61,000 1,310,280
International Business Machines Corporation 15,000 1,777,950
Microsoft Corporation 105,000 2,888,550
Oracle Corporation * 60,000 1,260,000
QUALCOMM Inc. 14,000 621,180
Other Information Technology (a) 3,364,605
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17,755,155
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See accompanying notes to financials statements.
2
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CORNERSTONE PROGRESSIVE RETURN FUND
SUMMARY SCHEDULE OF INVESTMENTS - JUNE 30, 2008 (UNAUDITED)(CONCLUDED)
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No. of
Description Shares Value
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MATERIALS - 3.78%
Monsanto Company 10,000 $ 1,264,400
Other Materials (a) 2,687,315
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3,951,715
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REAL ESTATE INVESTMENT TRUST - 0.62%
Total Real Estate Investment Trust (a) 651,425
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TELECOMMUNICATION SERVICES - 3.20%
AT&T Inc. 72,000 2,425,680
Verizon Communications Inc. 26,000 920,400
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3,346,080
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UTILITIES - 3.71%
Dominion Resources, Inc. 14,000 664,860
Entergy Corporation ^ 5,000 602,400
Total Utilities (a) 2,610,150
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3,877,410
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TOTAL EQUITY SECURITIES
(cost - $121,321,661) 103,951,174
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SHORT-TERM INVESTMENTS - 13.28%
MONEY MARKET SECURITY - 0.60%
JPMorgan U.S. Government Money Market Fund 627,916 627,916
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Principal
Amount
Description (000's) Value
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REPURCHASE AGREEMENTS - 12.68%
Bear, Stearns & Co. Inc. +
(Agreements dated
6/30/2008 to be
repurchased at
$13,257,373) (b) $13,257 $ 13,256,514
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TOTAL SHORT-TERM INVESTMENTS
(cost - $13,884,430) 13,884,430
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TOTAL INVESTMENTS - 112.71%
(cost - $135,206,091) 117,835,604
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LIABILITIES IN EXCESS OF
OTHER ASSETS - (12.71)% (13,285,765)
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NET ASSETS - 100.00% $104,549,839
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* Non-income producing security.
^ Security or a portion thereof is out on loan.
+ Includes investments purchased with collateral received for securities
on loan.
(a) Represents issues 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, 2008.
(b) At June 30, 2008, the maturity date for all repurchase agreements held
was July 1, 2008, with interest rates ranging from 1.25% to 2.50% and
collateralized by $13,629,716 in U.S. Treasury Bonds maturing April
15, 2028.
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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, 2008 (UNAUDITED)
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ASSETS
Investments, at value, including collateral for securities
on loan of $13,256,514 (Cost $135,206,091 ) (1) $ 117,835,604
Receivables:
Dividends 112,453
Prepaid expenses 8,730
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Total Assets 117,956,787
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LIABILITIES
Payables:
Upon return of securities loaned 13,256,514
Investment management fees 90,924
Trustees' fees 20,304
Other accrued expenses 39,206
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Total Liabilities 13,406,948
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NET ASSETS (applicable to 9,335,570 shares of common outstanding) $ 104,549,839
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NET ASSET VALUE PER SHARE ($104,549,839 / 9,335,570) $ 11.20
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NET ASSETS CONSISTS OF
Paid-in capital $ 125,185,523
Accumulated net realized loss on investments (3,265,197)
Net unrealized depreciation in value of investments (17,370,487)
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Net assets applicable to shares outstanding $ 104,549,839
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(1) Includes securities out on loan to brokers with a market value of
$12,996,033.
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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, 2008 (UNAUDITED)
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INVESTMENT INCOME
Income:
Dividends $ 1,322,112
Interest 34,710
Securities lending 7,669
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Total Investment Income 1,364,491
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Expenses:
Investment management fees 578,056
Administration fees 57,806
Trustees' fees 39,575
Legal and audit fees 22,730
Accounting fees 20,320
Custodian fees 9,945
Printing 9,415
Transfer agent fees 8,332
Stock exchange listing fees 4,929
Insurance 1,424
Miscellaneous 1,443
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Total Expenses 753,975
Less: Fees paid indirectly (49,181)
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Net Expenses 704,794
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Net Investment Income 659,697
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NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss from investments (3,265,197)
Net change in unrealized depreciation in value of investments (13,019,817)
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Net realized and unrealized loss on investments (16,285,014)
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NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(15,625,317)
============
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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 For the Period
Months Ended September 10, 2007*
June 30, 2008 Through
(unaudited) December 31, 2007
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INCREASE/(DECREASE) IN NET ASSETS
Operations:
Net investment income $ 659,697 $ 566,522
Net realized gain/(loss) from investments (3,265,197) 1,274,327
Net change in unrealized depreciation
in value of investments (13,019,817) (4,350,670)
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Net decrease in net assets resulting from operations (15,625,317) (2,509,821)
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Dividends and distributions to shareholders:
Net investment income (659,697) (566,522)
Net realized capital gains -- (1,274,327)
Return-of-capital (10,821,577) (3,647,294)
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Total dividends and distributions to shareholders (11,481,274) (5,488,143)
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Capital stock transactions:
Proceeds from initial public offering of 8,097,800 shares of common -- 121,467,000
Proceeds from secondary offering of 1,228,865 shares of common -- 18,432,975
Offering expenses associated with the issuance of common shares -- (379,619)
Proceeds from 1,904, and 333 shares newly issued
in reinvestment of dividends and distributions, respectively 28,721 5,297
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Net increase in net assets from capital share transactions 28,721 139,525,653
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Total increase/(decrease) in net assets (27,077,870) 131,527,689
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NET ASSETS
Beginning of period 131,627,709 100,020
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End of period $ 104,549,839 $ 131,627,709
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* Commencement of operations
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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
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 September 10, 2007*
June 30, 2008 Through
(unaudited) December 31, 2007
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PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 14.10 $ 14.96^
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Net investment income # 0.07 0.06
Net realized and unrealized loss on investments (1.74) (0.35)
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Net decrease in net assets resulting from operations (1.67) (0.29)
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Dividends and distributions to shareholders:
Net investment income (0.07) (0.06)
Net realized capital gains -- (0.15)
Return-of-capital (1.16) (0.41)
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Total dividends and distributions to shareholders (1.23) (0.62)
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Capital transactions:
Anti-dilutive effect due to issuance of common shares -- 0.05
Anti-dilutive effect due to shares issued in reinvestment of
dividends and distributions 0.00+ 0.00+
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Total capital share transactions 0.00 0.05
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Net asset value, end of period $ 11.20 $ 14.10
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Market value, end of period $ 16.12 $ 16.75
========= ==========
Total investment return (a) 4.32% 16.02%
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RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 104,550 $ 131,628
Ratio of expenses to average net assets, net of fees paid indirectly (b) 1.22% 1.29%
Ratio of expenses to average net assets, excluding the reduction for fees paid 1.30% 1.42%
indirectly (b)
Ratio of net investment income to average net assets (b) 1.14% 1.46%
Portfolio turnover rate 5.23% 6.77%
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* Commencement of operations
^ Based on $15.00 per share public offering price less $0.04 per share
of offering expenses related to the Fund's initial public offering.
# Based on average shares outstanding. + Amount is less than a $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) Annualized
================================================================================
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.
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, 2008, 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 American Stock Exchange, 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.
At this time, management is evaluating the implications of FAS 161 and its
impact on the financial statements has not yet been determined.
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
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8
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CORNERSTONE PROGRESSIVE RETURN FUND NOTES
TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
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.
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 in the open 2007 tax year. 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 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
================================================================================
9
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CORNERSTONE PROGRESSIVE RETURN FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
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. 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 investments, 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, 2008 in valuing the
Fund's investments carried at value:
INVESTMENTS IN OTHER FINANCIAL
VALUATION INPUTS SECURITIES INSTRUMENTS*
--------------------------------------------------------------------------------
Level 1 - Quoted
Prices $103,951,174 --
Level 2 - Other
Significant
Observable Inputs 13,884,430 --
Level 3 - Significant
Unobservable Inputs -- --
------------ ------------
Total $117,835,604 --
============ ============
-------
* 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,
2008.
================================================================================
10
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
NOTE D. AGREEMENTS
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, 2008, Cornerstone earned $578,056 for investment management services.
Included in the Statement of Operations, under the caption FEES PAID INDIRECTLY,
are expense offsets of $49,181 arising from credits earned on portfolio
transactions executed with a broker, pursuant to a directed brokerage
arrangement.
The Fund paid or accrued approximately $13,419 for the six months ended June 30,
2008 for legal services to Blank Rome LLP ("Blank"), counsel to the Fund. Thomas
R. Westle, partner of Blank, served as Secretary of the Fund until February 15,
2008.
NOTE E. INVESTMENT IN SECURITIES
For the six months ended June 30, 2008, purchases and sales of securities, other
than short-term investments, were $6,090,409 and $16,059,468 respectively.
NOTE F. COMMON SHARES OF BENEFICIAL INTEREST
The Fund has 9,335,570 common shares of beneficial interest authorized and
outstanding at June 30, 2008. As of that date, two individuals that Control
Cornerstone owned 8,458 shares in the Fund.
Transactions in common shares for the period ended June 30, 2008 were as
follows:
Shares at beginning of period 9,333,666
Shares newly issued in reinvestment
of dividends and distributions 1,904
---------
Shares at end of period 9,335,570
=========
NOTE G. 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, 2008. 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 H. 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
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, 2008 was $12,996,033.
During the six months ended June 30, 2008, the Fund earned $7,669 in securities
lending income which is included under the caption SECURITIES LENDING in the
Statement of Operations.
================================================================================
11
--------------------------------------------------------------------------------
CORNERSTONE PROGRESSIVE RETURN FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
NOTE I. FEDERAL INCOME TAXES
Income and capital gains distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments of losses deferred due to wash sales and
Post-October losses (as later defined), and excise tax regulations.
The tax character of dividends and distributions paid during the period ended
December 31, 2007 for the Fund were as follows: $566,522 in ordinary income,
$1,274,327 in capital gains, and $3,647,294 in return-of-capital.
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"). For the tax period ended December
31, 2007, the Fund did not incur Post-October losses.
At June 30, 2008, 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 $135,206,091, $2,872,251,
$(20,242,738), and $(17,370,487), respectively.
================================================================================
12
RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
On April 15, 2008, the Annual Meeting of Shareholders of Cornerstone Progressive
Return Fund was held and the following matter was voted upon based on 9,333,814
common shares outstanding on February 19, 2008:
(1) To approve the re-election of six Trustees until the 2009 Annual
Meeting.
NAME OF DIRECTORS FOR WITHHOLD
----------------- --- --------
Ralph W. Bradshaw 9,258,567 46,143
Thomas H. Lenagh 9,259,167 45,543
Edwin Meese III 9,259,167 45,543
Scott B. Rogers 9,259,117 45,593
Andrew A. Strauss 9,258,167 46,543
Glenn W. Wilcox, Sr. 9,258,117 46,593
================================================================================
13
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
American Stock Exchange, 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 to the Plan. Each participant, nevertheless, has the right to receive
certificates for whole shares owned.
================================================================================
14
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED) (CONCLUDED)
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.
================================================================================
15
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 (212) 272-3550 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 (212) 272-3550.
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 Cornerstone Progressive Return Fund's (the
"Fund") 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 transactions with the Fund, its affiliates, or
others (such as your account number and balance, payment history, parties
to transactions, cost basis information, and other financial information).
CATEGORIES OF INFORMATION THE FUND DISCLOSES. The Fund does not disclose any
nonpublic personal information about their current or former shareholders to
unaffiliated third parties, except as required or permitted by law. The Fund is
permitted by law to disclose all of the information it collects, as described
above, to its service providers (such as the Fund's custodian, administrator and
transfer agent) to process your transactions and otherwise provide services to
you.
CONFIDENTIALITY AND SECURITY. The Fund restricts access to your nonpublic
personal information to those persons who require such information to provide
products or services to you. The Fund maintains physical, electronic and
procedural safeguards that comply with federal standards to guard your nonpublic
personal information.
================================================================================
16
SUMMARY OF GENERAL INFORMATION (UNAUDITED)
Cornerstone Progressive Return Fund is a closed-end, diversified investment
company whose shares trade on the American Stock Exchange, 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 American Stock Exchange, 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 SHARES OF ITS CAPITAL SHARES IN THE OPEN MARKET.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. The financial information
included herein is taken from the records of the Fund without examination by
independent registered public accountants who do not express an opinion 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.
--------------------------------------------------------------------------------
================================================================================
17
CORNERSTONE PROGRESSIVE RETURN FUND
================================================================================
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
and Secretary
William A. Clark Vice President
Kayadti A. Madison 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
Bear Stearns Funds PUBLIC ACCOUNTING FIRM
Management Inc., Tait, Weller & Baker LLP
a J.P. Morgan Company 1818 Market Street
383 Madison Avenue Suite 2400
New York, NY 10179 Philadelphia, PA 19103
CUSTODIAN LEGAL COUNSEL
Custodial Trust Company Blank Rome LLP
101 Carnegie Center 405 Lexington Avenue
Princeton, NJ 08540 New York, NY 10174
EXECUTIVE OFFICES
383 Madison Avenue
New York, NY 10179
For shareholder inquiries, registered shareholders should call (800) 937-5449.
For general inquiries, please call (212) 272-3550.
LOGO
AMERICAN STOCK EXCHANGE(r)
LISTED
CFP
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a)
================================================================================
CORNERSTONE PROGRESSIVE RETURN FUND
SCHEDULE OF INVESTMENTS -- JUNE 30, 2008 (UNAUDITED)
================================================================================
No. of
Description Shares Value
---------------------------------------------------- ----------- ----------
EQUITY SECURITIES - 99.43%
CLOSED-END FUNDS - 2.39%
Boulder Growth & Income Fund Inc. 6,000 $ 44,160
Dreman/Claymore Dividend & Income Fund 63,050 800,735
Liberty All-Star Equity Fund 217,000 1,273,790
Royce Value Trust, Inc. 24,000 376,320
-----------
2,495,005
-----------
CONSUMER DISCRETIONARY - 8.52%
Amazon.com, Inc. * 5,500 403,315
Best Buy Co., Inc. ^ 8,000 316,800
Carnival Corporation ^ 5,000 164,800
Coach, Inc. * 4,000 115,520
Comcast Corporation, Class A ^ 36,000 682,920
DIRECTV Group, Inc. (The) * 15,000 388,650
Ford Motor Company * 30,000 144,300
Gamestop Corporation - Class A ^ * 2,500 101,000
Gap, Inc. (The) 11,000 183,370
Home Depot, Inc. (The) 15,000 351,300
Johnson Controls, Inc. ^ 10,000 286,800
Kohl's Corporation * 3,500 140,140
Lowe's Companies, Inc. ^ 14,000 290,500
McDonald's Corporation 15,000 843,300
News Corporation, Class A 31,000 466,240
NIKE, Inc., Class B 8,000 476,880
Nordstrom, Inc. ^ 5,500 166,650
Omnicom Group Inc. ^ 4,000 179,520
Philip Morris International Inc. 21,000 1,037,190
Staples, Inc. 5,000 118,750
Target Corporation 8,000 371,920
Tata Motors Limited ^ ADR 10,000 100,500
Time Warner Inc. ^ 35,000 518,000
Walt Disney Company (The) 25,000 780,000
Yum! Brands, Inc. ^ 8,000 280,720
-----------
8,909,085
-----------
CONSUMER STAPLES - 10.27%
Altria Group, Inc. 21,000 431,760
Anheuser-Busch Companies, Inc. 3,000 186,360
Archer-Daniels-Midland Company ^ 6,000 202,500
Coca-Cola Company (The) 25,000 1,299,500
Colgate-Palmolive Company 5,000 345,500
ConAgra Foods, Inc. 9,000 173,520
Costco Wholesale Corporation ^ 4,000 280,560
CVS Caremark Corporation 14,000 553,980
Estee Lauder Companies Inc. (The) ^ 3,000 139,350
General Mills, Inc. 5,000 303,850
Kimberly-Clark Corporation 4,500 269,010
Kraft Foods Inc, Class A 18,000 512,100
Kroger Co. (The) 7,000 202,090
Molson Coors Brewing Company 4,000 217,320
PepsiCo, Inc. ^ 12,000 763,080
Procter & Gamble Company (The) 31,000 1,885,110
Sysco Corporation ^ 7,000 192,570
Walgreen Company 11,000 357,610
Wal-Mart Stores, Inc. 43,000 2,416,600
-----------
10,732,370
-----------
ENERGY - 15.10%
Apache Corporation 3,500 486,500
Chesapeake Energy Corporation 4,000 263,840
Chevron Corporation 25,000 2,478,250
ConocoPhillips 13,000 1,227,070
CONSOL Energy Inc. 3,500 393,295
Devon Energy Corporation 8,000 961,280
EOG Resources, Inc. 3,000 393,600
Exxon Mobil Corporation ^ 60,000 5,287,800
Halliburton Company ^ 10,000 530,700
National-Oilwell Varco Inc. * 5,000 443,600
Noble Corporation ^ 5,000 324,800
Schlumberger Limited ^ 15,500 1,665,165
Southwestern Energy Company * 3,000 142,830
Transocean Inc. * ^ 2,098 319,714
Williams Companies, Inc. (The) 13,000 524,030
XTO Energy, Inc. 5,000 342,550
-----------
15,785,024
-----------
FINANCIALS - 12.54%
AFLAC Incorporated 4,000 251,200
American Express Company ^ 12,500 470,875
American International Group, Inc. ^ 25,000 661,500
Ameriprise Financial, Inc. 5,000 203,350
Aon Corporation 6,000 275,640
Bank of America Corporation 44,000 1,050,280
Bank of New York Mellon Corporation 14,000 529,620
BB&T Corporation ^ 10,000 227,700
Capital One Financial Corporation ^ 4,500 171,045
Charles Schwab Corporation (The) ^ 18,000 369,720
Chubb Corporation (The) ^ 7,000 343,070
Citigroup Inc. 46,000 770,960
CME Group Inc. ^ 500 191,595
Franklin Resources, Inc. ^ 5,000 458,250
Freddie Mac 14,000 229,600
Goldman Sachs Group, Inc. (The) ^ 5,000 874,500
Hudson City Bancorp, Inc. 5,000 83,400
JPMorgan Chase & Co. 39,000 1,338,090
KeyCorp ^ 7,000 76,860
Lehman Brothers Holdings Inc. 6,000 118,860
Loews Corporation ^ 5,000 234,500
Manulife Financial Corporation 10,000 347,100
Marsh & McLennan Companies, Inc. ^ 5,500 146,025
Metlife, Inc. ^ 11,000 580,470
Morgan Stanley ^ 10,000 360,700
PNC Financial Services Group, Inc. 4,000 228,400
ProLogis ^ 5,000 271,750
State Street Corporation 5,000 319,950
SunTrust Banks, Inc. ^ 7,000 253,540
Travelers Companies, Inc. (The) 10,000 434,000
U.S. Bancorp 4,000 111,560
Wachovia Corporation ^ 8,000 124,240
Wells Fargo & Company 38,000 902,500
XL Capital Ltd, Class A 5,000 102,800
-----------
13,113,650
-----------
HEALTHCARE - 11.47%
Abbott Laboratories 14,000 741,580
Aetna Inc. 9,000 364,770
Amgen Inc. * 9,000 424,440
Baxter International Inc. ^ 11,000 703,340
Biogen Idec Inc. * 3,500 195,615
Bristol-Myers Squibb Company ^ 20,000 410,600
Celgene Corporation ^ * 4,000 255,480
Eli Lilly and Company 15,000 692,400
Express Scripts, Inc. * 4,000 250,880
Gilead Sciences, Inc. * 13,000 688,350
Johnson & Johnson 33,000 2,123,220
Medco Health Solutions, Inc. ^ * 12,000 566,400
Medtronic, Inc. 16,000 828,000
Merck & Co. Inc. ^ 28,000 1,055,320
Pfizer Inc. ^ 15,000 262,050
Schering-Plough Corporation 15,000 295,350
St. Jude Medical, Inc. * 7,000 286,160
Stryker Corporation 8,000 503,040
UnitedHealth Group Incorporated 18,000 472,500
Wyeth 14,000 671,440
Zimmer Holdings, Inc. * 3,000 204,150
-----------
11,995,085
-----------
INDUSTRIALS - 10.85%
3M Co. 5,000 347,950
Boeing Company (The) ^ 5,000 328,600
Burlington Northern Santa Fe Corporation 4,000 399,560
Caterpillar Inc. 7,000 516,740
Danaher Corporation 8,000 618,400
Deere & Company ^ 10,000 721,300
Emerson Electric Co. 11,000 543,950
General Dynamics Corporation ^ 4,000 336,800
General Electric Company 111,000 2,962,590
Honeywell International Inc. 12,000 603,360
Illinois Tool Works Inc. 9,000 427,590
Lockheed Martin Corporation ^ 4,000 394,640
Norfolk Southern Corporation ^ 7,500 470,025
Raytheon Company 7,000 393,960
Textron Inc. 3,000 143,790
United Parcel Service, Inc., Class B 17,000 1,044,990
United Technologies Corporation 13,000 802,100
Waste Management, Inc. 7,500 282,825
-----------
11,339,170
-----------
INFORMATION TECHNOLOGY - 16.98%
Agilent Technologies Inc. * 7,000 248,780
Apple Computer Inc. ^ * 9,000 1,506,960
Applied Materials, Inc. ^ 15,000 286,350
Automatic Data Processing, Inc. 9,000 377,100
Cisco Systems, Inc. * 61,000 1,418,860
Corning Incorporated 20,000 461,000
eBay Inc. * 16,000 437,280
EMC Corporation 26,000 381,940
Google Inc. * 4,500 2,368,890
Hewlett-Packard Company 28,000 1,237,880
Intel Corporation 61,000 1,310,280
International Business Machines Corporation 15,000 1,777,950
Linear Technology Corporation 2,500 81,425
Microsoft Corporation 105,000 2,888,550
Nokia ADR 5,000 122,500
NVIDIA Corporation ^ * 5,000 93,600
Oracle Corporation * 60,000 1,260,000
Paychex, Inc. 5,000 156,400
QUALCOMM Inc. 14,000 621,180
Texas Instruments Incorporated ^ 18,000 506,880
Xerox Corporation ^ 10,000 135,600
Xilinx, Inc. 3,000 75,750
-----------
17,755,155
-----------
MATERIALS - 3.78%
Air Products and Chemicals, Inc. 2,500 247,150
Alcoa Inc. ^ 8,000 284,960
Dow Chemical Company (The) ^ 7,000 244,370
E. I. du Pont de Nemours and Company 12,500 536,125
Freeport-McMoRan Copper & Gold, Inc. 4,000 468,760
International Paper Company ^ 5,000 116,500
Monsanto Company 10,000 1,264,400
Nucor Corporation 3,000 224,010
Praxair, Inc. ^ 6,000 565,440
-----------
3,951,715
-----------
REAL ESTATE INVESTMENT TRUSTS - 0.62%
Public Storage 2,500 201,975
Simon Property Group, Inc. ^ 5,000 449,450
-----------
651,425
-----------
TELECOMMUNICATION SERVICES - 3.20%
AT&T Inc. 72,000 2,425,680
Verizon Communications Inc. 26,000 920,400
-----------
3,346,080
-----------
UTILITIES - 3.71%
American Electric Power Company, Inc. 7,000 281,610
Dominion Resources, Inc. 14,000 664,860
Duke Energy Corporation 20,000 347,600
Entergy Corporation ^ 5,000 602,400
Exelon Corporation 6,000 539,760
FPL Group, Inc. 7,000 459,060
PPL Corporation 4,000 209,080
Questar Corporation 4,000 284,160
Southern Company (The) ^ 14,000 488,880
-----------
3,877,410
-----------
TOTAL EQUITY SECURITIES
(cost - $121,321,661) 103,951,174
-----------
SHORT-TERM INVESTMENTS - 13.28%
MONEY MARKET SECURITY - 0.60%
JPMorgan U.S. Government Money Market Fund 627,916 627,916
-----------
Principal
Amount
(000's)
----------------
REPURCHASE AGREEMENTS - 12.68%
Bear, Stearns & Co. Inc. + ++
(Agreements dated 6/30/2008 to
be repurchased at $11,458,281, 2.50%,
7/1/2008, collateralized by $11,776,407
in United States Treasury Bonds) $ 11,457 11,457,485
Bear, Stearns & Co. Inc. + ++
(Agreements dated 6/30/2008 to be
repurchased at $1,799,092, 1.25%,
7/1/2008, collateralized by $1,853,309
in United States Treasury Bonds) 1,799 1,799,029
-----------
13,256,514
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost - $13,884,430) 13,884,430
-------------
OTAL INVESTMENTS - 112.71%
(cost - $135,206,091) 117,835,604
-------------
LIABILITIES IN EXCESS OF OTHER ASSETS - (12.71)% (13,285,765)
-------------
NET ASSETS - 100.00% $ 104,549,839
=============
------------------------------
* Non-income producing security.
^ Security or a portion thereof is out on loan.
ADR American Depositary Receipt
+ Stated interest rate, before rebate earned by borrower of securities on loan.
++ Represents investment purchased with collateral received for securities on loan.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT COMPANY AND
AFFILIATED PURCHASERS.
None.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Registrant's principal executive officer and principal financial officer
have evaluated the Registrant's disclosure controls and procedures as of a date
within 90 days of this filing and have concluded that the Registrant's
disclosure controls and procedures are effective, as of such date, in ensuring
that information required to be disclosed by the registrant in this Form N-CSR
was recorded, processed, summarized, and reported timely.
(b) The Registrant's principal executive officer and principal financial officer
are aware of no changes in the Registrant's internal control over financial
reporting that occurred during the Registrant's second fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Separate certifications of Principal Executive and Financial Officers
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 attached as
EX-99.CERT.
(b) Certification of Principal Executive and Financial Officers pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 furnished as EX-99.906 CERT.
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.
By: /S/ RALPH W. BRADSHAW
-------------------------
Name: Ralph W. Bradshaw
Title: Principal Executive Officer
Date: September 8, 2008
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.
Cornerstone Progressive Return Fund
By: /S/ RALPH W. BRADSHAW
-------------------------
Name: Ralph W. Bradshaw
Title: Principal Executive Officer
Date: September 8, 2008
By: /S/ KAYADTI A. MADISON
----------------------
Name: Kayadti A. Madison
Title: Principal Financial Officer
Date: September 8, 2008