fp0009745_ncsr.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)

7 Dawson Street, Huntington Station, New York
11746
(Address of principal executive offices)
(Zip code)

Frank J. Maresca

AST Fund Solutions, LLC, 7 Dawson Street, Huntington Station, New York 11746
 (Name and address of agent for service)
 
 
Registrant's telephone number, including area code:     (866) 668-6558

Date of fiscal year end:
December 31, 2013

Date of reporting period:
December 31, 2013

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
 
 
 
Annual Report
December 31, 2013
 
 
 
 
 
 
 
CONTENTS
 
Portfolio Summary
1
   
Schedule of Investments
2
   
Statement of Assets and Liabilities
8
   
Statement of Operations
9
   
Statement of Changes in Net Assets
10
   
Financial Highlights
11
   
Notes to Financial Statements
12
   
Report of Independent Registered Public Accounting Firm
17
   
Tax Information
18
   
Additional Information Regarding the Fund’s Trustees and Corporate Officers
19
   
Description of Dividend Reinvestment Plan
21
   
Proxy Voting and Portfolio Holdings Information
23
   
Privacy Policy Notice
24
   
Summary of General Information
27
   
Shareholder Information
27
 
 
 
 
 
Cornerstone Progressive Return Fund
Portfolio Summary – as of December 31, 2013 (unaudited)
 
SECTOR ALLOCATION
 
Sector
Percent of
Net Assets
Closed-End Funds
79.9
Information Technology
3.6
Financials
3.1
Consumer Discretionary
2.5
Industrials
2.1
Energy
1.9
Health Care
1.8
Consumer Staples
1.4
Telecommunication Services
1.1
Materials
0.3
Utilities
0.1
Commodity Pool
0.1
Other
2.1
 
TOP TEN HOLDINGS, BY ISSUER
 
 
Holding
Sector
Percent of
Net Assets
1.
Alpine Total Dynamic Dividend Fund
Closed-End Funds
4.9
2.
Cohen & Steers Preferred Securities and Income Fund, Inc.
Closed-End Funds
4.3
3.
Reaves Utility Income Fund
Closed-End Funds
3.2
4.
BlackRock International Growth and Income Trust
Closed-End Funds
3.2
5.
BlackRock Global Opportunities Equity Trust
Closed-End Funds
3.1
6.
BlackRock Real Asset Equity Trust
Closed-End Funds
3.1
7.
CBRE Clarion Global Real Estate Income Fund
Closed-End Funds
3.0
8.
Calamos Strategic Total Return Fund
Closed-End Funds
2.8
9.
Cohen & Steers Quality Income Realty Fund, Inc.
Closed-End Funds
2.6
10.
BlackRock Energy and Resources Trust
Closed-End Funds
2.5
 
 
1
 
 
Cornerstone Progressive Return Fund
Schedule of Investments – December 31, 2013

Description
  
No. of
Shares
    
Value
  
EQUITY SECURITIES — 97.90%
        
CLOSED-END FUNDS — 79.92%
        
CONVERTIBLE SECURITIES — 0.64%
        
AllianzGI Equity & Convertible Income Fund
     54,135     $ 1,056,715  
Putnam High Income Securities Fund
     3,701       30,570  
              1,087,285  
CORE — 4.49%
  
Adams Express Company (The)
     111,764       1,460,756  
Advent/Claymore Enhanced Growth & Income Fund
     55,837       565,629  
Cohen & Steers Dividend Majors Fund, Inc.
     85,854       1,251,751  
General American Investors Company, Inc.
     43,142       1,518,598  
Guggenheim Equal Weight Enhanced Equity Income Fund
     100,151       1,891,852  
Tri-Continental Corporation
     44,367       886,453  
              7,575,039  
CORPORATE DEBT INVESTMENT GRADE-RATED — 1.06%
  
Cutwater Select Income Fund
     1       25  
Federated Enhanced Treasury Income Fund
     4,011       51,261  
Invesco Van Kampen Bond Fund
     11,604       205,275  
MFS Intermediate Income Trust
     202,236       1,047,582  
Morgan Stanley Income Securities Inc.
     5,774       97,176  
Transamerica Income Shares, Inc.
     16,153       337,275  
                 
Description    
No. of
Shares
       Value  
CORPORATE DEBT INVESTMENT GRADE-RATED (continued)
  
Western Asset Income Fund
     4,282     $ 56,394  
              1,794,988  
CORPORATE DEBT INVESTMENT GRADE-RATED (LEVERAGED) — 0.11%
  
John Hancock Income Securities Trust
     12,472       178,350  
                 
DEVELOPED MARKET — 0.80%
  
Aberdeen Israel Fund, Inc.
     5,393       90,926  
Aberdeen Singapore Fund, Inc.
     30,775       392,997  
New Ireland Fund, Inc. (The) *
     27,013       346,847  
Swiss Helvetia Fund, Inc. (The)
     37,363       521,214  
              1,351,984  
EMERGING MARKETS — 3.27%
  
First Trust/Aberdeen Emerging Opportunity Fund
     16,750       302,338  
India Fund, Inc. (The)
     54,404       1,088,080  
ING Emerging Markets High Dividend Equity Fund
     119,670       1,406,123  
Morgan Stanley Eastern Europe Fund, Inc.
     3,500       70,910  
Morgan Stanley India Investment Fund, Inc. *
     108,371       1,894,325  
Templeton Russia and East European Fund, Inc.
     25,615       394,215  
Turkish Investment Fund, Inc. (The)
     24,532       359,884  
              5,515,875  
EMERGING MARKETS DEBT — 0.22%
  
Western Asset Emerging Markets Income Fund Inc.
     31,641       374,629  
 
See accompanying notes to financial statements.
 
 
2
 
 
Cornerstone Progressive Return Fund
Schedule of Investments – December 31, 2013 (continued)
 
 
Description
    
No. of
Shares
      
Value
  
FLEXIBLE INCOME — 0.35%
                
MFS Charter Income Trust
     64,650     $ 585,083  
                 
GENERAL & INSURED LEVERAGED — 6.46%
  
BlackRock MuniHoldings Quality Fund II, Inc.
     13,953       168,692  
DTF Tax-Free Income Inc.
     3,400       47,668  
Eaton Vance National Municipal Opportunities Trust
     19,609       361,982  
Invesco Advantage Municipal Income Trust II
     133,008       1,399,244  
Invesco Municipal Opportunity Trust
     149,474       1,750,341  
Invesco Municipal Trust
     38,950       451,431  
Invesco Trust for Investment Grade Municipals
     137,522       1,675,018  
Invesco Value Municipal Income Trust
     0       6  
MFS Investment Grade Municipal Trust
     33,606       289,348  
Nuveen Dividend Advantage Municipal Fund 2
     27,729       351,881  
Nuveen Dividend Advantage Municipal Fund 3
     125,626       1,551,481  
Nuveen Dividend Advantage Municipal Income Fund
     33,515       419,608  
Nuveen Municipal Advantage Fund, Inc.
     13,790       167,686  
Nuveen Municipal Market Opportunity Fund, Inc.
     10,918       131,016  
Nuveen Quality Income Municipal Fund, Inc.
     65,828       806,393  
Nuveen Quality Municipal Fund, Inc.
     2,550       30,804  
                 
Description    
No. of
Shares
       Value  
GENERAL & INSURED LEVERAGED (continued)
  
Nuveen Select Quality Municipal Fund, Inc.
     105,150     $ 1,303,860  
              10,906,459  
GENERAL BOND — 0.15%
  
John Hancock Investors Trust
     11,408       212,189  
Duff & Phelps Utility and Corporate Bond Trust Inc.
     3,900       39,117  
              251,306  
GLOBAL — 11.63%
  
Alpine Global Dynamic Dividend Fund
     415,611       2,119,616  
Alpine Total Dynamic Dividend Fund
     1,954,895       8,191,010  
BlackRock S&P Quality Rankings Global Equity Managed Trust
     2,409       31,221  
Calamos Global Dynamic Income Fund
     131,409       1,178,739  
Clough Global Allocation Fund
     33,867       520,874  
Delaware Enhanced Global Dividend and Income Fund
     159,250       1,946,035  
Gabelli Global Utility & Income Trust (The)
     28,750       576,150  
GDL Fund (The)
     2,868       31,605  
Nuveen Global Value Opportunities Fund
     110,016       1,448,911  
Virtus Total Return Fund
     232,860       933,769  
Wells Fargo Advantage Global Dividend Opportunity Fund
     366,859       2,659,728  
              19,637,658  
GLOBAL INCOME — 0.49%
  
Aberdeen Global Income Fund, Inc.
     16,011       166,034  
 
See accompanying notes to financial statements.
 
 
3
 
Cornerstone Progressive Return Fund
Schedule of Investments – December 31, 2013 (continued)
 
Description
    
No. of
Shares
       Value  
GLOBAL INCOME (continued)
                
Nuveen Multi-Currency Short-Term Government Income Fund
     65,155     $ 656,762  
              822,796  
HIGH CURRENT YIELD (LEVERAGED) — 1.69%
  
BlackRock Corporate High Yield Fund VI, Inc.
     43,880       534,020  
BlackRock Debt Strategies Fund, Inc.
     5,973       23,831  
DWS High Income Opportunities Fund, Inc.
     69,416       999,590  
DWS High Income Trust
     39,091       357,292  
First Trust Strategic High Income Fund II
     16,832       270,154  
Franklin Universal Trust
     23,017       159,738  
Invesco High Income Trust II
     2,832       45,510  
MFS Intermediate High Income Fund
     38,669       111,753  
Neuberger Berman High Yield Strategies Fund Inc.
     26,442       350,621  
              2,852,509  
HIGH YIELD — 0.18%
  
First Trust High Income Long/Short Fund
     5,700       98,154  
Western Asset Managed High Income Fund Inc.
     35,964       203,556  
              301,710  
HIGH YIELD MUNICIPAL DEBT — 0.32%
  
MFS High Income Municipal Trust
     87,005       388,912  
MFS High Yield Municipal Trust
     22,608       94,501  
Western Asset Municipal High Income Fund Inc.
     9,022       60,718  
              544,131  
                 
Description    
No. of
Shares
       Value  
INCOME & PREFERRED STOCK — 4.96%
  
Calamos Strategic Total Return Fund
     437,877     $ 4,768,481  
Dividend & Income Fund
     4,200       63,462  
John Hancock Premium Dividend Fund
     86,556       1,004,050  
LMP Capital and Income Fund Inc.
     51,936       819,031  
Nuveen Quality Preferred Income Fund
     12,410       95,433  
Nuveen Quality Preferred Income Fund 2
     20,800       169,312  
Nuveen Quality Preferred Income Fund 3
     75,646       593,821  
Zweig Total Return Fund, Inc. (The)
     61,646       859,345  
              8,372,935  
LOAN PARTICIPATION — 0.38%
  
Eaton Vance Floating-Rate Income Trust
     28,800       439,776  
First Trust Senior Floating Rate Income Fund II
     4,500       65,250  
Nuveen Senior Income Fund
     18,430       131,406  
              636,432  
OPTION ARBITRAGE/OPTIONS STRATEGIES — 7.78%
  
BlackRock Enhanced Capital & Income Fund, Inc.
     62,875       859,501  
BlackRock Enhanced Equity Dividend Trust
     53,016       420,947  
BlackRock Global Opportunities Equity Trust
     351,271       5,255,014  
BlackRock International Growth and Income Trust
     661,792       5,380,369  
ING Asia Pacific High Dividend Equity Income Fund
     59,890       762,999  
 
See accompanying notes to financial statements.
 
 
4
 
Cornerstone Progressive Return Fund
Schedule of Investments – December 31, 2013 (continued)
 
Description    
No. of
Shares
       Value  
OPTION ARBITRAGE/OPTIONS STRATEGIES (continued)
                
ING Global Advantage and Premium Opportunity Fund
     38,076     $ 447,774  
              13,126,604  
PACIFIC EX JAPAN — 2.94%
  
Aberdeen Greater China Fund, Inc.
     97,449       990,082  
Asia Pacific Fund, Inc. (The) *
     8,622       90,617  
China Fund, Inc. (The)
     163,563       3,403,746  
Taiwan Fund, Inc. *
     25,250       487,830  
              4,972,275  
REAL ESTATE — 13.09%
  
Alpine Global Premier Properties Fund
     96,754       695,661  
CBRE Clarion Global Real Estate Income Fund
     638,869       5,059,842  
Cohen & Steers Preferred Securities and Income Fund, Inc.
     459,844       7,219,551  
Cohen & Steers Quality Income Realty Fund, Inc.
     461,479       4,374,821  
Cohen & Steers Total Return Realty Fund, Inc.
     41,272       494,851  
LMP Real Estate Income Fund Inc.
     120,801       1,215,258  
Neuberger Berman Real Estate Securities Income Fund Inc.
     361,756       1,570,021  
Nuveen Diversified Dividend and Income Fund
     61,294       690,783  
RMR Asia Pacific Real Estate Fund
     45,838       775,119  
              22,095,907  
                 
Description    
No . of
Shares
       Value  
SECTOR EQUITY — 17.49%
  
BlackRock EcoSolutions Investment Trust
     135,919     $ 1,065,605  
BlackRock Energy and Resources Trust
     175,880       4,273,884  
BlackRock Real Asset Equity Trust
     597,924       5,207,918  
BlackRock Resources & Commodities Strategy Trust
     234,578       2,718,759  
BlackRock Utility and Infrastructure Trust
     137,701       2,460,717  
Cohen & Steers Infrastructure Fund, Inc.
     24,085       496,151  
Duff & Phelps Global Utility Income Fund Inc.
     96,706       1,845,150  
GAMCO Global Gold, Natural Resources & Income Trust by Gabelli
     72,921       657,747  
GAMCO Natural Resources, Gold & Income Trust by Gabelli
     57,450       575,649  
ING Risk Managed Natural Resources Fund
     121,878       1,195,623  
Nuveen Energy MLP Total Return Fund
     72,150       1,410,533  
Nuveen Real Asset Income and Growth Fund
     7,400       123,950  
Petroleum & Resources Corporation
     73,839       2,021,712  
Reaves Utility Income Fund
     218,412       5,479,957  
              29,533,355  
U.S. MORTGAGE — 0.41%
  
First Trust Mortgage Income Fund
     38,101       592,852  
Nuveen Mortgage Opportunity Term Fund 2
     4,618       106,075  
              698,927  
 
See accompanying notes to financial statements.
 
 
5
 
Cornerstone Progressive Return Fund
Schedule of Investments – December 31, 2013 (continued)
 
Description      
No. of
Shares
       Value  
UTILITY — 0.55%
                
Brookfield Global Listed Infrastructure Income Fund Inc.
     46,700     $ 923,259  
                 
VALUE — 0.46%
  
John Hancock Tax-Advantaged Dividend Income Fund
     42,643       776,955  
                 
TOTAL CLOSED-END FUNDS
       134,916,451  
                 
COMMODITY POOL — 0.07%
  
Nuveen Diversified Commodity Fund *
     7,729       117,249  
                 
CONSUMER DISCRETIONARY — 2.47%
  
Comcast Corporation - Class A
     24,358       1,265,763  
DIRECTV *
     4,000       276,360  
Ford Motor Company
     25,000       385,750  
Home Depot, Inc. (The)
     9,000       741,060  
Johnson Controls, Inc.
     7,000       359,100  
Macy's, Inc.
     2,000       106,800  
Time Warner Cable Inc.
     2,000       271,000  
Walt Disney Company (The)
     10,000       764,000  
              4,169,833  
CONSUMER STAPLES — 1.44%
  
Archer-Daniels-Midland Company
     4,000       173,600  
Kellogg Company
     2,000       122,140  
Kroger Co. (The)
     4,000       158,120  
Wal-Mart Stores, Inc.
     25,000       1,967,250  
              2,421,110  
ENERGY — 1.90%
  
Anadarko Petroleum Corporation
     4,000       317,280  
ConocoPhillips
     8,000       565,200  
                 
Description    
No. of
Shares
       Value  
ENERGY (continued)
  
Devon Energy Corporation
     3,000     $ 185,610  
EOG Resources, Inc.
     2,000       335,680  
Exxon Mobil Corporation
     10,000       1,012,000  
Marathon Oil Corporation
     2,000       70,600  
Schlumberger Limited
     8,000       720,880  
              3,207,250  
FINANCIALS — 3.07%
  
Allstate Corporation (The)
     3,000       163,620  
American International Group, Inc.
     8,000       408,400  
Bank of America Corporation
     15,000       233,550  
Bank of New York Mellon Corporation (The)
     6,000       209,640  
BB&T Corporation
     5,000       186,600  
Capital One Financial Corporation
     3,000       229,830  
Citigroup, Inc.
     19,000       990,090  
Goldman Sachs Group, Inc. (The)
     3,000       531,780  
JPMorgan Chase & Co.
     20,000       1,169,600  
Marsh & McLennan Companies, Inc.
     4,000       193,440  
MetLife, Inc.
     9,000       485,280  
Prudential Financial, Inc.
     3,000       276,660  
State Street Corporation
     1,500       110,085  
              5,188,575  
HEALTH CARE — 1.82%
  
Abbott Laboratories
     13,000       498,290  
AbbVie Inc.
     3,000       158,430  
Allergan, Inc.
     2,500       277,700  
Amgen Inc.
     4,000       456,640  
Boston Scientific Corporation *
     2,000       24,040  
Cardinal Health, Inc.
     6,000       400,860  
Eli Lilly & Company
     6,000       306,000  
Medtronic, Inc.
     6,000       344,340  
 
See accompanying notes to financial statements.
 
 
6
 
 
Cornerstone Progressive Return Fund
Schedule of Investments – December 31, 2013 (concluded)
 
Description    
No. of
Shares
       Value  
HEALTH CARE (continued)
                
St. Jude Medical, Inc.
     3,000     $ 185,850  
Wellpoint, Inc.
     4,500       415,755  
              3,067,905  
INDUSTRIALS — 2.09%
  
Deere & Company
     3,000       273,990  
General Dynamics Corporation
     3,000       286,650  
General Electric Company
     90,000       2,522,700  
Lockheed Martin Corporation
     3,000       445,980  
              3,529,320  
INFORMATION TECHNOLOGY — 3.60%
  
Cisco Systems, Inc.
     40,000       898,000  
Corning, Inc.
     9,000       160,380  
EMC Corporation
     15,000       377,250  
Hewlett-Packard Company
     12,400       346,952  
Intel Corporation
     20,000       519,200  
International Business Machines Corporation
     8,500       1,594,345  
Microsoft Corporation
     22,000       823,460  
QUALCOMM Incorporated
     14,500       1,076,625  
Yahoo! Inc. *
     7,000       283,080  
              6,079,292  
MATERIALS — 0.28%
  
Dow Chemical Company (The)
     10,500       466,200  
                 
TELECOMMUNICATION SERVICES — 1.13%
  
AT&T, Inc.
     32,000       1,125,120  
Verizon Communications, Inc.
     16,000       786,240  
              1,911,360  
UTILITIES — 0.11%
  
Exelon Corporation
     7,000       191,730  
                 
TOTAL EQUITY SECURITIES (cost - $160,908,228)
       165,266,275  
   
Description    
No. of
Shares
       Value  
SHORT-TERM INVESTMENTS — 2.30%
                
MONEY MARKET FUNDS — 2.30%
                
Fidelity Institutional Money Market Government Portfolio - Class I, 0.01%^ (cost - $3,884,182)
     3,884,182     $ 3,884,182  
                 
TOTAL INVESTMENTS — 100.20% (cost - $164,792,410)
       169,150,457  
                 
LIABILITIES IN EXCESS OF OTHER ASSETS — (0.20)%
       (338,312 )
                 
NET ASSETS — 100.00%
     $ 168,812,145  
 
*
Non-income producing security.
 
^
The rate shown is the 7-day effective yield as of December 31, 2013.
 
See accompanying notes to financial statements.
 
 
7
 
 
Cornerstone Progressive Return Fund
Statement of Assets and Liabilities – December 31, 2013

ASSETS
      
Investments, at value (cost – $164,792,410) (Notes B and C)
   $ 169,150,457  
Receivables:
        
Dividends
     573,197  
Investments sold
     316,011  
Prepaid expenses
     5,041  
Total Assets
     170,044,706  
         
LIABILITIES
        
Payables:
        
Investments purchased
     978,381  
Investment management fees (Note D)
     140,786  
Trustees’ fees and expenses
     15,889  
Administration fees (Note D)
     10,084  
Accounting fees (Note D)
     3,894  
Other accrued expenses
     83,527  
Total Liabilities
     1,232,561  
         
NET ASSETS (applicable to 39,190,980 common shares of beneficial interest
   $ 168,812,145  
         
NET ASSET VALUE PER SHARE ($168,812,145 ÷ 39,190,980)
   $ 4.31  
         
NET ASSETS CONSISTS OF
        
Paid-in capital
   $ 174,332,538  
Accumulated net realized loss on investments
     (9,878,440 )
Net unrealized appreciation in value of investments
     4,358,047  
Net assets applicable to shares outstanding
   $ 168,812,145  
 
See accompanying notes to financial statements.
 
 
8
 
 
Cornerstone Progressive Return Fund
Statement of Operations – for the Year Ended December 31, 2013

INVESTMENT INCOME
      
Income:
      
Dividends from investments
   $ 5,602,574  
         
Expenses:
        
Investment management fees (Note D)
     1,388,478  
Legal and audit fees
     121,856  
Administration fees (Note D)
     112,701  
Trustees’ fees and expenses
     63,024  
Accounting fees (Note D)
     48,040  
Printing
     42,219  
Custodian fees
     34,000  
Transfer agent fees
     14,992  
Stock exchange listing fees
     9,692  
Insurance
     5,285  
Miscellaneous
     11,211  
Total Expenses
     1,851,498  
Net Investment Income
     3,751,076  
         
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
        
Net realized gain from investments
     5,359,459  
Capital gain distributions from regulated investment companies
     2,372,338  
Net change in unrealized appreciation in value of investments
     1,541,738  
Net realized and unrealized gain on investments
     9,273,535  
         
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
   $ 13,024,611  
 
See accompanying notes to financial statements.
 
 
9
 
Cornerstone Progressive Return Fund
Statement of Changes in Net Assets

   
For the Years Ended December 31,
  
   
2013
    
2012
  
             
INCREASE IN NET ASSETS
            
Operations:
            
Net investment income
   $ 3,751,076     $ 2,461,938  
Net realized gain from investments
     7,731,797       5,549,955  
Net change in unrealized appreciation in value of investments
     1,541,738       7,677,296  
                 
Net increase in net assets resulting from operations
     13,024,611       15,689,189  
                 
Dividends and distributions to shareholders (Note B):
                
Net investment income
     (11,482,874 )     (8,011,893 )
Return-of-capital
     (20,156,702 )     (14,232,315 )
                 
Total dividends and distributions to shareholders
     (31,639,576 )     (22,244,208 )
                 
Transactions in common shares of beneficial interest:
                
Proceeds from rights offering of 13,352,005 and 8,817,593 shares of newly issued shares,
respectively
     64,890,744       44,793,372  
Offering expenses associated with rights offering
     (147,557 )     (128,254 )
Proceeds from 824,591 and 502,087 shares newly issued in reinvestment of dividends and distributions, respectively
     3,662,776       2,476,417  
                 
Net increase in net assets from capital share transactions
     68,405,963       47,141,535  
                 
Total increase in net assets
     49,790,998       40,586,516  
                 
NET ASSETS
                
Beginning of year
     119,021,147       78,434,631  
End of year
   $ 168,812,145     $ 119,021,147  
 
See accompanying notes to financial statements.
 
 
10
 
Cornerstone Progressive Return Fund
Financial Highlights
Contained below is per share operating performance data for a share of beneficial interest outstanding, total investment return, ratios to average net assets and other supplemental data for each year indicated. This information has been derived from information provided in the financial statements and market price data for the Fund’s shares.
 
   
For the Years Ended December 31,
  
   
2013
    
2012
    
2011
    
2010
    
2009
  
PER SHARE OPERATING PERFORMANCE
                              
Net asset value, beginning of year
   $ 4.76     $ 5.00     $ 5.90     $ 6.28     $ 7.16  
Net investment income #
     0.12       0.12       0.12       0.13       0.16  
Net realized and unrealized gain/(loss) on investments
     0.28       0.62       (0.11 )     1.03       1.42  
Net increase in net assets resulting from operations
     0.40       0.74       0.01       1.16       1.58  
                                         
Dividends and distributions to shareholders:
                                        
Net investment income
     (0.38 )     (0.40 )     (0.61 )     (1.14 )     (0.16 )
Return-of-capital
     (0.65 )     (0.70 )     (0.63 )     (0.40 )     (2.30 )
Total dividends and distributions to shareholders
     (1.03 )     (1.10 )     (1.24 )     (1.54 )     (2.46 )
                                         
Transactions in common shares of beneficial interest:
                                        
Anti-dilutive effect due to shares issued:
                                        
Rights offering
     0.18       0.12       0.31       —       —  
Reinvestment of dividends and distributions
     0.00 +     0.00 +     0.02       0.00 +     —  
Total transactions in common shares of beneficial interest
     0.18       0.12       0.33       —       —  
                                         
Net asset value, end of year
   $ 4.31     $ 4.76     $ 5.00     $ 5.90     $ 6.28  
Market value, end of year
   $ 5.14     $ 5.01     $ 6.04     $ 7.46     $ 8.90  
Total investment return (a)
     28.59 %     3.24 %     (2.12 )%     4.73 %     65.40 %
                                         
RATIOS/SUPPLEMENTAL DATA
                                        
Net assets, end of year (000 omitted)
   $ 168,812     $ 119,021     $ 78,435     $ 55,277     $ 58,738  
Ratio of expenses to average net assets, net of fee waivers and fees paid indirectly, if any (b)
     1.33 %     1.25 %     1.30 %     1.47 %     1.39 %
Ratio of expenses to average net assets, before fee waivers and fees paid indirectly, if any (b)
     1.33 %     1.34 %     1.45 %     1.61 %     1.54 %
Ratio of net investment income to average net assets (c)
     2.70 %     2.44 %     2.20 %     2.20 %     2.54 %
Portfolio turnover rate
     101.00 %     97.29 %     112.69 %     117.45 %     115.99 %
 
#
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)
Expenses do not include expenses of investment companies in which the Fund invests.
 
(c)
Recognition of net investment income by the Fund may be affected by the timing of the declaration of dividends, if any, by investment companies in which the Fund invests.
 
See accompanying notes to financial statements.
 
 
11
 
 
Cornerstone Progressive Return Fund
Notes to Financial Statements

NOTE A. ORGANIZATION
 
Cornerstone Progressive Return Fund (the “Fund”) was organized as a Delaware statutory trust on April 26, 2007 and commenced investment operations on September 10, 2007. Prior to such date it had no operations other than the sale and issuance of 6,668 shares at an aggregate purchase price of $100,020 on July 20, 2007. Its investment objective is to provide total return. The Fund is registered under the Investment Company Act of 1940, as amended, as a closed-end, diversified management investment company.
 
NOTE B. SIGNIFICANT ACCOUNTING POLICIES
 
Management Estimates: The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make certain estimates and assumptions that may affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
 
Subsequent Events: The Fund has evaluated the need for additional disclosures and/or adjustments resulting from subsequent events through the date its financial statements were issued. Based on this evaluation, no additional disclosures or adjustments were required to such financial statements.
 
Portfolio Valuation: Investments are stated at value in the accompanying financial statements. Readily marketable portfolio securities listed on the 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 NASDAQ Official Closing Price.
 
Readily marketable securities traded in the over-the- counter market, including listed securities whose primary market is believed by Cornerstone Advisors, Inc. (the “Investment Manager” or “Cornerstone”) to be over-the-counter, are valued at the mean of the current bid and asked prices as reported by the NASDAQ or, in the case of securities not reported by the NASDAQ or a comparable source, as the Board of Trustees deem appropriate to reflect their fair market value. Where securities are traded on more than one exchange and also over-the-counter, the securities will generally be valued using the quotations the Board of Trustees believes reflect most closely the value of such securities. At December 31, 2013, 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 is closed.
 
The Fund is exposed to financial market risks, including the valuations of its investment portfolio. During the year ended December 31, 2013, 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 purposes. Interest income is recorded on an accrual basis; dividend income is recorded on the ex-dividend date.
 
 
12
 
 
Cornerstone Progressive Return Fund
Notes to Financial Statements (continued)

Risks Associated with Investments in Other Closed-end Funds: Closed-end investment companies are subject to the risks of investing in the underlying securities. The Fund, as a holder of the securities of the closed-end investment company, will bear its pro rata portion of the closed-end investment company’s expenses, including advisory fees. These expenses are in addition to the direct expenses of the Fund’s own operations.
 
Taxes: No provision is made for U.S. federal income or excise taxes as it is the Fund’s intention to qualify as a regulated investment company and to make the requisite distributions to its shareholders which will be sufficient to relieve it from all or substantially all U.S. federal income and excise taxes.
 
The Accounting for Uncertainty in Income Taxes Topic of the FASB Accounting Standards Codification defines the threshold for recognizing the benefits of tax-return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority and requires measurement of a tax position meeting the more-likely-than-not criterion, based on the largest benefit that is more than 50 percent likely to be realized. The Fund’s policy is to classify interest and penalties associated with underpayment of federal and state income taxes, if any, as income tax expense on its Statement of Operations. As of December 31, 2013, 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 2010 through 2012, and for the year ended December 31, 2013. There was no material impact to the financial statements.
 
Distributions to Shareholders: The Fund seeks to make a level distribution to its shareholders each month pursuant to a distribution policy adopted by the Board of Trustees (“Distribution Policy”). To the extent these distributions are not represented by net investment income and capital gains, they will not represent yield or investment return on the Fund’s portfolio. The distribution rate may be modified by the Board of Trustees from time to time. If, for any monthly distribution, investment company taxable income, if any (which term includes net short-term capital gain), and net tax-exempt income, if any, is less than the amount of the distribution, the difference will generally be a tax-free return of capital distributed from the Fund’s assets. The Fund’s final distribution for each calendar year is expected to include any remaining investment company taxable income and net tax exempt income undistributed during the year, as well as all net capital gain realized during the year.
 
However, if they determine it is appropriate to do so, the Board of Trustees may elect to not distribute realized gains and to pay taxes incurred. In general, the total distributions made in any taxable year (other than distributions of net capital gain or return of capital) would be treated as ordinary dividend income to the extent of the Fund’s current and accumulated earnings and profits. Distributions in excess of the earnings and profits would first be a tax-free return of capital to the extent of the adjusted tax basis in the shares.
 
The Distribution Policy described above would result in the payment of approximately the same amount or percentage to the Fund’s shareholders each month. These distributions will not be tied to the Fund’s investment income and capital gains and will not represent yield or investment return on the Fund’s portfolio. Section 19(a) of the 1940 Act and Rule 19a-1 thereunder require the Fund to provide a written statement accompanying any such payment that adequately discloses its source or sources, other than net investment income. Thus, if the source of some or all of the dividend or other distribution were the original capital contribution of the shareholder, and the payment amounted to a return of capital, the Fund would be required to provide written disclosure to that effect. Nevertheless, persons who periodically receive the payment of a dividend or other distribution may be under the impression that they are receiving net profits when they are not. Shareholders should read any written disclosure provided pursuant to Section 19(a) and Rule 19a-1 carefully, and should not assume that the source of any distribution from the Fund is net profit.
 
 
13
 
 
Cornerstone Progressive Return Fund
Notes to Financial Statements (continued)

The Board of Trustees reserves the right to change the 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 December 31, 2013 in valuing the Fund’s investments carried at value:
 
Valuation Inputs
  
Investments
in Securities
    
Other
Financial
Instruments*
  
Level 1 – Quoted Prices
            
Equity Investments
   $ 165,266,275     $ —  
Short-Term Investments
     3,884,182       —  
Level 2 – Other Significant Observable Inputs
     —       —  
Level 3 – Significant Unobservable Inputs
     —       —  
Total
   $ 169,150,457     $ —  
 
*
Other financial instruments include futures, forwards and swap contracts.
 
The breakdown of the Fund’s investments into major categories is disclosed in its Schedule of Investments.
 
During the year ended December 31, 2013, 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 December 31, 2013.
 
 
14
 
 
Cornerstone Progressive Return Fund
Notes to Financial Statements (continued)

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 currently effective. The guidance requires retrospective application for all comparative periods presented. The Investment Manager has evaluated the impact ASU 2011-11 and believes that it does not have a material impact on the Fund’s financial statements and disclosures.
 
NOTE D. AGREEMENTS WITH AFFILIATES
 
At December 31, 2013, certain officers of the Fund are also officers of Cornerstone or AST Fund Solutions, LLC (“AFS”). Such officers are paid no fees by the Fund for serving as officers of the Fund.
 
Investment Management Agreement
 
Cornerstone serves as the Fund’s Investment Manager with respect to all investments. As compensation for its investment management services, Cornerstone receives from the Fund an annual fee, calculated weekly and paid monthly, equal to 1.00% of the Fund’s average weekly net assets. For the year ended December 31, 2013, Cornerstone earned $1,388,478 for investment management services.
 
Administration Agreement
 
Through April 16, 2013, Ultimus Fund Solutions, LLC (“Ultimus”) served as the administrator. Under the terms of the Administration Agreement, Ultimus supplied executive, administrative and regulatory services for the Fund. Ultimus supervised the preparation of reports to shareholders 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 paid 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. For the period January 1 through April 16, 2013, Ultimus earned $34,450 as administrator.
 
Effective April 17, 2013, AFS serves as the administrator. Under the administration agreement, AFS supplies executive, administrative and regulatory services for the Fund. AFS supervises the preparation of reports to shareholders 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 AFS a monthly fee at an annual rate of 0.075% of its average daily net assets, subject to an annual minimum fee of $50,000. For the period April 17 through December 31, 2013, AFS earned $78,251 as administrator.
 
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 year ended December 31, 2013, purchases and sales of securities, other than short-term investments, were $180,799,027 and $134,403,786, respectively.
 
 
15
 
 
Cornerstone Progressive Return Fund
Notes to Financial Statements (concluded)

NOTE F. COMMON SHARES OF BENEFICIAL INTEREST
 
The Fund has unlimited common shares of beneficial interest authorized and has 39,190,980 shares issued and outstanding at December 31, 2013. As of that date, two individuals that control Cornerstone owned 6,210 shares related to the initial issuance of the seed capital shares of the Fund. Transactions in common shares of beneficial interest for the year ended December 31, 2013 were as follows:
 
Shares at beginning of year
     25,014,384  
Shares newly issued from rights offering
     13,352,005  
Shares newly issued in reinvestment of dividends and distributions
     824,591  
Shares at end of year
     39,190,980  
 
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 years ended December 31, 2013 and December 31, 2012 was as follows:
 
   
2013
    
2012
  
Ordinary Income
   $ 11,482,874     $ 8,011,893  
Return-of-Capital
     20,156,702       14,232,315  
Total Distributions
   $ 31,639,576     $ 22,244,208  
 
At December 31, 2013, the components of accumulated deficit on a tax basis for the Fund were as follows:
 
Capital loss carryforwards
   $ (9,846,029 )
Net unrealized appreciation
     4,325,634  
Total accumulated deficit
   $ (5,520,395 )
 
GAAP requires that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. For the year ended December 31, 2013, the Fund reclassified $20,156,702 of return-of-capital distributions and $7,731,797 of distributions resulting from the recharacterization of capital gain distributions as ordinary income against paid-in capital on the Statement of Assets and Liabilities. 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 losses during the year ended December 31, 2013.
 
At December 31, 2013, the Fund had a capital loss carryforward for U.S. federal income tax purposes of $9,846,029 which expires in 2017.
 
Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized after December 31, 2010 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Under the law in effect prior to the Act, pre-enactment net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses. Therefore, there may be a greater likelihood that all or a portion of the Fund’s capital loss carryforward may expire without being utilized.
 
During the year ended December 31, 2013, the Fund reduced capital loss carryforwards by $7,675,093.
 
The following information is computed on a tax basis for each item as of December 31, 2013:
 
Cost of portfolio investments
   $ 164,824,823  
Gross unrealized appreciation
   $ 8,302,440  
Gross unrealized depreciation
     (3,976,806 )
Net unrealized appreciation
   $ 4,325,634  
 
 
16
 
 
Report of Independent Registered Public Accounting Firm
 
To the Shareholders and Board of Trustees
Cornerstone Progressive Return Fund, Inc.
Huntington Station, New York
 
We have audited the accompanying statement of assets and liabilities of the Cornerstone Progressive Return Fund, Inc. (the “Fund”), including the schedule of investments as of December 31, 2013, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2013, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Cornerstone Progressive Return Fund as of December 31, 2013, the results of its operations, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
 
 
TAIT, WELLER & BAKER LLP
 
Philadelphia, Pennsylvania
February 20, 2014
 
 
17
 
 
2013 Tax Information (Unaudited)
 
Cornerstone Progressive Return Fund (the “Fund”) is providing this notice along with Form 1099-DIV to assist its shareholders in the preparation of their 2013 calendar year U.S. federal income tax returns. The $31,639,576 in dividends and distributions paid to shareholders in respect of such year is represented by $11,482,874 of ordinary income, and $20,156,702 of return-of-capital.
 
As indicated in this notice, a portion of the Fund’s distributions for 2013 consist of ordinary income and return of captial. To the extent a distribution has been designated as return-of-capital, those distributions do not represent yield or investment return on the Fund’s portfolio.
 
SOURCES OF DIVIDENDS AND DISTRIBUTIONS
(Per Share Amounts)
 
Payment Dates:
  
1/31/13
    
2/28/13
    
3/28/13
    
4/30/13
    
5/31/13
    
6/28/13
  
Ordinary Income(1)
   $ 0.0308     $ 0.0308     $ 0.0308     $ 0.0308     $ 0.0308     $ 0.0308  
Return-of-Capital(2)
     0.0546       0.0546       0.0546       0.0546       0.0546       0.0546  
Total
   $ 0.0854     $ 0.0854     $ 0.0854     $ 0.0854     $ 0.0854     $ 0.0854  
                                                 
Payment Dates:
  
7/31/13
    
8/30/13
    
9/30/13
    
10/31/13
    
11/29/13
    
12/31/13
  
Ordinary Income(1)
   $ 0.0308     $ 0.0308     $ 0.0308     $ 0.0308     $ 0.0308     $ 0.0308  
Return-of-Capital(2)
     0.0546       0.0546       0.0546       0.0546       0.0546       0.0546  
Total
   $ 0.0854     $ 0.0854     $ 0.0854     $ 0.0854     $ 0.0854     $ 0.0854  
 
(1)
Ordinary Income Dividends – This is the total per share amount of ordinary income dividends and short-term capital gain distributions included in the amount reported in Box 1a on Form 1099-DIV.
 
(2)
Return-of-Capital – This is the per share amount of return-of-capital, or sometimes called nontaxable, distributions reported in Box 3 – under the title “Nondividend distributions” – on Form 1099-DIV. This amount should not be reported as taxable income on your current return. Rather, it should be treated as a reduction in the original cost basis of your investment in the Fund.
 
The Fund has met the requirements to pass through 20.38% of its ordinary income dividends as qualified dividends, which are subject to a maximum tax rate of 23.8% (20% qualified dividends maximum tax rate plus 3.8% Medicare tax). This is reported in Box 1b on Form 1099-DIV. Ordinary income dividends should be reported as dividend income on Form 1040. Please note that to utilize the lower tax rate for qualifying dividend income, shareholders generally must have held their shares in the Fund for at least 61 days during the 121 day period beginning 60 days before the ex-dividend date.
 
Foreign shareholders will generally be subject to U.S. withholding tax on the amount of the actual ordinary income dividend paid by the Fund.
 
In general, distributions received by tax-exempt recipients (e.g., IRA’s and Keoghs) need not be reported as taxable income for U.S. federal income tax purposes. However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7) plans) may need this information for their annual information reporting.
 
Shareholders are strongly advised to consult their own tax advisers with respect to the tax consequences of their investment in the Fund.
 
 
18
 
 
Additional Information Regarding the Fund’s Trustees
and Corporate Officers (unaudited)
 
Name and
Address*
(Birth Date)
Position(s)
Held with Fund
Principal Occupation
over Last 5 Years
Position with Fund Since
Ralph W. Bradshaw**
(Dec. 1950)
Chairman of the Board of Trustees and President
President, Cornerstone Advisors, Inc.; Financial Consultant; President and Director of Cornerstone Total Return Fund, Inc. and Cornerstone Strategic Value Fund, Inc.
2007
Edwin Meese III
(Dec. 1931)
Trustee; Audit, Nominating and Corporate Governance Committee Member
Distinguished Fellow, The Heritage Foundation Washington D.C.; Distinguished Visiting Fellow at the Hoover Institution, Stanford University; Senior Adviser, Revelation L.P.; Director of Cornerstone Total Return Fund, Inc. and Cornerstone Strategic Value Fund, Inc.
2007
Scott B. Rogers
(July 1955)
Trustee; Audit, Nominating and Corporate Governance Committee Member
Director, Board of Health Partners, Inc.; Chief Executive Officer, Asheville Buncombe Community Christian Ministry (“ABCCM”); President, ABCCM Doctor’s Medical Clinic; Director of Cornerstone Total Return Fund, Inc. and Cornerstone Strategic Value Fund, Inc.
2007
Andrew A. Strauss
(Nov. 1953)
Trustee; Chairman of Nominating and Corporate Governance Committee and Audit Committee Member
Attorney and senior member of Strauss & Associates, P.A., Attorneys; Director of Cornerstone Total Return Fund, Inc. and Cornerstone Strategic Value Fund, Inc.
2007
Glenn W. Wilcox, Sr.
(Dec. 1931)
Trustee; Chairman of Audit Committee, Nominating and Corporate Governance Committee Member
Chairman of the Board of Tower Associates, Inc.; Chairman of the Board of Wilcox Travel Agency, Inc.; Director of Champion Industries, Inc.; Director of Cornerstone Total Return Fund, Inc. and Cornerstone Strategic Value Fund, Inc.
2007
Gary A. Bentz
(June 1956)
Chief Compliance Officer, Secretary, and Assistant Treasurer
Chairman and Chief Financial Officer of Cornerstone Advisors, Inc.; Financial Consultant, C.P.A., Chief Compliance Officer, Secretary, and Assistant Treasurer of Cornerstone Total Return Fund, Inc. and Cornerstone Strategic Value Fund, Inc.
2007, 2008, 2009
 
 
19
 
 
Additional Information Regarding the Fund’s Trustees
and Corporate Officers (unaudited) (concluded)
 
Name and
Address*
(Birth Date)
  
Position(s)
Held with Fund
  
Principal Occupation
over Last 5 Years
  
Position with Fund Since
Frank J. Maresca
(Oct. 1958)
 
Treasurer
Executive Vice President of AST Fund Solutions, LLC (since February 2012), Executive Vice President of Ultimus Fund Solutions, LLC (from March 2009-February 2012) previous Executive Director, JP Morgan Chase & Co.; Previous President of Bear Stearns Funds Management Inc.; Previous Senior Managing Director of Bear Stearns & Co. Inc.; Treasurer of the Fund, Cornerstone Total Return Fund, Inc. and Cornerstone Strategic Value Fund, Inc. (from May 2009 through February 2012).
Since
April 17, 2013
 
 
*
The mailing address of each Trustee and/or Officer with respect to the Fund’s operation is 7 Dawson Street, Huntington Station, NY 11746.
 
 
**
Designates a trustee who is an “interested person” of the Fund as defined by the Investment Company Act of 1940, as amended. Mr. Bradshaw is an interested person of the Fund by virtue of his current position with the Investment Manager.
 
 
20
 
 
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.
 
 
21
 
 
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 (866) 668-6558.
 
 
22
 
 
Proxy Voting and Portfolio Holdings Information (unaudited)
 
The policies and procedures that the Fund uses to determine how to vote proxies relating to its portfolio securities are available:
 
 
•
without charge, upon request, by calling toll-free (866) 668-6558; and
 
 
•
on the website of the Securities and Exchange Commission, http://www.sec.gov.
 
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent period ended June 30 is available without charge, upon request, by calling toll-free (866) 668-6558, and on the SEC’s website at http://www.sec.gov or on the Fund’s website at www.cornerstoneprogressivereturnfund.com (See Form N-PX).
 
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 toll-free 1-800-SEC-0330.
 
 
23
 
 
Privacy Policy Notice (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.
 
 
24
 
 
Privacy Policy Notice (unaudited) (continued)
 
Reasons we can share your personal information
Does the 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
 
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.
 
 
25
 
 
Privacy Policy Notice (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.

Questions?
Call (866) 668-6558
 
 
26
 
 
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 Fund’s website at www.cornerstoneprogressivereturnfund.com.
 
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.
 
 
27
 

 
Cornerstone Progressive Return Fund
 
 
 
 
 
 
ITEM 2.
CODE OF ETHICS.

As of the end of the period covered by this report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. Pursuant to Item 12(a)(1), a copy of registrant's code of ethics is filed as an exhibit to this Form N-CSR. During the period covered by this report, the code of ethics has not been amended, and the registrant has not granted any waivers, including implicit waivers, from the provisions of the code of ethics.

ITEM 3.
AUDIT COMMITTEE FINANCIAL EXPERT.

The registrant's board of trustees has determined that the registrant does not have an audit committee financial expert serving on its audit committee. The audit committee determined that, although none of its members meet the technical definition of an audit committee financial expert, the experience provided by each member of the audit committee together offer the registrant adequate oversight for the registrant's current level of financial complexity.

ITEM 4.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.

(a)
Audit Fees. The aggregate fees billed for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $15,000 and $15,000 with respect to the registrant's fiscal years ended December 31, 2013 and 2012, respectively.

(b)
Audit-Related Fees. No fees were billed in either of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item.

(c)
Tax Fees. The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were $3,600 and $3,600 with respect to the registrant's fiscal years ended December 31, 2013 and 2012, respectively. The services comprising these fees are the preparation of the registrant's federal and state income and federal excise tax returns.

(d)
All Other Fees. $1,550 and $1,550 in fees were billed in with respect to the registrant's fiscal years ended December 31, 2013 and 2012, respectively, related to the review of the registrant’s rights offering registration.

(e)(1)
Before the principal accountant is engaged by the registrant to render (i) audit, audit-related or permissible non-audit services to the registrant or (ii) non-audit services to the registrant's investment adviser and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant, either (a) the audit committee shall pre-approve such engagement; or (b) such engagement shall be entered into pursuant to pre-approval policies and procedures established by the audit committee. Any such policies and procedures must be detailed as to the particular service and not involve any delegation of the audit committee's responsibilities to the registrant's investment adviser. The audit committee may delegate to one or more of its members the authority to grant pre-approvals. The pre-
 
 
 
 
 
 
approval policies and procedures shall include the requirement that the decisions of any member to whom authority is delegated under this provision shall be presented to the full audit committee at its next scheduled meeting. Under certain limited circumstances, pre-approvals are not required if certain de minimus thresholds are not exceeded, as such thresholds are determined by the audit committee in accordance with applicable Commission regulations.
 
(e)(2)
None of the services described in paragraph (b) through (d) of this Item were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f)
Less than 50% of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.

(g)
During the fiscal years ended December 31, 2013 and 2012 aggregate non-audit fees of $5,150 and $5,150, respectively, were billed by the registrant's principal accountant for services rendered to the registrant. No non-audit fees were billed in either of the last two fiscal years by the registrant's principal accountant for services rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant.

(h)
The principal accountant has not provided any non-audit services to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant.

ITEM 5.
AUDIT COMMITTEE OF LISTED REGISTRANTS.

(a)
The registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities and Exchange Act of 1934. Glenn W. Wilcox, Sr., (Chairman), Edwin Meese III, Andrew A. Strauss and Scott B. Rogers are the members of the registrant's audit committee.

(b)
Not applicable

ITEM 6.
SCHEDULE OF INVESTMENTS.
 
(a)
 Not required
 
ITEM 7.
DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
 
 
 
 
 
The registrant and Cornerstone Advisors, Inc., the registrant's investment adviser, share the same proxy voting policies and procedures. The proxy voting policies and procedures of the registrant and Cornerstone Advisors, Inc. are attached as Exhibit 99.VOTEREG.

ITEM 8.
PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

(a)(1)
All information included in this Item is as of the date of the filing of this Form N-CSR, unless otherwise noted. Ralph W. Bradshaw is the portfolio manager of the registrant. Mr. Bradshaw has acted as the portfolio manager since 2007. Mr. Bradshaw is President and Chief Financial Officer of Cornerstone Advisors, Inc. and serves as President and Chairman of the Board of the registrant, Cornerstone Strategic Value Fund, Inc. and Cornerstone Total Return Fund, Inc.

(a)(2)
Ralph W. Bradshaw manages two other closed-end registered investment companies: Cornerstone Strategic Value Fund, Inc. and Cornerstone Total Return Fund, Inc. As of December 31, 2013, net assets of Cornerstone Strategic Value Fund, Inc. were $180,372,051 and net assets of Cornerstone Total Return Fund, Inc. were $89,146,831. Mr. Bradshaw manages no accounts except for the registrant, Cornerstone Strategic Value Fund, Inc. and Cornerstone Total Return Fund, Inc. Mr. Bradshaw manages no accounts where the advisory fee is based on the performance of the account. No material conflicts of interest exist in connection with the portfolio manager's management of the registrant's investments, on the one hand, and the investment of the other accounts included in response to this Item, on the other.

(a)(3)
Compensation of Ralph W. Bradshaw includes a fixed salary paid by Cornerstone Advisors, Inc. plus his share of the profits of Cornerstone Advisors, Inc. The profitability of Cornerstone Advisors, Inc. is primarily dependent upon the value of the assets of the registrant and other managed accounts. However, compensation is not directly based upon the registrant's performance or on the value of the registrant's assets.

(a)(4) 
The dollar range of equity securities in the registrant beneficially owned by the portfolio manager as of December 31, 2013 is as follows: Ralph W. Bradshaw: $50,001 - $100,000

(b) 
Not applicable

ITEM 9.
PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

None

ITEM 10.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant's board of trustees that have been implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) or this Item.
 
 
 
 

ITEM 11.
CONTROLS AND PROCEDURES.

(a) Based on their evaluation of the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) as of a date within 90 days of the filing date of this report, the registrant's principal executive officer and principal financial officer have concluded that such disclosure controls and procedures are reasonably designed and are operating effectively to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which this report is being prepared, and that the information required in filings on Form N-CSR is recorded, processed, summarized, and reported on a timely basis.

(b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.

ITEM 12.
EXHIBITS.

File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated.

(a)(1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit: 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.CODE ETH
Code of Ethics

Exhibit 99.VOTEREG
Proxy Voting Policies and Procedures

Exhibit 99.CERT
Certifications required by Rule 30a-2(a) under the Act

Exhibit 99.906CERT
Certifications required by Rule 30a-2(b) under the Act
 
 
 
 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant) Cornerstone Progressive Return Fund

By (Signature and Title)*
/s/ Ralph W. Bradshaw
  
   
Ralph W. Bradshaw, Chairman and President
  
   
(Principal Executive Officer)
  
       
Date
March 4, 2014
    
 
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By (Signature and Title)*
/s/ Ralph W. Bradshaw
  
   
Ralph W. Bradshaw, Chairman and President
  
   
(Principal Executive Officer)
  
       
Date
March 4, 2014
    
       
     
By (Signature and Title)*
/s/ Frank J. Maresca
  
   
Frank J. Maresca, Treasurer
  
   
(Principal Financial Officer)
  
       
Date
March 4, 2014
    

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