================================================================================
PROGRESSIVE RETURN FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2001
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CONTENTS
Letter to Shareholders .................................................... 1
Portfolio Summary ......................................................... 4
Schedule of Investments ................................................... 5
Statement of Assets and Liabilities ....................................... 12
Statement of Operations ................................................... 13
Statement of Changes in Net Assets ........................................ 14
Financial Highlights ...................................................... 15
Notes to Financial Statements ............................................. 16
Results of Annual Meeting of Stockholders ................................. 20
Description of Dividend Reinvestment & Cash Purchase Plan ................. 21
Privacy Policy Notice ..................................................... 23
Summary of General Information ............................................ 24
Shareholder Information ................................................... 24
================================================================================
LETTER TO SHAREHOLDERS
August 2, 2001
Dear Fellow Shareholders:
Our report for Progressive Return Fund, Inc. (the "Fund"), formerly The Portugal
Fund, Inc., covering the six months ended June 30, 2001 follows. At the end of
the period, the Fund's net assets were $49.3 million. Net Asset Value ("NAV")
per share was $11.49, as compared to $12.37 at December 31, 2000. Following the
direction of the Board of Directors (the "Board") and votes of the shareholders
last year and at the Fund's annual meeting in April, the portfolio composition
changed substantially under new management by Cornerstone Advisors, Inc.
Investment focus changed from a concentration in Portuguese securities to a much
broader diversification in U.S. and non-U.S. equities.
ECONOMIC AND MARKET SUMMARY
The U.S. economy benefited from the longest peacetime expansion in its history,
having started way back in 1991. But it stalled alarmingly in the first quarter.
One industry after another found itself with excess capacity and withering
profits, leading to decreases in capital spending and significant layoffs.
The first quarter market downturn was broader and heavier than most expected and
few industry segments were spared. The Dow Jones Industrial Average dropped 8%,
the S&P 500 declined 12% and the NASDAQ Composite dove 25% for the quarter.
Financials, capital goods, and health care were particularly weak and technology
staged a major retreat. Outside the U.S., the picture was not pretty either,
with many stock markets around the world plunging to depths not seen for years.
The Morgan Stanley Capital International Europe Australasia Far East Index was
down 14% in U.S. dollar terms by quarter's end.
By the end of the second quarter, the Federal Reserve had just completed the
sixth interest rate cut of 2001. The three cuts made during this latest quarter
slashed an additional 1.25% from rates, following up on the three made in the
first quarter that totaled 1.5%. But the latest 1/4 point cut in late June,
which brought the Fed funds rate down to a seven year low of only 3.75%, was
treated with general disappointment by the market, even though the pace and
depth of the Fed's reductions has been historically fast and deep. There has
generally been a lag of at least six months before the impact of any rate cut is
fully felt. As we approached the six-month point since the first of these cuts,
most analysts remained mildly optimistic that growth would pick up soon, at
least by the latter half of the year. However, as more economic data and
corporate profit reports continued to roll in, doubts increased that the U.S.
economy will indeed be able to get back on its feet by the end of 2001.
The second quarter saw a much needed rebound in all the major U.S. stock indices
- the Dow Jones Industrial Average bounced back 6%; the S&P 500 was up 5%; the
NASDAQ Composite was up 17%. However, even after these rebounds, all these same
indices remained mired in negative territory for the year, still down 3%, 7% and
13%, respectively, with almost all of the rebound occurring only in April.
Unfortunately, many global developed markets continued to deteriorate, as the
dollar remained strong.
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1
LETTER TO SHAREHOLDERS (CONTINUED)
PORTFOLIO PERFORMANCE
The Fund moved from an early focus in international equities into much more
broadly diversified U.S. equities. In spite of the substantial downturn for many
technology companies like Cisco Systems, Inc., first quarter performance was
helped by the positive performance of Microsoft Corp. and International Business
Machines Corp. ("IBM"). Banco Comercial Portuguese, S.A. , ("BCP"), the Fund's
largest holding, declined through the quarter in line with the portfolio in
general, but other international portfolio holdings, like Siemens AG and ING
Groep N.V., fell even more. Even though the market retreated from the heights of
the April rally, the second quarter brought some relief to a protracted market
slide. Performance was helped by continuing positive returns from Microsoft and
IBM and by solid recoveries in General Electric Co. and AOL Time Warner Inc.
John Hancock Bank & Thrift Opportunity Fund, a closed-end fund specializing in
financial securities, also provided a boost with a double-digit return for the
quarter. Continuing weakness in international markets, however, moderated the
gains. The Fund sold the remaining Portuguese positions in BCP and Fabrica de
Porcelana Vista Alegre, S.A. as the Portuguese market showed signs of continuing
decline. (This move proved timely in that the Morgan Stanley Capital
International Portugal Index, down 9% for the first quarter, declined further to
-25% by the end of the second quarter in U.S. dollar terms.)
OUTLOOK
Previous hopes for a third quarter recovery have apparently been dashed. We
think that as the second half of 2001 unfolds, equities will remain under
pressure from earnings disappointments. Continuing threats to the U.S. economy
remain, such as the possibility of decline in consumer spending, lack of
recovery in business capital expenditures, or emerging weakness in other parts
of the world. Globally, Europe will continue to face lower growth with little
hope of significant central bank rate reduction. Japan's new Prime Minister
faces the daunting task of cleaning up a banking mess without further damaging a
burdened economy entering its fourth recession in a decade. Asia's other
export-driven economies will continue to feel the effects of cooling demand.
Nevertheless, indications appear to be growing that the U.S. economic downturn
is nearing a bottom and we may see a return of more acceptable growth in 2002,
possibly even by the earlier part of the year. Much about today's economic
outlook for the U.S. remains positive. Inflation is still under control, the
unemployment rate remains low and the positive effects of past interest rate
cuts are beginning to be felt. Furthermore, additional reduction in interest
rates can now be expected, the impact of recent tax rate cuts will start to be
felt soon, and energy costs have been dropping, all of which should provide a
further boost to economic growth.
The feeling is increasing that the worst may be behind us. We believe the stock
market record of the past few years suggests that there are some eternal truths
in equity investing, and that our consistent, more conservative strategies did
not go out of style with the "new economy". We continue to maintain that our
more conservative approach involving a long-term perspective, with an emphasis
on broad diversification, balanced asset allocation and liquidity, and our
current U.S. equity focus, are appropriate for our shareholders in this
environment.
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2
LETTER TO SHAREHOLDERS (CONCLUDED)
The Board continues to emphasize using the Fund's unique advantages to enhance
long-term capital appreciation.
-- The investment flexibility recently given by the stockholders has
enabled substantial change in the Fund's holdings. This has allowed
the portfolio to be much more diversified; thus moderating the
negative volatility that often accompanies narrowly focused
objectives.
-- The program of repurchasing the Fund's shares has continued. Through
June 30, 2001, a total of 1,063,100 shares have been bought by the
Fund, representing 19.85% of the shares outstanding at the start of
the program. In effect, this repurchasing of shares at a discount
allows the Fund to purchase its portfolio at below market prices. It
has provided a direct benefit to those remaining as shareholders by
increasing the Fund's NAV per share. This program has also provided
additional liquidity for those shareholders desiring to sell their
shares in the Fund.
-- The expense ratio has been substantially reduced. Working with the new
investment adviser, the Board has overseen changes in and by a number
of providers to improve the scope and cost of services to the Fund. In
addition, the investment management agreement recently approved by
shareholders provides for a waiver of management fees if Fund expenses
exceed certain limits.
We believe that we have positioned Progressive Return Fund, Inc. to produce
excellent returns for the long-term investor. We know you have a choice, we
thank you for your support, and we look forward to continuing to serve you in
the future.
Sincerely,
/s/ RALPH W. BRADSHAW
---------------------
Ralph W. Bradshaw
Chairman
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3
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PROGRESSIVE RETURN FUND, INC.
PORTFOLIO SUMMARY - AS OF JUNE 30, 2001 (UNAUDITED)
--------------------------------------------------------------------------------
TOP TEN, BY SECTOR
Percent of
Sector Net Assets
--------------------------------------------------------------------------------
1 Drugs (Major Pharmaceuticals) 9.5
--------------------------------------------------------------------------------
2 Computers (Software & Services) 7.6
--------------------------------------------------------------------------------
3 Manufacturing (Diversified) 7.1
--------------------------------------------------------------------------------
4 Computers (Hardware) 5.4
--------------------------------------------------------------------------------
5 Insurance (Property-Casualty) 4.7
--------------------------------------------------------------------------------
6 Telephone 3.8
--------------------------------------------------------------------------------
7 Banks (Money Center) 3.7
--------------------------------------------------------------------------------
8 Electronics (Semiconductors) 3.1
--------------------------------------------------------------------------------
9 Broadcasting (TV, Cable, Radio) 2.8
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10 Oil (Domestic Integrated) 2.8
--------------------------------------------------------------------------------
TOP TEN HOLDINGS, BY ISSUER
Percent of
Holding Sector Net Assets
--------------------------------------------------------------------------------------------------
1 Microsoft Corp. Computers (Software & Services) 5.0
--------------------------------------------------------------------------------------------------
2 General Electric Co. Manufacturing (Diversified) 4.5
--------------------------------------------------------------------------------------------------
3 International Business Machines Corp. Computers (Hardware) 3.3
--------------------------------------------------------------------------------------------------
4 Exxon Mobil Corp. Oil (Domestic Integrated) 2.8
--------------------------------------------------------------------------------------------------
5 Citigroup Inc. Insurance (Property-Casualty) 2.5
--------------------------------------------------------------------------------------------------
6 Pfizer Inc. Drugs (Major Pharmaceuticals) 2.4
--------------------------------------------------------------------------------------------------
7 AOL Time Warner Inc. Broadcasting (TV, Cable, Radio) 2.1
--------------------------------------------------------------------------------------------------
8 Wal-Mart Stores, Inc. Retail (Discounters) 2.0
--------------------------------------------------------------------------------------------------
9 John Hancock Bank & Thrift Opportunity Fund Closed-End Domestic Funds 1.9
--------------------------------------------------------------------------------------------------
10 American International Group, Inc. Insurance (Property-Casualty) 1.8
--------------------------------------------------------------------------------------------------
================================================================================
4
--------------------------------------------------------------------------------
PROGRESSIVE RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 2001 (UNAUDITED)
--------------------------------------------------------------------------------
No. of Value
Description Shares (Note A)
--------------------------------------------------------------------------------
EQUITY SECURITIES - 98.41%
Bermuda - 1.05%
Basic Materials - 0.98%
Manufacturing (Diversified) - 0.98%
Tyco International Ltd. .............................. 8,897 $ 484,887
----------
COMMUNICATION SERVICES - 0.07%
TELECOMMUNICATIONS (LONG DISTANCE) - 0.07%
Global Crossing Ltd.+ ................................ 4,000 34,560
----------
Total Bermuda (cost - $556,822) ...................... 519,447
----------
CANADA - 0.48%
BASIC MATERIALS - 0.22%
ALUMINUM - 0.13%
Alcan Inc. ........................................... 1,500 63,030
----------
GOLD & Precious Metals - 0.09%
Barrick Gold Corp. ................................... 1,900 28,785
Placer Dome Inc. ..................................... 1,500 14,700
----------
43,485
----------
Total Basic Materials ................................ 106,515
----------
TECHNOLOGY - 0.26%
COMMUNICATION EQUIPMENT - 0.26%
Nortel Networks Corp. ................................ 14,400 130,896
----------
Total Canada (cost - $295,236) ....................... 237,411
----------
CAYMAN ISLANDS - 0.13%
ENERGY - 0.13%
OIL & GAS (DRILLING & EXPLORATION) - 0.13%
Transocean Sedco Forex Inc.
(cost - $73,035) ............................. 1,500 61,875
----------
GERMANY - 0.45%
BASIC MATERIALS - 0.45%
MANUFACTURING (DIVERSIFIED) - 0.45%
Siemens AG, ADR (cost - $285,275) .................... 3,600 222,804
----------
NETHERLANDS - 1.98%
CONSUMER STAPLES - 0.54%
FOODS - 0.54%
Unilever NV, NY Shares ....................... 4,500 268,065
----------
ENERGY - 1.44%
OIL (INTERNATIONAL INTEGRATED) - 1.16%
Royal Dutch Petroleum Co., NY Shares ................. 9,800 571,046
----------
No. of Value
Description Shares (Note A)
--------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.28%
Schlumberger Ltd. ............................ 2,600 $ 136,890
----------
Total Energy ......................................... 707,936
----------
Total Netherlands (cost - $1,075,146) ................ 976,001
----------
PANAMA - 0.17%
CONSUMER STAPLES - 0.17%
ENTERTAINMENT - 0.17%
Carnival Corp. (cost - $80,421) ...................... 2,700 82,890
----------
UNITED STATES - 94.15%
BASIC MATERIALS - 1.84%
ALUMINUM - 0.34%
Alcoa Inc. ........................................... 4,200 165,480
----------
CHEMICALS (DIVERSIFIED) - 0.90%
Air Products & Chemicals, Inc. ....................... 1,100 50,325
Dow Chemical Co. (The) ............................... 4,100 136,325
E.I. du Pont de Nemours & Co. ........................ 4,700 226,728
Rohm & Hass Co. ...................................... 1,000 32,900
----------
446,278
----------
GOLD & PRECIOUS METALS - 0.02%
Homestake Mining Co. ................................. 1,300 10,075
----------
PAPER & FOREST PRODUCTS - 0.58%
International Paper Co. .............................. 2,500 89,250
Kimberly-Clark Corp. ................................. 2,500 139,750
Weyerhaeuser Co. ..................................... 1,000 54,970
----------
283,970
----------
Total Basic Materials ................................ 905,803
----------
CAPITAL GOODS - 8.02%
AEROSPACE/DEFENSE - 1.15%
Boeing Co. (The) ..................................... 4,100 227,960
General Dynamics Corp. ............................... 2,600 202,306
Lockheed Martin Corp. ................................ 2,500 92,625
Raytheon Co. ......................................... 1,600 42,480
----------
565,371
----------
ELECTRICAL EQUIPMENT - 0.44%
Motorola, Inc. ............................... 10,000 165,600
Solectron Corp.+ ............................. 2,900 53,070
----------
218,670
----------
================================================================================
See accompanying notes to financial statements.
5
--------------------------------------------------------------------------------
PROGRESSIVE RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 2001 (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
No. of Value
Description Shares (Note A)
--------------------------------------------------------------------------------
MACHINERY (DIVERSIFIED) - 0.43%
Caterpillar Inc. ............................. 1,600 $ 80,080
Deere & Co. .................................. 1,100 41,635
Illinois Tool Works Inc. ..................... 1,400 88,620
----------
210,335
----------
MANUFACTURING (DIVERSIFIED) - 5.68%
General Electric Co. ................................. 45,400 2,213,250
Honeywell International Inc. ......................... 3,600 125,964
Masco Corp. .......................................... 2,500 62,400
Minnesota Mining & Manufacturing Co. (3M) ............ 1,900 216,790
United Technologies Corp. ............................ 2,500 183,150
----------
2,801,554
----------
OFFICE EQUIPMENT & SUPPLIES - 0.15%
Pitney Bowes Inc. .................................... 1,100 46,332
Xerox Corp. .......................................... 3,000 28,710
----------
75,042
----------
WASTE MANAGEMENT - 0.17%
Waste Management, Inc. ............................... 2,800 86,296
----------
Total Capital Goods .................................. 3,957,268
----------
CLOSED-END FUNDS - 1.85%
CLOSED-END DOMESTIC FUNDS - 1.85%
John Hancock Bank & Thrift Opportunity Fund .......... 103,000 913,610
----------
COMMUNICATION SERVICES - 5.90%
TELECOMMUNICATIONS (CELLULAR) - 0.79%
Alltel Corp. ......................................... 1,500 91,890
Ciena Corp.+ ......................................... 3,200 121,600
Nextel Communications, Inc., Class A+ ................ 3,500 61,250
Sprint Corp. (PCS Group)+ ............................ 4,300 103,845
WorldCom, Inc. (MCI Group)+ .......................... 528 8,501
----------
387,086
----------
TELECOMMUNICATIONS (LONG DISTANCE) - 1.32%
AT&T Corp. ........................................... 17,200 378,400
Sprint Corp. ......................................... 4,000 85,440
WorldCom, Inc.
(WorldCom Group) ................................... 13,200 187,440
----------
651,280
----------
No. of Value
Description Shares (Note A)
--------------------------------------------------------------------------------
TELEPHONE - 3.79%
BellSouth Corp. ...................................... 8,500 $ 342,295
Qwest Communications International Inc. .............. 7,600 242,212
SBC Communications Inc. .............................. 15,500 620,930
Verizon Communications Inc. .......................... 12,400 663,400
----------
1,868,837
----------
Total Communication Services ......................... 2,907,203
----------
CONSUMER CYCLICALS - 7.23%
AUTO PARTS & EQUIPMENT - 0.08%
Delphi Automotive Systems Corp. ...................... 2,600 41,418
----------
AUTOMOBILES - 0.90%
Ford Motor Co. ....................................... 8,600 211,130
General Motors Corp. ................................. 2,600 167,310
Harley-Davidson, Inc. ................................ 1,400 65,912
----------
444,352
----------
BUILDING MATERIALS - 0.07%
Georgia-Pacific Group ................................ 1,000 33,850
----------
CONSUMER (JEWELRY, NOVELTIES) - 0.10%
Mattel, Inc. ......................................... 2,500 47,300
----------
HOUSEHOLD FURNISHINGS & APPAREL - 0.15%
Bed Bath & Beyond Inc.+ .............................. 1,300 40,560
Newell Rubbermaid Inc. ............................... 1,100 32,630
----------
73,190
----------
LODGING & HOTELS - 0.15%
Hilton Hotels Corp. .................................. 1,700 19,720
Marriott International, Inc., Class A ................ 1,100 52,074
----------
71,794
----------
PUBLISHING (NEWSPAPERS) - 0.27%
Gannett Co., Inc. ............................ 1,200 79,080
Tribune Co. .................................. 1,400 56,014
----------
135,094
----------
RETAIL (BUILDING SUPPLIES) - 0.26%
Lowe's Companies, Inc. ....................... 1,800 130,590
----------
================================================================================
See accompanying notes to financial statements.
6
--------------------------------------------------------------------------------
PROGRESSIVE RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 2001 (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
No. of Value
Description Shares (Note A)
--------------------------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 0.04%
Circuit City Stores - Circuit City Group ............. 1,000 $ 18,000
----------
RETAIL (DEPARTMENT STORES) - 0.63%
Federated Department Stores, Inc.+ ................... 1,000 42,500
J.C. Penney Co., Inc. ................................ 1,300 34,268
Kohl's Corp.+ ........................................ 3,000 188,190
May Department Stores Co. (The) ...................... 1,400 47,964
----------
312,922
----------
RETAIL (DISCOUNTERS) - 2.47%
Dollar General Corp. ................................. 1,500 29,250
Kmart Corp.+ ......................................... 2,500 28,675
Target Corp. ......................................... 4,100 141,860
TJX Companies, Inc. (The) ............................ 1,300 41,431
Wal-Mart Stores, Inc. ................................ 20,000 976,000
----------
1,217,216
----------
RETAIL (GENERAL MERCHANDISE) - 0.14%
Sears, Roebuck & Co. ................................. 1,600 67,696
----------
RETAIL (HOME SHOPPING) - 0.97%
Home Depot, Inc. (The) ............................... 10,300 479,465
----------
RETAIL (SPECIALTY) - 0.16%
Office Depot, Inc.+ .................................. 1,400 14,532
Staples, Inc.+ ....................................... 2,500 39,975
Toys "R" Us, Inc.+ ................................... 1,000 24,750
----------
79,257
----------
RETAIL (SPECIALTY-APPAREL) - 0.30%
Gap, Inc. (The) ...................................... 3,900 113,100
Limited, Inc. (The) .................................. 2,000 33,040
----------
146,140
----------
SERVICES (ADVERTISING/MARKETING) - 0.08%
Interpublic Group of Companies (The) ................. 1,400 41,090
----------
SERVICES (COMMERCIAL & CONSUMER) - 0.35%
Cendant Corp.+ ....................................... 3,300 64,350
IMS Health Inc. ...................................... 1,400 39,900
Paychex, Inc. ........................................ 1,700 68,000
----------
172,250
----------
No. of Value
Description Shares (Note A)
--------------------------------------------------------------------------------
TEXTILES (APPAREL) - 0.11%
Nike, Inc., Class B .................................. 1,300 $ 54,587
----------
Total Consumer Cyclicals ............................. 3,566,211
----------
CONSUMER STAPLES - 11.65%
BEVERAGES (ALCOHOLIC) - 0.34%
Anheuser-Busch Companies, Inc. ....................... 4,100 168,920
----------
BEVERAGES (NON-ALCOHOLIC) - 1.70%
Coca-Cola Co. (The) .................................. 11,300 508,500
Coca-Cola Enterprises Inc. ........................... 2,500 40,875
PepsiCo., Inc. ....................................... 6,600 291,720
----------
841,095
----------
BROADCASTING (TV, CABLE, RADIO) - 2.84%
AOL Time Warner Inc.+ ................................ 19,850 1,052,050
Clear Channel Communications, Inc.+ .................. 2,700 169,290
Comcast Corp., Special Class A+ ...................... 4,100 177,940
----------
1,399,280
----------
DISTRIBUTORS (FOOD & HEALTH) - 0.21%
Costco Wholesale Corp.+ .............................. 2,500 102,700
----------
ENTERTAINMENT - 1.28%
Viacom Inc., non-voting Class B+ ..................... 6,900 357,075
Walt Disney Co. (The) ................................ 9,500 274,455
----------
631,530
----------
FOODS - 1.15%
Archer-Daniels-Midland Co. ........................... 2,900 37,700
Campbell Soup Co. .................................... 2,000 51,500
ConAgra Foods, Inc. .................................. 2,500 49,525
General Mills, Inc. .................................. 1,300 56,914
H.J. Heinz Co. ....................................... 1,600 65,424
Kellogg Co. .......................................... 1,900 55,100
Ralston Purina Co. ................................... 1,400 42,028
Sara Lee Corp. ....................................... 3,800 71,972
Sysco Corp. .......................................... 3,100 84,165
Wrigley (William) Jr. Co. ............................ 1,100 51,535
----------
565,863
----------
================================================================================
See accompanying notes to financial statements.
7
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PROGRESSIVE RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 2001 (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
No. of Value
Description Shares (Note A)
--------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 0.07%
Clorox Co. (The) ..................................... 1,100 $ 37,235
----------
PERSONAL CARE - 1.52%
Avon Products, Inc. .................................. 1,200 55,536
Colgate-Palmolive Co. ................................ 2,600 153,374
Gillette Co. (The) ................................... 5,500 159,445
Procter & Gamble Co. (The) ........................... 6,000 382,800
----------
751,155
----------
RESTAURANTS - 0.44%
McDonald's Corp. ..................................... 6,500 175,890
Starbucks Corp.+ ..................................... 1,700 39,100
----------
214,990
----------
RETAIL (DRUG STORES) - 0.46%
CVS Corp. ............................................ 1,800 69,480
Walgreen Co. ......................................... 4,600 157,090
----------
226,570
----------
RETAIL (FOOD CHAINS) - 0.59%
Albertson's, Inc. .................................... 2,500 74,975
Kroger Co. (The)+ .................................... 3,800 95,000
Safeway Inc.+ ........................................ 2,500 120,000
----------
289,975
----------
TOBACCO - 1.05%
Philip Morris Companies Inc. ......................... 10,200 517,650
----------
Total Consumer Staples ............................... 5,746,963
----------
ENERGY - 5.48%
OIL (DOMESTIC INTEGRATED) - 2.82%
Exxon Mobil Corp. .................................... 15,900 1,388,865
----------
OIL (INTERNATIONAL INTEGRATED) - 1.08%
Chevron Corp. ........................................ 5,000 452,500
Conoco Inc., Class B ................................. 2,800 80,920
----------
533,420
----------
OIL & GAS (DRILLING & EXPLORATION) - 0.11%
Baker Hughes Inc. .................................... 1,600 53,600
----------
No. of Value
Description Shares (Note A)
--------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.89%
Anadarko Petroleum Corp. ............................. 1,200 $ 64,836
Burlington Resources Inc. ............................ 1,000 39,950
Enron Corp. .......................................... 3,400 166,600
Texaco Inc. .......................................... 2,500 166,500
----------
437,886
----------
OIL & GAS (REFINING & MINING) - 0.58%
Halliburton Co. ...................................... 2,500 89,000
Occidental Petroleum Corp. ........................... 1,700 45,203
Phillips Petroleum Co. ............................... 1,200 68,400
Unocal Corp. ......................................... 1,200 40,980
USX-Marathon Group ................................... 1,500 44,265
----------
287,848
----------
Total Energy ......................................... 2,701,619
----------
FINANCIAL - 16.45%
Banks (Major Regional) - 2.43%
AmSouth Bancorp ...................................... 1,800 33,282
Bank One Corp. ....................................... 5,300 189,740
BB&T Corp. ........................................... 1,900 69,730
Fifth Third Bancorp .................................. 2,500 150,125
Huntington Bancshares Inc. ........................... 1,200 19,620
Mellon Financial Corp. ............................... 2,500 115,000
National City Corp. .................................. 2,800 86,184
Northern Trust Corp. ................................. 1,000 62,500
PNC Financial Services Group ......................... 1,400 92,106
Regions Financial Corp. .............................. 1,000 32,000
SouthTrust Corp. ..................................... 1,500 39,000
Synovus Financial Corp. .............................. 1,300 40,794
U.S. Bancorp ......................................... 8,701 198,296
Wachovia Corp. ....................................... 1,000 71,150
----------
1,199,527
----------
BANKS (MONEY CENTER) - 3.73%
Bank of America Corp. ................................ 7,400 444,222
Bank of New York Co., Inc. (The)+ .................... 3,400 163,200
First Union Corp. .................................... 4,500 157,230
FleetBoston Financial Corp. .......................... 4,100 161,745
J.P. Morgan Chase & Co. .............................. 8,700 388,020
KeyCorp .............................................. 2,000 52,100
SunTrust Banks, Inc. ................................. 1,400 90,692
Wells Fargo & Co. .................................... 8,100 376,083
----------
1,833,292
----------
================================================================================
See accompanying notes to financial statements.
8
--------------------------------------------------------------------------------
PROGRESSIVE RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 2001 (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
No. of Value
Description Shares (Note A)
--------------------------------------------------------------------------------
CONSUMER FINANCE - 1.23%
American Express Co. ................................. 6,100 $ 236,680
Household International, Inc. ........................ 2,500 166,750
MBNA Corp. ........................................... 3,900 128,505
Providian Financial Corp. ............................ 1,300 76,960
----------
608,895
----------
DIVERSIFIED - 1.78%
Fannie Mae ........................................... 4,000 340,600
Freddie Mac .......................................... 3,100 217,000
Morgan Stanley Dean Witter & Co. ..................... 5,000 321,150
----------
878,750
----------
INSURANCE (BROKERS) - 0.42%
Hartford Financial Services Group, Inc. (The) ........ 1,100 75,240
Marsh & McLennan Companies, Inc. ..................... 1,300 131,300
----------
206,540
----------
INSURANCE (LIFE & HEALTH) - 0.81%
AFLAC Inc. ........................................... 2,600 81,874
American General Corp. ............................... 2,400 111,480
Aon Corp. ............................................ 1,200 42,000
Conseco Inc. ......................................... 1,500 20,475
MetLife, Inc. ........................................ 3,500 108,430
UnumProvident Corp. .................................. 1,100 35,332
----------
399,591
----------
INSURANCE (PROPERTY-CASUALTY) - 4.71%
Allstate Corp. (The) ................................. 3,300 145,167
American International Group, Inc. ................... 10,600 911,600
Citigroup Inc. ....................................... 23,000 1,215,320
St. Paul Companies, Inc. (The) ....................... 1,000 50,690
----------
2,322,777
----------
INVESTMENT BANKING & BROKERAGE - 0.81%
Charles Schwab Corp. (The) ........................... 6,300 96,390
Lehman Brothers Holdings Inc. ........................ 1,100 85,525
Merrill Lynch & Co., Inc. ............................ 3,700 219,225
----------
401,140
----------
No. of Value
Description Shares (Note A)
--------------------------------------------------------------------------------
INVESTMENT MANAGEMENT - 0.18%
Franklin Resources, Inc. ............................. 1,200 $ 54,924
Stilwell Financial, Inc. ............................. 1,000 33,560
----------
88,484
----------
SAVINGS & LOANS - 0.35%
Charter One Financial, Inc. .......................... 1,000 31,900
Washington Mutual, Inc. .............................. 3,750 140,812
----------
172,712
----------
Total Financial ...................................... 8,111,708
----------
HEALTH CARE - 12.28%
BIOTECHNOLOGY - 0.67%
Amgen Inc.+ .......................................... 4,700 285,196
MedImmune, Inc.+ ..................................... 1,000 47,200
----------
332,396
----------
DRUGS (GENERIC) - 0.37%
Cardinal Health, Inc. ................................ 1,950 134,550
McKesson HBOC, Inc. .................................. 1,300 48,256
----------
182,806
----------
DRUGS (MAJOR PHARMACEUTICALS) - 9.54%
Abbott Laboratories .................................. 7,100 340,871
Allergan, Inc. ....................................... 1,000 85,500
American Home Products Co. ........................... 6,000 350,640
Bristol-Myers Squibb Co. ............................. 8,900 465,470
Eli Lilly & Co. ...................................... 5,300 392,200
Johnson & Johnson .................................... 13,878 693,900
Merck & Co., Inc. .................................... 10,500 671,055
Pfizer Inc. .......................................... 29,700 1,189,485
Pharmacia Corp. ...................................... 5,900 271,105
Schering-Plough Corp. ................................ 6,700 242,808
----------
4,703,034
----------
HOSPITAL MANAGEMENT - 0.38%
HCA Inc. ............................................. 2,500 112,975
Tenet Healthcare Corp.+ .............................. 1,500 77,385
----------
190,360
----------
MANAGED CARE - 0.19%
UnitedHealth Group Inc. .............................. 1,500 92,625
----------
================================================================================
See accompanying notes to financial statements.
9
--------------------------------------------------------------------------------
PROGRESSIVE RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 2001 (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
No. of Value
Description Shares (Note A)
--------------------------------------------------------------------------------
MEDICAL PRODUCTS - 1.07%
Baxter International Inc. ............................ 2,800 $ 137,200
Becton, Dickinson & Co. .............................. 1,200 42,948
Boston Scientific Corp.+ ............................. 2,500 42,500
Guidant Corp.+ ....................................... 1,400 50,400
Medtronic, Inc. ...................................... 5,500 253,055
----------
526,103
----------
SPECIALIZED SERVICES - 0.06%
Healthsouth Corp. .................................... 1,800 28,746
----------
Total Health Care .................................... 6,056,070
----------
TECHNOLOGY - 19.60%
COMMUNICATION EQUIPMENT - 1.02%
ADC Telecommunications, Inc.+ ........................ 3,500 23,100
Avaya Inc. ........................................... 1,300 17,810
Corning Inc. ......................................... 4,200 70,182
Lucent Technologies Inc. ............................. 19,600 121,520
Qualcomm Inc.+ ....................................... 4,000 233,920
Tellabs, Inc.+ ....................................... 1,900 36,822
----------
503,354
----------
COMPUTERS (HARDWARE) - 5.40%
Apple Computer, Inc.+ ................................ 1,500 34,875
Compaq Computer Corp. ................................ 15,400 238,546
Dell Computer Corp.+ ................................. 11,800 308,570
Gateway, Inc.+ ....................................... 1,500 24,675
Hewlett-Packard Co. .................................. 9,100 260,260
International Business Machines Corp. ................ 14,500 1,638,500
Sun Microsystems, Inc.+ .............................. 10,000 157,200
----------
2,662,626
----------
COMPUTERS (NETWORKING) - 0.74%
Cisco Systems, Inc.+ ................................. 20,000 364,000
----------
No. of Value
Description Shares (Note A)
--------------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 7.60%
Adobe Systems Inc. ................................... 1,100 $ 51,700
BMC Software, Inc.+ .................................. 1,100 24,794
BroadVision, Inc.+ ................................... 1,300 6,500
Computer Associates International, Inc. .............. 2,700 97,200
Compuware Corp.+ ..................................... 1,700 23,783
Emc Corp.+ ........................................... 10,000 290,500
First Data Corp. ..................................... 1,900 122,075
Intuit Inc.+ ......................................... 2,000 79,980
McDATA Corp., Class A+ ............................... 368 6,458
Microsoft Corp.+ ..................................... 33,800 2,467,400
Novell, Inc.+ ........................................ 1,500 8,535
Oracle Corp.+ ........................................ 25,200 478,800
Parametric Technology Corp.+ ......................... 1,300 18,187
Unisys Corp.+ ........................................ 1,500 22,065
Yahoo! Inc.+ ......................................... 2,500 49,975
----------
3,747,952
----------
ELECTRONICS (COMPONENT DISTRIBUTION) - 0.25%
Emerson Electric Co. ................................. 2,000 121,000
----------
ELECTRONICS (SEMICONDUCTORS) - 3.06%
Advanced Micro Devices, Inc.+ ........................ 1,500 43,320
Altera Corp.+ ........................................ 1,900 55,100
Analog Devices, Inc.+ ................................ 1,700 73,525
Conexant Systems, Inc.+ .............................. 1,100 9,845
Intel Corp. .......................................... 30,200 883,350
LSI Logic Corp.+ ..................................... 1,500 28,200
Micron Technology, Inc.+ ............................. 2,600 106,860
Texas Instruments Inc. ............................... 7,900 248,850
Xilinx, Inc.+ ........................................ 1,500 61,860
----------
1,510,910
----------
EQUIPMENT (SEMICONDUCTORS) - 0.79%
Agilent Technologies, Inc.+ .......................... 2,500 81,250
Applied Materials, Inc.+ ............................. 3,700 181,670
Linear Technology Corp. .............................. 1,500 66,330
Maxim Integrated Products, Inc.+ ..................... 1,300 57,473
----------
386,723
----------
PHOTOGRAPHY/IMAGING - 0.13%
Eastman Kodak Co. .................................... 1,400 65,352
----------
================================================================================
See accompanying notes to financial statements.
10
--------------------------------------------------------------------------------
PROGRESSIVE RETURN FUND, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 2001 (UNAUDITED) (CONCLUDED)
--------------------------------------------------------------------------------
No. of Value
Description Shares (Note A)
--------------------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 0.61%
Automatic Data Processing, Inc. ...................... 2,900 $ 144,130
Electronic Data Systems Corp. ........................ 2,500 156,250
----------
300,380
----------
Total Technology ..................................... 9,662,297
----------
TRANSPORTATION - 0.63%
AIR FREIGHT - 0.10%
FedEx Corp.+ ......................................... 1,300 52,260
----------
AIRLINES - 0.14%
Southwest Airlines Co. ............................... 3,750 69,338
----------
RAILROADS - 0.39%
Burlington Northern Santa
Fe Corp. ............................................. 1,900 57,323
CSX Corp. ............................................ 1,000 36,240
Norfolk Southern Corp. ............................... 1,800 37,260
Union Pacific Corp. .................................. 1,100 60,401
----------
191,224
----------
Total Transportation ................................. 312,822
----------
UTILITIES - 3.22%
ELECTRIC COMPANIES - 2.32%
AES Corp. (The)+ ..................................... 2,500 107,625
American Electric Power Co., Inc. .................... 1,500 69,255
Consolidated Edison, Inc. ............................ 1,000 39,800
Dominion Resources, Inc. ............................. 1,100 66,143
Duke Energy Corp. .................................... 9,000 351,090
Edison International+ ................................ 1,500 16,725
Entergy Corp. ........................................ 1,100 42,229
Exelon Corp. ......................................... 1,500 96,180
FirstEnergy Corp. .................................... 1,100 35,376
NiSource Inc. ........................................ 1,000 27,330
Progress Energy, Inc. ................................ 1,000 44,920
Reliant Energy, Inc. ................................. 1,400 45,094
Sempra Energy ........................................ 1,000 27,340
Southern Co. (The) ................................... 3,100 72,075
TXU Corp. ............................................ 1,200 57,828
Xcel Energy, Inc. .................................... 1,600 45,520
----------
1,144,530
----------
No. of Value
Description Shares (Note A)
--------------------------------------------------------------------------------
NATURAL GAS - 0.71%
Dynegy Inc., Class A ................................. 1,500 $ 69,750
El Paso Corp. ........................................ 2,500 131,350
PG&E Corp.+ .......................................... 1,800 20,160
Public Service Enterprises Group Inc. ................ 1,000 48,900
Williams Companies, Inc. (The) ....................... 2,500 82,375
----------
352,535
----------
POWER PRODUCTS (INDEPENDENT) - 0.19%
Calpine Corp.+ ....................................... 1,300 49,140
Mirant Corp.+ ........................................ 1,232 42,380
----------
91,520
----------
Total Utilities ...................................... 1,588,585
----------
Total United States (cost - $47,643,678) ............. 46,430,159
----------
TOTAL EQUITY SECURITIES
(cost - $50,009,613) ............................... 48,530,587
----------
SHORT-TERM INVESTMENT - 1.77%
REPURCHASE AGREEMENT - 1.77%
Principal
Amount
(000's)
----------
Bear, Stearns & Co. Inc. (Agreement
dated 06/29/01 to be repurchased at
$871,129), 3.97%, 07/02/01
(cost - $870,841) (Note F) ...................... $871 870,841
----------
TOTAL INVESTMENTS - 100.18%
(cost - $50,880,454) (Notes A, C) .................. 49,401,428
LIABILITIES IN EXCESS OF CASH AND
OTHER ASSETS - (0.18)% ....................... (88,776)
-----------
NET ASSETS - 100.00% ................................. $49,312,652
===========
ADR American Depositary Receipts.
+ Security is non-income producing.
================================================================================
See accompanying notes to financial statements.
11
--------------------------------------------------------------------------------
PROGRESSIVE RETURN FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - JUNE 30, 2001 (UNAUDITED)
--------------------------------------------------------------------------------
ASSETS
Investments, at value (Cost $50,880,454) (Note A) .................... $ 49,401,428
Cash collateral received for securities loaned (Note E) .............. 1,334,269
Receivables:
Investments sold ............................................. 87,862
Dividends .................................................... 32,489
Interest ..................................................... 3,919
Prepaid expenses ..................................................... 27,952
------------
Total Assets ......................................................... 50,887,919
------------
LIABILITIES
Payables:
Upon return of securities loaned (Note E) .................... 1,334,269
Investments purchased ........................................ 86,178
Investment management fees (Note B) .......................... 41,316
Capital stock repurchased (Note D) ........................... 39,104
Other accrued expenses ....................................... 74,400
------------
Total Liabilities .................................................... 1,575,267
------------
NET ASSETS (applicable to 4,292,316 shares of common stock oustanding) $ 49,312,652
============
NET ASSET VALUE PER SHARE ($49,312,652 / 4,292,316) .................. $ 11.49
============
NET ASSETS CONSISTS OF
Capital stock, $0.001 par value; 4,292,316 shares outstanding
(100,000,000 shares authorized) ...................... $ 4,292
Paid-in capital ...................................................... 62,101,892
Cost of 140,100 shares repurchased ................................... (1,378,476)
Undistributed net investment income .................................. 43,698
Accumulated net realized loss on investments and
foreign currency related transactions ........................ (9,979,728)
Net unrealized depreciation in value of investments .................. (1,479,026)
------------
Net assets applicable to shares outstanding .......................... $ 49,312,652
============
================================================================================
See accompanying notes to financial statements.
12
--------------------------------------------------------------------------------
PROGRESSIVE RETURN FUND, INC.
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 2001 (UNAUDITED)
--------------------------------------------------------------------------------
INVESTMENT INCOME Income (Note A):
Dividends ............................................ $ 309,061
Interest ............................................. 122,766
Less: Foreign taxes withheld ......................... (2,160)
-----------
Total Investment Income .............................. 429,667
-----------
Expenses:
Investment management fees (Note B) .................. 102,485
Audit and legal fees (Note B) ........................ 93,104
Directors' fees ...................................... 54,488
Administration fees .................................. 37,929
Accounting fees ...................................... 27,429
Custodian fees ....................................... 25,505
Transfer agent fees .................................. 19,383
Printing ............................................. 14,795
NYSE listing fees .................................... 8,024
Insurance ............................................ 4,668
Other ................................................ 17,337
-----------
Total Expenses ....................................... 405,147
Less: Fees paid indirectly (Note B) .......... (16,634)
Less: Management fee waivers (Note B) ........ (2,544)
-----------
Net Expenses ......................................... 385,969
-----------
Net Investment Income ................................ 43,698
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
AND FOREIGN CURRENCY RELATED TRANSACTIONS
Net realized gain/(loss) from:
Investments .......................................... (2,193,514)
Foreign currency related transactions ................ 234
Net change in unrealized appreciation in value of
investments and translation of other assets
and liabilities denominated in foreign currency ......... (1,999,542)
-----------
Net realized and unrealized loss on investments and
foreign currency related transactions ................... (4,192,822)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ......... $(4,149,124)
===========
================================================================================
See accompanying notes to financial statements.
13
--------------------------------------------------------------------------------
PROGRESSIVE RETURN FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
For the For the
Six Months Ended Year Ended
June 30, 2001 December 31,
(unaudited) 2000
----------- ----
DECREASE IN NET ASSETS
Operations:
Net investment income/(loss) ................ $ 43,698 $ (38,625)
Net realized loss on investments and
foreign currency related transactions ..... (2,193,280) (7,140,430)
Reimbursement from adviser .................. -- 86,640
Net change in unrealized appreciation in
value of investments and translation of
other assets and liabilities denominated
in foreign currency ....................... (1,999,542) (7,125,666)
------------ ------------
Net decrease in net assets resulting
from operations ................. (4,149,124) (14,218,081)
------------ ------------
Dividends and distributions to shareholders (Note A):
Net investment income ....................... -- (3,607)
Net realized gain on investments and
foreign currency related transactions ..... -- (1,168,685)
------------ ------------
Total dividends and distributions
to shareholders ................. -- (1,172,292)
------------ ------------
Capital stock transactions (Note D):
Cost of 140,100 and 651,800
shares repurchased, respectively .......... (1,378,476) (8,378,956)
------------ ------------
Total decrease in net assets ........ (5,527,600) (23,769,329)
------------ ------------
NET ASSETS
Beginning of period ................................. 54,840,252 78,609,581
------------ ------------
End of period (including undistributed
net investment income of $43,698
at June 30, 2001) .............................. $ 49,312,652 $ 54,840,252
============ ============
================================================================================
See accompanying notes to financial statements.
14
--------------------------------------------------------------------------------
PROGRESSIVE RETURN FUND, INC.
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Contained below is per share operating performance data for a share of common
stock oustanding, total investment return, ratios to average net assets and
other supplemental data for each period indicated. This information has been
derived from information provided in the financial statements and market price
data for the Fund's shares.
--------------------------------------------------------------------------------
For the Six
Months Ended For the Years Ended December 31,
June 30, 2001 --------------------------------
(unaudited) 2000 1999 1998 1997
----------- ---- ---- ---- ----
Per Share Operating
Performance
Net asset value, beginning
of period .............................. $ 12.37 $ 15.46 $ 18.31 $ 19.45 $ 17.43
----------- ----------- ---------- ---------- -----------
Net investment income/(loss) ........... 0.01# (0.01)# 0.09# 0.12 0.05
Net realized and unrealized
gain/(loss) on investments
and foreign currency
related translations ................... (0.95) (3.17) (0.90) 4.43+ 6.11+
----------- ----------- ---------- ---------- -----------
Net increase/(decrease)
in net assets from operations .......... (0.94) (3.18) (0.81) 4.55 6.16
----------- ----------- ---------- ---------- -----------
Dividends and distributions
to shareholders:
Net investment income .......... -- --* (0.08) (0.07) (0.01)
Net realized gain on investments
and foreign currency related
transactions ................... -- (0.26) (2.08) (5.62) (4.13)
----------- ----------- ---------- ---------- -----------
Total dividends and distributions
to shareholders ........................ -- (0.26) (2.16) (5.69) (4.14)
----------- ----------- ---------- ---------- -----------
Anti-dilutive effect due to
capital shares repurchased ............. 0.06 0.35 0.12 -- --
----------- ----------- ---------- ---------- -----------
Net asset value, end of period ......... $ 11.49 $ 12.37 $ 15.46 $ 18.31 $ 19.45
=========== =========== ========== ========== ===========
Market value, end of period ............ $ 10.000 $ 9.500 $ 13.063 $ 15.625 $ 15.813
=========== =========== ========== ========== ===========
Total investment return (a) ............ 5.26% (27.27)% (1.84)% 32.56% 43.21%
=========== =========== ========== ========== ===========
Ratios/Supplemental
Data
Net assets, end of period
(000 omitted) .......................... $ 49,313 $ 54,840 $ 78,609 $ 98,084 $ 103,444
Ratio of expenses to average
net assets, net of fee waivers ......... 1.48%(b)(c) 2.46% 2.10% 1.50% 1.56%
Ratio of expenses to average
net assets, excluding
fee waivers ....................... 1.56%(b)(d) 2.65% 2.28% 1.66% 1.73%
Ratio of net investment income/
(loss) to average net assets ...... 1.65%(b) (0.06)% 0.59% 0.51% 0.23%
Portfolio turnover rate ................ 30.15% 38.13% 39.60% 48.52% 72.25%
For the Years Ended December 31,
--------------------------------
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
Net asset value, beginning
of period .............................. $ 13.29 $ 14.33 $ 12.52 $ 8.90 $ 10.77 $ 10.96
----------- ---------- --------- ---------- ---------- ----------
Net investment income/(loss) ........... 0.11 0.17 0.06 0.07 0.11 0.13
Net realized and unrealized
gain/(loss) on investments
and foreign currency
related translations ................... 4.11 (1.03) 1.81 3.55 (1.92) (0.21)
----------- ---------- --------- ---------- ---------- ----------
Net increase/(decrease)
in net assets from operations .......... 4.22 (0.86) 1.87 3.62 (1.81) (0.08)
----------- ---------- --------- ---------- ---------- ----------
Dividends and distributions
to shareholders:
Net investment income .......... (0.08) (0.15) (0.06) -- (0.06) (0.11)
Net realized gain on investments
and foreign currency related
transactions ................... -- (0.03) -- -- -- --
----------- ---------- --------- ---------- ---------- ----------
Total dividends and distributions
to shareholders ........................ (0.08) (0.18) (0.06) -- (0.06) (0.11)
----------- ---------- --------- ---------- ---------- ----------
Anti-dilutive effect due to
capital shares repurchased ............. -- -- -- -- -- --
----------- ---------- --------- ---------- ---------- ----------
Net asset value, end of period ......... $ 17.43 $ 13.29 $ 14.33 $ 12.52 $ 8.90 $ 10.77
=========== ========== ========= ========== ========== ==========
Market value, end of period ............ $ 13.750 $ 11.125 $ 13.875 $ 14.125 $ 8.000 $ 9.750
=========== ========== ========= ========== ========== ==========
Total investment return (a) ............ 24.28% (18.65)% (1.35)% 76.56% (17.34)% 6.58%
=========== ========== ========= ========== ========== ==========
Ratios/Supplemental
Data
Net assets, end of period
(000 omitted) .......................... $ 92,399 $ 70,431 $ 5,908 $ 66,351 $ 47,134 $ 57,036
Ratio of expenses to average
net assets, net of fee waivers ......... 1.62% 1.58% 1.41% 1.97% 1.92% 1.96%
Ratio of expenses to average
net assets, excluding
fee waivers ....................... 1.81% 1.76% 1.59% 2.00% -- --
Ratio of net investment income/
(loss) to average net assets ...... 0.75% 1.18% 0.43% 0.66% 1.07% 1.20%
Portfolio turnover rate ................ 35.94% 35.73% 15.47% 24.47% 39.07% 13.31%
----------------------------------------------------------------------------------------------------------------------------------
+ Includes $0.02 and $0.01 per share decrease to the Fund's net asset value
resulting from the dilutive impact of shares issued pursuant to the Fund's
dividend reinvestment plan in 1998 and 1997, respectively.
# Based on average shares outstanding.
* Amount is less than $0.01 per share.
(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 program. Total investment return does not reflect
brokerage commissions.
(b) Annualized.
(c) Expenses are net of fees paid indirectly.
(d) Expenses exclude fees paid indirectly.
================================================================================
15
--------------------------------------------------------------------------------
PROGRESSIVE RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
NOTE A. SIGNIFICANT ACCOUNTING POLICIES
Progressive Return Fund, Inc. (the "Fund") was incorporated in Maryland on
August 11, 1989 and commenced investment operations on November 9, 1989. As a
result of a Special Meeting of Stockholders held on December 15, 2000, the Fund,
formerly known as The Portugal Fund, Inc., changed its name and investment
objective. Its investment objective is to seek total return, consisting of
capital appreciation and current income through investing substantially all of
its assets in equity securities of U.S. and non-U.S. companies and U.S. dollar
denominated debt securities. The Fund is registered under the Investment Company
Act of 1940, as amended, as a closed-end, diversified management investment
company.
The following is a summary of significant accounting policies consistently
followed by the Fund:
MANAGEMENT ESTIMATES: The preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America
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. All equity securities are valued at the closing price on
the exchange or market on which the security is primarily traded ("Primary
Market"). If the security did not trade on the Primary Market, it shall be
valued at the closing price on another exchange where it trades. If there are no
such sale prices, the value shall be the most recent bid, and if there is no
bid, the security shall be valued at the most recent asked. If no pricing
service is available and there are more than two dealers, the value shall be the
mean of the highest bid and lowest ask. If there is only one dealer, then the
value shall be the mean if bid and ask are available, otherwise the value shall
be the bid. All other securities and assets are valued as determined in good
faith by the Board of Directors. Short-term investments having a maturity of 60
days or less are valued on the basis of amortized cost. The Board of Directors
has established general guidelines for calculating fair value of not readily
marketable securities. At June 30, 2001, the Fund held no securities valued in
good faith by the Board of Directors. 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 New York Stock Exchange is closed.
REPURCHASE AGREEMENTS: The Fund has agreed to purchase securities from financial
institutions subject to the sellers agreement to repurchase them at an
agreed-upon time and price ("repurchase agreements"). The financial institutions
with whom the Fund enters into repurchase agreements are banks and
broker/dealers, which Cornerstone Advisors, Inc. (the Fund's "Adviser" or
"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 marks to market daily 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.
================================================================================
16
--------------------------------------------------------------------------------
PROGRESSIVE RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
TAXES: No provision is made for U.S. federal income or excise taxes as it is the
Fund's intention to continue 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.
For U.S. federal income tax purposes, realized capital or foreign exchange
losses incurred after October 31, 2000 within the prior fiscal year are deemed
to arise on the first day of the current fiscal year. The Fund elected to defer
such capital losses of $6,198,459. The Fund has a capital loss carryforward of
$1,587,989 which expires in 2008.
The Fund may be subject to foreign withholding taxes with respect to its foreign
investment securities, if any.
FOREIGN CURRENCY TRANSLATIONS: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(I) market value of investment securities, assets and liabilities at the
current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions.
The Fund does not isolate that portion of gains and losses in investments in
equity securities which is due to changes in the foreign exchange rates from
that which is due to changes in market prices of equity securities. Accordingly,
realized and unrealized foreign currency gains and losses with respect to such
securities are included in the reported net realized and unrealized gains and
losses on investment transactions balances.
Net currency gains from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of net
unrealized appreciation/(depreciation) in value of investments, and translation
of other assets and liabilities denominated in foreign currency.
Net realized foreign exchange gains represent foreign exchange gains and losses
from transactions in foreign currency and forward foreign currency contracts,
exchange gains or losses realized between the trade date and settlement date on
security transactions, and the difference between the amounts of interest and
dividends recorded on the Fund's books and the U.S. dollar equivalent of the
amounts actually received.
DISTRIBUTIONS OF INCOME AND GAINS: The Fund distributes at least annually to
shareholders, substantially all of its net investment income and net realized
short-term capital gains, if any. The Fund determines annually whether to
distribute any net realized long-term capital gains in excess of net realized
short-term capital losses, including capital loss carryovers, if any. An
additional distribution may be made to the extent necessary to avoid the payment
of a 4% U.S. federal excise tax. Dividends and distributions to shareholders are
recorded by the Fund on the ex-dividend date.
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for U.S.
federal income tax purposes due to U.S. generally accepted accounting
principles/tax differences in the character of income and expense recognition.
OTHER: Securities denominated in currencies other than U.S. dollars are subject
to changes in value due to fluctuations in exchange rates. Some countries in
which the Fund may invest require government approval for the repatriation of
investment income, capital or proceeds of sales of securities by foreign
investors. In addition, if there is a deterioration in a country's balance of
payments or for other reasons, a country may impose temporary restrictions on
foreign capital remittances abroad. The securities exchanges of certain foreign
markets are substantially smaller, less liquid and more volatile than the major
securities markets in the United States.
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17
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PROGRESSIVE RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
NOTE B. AGREEMENTS
At the Annual Meeting of Stockholders of the Fund held on April 19, 2001,
stockholders approved a new investment management agreement by and between
Cornerstone and the Fund. As a result, Cornerstone commenced its performance of
the investment management services with respect to the Fund's portfolio
securities, and the temporary internal management of the Fund's portfolio
securities automatically ceased.
Effective April 19, 2001, Cornerstone serves as the Fund's investment adviser
with respect to all investments. As compensation for its advisory 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. Cornerstone has
voluntarily agreed to limit the Fund's annual operating expenses (excluding
interest, taxes, brokerage commissions, legal fees, expenditures which are
capitalized in accordance with generally accepted accounting principles, and
other extraordinary expenses not incurred in the ordinary course of such Fund's
business) to 1.65% (on an annualized basis) of the Fund's average net assets for
the fiscal period from April 19, 2001 through December 31, 2001. For the period
April 19, 2001 through June 30, 2001, Cornerstone earned $102,485 for investment
advisory services, of which Cornerstone waived $2,544.
For the period January 1, 2001 through April 18, 2001, portfolio securities were
managed by Messrs. Ralph W. Bradshaw and William A. Clark, a current and former
director of the Fund, respectively. Internal management fees for this period of
$30,466 are included in Directors' fees on the Statement of Operations. During
such period the Fund assumed all of its own operating expenses.
Included in the Statement of Operations, under the caption Fees paid indirectly,
are expense offsets of $16,634 arising from credits earned on portfolio
transactions executed with a broker pursuant to a directed brokerage
arrangement.
The Fund paid or accrued approximately $73,000 for the six months ended June 30,
2001 for legal services to Spitzer & Feldman P.C., counsel to the Fund. Mr.
Westle, a partner of the firm, serves as secretary of the Fund.
NOTE C. INVESTMENT IN SECURITIES
For U.S. federal income tax purposes, the cost of securities owned at June 30,
2001 was $51,029,620. Accordingly, the net unrealized depreciation of
investments of $1,628,192 was composed of gross appreciation of $2,548,767 for
those investments having and excess of value over cost and gross depreciation of
$4,176,959 for those investments having an excess of cost over value.
For the period ended June 30, 2001, purchases and sales of securities, other
than short-term investments, were $50,217,006 and $13,735,655, respectively.
NOTE D. SHARE REPURCHASE PROGRAM
On October 21, 1998, the Fund announced that its Board of Directors had
authorized the repurchase of up to 15% of the Fund's outstanding common stock,
for purposes of enhancing shareholder value. The Fund's Board had authorized
management of the Fund to repurchase such shares in open market transactions at
prevailing market prices from time to time in a manner consistent with the Fund
continuing to seek to achieve its investment objectives. The Board's actions
were taken in light of the significant discounts at which the Fund's shares were
trading. It is intended both to provide additional liquidity to those
shareholders that elect to sell their shares and to enhance the net asset value
of the shares held by those shareholders that maintain their investment.
Effective October 22, 1999, the Fund committed to engage in an enhanced and
aggressive repurchase program of the Fund's shares whenever those shares trade
at more than a nominal discount to net asset value. Shares will be repurchased
in open market transactions at prevailing market prices from time to time in a
manner consistent with the Fund continuing to seek its investment objective. The
repurchase program will be subject to review by the Board of Directors of the
Fund.
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18
--------------------------------------------------------------------------------
PROGRESSIVE RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
--------------------------------------------------------------------------------
For the period ended June 30, 2001, the Fund repurchased 140,100 of its shares
for a total cost of $1,378,476 at a weighted average discount of 15.37% from net
asset value. The discount of the individual repurchases ranged from 12.71% -
18.68%. For the year ended December 31, 2000, the Fund repurchased 651,800 of
its shares for a total cost of $8,378,956 at a weighted average discount of
16.86% from net asset value. The discount of the individual repurchases ranged
from 13.30% - 24.20%. No limit has been placed on the number of shares to be
purchased by the Fund other than those imposed by federal securities laws. All
purchases will be made in accordance with federal securities laws, with shares
repurchased held in treasury, effective January 1, 2001.
NOTE E. SECURITIES LENDING
To generate additional income, the Fund may lend up to 331/3% of its portfolio's
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 and
the related collateral received at June 30, 2001 was $1,298,109 and $1,334,269,
respectively. Any cash collateral received is reinvested into repurchase
agreements, which in turn are collateralized by various U.S. Government and
Agency securities.
During the period ended June 30, 2001, the Fund earned $542 in securities
lending income which is included under the caption Interest in the Statement of
Operations.
NOTE F. COLLATERAL FOR REPURCHASE AGREEMENT
Listed below is the collateral associated with the repurchase agreement with
Bear, Stearns & Co. Inc. outstanding at June 30, 2001.
PRINCIPAL TOTAL
AMOUNT MARKET
ISSUER (000'S) YIELD MATURITY VALUE
------ ------- ----- -------- -----
United States Treasury Bond,
Interest Only $4,040 5.43% 11/15/26 $888,800
========
NOTE G. SETTLEMENT OF LEGAL ACTION
In December 2000, the Fund reached a settlement which was approved by the court
in the class action lawsuit in which it was a defendant along with its former
investment adviser, Credit Suisse Asset Management Inc. ("CSAM") and the Fund's
former directors (Brautigam v. Priest et al.). As a result, the Fund paid to the
plaintiff's attorney $100,000 in fees and expenses and agreed to engage in
certain business practices under the agreed settlement. The complaint, initially
filed on June 10, 1999 in the United States District Court for the District of
Delaware and thereafter transferred to the United States District Court for the
Southern District of New York, alleged that the defendants breached their
fiduciary duties to the Fund in violation of Sections 36 and 48 of the 1940 Act
and Maryland law, by, inter alia, failing to put the interests of the Fund's
shareholders before those of others, failing to take steps to reduce or
eliminate the discount to net asset value at which shares of the Fund trade, and
postponing the annual meeting of the Fund. In addition to plaintiff's attorney's
fees mentioned above, the Fund incurred approximately $200,000 in legal expenses
as a result of the lawsuit, of which approximately $145,000 was reimbursed to
CSAM. Such amounts were accrued and paid by the Fund during the fiscal year
ended December 31, 2000.
================================================================================
19
RESULTS OF ANNUAL MEETING OF STOCKHOLDERS (UNAUDITED)
On April 19, 2001, the Annual Meeting of Stockholders of Progressive Return
Fund, Inc. (the "Fund") was held and the following matters were voted upon:
(1) To elect two class I Directors until the year 2004 Annual Meeting and
one Class II Director until the year 2002 Annual Meeting.
Name of Class I Directors For Abstain
------------------------- --- -------
Thomas H. Lenagh 3,400,911 272,614
Andrew A. Strauss 3,400,915 272,610
Name of Class II Director For Abstain
------------------------- --- -------
Edwin Meese III 3,399,862 273,663
(2) To approve a new investment management agreement between Cornerstone
Advisors, Inc. and the Fund.
For Against Abstain
--- ------- -------
2,240,090 276,605 24,665
(3) To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants for the year ending December 31, 2001.
For Against Abstain
--- ------- -------
3,490,256 167,211 16,058
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20
DESCRIPTION OF DIVIDEND REINVESTMENT & CASH PURCHASE PLAN (UNAUDITED)
Shareholders who have Shares registered directly in their own names
automatically participate in the Fund's Dividend Reinvestment & Cash Purchase
Plan (the "Plan"), unless and until an election is made to withdraw from the
Plan on behalf of such participating shareholders. Shareholders who do not wish
to have distributions automatically reinvested should so notify American Stock
Transfer & Trust Co. (the "Agent") at 59 Maiden Lane, New York, NY 10038. Under
the Plan, all of the Fund's dividends and other distributions to shareholders
are reinvested in full and fractional Shares as described below.
When the Fund declares an income dividend or a capital gain or other
distribution (each, a "Dividend" and collectively, "Dividends"), the Agent, on
the shareholders' 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) at the sole discretion
of the Board of Directors, be authorized to purchase outstanding shares on the
open market, on the NYSE or elsewhere, with cash allocated to it by the Fund
("Open Market Purchases").
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. Alternatively, the Agent will allocate Newly Issued Shares to the
reinvesting shareholders at a price equal to the average closing price of the
Fund over the five trading days preceding the payment date of such dividend.
Registered shareholders who acquire their shares through Open Market Purchases
and who do not wish to have their Dividends automatically reinvested should so
notify the Fund in writing. If a Shareholder has not elected to receive cash
Dividends and the Agent does not receive notice of an election to receive cash
Dividends prior to the record date of any Dividend, the shareholder will
automatically receive such Dividends 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 Dividend payment date.
When a participant withdraws from the Plan, or upon termination of the Plan as
provided below, certificates for whole shares credited to his/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 each 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.
================================================================================
21
DESCRIPTION OF DIVIDEND REINVESTMENT & CASH PURCHASE PLAN (UNAUDITED)(CONCLUDED)
There will be no charge to participants for reinvesting Dividends
other than their share of brokerage commissions as discussed below. The Agent's
fees for administering the Plan and handling the reinvestment of Dividends will
be paid by the Fund. Each participant's account will be charged a pro-rata share
of brokerage commissions incurred with respect to the Agent's Open Market
Purchases in connection with the reinvestment of Dividends. Brokerage charges
for purchasing small amounts of shares for individual accounts through the Plan
are expected to be less than the usual brokerage charges for such transactions
because the Agent will be purchasing shares for all the participants in blocks
and pro-rating the lower commission that may be attainable.
The automatic reinvestment of Dividends will not relieve participants of any
income tax that may be payable on such Dividends. Participants who receive
shares pursuant to the Plan as described above will recognize taxable income in
the amount of the fair market value of those shares. In the case of non-U.S.
participants whose Dividends are subject to U.S. income tax withholding and in
the case of participants subject to 30.5% federal backup withholding, the Agent
will reinvest Dividends after deduction of the amount required to be withheld.
The Fund reserves the right to amend or terminate the Plan by written notice to
participants. All correspondence concerning the Plan should be directed to the
Agent at the address referred to in the first paragraph of this section.
================================================================================
22
PRIVACY POLICY NOTICE
The following is a description of Progressive Return Fund, Inc.'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.
May 2001
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23
SUMMARY OF GENERAL INFORMATION
The Fund-- Progressive Return Fund, Inc. is a closed-end, diversified management
investment company whose shares trade on the New York Stock Exchange. Its
investment objective is to seek total return, consisting of capital appreciation
and current income through investing substantially all of its assets in equity
securities of U.S. and non-U.S. companies and U.S. dollar denominated debt
securities. The Fund is managed by Cornerstone Advisors, Inc.
SHAREHOLDER INFORMATION
The Fund is listed on the New York Stock Exchange (symbol "PGF"). The share
price is published in: The New York Times (daily) under the designation
"ProgRetFd" and The Wall Street Journal (daily) and Barron's (each Monday) under
the designation "PrgrssvRetFd." The net asset value per share is published under
"Closed-End Funds" each Sunday in The New York Times and each Monday in The Wall
Street Journal and Barron's under the designation "ProgessvFd."
--------------------------------------------------------------------------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that Progressive Return Fund, Inc. may from
time to time purchase shares of its capital stock in the open market.
--------------------------------------------------------------------------------
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24
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PROGRESSIVE RETURN FUND, INC.
================================================================================
DIRECTORS AND CORPORATE OFFICERS
Ralph W. Bradshaw Chairman of the Board of
Directors and President
Thomas H. Lenagh Director
Edwin Meese III Director
Scott B. Rogers Director
Andrew A. Strauss Director
Glenn W. Wilcox, Sr. Director
Gary A. Bentz Vice President and Treasurer
Thomas R. Westle Secretary
INVESTMENT ADVISER SHAREHOLDER SERVICING AGENT
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 ACCOUNTANTS
Bear Stearns Funds PricewaterhouseCoopers LLP
Management Inc. Two Commerce Square
575 Lexington Avenue Philadelphia, PA 19103
New York, NY 10022
CUSTODIAN LEGAL COUNSEL
Custodial Trust Company Spitzer & Feldman P.C.
101 Carnegie Center 405 Park Avenue
Princeton, NJ 08540 New York, NY 10022
EXECUTIVE OFFICES
575 Lexington Avenue
New York, NY 10022
For shareholder inquiries, registered shareholders should call (800) 937-5449.
For general inquiries, please call (212) 272-2093.
PGF
LISTED
NYSE(R)
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. The financial information herein
is taken from the records of the Fund without examination by independent
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 this report.