SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant toss.240.14a-11(c) orss.240.14a-12
PROGRESSIVE RETURN FUND, INC.
-----------------------------
Name of Registrant as Specified In Its Charter
N/A
---
Name of Person(s) Filing Proxy Statement if other than the Registrant
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which such offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
PROGRESSIVE RETURN FUND, INC.
575 Lexington Avenue
New York, New York 10022
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On Thursday, April 19, 2001
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of Progressive Return Fund, Inc. (the "Fund"), a Maryland
corporation, will be held at the executive offices of Bear Stearns Funds
Management Inc., 245 Park Avenue, 7th Floor, Conference Room F, New York, New
York 10167 on Thursday, April 19, 2001, at 3:30 p.m., for the following
purposes:
1. To elect two Class I Directors until the year 2004 Annual Meeting and
one Class II Director until the year 2002 Annual Meeting (Proposal 1);
2. To approve a new investment management agreement between Cornerstone
Advisors, Inc. and the Fund (Proposal 2);
3. To ratify the selection of PricewaterhouseCoopers LLP as the Fund's
independent accountants for the year ending December 31, 2001
(Proposal 3); and
4. To consider and vote upon such other matters as may properly come
before said Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on February
14, 2001 as the record date for the determination of stockholders entitled to
notice of, and to vote at this Meeting or any adjournment thereof.
Copies of the Fund's most recent annual report and semi-annual report
may be ordered free of charge to any stockholder by writing to the Fund at c/o
Bear Stearns Funds Management Inc., 575 Lexington Avenue, New York, New York
10022, or by telephone at (888) 505-5954.
By Order of the Board of Directors,
Thomas R. Westle
Secretary
Dated: March 7, 2001
UNLESS YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE FILL IN, DATE, SIGN AND
MAIL THE ENCLOSED PROXY CARD IN THE ENCLOSED REPLY ENVELOPE. YOUR PROMPT
RESPONSE WILL ASSURE A QUORUM AT THE MEETING.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to you
and avoid the time and expense to the Fund involved in validating your vote if
you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the registration.
3. Other Accounts: The capacity of the individual signing the proxy card
should be indicated unless it is reflected in the form of
registration. For example:
REGISTRATION
CORPORATE ACCOUNTS VALID SIGNATURE
------------------ ---------------
(1) ABC Corp.............................ABC Corp. (by John Doe, Treasurer)
(2) ABC Corp.............................John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer..............John Doe
(4) ABC Corp. Profit Sharing Plan........John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust............................Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d/ 12/28/78......................Jane B. Doe
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA........John B. Smith
(2) John B. Smith........................John B. Smith, Jr., Executor
PROGRESSIVE RETURN FUND, INC.
575 Lexington Avenue
New York, New York 10022
--------------------------------
PROXY STATEMENT
for
ANNUAL MEETING OF STOCKHOLDERS
to be held on Thursday, April 19, 2001
--------------------------------
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Progressive Return Fund, Inc. (the
"Fund") for use at the Annual Meeting of Stockholders (the "Meeting" or "Annual
Meeting") to be held at the executive offices of Bear Stearns Funds Management
Inc., 245 Park Avenue, 7th Floor, Conference Room F, New York, New York 10167 on
April 19, 2001, at 3:30 p.m., New York time, and at any and all adjournments
thereof. A form of proxy is enclosed herewith. This Proxy Statement and the
accompanying form of proxy are first being mailed to stockholders on or about
March 7, 2001.
Any stockholder who executes and delivers a proxy may revoke it by
written communication to the Secretary of the Fund at any time prior to its use
or by voting in person at the Meeting. Unrevoked proxies will be voted in
accordance with the specifications thereon and, unless specified to the
contrary, will be voted FOR the election of the nominees for Director, FOR the
approval of the investment management agreement between Cornerstone Advisors,
Inc. and the Fund, and FOR the ratification of the selection of
PricewaterhouseCoopers LLP as the independent accountants of the Fund for the
year ending December 31, 2001.
In general, abstentions and broker non-votes (reflected by signed but
unvoted proxies), as defined below, count for purposes of obtaining a quorum but
do not count as votes cast with respect to any proposal where the broker does
not have discretion. With respect to a proposal requiring the affirmative vote
of a majority of the Fund's outstanding shares of Common Stock, the effect of
abstentions and broker non-votes is the same as a vote against such proposal.
Otherwise, abstentions and broker non-votes have no effect on the outcome of a
proposal. Broker non-votes are shares held in the name of the broker or nominee
for whom an executed proxy is received by the Fund, but are not voted on a
proposal because voting instructions have not been received from the beneficial
owners or persons entitled to vote and the broker or nominee does not have
discretionary voting power.
In the event that a quorum is not present at the Meeting, the persons
named as proxies may propose one or more adjournments of the Meeting to a date
not more than one hundred twenty (120) days after the original record date to
permit further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares represented at the Meeting in
person or by proxy. The persons named as proxies will vote those proxies that
they are entitled to vote FOR or AGAINST any such proposal in their discretion.
Under the By-Laws of the Fund, a quorum is constituted by the presence in person
or by proxy of the holders of record of a majority of the outstanding shares of
Common Stock of the Fund entitled to vote at the Meeting.
1
The cost of soliciting the proxies will be borne by the Fund. Proxy
solicitations will be made primarily by mail, but solicitations may also be made
by telephone, telegraph or personal interviews conducted by officers or
employees of the Fund, Bear Stearns Funds Management Inc., the administrator to
the Fund (the "Administrator"), or Shareholder Communications Corporation
("SCC"), a proxy solicitation firm that has been retained by the Fund.
The agreement between SCC and the Fund provides for SCC to provide
general solicitation services to the Fund at an estimated cost of $11,200,
including expenses. The Fund will, upon request, bear the reasonable expenses of
brokers, banks and their nominees who are holders of record of the Fund's Common
Stock on the record date, incurred in mailing copies of this Notice of Meeting
and Proxy Statement and the enclosed form of proxy to the beneficial owners of
the Fund's Common Stock.
Only holders of issued and outstanding shares of the Fund's Common
Stock of record at the close of business on February 14, 2001 are entitled to
notice of, and to vote at, the Meeting. Each such holder is entitled to one vote
per share of Common Stock so held. The number of shares of Common Stock
outstanding on February 14, 2001 was 4,418,716. The Fund is a closed-end,
management investment company.
COPIES OF THE FUND'S MOST RECENT ANNUAL REPORT AND SEMI-ANNUAL REPORT
MAY BE ORDERED FREE OF CHARGE TO ANY STOCKHOLDER BY WRITING TO THE FUND AT C/O
BEAR STEARNS FUNDS MANAGEMENT INC., 575 LEXINGTON AVENUE, NEW YORK, NEW YORK
10022, OR BY TELEPHONE AT (888) 505-5954. THIS REPORT IS NOT TO BE REGARDED AS
PROXY SOLICITING MATERIAL.
This Proxy Statement is first being mailed to stockholders on or
about March 7, 2001.
2
PROPOSAL NO. 1
ELECTION OF DIRECTORS
In accordance with the Fund's By-laws, the terms of the Fund's Board
of Directors are staggered. The Board of Directors is divided into three
classes: Class I, Class II and Class III, each class having a term of three
years. Each year the term of office of one Class expires. The effect of these
staggered terms is to limit the ability of other entities or persons to acquire
control of the Fund by delaying the replacement of a majority of the Board of
Directors.
At the Meeting, stockholders will be asked to elect two Class I
Directors to hold office until the year 2004 Annual Meeting of Stockholders or
thereafter until each of their respective successors is duly elected and
qualified and one Class II Director to hold office until the year 2002 Annual
Meeting of Stockholders or thereafter until his successor is duly elected and
qualified. The term of office of the Class III Directors, currently consisting
of Messrs. Glenn W. Wilcox, Sr. and Scott B. Rogers, expires at the Annual
Meeting of Stockholders in 2003, or thereafter in each case until each of their
respective successors is duly elected and qualified. The term of office of the
other Class II Director, Mr. Ralph W. Bradshaw, expires at the Annual Meeting of
Stockholders in 2002, or thereafter until his successor is duly elected and
qualified.
On January 25, 2001, Mr. William A. Clark, a Class I Director since
2000, announced his intention to resign from the Board of Directors and on
January 31, 2001, Mr. Clark submitted his letter of resignation as a Director
and as Secretary and Treasurer of the Fund. At the January 25, 2001 Board
Meeting, the Board of Directors expanded the size of the Board and elected
Messrs. Thomas H. Lenagh and Edwin Meese III as Directors of the Fund with Mr.
Lenagh filling the vacancy created on January 31, 2001, by Mr. Clark's
resignation as a Director. The Board then nominated Messrs. Thomas H. Lenagh and
Andrew A. Strauss for election as Class I Directors, and nominated Mr. Edwin
Meese III for election as a Class II Director.
At the Annual Meeting, stockholders will be asked to vote FOR the
election of Thomas H. Lenagh and Andrew A. Strauss as Class I Directors to serve
until the year 2004 Annual Meeting of Stockholders or thereafter until each of
their respective successors is duly elected and qualified, and to vote FOR the
election of Mr. Edwin Meese III as a Class II Director to serve until the year
2002 Annual Meeting of Stockholders or thereafter until his successor is duly
elected and qualified. If elected, each nominee has consented to serve as a
director of the Fund until his respective successor is duly elected and
qualified.
The persons named in the accompanying form of proxy intend to vote at
the Meeting (unless directed not to vote) FOR the election of Thomas H. Lenagh,
Andrew A. Strauss and Edwin Meese III. Each nominee has indicated that he will
serve if elected, and the Board of Directors has no reason to believe that any
of the nominees named above will become unavailable for election as a director,
but if any nominee should be unable to serve, the proxy will be voted for any
other person determined by the persons named in the proxy in accordance with
their judgment.
3
The following table sets forth the ages and principal occupations of
each of the nominees for election as Class I and Class II Directors, and the
number of shares of Common Stock of the Fund beneficially owned by each of them,
directly or indirectly:
NOMINEES
Class I Directors to serve until the Year 2004 Annual Meeting of Stockholders:
SHARES OF COMMON STOCK
BENEFICIALLY OWNED ON FEBRUARY
POSITION 14, 2001*
PRINCIPAL OCCUPATION WITH THE --------------------------------
NOMINEE OVER LAST 5 YEARS FUND SINCE AGE AMOUNT %
------- ----------------- ---------- --- ------ -
Thomas H. Lenagh Chairman of the Board of Inrad Corp.; 2001 78 -0-** -0-
13 Allen's Corner Rd. Independent Financial Adviser; Director of
Flemington, NJ 08822 Clemente Strategic Value Fund, Inc.,
Gintel Fund, Adams Express and Petroleum
and Resources, ASD Group, ICN
Pharmaceuticals and V-Band Corp.; Nominee
for Director of The Cornerstone Strategic
Return Fund, Inc.
Andrew A. Strauss Attorney and senior member of Strauss & 2000 47 -0-** -0-
77 Central Avenue Associates, P.A., attorneys, Asheville,
Suite F N.C.; previous President of White Knight
Asheville, NC 28801 Healthcare, Inc. and LMV Leasing, Inc., a
wholly owned subsidiary of Xerox Credit
Corporation; Director of The Cornerstone
Strategic Return Fund, Inc. and Clemente
Strategic Value Fund, Inc.
4
Class II Director to serve until the Year 2002 Annual Meeting of Stockholders:
SHARES OF COMMON STOCK
BENEFICIALLY OWNED ON FEBRUARY
POSITION 14, 2001*
PRINCIPAL OCCUPATION WITH THE ------------------------------
NOMINEE OVER LAST 5 YEARS FUND SINCE AGE AMOUNT %
------- ----------------- ---------- --- ------ -
Edwin Meese III Distinguished Fellow, The Heritage 2001 68 -0-** -0-
The Heritage Foundation Foundation, Washington D.C.; Distinguished
214 Massachusetts Ave NE Visiting Fellow at the Hoover Institution,
Washington D.C. 20002 Stanford University; Distinguished Senior
Fellow at the Institute of United States
Studies, University of London; Formerly
U.S. Attorney General under President
Ronald Reagan; Chairman of the Domestic
Policy Council and the National Drug
Policy Board and a member of the National
Security Council; Director of The
Cornerstone Strategic Value Fund, Inc. and
Nominee for Director of Clemente Strategic
Value Fund, Inc.
------------------
* Unless otherwise noted, each nominee directly owns and has sole voting and
investment power with respect to the listed shares.
** For this purpose "beneficial ownership" is defined under Section 13(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
information as to beneficial ownership is based upon information furnished
to the Fund by the nominees.
5
REMAINING BOARD OF DIRECTORS
The following tables set forth the names, ages and principal
occupations of each of the remaining Directors of the Fund, and the number of
shares of Common Stock of the Fund beneficially owned by them, directly or
indirectly, as of February 14, 2001:
Class II Directors serving until the Year 2002 Annual Meeting of Stockholders:
SHARES OF COMMON STOCK
BENEFICIALLY OWNED ON FEBRUARY
POSITION 14, 2001*
PRINCIPAL OCCUPATION WITH THE --------------------------------
DIRECTOR OVER LAST 5 YEARS FUND SINCE AGE AMOUNT %
-------- ----------------- ---------- --- ------ -
Ralph W. Bradshaw** Chairman of the Board of Directors and 1999 50 1,500*** .0003%
One West Pack Square President of the Fund; President, Director
Suite 750 and shareholder of Cornerstone Advisors,
Asheville, NC 28801 Inc.; Financial Consultant; Vice
President, Deep Discount Advisors, Inc.
(1993-1999); Director of The Austria Fund,
Inc., Clemente Strategic Value Fund, Inc.,
and The Cornerstone Strategic Return Fund,
Inc.
Class III Directors serving until the Year 2003 Annual Meeting of Stockholders:
SHARES OF COMMON STOCK
BENEFICIALLY OWNED ON FEBRUARY
POSITION 14, 2001*
PRINCIPAL OCCUPATION WITH THE --------------------------------
DIRECTOR OVER LAST 5 YEARS FUND SINCE AGE AMOUNT %
-------- ----------------- ---------- --- ------ -
Glenn W. Wilcox, Sr. Chairman of the Board and Chief Executive 2000 69 -0-*** -0-
One West Pack Square Officer of Wilcox Travel Agency; Director,
Suite 1700 Champion Industries, Inc.; Chairman, Tower
Asheville, NC 28801 Associates, Inc. (a real estate venture);
Member and Vice Chairman, the Board of
First Union National Bank; Board Trustee
and Vice Chairman, Appalachian State
University; Board Trustee and Director,
Mars Hill College; Director of Clemente
Strategic Value Fund, Inc. and The
Cornerstone Strategic Return Fund, Inc.
6
SHARES OF COMMON STOCK
BENEFICIALLY OWNED ON FEBRUARY
POSITION 14, 2001*
PRINCIPAL OCCUPATION WITH THE --------------------------------
DIRECTOR OVER LAST 5 YEARS FUND SINCE AGE AMOUNT %
-------- ----------------- ---------- --- ------ -
Scott B. Rogers Chief Executive Officer, Asheville 2000 45 -0-*** -0-
30 Cumberland Ave. Buncombe Community Christian Ministry;
Asheville, NC 28801 President, ABCCM Doctor's Medical Clinic;
Director, Southeastern Jurisdiction Urban
Networkers; Director, A-B Vision Board,
Appointee, NC Governor's Commission on
Welfare to Work; Chairman and Director,
Recycling Unlimited; Director,
Interdenominational Ministerial Alliance;
Director of Clemente Strategic Value Fund,
Inc. and The Cornerstone Strategic Return
Fund, Inc.
---------------
* Unless otherwise noted, each director directly owns and has sole
voting and investment power with respect to the listed shares.
** Mr. Bradshaw is an "interested person" as defined in the Investment
Company Act of 1940 ("1940 Act").
*** For this purpose "beneficial ownership" is defined under Section 13(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The information as to beneficial ownership is based upon
information furnished to the Fund by the directors.
7
Under the federal securities laws, the Fund is required to provide to
stockholders in connection with the Meeting information regarding compensation
paid to Directors by the Fund as well as by the various other U.S. registered
investment companies advised by the Fund's investment adviser during its prior
fiscal year. The following table provides information concerning the
compensation paid during the year ended December 31, 2000, to each Director of
the Fund. Please note that the Fund has no bonus, profit sharing, pension or
retirement plans.
NAME OF DIRECTOR DIRECTOR SINCE AGGREGATE COMPENSATION FROM FUND FOR 2000
----------------------------------------- ------------------------------ ------------------------------------------
Ralph W. Bradshaw 1999 $7,500
Glenn W. Wilcox, Sr. 2000 $5,379
Andrew A. Strauss 2000 $5,379
Edwin Meese III* 2001 -0-
Scott B. Rogers 2000 $5,379
Thomas H. Lenagh* 2001 -0-
Ronald G. Olin** 1999 $3,087
Martin M. Torino*** 1989 $2,120
Jonathan W. Lubell*** 1989 $1,620
Dr. Enrique R. Arzac*** 1996 $2,120
William A. Clark**** 2000 $5,379
William W. Priest, Jr.***** 1997 -0-
-----------------
* Did not serve as a director of the Fund in 2000.
** Mr. Olin resigned from his position as a member of the Board of
Directors of the Fund on May 31, 2000.
*** Resigned from his position as a member of the Board of Directors of
the Fund on April 27, 2000.
**** Mr. Clark resigned from his position as a member of the Board of
Directors of the Fund on January 31, 2001.
***** Mr. Priest resigned from his position as a member of the Board of
Directors of the Fund on April 27, 2000 and did not receive any
compensation from the Fund in 2000.
8
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") and Section 30(h) of the 1940 Act in combination require the Fund's
directors and officers, persons who own more than ten (10%) percent of the
Fund's Common Stock, and the Fund's prior investment adviser and its directors
and officers, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and the New York Stock Exchange, Inc. The
Fund believes that the Fund's directors and officers, the Fund's prior
investment adviser and its directors and officers have complied with applicable
filing requirements during the year ended December 31, 2000.
REQUIRED VOTE
-------------
Directors are elected by a plurality (a simple majority of the votes
cast at the meeting) of the votes cast by the holders of shares of Common Stock
of the Fund present in person or represented by proxy at a meeting with a quorum
present. For purposes of the election of Directors, abstentions and broker
non-votes will be counted as shares present for quorum purposes, may be
considered votes cast, and may affect the plurality vote required for Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE ELECTION OF MESSRS. THOMAS H. LENAGH AND ANDREW A. STRAUSS AS CLASS I
DIRECTORS OF THE FUND AND MR. EDWIN MEESE III AS A CLASS II DIRECTOR OF THE
FUND.
9
PROPOSAL NO. 2
CONSIDERATION OF THE APPROVAL OF
THE NEW INVESTMENT MANAGEMENT AGREEMENT
BETWEEN THE FUND AND CORNERSTONE ADVISORS, INC.
The Board of Directors, at a special meeting held on February 9,
2001, unanimously approved and authorized for submission to the Fund's
stockholders for their approval of a new investment management agreement (the
"Cornerstone Agreement") by and between Cornerstone Advisors, Inc. ("Cornerstone
Advisors") and the Fund.
Currently, Mr. Bradshaw performs the management of the Fund's
portfolio securities in his capacity as a director and executive officer of the
Fund. Prior to his resignation on January 31, 2001, Mr. Clark shared
responsibility with Mr. Bradshaw for the management of the Fund's portfolio
securities. In connection with the Board's oversight and continued examination
of the internalization of the Fund's management functions, as provided for in
the proxy statement for the December 15, 2000 Special Meeting of Stockholders,
the Board stated that it would determine, by the 2001 Annual Meeting of
Stockholders, whether this internalized management approach would be adopted as
a permanent measure or whether the Fund would contract with an investment
adviser to perform the external management of the Fund's portfolio.
The Board of Directors now believes that immediately upon stockholder
approval of the Cornerstone Agreement, the Fund should discontinue the temporary
internal management of the Fund's portfolio securities and that Cornerstone
Advisors should assume such responsibilities.
Cornerstone Advisors, which has its principal office at One West Pack
Square, Suite 750, Asheville, North Carolina 28801, was organized to provide
investment management services to closed-end investment companies. Newly
organized as an investment adviser, Cornerstone Advisors is registered with the
Securities and Exchange Commission under the Investment Advisers Act of 1940, as
amended (the "Investment Advisers Act"), and has no previous operating history.
In his capacity as a principal of Cornerstone Advisors, Mr. Bradshaw will serve
as the Fund's portfolio manager assuming the Fund's stockholders approve the
Cornerstone Agreement. A copy of the proposed Cornerstone Agreement is attached
hereto as Appendix A.
Mr. Bradshaw and Mr. Gary A. Bentz, formerly a director of The
Cornerstone Strategic Return Fund, Inc. and the Clemente Strategic Value Fund,
Inc., are the sole stockholders of Cornerstone Advisors. Both Mr. Bradshaw and
Mr. Bentz have extensive experience with closed-end investment companies. Mr.
Bradshaw, who also serves as a director to The Austria Fund, Inc., Clemente
Strategic Value Fund, Inc. and The Cornerstone Strategic Return Fund, Inc.,
served as a Vice President of Deep Discount Advisors, Inc. ("Deep Discount")
from 1993 to 1999. Mr. Bentz, who also serves as a director to the Austria Fund,
Inc., was also affiliated with Deep Discount as its Chief Financial Officer from
1993 to 2000. Messrs. Bradshaw and Bentz no longer possess any ownership
interest in Deep Discount nor do they provide any investment advisory services
to Deep Discount or its clients. Deep Discount and Ron Olin Investment
10
Management Company ("ROIMC"), both of which jointly filed a Schedule 13G with
the Securities and Exchange Commission (the "SEC") on February 5, 2001 as
beneficial owners of more than five (5%) percent of the outstanding shares of
the Fund, are registered investment advisers which, on behalf of their
respective advisory clients, invest in the common stock of closed-end investment
companies. There exists no arrangements or understandings among Cornerstone
Advisors, Deep Discount, ROIMC or any of their respective stockholders with
respect to the Fund.
The Board of Directors unanimously approved the Cornerstone Agreement
at a meeting of the Board of Directors duly held on February 9, 2001, and hereby
submits the Cornerstone Agreement to the stockholders for their consideration
and approval. Immediately upon stockholder approval of the Cornerstone Agreement
at this Meeting (or an adjournment thereof), Cornerstone Advisors will commence
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 will automatically cease. If the stockholders do not
approve the Cornerstone Agreement at this Meeting (or an adjournment thereof),
the Board will continue the current internal management of the Fund's portfolio
securities by Mr. Bradshaw, in his capacity as an officer and director of the
Fund, and consider alternative sources from which to obtain investment
management and research services for the Fund.
The externalization of a registered investment company's management
to persons previously responsible for the internal management of such investment
company's portfolio securities has been the subject of prior No-Action Letters
granted by the SEC. Cornerstone Advisors represented to the Fund's Board of
Directors at the February 9, 2001 Meeting that it fully intends to comply with
all of the applicable requirements set forth in the 1994 No-Action Letter
granted by the SEC to Century Shares Trust. Therefore, in order to comply with
the requirements of the 1940 Act as interpreted by the SEC in the Century Shares
Trust No-Action Letter, dated May 4, 1994, Cornerstone Advisors and the Fund
have agreed to certain terms and conditions which enable each to make the
following general representations and covenants to the other: (i) that the Board
of Directors of the Fund will remain in control of the Fund; (ii) that
Cornerstone Advisors will not obtain undue valuation from the plan of
externalization; and (iii) Cornerstone Advisors will not undertake any
conflicting duties of loyalty which would affect its fiduciary duty to the Fund.
THE BOARD OF DIRECTORS SHALL REMAIN IN CONTROL OF THE FUND.
-----------------------------------------------------------
The Fund will continue to be controlled by the members of the Board
of Directors, who are not "interested directors", as that term is defined under
the 1940 Act, although Mr. Bradshaw will continue in his capacity as the
Chairman of the Board, which does not carry any special powers or greater voting
rights. Furthermore, in an effort to continue the efficient reporting structure
currently in place under the internalized management approach, which affords
appropriate levels of oversight of the management of the Fund's portfolio
securities, Cornerstone Advisors will report, on a monthly basis, to the
Investment Oversight Committee which was originally created for the purpose of
overseeing the internal management of the Fund's portfolio securities. The
Investment Oversight Committee consists of the disinterested directors of the
Board of Directors. Lastly, the Board of Directors will continue to hold regular
meetings at which it shall be kept fully informed of Cornerstone Adviser's
transactions in the Fund's common stock and of any changes in the Fund's
investment portfolio.
11
CORNERSTONE ADVISORS WILL NOT OBTAIN UNDUE VALUE FROM THE PLAN OF
-----------------------------------------------------------------
EXTERNALIZATION.
----------------
The annual advisory fee payable by the Fund under the Cornerstone
Agreement is equal to one (1%) percent of the Fund's average weekly net assets.
This is the same fee paid to the Fund's previous investment adviser, Credit
Suisse Asset Management, LLC ("CSAM"), and is within the range of the standard
industry fee for comparable investment companies. The original CSAM advisory
agreement required a one and fifteen-one hundredths (1.15%) percent annual
advisory fee. However, CSAM subsequently waived fifteen one-hundredths (.15%)
percent of its fee, thereby effectively reducing the fee to one (1%) percent.
In addition to the representations of Cornerstone Advisors that it
will not propose any change in the method of computing the advisory fee during
the term of the Cornerstone Agreement, and that its shareholders, Messrs.
Bradshaw and Bentz, do not have any present intention of selling any of their
shares in Cornerstone Advisors, the Fund and Cornerstone Advisors have agreed to
certain terms and conditions which would effectively prevent it from obtaining
undue value from Cornerstone Advisors' engagement as the Fund's investment
adviser.
CORNERSTONE ADVISORS WILL NOT UNDERTAKE ANY CONFLICTING DUTIES OF LOYALTY.
--------------------------------------------------------------------------
Cornerstone Advisors has represented to the Fund that it will not
undertake any conflicting duties that might lead to a violation of its fiduciary
duty to the Fund. To implement this undertaking, Cornerstone Advisors has
agreed, for the duration of the Cornerstone Agreement, to give the Fund advanced
written notice of any proposed undertaking by it of material significance
(including the taking on of additional clients) and to provide to the Fund all
information relevant to a determination of the effect of such undertaking on
Cornerstone Advisors' ability to carry out its obligations under the Cornerstone
Agreement.
The Board of Directors, including the disinterested directors as
advised by its independent legal counsel, and Cornerstone Advisors have
determined that the rendering of investment management services to other
closed-end investment companies will not likely constitute or create a conflict
of Cornerstone Advisors' duty of loyalty affecting its fiduciary duty owing to
the Fund or its stockholders. Further, both the Board of Directors and
Cornerstone Advisors have stated that they do not believe that the proposed
externalization will result in a material increase in the Fund's total operating
expenses. Moreover, Cornerstone Advisors has voluntarily agreed to limit the
Fund's annual operating expenses to one and sixty-five one-hundredths (1.65%)
percent (on an annualized basis) of the Fund's average net assets for the fiscal
period from April 19, 2001 (subject to stockholder approval of the Cornerstone
Agreement) through December 31, 2001.
DESCRIPTION OF THE CORNERSTONE AGREEMENT
----------------------------------------
The following description of the Cornerstone Agreement is qualified
in its entirety by reference to the copy of the Cornerstone Agreement attached
hereto and made a part hereof as Appendix A.
12
SERVICES TO BE PERFORMED
------------------------
Pursuant to the Cornerstone Agreement, Cornerstone Advisors shall
conduct investment research and supervision for the Fund and shall be
responsible for the purchase and sale of investment securities for the Fund's
portfolio, subject to the supervision and direction of the Board of Directors.
Cornerstone Advisors shall provide the Fund with investment advice, shall
supervise the Fund's management and investment programs and shall provide
investment advisory facilities and executive and supervisory personnel for
managing the investments and effectuating portfolio transactions. Cornerstone
Advisors shall also furnish, at its own expense, all necessary administrative
services, office space, equipment and clerical personnel for servicing the
investments of the Fund. In addition, Cornerstone Advisors will pay the salaries
and fees of all officers of the Fund who are affiliated with Cornerstone
Advisors.
EXPENSES AND ADVISORY FEES
--------------------------
The Cornerstone Agreement provides that the Fund is responsible for
all of its expenses and liabilities, except that Cornerstone Advisors shall be
responsible for the expenses in connection with maintaining a staff within its
organization to furnish the above services to the Fund. Cornerstone Advisors 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 one and sixty-five one-hundredths (1.65%) percent (on an annualized
basis) of the Fund's average net assets for the fiscal period from April 19,
2001 (subject to stockholder approval of the Cornerstone Agreement) through
December 31, 2001. Although Cornerstone Advisors is a newly organized investment
adviser, the Fund is not aware of any other circumstances that are reasonably
likely to impair the financial ability of Cornerstone Advisors to fulfill its
commitment to the Fund under the Cornerstone Agreement.
The annual rate used to determine fees payable by the Fund pursuant
to the Cornerstone Agreement is identical to the rate in the prior CSAM
Agreement. The Fund shall pay Cornerstone Advisors monthly an annual fee of one
(1.00%) percent of the Fund's average weekly net assets for the investment
management and research services provided by Cornerstone Advisors.
The approximate net assets of the Fund at December 31, 2000 were
$54.8 million. The total amount paid to CSAM by the Fund under the CSAM
Agreement was $677,354, during the year ending December 31, 2000.
LIMITATION OF LIABILITY
-----------------------
The Cornerstone Agreement provides that, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard for its
obligations and duties thereunder ("disabling conduct"), Cornerstone Advisors
shall not be liable to the Fund or its stockholders for any act or omission in
the course of or in connection with the rendering of its services thereunder. In
addition, the Cornerstone Agreement provides that the Fund, under certain
circumstances, will indemnify Cornerstone Advisors against any losses or
expenses incurred, including amounts paid in satisfaction of judgments and
reasonable legal costs, not resulting from disabling conduct.
13
DURATION AND TERMINATION
------------------------
Subject to stockholder approval, the Cornerstone Agreement will have
a term beginning April 19, 2001 and ending April 18, 2003, and, thereafter, will
continue in effect for successive annual periods provided such continuance is
specifically approved at least annually by (i) a majority of the members of the
Fund's Board of Directors who are not parties to the Cornerstone Agreement, and
who are not "interested persons" of any such party, and (ii) a majority of the
Fund's Board of Directors or the holders of a "majority of the outstanding
voting securities" of the Fund. The Cornerstone Agreement may be terminated,
without penalty, on sixty (60) days' notice, by the Fund's Board of Directors,
by a vote of the holders of a "majority of the outstanding voting securities" of
the Fund (as defined under "Required Vote" below) or by Cornerstone Advisors.
SOFT DOLLAR ARRANGEMENTS
------------------------
It is understood by both Cornerstone Advisors and the Board of
Directors that any soft dollars resulting from soft dollar arrangements between
the Fund, Cornerstone Advisors and selected dealers and brokers (to the extent
that such arrangements are in connection with, or for the benefit of, the Fund),
may be used to pay for certain services provided to the Fund which can be
provided by third parties, including but not limited to administration,
accounting and custodial services. Notwithstanding the foregoing, however, the
Cornerstone Agreement authorizes Cornerstone Advisors to direct the execution of
the Fund's portfolio transactions to dealers and brokers furnishing statistical
information or research deemed by Cornerstone Advisors to be useful or valuable
to the performance of its investment advisory functions for the Fund. In such
circumstances, the commissions paid may be higher than those that the Fund might
otherwise have paid to another broker if those services had not been provided.
Such research services provided to Cornerstone Advisors by brokers who effect
securities transactions for the Fund may be used by Cornerstone Advisors in
servicing other investment companies and accounts that it manages. It is
understood that not all of the research services may be used by Cornerstone
Advisors in managing any particular account, including the Fund. Notwithstanding
the foregoing, however, it is the intention of both Cornerstone Advisors and the
Board of Directors to use such soft dollar arrangements to pay for certain of
the Fund's expenses which may be provided by third parties, including but not
limited to administration, accounting and custodial services.
EVALUATION BY THE BOARD OF DIRECTORS
------------------------------------
The Fund's Board of Directors, including the Directors who are not
interested persons of any party to the Cornerstone Agreement or its affiliates,
has approved the Cornerstone Agreement for the Fund and recommends that
stockholders of the Fund approve such agreement. The Board's deliberations and
approval occurred at the Director's meeting held on February 9, 2001, with its
legal counsel in attendance. The Cornerstone Agreement is effective upon
stockholder approval. If the stockholders do not approve the Cornerstone
Agreement at the Meeting (or at an adjournment thereof), the Board will continue
the current internal management of the Fund's portfolio securities by Mr.
Bradshaw, in his capacity as an officer and director of the Fund, and either
resubmit the Cornerstone Agreement to the stockholders for their consideration
and approval or consider alternative sources from which to obtain investment
management and research services for the Fund.
14
In concluding that the externalization of the Fund's management of
its portfolio securities is in the best interest of the stockholders of the
Fund, the Board of Directors was influenced, in part, by its independent
counsel's assessment that the Fund's compliance with Federal and state
securities laws may possibly involve less interpretive review, and thereby be
less costly to the Fund, if the Fund is managed by an investment adviser
registered under the Investment Advisers Act. It was further noted that the laws
governing investment companies have historically evolved around investment
companies managed externally, as opposed to internally. Additionally, the Board
of Directors determined that the externalization of the investment management
functions is necessary to allow for greater flexibility by the external manager
to use compensation incentives in hiring and retaining qualified candidates to
assist in the management of the Fund's portfolio securities.
In approving the Cornerstone Agreement and determining to submit it
to the stockholders of the Fund for their approval, the Board of Directors
considered the best interests of the stockholders and took into account factors
they deemed relevant. The factors considered by the independent Directors
included the nature, quality and scope of the operations and services to be
provided by Cornerstone Advisors, while focusing on the prior experience of
Cornerstone Advisors' principals with respect to: (i) the continuity of the
Fund's portfolio management due to the fact that Mr. Bradshaw will continue to
be the person responsible for the investment management of the Fund's portfolio
securities, despite the externalization of management; (ii) the structure of
closed-end investment companies in general; (iii) management of portfolios of
U.S. equity securities; (iv) implementing aggressive policies to eliminate
closed-end investment companies' discounts; and (v) implementing policies to cut
costs and expenses of closed-end investment companies. Furthermore, the Board of
Directors of the Fund considered the opportunity to obtain high quality services
at costs that it deemed appropriate and reasonable. The Board of Directors also
reflected upon the intention of Cornerstone Advisors to act as the investment
manager to Clemente Strategic Value Fund, Inc. (the "Clemente Fund") and The
Cornerstone Strategic Return Fund, Inc. (the "Cornerstone Fund"), subject to
stockholder approval at each of its respective 2001 Annual Meetings of
Stockholders, thereby creating a family of closed-end funds including but not
necessarily limited to the Fund, the Cornerstone Fund and the Clemente Fund.
Lastly, consideration was given to the fact that there exists no arrangement or
understanding in connection with the Cornerstone Agreement with respect to the
composition of the Board of Directors of the Fund or of Cornerstone Advisors or
with respect to the selection or appointment of any person to any office of the
Fund or Cornerstone Advisors.
Based upon its review of the above factors, the Board of Directors of
the Fund determined that the Cornerstone Agreement is in the best interests of
the Fund and its stockholders.
15
REQUIRED VOTE
-------------
As provided by the 1940 Act, approval of the Cornerstone Agreement
will require the affirmative vote of a "majority of the outstanding voting
securities" of the Fund, which means the affirmative vote of the lesser of (a)
sixty-seven (67%) percent or more of the shares of the Fund entitled to vote
thereon present or represented by proxy at the Meeting, if the holders of more
than fifty (50%) percent of the outstanding shares of the Fund entitled to vote
thereon are present or represented by proxy, or (b) more than fifty (50%)
percent of the total outstanding shares of the Fund entitled to vote thereon.
For this purpose, abstentions and broker non-votes will be counted as shares
present at the Meeting for quorum purposes, but not as votes cast and will have
the same effect as votes cast against the Proposal.
THE BOARD OF DIRECTORS, INCLUDING THE DIRECTORS WHO ARE NOT
"INTERESTED PERSONS" OF THE FUND, CORNERSTONE ADVISORS OR ITS AFFILIATES,
RECOMMENDS THAT THE STOCKHOLDERS OF THE FUND VOTE "FOR" THE APPROVAL OF THE
CORNERSTONE AGREEMENT.
16
PROPOSAL NO. 3
RATIFICATION OF THE SELECTION OF INDEPENDENT ACCOUNTANTS
By vote of the Board of Directors, including the vote of the
Directors who are not "interested persons" as that term is defined in the 1940
Act, the Board has selected the firm of PricewaterhouseCoopers LLP as the Fund's
independent accountants for the year ending December 31, 2001. Such selection is
being submitted to the stockholders for ratification. The engagement of
PricewaterhouseCoopers LLP is conditioned on the right of the Fund, by majority
vote of its stockholders, to terminate such employment.
The Fund's independent accountants are to perform any services
normally provided by independent accounting firms, provided that such services
meet any and all of the independence requirements of the American Institute of
Certified Public Accountants and the Securities Exchange Commission, including
the examination of the Fund's annual financial statements and limited review of
its unaudited quarterly statements, assistance and consultation in connection
with Securities and Exchange Commission and New York Stock Exchange filings, and
preparation of the Fund's annual federal and state income tax returns.
A representative of PricewaterhouseCoopers LLP is expected to be
present at the Meeting by telephone and will have the opportunity to make a
statement if he or she so desires. This representative will also be available to
respond to appropriate questions.
REQUIRED VOTE
-------------
Ratification of the selection of PricewaterhouseCoopers LLP as
independent accountants of the Fund requires the affirmative vote of the holders
of a simple majority, defined as a majority of the votes cast by holders of
shares of Common Stock of the Fund present in person or represented by proxy at
a meeting with a quorum present. For purposes of this proposal, abstentions and
broker non-votes will be counted as shares present at the Meeting for quorum
purposes, and may be considered votes cast for the foregoing purpose.
THE BOARD OF DIRECTORS, INCLUDING THE NON-INTERESTED DIRECTORS,
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE RATIFICATION OF
PRICEWATERHOUSECOOPERS LLP AS THE FUND'S INDEPENDENT ACCOUNTANTS.
17
AUDIT COMMITTEE
The Fund's Audit Committee is currently composed of three independent
directors, Messrs. Wilcox, Strauss, and Rogers. The principal functions of the
Audit Committee include but are not limited to: (i) recommendations to the Board
for the appointment of the Fund's independent accountants; (ii) review of the
scope and anticipated cost of the independent accountant's audit; and (iii)
consideration of the independent accountant's reports concerning their conduct
of the audit, including any comments or recommendations the Board of Directors
might want to make in connection thereto. The Audit Committee convened two times
during the fiscal year ended December 31, 2000.
On June 1, 2000, the Audit Committee, followed by the full Board of
Directors, adopted a written charter setting forth the duties and
responsibilities of the Audit Committee. A copy of the charter, as adopted by
the Board of Directors of the Fund, and reapproved by the Board of Directors on
January 25, 2001, is included in this Proxy Statement as Appendix B. The Audit
Committee recommends to the Board of Directors, subject to shareholder approval,
the selection of the Fund's independent accountants.
The following table sets forth the aggregate fees billed by the
independent accountants for the Fund's most recent fiscal year for professional
services rendered for: (i) the audit of the Fund's annual financial statements
and the review of financial statements included in the Fund's reports to
stockholders ("Audit Fees"); (ii) financial information systems design and
implementation services provided to the Fund, its investment adviser and
entities that control, are controlled by or under common control with the
Adviser that provides services to the Fund ("Financial Information Systems
Design"); and (iii) all other services provided to the Fund, its investment
adviser and entities that control, are controlled by or under common control
with the Adviser that provides services to the Fund ("All Other Fees").
---------------- ----------------------------------------- ------------------
AUDIT FEES FINANCIAL INFORMATION SYSTEMS DESIGN ALL OTHER FEES
---------------- ----------------------------------------- ------------------
$32,800.00 $0.00 $2,195,800.00*
---------------- ----------------------------------------- ------------------
-------------
* All other Fees are fees paid for all other services, including but not
limited to tax return preparation of $5,800. $2,190,000 was paid to CSAM
for attestation services in accordance with the Association of Investment
Management and Research Performance Presentation Standards, process and
organization reviews over operations including the evaluation of system
trading controls, implementation of an investment performance system and a
feasibility study for a worldwide investment management system.
The Fund has no nominating or compensation committees.
With the exception of Messrs. Martin Torino, Jonathon Lubell, Enrique
Arzac, Ronald G. Olin and William W. Priest, Jr., each Director attended at
least seventy-five (75%) percent or more of the five (5) meetings of the Board
of Directors (including regularly scheduled and special meetings) held during
the year ended December 31, 2000. Messrs. Torino, Arzac and Olin, however, each
attended 100% of the meetings of the Board of Directors (including regularly
scheduled and special meetings) held during the period for which each respective
individual served as a Director in the year ended December 31, 2000.
18
AUDIT COMMITTEE REPORT
----------------------
The Audit Committee has met and held discussions with management
including, the Fund's Administrator and the Fund's independent accountants.
Management and the Fund's Administrator represented to the Audit Committee that
the Fund's financial statements were prepared in accordance with U.S. generally
accepted accounting principles, and the Audit Committee has reviewed and
discussed the financial statements with management, the Fund's Administrator and
the Fund's independent accountants. The Audit Committee discussed with the
independent accountants matters required to be discussed by Statement on
Auditing Standards No. 61.
The Fund's independent accountants also provided to the Audit
Committee the written disclosures required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the Audit
Committee discussed with the independent accountants' their independence, in
light of the services they were providing.
Based upon the Audit Committee's discussion with management, the
Fund's Administrator and the independent accountants and the Audit Committee's
review of the representations of management and the Fund's Administrator and the
report of the independent accountants to the Audit Committee, the Audit
Committee recommended that the Board of Directors include the audited financial
statements in the Fund's Annual Report for the fiscal year ended December 31,
2000 filed with the Securities and Exchange Commission.
Respectfully submitted,
Glenn W. Wilcox, Sr.
Andrew A. Strauss
Scott B. Rogers
19
INFORMATION PERTAINING TO THE FUND'S
PROPOSED INVESTMENT ADVISER AND ADMINISTRATOR
THE PROPOSED INVESTMENT ADVISER
-------------------------------
Cornerstone Advisors, Inc. ("Cornerstone Advisors"), the Fund's
proposed investment adviser, has its principal office at One West Pack Square,
Suite 750, Asheville, North Carolina 28801. Ralph W. Bradshaw owns fifty (50%)
percent of the total outstanding shares of common stock of Cornerstone Advisors
and is Chairman of the Board, President and a Director of the Fund. Gary A.
Bentz, who is the Vice President and Treasurer of the Fund also owns fifty (50%)
percent of the total outstanding shares of common stock of Cornerstone Advisors.
Cornerstone Advisors is a newly organized registered investment adviser that has
no previous operating history.
THE ADMINISTRATOR
-----------------
Bear Stearns Funds Management Inc. (the "Administrator"), whose
address is 575 Lexington Avenue, New York, New York 10022 has acted as the
Fund's administrator since June 30, 1995.
At their meeting on February 9, 2001, the Board of Directors entered
into a new Custodian Agreement with Custodial Trust Company, an affiliate of the
Administrator, effective on or about May 1, 2001.
20
INFORMATION PERTAINING TO CERTAIN STOCKHOLDERS
The following table sets forth the beneficial ownership of shares of
the Fund, at February 5, 2001, by each person known to the Fund to be deemed the
beneficial owner of more than five (5%) percent of the outstanding shares of the
Fund:
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF COMMON STOCK % OF FUND'S OUTSTANDING
BENEFICIALLY OWNED ON FEBRUARY 5, SHARES BENEFICIALLY OWNED ON FEBRUARY
2001 5, 2001
------------------------------------------ ------------------------------------ ---------------------------------------
Deep Discount Advisors, Inc.(1) 754,300 17.0%
One West Pack Square
Suite 777
Asheville, NC 28801
938,400 21.2%
Ron Olin Investment (1)
Management Company
One West Pack Square
Suite 777
Asheville, NC 28801
-------------
(1) Based solely upon information presented in a Schedule 13G, dated
February 5, 2001, filed jointly by Deep Discount Advisors, Inc. and
Ron Olin Investment Management Company. Based upon this information,
the aggregate beneficial ownership of shares of the Fund by these
entities, on behalf of their respective advisory clients as of
February 5, 2001, was 1,692,700 shares, representing approximately
38.2% of the outstanding shares of the Fund. Further pursuant to the
Schedule 13G, dated February 5, 2001, each respective entity has both
sole voting and dispositive power, as well as shared voting and
dispositive power, over the shares beneficially owned.
Additionally, on February 14, 2001, Cede & Co., a nominee for
participants in the Depository Trust Company, held of record 4,288,377 shares of
the Fund, equal to approximately 97% of the outstanding shares of the Fund.
OTHER BUSINESS
The Board of Directors of the Fund does not know of any other matter
which may come before the Meeting, but should any other matter requiring a vote
of stockholders arise, including any questions as to the adjournment of the
Meeting, it is the intention of the persons named in the proxy to vote the
proxies in accordance with their judgment on that matter.
21
PROPOSALS TO BE SUBMITTED BY STOCKHOLDERS
All proposals by stockholders of the Fund which are intended to be
presented at the Fund's next Annual Meeting of Stockholders, to be held in the
year 2002, must be received by the Fund addressed to Progressive Return Fund,
Inc. c/o Bear Stearns Funds Management Inc., 575 Lexington Avenue, New York, New
York 10022 for inclusion in the Fund's proxy statement and proxy relating to
that meeting in advance of the meeting as set forth below. Any stockholder who
desires to bring a proposal at the Fund's 2002 Annual Meeting of Stockholders
without including such proposal in the Fund's proxy statement must deliver (via
the U.S. Post Office or such other means that guarantees delivery) written
notice thereof to the Secretary of the Fund c/o Bear Stearns Fund Management
Inc., 575 Lexington Avenue, New York, New York 10022 no less than one hundred
twenty (120) calendar days (approximately December 20, 2001) before the date of
the Annual Meeting of Stockholders which will be scheduled to be held in April
2002 or the tenth (10th) day after public announcement is made by way of
publication by the New York Stock Exchange of the Fund's Meeting date.
Progressive Return Fund, Inc.
Thomas R. Westle
Secretary
March 7, 2001
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. STOCKHOLDERS WHO
DO NOT EXPECT TO ATTEND THE MEETING ARE THEREFORE URGED TO COMPLETE, SIGN, DATE
AND RETURN THE PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
22
FORM OF PROXY CARD
------------------
PROGRESSIVE RETURN FUND, INC.
-----------------------------
The undersigned stockholder of Progressive Return Fund, Inc. (the
"Fund") hereby constitutes and appoints Ralph W. Bradshaw, Thomas R. Westle and
Frank J. Maresca, or any one of them, as proxy of the undersigned, with full
power of substitution, to vote all shares of Common Stock of the Fund standing
in his or her name on the books of the Fund at the Annual Meeting of
Stockholders (the "Meeting") of the Fund to be held at the executive offices of
Bear Stearns Funds Management Inc., 245 Park Avenue, 7th Floor, Conference Room
F, New York, New York 10167, on Thursday, April 19, 2001 at 3:30 p.m., or at any
adjournment thereof, with all the powers which the undersigned would possess if
personally present, as designated on the reverse hereof:
The undersigned hereby revokes any proxy previously given and
instructs the said proxies to vote in accordance with the aforementioned
instructions with respect to (a) the election of two Class I Directors and one
Class II Director; (b) the approval of a new investment management agreement
between Cornerstone Advisors, Inc. and the Fund; (c) the ratification of the
selection by the Board of Directors of the Fund's independent accountants; and
(d) the consideration and vote of such other matters as may properly come before
the Meeting or any adjournment thereof. If no such specification is made, the
undersigned will vote FOR each of the proposals set forth above, and in their
discretion with respect to such other matters as may properly come before the
Meeting.
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF PROGRESSIVE RETURN FUND, INC.'S
BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD ON
APRIL 19, 2001
(To be dated and signed on reverse side)
Please mark boxes / / or /X/ in blue or black ink.
PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE:
------
X
------
1. To elect two (2) Class I Directors: FOR WITHHELD
Thomas H. Lenagh [ ] [ ]
Andrew A. Strauss [ ] [ ]
To elect one (1) Class II Director: FOR WITHHELD
Edwin Meese III [ ] [ ]
[ ] [ ]
2. To approve a new investment management agreement between Cornerstone
Advisors, Inc. and the Fund:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To ratify the selection by the Board of Directors of PricewaterhouseCoopers
LLP as the Fund's independent accountants for the year ending
December 31, 2001:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
In their discretion, the proxies are authorized to consider and vote
upon such matters as may properly come before said Meeting or any
adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE STOCKHOLDER. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED IN
FAVOR OF EACH PROPOSAL.
Your proxy is important to assure a quorum at the annual meeting of stockholders
whether or not you plan to attend the meeting in person. You may revoke this
proxy at anytime, and the giving of it will not affect your right to attend the
annual meeting and vote in person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
SIGNATURE(S)____________________________ DATE___________________
NOTE: Please sign exactly as name appears. When shares are held as joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer and if a
partnership, please sign in full partnership name by authorized person.
APPENDIX A
----------
INVESTMENT MANAGEMENT AGREEMENT
THIS INVESTMENT MANAGEMENT AGREEMENT dated and effective as of April
19, 2001 between PROGRESSIVE RETURN FUND, INC., a Maryland corporation (herein
referred to as the "Fund"), and CORNERSTONE ADVISORS, INC., a corporation duly
organized under the laws of North Carolina (herein referred to as the
"Investment Manager").
1. APPOINTMENT OF INVESTMENT MANAGER. The Investment Manager hereby
undertakes and agrees, upon the terms and conditions herein set forth, to
provide overall investment management services for the Fund, and in connection
therewith to (i) supervise the Fund's investment program, including advising and
consulting with the Fund's Board of Directors regarding the Fund's overall
investment strategy; (ii) make, in consultation with the Fund's Board of
Directors, investment strategy decisions for the Fund; (iii) manage the
investing and reinvesting of the Fund's assets; (iv) place purchase and sale
orders on behalf of the Fund; (v) advise the Fund with respect to all matters
relating to the Fund's use of leveraging techniques; (vi) provide or procure the
provision of research and statistical data to the Fund in relation to investing
and other matters within the scope of the investment objective and limitations
of the Fund; (vii) monitor the performance of the Fund's outside service
providers, including the Fund's administrator, transfer agent and custodian;
(viii) be responsible for compliance by the Fund with U.S. federal, state and
other applicable laws and regulations; and (ix) pay the salaries, fees and
expenses of such of the Fund's directors, officers or employees who are
directors, officers or employees of the Investment Manager or any of its
affiliates, except that the Fund will bear travel expenses or an appropriate
portion thereof of directors and officers of the Fund who are directors,
officers or employees of the Investment Manager, to the extent that such
expenses relate to attendance at meetings of the Board of Directors or any
committees thereof. The Investment Manager may delegate any of the foregoing
responsibilities to a third party with the consent of the Board of Directors.
2. EXPENSES. In connection herewith, the Investment Manager agrees to
maintain a staff within its organization to furnish the above services to the
Fund. The Investment Manager shall bear all expenses arising out of its duties
hereunder.
Except as provided in Section 1 hereof, the Fund shall be
responsible for all of the Fund's expenses and liabilities, including expenses
for legal, accounting and auditing services; taxes and governmental fees; dues
and expenses incurred in connection with membership in investment company
organizations; fees and expenses incurred in connection with listing the Fund's
shares on any stock exchange; costs of printing and distributing shareholder
reports, proxy materials, prospectuses, stock certificates and distribution of
dividends; charges of the Fund's custodians and sub-custodians, administrators
and sub-administrators, registrars, transfer agents, dividend disbursing agents
and dividend reinvestment plan agents; payment for portfolio pricing services to
A-1
a pricing agent, if any; registration and filing fees of the Securities and
Exchange Commission; expenses of registering or qualifying securities of the
Fund for sale in the various states; freight and other charges in connection
with the shipment of the Fund's portfolio securities; fees and expenses of
non-interested directors or non-interested members of any advisory or investment
board, committee or panel of the Fund; fees and expenses of any officers and
interested directors of the Fund who are not affiliated with the Investment
Manager, the Administrator or their respective affiliates; travel expenses or an
appropriate portion thereof of directors and officers of the Fund, or members of
any advisory or investment board, committee or panel of the Fund, to the extent
that such expenses relate to attendance at meetings of the Board of Directors or
any committee thereof, or of any such advisory or investment board, committee or
panel; salaries of shareholder relations personnel; costs of shareholders
meetings; insurance; interest; brokerage costs; and litigation and other
extraordinary or non-recurring expenses.
3. TRANSACTIONS WITH AFFILIATES. The Investment Manager is
authorized on behalf of the Fund, from time to time when deemed to be in the
best interests of the Fund and to the extent permitted by applicable law, to
purchase and/or sell securities in which the Investment Manager or any of its
affiliates underwrites, deals in and/or makes a market and/or may perform or
seek to perform investment banking services for issuers of such securities. The
Investment Manager is further authorized, to the extent permitted by applicable
law, to select brokers (including any brokers affiliated with the Investment
Manager) for the execution of trades for the Fund.
4. BEST EXECUTION; RESEARCH SERVICES. The Investment Manager is
authorized, for the purchase and sale of the Fund's portfolio services, to
employ such dealers and brokers as may, in the judgment of the Investment
Manager, implement the policy of the Fund to obtain the best results taking into
account such factors as price, including dealer spread, the size, type and
difficulty of the transaction involved, the firm's general execution and
operational facilities and the firm's risk in positioning the securities
involved. Consistent with this policy, the Investment Manager is authorized to
direct the execution of the Fund's portfolio transactions to dealers and brokers
furnishing statistical information or research deemed by the Investment Manager
to be useful or valuable to the performance of its investment advisory functions
for the Fund. It is understood that in these circumstances, as contemplated by
Section 28(e) of the Securities Exchange Act of 1934, the commissions paid may
be higher than those that the Fund might otherwise have paid to another broker
if those services had not been provided. Information so received will be in
addition to and not in lieu of the services required to be performed by the
Investment Manager. It is understood that the expenses of the Investment Manager
will not necessarily be reduced as a result of the receipt of such information
or research. Research services furnished to the Investment Manager by brokers
who effect securities transactions for the Fund may be used by the Investment
A-2
Manager in servicing other investment companies and accounts that it manages.
Similarly, research services furnished to the Investment Manager by brokers who
effect securities transactions for other investment companies and accounts that
the Investment Manager manages may be used by the Investment Manager in
servicing the Fund. It is understood that not all of these research services are
used by the Investment Manager in managing any particular account, including the
Fund.
5. REMUNERATION. In consideration of the services to be rendered by
the Investment Manager under this Agreement, the Fund shall pay the Investment
Manager a monthly fee in United States dollars for the previous month at an
annual rate of 1.00% of the Fund's average weekly net assets. If the fee payable
to the Investment Manager pursuant to this paragraph 5 begins to accrue before
the end of any month or if this Agreement terminates before the end of any
month, the fee for the period from such date to the end of such month or from
the beginning of such month to the date of termination, as the case may be,
shall be prorated according to the proportion which such period bears to the
full month in which such effectiveness or termination occurs. For purposes of
calculating each such monthly fee, the value of the Fund's net assets shall be
computed at the time and in the manner specified in the Registration Statement.
6. REPRESENTATIONS AND WARRANTIES. The Investment Manager represents
and warrants that it is duly registered and authorized as an investment adviser
under the Investment Advisers Act of 1940, as amended, and the Investment
Manager agrees to maintain effective all requisite registrations, authorizations
and licenses, as the case may be, until the termination of this Agreement.
7. SERVICES NOT DEEMED EXCLUSIVE. The services provided hereunder by
the Investment Manager are not to be deemed exclusive and the Investment Manager
and any of its affiliates or related persons are free to render similar services
to other and to use the research developed in connection with this Agreement for
other clients or affiliates. Nothing herein shall be construed as constituting
the Investment Manager an agent of the Fund.
8. LIMIT OF LIABILITY. The Investment Manager shall exercise its best
judgment in rendering the services in accordance with the terms of this
Agreement. The Investment Manager shall not be liable for any error of judgment
or mistake of law or for any act or omission or any loss suffered by the Fund in
connection with the matters to which this Agreement relates, provided that
nothing herein shall be deemed to protect or purport to protect the Investment
Manager against any liability to the Fund or its shareholders to which the
Investment Manager would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this Agreement
("disabling conduct"). The Fund will indemnify the Investment Manager against,
and hold it harmless from, any and all losses, claims, damages, liabilities or
expenses (including reasonable counsel fees and expenses), including any amounts
paid in satisfaction of judgments, in compromise or as fines or penalties, not
resulting from disabling conduct by the Investment Manager. Indemnification
shall be made only following: (i) a final decision on the merits by a court or
other body before whom the proceeding was brought that the Investment Manager
was not liable by reason of disabling conduct, or (ii) in the absence of such a
decision, a reasonable determination, based upon a review of the facts, that the
Investment Manager was not liable by reason of disabling conduct by (a) the vote
of a majority of a quorum of directors of the Fund who are neither "interested
persons" of the Fund nor parties to the proceeding ("disinterested non-party
directors"), or (b) an independent legal counsel in a written opinion. The
Investment Manager shall be entitled to advances from the Fund for payment of
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the reasonable expenses (including reasonable counsel fees and expenses)
incurred by it in connection with the matter as to which it is seeking
indemnification in the manner and to the fullest extent permissible under law.
Prior to any such advance, the Investment Manager shall provide to the Fund a
written affirmation of its good faith belief that the standard conduct necessary
for indemnification by the Fund has been met and a written undertaking to repay
any such advance if it should ultimately be determined that the standard of
conduct has not been met. In addition, at least one of the following additional
conditions shall be met: (a) the Investment Manager shall provide a security in
form and amount acceptable to the Fund for its undertaking; (b) the Fund is
insured against losses arising by reason of the advance; or (c) a majority of a
quorum of disinterested non-party directors, or independent legal counsel, in a
written opinion, shall have determined, based on a review of facts readily
available to the Fund at the time the advance is proposed to be made, that there
is reason to believe that the Investment Manager will ultimately be found to be
entitled to indemnification.
9. DURATION AND TERMINATION. This Agreement shall have an initial term
beginning April 19, 2001 and ending April 18, 2003, and then shall continue in
effect thereafter for successive annual periods, but only so long as such
continuance is specifically approved at least annually by the affirmative vote
of (i) a majority of the members of the Fund's Board of Directors who are not
parties to this Agreement or "interested persons" (as defined in the Investment
Company Act of 1940 (the "1940 Act")) of any such party, cast in person at a
meeting called for the purpose of voting on such approval, and (ii) the Fund's
Board of Directors or the holders of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund.
Notwithstanding the above, this Agreement (a) may nevertheless be
terminated at any time, without penalty, by the Fund's Board of Directors, by
vote of holders of a majority of the outstanding voting securities (as defined
in the 1940 Act) of the Fund or by the Investment Manager, upon sixty (60) days'
written notice delivered to each party hereto, and (b) shall automatically be
terminated in the event of its assignment (as defined in the 1940 Act). Any such
notice shall be deemed given when received by the addressee.
10. GOVERNING LAW. This Agreement shall be governed, construed and
interpreted in accordance with the laws of the State of New York, provided,
however, that nothing herein shall be construed as being inconsistent with the
1940 Act.
11. NOTICES. Any notice hereunder shall be in writing and shall be
delivered in person or by telex or facsimile (followed by delivery in person) to
the parties at the addresses set forth below:
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IF TO THE FUND:
--------------
PROGRESSIVE RETURN FUND, INC.
c/o Bear Stearns Funds Management Inc.
575 Lexington Avenue
New York, NY 10022
Attention:Mr. Frank J. Maresca
Telephone No.: (212) 272-2093
Fax No.: (973) 463-5126
IF TO THE INVESTMENT MANAGER:
----------------------------
CORNERSTONE ADVISORS, INC.
One West Pack Square, Suite 750
Asheville, North Carolina 28801
Attention:Mr. Gary A. Bentz
Telephone No.: (828) 255-4831
Fax No.: (828) 210-8183
or to such other address as to which the recipient shall have informed the other
party in writing.
Unless specifically provided elsewhere, notice given as
provided above shall be deemed to have been given, if by
personal delivery, on the day of such delivery, and, if by facsimile and mail,
on the date on which such facsimile or mail is sent.
12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto caused their duly authorized
signatories to execute this Agreement as of the day and year first written
above.
PROGRESSIVE RETURN FUND, INC.
By:_______________________
Name: Ralph W. Bradshaw
Title: Chairman of the Board
CORNERSTONE ADVISORS, INC.
By:_______________________
Name: Gary A. Bentz
Title: Vice President
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APPENDIX B
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AUDIT COMMITTEE CHARTER
PROGRESSIVE RETURN FUND, INC.
ORGANIZATION
------------
The members of the Audit Committee of the Board of Directors
("Directors") of Progressive Return Fund, Inc., a closed-end registered
investment company (the "Fund") are selected by the full Board of Directors. The
members of the Audit Committee shall consist of not less than three persons
(except as otherwise provided below) who are not "interested persons" (as
defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended)
of the Fund and who are "independent" within the meaning of the audit committee
rules of any securities exchange on which the Fund's shares are listed for
trading. Each member of the Audit Committee shall be financially literate, as
such qualification is interpreted by the Board of Directors in its business
judgment, or must become financially literate within a reasonable period of time
after his appointment to the Audit Committee. At least one member of the Audit
Committee must have accounting or related financial management expertise, as the
Board of Directors interprets such qualification in its business judgment. In
the event that the Fund currently has less than three members on its Audit
Committee it must have three members not later than June 14, 2001.
STATEMENT OF POLICY
-------------------
The Fund's Audit Committee oversees the financial reporting process for the
Fund. The Fund's Board and its Audit Committee recognize that they are the
shareholders' representatives, that the auditors are ultimately accountable to
the Board of Directors and the Audit Committee and that the Board of Directors
and the Audit Committee have the authority and responsibility to select,
evaluate and, where appropriate, recommend to shareholders the selection or
replacement of the outside auditors.
The Fund's Audit Committee shall monitor the process for the Fund's
valuation of portfolio assets. This is key to providing shareholders and
regulators adequate, meaningful information for decision-making. Members of the
Fund's Audit Committee must have a general understanding regarding the
accounting process and the control structure in place for the Fund. Open
communication with management and the independent auditors is essential. This
Charter shall be reviewed annually by the Board of the Fund.
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RESPONSIBILITIES OF THE AUDIT COMMITTEE
---------------------------------------
In order to provide reasonable flexibility, the following listed
Committee responsibilities are described in broad terms:
o The Audit Committee's role is clearly one of oversight and review and not
of direct management of the audit process. The Fund's Board and Audit
Committee note that the outside auditors are ultimately accountable to the
Board and the Audit Committee.
o The Audit Committee members are responsible for a general understanding of
the Fund's accounting systems and controls.
o Committee members shall periodically evaluate the independent audit firm's
performance and the costs of its services. The Audit Committee will make
recommendations to the full Board of Directors regarding the selection of
the independent audit firm. The Committee shall request from the
independent auditors periodically a formal written statement (1)
delineating all relationships between the auditors and the Fund, its
investment adviser and their corporate affiliates and including
disclosures regarding the auditors' independence required by Independence
Standards Board Standard No. 1, as may be modified or supplemented, and
(2) certifying that, in the view of the auditors, they are independent
public accountants with respect to the Fund within the meaning of the
Securities Act of 1933, as amended, and the applicable rules and
regulations thereunder. The Audit Committee is responsible for actively
engaging in a dialogue with the auditors with respect to any disclosed
relationships or services that may affect the objectivity and independence
of the auditors, and for recommending that the full Board take appropriate
steps, if any, in response to the auditors' response to satisfy itself of
the independence of the auditors.
o The Fund's Audit Committee is responsible for reviewing the scope of the
audit proposed by the Fund's independent auditors.
o The Fund's Audit Committee is responsible for recording minutes of its
meetings and reporting significant matters to the full Board of Directors.
The Audit Committee, shall meet no less frequently than annually and
receive information (as necessary) from, among others, the Fund's
investment advisor or its counsel and Fund counsel, in addition to the
auditors, in order to be informed about legal and accounting issues having
the possibility of affecting the financial reporting process. This would
include items of industry-wide importance and internal issues such as
litigation.
o The Fund's Audit Committee is responsible for (i) reviewing and discussing
with management and the auditors the Fund's audited financial statements;
and (ii) discussing with the auditors the matters required to be discussed
by Statement on Auditing Standards No. 61, as may be modified or
supplemented. The Audit Committee shall confirm that the independent
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auditors are satisfied with the disclosure and content of the Fund's
audited financial statements and shall advise the Board of Directors with
respect to its recommendation as to the inclusion of the Fund's audited
financial statements in its Annual Report to Shareholders.
o In reviewing the activities of the independent auditors, the Fund's Audit
Committee shall consider the auditors' comments with respect to the
appropriateness and adequacy of the Fund's accounting policies, procedures
and principles.
o The Audit Committee should take appropriate steps to keep apprised of
regulatory changes and new accounting pronouncements that affect net asset
value calculations and financial statement reporting requirements.
o The Fund's Audit Committee shall review and reassess the adequacy of this
Charter on an annual basis.
EFFECTIVE DATE
--------------
This Audit Committee Charter shall be effective as of June 1, 2000.
The Audit Committee Charter was reapproved by the Board of Directors on January
25, 2001.
3912-PS-01
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