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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] 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:
PROXY MATERIAL FOR THE INFORMATION OF
THE SECURITIES AND EXCHANGE COMMISSION ONLY
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 ratify 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.
A copy of the Fund's annual report to stockholders accompanies this
proxy material. Semi-annual reports 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 (___)
________.
By Order of the Board of Directors,
Thomas R. Westle
Secretary
Dated: February 26, 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
February 28, 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
ratification 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 which 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 which
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 $6,000, plus
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__________. The Fund is a closed-end,
management investment company.
A COPY OF THE FUND'S MOST RECENT ANNUAL REPORT ACCOMPANIES THIS PROXY
MATERIAL AND COPIES OF ITS SEMI-ANNUAL REPORT ARE AVAILABLE FREE OF CHARGE BY
WRITING TO THE FUND, C/O BEAR STEARNS FUNDS MANAGEMENT INC., 575 LEXINGTON
AVENUE, NEW YORK, NEW YORK 10022, OR BY TELEPHONE AT (___) _____. THIS REPORT IS
NOT TO BE REGARDED AS PROXY SOLICITING MATERIAL.
This Proxy Statement is first being mailed to stockholders on or about
February 28, 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 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 a 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 their successors are 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 or thereafter until each of their 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 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 their successors
are 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 Director to serve until the Year 2004 Annual Meeting of Stockholders:
Shares of Common Stock
Beneficially Owned
Position Directly or Indirectly
with the Principal Occupation on
Nominee Fund Since Age During Past Five Years February 14, 2001*
---------------------------------------------------------------------------------------------------------------------
Thomas H. Lenagh 2001 78 Chairman of the Board of Inrad -0-
Gintel Equity Management Corp.; Independent Financial
Greenwich Office Park # 6 Adviser; Director of Clemente
Greenwich, CT 06831 Strategic Value Fund, Inc.,
Gintel Fund, Adams Express and
Petroleum and Resources, ASD
Group, ICN Pharmaceuticals, and
V-Band Corp.; Nominee for
Director of Cornerstone Strategic
Return Fund, Inc.
Andrew A. Strauss 2000 46 Attorney and senior member of -0-
77 Central Avenue Strauss & Associates, P.A.,
Suite F attorneys, Asheville, N.C.;
Asheville, NC 28801 previous President of White
Knight Healthcare, Inc. and LMV
Leasing, Inc., a wholly owned
subsidiary of Xerox Credit
Corporation; Director of
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
Position Directly or Indirectly
with the Principal Occupation on
Nominee Fund Since Age During Past Five Years February 14, 2001*
---------------------------------------------------------------------------------------------------------------------
Edwin Meese III 2001 68 Distinguished Fellow, The -0-
Heritage Foundation Heritage Foundation, Washington,
214 Massachusetts Ave NE D.C.; Distinguished Visiting
Washington, DC 20002 Fellow at the Hoover Institution,
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
Cornerstone Strategic
Return Fund.
----------------
* Each director has sole voting and investment power with respect to the
listed shares.
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 Director serving until the Year 2002 Annual Meeting of Stockholders:
Shares of Common Stock
Beneficially Owned
Position Directly or Indirectly
with the Principal Occupation on
Nominee Fund Since Age During Past Five Years February 14, 2001*
---------------------------------------------------------------------------------------------------------------------
Ralph W. Bradshaw*** 1999 50 Chairman of the Board of Directors 300**
One West Pack Square and President of the Fund;
Suite 750 President, Director and majority
Asheville, NC 28801 shareholder of Cornerstone Advisors,
Inc.; Financial Consultant; Vice
President, Deep Discount Advisors,
Inc. (1993-1999); Director of The
Austria Fund, Inc., Cornerstone
Strategic Return Fund, Inc. and
Clemente Strategic Value Fund, Inc.
5
Class III Directors serving until the Year 2003 Annual Meeting of Stockholders:
Shares of Common Stock
Beneficially Owned
Position Directly or Indirectly
with the Principal Occupation on
Nominee Fund Since Age During Past Five Years February 14, 2001*
---------------------------------------------------------------------------------------------------------------------
Glenn W. Wilcox, Sr. 2000 69 Chairman of the Board and Chief -0-
One West Pack Square Executive Officer of Wilcox Travel
Suite 1700 Agency; Director, Champion
Asheville, NC 28801 Industries, Inc.; Chairman, Tower
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 Cornerstone Strategic
Return Fund, Inc. and Clemente
Strategic Value Fund, Inc.
Scott B. Rogers 2000 45 Chief Executive Officer, Asheville -0-
30 Cumberland Ave. Buncombe Community Christian
Asheville, NC 28801 Ministry; 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, Recycling Unlimited;
Director, Interdenominational
Ministerial Alliance; Director,
Cornerstone Strategic Return Fund,
Inc. and Clemente Strategic Value
Fund, Inc.
---------------------
* Each director 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 Director.
*** Mr. Bradshaw is an "interested person" as defined in the Investment
Company Act of 1940 ("1940 Act").
6
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 Total Compensation
---------------------------- ------------------ ------------------------
Ralph W. Bradshaw 1999 $7,000
Glenn W. Wilcox, Sr. 2000 $4,879
Andrew A. Strauss 2000 $4,879
Edwin Meese, III 2001 $0
Scott B. Rogers 2000 $4,879
Thomas H. Lenagh 2001 $0
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, will be
considered votes cast, and will affect the plurality vote required for
Directors.
THE BOARD OF DIRECTORS RECOMMEND 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.
7
PROPOSAL NO. 2
CONSIDERATION OF THE RATIFICATION OF THE INVESTMENT MANAGEMENT AGREEMENT
BETWEEN THE FUND AND CORNERSTONE ADVISORS, INC.
The Board of Directors, at its special meeting held on February 9, 2001
unanimously approved and authorized for submission to stockholders the approval
of an investment management agreement (the "Cornerstone Agreement") by and
between Cornerstone Advisors, Inc. ("Cornerstone Advisors") and the Fund.
Currently, the management of the Fund's portfolio securities is
performed by Mr. Bradshaw 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 the Fund should discontinue
the temporary internal management of the Fund's portfolio securities, effective
March 1, 2001, and recommends to the stockholders to ratify, retroactive to
March 1, 2001, the Cornerstone Agreement with Cornerstone Advisors, which was
approved by the Board at its February 9, 2001 Meeting. Cornerstone Advisors,
which has its principal office at One West Pack Square, Suite 750, Asheville,
North Carolina 28801, provides investment management services to closed-end
investment companies. Cornerstone Advisors is a newly organized being registered
as an investment adviser with the Securities and Exchange Commission under the
Investment Advisers Act of 1940, as amended, which has no previous operating
history. It is intended, subject to stockholder ratification at each of their
2001 Annual Meetings of Stockholders, that Cornerstone Advisors will also act as
the investment manager to Cornerstone Strategic Return Fund, Inc. and Clemente
Strategic Value Fund, Inc. Messrs. Ralph W. Bradshaw and Gary A. Bentz are the
majority stockholders of Cornerstone Advisors and Mr. Bradshaw will serve as the
Fund's portfolio manager assuming the Cornerstone Agreement is ratified by
stockholders at the Meeting. A copy of the proposed Cornerstone Agreement is
attached hereto as Appendix A.
The Board of Directors has determined that it would be in the best
interest of the Fund to externalize the management of the Fund's portfolio
securities and have a registered investment adviser responsible for such day to
day management of the Fund's portfolio securities. The Board believes that the
externalization of the investment management functions is necessary to better
enable the Fund to meet its investment objective and will allow for greater
flexibility by the external manager to use compensation incentives in hiring
qualified candidates to assist in the management process.
8
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 ratification. The approval is being sought retroactive to March 1, 2001,
because, subject to stockholder approval, Cornerstone Advisors commenced its
performance of the investment management services with respect to the Fund's
portfolio securities and entered into the Cornerstone Agreement on March 1,
2001. Payment of the management fee accruing to Cornerstone Advisors for the
period March 1, 2001 through the date of the Meeting, is conditioned upon the
Fund obtaining stockholder ratification of the Cornerstone Agreement at this
Meeting. If the stockholders do not approve the Cornerstone Agreement, then no
payments will be due or payable under the Cornerstone Agreement.
The externalization of a Fund's management to persons previously
responsible for the internal management of such Fund's portfolio securities has
been the subject of prior No-Action Letters granted by the Securities and
Exchange Commission. 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 Investment Advisers Act as interpreted by the Securities
Exchange Commission in the Century Shares Trust No-Action Letter, dated May 4,
1994, Cornerstone Advisors and the Fund have made the following representations
and covenants to each 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 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 of the Fund and Cornerstone Advisors
have determined that the rendering of investment management services to other
closed-end investment companies does not and will not constitute or create a
conflict of Cornerstone Advisors' duty of loyalty affecting its fiduciary duty
owing to the Fund or its stockholders.
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. Mr. Bradshaw will continue in his capacity as the Chairman of the
Board; however, this office does not carry any special powers or greater voting
rights. 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.
CORNERSTONE ADVISORS WILL NOT OBTAIN UNDUE VALUE FROM THE PROCESS 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,
which 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.
Cornerstone Advisors has represented 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.
9
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. The Board of Directors of the Fund and Cornerstone Advisors
have determined that the rendering of investment management services to other
closed-end investment companies does not and will not 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 March 1, 2001 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.
SERVICES TO BE PERFORMED
Pursuant to the Cornerstone Agreement, Cornerstone Advisors conducts
investment research and supervision for the Fund and is 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
provides the Fund with investment advice, supervises the Fund's management and
investment programs and provides investment advisory facilities and executive
and supervisory personnel for managing the investments and effectuating
portfolio transactions. Cornerstone Advisors also furnishes, 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 pays 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 is 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 March 1, 2001
through December 31, 2001.
10
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 pays 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.
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.
DURATION AND TERMINATION
The Cornerstone Agreement will have an initial term beginning March 1,
2001 and ending February 28, 2003, subject to stockholder ratification, 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.
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 ratify such agreement. The Board's deliberations and
approval occurred at the Directors' meeting held on February 9, 2001. The
Cornerstone Agreement is effective as of March 1, 2001, subject to stockholder
ratification. If the stockholders do not ratify 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 and
either resubmit the Cornerstone Agreement to the stockholders for their
consideration and ratification or consider alternative sources from which to
obtain investment management and research services for the Fund.
In approving the Cornerstone Agreement and determining to submit it to
stockholders for their ratification, the Board of Directors has sought to obtain
high quality and specialized management and advisory services. The Board of
Directors of the Fund believes that the Cornerstone Agreement will enable the
Fund to obtain high quality services at costs which it deems appropriate and
reasonable and that approval of the Cornerstone Agreement is in the best
interests of the Fund and its stockholders.
11
In approving the Cornerstone Agreement, the Board of Directors of the
Fund focused primarily on the nature, quality and scope of the operations and
services to be provided by Cornerstone Advisors to the Fund. Based upon its
review of the above factors, the Board of Directors of the Fund concluded that
the Cornerstone Agreement is in the best interests of the Fund and its
stockholders.
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 voting 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 THEIR AFFILIATES, RECOMMEND THAT
THE STOCKHOLDERS OF THE FUND VOTE "FOR" THE RATIFICATION OF THE CORNERSTONE
AGREEMENT.
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.
12
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 will be considered votes cast for the foregoing purpose.
THE BOARD OF DIRECTORS, INCLUDING THE NON-INTERESTED DIRECTORS,
RECOMMEND THAT STOCKHOLDERS VOTE "FOR" THE RATIFICATION OF
PRICEWATERHOUSECOOPERS LLP AS THE FUND'S INDEPENDENT ACCOUNTANTS.
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 includes but is 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 three
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 ("Other Fees").
13
------------- -------------------------- --------------------
AUDIT FEES FINANCIAL INFORMATION OTHER FEES
SYSTEMS DESIGN
------------- -------------------------- --------------------
$25,800 $0 $2,190,000*
------------- -------------------------- --------------------
* All Other Fees are fees 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 world-wide
investment management system.
The Fund has no nominating or compensation committees.
Each Director attended at least seventy-five (75%) percent or more of
the aggregate number of the Board and committee meetings held during the period
for which he was a Director.
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 consolidated financial statements were prepared in accordance with
U.S. generally accepted accounting principles, and the Audit Committee has
reviewed and discussed the consolidated 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.
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 consolidated
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
14
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 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 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.
15
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, SHARES BENEFICIALLY OWNED,
DIRECTLY OR INDIRECTLY, DIRECTLY OR INDIRECTLY,
ON FEBRUARY 5, 2001 ON FEBRUARY 5, 2001
------------------------------------- --------------------------- --------------------------------
Deep Discount Advisors, Inc.(1) 754,300 16.9%
One West Pack Square
Suite 777
Asheville, NC 28801
938,400 21.0%
Ron Olin Investment (1)
Management Company
One West Pack Square
Suite 777
Asheville, NC 28801
--------------------------------
(1) Based solely upon information presented in Schedule 13G, dated February
5, 2001, filed jointly by Deep Discount Advisors, Inc. and Ron Olin
Investment Management Company. The Fund's understanding is that the
aggregate beneficial ownership of shares of the Fund by these entities
as of February 5, 2001 was 1,692,700 shares, representing approximately
37.9% of the Fund.
In addition, on February 14, 2001, Cede & Co., a nominee for
participants in the Depository Trust Company, held of record
___________ shares of the Fund, equal to approximately ____% 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.
16
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 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 earlier than one hundred eighty
(180) days (approximately December 18, 2001) and no later than sixty (60) days
(approximately February 1, 2002) before the date of the 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
February 26, 2001
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. STOCKHOLDERS WHO DO
NOT EXPECT TO ATTEND THE MEEING ARE THEREFORE URGED TO COMPLETE, SIGN, DATE AND
RETURN THE PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVEOPE.
17
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 ratification 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 ABSTAIN
Thomas H. Lenagh [ ] [ ] [ ]
Andrew A. Strauss [ ] [ ] [ ]
To elect one (1) Class II Director: FOR WITHHELD ABSTAIN
Edwin Meese III [ ] [ ] [ ]
2. To ratify a new investment management agreement between Cornerstone
Advisors, Inc. and the Fund:
FOR WITHHELD 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 WITHHELD ABSTAIN
[ ] [ ] [ ]
4. 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.
FOR WITHHELD ABSTAIN
[ ] [ ] [ ]
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 effect 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 March 1,
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
pricing agent, if any; registration and filing fees of the Securities and
A-1
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 which 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
Manager in servicing other investment companies and accounts which it manages.
Similarly, research services furnished to the Investment Manager by brokers who
effect securities transactions for other investment companies and accounts which
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.
A-2
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
A-3
("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
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 March 1, 2001 and ending February 28, 2003, subject to stockholder
ratification, 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:
A-4
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.
A-5
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: /S/ RALPH W. BRADSHAW
---------------------------------
Name: Ralph W. Bradshaw
Title: Chairman of the Board
CORNERSTONE ADVISORS, INC.
By: /S/ GARY A. BENTZ
---------------------------------
Name: Gary A. Bentz
Title: Vice President
A-6
APPENDIX B
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:
-- 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.
-- The Audit Committee members are responsible for a general understanding of
the Fund's accounting systems and controls.
-- 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.
-- The Fund's Audit Committee is responsible for reviewing the scope of the
audit proposed by the Fund's independent auditors.
-- 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
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.
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-- 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.
-- 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.
-- 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.
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